Fees for Representing Claimants -- Administrative -- How Much?

 Thirty years ago, Congress amended the representation section of the Social Security Act to establish a presumptive reasonable fee not to exceed 25% of the past due benefits or $4,000, whichever is less.  The US Inflation Calculator states that $4,000 in 1990 is worth $7,964.16 in 2020 dollars.  The current fee cap of $6,000 is behind by 30%.  Social Security informs the representative community that the average fee is less than $4,000 so there is no need for a fee cap increase.  The average will always be lower than $6,000 because that is the maximum and there are cases where very small fees are paid -- initial application paid with one or two months of past due benefits accrued, for example.  

Fees have fallen behind the cost of living by 30%.  And that is the good news.  The bad new starts with the recognition that the CPI includes consideration of Other Services.  Other Services in turn includes Legal Services.  The cost of legal services since 1990 have either lagged inflation, tracked inflation, or outpaced inflation.  Those are the three possible answers.  The correct answer is the third one:  the cost of legal services have outpaced inflation just as education and medical care have outpaced inflation.  I see a hand in the back, "by how much?"  Good question but you won't like the answer.  

Legal services has a base calculation of 100 for December 1986.  As of November 2020, the CPI-U for legal services had risen to 369.112.  We can compare that to the CPI-U for all goods with a base of 1982-84 at 100 to a current value in November 2020 of 260.817.  Using an earlier point in time, the all goods CPI represents 161% inflation.  The legal services inflation is 269% since 1986.  "Goodness gracious, are you kidding me?"  Sorry, I don't make it up, I just report the numbers.  The CPI data tool is here.  

The next question is simple, what does $4,000 worth of legal services in 1991 cost today?  The answer is disturbing:  $11,379.90.  See Historical Pricing for Legal Services.

Before the 1990 amendments, the presumptive fee was $3,000 maximum.  That was the extent of ALJ discretion.  Anything more than that required RCALJ approval.  A fee of $3,000 in 1989 would require $9,691.33 in todays dollars to buy the same quantity and quality of legal services.  That $3,000 fee ceiling was in effect in December 1985 when I got my license.  A 1986 fee requires $11,059 in November 2020 to buy the same quantity and quality of legal services.  

Are some representative overpaid for their potted plant posture during hearings?  Yes.  Should the fee caps get raised to attract the same caliber of legal talent as other areas of law?  Yes.  

The Commissioner should raise ALJ discretion to $15,000 on fee petitions.  The Commissioner should raise the fee agreement process ceiling to $9,000.  Claimants deserve that caliber of representation.  

"You get what you pay for."  

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Suggested Citation:

Lawrence Rohlfing, Fees for Representing Claimants -- Administrative -- How Much?, California Social Security Attorney (December 15, 2020) https://californiasocialsecurityattorney.blogspot.com/2020/12/fees-for-representing-claimants.html

Questions on Fees from NOSSCR Spring 2018

We ran out of time at the NOSSCR conference in the discussion of attorney fees.  I answer those questions here:

I have had several instances recently where I did all the case prep, but then did not rep the client at the hearing (fired the week before the hearing, client with dementia doesn't remember hiring me and then hires another attorney, client became unresponsive). The ALJs awarded fees in all cases after fee petition, but fee is not withheld. Clients refuse to pay-- what do I do?

 The agency does not withhold fees for a discharged or withdrawing representative.  You have to collect the fee from the claimant or representative payee.  The only way to turn that award into something collectible is to turn it into a state court judgment.  Consult your state rules about suing your client -- most carriers frown on it and if the claimant is demented, that person may try to relitigate the fee award from the ALJ.

Is it proper for an ALJ to reduce a requested fee on a fee petition on the basis that the fee petition was "delayed," e.g., 6 months after the Notice of Award was issued?

Is there a reason for the delay other than the press of business?  If the fee petition seeks less than the entire withholding, then the delay has prejudiced the claimant by delaying the receipt of the residual withholding.

Do we have any recourse for this scenario: we had an AC remand awarded upon second hearing for a closed period of benefits. Even though the rep paperwork and fee agreement were on file, SSA failed to withhold our fee. The client won't return our calls. HELP! 

I successfully represented a client and the Judge approved the fee agreement.  The client was paid the full amount of the back pay but SSA mistakenly did not withhold my fee.  Suggestions... 

Ask the field office in an SSI case or the processing center/OCO in a DIB case to create an overpayment and pay you directly -- assuming that you are eligible for direct payment.  You need to document your collection efforts to qualify for the creation of the overpayment.  The agency will not declare an overpayment without that showing nor if the claimant is deceased.

I've had problems in which SSA is failing to release past-due benefits to my clients while my fee petitions are pending. Shouldn't SSA be releasing 75% of those benefits to my clients in the interim? (Instead of telling my clients that "your lawyer is holding up payment of your benefits?")

A writ of mandate comes to mind.  Don't file one, threaten to file one.  If this is a Title II claim, it is a rogue in the office.  If this is a Title XVI claim, the claimant gets the benefit in three payments with the bulk coming at the end of 12 months.

How should I handle getting a 1099 from SSA every year? Why does no one ever directly address this with NOSSCR or SSA or IRS?

File a schedule C that declares the income reported on the 1099 and then report the transfer of the entire corpus of those funds to the firm or other entity.  NOSSCR cannot control the IRS reporting requirements; nor does SSA.

 how do you address the fee with the client at signup in cases where the ALJ finds disability 5 1/2 months prior or say 7 months prior?

Anticipate the scenario as part of the fee agreement.  You can reserve the right to seek administrative review of the fee agreement or opt into a fee petition process in those cases.  We take risk in representing claimants of either a small fee or no fee.  This is part of the process.

What is the review process available if the Payment Center disapproves your fee agreement after an ALJ approved it (Assuming the PC disapproved for an incorrect reason)?

Seek administrative review of the fee agreement disapproval by the PC.  Due process requires a notice and opportunity to be heard.   See HALLEX I-1-2-49. 

Prior attorney withdraws but does not waive.  Does SSA send copy of favorable decision or award letter.  You file fee petition.  How does prior attorney know when to file?

SSA notifies the representative to file a fee petition and/or the representative files a fee petition on discharge/withdrawal. 

If a client fires a rep and hires someone else, and the previous rep withdraws, why does the new rep still have to do a fee petition?

Because the withdrawing representative still has the right to seek a fee.  If the previous representative waives, then the ALJ can approve the current representative fee's fee agreement.

It took almost a year for my fee agreement to be approved. SS told me my clients full backpay would not be disbursed until my fee agreement was approved. This didn't happen. They gave her everything. Now I have to collect from her direct. How can I prevent this from happening in the future?

The backpay should be released and the withholding held back.  If I were told that SSA would not release the PDB until my fee was set, I would demand that the agency release that 75% of the PDB to the client.  As to release of the withholding, it happens because the agency makes mistakes. 

The EAJA Offset and 406(b) Fees

The Equal Access to Justice Act permits an attorney to obtain a fee outside of the confines of the Social Security Act.  The savings provision (Section 206 of Pub. L. 96–481, as amended by Pub. L. 99–80, §3, Aug. 5, 1985, 99 Stat. 186) provides in relevant part that:

Section 206(b) of the Social Security Act (42 U.S.C. 406(b)(1)) shall not prevent an award of fees and other expenses under section 2412(d) of title 28, United States Code. Section 206(b)(2) of the Social Security Act 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 and section 2412(d) of title 28, United States Code, the claimant's attorney refunds to the claimant the amount of the smaller fee.

 Parish v. Comm'r of Soc. Sec. Admin. reads the same work provision broadly, to include all civil actions on the application.  Morales v. Colvin applied the offset to EAJA fees paid for the work before the agency after remand under sentence six pursuant to Sullivan v. Hudson.

Enter the fray and apply Clark v. Astrue.  Clark holds that the plain text of 42 USC § 406(b) limited the dollar amount of fees awarded for cart work, not the combined fees for administrative work under §406(a) and (b).  The District Court held that it should reduce the amount of withholding by the administrative fee and by the EAJA fee.  The footnote in Clark explains the math:

The district court arrived at this figure as follows: $18,017 (25% of Clark's past-due benefits) minus $5,300 (amount awarded to Ms. Cook under § 406(a)) minus $6,058.68 (amount previously awarded to Mr. Halpern under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412, for his representation of Clark in this matter). The district court's $6,058.68 deduction for the prior EAJA award is not at issue in this appeal.

Clark answered the question of whether the court could award $18,017 or whether it could only award $14,717, the amount of the withholding less the administrative fee.  The real question is whether it matters.

The agency will only withhold $18,017 under the facts of Clark.  The Commissioner certifies to the treasury the payment of the administrative fee of $5300.  The Commissioner continues to withhold $14,717.  Once the award exceeds $14,717, the most that the Commissioner will ever pay is $14,717.  The only time in which Clark makes sense is if the motion seeks in the order sets out a payment of $18,017 to the attorneys representing the plaintiff in the civil action for review by the District Court net of the EAJA fees already paid.  If the motion for fees seeks a "net" payment $11,958.32 on the premise that the net payment reimburses the client for the amount of the EAJA fees, all the while ignoring the administrative fee of $5300, and the proposition that the net fee award $758.68 in fee relief, then the savings provision of the EAJA has been satisfied.  In the real world, the most that the Commissioner would ever certify from the withholding is $14,717.  The Commissioner already certified $5300 to the administrative representative.  If the court ordered the fee of $18,017 and the attorney representing the claimant in court received $14,717, the savings provision requiring reimbursement of the smaller of the two fees for the same work would apply, resulting in a reimbursement to the claimant of $6058.68.

The question would then be whether the attorney could engage in self-help to make up the difference in the field awarded by the court ($18,017) in the amount actually certified by the Commissioner and paid by Treasury ($14,717) to the tune of $5300, and then reimbursing the client $758.68 and satisfy the statute.  To be sure, Clark is correct that the court fees and the administrative fees are separately calculated.  But that does not mean that when the available withholding is reduced by an administrative fee award and the residual was paid over to the court attorneys that those attorneys can then invade the reimbursement provisions of the savings award.

The court should never award a "net" fee under 42 USC § 406(b).  The 11th circuit got it wrong, completely wrong in Jackson v. Comm'r of Soc. Sec. Permitting the net fee award simply allows the attorney to evade the reimbursement.  Why else would the attorney have appealed the order in Jackson.   To keep the $3,371.93 in the EAJA fee.  Appealing for an accounting problem -- please.

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).