The opinion of the court was delivered by: NEAL P. MCCURN
MEMORANDUM-DECISION AND ORDER
Plaintiff Linda Lacatena was denied Social Security disability benefits and lost her administrative appeals. She then retained attorney David Zube on September 9, 1984, to seek judicial review of the denial of those benefits. Following the filing of this action, all litigation was stayed when it became apparent that plaintiff's application for benefits should be redetermined administratively.
The matter was eventually remanded to the defendant, Secretary of Health and Human Services ("the Secretary"), who in turn remanded the matter to an administrative law judge for a hearing. The Appeals Council then issued a decision awarding benefits to the plaintiff on June 20, 1988, in the amount of $ 14,588.00. Of this total, 25% or $ 3,647.00 was withheld from the award for possible payment of plaintiff's attorney's fees. Affidavit of L. David Zube, February 26, 1991, Ex. C thereto.
Attorney Zube represented plaintiff Lacatena throughout this administrative stage. For services rendered at the administrative level, Attorney Zube sought and was granted fees by the Social Security Administration in the amount of $ 550.00.
Zube Affidavit, Exs. D and E thereto. Pursuant to 42 U.S.C. § 406(b), attorney Zube is now seeking $ 3,097.00, the balance of the amount withheld by the Social Security Administration, as fees for services rendered to plaintiff Lacatena in relation to her action in this court. While the Secretary does not object to an award of attorney's fees here, he does object to the amount requested as unreasonable and instead proposes an award of $ 1,851.20.
In determining reasonableness of the contingency agreement, the Second Circuit found that "the best indicator of the 'reasonableness' of a contingency fee in a social security case is the contingency percentage actually negotiated between the attorney and client, not an hourly rate determined under lodestar calculations." Id. Although contingency fee arrangements are not to be accepted as per se reasonable in all cases, such arrangements are to be given deference by the court, as they reflect the contractual intent of the parties. Id. Thus the court may reduce the amount called for by the contingency agreement only when the amount is found to be unreasonable. Id. To determine the reasonableness of a contingency agreement, the court is to consider whether the contingency percentage is within the 25% statutory cap, whether there was fraud or overreaching in making the agreement, and whether the requested amount is so large as to constitute a windfall to the attorney. Id. at 372, (citing McGuire, 873 F.2d at 981).
In relying on the strength of contingency agreements in social security cases, courts have given little guidance as to what exactly constitutes a windfall so as to render a contingency fee arrangement unreasonable. The Sixth Circuit has specifically noted its reluctance "to incorporate a scale or grid . . . or otherwise attempt to draw a line beyond which a fee becomes unconscionable." Rodriquez v. Bowen, 865 F.2d 739, 747 (1989). The Rodriquez Court added that a case lacking in material facts and obvious legal research, as well as one submitted on boilerplate pleadings may be grounds for a reduction from the requested contingency agreement amount, but offered no clear examples of how these factors are to be applied. Id.
The fee agreement between plaintiff Lacatena and attorney Zube stipulated a contingency fee of 25%, the statutory limit. See Zube Affidavit, Ex. B thereto. There are no allegations of fraud or overreaching in making that agreement, as evidenced by plaintiff's letter to her attorney confirming her concurrence with the amount stipulated in the contingency agreement.
Plaintiff's Memorandum in Response to Secretary's Objections, attachment thereto. The Secretary objects to an award of this amount as unreasonable because, in the Secretary's view, it would constitute a windfall to plaintiff's attorney. Defendant's Objections at 2. Instead, the Secretary proposes an award of $ 1,851.20, based upon an hourly rate of $ 104.00. In arriving at this number, the Secretary relies upon the Second Circuit's decision in Wells v. Bowen, 855 F.2d 37 (1988) ("Wells I"). The Secretary is correct that in Wells I the Court viewed the lodestar amount, based on the number of hours worked and a reasonable hourly rate, as the appropriate starting point for determining a reasonable fee. Id. at 43. The Secretary is ignoring the fact, however, that the lodestar approach was expressly rejected by the Second Circuit in Wells II as inappropriate for evaluating a reasonable fee in a social security case with a contingent fee agreement, which is the situation here. See Wells II, 907 F.2d at 371.
Regardless of the approach taken (lodestar or contingent fee arrangement), the Secretary maintains that the services performed by attorney Zube were "not worth" the requested fee in light of the nature of the services rendered, and thus plaintiff's attorney is only entitled to the lesser amount as recommended by the Secretary. See Defendant's Objections at 3. Mindful of the deference to be shown to the contingency agreement, in the court's opinion, the amount requested by attorney Zube does not appear to constitute an unreasonable windfall under these circumstances. See Wells II, 907 F.2d at 372. There is no evidence to the effect that plaintiff's case was submitted on boilerplate pleadings or that it lacked issues of material fact or legal research. Furthermore, the number of hours of work does not appear unreasonable given the nature of the case. In fact, because of attorney Zube's experience in handling social security cases, it is highly likely that he expended fewer hours than less experienced attorneys may require. See Zube Affidavit at PP7-10. The court believes that Mr. Zube should not be penalized for his efficiency by basing his reimbursement on a lower hourly rate.
While recognizing that Wells II evinces a strong preference for honoring contingency fee agreements when awarding attorney's fees in social security cases, this court, in future similar cases, will not hold, as a matter of course, that any contingent fee agreement is reasonable. Rather the court will engage in a thorough review of the facts and circumstances of each case. Then, consistent with Wells II, the court will scrutinize the contingency percentage, the absence of fraud, and whether an award in accordance with the contingency fee agreement would result in a windfall to the attorney. In that way, the court can assure itself as well as the parties that an award based upon the contingent fee agreement is a ...