United States District Court, S.D. New York
September 16, 2005.
LEON P. ROSE, Plaintiff,
JO ANNE B. BARNHART, as COMMISSIONER OF SOCIAL SECURITY, Defendant.
The opinion of the court was delivered by: RONALD ELLIS, Magistrate Judge
OPINION AND ORDER
Josephine Gottesman, attorney for the plaintiff, Leon P. Rose,
has submitted a petition for attorney's fees pursuant to
42 U.S.C. § 406(b)(1). In 2002, Rose appealed the denial of his
application for Social Security disability benefits to the
District Court. Memorandum of Law in Further Support of
Plaintiff's Petition for Attorney Fees Pursuant to
42 U.S.C. § 406(b)(1) ("Pl. Mem.") at 1. The Court granted Rose's motion for
remand to the Social Security Administration ("SSA") for further
proceedings. Pl. Mem. at 1. Rose petitioned for attorney's fees
under the Equal Access to Justice Act ("EAJA"),
28 U.S.C. § 2421(d)(1)(A), which the Court granted. Pl. Mem. at 1. On remand,
Rose won an award of past-due Social Security disability
benefits. Pl. Mem. at 1. Gottesman now seeks fees for her work
before the Court pursuant to the Social Security Act,
42 U.S.C. § 406(b)(1). For the reasons that follow, the § 406(b)(1) fee
petition is DENIED.
There are three ways for attorneys of prevailing parties to
recover fees in social security cases. See Brannen v. Barnhart, 2004 WL 1737443, *2-3
(E.D.Tex. July 22, 2004). First, 42 U.S.C. § 406(a) allows
attorneys to obtain fees from the SSA for work at the
administrative level. Id. at *2. Second, 42 U.S.C. § 406(b)
allows attorneys to obtain fees from the district courts for work
before the court. Id. The money for these fees, in both
instances, comes out of the plaintiff's reward of past-due
benefits. Id. Third, the EAJA allows attorneys to obtain a
reward of fees paid by the government if the agency's position
was not "substantially justified" or under other special
circumstances. 28 U.S.C. § 2421(d)(1)(A). The intent of the EAJA
award is to penalize the agency for taking unjustified legal
positions. Brannen, 2004 WL 1737443 at *2 (quoting Orner v.
Shalala, 30 F.3d 1307, 1309 (10th Cir. 1994)). While these
potential awards are separate and do not limit each other,
attorneys are not allowed double recovery and must give their
clients whichever award is less. Id. As the Supreme Court noted
in Gisbrecht v. Barnhart, 535 U.S. 789, 796 (2002), allowing
for EAJA awards in addition to § 406(a) or (b) awards ultimately
increases the plaintiff's recovery.
There has been extensive litigation interpreting how these
statutes interact with each other and with attorney-client fee
agreements. The Supreme Court recently upheld 42 U.S.C. § 406,
holding that the statute, which limits attorney's fees in social
security cases to 25% of past-due benefits, does not override
contingent fee agreements, but "instructs courts to review for
reasonableness fees yielded by those agreements." Gisbrecht,
535 U.S. at 808-09.
Courts have also had to determine when plaintiffs whose cases
have been litigated within both the administration and the courts
are considered "prevailing" for the purposes of fee awards. After
many years of confusion in the case law, the Supreme Court has
resolved some of the outstanding issues. For example, in Shalala
v. Schaefer, 509 U.S. 292 (1993), the Court clarified the distinction between remands in social security
cases made pursuant to sentence four and those made pursuant to
sentence six of the same provision. The difference is critical
for fee petitions because the Court determined that remands
pursuant to sentence four are final judgments, whereas courts
retain jurisdiction when remanding pursuant to sentence six.
Id. at 297. The Court established that plaintiffs who obtained
remands pursuant to sentence four had final judgments and
therefore could be considered "prevailing parties" for the
purposes of their attorneys' EAJA fee petitions. Id. at 300-02.
Since Schaefer, courts have granted § 406(b) fee petitions
like the one at issue here, in which the district court remanded
for further proceedings. See, e.g., Brannen, 2004 WL 1737443,
*3; Claypool v. Barnhart, 294 F. Supp. 2d 829 (S.D.W.Va. 2003);
Boyd v. Barnhart, 2002 WL 32096590 (E.D.N.Y. Oct. 24, 2002).
However, few of these cases have closely analyzed the statutory
language. A close reading of the statute reveals that, in fact,
fee petitions like this one are not provided for.
The SSA fee provisions require, not a "prevailing party" as in
the EAJA, but a "judgment favorable to a claimant."
42 U.S.C. § 406(b)(1)(A). The statute also requires that the fee award be
"part of [the court's] judgment." Id. Finally, the statute
mandates that the fee may not be in excess of 25% of the total of
past-due benefits "to which the claimant is entitled by reason
of such judgment." Id (emphasis added). Although a remand for
further proceedings, such as this one, is a final judgment after
Schaefer, no fee award is part of the judgment, and any
recovery of benefits at the administrative level is not "by
reason" of the court's judgment.
One case has engaged in an extensive analysis of the law and
subsequently denied a similar § 406(b) petition. In McGraw v.
Barnhart, 370 F. Supp. 2d 1141 (N.D. Okla. 2005), the court made a distinction between sentence four remands for
further proceedings and remands for an entry of benefits. Id.
at 1143-45, 1150. If the remand is for further proceedings, the
judgment of the court does qualify as a "favorable" judgment as
required by the first clause of § 406(b)(1)(A), but even when
past-due benefits are ultimately obtained, those benefits are
"too attenuated from the original order of the Court to be
considered an award of benefits by reason of this Court's
judgment" as required by the second clause of that section of the
statute. Id. at 1144. A remand from the court for an entry of
benefits, on the other hand, would fit the requirements of the
statute. Id. at 1150 (noting that in Gisbrecht, the Supreme
Court granted the writ certiorari in three cases in which the
district court had remanded for an entry of benefits but denied
the writ of certiorari in the one case in which the district
court had remanded for further proceedings). According to
McGraw, no § 406(b) fee petitions should be granted in social
security cases appealed to the district court and remanded for
further proceedings, even if the plaintiff ultimately wins at the
administrative level. Despite this perhaps anomalous result, this
is the logical outcome of the statute's language.
The McGraw court analyzed a long history of cases which
either explicitly find the other way or would seem to support
that position. Id. at 1145-52. The court found that in the
majority of cases awarding § 406(b) fee petitions in cases in
which the court remanded for further proceedings, there was
little, if any, attention to the language of the statute. Id.
at 1156. The court also found that, in older cases, the logic
behind the decisions to grant such fee petitions no longer holds
true given changes in the law, namely the availability of EAJA
fee awards. Id. at 1146. For example, in Conner v. Gardner,
381 F.2d 497 (4th Cir. 1967), the Fourth Circuit analyzed the
language of § 406(b) and came to a similar conclusion as this
court and McGraw, but for public policy reasons decided to import a broader
interpretation into the statute. Id. at 500. The Conner court
argued that if the statute were interpreted as outlined here,
"there would be a serious hiatus in the Social Security law which
would work to the ultimate detriment of those seeking disability
benefits." Id. As the McGraw court pointed out, this is no
longer the case, as EAJA fees area available to fill the gap,
370 F. Supp. 2d at 1146, provided the plaintiff qualifies in that the
SSA took a position in the case that was not substantially
justified. See 28 U.S.C. § 2421(d)(1)(A).
Finally, any apparent injustice can easily be prevented if
attorneys in social security cases enter into fee agreements with
their clients. The Court's caution in this area is certainly
merited, as "there is no party in this proceeding motivated to
argue that the statute does not permit an award of attorney's
fees. The only party that has a real interest in asserting that
the statute does not permit an award of fees is the claimant, who
is not an attorney and is not before the Court." McGraw,
370 F. Supp. 2d at 1153. Accordingly, Rose's fee petition is DENIED.
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