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May 29, 1990


The opinion of the court was delivered by: Nickerson, District Judge:

This matter concerns the conduct of plaintiff's attorney, Calvin C. Saunders, in representing plaintiff in 80 CV 2638, an appeal from a denial of disability insurance benefits (the "disability" claim), and in 83 CV 0237, an action seeking compensatory and punitive damages against defendant for alleged delay and mishandling of the earlier case (the "damages" claim).

Saunders was appointed from the pro bono panel on October 25, 1985, to represent plaintiff, Wallace Krauss, in his two earlier commenced actions. The court consolidated these actions on defendant's motion on March 23, 1984. The procedural history of these actions both before and after Saunders' appointment is set forth in the court's memorandum and order of August 18, 1989, familiarity with which is assumed.

On February 20, 1987, Assistant United States Attorney Deborah Zwany filed a memorandum of law in support of defendant's motion to dismiss the damages claim on the grounds of sovereign immunity. That day she informed the court and Saunders at a status conference that her office was asking the Department of Justice for permission to decline to defend the denial of Krauss' disability claim. The motion was argued on March 27, 1987 with Saunders present. The court reserved decision.

On May 8, 1987 the Assistant United States Attorney sent Saunders a proposed stipulation, dated May 8, 1987, providing that the disability claim be remanded to the defendant "solely for the purpose of calculation and payment of benefits." Saunders, on behalf of Krauss, rejected the stipulation. On May 27, 1987, Zwany sent Saunders a second set of proposed stipulations. The first provided for remand of the disability claim "solely for the purpose of calculation and payment of benefits from December 31, 1975, the date of onset alleged by plaintiff." The second provided for dismissal of plaintiff's damage claim with prejudice. Krauss again refused to agree to these. Saunders did not respond to this offer, or to a second mailing of these proposed stipulations on June 17, 1987.

Assistant United States Attorney Bruce Nims took over the case from Zwany. In April 1988 he explained to Saunders that Krauss' latest conditions for signing a stipulation to remand the disability claim, namely, that the defendant not review Krauss' eligibility for disability benefits for at least three years, would contravene 42 U.S.C. § 421(h). Nims again enclosed a proposed stipulation to remand the disability claim for calculation and payment of benefits from December 31, 1975.

Saunders prepared a counter-stipulation dated April 25, 1988, with new conditions, including that defendant reimburse plaintiff for various costs, provide him with various records, and provide a physical examination before denying or reducing benefits in the future. In a letter dated July 29, 1988, Nims informed Saunders the defendant would not agree to any terms other than those it had proposed, and again sent a proposed stipulation for remand of the disability claim.

On November 1, 1988, Saunders sent another counter-stipulation with further conditions, including that the defendant pay various costs Krauss had incurred, and attorneys fees on the damage claim for Krauss' self-representation, although the counter-stipulation also provided for dismissal of the damage claim with prejudice. Apparently aware these conditions would be unacceptable, Saunders wrote in an accompanying letter that further negotiation was useless, and that his client requested the "matter be brought before the court . . . per Rule 11, to be heard as expediently as possible."

Unable to discontinue the actions with plaintiff's consent, defendant moved to remand the disability claim for calculation of benefits, and moved to dismiss the damage claim on December 19, 1988. This court granted both motions, the remand on January 20, 1989 and the dismissal with prejudice on March 1, 1989.

On April 11, 1989, shortly after Krauss was notified of the amounts defendant would pay him, Saunders sent him a contingency fee arrangement to review and sign. The arrangement was in the form of a letter from Krauss to Saunders, which read in relevant part:

  At the time your firm agreed to represent me before the Eastern
  District Court of New York, I agreed to a legal fee of 25% of
  all retroactive benefits receive by me, if successful.
  Subsequent to this agreement you informed me that the [sic] in
  the event the Court determined that the reasonable value of
  your legal services was determined by the Court to be less than
  25% of the retroactive benefits, I would be entitled to any
  difference between the amount you were awarded, and the 25%
  that Social Security would withhold from my award. [. . . .]
  As a result of the expertise of the law firm of Calvin C.
  Saunders., an acceptable decision was rendered, and I will be
  receiving monthly Social Security benefits as well as the
  retroactive monies due.
  I am thoroughly satisfied with the way in which the Social
  Security matter was handled and I approve and consent to the
  25% of any retroactive benefits withheld for legal fees
  (. . .).

This was accompanied by a cover letter that said, "if [the fee arrangement] contains anything that is inaccurate please feel free to correct it" and "I will submit [the arrangement] to Judge Nickerson and allow him to determine the appropriate amount of attorney's fees."

Saunders subsequently applied to this court for fees equal to 25% of the considerable benefits due plaintiff, or $24,466. In his papers to support this application, Saunders included timesheets — all captioned with the docket number of the damages action — stating he spent a total of 1831/2; hours of his time (incorrectly totaled on those documents as 182 hours) on ...

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