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).