ERISA-Supreme Court Announces New “Some Degree of Success” Standard For Award Of Attorney’s Fees Under ERISA

Hardt v. Reliance Standard Life Insurance Co., No. 09-448 (Supreme Court 2010) involved a claim by the plaintiff against an insurance company, defendant Reliance, for long-term disability benefits. Reliance had denied the plaintiff’s claim for the benefits. The District Court had ruled against the plaintiff’s motion for summary judgment on her claim for the benefits. The District Court had found compelling evidence that the plaintiff is totally disabled, and stated that it was inclined to rule in her favor. However, to give Reliance a chance to reconsider its denial, the District Court remanded the case back to Reliance for another review of the plaintiff’s claim. Reliance conducted the court-ordered review, reversed its denial of the benefit claim, and awarded the plaintiff the benefits she sought. The District Court then awarded attorney’s fees to the plaintiff, under section 502(g)(1) of ERISA.

One matter addressed by the Court was whether the District Court’s award of attorney’s fees was correct. Here is what the Court said on this matter. Section 502(g)(1) is a fee shifting provision, which applies in most ERISA lawsuits. It states that the court in its discretion may allow a reasonable attorney’s fee and costs to either party. A person need not be a prevailing party to be eligible for an award of attorney’s fees and costs under section 502(g)(1). A court may award attorney’s fees and costs to either party under that section, as long as the party asking for the fees and costs has achieved some degree of success on the merits. A party does not satisfy this requirement by achieving trivial success on the merits or a purely procedural victory. This requirement is satisfied if the court can fairly call the outcome of the litigation some success on the merits, without conducting a lengthy inquiry into the question of whether a particular party’s success was substantial or came on a central issue. Further, the Court found that, in this particular case, the plaintiff showed the requisite success in order to be eligible for the award, so that the District Court properly exercised its discretion to attorney’s fees to the plaintiff.

Questions/Points: The new standard makes it easier for a plaintiff bringing suit for benefits under ERISA to collect attorney’s fees and costs. However, if the defendant, typically the insurance company denying the benefits, has “some degree of success on the merits”, can it collect attorney’s fees from the plaintiff, even if the plaintiff wins the case? Doesn’t that possibility make it more risky for a plaintiff to pursue a claim for benefits, contrary to the intention behind ERISA? Also, the standard of “some success on the merits” would seem to invite a lot of

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