Brown v. Commissioner, Social Security Administration

Filing 31

OPINION & ORDER: Plaintiff's Motion for Section 406(b) Attorney Fees 30 is Granted, and payment to Brown's counsel of $11,114.68 (less payment of any EAJA fees received and less an administrative deduction to be assessed by the Commissioner pursuant to 42 U.S.C. § 406(d)) from Brown's award of retroactive SSI benefits is approved. Signed on 9/25/15 by Magistrate Judge Paul Papak. (gm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
WALTERL. BROWN,
Plaintiff,
6:13-CV-1518-PK
OPINION AND
ORDER

v.

CAROLYN W. COLVIN,
Defendant.
PAP AK, Magistrate Judge:
Plaintiff Walter L. Brown filed this action against defendant Carolyn W. Colvin, Acting
Commissioner of Social Security, on August 28, 2013, seeking judicial review of the
Commissioner's decision finding him not disabled for purposes of entitlement to supplemental
security income benefits ("SSI") under Title XVI of the Social Security Act. On April 24, 2015, I
issued an order reversing the Commissioner's final decision and remanding Brown's petition
pursuant to sentence four of 42 U.S.C. § 405(g) for the immediate calculation and payment of
SSI benefits. Brown moved unopposed for an award of attomey fees pursuant to the Equal
Access to Justice Act (the "EAJA") on July 22, 2015, and on July 23, 2015, I granted the motion,
authorizing award of fees to Brown pursuant to the EAJA in the amount of$4,537.42.
Now before the court is Brown's unopposed motion (#30), filed pursuant to 42 U.S.C. §
406(b), for approval of payment to his counsel out of his retroactive benefits award of
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$49,492.00 the amount of $11,823.25, 1 less payment of any EAJA fees received and less an
administrative deduction to be assessed by the Commissioner pursuant to 42 U.S.C. § 406(d). I
have considered Brown's moving papers and all of the evidence in the record. For the reasons set
foith below, Brown's motion is granted, and payment to Brown's counsel of attorney fees in the
amount of $11,114.68 (less payment of any EAJA fees received and less an administrative
deduction to be assessed by the Commissioner pursuant to 42 U.S.C. § 406(d)) is approved.
ANALYSIS
Pursuant to 42 U.S.C. § 406(b), Brown's counsel seeks the cou1t's approval of payment to
him of attorney fees out of Brown's retroactive benefits award in the amount of $11,823.25. This
amount does not reflect any deduction from the 25% contingency fee to which Brown's counsel is
entitled pursuant to her fee agreement with Brown, which counsel asserts she has not received,
nor does it reflect any deduction from the contingency amount pursuant to 42 U.S.C. § 406(d).
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 cou11 may
detennine and allow as part 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

1

Brown characterizes this requested amount as constituting 25% of his retroactive
benefits award, but 25% of his retroactive benefits award is in fact $12,373.00.
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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 Gisbrechtv. 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 Section 406(b)
contingency fee is not to be dete1mined 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 te1ms 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, comis 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
claimant's counsel bears the burden to establish the reasonableness of a Section 496(b) fee. See

id. at 807.
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

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fee agreement, a record of the hours spent reptesenting 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 bane).
The Ninth Circuit's en bane decision in Crawford v. Astrue, 586 F.3d 1142 (9th Cir.
2009), applied the Gisbrecht reasonableness analysis. The Crm1ford court affirmed Gisbrecht's
holding that it is error to dete1mine the reasonableness of a Section 406(b) fee by the metric of
the lodestar method. See Crawford, 586F.3d at 1150.
Here, Brown entered into a contingency fee agreement with his counsel providing for
payment of25% of his retroactive benefits to his attorney. It therefore now falls to me to assess
whether $11,823.25.00, or 23.89% of the retroactive benefits award, constitutes reasonable
compensation for Brown's counsel under the various factors discussed in Gisbrecht and

Crawford.

A.

Character of the Representation
1.

Quality of Attorney Performance

As Gisbrecht and Crallford 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; Crmiford, 586 F.3d at 1151. Here, there is no indication in the record that Brown's
counsel's representation of her 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; Crmiford, 586 F.3d at

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1151. Here, Brown's counsel sought and received a 101-day extension of the deadline for filing
the opening brief and a 15-day extension of the deadline for filing a reply memorandum due, in
each case, to "a combination of press of business and personal matters." Although there was no
impropriety in seeking an extension of court deadlines attributable to challenges in workload
management or even (as in connection with the reply memorandum) to accommodate personal
vacation time, such extension did occasion delay in the final outcome of review proceedings for
which the attorney was squarely responsible, warranting a commensurate reduction under

Gisbrecht. Moreover, although there was similarly nothing inherently umeasonable about the
request for extension itself, I find under the court's inherent authority and obligation to evaluate
the reasonableness of fee awards, see Gisbrecht, 535 U.S. at 808, see also Craiiford, 586 F.3d at
1149, that it would nevertheless be unreasonable for Brown's attorney to benefit financially at
Brown's expense from a delay caused by the attorney's difficulties in managing the workload she
elected to bear and/or by the attorney's personal affairs. 2
But for the attorney-attributable delay, Brown would have had 116 fewer days of past-due
benefits, and would have received benefits for those 116 days without a deduction for attorney
fees. Those 116 days of benefits would have been compensated at a monthly rate of$733.00,
and thus would have been compensated in the total amount of$2,834.27, twenty-five percent of
which is $708.57. The requested Section 406(b) fee is therefore reduced by $708.57 on the basis
of attorney delay.

B.

Proportionality of Benefits Awarded to Attorney Time Spent

2

Where extension is sought due to the particular complexity of a case or for the purpose
of facilitating settlement negotiations, attorney-requested extensions of time do not warrant
reduction under Gisbrecht. However, those factors are not at issue here.
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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 attorney. See Gisbrecht, 535 U.S. at 808; Crawford, 586 F.3d at 1151.
Although neither cou1t's opinion provides significant guidance as to how to measure such
disproportionality, Gisbrecht established, see 535 U.S. at 808, and Crauford affomed, see 586
F.3d at 1151, that records of attorney time expended and a statement of the attorney's n01mal
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.
As noted above, the Gisbrecht and CraHford courts made clear that the lodestar method
is an inappropriate metric for determining the proportionality of Section 406(b) compensation.

See Gisbrecht, 535 U.S. at 801-802; Crm1ford, 586 F.3d at 1150. Indeed, 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
rather than on the basis of results achieved, milestones reached, or any of the myriad other bases
on 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 attorneys
commensurately with results achieved, and to take into account the risk of failure, in which case
no compensation is available. As a matter of logic, the fact (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 dispropo1iionate.

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Approaching the question from first principles, it is clear that the disproportionality
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 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 pre-litigation probability that
litigation would lead to a favorable result, based on the paiiicular facts presented in a given case. 3
That is, an effective requested hourly rate cannot be disproportionately high if it does not
overcompensate an attorney for the risk that attorney assumed at the time the representation was
unde1iaken that the attorney 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 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
attorney's normal hourly rate could bear materially on the disproportionality analysis, see

3

Thus, if $100 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 particular
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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Gisbrecht, 535 U.S. at 808, and to the Crm1ford court's suggestion that case-specific risk could
be a material factor in assessing the reasonableness of a Section 406(b) fee, see CraHford, 586
F.3d at 1152-1153, measuring the relationship between a reasonable hourly fee for noncontingent matters and the effective requested hourly rate by reference to the case-specific risk of
an unfavorable result has the benefit of suggesting a potentially useful metric for assessing
proportionality: a contingency fee award is disproportionately high where it disproportionately
overcompensates for the pre-litigation risk of an unfavorable result. I therefore assess the
proportionality of the fee requested in this action to the time expended in litigation by reference
to this risk-assessment metric.
Here, Brown's counsel offers evidence that Brown's attorneys expended a total of23.9
hours in litigating Brown's petition for judicial review; this time does not include time spent
preparing the motion for 406(b) fees. Compensation for 23.9 hours work in the amount of
$11,823.25 in a non-contingency context would reflect an hourly rate of $494.70. Brown's
counsel offers no evidence of her nonnal hourly rate, but I may 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, that the legal services at issue
here were performed by Kathryn Tassinari, a Eugene-based practitioner, in 2013, 2014, and 2015,
that Tassinari has been a member of the Oregon bar since 1980, that the most recent such survey
issued in 2012 and provides information as to rates actually charged by Oregon attorneys in 2011,
and that, according to the 2012 Economic Survey, the median hourly rate charged by Oregon
attorneys with 21-30 years' experience in private practice in 2011 was $250.00. An appropriate
method for adjusting the 2011 rates reported in the 2012 Economic Survey for inflation to

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produce an estimate of the co1Tesponding rates prevalent in the material legal community in
2013, 2014, and 2015, when Brown's petition for judicial review was litigated, is to multiply the
2011 rates by the federal Bureau of Labor Statistics' rep01ied consumer price index for urban
consumers ("CPI-U") for the years in which the fees were incurred, and then to divide the
resulting quotients by the reported CPI-U for 2011. I take judicial notice that the Bureau of
Labor Statistics has published a CPI-U for the Western states of227.485 for 2011, of235.824 for
2013, or 240.215 for 2014, and of241.770 for the first half of2015. Adjusting for inflation thus
yields constructive reasonable average rates of$259.16 for 2013, $263.99 for 2014, and $265.70
for the first half of 2015.
Because the back-derived rate for the contingency fee is $495, or approximately 1.9 times
the constructive reasonable hourly rates for non-contingency work, the requested contingency fee
can only can only be dispropo1iionate if, at the time Tassinari unde1took to represent Brown, the
risk of an unfavorable outcome was clearly lower than approximately 4 7%. In light of the fact
that Brown's medical history included a hist01y of substance abuse, which nearly always
increases the risk of an unfavorable outcome in Social Security cases, I do not find that the risk to
Tassinari of an unfavorable outcome was clearly lower than 47% at the time she undertook
Brown's representation. I therefore conclude that reduction is not wananted in connection with
the proportionality factor, taking into account the case-specific risks and the appropriate normal
hourly rate for non-contingent matters.

C.

Appropriate Fee

For the foregoing reasons, I find that the contingency fee agreement in place between
Brown and his counsel is within the statutory limits provided in 29 U.S.C. § 406(b), and that the

Page 9 - OPINION AND ORDER

fee provided therein is reasonable. The motion for approval of Section 406(b) fees is therefore
granted, and payment to Brown's counsel of $11,114.68 (less payment of any EAJA fees received
and less an administrative deduction to be assessed by the Commissioner pursuant to 42 U.S.C. §
406(d)) from Brown's retroactive fee award is approved.
CONCLUSION
For the reasons set fotih above, the motion (#30) for Section 406(b) attorney fees is
granted, and payment to Brown's counsel of $11,114.68 (less payment of any EAJA fees received
and less an administrative deduction to be assessed by the Commissioner pursuant to 42 U.S.C. §
406( d)) from Brown's award of retroactive SSI benefits is approved.

Dated this 25th day of September, 20"1~~

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