Attorneyâ€™s fees and retirees: is a â€œprevailing partyâ€ necessary under ERISA?
on Apr 27, 2010 at 7:15 pm
Below, Kyle Maurer of Stanford Law School recaps yesterday’s oral argument in Hardt v. Reliance Standard Life Insurance Co. (09-448). Check the Hardt SCOTUSwiki page for additional updates.
Yesterday, the Court heard oral argument in Hardt v. Reliance Standard Life Insurance Co. (No. 09-448).Â At issue in the case is whether the â€œprevailing partyâ€ standard used to award attorneyâ€™s fees applies to ERISA, which â€“ unlike other statutes containing fee-shifting provisions â€“ provides only that â€œthe court in its discretion may allow a reasonable attorneyâ€™s fee and costs of the action to either party.â€
After developing debilitating carpal-tunnel syndrome, petitioner Bridget Hardt applied for long-term disability (LTD) benefits under her employerâ€™s group insurance plan.Â The insurer, Respondent Reliance Standard Life Insurance Company, initially approved benefits but then subsequently terminated them.Â After exhausting her administrative appeals, Hardt filed suit against Reliance, arguing that the insurerâ€™s wrongful denial of benefits violated ERISA.
Finding â€œcompelling evidenceâ€ that Hardt was totally disabled, the district court determined that she had not received â€œthe kind of review to which she was entitled under applicable law.â€Â The court thus remanded the case to Reliance, cautioning the insurer that if it did not reassess Hardtâ€™s claim â€œby adequately considering all the evidenceâ€ within thirty days, â€œjudgment will be issued in favor of Ms. Hardt.â€ On remand, Hardt obtained her long-term disability benefits.
Hardt then asked the district court to award attorneyâ€™s fees pursuant to Section 502(g)(1) of ERISA, and the district court granted the motion.
On appeal, the Fourth Circuit vacated the award of attorneyâ€™s fees.Â In its view, Hardt could not establish that she was a â€œprevailing partyâ€ under the Supreme Courtâ€™s decision in Buckhannon Board and Care Home v. West Virginia (2002), because that standard can only be satisfied when a party has obtained either an â€œenforceable judgment on the merits [or a]court-ordered consent decree[.]â€
Oral Argument Recap
At oral argument yesterday, the Court attempted to fill the void in the ERISA fee-shifting provision â€“ that is, the absence of language explicitly referring to a â€œprevailing partyâ€ â€“ with the â€œsuccess on the meritsâ€ standard established in Ruckleshaus v. Sierra Club (1983).Â Justice Sotomayor led off the questioning, asking John Ates (representing petitioner Hardt) how he would define â€œsuccess on the merits.â€Â Explaining that the â€œheart of ERISA is the full and fair review process,â€ Ates characterized the district courtâ€™s remand as â€œan equitable-type reliefâ€ that constituted â€œsuccess on the meritsâ€ under ERISA.Â When asked by Justice Sotomayor about â€œChief Justice Rehnquistâ€™s footnote in Ruckleshaus, [in which he] said a procedural victory is not some success on the merits,â€ Ates distinguished his case from a purely procedural victory, arguing that â€œhere we have a violation of ERISA, a violation of a fiduciary obligation by the plan administrator.Â The relief accorded for that violation was a remand back to the plan administrator to get it right.â€
Justice Ginsburg next posed a hypothetical in which â€œtotal disability was not provedâ€ on remand.Â Ates responded that Hardt would still be eligible for fees in such a scenario â€œbased on the violation by Reliance in bad faith.â€Â Justice Kennedy then extended the hypothetical by asking whether attorneyâ€™s fees should still be awarded if on remand Reliance determined that the case was â€œpatently frivolous, close to a fraud.â€ Â Ates answered that â€œthe only way itâ€™s going back [down on remand] is from a violation of law.Â So in that regard, she has succeeded on the merits by proving a violation regardless of the outcome at the end of the day.â€
Arguing on behalf of the United States in support of the petitioner, Assistant to the Solicitor General Pratik Shah faced questions from Justice Scalia, who asked about the potential tension between the governmentâ€™s position in this case and the caseâ€™s implications for other fee-shifting statutes that similarly lack an â€œprevailing partyâ€ standard.Â Shah countered that ERISA is â€œunique in that it is informed explicitly by trust law principles,â€ which â€œdepart from the American Rule.â€Â (Shahâ€™s heavy reliance on trust law principles and precedent throughout the argument may stem from last weekâ€™s decision in Conkright v. Frommert, which looked to trust law principles to determine whether deference to a retirement plan administrator was appropriate when the text of ERISA was inconclusive.)Â Unlike ERISA, Shah continued, other similar statutes lacking the â€œprevailing partyâ€ language â€œare premised on the background of the American rule.â€Â However, Justice Scalia did not seem to agree with the distinction, deeming it â€œvery artificial.â€Â Justice Kennedy was similarly skeptical.Â He noted that â€œthere are many statutes that are not prevailing party statutesâ€; although this is one is â€œunique in the sense itâ€™s in ERISA . . . itâ€™s very close to many of the statutes with [similar] language.â€
When Nicholas Rosenkranz began his argument on behalf of Reliance, members of the Court pressed him on his argument that the district courtâ€™s order was purely procedural.Â In response to Justice Ginsburgâ€™s observation that the district court seemed â€œinclined to rule for Hardtâ€ but was willing to give Reliance â€œan opportunity to respond,â€ Rosenkranz warned that â€œit would be an utterly unadministrable rule to attempt to weigh the inclinations of judges in their opinions.â€Â Justice Breyer next characterized the remand as â€œa big victory for the other sideâ€; Rosenkranz countered that, to the contrary, Hardtâ€™s motion for summary judgment was denied.Â Thus, he continued, â€œrather than giving her the judgment she sought, the district court employed a particular procedural maneuver, which was to remand the case.â€Â And when Justice Sotomayor reiterated Hardtâ€™s argument that the case did involve an ERISA violation, with the remand simply a remedy, Rosenkranz responded that â€œ[t]his was not a decision on the merits.Â This was a purely interlocutory order.â€
Chief Justice Roberts then shifted the tone of the argument by turning to Conkright.Â In the typical ERISA case, the Chief Justice noted, â€œthe likely relief is going to be sending [the case] back rather than making a judicial decisionâ€ â€“ which, under Relianceâ€™s reading, would â€œseverely limit the circumstances under which Plaintiffs are entitled to fees.â€Â After Rosenkranz agreed that â€œunder circumstances like this . . . there would be fewer opportunities for district courts to award fees,â€ the Chief Justice asked whether Relianceâ€™s reasoning would apply â€œ[e]ven though . . . this was a very, very significant victory for the claimant to get it sent back under those circumstances.â€Â Rosenkranz reiterated, however, that this case â€œshould not be characterized as a victory.Â The plaintiff asked for summary judgment and her summary judgment motion was denied.â€
The Court continued to press Rosenkranz on the question of what would constitute a victory for purposes of obtaining attorneyâ€™s fees.Â Justice Scalia, for example, asked what would happen â€œif all [petitioner] asked for was a remand, and he got a remandâ€; Rosenkranz responded that â€œa properly framed complaint under ERISA should still be a claim for benefits.â€Â Justice Ginsburg next asked whether a plaintiff would be entitled to attorneyâ€™s fees based on a successful request to turn over documents.Â After some back and forth (which did not ultimately seem to satisfy Justice Ginsburg), Rosenkranz conceded that â€œit might be proper to frame a complaint under ERISA for a purely procedural remedy like some documents,â€ but he emphasized that such a case would not be â€œthe main run of ERISA cases.â€Â Finally, Justice Breyer sought to push back on Rosenkranzâ€™s continued assertions that the order was procedural by instead characterizing the district courtâ€™s order as a â€œconditional judgment in [Hardtâ€™s] favor.â€Â Although Rosenkranz attempted to resist this characterization by returning to his formalism argument, Justice Breyer turned the formalism argument on its head:Â â€œ[i]f we are going to be formal and we are going to look to certain words included in certain papers irrespective of what really happened, donâ€™t we have those words in the paper thatâ€™s relevant here?â€
On rebuttal, Ates used his four minutes without interruption.