ERISA – Lawyers Fees

Lawyers who handle ERISA (Employee Retirement Income Security Act) claims need to read this opinion from the U. S. Western District, Austin Division.  The opinion is styled, Genevie Ilene Maley, et al. v. Minnesota Life Insurance Co.

In this case, the insured had, at various times named two beneficiaries.  When the insured died, both the beneficiaries sought benefits.  They eventually agreed to split the policy proceeds and entered into an agreement with Minnesota for them to be paid half each.  Later, Minnesota then asserted a policy defense of suicide and refused to pay.  The insureds sued for breach of contract.  In the breach of contract claim, the Court ruled in favor of Minnesota.  Minnesota then sued for attorney fees under 29 U.S.C. 1132(g)(1).

ERISA provides that: in any action under this subchapter … by a participant, beneficiary, or fiduciary, the court in its discretion may allow reasonable attorney’s fees and costs of action to either party.  Any party who achieves some degree of success on the merits may request attorney’s fees, not merely the prevailing party.  This success cannot be merely trivial success on the merits or a purely procedural victory.  Instead, the party satisfies this standard when the court can fairly call the outcome of the litigation some success on the merits without conducting a lengthy inquiry into the question whether the particular party’s success was established or occurred on a central issue.  Here, the parties agree that the judgement qualifies as some degree of success on the merits for Minnesota.

The 5th Circuit has determined five factors to use in determining whether to award attorney’s fees in an ERISA cause of action.  The factors are:

  1.  the degree of the opposing parties’ culpability or bad faith;
  2.  the ability of the opposing parties to satisfy an award of attorneys’ fees;
  3.  whether an award of attorneys’ fees against the opposing parties will deter other persons acting under similar circumstances;
  4.  whether the parties requesting attorneys’ fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and
  5.  the relative merits of the parties’ positions.

No one of these factors is necessarily decisive, and some may not be apropos in a given case, but together they are the nuclei of concerns that a court should address.  Moreover, these factors are not exclusive, and a court is free to address other concerns.

This Court refused to award attorney fees to Minnesota and stated:

First, there is no evidence that the plaintiffs filed this suit in bad faith.  The two beneficiaries believed the original settlement agreement controlled payment of the benefits.  The fact that the claims were preempted by the suicide exclusion does not create bad faith on the part of the plaintiffs.  The second factor weighs heavily against awarding attorney fees as individual plaintiffs are unlikely to be able to satisfy an award of fees.  The third and fourth also weigh against awarding attorney fees.  Minnesota did not seek to benefit all participants and beneficiaries in its defense of the claim, and the suit did not resolve a significant legal question.  Moreover, there is no indication that a fee award here would deter other plaintiffs acting in similar circumstances.  Although ultimately Minnesota prevailed here, plaintiffs had good faith arguments for their position.  Thus, although the fifth factor weighs slightly in favor of awarding fees, the other factors weigh against it.


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