Cotter v. Bowen

• Decision Date: 12 July 1989
• Docket Number: No. 88-5338,88-5338
• Citation: 879 F.2d 359
• Parties: , Unempl.Ins.Rep. CCH 14839A Tobias J. COTTER, Appellant, v. Otis R. BOWEN, Secretary of Health and Human Services of the United States, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 359

879 F.2d 359

26 Soc.Sec.Rep.Ser. 226, Unempl.Ins.Rep. CCH 14839A

Tobias J. COTTER, Appellant, v. Otis R. BOWEN, Secretary of Health and Human Services of the United States, Appellee.

No. 88-5338.

United States Court of Appeals,

Eighth Circuit.

Submitted March 14, 1989.

Decided July 12, 1989.

George H. Smith, Minneapolis, Minn., for appellant.

Esther R. Scherb, Baltimore, Md., for appellee.

Before WOLLMAN and MAGILL, Circuit Judges, and LARSON, ^* Senior District Judge.

LARSON, Senior District Judge.

The sole issue presented in this appeal is whether the district court abused its discretion in refusing to apply a multiplier to "enhance" an attorney's fee award under section 206(b)(1) of the Social Security Act. See 42 U.S.C. Sec. 406(b)(1).

Section 406 is a parens patriae limit on the amount of fees an attorney may receive from a disability claimant, usually an individual of limited resources, who suffers the additional handicap of a severe physical or mental disability. The statute provides:

Whenever a court renders a judgment favorable to a claimant under this subchapter 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, and the Secretary may, notwithstanding the provisions of section 405(i) of this title, certify the amount of such fee for payment to such attorney out of, and not in addition to, the amount of such past-due benefits. In case of any such judgment, no other fee may be payable or certified for payment for such representation except as provided in this paragraph.

Enacted in part in response to "inordinately large" contingency fee awards, Congress also sought through section 406 to ensure representation of Social Security disability claimants by providing for payment of a "reasonable fee" directly from past due benefits. See Straw v. Bowen, 866 F.2d 1167, 1169 (9th Cir.1989); Rodriquez v. Bowen, 865 F.2d 739, 744 (6th Cir.1989) (en banc); Coup v. Heckler, 834 F.2d 313, 320-21 (3d Cir.1987).

Unlike the Equal Access to Justice Act, which represents a waiver of the normal principles of sovereign immunity, see Wells v. Bowen, 855 F.2d 37, 42 (2d Cir.1988), or fee-shifting statutes such as section 1988 which require losing defendants to pay their opponents' attorney's fees, see Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 107 S.Ct. 3078, 3081, 3086-87, 97 L.Ed.2d 585 (1987), section 406 is "a statutory interference with the attorney client contractual relationship, which would otherwise be determined by the marketplace for legal services." Wells, 855 F.2d at 42 (citation omitted). See Rodriquez, 865 F.2d at 743-44. Thus, while a contingent fee agreement is not a "cap" on the reasonable fee award under statutes such as section 1988, see Blanchard v. Bergeron, --- U.S. ----, 109 S.Ct. 939, 946, 103 L.Ed.2d 67 (1989), section 406 specifically provides for a maximum 25% contingency fee. See 42 U.S.C. Sec. 406(b)(1).

Plaintiff's counsel in this case requests the Court to award the 25% maximum fee, or at least to enhance the district court's "lodestar" fee award based upon the contingency fee arrangement approved by plaintiff, the delay in obtaining a fee award, and the favorable results achieved on behalf of the plaintiff. In reviewing the district court's fee award, we consider whether "the district court's findings were clearly erroneous as to the factual basis for the award, or whether it committed abuse as to the discretional margin involved in its allowance." Jorstad v. IDS Realty Trust, 643 F.2d 1305, 1312 (8th Cir.1981). See Pierce v. Underwood, --- U.S. ----, 108 S.Ct. 2541, 2553, 101 L.Ed.2d 490 (1988); Blum v. Stenson, 465 U.S. 886, 896, 104 S.Ct. 1541, 1547, 79 L.Ed.2d 891 (1984). The district court is often in the best position to evaluate counsel's services and fee request, particularly when the court has had the opportunity to observe first-hand counsel's representation on the substantive aspects of the disability claim. See generally Blum, 465 U.S. at 899, 104 S.Ct. at 1549; Gilbert v. City of Little Rock, 867 F.2d 1063, 1066 (8th Cir.1989).

I.

We begin our review with a summary of the relevant facts. Plaintiff Cotter initially filed for Social Security disability benefits on November 30, 1977, alleging he became disabled in March, 1975. His claim was denied by an Administrative Law Judge (ALJ) in March of 1979, and plaintiff, who was not represented by counsel at the time, did not appeal this decision.

Plaintiff filed a second application for benefits on August 29, 1980, alleging he became disabled as of February, 1976. After an ALJ again issued a decision denying benefits, plaintiff retained counsel in July, 1982, and executed a retainer agreement providing for direct payment "on the basis of recovery" of "all amounts as certified by the Secretary as and for attorney fees, or twenty-five (25%) percent of the net award, whichever is smaller."

After numerous appeals and remands, plaintiff's counsel succeeded in obtaining a ruling from the Appeals Council that plaintiff was entitled to disability benefits commencing in February, 1976. In reaching its decision, the Appeals Council found good cause for reopening the first ALJ's decision in March, 1979, and adopted the most recent ALJ's recommendation that the claimant be found totally disabled as of February, 1976. Plaintiff was awarded past due benefits of $47,499.30, 25% or $11,874.83 of which was withheld by the Secretary pending a determination of the appropriate attorney fee award.

On January 20, 1988, counsel petitioned the Secretary for an award of fees of $2,300 for 23 hours of work performed before the agency. See 42 U.S.C. Sec. 406(a). ¹ The Secretary approved this request on February 25, 1988, leaving $9,574.83 available for a possible award of attorney's fees for court-related services. On January 27, 1988, counsel petitioned the court for attorney's fees under both the Equal Access to Justice Act, 28 U.S.C. Sec. 2412(d)(1)(A), and the Social Security Act, 42 U.S.C. Sec. 406(b)(1). Counsel requested $4,020 as compensation for 33.5 hours under the Equal Access to Justice Act (30 hours of court-related time plus 3.5 hours for preparing the fee application at an hourly rate of $120), and $9,574.83 as compensation under the Social Security Act (reflecting a total fee award of 25% of past due benefits).

The matter was initially referred to a Magistrate, who awarded $2,572.50 under the Equal Access to Justice Act (33.5 hours of court-related services at $75 per hour, plus $60 for the filing fee). ² The Magistrate also ruled counsel was entitled to compensation under the Social Security Act for 30 hours of court-related services at a reasonable hourly rate of $100 per hour, or $3,000. The Magistrate "enhanced" this award by a multiplier of 1.5 to $4,500 in view of the "unusual delay and contingent nature of plaintiff's claim."

The Secretary objected to the use of a multiplier, and the district court, ³ after a de novo review of the record, held that a reasonable fee award in this case would be $3,600, for 30 hours of court-related services at an hourly rate of $120 per hour. ⁴ The district court declined any further enhancement, and plaintiff has appealed.

II.

Conceding that the court is not bound by the contingency fee agreement between the plaintiff and his attorney in this case, see, e.g., Rohrich v. Bowen, 796 F.2d 1030, 1031 (8th Cir.1986); Brissette v. Heckler, 784 F.2d 864, 866 (8th Cir.1986), plaintiff's counsel nonetheless argues that in view of the results achieved, the delay in receiving payment of fees, and the client's approval of a 25% contingency fee, an award of the maximum statutory amount is justified.

The Secretary, on the other hand, argues that in view of the Supreme Court's decision in Pennsylvania v. Delaware Valley Citizens' Counsel for Clean Air (Delaware Valley II), 483 U.S. 711, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987), contingency enhancements may only be given in very limited circumstances, that is, where the claimant otherwise "would have faced substantial difficulties in finding counsel in the local or other relevant market." Id. 107 S.Ct. at 3091 (J. O'Connor, concurring in part and concurring in judgment). See Gilbert v. City of Little Rock, 867 F.2d 1063, 1067-68 (8th Cir.1989); Catlett v. Missouri Highway & Transportation Comm'n, 828 F.2d 1260, 1271 (8th Cir.1987), cert. denied, --- U.S. ----, 108 S.Ct. 1574, 99 L.Ed.2d 889 (1988). The Secretary also argues that delay is effectively accounted for in the reasonable hourly rate, and that the quality of services rendered was not superior to the quality one reasonably should expect in light of the hourly rates awarded, nor was the success "exceptional." See Delaware Valley II, 107 S.Ct. at 3081-82; Pennsylvania v. Delaware Valley Citizens' Council for Clean Air (Delaware Valley I), 478 U.S. 546, 565-68, 106 S.Ct. 3088, 3098-3100, 92 L.Ed.2d 439 (1986); Blum v. Stenson, 465 U.S. 886, 899-900, 104 S.Ct. 1541, 1549-1550, 79 L.Ed.2d 891 (1984).

We consider the "contingency" factor first. Members of the Supreme Court have alternately described this factor as the risk of losing rather than winning in a particular case, based upon how unsettled the applicable law is and how likely it is that the facts could be decided against the complainant, Delaware Valley II, 107 S.Ct. at 3081 (plurality), and the risk of nonpayment associated with contingent employment as a class, as opposed to non-contingent employment. Id. 107 S.Ct. at 3097 (J. Blackmun, dissenting). Justice O'Connor's concurring opinion in Delaware Valley II, which forms the majority's decision on the standard to be applied under section 304(d) of the Clean Air Act, rejects enhancement based upon the risks of a...