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Daley v. Colvin

United States District Court, D. Oregon, Portland Division

May 15, 2015

JAMES J. DALEY, Plaintiff,
v.
CAROLYN W. COLVIN, Commissioner of Social Security, Defendant.

FINDINGS AND RECOMMENDATION

PAUL PAPAK, Magistrate Judge.

This action was filed against defendant Carolyn W. Colvin, Commissioner of Social Security, by plaintiff James J. Daley on May 22, 2013. Daley sought review of the Commissioner's decision finding Daley disabled for the closed period of March 17, 2008, through July 27, 2010, but thereafter medically improved and therefore not disabled for purposes of entitlement to Disability Insurance Benefits ("DIB") and Supplemental Security Income ("SSI"). On October 3, 2014, I recommended that the Commissioner's decision finding plaintiff not disabled after July 27, 2010, be reversed and remanded for the immediate payment of benefits. On October 28, 2014, Judge Simon adopted my recommendation. On December 3, 2014, Daley moved for an award of attorney fees pursuant to the Equal Access to Justice Act (the "EAJA"), and on December 15, 2014, Judge Simon entered an award of attorney fees in Daley's favor in the amount of $4, 331.81.

Now before the court is Daley's motion (# 30) for approval of payment to his counsel of additional attorney fees out of Daley's retroactive benefits award, pursuant to 42 U.S.C. § 406(b). I have considered the parties' briefs and all of the evidence in the record. For the reasons set forth below, Daley's motion should be granted, subject to the adjustments discussed herein. Payment to Daley's counsel of $12, 642.01 out of Daley's past-due benefits award should be approved.

ANALYSIS

Pursuant to 42 U.S.C. § 406(b), Daley moves for approval of payment of attorney fees to his counsel in an amount less than 25% of his retroactive DIB and SSI award, less the $4, 331.81 that his counsel has already received pursuant to the EAJA and less an additional $5, 917.00 received by his counsel pursuant to 42 U.S.C. § 406(a) for legal services provided in connection with administrative proceedings before the SSA. Section 406(b) provides, in relevant part, as follows:

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). By contrast with fees awarded pursuant to the EAJA, a fee-shifting statute, Section 406(b) fees are paid out of the retroactive benefits awarded to the successful Social Security claimant. See id. Counsel representing Social Security claimants may not seek compensation from their clients for trial litigation other than through a Section 406(b) fee. See id. In the event that both an EAJA fee is awarded and a Section 406(b) fee payment is approved, the claimant's counsel must refund to the claimant the amount of the smaller of the two payments. See Gisbrecht v. Barnhart, 535 U.S. 789, 796 (2002). Any Section 406(b) fee must be approved by the court following analysis of its reasonableness before it may be paid. See 42 U.S.C. § 406(b)(1)(A).

In Gisbrecht, the Supreme Court established that the reasonableness of a 406(b) contingency fee is not to be determined primarily by reference to the lodestar method which governs fee-shifting disputes. See Gisbrecht, 535 U.S. at 801-802. Instead, to the extent contingency fee agreements do not provide for fees exceeding 25% of claimants' retroactive benefits, their terms are fully enforceable subject only to the court's review "to assure that they yield reasonable results in particular cases." Id. at 807. It is the claimant's counsel's burden to establish the reasonableness of the calculated fee. See id.

In assessing the reasonableness of a Section 406(b) fee, courts look first to the contingency fee agreement itself, and then may reduce the resulting award "based on the character of the representation and the results the representative achieved." Id. at 808. The Gisbrecht court provided, as examples of circumstances that could justify a downward reduction, situations in which the attorney was responsible for delay or in which "the benefits are large in comparison to the amount of time counsel spent on the case." Id. The court specified that "the court may require the claimant's attorney to submit, not as a basis for satellite litigation, but as an aid to the court's assessment of the reasonableness of the fee yielded by the fee agreement, a record of the hours spent representing the claimant and a statement of the lawyer's normal hourly billing charge for noncontingent-fee cases." Id., citing Rodriquez v. Bowen, 865 F.2d 739, 741 (6th Cir. 1989) (en banc).

The Ninth Circuit addressed the Gisbrecht reasonableness analysis in Crawford v. Astrue, 586 F.3d 1142 (9th Cir. 2009) (en banc). The Crawford court reviewed the consolidated appeals of three different actions in which district courts reduced Section 406(b) fees from the amounts requested. In the first of these, claimant Clara Crawford was represented by attorney Brian Shapiro. See Crawford, 586 F.3d at 1144. The Administration initially denied Crawford's application for benefits, but following litigation, ultimately awarded her $123, 891.20 in past-due benefits. See id. at 1145. Although Shapiro and Crawford had entered into a contingency fee agreement that provided for a 25% contingency fee, Shapiro requested a fee of only $21, 000, or 16.95% of Crawford's retroactive benefits, representing an amount 3.55 times the amount that would have resulted from a lodestar calculation. See id. The district court found no evidence of fraud or over-reaching in the negotiation of the fee agreement, that Shapiro had caused no unnecessary delay, and that Shapiro's lodestar calculations were correct. See id. However, the district court found that Shapiro had not met his burden to show that the requested "enhancement" of the lodestar figure was reasonable, because he had not presented evidence of his own firm's success rate in representing Social Security claimants (as opposed to data regarding the success rate of Social Security claimants generally) and because Crawford's attorneys' skill and experience were already reflected in the lodestar figure. See id. The court ruled, without explanation, that a 40% "enhancement" over the lodestar figure was reasonable, and on that basis awarded a fee of $8, 270.00, the equivalent of 6.68% of Crawford's retroactive benefits. See id.

In the second action of the consolidated appeal, claimant Ruby Washington was represented by attorney Young Cho. See id. at 1144. As in Crawford's case, the Administration initially denied Washington's application for benefits, but following litigation, awarded $76, 041.00 in retroactive benefits. See id. Although Cho and Washington had entered into a contingency fee agreement that provided for a 25% contingency fee, Cho requested a fee of only $11, 500, or 15.12% of Washington's retroactive benefits, representing an amount 1.82 times the amount that would have resulted from a lodestar calculation. See id. The district court found no evidence of fraud or over-reaching in the negotiation of the fee agreement, that Cho had caused no unnecessary delay, and that Cho's lodestar calculations were correct. See id. at 1146. However, as for Crawford, the district court found that Cho had not met his burden to show that the requested "enhancement" of the lodestar figure was reasonable, because he had not presented evidence of his own firm's success rate in representing Social Security claimants, because Washington's attorneys' skill and experience were already reflected in the lodestar figure, and because Cho had not been required to do much work to obtain benefits on Washington's behalf. See id. The court ruled, without explanation, that a 40% "enhancement" over the lodestar figure was reasonable, and on that basis awarded a fee of $8, 825.53, the equivalent of 11.61% of Washington's retroactive benefits. See id.

In the third action of the consolidated appeal, claimant Daphne M. Trejo was represented by attorney Denise Bourgeois Haley. See id. at 1144. As in Crawford's and Washington's cases, the Administration initially denied Trejo's application for benefits, but following litigation, awarded $172, 223.00 in retroactive benefits. See id. at 1146. Although Haley and Trejo had entered into a contingency fee agreement that provided for a 25% contingency fee, Haley requested a fee of only $24, 000, or 13.94% of Washington's retroactive benefits, representing an amount 2.79 times the amount that would have resulted from a lodestar calculation. See id. The district court found no evidence of fraud or over-reaching in the negotiation of the fee agreement, that Haley had caused no unnecessary delay and that her representation had been excellent, and that Haley's lodestar calculations were correct, except that 1.5 hours of claimed paralegal time and 1.4 hours of claimed attorney time had been improperly attributed to the federal action. See id. However, as for Crawford and Washington, the district court found that Haley had not met her burden to show that the requested fee was reasonable, because she had not presented evidence of her own firm's success rate in representing Social Security claimants, because Trejo's attorneys' skill and experience were already reflected in the lodestar figure, and because Haley had not presented evidence that Haley's firm had been precluded from accepting other work in consequence of Haley's representation of Trejo. See id. The court ruled, without explanation, that a 100% "enhancement" over the lodestar figure was reasonable, and on that basis awarded a fee of $12, 650.40, the equivalent of 7.35% of Trejo's retroactive benefits. See id.

The Crawford majority characterized the district courts' decisions as impermissibly beginning with the lodestar calculation and determining a reasonable fee award by applying enhancements to the lodestar figure, rather than by beginning with the claimants' fee agreements and applying any appropriate reductions to the calculated contingency fees to arrive at reasonable fees. See id. at 1150. In addition, the Crawford majority found no evidence of substandard performance or dilatory conduct by the claimants' attorneys, and that the requested fees were not "excessively large in relation to the benefits achieved." See id. at 1151. On the basis of these findings, the Crawford majority found that the requested fees-each of which was less than the fee provided for in the applicable contingency fee agreement-were reasonable in each case, and therefore reversed each district court's decision with instructions to award the requested fees. See id. at 1151-1152.

As a separate and independently adequate ground for vacating the orders below, the Crawford court further noted the district courts' failure to explain the bases for the percentages they found to constitute reasonable enhancements of the lodestar figure in each case. See id. at 1152. The Crawford court also flatly rejected the district courts' reliance on the attorneys' failure to provide firm-specific historical success rates as a basis for reducing the requested fee awards, and suggested that the reasonableness of a fee award could be measured in part ...


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