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US Supreme Court: ERISA Claimants Need Not Be a “Prevailing Party” to Obtain Award of Attorneys’ Fees Under § 1132(g)(1)

Blogs, Erisa

Yesterday, the United States Supreme Court settled an issue among the Courts of Appeal, as it clarified the standard by which District Courts may award attorneys’ fees to ERISA claimants under § 1132(g)(1).

The Supreme Court, in Hardt v. Reliance Standard Life Ins. Co., No. 09-448, 2010 WL 2025127 (May 24, 2010) reversed the Fourth Circuit Court of Appeals, and held that ERISA claimants need not be a prevailing party under a judgment to be eligible for an award of attorneys’ fees under § 1132(g)(1). Id. at *7.

In so holding, the Court explained how the absence of the words, “prevailing party” from the statute required a different interpretation, consistent with its holding in Ruckelshaus v. Sierra Club, 463 U.S. 680, 694, 103 S.Ct. 3274, 77 L.Ed.2d 938 (1983):

Instead, we interpret § 1132(g)(1) in light of our precedents addressing statutory deviations from the American Rule that do not limit attorney’s fees awards to the “prevailing party.” In that line of precedents, Ruckelshaus is the principal case. There, the Court interpreted § 307(f) of the Clean Air Act, which authorizes a court to award fees “whenever it determines that such an award is appropriate.” 42 U.S.C. § 7607(f). We began by noting that because nothing in § 307(f)’s text “clear[ly] show[ed]” that Congress meant to abandon the American Rule, 463 U.S., at 685, fee claimants must have achieved some litigating success to be eligible for a fees award under that section, id., at 686. We then concluded that by using the less stringent “whenever … appropriate” standard instead of the traditional “prevailing party” standard, Congress had “expand[ed] the class of parties eligible for fees awards from prevailing parties to partially prevailing parties–parties achieving some success, even if not major success.”  Id., at 688. We thus held “that, absent some degree of success on the merits by the claimant, it is not ‘appropriate’ for a federal court to award attorney’s fees under § 307(f).” Id., at 694.

* * *

Ruckelshaus lays down the proper markers to guide a court in exercising the discretion that § 1132(g)(1) grants. As in the statute at issue in Ruckelshaus, Congress failed to indicate clearly in § 1132(g)(1) that it “meant to abandon historic fee-shifting principles and intuitive notions of fairness.” 463 U.S., at 686. Accordingly, a fees claimant must show “some degree of success on the merits” before a court may award attorney’s fees under § 1132(g)(1), id.,at 694. A claimant does not satisfy that requirement by achieving “trivial success on the merits” or a “purely procedural victor[y],” but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a “lengthy inquir[y] into the question whether a particular party’s success was ‘substantial’ or occurred on a ‘central issue.’ ” Id., at 688, n. 9.

Id. at *8-9.

The facts in Hardt v. Reliance involved the District Court’s remand, ordering the plan administrator to review all the medical evidence concerning plaintiff’s claim for Long Term Disability Benefits within 30 days and stating that otherwise judgment would be entered in claimant’s favor. The District Court had concluded that there was compelling evidence the plaintiff was totally disabled and indicated that it was inclined to rule in her favor. Id. at *5.

Consistent with the “markers” under Ruckelhaus, the Court concluded that “Hardt has achieved far more than ‘trivial success on the merits’ or a ‘purely procedural victory.’” The Court thus concluded that “she has achieved ‘some success on the merits,’ and the District Court properly exercised its discretion to award Hardt attorney’s fees in this case.”

The Court expressly did not decide “whether a remand order, without more, constitutes ‘some success on the merits’ sufficient to make a party eligible for attorney’s fees under § 1132(g)(1).”

The Supreme Court noted that the issue previously divided the Courts of Appeals:

The Courts of Appeals are divided on this issue. Some (a few only tentatively) agree with the Court of Appeals’ conclusion here that only prevailing parties are entitled to fees under § 1132(g)(1). See, e.g., Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225 (C.A.1 1996) (“Congress declared that, in any ERISA claim advanced by a ‘participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee’ to the prevailing party ” (emphasis added)); Tate v. Long Term Disability Plan for Salaried Employees of Champion Int’l Corp. # 506, 545 F.3d 555, 564 (C.A.7 2008) (“In analyzing whether attorney’s fees should be awarded to a ‘prevailing party’ in an ERISA case, a court should consider whether the losing party’s position was justified an taken in good faith. However, we have held that a claimant who is awarded a remand in an ERISA case generally is not a prevailing party in the truest sense of the term” (some internal quotation marks and citation omitted)); Graham v. Hartford Life and Accident Ins. Co., 501 F.3d 1153, 1162 (C.A.10 2007) (“We also afford certain weight to prevailing party status, even though we acknowledge that the ERISA attorney’s fees provision is not expressly directed at prevailing parties”). Other Courts of Appeals have rejected or disavowed that position. See, e.g., Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (C.A.2 1995); Gibbs v. Gibbs, 210 F.3d 491, 503 (C.A.5 2000); Freeman v. Continental Ins. Co., 996 F.2d 1116, 1119 (C.A.11 1993).

Id. at *6.

Hardt v. Reliance likely will result in an increase in attorneys’ fees awards, as fees are now available to “partially prevailing parties”. It also may have far-reaching application for any federal statutes that provide for the award of attorneys’ fees without mention of “prevailing party” within the statute.