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Life Health > Health Insurance > Life Insurance Strategies

Court Rules On Hardt Vs. Reliance Standard

By Arthur D. Postal

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WASHINGTON BUREAU — A party to an Employee Retirement Income Security Act lawsuit may be able to collect attorney’s fees from the other side without winning the case, the U.S. Supreme Court ruled today in a 9-0 decision.

The fact that the term “prevailing party” does not appear in the ERISA provision that governs attorney’s fees means that district court judges have discretion to award attorney’s fees to either party, the court held in Hardt vs. Reliance Standard Life Insurance Company, No. 09-448.

The next provision of ERISA governs the availability of attorney’s fees in ERISA actions involving recoveries of delinquent employer contributions to a multiemployer plan. That provision does refer to the term “prevailing party,” and, in multiemployer cases, only plaintiffs who obtain “a judgment in favor of the plan” may seek attorney’s fees, Justice Clarence Thomas has written in an opinion for the court.

“The contrast between these two paragraphs makes clear that Congress knows how to impose express limits on the availability of attorney’s fees in ERISA cases,” Thomas writes.

Justice John Paul Stevens concurred in part with the opinion and concurred with the decision.

The U.S. solicitor general filed a brief stating that the ERISA provision involved in Hardt “authorizes courts to use their discretion to determine whether to award fees and does not limit fees only to a prevailing party.”

The case concerns Bridget Hardt, who was employed by Dan River Inc., Danville, Va. After complaining of pain in her neck and shoulders, Hardt was diagnosed with carpal-tunnel syndrome and underwent surgery on both wrists.

She stopped working in January 2003 and filed for long-term disability under her employer’s long-term disability program, which was provided by Reliance Standard Life Insurance Company, Philadelphia.

Hardt sued after her claim was denied.

A district court in Virginia denied Reliance summary judgment, finding that because the carrier had acted on incomplete medical information, the benefits denial was not based on substantial evidence.

Though also denying Hardt summary judgment, the court stated that it found “compelling evidence” in the record that she was totally disabled and that it was inclined to rule in her favor, but the court concluded that it would be unwise to do so without giving Reliance the chance to address the deficiencies in its approach.

The court therefore remanded to Reliance, giving the company 30 days to consider the evidence and to act on Hardt’s application. If Reliance did not act, the court would enter a judgment in Hardt’s favor, the court said.

Reliance reconsidered its earlier decision and awarded Hardt benefits.

Hardt then filed a motion under 29 U. S. C. Section 1132(g)(1). The statute, which applies in most ERISA lawsuits, provides that “the court in its discretion may allow a reasonable attorney’s fee and costs . . . to either party.”

Granting the motion, the district court applied the framework governing attorney’s fee requests in ERISA cases in the 4th U.S. Circuit Court of Appeals, concluding that Hardt had attained the requisite “prevailing party” status.

A panel of the appeals court, however, vacated the fee award, ruling that Hardt had failed to establish that she qualified as a “prevailing party” under an earlier 4th Circuit decision.

“The bedrock principle known as the American Rule provides the relevant point of reference: Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise,” Thomas writes. “This Court’s ‘prevailing party’ precedents do not govern here because that term of art does not appear in Section 1132(g)(1).”

Instead, “the Court interprets Section 1132(g)(1) in light of its precedents addressing statutes that deviate from the American Rule by authorizing attorney’s fees based on other criteria,” Thomas writes.

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