Harrington v. Berryhill

• Citation: 906 F.3d 561
• Decision Date: 10 October 2018
• Docket Number: No. 17-3194,No. 17-3179,17-3179
• Parties: Staci HARRINGTON, Plaintiff-Appellant, v. Nancy A. BERRYHILL, Acting Commissioner of Social Security, Defendant-Appellee, Andrew Banks, Plaintiff-Appellant, v. Nancy A. Berryhill, Acting Commissioner of Social Security, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

906 F.3d 561

Staci HARRINGTON, Plaintiff-Appellant,

v.Nancy A. BERRYHILL, Acting Commissioner of Social Security, Defendant-Appellee,Andrew Banks, Plaintiff-Appellant,

v.Nancy A. Berryhill, Acting Commissioner of Social Security, Defendant-Appellee.

No. 17-3179

No. 17-3194

United States Court of Appeals, Seventh Circuit.

Argued September 5, 2018

Decided October 10, 2018

Mahesha P. Subbaraman, Attorney, Subbaraman PLLC, Minneapolis, MN, Adriana Maria de la Torre, Attorney, Carina Maria de la Torre, Attorney, De La Torre Law Office, LLC, Indianapolis, IN, for Plaintiff-Appellant.

Dennis Fan, Attorney, Charles W. Scarborough, Attorney, Department of Justice, Civil Division, Appellate Staff, Washington, DC, Bob Wood, Attorney, Office of the United States Attorney, Indianapolis, IN, for Defendant-Appellee.

Michael Jason Scoggins, Attorney, Social Security Administration, Office of the General Counsel, Region V, Chicago, IL, for Defendant-Appellee (Case No. 17-3179).

Jason Scoggins, Social Security Administration, Office of the General Counsel, Region V, Chicago, IL, for Defendant-Appellee (Case No. 17-3194).

Before Kanne, Sykes, and St. Eve, Circuit Judges.

Kanne, Circuit Judge.

The Commissioner of Social Security separately denied benefits to Staci Harrington and Andrew Banks. Both individuals sought judicial review of those decisions. To that end, each separately engaged the services of The de la Torre Law Office LLC, which agreed to represent them in federal court. In exchange, the two plaintiffs assigned to counsel any legal fees to which they might be entitled under the Equal Access to Justice Act ("EAJA"), 28 U.S.C. § 2412(d). After successfully prosecuting their cases, the plaintiffs obtained the statutory fee awards.

But that was not the end of the story. The Treasury Department, which had the responsibility of processing the payments, determined that both litigants had outstanding debts to various government entities. Rather than paying out the fees directly, it reduced the litigants’ debts by equal amounts under the Treasury Offset Program, 31 C.F.R. § 285. The attorneys received nothing. In response, the parties brought these appeals, which we have consolidated because they pose the same legal questions. See Harrington v. Berryhill , 876 F.3d 889 (7th Cir. 2017). We believe it would be imprudent to entertain new administrative claims that are only minimally related to the judgments, so we decline to exercise ancillary jurisdiction over the plaintiffs’ collateral challenges to the regulations and instead affirm the district courts’ judgments.

I. BACKGROUND

Both Harrington and Banks are indigent petitioners who filed claims for Social Security Disability Insurance Benefits and Supplemental Security Income in 2014. In each case, the Commissioner found that the petitioner was not disabled and was therefore not entitled to benefits. Both separately sought judicial review of those determinations in district court, and both engaged The de la Torre Law Office LLC to assist with those suits. Because the plaintiffs had limited means, the attorneys conditioned their representation on their clients’ agreement to assign any potential award of attorney fees to the law firm under Indiana law. Both plaintiffs were victorious, and the district courts remanded the cases to the Commissioner for reconsideration.

As in many cases involving Social Security, the parties then successfully petitioned the district courts to award attorney fees under EAJA; Harrington received $11,851.04, and Banks received $11,001. Although the plaintiffs requested that the government make its payments directly to the attorneys rather than to their clients, neither district court ordered the government to do so.

Pursuant to the awards, the Social Security Administration ("SSA") submitted payment vouchers to Treasury under 31 U.S.C. § 3325(a). Rather than issuing a direct payment to the "prevailing part[ies]" as envisioned by EAJA, however, § 3325(a) permits Treasury to execute "payment intercepts or offsets" under a provision of the Debt Collection Improvement Act of 1996 ("DCIA"), 31 U.S.C. § 3716. As it processed the payment vouchers, Treasury determined that Harrington had an outstanding debt to the Department of Education that exceeded the sum of her attorney fees. Likewise, Banks was delinquent on child support obligations administrated by the prosecutor’s office in Allen County, Indiana, a debt monitored and administered at the federal level by the Department of Health and Human Services ("HHS"). Under its regulations issued pursuant to the DCIA, Treasury applied an administrative offset to both awards of attorney fees. See 31 C.F.R. §§ 285.1, 285.5. Treasury deducted amounts from SSA appropriations and transferred those sums to Education and HHS accounts. In turn, those departments reduced the plaintiffs’ outstanding debts by equal amounts, effectively "paying" the litigants as required by the fee awards.

Harrington subsequently filed a motion under Fed. R. Civ. P. 69. That motion pointed to the assignment of fees under Indiana law and requested that the district court order the government to rescind the administrative offset and pay the full amount of the fee award directly to counsel. The district court, citing both Astrue v. Ratliff , 560 U.S. 586, 130 S.Ct. 2521, 177 L.Ed.2d 91 (2010) and our decision in Matthews-Sheets v. Astrue , 653 F.3d 560 (7th Cir. 2011), overruled on other grounds by Sprinkle v. Colvin , 777 F.3d 421 (7th Cir. 2015), denied that motion and upheld the government’s action. Banks made no such motion.

Both plaintiffs appealed their cases. They now ask us to do what the district courts would not do: compel the government to reverse Treasury’s administrative offsets, reinstate their prior debts, and pay their lawyers.

II. ANALYSIS

We review an order to award attorney fees under EAJA for abuse of discretion. See Sprinkle , 777 F.3d at 424. We review all questions of law involved in the interpretation of EAJA de novo . Id.

The shadow of Ratliff looms over this appeal. In that case, the Court held that the plain text of EAJA requires courts to award fees to the "prevailing litigant," not to the litigant’s attorney. 560 U.S. at 596, 130 S.Ct. 2521. The award is "thus subject to offset where the litigant has relevant federal debts." Id. In essence, the statute "controls what the losing defendant must pay, not what the prevailing plaintiff must pay his lawyer." Id. at 598, 130 S.Ct. 2521 (quoting Venegas v. Mitchell , 495 U.S. 82, 90, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990) ). Instead, the Court observed that it is usually "nonstatutory (contractual and other assignment-based) rights that typically confer upon the attorney the entitlement to payment," and that those contractual arrangements would be unnecessary if EAJA required a direct payment to attorneys. 560 U.S. at 598, 130 S.Ct. 2521.

That language raises the question of whether an assignment or other contractual claim to the fees might change the calculus. The plaintiff in Ratliff had no such assignment in hand, so the Court did not give the possibility any further thought. In dicta, we observed the following year in Matthews-Sheets that Ratliff "suggests that if there is an assignment, the only ground for the district court’s insisting on making the award to the plaintiff is that the plaintiff has debts that may be prior to what she owes her lawyer." 653 F.3d at 565. Again, however, we did not definitively answer the question.

The plaintiffs pose it to us directly today. The attorneys in these cases have assignments in hand, which they contend give them priority over any government claim under Indiana law. In addition, they challenge the offsets on the basis of several other theories. First, they contend that even if their assignments do not enable them to take the awards free and clear of the government’s claims, their state law attorney’s liens do. Second, they attempt to distinguish Ratliff by attacking the offsets on grounds other than EAJA: they argue that Treasury lacked the statutory authority to promulgate the offset regulations; that the offsets violate the equitable Rule of Mutuality; that they violate the Takings Clause of the Fifth Amendment; that they violate the Judgment Setoff Act of 1875; and finally that the offsets violate Article III of the Constitution as an improper executive intrusion into the judicial power to issue judgments.¹

Because Ratliff did not consider any of these questions, they contend, it does not control here, and we must give the plaintiffs a fresh opportunity to challenge the administrative offsets of attorney fees.

A. The district courts properly awarded attorney fees

Before we reach any of those issues, we must first assess the threshold question of whether the district courts properly awarded fees under EAJA. The statute directs that courts "shall award to a prevailing party other than the United States fees and other expenses ... incurred by that party in any civil action ..., including proceedings for judicial review of agency action ... unless the court finds that the position of the United States was substantially justified." § 2412(d)(1)(A). Both district courts granted the plaintiffs’ motions for fees upon request. See Harrington v. Berryhill , No. 2:16-cv-00129-JMS-MJD, 2017 WL 2502456 (S.D. Ind. Jun. 9, 2017) ; see also Banks v.Comm’r of Soc. Sec. , No. 1:15-cv-00400-SLC, 2017 WL 3634300 (N.D. Ind. Aug. 23, 2017). No party has brought a challenge to the calculation of those fees on appeal, and we see no reason to disturb the findings of the district courts.

Instead, the plaintiffs contend that the district courts erred by failing to direct the government to render payment directly to the attorneys, as both parties requested in their EAJA petitions and Harrington reiterated in a subsequent Rule 69 motion requesting that the district court order "the Commissioner to pay any EAJA award directly to Plaintiff’s counsel" and "[d]eclare...