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."  

___________________________

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

Culbertson -- Predictions

Culbertson v. Berryhill - a case in which the Supreme Court granted certiorari to resolve the split in the circuits.  The question presented:

QUESTION PRESENTED:

"Fees   for [the] representation of individuals claiming Social Security old-age, survivor, or disability benefits [at] the administrative and judicial review stages [are handled] discretely: [42 U.S.C.] § 406(a) governs fees for representation in administrative proceedings; § 406(b) controls fees for representation in court.” Gisbrecht v. Barnhart, 535 U.S. 789, 793- 794 (2002).  Section 406(b) specifies in particular that

[w]henever a court renders a judgment favorable to a claimant * * * who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due  benefits to which the claimant is entitled by reason of such judgment.

42 U.S.C. § 406(b)(l)(A) (emphasis added).

The question presented is:  Whether fees subject to § 406(b)'s 25-percent cap include, as the Sixth, Ninth, and Tenth Circuits hold, only fees for representation in court or, as the Fourth, Fifth, and Eleventh Circuits hold, also fees for representation before the agency.

 The chances of the Supremes granting certiorari went way up when the Solicitor General agreed that the Court should resolve the split among the circuits.  Is there a de jur 25% cap on fees when cases go to federal court?  We know that there is no cap if a case is resolved at the agency level only -- just a reasonableness cap.

So we all entered the merits stage sitting fat and happy -- the Supreme Court was going to agree that there did not exist a cumulative cap on fees under section 406(a) and (b), just a 25% cap on fees under 406(b).  The SG threw a curveball.  While a de jur 25% cumulative cap on fees did not exist, the agency and the courts could exercise their discretion to impose a 25% cap when the courts believed that a reasonable fee should not exceed 25% of the past due benefits.

So here are my predictions:

1.  Culbertson will win a pyrrhic victory.  The Supreme Court will vacate and remand back to the 11th Circuit the fee petition where the court will entertain the question of whether Culbertson can or should get 25% of the past due benefits plus keep the EAJA fee and the 11th Circuit will say "no."

2.  Whichever decides fees second, the agency or the court, will take the decision in Culbertson as permission if not a mandate to limit the aggregate fees in court remand cases to a de facto cumulative cap of 25% of the past due benefits.

3.  Neither party nor any amicus to date has explained why the attorneys would ever want overlapping or coterminous fees that exceed 25% of the past due benefits and so the Court will assume that no good reason exists other than trying to avoid the mandatory reimbursement provisions of the Equal Access to Justice Act.

4.  Attorneys that share fees to even out the 25% distribution on a pro rata basis will lose that ability because it will remain a crime for either to receive an unauthorized fee.

5.  In the anti-claimant representative era, the practice of  Social Security law will get more cumbersome thanks to Mr. Culbertson.

We can all expect changes that will not be good in the long run.  This arises from the desire to avoid the uncodified portions of the EAJA to refund to the claimant the smaller of the two fees under the EAJA and 406(b).

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. 

When the Commissioner Stipulates to Remand, the Plaintiff Always Gets EAJA Fees

Sample statement from the Court:

The problem: the Court knows nothing about this case. The government stipulated to a voluntary remand of the action to the agency for further proceedings on the disability benefits application – without any substantive court involvement. (Docket # 21.) As a result, the Court has no insight into the agency’s litigation position during proceedings with the ALJ or on appeal. That’s a prerequisite to a finding that Plaintiff is entitled to fees under EAJA. And it’s not addressed anywhere in Plaintiff’s form brief.

Response -- or should be in the fee petition if it gets that far:

The Commissioner stipulated to the remand of this matter.  The Court did not have the opportunity to determine the reasonableness of the Commissioner's position.  The Court should not hear the Commissioner's assertions of reasonableness now.  The Court does not weigh the reasonableness of the issues that the Court did not address on the merits.  Hardisty v. Astrue, 592 F.3d 1072, 1079 (9th Cir. 2010).
 The Court cannot find substantial justification in this case because to do so would require the inquiry into the merits of the Commissioner's position administratively and in forcing the matter into Court.  Hardisty precludes that inquiry.  Therefore, the Commissioner cannot sustain her burden of proof.  Floresv. Shalala, 49 F.3d 562, 569 (9th Cir. 1995). 

I submit that the upshot of the analysis is simple -- when the Commissioner stipulates to the remand of the matter, the plaintiff always prevails in the quest for reasonable fees and expenses.  This argument is tailored to Ninth Circuit caselaw.  

EAJA Timeliness and Prematurity

Every once in a while, a court will enter an order making a party the prevailing party in litigation involving the United States.  The court sometimes does not formally enter judgment.  Because of the 60 days in which to appeal a judgment of a District Court or 90 days in which to seek certiorari from a decision of the Court of Appeals, the intrepid attorneys for the prevailing party may wish to file before the entry of formal judgment or before the expiration of the time in which to appeal.

The Commissioner will complain that the application is premature.  Judgment has not been entered or the time in which to appeal has not expired.  These are spurious arguments designed to extend litigation, creates satellite litigation, and do not assist the Court in management of its docket.  A recent decision from the Court of International Trade, in Former Employee of Marlin Firearms, Co. v. United States Secretary of Labor, says the following about prematurity:

Regardless, the plaintiff did not make his application prematurely. Section 2412(d)(1)(B) requires “[a] party seeking an award of fees and other expenses” to submit its application “within thirty days of final judgment in the action.”  Legislative history and the weight of case law correctly interprets this language as creating only a final deadline for filing, rather than also establishing a time before which applications are premature, i.e., the entry of final judgment. See Equal Access to Justice Act, Extension and Amendment, H.R. Rep. 99-120(I), at 18 n.26 (1985), as reprinted in 1985 U.S.C.C.A.N. 132, 146 n.26 (stating that “fee petitions [under the EAJA] may be filed before a ‘final judgment,’” and disavowing “the overly technical approach” of a case holding that applications filed prior to final judgment are premature) (emphasis added); see, e.g., Haitian Refugee Ctr. v. Meese, III, 791 F.2d 1489, 1495 (11th Cir. 1986) (“[S]ince the district court has not entered final judgment, since the thirty-day limit has not begun, and sincethe time to appeal has not run, the application for attorneys’ fees was timely filed.”), vacated on other grounds, 804 F.2d 1573 (11th Cir. 1986); Gonzalez v. United States, 44 Fed. Cl. 764, 767 (1999) (“Congress did not intend to proscribe EAJApetitions filed prior to the start of the 30-daylimitations period.”). But see Perez v. Guardian Roofing, No. 3:15-cv-05623-RJB, 2016 WL898545, at *3 (W.D. Wash. Mar. 9, 2016) (“[Defendant’s] EAJA Counterclaim is premature,because EAJA contemplates that the submission of an EAJA application follows, not precedes, final judgment. This interpretation is supported by use of the word ‘within,’ . . . versus use of words such as ‘before’ or ‘prior to[.]’”). Because the plaintiff did not file the application prematurely, and because, regardless, Labor has waived its objection to the application’s timing,the court will consider the merits of the plaintiff’s motion.

 The prevailing party needs to prevail, not have judgment entered.  Animal Lovers v. Carlucci, 867 F.2d 1224, 1225 (9th Cir. 1989); Marks v. Clarke, 102 F.3d 1012, 1034 (9th Cir. 1996).  The whole idea of a premature EAJA petition is wrong.  Labor was wrong to wrong to raise it in Marlin Firearms but right to waive it.  

Subsequent Applications and Fees -- Oh My

On June 3, we discussed the ethics and strategy behind a subsequent application while the claimant has a complaint for review pending with the federal courts -- Just Do It.  The problem for the representatives extend beyond the cutting off of the past-due benefit accumulation.  The fees get messy.

1.  The Subsequent Application Gets Paid

Whether by initial determination, reconsideration determination, or hearing, subsequent applications get paid with fair regularity.  These are cases on the cusp where reasonable minds could differ; you contend that the ALJ acted unreasonably in denying the case now pending in court.  These cases get paid, expect it.

The typical paradigm is the fee agreement process.  As long as the operative fee agreement is 25% of the past due benefits or $6,000, whichever is less, applies to the subsequent application, the fee agreement will get approved and the representative will get paid.  HALLEX I-1-2-16 states that the ALJ or the AC will approve or disapprove the fee agreement on the facts before the agency.  POMS GN 03940.038 gets into more detail but to the same result.  When the claimant receives a favorable decision on a subsequent application, SSA will approve the fee agreement and pay the withheld fees so long as the fee agreement meets the requirements and the representative is eligible.

What HALLEX and POMS do make clear is that all the cases that the claimant has constitute one case for fee purposes.  That $6,000 ceiling on the fees for the subsequent application continues to apply if and when the district court remands the case back to the agency for further proceedings.  There is no reset button and the claimant is not liable for up to $6,000 twice.  One continuous period deserves one fee.

     a. No Tiering and Same Representative(s)

The last fee agreement controls the fees in the case.  If the representative had the claimant sign a new fee agreement on filing the subsequent application, that is the fee agreement that controls all the fees.  Remember, one fee for the entire case.  All representatives must sign the same fee agreement.  The usual conditions apply.

If the fee agreement does not make an exception to the ceiling for remanded cases, the fee agreement continues to apply.  If the representative received $2,000 on the subsequent claim, the maximum that representative can get on the remanded case for agency work is $4,000.  The time to request administrative review of the fee ceiling -- that deadline is triggered by the notice of award or other payment document on the first favorable decision, the one on the subsequent application.  Absent that timely request for administrative review of the fee filed before the court remanded the case, the representative is stuck with the ceiling.  HALLEX I-1-2-14.

     b.  Tiering or Different Representatives

If the fee agreement provides for a fee without reference to a ceiling on remand, the conditions for approval of the fee agreement no longer apply.  If the claimant appoints different representatives or they all don't sign the same fee agreement, the conditions for approval of the fee agreement no longer apply.  These circumstances manifest for the first time after a favorable decision and cause a rescission of the approval of the fee agreement on the subsequent application.  HALLEX I-1-2-16. 

Whatever fee the representative received on the subsequent application, that authorization to charge and receive a fee is no more.  It is gone.  The representative now holds an unauthorized fee with all of the potential ramifications for holding an unauthorized fee.  Prudence suggests that moving that fee amount to a client trust account is the minimum required. 

All the representatives must file a fee petition with the decision maker that made the last favorable decision and order rescinding approval of the fee agreement on the subsequent application.  The representative must cover all the fees that he/she will seek to charge and receive. 

Example:

Claude Claimant goes through the process and receives a denial of review from the Appeals Council.  CC and Rachel Representative refer that case to Andy Attorney.  RR advises CC to file a new claim, which he does. 

While AA goes through the litigation process, RR presses the claim forward on the subsequent application.  CC receives a favorable decision and receives an award for $16,000 is past due benefits.  RR receives a fee agreement approval and a fee of $4,000 for her services.  AA wins the federal court action, obtaining a remand for another hearing.  The Appeals Council affirms the subsequent grant and remands the first claim to an administrative law judge to comply with the order of the court. 

On remand, AA represents CC.  The ALJ issues a fully favorable decision awarding CC a finding of disability for the earlier period and rescinding the fee agreement.  For the period not covered by the subsequent claim, SSA owes CC an additional $60,000 in PDB.  RR must now move the $4,000 to trust; she is no longer authorized to hold that fee.  RR and AA must file fee petitions to charge and receive a fee.  AA can also apply for fees in federal court, subject to the offset for any EAJA fee received.

If RR represented CC at the remand hearing without a tiered fee agreement and did not request administrative review after the favorable decision/determination on the subsequent claim, the most that RR could receive for that last hearing (and the first one that lead to the court action) is $2,000. 

It doesn't matter if AA had a tiered fee agreement, AA and RR are not in the same firm and the conditions to approve the fee agreements no longer apply.  The agency will only approve on fee agreement.  Two fee petitions will have to be filed. 

The lesson is that the subsequent application can cause fee issues later.  As we discussed earlier this month -- it is ethically required to advise the client of the advantages and disadvantages to the client of a new application.  Convincing the client not to file a subsequent claim because it makes AA's fees problematic is poor form.  Client's interests first and foremost.  We are fiduciaries and that is how fiduciaries act. 

The Fallacy of the Labor Value Matrix - Contingency Fees

I start with the assumption that a "lawyer's time and advice are his stock in trade."  Abraham Lincoln.  Lincoln identified two components that a lawyer sells:  time; and advice.  They represent two different commodities that do not share a correlation.  The problem comes in the value of time spent by a lawyer.

Time does not Determine Value

The value of services provided to a client does not depend on the amount of time that a lawyer spends on an endeavor.  Rather, the time that an endeavor requires may determine that the value conferred is not worth the expense.  Time does not correlate to value.

Time correlates to complexity or lack of skill of the practitioner.  The more complex a matter, the more time it will require.  That provides a direct correlation between complexity and time.  The more experienced and adept the lawyer, the less time the matter will require.  That provides an inverse correlation between skill and time.  Neither implicates the value conferred.

In Burlington v. Dague, the Court observed that it had held in the lodestar (reasonable time multiplied by a reasonable hourly rate) had "become the guiding light of our fee-shifting jurisprudence."  Dauge relied on Pennsylvania v. Delaware Valley Citizens' Council for Clean Air.  The Court did not hold that a lodestar represented the best measure for assessing the value conferred on the client.  Rather, the Court consistently holds that the lodestar is the beacon by which to shift fees from the loser to the winner in cases where the statute shifts fees.  The lodestar does not implicate value.

Value has Intrinsic Measurement

A client walks in with a contract proposal from a potential customer.  The contract has the potential of making the client $1,000.  The lawyer agrees to look over the contract at $300 per hour with an estimated completion time of two hours.  Is it worth the client's expense to hire the lawyer for $600 on the assumption that the deal could make $1,000 later?  Probably not.  The value of the services anticipated absorbs most of the value in expectation.

Same situation but the client anticipates making $1 million.  The lawyer agrees to look over the contract proposal at $300 per hour and anticipates that the project will take 33.3 hours of time.  The client assesses the $10,000 anticipated charges against the $1 million in anticipated net income.  Same type of services but a much higher estimated cost but the client sees the value in the cost of the services as 1% of the anticipated benefit.

In neither situation does the amount of time dictate the value to the client.  The value is in the deal, not in the ancillary cost of the services provided.  In the Dague and Delaware Valley scenarios, the client opts to retain the services of the lawyer, value be damned, because someone else is going to have to pay the bill.

The idea that labor determines or influences value has its roots in ancient civilization.  David Ricardo, Karl Marx, and others advocated that labor determines or influences value.  But the person digging a ditch for drainage and the person digging the ditch to extract gold from the hill have the same effort involved but the prospector provides more value and will receive more compensation -- if they find gold -- than the ditch digger providing drainage.  The property owner assesses value of the ditch and makes a decision to excavate based on the exchange value of the services versus the change in the property.  The prospector speculates on the gold market and the chance of finding more gold.

Time does not determine value.  Rather, value determines whether to invest time.  Scott Turow makes a powerful pitch that The Billable Hour Must Die.  The time equals value of services model encourages investing more time on cases or issues that don't warrant more time. 

Contingent Fee Rests on Value

Contingency fees are common in the United States.  They open the doors of the courthouse to those that cannot afford to pay for legal services on an hourly basis by exchanging part of the value of the claim for the lawyer's time and advice.  No reasonable lawyer would exchange time and advice for a claim that had little or no value (absent the market-distorting impact of fee shifting).  The presence of time and advice from lawyers depends on the presence of value.  The time and advice do not create the value but arise because of the value.

There are several arenas where the lawyer and the client may not take a joint interest in the value of the services provided.  ABA Model Rule 1.5(d) provides

(d) A lawyer shall not enter into an arrangement for, charge, or collect:

(1) any fee in a domestic relations matter, the payment or amount of which is contingent upon the securing of a divorce or upon the amount of alimony or support, or property settlement in lieu thereof; or

(2) a contingent fee for representing a defendant in a criminal case.

Outside of those identified areas of law, contingency fees are generally ethical under the ABA Model Rules. 

The contingency model tracks value and makes the lawyer a partner in the outcome of the claim.  The lawyer stops working on claims that have no perceivable merit because of the improbability of receiving value in the end.  Lawyers will take cases that have perceived value assessing the time expected to be invested against that eventual outcome.  Again, time does not create or transfer value but operates as a lever counseling for or against cases with high time expectations and low value.  Conversely, time counsels in favor of claims that have relatively low time expectations and relatively high value. 

What Happens When Allowance Rates Drop ... to the Public Fisc

Ask any ALJ or any representative that handles Social Security disability claims -- allowance rates have dropped for the good judges, the bad judges, and those in between.  According to the ALJ disposition data figures, the allowance rate of all dispositions in FY 2010  was 46%.  The allowance rate for all decisions was 67%.  The allowance rate for all dispositions in FY 2015 was 37%.  The allowance rate for all decision was 53%. 

The allowance rates dropped by 9% for all disposition and 14% of all ALJ decisions.  Good for the public fisc, right?  The answer is counter intuitive and  the dilution of allowance rates just hurts those that cannot fend for themselves -- the disabled.  But it also hurts the public fisc. 

President Reagan advocated and signed into law the Equal Access to Justice Act to to give common people the ability to fight unreasonable government action.   28 USC sec. 2412.  As long as the person or organization meets the financial ceiling test, that person or organization can shift part of the fees to the United States for acting unreasonably.  The rate is $125 per hour adjusted potentially for inflation. 

In FY 2010, SSA paid $19 million in EAJA fees for making or defending flawed decisions denying human beings disability benefits.  In FY 2015, SSA paid $38 million in EAJA fees.  What happens when the ALJ corps succumbs to political pressure to deny benefits?  The corps does it badly.  Does it benefit the public fisc?  Not in terms of EAJA fees, the government doubled its EAJA outlay in five short years.