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. 

Remand for Further Proceedings in Esparza v. Colvin

The little trinkets of gold filter down in unpublished opinions.  Esparza v. Colvin provides insight into the court's thinking and assumptions that will prove dangerous.

Esparza remands for further proceedings because the ALJ did not give good reasons for rejecting the claimant's testimony or the opinions of the treating physician.  Pretty pedestrian stuff, the issues that permeate Social Security cases on a daily basis.  The federal courts decide those issues every day.

But a battle wages on in the Ninth Circuit over the remand versus pay issue.  The agency lawyers and the court have yet to address the elephant in the room -- the statute clearly permits the courts to find that the claimant deserves to be paid without a remand for further proceedings.  42 USC sec. 405(g) and (i).  More on that another day.

Esparza remands for further proceedings as a useful exercise to further develop the record.  Fair enough, the court has discretion under the statute and the cases tip the hat in that direction without giving fair account to the statute.  The next sentence has a bomb waiting to explode:

If she deems it appropriate, the ALJ should reopen the hearing to receive additional evidence.  

Whoa Nellie.  We just spent six pages analyzing how the ALJ abused her discretion in weighing evidence and now the court wants to inject another round of unfettered discretion into the process.  Bad politics.

 The closed remand also violates agency policy.  When the ALJ makes a decision on remand by the court,

The ALJ will generally decide the remanded issues through the date of the new hearing  decision, or in title II cases involving an expired date last insured, through the date of last insured status.

HALLEX I-2-8-18.  How will the ALJ adjudicate through the date of the new decision without taking new evidence of recent education, recent work attempts/activity, and medical treatment.

When the ALJ makes an unfavorable decision, the Appeals Council will get around to the request for review in about 18 months.  The district court will take at least another year to decide the case at that leve.  And the court of appeals, Betty hold the door because that level of review will take two years.  We know that because the Ninth Circuit case number is 13-16522.  The "13" -- that means the appellant filed a notice of appeal in 2013.  The District Court case number is 2:12-cv-00733-SPL.  The "12" -- that means that the claimant for benefits filed a complaint in that court in 2012.

The case is likely five years stale from the date of original ALJ decision.  Discretion to receive additional evidence is misguided if not simply wrong.  It is only palatable if the ALJ will just award benefits to a claimant that probably applied for disability in 2008 (my guess).  Thomas Alvarez Esparza has endured a probable seven-year wait and won't get a decision from SSA until mid- to late-2016.