Once Some Degree of Success in Shown, Fee Claimant Must Satisfy Some Elements of Multi-Factored Test For Discretionary Fee Award.
Pretty recently, the Second Circuit Court of Appeals in Donachie v. Liberty Life Assurance Co. of Boston, 2014 WL 928971 (2d Cir. Mar. 14, 2014), had to decide what factors are used to determine if a fee claimant should be given a discretionary fee award under ERISA’s fee-shifting statute, 29 U.S.C. § 1132(g)(1).
The starting point was Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010), a U.S. Supreme Court decision holding that ERISA’s fee-shifting provision unambiguously allows a district court to award attorney’s fees in its discretion to either party. (SCOTUS rejected that a pure “prevailing party” analysis applied in the ERISA fee-shifting context.)
So, once the “some degree of success” threshold is reached, what are the factors then considered by the district court in exercising its discretion under the ERISA statute?
Donachie, utilizing factors set forth in a prior Second Circuit decision, listed a five factor test to channel discretion in awarding fees: (a) degree of opposing party’s culpability or bad faith; (b) ability of opposing party to pay an award of fees; (c) whether an award against an opposing party would deter other persons in similar circumstances; (d) whether the decision benefits all participants/beneficiaries of an ERISA plan or resolves a significant ERISA legal issue; and (e) the relative merits of the parties’ positions.
In the particular case before it, the Second Circuit reversed a fee denial where a district judge relied only on one factor, namely, that the benefit denial by an insurance company was not done in “bad faith.”