In re Handel

• Decision Date: 18 February 2009
• Docket Number: No. 08-2137.,08-2137.
• Citation: 570 F.3d 140
• Parties: In re Melinda HANDEL, Debtor. Binder & Binder, P.C., Appellant v. Melinda Handel, and Jo Anne Barnhart, Commissioner of the Social Security Administration, Appellees.
• Court: U.S. Court of Appeals — Third Circuit

570 F.3d 140

In re Melinda HANDEL, Debtor Binder & Binder, P.C., Appellant v. Melinda Handel, and Jo Anne Barnhart, Commissioner of the Social Security Administration, Appellees.

No. 08-2137.

United States Court of Appeals, Third Circuit.

Submitted under Third Circuit L.A.R. 34.1(a) January 13, 2009.

Filed: February 18, 2009.

Jeffrey Herzberg, Zinker & Herzberg, Smithtown, NY, for Appellants.

Anthony J. LaBruna, Office of United States Attorney, Newark, NJ, for Appellee.

Comm'r of Social Security, Allen B. Gillman, Edison, NJ, for Appellee, Melinda Handel.

Before SLOVITER and BARRY, Circuit Judges, and POLLAK, District Judge.^*

OPINION OF THE COURT

POLLAK, District Judge.

Appellant Binder & Binder, P.C. (Binder), appeals from a March 28, 2008 order of the United States District Court for the District of New Jersey affirming earlier grants of summary judgment from the United States Bankruptcy Court, District of New Jersey, in favor of the appellees, Melinda Handel and the Commissioner of the Social Security Administration. Binder sought payment, from Handel herself or from the Social Security Administration, of an outstanding debt for legal fees owed by Handel. We have jurisdiction pursuant to 28 U.S.C. §§ 158(d), 1291 and exercise the same standard of review as the District Court when it reviewed the original appeal from the Bankruptcy Court. In re Woskob, 305 F.3d 177, 181 (3d Cir.2002). Thus, we review the Bankruptcy Court's findings of fact for clear error and exercise plenary review over the Bankruptcy Court's legal determinations. Id.

I.

In September 1996, Melinda Handel, a resident of New Jersey, became disabled and sought benefits from the Social Security Administration. In January 1998, she engaged the New York law firm of Binder & Binder to represent her in seeking benefits. Handel signed a retainer agreement stating, inter alia, that if "the litigation is successful at any stage of the administrative process, the CLAIMANT will pay [attorney's fees of] 25% of the past due benefits or $1,000, whichever is greater." J. Appx. at 27.

On March 6, 2002, the Social Security Administration issued a notice of award to Handel, granting her disability benefits from March 1997. Her past due benefits from March 1997 through November 2001 were calculated at $68,150. The notice of award stated the following (J. Appx. at 31):

We have approved the fee agreement between you and your lawyer. Your past-due benefits are $68,150.00 for March 1997 through November 2001. Under the fee agreement, the lawyer cannot charge you more than $4,000.00 for his or her work.... Because of the law, we usually withhold 25 percent of the total past-due benefits or the maximum payable under the fee agreement to pay an approved lawyer's fee. We withheld $4,000.00 from the past due benefits to pay the lawyer.

Handel and Binder each had fifteen business days from the date of receipt of the award notice to contest the fee as too high or too low. At some point (the record does not reveal exactly when), the Social Security Administration issued a fee payment of $4,000 to Binder and issued the remaining past-due benefits to Handel.

Binder filed a challenge to the fee determination as too low. The record contains no evidence regarding whether Binder objected within the fifteen-day deadline. In its Reply Brief on this appeal, Binder has included an affirmation by attorney Charles Binder contending that the firm objected in a timely fashion.¹ On September 9, 2002, an administrative law judge increased the fee to $9,908.40. On October 2, 2002, Binder contested this determination. In April 2003, a different administrative law judge approved a fee amount of $14,000 for Binder. The record does not establish what steps, if any, Binder then took to obtain the $10,000 difference in fees from Handel or from the Social Security Administration.

On September 2, 2003, Handel filed a voluntary petition for bankruptcy under Chapter 7 of the Bankruptcy Code. The petition listed Binder as "an unsecured, nonpriority creditor holding a claim in the amount of $10,000." J. Appx. at 102. The Bankruptcy Court issued notices to creditors on Sept. 6 for a meeting on October 2, 2003. It is unclear whether Binder attended the meeting or pursued its listed debt through the regular bankruptcy process. Appellees contend that Binder did neither. On October 28, 2003, the bankruptcy trustee reported that Handel had no property available to satisfy her outstanding debts; the trustee recommended discharge of all remaining obligations. The Bankruptcy Court issued an order discharging Handel's debts on December 5, 2003.

On November 21, 2003, Binder filed a complaint in the Bankruptcy Court against Handel and the Commissioner of the Social Security Administration. Binder sought a determination that Handel's outstanding $10,000 debt to the firm was non-dischargeable. Binder further sought a declaratory judgment that (1) it retained rights to its full fee against both Handel and the Social Security Administration and (2) the Social Security Administration's "POMS" manual provisions regarding attorney's fees and claimant bankruptcy are void. The Bankruptcy Court held a hearing on February 23, 2004; following the hearing, the parties entered discovery, then filed cross-motions for summary judgment.

On October 4, 2005, the Bankruptcy Court issued an opinion and order concerning Binder's claim that the law firm retained an enforceable attorney's charging lien against Handel's benefits. The Bankruptcy Court ruled that Binder did not have an enforceable lien because 42 U.S.C. § 407(a) expressly bars "execution, levy, attachment, garnishment, or other legal process" against Social Security payments. Then on December 2, 2005, the Bankruptcy Court ruled that Binder had no "federal common law property right/lien" against Handel's benefits that could be enforced against the Social Security Administration.

Binder appealed the October and December 2005 summary judgment decisions to the District Court. On March 28, 2008, following some intervening process not at issue here, the District Court affirmed both decisions of the Bankruptcy Court.

II.

Initially, we consider the Commissioner's contention that Binder's appeal should be dismissed. The Commissioner argues that Binder failed to object to the March 6, 2002 award within the allotted fifteen business days, and hence had no entitlement to pursue the matter further. The Commissioner's contention was not presented to the Bankruptcy Court or the District Court. It is raised here for the first time. To the argument that the time to raise this issue has passed, the Commissioner responds that the issue is one of standing to challenge a payment from the Commissioner, a jurisdictional question that can be raised at any time.

The award notice found in the record, which allocated $4,000 of the past-due benefits to Binder for attorney's fees, gave claimant's counsel fifteen business days to object to the fee determination. J. Appx. at 29-34. The record of the Bankruptcy Court proceedings does not reveal whether Binder objected within that period; in its Reply Brief on this appeal, the firm has included an affirmation that it made a timely objection of some kind to the fee determination.²

Despite appellees' creative pleading, this is an allegation of procedural default, not an issue of standing. The Commissioner argues that Binder should be barred from pursuit of the increased fee because it failed to file objections by the deadline set by the Social Security Administration. The Commissioner, however, should have raised this argument before the Bankruptcy Court. "It is well established that failure to raise an issue in the [court of original jurisdiction] constitutes a waiver of the argument." Brenner v. Local 514, United Brotherhood of Carpenters & Joiners of Am., 927 F.2d 1283, 1298 (3d Cir.1991). The issue of whether Binder failed to timely object is waived.

III.

Binder argues that "SSA remains liable to pay the amount of the awarded attorney's fees" determined pursuant to 42 U.S.C. § 406(a) and that sovereign immunity does not protect the Social Security Administration from Binder's direct claim for the increased fee. The Bankruptcy Court determined that Binder held no kind of enforceable right against the Social Security Administration, and the District Court affirmed.

Section 206 of the Social Security Act ("the Act"), 42 U.S.C. § 406, governs the representation of Social Security claimants and dictates how fees for representation will be assessed and paid. The provision applicable to this controversy is as follows:

... if the claimant is determined to be entitled to past-due benefits under this subchapter and the person representing the claimant is an attorney, the Commissioner of Social Security shall, notwithstanding section 405(i) of this title, certify for payment out of such past-due benefits ... to such attorney an amount equal to so much of the maximum fee as does not exceed 25 percent of such past-due benefits ...

42 U.S.C. § 406(a)(4). The attorney's fees provisions of § 406 were developed, in large measure, to eliminate conflicts over fees between claimants and counsel by creating a statutory mechanism for payment as well as a statutory cap on fees. See, e.g., Pappas v. Bowen, 863 F.2d 227, 231 (2d Cir.1988); Rodriguez v. Sec'y of HHS, 856 F.2d 338, 340 (1st Cir.1988); Motley v. Heckler, 800 F.2d 1253, 1255 (4th Cir. 1986).

Under the doctrine of sovereign immunity, the United States has no liability for the payment of attorney's fees absent express waiver. Ruckelshaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 77 L.Ed.2d 938 (1983). "[42 U.S.C. § 406] is not a waiver of sovereign immunity, but rather a statutory interference with the attorney client contractual relationship which would otherwise be determined by the marketplace for legal services." Coup v. Heckler, 834 F.2d 313, 324 (3d Cir.1987), ...