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Can Prevailing Defendants in ERISA Cases Recover Attorneys' Fees?

In a ruling recently secured by DeBofsky Sherman & Casciari, P.C., a federal court definitively ruled that prevailing defendants in ERISA cases are rarely entitled to fees. In Geiger v. Aetna Life Ins. Co., 2016 WL 5391206 (N.D. Ill. September 27, 2016) (opinion), where a court upheld Aetna's termination of disability benefits (currently on appeal), the court denied the insurer's application for fees. Although the court acknowledged that under Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 244 (2010), either party is entitled to fees so long as the fee claimant has achieved "some degree of success on the merits," and also recognized "a 'modest presumption' in favor of awarding fees to the prevailing party, the court nonetheless refused to award fees to Aetna.

Notwithstanding Aetna's achievement of "success on the merits," the court found a fee award inappropriate for a number of reasons. The court explained the overarching test is: "[W]as the losing party's position substantially justified and taken in good faith, or was that party simply out to harass its opponent?" (citations omitted). The court concluded that the plaintiff's litigation position was "substantially justified and taken in good faith." The court explained:

Given the deferential standard of review in ERISA denial-of-benefit cases in which the plan administrator has discretionary authority, Geiger faced an uphill battle to prevail in her claim for benefits. She did not, however, enter this battle without ammunition. Multiple doctors diagnosed Geiger with conditions affecting her back and ankles, and those diagnoses were severe enough to require some surgery as well as pain medication. Even Dr. Gutierrez, who opined that Geiger could work, conceded that Geiger had "fairly significant necrosis and osteochondral pathology that would become very painful with prolonged standing and/or walking." (Id. at 34.) Based on the existence of the medical evidence supporting Geiger's claim, the Court cannot say that her position lacked a "solid basis." Hakim, 901 F. Supp. 2d at 1053 (quoting Prod. & Maint. Emps.' Local 504 v. Roadmaster Corp., 954 F.2d 1397, 1405 (7th Cir. 1992)).

 The court also noted that Geiger had a legitimate basis to challenge Aetna's reliance on surveillance video since the footage did not show plaintiff "engaging in extensive physical activity." The court also recognized the authoritativeness of the case law Geiger cited in her effort to undermine the surveillance which deems surveillance inconclusive when it fails to show activities performed on a daily basis or the ability to continue job related activities for an extended period of time.

The court further recognized that since Aetna had twice approved Geiger's claim and the Social Security Administration's concurrent approval of disability benefits further "bolster[ed] the reasonableness of her litigation position, as it validates the reliability of the medical evidence upon which she relied." The court further added, "[a] grant of attorneys' fees may have a chilling effect on beneficiaries seeking redress for legitimate claims."

This ruling illustrates that there is rarely a basis for awarding fees to a prevailing defendant in an ERISA benefit case. The only cases in which fees have been awarded have been situations where the litigation was frivolous and brought in bad faith. The court's remarks about the evidence supporting the plaintiff also suggest that she has a reasonable chance on appeal since the court of appeals applies the de novo standard of appellate review over a summary judgment ruling.

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