Rice v. Astrue

• Decision Date: 22 June 2010
• Docket Number: No. 09-10589.,09-10589.
• Parties: Evelyn D. RICE, Plaintiff-Appellant,v.Michael J. ASTRUE, Commissioner of Social Security, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

609 F.3d 831

Evelyn D. RICE, Plaintiff-Appellant,v.Michael J. ASTRUE, Commissioner of Social Security, Defendant-Appellee.

No. 09-10589.

United States Court of Appeals Fifth Circuit.

June 22, 2010.

Ronald David Honig, Dallas, TX, Eric Schnaufer, Evanston, IL, for Plaintiff-Appellant.

Jose Ricardo Hernandez, Special Asst. U.S. Atty., Dallas, TX, Charles Ottis Dobbs, Asst. U.S. Atty., Fort Worth, TX, William Kanter, Michael Eugene Robinson, Dept. of Justice, Civ. Div., Appellate Staff, Washington, DC, for Defendant-Appellee.

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

Before JONES, Chief Judge, and HIGGINBOTHAM and ELROD, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This social security case brings the issue of whether a federal court may condition the amount of its Equal Access to Justice Act award of attorney's fees on a future grant of attorney's fees by the Commissioner of Social Security. The government concedes that Congress does not permit the offset. We are persuaded that this concession is compelled by the statutory scheme.

I.

Evelyn D. Rice, a former postal clerk, has not worked since February 18, 2003, due to a car accident, and continues to have a variety of musculoskeletal disorders, including fibromyalgia. She filed an application for disability insurance benefits on October 18, 2004, but the Commissioner of Social Security denied it, asserting there were jobs in the national economy that Rice could perform.

Rice then hired attorney Ronald D. Honig under a contingency fee arrangement, whereby Rice would pay Honig up to 25% of any past-due benefits. Specifically, Rice would pay over approved Social Security Act fees for work performed before the agency under 42 U.S.C. § 406(a) and for work performed before a court under 42 U.S.C. § 406(b).¹ And Honig would retain any attorney's fee awarded under the Equal Access to Justice Act (EAJA),² to the extent it was not offset by a § 406(b) fee.

With Honig in her corner, Rice sought judicial review in the Northern District of Texas. After answering Rice's complaint, the Commissioner voluntarily moved to remand, acknowledging error in the administrative process: the Commissioner had not proven that Rice had transferable skills needed to engage in the type of semi-skilled work available to her. Pursuant to sentence four of 42 U.S.C. § 405(g),³ the district court granted the motion to remand for further proceedings.

Under a sentence four remand, the court immediately enters judgment and terminates the civil action.⁴ As happened with Rice, a sentence four remand does not necessarily mean that the claimant will get benefits; the district court may remand for a legal error and leave for further agency findings whether benefits are due. However, “a party who wins a sentence-four remand order is a prevailing party,” opening the door to an EAJA award if the government's position was not substantially justified. ⁵

The district court granted an unopposed motion⁶ for an EAJA award of attorney's fees in the amount of $2,853.87, plus costs of $360.60. The court further ordered that, “in the event that Rice's counsel receives fee awards under [ 42 U.S.C.] § 406 for work performed on Rice's claim, regardless of whether such awards are awarded at the administrative or judicial level, Rice's counsel shall promptly pay to Rice an amount equal to [the lesser of the two awards].” Rice appealed the order insofar as it required her attorney to remit a portion of the EAJA award if she won attorney's fees at the administrative level under § 406(a).

II.

A.

i.

Attorneys representing social security claimants can often win fees in two ways. The first type of fee in contingency agreement cases comes out of the claimant's past-due benefits.⁷ Congress allows both the Commissioner and the courts to award these fees, but treats “the [two] review stages discretely: § 406(a) governs fees for representation in administrative proceedings; § 406(b) controls fees for representation in court.”⁸

For contingency fees at the administrative level, the Commissioner “shall approve” the agreement as long as: (1) the attorney files it with the Commissioner in advance; and (2) the fee does not exceed the lesser of 25% of the total past-due benefits or $6,000.⁹ And for contingency fees on judicial review:

Whenever a court renders a judgment favorable to a claimant ..., the court may ... allow ... a reasonable fee for ... representation, not in excess of 25 percent of ... the past-due benefits to which the claimant is entitled by reason of such judgment, and the Commissioner of Social Security may ... certify the amount ... to [the] attorney out of, and not in addition to, the ... past-due benefits.¹⁰

This regime recognizes that the Commissioner and the courts operate in different spheres. “The district court ... may consider only court-related services in setting allowable fees for representation before it. On the other hand, Congress has made it equally clear that the authority for setting fees for representation in agency proceedings rests exclusively with the [Commissioner].”¹¹ Despite this segregation-and despite sharp disagreement from other courts of appeals-Fifth Circuit interpretation of § 406 “precludes the aggregate allowance of attorney's fees greater than twenty-five percent of the past due benefits received by the claimant.”¹² That is, fees under § 406(a) plus fees under § 406(b) cannot exceed 25%. That structure is not at issue here.

ii.

The second type of attorney's fees comes through the EAJA, which allows “a party prevailing against the United States in court, including a successful Social Security benefits claimant, [to] be awarded fees payable by the United States if the Government's position in the litigation was not ‘substantially justified.’ ”¹³ In contrast to fees under § 406(b), “EAJA fees are determined not by a percent of the amount recovered, but by the time expended and the attorney's hourly rate, capped in the mine run of cases at $125 per hour.”¹⁴ Because in a sentence four remand the court terminates the “civil action,” the prevailing party cannot receive enhanced EAJA payments for work done on the administrative level.¹⁵

B.

Twenty-five years ago, social security attorneys looking to collect both a court-ordered contingency fee and an EAJA award in the same case found themselves in a pickle, because when a court grants contingency fees under § 406(b) for a successful judicial challenge, it is a crime for an attorney to “charge[ ], demand[ ], receive[ ], or collect[ ] for services rendered in connection with proceedings before a court ... any amount in excess of that allowed by the court.”¹⁶ This provision would forbid attorneys from seeking to collect fees awarded under the EAJA. Recognizing the problem, Congress endeavored to harmonize the two types of fees by creating a savings clause.¹⁷

Through an uncodified 1985 amendment to the EAJA, “[f]ee awards may [now] be made under both prescriptions, but the claimant's attorney must ‘refun[d] to the claimant the amount of the smaller fee.’ ”¹⁸ “Thus, an EAJA award offsets an award under Section 406(b), so that the amount of the total past-due benefits the claimant actually receives will be increased by the EAJA award up to the point the claimant receives 100 percent of the past-due benefits.” ¹⁹

The amendment did not provide a savings provision for administrative level awards under § 406(a), which also makes it a crime for any person to “knowingly charge or collect directly or indirectly any fee in excess of the maximum fee.”²⁰ (The “maximum fee” in contingency cases at the administrative level is the lesser of 25% of past-due benefits or $6,000. ²¹) The question is whether an attorney may earn both a § 406(a) award of attorney's fees at the administrative level and an EAJA award of attorney's fees at the judicial level.

The district court in Rice's case said no, granting an EAJA award, but conditioned it on Honig returning to Rice an amount equal to the lesser of the EAJA award or any subsequent § 406(a) award made by the Commissioner. Both Rice and the Commissioner urge that the court had no authority to order an offset of this kind. We review de novo the district court's legal conclusion that it did.²²

III.

Both the Social Security and Equal Access to Justice statutes treat administrative and judicial review as separate entities-suggesting, at first blush, that § 406(a) administrative fees do not overlap with EAJA judicial fees. Regarding the Social Security Act, Congress designed “the administrative and judicial review stages discretely,”²³ and “the authority for setting [ § 406(a)] fees for representation in agency proceedings rests exclusively with the [Commissioner],”²⁴ while “[t]he district court ... may consider only court-related services in setting allowable [ § 406(b)] fees for representation before it.”²⁵

On sentence four remands, as here, the EAJA states the district court “shall” grant EAJA attorney's fees if the government's position before the court had not been substantially justified, and the court derives the fee from work performed only at the judicial level. Because these EAJA fees can overlap with § 406(b) fees-and because § 406(b)(2) makes it a crime for an attorney to double collect at the judicial level-Congress passed the savings clause, which requires the attorney to refund to the client the lesser amount. Because judicial and administrative reviews are separate, the parties urge that an EAJA award for judicial work cannot mix with § 406(a) fees for administrative work, obviating the need for a savings clause with respect to § 406(a).²⁶

We agree, noting that the texts of the two § 406 criminal provisions adhere strictly to forum lines. Section 406(a)(5) makes it a crime only to collect more for work done at the administrative level than the maximum fee allowed by the Commissioner,²⁷ and § 406(b)(2) forbids only collecting more for work done at the...