Hardt Times

The Supreme Court's decision in Hardt v. Reliance Standard should have been a reason to celebrate for participants and their lawyers (99 PBD, 5/25/10). The simple holding, that you don't have to be a prevailing party before a court can exercise its discretion to grant attorney's fees is unexceptionable. Their were no dissents. But the court seemed to be at pains to tie the decision to its facts. The participant was granted benefits by the plan on the remand. Did that matter?

Against this background, the new "some success on the merits" test is unsettling, particularly when coupled with the suggestion that the victory should be more than "merely procedural." All remands are procedural in the sense that they don't determine the ultimate merits, but a victory on the merits is precisely what the court just held isn't required. If the participant lost on remand and left it at that, would fees necessarily be denied, even though the original decision was admittedly unreasonable? Does it matter that the original decision was unreasonable based on matters considered, or does the "procedural" failure to consider certain matters lead to a different outcome? Does a participant have to wait for the outcome of a remand to apply for fees? Will a court receiving a fee application after remand hold the application in abeyance, waiting to see how the remand comes out? Hardt answers none of these nagging questions.

The answer should be simple. If the decision was so flawed as to require a remand, the participant had some success. He obtained the review he was entitled to by order of the court. After Conkright, remands will be the common outcome of benefit cases; outright awards of benefits will be extraordinary. Commenting in BNA (99 PBD, 5/25/10), Greg Braden notes that if granting the participant's request on remand is what controls liability for fees, fiduciaries will have an added reason to be leery of granting benefits. I'm not sure where Greg was going with this point, but I know where it takes me. Level the playing field by granting fees whenever there's a remand; the only incentive will be to review benefits appropriately in the first instance to avoid paying fees.

It's too late to observe that Stevens's dissent was correct. The "some success on the merits" standard had no real basis in the statute being construed in Ruckelshaus; it was conjured out of a debatable (four liberals said it was wrong) reading of the legislative history of another statute. It has no bearing on ERISA.

As things stand, an attorney deciding whether to take a benefit case has to worry not just about whether he can win all there is to win in court--a remand in most cases. He has to worry about the result after remand and whether that matters. If the Congress's intent in enacting 502(g) was to allow participants who had been mistreated in the claims process to obtain counsel, thirty five years after the law's enactment, that intent continues to be frustrated.