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awarding fees that together with section 406 fees equated to a 25 percent recovery, where de facto hourly rate on entire recovery for time spent before the court and the agency was only $20.31
Summary of this case from Ellick v. BarnhartOpinion
Cause No. 1:99-CV-44
February 26, 2003
MEMORANDUM OF DECISION AND ORDER
I. INTRODUCTION
Before the Court is the "Plaintiff's Attorney's Motion for an Award of Attorney's Fees Under 42 U.S.C. § 406(b)" filed on February 3, 2003. The defendant, Commissioner of Social Security has declined to file a response and has informed the Court that it does not contest an award of fees. As we shall see infra, plaintiff's counsel, Joseph W. Shull ("Shull"), is entitled to fees, but not in the amount sought.
Jurisdiction of the undersigned Magistrate Judge is based on 28 U.S.C. § 636(c), all parties consenting.
II. THE FACTUAL AND PROCEDURAL BACKGROUND
The instant motion represents the final stage in this ongoing Social Security saga. It all began back in 1997 when the Plaintiff lost her case for Title II benefits before the Administrative Law Judge ("ALJ"). After losing her administrative appeal, the Plaintiff sued for judicial review before this Court, but in September 1999, she lost again. Despite these losses, in September 2000, things started going her way, and she won before the United States Court of Appeals for the Seventh Circuit, which reversed our decision and remanded the decision to the ALJ. Ultimately, the Plaintiff won on her second trip before the ALJ, who awarded her past-due Title II benefits in the amount of $19,252.00.
But the part of the story that concerns us was just beginning. Since Shull wanted to get paid, he filed a motion for the government to pay him nearly $16,000 in attorney's fees pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412. But he lost before this Court and the Seventh Circuit.
This left plaintiff's counsel with only one path to compensation: the January 21, 1999, contingent fee agreement between Shull and the Plaintiff. That contract provides that "I [the Plaintiff] agree that my attorney shall charge and receive his fee [in] an amount equal to twenty-five percent (25%) of the past-due benefits which are awarded to me and my family in the event my case is won." See Attorney Fee Agreement.
Apparently Shull petitioned Social Security to deduct the cost of his fees from the Plaintiff's award of past-due benefits and to pay him that amount. However, rather than paying him the full amount of $4,813 (i.e. 25% of $19,252), Social Security payed him $4000 for services rendered during the administrative stages, and withheld an additional $2467 from the Plaintiff's past-due benefits. In a letter dated December 16, 2002, Social Security explained that any additional fee Shull wished to charge for his services, presumably before the federal court, would be subject to federal court approval.
Shull now seeks the remaining $2,467 of the Plaintiff's past-due benefits withheld by Social Security.
DISCUSSION
Fees for representation of individuals claiming Social Security disability benefits, both at the administrative level and in federal court, are governed by the prescriptions of 42 U.S.C. § 406. See Gisbrecht v. Barnhard, ___ U.S. ___, 122 S.Ct. 1817, 1820-21 (2002). "The statute deals with the administrative and judicial review stages discretely: § 406(a) governs fees for representation in administrative proceedings; § 406(b) controls fees for representation in court." Id.
For representation at the administrative level, an attorney may file a contingency fee agreement with the Social Security in advance of a ruling on a claim for benefits. Id.; 42 U.S.C. § 406(a)(1); (a)(2)(A). If the Plaintiff ultimately succeeds in securing benefits, the "agency will generally approve the fee agreement, subject to this limitation: Fees may not exceed the lesser of 25 percent of past due benefits or $4,000." Gisbrecht, 122 S.Ct. at 1821 (citing 42 U.S.C. § 406(a)(2)(A)(ii)(I) (II)).
For representation in federal court, a successful claimant's attorney may receive a "reasonable fee . . . not in excess of 25 percent of the total past due benefits to which the claimant is entitled[.]" 42 U.S.C. § 406(b)(1)(A); Gisbrecht, 122 S.Ct. at 1821. In this case, the Plaintiff and Shull entered into a valid contingency fee agreement entitling Shull to 25% of any past-due benefits the Plaintiff might receive. After Social Security awarded past-due benefits, Shull appropriately petitioned Social Security to pay his contingency agreement fees from the Plaintiff's past-due benefits, and the agency doled out the statutory maximum of $4,000 in accordance with § 406(a)(2)(A)(ii), but this represented only 21% of the Plaintiff's total past-due benefits.
But what about the remaining 4 percent? Social Security withheld another $2,467 of the Plaintiff's past-due benefits, and told Shull to secure a Court order for the rest of his fees, apparently to be paid out of these funds, and presumably for work done at the judicial review level. But rather than seek the 4% remaining on his contract, Shull now asks the Court to award him the entire $2,467. He argues that 42 U.S.C. § 406(b) entitles him to this amount because it represents only 13% of the Plaintiff's past-due benefits, far less than the "presumptively reasonable" 25% provided for under § 406(b). See Gisbrecht, 122 S.Ct. at 1820. Of course, by this reasoning Shull would ultimately receive 34% of the Plaintiff's past-due benefits, a considerable windfall far exceeding the contractual 25%. Indeed, the fundamental flaw in Shull's reasoning is his belief that § 406(b) entitles him to essentially a "fresh 25%," but this ignores his contingency fee agreement, as the Supreme Court explains:
§ 406(b) does not displace contingent-fee agreements as the primary means by which fees are set for successfully representing Social Security benefits claimants in court. Rather, § 406(b) calls for court review of such arrangements as an independent check, to assure that they yield reasonable results in particular cases. Congress has provided one boundary line: Agreements are unenforceable to the extent that they provide for fees exceeding 25 percent of past due benefits. . . . Within the 25 percent boundary . . . the attorney for the successful claimant must show that the fee sought is reasonable for the services rendered.
Gisbrecht, 122 S.Ct. at 1828. Thus, to determine the amount of fees owed to Shull, we must look to the contingency fee agreement and then determine whether the total fee amount is reasonable under § 406(b).
In assessing that figure here, the contingency fee agreement clearly entitles Shull to 25% of the Plaintiff's $19,252 in past due benefits, or a total of $4,813. Shull has already received $4,000 of this from Social Security. Thus, the fee agreement entitles him to another $813 for services provided in this court and before the Seventh Circuit. See 42 U.S.C. § 406(b). Nevertheless, § 406(b) requires the Court to determine whether a full award of the contingency fee amount is a "reasonable fee." The Supreme Court acknowledges that attorney's fees may be reduced in certain circumstances: "If the attorney is responsible for delay, for example, a reduction is in order so that the attorney will not profit from the accumulation of benefits during the pendency of the case in court. If the benefits are large in comparison to the amount of time counsel spent on the case, a downward adjustment is similarly in order." Id. But those circumstances are not present here as Shull has provided prompt and effective representation, and the benefits obtained are not large in comparison to the amount of time he spent on this case. Indeed, Shull devoted 237 hours to this case, and at $4,831, he will receive only an hourly rate of $20.31. Thus, we find that the total amount of fees sought under the fee agreement is reasonable.
Accordingly, Shull's motion for attorney's fees under 42 U.S.C. § 406(b) is GRANTED in the amount of $831.00.
SO ORDERED.