May 24, 2010

Supreme Court Decides Hardt v. Reliance Standard Life Insurance Co.

On May 24, the Supreme Court decided Hardt v. Reliance Standard Life Insurance Co., No. 09-448, holding that the ERISA fee-shifting provision contained in 29 U.S.C. § 1132(g)(1) does not require a claimant to be the "prevailing party," but only to have achieved some degree of success on the merits.

In 2003, Bridget Hardt stopped working due to pain caused by carpal tunnel syndrome. She later applied for long-term disability benefits from her employer's plan. Reliance Standard Life Insurance Company, which had the authority to decide whether a claimant qualified for benefits under the employer's plan, provisionally approved Hardt's claim. After conducting a functional capacity evaluation, however, Reliance denied the claim. Hardt filed an administrative appeal and Reliance reversed its decision in part, awarding Hardt temporary disability benefits for 24 months.

While her appeal was pending, Hardt began experiencing new symptoms and was diagnosed with small-fiber neuropathy, which increased her pain and decreased her physical capabilities. Hardt eventually applied for, and received, disability benefits from the Social Security Administration. In 2005, Reliance informed Hardt that her plan benefits would expire at the end of the 24-month temporary disability period. Hardt filed another administrative appeal and provided Reliance with supplemental medical records and the information she had submitted to the Social Security Administration. Reliance again asked Hardt to participate in two functional capacity evaluations, but it did not ask the evaluators to review Hardt for neuropathic pain. Reliance also retained a physician and a vocation rehabilitation counselor to review Hardt's claim, but the physician did not examine Hardt or review all of her medical records. Reliance ultimately denied Hardt's administrative appeal.

Hardt filed a lawsuit against Reliance, alleging that it had violated ERISA by wrongfully denying her claim for long-term disability benefits. The district court denied both parties' motions for summary judgment, but noted that Reliance's decision to deny benefits was based on incomplete information and that it found compelling evidence in the record that Hardt was totally disabled due to her neuropathy. The district court then remanded the case to Reliance for further consideration of Hardt's claim. Reliance conducted another review and found Hardt eligible for long-term disability benefits. Hardt then moved for attorney's fees and costs under 29 U.S.C. § 1132(g)(1). The district court granted her motion, but the United States Court of Appeals for the Fourth Circuit reversed, finding that Hardt was not a "prevailing party" in the litigation.

The Supreme Court reversed. The Court noted that the plain and unambiguous language of § 1132(g)(1) does not include the term "prevailing party." Instead, § 1132(g)(1) grants district courts discretion to award fees to either party. Thus, a fee claimant need not be a prevailing party to be eligible for an award of fees. After considering its own precedent addressing deviations from the American Rule that do not limit attorney's fees to a prevailing party, the Court held that a fees claimant must show "some degree of success on the merits" before a court may award attorney's fees under § 1132(g)(1). Applying this standard, the Court held that the district court properly exercised its discretion under § 1132(g)(1) to award attorney's fees to Hardt.

Justice Thomas delivered the opinion of the Court, in which Chief Justice Roberts and Justices Scalia, Kennedy, Ginsburg, Breyer, Alito, and Sotomayor joined, and in which Justice Stevens joined in part. Justice Stevens also filed an opinion concurring in part and concurring in the judgment. .

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