Wednesday, May 26, 2010

Supreme Court Decides ERISA Attorneys' Fee Case -- And Doesn't Answer Any Questions

In its latest ERISA decision, and in a decision that will leave practitioners and litigants scratching their heads, the Supreme Court ruled on Monday that attorneys' fees are available in ERISA benefits cases to parties that have achieved "some degree of success on the merits." The Court's ruling, in this practitioner's view, did nothing but further confuse the issues.

By way of background, the case arose from Reliance Standard Life Insurance Company's ("Reliance") denial of Bridget Hart's claim for long term disability benefits. Hart filed suit in federal district court challenging the denial. The district court held that Reliance did not properly review Hart's benefit claim and remanded the case to Reliance for further consideration with instructions to properly review the evidence in the administrative record. On remand, Reliance reversed its decision and awarded Hart benefits. Hart subsequently moved for attorneys' fees in the district court, which fees the district court awarded and the United States Court of Appeals for the Fourth Circuit reversed.

In reversing the Fourth Circuit's denial of attorneys' fees, the Supreme Court focused its attention on the circumstances under which a court may award attorneys' fees under section 502(g)(1) of ERISA. Citing its 1983 decision in Ruckelshaus v. Sierra Club, the Court said that because the words "prevailing party" do not appear in the next of Section 502(g)(1), and nothing else in Section 502(g)(1) showed that Congress meant to abandon the traditional American Rule (that each party is responsible for their own attorneys' fees unless a statute says otherwise), some degree of success on the merits would be necessary for an award of fees. The Court continued by noting that "[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 inquiry into the question whether a particular party's success was 'substantial' or occurred on a 'central issue". The Court determined that Hart had obtained some degree of success on the merits in the case before it because the district court had determined that the plan administrator did not follow ERISA's guidelines when reviewing the Hart's benefit claim and had instructed the administrator to re-review the claim, taking into consideration all of the evidence, or the district court would enter judgment for Hart.

Quite simply, the Court really did nothing to clarify the issue of when attorneys' fees are appropriate in an ERISA benefits dispute. The Court's ruling will just create more confusion in the district courts and basically allows the district courts to award or deny attorneys' fees on a whim.