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Recovery of Attorney Fees In
ERISA and Non-ERISA Cases
Eric Buchanan, Attorney at Law
Daniel W. Maguire, Burke, Williams & Sorensen LLP
William Patton, Lane Powell PC
Copyright © 20141
“A request for attorney's fees should not result in a second major litigation.” Hensley v.
Eckerhart, 461 U.S. 424, 439, 103 S.Ct. 1933, 1941 (1983).
I. RECOVERY OF ATTORNEY FEES IN ERISA CASES
The American rule in litigation provides that in general, each party in a lawsuit is
responsible for his or her own attorney’s fees, unless there is a statutory exception.
Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44
L.Ed.2d 141 (1975); Camacho v. Bridgeport Financial, 523 F.3d 973 (9th Cir. 2008)
(under the “American Rule,” absent a statutory or a contractual provision, each party to
litigation must bear its own attorneys’ fees and may not recover those fees from an
adversary). ERISA contains such a statutory exception, allowing parties to petition for
attorney’s fees. See 29 U.S.C. § 1132(g)(1).
There are many similarities between the fee-shifting provision in ERISA and the fee-
shifting statutes in other federal statutes.2 For example, courts typically apply the
“lodestar” method when setting the fees under fee-shifting statutes, including ERISA. On
the other hand, the fee-shifting provision in ERISA has some important differences from
other fee-shifting statutes. The ERISA fee shifting statute does not specifically require
that a party seeking fees be a “prevailing party” as is typically required in most federal
fee-shifting schemes. Also, in many circuits there is no presumption that attorney’s fees
will be awarded in an ERISA case.
1 Portions of this paper were previously presented at the 2002, 2007, and 2011ATLA/AAJ conferences and
the 2013 ACI Disability Insurance conference; however, the author retained the copyright.
2 Examples of fee-shifting statutes from other areas of federal law include: The Civil Rights Attorney’s
Fees Awards Act of 1976, 42 U.S.C. § 1988, The Freedom of Information Act, 5 U.S.C. § 552(a)(4)(E),
The Privacy Act of 1974, 5 U.S.C. §552a, the Government-in-the-Sunshine Act. 5 U.S.C. § 552b, The
Truth-in-Lending Act, 15 U.S.C. §§ 1640(a), 1667b(a), 1667d(a) (1982), the Fair Credit Reporting Act, 15
U.S.C. §§ 1681n, 1681o (1982), and the Fair Debt Collection Practices Act, 15 U.S.C. § 1692k(a) (1982).
Fee may be collected from the government if the government’s position is not substantially justified under
the Equal Access to Justice Act, 5 U.S.C. § 504 and 28 U.S.C. § 2412.
2
This paper does not contain cases from every circuit on every issue, but provides an
overview of the common issues that come up in ERISA fee litigation.
A. ERISA’s Statutory Authority for Attorney Fees.
ERISA’s fee provision provides as follows:
In any action under this subchapter [other than actions on behalf of the
plan under 29 U.S.C. § 1145, ERISA § 515 dealing with employer
contributions to a multi-employer plan], the court in its discretion may
allow a reasonable attorney’s fee and costs of action to either party.
29 U.S.C. § 1132(g)(1), ERISA § 503(g)(1).
B. When Is A Party Entitled to Recover Fees Under ERISA?
Determining whether a party is entitled to fees under ERISA involves a two-step process.
First, a party claiming fees must show “some degree of success on the merits” before a
court may award attorney fees. Hardt v. Reliance Standard Life Ins. Co., 130 S.Ct. 2149,
2150 (2010); see also Simonia v. Glendale Nissan/Infiniti Disability, 608 F.3d 1118,
1120-21 (9th Cir. 2010). Second, if a claimant passes through the “some degree of
success on the merits” door, the court must determine whether to exercise its discretion
and award fees under § 1132(g)(1). Simonia, 608 F.3d at 1120 (“Only after passing
through the ‘some degree of success on the merits’ door is a claimant entitled to the
district court’s discretionary grant of fees.”). In most jurisdictions, this discretionary
decision is governed by a five-factor test3 which is discussed below. See id.
1. A fee claimant must show “some degree of success on the merits.”
In Hardt, the Supreme Court addressed the question of when attorneys’ fees are available
in ERISA cases. Hardt involved a case where the district court had remanded a claim
back to the plan administrator for further consideration.4 The Fourth Circuit had held that
such a remand did not make the plaintiff, Hardt, a prevailing party. Therefore, Hardt was
3 The five factors are: “(1) the degree of opposing parties' culpability or bad faith; (2) ability of opposing
parties to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees against the opposing
parties would deter other persons acting under similar circumstances; (4) whether the parties requesting
attorneys' fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a
significant legal question regarding ERISA itself; and (5) the relative merits of the parties' positions.”
Hardt, 130 S.Ct. at 2154 n. 1; Simonia, 608 F.3d at 1120; Quesinberry v. Life Ins. Co. of North Am., 987
F.2d 1017, 1029 (4th Cir. 1993).
4 The district court had denied the insurance company’s motion for summary judgment for multiple
reasons, but also denied Hardt's motion for summary judgment. Even though the district court found
“compelling evidence” that “Ms. Hardt [wa]s totally disabled due to her neuropathy,” and was “inclined to
rule in Ms. Hardt's favor,” the district court instead ruled that “it would be unwise to take this step without
first giving Reliance the chance to address the deficiencies in its approach.” Hardt, 130 S.Ct. at 2154. On
remand, Reliance found her to be disabled and awarded her approximately $55,000 in past-due benefits.
3
not entitled to ERISA attorneys’ fees.5 The Supreme Court disagreed, and explained that
requiring a party to be a “prevailing party” was contrary to the language of the statute:
“We reject this interpretation as contrary to § 1132(g)(1)’s plain text. We hold instead
that a court ‘in its discretion’ may award fees and costs ‘to either party,’ ibid., as long as
the fee claimant has achieved ‘some degree of success on the merits,’ Ruckelshaus v.
Sierra Club, 463 U.S. 680, 694, 103 S.Ct. 3274, 77 L.Ed.2d 938 (1983).” Hardt, 130
S.Ct. at 2152. The Supreme Court came to this conclusion after analyzing the statutory
language, and noted that the term “prevailing party” is not found in the statute, but,
rather, that the statute allows a court to award fees, in its discretion, to “either party.” Id.
at 2156.
The Court went on to explain that, while a party need not be a “prevailing party” in the
technical sense, a party should still obtain some success to be awarded attorneys’ fees.
The Court explained that, under the American Rule, parties are responsible for their own
attorneys’ fees unless a statute says otherwise. The Court then compared the language of
many fee shifting statutes, and noted that many, if not most of them, contained language
requiring a party to be a “prevailing party.” However, the Court noted that, even in those
few statutes, like this one, that did not require a party to be a “prevailing party,” Congress
did not intend for courts to abandon the American Rule. Id. at 2156-8.
Comparing its previous cases discussing fee-shifting statutes without a prevailing party
requirement to the ERISA attorneys’ fee provision, the Court concluded that a party must
still obtain “some degree of success on the merits” before attorneys’ fees should be
awarded. Id., at 2158. The Court explained that,
[a] claimant does not satisfy that requirement by achieving “trivial success
on the merits” or a “purely procedural victor[y],” but does satisfy it 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.’”
Id. (internal citations omitted).
5 At the time, the Fourth Circuit applied a three-step analysis to determine whether fees should be awarded
under ERISA. The Supreme Court explained that analysis as it existed in the Fourth Circuit:
At step one of that framework, a district court asks whether the fee claimant is a
“prevailing party.” If the fee claimant qualifies as a prevailing party, the court proceeds to
step two and “determin[es] whether an award of attorneys' fees is appropriate” by
examining “five factors.” Finally, if those five factors suggest that a fees award is
appropriate, the court “must review the attorneys' fees and costs requested and limit them
to a reasonable amount.”
Hardt, 130 S.Ct. at 2154-5 (internal citations omitted).
4
The Court also found that, when exercising discretion under the ERISA fee statute, courts
are not bound by the five-factor test previously used by the Fourth Circuit (and every
other circuit6). Hardt, 130 S.Ct. at 2158. The Court explained that “[b]ecause these five
factors bear no obvious relation to § 1132(g)(1)’s text or to our fee-shifting jurisprudence,
they are not required for channeling a court's discretion when awarding fees under this
section.” The Court, however, did not reject the five-factor test entirely. Instead, it found
that once a claimant has demonstrated “some degree of success on the merits,” and thus
becomes eligible for a fees award under § 1132(g)(1), a court may consider the five
factors. Id. n. 8.
Thus, while not required, courts may still apply the five-factor test in exercising their
discretion. As explained below, since Hardt was decided, most circuits have held that the
district court should apply the five-factor test if a claimant meets the initial burden of
showing “some degree of success on the merits.”
a. Fees may be available for a remand, even if the plaintiff
ultimately loses on the merits.
In Hardt, the Court clarified that it was not a holding that a remand, alone, is enough to
entitle a party to fees. Instead, the Court noted that the facts “establish that Hardt has
achieved far more than ‘trivial success on the merits’ or a ‘purely procedural victory.’”
Id. at 2159. The Court explained that “[b]ecause these conclusions resolve this case, we
need not decide today whether a remand order, without more, constitutes ‘some success
on the merits’ sufficient to make a party eligible for attorney’s fees under § 1132(g)(1).”
Id.
Since the Court decided Hardt, lower courts have explored what qualifies as “some
degree of success on the merits.” In McKay v. Reliance Standard Life Ins. Co., 428
Fed.Appx. 537, 546-47, (6th Cir. 2011) (unpublished), the plaintiff claimed he became
disabled at around the time his employer changed coverage from a Unum LTD policy to
a Reliance Standard Policy. Both insurance companies denied the claim, essentially
arguing that the plaintiff became disabled, if at all, while the other company’s policy was
in place. The district court found that Unum’s denial was not arbitrary and capricious,
but that Reliance had made its decision using the wrong version of their Plan, and the
court remanded to Reliance to reconsider under the correct plan. The plaintiff petitioned
for attorneys’ fees, which were awarded by the district court.
Although the Sixth Circuit found that neither insurance company’s denial was an abuse
of discretion, it affirmed the district court’s award of attorneys’ fees. The court
explained:
6 See Secretary of Dept. of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985); Chambless v. Masters, Mates
& Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987); Quesinberry v. LINA, 987 F.2d 1017, 1029 (4th
Cir. 1993), Schwartz v. Gregori, 160 F.3d 1116, 1119 (6th Cir. 1998), Lain v. UNUM Life Ins. Co. of Am.,
279 F.3d 337, 347-348 (5th Cir. 2002); Hummell v. Rykoff & Co, 634 F.2d 446, 453 (9th Cir. 1980).
5
Reliance argues in vain that the Supreme Court’s decision in Hardt
supports its position. Reliance is correct that the Court in Hardt did not
give unlimited authority to courts to award fees under § 1132(g)(1).
Instead, it found that § 1132(g)(1) requires a claimant to show “some
degree of success on the merits,” and not merely a “trivial success on the
merits” or a “purely procedural victory.” Here, the district court explicitly
concluded that McKay's receipt of “another shot” at his claimed benefits
was a “success on the merits because his case was remanded for further
consideration”; in other words, McKay “achieved some degree of success”
by achieving a remand. Indeed, McKay was just like the Hardt claimant in
that he “persuaded the District Court to find that the plan administrator . . .
failed to comply with the ERISA guidelines” and that, as a result, he “did
not get the kind of review to which [he] was entitled under the applicable
law.” Reliance’s reliance on Hardt is misplaced; Hardt supports McKay’s
position.
McKay, 428 Fed.Appx. at 546-547 (quoting Hardt, 130 S.Ct. at 2158-59).
However, it is important to note that the Court in Hardt did not reach the decision of
whether a remand order, without more, constitutes “some success on the merits.” Potter
v. SABIC Innovative Plastics US, LLC, 2011 U.S. Dist LEXIS 118604, at *7 (S.D. Ohio
2011). The McKay decision, consistent with Hardt, held that a plaintiff realizes some
degree of success on the merits by achieving a remand based on failure to comply with
ERISA guidelines. Id..
In Yates v. Bechtel Jacobs Co, LLC, 2011 U.S. Dist. LEXIS 66820, at *6 (E.D. Tenn.
2011), the court found that the plaintiff’s request for attorneys fees was not ripe where a
claim was remanded based upon conflicting evidence in the record including evidence
that plaintiff engaged in self-limiting behavior during disability examinations. The court
concluded: “Though the Plaintiff may be entitled to attorney’s fees if he prevails on the
underlying ERISA claim, the Court finds that the remand decision in this case, without
more, does not qualify as success on the merits. Accordingly, the undersigned will
recommend that the Plaintiff’s Motion for Attorney Fees be denied, without prejudice, to
allow refilling should he prevail on his claim.” Id.
In Dickens v. Aetna Life Insurance Co., 2011 U.S. Dist. LEXIS 32595, at *17 (S.D.
W.Va. 2011), the court held that “the remand in this case represents a purely procedural
victory for plaintiff, and attorney’s fees are not warranted at this time.” In Dickens, the
plaintiff filed suit seeking restoration of his LTD Plan benefits. The court found that
Aetna abused its discretion in failing to address the evidence relating to plaintiff’s award
of disability benefits by the Social Security Administration and remanded the claim to the
plan administrator for reconsideration. In denying the plaintiff’s request for attorney’s
fees, the court found that “[i]n contrast to Hardt, the Court today expresses no opinion as
to whether plaintiff is disabled under the LTD Plan’s definition.” Id. at *17. In Hardt,
the Court determined that the plaintiff had shown some degree of success on the merits
on the basis of the district court’s finding that there was “compelling evidence that [the
6
claimant] is totally disabled” and its statement that it was “inclined to rule in [the
claimant’s] favor.” Id. at *16. In Dickens, however, the remand represented a “purely
procedural victory” and did not demonstrate any degree of success on the merits as is
required to obtain an award of attorney’s fees. Id. at *17.
Following Hardt, other courts have awarded fees for a remand. For example, in Olds v.
Retirement Plan of Intern. Paper Co., Inc., 2011 WL 2160264, 3 (S.D. Ala. 2011), the
court awarded the full amount of attorney fees requested by the plaintiff following a
remand back to the plan to conduct a full and fair review. The court stated: “That the
relief the plaintiff received on this meritorious claim is a full and fair administrative
review rather than a guaranteed award of benefits . . . does not convert his substantial
success on that claim into failure or trivial success.” Id.
Similarly, in Blajei v. Sedgwick Claims Mgmt. Servs., 2010 U.S. Dist. LEXIS 102793
(E.D. Mich. 2010), the district court remanded a case back to an administrator after
finding the administrator acted arbitrarily by relying on an IME that did not address,
much less rebut, a treating physician’s opinion, and by relying on medical records
reviews that cherry-picked the evidence. According to the court, the administrator
“breached the procedural protections provided by ERISA and its implementing
regulations.” Id. at 4. Following Hardt, the court found that it could easily determine that
the plaintiff was successful without a “lengthy inquiry” into whether the success was
substantial or reached a central issue. The court found the “[w]hile Plaintiff was not
awarded [continuing benefits], Plaintiff achieved ‘some degree of success on the merits.’
The termination of benefits by Sedgwick, GM, and the GM EBPC has been found
arbitrary, and Plaintiff is now entitled to a fresh review of her claim.” Id. at 8.
In Adair v. El Pueblo Boys & Girls Ranch, 2013 WL 4775927 (D. Colo. 2013), the court
awarded attorney fees because the district court had earlier remanded the benefit claim,
and benefits were partially approved after remand.
b. If the insurance company decides to pay a claim while a court
case is pending, a court may still award fees.
What happens if an insurance company changes its mind and decides to pay a claim
while litigation is going on but before the court makes a ruling on the merits or enters
judgment? One court has held that attorneys’ fees may be available in that situation,
finding that to be “some success on the merits” under Hardt. In Hollingshead v. Stanley
Works Long Term Disability Plan, 2012 U.S. Dist. LEXIS 175253, (D. Colo. 2012), a
plaintiff filed his complaint in December 2010, alleging that Aetna had not paid benefits
due under the plan, and also had not made a final decision on the plaintiff’s claim. Ten
months later, in October 2011, while the case was pending before the court, but before
the court entered judgment, Aetna reversed its denial of plaintiff’s claim, and in
December 2011 paid the claim. Id, at 2. The defendant argued that the Plaintiff should
not be awarded fees because the plaintiff did not obtain a judgment. Id. at 4.
The court noted that “[o]nly after Plaintiff filed this lawsuit and engaged in extensive
litigation and motion practice did Defendant Aetna ultimately reverse its finding and
7
award Plaintiff benefits under the Plan. Indeed, Plaintiff endured a nearly two-year fight
to obtain benefits that were originally paid to him, but later taken away.” Id. at 5. The
court rejected the Defendant’s arguments, and held that “a Plaintiff is not required to first
obtain a judgment on the merits in order to recover reasonable attorneys' fees and costs in
an ERISA action, and the Court will not impose such a hurdle.” Id. at 5-6.
Similar cases may be found in other circuits. For example, in Kirkpatrick v. Liberty Mut.
Group, Inc., 2012 U.S. Dist. LEXIS 83925 (S.D. Ind. 2012), where the court ordered a
remand, after finding that the insurance company’s decision to deny benefit was arbitrary
and capricious, and specifically, where a review of the claim decision “reveals a
physician-review process that is simply riddled with obvious errors and inconsistencies,”
an award of fees for remand was appropriate. Id. at 9. In Kirkpatrick, the defendant
argued that the award would be premature, because the defendant had appealed the order
remanding (something that many circuits would not allow). The court disagreed, and
held that the remand, and reasons for it, provided some success on the merits. However,
after setting the amount of fees owed, the court did agree with the Defendants to stay
enforcement of the order pending the outcome of the appeal. Id. at 11.
Other district courts, however, have declined to award attorney fees where the case is
resolved “outside the courtroom.” Boyle v. International Brotherhood of Teamsters
Local 863 Welfare Fund, 2012 U.S. Dist. LEXIS 170330, at *30 (D.N.J. 2012). In Boyle,
plaintiff filed suit in June 2011, and later that month the Fund restored health care
coverage and in October 2011, the Fund offered to reimburse out-of-pocket medical
expenses. Id. at *26. Plaintiff argued that, pursuant to the “catalyst theory”, the pressure
generated by the lawsuit was the reason for the Fund’s voluntary restoration and
reimbursement. “Under the catalyst theory, a plaintiff’s counsel may be awarded fees on
the basis of voluntary action taken by the defendant if ‘the pressure of the lawsuit was a
material contributing factor in bringing about [the] extrajudicial relief.’” Id. at *27.
The Court held that ERISA does not permit fee shifting under the catalyst theory. Id. at
*28; see also Scarangella v. Group Health, Inc., No. 10-254, 2012 U.S. Dist. LEXIS
92433, at *17, n. 5 (S.D.N.Y. 2012) (“‘[T]he catalyst doctrine does not apply to
attorneys’ fee applications under ERISA.”’) (internal citations omitted). The Court
reasoned that the Supreme Court’s requirement that plaintiffs show some success “on the
merits” presumes, at a minimum, that this success be before the court. Boyle, 2012 U.S.
Dist. LEXIS 170330 at *29. Accordingly, the court found “that where the only success
counsel can point to is outside the courtroom, there has not been even partial success ‘on
the merits,’ and there can be no fee shifting under § 1132(g)(1).” Id.
Similarly, district courts in Pennsylvania have held that where the court has made no
determination on the merits, an award of attorney’s fees is not warranted. Staats v.
Procter & Gamble Long Term Disability Allowance Plan, 2012 U.S. Dist. LEXIS
121289, at *14 (W.D. Pa. 2012); Zacharkiw v. The Prudential Insurance Company of
America, 2012 U.S. Dist. LEXIS 21242, at *14 (E.D. Pa. 2012). In Staats, the court
found that in accordance with Zacharkiw, where a defendant “‘voluntarily reinstates a
claimant’s benefits in an administrative appeal based on substantial new evidence without
8
any significant court involvement, that claimant has not achieved ‘some success on the
merits’ of his ERISA claim and cannot recover attorney’s fees and costs under Hardt.’”
Staats, 2012 U.S. Dist. LEXIS 121289, at * 14 (internal citations omitted).
The Court in Zacharkiw, distinguished the facts from Hardt and found as follows:
Other than granting the parties’ joint request to stay this litigation pending
Zacharkiw’s administrative appeal, we have had little involvement in this
matter. We did not make any finding as to whether Prudential improperly
terminated Zacharkiw’s LTD benefits in the first place. We did not make
any findings as to whether Prudential improperly denied Zacharkiw’s first
administrative appeal. We did not decide the exhaustion question. We did
not rule on any summary judgment motions, as the parties submitted
none. . . . Finally, we did not remand this matter to Prudential for further
consideration of . . . the old record. As such, our actions in this case bear
no resemblance to the active role played by the district court judge in
Hardt, who found ‘compelling evidence’ of Ms. Hardt’s disability and
directed the insurance company to reevaluate her claim or face an adverse
court ruling. In short, the parties here resolved this dispute among
themselves at the administrative level, not in this Court. Additionally, and
importantly, based on the record before us, we believe that Zacharkiw’s
new evidence of disability, not this lawsuit, caused Prudential to change
course and reinstate Zacharkiw’s benefits.
Zacharkiw, 2012 U.S. Dist. LEXIS 21242, at *11-12.
In Binaley v. AT&T Umbrella Benefit Plan No. 1, __ F. Supp. 2d _, 2013 WL 5402236
(N.D. Cal. 2013), the court denied plaintiff’s request for fees because “[t]he evidence
shows that Plaintiff did not serve Defendants with the Complaint until after the decision
had been made to reverse the previous denial and award of LTD benefits [and Defendants
had no prior knowledge of the lawsuit].”
d. Defeating the opposing party’s motion for summary judgment
may be “some success on the merits.”
In Scarangella v. Group Health, Inc., 731 F.3d 146, 153 (2d Cir. 2013), the court
addressed a complicated, three-way litigation concerning health insurance coverage under
ERISA. Scarangella’s wife was covered under his health plan through his employer,
Village Fuels, and the benefits were provided through an insurance policy issued by
Group Health, Inc (GHI). GHI claimed that Scarangella should not have been a covered
employee after reviewing some of his wife’s medical bills, and at first attempted to
cancel the whole policy and rescind all the benefits, but later only sought to rescind the
coverage and sought restitution for the payments made for Scarangella’s wife’s bills from
Scarangella and Village Fuels.
9
The district court dismissed GHI’s claim of restitution from Village Fuels, as well
similarly dismissed a counter-claim by Village Fuels. In the first relevant part of the
decision on fees the court found “that Village Fuel obtained at least ‘some degree of
success on the merits’ through the dismissal of GHI's restitution claim, and the district
court erred in classifying this success as merely a procedural victory.” The Second
Circuit noted that, even though both parties had claims dismissed, that did not mean that
neither party had success, but that both parties had success. The case was remanded to
calculate attorneys’ fees for Village Fuels.
e. “Some success on the merits” can include voluntary dismissal
of an opposing party’s claim.
In Scarangella, the court also allowed attorneys’ fees to be awarded where the opposing
party voluntarily dismissed some of its claims. After the parties settled claims between
GHI and Scarangaella, GHI voluntarily dismissed claims it had brought against Village
Fuels, the employer/plan administrator. The court explained:
Where, however, the parties already have received a tentative analysis of
their legal claims within the context of summary judgment, a party may be
able to show that the court’s discussion of the pending claims resulted in
the party obtaining relief. This is in line with the underlying policy
considerations of ERISA that we are to construe broadly.
Scarangella, 731 F.3d at 155. The Second Circuit went on to explain:
[W]e are also hesitant to create an extra-statutory rule requiring success be
obtained only by court order. . . . Doing so also could have the adverse
impact of discouraging settlement where a plan beneficiary is forced to
bring potentially expensive litigation in order to obtain the benefits or
process rightfully owed to them, only to be denied the right to seek
attorney's fees.
Id. at 155.
f. When the opposing party changes its behavior as a result of the
lawsuit, that change can be “some success on the merits” even
if the rest of the case does not result in a judgment.
In another case decided by the Second Circuit, plaintiff Carlson sought relief for herself
and similarly situated plan participants that her retirement plan did not properly credit her
per-ERISA, pre-break in service employment under parity rules. In Carlson v. HSBC-
North Am. (US) Ret. Income Plan, 2013 U.S. App. LEXIS 19052, 3-4 (2d Cir. 2013)
(unpublished), the court explained that after the plaintiff brought her suit, the defendant
plan amended its plan to properly credit the pre-ERISA, pre-break in service for her and
others like her. Id. The district court dismissed her claim for attorneys’ fees under
ERISA, but the Court of Appeals reversed:
10
Carlson’s lawsuit prompted defendants to modify how the Plan credited
pre-ERISA breaks in service — a change which provided Carlson most of
the benefits she sought. Prior to the lawsuit, the Committee refused to
credit Carlson's first 5.3 years of service fully and refused to be bound by
McDonald. Only after Carlson filed her present suit, and only after the
defendants answered the complaint, did the defendants finally concede
that McDonald applies. And only after Carlson rejected an offer to settle
her individual claims did Amendment Eight pass, crediting Carlson's pre-
ERISA, pre-break in service employment at a 100% accrual rate. . . . [H]er
success in pushing defendants to comply with the rule of parity was hardly
“trivial” or a “purely procedural victory.” Thus, Carlson achieved, at a
minimum, some success on the merits and is eligible for an award of
attorney's fees under 29 U.S.C § 1132(g)(1).
Id., 2013 U.S. App. LEXIS 19052, at 12-13 (quoting Hardt, 130 S. Ct. at 2158).
2. If a party demonstrates “some success on the merits,” courts
will then apply the five-factor test in deciding whether to
award fees under 29 U.S.C. § 1132(g)(1).
In Hardt, the Court held that, although not required, a district court could apply the five-
factor test in exercising its discretion in determining whether fees should be awarded
under § 1132(g)(1). Again, the five factors are:
(1) the degree of the opposing party’s culpability or bad faith;
(2) the opposing party's ability to satisfy an award of attorney's
fees; (3) the deterrent effect of an award on other persons under
similar circumstances; (4) whether the party requesting fees
sought to confer a common benefit on all participants and
beneficiaries of an ERISA plan or resolve significant legal
questions regarding ERISA; and (5) the relative merits of the
parties’ positions.
Hardt, 130 S.Ct. at 2158. Since Hardt was decided in 2010, several courts have held that
a district court must consider the five factors before exercising its discretion to award fees
in ERISA cases. Scarangella, 731 F.3d at 156 (2d Cir. 2013); Raybourne v. Cigna Life
Ins. Co. of New York, 700 F.3d 1076, 1090 (7th Cir. 2012); National Sec. Sys, Inc. v. Iola,
700 F.3d 65, 103-04 (3d Cir. 2012) (“Once satisfied that a party has met that threshold
standard [of “some degree of success on the merits”], the court must consider the [five]
policy factors in determining whether to award fees and costs . . .”); Treasurer, Trustees
of Drury Indust., Inc. Health Care Plan & Trust v. Goding, 692 F.3d 888, 898-99 (8th
Cir. 2012); Cross v. Quality Management Group, LLC, 491 Fed.Appx. 53, 2012 WL
4465227 (11th Cir. 2012); Williams v. Metro. Life Ins. Co., 609 F.3d 622, 635 (4th Cir.
2010) (“[W]e conclude that once a court in this Circuit determines that a litigant in an
ERISA case has achieved some degree of success on the merits, the court should continue
to apply the general guidelines that we identified . . . when exercising its discretion to
11
award attorneys’ fees to an eligible party.”) (internal quotation marks omitted); Simonia,
608 F.3d at 1119, 1121 (9th Cir. 2010) (holding that “after determining a litigant has
achieved some degree of success on the merits, district courts must still consider the
Hummell factors before exercising their discretion to award fees under § 1132(g)(1).”);
Thies v. Life Ins. Co. of North Am., 839 F.Supp.2d 886, 891 (W.D. Ky. 2012) (“Once a
court determines that attorney’s fees are available because a party has achieved “some
degree of success on the merits,” whether those fees should be awarded is governed by
the [five] King factors.”); Ortiz v. A.N.P., Inc., 768 F.Supp.2d 896, 906 (S.D. Tex. 2011)
(“Subsequent to the Hardt decision, several Courts of Appeal and district courts have
held that these five factors should continue to be applied by a court when exercising its
discretion to award attorneys' fees to an eligible party.”) (collecting cases).
In Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 111 (2d Cir. 2011), a successful ERISA
defendant sought attorneys’ fees, and argued that, because the defendant achieved “some
success on the merits,” the court abused its discretion by not awarding attorneys’ fees.
The Second Circuit disagreed, and explained that the “five factor” test should still be
used where those factors are applicable.7 The court found that Hardt
does not disturb our observation that “the five factors very frequently
suggest that attorney’s fees should not be charged against ERISA
plaintiffs.” This “favorable slant toward ERISA plaintiffs is necessary to
prevent the chilling of suits brought in good faith.” For this reason, when
determining whether attorney’s fees should be awarded to defendants, we
focus on the first Chambless factor: whether plaintiffs brought the
complaint in good faith. After a thorough review of the record, we
conclude that the district court did not abuse its discretion in denying fees
in the present case.
Toussaint, 648 F.3d at 111 (quoting Salovaara v. Eckert, 222 F.3d 19, 28 (2d Cir. 2000));
see also Tomlinson v. El Paso Corp., 2011 WL 1158637, 4 (D. Colo. 2011) (Finding that
Hardt did not mandate an award of fees simply by achieving “some success on the
merits,” but rather, when considering the five factors previously adopted by the Tenth
Circuit in Graham v. Hartford Life, 501 F.3d 1153, 1162 (10th Cir. 2007), the court
denied defendant’s motion for attorneys’ fees).
Additionally, there is a long history of cases discussing the five factors pre-Hardt. These
cases are relevant to the analysis now. Graham, 501 F.3d at 1162 (10th Cir. 2007);King,
775 F.2d at 669 (6th Cir. 1985); Chambless, 815 F.2d at 871 (2d Cir. 1987); Quesinberry,
987 F.2d at 1029 (4th Cir. 1993), Schwartz, 160 F.3d at 1119 (6th Cir. 1998), Lain, 279
F.3d 347-48 (5th Cir. 2002); Hummell, 634 F.2d at 453 (9th Cir. 1980).
Not all factors must be present to justify an award of assessed attorney’s fees. Curry v.
Contract Fabricators, Inc. Profit Sharing Plan, 891 F.2d 842, 849 (11th Cir. 1990)
(“these five factors are the 'nuclei of concerns [,]’ . . . which should guide but not control
7 The Second Circuit had previously adopted the five factor test in Chambless v. Masters, Mates & Pilots
Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987).
12
the district court's decision.” (internal quotes and citations omitted)); see also Schwartz,
160 F.3d at 1119 (6th Cir. 1998) (no single factor is determinative).
Because no single factor is determinative, some circuits say that the court must consider
each factor before exercising its discretion. See Wells v. United States Steel, 76 F.3d 731,
736 (6th Cir. 1996); Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983) (a
district court must consider all five factors); and McPherson v. Employees' Pension Plan
of American Re Insurance Co., 33 F.3d 253 (3d Cir. 1994). “[I]n each instance in which
the district court exercises its fee-setting discretion, it must articulate its considerations,
its analysis, its reasons and its conclusions touching on each of the five factors delineated
in Ursic.” Anthuis v. Colt Industries Operating Corp., 971 F.2d 999, 1012 (3d Cir. 1992).
But other courts have held that a district court is not required to consider all the factors.
See Beatty v. North Central Companies, Inc., 2002 WL 277277 (8th Cir. 2002) (The
district court may weigh the plaintiff’s good faith in asserting an ERISA claim and the
relative merits of the ERISA claims to deny defendant’s attorney’s fees, even when the
ERISA cause of action is brought against the defendant employer while other litigation
between the parties is ongoing); see also Griffin v. Jim Jamison, Inc., 188 F.3d 996, 997-
98 (8th Cir. 1999).
C. For what work are fees available under ERISA?
1. Fees are generally only available for “court time.”
Attorneys’ fees are available for work before the district court and during appellate
litigation. Secretary of Dep't of Labor v. King, 775 F.2d 666, 670 (6th Cir.1985). The
general rule in ERISA cases is that a plaintiff must exhaust her administrative remedies
before filing a case in court.
Most courts have held that the time spent exhausting administrative remedies, before the
case is filed, is not compensable time under the ERISA fee shifting provision. For
example, the Second Circuit has held that, “[29 U.S.C.] § 1132(g)(1) authorizes a district
court to award fees incurred only after a district court has assumed jurisdiction over a
case. Thus, fees incurred in administrative proceedings prior to filing suit in the district
court are unavailable. . .” Peterson v. Continental Cas. Co., 282 F.3d 112, 121, (2nd Cir.
2002) (interpreting the word “action” to mean formal judicial proceedings); see also
Cann v. Carpenters' Pension Trust Fund, 989 F.2d 313 (9th Cir. 1993) (not allowing an
award of fees incurred in administrative proceedings prior to a suit being filed in a district
court, construing ERISA "as limiting the award to fees incurred in the litigation in court."
Id. at 316.); Anderson v. Proctor & Gamble Co., 220 F.3d 449 (6th Cir. 2000) (a plaintiff
who prevailed in securing benefits during administrative proceedings before her plan
administrator could not recover fees for that proceeding.)
2. Time spent preparing to file the lawsuit counts as “court time.”
Cann also holds that time spent preparing for litigation (preparing the appeal, conferences
13
with client, etc. are compensable because the time is spent on tasks necessary for the
litigation.) See also LaSelle v. Public Service Co. of Colorado Severance Pay Plan, 988
F.Supp. 1348, 1352 (D. Colo. 1997) (“Interviews, consultation, preliminary research, and
various additional tasks unrelated to the administrative appeal all can, and generally do,
occur before work is commenced on the complaint” and are compensable.); Schneider v
Wisconsin UFCW Unions & Employers Health Plan, 13 F. Supp. 2d 837, 841 (E.D. Wis.
1998).
3. Fees may be available for the time spent before the administrator, if
the case is remanded by the court subject to the court’s jurisdiction
Several Circuits have held that if a district court remands a claim back to the
administrator, that decision is not a final, appealable, order. See, e.g., Bowers v. Sheet
Metal Workers’ Nat’l Pension Fund, 365 F.3d 535, 537 (6th Cir. 2004); Shannon v. Jack
Eckerd Corporation, 55 F.3d 5612 (11th Cir. 1995) (relying on since overturned principle
that SS remand orders are non-appealable). Therefore, when a court remands, it has not
issued a final decision, it has retained jurisdiction over the case. Since it has retained
jurisdiction, arguably, the attorney time spent on remand is also “court time” and may be
tie for which attorneys’ fees may be claimed.
In addressing an analogous issue, the Supreme Court has held that time spent on
administrative remand, while a court maintained jurisdiction, was “court time” and that
attorneys’ fees may be awarded for the time spent on further administrative proceedings
while a court retained jurisdiction over the matter. Sullivan v. Hudson, 490 U.S. 877, 892
(1989) (attorneys’ fees awarded under the Equal Access to Justice Act for time spent on
remand to Commissioner of Social Security while a court maintained jurisdiction.) The
Court held that “administrative proceedings may be so intimately connected with judicial
proceedings as to be considered part of [a] civil action for purposes of a fee award.” Id.
The Court explained that this intimate connection exists where a party has brought a suit
which remains within the court’s jurisdiction and “depends for its resolution upon the
outcome of the administrative proceedings.” Id.; see also Melkonyan v. Sullivan, 111 S.
Ct. 2157, 2162 (1991) (Explaining that Sullivan “stands for the proposition that in those
cases where the district court retains jurisdiction of the civil action and contemplates
entering a final judgment following the completion of administrative proceedings, a
claimant may collect EAJA fees for work done at the administrative level” even though
such fees are normally only available for work done in court.); Pennsylvania v. Delaware
Valley Citizens’ Council for Clean Air, 478 U.S. 546, 561 (1986) (attorneys’ fees
awarded under Clean Air Act for time expended pursuing enforcement of consent
decree); Johnson v. US, 554 F.2d 632, 633 (4th Cir. 1977) (attorneys’ fees awarded
during remand of case to Civil Service Commission: “In a sense this remanded
administrative proceeding was ancillary to [the plaintiff’s] initial action in the district
court.”)
Many courts have applied this logic to award attorneys’ fees for time spent on “remand.”
See e.g., Peterson v. Continental Cas. Co., 282 F.3d 112, 121 (2d Cir. 2002) (“The fact
that a court orders additional fact finding or proceedings to occur at the administrative
14
level does not alter the fact that those proceedings are part of the ‘action’ as defined by
ERISA.”); Rote v. Titan Tire Corp., 611 F.3d 960, (8th Cir. 2010) (allowing attorney fees
during administrative remand); Seal v. John Alden Life Ins. Co., 437 F. Supp.2d 674, 685
(E.D. Mich. 2006); Lindbergh v. UT Medical Group, 2006 WL 42174 at *4, note 7 (W.D.
Tenn. 2006) (unreported) .“While the Ninth Circuit has not yet weighed in on this issue,
it appears that the ‘general consensus among other district courts is that hours spent
representing a plan participant in a court-ordered remand proceeding are recoverable.’”
Day v. AT&T Disability Income Plan, 2010 U.S. Dist. LEXIS 132738 (N.D. Cal. 2010).
In Richards v. Johnson & Johnson, 2010 WL 3219138 (E.D.Tenn. 2010), the plaintiff
was denied fees for time spent on remand, but only because the plaintiff sought fees for
that time while the claim was still pending on remand, and the Plan had not made a
decision, so the court did not yet know whether the remand would result in some success
for the Plaintiff. The court8 in Richards noted that, “[e]ach of the district courts [in the
Sixth circuit] that has addressed the applicability of Anderson to post-suit fees has
concluded that fees incurred after a remand are recoverable.” Id.; see also Seal, 437 F.
Supp.2d at 685; Delisle v. Sun Life Assur. Co. of Canada, 2007 WL 4547884, at *5
(E.D. Mich. 2007) (holding that post-remand fees were recoverable); Smith v. Bayer
Corp. Long Term Disability Plan, 2006 WL 3053472, at *7 (E.D. Tenn. 2006) (same).
The Richards court noted that in all those cases, the benefits had been awarded on
remand or after the claim returned to the court. Id. at *8. So, while the Richards court
denied fees for the remand, the court explained that this decision “should not be
construed to express an opinion as to whether, assuming Plaintiff wins her benefits on
remand (as in Seal) or in a second suit (as in Delisle), she is entitled to fees she incurs
during administrative remand.” Id. at n. 7.
The Anderson case (the Sixth Circuit case holding fees were not available for work at the
administrative level in an ERISA case) is distinguishable from cases where the court
remands back to the administrator. In Anderson, the plaintiff filed suit to recover
attorneys’ fees after her claim was approved at the administrative level, prior to ever
filing suit. 220 F.3d at 452. She filed suit later, after she had won her case, seeking only
to recover fees incurred during the normal claims process. Id. The Sixth Circuit
distinguished Sullivan on the basis that the administrative proceedings for which the
Plaintiff sought fees were not conducted pursuant to a court order and were not closely
related to the substance of the issues before the court. Id. at 454. The plaintiff never
sought judicial review of her benefits claim; she had already won her benefits before she
filed a complaint in court. Id. The court focused heavily on the pre-litigation nature of
the requested fees, noting that exposure to liability for pre-litigation attorneys’ fees would
place undue pressure on a plan administrator to approve claims that the administrator
believed in good faith to be invalid. Id. at 455.
8 This analysis is found in the Magistrate Judge’s Report and Recommendation, which
was subsequently accepted and adopted in its entirety by the district court. Richards v.
Johnson & Johnson 2010 WL 3219133, *10 (E.D. Tenn. 2010)
15
4. Fees may be sought for the time spent litigating the request for fees.
Time devoted to the prosecution of the attorney fee motion itself is appropriately
included in the resulting award of fees. See Mogck v. UNUM Life Ins. Co. of America,
289 F.Supp.2d 1181, 1194 (S.D. Cal. 2003).
D. Is there a presumption that attorneys fees will be awarded?
Hardt and subsequent cases suggest that if a party achieves “some success on the merits,”
then the court should exercise its discretion to determine if fees should be awarded. But
nothing in Hardt suggests there should be a presumption that fees should or should not be
awarded. The Court did suggest that a lower court certainly could consider the five-
factor test to determine if fees should be awarded. Furthermore, prior to Hardt, the
Courts of Appeal were not clear on the issue of whether there is a presumption that fees
should be awarded.
Some courts have held there is no presumption that attorneys fees will be awarded in an
ERISA case. See Reilly v. Charles M. Brewer Ltd. Money Purchase Pension Plan and
Trust, 349 Fed.Appx. 155, 2009 WL 3326420 (9th Cir. 2009) (“We have repeatedly held
that in awarding fees pursuant to 29 U.S.C. § 1132(g), ‘the playing field is level’ and the
‘analysis . . . must focus only on the Hummell factors, without favoring one side or the
other.’”) (quoting Estate of Shockley v. Alyeska Pipeline Serv. Co., 130 F.3d 403, 408
(9th Cir. 1997)); Foltice v. Guardsman Prods., Inc., 98 F.3d 933, 936 (6th Cir. 1996)
(citing Armistead v. Vernitron Corp., 944 F.2d 1287, 1302-03 (6th Cir.1991)); See also
Wright v. Hanna Steel Corp., 270 F.3d 1336, 1343 (11th Cir, 2001), citing Freeman v.
Continental Ins. Co., 996 F.2d 1116, 1119 1121 (11th Cir. 1993) (“The law provides no
presumption in favor of granting attorney's fees to a prevailing claimant in an ERISA
action.”).
Other courts have held that where the defendant has abused his discretion, the court may
award fees, using language that implies there is a presumption that fees will be awarded.
For example, the Fifth Circuit stated:
If an administrator has made a decision denying benefits when the record
does not support such a denial, the court may, upon finding an abuse of
discretion on the part of the administrator, award the amount due on the
claim and attorneys' fees. . . We find such an abuse of discretion here, and
we will remand to the district court for a determination of damages and
reasonable attorney's fees.
Vega v. National Life Ins. Services, Inc., 188 F.3d 287, 302 (5th Cir. 1999). Similarly,
the Seventh Circuit has held:
there is a modest presumption that the prevailing party in an ERISA case
is entitled to a fee. Although we have formulated the test for when
attorneys' fees should be awarded under ERISA in various ways, we have
16
recently noted that the various formulations boil down to the same bottom-
line question: “Was the losing party's position substantially justified and
taken in good faith, or was that party simply out to harass its opponent?”
See Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 592 (7th Cir. 2000); See
also Hess v. Hartford Life & Acc. Ins. Co., 274 F.3d 456, 464 (7th Cir. 2001);
Bittner v. Sadoff & Rudoy Indus., 728 F.2d 820, 830 (7th Cir. 1984).
According to the Ninth Circuit, “a successful ERISA participant ‘should ordinarily
recover an attorney’s fee unless special circumstances would render such an award
unjust.’” McElwaine v. U.S. West Inc., 176 F.3d 1167, 1172 (9th Cir. 1999); but see
Reilly, 349 Fed.Appx. 155, 2009 WL 3326420 (9th Cir. 2009). Furthermore, in the Ninth
Circuit, a court is admonished to “keep at the forefront ERISA’s remedial purposes that
[ERISA’s provisions] ‘should be liberally construed in favor of protecting participants in
employee benefit plans.’” McElwaine, 176 F.3d at 1172 (citing Smith v. CMTA-IAM
Pension Trust, 746 F.2d 587, 589 (9th Cir. 1983)).
E. Fees Are Not Available Under ERISA if the Result of the Lawsuit is a
Holding that ERISA Does Not Apply to the Cause of Action.
Typically, fees are not available if the court holds that ERISA did not apply to the
lawsuit. If the underlying case is dismissed due to lack of subject matter jurisdiction (i.e.,
if a federal court holds that there is no federal subject matter jurisdiction because the
underlying case is not an ERISA case) then the court does not have jurisdiction to hear a
petition for attorneys fees under ERISA. See Knight v. Knight, 207 F.3d 1115 (9th Cir.
2000) (The Court of Appeals addressed the propriety of entertaining an attorney fee
application under ERISA, when the underlying action had been dismissed for lack of
subject matter jurisdiction. Held: because the district court lacked subject matter
jurisdiction under ERISA to hear the plaintiff's substantive claim, it similarly lacked
jurisdiction “to apply the statute's cost and fee-shifting provision . . .”); see also Rocco v.
New York State Teamsters Conference Pension and Retirement Fund, 281 F.3d 62, 2002
WL 220886 (2nd Cir. 2002) (“a party who succeeds in defeating a claim that ERISA is
applicable is not entitled to attorney's fees under ERISA for defending that claim.”);
Trans World Airlines, Inc. v. Sinicropi, 84 F.3d 116, 117 (2nd Cir. 1996) (per curiam),
cert. denied, 519 U.S. 949 (1996).
F. Fees Against a Losing Plaintiff.
While the Supreme Court explained in Hardt, supra, that a court may exercise its
discretion to award fees once a party achieves “some success on the merits,” the Court
also said that the five-factor test may still be used to guide the court’s discretion. As
explained above, the Second Circuit has addressed this issue since Hardt and found that,
by applying the five factors, fees should not be awarded against a losing plaintiff who
brought his claim in good faith. Toussaint 648 F.3d at 111 (A “favorable slant toward
ERISA plaintiffs is necessary to prevent the chilling of suits brought in good faith.”).
17
In Daul v. PPM Energy, Inc., 2011 WL 841145 at *2 (D. Or. 2011) the court stated:
Courts have generally found that the third and fourth Hummell factors are
more appropriately analyzed when determining whether to award fees to a
plaintiff, in contrast to a defendant, because the policy reasons behind the
Hummell analysis better apply to institutional litigants in the ERISA
arena. Tingley v. Pixley–Richards West, Inc., 958 F.2d 908, 910 (9th
Cir.1992). These policies recognize that a losing employer has
“necessarily violated ERISA,” whereas a losing plaintiff “may only be in
error or unable to prove his case.” Russell, 726 F.2d at 1416. Nevertheless,
courts still analyze these factors when a prevailing defendant seeks
attorney's fees and costs. Alfonso v. Tri–Star Search LLC, No. 07–1208,
2009 WL 2517080, at *5 (Aug. 14, 2009).
Id. The court also noted that “the Ninth Circuit has stressed that when examining
an attorney fee claim in an ERISA case, a court is not to favor one side over the
other because the statute makes clear that the playing field is level. Shockley v.
Alyeska Pipeline Serv. Co., 130 F.3d 403, 408 (9th Cir. 1997). Regardless, the
Ninth Circuit typically finds that attorney's fees should not be imposed against
ERISA plaintiffs. See, e.g., Flanagan v. Inland Empire Elec. Workers Pension
Plan & Trust, 3 F.3d 1246, 1253 (9th Cir. 1993).
The Second Circuit’s opinion in Toussaint is consistent with other Supreme Court
precedent, addressing whether it is appropriate to award attorneys’ fees against an
unsuccessful plaintiff, in the context of the right to petition the government for redress.
For example, BE & K Const. Co. v. N.L.R.B., 122 S.Ct. 2390, (2002) holds that the “[t]he
right of access to the courts is ... but one aspect of the right of petition.” However, there
“is a line of cases thus establishes that while genuine petitioning is immune from antitrust
liability, sham petitioning is not.” Id.
In the post-Hardt decision of 1 Lincoln Financial Co. v. Met. Life Ins. Co., 428 Fed.
Appx. 394 (5th Cir. 2011) (unpublished), the Fifth Circuit affirmed an award to MetLife
of $17,842.21 in attorney’s fees and costs. MetLife’s motion for summary judgment was
unopposed by the plaintiff, and the district court granted summary judgment in favor of
MetLife on all of the plaintiff’s claims. Accordingly, MetLife clearly succeeded on the
merits and the district court’s award of attorney’s fees after considering the five factors
was warranted.
Prior to Hardt, other courts had already set a high standard before fees would be charged
against a losing ERISA plaintiff. See Collins Pension & Ins. Comm. of the So. Cal. Rock
Prods., 144 F.3d 1279 (9th Cir. 1998) (Finding plaintiffs' position weak, but its claims
not frivolous or made in bad faith, therefore denial of attorney's fees not abuse of
discretion citing Hope v. Int'l Bhd. of Elec. Workers, 785 F.2d 826, 831 (9th Cir. 1986));
Buchanan v. Reliance Std. Life Ins. Co., 1998 U.S. Dist. LEXIS 12957 (D. Kan. 1998)
(explaining that “it generally is sufficient that plaintiff bears his own attorneys’ fees and
costs to deter ‘institution of a frivolous or baseless suit;’” therefore, because most ERISA
18
participants do not have substantial assets or net worth to begin with, the threat of the
plaintiff incurring his own attorney’s fees is more than sufficient deterrent, without the
threat of having to pay the winning side’s fees.
In the Seventh Circuit, the court looks to the factor of whether the claim by the Plaintiff
was brought in “bad faith” and explained that the party seeking fees would have to
submit competent evidence reflecting that the losing plaintiff engaged in litigation just to
harass the Defendant opponent. Meredith v. Navistar, 935 F.2d 124, 128-28 (7th Cir.
1991).
In Hoover v. Armco, Inc., 915 F.2d 355 (8th Cir. 1990), the court found that “[t]he district
court, however, may award attorney’s fees to a prevailing defendant under the bad faith
exception to the American Rule. Id. Under the bad faith exception, a trial court may
award attorney’s fees . . . when it finds ‘the losing party has 'acted in bad faith,
vexatiously, wantonly, or for oppressive reasons.’” Id. (citing Alyeska Pipeline Serv. Co.
v. Wilderness Soc'y, 421 U.S. 240, 258-59, 44 L. Ed. 2d 141, 95 S. Ct. 1612 (1975) and
quoting F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 129, 94
S. Ct. 2157, 40 L. Ed. 2d 703 (1974)). In Hoover, the plaintiff “intentionally advanced a
frivolous contention for an ulterior purpose.” Id. (citing Actors’ Equity Assn. v. American
Dinner Theatre Institute, 802 F.2d 1038, 1043 (8th Cir. 1986). After Armco fired him,
Hoover brought and doggedly pursued a baseless retaliatory discharge claim out of spite.
Nevertheless finding the district court did not abuse its discretion in denying Armco fees
on Hoover’s ERISA claim, the court continued:
The award of attorney's fees can have an “undesirable chilling effect on an
attorney's legitimate ethical obligation to represent his [or her] client
zealously.” Ford v. Temple Hospital, 790 F.2d at 349. As noted by the
Supreme Court in Christiansburg Garment Co. v. EEOC, 434 U.S. 412,
421-22, 98 S. Ct. 694, 54 L. Ed. 2d 648 (1978), it is important that a
district court resist the understandable temptation to engage in post hoc
reasoning by concluding that, because a plaintiff did not ultimately
prevail, his [or her] action must have been unreasonable or without
foundation. This kind of hindsight logic could discourage all but the most
airtight claims, for seldom can a prospective plaintiff be sure of ultimate
success. No matter how honest one's belief that he [or she] has been the
victim of discrimination, no matter how meritorious one's claim may
appear at the outset, the course of litigation is rarely predictable. Decisive
facts may not emerge until discovery or trial. The law may change or
clarify in the midst of litigation. Even when the law or the facts appear
questionable or unfavorable at the outset, a party may have an entirely
reasonable ground for bringing suit.
In Hess & Hess v. Reg-Ellen Machine Tool Corp., Employee Stock Ownership Plan, 367
Fed. Appx. 687 (7th Cir. 2010) (unpublished), the court affirmed the district court’s
award of attorney’s fees to the defendants. The plaintiffs and their attorney filed four
lawsuits against defendants in federal court arising out of changes in the value of their
19
retirement accounts. After prevailing on summary judgment for the fourth time, the
district court granted the defendants’ request for attorney’s fees. The Seventh Circuit
affirmed the district court’s finding that: “[T]he Hesses’ claim was not substantially
justified because it was barred by res judicata; it was not maintained in good faith
because the Hesses pressed on with this suit in spite of our warning in Hess II; and no
special circumstances made an award of fees unjust.”
G. Appealing a Fee Determination
The standard of review of district court’s fee determination is abuse of discretion.
Tiemeyer v. Community Mut. Ins. Co., 8 F.3d 1094, 1101-02 (6th Cir. 1993). “[A]n
abuse of discretion exists only when the court has the definite and firm conviction that
the district court made a clear error of judgment in its conclusion upon weighing relevant
factors.” Foltice v. Guardsman Prods., Inc., 98 F.3d 933, 939 (6th Cir. 1996) (quoting
Secretary of Dep't of Labor v. King, 775 F.2d 666 at 669), cert. denied, 520 U.S. 1143,
117 S.Ct. 1312, 137 L.Ed.2d 475 (1997).
A district court has discretion in determining the fee award. Hensley v. Eckerhart, 461
U.S. 424, 437, 103 S.Ct. 1933 (1983). However, “It remains important, however, for the
district court to provide a concise but clear explanation of its reasons for the fee award.
When an adjustment is requested on the basis of either the exceptional or limited nature
of the relief obtained by the plaintiff, the district court should make clear that it has
considered the relationship between the amount of the fee awarded and the results
obtained. Jordan v. Multnomah County, 815 F.2d 1258, 1263-1264 (9th Cir. 1987).
H. Calculating Fees to be Awarded.
“Once it is determined that the plaintiff is entitled to attorneys' fees, it is incumbent upon
the district court to ‘utilize the lodestar method to determine the amount to be awarded.’”
Lain, 279 F.3d at 348 (5th Cir. 2002) (citing Wegner v. Standard Ins. Co., 129 F.3d 814,
822 (5th Cir. 1997)). The calculation of the lodestar figure “requires the district court to
assess the ‘reasonable number of hours expended on the litigation and the reasonable
hourly rates for the participating attorneys, and then multiply the two figures together to
arrive at the “lodestar.” ’ Id. at 348.
1. Lodestar factors.
In order to calculate the “lodestar” figure, the court should consider twelve factors.
Johnson v. Georgia Highway Exp., Inc., 488 F.2d 714 (5th Cir. 1974). Johnson explains
that the factors are:
(1) the time and labor required; (2) the novelty and difficulty of the
questions; (3) the skill requisite to perform the legal service properly; (4)
the preclusion of employment by the attorney due to acceptance of the
case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7)
time limitations imposed by the client or the circumstances; (8) the
amount involved and the results obtained; (9) the experience, reputation,
20
and ability of the attorneys; (10) the “undesirability” of the case; (11) the
nature and length of the professional relationship with the client; and (12)
awards in similar cases.
488 F.2d at 717-19. These factors were derived directly from the American Bar
Association Code of Professional Responsibility, Disciplinary Rule 2-106. Id.
“The most useful starting point for determining the amount of a reasonable fee is the
number of hours reasonably expended on the litigation multiplied by a reasonable hourly
rate. This calculation provides an objective basis on which to make an initial estimate of
the value of a lawyer’s services.” Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The
Court explained that the burden is on the prevailing party to establish the hours and rate
claimed: “The party seeking an award of fees should submit evidence supporting the
hours worked and rates claimed. Where the documentation of hours is inadequate, the
district court may reduce the award accordingly.” Id.
The Supreme Court further considered the proper application of the lodestar method in
Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984); Riverside v.
Rivera, 477 U.S. 561, 106 S.Ct. 2686, 91 L.Ed.2d 466 (1986); Pennsylvania v. Delaware
Valley Citizens' Council, 478 U.S. 546, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986)
(Delaware Valley Citizens' Council I ); and Pennsylvania v. Delaware Valley Citizens'
Council, 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987) (Delaware Valley
Citizens' Council II ). Taken together, these cases hold that the “lodestar as calculated in
Hensley presumptively includes all of the twelve [“lodestar”] factors derived from the
ABA Code of Professional Responsibility DR 2-106 (1980) . . . except on rare occasions
the factor of results obtained. . .” Norman v. Housing Authority of City of Montgomery,
865 F.2d 1292, 1299 (11th Cir. 1988).
In other words, in most cases, the entire calculation will be to take the reasonable market
rate and multiply it by the hours reasonably expended. The lodestar factors are largely
subsumed in the hourly rate requested and in the decision as to what hours were
reasonably expended. Factors such as the skills and experience of the attorney, for
example, are subsumed in the “market rate” that is included in the basic calculation. See
Hensley 461 U.S. at n. 9; Delaware Valley, 106 S.Ct. at 3098; Norman 865 F.2d at 1300;
Mares v. Credit Bureau of Raton, 801 F.2d 1197, 1201 (10th Cir 1986).
Courts do not allow an enhancement to the lodestar fee for a contingency contract. City
of Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992). This rule
has been applied in the ERISA context. See Cann, 989 F.2d at 316 (9th Cir. 1993);
Murphy v. Reliance Standard Life Ins. Co., 247 F.3d 1313, 1314 (11th Cir. 2001).
2. What hours should be considered “reasonably expended” as part of
the “lodestar” calculation?
In Hensley, the Court cited with approval the previous cases that held that
21
Where a plaintiff has obtained excellent results, his attorney should
recover a fully compensatory fee. Normally this will encompass all hours
reasonably expended on the litigation, and indeed in some cases of
exceptional success an enhanced award may be justified. In these
circumstances the fee award should not be reduced simply because the
plaintiff failed to prevail on every contention raised in the lawsuit.
461 U.S. at 435; see also Norman v. Housing Authority of City of Montgomery, 865 F.2d
1292 (11th Cir. 1988).
3. How do you prove the “reasonable” hourly rate?
A reasonable hourly rate is the prevailing market rate in the relevant legal community for
similar services by lawyers of reasonably comparable skills, experience, and reputation.
Blum, 465 U.S. at 895-96 n. 11, 104 S.Ct. at 1547 n. 11. Satisfactory evidence at a
minimum is more than the affidavit of the attorney performing the work. Id.
4. What evidence is to be considered in determining the reasonable
hourly rate?
The starting point for determining the reasonable hourly rate for attorneys’ is the
attorneys regular or published rate. Counsel for the prevailing party may submit “specific
evidence of his or her actual billing practice during the relevant time period. . .This
information . . . will provide important substantiating evidence of the prevailing
community rate . . . [T]he actual rate that applicant’s counsel can command in the market
is itself highly relevant proof of the prevailing community rate.” National Ass’n of
Concerned Veterans v. Secretary of Defense, 675 F.2d 1319, 1326 (D.C. Cir. 1982).
However, such affidavits should be supported with affidavits or testimony from other
attorneys.
Evidence of rates may be adduced through direct evidence of charges by
lawyers under similar circumstances or by opinion evidence. The weight
to be given to opinion evidence of course will be affected by the detail
contained in the testimony on matters such as similarity of skill,
reputation, experience, similarity of case and client, and breadth of the
sample of which the expert has knowledge.
Norman, 836 F.2d at 1299. But, “generalized and conclusory ‘information and belief’
affidavits from friendly attorneys presenting a wide range of hourly rates will not
suffice.” National Ass’n of Concerned Veterans, 675 F.2d at 1325. The affidavits should
state what type of litigation the rates refer to, whether that is a current rate or past rate,
whether it is an average or for a specific attorney. “The best evidence would be the
hourly rate customarily charged by the affiant himself or by his law firm . . . or based on
the affiant’s personal knowledge about specific rates charged by other lawyers or rates
for similar litigation.” Id. at 1325-1326.
22
Evidence from prior cases can also be used to determine what hourly rate is reasonable.
“Evidence submitted by attorney fee applicants in prior cases may also be relied on in
compiling an attorney fee application. There is no requirement that each attorney
develop all of the evidence for the hourly rate he seeks from scratch.” National Ass’n of
Concerned Veterans, 675 F.2d at 1326.
Evidence submitted by attorneys in prior cases may be used again as evidence; however,
fee applicants should argue against courts using prior awards as “setting the fee” in
current cases where the lower rates in older cases do not reflect the current market rate.
The Eleventh Circuit has found cause to caution against the use of prior awards in setting
hourly rates. Firstly, use of prior awards has an improper collateral estoppel and issue
preclusion effect, making prior awards binding on individuals who were not parties to,
and thus had no influence on, the prior litigations. Also, obedience to precedent is static,
holding rates at the same level for long periods of time. This is directly contrary to what
we all know about market rates: they go up, particularly to reflect cost of living and
inflation. Thus, the Eleventh Circuit held:
prior awards are not direct evidence of prior behavior; the court is not a
legal souk. Of course there is some inferential evidentiary value to the
prior award, because in theory the prior court based the award on the
market rate. But giving prior awards controlling weight over the superior
evidence of a lawyer’s actual billing rate equates to giving the prior
awards issue-preclusive value against a party whose interests were not
even arguably represented in the prior litigation.
Dillard v. Greensboro, 213 F.3d 1347, 1355 (11th Cir. 2000).
The following California district court case illustrates the court’s reluctance to accept at
face value the declarations of other plaintiff’s attorneys to bolster the rates of the
prevailing attorney. In Chellino v. Kaiser Found. Health Plan, 2010 U.S. Dist. LEXIS
20723 (2010), the court found an attorney’s hourly rate of $550 unreasonable because:
(1) the court found a 2009 case with another court where the attorney submitted a
declaration in support of another attorney’s fee motion stating that his hourly rate was
$400/hour; and (2) the attorney failed to produce declarations from other attorneys. In
reducing his hourly rate to $500 from $550, the court also noted that the 2010 economy
has not changed significantly since 2009.
Courts may also consider evidence from third party sources. For example, Mr. Buchanan
has had success using the Altman Weil corporation Survey of Law Firm Economics as
evidence from an objective third party as to prevailing rates in EAJA cases, another
federal fee shifting statute. In an unpublished case in the Eastern District of Tennessee,
the Court considered The 1998 Survey of Law Firm Economics, to ascertain the market
rate for attorney compensation. Hackney v. Apfel, 3:98-cv-58 (E.D. Tenn., Memorandum
and Order on EAJA fees, August 13, 1999). The court found the Altman Weil Survey to
be “relevant and persuasive evidence of a reasonable prevailing market rate. . .” Id.
(emphasis added). However, in a more recent case concerning the hourly rates for
paralegals, London v. Halter, 134 F.Supp.2d 940 (E.D.Tenn. 2001) the same court was
23
not persuaded by The 2000 Small Firm Economic Survey that the market rate for
paralegals was higher than $45 an hour.9
Another issue that comes up is whether fees should be enhanced under the Lodestar
method if the attorney’s contract with his client is contingent. Many courts will not
enhance a lodestar amount in a fee-shifting case based on a contingency contract. City of
Burlington v. Daugue, 505 U.S. 557, 112 S.Ct. 2638 (1992). However, where the
contingency fee results in a fee lower than the lodestar amount, the contingency fee is not
a limit on the amount that can be recovered. Blanchard v. Bergeron, 489 U.S. 87, 109
S.Ct. 939, 103 L.Ed.2d 67 (1989).
5. Is the amount recovered a cap on the attorneys’ fees?
Several courts have that the amount recovered is not a cap on attorneys’ fees and have
awarded fees in excess of the actual benefits awarded. See, e.g., West v. Aetna, 188
F.Supp.2d 1096 (N.D.Iowa, 2002) (fee awarded was $98,960 for 503.8 hours of attorney
work to recover $67,000 in benefits, which was 147 % of the benefits recovered); Wilson,
et. al. v. Independence Blue Cross, 1999 U.S. Dist. LEXIS 9309 (E.D.Penn.,1999) (fee of
$63,344.90 awarded against recovered benefits of $6,800 and equitable relief); Porter v.
Elk Remodeling, Inc., 2010 WL 3395660, 10, 2010 U.S. Dist. LEXIS 89037 (E.D.Va.
2010) (After the Plaintiff was awarded $49,988.90 in damages, the court awarded
$76,672.60 in general litigation attorneys' fees and $33,139.80 in fees associated with a
sanctions motion); Grochowski v. Ajet Constr. Corp., 2002 U.S. Dist. LEXIS 5031, 2002
WL 465272 at *2 (S.D.N.Y. Mar. 27, 2002) (In a Fair Labors Standards Act case, where
plaintiffs were awarded approximately $26,000 in damages, the court awarded
$97,207.50 in attorneys fees. The court explained, “[c]ourts should not place an undue
emphasis on the amount of the plaintiff's recovery because an award of attorney fees here
‘encourage[s] the vindication of congressionally identified policies and rights.’ ” citing to
Fegley v. Higgins, 19 F.3d 1126, 1134–35 (6th Cir.1994)); Baird v. Boies, Schiller &
Flexner LLP, 219 F. Supp. 2d 510, 519-20 & n.7 (S.D.N.Y. 2002) (In a gender
discrimination case, Plaintiffs accepted an offer of judgment of $37,500, plus reasonable
attorneys' fees and costs to be set by the Court. The court awarded $54,723.93 in
attorneys’ fees.)
I. Rebuttal Evidence
“Once a fee applicant has provided support for his requested rate, the burden falls on the
[opposing party] to go forward with evidence that the rate is erroneous. And when the
[opposing party] attempts to rebut the case for a requested rate, it must do so by equally
specific countervailing evidence.” National Ass’n of Concerned Veterans v. Secretary of
Defense, 675 F.2d 1319, 1326 (D.C. Cir. 1982).10
Unless the fee applicant’s evidence is
9 These cases were filed under the Equal Access to Justice Act, not ERISA, but many of the techniques
overlap.
10
Interestingly, the LEXIS version of this case omits this very helpful language. It is in the WESTLAW
version. Its exclusion from the LEXIS version appears to be an error.
24
so weak that it may be challenged as unsubstantiated, “in the normal case the [opposing
party] must either accede to the applicant’s requested rate or provide specific contrary
evidence tending to show a lower rate would be appropriate.” Id.
A party opposing a fee award must meet its rebuttal burden by producing evidence
(including declarations of other counsel) challenging the accuracy and reasonableness of
the hours charged. Blum v. Stenson, 465 U.S. 886, 896 n.11 (1984); Gates v.
Deukmejian, 987 F.2d 1392, 1397-1398 (9th Cir. 1992); Envtl. Protection Info. Ctr. v.
Pacific Lumber, Co., 229 F.Supp.2d 993, 1005 (N.D.Cal. 2002). The failure to provide
such evidence waives the challenger's right to an evidentiary hearing before the District
Court on any factual questions at issue in a fee dispute. Blum, 465 U.S. at 892 n.5.
J. Fed. R. Civ. P. 54 and the Timing of Fee Petitions.
ERISA does not provide for a specific deadline for the filing a fee petition with the court.
If the court does not grant attorneys fees in its judgment, or state by when the winning
party should file a petition for fees, the safest approach is to file a fee petition within 14
days of the judgment, as set out in Fed. R. Civ. P. 54. Courts have held that “a motion for
fees and costs under § 1132(g)(1) falls under Fed. R. Civ. P. 54. Bittner v. Sadoff &
Rudoy Indus., 728 F.2d 820 (7th Cir. 1984).
In addition, Rule 54 sets out general rules for what must be disclosed and what may be
discovered in fee litigation, absent specific statutory guidance. This rule refers to specific
substantive law. Rule 54 usually should be considered in addition to or in conjunction
with the procedures for seeking and proving attorneys’ fees and costs that is set out in the
substantive statute under which fees are claimed.
Courts have held that the failure to comply with the 14-day requirement set forth in Rule
54(d)(2) constitutes a waiver of the right to seek attorney’s fees. See e.g., Allen v. Murph,
194 F.3d 722, 723-24 (6th Cir. 1999); United Industries, Inc. v. Simon-Hartley, Ltd., 91
F.3d 762, 765-66 (5th Cir. 1996).
Do not assume that the time is tolled. For example, a district court held that the
Defendant’s appeal of a preliminary injunction granted to a § 1983 plaintiff did not toll
the time for filing of plaintiff’s application for fees and costs. Doe v. Terhune, 121 F.
Supp.2d 773 (D.N.J. 2000).
Note that Rule 54 (d)(2)(D) allows the local court to set up its own procedures for
deciding fee issues. Check your local rules.
II. RECOVERY OF ATTORNEY FEES IN NON-ERISA CASES
Recovery of attorneys’ fees in non-ERISA disability insurance cases is dictated by state
law, and no two states are exactly identical in their approach to recovery. In order to
avoid a 50-state survey of recovery of attorneys’ fees in every jurisdiction, this Paper
focuses on the general trends in the recovery of attorneys’ fees with a few specific
25
examples from disability benefits cases. However, given the diverse nature of state law
governing non-ERISA disability insurance cases, reference to the statutes and case law of
each specific jurisdiction must be made to determine whether attorneys’ fees are
recoverable in a particular action.
A. The General Rule, With General Exceptions.
An insured who recovers against an insurer for refusal to pay benefits due under an
insurance contract may be entitled to reasonable attorneys’ fees, even in the absence of a
statute or contractual provision. This statement at first appears to be contrary to the
American Rule, whereby attorneys’ fees are generally not allowed, either as costs or
damages, unless recovery is expressly authorized by statute or contract. In taking a
survey of state law, however, it becomes evident that the exceptions to the American
Rule have subsumed the Rule itself in insurance cases.
First, many jurisdictions have adopted such statutory exceptions to the American Rule,
making it necessary to check the laws of the pertinent jurisdictions in determining
whether or not recovery of fees is available. In Kansas, attorneys’ fees cannot be
awarded absent statutory authority or agreement, and statutory approval for attorneys’
fees is provided by K.S.A. 40-256. See Johnson v. Westhoff Sand Co., Inc., 135 P.3d
1127 (Kan. 2006).
Second, some jurisdictions have created an additional exception to the American Rule:
where an insurer is found to have acted in bad faith in denying benefits due under an
insurance contract. This exception is unique to insurance benefits cases. In Connecticut,
courts have recognized exceptions for specific contractual terms providing for recovery,
statutes that confer such rights, and a bad faith finding for the prevailing party. See
AMCAT Corp. v. Greater New York Mutual Insurance Co., 923 A.2d 697 (Conn. 2007).
In Montana, the American Rule precludes the award of attorney’s fees in first party bad
faith cases, except where the insured is forced to shoulder burden of legal action to obtain
benefits. See U.S. Fidelity & Guarantee Co. v. Cont’l Ins. Co., No. CV-04-29-BLG-
RFC, 2010 WL 4595790 (D. Mont. Nov. 5, 2010).
However, not all jurisdictions follow the general rule for recovery of attorneys’ fees in
insurance benefits cases; that is, they remain loyal to the American Rule and not the
exceptions. In Massachusetts, each party in insurance coverage litigation is responsible
for their own attorneys’ fees and costs; fee shifting only available in duty to defend
situations. See Invensys Sys., Inc. v. Centennial Ins. Co., 473 F. Supp. 2d 211 (D. Mass.
2007).
In Brandt v. Superior Court, 693 P.2d 796 (Cal. 1985), the insured became totally
disabled but was denied disability benefits by the insurer. The insured brought suit for
breach of contract and for breach of the implied covenant of good faith and fair dealing.
Despite California Code of Civil Procedure section 1021, which precludes awards of
attorneys’ fees unless there is a contractual agreement for such an award between the
parties, the Court granted attorneys’ fees for the insured’s action to recover contract
benefits. According to the California Supreme Court, fees were part of the damages
26
wrongfully caused by the insurer’s wrongful actions and, thus, properly compensated in
this case as an economic loss.
B. Basis for Fee Award.
The basis for recovery of attorneys’ fees in non-ERISA cases varies by jurisdiction and
fall into two different categories: statutory jurisdictions and case law jurisdictions.
Additionally, the basis for recovery varies within each of the two categories.
1. Statutes
There are two general categories of statutes for the recovery of attorneys’ fees in
insurance benefits cases. First, some statutes automatically grant attorneys’ fees to the
plaintiff-insured if the insured is successful in his or her action on the insurance policy.
In Idaho, Idaho Code Annotated § 41-1839(4) provides the exclusive remedy for the
award of attorney’s fees in actions between insureds and insurers involving disputes
arising under policies of insurance. See Hayden Lake Fire Prot. Dist. v. Alcorn, 109 P.3d
161 (Idaho 2005). Such statutes are punitive in nature. In Hawaii, Section 431:10C–304
is a mandatory provision for parties who prevail against insurers for denial of personal
injury protection benefits. See Painsolvers, Inc. v. State Farm Mut. Auto. Ins. Co., CIV.
09-00429 ACK, 2012 WL 2529298 (D. Haw. June 28, 2012). In Oregon, Oregon Rev.
Stat. § 742.061 provides that the court “shall” award fees to a plaintiff who succeeds in
certain insurance coverage actions, including claims under life and disability policies.
Second, some statutes grant courts discretion in whether to award attorneys’ fees to a
successful party. These statutes treat attorneys’ fees as consequential, or economic,
damages. In Florida, Florida Statute § 624.155(3) provides that an insurer who suffers an
adverse adjudication at trial may be liable for damages, court costs, and reasonable
attorney’s fees incurred by the insured.
While this Paper identifies two general categories statutes, it is important to note that
there are thousands of state statutes regarding recovery of damages, and it is important to
check the specific statutes in a particular jurisdiction before making a determination
whether attorneys’ fees may be recovered. For example: some statutes require bad faith,
while some do not require bad faith; and many, but not all, statutes require that the
plaintiff be a prevailing party.
In Burnett v. Combined Ins. of Am., No. 5:10-CV-338 MTT, 2011 WL 6012523 (M.D.
Ga. Dec. 1, 2011), the insured fell from a tractor-trailer truck and claimed total disability,
and benefits were awarded by the insurer. Two years later, the insured fell from a step-
ladder and claimed a second disability, but the insurer denied the claim. The insured
filed suit for contract damages and requested attorneys’ fees under O.C.G.A.§ 13-6-11,
which awards fees where the defendant pleads insurer bad faith and the defendant
actually acted with bad faith. However, Georgia provides a specific statute for recovery
of attorneys’ fees for bad faith actions against insurers for failure to pay insurance
benefits –– O.C.G.A. § 33-4-6. By failing to plead for attorneys’ fees under the correct
statute, the insured was barred as a matter of law from recovering fees.
27
2. Case Law
There is a split of authority regarding case law–created recovery of attorneys’ fees in
insurance benefits cases. Some jurisdictions allow recovery; some jurisdictions do not
allow recovery. In Michigan attorney’s fees are a reasonable measure of damages for
breach of the duty to act in good faith and, thus, are recoverable even in the absence of a
statute. See Murphy v. Cincinnati Ins. Co., 576 F. Supp. 542 (E.D. Mich. 1983), aff’d,
772 F.2d 273 (6th Cir. 1985). However, in Colorado attorney’s fees incurred in securing
a judgment against an insurer for bad faith breach of an insurance contract are not
recoverable in the absence of a contractual provision allowing such recovery. See
Bernhard v. Farmers Ins. Exch., 915 P.2d 1285 (Colo. 1996).
Even in jurisdictions that allow recovery, there is a split of authority whether contract and
bad faith claims should be treated as one claim or separate claims. Where contract and
bad faith claims are treated as separate claims, a prevailing insured is able to recover
contract damages up to the policy limits and then tort damages for any excess. See claim
Universal Life Ins. Co. v. Veasley, 610 So. 2d 290 (Miss. 1992). Where contract and bad
faith claims are essentially treated as one claim, a prevailing insured is able to recover
consequential, compensatory, and punitive damages flowing from the breach of the
insurance contract. See DeChant v. Monarch Life Ins. Co., 547 N.W.2d 592 (Wis. 1996);
see also Filasky v. Preferred Risk Mut. Ins. Co., 152 Ariz. 591, 734 P.2d 76 (1987).
In Nugent v. Unum Life Ins. Co. of Am., 752 F. Supp. 2d 46 (D.D.C. 2010), the insured
was involved in a car accident and, as a result, suffered debilitating migraine headaches.
The insured stopped working as a physician and made a claim under her disability
income policy. The insurer denied the claim after the insured returned to work as a part-
time neuroradiologist. The insured sued for breach of the covenant of good faith and fair
dealing for and intentional infliction of emotional distress. The insurer moved to dismiss
the insured’s claims. The court dismissed the claim for emotional distress but allowed
the bad faith claim to continue. Punitive damages were denied because the District of
Columbia requires an independent tort for punitive damages awards, and breach of
contract claims do not merge with and assume the character of a willful tort, even if the
breach of contract is in bad faith. While the insured was unable to show a separate tort
sufficient for punitive damages, the insured could still potentially be awarded attorneys’
fees because a showing that the insurer’s conduct was willfully and oppressively
fraudulent is sufficient for an award of attorneys’ fees.
C. Is a Finding of Bad Faith or Unreasonable Conduct Necessary for A Fee
Award?
Similar to the discussion of the basis for recovery of attorneys’ fees, statutory-based
jurisdictions and case law–jurisdictions differ with regards to whether a finding of bad
faith or unreasonable conduct is necessary for an attorneys’ fee award.
28
1. Statutes
Some statutes require a finding of bad faith against the insurer in order for the insured to
recover attorney’s fees. Each jurisdiction requires different elements such a bad faith
finding. In Florida, there can be no award under state statute where the insurer’s conduct
was not wrongful as required by statute. See Liberty Nat. Life Ins. Co. v. Bailey, 944 So.
2d 1028 (Fla. Dist. Ct. App. 2006). In Illinois, an award for attorneys’ fees in a breach of
contract action under state statute requires a showing of vexatious and unreasonable
delay. See Shrader v. Paul Revere Life Ins. Co., 833 F. Supp. 2d 877 (N.D. Ill. 2011).
Where a finding of bad faith is required, insurers can provide a good faith or genuine
dispute defense; thus, even a finding that disability benefits should have been paid will
not necessarily entitle an insured to recovery of attorneys’ fees. In Georgia, attorneys’
fees available under the applicable statute are not awardable if an insurer has a reasonable
and probable cause for refusing to pay a claim. See Lancaster v. USAA Cas. Ins. Co., 502
S.E.2d 752 (Ga. 1998).
However, not all statutes require a bad faith finding. In such jurisdictions, a finding that
the insurer should have awarded benefits but did not may be sufficient for a court to
award recovery of attorneys’ fees. In Florida, all that is necessary for recovery of
attorneys’ fees under Florida Statute 627.428 is an adverse judgment against the insurer.
See Valenti v. Unum Life Ins. Co. of Am., NO. 8:04CV2405T17TBM, 2006 WL 1528925
(M.D. Fla. June 2, 2006). In fact, in Illinois common law causes of action for bad faith,
intentional infliction of emotional distress, and fraud are barred by Illinois Insurance
Code section 155. See Surles v. Prudential Ins. Co. of Am., C 06-0587 WHA, 2007 WL
164548 (N.D. Cal. Jan. 19, 2007) (applying Illinois law).
In McDonald v. American Family Life Assurance Co. of Columbus, 2010-1873 (La. App.
1 Cir. 7/27/11); 70 So. 3d 1086, the insured suffered injuries in a car accident and
claimed short term disability benefits. The insurer denied the claim once it learned that
the claim was covered by workers comp insurance, a claim that was rejected by the trial
court. Subsequently, the insured claimed short term benefits under successive disability
periods. This claim was denied by the court. The insured’s claim for attorneys’’ fees
under LSA–R.S. 22:1821(A) was also denied because the insured failed to show that the
insurer’s actions were arbitrary and capricious, as required by the statute.
2. Case Law
Recovery under case law exceptions to the American Rule generally require a finding of
bad faith by the insurer. In Washington, attorneys’ fees are required any time an insured
is compelled to pursue legal action to obtain the full benefits of its insurance contract.
See Olympic S.S. Co., Inc., v. Centennial Ins. Co., 811 P.2d 673 (Wash. 1991). In Maine,
attorneys’ fees are appropriate on the basis of bad faith where an individual is forced to
seek judicial assistance to secure benefits under an insurance contract. See Drop Anchor
Realty Trust v. Hartford Fire Ins. Co., 496 A.2d (Me. 1985). In Oklahoma, attorneys’
fees are recoverable where the insurer has acted in bad faith, wantonly, or withheld
29
insurance benefits for an oppressive reason. See Christian v. Am. Home Assurance Co.,
577 P.2d 899 (Okla. 1977).
However, in some jurisdictions it is only necessary to show that benefits were actually
withheld by the insurer.11
In B-T Dissolution, Inc. v. Provident Life & Acc. Insurance Co., 192 F. Appx. 444 (6th
Cir. 2006), the insured became totally disabled and made a claim for benefits under an
employer-provided insurance policy. The insurer denied the claim and the insured’s
employer brought a claim for breach of contract on behalf of the insured. The Court
found that the insurer incorrectly denied coverage. However, applying Ohio law, the
Court refused to award the employer attorneys’ fees because there was no showing of
insurer bad faith.
D. Are Attorneys’ Fees limited to efforts in pursuit of Contract Benefits?
There is a split of authority, for both statutory and case law–based claims for attorneys’
fees, whether a plaintiff can recovery fees only for efforts seeking benefits owed under
the contract (consequential or economic damages) or if fees may be recovered for efforts
seeking compensatory and punitive damages in additional to contract benefits.
Generally, if an action is brought under an exception to the American Rule, consequential
damages must be separate from punitive damages for bad faith, and only attorneys’ fees
incurred in securing contract benefits may be recovered. In South Dakota, recovery of
attorneys’ fees under the applicable state statute applies to contract actions only, and not
to awards in tort actions. See Sawyer v. Farm Bureau Mut. Ins. Co., 619 N.W.2d 644
(S.D. 2000). In South Carolina, recovery of attorneys’ fees under state statute applies in
breach of contract actions only and not in bad faith tort actions. See Nichols v. State
Farm Mut. Auto Ins. Co., 306 S.E.2d 616 (S.C. 1983). In California, only attorneys’ fees
in bringing the contract claim are recoverable as a form of economic damages resulting
directly from the insurer’s tortious actions. See Brandt, 693 P.2d 796.
However, some jurisdictions allow recovery of attorneys’ fees for seeking any
foreseeable damages flowing from the insurer’s breach of the insurance contract,
including compensatory and punitive damages. In Wisconsin, if the disability insurer
acts in bad faith in denying benefits, it is liable to the insured in tort for any damages
which are the proximate result of that bad faith conduct, including attorneys’ fees. See
DeChant, 547 N.W.2d 592.
Additionally, jurisdictions that strictly follow the American Rule allow no recovery of
attorneys’ fees, even for actions seeking contract benefits. In New York, recovery of
attorneys’ fees is inappropriate in cases brought by an insured to settle its rights; recovery
is permissible only where the insured is cast in a defensive posture by legal steps taken by
the insurer. See Mighty Midgets, Inc. v. Centennial Ins. Co., 389 N.E.2d 1080 (N.Y.
1979).
11
This Paper does not address recovery of fees based on the breach of statutes requiring prompt payment of
claims.
30
E. The Burden of Proof.
1. What does the plaintiff need to show for an award of attorneys’ fees?
Some jurisdictions make the recovery of attorneys’ fees discretionary, essentially
requiring bad faith. Where a finding of bad faith is required, the burden of proof for
recovery is on the insured. In some jurisdictions, this means that the insured must show
that the insurer intentionally or wrongfully denied or delayed payment of the claim, or
that the insurer’s refusal to honor its contractual obligations was clearly without any
reasonable justification. In a few jurisdictions, a finding of insurance bad faith requires
evidence of state of mind reflecting dishonest purpose, moral obliquity, furtive design, or
ill will. In such jurisdictions, the insurer’s refusal to pay is not arbitrary or capricious
where serious issues regarding the right to recovery are raised, where the claim which the
insurer has failed to pay is as a fairly debatable matter of law, or where the insurer’s
interpretation of its policy is reasonable and not contrary to any existing jurisprudence.
Some jurisdictions make recovery of fees a penalty automatic upon a finding against the
insurer. Such a finding is generally predicated on specific statutory language.
2. What attorneys’ fees are reasonable?
Most jurisdictions provide for the recovery of only reasonable attorneys’ fees; however,
different jurisdictions apply different definitions of reasonable. Reasonableness may be
dictated by statute or by the particular facts of each case. Therefore, it is important to
check the applicable statutes and case law of the specific jurisdiction to determine how
much fees are reasonable.
In determining a reasonable fee, courts may consider: the amount and character of the
services rendered; the labor, time and trouble involved; the nature and importance of the
litigation or business in which the services were rendered; the responsibility imposed; the
amount of money or the value of the property affected by the controversy; the skill and
experience called for in the performance of the services; the professional character and
standing of the attorney; and the market rate for such services. See Hofer v. Unum Life
Ins. Co. Of Am., 441 F.3d 872 (10th Cir. 2006). Additionally, courts may reduce
attorneys’ fees where the plaintiff recovers little of the amount originally sought.
It is important to note that there is no exact formula for determining reasonableness.
3. Who determines the amount of an attorneys’ fees award?
There is a three-way split amongst jurisdictions as to who determines the amount of
attorneys’ fees that may be recovered.
Some jurisdictions believe that it is within the discretion of court, not the jury, to
determine the amount of attorneys’ fees. In Kansas, the award of attorney fees in
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insurance cases is committed to the sound discretion of the trial court. See Hofer v.
Unum Life Ins. Co. of Am., 338 F. Supp. 2d 1252 (D. Kan. 2004).
Some jurisdictions require that the jury determine the amount of recovery where the jury
is the finder of fact. In California, the decision on attorneys’ fees in bad faith actions
must be decided by the jury. See Brandt, 693 P.2d 796. While the jury generally must
make the decisions on fees, courts recognize that it is preferable to wait until after the
trial to make a fee award, which would necessitate that the court, not the jury, make the
fees determination.
Finally, some jurisdictions apply a hybrid –– sometimes courts determine the amount of
recovery, sometimes juries determine the amount of recovery. In Wisconsin, attorney fees
are awarded as a matter of law to a successful claimant in a bad faith action, but the
amount can be determined by the jury or the court, depending on facts of the case. See
Roehl Transp., Inc. v. Liberty Mutual Ins. Co., 784 N.W.2d 542, 574 (Wis. 2010).
However, such jurisdictions generally agree that courts are in an advantageous position to
make the determination based on their expertise and experience.
4. What evidence is admissible for determinations of the amount and
reasonableness of attorneys’ fees?
Courts have considered a wide range of evidence in making determinations regarding the
amount and reasonableness of attorneys’ fees awards, including evidence showing: the
amount involved, the care and diligence exhibited by the attorney, the character and
standing of attorney, the schedule of attorneys’ fees; the services needed to effect
recovery; the degree of professional skill and ability exercised; the volume of work
performed; the time devoted to the case; the result obtained; the novelty and difficulty of
the questions involved; the client agreement; and market rates for similar attorney
services.
Contingency fee agreements are generally permitted; however, if the action is in a
jurisdiction that requires separation of contract and bad faith claims, the attorney must
differentiate fees incurred to obtain policy benefits and fees incurred in pursuing the bad
faith action. See S. Farm Bureau Life Ins. Co. v. Cowger, 748 S.W.2d 332 (Ark. 1988).
Additionally, attorneys’ fees awarded under statute may be reduced for contingency fee
agreements. See Burgess v. Trustmark Ins. Co., No. 4:05-CV-1760GTE, 2007 WL
496757 (E.D. Ark. Feb. 13, 2007) (awarding reduced attorneys’ fees under statute where
parties entered 1/3 contingency fee agreement).
Where juries are left to determine attorneys’ fees, expert witness testimony may be
appropriate, but such evidence is not necessarily required. The requirement for expert
witnesses will depend on the jurisdiction and the complexity of facts at issue in each
particular case.
In DeChant v. Monarch Life Insurance Co., 547 N.W.2d 592 (Wis. 1996), the insured
was injured in an automobile accident, forcing the insured to take a lower paying job in
the same company. The insured then applied for disability benefits but was denied by the
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insurer; the insured filed suit for breach of contract and bad faith. The court awarded the
insured attorneys’ fees incurred in bringing the breach of contract and bad faith claims
because the insurer acted wrongfully in denying disability benefits and the insured
showed that the insurer lacked any reasonable basis for denying benefits. While the
insured did not offer expert witness testimony, the jury was presented with sufficient
information demonstrating the insurer’s bad faith such that the jury could make an
informed decision regarding the reasonableness and amount of attorneys’ fees.
5. May lodestars be applied to awards of attorneys’ fees?
Some jurisdictions use a lodestar calculation as part of a calculation for reasonable
attorney’s fees. In Arizona, the lodestar is calculated by taking the number of hours
reasonably expended multiplied by a reasonable hourly rate, and then adjusting that
number based on reasonableness concerns presented by the specific case. See Leavey v.
UNUM/Provident Corp., No. CV-02-2281-PHX-SMM, 2006 WL 1515999 (D. Ariz. May
26, 2006), aff'd sub nom. Leavey v. Unum Provident Corp., 295 F. App'x 255 (9th Cir.
2008). The burden of proving that enhancement of the lodestar amount is necessary to
the determination of a reasonable fee falls upon the fee applicant, who must present
evidence supporting an upward adjustment. Discretion to apply a multiplier lies with the
court. See U.S. Sec. Ins. Co. v. LaPour, 617 So. 2d 347 (Fla. Dist. Ct. App. 1993)
(refusing to grant a multiplier to statutorily awarded fees where there was a contingency
fee agreement and attorney did not demonstrate any special effort in personal injury
protection benefits case).
F. Conclusion.
As is evident from the discussion above, there is great nuance between each jurisdiction
in awarding reasonable attorneys’ fees in non-ERISA disability insurance cases.
Therefore, it is important to check the statutes and case law of the specific jurisdiction for
a particular case. In terms of overall trends, it is clear that the exceptions to the American
Rule have almost entirely subsumed the Rule itself, and recovery of reasonable attorneys’
fees will be available to prevailing plaintiffs-insureds in actions for benefits under non-
ERISA governed disability insurance cases.
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About the authors:
Eric Buchanan is founding partner of the firm of Eric Buchanan and Associates, PLLC,
a firm that represents disabled people in claims for disability insurance and Social
Security Disability, as well as individuals and policyholders who have been denied
ERISA benefits and other insurance benefits. In 2007 Eric Buchanan was certified as a
specialist in Social Security Disability law by the Tennessee Commission on Continuing
Legal Education and Specialization. Eric Buchanan currently sits on the disability
advisory committee to the NFL Alumni Association.
Eric Buchanan is past-chair of two disability organizations within the American
Association of Justice (AAJ) (Formerly the Association of Trial Lawyers of America
(ATLA)); Mr. Buchanan is past chair of the AAJ ERISA Health Care and Disability
Litigation Group and past chair of the AAJ Social Security Disability Section. He is Vice
President for East Tennessee of the Tennessee Association for Justice (TAJ) (formerly
the Tennessee Trial Lawyers Association (TTLA)), as well as a lifetime member of TAJ,
and past President of the Chattanooga Trial Lawyers. He is also past-chair of the
Tennessee Bar Association Disability Law Section and a sustaining member of NOSSCR.
Eric Buchanan has written numerous articles on ERISA law, including a chapter on
ERISA subrogation in West’s Auto Tort Litigation Manual. He is also a frequent speaker
on ERISA law, subrogation, and disability law at both the state and national levels.
Eric Lane Buchanan is a 1989 graduate of The Virginia Military Institute, and a 1997
magna cum laude graduate of the Washington and Lee School of Law. In law school, he
was inducted in the ODK honorary leadership fraternity in January 1997 and inducted
into Order of the Coif upon graduation.
Prior to attending law school, Eric Buchanan served as an officer and naval aviator in the
United States Navy, serving as a pilot of P3-C “Orion” aircraft. He served in the East
Coast of the U.S., in the Atlantic, Mediterranean, and Arctic Oceans, and was deployed
throughout Europe, including eleven months spent in Iceland.
Daniel W. Maguire is a Partner in the Palm Desert office of Burke, Williams &
Sorensen, LLP. Mr. Maguire counsels and represents insurers in trial and appellate
matters. He has defended clients in virtually all State and Federal Courts within
California, including the California Supreme Court, and has acted as lead trial counsel for
cases pending in other States.
Mr. Maguire represents clients in individual disability, employee benefits, and investment
products disputes. He is a frequent speaker on insurance matters, and has given
presentations at numerous national conferences including the Defense Research Institute,
American Conference Institute, Association of Life Insurance Counsel, and Eastern
Claims Conference. His pro bono work has included indigent client representation
through Los Angeles Public Counsel and the Riverside County Public Assistance
Program.
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He received his juris doctor, cum laude, from Pepperdine University School of Law in
1985, and his Bachelor of Arts from the University of Notre Dame in 1981. He is
licensed to practice in all State and Federal Courts within California, and also in the
Ninth Circuit Court of Appeal and the United States Supreme Court.
William (“Bill”) Patton is a shareholder in the Portland, Oregon office of Lane Powell
PC. Bill focuses his practice in the areas of employee benefits and ERISA/life, health
and disability litigation. He has successfully represented employers, employee benefit
plans, ERISA fiduciaries, plan administrators, plan participants and insurers in a wide
range of actions, including: benefit claims under retirement plans, severance pay plans,
and life, health and disability plans (self-funded and insured); breach of fiduciary duty
claims; claims for equitable relief under ERISA Section 502(a)(3); disputes between
plans and service providers; withdrawal liability and delinquent contribution claims;
benefit discrimination and other employment-related claims under ERISA Section 510;
disputes with the Department of Labor and the IRS; claims involving ERISA-prohibited
transactions with plan assets; and claims that the employer has failed to comply with
ERISA-mandated administrative procedures, such as filing annual reports or providing
employees with summary plan descriptions.
Bill is well-versed on ERISA litigation issues, including ERISA standard of review,
ERISA preemption and removal of claims to federal court, COBRA disputes, recovery of
attorneys’ fees and costs, and the availability of punitive or other damages. Bill also has
extensive experience litigating non-ERISA benefits cases, including claims under
individual life, AD&D and disability plans, government plans and church plans.
In addition, Bill has an active employment law practice focusing on non-compete and
non-solicitation agreements, and claims under the Trade Secrets Act. Bill also has
substantial appellate law experience, having successfully represented clients before the
U.S. Court of Appeals for the Ninth Circuit and the Oregon Court of Appeals in a variety
of matters.
Bill received Juris Doctor degree from The George Washington School of Law in 1997
and his Bachelor of Arts (cum laude) from Occidental College in 1993.
