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3rd Circuit Adopts Catalyst Theory for Attorney’s Fees in ERISA Cases

Posted by Frank Steinberg | Jun 29, 2015 | 0 Comments

Many employment law statutes are so-called “fee-shifting” laws.  This means that the prevailing party in litigation can be reimbursed by the loser, under standards that the courts have established to determine what amount of reimbursement is warranted in a given case. 

Not quite so is ERISA – the Employee Retirement Income Security Act – a sleep-inducing statute designed to protect the interests of beneficiaries of certain retirement and similar plans established by employers. (If you don't believe that it's sleep-inducing, try reading it sometime.) 

In any event, it is now clear in the Third Circuit (New Jersey, Delaware, Pennsylvania and the Virgin Islands) that you do not need to be a prevailing party to recover fees in an ERISA case.  That is, there doesn't have to be a clear-cut winner and loser.  Rather, just some degree of success need be shown.  And, as Templin v. Independence Blue Cross recently taught us, success can be achieved even if the trial court does not issue a substantive legal ruling, and therefore the prevailing party has not “won” anything in the gladiatorial sense of the word.  Thus, under ERISA an award of attorneys' fees does not depend upon court action but upon the effect of the litigation in achieving some beneficial result.

In Templin the plaintiff filed a case that resulted in a settlement for the payment of $68,000 in interest, far less than was initially sought.  The trial court denied the plaintiff's petition for attorney's fees on the misunderstanding that the plaintiff had not achieved success on the merits because (1) the court had not ruled on the legal issues, and (2) the amount  recovered by settlement was insignificant when compared with the amount originally sought.

The Court of Appeals reversed, holding that the relevant question is whether the litigation itself, not a specific ruling by the court, is the “catalyst” or material factor in bringing about some level of relief.  This was the first formal adoption by the Third Circuit of the catalyst theory in ERISA litigation.

The case was remanded to the trial court for reconsideration in light of the correct criteria. As of today, the court's docket does not reflect any proceeding on remand.  If we learn of proceddings to establish the appropriate fee we will keep you informed.

The takeaway, in the meantime, is that Templin is a menaingful win for employees.  It will now be easier for them to convince attorneys to take their cases since the bar has been lowered to recover fees.  Conversely, defendants will want to review their litigation and settlement strategies in light of the greater risk of fee awards that they now run.

About the Author

Frank Steinberg

Frank is the founder and principal of Steinberg Law, LLC. A Jersey boy born and bred, he focuses on employment litigation and counseling, business litigation,  and aviation law. Following law school and a clerkship in the federal district court Frank spent his early career with large litigation ...

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