When Are Defense Counsel's Fees Relevant to an Attorney Fee Claim by a Plaintiff under ERISA?

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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Wow, this is fascinating. The “this” in question is an interesting little twist in litigation over an attorney fee award to plaintiff’s counsel in the long running ERISA litigation, Frommert v. Conkright. Attorney fee awards in ERISA litigation are a fascinating sub-issue in and of itself, for a number of reasons. First, it is one of the few areas of American law in which the American rule – all parties pay their own legal fees – is overridden in favor of a modified system of loser pays. While there are various statutes that allow such an award, few, if any, actually give rise to such awards on the frequency that they are granted in ERISA cases. Second, ERISA provides a great deal of flexibility and discretion to courts in making such awards, and the manner in which courts handle them suggests why tort reform advocates of a loser pays system across the board are likely barking up the wrong tree: 40 years of experience with a modified form of loser pays in ERISA litigation suggests that all sorts of exemptions, exclusions and rules of thumbs arise in such systems that are intended to enforce equity, even in the face of a loser pays regime. For instance, even though a court could theoretically grant attorneys fees to a prevailing plan sponsor that defends a case, when is the last time you saw that happen? And if you have, can you count on the fingers of one hand the number of times you have seen it happen?

Moreover, litigation over attorneys fee awards is often resolved without anyone wanting to look too closely under the hood of fee requests, for fear of what people might find. This article on fee litigation in Frommert is the perfect example. The defendant challenged the rates requested by the prevailing attorneys, claiming that a much lower rate would be reasonable. This is a common argument, and, when made by a losing party in motion practice over fees in an ERISA case, most often just leads to the judge declaring and then applying some particular rate that seems fair to the judge. In my experience, it is usually some discount off of what prevailing counsel wanted to have applied, but nothing like the haircut counsel for the losing party sought. In Frommert though, the Court has apparently responded to that argument by the defendant by ordering disclosure of the rates charged by the defendant’s counsel, on the thesis that it represents the best proxy for determining what a reasonable rate for plaintiff’s counsel should be in the case. I can guarantee you, by the way, that it is much higher than the relatively low rate that defense counsel argued, on the fee request, would be the reasonable rate to use in calculating a fee award (and I am sure the judge knows this as well).

I am sure the defendant has no desire to disclose this information. There is a more important point here, however, which is the lesson that you always have to be careful what you argue for in motion practice over fee awards in ERISA case, because otherwise you risk the court or the opposing party opening doors that you might have preferred stayed closed.

What Are the Costs and Risks to Administrators When District Courts Remand Benefit Denials Back to Them?

Posted By Stephen D. Rosenberg In Attorney Fee Awards , Benefit Litigation , Long Term Disability Benefits
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I have been writing a lot recently about big picture items, from Supreme Court cases over ERISA’s statute of limitations to the ability of plan sponsors to legally control litigation against them, and everything in between. It is worth remembering, however, that ERISA is a nuts and bolts statute that is litigated day in and day out, often by plan participants for whom the pension or lump sum or disability benefit at issue is the most important financial vehicle open to them. As a result, the details of litigating under the statute are of supreme importance to them.

One of the technical and less sexy areas of litigating these types of cases concerns the circumstances in which federal District Courts, in deciding benefit disputes, elect not to enter an order granting benefits to a participant because of flaws found in an administrator’s processing of a claim for benefits, but instead order the administrator to revisit the issue, in much the same way that an appeals court would remand a case back to a trial court for further proceedings. Issues arising from this type of a remand have become more and more important over the years, as the district courts have become more inclined to remand benefit denials back to administrators for further review as opposed to overturning a denial outright and awarding benefits. Partly, this has occurred because of years of defense lawyers arguing that this is the appropriate way of proceeding, with the courts eventually coming around. Defense lawyers pressed this point in benefit litigation for years before it really became the standard mode of operating for many trial judges, and the reason was simple. It gave the administrator two bites at the apple, in the sense of they would either win at the district court by having the denial upheld by the court or, worst case, would get to decide the issue again on remand. For administrators and plans, this beat the heck out of having a benefit decision up on summary judgment before a court with one of two possible outcomes, those being the court upholding the denial or instead the court granting the benefits to the participant. The remand argument, at a minimum, meant that a court considering a benefit denial on summary judgment would be invited to make any of three decisions, only one of which was truly and immediately detrimental to the administrator, which are: (1) uphold the denial of benefits; (2) overturn the denial and grant the benefits; or (3) remand the denial to the administrator to redo the whole thing.

My friend, colleague, and sometimes adversary, ERISA lawyer Jonathan Feigenbaum, recently won a pair of significant rulings from the First and Second circuits (he will have to try for the Third and Fourth in short order, so as to hit for the cycle) on two key issues arising out of remands of this nature to an administrator, one being the circumstances in which attorney’s fees can be awarded and the other being whether a plan or its insurer can appeal a district court order remanding the benefit dispute back to the administrator for further analysis. The two decisions, and the two issues, are interconnected in an interesting way. In one, the First Circuit’s ruling in Gross v. Sun Life, the Court held that such a remand order is sufficient success on the merits of the case to support an award of attorney’s fees. In the other, the Second Circuit’s opinion in Mead v. Reliastar Life Insurance Company, the Court held that such a remand order is not appealable, as it is not a final order.

Together, they form an interesting counter to the preference of administrators and their lawyers to seek a remand, rather than an outright reversal, when a district court finds problems with an administrator’s benefit determination. They stand for the proposition that administrators may be able to seek that relief, but if they get it, they will have to pay attorney’s fees to the participant and will not have an opportunity to test the remand order on appeal until the entire benefit dispute has been conclusively resolved once and for all at the district court level. Together, they represent an interesting doctrinal response to the preference of administrators to seek remand when problems are found with a benefit determination. Like all legal doctrines, it needs a catchy name – like the Younger doctrine is for abstention – if it is to get much traction in the legal literature. Let’s call it the “Feigenbaum doctrine.”

Santomenno v. John Hancock: Does It Matter That the 401(k) Service Provider Is Not a Fiduciary?

Posted By Stephen D. Rosenberg In Attorney Fee Awards , Class Actions , ERISA Statutory Provisions
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I wanted to comment at least briefly, or more accurately thematically, on the Third Circuit’s decision last week in Santomenno v. John Hancock, in which the Court held that John Hancock’s role as an advisor and service provider for a company 401(k) plan, by which it helped select fund options and administer participant investments, did not render it a functional fiduciary under ERISA for purposes of an excessive fee claim. It’s a well-reasoned and interesting opinion on a number of fronts, but what struck me as important about it relates more to broader issues than to the narrow details on which the decision itself turns. Personally, I think the 30 page decision itself does a wonderful job of laying out the issues and explaining them, something which is not always true of appellate decisions concerning the technicalities and complexities of ERISA class action cases, making the source document here the best place to turn for a full understanding of the details of the decision. This is not always the case, as some decisions of this ilk are simply too dense or otherwise difficult to penetrate to go first to the opinion itself, rather than to secondary sources – such as blogs and client alerts – for a full understanding of the case.

If you want to skip reading the case itself and instead go to commentary on it that sums up the central facts, Thomas Clark, who has staked out a firm position in the blogging world as one of the more scholarly analysts of fiduciary duty litigation, recommends some summaries in his post on the case. His recommendation is good enough for me in that regard, so I would refer you to his post and the summaries about the opinion for which he provides links.

For me, I was struck, as I noted, by some thematic, big picture aspects of the decision, and I wanted to discuss three of them in a post. First, in speeches, articles, presentations and even in small group meetings with clients, I often make the point that service providers to 401(k) plans are very good at structuring their contracts and relationships to avoid incurring fiduciary status. Most recently, in providing an update on ERISA litigation to an ASPPA conference, I discussed this point in the context of explaining why it is such a smart strategy: because it is simply not possible to predict the next theories of ERISA liability that the class action bar will pursue (did anyone foresee the rise of church plan litigation? I didn’t think so), the best strategy open to plan service providers is to avoid assuming fiduciary status at all, thus defanging new theories of liability without even knowing what they will be. The opinion in Santomenno provides a very detailed explanation of the contractual structure by which John Hancock avoids fiduciary status despite its intimate involvement with the plan’s assets and investment options, and as such it does a beautiful job of making my point; the Court demonstrates exactly the subtle, intelligent, thoughtful and carefully planned structure that insulates the service provider from incurring fiduciary status.

Second, I have long been a critic of a habit some courts have of, in a nutshell, jumping the gun and deciding complex ERISA cases prematurely, without first allowing the facts to develop to a sufficient level. I understand the impulse – ERISA litigation, and class action litigation in general, can be very expensive as well as disruptive to plan sponsors, and courts can often be sympathetic to the desire to avoid unnecessary litigation in circumstances where the likely outcome of the case can be anticipated at an early stage. I recently listened to one well-regarded federal judge address a law school class after a motion session, when he commented – in a different context entirely – on the fact that we have created, in the federal court system, a Maserati, a beautiful machine but one that most people can’t afford. Early resolution, such as at the motion to dismiss stage, of lawsuits that are unlikely to end up any differently later on is an antidote to this problem.

That said, however, this mindset can often lead to cases being decided too early, with regard to the question of whether a court has enough information to really get the nuances right. All too often, judicial opinions in ERISA cases issued at the motion to dismiss stage – or on appeal from an order granting a motion to dismiss – end up reading more like a law review article than a judicial decision because, by being decided without much factual development having yet occurred, they end up being based more on hypothesis and assumptions about the world of service providers, investments, fees and the like than on the actual realities of those worlds. This is a problem with a simple solution, which is for courts to avoid making significant doctrinal rulings without first having a well-developed factual record. You can see this, but from the good side, in Santomenno, in which the Court had access to significant factual information, including the relevant contractual documents, and fashioned a ruling around – and dependent upon – those facts. It makes for a far more compelling and weighty decision than would otherwise be the case. It is for me, in any event, an approach that makes me give far more value to the Court’s reasoning and makes me far more likely to be persuaded by the Court’s reasoning.

Third, the case illustrates, and the Court even alludes to briefly, a point that I think is very important and which I often raise in a variety of contexts involving ERISA litigation. This is the question of whether systemically it matters whether John Hancock or a similarly situated service provider is or is not a fiduciary, and the answer is that, generally speaking, it does not matter. Sure, it may matter to the participants and their lawyers who are looking for a deep pocket, and it certainly may matter to the business model of the service provider, but it shouldn’t actually matter to the ERISA regulatory and enforcement regime itself. As I have written many times, including too often to count in this blog, ERISA is essentially a private attorney general regime, in which the idea is that private litigation and even just the threat of it enforces proper behavior within the relevant industry. That occurs here regardless of the fact that John Hancock and other such vendors are not considered, in this context, to be fiduciaries who can be held liable, as a breach of fiduciary duty, if the expenses and fees in a 401(k) plan are too high. And why is that? Because the system outlined in Santomenno is one in which the vendors may not be fiduciaries, but they are obligated to provide sufficient information and control to the actual fiduciaries – those appointed by the plan sponsor to run the plan – to allow the actual fiduciaries to make informed decisions about the investment options and the fees. Importantly, the system as viewed and approved of by the Santomenno court is one in which the actual plan fiduciaries bear financial liability if they don’t use the power granted to them by the vendor to police fees and expenses, thereby resulting in excessively high expenses. In that circumstance, the named fiduciary becomes liable for that problem. As a result, even without the service provider being deemed a fiduciary, the system still captures the risks of excessive fees and requires action – only by the plan sponsor and its appointees rather than by service providers such as John Hancock – to ensure that the problem is either avoided or remedied.

Tick Tock, Tick Tock, Pay Attention to the Clock: The Importance of Procedural Timing Issues in ERISA Litigation

Posted By Stephen D. Rosenberg In Attorney Fee Awards , Benefit Litigation
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I have been tied up on trial out of state most of January, and am now starting to go back over the more interesting items that landed in my in-box during that time. One of my favorites is this Supreme Court decision in an ERISA case, which essentially holds that a party cannot wait for a district court’s resolution of a request for attorney’s fees before seeking to appeal any part of an earlier ruling on the substance of the ERISA claim. As Sarah Jenkins and Jon Laramore of Faegre Baker Daniels discussed in this piece – the first one I have seen discussing the substance of this opinion – the Court held in Ray Haluch Gravel Co. v. Central Pension Fund of the International Union of Operating Engineers that “an appeal was untimely because an unresolved issue of contractual attorneys' fees did not prevent judgment on the merits from being final for purposes of” the appellate clock.

While the details of the decision will be of immense interest – I am sure – to appellate mavens (oh where have you gone, Appellate Law & Practice blog?), the more interesting aspect to me is the decision’s unspoken and unacknowledged linkage to the Supreme Court’s very recent decision in Heimeshoff v. Hartford Life & Accident Insurance, which held that an ERISA claim could be barred by failing to comply with a contractual filing period established under a plan document. The combination of the two decisions drives home the highly technical nature of prosecuting ERISA claims, and the crucial importance of getting every step right so as to protect all rights of recovery available under the statute. As the two cases make clear, one can waive clear rights to recovery under ERISA by failing to prosecute them exactly as required and on the exact time schedule required by applicable plan terms and governing statutes. While some might view the particular timing requirements addressed in Ray Haluch Gravel and Heimeshoff as picayune, the Court’s strict enforcement of them make clear that parties seeking relief under ERISA had best not treat them that way.

Trust But Verify: The Importance of Private Attorney Generals to Plan Governance

Posted By Stephen D. Rosenberg In Attorney Fee Awards , Employee Benefit Plans , Fiduciaries
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Here is a neat little story that illustrates a bigger point. The article describes the resolution of a Department of Labor lawsuit brought against a small company to recover approximately $100,000 of participant holdings in a profit sharing plan that was diverted to other uses. Its own moral is clear – plan sponsors need to remember that plan assets belong to the plan, not them – but one that is too often forgotten in closely held, smaller companies. The bigger story, though, is the one this case illustrates. I have written before about the idea that ERISA is really a private attorney general statute, one that uses the awarding of legal fees to a prevailing participant as a means of allowing individual participants to retain counsel and enforce fiduciary discipline, even in cases where the amount at risk – such as the one hundred thousand at issue in the article – wouldn’t otherwise justify either a participant paying out of pocket to hire counsel or a lawyer taking the case on contingency. And yet, as this case shows, there are real breaches, real problems, and real losses in many plans that require legal redress; this remains true even when the amounts at issue aren’t particularly large, as the losses are still significant to the participants who incur them. The Department of Labor itself does not have the litigation resources, relative to the number of plans out there, to litigate each and every such case, and has to pick and choose. Allowing recovery of attorneys fees allows those participants whose cases are not pressed by the Department of Labor to still bring breach of fiduciary duty actions and thereby enforces a level of legal oversight on plan sponsors that might otherwise not exist. The ERISA structure is, to a certain extent, dependent upon – and assumes the existence of – such private enforcement actions; they impose a level of discipline on fiduciary conduct that would otherwise be absent.

Briefing Attorneys' Fee Awards Under ERISA

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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I have to admit I have never been to Oklahoma. I am not, however, afflicted with the New Yorker’s view of the world and do in fact know where Oklahoma is on a map (I have also been to states that border it, if that counts). Either way though, the next time you have to brief the subject of awarding attorneys’ fees in an ERISA case in the post-Hardt world, you will be able to thank Oklahoma lawyer Renee DeMoss for the fact that you do not have to research the question or even put together your own completely original briefing of the subject to present to the court; she has already done it for you right here, in a structure useable in any jurisdiction.

The Future After Hardt

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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Well, everybody and their mother’s lawyer has an article, blog post or client advisory memo out on the Hardt case, and I suspect that is because, frankly, its about as easy a Supreme Court decision to understand as you can find. What’s it hold? Procedural victory requiring remand of an ERISA denied benefit claim is sufficient to justify an award of attorney’s fees to the claimant so long as there is some substantive achievement by the claimant in moving his or her case forward. The question left open? What more than just a simple order of remand is necessary to trigger an award of attorneys’ fees, since that alone isn’t enough. The answer? Frankly, on a practical level, it is hard to conceive of a remand that isn’t driven by the claimant showing some significant problem in the administrative record whose existence advances the claimant’s case sufficiently to justify an award under the Hardt ruling. That said, however, I am sure there are going to be factual scenarios in which the issue is arguably close, and one can predict that the development of the case law on that point going forward will be driven by how certain fact patterns intersect with the quality of the lawyering, the quality of the administrative record at issue (and thus of the administrator in question as well, since the caliber of the administrative record in a given case is, in essence, a stand in for the quality of the work done by the administrator and is its physical representation), and with the approach of the particular judge to which the case is assigned. How’s that for an easy and safe prediction? The great southern novelist Walker Percy once commented to the effect that a well written horoscope is one that many people can fit themselves into, and, similarly, this prediction is one into which you can shoe horn pretty much any future development of the case law on this issue. That doesn’t make it any less accurate, though.

This is all a preamble to this link, registration required, to a Lawyers USA story on the decision, in which yours truly is quoted:

Stephen D. Rosenberg, a partner at the McCormack Firm in Boston and author of the Boston ERISA and Insurance Litigation blog, said the relaxed standard could result in more cases being filed.

“I can see more cases being brought by plaintiffs’ lawyers because they can file a case with a procedural problem, knowing they don’t have to win the whole case at the end of the day to collect a fee,” he said.

But a remand order to a plan administrator might not be enough by itself to be considered success on the merits, Rosenberg noted. . . .

“The fight that is going to play out in these cases [involves] the question of how much beyond just a failure to dot an “I” on remand does [a claimant] need to have,” Rosenberg said.

I have a lot more thoughts on the case, some of which are actually more subtle than these broad brush thoughts, but an important one to pass along relates to the issue I am quoted on, of the possibility of Hardt opening the door to more cases being filed. Certainly, there is room and motivation now for participants’ lawyers to bring cases where a clear procedural problem is present, thus making recovery of attorneys’ fees more likely and making filing suit more feasible economically from their perspective, in cases where previously the relatively low dollar value of the benefits at issue combined with a reasonably high degree of difficulty in prevailing on the substantive claim to reverse the denial of the benefits itself would have argued against filing suit. But even that dynamic, in terms of its likelihood of producing more lawsuits, is tempered by a dynamic somewhat peculiar to ERISA litigation, namely the relative paucity of participant lawyers who can spot both a procedural error and a strategic path from it to remand; that is not something just any old plaintiff side lawyer or moonlighting personal injury attorney is going to be able to do. As a result, you may see more cases filed by the better ERISA focused participant lawyers on claims that they otherwise would not have seen as financially worth pursuing, but I doubt you are going to see a noticeable or measurably significant increase in the filing of such suits across the legal and participant population as a whole.

Hardt, A Unanimous Supreme Court, and the Perfect Example of Why Remand Is Enough of a Win to Support an Award of Attorneys' Fees

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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I posted recently on the Supreme Court’s consideration in Hardt v. Reliance Standard Life Insurance of the question of just how much success on the merits is necessary to trigger a plan participant’s right to an award of attorneys’ fees, and discussed the fact that requiring an outright and complete win by the plan participant is likely too high of a standard for a fair and equitable system. In a case mostly remarkeable for its unanimaty, the Supreme Court ruled to this effect today, upholding, in essence, the approach to this issue taken by those courts that find some substantive success by the plan participant to be enough to trigger an award of attorneys' fees.

A decision a week or so ago, Gelumbaukskas v. USG Corporation Retirement Plan Pension and Investment Committee, out of the United States District Court for the District of Maryland provides a perfect example of why this is the correct rule. As the case reflects, the plan participant in that case was never provided with a substantively and procedurally compliant internal appeal process, leaving a record in place from which the court could not pass on the question of whether, in fact, the decision denying benefits was arbitrary and thus should be overturned, which would have resulted in an award of benefits by the court to the plan participant. Rather, the court found that the matter had to be remanded to the plan administrator to redo the appeal process in a manner that would comply with its obligations under ERISA and would create the necessary record for the court to pass on the ultimate question of whether or not the plan participant was actually entitled to the benefits after application of the arbitrary and capricious standard.

Certainly, this is a significant enough win for the plan participant that it should allow an award of attorney’s fees, in that the remand is likely to either end in: (1) a settlement or an award of benefits to him, to avoid the court passing on the question again after having already found deficiencies in the record and having noted potential substantive problems with the record in its opinion; or (2) in the creation of a record that the plan participant can actually use to challenge the denial. In that first possible outcome, the remand order in essence becomes a victory for the plan participant, and it is hard to justify, other than as form over function, the idea that the plan participant should not be entitled to attorney’s fees for that result, when the outcome ends up substantively comparable to an actual outright victory at the courthouse. In the second potential outcome, it is clear that the procedural victory by the plan participant was, at a minimum, a necessary counterweight to the administrator’s control of the appeal process and, simultaneously, the necessary prerequisite to the court ever ruling on the substantive claim for recovery of the actual benefits in dispute; should the plan participant thereafter prevail in court, that initial procedural victory becomes a necessary prerequisite to overturning the substantive denial of benefits, thus warranting treating the remand decision as a necessary part of the court process in litigating the case and one that is therefore capable of supporting an award of fees.

Of course, one can point out the other possible outcome after the administrative appeal process is concluded after the remand by the court, which is that the benefits are still denied on remand, and the court eventually upholds that denial. But even then, the original win served the purpose of enforcing ERISA’s procedural regulations and mandates, which the court found were violated by the administrator. ERISA imposes those procedural obligations on plan administrators for a reason, which is to guarantee the type of fair process that is supposed to stand in for a quick trip to the courthouse clerk’s office; recall that ERISA is interpreted to disfavor litigation for the resolution of disputes, in favor of an administrative handling of disputes outside of the court system, so as to lower plan expenses, encourage the adoption of benefit plans, and make use of the administrator’s expertise in deciding claims for benefits. It is the plan participant in this third potential outcome who has vindicated those underlying principles, and thus has, in essence, scored a win, which should be the predicate for an award of attorney’s fees.

What's a Good ERISA Lawyer Worth, Anyway?

Posted By Stephen D. Rosenberg In Attorney Fee Awards , ERISA Statutory Provisions , Standard of Review
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That’s what this case here begins to answer, at least in the Boston market and in the context of the fees that should be awarded to a prevailing plaintiff. This case was intended to be the next in the series of recent Massachusetts/First Circuit centric decisions I started writing two weeks ago, and haven’t returned to since. It is interesting on two fronts, the first being, as intimated above, it’s survey of billing rates for ERISA counsel in the Boston market. The second is it provides a good explanation, as well as example, of applying a lodestar.

It seemed particularly timely to return to the series of recent decisions by bringing up this one, in light of the Supreme Court’s recent hearing of arguments on the question of the nature of attorney’s fee awards to prevailing plaintiffs in ERISA cases. That case, and the argument before the Court, revolved heavily around exactly what result adds up to a sufficient enough win by a plaintiff/plan participant to trigger an award of attorney’s fees, since an ERISA case involving denied benefits can end up with a result that falls anywhere across a broad continuum of possible outcomes that range from a win for the plan, to a remand back to the plan administrator to fix procedural errors and make a new decision, to an outright win for the plan participant. It is my view, even as predominately a defense lawyer, that those courts who use substantial success (under other names sometimes) by the plan participant in his or her suit as the proper trigger for awarding attorney’s fees under ERISA have it right. There are a lot of barriers to plan participants bringing suit over denied benefits that relate to the costs of doing so, including the fact that many cases simply don’t involve enough in benefit amounts to warrant the plan participant incurring the costs needed to prosecute a claim out of his or her own pocket; making attorney’s fees available so long as the participant proves some substantive problem in the handling of the claim, even if it only results in remand to the plan administrator, is both a necessary counterweight to this problem and consistent with the premise that a plan participant is entitled, even if not to benefits, than to the proper handling of his or her claim and a correct decision making process.

Indeed, if you think about it, the animating principle that makes arbitrary and capricious review morally appropriate is the idea that the decision must be based on a proper process; absent a proper process, the justification for allowing the plan administrator the leeway to make the decision, with only limited review by a court, is weak at best. One can only assume that the administrator’s decision making is appropriate, which is the essential assumption behind discretionary review, if in fact the process used to make that decision was correct; anything less, and there is no reason to assume a correct outcome by the administrator. From a practical perspective, as one who has represented various plan administrators over the years, there is nothing wrong with this approach and idea either, as it is my experience that most good companies strive for a proper process and a correct result (something that itself is dependent on a quality decision making process in the first instance).

For arbitrary and capricious review to exist in a fair legal system, there has to be a realistic opportunity for plan participants to test whether the process pursued was correct, and the opportunity to recover the legal costs incurred in proving that the process was flawed is a necessary part of that, as in its absence, participants will become, for financial reasons, even less likely than they are now to challenge the procedural underpinnings of decisions that go against them. This is simply logical, if you think about it. Why would any rational economic actor spend tens of thousands to prove a mere procedural error leading to remand to the administrator, in cases that often involve only five figures in benefits, absent a realistic opportunity to recoup those fees if correct in his or her belief that the process was flawed?

From this point of view, the exceptional (when compared to every other legal area I can think of at the moment) degree of latitude granted to the administrator by arbitrary and capricious review, something firmly shored up most recently by Chief Justice Roberts in Conkright v Frommert, must exist hand in hand with rules that create a realistic system under which participants can test the administrator’s process in reaching decisions, and the ability to recover legal fees by proving a procedural error and forcing a remand is a sensible part of that system.

When Does Little Recovery Justify a Large Fee Award?

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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This is a little item about a large award of attorney’s fees in an ERISA case to a prevailing plaintiff in a case involving only several hundred dollars in actual recovered damages, but it caught my eye for a couple of reasons. Factually, as the story goes, the court awarded some $45,000 in attorney’s fees in a case in which the claimant recovered just over $600, raising the issue of whether the fee award was too disproportionate to the recovery to be justified. Even speaking predominately as a defense lawyer, I don’t think there is any problem with the large gap between the fee and the recovery, nor do I think that proportionality is an appropriate consideration to graft onto the standard for determining fee awards in these types of situations. To be more nuanced, if proportionality is an appropriate consideration for a fee award, then the level at which fees become deemed disproportionate must be a lot higher than in the case at hand; I can foresee the immediate objection as to whether an award of $450,000 to recover a few hundred dollars is too disproportionate, and the answer to that question would probably be yes. However, it is worth noting that in that hypothetical situation, the more salient question is not proportionality, but value of the legal services - it is simply unrealistic to belief that the legal work needed to bring about such a recovery costs or should cost that much. That is not something that is true of $45,000 of legal work to recover an award - of however much - on an ERISA claim; that doesn’t seem out of line with the work needed to win such a case under many typical circumstances.

But proportionality itself is not an appropriate factor, nor an appropriate lens through which to view this issue. To an individual plan participant, a 5, 10 or 15 thousand dollar recovery of additional benefits can be a very significant recovery, one absolutely worth fighting for, but the legal work needed to recover that will almost always cost significantly more. The very purpose of shifting fees under ERISA on participant claims is to allow for that dynamic, and ensure that participants can recover unpaid benefits, even where the cost of suing would exceed the value of the benefits at issue. Worrying about the proportionality of the legal fees to the recovery, under most normal scenarios, undermines that, because in many typical situations, the fees needed to recover the amounts at issue can often exceed the value of the benefits if the participant must litigate the issue to a conclusion to recover the benefits.

The other reason the story caught my eye is that, at the end of the day, the dispute over the several hundred dollars was a dispute between two lawyers who had formerly worked together, and the litigation appears to have been very contentious. Its unclear to me from the story whether the cause of that excessive contentiousness - given the amounts actually at stake - was personal or work related enmity, or simply what inevitably happens when two lawyers sue each other. From a broader perspective, however, it is worth noting that you see similar dynamics time and again with small plans run by small businesses, in which there is often a great deal of informality with regard to benefit plans, leading to highly contentious litigation - often personal in nature - over one partner’s handling of the benefit plan, once the business comes to an end. Compliance, structure, outside management of a plan - all the things that one would hope would be in place and which could diffuse such strife are often missing in that scenario, resulting in ERISA litigation that would never have arisen in a bigger operation with more controls.

On Attorneys Fees and Hecker

Posted By Stephen D. Rosenberg In 401(k) Plans , Attorney Fee Awards , ERISA Statutory Provisions , Fiduciaries
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Honestly, I have spent a week scratching my head, off and on, over the Supreme Court granting cert to consider the standards governing when attorneys fees can be awarded in an ERISA case, particularly when they denied cert shortly thereafter in Hecker, which presented the opportunity to address the much more substantive issue of the scope of fiduciary responsibility for the amount - and corresponding degree of disclosure - of 401(k) fees. In my mind, there is already a conflict among the circuits over that issue, with the Seventh Circuit finding outright that there was no viable theory against fiduciaries of large plans with market standard fees, and the Eighth finding this same theory worthy of factual inquiry. However, as I thought more on it, the denial of cert for Hecker makes some jurisprudential sense. Hecker itself was decided on a motion to dismiss, leaving essentially no factual record for evaluating these types of claims (critics will say, of course, that this didn’t stop the Seventh Circuit from deciding the theory had no merit) and forcing any Supreme Court ruling to turn solely on the allegations in the pleadings. This is a complicated issue, one I have said before would have been more properly evaluated by the Seventh Circuit after factual development, and I suppose it is likewise fair to say that a Supreme Court review of the issues posed by Hecker by means of reviewing Hecker itself would have suffered from the same flaw; Supreme Court review of the fee issues raised by the Hecker line of cases is probably better suited to a case that has played out sufficiently to allow all of the factual and legal fault lines to develop prior to Supreme Court review.

But the attorneys fee case itself still doesn’t make a whole lot of sense to me, as a practicing litigator who spends plenty of time with cases pending in the federal courts that are governed by that fee statute. The reality is that such attorney fee awards are either subsumed within settlements, or the courts award them under current standards only, typically, where there is significant merit to a party’s position and the party obtains significant relief; the district court judges, in my experience, do a good job of utilizing the current standards and understanding of the fee shifting provision of the statute to bring about that result, such as in this case here. And at the end of the day, no matter certain peculiarities that exist in the wording of the statute, this is really the only standard for awarding or not awarding fees that makes practical sense in the real world. After all, do we really want attorneys fees awarded for less than obtaining at least a significant portion of the relief sought by a plan participant?

I understand that the Fourth Circuit, in the case under review, applied a somewhat more stringent test than what I am discussing here, but, from a courtroom level view, courts get this issue right often enough that it doesn’t seem to warrant Supreme Court intervention. But the Court seems to have a thing for ERISA cases these days, for whatever reason.

It Depends on What the Meaning of the Word Prevail Is

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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I have been swamped for awhile, but have wanted to post on this case, by Judge Young of the U.S. District Court here, for almost as long, and I want to get it up today while I have a few minutes of daylight, because I think it is a very important opinion for practitioners. Long time readers will know that I am very fond of federal court decisions that give a scholarly, extensive overview of the case law on both sides of an issue, because it prevents a litigator from having to reinvent the wheel by creating his or her own survey of the law on that particular issue when it comes up in their own practices, since a court has already done it. In this opinion here, Judge Young gives a scholarly overview of the split among the circuits on what it means to be a “prevailing party” entitled to recover attorneys’ fees in an ERISA case. The particular issue before him was whether a participant who does not recover benefits, but instead attains a remand to the administrator for further review has prevailed, for purposes of ERISA’s attorney fee shifting provision. The court’s conclusion, after surveying the cases throughout the country, is: (1) maybe; and (2) sometimes. I am being a bit flippant, but the truth is it is an excellent analysis of an issue you don’t see that often and the court’s conclusion, in a nutshell, is that you have to look and see if the plaintiff, beyond just getting that relief, accomplished some significant goal of the suit; if so, then the plaintiff is a prevailing party entitled to an award of attorney’s fees. It is not a black and white issue, in the sense of remand either always does or always does not warrant such an award, but a fact based one dependent on what was actually accomplished in the lawsuit. For anyone who deals with these issues, it is certainly worth a read. The case is Colby v. Assurant Employee Benefits.

A Thanksgiving Week Feast

Posted By Stephen D. Rosenberg In 401(k) Plans , Attorney Fee Awards , Benefit Litigation , ERISA Seminars and other Resources , Employee Benefit Plans , Fiduciaries
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Some of the more prolific bloggers manage to be prolific by posting short notes on various topics of interest written by others, which isn’t my usual style. But over the past week or so I have managed to back up a good stack of things that I have wanted to talk about in detail, but haven’t had the time to comment on. So in the spirit of a Thanksgiving host laying out a big spread, here’s a whole bunch of things at once:

First, here is a good follow up story providing more detail on Wal-Mart’s success in defending itself against excessive fee litigation, a topic I first discussed in this post here. This particular story, in PlanAdvisor, does a nice job of illustrating the point I made in my earlier post, which is that the court, in ruling in favor of Wal-Mart, did not focus on or analyze the propriety of the particular fees themselves, but rather focused on the method used by the fiduciary to select the investment options in question and whether that was prudent. Interestingly, the article describes the Wal-Mart investment menu, and it reads like one you would find in just about any 401(k) plan. Does this suggest that most plans are actually fine on this front? Or might it suggest that fiduciaries as a whole accept fees that are too high, and that perhaps comparing a particular plan’s investment choices, such as Wal-Mart’s, against industry benchmarks is not really the right focus for deciding whether the fees in a particular plan were too high? Just asking.

Second, here’s one court’s answer to an oft asked question: is a plan participant seeking benefits entitled to attorney’s fees for the administrative appeal portion of his claim?

Third, here’s an interesting webinar rounding up the Supreme Court’s treatment of ERISA issues during the 2008 term. The Court’s fascination with ERISA during the past year has been well documented and the biggest item of discussion in ERISA related media, and pretty much everything about those developments has been chronicled on this blog and a million other places. But if you haven’t seen it all enough by now, the webinar may be for you. Interestingly, one of the topics noted in the webinar is the Court’s involvement in a case, still pending and not yet decided, concerning waivers by divorcing spouses of plan benefits. This is the quickly becoming infamous Kennedy case, which to date has caught the eye for two reasons: first, many people have some question as to why the Court took on this case and whether it merited the Court’s involvement, and second, because of the Court’s decision to seek supplemental, post-argument briefing on the very basic issue of the extent to which plan administrators are bound - barring an effective QDRO - to the express written terms of a plan. As a very experienced benefits consultant recently commented to me, the Court is going to upturn an awful lot of apple carts if, intentionally or even (probably by accident) implicitly, they indicate that administrators are not strictly controlled by the actual written terms of the plan instrument. As a result, a case that started out as perhaps the least substantively significant of the ERISA cases taken up by the Court in the past year threatens to become one of the more disruptive to settled practices, in a manner similar to how the Court reopened much settled thinking on fiduciary duty issues by indicating in LaRue that rules long established in the defined benefit context may not hold true for all other situations.

Okay, that clears some of the backlog.

LaRue, The Postscript

Posted By Stephen D. Rosenberg In 401(k) Plans , Attorney Fee Awards , Benefit Litigation
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Remember the grave concern in different quarters about whether the Supreme Court’s ruling in LaRue would lead to a flood of litigation? Turns out it didn’t even do so in the LaRue case itself, which, now on remand at the trial court level, has been voluntarily dismissed by the plaintiff to avoid the expense of litigating the case. There’s your real check on excessive litigation: the costs of pursuing them. While ERISA grants a prevailing party the right to recover attorney’s fees, it is not a given that they will be awarded, particularly in a case, such as LaRue, where - as the multiplicity of opinions at the Supreme Court make clear - the law governing the issues in dispute is unsettled. Moreover, they are only awarded if you win; litigating a questionable case at significant expense risks large attorney’s fees that may never be recouped.

Of course, I guess all of this is just a back door argument for the outcome suggested by the opinion in Bendaoud discussed here: that the LaRue type cases are better structured as class actions than individual actions, for a variety of reasons, apparently including that litigating one small case is just plain not cost effective.

Does David Have to Pay Goliath if the Slingshot Misses Its Mark?

Posted By Stephen D. Rosenberg In Attorney Fee Awards , Benefit Litigation , ERISA Statutory Provisions
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Fee shifting provisions, such as the one in the ERISA statute, that authorize a court to award attorney’s fees to a prevailing party, are facially neutral, and allow for an award in favor of the prevailing party, whomever that may be, and against the losing party, again whomever that may be. But should attorney’s fees be awarded to a large plan or administrator, such as a multimillion or billion dollar pension plan, from a plan participant who has lost a case seeking benefits that he or she believed was owed under the plan’s terms? In essence, does a facially neutral fee shifting statute really require David to pay Goliath?

The elements that are to be considered in ruling on an award of attorney’s fees under ERISA are, like the statute’s fee shifting provision itself, facially neutral; they do not presuppose that any particular type of party is more or less entitled to an award of attorney’s fees than any other party, nor that any particular type of party is entitled to protection against being hit with such an award. But the devil, as always, is in the details or, perhaps more accurately when, as in this case, broad open ended standards in the law are applied to a particular case, in the application of the standard to the concrete facts before the court. And as this case here, and Roy Harmon’s discussion of it shows, the application of those elements to this type of scenario tends to end up with a finding that the individual plan participant who has lost a case against a large plan does not have to pay attorney’s fees to the prevailing defendant.

Seldom Seen: Awarding Attorney's Fees Under ERISA to a Prevailing Defendant

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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This is something you don’t see every day, namely an award of significant attorney’s fees to the prevailing defendant in an ERISA governed action. In R.I. Carpenters Annuity Fund v. Trevi Icos Corp., just decided by the United States District Court for the District of Rhode Island (but not yet up on its website), the court entered such an award against the losing plaintiff, a union provided employee benefit plan, on a claim brought by it under ERISA, even though the court acknowledged that ERISA’s fee shifting provisions are seldom used to require a losing plaintiff to pay attorney’s fees to a prevailing defendant. Here, however, the plaintiff had used ERISA as an alternative mechanism for litigating a jurisdictional dispute with another union over a project, apparently for tactical reasons related to adverse rulings against it before the National Labor Relations Board in other, similar circumstances. The court provides a nice review of the factors in the First Circuit that govern the decision whether to award attorney’s fees to a prevailing party, and noted that the key issue in the case before it was whether the plaintiff’s decision to use ERISA as a tactical tool for litigation strategy constituted a misuse of the statute, warranting an award of attorney’s fees in favor of the prevailing defendant. The court explained:

The Court should consider five factors in deciding whether to award fees and costs to a party: (1) the degree of culpability or bad faith attributable to the losing party; (2) the depth of the losing party's pocket, i.e., his or her capacity to pay an award; (3) the extent (if at all) to which such an award would deter other persons acting under similar circumstances; (4) the benefit (if any) that the successful suit confers on plan participants or beneficiaries generally; and (5) the relative merit of the parties' positions. Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225 (1st Cir. 1996); see also Beauvais v. Citizens Fin. Group, Inc., 418 F. Supp. 2d 22, 33 (D.R.I. 2006). These so-called Cottrill factors are guidelines and do not preclude the Court from consideration of other factors. Cook, 334 F.3d at 124. Rather, the Court may - and should - consider "additional criteria that seem apropos." Cottrill, 100 F.3d at 225. Ultimately, the test for granting or denying attorney's fees and costs in an ERISA case is, in a word, "flexible." Id.; see also Gray v. New England Tel. & Tel. Co., 792 F.2d 251, 258 (1st Cir. 1986).ERISA's broad language permits the Court to award fees and costs to "either" party. However, the substantive purpose of ERISA is remedial, i.e., it is designed to protect "the interests of participants in employee benefit plans and their beneficiaries." 29 U.S.C. § 1001(b). Consequently, some courts have noted that fees or costs seldom should be assessed against unsuccessful ERISA plaintiffs. See, e.g., Operating Eng'rs Pension Trust v. Gilliam, 737 F.2d 1501, 1505-06 (9th Cir. 1984); Marquardt v. N. Am. Car Corp., 652 F.2d 715, 719-20 (7th Cir. 1981). Before the Court tackles the individual Cottrill factors it should be noted that this is not a typical ERISA case. As was discussed in the Court's decision denying summary judgment, the driving force behind this action seems to be a jurisdictional dispute between two labor unions -- the Carpenters Union Local 94 and the Laborers Union, both of which claimed the right to represent the workers on the "front-end" of the CM-120. R. I. Carpenters Annuity Fund v. Trevi Icos Corp., 474 F. Supp. 2d 326, 331 (D.R.I. 2007). Whether fees should be awarded turns on the question of whether it is appropriate to use ERISA litigation as a vehicle to pursue Local 94's claim of jurisdiction. If it is legitimate to use ERISA in this way, then even an unsuccessful Plaintiff might not be "culpable" under the Cottrill factors. If it is not, then to use ERISA this way (at the expense of an innocent employer) more likely evidences culpability under the Cottrill analysis.

The court then concluded that the plaintiff’s strategic use of ERISA in this manner was not appropriate, and justified an award of attorney’s fees to the defendant.

It is a fascinating decision for at least two reasons. The first is the relative rarity of a court granting attorney’s fees to the prevailing defendant, and the case presents a road map as to one particular line of argument that a defendant can pursue to seek such an award. The second is that the case drives home the need to consider the rationale for including an ERISA claim in a case, and suggests that there are risks to using ERISA in situations where other statutes or theories of liability are better suited to targeting the specific mischief at issue.

The Five Factor Test for Attorney's Fee Awards Under ERISA

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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Here’s a nice follow up ruling in the case of Curran v Camden National, a particularly interesting ERISA case that I discussed here. In this newest ruling, the United States District Court for the District of Maine denied the motion of the defendant - which had earlier successfully moved to dismiss the complaint against it - for an award of attorney’s fees under ERISA. The Court first stated the governing standard in the First Circuit on this issue, which is that: 

in an ERISA case, a prevailing plaintiff does not, merely by prevailing, create a presumption that he or she is entitled to a fee-shifting award [and there is no] creation of a presumption in favor of prevailing defendants. Rather . . . in the context of ERISA cases, the Court is to apply a five-factor analysis to determine the appropriateness of an award of attorney's fees to the prevailing party: (1) the degree of culpability or bad faith attributable to the losing party; (2) the depth of the losing party's pocket, i.e., his or her capacity to pay an award; (3) the extent (if at all) to which such an award would deter other persons acting under similar circumstances; (4) the benefit (if any) that the successful suit confers on plan participants or beneficiaries generally; and (5) the relative merit of the parties' positions.

The Court then went step by step through each factor, explaining how none warranted an award of attorney’s fees, despite the fact that the defendant had prevailed on a motion to dismiss - which is always a pretty good showing of a potentially severe absence of merit in the plaintiff’s claims. The Court explained that prevailing on such a motion alone cannot be enough to support an award of attorney’s fees, because if it was, it would discourage parties from proceeding with what may well be meritorious claims out of fear of being hit with an award of attorney’s fees if they are wrong in their analysis of the merits. The take home from the opinion in this case can only be that the standard for obtaining such an award, at least as a prevailing defendant, is pretty high, and if I were defending against a claim for attorney’s fees under ERISA, this is the case I would open my brief with.

Attorney Fee Awards in Insurance Coverage Litigation

Posted By Stephen D. Rosenberg In Attorney Fee Awards , Coverage Litigation
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When I was first starting out as a lawyer, stuck with research assignments that required figuring out all aspects of a particular state's law on a particular issue, I always liked to begin by looking for a federal district court decision on the subject, because the federal court decisions had a tendency to include a comprehensive summary of all the law in the state in question on the issue in dispute. This saved the work of reviewing multiple state court decisions, each of which tended to address only one narrow part of the overall issue without discussing other state court decisions that addressed other aspects of the issue. I have always attributed this, by the way, to the federal courts' greater access to law clerks, who could be counted on to turn opinions into minor treatises.

Anyway, here is a perfect example of this phenomenon, only here on an issue that matters to this blog: namely, when can an insured obtain recovery of attorneys fees under Massachusetts law from an insurer in a lawsuit over coverage. Massachusetts state court decisions establish that coverage litigation is an exception, at least here, to the American rule, and that in Massachusetts, it is loser pays, at least if the insurer is the loser in the case.

But the Massachusetts state court decisions to this effect are spread across several cases and could arguably be limited to their facts, unless you synthesize them and push their reasoning one step further. The federal district court in Massachusetts has taken this last step for us, reviewing the Massachusetts state court decisions on this issue and concluding that they add up to an insured being entitled to recover the attorneys fees it incurs in establishing either a duty to defend or a duty to indemnify on the part of the insurer, without limitation to whether the policy in question provides first party or instead third party coverage.

Attorney Fee Awards in the First Circuit

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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There was another important issue addressed in the First Circuit's decision this month in Janeiro, one I had planned to address in a return post on the case, involving an issue dear to the hearts of anyone who sues plans, administrators or fiduciaries for a living, namely the right to recover attorneys' fees in such a lawsuit. Before I could return to this point, however, I got sidetracked by my favorite decision of the month, Abatie v. Alta Health and Life Insurance. So I am returning to it now, before this point can get shunted to the side again by some other new development.

In Janeiro, you may recall, the defendant took a beating in the case, and the plaintiff, rightfully so under ERISA, sought to recover attorneys' fees after prevailing on his claim. The First Circuit, addressing the district court's decision not to award fees to the prevailing plaintiff, gave a nice, concise presentation of the law at this point in time in this circuit on this issue. Emphasizing that an award of attorneys' fees in such cases is entirely discretionary, the court discussed the standards governing this determination in this circuit. In key part, the court declared:

ERISA provides that attorneys' fees are available in the court's discretion. . . . We begin by noting that in an ERISA case, a prevailing plaintiff does not, merely by prevailing, create a presumption that he or she is entitled to a fee-shifting award.. . . [T]his court has listed five factors that ordinarily should guide the district court's analysis: (1) the degree of culpability or bad faith attributable to the losing party; (2) the depth of the losing party's pocket, i.e., his or her capacity to pay an award; (3) the extent (if at all) to which such an award would deter other persons acting under similar circumstances; (4) the benefit (if any) that the successful suit confers on plan participants or beneficiaries generally; and (5) the relative merit of the parties' positions. . . .This list is illustrative, not exhaustive[;]no single factor is dispositive; and indeed, not every factor in the list must be considered in every case.

The First Circuit approved of the district court's analysis of this issue, and in so doing presented the model for how to address this issue. It is fact specific, and the way to argue it to the court, and for the court to in turn consider the issue, is to address what the actual facts of the matter show on that specific case with regard to each of the five factors (recognizing, of course, that the First Circuit specifically left open the possibility that there are still more factors that could possibly be considered, and that even some of the factors specifically identified by the court may have no relevance).

How Do You Calculate a Fee Award to a Solo Practitioner?

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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There is a neat little ERISA decision just out from the Second Circuit Court of Appeals. In the case of James McDonald et al. v. Pension Plan of the NYSA-ILA Pension Trust Fund, et al., http://www.ca2.uscourts.gov/ decided on Tuesday, the court addressed the question of determining an appropriate fee award under ERISA for a prevailing plaintiff who was represented by a solo practitioner. Noting that the general rule is that "[i]n calculating attorney's fee awards, district courts use the loadstar method - hours reasonably expended multiplied by a reasonable hourly rate," the court launched into an interesting discussion of how to determine for these purposes the reasonable hourly rate for a solo practitioner. The court rejected the idea that the rate should automatically be lower based on the status of the attorney as a solo practitioner or that otherwise the size of the attorney's firm alone is grounds upon which to set the rate; it is, the court noted, a factor that should go into determining the market against which the reasonable fee should be set, but no more than that. Of even more interest, the court rejected the unique act of trying to set the solo attorney's reasonable hourly fee at what would be an acceptable blended rate in the market, because while larger firms use blended rates to even out the cost to the client across the services of more experienced and less experienced attorneys, this did not actually occur in the case before the court, where the plaintiff was represented by a solo practitioner.

Ringing the bell twice

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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There is an interesting article concerning the latest developments over the case of Jurinko v. Medical Protective Corp., the largest insurance bad faith verdict in Pennsylvania history, reprinted in Law.com from The Legal Intelligencer, at http://www.law.com/jsp/law/sfb/lawArticleSFB.jsp?id=1144330160389. The article concerns the plaintiffs' lawyers attempt to make new law that would increase the attorney's fee award to them as the prevailing plaintiffs in this insurance bad faith case, a case which is nicely summed up in the court's opinion on post trial motions at http://www.paed.uscourts.gov/documents/opinions/06d0372p.pdf.

The article points out that fee awards are entirely discretionary under Pennsylvania law, and discusses that the plaintiffs' lawyers are trying to convince the court to vary from the usual application in that jurisdiction of the lodestar method of awarding attorney's fees.

Such an award would not be discretionary in Massachusetts, where General Laws Chapter 93A, which is the operative statute for bringing a bad faith action against an insurer, mandates such awards to plaintiffs. This is entirely consistent with Massachusetts law in general at this point, which essentially provides a carve out for insurance disputes, in most circumstances, from the typical pay your own way rule with regard to attorney's fees. Instead, in this state, if the policyholder or the claimant wins a coverage or bad faith dispute, their attorney's fees typically become the problem of the insurer that ended up on the wrong side of the verdict.