Today in ERISA History

May 24, 2010 – The United States Supreme Court decides Hardt v. Reliance Standard Life Insurance Co., 560 U.S. __, 130 S.Ct. 2149 (2010), holding that a court “in its discretion” may award fees and costs “to either party” as long as the fee claimant has achieved “some degree of success on the merits.”

Bridget Hardt was working as an executive assistant when she was diagnosed carpel tunnel syndrome. Eventually, due to her illness, she stopped working and applied for long-term disability benefits from her employer’s long-term disability insurance plan, which was administered by Reliance. Reliance initially approved her claim pending the outcome of a functional capacities evaluation. After the evaluation, Reliance denied her claim, finding that she was not totally disabled within the meaning of the plan. Hardt filed an administrative appeal, and Reliance reversed their decision and granted Hardt temporary disability benefits for 24 months. During those 24 months, Hardt was diagnosed with small-fiber neuropathy, and based on that diagnosis, she applied for and was granted Social Security disability benefits.

Reliance notified Hardt that her benefits would expire at the end of the 24-month period due to the earlier finding that she was not totally disabled by her carpel tunnel syndrome. Additionally, Reliance demanded Hardt pay $14,913.23 to offset the disability benefits she had received from the Social Security Administration as required by a plan provision which coordinated benefits with Social Security payments. Hardt paid the offset to Reliance, and filed an administrative appeal regarding the termination of her benefits, which Reliance denied. Hardt then filed a lawsuit against Reliance in the U.S. District Court for the Eastern District of Virginia.

Both Hardt and Reliance filed motions for summary judgment with the district court, which the district court denied. In denying Hardt’s motion for summary judgment, the district court instructed Reliance to review their decision in her administrative appeal within 30 days, at which time the district court would enter judgment in favor of Hardt. After reviewing their decision, Reliance found Hardt eligible for long-term disability benefits and paid her $55,250 in accrued, past-due benefits.

Hardt then filed a motion for attorneys fees with the district court pursuant to ERISA section 502(g)(1), 29 U.S.C. 1132(g)(1), which allows a court, in its discretion, to award reasonable attorney’s fees and costs to either party in a lawsuit involving ERISA.

In deciding whether to award attorneys fees to Hardt, the district court applied a 3-step process in making the determination. The first step was determining whether Hardt was a “prevailing party”. The district court found she was, applied the next two steps in Hardt’s favor, and awarded Hardt attorneys’ fees. Reliance appealed to the U.S. Court of Appeals for the 4th Circuit.

The 4th Circuit reversed, finding that Hardt was not a “prevailing party”, and vacated the award of attorneys’ fees to Hardt. Hardt appealed, and the U.S. Supreme Court reversed the 4th Circuit.

The Supreme Court examined the language of ERISA section 502(g)(1), and found that the statute did not require Hardt to be a “prevailing party” to be awarded attorneys’ fees. The Court said that “a fees claimant must show ‘some degree of success on the merits’ before a court may award attorney’s fees” under ERISA section 502(g)(1), and Hardt had met this standard by persuading the district court that the plan administrator had failed to comply with ERISA guidelines in denying her benefits.

John R. Ates argued for Bridget Hardt before the U.S. Supreme Court. Ann Sullivan of Crenshaw, Ware & Martin, PLC argued on behalf of Ms. Hardt before the U.S. Court of Appeals for the 4th Circuit with Elaine Kathryn Inman joining her on the brief.

R. Ted Cruz of Morgan, Lewis & Bockius LLP argued for Reliance Standard Life Insurance Co. before the U.S. Supreme Court. Joshua Bachrach of Wilson, Elser, Moskowitz, Edelman & Dicker argued on behalf of Reliance before the 4th Circuit.

One Response to Today in ERISA History

  1. Pingback: Today in ERISA History | The Pension Protection Act Blog | Pro Openbin