Steigerwald v. Comm'r of Soc. Sec.

• Citation: 48 F.4th 632
• Decision Date: 09 September 2022
• Docket Number: 21-3023
• Parties: Stephanie L. STEIGERWALD, Plaintiff-Appellee, v. COMMISSIONER OF SOCIAL SECURITY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

48 F.4th 632

Stephanie L. STEIGERWALD, Plaintiff-Appellee,
v.
COMMISSIONER OF SOCIAL SECURITY, Defendant-Appellant.

No. 21-3023

United States Court of Appeals, Sixth Circuit.

Argued: October 28, 2021
Decided and Filed: September 9, 2022

ARGUED: Dennis Fan, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant. William Escobar, KELLEY, DRYE & WARREN LLP, New York, New York, for Appellee. ON BRIEF: Dennis Fan, Charles W. Scarborough, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellant. John H. Ressler, ROOSE & RESSLER, Lorain, Ohio, Ira T. Kasdan, Bezalel A. Stern, KELLEY, DRYE & WARREN LLP, Washington, D.C., Joseph A. Boyle, KELLEY DRYE & WARREN LLP, Parsippany, New Jersey, for Appellee. Neil H. Good, THE GOOD LAW GROUP, Palatine, Illinois, for Amicus Curiae.

Before: MOORE, KETHLEDGE, and DONALD, Circuit Judges.

MOORE, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J. (pp. 643-45), delivered a separate dissenting opinion.

KAREN NELSON MOORE, Circuit Judge.

The Social Security Administration (SSA) failed to perform a statutorily obligated duty to pay claimants the total amount of benefits to which they are entitled. To ensure that claimants receive the entirety of these benefits, Congress enacted two provisions in the Social Security Act: a judicial-review provision to keep the agency honest and an attorney-fees provision to incentivize lawyers to represent claimants. Because the SSA may not hide behind these statutory provisions merely because it erred at the end, rather than at the beginning, of the benefits-award process,

48 F.4th 635

we affirm the judgment of the district court.

I. BACKGROUND

As the district court in this case rightly noted, "[t]he mechanics of the alleged underpayment are fairly byzantine," so we provide a summary for clarity. Steigerwald v. Berryhill , 357 F. Supp. 3d 653, 654 (N.D. Ohio 2019). The SSA awards a claimant a certain amount of benefits, which a claimant may challenge through a series of procedural steps that involve a hearing before an Administrative Law Judge. See Smith v. Berryhill , ––– U.S. ––––, 139 S. Ct. 1765, 1772, 204 L.Ed.2d 62 (2019). Those benefits are awarded pursuant to Title II of the Social Security Act, 42 U.S.C. § 401 – 434, which provides individuals with disability benefits, and Title XVI of the Social Security Act, 42 U.S.C. § 1381 – 1385, which provides individuals with need-based supplemental security income.

A claimant's income impacts eligibility for and the amount of Title XVI benefits, and any disability benefits that a claimant receives under Title II are considered income under Title XVI. See 42 U.S.C. § 1382(a) – (b) ; 1382a(a)(2)(B). Accordingly, when a claimant applies for and receives monthly Title II and Title XVI benefits concurrently, the SSA reduces a claimant's monthly Title XVI benefits by any Title II benefits received during those same months. See id.

The same principles apply when a claimant retroactively receives past-due Title II benefits, or "benefits that accrued before a favorable [SSA] decision." Culbertson v. Berryhill , ––– U.S. ––––, 139 S. Ct. 517, 520, 202 L.Ed.2d 469 (2019). When a claimant receives past-due Title II benefits, the SSA adjusts any need-based Title XVI award to account for the claimant's additional award of past-due Title II disability income. See 42 U.S.C. § 1320a-6(a). In applying this adjustment, the SSA reduces a portion of a claimant's total past-due benefits because any past-due Title II payments would have increased the claimant's income in the same months that Title XVI benefits were due. See id. Congress enacted the statutory provision governing this process to prevent a windfall to the claimant merely because the claimant obtained past-due Title II income in one lump sum rather than in monthly payments. See S. Rep. No. 96-408, at 78 (1979). The SSA calls this adjustment the "windfall offset calculation."

When a claimant hires a representative, such as an attorney, to assist in obtaining past-due benefits before the SSA, an additional wrinkle complicates the SSA's benefit calculations. A claimant may elect to pay the representative fees out of the award of past-due benefits. See 42 U.S.C. § 406(a) ; § 1383(d)(2). Sometimes, the SSA awards the representative fees after it has already performed the windfall offset, i.e. reduced the award of past-due benefits to account for a claimant's Title II income. See Social Security Program Operations Manual System (POMS), SI 02006.200 § A.4, available at https://go.usa.gov/xs92e. But because the representative-fee award is paid out of and reduces the claimant's award of past-due benefits, the representative-fee award reduces the claimant's income. See 42 U.S.C. § 1320a-6(a). The claimant's reduction, or "subsequent change[ ]," in income consequently causes the claimant's need-based Title XVI benefits amount to increase in some cases. See 20 C.F.R. § 404.408(b)(d). Therefore, after the SSA takes representative fees out of a claimant's past-due benefits, the SSA is supposed to perform the windfall offset recalculation again and award the claimant any difference in benefits. See 42 U.S.C. § 1383(b)(1)(A) ; 20 C.F.R. § 416.1123(b)(3) ;

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POMS SI 02006.200 § A.1. This case originated from the SSA's failure to perform this second windfall-offset calculation, known as the "Subtraction Recalculation," for the classes of claimants who sought relief. When applied to many claimants, this difference can amount to a substantial sum.

Fees that attorneys or representatives recover for their work in proceedings before the SSA under 42 U.S.C. § 406(a) (such as the fees that provide the impetus for the Subtraction Recalculation) are distinct from fees that attorneys recover for their efforts in litigating in federal court, which are governed by 42 U.S.C. § 406(b). Gisbrecht v. Barnhart , 535 U.S. 789, 794, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002) ("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."). In this appeal, Class Counsel seek to recover the latter type of fees. Once Class Counsel discovered the SSA's systemic failure to perform the Subtraction Recalculations, they recovered over $106 million in past-due benefits for the class of claimants through litigation before the district court. Steigerwald v. Saul , No. 1:17-CV-01516, 2020 WL 6485107, at *1 (N.D. Ohio Nov. 4, 2020) ; Steigerwald , 357 F. Supp. 3d at 658. After performing the Subtraction Recalculations for all the claimants, the SSA now argues that the district court did not have authority under the Social Security Act's judicial-review provision, 42 U.S.C. § 405(g), to order the Subtraction Recalculations. Therefore, the SSA argues, Class Counsel cannot recover attorney fees under § 406(b) for Class Counsel's representation of the claimants in federal court. On appeal, the SSA challenges the district court's award of $15.9 million in attorney fees to Class Counsel. Steigerwald , 2020 WL 6485107, at *6.

II. ARTICLE III STANDING

Before proceeding to the merits, we follow our "obligation to assure ourselves of litigants’ standing under Article III." Fednav, Ltd. v. Chester , 547 F.3d 607, 614 (6th Cir. 2008) (quoting DaimlerChrysler Corp. v. Cuno , 547 U.S. 332, 340, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) ). Article III standing requires a party to have "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins , 578 U.S. 330, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016). On appeal, Class Counsel argues that because fees in this case are awarded out of claimants’ past-due benefits, the SSA has no monetary interest, and therefore has suffered no injury in fact to support standing.

Class Counsel's argument does not persuade us. Broadly speaking, the SSA retains an interest in benefiting disabled persons through its "humanitarian policy." Lewis v. Sec'y of Health & Hum. Servs. , 707 F.2d 246, 248 (6th Cir. 1983). Even without a pecuniary stake, the SSA maintains an obligation to promote those interests. See In re Debs , 158 U.S. 564, 584, 15 S.Ct. 900, 39 L.Ed. 1092 (1895). Specifically, in an attorney-fees case proceeding under § 406(b) such as this one, the SSA represents the "interests of the claimant whose benefits pay for the fees." Lasley v. Comm'r of Soc. Sec. , 771 F.3d 308, 308–09 (6th Cir. 2014). Indeed, we have noted that the government is "entitled to participate in attorneys’ fees adjudications under 42 U.S.C.A. § 406(b)" because "the Secretary ‘retains an interest in the fair distribution of monies withheld for attorney's fees.’ " Lewis , 707 F.2d at 248 (quoting

48 F.4th 637

Moore v. Califano , 471 F. Supp. 146, 149 (S.D.W.Va. 1979) ). Without questioning the government's standing, we have exercised jurisdiction over appeals challenging § 406(b) attorney-fee awards. Rodriquez v. Bowen , 865 F.2d 739, 741 (6th...