The opinion of the court was delivered by: Thomas Platt, Jr., Senior District Judge
Before the Court are cross-motions for summary judgment. Plaintiff Binder & Binder, P.C. ("Binder" or "Plaintiff") moves for summary judgment in its declaratory judgment action against defendant Jo Anne B. Barnhart (the "SSA" or "Defendant"), in which Plaintiff seeks a declaratory judgment that it is entitled to retain $1,200 in fees it has already received from Defendant relating to Plaintiff's representation of a certain SSA claimant and that a certain Program Circular of the SSA is void. Defendant has cross-moved for summary judgment to dismiss the complaint in its entirety. [ Page 2]
On July 21, 1998, the Defendant denied the initial application of Gail S. Delnegro ("Claimant" or "Delnegro") for Social Security disability benefits. Claimant resides in Toms River, New Jersey and is not a party to this action.
On August 25, 1998, Claimant retained Plaintiff to represent her in her application to the Social Security Administration for disability benefits. In connection therewith, Claimant executed (i) a Social Security Retainer Agreement and (ii) an Appointment of Representative, which were submitted to the Defendant. Additionally, on August 25, 1998, Claimant and Plaintiff executed an Expedited Fee Agreement in accordance with 42 U.S.C. § 406 (the "Agreement"). The Agreement provided that:
The claimant and the firm of Binder and Binder . . .
agree that if claimant receives a fully or partially
favorable decision, the legal fee owed by the claimant
is equal to the lesser of 25% of the past-due benefits
or $4,000. Under Social Security Regulations,
`past-due benefits' is the total amount of retroactive
money to which the claimant and all family members
become entitled . . . [t]his fee agreement is only
valid if a fully or partially favorable decision is
rendered prior to oral testimony being taken at an
administrative hearing before an administrative law
[ Page 3]
On September 28, 1999, the SSA again denied Claimant's application for disability benefits. By letter dated November 30, 1999, Claimant discharged Plaintiff and advised him that she had retained Joseph Puzzarella ("Puzzarella") to represent her in her application for Social Security disability benefits. Claimant also advised the SSA of the change in representation and Puzzarella provided the SSA with a copy of the retainer agreement.
Plaintiff then notified the SSA that it would petition for fees if Claimant's application was granted and requested to be notified of the same. Plaintiff also notified Claimant that it intended to file a fee petition with Defendant for services already rendered.
On February 25, 2000, the SSA issued a fully favorable decision on the Claimant's application for Social Security disability benefits.
The SSA also approved, as to form, the fee agreement with Puzzarella. By letter to the SSA dated March 24, 2000, Puzzarella requested a fee of $250. Puzzarella also enclosed a copy of an undated letter from Claimant in which she objected to payment of any fee to Plaintiff because of dissatisfaction with their services. The SSA then notified Plaintiff that Claimant had been awarded benefits and enclosed a copy of the notice of benefits it sent to Claimant. This notice stated that because Claimant was represented by an attorney the SSA was [ Page 4]
retaining $4,116.75 of past due benefits, in the event the attorney claimed fees in the maximum amount of 25% of past due benefits.
By petition dated July 5, 2000, Plaintiff asked SSA to approve fees in the amount of $1,200 for services that had been provided to Claimant. Plaintiff's petition was supported by a contemporaneous time account detailing 22.75 hours expended on Claimant's behalf.
Approximately six weeks later, Claimant and her husband filed a voluntary petition under Chapter 7 of the bankruptcy laws in the Bankruptcy Court for the District of New Jersey. According to this petition, Plaintiff's claim for fees was an unsecured, nonpriority claim which she disputed.
On January 3, 2002, Claimant received a discharge from the Bankruptcy Court under 11 U.S.C. § 727. Plaintiff contends that it was unaware of the Claimant's bankruptcy filing and discharge while it was pending.
By notice dated January 11, 2002, the SSA approved Plaintiff's fee request, but advised both Plaintiff and Claimant that they could contest the fee within 30 days. By letter dated the next day to the SSA, Claimant objected to the award of any attorney's fees to Plaintiff and re-iterated her dissatisfaction with ...