Bennetts v. Commissioner of Social Security Administration

Filing 32

OPINION & ORDER: Plaintiff's Motion for Attorney Fees 29 is Granted, and payment to Bennetts' counsel of $3,979.94 from Bennetts' award of retroactive SSI benefits is approved. Signed on 12/10/12 by Magistrate Judge Paul Papak. (gm)

INTI-IE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MARY ROSE BENNETTS,
Plaintiff,
3:10-CV-1124-PK
OPINION AND
ORDER

v.

MICHAEL J. ASTRUE,
Defendant.
PAPAK, Magistrate Judge:
PlaintitiMmy Rose Bennetts filed this action against defendant Michael A. Astrue,
Commissioner of Social Security, on September 17, 2010, seeking judicial review of the
Commissioner's decision finding her not disabled for purposes of entitlement to supplemental
security income (''SSI") under Title XVI of the Social Security Act. On October 20, 2011, I

.

issued an order affim1ing the Commissioner's final decision, but on April 11, 2012, based on the
pmiies' stipulations, the Ninth Circuit vacated my disposition and remanded the matter back to
this comi for the purpose of allowing the court to remand the matter back to the Agency for
further proceedings consistent with the parties' stipulation. The Circuit's Federal Appellate
procedure Rule 41(a) mandate to that effect issued June 6, 2012. Bennetts moved for an award
of attorney fees pursuant to the Equal Access to Justice Act (the "EAJA") on May 15,2012, and
on that same date I granted the motion, authorizing award of fees to Bennetts pursuant to the
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EAJA in the amount of$5,651.06.
Now before the comt is Be1mett's unopposed motion (#29) for approval of payment to her
counsel out of her retroactive benefits award of$38,524.00 the amount of$3,979.94, 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 fmth below, Bennetts' motion is granted, and payment to Bennetts' counsel of
attorney fees in the amount of $3,979.94 is approved.
ANALYSIS
Pursuant to 42 U.S. C. § 406(b), Bennetts' counsel seeks the comt's approval of payment
to him ofattomey fees out of Bennetts' retroactive benefits award in the amount of$3,979.94
(calculated by subtracting $5,651.06, the amount of the EAJA attomey fee award counsel has
already received, from $9,631.00, which latter amount constitutes 25% of Bennetts' retroactive
benefits award of38,524.00). 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 attomey, the court may
determine and allow as pmt of its judgment a reasonable fee for such
representation, not in excess of25 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)(l )(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

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be approved by the court following analysis of its reasonableness before it may be paid. See 42
U.S.C. § 406(b)(l)(A).
In Gisbrecht, the Supreme Comt 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 inpmticular cases." !d. 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, comts 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." !d. at 808. The

Gisbrecht comt 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." !d. The comi specified that "the
comt 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 nonnal hourly
billing charge for noncontingent-fee cases." !d., citing Rodriquez v. Bowen, 865 F.2d 739, 741
(6th Cir. 1989) (en bane).
The Ninth Circuit's en bane decision in Cnmfordv. As/rue, 586 F.3d 1142 (9th Cir.
2009), applied the Gisbrecht reasonableness analysis. The Crawford court reviewed the

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consolidated appeals of three different actions in which district courts reduced Section 406(b)
fees ti·om the amounts requested. In the first of these, claimant Clara Crawford was represented
by attorney Brian Shapiro. See Crcll1ford, 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 comt 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 conect. See id.
However, the district comt 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 comt
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 of6.68% 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. at 1145. Although Cho and Washington had entered

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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 tmnecessary delay, and that Cho's lodestar calculations were correct. See id. at 1146.
However, as for Shapiro, 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 fitm'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

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that Haley's lodestar calculations were correct, except that 1.5 hours of claimed paralegal time
and 1.4 hours of claimed paralegal time had been improperly attributed to the federal action. See
id. However, as for Shapiro and Cho, 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 fi1m'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 I 00%
"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 Crcmford 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 Crm1{ord 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 1151-1152. On the basis of
these findings, the Cra11{ord majority found that the requested fees were reasonable in each case,
and therefore reversed each district court's decision with instructions to award the requested fees.
See id. at 1152.

'

As a separate and independently adequate ground for vacating the orders below, the
Crawford court further noted the district COUlis' failure to explain the bases for the percentages

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they found to constitute reasonable enhancements of the lodestar figure in each case. See id. The
court also rejected the district comis' reliance on the attomeys' failure to provide firm-specific
success rates as a basis for reducing the requested fee awards. See id. at 1152-1153.
Here, the Administration initially rejected Bennetts' application for SSI benefits, only to
award her $38,524.00 in retroactive benefits following litigation. As in the cases reviewed by the

Crm1jord and Gisbrecht courts, Bennetts entered into a contingency fee agreement with her
counsel providing for payment of25% of her retroactive benefits to her attorney. It therefore
now falls to me to assess whether $9,631.00, or 25% of the retroactive benefits award, constitutes
reasonable compensation for Bennetts' counsel under the various factors discussed in Gisbrecht
and Crm1jord.

A.

Character of the Representation
1.

Quality of Attorney Performance

As Gisbrecht and Crm1jord both make clear, substandard performance by a legal
representative warrants a reduction in a Section 406(b) fee award. See Gisbrecht, 535 U.S. at
808; Crawford, 586 F.3d at 1151. Here, there is no indication in the record that Bennetts'
counsel's representation of his client was in any way substandard. No reduction in the Section
406(b) fee is therefore warranted due to the character of counsel's legal representation.

2.

Dilatoriness

A Section 406(b) award may properly be reduced if any delay in proceedings is properly
attributable to the claimant's counsel. See Gisbrecht, 535 U.S. at 808; Crcmford, 586 F.3d at
1151. Here, although counsel for Bennetts filed multiple motions for extension of time to file
her opening memorandum, each such extension was for a short period of time, and the delay in

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these proceedings caused by such extensions was insignificant. Review of the record does not
suggest that counsel was otherwise responsible for any unreasonable delay of these proceedings.
No reduction in the Section 406(b) fee is warranted on the basis of dilatory performance.

B.

Proportionality of Benefits Awarded to Attorney Time Spent

The Gisbrecht and Crawford comis both held that a Section 406(b) award could be
reduced if the benefits awarded to the Social Security claimant were out of proportion to the time
spent by the claimant's attomey. See Gisbrecht, 535 U.S. at 808; Crauford, 586 F.3d at 1151.
Although neither court's opinion provides significant guidance as to how to measure such
dispropmiionality, Gisbrecht established, see 535 U.S. at 808, and Crm1jord affitmed, see 586
F.3d at 1151, that records of attorney time expended and a statement of the attorney's nmmal
hourly fee in non-contingent matters could be considered in this connection, but only as an "aid"
in assessing the reasonableness of the award provided in the contingency fee agreement.
Here, Bennetts' counsel offers no evidence of either the number of hours he expended in
representing his client, of the hours he expended in connection with specifically identified
litigation tasks, or of his typical hourly rate for non-contingency work. Instead, counsel offers
only the unsworn assertion that he expended "approximately 42 hours in work on Claimant's
behalf," comprised of"approximately six hours of work in interviewing claimant, reviewing the
record, and gathering additional records," "approximately 32 hours" in pre-award litigation
before this court, and "four hours" for post-award services, and the unsworn assertion that his
typical hourly rate for noncontingency work is $300 per hour. I am concerned by counsel's
failure to provide the comi with documentary evidence of contemporaneously maintained records
of time expenditures in connection with this matter. It is counsel's burden to support his Section

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406(b) fee petition with evidence from which the court can assess the reasonableness of his time
expenditures, and I do not treat his failure to make any effmi to meet that burden lightly.
However, in light of the Commissioner's express election not to oppose counsel's petition and of
the relatively modest number of expended hours assetied to be at issue, for purposes of the
motion I accept as accurate counsel's unsworn assertions as to the number of hours expended and
his typical hourly rate.
As to counsel's hourly rate, I take judicial notice that the Oregon State Bar Economic
Surveys provide information as to rates prevalent in various Oregon legal communities in the
years in which survey data are collected. I fmiher take judicial notice that the Oregon State Bar
2012 Economic Survey provides information as to rates actually charged by Oregon attomeys in
2011. According to the 2012 Economic Survey, the median hourly rate charged by Portland-area
attomeys practicing in "other" areas of private practice in 2011 was $300.00, the same rate as
counsel asserts to be his typical hourly rate. I thus accept counsel's unsworn assetiion as to his
typical hourly rate, and find that rate to be reasonable for non-contingency matters.
Considered in isolation, the product of the lodestar calculation can at best be of extremely
limited utility in assessing the reasonableness of a contingency fee. The lodestar method of
calculating fees is designed for use where it is intended that an attorney be compensated strictly
for time expended and not on the basis of results achieved, milestones reached, or any of the
myriad other bases by which clients may permissibly compensate their legal representatives, and
where the probability of nonpayment is both low and unrelated to the attorney's ultimate success
or failure. By contrast, the method authorized under Section 406(b) is one designed to
compensate attomeys commensurately with results achieved. As a matter oflogic, the fact

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(standing alone) that a fee calculated according to the lodestar method differs from a fee
calculated according to a contingency fee agreement is uninformative as to whether the
contingency fee might be disproportionate.
Approaching the question from first principles, it is clear that the dispropmiionality
analysis can have nothing to do with the absolute amount of the Section 406(b) fee requested,
since that fee is always a maximum of25% of the retroactive benefits award, and must instead
necessarily address primarily the effective requested hourly rate that may be back-derived by
dividing the putative contingency award by the number of hours spent in pursuing it. Although
that effective requested hourly rate cannot usefully be directly compared to a reasonable hourly
fee to determine its proportionality, it is logically defensible to posit, at least in the abstract, that
an effective requested hourly rate is not disproportionately high if it is less than or equal to the
product of a reasonable hourly rate for non-contingent matters and the reciprocal of the prelitigation probability that litigation would lead to a favorable result, based on the particular facts
presented in a given case.' That is, an effective requested hourly rate cannot be
disprop01iionately high if it does not overcompensate an attorney for the risk that attorney
assumed at the time the representation was undertaken that the attomey would ultimately receive
no compensation for his or her services. An attorney is not overcompensated for such risk if the
pre-litigation expected value of the representation - the probability of a favorable result times the
compensation that would be received in the event of a favorable result- does not exceed the

1

Thus, if $1 00 is a reasonable hourly rate of compensation for non-contingent matters,
an effective requested hourly rate would not be disproportionate in light of the risk a pmiicular
contingency matter presented if, e.g., the effective requested hourly rate did not exceed $400 (or
four times the reasonable hourly rate) where the probability of a favorable outcome was 25% (or
a one in four chance).
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product of the appropriate hourly rate and the expected number of hours required.
In addition to giving cognizable effect to the Gisbrecht court's suggestion that an
attomey's normal hourly rate could bear materially on the disproportionality analysis and the

Crawford court's suggestion that case-specific risk could be a material factor in assessing the
reasonableness of a Section 406(b) fee, measuring the relationship between a reasmiable hourly
fee for non-contingent matters and the effective requested hourly rate by reference to the casespecific risk of an unfavorable result has the benefit of suggesting a potentially useful metric for
assessing propmiionality: a contingency fee award is disproportionately high where it
disproportionately overcompensates for the pre-litigation risk of an unfavorable result. I
therefore assess the propotiionality of the fee requested in this action to the time expended in
litigation by reference to this risk-assessment metric.
According to his unsworn assertion, Bennetts' counsel expended 42 hours in connection
with litigating Bennetts' application for SSI benefits. To give effect to the contingency fee
anangement in place between Bennetts and her counsel would thus yield an effective hourly rate
of$229.31 (25% of $38,524.00 is $9,631.00; the quotient of $9,631.00 and 42 hours is $229.31
per hour). Because the back-derived rate for the contingency fee is lower than the $300
reasonable hourly rate for non-contingency matters, it is evident that the requested contingency
fee cannot constitute overcompensation for the risk presented by counsel's decision to undetiake
Bennetts' representation, because it is logically impossible that the pre-litigation risk of an
ultimate unfavorable outcome was less than zero. I therefore conclude that reduction is not
wananted in connection with the proportionality factor, taking into account the case-specific
risks and the appropriate nmmal hourly rate for non-contingent matters.

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C.

Appropriate Fee

For the foregoing reasons, I find that the contingency fee agreement in place between
Bennetts and her counsel is within the statutory limits provided in 29 U.S. C.§ 406(b), and that
the fee provided therein is reasonable. Counsel's motion for approval of Section 406(b) fees is
therefore granted, and payment to Bennetts' counsel of $3,979.94 from Bennetts' retroactive fee
award is approved.
CONCLUSION

For the reasons set forth above, counsel's motion (#29) for Section 406(b) attomey fees is
granted, and payment to Bem1etts' counsel of $3,979.94 from Bennetts' award of retroactive SSI
benefits is approved.

Dated this I Oth day of December, 2012.

Honorable Paul Papa
United States Magistrate Judge

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