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Application of Five-Factor Test to Deny Competing Claims for Attorney

Application of Five-Factor Test to Deny Competing Claims for Attorney's Fees Did Not Contravene Hardt

ERISA and Life Insurance News
(December 21, 2012)

Cross claimed that she was 100% vested in pension benefits under defendants’ defined benefit plan, while the plan claimed that her vesting was at 60%. The parties settled the action, using a 75% vesting calculation, and then each moved for attorney’s fees under ERISA, 29 U.S.C. § 1132(g)(1). Exercising its discretion, the district court denied both motions.

On appeal, Cross argued that in denying her motion (1) the district court applied a five-factor test in contravention of Hardt v. Reliance Standard Life Ins. Co., 130 S.Ct. 2149 (2010), and (2) the court erred in finding that defendants had not acted in bad faith in assessing her claim and in litigating the case. Defendants argued that the district court abused its discretion in applying the five-factor test to deny their claim for fees.

The Eleventh Circuit rejected Cross’s argument that the district court should have ended its inquiry when it determined that she had obtained “some degree of success on the merits,” and held that the court had taken the exact approach approved by the Supreme Court in Hardt:

[T]he Supreme Court in Hardt directed, first, that “a fees claimant must show ‘some degree of success on the merits’ before a court may award attorney’s fees under § 1132(g)(1).” It then said: “We do not foreclose the possibility that once a claimant has satisfied this requirement, and thus becomes eligible for a fees award under § 1132(g)(1), a court may consider … five factors … in deciding whether to award attorney’s fees.”

The Eleventh Circuit held that the district court correctly determined that Cross had obtained “some degree of success on the merits” because she ultimately achieved 15% more vesting in the plan than defendants had claimed she was entitled to receive.

The appellate court also held that the district court did not err in its application of the five-factor test, particularly in rejecting both parties’ claims of bad faith and in weighing the relative merits of their claims. The court noted that “[b]oth parties’ positions had some merit, but neither had relatively more merit than the other.”

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H. Sanders Carter
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