Kay v. Apfel, 98-9233

• Decision Date: 25 May 1999
• Docket Number: No. 98-9233,98-9233
• Citation: 176 F.3d 1322
• Parties: , Unempl.Ins.Rep. (CCH) P 16196B Marvin KAY, Plaintiff-Appellant, v. Kenneth S. APFEL, Commissioner of Social Security, Defendant-Appellee. Non-Argument Calendar.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1322

176 F.3d 1322

61 Soc.Sec.Rep.Ser. 206, Unempl.Ins.Rep. (CCH) P 16196B

Marvin KAY, Plaintiff-Appellant, v. Kenneth S. APFEL, Commissioner of Social Security, Defendant-Appellee.

No. 98-9233

Non-Argument Calendar.

United States Court of Appeals Eleventh Circuit.

May 25, 1999.

Dale L. Buchanan, Chattanooga, TN, for Plaintiff-Appellant.

Douglas Cohen, David Wright, Assistant U.S. Attorney, Baltimore, MD, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before BIRCH, CARNES and BARKETT, Circuit Judges.

CARNES, Circuit Judge:

Dale Buchanan, an attorney, represented plaintiff Marvin Kay on his claim for Social Security benefits. As a result of Buchanan's efforts, Kay was awarded over $52,000 in past-due benefits. Buchanan moved for attorney's fees, pursuant to 42 U.S.C. § 406(b). The district court, applying the "lodestar" method, awarded Buchanan $3,990.13 in attorney's fees. On appeal, we join the majority of circuits in holding that reasonable attorney's fees under § 406(b) should be calculated using the "lodestar" approach, not the "contingent fee" approach. We conclude that the district court's award was not an abuse of discretion. ¹

I. BACKGROUND

Buchanan, an attorney with considerable experience in government and private practice dealing with Social Security claims, began representing Kay on his claim in 1992, when he appeared before an Administrative Law Judge seeking disability benefits for Kay, who had a claimed disability onset date of March 11, 1991. Kay's claim and an administrative appeal were unsuccessful. Buchanan then brought suit on behalf of Kay in the district court, which remanded Kay's claim to the Commissioner for further proceedings and awarded Buchanan attorney's fees pursuant to the Equal Access to Justice Act, 28 U.S.C. § 2412(d).

In February 1995, the Administrative Law Judge held an additional hearing and found that Kay was eligible for benefits, with a disability onset date of February 1994. Buchanan appealed the finding with respect to the disability onset date. The Appeals Council denied review, and Buchanan again filed suit in the district court. The district court again ordered the case remanded to the Commissioner, and on August 30, 1996, the Administrative Law Judge concluded that Kay's disability onset date was in March 1991. Kay was awarded $52,305.00 in past-due benefits, of which 25 percent, or $13,076.25, were set aside pending determination of Buchanan's entitlement to attorney's fees.

Buchanan had agreed to represent Kay on a contingency basis. Kay's contract with Buchanan states:

I agree to pay my attorney an amount equivalent to twenty-five percent (25%) of the total amount of the past due benefits accrued from the time [of] disability or the first entitlement started through the time my benefits are received or $1500.00, whichever is greater. I understand that this fee includes 25% of ALL my Social Security benefits including those paid on my earnings record or on any account for my dependents, and those paid in the form of Supplemental Security Income. I understand that the minimum fee, should I win will be $1500.00.... I understand that Dale L. Buchanan and Associates is not going to charge me a fee in advance and that they will not charge me any fee at all except the amount for expenses unless I win.

Buchanan moved for attorney's fees under section 206(b) of the Social Security Act, 42 U.S.C. § 406(b). He requested $8,500.00 for 26.6 hours of work performed in connection with his representation of Kay before the district court. That figure is about one-third smaller than the 25 percent contingency fee of $13,076.25 which he might have claimed. But Buchanan's fee request still relied on his contingency agreement with Kay, and Buchanan argued that the claimed fee of $8,500.00 must be reasonable because it was substantially less than the amount he could have requested. The Commissioner objected to the requested amount, arguing that Buchanan should be compensated for 24.1 hours of court-related work at an hourly rate of $150.00, for a total of $3,615.00.

Employing the lodestar method, the magistrate judge recommended that Buchanan receive $3,990.00, representing 26.6 hours of work at $150.00 per hour. While noting that "the prevailing market rate for the Rome Division in the Northern District of Georgia .... has never exceeded $95.00 per hour," the magistrate judge increased the rate to reflect the contingent nature of Buchanan's representation, in light of which he might have recovered no fees at all.

The district court agreed that the proper method of calculating Buchanan's fees was the lodestar method, not the contingent fee approach, but applied an hourly rate of $95.00 per hour, reasoning that "$95.00 is the amount the Court customarily awards to attorneys of comparable skills, experience, and reputation for similar services." Multiplying this figure by 26.6 hours, the district court arrived at a lodestar amount of $2,527.00. It concluded that the lodestar amount should be multiplied by an adjustment figure of 1.579, especially since Buchanan had been acting on a contingency basis. Applying that adjustment, the court awarded Buchanan $3,990.13 in attorney's fees. Buchanan filed this appeal, though Kay, as the claimant, is the named appellant.

II. STANDARD OF REVIEW

We review questions of statutory interpretation de novo. See, e.g., United States v. Alborola-Rodriguez, 153 F.3d 1269, 1271 (11th Cir.1998). We review awards of attorney's fees for abuse of discretion. See American Civil Liberties Union v. Barnes, 168 F.3d 423, 427 (11th Cir.1999). We will find that the district court abused its discretion if it has not applied the proper standard, or has failed to follow proper procedures in making its determination, or has based its award on findings of fact that are clearly erroneous. Id.

III. ANALYSIS

A. THE LODESTAR METHOD IS TO BE APPLIED IN DETERMINING ATTORNEY'S FEES UNDER 42 U.S.C. § 406(b)

As noted above, Buchanan agreed to take Kay's case on a contingent fee basis. In the event Kay's claim succeeded, he would owe Buchanan a minimum of $1,500.00 and a maximum of 25 percent of the past-due benefits awarded. If he lost, he would owe Buchanan only his expenses. Buchanan argues that the district court erred by applying the lodestar method to determine his reasonable fees for his work in this case. He contends that the district court should have employed the contingency fee method and treated his requested fee as presumptively reasonable.

The Social Security Act provides for the recovery of attorney's fees in the following terms:

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, ...

42 U.S.C. § 406(b)(1)(A). Beyond this capacious language, however, the Act offers no further guidance on what amounts to a "reasonable fee" for successful Social Security claims.

The circuits have split over the proper method for calculating attorney's fees under 42 U.S.C. § 406(b). At least five circuits, which is a majority of those that have addressed the issue, have adopted the "lodestar" method. ² Under that method, the court arrives at a lodestar figure "by multiplying the number of hours reasonably expended by a reasonable hourly rate. The district court may then adjust the resulting 'lodestar' depending upon a variety of factors...." Andrews v. United States, 122 F.3d 1367, 1375 (11th Cir.1997) (internal citations omitted) (attorney's fees claimed under Equal Access to Justice Act) (citing Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983)).

Three circuits, however, have adopted the "contingent fee" method. ³ Under that method, where a Social Security benefit claimant has signed a contingency fee agreement for an amount falling within the statutory cap of 25 percent of the claimant's past-due benefits, the court will defer to the contract amount of fees unless it is unreasonable. See, e.g., Wells v. Sullivan, 907 F.2d 367, 370 (2d Cir.1990). Although each court taking this approach uses slightly different language, all essentially erect a rebuttable presumption that a contingency fee arrangement of 25 percent or less is a reasonable fee, absent evidence suggesting otherwise. See, e.g., id. at 371 ("[T]he district court's determination of a reasonable fee under § 406(b) must begin with the [contingency fee] agreement, and the district court may reduce the amount called for by the contingency agreement only when it finds the amount to be unreasonable."); McGuire v. Sullivan, 873 F.2d 974, 981 (7th Cir.1989) (the court "should defer to the parties' intentions where reasonable.... [T]he fee agreement entered into by the parties should be the starting place for a court's review but that amount may be reduced if appropriate."); Rodriquez v. Bowen, 865 F.2d 739, 746 (6th Cir.1989) (en banc) ("[I]f the agreement states that the attorney will be paid twenty-five percent of the benefits awarded, it should be given the weight ordinarily accorded a rebuttable presumption."). The amount awarded pursuant to a contingency fee agreement may be reduced where factors such as ineffective counsel or a potential windfall to the claimant's attorney are present. See, e.g., Rodriquez, 865 F.2d at 746.

Until now, we have not taken a position on the matter. ⁴ Upon examination, we conclude that the majority approach is the right one. Accordingly, we hold that the lodestar method applies to the determination of attorney's fees in Social Security cases under 42 U.S.C. § 406(b), even where counsel and the claimant contractually agreed to a contingency fee arrangement. As we...