Supreme Court looks at Attorney's Fees
In Hardt v. Reliance Standard Life Insurance Co., the U.S. Supreme Court ruled that the Employee Retirement Income Security Act (ERISA), the federal law that governs private pension, disability, and health insurance plans, can allow courts to award attorney’s fees in cases in which the party is not the “prevailing party” as long the party has had “some degree of success.”
In this case, Bridget Hardt sued her disability insurance provider, Reliance Standard, claiming that the company wrongfully denied her claim for long-term disability benefits. The District Court for the Eastern District of Virginia found that Reliance Standard’s decision to deny benefits was based on incomplete information and did not comply with ERISA guidelines. The District Court ordered Reliance Standard to review Ms. Hardt’s claim by “adequately considering all the evidence.”
After reviewing her claim, Reliance Standard determined that Ms. Hardt was eligible for long-term disability benefits. Ms. Hardt then requested that the District Court grant her attorney’s fees and other related costs.
The District Court awarded Ms. Hardt attorney’s fees. Reliance Standard appealed to the Court of Appeals for the 4th Circuit, which overturned the District Court’s award citing that Ms. Hardt was not entitled to attorney’s fees because she was not a “prevailing party.”
The 4th Circuit ruled that attorney’s fees can be awarded in ERISA cases only when a party prevails by winning an enforceable judgment. The Court determined that the District Court’s order requiring Reliance Standard to review its decision did not amount to an enforceable judgment. Therefore, Ms. Hardt was not a prevailing party and she was not entitled to an award of attorney’s fees.
Ms. Hardt appealed the Court of Appeals decision to the Supreme Court of the United States, which agreed to answer two questions:
- Does ERISA* limit the availability of attorney’s fees to a prevailing party?
- Under what circumstances is a party entitled to attorney’s fees in ERISA* cases?
In its opinion, the Supreme Court held that ERISA does not require a party to be a “prevailing party,” in order to be eligible for an attorney’s fees award. The Supreme Court found that the language of the statute simply states that a court may award attorney’s fees to either party. Because there is no mention of a prevailing party requirement, the 4th Circuit was in error when it imposed such a rule.
In answering the second question, the Supreme Court determined that a court may award attorney’s fees in its discretion to either party where the party has achieved “some degree of success on the merits”, but the success must not be merely “trivial” or a “purely procedural victory.”
The Court concluded that Ms. Hardt did achieve the requisite degree of success because the District Court determined that Reliance Standard had not afforded her a claim review in compliance with ERISA guidelines. The District Court’s ruling was not “trivial” or “purely procedural,” because it found “compelling evidence” that Ms. Hardt was entitled to long-term disability benefits, and, while inclined to rule in her favor, wanted to first give Reliance a chance to address its deficiencies in reviewing her claim.
What this means: Courts can award attorneys fees to either party even where there is no major victory as long as the party has had some degree of success in the eyes of the court.
- U.S. Supreme Court opinion issued May 24, 2010.
- U.S. Court of Appeals for the 4th Circuit opinion issued July 14, 2009
*See ERISA §502(g)(1), specifically 29 U.S.C. §1132(g)(1).
Looking for help with your retirement plan?
If you have a problem with your retirement plan, free help may be available from the U.S. Administration on Aging's network of Pension Counseling and Information Projects. Find help now.
Roadmap to retirement
Let our roadmap to helpful information about retirement plans for private-sector workers put you on the path toward a secure retirement. Get started.
PensionHelp America connects people who need help with their pension, 401(k), and other retirement plans with the pension counseling projects, legal services providers, and government agencies that can help answer their questions. Visit www.pensionhelp.org.
Get E-mail Updates
Retirement USA is a national initiative that is working for a new retirement system that, along with Social Security, will provide universal, secure, and adequate income for future retirees. Visit the website.