Motley v. Heckler, Civ. A. No. 83-0071-D.

• Decision Date: 02 March 1985
• Docket Number: Civ. A. No. 83-0071-D.
• Citation: 605 F. Supp. 88
• Court: U.S. District Court — Western District of Virginia
• Parties: Johnnie MOTLEY, Jr., Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.

605 F. Supp. 88

Johnnie MOTLEY, Jr., Plaintiff, v. Margaret M. HECKLER, Secretary of Health and Human Services, Defendant.

Civ. A. No. 83-0071-D.

United States District Court, W.D. Virginia, Danville Division.

March 2, 1985.

J. Patterson Rogers, Danville, Va., for plaintiff.

E. Montgomery Tucker, Asst. U.S. Atty., Roanoke, Va., for defendant.

MEMORANDUM OPINION

KISER, District Judge.

It is trite but true that the contingent fee is the poor man's key to the courthouse door. This is recognized both statutorily and judicially. 42 U.S.C. § 406(b)(1); Morris v. Social Security Administration, 689 F.2d 495 (4th Cir.1982). This case presents a challenge to certain procedures of the Secretary of Health and Human Services (the "Secretary") which adversely affect the use of the contingent fee in appeals of social security benefit determinations.

I.

Johnnie Motley, Jr., suffers from severe lower back pain caused by a ruptured disc. This injury, coupled with his illiteracy, age and prior work experience, led an Administrative Law Judge to find him "disabled" on April 13, 1982. The Appeals Council elected to review this determination. Disregarding Motley's testimony of pain, the Appeals Council reversed the decision of the ALJ. Motley appealed to this Court. The merits of Motley's claim for benefits was set out in a Report and Recommendation of Magistrate B. Waugh Crigler filed January 19, 1984. On February 9, 1984, judgment was entered for Motley, and this case was remanded to the Secretary for a calculation of benefits. On remand, the Secretary determined that Motley was entitled to $10,230 in past due disability benefits under Title II of the Social Security Act, and to $5,318 in Supplemental Security Income (SSI) benefits under Title XVI of the Social Security Act.

Motley was successfully represented before this Court by J. Patterson Rogers, 3rd, Esquire. Rogers petitioned this Court for approval of attorney's fees pursuant to § 206(b) of the Social Security Act, 42 U.S.C. § 406(b).¹ On September 26, 1984, the Court referred this petition to United States Magistrate Crigler for proposed findings and recommendations. Magistrate Crigler filed his report on January 28, 1985. He recommends that attorney's fees in the amount of $2,556.13 be awarded. The Secretary objects to the payment of any fee beyond the $1,476.40 currently being withheld. The difference between these figures results from the Secretary's practice of withholding attorney's fees based upon the net amount which will actually be paid to the claimant, rather than the gross amount of the Title II award.

II.

Magistrate Crigler has made an initial determination that an attorney's fee award of twenty-five percent of Motley's benefits is reasonable in this case. Section 406(b)(1) of the Social Security Act authorizes the Court to certify a fee award "not in excess of 25 percent of the total past due benefits to which the claimant is entitled by reason of such judgment" granted by the Court. While it is true that this amount is a maximum, and not appropriate for all cases, Blankenship v. Schweiker, 676 F.2d 116 (4th Cir.1982), I agree with the Magistrate that a 25 percent award is reasonable in this case. The most influential factor in this determination is that Motley and Rogers entered into a contingent fee arrangement for legal services which provided that Rogers would receive 25 percent of Motley's past due benefits together with recoverable costs.

The Secretary does not object to this aspect of the Magistrate's Report. In fact, she has withheld and certified what she considers to be 25 percent of Motley's benefits. When the concurrent award was made, the Secretary first calculated Motley's past due SSI benefits. This sum, $5,318.90, was sent directly to Motley. Then the Secretary calculated Motley's past due Title II award. The $10,230.90 disability benefit award was offset by the SSI award and $6.40 in undisputed deductions. Of the remaining $5,905.60, 25 percent ($1,476.40) was withheld as attorney's fees. The remainder was paid to Motley.

The procedure used by the Secretary to offset Title II awards with SSI benefits previously or concurrently received is the result of legislation designed to prevent windfalls to claimants, Section 1127 of the Social Security Act. 42 U.S.C. § 1320a-6.² Pursuant to these provisions, the Secretary adopted appropriate regulations, which are set out at 20 C.F.R. § 404.4086 and § 416.1123. While these regulations do not explicitly amend the attorney's fee provisions of 42 U.S.C. § 406, the interaction of these provisions was addressed when the final regulations were promulgated.

As for attorneys' fees, the amount of retroactive benefits that is subject to withholding for payment of an attorney's fees is the total amount of retroactive Social Security benefits payable to the beneficiary (see § 404.1703). The amount payable is the amount of retroactive benefits less the amount of any deductions, reductions, or overpayments applicable to the retroactive period. Thus, the amount of retroactive benefits payable for purposes of withholding an attorney's fee is the amount of retroactive Social Security benefits reduced by the amount of any SSI payments received in the retroactive period.

47 Fed.Reg. 4986 (1982) (emphasis in original).

In response to comments that this procedure would provide less incentive for attorneys to represent disability applicants, the Secretary claimed that the amount of the authorized fee is not based upon the amount of retroactive benefits payable to the claimant, but upon independent criteria. She further asserted that the amount of retroactive benefits is relevant only to the amount of the fee that the Secretary may withhold and pay directly to the attorney. 47 Fed.Reg. 4987 (1982).³

Magistrate Crigler has recommended that attorney's fees in this case be based upon the gross amount of past due Title II benefits, rather than the net benefits after the SSI offset. The Secretary objects to this recommendation.

The only two reported decisions on this question both hold that the Secretary's off-set procedure artificially reduces the amount of benefits available to make an award of attorney's fees, and thus deters representation of social security claimants. Burnett v. Secretary of Health and Human Services, 563 F.Supp. 789, 793 (W.D. Ark.1983); Carlisi v. Secretary of Health and Human Services, 583 F.Supp. 135, 138 (E.D.Mich.1984).

Thus, in cases where the Court eventually awards a fee to claimant's counsel, a procedure which artificially reduces the amount of benefits available from which to make such an award represents a strong disincentive for lawyers to represent Social Security claimants. This cannot have been Congress's intent in enacting Section 1127. That section was intended to recover windfalls from those who had overcollected benefits under Title XVI, not to penalize attorneys.

Burnett, 563 F.Supp. 793.

The Secretary argues that these decisions are incorrect and premised upon an unwarranted distinction between concurrent SSI and Title II awards, and Title II awards where SSI benefits were previously paid. Such a distinction, the Secretary claims, is improper. She cites the recent decision in Gallo v. Heckler, 600 F.Supp. 1513 (D.C.E.D.N.Y.1985).

The Gallo court concluded that the offset provisions of 42 U.S.C. § 1320a-6 were properly applied in cases of concurrent adjudications. The court was particularly persuaded by the recent amendments to § 1320a-6. But the Gallo court was not presented with the issue of attorney's fees. (At 1518, ftnt. 8). The decision was expressly limited to the calculation of the actual amount of money to be paid to the claimant. (At 1519). And the Burnett and Carlisi cases were both distinguished because they involved attorney's fees and the problem of discouraging representation of claimants. (At 1518). Therefore, while I do not dispute the analysis used by the Gallo court, I do not believe that decision is particularly helpful in resolving the issue at hand.

III.

In enacting 42 U.S.C. § 406, Congress sought to encourage the effective legal representation of claimants by ensuring lawyers that they would receive reasonable fees through certification by the Secretary. Dawson v. Finch, 425 F.2d 1192, 1195 (5th Cir.1970), cert. denied, 400 U.S. 830, 91 S.Ct. 60, 27 L.Ed.2d 60 rehearing denied, 400 U.S. 953, 91 S.Ct. 233, 27 L.Ed.2d 261. In this case, like many others, the claimant's disability benefits are his only source of income. Rogers contends that in the absence of withholding and certification, there is no practical method for him to collect his fee. In addition, it is clear that Motley and his attorney contemplated that the fee would be based upon the amount of any Title II judgment granted by the Court. There are no provisions under Title XVI equivalent to § 406, so an attorney cannot receive his fee out of past due SSI benefits. In the case of concurrent adjudications, the only funds available for withholding are Title II benefits.

The congressional intent behind 42 U.S.C. § 1320a-6 was to prevent the windfall to claimants that could occur under the prior law. An individual's entitlement under SSI and Title II is to be considered as a totality, so that the claimant doesn't receive a benefit because of the timing of Title II checks. S.Rep. No. 408, 96th Cong., 2d Sess. 78 (1980); H.R. Conference Rep. No. 944, 96th Cong., 2d Sess. 69 (1980), U.S.Code Cong. & Admin.News 1980, 1277. But at no point is there any evidence that this windfall provision was intended to affect attorney's fees under 42 U.S.C. § 406. And such an effect is not a necessary consequence of the two acts. In fact, the Secretary's regulations implementing § 1320a-6 appear to conflict with her earlier regulations involving the calculation of SSI benefits.

SSI benefits are available to aged, blind or disabled individuals whose income does not exceed specified levels. 42...