EAJA Offset

The recurring question of the reduction of fee awards under 42 U.S.C. §§ 406(a); 1382(d)(2) (hereafter referred to generically as “406(a)”) by the amounts awarded under 28 U.S.C. § 2412.  The question arises where counsel has submitted a fee petition or the Social Security Administration reviews the reasonableness of the fees on a review under the expedited fee process on request by the claimant, counsel, or own timely own motion.  The result is the same regardless of the scenario under which counsel seeks fees under sec. 406(a) after having first received fees under sec. 2412. 

 The uncodified portion of the EAJA provides the short answer to the question.  The Savings Provisions of Section 206 of Pub.L. 96-481, as amended by Pub.L. 99-80, § 3, Aug. 5, 1985, 99 Stat. 186, provide that:

“(b) Section 206(b) of the Social Security Act (42 U.S.C. 406(b)(1)) [section 406(b) of Title 42, The Public Health and Welfare] shall not prevent an award of fees and other expenses under section 2412(d) of title 28, United States Code [subsec. (d) of this section].  Section 206(b)(2) of the Social Security Act [section 406(b)(2) of Title 42] shall not apply with respect to any such award but only if, where the claimant's attorney receives fees for the same work under both section 206(b) of that Act [section 406(b) of Title 42] and section 2412(d) of title 28, United States Code [subsec. (d) of this section], the claimant's attorney refunds to the claimant the amount of the smaller fee.”

 (Emphasis added); see also HALLEX I-1-2-91(A).[i]  This uncodified provision articulates the intent of Congress that counsel not receive and keep both EAJA and fees under 42 U.S.C. § 406(b) “for the same work” and if counsel receives both fees then counsel shall refund the smaller fee to the claimant. 

In a case remanded under 42 U.S.C. § 405(g)(sentence 4), the court enters judgment and counsel seeks EAJA fees immediately.  The court does not retain jurisdiction and the time invested on remand is not part of the court case.  See generally Shalala v. Schaefer, 509 U.S. 292, 113 S.Ct. 2625, 125 L.Ed.2d 239 (1993).  Time invested by counsel either before the first exhaustion of administrative remedies or after the remand from the court are not part of the court case and are not “the same work.”  See also HALLEX I-1-2-91(B)(1). 

There are times when the EAJA fee can and should offset a fee payable under 42 U.S.C. § 406(a).  Those circumstances occur when the fee is “for the same work.”  The court retains jurisdiction and work performed on remand is part and parcel of the court case when the court remands pursuant to 42 U.S.C. § 405(g)(sentence 6).  Sullivanv. Hudson, 490 U.S. 877, 109 S.Ct. 2248, 104 L.Ed.2d 941 (1989); Melkonyan v. Sullivan, 501 U.S. 89, 111 S.Ct. 2157, 2162-63, 115 L.Ed.2d 78 (1991); Shalala v. Schaefer, 509 U.S. 292, 113 S.Ct. 2625, 125 L.Ed.2d 239 (1993).  If and only if the court has retained jurisdiction over the proceedings on remand and awards fees pursuant to the EAJA for that time does the offset of the EAJA fee award from the fees payable for that time expended before the Social Security Administration arise.[ii] 

The policy concerns are appropriate.  The Congressional purpose in enacting the EAJA is patent.  Congress sought to offset the costs of litigating against the government where the United States could not prove that its position was substantially justified.  Scarboroughv. Principi, 541 U.S. 401, 124 S.Ct. 1856, 1861, 158 L.Ed.2d 674 (2004) citing H.R.Rep. No. 99-120, p. 4; see also POMS GN 03990.001.  In some circumstances, the EAJA fee may be the entire fee that counsel can receive.  See e.g. McGraw v. Barnhart, 370 F.Supp.2d 1141 (N.D. Okla. 2005) rev’d on other grounds 450 F.3d 493 (10th Cir. 2006).  The district court in McGraw illustrates the proposition that in many cases the EAJA fee is the only fee for the court work.  This can arise in small benefit level cases (e.g. SSI with income by a non-eligible spouse), closed period (including cases where the back benefit pool is cut off by the claimant getting benefits on a subsequent application with or without the encouragement or assistance of counsel), or other circumstances.  Reducing the fee payable for time spent before the Social Security Administration by the amount of the fee received by counsel before the courts defeats the intent of Congress that counsel only get paid once for each hour of work.  Reducing the administrative award by the court fees means one set of hours did not get paid, at all. 

It is a true observation that the claimant gets no true fee relief by the presence of the EAJA award not offsetting an administrative fee.  Where the administrative fee exhausts the 25% withheld for that purpose, the question raised is whether counsel can keep the entire EAJA fee for court work and the entire 25% for the administrative work.  The claimant has received some fee relief insofar as counsel had any incentive to take a case to the district court.  If it were not for the presence of EAJA fees, many cases would become unviable.  This would violate the intent of Congress that people have the resources to litigate against government action that is not substantially justified.  Therefore, allowing counsel to retain an EAJA fee and receive fully reasonable compensation for different hours expended before the Social Security Administration is correct.

Finally, any practice by an ALJ, ODAR, Region, or SSA generally to reduce the amount of the sec. 406(a) fees by the amount of the EAJA fees for different time means that counsel that seeks fees both before the Social Security Administration and before the courts for representation of a claimant will have the amount of the EAJA fees offset twice.  The courts will offset the amount of a fee payable under 42 U.S.C. § 406(b) by the amount of the EAJA fee.  Scarborough, 124 S.Ct. at 1862 fn. 2.  It is the court that is obligated not to offset the EAJA fee against the sec. 406(b) fee but to order counsel to reimburse the smaller of the two fees for time paid for twice. 

In light of the uncodified portion of the EAJA, the intent of Congress, and the possibility that in many cases the court will order the reimbursement against a fee payable under sec. 406(b), it is not appropriate to reduce, credit, offset, or otherwise take into account the amount of a prior EAJA award in setting the fees payable under sec. 406(a). 

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[i] This section “provides that when a representative received fees for the same work under both section 206(b) of the Social Security Act and EAJA, the representative must refund to the claimant the amount of the smaller fee.”  The “NOTE” in the following paragraph ignores the operative phrase “for the same work.”  POMS GN 03990.040 clarifies the “for the same work” requirement for offset.  See also POMS SI 00830.100(B)(5). 

[ii] A fair question, beyond the pale of this position paper, is whether time expended by counsel after remand from the court under sentence 6 should be the focus of fees under sec. 406(a) or 406(b). 

Wall Street Journal and Binder & Binder

Beginning on December 21, 2011, the Wall Street Journal began a series of articles assailing the disability system and those that work in that system. The first article focuses on Binder & Binder.  Damian Paletta and Dionne Searcey has taken the task with relish to assault the system that functions as a safety net, claiming that unemployment fuels the uptick in disability applications.

The assault on representatives and on the system as a whole constitutes a pincer attack with the apparent intent to call for a dismantling of the current structure and placing in it something different.  What Paletta and Searcey appear to have missing from the quiver is a basic understanding of the disability program and how Congress intended it to function ab initio.

The basic structure of the Act calls for disability benefits to individuals that suffer from "severe" impairments that can no longer perform not only their past work but any other work that exists in significant numbers either in the region in which the person lives or in several other regions of the country.  42 USC §§ 423(d)(2)(A); 1382c(a)(3)(B).    So if a person cannot perform his past work and because of those impairments cannot perform any other work that actually exists in the economy, that person suffers from a disability.  Throw in the other statutory factors to consider age, education, and work experience and the pool of people that meet the statutory test expands.

We have several factors that implicate an increasing number of disability applicants.  Yes Damian and Dionne, the demographics of the United States are aging.  With the baby boomers aging and the average age creeping to over 36, the incidence of disability claims in a statutory construct will increase as a matter of design.  Second, the United States witnessed the exportation of unskilled labor to countries with cheaper sources of labor and more lenient laws about workplace and pay.  Without getting into an international economics discussion of whether the presence of jobs in Mexico, Malaysia, China, or Nigeria, everyone can agree that the numbers of unskilled labor jobs in the United States has dwindled.  If a statute places benefit entitlement on the ability to perform a significant number of jobs in the economy and a whole class of work no longer exists in the economy, then the incidence of disability claims in a statutory construct will increase as a matter of design. Third, the United States economy slid headfirst into a recession beginning in 2008 and although the government would like us to believe that the recession is over we can all take notice that the true unemployment rate, including those that have given up looking for work, remains high.  The number of people not in the labor force rose by almost 2 million in just 12 months.  Because the statute places benefit entitlement on the ability to perform a significant number of jobs in the economy and a work no longer exists in the economy, then the incidence of disability claims in a statutory construct will increase as a matter of design.

So I agree with Paletta and Searcey, the number of disability claims has risen and that rise is due in part to economic conditions.  The Modest Proposal then stands quite starkly in the wind.  We can tell people with severe impairments that although they can no longer perform their past work and there is nothing else for them to do in terms of work in the economy that they must whither on the vine or we can fulfill the intent of Congress and extend the lifeline to them.  Instead of calling for an overhaul of the disability system, Paletta and Searcey ought be calling on the agency to take a closer look at the world and ask the agency to make reasonable decisions based on the workplace as it exists.

Which takes this conversation back to where it started, Binder & Binder.  We have an aging population that lives longer and survives catastrophic illness and injury because of advances in modern medicine that does not necessarily return those people to function.  Binder & Binder see clearly an economic opportunity to give significant help to a class of people that the government frequently steamrolls.  We can label those people the "arguably disabled."  Binder & Binder also seek to help those that chose not to deal with the federal bureaucracy because companies make a living preparing short form tax returns.  The government across agencies has gotten so complex that many want a professional to handle the matter.  We can label those people the "bureaucracy challenged."  Enter Binder & Binder with a business model to address both.

Paletta and Searcey report that Charles Binder received over $22 million in fees in 2010.  If we assume an average fee for a successful case of $2,000, then the report in the WSJ means that Charles Binder successfully represented 11,000 people.  The agency processed 2.5 million claims in 2005.  Report of the SSAB, chart 69.  Quadruple the number of people represented by Binder & Binder just for giggles.  Assuming that Binder & Binder represented 50,000 people successfully, that is still less than 5% of all the claims handled by SSA in any fiscal year of recent report.

And that is the untold story.  Disability claims are rising because of demographics and economics, factors built into the statute.  People with impairments are more likely to use professional representation because their cases are difficult or nuanced, or they just don't want to deal with the government while trying to deal with life.   What Paletta and Searcey see and report is of no consequence.  The sky is not falling.  The nation needs economic reforms that will take decades to play out.  In the interim, we must take care of those that suffer from severe impairments that have robbed them not only of the ability to perform their past work but also of any other work that exists in the economy.