McGraw v. Barnhart, No. 05-5079.

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Writing for the CourtEbel
Citation450 F.3d 493
PartiesRandy L. McGRAW, Plaintiff-Appellant, v. Jo Anne B. BARNHART, Commissioner, Social Security Administration, Defendant-Appellee.
Decision Date13 June 2006
Docket NumberNo. 05-5079.
450 F.3d 493
Randy L. McGRAW, Plaintiff-Appellant,
v.
Jo Anne B. BARNHART, Commissioner, Social Security Administration, Defendant-Appellee.
No. 05-5079.
United States Court of Appeals, Tenth Circuit.
June 13, 2006.

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COPYRIGHT MATERIAL OMITTED

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Submitted on the briefs: Timothy M. White, Richmond Brownson, Tulsa, OK, for Appellant.

David E. O'Meilia, United States Attorney, Tina M. Waddell, Regional Chief Counsel, Amy J. Mitchell, Special Assistant United States Attorney, Office of the General Counsel, Region VI, Social Security Administration, Dallas, TX, for Appellee.

Before LUCERO, EBEL, and MURPHY, Circuit Judges.

EBEL, Circuit Judge.


This appeal presents a question of first impression in this court: whether the Social Security Act (SSA), 42 U.S.C. § 406(b)(1), allows the district court to award attorney's fees to claimant's counsel

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when the court remands a Title II Social Security disability case for further proceedings and the Commissioner ultimately determines that the claimant is entitled to an award of past-due benefits. We conclude that § 406(b)(1) does permit an award of counsel fees under these circumstances, and therefore we REVERSE the district court's denial of fees, see McGraw v. Barnhart, 370 F.Supp.2d 1141 (N.D.Okla.2005), and REMAND for further proceedings.*

I. Background and District Court Proceedings

In April 1998, Randy L. McGraw applied for Title II Social Security disability benefits. He and his counsel entered into a contingent-fee agreement in which he agreed to pay counsel twenty-five percent (25%) of any past-due benefits recovered.

Mr. McGraw's application for benefits was denied at the agency level by both the administrative law judge (ALJ) and the Appeals Council, and he filed a complaint in the district court. Upon the Commissioner's motion, on May 28, 2002, the magistrate judge, presiding by consent of the parties under 28 U.S.C. § 636(c), remanded the case to the Commissioner for further proceedings under sentence six of 42 U.S.C. § 405(g).1 The court also administratively closed the case and ordered the Commissioner to file a status report within 120 days. On August 29, the Commissioner duly filed a status report, which informed the court that the agency had determined that the tape of Mr. McGraw's original benefits hearing was defective and a complete record of the administrative proceedings could not be prepared. Thus, the Appeals Council had vacated the Commissioner's final decision and remanded the case to the ALJ for further proceedings consistent with the district court's order of remand.

In light of the status report, the district court remanded the case for a de novo hearing under sentence four of 42 U.S.C. § 405(g), and it entered judgment in favor of Mr. McGraw. After the district court's judgment became final and non-appealable, Mr. McGraw filed a motion for an award of attorney's fees under the Equal Access to Justice Act, 28 U.S.C. § 2412(d) (EAJA). On December 12, 2002, the court awarded an EAJA fee of $445.40.

On February 19, 2004, counsel filed a motion for a fee award under § 206(b)(1) of the SSA, 42 U.S.C. § 406(b)(1). Referring to the agency's Notice of Award dated December 16, 2002, he advised the court that Mr. McGraw had received a fully favorable

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ALJ decision on remand, and that the Commissioner had determined that Mr. McGraw was entitled to past-due benefits in the amount of $46,505.00. Counsel calculated that twenty-five percent of the past-due benefits totaled $11,626.25. Deducting from that amount the SSA fee that the Commissioner had awarded for work before the agency ($5,300) and the EAJA fee the court had awarded ($445.40), as well as an additional amount to avoid a windfall to counsel, he requested an additional SSA fee award of $1,847.80 for his work before the court.2

The district court denied the SSA fee request, holding that § 406(b)(1) did not allow a fee award when "the Commissioner, not the Court, determined that the Plaintiff was entitled to past-due benefits, and the Commissioner's action, not the Court's judgment, awarded the benefits." McGraw, 370 F.Supp.2d at 1143. Mr. McGraw (or, more precisely, his counsel) appealed directly to this court in accordance with 28 U.S.C. § 636(c)(3) and the terms of the parties' consent to proceed before the magistrate judge.

II. Analysis

The issue presented is a question of statutory interpretation and therefore a question of law. As such, it is reviewed de novo. See Grimsley v. MacKay, 93 F.3d 676, 679 (10th Cir.1996).

A. Fees in Social Security Cases

Attorneys handling Social Security proceedings in court may seek fees for their work under both the EAJA and the SSA. "EAJA fees and fees available under § 406 are two different kinds of fees that must be separately awarded." Frazier v. Apfel, 240 F.3d 1284, 1286 (10th Cir.2001). There are several differences between the two types of fees. For example, EAJA fees are awarded based on a statutory maximum hourly rate, while SSA fees are based on reasonableness, with a maximum of twenty-five percent of claimant's past-due benefits. See id.; 28 U.S.C. § 2412(d)(2)(A); 42 U.S.C. § 406(b)(1). Also, "[f]ees under § 406(b) satisfy a client's obligation to counsel and, therefore, are paid out of the plaintiff's social security benefits, while fees under the EAJA penalize the [Commissioner] for assuming an unjustified legal position and, accordingly, are paid out of agency funds." Orner v. Shalala, 30 F.3d 1307, 1309 (10th Cir.1994). In that vein, an EAJA award is to the claimant, while counsel receives an SSA award. See 28 U.S.C. § 2412(d)(1)(A) (making award to "a prevailing party"); 42 U.S.C. § 406(b)(1) (providing for attorney's payment of approved fee out of past-due benefits). Finally, EAJA fee awards are allowed only if the government's position was not "substantially justified" or there are no special circumstances that "make an award unjust." 28 U.S.C. § 2412(d)(1)(A). SSA funds are not so conditioned. 42 U.S.C. § 406(b)(1). If counsel is awarded fees under both the EAJA and the SSA, counsel must refund the smaller amount to the claimant. See Gisbrecht v. Barnhart, 535 U.S. 789, 796,

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122 S.Ct. 1817, 152 L.Ed.2d 996 (2002); Weakley v. Bowen, 803 F.2d 575, 580 (10th Cir.1986).

In addition to providing for fees for work before the court, the SSA also provides for fees for work done at the administrative level. "The statute deals with the administrative and judicial review stages discretely: § 406(a) governs fees for representation in administrative proceedings; § 406(b) controls fees for representation in court." Gisbrecht, 535 U.S. at 794, 122 S.Ct. 1817. Under the SSA scheme, each authority sets fees for the work done before it; thus, the court does not make fee awards for work at the agency level, and the Commissioner does not make fee awards for work done before the court. See 20 C.F.R. §§ 404.1720, 404.1728; Harris v. Sec'y of Health & Human Servs., 836 F.2d 496, 497 (10th Cir.1987), abrogated on other grounds by Frazier, 240 F.3d at 1286. The agency's and the court's determinations on SSA fees bind counsel: "[t]he prescriptions set out in §§ 406(a) and (b) establish the exclusive regime for obtaining fees for successful representation of Social Security benefits claimants. Collecting or even demanding from the client anything more than the authorized allocation of past-due benefits is a criminal offense." Gisbrecht, 535 U.S. at 795-96, 122 S.Ct. 1817; see also 42 U.S.C. § 406(b)(2).

With regard to work before the courts, "§ 406(b) does not displace contingent-fee agreements as the primary means by which fees are set for successfully representing Social Security benefits claimants in court. Rather, § 406(b) calls for court review of such arrangements as an independent check, to assure that they yield reasonable results in particular cases." Gisbrecht, 535 U.S. at 807, 122 S.Ct. 1817. One of the primary benefits of § 406 and its accompanying regulation, from counsel's perspective, is that they authorize the Commissioner to deduct the approved fees from the claimant's past-due benefits and pay them directly to counsel. 42 U.S.C. § 406(b)(1)(A); 20 C.F.R. § 404.1730.

B. Statutory Analysis
1. Text

"Our primary task in construing statutes is to `determine congressional intent, using traditional tools of statutory interpretation.'" N.M. Cattle Growers Ass'n v. U.S. Fish & Wildlife Serv., 248 F.3d 1277, 1281 (10th Cir.2001) (quoting NLRB v. United Food & Commercial Workers Union, 484 U.S. 112, 123, 108 S.Ct. 413, 98 L.Ed.2d 429 (1987)) (further quotation omitted). "When interpreting the language of a statute, the starting point is always the language of the statute itself. If the language is clear and unambiguous, the plain meaning of the statute controls. A statute is ambiguous when it is capable of being understood by reasonably well-informed persons in two or more different senses." United States v. Quarrell, 310 F.3d 664, 669 (10th Cir.2002) (quotation omitted).

In relevant part, the statute at issue states:

Whenever a court renders a judgment favorable to a claimant under this subchapter [Title II] 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. . . . 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.

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42 U.S.C. § 406(b)(1)(A). The district court read this statute in the narrowest sense. It particularly focused on the phrases "by reason of" the court's judgment, McGraw, 370 F.Supp.2d at 1143, and "allow as part of its judgment," id. at 1144.

When discussing "by reason of" the court's judgment, the district court stated, "[a] judgment which merely...

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