Hardt v. Reliance Standard Life Insurance Co.: breathing new life into claimants' ability to obtain attorney's fees under ERISA's civil enforcement provision.

• Author: Timmerman, Tiffany R.

In Hardt v. Reliance Standard Life Insurance Co., the United States Supreme Court interpreted the statutory language of 29 U.S.C. section 1132(g)(1) to clarify that a court, in its discretion, may now grant a party's motion for attorney's fees when the party has achieved "some degree of success on the merits" in his or her case. The Court's decision was correct in adopting this less strenuous test rather than requiring prevailing party status before attorney's fees can be awarded. Additionally, under application of this less arduous test, the Court correctly concluded that Hardt was entitled to attorney's fees because remand of her case equated to some degree of success. The Court's adoption of the "some degree of success on the merits" standard was correct because this standard is consistent with the civil enforcement provision and express goals of the Employee Retirement Income Security Act ("ERISA") and deters plan administrators from using questionable practices in their review of claims for benefits.

1. INTRODUCTION

   Generally, in civil litigation each party is responsible for his or her own attorney's fees. (1) However, the burden of paying fees may be shifted by statute. (2) Prior to the United States Supreme Court's ruling in Hardt v. Reliance Standard Life Insurance Co., (3) the federal circuits were split as to when to allow awards of attorney's fees when the underlying statute requires that the award be appropriate or within the court's discretion. (4) Importantly, several of the Federal Courts of Appeals prior to Hardt required that a party be a "prevailing party" before an award of attorney's fees was deemed appropriate. (5)

   In Hardt, the United States Supreme Court reversed the Fourth Circuit's decision to deny attorney's fees to a woman who had been denied long-term disability insurance benefits under her employer's welfare benefits plan. (6) Although Hardt's motion for summary judgment was denied by the district court, she did secure a remand for reconsideration. (7) Moreover, the district court gave Reliance a firm warning that if it did not consider all of the evidence regarding Hardt's health upon remand, the district court would be inclined to rule for Hardt. (8) Not surprisingly, upon reconsideration, Reliance granted Hardt's long-term benefits. (9) Hardt then sought relief under section 1132(g)(1) for an award of attorney's fees. (10) The district court granted Hardt's attorney's fees, but the Fourth Circuit Court of Appeals reversed, finding that Hardt had not been a prevailing party and, therefore, was ineligible to receive the attorney's fees award. (11)

   In deciding Hardt, the United States Supreme Court looked to its prior case law regarding fee-shifting statutes. (12) The Court rejected the lower federal court's requirement that Hardt must be a prevailing party before an award of attorney's fees would be appropriate. (13) Instead, the Court followed Ruckelshaus v. Sierra Club, (14) and found that Hardt was entitled to an award of attorney's fees under ERISA because she had achieved "some degree of success on the merits" in her case. (15)

   This casenote will first explain the circumstances of Hardt, including the facts surrounding the issues that led to the appeal before the nation's highest court. (16) Next, this casenote examines the background of ERISA procedures for judicial review (17) and ERISA's civil enforcement provision. (18) The next portion of the background section examines the development of the Ruckelshaus standard of "some degree of success on the merits." (19) The final sections of the background examine the development of the five-factor test (20) and the resulting pre-Hardt split of opinion among the Federal Circuit Courts regarding when attorney's fees should be awarded under ERISA. (21) Lastly, and most importantly, the analysis will illustrate why the United States Supreme Court's holding was correct based on the express language of ERISA's civil enforcement provision, (22) as well as the express goals underlying ERISA. (23) The analysis ends with a discussion illustrating how the adoption of the "some degree of success on the merits" standard should deter plan administrators from using questionable practices in their review of claims for benefits. (24)

2. FACTS AND PROCEDURE

   Bridget Hardt was employed by Dan River Inc. as an executive assistant. (25) In 2000, Hardt began suffering from pain in her neck and shoulders. (26) She was initially diagnosed with carpal tunnel syndrome. (27) Despite undergoing multiple surgeries her pain persisted. (28) Hardt was forced to leave Dan River in January of 2003 due to the pain from her carpal tunnel syndrome. (29)

   Dan River's Group Long-Term Disability Insurance Program plan ("Plan") covered Hardt. (30) While Dan River administered the plan, Reliance underwrote any benefits awarded and also had the power to determine when benefits under the plan would be awarded to a claimant. (31) Because the plan was funded by her employer, it was subject to ERISA. (32) Hardt applied for long-term disability benefits from the plan in August 2003. (33) Her claim was provisionally accepted, but Reliance informed Hardt that final acceptance of her claim would be determined by the results of a functional capacities evaluation. (34) This evaluation was to assess how her medical condition affected her capacity to work. (35)

   In October of 2003, Hardt underwent her functional capacities evaluation. (36) The evaluation concluded that Hardt was capable of doing "some amount of sedentary work." (37) Based on this result, Reliance found that Hardt did not meet the Plan's requirement that she must be completely disabled from any occupation in order to receive long-term disability benefits. (38) Reliance then denied Hardt's claim for long-term disability benefits. (39) Reliance partially reversed its decision after Hardt appealed to the Plan administrator. (40) Reliance found that "Hardt was totally disabled from her regular occupation." (41) Hardt therefore qualified to receive temporary disability benefits under the Plan for twenty-four months. (42)

   During the period of time that Hardt received temporary disability benefits, new pains developed in her feet and knees. (43) She was subsequently diagnosed with small-fiber neuropathy. (44) Hardt's physical capabilities decreased as the pain grew worse over the subsequent months. (45) Hardt ultimately applied for Social Security disability benefit. (46) In her Social Security application, Hardt's physicians stated their conclusion that Hardt could not obtain full gainful employment because of her ailments. (47) Hardt's application was accepted, and she began receiving disability benefits in February 2005. (48)

   Shortly thereafter, Reliance informed Hardt that her twenty-four month period of temporary benefits was about to elapse, and she still did not qualify as totally disabled as defined under the Plan. (49) Under the Plan's terms, long-term disability benefits are only available to participants who are "totally disabled from all occupations[.]" (50) Therefore, Hardt would not be able to collect long term disability benefits from the Plan. (51) Because Hardt received Social Security Disability benefits during the twenty-four month period she was also receiving benefits under the Plan, Reliance ordered that Hardt pay it $14,913.23 to offset the Social Security disability benefits. (52) Hardt paid the offset and filed her second administrative appeal. (53)

   As part of her second administrative appeal, Hardt supplied Reliance with updated medical records and her application for Social Security disability benefits. (54) Reliance asked Hardt to complete additional functional capacities evaluations in December 2005 and January 2006. (55) The evaluator, under Reliance's direction, did not review Hardt for neuropathic pain despite the fact Reliance knew from her updated medical records that her doctor had added a diagnosis of neuropathy since her last evaluation. (56) Hardt appeared at both scheduled evaluations but feared submitting to specific tests because of the nausea and heightened pain they would cause her. (57) Therefore, the evaluations were deemed invalid. (58)

   Because it considered Hardt's evaluation invalid, Reliance employed a physician and a vocational rehabilitation counselor to assist in deciding Hardt's appeal. (59) The physician reviewed only a select portion of Hardt's medical records. (60) Furthermore, he did not mention in his report Hardt's doctors' questionnaires for her Social Security disability benefits application or her pain medications. (61) Most notably, this physician, employed by Reliance, did not physically examine Hardt. (62)

   Based on Hardt's functional capacities evaluation from 2003, the vocational rehabilitation counselor conducted a labor market survey and found eight employment opportunities that Hardt would be capable of performing. (63) Relying on the physician's report, the vocational rehabilitation counselor's market survey, and Hardt's 2003 functional capacities evaluation, Reliance affirmed its termination of Hardt's long-term disability benefits. (64) Reliance informed Hardt of its conclusion in March of 2006. (65)

   Hardt consequently brought this action against Reliance in the United States District Court for the Eastern District of Virginia. (66) She claimed that procedural errors in her appeal for long-term disability benefits constituted violations of ERISA. (67) Hardt and Reliance each moved for summary judgment. (68) The district court denied both motions. (69)

   The district court denied Reliance's motion for summary judgment ruling that "Reliance's decision to deny benefits was based on incomplete information." (70) The district court found it significant that the functional capacities evaluations did not assess the impact of Hardt's neuropathic pain. (71) The district court also found that the conclusions in the reviewing physician's report were not...