The award of attorneys fees under Section 502(g) of ERISA (29 U.S.C. 1132(g)) is a pretty misunderstood concept. 502(g)(2) gives a plan or fiduciary the ability to recoup attorneys fees for cases involving delinquent contributions under Section 515 when the fund "prevailed" or was successful in its action. But 502(g)(1) has remained a bit of a mystery because it simply provides that in suits by participants or fiduciaries brought to enforce ERISA, the court can award attorneys fees to either party in its discretion.
Most courts look to apply a 5-factor test to an award of attorneys fees: (1) culpability or bad faith of the opposing party, (2) ability to satisfy a fee award, (3) deterrence effect, (4) whether the decision benefits all participants or resolves a significant legal questions, and (5) relative merits of each party's position. While 502(g)(1) does not specifically require a party to prevail to get an award for attorneys fees, many courts have found that in order to get them, you first have to win.
In Hardt v. Reliance Standard Life, the United States Supreme Court has now weighed in to find that there is no "prevailing party" requirement in 502(g)(1) that would require a win before fees could be awarded. The Court determined that "some success" by the applicant on the merits of the case which is not merely trivial or procedural is required in order to support an award. However, "some success" does not mean an complete and final determination on favor of the applicant. Moreover, the Court completely rejected the traditional 5-factor test, finding it has no relation to ERISA laws as written.
In the Hardt case, the apparent success was an award remanding the claim to the plan for a second review. It was not a determination that benefits were improperly denied. So that was "some success." But the Court's decision does not provide any further clarification as to what "some success" will mean going forward, only that it is less than a complete victory that may have previously been the default measurement.
So by eliminating the 5-factor test, and requiring only "some success," the Court has probably muddied rather than cleared the waters. In theory, because Reliance also had some success, it too could have been awarded attorneys fees. But since the award would be fully in the discretion of the lower Court, could that Court still have considered the traditional components of the 5-factor test even if it was not applied specifically? It remains to be seen how courts will deal with this further. But plan administrators should now be prepared to consider attorneys fees as a possible litigation risk even if it appears a plaintiff will not fully succeed on their claim. Even a partial win could be a full win when it comes to fees.
