District Court's Discretion To Award Attorneys' Fees Under ERISA After Hardt

With respect to the exercise of discretion to award attorneys' fees under ERISA, what is the impact of the U.S. Supreme Court decision in Hardt v. Reliance Std. Life Ins. Co., 130 S. Ct. 2149 (U.S. 2010) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law], rejecting the prevailing party requirement, on a district court in the Second Circuit's application of the five-factors test? In this Analysis, Barry L. Salkin of Olshan Grundman Frome Rosenzweig & Wolosky LLP addresses this and the other issues. He writes:

District Court Decision: The fee action in Toussaint [v. JJ Weiser, Inc., 2011 U.S. App. LEXIS 11410 (2d Cir. N.Y. June 6, 2011)] [enhanced version / unenhanced version] was brought by former directors of a retirees' association of former unionized transportation workers. In the underlying ERISA action, the retirees' association and six of its members brought an action alleging that former directors had breached their fiduciary duty under ERISA to the retirees' association and its members by buying and maintaining a health insurance policy with premiums that outstripped the benefit received by members. The defendants prevailed on all counts and sought attorneys' fees and costs under ERISA. The District Court denied defendants' motion for fees. Applying the Chambless [v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir. N.Y. 1987)] [enhanced version] test, the court concluded:

As to the first [Chambless] factor, though Defendants ultimately prevailed on the merits of their position in this Court and on appeal, under the circumstances that gave rise to the action at the time it was filed, there is no sufficient evidence of culpability or bad faith on Plaintiffs' part in commencing the litigation. Concerning the need for deterrence reflected in the third factor, the Court agrees that given ERISA's policy of protecting plan beneficiaries, colorable claims pursued in good faith, even if ultimately unsuccessful, should not be discouraged by awards of attorney's fees to prevailing defendants.

As regards the fourth factor, the relative merits of the parties' positions, though Defendants' arguments prevailed, Plaintiffs' losing claims should be considered in the context of the absence of culpability or bad faith as determined in assessing the first factor. In this light, the Court finds that Plaintiff's position cannot be considered so substantially devoid of merit as to tip the Chambless factors dispositively in Defendants' favor on this basis alone.

Decision on Appeal: The Court of Appeals for the Second Circuit affirmed and concluded, with a surprising lack of analysis, that Hardt's recognition that courts need not apply the five-factor test did not suggest that it was an abuse of discretion for a district court to apply the Chambless factors in channeling its discretion when awarding fees.

(citations omitted)

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