Can a court deny a successful ERISA claimant’s attorney fees solely because there is no evidence of bad faith?  NO.

Here’s the case of Donachie v. Liberty Life Assurance Company of Boston, __ F.3d __ (2nd Cir. March 11, 2014) [PDF].

FACTS: Donachie had a peculiar heart condition: Everyone “sitting in the same room” with Donachie could literally hear his heart beating.  This caused him anxiety and he sought ERISA-governed Long Term Disability (LTD) benefits. After Donachie’s claim appeal was denied, he filed a lawsuit for ERISA benefits.

The trial court eventually granted Donachie disability benefits. The court then DENIED Donachie’s request for attorney fees because he had “failed to show any bad faith by [the Plan] administrator in making its LTD determination.”

ISSUE: Can a Court deny Claimant’s attorney fee request because there is no evidence of a “bad faith” claim denial?

SECOND CIRCUIT HELD:

  1. “’Congress intended the fee provisions of ERISA to encourage beneficiaries to enforce their statutory rights.’” Op. at 8.
  2. Attorney fees may be awarded to a beneficiary only if he has obtained “some degree of success on the merits.”  Op. at 8.
  3. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010) permits courts to use the five factor test to channel discretion in awarding fees. Those factors are: (a) degree of bad faith; (b) ability to pay an award of fees; (c) whether an award would deter other persons in similar circumstances; (d) whether the decision benefits all participants or resolves a significant ERISA legal issue; (e) the merits of the parties’ positions.  Op. at 9.
  4. “[T]here is no question that Donachie…was eligible for an award of attorneys’ fees.”  Op. at 11.
  5. The trial court abused its discretion by failing to consider all five factors, and denying fees on the sole basis that the plan “had not acted in bad faith [because the court has]  explained that ‘a party need not prove that the offending party acted in bad faith’ in order to be entitled to attorney fees.”  Op. at 11.

Happy St. Patrick’s Day…

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Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment…

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in NewsweekCorporate Legal TimesSeattle TimesEmployee Relations Law JournalPuget Sound Business JournalCFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.