UNITED STATES DISTRICT COURT WESTERN DISTRICT OF NEW YORK
June 3, 1985
WILLIAM COLDICOTT, Plaintiff,
SECRETARY OF HEALTH and HUMAN SERVICES, Defendant.
The opinion of the court was delivered by: ELFVIN
MEMORANDUM and ORDER
Presently before the Court is a petition by plaintiff's attorney ("the attorney")
for fees pursuant to 42 U.S.C. § 406(b), section 206(b) of the Social Security Act [the "Act"]. While the somewhat unusual facts of the case raise questions concerning the application of that section of the Act, such need not be resolved for present purposes.
Following termination by the Secretary of his disability benefits under the Act, plaintiff had requested and received a hearing before an Administrative Law Judge ("The ALJ") April 18, 1983. Plaintiff had been assisted at the hearing by a National Service Officer with the Disabled American Veterans. On June 7, 1983 the ALJ ruled that plaintiff was no longer disabled for purposes of the Act and plaintiff's request for review of the ALJ's decision was denied October 19, 1983 making final the decision of the Secretary.
Plaintiff then had retained the attorney in order to obtain this Court's review of the decision and a complaint had been filed November 30, 1983. The Secretary had answered April 2, 1984 denying the Complaint's relevant allegations. Subsequently, however, the appeals Council of the Social Security Administration, recognizing that certain medical evidence had not been adequately considered, on its own initiative had requested a remand for the purpose of reinstating plaintiff's benefits. This Court had ordered the matter remanded October 18, 1984 pursuant to a Stipulation For Remand signed by the attorney and counsel for the Secretary. The remand had not been prompted or brought about by any particular action by the attorney other than the preparation and signing and filing of the Complaint.
Upon remand plaintiff had been awarded slightly more than $20,000 in back benefits.
On January 24th plaintiff's attorney filed with this Court a petition seeking $5,155.15 as his fee pursuant to a signd retainer agreement by virtue of which plaintiff had promised to pay for the services rendered in this Court fees equal to 25% of any award of back benefits.Contemporaneously this Court had been made aware of certain questions surrounding the retainer agreement and the application for fees. Plaintiff had telephoned on at least two occasions and had followed such by a letter dated January 19th and another which was received January 30th. The general tenor of the calls and letters was that plaintiff questioned the size of the requested fee, that he was not certain what his rights or obligations were and that his attorney was not being responsive to his inquiries. Plaintiff also indicated he had contacted the Attorney Fee Staff of the Social Security Administration and the Erie County Bar Association without substantial clarification of these issues. Perhaps most potentially troubling was plaintiff's indication that the attorney had in some way pressured him to remit funds or to acquiesce in certain conditions concerning payment of the attorney's fees. For example, in the January 19th letter plaintiff wrote:
"Due to the lack of knowledge that I have, and also against my own will, I have complied with all of [the attorney's] demands. I would be greatful [sic] and deeply appreciate your help concerning this matter in which I have been very helpless.
"The disabled American Veterans represented me through the first two years of my appeals. Although it proved fruitless, I had no other choice but to seek legal help and because I had no money, I had no choice but to sign this retainer with [the attorney]."
The retainer agreement to which plaintiff refers is dated October 28, 1983 and reads in pertinent part as follows:
"The client understands and acknowledges that the Social Security Administration may award a fee to the attorneys for the attorneys' services rendered by them before the Social Security Administration. The client understands and acknowledges that the fee awarded by the Social Security Administration reduces the amount the client receives in past due disability benefits. The client also acknowledges and understands that such payment in no way pays the attorney for the attorney's services rendered in the United States District Court for the Western District of New York. The client agress [sic] that he will pay to the attorneys for the attorneys' services rendered in the United States District Court of the Western District of the State of New York an amount equal to twenty-five (25%) percent of the total amount of past due Social Security disability benefits finally awarded for the client and all members of the client's family as a result of the efforts of the attorney. The attorneys acknowledge that if they are awarded attorneys' fees by the Social Security Administration for work done on behalf of the client at Social Security Administration hearings, then they will deduct the amount paid directly by the Social Security Administration from the twenty-five (25%) percent fee owed by the client for services rendered in the United States District Court. As a result, the fee paid by the client will never exceed twenty-five (25%) percent of the total award for past due disability benefits. The client acknowledges and understands that he may receive his past due disability benefits in two separate checks. The client agrees that at the time of the receipt of his first check from the Social Security Administration for past due benefits, the client will deposit twenty-five (25%) percent of the total award into an escrow account for the protection of the attorneys' fees until such time as all past due benefits are released by the Social Security Administration."
The attorney, apparently acting pursuant to the retainer agreement but apparently also over his client's objections,
had on December 21st persuaded plaintiff to pay him $5,154.81 which was put in an escrow account in plaintiff's name. This amount represented plaintiff's attorney's calculation of 25% of the total award of back benefits. However, because the secretary, as is routinely the case, was already withholding 25% of plaintiff's award to provide a fund for potential attorney fee claims, plaintiff was left with half of his award although no determination had yet been made as to what fees might be appropriate. Moreover, plaintiff has indicated that the attorney called him January 18th and requested that plaintiff sign a document releasing the money from the escrow account. Plaintiff, after reportedly contacting the Attorney Fee Staff and being advised that releasing the escrow account would constitute an approval of the fee sought by the attorney, did not do so. On February 1st the Secretary, through the United States Attorney for the Western District of New York, filed a cross-motion objecting to plaintiff's attorney's petition for fees and requesting a permanent injunction prohibiting the attorney from using "the type of retainer agreements in question" and "an order that [the attorney] return to plaintiff any and all moneys taken from plaintiff, together with interest and an accounting." The government contended, among other things, that the retainer agreement on its face violated the Social Security Act and that plaintiff's attorney's petition for fees was defective.
On February 21st the attorney filed a Supplemental Affidavit to which was attached a xerographic copy of the services rendered portion of the earlier petition for fees, this time with hourly totals handwritten in the margin. The attorney now averred that 15.8 hours had been spent obtaining plaintiff's benefits. Accordingly the government entered into a stipulation with the attorney February 21st withdrawing its earlier motion and approving a fee of $1,250 as "reasonable and justifiable under the circumstances." The attorney agreed to revise his "retainer agreements in Social Security cases to eliminate any and all provisions relating to the direct taking and holding of monies in escrow accounts from client's back benefits award" and to refrain from setting up fee-protecting escrow accounts in such cases. The attorney sent plaintiff a letter dated February 20th referring to the pending discussions with the government and enclosed a check for $5,175.81 representing the amount held in escrow plus interest.
The letter further stated:
"After reviewing our time slips and our file for the services we rendered to you and discussing the time and services with the United States Attorney's Office, we have agreed with them that a reasonable fee would be $1,250, which was computed at an hourly rate of $75 per hour.
If this meets with your approval, then a stipulation for payment of attorney's fees in the amount of $1,250 would be submitted for approval. If this meets with your approval, please you and your wife sign the enclosed copy of this letter and return it to me immediately."
Plaintiff and his wife signed the letter February 21st, although it is questionable whether such signature was an endorsement of the indicated fee. Plaintiff challenged the fairness of such fee both before this Court February 28th, specifically stating that he did not approve of it, and by his March 5th letter to this Court in which he indicated that he had signed the earlier letter because he had misunderstood the extent to which the government had investigated the propriety of such an award and had inferred that the government had approved or validated it.
This Court denied the parties' joint request that the petition for fees be adjourned from its scheduled February 25th hearing date.Instead, upon entertaining said motion and in consideration of all of the circumstances, an evidentiary hearing was ordered to be held February 28th. Such hearing was held and interested parties were provided an opportunity to testify and to present evidence. Thereby the foregoing factual recitations were confirmed.
This case has raised significant questions about the Act's mechanisms for providing fees, such questions ranging from the propriety vel non of escrow accounts and/or retainer agreements to more general concerns whether its integral parts -- whether the Secretary or the reviewing court determines the total amount of fees, when such determination or determinations are to be made, what is or are the quantitative limitations -- can be said to function cohesively when viewed comprehensively.
Such questions, however, are not squarely before this Court at this time and have not been thoroughly briefed or researched or otherwise developed. They are not ripe for disposition in the present case. The problem at hand may be resolved without reaching such fundamental issues regarding the Act, and therefore should be.
The attorney's conduct herein is to be condemned, quite aside from the Act's specific provisions. It was unconscionable for example, that the attorney should insist that the escrow account be funded at a time when the Secretary had already withheld 25% of past-due benefits and thus was protecting the attorney's fee. The attorney's argument -- made at the evidentiary hearing -- that the withholding of money in the escrow account does not prejudice the client because the account is interest-bearing ignores the fact that, in this and many other Social Security cases, liquidity of funds may be crucial to the making of certain immediate and necessary purchases. The entering into a retainer agreement whereby the fee is fixed at 25% of the litigative gains, rather than specifying that the fee would be fixed by the agency and reviewing court is facially overreaching.
The sheer size of the fee initially sought by the attorney and his failure to adequately examine into and respond to his client's legitimate questions represent severe breaches of an attorney's responsibility to his client. See e.g. paragraph EC2-23 of Canon 2 and paragraph DR2-106(A) of the Disciplinary Rules as embodied in Code of Professional Responsibility which is found in the Appendix to New York's Judiciary Law. In this case the attorney has sought more than $5,000 for work which he acknowledges required no more than 15.8 hours, in support of which he has not submitted contemporarily maintained appropriately detailed time records, in a case involving minimal effort on the part of the attorney and posing only routine issues of law. By persisting in the application for fees without resolving questions that could and should have been handled without this Court's intervention, the attorney has caused his client considerable and unnecessary inconvenience. Due to the attorney's gross overreaching, his alarming neglect in responding to and protecting his client and his failure to have presented contemporarily maintained time records, no fee is warranted.
Accordingly, it is hereby
ORDERED that plaintiff's attorney's petition for fees is denied.