Employment Law | Expert Legal Commentary

September 2, 2010

Hardt v. Reliance Standard: ERISA Claimants Can Get Attorney Fees Even If They Don’t Win a Judgment

Hardt v. Reliance Standard Life Insurance Co.

By Jeremy Gray of Zuber Lawler & Del Duca

Hardt v. Reliance Standard: ERISA Claimants Can Get Attorney Fees Even If They Don’t Win a Judgment

Email Print

In a 9-0 decision, the U.S. Supreme Court has resolved a split among Circuit courts and has held that an ERISA claimant need not be the “prevailing party” in a lawsuit to receive an award of attorneys fees under 29 U.S.C. section 1132(g)(1). In Hardt v. Reliance Standard Life Insurance Co., ___ U.S. ___, 130 S.Ct. 2149 (2010), the Supreme Court determined that the claimant need only achieve “some degree of success” in the case to enable a district court to award her attorney’s fees under the statute.

BACKGROUND

Bridget Hardt stopped working in 2003 due to pain caused by carpal tunnel syndrome, for which she underwent surgery on both wrists. She applied for long-term disability under her employer’s plan, which was administered by Reliance Standard Life Insurance Company. After denying Hardt’s claims, then re-evaluating them on administrative appeal, Reliance awarded her temporary disability for 24 months.

While her administrative appeal was pending, Hardt’s symptoms worsened and she was diagnosed with small-fiber neuropathy, which further decreased her physical capabilities. Hardt applied for and received Social Security benefits but Reliance advised her that her disability would expire after the 24 months of temporary disability. She filed another administrative appeal, providing Reliance with the supplemental medical records she had provided to the Social Security Administration. After a somewhat cursory review and incomplete evaluation, Reliance denied Hardt’s appeal.

Hardt filed suit against Reliance, alleging that it violated the Employee Retirement Income Security Act of 1974 (ERISA) by wrongfully denying her claim for long-term disability benefits. Both parties moved for summary judgment. The district court denied both motions, but noted that Reliance’s decision to deny Hardt’s benefits was based on incomplete information. The court also found “compelling evidence” that Hardt was totally disabled. The district court stated that it was inclined to rule in Hardt’s favor, but determined that it was appropriate to first give Reliance the chance to address the deficiencies in its evaluation of Hardt’s claim. The district court remanded the case to Reliance, giving it 30 days to further consider Hardt’s claim. If Reliance failed to take action in 30 days, the court said that it would enter an order in favor of Hardt. Reliance subsequently conducted another review and found Hardt eligible for long-term disability benefits.

Hardt then filed a motion with the district court for an award of attorney fees pursuant to ERISA section 502(g)(1), which the district court granted, awarding Hardt fees of $39,149. Reliance appealed the grant of attorney’s fees, claiming that Hardt was not entitled to fees because she was not the “prevailing party.” The U.S. Court of Appeals for the Fourth Circuit agreed with Reliance, finding that Hardt was not a “prevailing party” because she did not obtain from the court “an enforceable judgment on the merits.” Hardt v. Reliance Standard Life Ins. Co., 336 Fed. Appx. 332, 336 (4th Cir. 2009). The Fourth Circuit reversed the district court’s decision and vacated the fees award.

An ERISA claimant need not be the “prevailing party” to obtain an attorney’s fees award

ERISA Section 502(g)(1) (codified at 29 U.S.C. section 1132(g)(1)) provides: “In any action under this subchapter by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of the action to either party.”

In its decision in Hardt, the Fourth Circuit Court of Appeals held that “only a prevailing party is entitled to consideration for attorneys’ fees in an ERISA action.” 336 Fed. Appx. at 335. By contrast, the Second, Fifth, and Eleventh Circuits have declined to read a “prevailing party” requirement into the statute.

The U.S. Supreme Court unanimously reversed the Fourth Circuit’s opinion, holding that pursuant to the plain language of the statute, a fee claimant need not be a “prevailing party” to be eligible for an attorney’s fees award. In its opinion, written by Justice Clarence Thomas, the Court reasoned that because Congress omitted an express “prevailing party” requirement – language expressly included in other statutory provisions, including other ERISA provisions – the Court had to interpret the statute without that requirement. To add a “prevailing party” requirement, wrote the Court, would more closely resemble “’invent[ing] a statute rather than interpret[ing] one.’” Hardt v. Reliance Standard Life Ins. Co., 130 S.Ct. 2149, 2156 (2010)(citing Pasquantino v. U.S., 544 U.S. 349, 359 (2005)).

The Supreme Court noted that Section 502(g)(1) expressly grants district courts the “discretion” to award attorney’s fees “to either party,” indicating that a party need not be a “prevailing party” to obtain a fees award. Id.

The Court reviewed its own precedent regarding deviations from the American Rule and held that even though the fees claimant need not be the “prevailing party,” he or she must show “some degree of success on the merits” before a court may award attorney’s fees under the statute. Id. at 2157. Applying that standard, the Court found that the district court properly exercised its discretion in Hardt, since Hardt did present the district court with “compelling evidence” of her total disability and obtained a remand of her case that ultimately proved successful.