Counsel Fees in ERISA Actions

Litigation to recover denied disability benefits is costly. Not only must the claimant suffer the absence of any disability benefits during the court case, but they must pay counsel for representing them in court. Most attorneys charge a contingency fee for representing disabled claimants in federal litigation; our office is no exception. This means, that if our client is successful, then our fee is paid. Fortunately, ERISA provides that the court, in its discretion, may order that the successful party receives counsel fees from the culpable party. This means that the court may decide that a claimant’s attorney’s fees are paid in part, by the insurer! In our experience, this occurs about 50% of the time. This is totally up to the court’s discretion. See 29 U.S.C. §1132(g).

It is important to understand how the court gauges whether the claimant is the successful party. What happens if the case settles soon after the Complaint is filed, and before the court is substantially involved in the case? What if, as a result of the lawsuit, the defendant voluntarily pays the benefits due? What should the court use as its barometer? Our third circuit court of appeals recently had an opportunity to clarify the law on this subject.

The usual standard for fee awards is the achievement of “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010). Just recently in Templin v. Independence Blue Cross, No. 13-4493 (3d Cir. May 8, 2015), the Third Circuit decided that the standard, “success on the merits” can be met without any judicial action. In Templin, plaintiffs brought claims under ERISA based on the refusal of the defendants/insurance companies to honor claims for payment of blood-clotting-factor products. After settling the case, the claimants sought $349,385.15 in attorney’s fees. The lower court ruled that the claimants had failed to achieve “some degree of success on the merits”. The claimants argued that they were entitled to attorney’s fees under a catalyst theory.

The Third Circuit agreed that the claimants were entitled to fees because the filing of the lawsuit was the catalyst to recover interest and represented a success on the merits. Essentially, the court concluded that the claimants were eligible for an award of attorney’s fees because the settlement of $68,000 in interest was a “substantive victory”. The catalyst theory establishes the standard to recover attorney’s fees in early settlements of ERISA actions- there is no requirement of some judicial activity to succeed; “[a]ll that is necessary is that litigation activity pressure[s] a defendant to settle or render to a plaintiff the requested relief”.

We have recovered counsel fees several times from the Court. In 2010, we filed litigation on behalf of Ms. Hewel, and soon afterwards, Defendant Johnson & Johnson reversed its denial and placed our client back on claim. We sought counsel fees for all of the work involved with preparing for and filing the Complaint and litigation activity. The court determined that our advocacy on behalf of our client in litigation was the catalyst, and granted our attorney’s fees. Hewel v. Long Term Disability Income Plan for Choices Eligible Emples. Of Johnson & Johnson, 2010 U.S. Dist. LEXIS 67340 (D.N.J. July 7, 2010). Keep in mind that counsel fees cannot be recovered from the insurer for any pre-litigation administrative proceedings. Howley v. Mellon Fin. Corp., 2011 U.S. Dist. LEXIS 695284 (D.N.J. June 27, 2011).