High Court Rules In ERISA Case

The U.S. Supreme Court recently handed down an opinion interpreting Section 502(g)(1) of the Employee Retirement Income Security Act (ERISA) to grant district courts discretion to award attorneys’ fees to either party, not just to a prevailing party. However, the Court also ruled that a district court’s discretion to award attorneys’ fees is triggered only if the party applying for the fee award “achieved `some degree of success on the merits.’” The Court noted that achieving a “purely procedural victory” does not satisfy this standard. Hardt v. Reliance Standard Ins. Co., No. 09-448, U.S. Supreme Court (May 24, 2010).

Until this ruling, the federal courts of appeals had been split on whether a party seeking attorneys’ fees under ERISA must be a “prevailing party” or, if so, what it means to “prevail.” Hardt lays that disagreement to rest in terms that may seem definitive at first.

Tom Christina, a shareholder in Ogletree Deakins’ Greenville office, notes: “The Court left open a few questions about how district courts should apply the Hardt standard in future cases. For example, if a plaintiff persuades a district court to remand her claim to the insurer because the decision-making process violated ERISA, but the denial of benefits is upheld on remand after proper procedures had been applied, would the `outcome’ of her case have constituted a `purely procedural victory?’ Or would the plaintiff have achieved `some success on the merits,’ at least to the extent that the plaintiff vindicated a procedural right under the statute?” These and other questions will ultimately need to be answered by the courts.