In an ERISA benefits case, the court can order one side to pay the other’s ERISA attorney fees and litigation costs under 29 U.S.C. § 1132(g)(1), but only if the party asking for fees first shows “some degree of success on the merits” and then convinces the judge that the equities favor an award.1Office of the Law Revision Counsel. 29 USC 1132 – Civil Enforcement Nothing about the award is automatic. The statute gives judges broad discretion, and how you use the two-step framework often decides whether you walk away with your legal bills covered.
The Eligibility Threshold: Some Degree of Success
The Supreme Court set the eligibility bar in Hardt v. Reliance Standard Life Insurance Co. A party requesting fees must show “some degree of success on the merits,” which is a lower bar than the “prevailing party” test used under other federal fee-shifting statutes. You satisfy it if the court can fairly describe the outcome as some success without a lengthy inquiry into whether that success was substantial or came on a central issue.2Justia. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010)
Trivial or purely procedural wins don’t qualify. If the other side simply drops the case without any judicial action forcing a change, that also falls short. You don’t need a final judgment awarding benefits, but the court’s intervention has to have produced something real, either a ruling on the merits or an order requiring the plan administrator to act.
When a Remand Counts
A common scenario: the court sends the case back to the plan administrator for a new review rather than awarding benefits outright. Multiple federal courts have treated a remand as “some degree of success” because the court has found the original review deficient and given the participant another chance at the benefit. You can seek fees in that posture even without a direct benefits award.
Catalyst Theory After a Voluntary Payoff
What if the administrator quietly reverses course and pays benefits after you sue but before the judge rules? Some circuits allow fees under the “catalyst theory,” meaning the lawsuit itself pressured the defendant into providing relief. The Third Circuit has held the theory available in ERISA cases because the statute requires only “some degree of success on the merits” rather than a formal judicial victory.3Justia. Templin v. Independence Blue Cross Not every circuit agrees, so where you filed matters. And even in circuits that accept the theory, eligibility isn’t the award. The judge still runs the five-factor analysis below.
The Five Factors That Actually Decide the Award
Clearing the threshold makes you eligible. It doesn’t get you paid. Courts apply a five-factor test to structure their discretion, though the Supreme Court noted in Hardt that the factors aren’t required and bear no obvious relation to the statute’s text.2Justia. Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010) Most courts still use them:
- Bad faith or culpability of the opposing party. Bad faith requires something close to actual dishonesty or ill will. Culpability is a lower bar, closer to negligently breaching a legal duty. An arbitrary denial unsupported by competent medical evidence can meet the culpability prong without any showing of malice.
- Ability of the opposing party to pay. When the defendant is a major insurer, courts sometimes take judicial notice of the company’s resources. This factor rarely blocks an award against a large administrator.
- Deterrent effect of a fee award on others in similar situations. This looks forward, aiming to improve claims handling across the industry rather than punish one defendant.
- Benefit to other plan participants or resolution of a significant legal question. Cases that clarify ambiguous plan language or set the reading of a common exclusion score well here.
- Relative merits of the parties’ legal positions. If the denial rested on a clearly unreasonable interpretation of plan language, this factor pushes hard toward an award.
No factor controls. A judge can find no bad faith and still award fees because the deterrent value is strong and the defendant’s legal position was weak. This is where most fee fights are actually won and lost, because the eligibility threshold is comparatively easy to clear and the equitable analysis is where careful briefing pays off.
Can the Plan or Insurer Recover Fees From You?
Yes, in theory. Section 1132(g)(1) authorizes fees “to either party,” so a plan or insurer that wins can ask you to pay.1Office of the Law Revision Counsel. 29 USC 1132 – Civil Enforcement In practice, awards against individual participants are uncommon. Courts recognize the chilling effect of pointing the fee cannon at claimants when the statute exists to make benefit rights enforceable.
When defendants do seek fees, the same five factors apply, aimed the other direction. The focus lands on whether the participant filed a frivolous claim, pursued it in bad faith, or kept litigating after it became clear the position had no merit. The participant’s limited resources cut against a defense award under the ability-to-pay factor. Still, filing a baseless claim or pushing on after a court signals your position is untenable puts you at real risk.
How the Dollar Amount Gets Set
Once the court decides to award fees, it uses the lodestar method: reasonable hours worked multiplied by a reasonable hourly rate. The result is presumed reasonable.
On the hours side, you need detailed, contemporaneous billing records showing what was done and how long it took. Judges cut hours they see as excessive, duplicative, or spent on claims that lost. If you prevailed on one theory but lost on two others, expect the time on the losers to be trimmed. Reconstructed records submitted after the fact invite skepticism.
On the rate side, courts look at prevailing market rates in the district for attorneys of comparable skill and experience doing similar federal benefits work. Judges consider rate declarations, fee agreements, and evidence of what the local market pays, not whatever number an attorney writes down.
Adjustments to the lodestar are possible but rare. Upward adjustments require exceptional complexity or results well beyond what the raw calculation reflects. Downward adjustments are more common when success was only partial.
If You Represent Yourself, You Generally Get Nothing
The Supreme Court has held that pro se litigants are not entitled to attorney fees under fee-shifting statutes. The statute pays “attorney’s fees,” and a non-lawyer representing themselves hasn’t incurred any. If you’re thinking about handling an ERISA case alone to save money, factor this in. You can win the benefits and still recover nothing for the hundreds of hours you put in.
Fees You Can’t Recover: The Internal Appeal
ERISA requires you to exhaust the plan’s internal appeal process before filing suit. Legal fees for that pre-litigation work are generally not recoverable. Most federal circuits read the statute’s reference to “any action” as meaning a civil action filed in court, not the administrative proceedings that lead up to it.1Office of the Law Revision Counsel. 29 USC 1132 – Civil Enforcement The line is drawn when you file the complaint.
That creates a real tension. The administrative record built during the internal appeal is usually the entire evidentiary base for the court’s later review, especially under the deferential abuse-of-discretion standard. You’re paying to build a record the court will rely on, and you carry that cost yourself. Knowing this up front helps you decide how much attorney involvement to invest at the administrative stage versus saving resources for litigation.
Tax Consequences You Should Plan For
A fee award can create a tax bill on money you never touched. Under IRC § 61, all income is taxable unless specifically exempted, and when a defendant pays your attorney fees directly to your lawyer as part of a judgment, the IRS may still treat that payment as income to you.4Internal Revenue Service. Tax Implications of Settlements and Judgments The defendant is generally required to report the payment on Form 1099-MISC to both you and your attorney when it exceeds $600.
Section 62(a)(20) of the Internal Revenue Code allows an above-the-line deduction for attorney fees in certain employment-related claims, which can offset this phantom income in some cases. Whether your particular ERISA claim qualifies depends on the nature of the benefits at issue. Talk to a tax professional before the fee award is finalized rather than discovering the problem the next April.
Appealing a Fee Ruling
Either side can appeal. Appellate courts review a district court’s decision to grant or deny attorney fees for abuse of discretion, which is deferential. The trial judge’s factual findings, including the reasonable rate and the hours reasonably worked, get clear-error review. The legal standard the district court applied is reviewed without deference.5United States Court of Appeals for the Third Circuit. United Automobile Workers Local 259 Social Security Department v. Metro Auto Center
If the judge applied the correct framework and weighed the factors without clearly wrong facts, reversal is unlikely. Fee rulings get overturned most often when the district court used the wrong legal test, such as requiring “prevailing party” status instead of “some degree of success,” or when the court failed to explain its reasoning. A boilerplate order that grants or denies fees without addressing the factors is exposed on appeal because it leaves nothing for the appellate court to defer to.