Seeking Payment of Attorneys' Fees in ERISA Cases

June 27, 2012

Attorneys fees in ERISA cases are awardable under 29 U.S.C. Section 1132(g)(1). "A court may award fees and costs under 1132(g)(1) as long as the claimant has achieved 'some degree of success on the merits." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 3, 130 S.Ct. 2149, 2158 (2010) citing Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983). If the Court can fairly call the outcome of the litigation "some success on the merits" for the party claiming fees, then the claimant is eligible for an award of attorneys fees. There is a modest presumption in favor of an award of attorneys fees in ERISA cases in the Seventh Circuit. Fritcher v. Health Care Service Corp., 301 F.3d 811 (7th Cir. 2002).

In determining whether a fee award is appropriate, the Seventh Circuit applies two tests. The first test looks to five factors: (1) the degree of the offending party's culpability or bad faith; (2) the ability of the offending party to satisfy personally an award of attorney's fees; (3) whether an award of attorney's fees against the offending party would deter other persons acting in similar circumstances; (4) the amount of benefit conferred on members of the plan as a whole; and (5) the relative merit of the parties' positions. Bowerman, 226 F.3d at 592-93 (7th Cir. 2000)(citing Quinn v. Blue Cross & Blue Shield Ass'n, 161 F.3d 472, 478 (7th Cir. 2998)). The second test looks "to whether or not the losing party's position was 'substantially justified.'" Id. at 593 (quoting Quinn, 161 F.3d at 478).

Fundamental fairness and equity require an award of fees where an insurance company has been found to have abused their discretion in a disability, health insurance or life insurance case. As explained in Hooper v. Demco, Inc., 37 F.3d 287, 291 (7th Cir. 1994):

We note that the primary purpose of ERISA, to protect the participants in employee benefit plans, is achieved by 'establishing standards of conduct, responsibility, and obligations for fiduciaries of employment benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the federal courts.' ERISA Section 2(b), 29 U.S.C. Section 1001(b). To encourage aggrieved parties to seek redress under ERISA, the statute gives the trial court discretion to award attorney's fees to a prevailing party.

When considering whether to award attorneys fees in an ERISA case, the court must keep in mind that ERISA's purpose is to protect beneficiaries of employee benefit plans. Meredith v. Navistar Int'l Transp. Co., 935 F.2d 124, 129 (7th Cir. 1991).

Further, fee awards provide the only incentive for ERISA plan administrators to pay legitimate claims since ERISA jurisprudence does not permit plaintiffs to pursue punitive damages or extra-contractual damages when insurers abuse their discretion. Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41 (1987); Franklin v. H.O. Wolding, Inc. Group Health and Welfare Plan, 2004 WL 3059789, *11 (S.D. Ind., Dec. 8, 2004). ERISA is a law of equity (Great West Life & Annuity Insurance Company v. Knudson, 122 S.Ct. 708 (2002)) and without a fee award, the Plaintiff would not be made whole as equity requires. "[A] fee award is needed to take a step toward making the insured [claimant] financially as well off as she would have been if the insurer had acknowledged its contractual responsibility in the first place." Franklin v. H.O. Wolding, Inc. Group Health and Welfare Plan, 2004 WL 3059789, *11.

Reasonable fees are determined by calculating the "lodestar" which is the number of hours expended on the litigation multipled by the attorney's hourly rate. Anderson v. AB Painting and Sandblasting, Inc., 578 F.3d 542, 544 (7th Cir. 2009).