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Posted: March 19, 2014

District Court May Not Refuse To Award Prevailing ERISA Plaintiff Attorney’s Fee Without Performing Full Analysis Of Relevant Factors

On March 11, 2014, the Second Circuit issued a decision in Donachie v. Liberty Mutual Ins. Co. et al., Nos. 12-2996-CV (Lead), 12-3031 (XAP), clarifying “the scope of a district court’s discretion in deciding whether to award attorneys’ fees to a prevailing” ERISA plaintiff.

In Donachie, the EDNY granted the plaintiff summary judgment “on his claim for long-term disability benefits pursuant to ERISA,” but denied the “plaintiff’s request for attorneys’ fees, based on the conclusion that defendant did not act in bad faith.” The Second Circuit reversed the denial of an award of attorneys’ fees, explaining:

[A] district court’s discretion to award attorneys’ fees under ERISA is not unlimited, inasmuch as it may only award attorneys’ fees to a beneficiary who has obtained some degree of success on the merits. . . . [W]hether a plaintiff has obtained some degree of success on the merits is the sole factor that a court must consider in exercising its discretion. Although a court may, without further inquiry, award attorneys’ fees to a plaintiff who has had some degree of success on the merits, . . . courts retain discretion to consider five additional factors in deciding whether to award attorney’s fees. Those five factors, known in this Circuit as the Chambless factors are:

(1) the degree of opposing parties’ culpability or bad faith; (2) ability of opposing parties to satisfy an award of attorneys’ fees; (3) whether an award of attorneys’ fees against the opposing parties would 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.

. . .

[However,] if a court chooses to consider factors other than a plaintiff’s success on the merits in assessing a request for attorneys’ fees, Chambless still provides the relevant framework in this Circuit, and courts must deploy that useful framework in a manner consistent with our case law. A court cannot selectively consider some factors while ignoring others.

(Internal quotations and citations omitted) (bold emphasis added).

Because the district court “misapplied” the Chambless “framework,” the Second Circuit found that it had abused its discretion and, on performing the analysis itself, found no reason to deny an award and remanded the case to the district court for an award of reasonable fees.

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