3. May a Representative that Worked on a Case and Subsequently Appointed Annotate on the Itemization Services Provided Before the Actual Appointment?

When the fee agreement process does not apply, a representative can charge and receive a fee only upon authorization of the Commissioner.  Before 1991, the fee petition process was the norm.  Now the fee petition process is the exception to the rule.  42 U.S.C. § 406(a)(1) describes the exception to the rule.    The fee petition process applies whenever the fee agreement process does not with limited exceptions.  HALLEX I-1-2-51.  The fee petition process is set out in the regulations.  See, 20 C.F.R. §§ 404.1720 and 416.1520.  Subsections (b) and (c) of those two sections both provide for the petition, decision, and review process.  This raises the question of the parameters of agency discretion in setting fees. 

A claimant can appoint a representative and that appointed representative can delegate to other persons work on a claim other than the actual appearance at a hearing.  POMS GN 03910.025.B.3.  That subsection states:

3. Delegation of Duties

Although an appointed representative may not redelegate his/her authority to represent the claimant to another person whom the claimant has not appointed, the appointed representative is not required to perform every task related to the representation personally. Appointed representatives often delegate such tasks as developing the claimant's medical record or preparing written materials regarding an appeal to an assistant. An unappointed assistant who is supervised and directed by the appointed representative may perform tasks of this nature, as long as the appointed representative personally makes the decisions central to presenting the claimant's case before SSA.

A representative may not delegate to an unappointed assistant the authority to undertake tasks that require making significant decisions regarding the case. Whoever performs such tasks is, by definition, a representative, and must be appointed as such by the claimant. Appearing as the claimant's advocate in a hearing before an Administrative Law Judge (ALJ), for example, requires making decisions about presenting evidence, cross-examining witnesses, arguing facts and law, and appealing any adverse ruling. Only an individual whom the claimant has appointed, and whom SSA has accepted, as the claimant's representative has the authority to perform such tasks.

The presentation of the arguments on the request for review would appear to cross the line into a non-delegable duty.  The question is whether a person not named on a form 1696 may perform duties tantamount to representation.  The regulations do not require an attorney to use form 1696.  20 C.F.R. § 416.1507.  That regulation states in relevant part that:

We will recognize a person as your representative if the following things are done:

(a) You sign a written notice stating that you want the person to be your representative in dealings with us.

(b) That person signs the notice, agreeing to be your representative, if the person is not an attorney. An attorney does not have to sign a notice of appointment.

In footnote 2 of the inquiry, SSA states that a claimant may only appoint a representative and that the agency does not represent a law firm.[i] 

     A reasonable reading of secs. 404.905 and 416.1505 permit an attorney to act as a representative in this matter in an independent capacity.  To the extent that only the appointee could act as a representative in this matter, the services rendered to a claimant, the appointee can delegate those duties.  This conclusion finds support where the Appeals Council accepts the presentation of those arguments.   

     The appointee should be the only person that submits a fee petition.  But a claimant can appoint more than one representative.  POMS GN 03910.040 ¶ B.3.  Where the claimant subsequently appoints the de facto representative with a form 1696, that person becomes the appointed representative nunc pro tunc.  A claimant that signs that form 1696 knowing that a de facto representative or delegee had undertaken substantial efforts on his/her behalf.  Validating representational activities nunc pro tunc constitutes a reasonable understanding by a subsequently appointed and ratified representative. 

     The question then becomes how to account for all the time.  The fee petition form does not permit a representative to parse out services rendered as a delegee from those as an appointment representative.  Paragraph 1 of the form SSA-1560-U4 directs:

Itemize on a separate page or pages the services you rendered before the Social Security Administration (SSA). […]  Attach to this petition the list showing the dates, the descriptions of each service, the actual time spent in each, and the total hours.

     The form calls for the itemization of all services rendered, not just those rendered after the appointment of representative got executed.  Whether those services are compensable under the petition of the ultimate representative or the earlier representative as the delegor of those prior acts constitutes a question that elevates form over substance.  To refrain from making full disclosure would have the net effect of misleading the agency as to the services rendered and by whom those services were rendered.  Whether those services are compensable to the ultimate representative or a prior representative forms the core of the question that the ALJ must ask as part of the fee authorization process. 

     The fee petition form cannot direct the representative in the situation of co-representation with overlapping or adjoining delegee and representative status to violate the call of the question by both listing and not listing the services the representative rendered from the Social Security Administration both before and after date of appointment.  If a delegee does not list all the services rendered before the Social Security Administration, then the agency could raise a concern that the delegee failed to make a full disclosure. 

     The fee petition form requires full disclosure and a delegee possessing a later formal appointment should always list all services rendered.  Where that second representative performed all the services under the two hats, the agency would waste scarce resources by requiring a fee petition for a supervising appointed representative and a second petition from the later appointed primary representative.  This observation rests not only on the nunc pro tunc later appointment but also on the patent proposition that the claimant does not retain a firm or a representative to invest time but to secure a result.  Factors 3, 4, 6, 7, and 8 do not focus on time and time should never become more than a guidepost to assess reasonableness to avoid an unconscionable fee. 

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[i] Please note that a claimant can retain a firm, partnership, or corporation.  HALLEX I-1-2-12. 

EM-13024 And Fees to Representatives that Waive Direct Payment

The Social Security Administration regulates fees that representatives can charge and receive.  The Program Operations Manual System (POMS) confirms agency policy.  The regulations carve out an exception when SSA will not involve itself in the authorization of when a representative can charge and receive a fee.  20 C.F.R. sec. 404.1720(e).  That exception concerns payment an entity or government agency will pay the representative.  The exception has two elements:  (1) the claimant will not have liability to pay fees or expenses to the representative or someone else; and (2) the representative tells SSA that he/she is waiving the fee from the claimant.  The form is SSA-1696 - the appointment of representative form.  The portion of the form provides:

I certify that my fee will be paid by a third-part entity [...] that the claimant [is] free of all liability [...]  to pay any fee or expenses to me or anyone as a result of their claim(s) or asserted rights(s).  [...] Do not check this box if a third-party individual will pay the fee.)

Now for the fun stuff.   On July 15, 2013, SSA published an Emergency Message.  EM-13024 provides guidance on what to expect when a claimant has multiple representatives and SSA approves the fee agreement (the expedited fee process).  The first and third examples reflect the waiver fees benefiting the claimant and not the representatives.  If the waving representative is a member of the firm that will receive a fee, the fee is reduced.  If the waiving representative is not a member of the firm that will receive a fee, the fee is not reduced.  I am not sure how that differentiation squares with HALLEX I-1-2-18.  When a representative waives, the other representatives should receive a percentage of the fee regardless of whether the waiving representative was a member of the firm.

The EM represents a concession that permits claimants to change representatives and permit the new representative to receive a full fee.  Many representatives won't take a claim if they can't get the fee agreement approved.  No one likes fee petitions and SSA sees a way to accommodate the interests of the claimants and the representatives as long as the waiving representative comes from a different firm from the other representative(s).

Now the hard part -- example two is wrong.  Examples one and three represent an accommodation and a sub-regulatory address of a bare bones statutory scheme.  But the second example contradicts the regulation.

The regulation permits a representative to get paid by a third party if and only if the claimant has no liability to any representative for the fees or expenses associated with the claim.  The appointment of representative form tracks the regulation.  But example two allows the representatives from firm A to receive the fees while the solo practitioner gets paid by a third-party entity. We can ignore the withdrawing representative from firm B so the redacted example is this:

The claimant appointed two representatives from Firm A, [...] and one representative who is a sole practitioner. [...] The sole practitioner waived charging and collecting a fee from the claimant or any auxiliary beneficiaries because a third party entity will be paying his or her fee. The two representatives from Firm A have an approved fee agreement that each of them signed, and SSA determines a fee of $6000. The representatives from Firm A will receive $3000 each.

The claimant in the example has a liability to the representatives from firm A.  SSA pays the fees but that payment comes from the past due benefits -- making the liability or payment indirect.

If the sole practitioner gets paid by firm A, then the representatives are paying the solo to represent the claimant without SSA authorization over the fee.  While that fits with fee splitting rules under the Rules of Professional Conduct and the Model Rules, it doesn't fit with the expedited fee process and the regulations stating that SSA will authorize not only the fees to the representatives from firm A and the payment to the solo.

If the sole practitioner gets paid by someone else (an insurance carrier or a governmental entity), then a real question exists about the value of the services provided by the members of firm A or the solo or both.  If the claimant ends up with the representatives from firm A, the only reason to permit the solo to get paid by the third-party entity is a time saving device and the assumption that the third-party entity can protect its own interests.  If the claimant ends up with the solo and the paying entity is firm A, then SSA is encouraging a business model that violates the regulation and defeats the interest of the claimant.

The claimant hires firm A.  The claimant appoints one or more representatives from firm A to represent the claimant at the hearing.  SSA sets the claim for hearing.  Firm A hires the solo to appear at the hearing.  The claimant finds out about the solo the day of the hearing or some time shortly before the hearing.  The claimant does not get the continuity of representation, the representative most familiar with the claim, or someone responsible for the claim at the firm.  The arrangement violates the regulation and removes the financial supervision of the representation by the solo by SSA.

EM-13024 will sunset on January 15, 2016.  SSA should delete example 2.  It violates the regulation.

Hardisty v. Astrue-- EAJA and Unreached Issues

 One of the frequent issues that comes up in the practice of law when fee shifting to the losing side becomes an issue concerns the question of recoverability of fees.  Many cases involve more than one issue and the prevailing party sometimes wins on all, some, or just one issue.  Sometimes the court reaches all the issues up or down, but with some degree of regularity does not decide all the issues.  The Ninth Circuit decisin in Hardisty v. Astrue decided in January 2010.  This post explores my opinions and observations on the case in particular and the subject in general. 

1.      Hardisty v. Astrue, the Boundaries of the Decision

Hardisty v. Astrue, 592 F.3d 1072 (9th Cir. 2010) cert. denied ___ U.S. ___ (2010) stands for the proposition that the Court should not consider issues it did not decide in determining substantial justification.  The Court’s reasoning is that fee litigation should not create satellite litigation and that determining substantial justification on unreached issues would necessarily require deciding those issues on the merits first.  In a case where the plaintiff prevailed, the Court decides whether the Commissioner was substantially justified administratively and in Court on the issues that the Court actually reached.  

In Casey v. Astrue, 2010 WL 2925094, *2 (E.D. Cal. 2010), the District Court did reduce the time paid by 6 hours for issues not reached, relying on Hardisty. The Court reasoned that it should not pay for time expended on issues not reached.  That constitutes an over-reading of Hardisty.  The Ninth Circuit held that issues not reached cannot form part of the calculus of whether to pay fees under the substantial justification analysis.  The issue of whether the Court should pay for such time became moot once the Court reached the issue before it in the negative.  Any reading of Hardisty for the proposition that the Court can or should deny fees for issues not reached or issues decided adversely to the plaintiff violates the law of the circuit.  See Natural Resources Defense Council, Inc. v. Winter, 543 F.3d 1152, 1162 (9th Cir. 2008) citing Hensley v. Eckerhart, 461 U.S. 424, 440, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); Sorenson v. Mink, 239 F.3d 1140, 1147 (9th Cir. 2001).  Even in the event of limited success, the prevailing plaintiff recovers a full fee absent some special circumstance under the Equal Access to Justice Act.  For instance, raising a frivolous issue might satisfy the special circumstance question. 

Even if Hardisty wrote on a blank slate, a reading foreclosing compensation for some issues would not constitute the law of the circuit.  United States v. Johnson, 256 F.3d 895, 914 (9th Cir. 2001) (en banc) (opinion of Kozinski,.J.) (plurality) holds that:

where a panel confronts an issue germane to the eventual resolution of the case, and resolves it after reasoned consideration in a published opinion, that ruling becomes the law of the circuit, regardless of whether doing so is necessary in some strict logical sense.

The question of what could be paid in Hardisty was never germane to the question of whether Hardisty could overcome the Commissioner’s affirmative defense of substantial justification on the issue reached by the District Court in that case.  It would constitute an anomalous state indeed where a plaintiff could recover for an issue on which he lost under Winter and Sorenson but not recover on an issue that the Court did not reach.  The Court should reject the Casey extension of Hardisty as unwarranted and not justified by any part of the Hardisty opinion germane to the resolution of the issue before the Ninth Circuit in that case.

2.     Reasonableness of Time Expended

The crux of the Commissioner’s position is that plaintiffs should not recover fees for time not reasonably expended.  Certainly the Commissioner cannot press on the plaintiffs’ bar the prescience to know which issues the Court will decide first or place upon them the Hobbesian choice of waiving certain issues on the belief that another issue will win the day.  In the case of limited success, the Court should use the same paradigm whether the plaintiff lost outright on an issue or the Court chose not to decide an issue:  was the plaintiff reasonable in briefing that issue?  The failure to prevail raises a threshold question but does not resolve the issue.  The failure to reach an issue does not cut either way. 

The Court should use an ad hoc analysis to determine reasonableness of time expended.  The issue is fact dependent.  Time spent testing the sufficiency of an articulation may frequently be reasonable.  The case of Hardisty provides an illustrative analysis.  Assuming arguendo that the Court had decided that the Commissioner lacked substantial justification, the question that would arise is whether the plaintiff reasonably expended time addressing the treating and other physician testimony.  The two issues have clear commonality.  Whether the ALJ articulated specific and legitimate or clear and convincing reasons for rejecting that testimony would necessarily require consideration of the medical baseline, i.e. by how much does the plaintiff’s complaints of limitation exceed the objectively based limitations?  In Hardisty, a reasonable plaintiff’s lawyer would either have to include a full discussion of the medical evidence inside of the excess pain analysis or segregate that discussion into an issue of the treatment of the opinion evidence.  Briefing or not briefing the opinion evidence would save little time and potentially provide a more confusing or convoluted presentation.  Similarly, the plaintiff that prevails on a treating physician opinion must prove up that the boilerplate allegation that the physician merely regurgitated the subjective complaints requires a full consideration of the plaintiff’s testimony. 

The majority of the Social Security docket come before the Court at step 4 of the sequential evaluation process.  Did the ALJ properly consider and determine the plaintiff’s residual functional capacity?  That is the issue.  The knife that cuts through that issue comes in two basic serrations:  expert opinion evidence and lay evidence.  Within those two broad classifications, there are at least seven forms of evidentiary distinction.  Because those issues blend together under Reddickv. Chater, 157 F.3d 715, 725 (9th Cir. 1998) (rejecting the quantum of evidence approach), the circumstance where the government lacked substantial justification on one of the seven variations of residual functional capacity evidence and the plaintiff was unreasonable in briefing together or separately one or more of the other six variations should prove rare. 

More likely candidates for reasonableness analysis exist in the step 4 or 5 analysis of the ability to perform past relevant work or other work.  These two issues rely on the completeness of the hypothetical question or the variation of the vocational testimony from the DOT.  These issues always assume the adequacy of the ALJ’s determination of residual functional capacity.  When the plaintiff prevails on the ability to engage in substantial gainful activity question, it is more likely that the plaintiff may have unreasonably briefed the residual functional capacity issue on the first half of the step 4 analysis. 

The same kind of analysis holds true in the briefing of a step 2 medically determinable severe impairments question or a step 3 listings question.  Those issues have common facts but completely different legal principles than does a residual functional capacity issue.  Prevailing on step 2 medically determinable severe impairments question or a step 3 listings question would rarely if ever result in a finding that the plaintiff was unreasonable in questioning the residual functional capacity assessment at step 4.  Failing to prevail at step 2 medically determinable severe impairments question or a step 3 listings question but prevailing on the residual functional capacity question would leave open a question of reasonableness for case-by-case determination. 

3.     A Rough Application of Hardisty and Reasonableness

When a plaintiff prevails at a lower step of the sequential evaluation process, it would present a rare case that the plaintiff unreasonably briefed issues at a higher step of the sequential evaluation process.  Prevailing at steps 2 or 3 of the sequential evaluation process implies error at steps 4 or 5 of the sequential evaluation process as based on a legally or factually infirm foundation.  Although the burden of proof of reasonableness remains with the plaintiff, the burden of persuasion would shift to the Commissioner. 

When the Court is convinced that the classification of an impairment as either not medically determinable or non-severe at step 2 of the sequential evaluation process constitutes a material error in the adjudication of the claim, the Court should rarely proceed to consider the remaining steps of the sequential evaluation process unless the Court intends to order the payment of benefits on one or more of those issues. 

When the plaintiff prevails at a higher step of the sequential evaluation process and loses at the lower steps of the sequential evaluation process, the burden of proof and the burden of persuasion on the question of reasonableness would still remain with the plaintiff. 

Where the Court is convinced that the independent step 5 analysis resulted in a finding of ability to engage in substantial gainful activity arose out of legal error, the Court should never ignore the step 4 residual functional capacity question unless it is clearly frivolous or the Court is ordering the payment of benefits.