Turning Down the Heat on the "Remand for the Payment of Benefits"

I wrote about Dominguez v. Colvin last month.  The discussion focused on the intra-circuit battle over the Credit-as-True doctrine and the remand for the payment of benefits.  The Ninth Circuit issued an amended opinion in Dominguez.  The Court removed:

 "Only when all factual issues in the record have been resolved,
overwhelming evidence establishes that the claimant is disabled, and the government points to no evidence to the contrary, have we held a district court abused its discretion in failing to remand for benefits. See Garrison, 759 F.3d at 1022." 

That wasn't an accurate statement of the law and warranted removal from the decision.  The panel turned down the heat in the warring panels.

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. 

2. May a Representative Charge for Time After the Favorable Decision in Social Security Cases?

This is Part II of a series on fee petitions in Social Security cases.  We previously addressed fee petitions as including travel time.  To recap:

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.

May a Representative Charge for Time After the Favorable Decision?

A claimant generally contracts for the pursuit of benefits.  A period of disability or a finding of disability does not pay the bills or put food, clothing, or shelter in the possession of the claimant for benefits.  The regulatory factor – the purpose of the program – obligates a retained representative to complete the representation process to make sure that the claimant receives all of the benefits awarded by a favorable decision or determination of the agency.          

The model fee agreement language obligates the representative to secure past-due benefits to the claimant.[i]  The model fee agreement brings the interests of the claimant and the representative into harmony after the issuance of a favorable decision or determination.  Both the claimant and the representative have a pecuniary interest in maximizing the past due benefits payable to the claimant to increase the recovery of the claimant and the representative share of that recovery.

To preclude a representative from fulfilling the implied term of the model fee language would frustrate the reasonable expectations of the claimant and provide a financial disincentive to the representative to complete the work on the case.  While it may behoove a non-party to the agreement not to burden the agency with getting the math right, such a path would constitute an ethical breach of the fiduciary obligations of the retained representative and deprive the claimant of the benefit of the social contract – the disability benefits promised by the Act.

The constraints on the time and scope of the fee agreement are a matter of contract.  ABA Formal Opinion 93-379.  If the claimant and representative desired to terminate the work of the professional on the day that the agency issues a favorable decision or determination, then that critical term would need to be included in the fee agreement.  At least for lawyers, it would constitute an unethical act to detach representation only yards from the finish line. 

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[i] See https://www.ssa.gov/representation/model_fee_agreement_language.htm. 

1. Fee Petitions and Travel Time in Social Security Cases

As a practical matter, fee petitions submitted to the Social Security Administration do not bill for time, they bill for a specific result.  It constitutes a substitute for the expedited fee or fee agreement process.  The statute establishes the three criteria as (1) a written agreement filed with the Commissioner before a decision is made; (2) the fee is set at the lesser of $4,000 or 25% of the past due benefits;[i]and (3) the decision made is favorable to the claimant.  Failure of any one of the three conditions preclude the Social Security Administration from approving the fee agreement under the “expedited fee process.”  42 U.S.C. §§ 406(a)(2)(A); 1631(d)(2)(A). When that happens, the representative must file a fee petition including an itemization of time.   

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.  

May a Representative Charge for Travel Time? 

A question arises whether a representative may legitimately bill for time associated with travel or waiting at the hearing office for the agency to call the matter.  The agency has no published policy or statement about billing for travel time.  “A lawyer’s time and advice are his stock in trade.”  Abraham Lincoln. 

The American Bar Association discussed billing practices for fees, disbursement, and other expenses.  ABA Formal Opinion 93-379 (December 6, 1993).  The Formal Opinion posits examples of a lawyer appearing on three matters on the same day in the same courthouse; flying cross-country for a deposition on a matter and simultaneously working on a brief for another client; and using research conducted for one client to the benefit of representation of another client.  The Formal Opinion quotes the comment to Model Rule 1.2 to the effect that the scope of services may be limited by agreement.  The Formal Opinion then answers the three questions:  a lawyer appearing on three cases may not bill for all the time associated with travel and attendance to all three clients; a lawyer may not bill for travel and preparation of a motion;[ii] and use of recycled pleadings does not permit billing again for the same time spent in the past. 

If Abraham Lincoln made a correct statement about a lawyer’s time and the client has retained a representative to handle a claim that requires travel, then travel time is compensable.  The ABA Formal Opinion assumes without discussion that travel time is compensable just cautions against double billing for the time.  Ethics and Time-Based Billing cites to the ABA Formal Opinion for the proposition that a lawyer may only bill for the time actually spent.  Michael Downey, Ethics of Time-Based Billing, Law Practice Today (ABA Law Practice Management Section 2006).[iii] 

Some have suggested that the regulatory availability of reimbursement for expenses precludes billing for time.  See 20 C.F.R. § 404.999c.  That regulation discusses the reimbursable travel expenses.  Billing for time and billing for expenses constitute two separate and discrete billable items.  It would constitute an unreasonable exercise of billing discretion to charge the client for expenses which the Social Security Administration has promised to pay by binding regulation.  But expenses for gasoline and depreciation of a private vehicle certainly constitute a subject for reimbursement, the vehicle and its consumables do not constitute the lawyer’s stock in trade; his time constitutes his stock in trade.  Lincoln. 

A representative can and should charge for reasonable travel time associated with representation of a claimant.  Claimants have an interest in retaining the representative of his/her choice without regard to the agency's ability to constrain that choice by depriving that person of the liberty to compensate the representative for all the time associated with that representation.  No ethical limitation exists to preclude the claimant form making that choice or from the representative to request compensation for the time expended. 

This takes on greater importance where the claimant and the representative never contemplate compensation for any particular allotment of time.  The claimant contracts with the representative to compensate out of a specific percentage of past due benefits.  While the amount of time expended constitutes a regulatory factor, that regulatory factor is never dispositive of the eight factors listed.[iv] 

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[i] Effective February 1, 2002, the Commissioner increased the fee cap to $5,300.  Effective June 22, 2009, the Commissioner increased the fee cap to $6,000.  See GN 03940.003.  ODAR sometimes suggests that it is not bound by POMS.  It is a factual resource regardless of the wisdom of advocating an agency publication has the net effect of deluding the public about what is and is not agency policy. 

[ii] The Formal Opinion appears to countenance watching a movie on the airplane, a purely personal endeavor.  This author submits that personal departure precludes billing for that time because the lawyer could review and re-review the file and other papers related to the client’s interests during a plane flight. 

[iii] Available at http://apps.americanbar.org/lpm/lpt/articles/mgt01064.html. 

[iv]  They are: (1) the purpose of the program; (2) services provided; (3) complexity of the case; (4) level of skill and competence required in providing the services;  (5) amount of time spent on the case; (6) results the representative achieved; (7) level(s) in the administrative process; and, (8) amount of the fee requested.  20 C.F.R. §§ 404.1725(b)(1) and 416.1525(b)(1).   HALLEX I-1-2-57.

Dominguez v. Colvin -- the CAT and Award of Benefits

Ninth Circuit decided Dominguez v. Colvin on December 15, 2015.  This is the latest development in the Credit-as-True (CAT) jurisprudence in the Social Security cases decided within the circuit.  The CAT has fermented within the circuit since at least 1988.

In Varney v. Secretary of HHS, the Court clarified the scope of judicial power under the Social Security Act as including the power to credit the testimony is true and to remand for the payment of benefits.  Varney establishes a three-part test for a remand for the payment of benefits.  First, the record was fully developed and further administrative proceedings would serve no useful purpose.  Second, the ALJ failed to provide legally sufficient reasons for rejecting the evidence, whether a medical opinion or the claimant's testimony.  Third, if the improperly discredited evidence were credited as true, the ALJ would be acquired to find the claimant disabled on remand, then the court would reverse an award benefits.  Judge Stephen Reinhardt is the author of Varney.

Judge Reinhardt turned up the heat in Garrison v. Colvin, decided in July 2014.  Garrison made the three-part test sound mandatory with one caveat.  Garrison allows for the remand if the record as a whole creates serious doubt that the claimant does in fact suffer from a disability.

Burrell v. Colvin pulled back on the reins.  Burrell rejected the government's position that the court can never credit evidence as true and remand for the payment of benefits.  Burrell rejected the claimant's position that Garrison established a requirement to remand for the award of benefits.  In a decision authored by Judge Susan Graber, the court held that even if the facts met the Garrison elements, the court retains the flexibility in determining the appropriate remedy.  Burrell found serious doubt and remanded.  Judge Mary Schroeder dissented and would have applied Garrison to award benefits.

Judge Sandra Ikuta entered the fray in Treichler v. Comm'r of SSA.  Treichler resurrected the discretionary component of the CAT, pointed to the review of a District Court decision to remand rather than award benefits as falling under the abuse of discretion standard, and other cases describing the power to award benefits as used in rare circumstances.  Treichler stands for the proposition that in assessing the exercise of the power to award benefits as opposed to a remand for further proceedings, that the court reviews the record as a whole including evidence and theories never espoused by the ALJ as a basis for rejecting the claim for disability benefits.  Judge Wallace Tashima dissented and would have applied Garrison to award benefits.

Judge Ikuta uses Dominguez as the platform to swing the pendulum back to the other side.  While Garrison made the credit-as-true doctrine as appearing mandatory in many circumstances, Dominguez makes the CAT appear exceedingly rare.  Dominguez holds that the District Court must find that administrative proceedings would serve no useful purpose.

And therein lies the rub.  The no useful purpose element of the CAT requires a tempered consideration of not only the fairness of additional administrative proceedings to the claimant but also the preservation of scarce resources.  Where the result is obvious, the court should reverse an award benefits.  It isn't so much that additional administrative proceedings would serve no useful purpose, but more that the utility gained from a remand are unlikely to provide a basis for a different result other than the payment of benefits.

The representatives that handle claims will complain among themselves about vindictive ALJs that will change factual findings on remand to avoid the payment of benefits. That arises because the ALJ corps sees its function not as adjudicating the eligibility for benefits and whether a claimant meets specific legal requirements to obtain relief promised by the Social Security Act, but instead to determine whether an individual claimant deserves to receive disability benefits.  Some ALJs look for legal and proper bases to award benefits.  Some ALJs look for legal and proper bases to deny benefits.  That is why we have a decisional scatter where some ALJs pay 85% of the claims and other ALJs pay 15% of the claims.  This creates a nightmare for claimants and their representatives.  We can accurately predict the results in only 30% of all claims.  We know that in 15% of the cases, no ALJ will pay the case; we know that in 15% of the cases, every ALJ will pay the case.  That leaves 70% of the cases in the middle where no one can tell whether a claimant will receive a favorable or unfavorable decision until we know one the irrelevant fact — the identity of the ALJ.  That lottery-affect represents a horrible way to dispense administrative justice in the largest adjudicative body in the world.

The courts play an important role in evening out the dispensation of administrative justice.  When the court pays benefits on a fact pattern, the soft precedential effect of that decision permeates through the system and creates a floor to push up the bottom towards the middle.  When the court denies relief on a fact pattern, that soft precedential effect pushes the top down towards the middle.  Political pressure and bad press on disability claimants in general serve to push all of the decision-makers down, driving up the incidence of denied benefits for people who truly cannot work and to also meet the strict legal requirements of the Social Security Act.  When the pendulum swings from Varney to Garrison to Burrell to Treichler and now to Dominguez, the lack of stability and percolation of the issues within the circuit does something that the law should never do — add a layer of and certainty and doubt.

The panels in Burrell and Treichler asked the parties to comment on whether the Ninth Circuit should hear the CAT en banc with an 11 judge panel.  The government declined the invitation, probably because SSA got what it wanted in the form of a remand to preserve its jurisdictional turf to make decisions.  The claimants in Burrell and Treichler declined, satisfied that they got some relief.  In the near future, the court will need to take the CAT en banc and resolve the tension of the Varney legacy and to provide some formulaic consistency to the question of when a district court should reverse an award benefits and when the district court should remand for further proceedings.

JMHO, YMMV.

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. 

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.