In Hardt v. Reliance Standard Life Ins. Co. (.pdf), the Supreme Court resolved a Circuit split on the issue of whether an ERISA attorney’s fees claimant must be a prevailing party to obtain a fee award — in short, the answer is “no.” Instead, an ERISA fee claimant must only show “some degree of success on the merits,” which is not “trivial success on the merits” or “a purely procedural victory.” Anticipating that the degree of success question could take on a life of its own, the Court stated that this standard is satisfied "If the court can fairly call the outcome of the litigation some success on the merits without conducting a “lengthy inquir[y] into the question whether a particular party’s success was ‘substantial’ or occurred on a ‘central issue.’”
Nonetheless, in answering the prevailing party question, the Court left open at least two questions ERISA practitioners were hoping to have answered: (1) does the “five factor” test still apply; and (2) does a remand order constitute some success on the merits?
On the first issue, in awarding a fee under ERISA’s discretionary fee provision, 29 U.S.C. § 1132(g)(1), the Circuits had almost uniformly applied the so-called “five factor” test: the degree of the opposing parties’ culpability or bad faith, ability to satisfy a fee award, whether an award would deter other persons acting under similar circumstances, whether the fee claimant sought to benefit all plan participants and beneficiaries or to resolve a significant legal question regarding ERISA, and the relative merits of the parties’ positions. In Hardt, the Court seemingly dispensed with the “five factor” test, stating the factors “are not required for channeling a court’s discretion” and “bear no obvious relation to § 1132(g)(1)’s text or to our fee-shifting jurisprudence.” But then, in footnote 8, the Court stated that it did not foreclose the possibility that a court could consider these factors in deciding to award fees after a claimant has satisfied the “some degree of success” requirement. It remains to be seen whether the Circuits will continue to adhere to the five factor test in light of Hardt.
On the second issue, the Court upheld the claimant’s fee award as the order remanding the claim to the insurer for further consideration constituted “some success on the merits.” In Hardt, the district court concluded that remand was required because the denial of Hardt’s long term disability benefits claim was unreasonable, but also stated that it was “inclined to rule in Ms. Hardt’s favor” based on compelling evidence of her total disability and that judgment would be entered in her favor unless the insurer acted on the remand order within 30 days. Ultimately, the insurer did award the benefits to Hardt on remand. The open question, however, is how the lower courts will treat fee requests in future cases involving remand orders, because the Hardt Court specifically stated: “we need not decide today whether a remand order, without more, constitutes ‘some success on the merits’ ….”