United States District Court, E.D. New York
Jeffrey Herzberg, Esq., ZINKER & HERZBERG, LLP, Attorneys for Plaintiff Smithtown, New York.
Vincent Lipari, Assistant U.S. Attorney., LORETTA E. LYNCH, UNITED STATES ATTORNEY, Eastern District of New York Attorney for Defendant Central Islip, New York.
MEMORANDUM & ORDER
DENIS R. HURLEY, Senior District Judge.
Plaintiff, Binder & Binder, P.C. ("Binder" or "Plaintiff"), brings this action against defendant, Carolyn W. Colvin, Commissioner of Social Security ("Commissioner" or "Defendant"), seeking a judgment for the statutory fees relating to Binder's successful representation of a claimant in a proceeding before the Social Security Administration ("SSA"). Presently before the Court are the parties' cross-motions for summary judgment pursuant to Federal Rule of Civil Procedure ("Rule") 56. For the reasons stated below, the Commissioner's motion for summary judgment is granted, and Plaintiff's motion for summary judgment is denied.
The material facts are drawn from Defendant's Local Civil Rule 56.1 Statement. Plaintiff failed to file a Local Civil Rule 56.1 Statement with its motion for summary judgment and failed to controvert the statement of material facts submitted by Defendant. Accordingly, the material facts submitted by Defendant that are supported by citation to admissible evidence, as required by Local Civil Rule 56.1, are deemed admitted.
In August 2006, David Walton, a Michigan resident, filed applications for Supplemental Social Security Income and disability insurance benefits under Titles II and XVI of the Social Security Act. Walton entered into a fee agreement with Plaintiff on June 15, 2007, which provided that, pursuant to 42 U.S.C. § 406(a)(2), if Walton were to be awarded benefits, he would pay Plaintiff's attorneys' fees out of his past due benefits.
In March 2009, an administrative law judge ("ALJ") issued a partially favorable decision which denied disability insurance benefits to Walton for the time period from September 20, 2005 to January 31, 2007, and for the time period after September 1, 2008, but granted disability insurance benefits to Walton for the time period of February 1, 2007 through September 1, 2008. Subsequently, the SSA notified Walton, in a letter dated April 27, 2010, that his fee agreement with Plaintiff had not been approved, and that Plaintiff was required to file a petition in order to recover its fees. Accordingly, Plaintiff notified the SSA that it intended to file a petition to recover its fees at the conclusion of its representation of Walton, and that Walton's case was still pending as Plaintiff had appealed the ALJ's partially favorable decision.
Walton's case was remanded by the Appeals Council to the ALJ, and, upon remand, the ALJ issued a fully favorable decision on May 20, 2010. However, the ALJ's decision again rejected Plaintiff and Walton's fee agreement because more than one representative had been appointed, the representatives had not signed a single fee agreement, and the representatives who had not signed the fee agreement had not waived filing and charging a fee.
Plaintiff sent a letter to the ALJ, dated October 26, 2010, requesting that the SSA approve a fee of $11, 486.75, representing 25% of the past due benefits awarded to Walton. Plaintiff also sent a letter to the ALJ, dated November 15, 2010, which asked the ALJ to process Plaintiff's request for approval to charge and receive a fee, and which request attached a letter, signed by Walton, stating that Walton consented to Plaintiff's requested fee. Plaintiff again requested, by letter dated January 10, 2012, that the ALJ issue its approval for Plaintiff to charge and receive a fee. The ALJ then provided Walton with copies of Plaintiff's fee petitions for which Walton was to comment on within twenty days; however, Walton did not submit any comments.
On June 1, 2012, Walton filed a voluntary petition for bankruptcy in Michigan, listing Plaintiff as an unsecured creditor. On October 23, 2012, the ALJ issued an authorization for Plaintiff to charge and collect $11, 486.75 for its attorneys' fees. The ALJ's order permitted Walton thirty days to object to Plaintiff's fee. Walton thereafter notified the SSA, on November 26, 2012, that he was entitled to keep the amount of money being withheld as Plaintiff's attorneys' fees because he had filed for bankruptcy. Walton's bankruptcy attorneys also sent the SSA a copy of Walton's Notice of Bankruptcy Filing. On January 8, 2013, the bankruptcy court granted Walton a discharge under § 727 of the Bankruptcy Code, which discharge Plaintiff did not oppose.
Pursuant to the SSA's policy manual, HALLEX I-1-2-3, when attorneys' fees are sought by a claimant's representative, and a bankruptcy action has been commenced by the claimant, the SSA's actions will depend upon the outcome of the bankruptcy proceeding. In that regard, HALLEX I-1-2-3 specifically provides that if the bankruptcy proceeding results in a discharge of the claimant's debt to the representative, the claimant is no longer responsible for the representative's fee and the SSA will release any withheld funds to the claimant. If the representative inquires about its fee, the SSA is to advise the parties of the action it took pursuant to the bankruptcy court's order. The SSA is further prohibited from acting upon fee petitions or approving or disapproving a fee agreement for any services that were performed during the claimant's bankruptcy time period.
The SSA paid $14, 663.24 directly into Walton's bank account on January 15, 2013, and sent a letter to Walton on January 20, 2013 notifying him of the payment. Plaintiff was also provided with a copy of the SSA's January 20, 2013 letter to Walton. Thereafter, Plaintiff commenced the instant action. The SSA thereafter sent Plaintiff a letter, dated April 8, 2013, informing Plaintiff that it would not take any further action on Plaintiff's attorneys' fee issue because of ...