Second Circuit: Five Factors Still Relevant to Employee Retirement Income Security Act (ERISA) Attorney Fee Awards
The Second Circuit recently had occasion to provide guidance to the lower courts on the standard for evaluating an ERISA attorneys’ fee application following the U.S. Supreme Court’s ruling in Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010). As previously reported, in Hardt, the Supreme Court observed that ERISA’s fee shifting provision unambiguously allows a court to award attorneys’ fees in its discretion to either party. Noting that a court’s discretion is never unlimited, the Court held that a claimant must only show “some degree of success on the merits” before a trial court may award attorneys’ fees under ERISA. In so holding, the Court stated that once a claimant has satisfied this requirement, and thus becomes eligible for an attorneys’ fees award, a court may consider other factors in deciding whether to award attorneys’ fees.
In Donachie v. Liberty Life Assurance Co. of Boston, 2014 WL 928971 (2d Cir. Mar. 11, 2014), the Second Circuit concluded that district court judges, when using their discretion to award attorneys’ fees to claimants who have achieved some degree of success on the merits, must do so using the framework developed by the Second Circuit in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir. 1987). There, the Second Circuit held that courts must consider the following factors in deciding whether to award attorneys’ fees: (i) the degree of opposing parties’ culpability or bad faith; (ii) ability of opposing parties to satisfy an award of attorneys’ fees; (iii) whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances; (iv) whether 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 (v) the relative merits of the parties’ positions. In Donachie, the Court therefore overturned a district court ruling that denied plaintiffs’ request for attorneys’ fees based exclusively on its finding that the insurance company that improperly denied the long-term disability claim had not acted in “bad faith,” without considering any of the other Chamblessfactors.