Last year in Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149 (2010), the U.S. Supreme Court addressed a split between the federal courts of appeal on whether an ERISA litigant must be a prevailing party in order to obtain fees under 29 U.S.C. §1132(g)(1), which provides “the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” The Court held that prevailing party status is not required, and set a new standard that broadened the class of litigants who can qualify for fees under the statute. An ERISA litigant now must only achieve “some degree of success on the merits of a case” to be eligible for fees. The Court did not, however, elaborate on the scope of the new standard, and left open questions regarding just how much success in an ERISA matter is enough to sustain a fee claim: (1) Is a court order remanding a case to a plan administrator for further review enough success? (2) How does the standard apply if the claimant loses on remand? (3) What if a case settles prior to a decision?
The Hardt case arose from these facts. Hardt stopped working due to carpal tunnel syndrome, and applied for long-term disability benefits under her employer’s ERISA plan. The plan administrator, Reliance Standard Life Insurance Company, approved Hardt’s claim temporarily while she underwent a functional capacities evaluation at its request. Reliance asserted that even though the test confirmed her neck and hand limitations, it showed she could perform sedentary work. Hardt appealed and the administrator partially reversed, finding she was totally disabled from her regular occupation and was entitled to 24 months of benefits. Id. at 2152.
While her appeal was pending, Hardt was diagnosed with neuropathy. She applied for and was awarded Social Security disability benefits based on her treating physicians’ reports that she could not perform even sedentary work. Shortly thereafter, her 24 months expired, and Reliance declined to continue benefits on the grounds that the medical records did not show she was totally disabled from working at any occupation. Hardt appealed again and submitted her neuropathy records. Reliance had her undergo another FCE, but did not ask the evaluator to review her for neuropathic pain, even though it knew of her diagnosis. The exam results were invalid, so Reliance obtained additional reviews. Again, it did not require a physical exam of Hardt or a review of all her records. Based on the reports it received, Reliance denied Hardt’s second appeal. Id. at 2153.
Hardt brought suit, alleging Reliance wrongfully denied her benefits claim. The district court did not grant Hardt’s summary judgment motion, but found Reliance did not give her the kind of review she was entitled to under ERISA. It did not adequately consider Hardt’s treating physicians’ findings and its physician’s report was vague and conclusionary. The record in fact demonstrated compelling evidence of total disability due to neuropathy. Although inclined to rule for Hardt, the court instead ordered Reliance to address the deficiencies on remand, instructing it to “adequately consider” all of the evidence, and warning that judgment would be entered for Hardt if it did not do so within 30 days. Id. at 2154.
After another review, Reliance awarded long term benefits, and Hardt moved for attorney’s fees under §1132 (g)(1). The district court concluded she was a prevailing party, and, applying the “five-factor” test requiring evaluation of factors such as the relative merits of the parties’ positions, granted fees to Hardt. See, e.g., Gordon v. United States Steel Corp., 1724 F. 2d 106, 108 (10th Cir. 1983). On appeal, the Fourth Circuit Court of Appeals reversed the fee award. It found Hardt was not a prevailing party because the remand order did not require Reliance to award benefits to her, so there was no enforceable judgment on the merits or court ordered consent decree, which was required for “prevailing party” status. Id. at 2155.
Hardt asked the U.S. Supreme Court on writ of certiorari to consider two questions: (1) whether the Fourth Circuit correctly held that fee recovery under §1132 (g)(1) was limited to a prevailing party, and (2) whether an order remanding a benefits claim was, without more, sufficient to support a fee award under the statute. Id. at 2155-56.
The Supreme Court reversed on the first question. Congress had not included in the plain text of §1132(g)(1) an express “prevailing party” limitation on attorney fee awards, nor did anything in the statute suggest such a limitation. Instead, the statute by its terms gave courts discretion to award fees to either party. Id. at 2156.
The Court then addressed other statutes that, like prevailing party statutes, deviate from the “American Rule,” which requires each litigant in a lawsuit to pay its own fees, unless a statute or contract provides otherwise. The Court cited to its interpretation of the Clean Air Act fee provision, under which fees are recoverable “whenever appropriate” as long as a party “achiev[ed] some success” on the merits, even if not a “major success.” Id. at 2157. The Court applied a similar standard, holding an ERISA fee claimant must show “some degree of success on the merits” before discretionary fees can be awarded. The Court further found the five-factor test had no role in the success on the merits analysis, although it observed in a footnote that the factors could possibly play some role once success was shown. The Court did not, unfortunately, go on to clearly explain what an ERISA litigant must show to prove it had achieved some degree of success. Instead, it simply observed that a claimant does not satisfy the requirement by achieving “trivial success” or a “purely procedural victory,” but does satisfy it if one can “fairly call the outcome of the litigation some success on the merits without concluding a lengthy inquiry into the question whether a particular success was substantial or occurred on a central issue.” Id. at 2158.
In the Court’s view, the facts of Hardt’s particular case showed she had achieved far more than trivial success or a procedural victory. She had not prevailed on summary judgment, but had: (1) produced compelling evidence that she was totally disabled, (2) persuaded the district court that Reliance inadequately reviewed her claim and failed to follow ERISA guidelines, and (3) obtained an order that led Reliance to reverse its decision and award her benefits. Id. at 2159.
The Court explicitly declined to decide the second question raised on certiorari – whether an order remanding a benefits denial for further review, without more, is sufficient “success on the merits” to support a fee award under §1132 (g)(1). Id.
The Hardt decision thus left in its wake several open issues. First, because a clear order on the merits is no longer required to qualify an ERISA claimant for statutory fees, courts differ on what exactly is required. Some have found that the remand of an ERISA benefits decision to a plan administrator without “something more,” such as an explicit court finding of an ERISA violation or total disability as expressed in Hardt is not enough success on which to base a fee award. See, Dickens v. Aetna Life Ins. Co., 2011 WL 1258854 (S.D. W. Va.); Christoff v. Ohio Northern Univ. Emp. Benefit Plan, 2010 WL 3958735 (N.D. Ohio).
Others, however, have held that the fact a court has remanded an ERISA case to a plan administrator for further consideration is enough success to entitle an ERISA plaintiff to fees. Although remand does not guarantee that the plaintiff will obtain the exact relief it seeks, such as a full award of benefits, it at least sends the case back for a second administrative review of the evidence, providing another shot at benefits. See, e.g., Richards v. Johnson & Johnson, 2010 WL 3219133 (E.D. Tenn.); Blajei v. Sedgwick Claims Management Services, Inc., 2010 WL 3855239 (E.D. Mich.); Olds v. Retirement Plan of International Paper Co., 2011 WL 2160264 (S.D. Ala.). Indeed, it has been held that even if an ERISA claimant completely loses a case on remand, she can still be entitled to fees by virtue of achieving the remand order. See, Scott v. PNC Bank Corp. & Affiliates Long Term Disability Plan, 2011 WL 2601569 (D. Md.).
Second, the point at which a request for fees is appropriate remains a question. Citing Hardt, at least one court has determined that fees can be awarded to an ERISA claimant even before a plan administrator has reviewed and decided a case remanded to it, because the litigant achieved sufficient success on the merits by the remand alone. Blajei, supra. Others have refused to consider fee requests until the plan administrator makes a final benefits determination after remand, or until the appellate process on a benefits determination made after remand is completed. Mohamed v. Sanofi-Aventis Pharmaceuticals, 2010 WL 2836617 (S.D.N.Y.); Spradley v. Ownes-Illinois Hourly Employees Welfare Benefit Plan, 2011 WL 209164 (E.D. Okla.).
Third, how “success on the merits” is achieved remains an open question after Hardt. Courts have indicated that the voluntary settlement of a claim by an administrator after an ERISA suit is filed perhaps can meet the new standard, as well as an administrator’s voluntary dismissal of a counterclaim for reimbursement of benefits. See, Taaffe v. Life Ins. Co. of N. Am., 769 F. Supp. 2d 530 (S.D. N.Y. 2011); Simonia v. Glendale Nissan/Infiniti Disability Plan, 608 F. 3d 1118 (9th Cir. 2010).
Finally, the Hardt Court’s treatment of the five-factor test has elicited different results among courts. The Hardt Court believed the test was unnecessary to the analysis of ERISA fee entitlement. One court has interpreted the Court’s consideration of this issue as entirely prohibiting application of the test. Taaffe, supra. Others continue to apply the test. Some say it is required in the analysis, Simonia, infra, while others say the five factors “may” be considered as guidelines in exercising fee entitlement discretion, once success on the merits is established. See, e.g., Williams v. Metropolitan Life Ins. Co., 609 F.3d 622 (4th Cir. 2010); Thompson v. Union Security Insurance Co., 2011 WL 346467 (D. Kan); Bowers v. Hartford Life and Accident Insurance Co., 2010 WL 4117515 (S.D. Ohio).
The cases interpreting Hardt illustrate that the new standard established by the Supreme Court has not simplified the ERISA fee process. The decision merely replaced the determination of whether an ERISA claimant is the “prevailing party” with a more fact-intensive determination of whether the claimant has achieved “some degree of success on the merits” through remand, settlement, or other action. Therefore, in the assessment of ERISA cases with respect to fees after Hardt, factors such as the particular language or facts surrounding a remand order, the timing of a fee application, and the possibility that fees may be awarded to an ERISA claimant even when a case is resolved through settlement or voluntary dismissal are significant. Notwithstanding the disparate court views on these factors, one issue is clear after Hardt. Even with the Hardt Court’s express recognition that §1132(g)(1) authorizes discretionary fees to either party when some success on the merits is achieved, ERISA plan administrator defendants – even when completely successful in a case – remain unlikely to obtain fee awards under the statute. See, Toussaint v. J.J. Weser, Inc., 2011 WL 2175987 (2nd Cir.); Tomlinson v. El Paso Corp., 2011 WL 1158637 (D. Co.).