The Hardt decision and fee shifting in ERISA cases

May 26, 2010

The United States Supreme Court decided Hardt v. Reliance Standard Life Insurance Co., 560 U.S. ___ (2010) on May 24, 2010, and altered the landscape for future ERISA cases in some circuits. The Supreme Court reversed the Fourth Circuit and held that a fee claimant in an ERISA case need not be a "prevailing party" to be eligible for an attorney's fees award. District courts have discretion to award attorney's fees to either party under Section 1132(g)(1).

The Supreme Court stated that a court may award fees and costs under Section 1132(g)(1) as long as the fee claimant has achieved "some degree of success on the merits." This decision will change the law in circuits who have required a party to prevail to receive fees, but will not change the approach in other circuits such as the Sixth Circuit. The Sixth Circuit approach to ERISA fees under Section 1132(g)(1) has long been to examine the following five factors to determine whether to award attorney's fees under ERISA: (1) the degree of the opposing party's culpability or bad faith; (2) the opposing party's ability to satisfy an award of attorney's fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties' positions.  See, e.g, Shelby County Health Care Corp. v. Majestic Star Casino, 581 F.3d 355 (6th Cir. 2009). This is harmonious with the Supreme Court's holding.

One likely unintended consequence of this new case is that plaintiffs' attorneys may search in earnest for ERISA benefits cases with an eye toward using this new case to obtain fees from district court judges. Another may be that plaintiffs' attorneys will use the case to leverage higher settlements from ERISA defendants. However, the case should have little effect in circuits like the Sixth Circuit where the standard for awarding ERISA fees will remain roughly the same. It will certainly have some effect in circuits like the Fourth Circuit where the standard is now changed.

For those with questions about this case, other ERISA cases or ERISA litigation in general, please contact Doug Dennis or any member of Frost Brown Todd's ERISA and Employee Benefits Litigation Practice Group.

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