Astrue v. Ratliff (08-1322)

Appealed from the United States Court of Appeals for the Eighth Circuit (Sept. 5, 2008)

Oral argument: Feb. 22, 2009

EQUAL ACCESS TO JUSTICE ACT, SOCIAL SECURITY

Petitioner, Michael J. Astrue (“Astrue”), argues that an award of fees and other expenses under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d), is payable to the prevailing party in Social Security cases. Respondent, Catherine G. Ratliff (“Ratliff”), counters that an award of attorneys’ fees should go to the prevailing party’s attorney as compensation for services rendered. Astrue asserts that an award of attorneys’ fees is subject to an administrative offset to satisfy the prevailing party’s debt, if any, to the United States. Ratliff argues that because the award belongs to the party’s attorney and not to the party itself, the award of attorneys’ fees cannot be subject to an offset for a debt that is not his or her own. The Eighth Circuit held that Congress intended attorneys’ fees awarded under EAJA to go to the prevailing party’s attorney and not to the prevailing party. The Supreme Court must resolve whether an award of attorneys’ fees under EAJA is payable to the prevailing party rather than the party’s attorney and, therefore, is subject to an administrative offset for a pre-existing debt owed by the prevailing party to the federal government.

Question presented

Whether an "award of fees and other expenses" under the Equal Access to Justice Act, 28 U.S.C. 2412(d), is payable to the "prevailing party" rather than to the prevailing party's attorney, and therefore is subject to an offset for a pre-existing debt owed by the prevailing party to the United States.

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Issue

Whether, under the Equal Access to Justice Act, fee awards are payable to attorneys or to their clients.

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Facts

Respondent, Catherine G. Ratliff (“Ratliff”), an attorney, successfully represented two claimants seeking benefits from the Social Security Administration. See Ratliff v. Astrue, 540 F.3d 800, 801 (8th Cir. 2008). Ratliff then moved for an award of fees and costs under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d), in the South Dakota Federal District Court. See id. The court granted the award, but the government did not give her the full amount of fees owed to her. See id. Instead, the government reduced the fee award to pay for debts her clients owed the federal government. See id. Ratliff objected to this and alleged that it was an illegal seizure under the Fourth Amendment. See id. The district court held that Ratliff lacked standing to challenge the government’s offset because the fees were awarded to the parties and not their attorney. See id.

The United States Court of Appeals for the Eighth Circuit reversed the district court’s decision based on controlling Eighth Circuit precedent. See Ratliff, 540 F.3d at 801. The court of appeals held that attorney fees awarded under EAJA are awarded the prevailing parties’ attorneys and not the parties themselves. See id. As such, the government cannot reduce them to pay for debts the parties owe to the federal government. See id. As California Attorney’s Fees points out, this decision is contrary to the holdings of several other circuits. See EAJA Federal Circuit Court Split: U.S. Supreme Court to Hear Case on Whether Social Security Disability Fee Awards are Payable to Client or Client's Attorney.

On September 30, 2009, the United States Supreme Court granted certiorari to determine whether an award of fees and other expenses under EAJA is payable to the prevailing parties rather than to the prevailing parties’ attorney. See Question Presented.

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Discussion

This case will determine whether an award of fees and other expenses under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412(d), is payable to the prevailing party rather than to the prevailing party’s attorney. Amici Curiae in support of Respondent, Catherine G. Ratliff (“Ratliff”), an attorney, argue that in many Social Security court cases, attorneys may only receive EAJA fees as payment. See Brief of Amicus Curiae National Organization of Social Security Claimants' Representatives, et al. ("NOSSCR") in Support of Respondent at 22. NOCCSR is concerned that subjecting attorneys’ fees to debt recovery would create a significant disincentive for attorneys to represent individuals with substantial debt in Social Security cases. See id. Often these individuals’ claims do have legal merit, and in many cases, the Social Security benefits they seek cover their “ordinary and necessary living expenses.” See id. NOCCSR contends that it is vital to improve access to representation in Social Security cases instead of impairing it, and that in Social Security cases, EAJA attorneys’ fees awards must go to the attorney to ensure payment. See id.

Additionally, NOSSCR contends that Congress enacted EAJA for the purpose of improving access to the courts. See Brief of NOSSCR at 11. Congress intended EAJA to encourage and permit private parties of modest means to recover litigation costs, thereby making it easier for individuals whom the Government has unjustly harmed to challenge the Government’s actions. See id. at 12. Thus, NOSSCR insists that 28 U.S.C. § 2412(d) was never intended to provide the Government a means for collecting debts it is owed. See id.

Petitioner, Michael J. Astrue, Commissioner of Social Security (“Astrue”), argues that the Eighth Circuit’s holding is inconsistent with the text of EAJA and congressional intent. See Brief for Petitioner, Michael J. Astrue at 10. EAJA provides that, in circumstances where an award is appropriate and “[e]xcept as otherwise specifically provided by statute, a court shall award to a prevailing party . . . fees and other expenses . . . incurred by that party.” 28 U.S.C. §2412(d)(1)(A). Astrue contends that EAJA’s text thus compels the court to award attorneys’ fees to prevailing parties rather than to their attorneys. See Brief for Petitioner at 14-15.

Astrue further argues that the Eighth Circuit’s decision is contrary to congressional intent. See Brief for Petitioner at 19. He maintains that the application of the holding in Ratliff v. Astrue would create “unusual and cumbersome outcomes” that Congress could not have intended. See id. He predicts that if multiple law firms represented an individual, the Eighth Circuit’s decision would require EAJA rewards to be divided into multiple payments which would be cumbersome for the court. See id. This result would be unusual, because the statute does not distinguish between attorneys and other businesses providing the prevailing party with litigation services (e.g. expert witnesses, engineers, scientists, and other analysts), and the Eighth Circuit’s holding would require EAJA rewards to go to these persons as well. See id.

As California Attorney’s Fees points out, the Court’s decision will settle a federal circuit split. In Stephens v. Astrue, the United States Court of Appeals for the Fourth Circuit held that fees are payable to the prevailing party. Stephens v. Astrue, 565 F.3d 131 (4th Cir. 2009). This decision goes directly against the holding of the United States Court of Appeals for the Eighth Circuit in Ratliff v. Astrue in which the Eighth Circuit held that attorneys’ fees awarded under EAJA are awarded to the prevailing parties’ attorneys and not the parties themselves and as such, that the government cannot reduce them to pay for debts the parties owe to the federal government. Ratliff v. Astrue, 540 F.3d 800, 801 (8th Cir. 2008).

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Analysis

The Equal Access to Justice Act (“EAJA”) provides that “…a court shall award to a prevailing party other than the United States fees and other expenses…” 28 U.S.C. § 2412(d). Petitioner, Michael J. Astrue (“Astrue”), and respondent, Catherine G. Ratliff (“Ratliff”), disagree as to the intended recipient of the award of attorneys’ fees. The Eighth Circuit sided with Ratliff and held that Congress intended attorneys’ fees awarded under EAJA to go to the prevailing party’s attorney and not to the prevailing party itself. See Ratliff v. Astrue, 540 F.3d 800, 801 (8th Cir. 2008). The Eighth Circuit also concluded that because the fee award goes to the prevailing party’s attorney, “it cannot be used to offset the parties’ debt to the government.” See id. The Supreme Court must now decide whether (1) an “award of fees and other expenses” under EAJA is payable to the prevailing party rather than to the prevailing party’s attorney and (2) if the award goes to the prevailing party, whether that award is “subject to an offset for a pre-existing debt owed by the prevailing party to the United States.” See Questions Presented.

Does the text of EAJA illuminate Congress’s intended recipient of an award of attorneys’ fees?

Much of the dispute between petitioner, Astrue, and respondent, Ratliff, involves language. Astrue argues that an award of attorneys’ fees under EAJA should go to the prevailing party and not to the prevailing party’s attorney. See Brief for Petitioner, Michael J. Astrue at 13. Astrue asserts that the language of § 2412(d) “unambiguously” indicates that Congress intended the award to go to the prevailing party as the statute explicitly states, “a court shall award to a prevailing party…fees and other expenses.” See 28 U.S.C. § 2412(d); see id. at 14–15.

Astrue also cites § 2412(d)’s fee application procedure in support of his argument. Astrue points out that the “prevailing party,” and not the attorney, must indicate the fee amount sought as well as indicate their net worth. See Brief for Petitioner at 18. He asserts that these procedural details are clear evidence that the government must pay EAJA awards directly to the party. See id. Astrue contends that the Eighth Circuit’s opinion is nonsensical in that the attorneys are not ones who applied and established eligibility for the award. See id.

Conversely Ratliff argues that in Social Security cases “attorneys’ fees” are fees payable directly to the prevailing party’s attorney. See Brief for Respondent, Catherine J. Astrue at 19. Ratliff explains that attorneys’ fees should go to the attorneys directly, because that is the traditional judicial understanding of “attorneys’ fees” and is consistent with Supreme Court precedent. See id. Ratliff explains that Supreme Court precedent authorizes payment to the attorney directly if necessary to avoid a “windfall” to the prevailing party or, as in this case, “to prevent the client’s creditor from offsetting the attorney’s fee.” Id. at 23.

Focusing on the language of EAJA, Ratliff states that “award” is a synonym for “decision.” See Brief for Respondent at 15. She explains that the “award” is the decision to grant fees, but only the attorney is entitled to “receive” the fees for services rendered. See id. Also citing § 2412(d)’s text, Ratliff explains that the phrase “incurred by” indicates that attorneys take Social Security cases in expectation of being compensated if EAJA awards attorneys’ fees. See id. at 18. Also making a procedural argument, Ratliff points out that IRS 1099 forms are issued directly to attorneys and state that awards of fees are taxable income of attorneys. See id. at 28.

Does the history and purpose of EAJA’s enactment indicate which party Congress intended to receive the award of attorneys’ fees?

In support of his argument, Astrue compares EAJA’s relationship to 42 U.S.C. § 406(d). Section 406(b) contains clear language authorizing the federal government to directly pay attorneys to ensure that attorneys are compensated for their services. See Brief for Petitioner at 22. Astrue points out that, unlike § 406(b), § 2412(d) does not contain explicit language authorizing direct payment to the prevailing party’s attorney. See id. at 23. Therefore, according to Astrue, the dissimilar language in § 406(b) and § 2412(d) shows that when Congress intends payment to go directly to attorneys, it will explicitly say so. See id. Astrue therefore concludes that the absence of language in § 2412(d) directing payment to attorneys illustrates Congress’s intent that the award of attorney’s fees go to the prevailing party. See id.

Astrue cites § 206(b) in support of his assertion that the prevailing party is the intended recipient of an award of attorney’s fees. See Brief for Petitioner at 22. Section 206(b) is the 1985 amendment to EAJA, which clarified that when an attorney representing a Social Security claimant receives fees under either § 406(b) or § 2412(d), the claimant is the beneficiary of the EAJA award. See id. at 26. Astrue concludes, “had Congress intended for EAJA awards in Social Security cases to be payable directly to the attorneys who provide the relevant services, it presumably would have used language similar to that in Section 406(b).” See id. at 27.

However, Ratliff asserts that EAJA’s history and purpose indicates that awards of attorneys’ fees should be paid to attorneys. See Brief for Respondent at 37. She explains that the purpose of EAJA is to encourage attorneys to represent claimants with meritorious claims by promising a possible award of fees. See id. Ratliff notes “attorneys are more likely to provide legal services if they may be paid for them.” See id. at 38. She continues that the purpose of EAJA is to serve the public interest and it is not designed to improve the “short-term lot of a few plaintiffs or their creditors.” See id.

Ratliff concludes that the Supreme Court should reject any lower court decision that discourages attorneys from taking Social Security cases, as that would be contrary to the purpose of EAJA. See Brief for Respondent at 39. According to Ratliff, Congress enacted EAJA to enable poor claimants to challenge unjustified government action by giving attorneys a financial incentive (possible award of attorneys’ fees) that would not otherwise exist. See id. at 40–42.

Are EAJA awards subject to administrative offsets to satisfy debts owed to the United States by the prevailing party?

Astrue explains that because the award of attorneys’ fees is payable to the prevailing party, that award is subject to an administrative offset under 31 U.S.C. § 3716 to satisfy a debt owed to the United States. See Brief for Petitioner at 32. Additionally, Astrue cites the Debt Collection Improvement Act of 1996 as evidence of Congress’s intent that awards under EAJA be subject to an administrative offset. See id. Astrue explains that the Debt Collection Improvement Act reflects Congress’s effort to maximize the collection of debts owed to the United States by using all appropriate collection methods. See id. He infers that subjecting EAJA awards to an administrative offset is an appropriate collection method. See id. at 34. Astrue explains that the only reason the Eighth Circuit rejected an administrative offset is because it held that the awards should go to the prevailing party’s attorney rather than the prevailing party. See id. So, according to Astrue, there is nothing inherently unjust about subjecting an award of attorneys’ fees to an administrative offset to satisfy the prevailing party’s debt to the government if that award goes to the prevailing party. See id.

Conversely, Ratliff asserts that an award of attorney’s fees, even if awarded to the prevailing party, is not subject to an administrative offset. See Brief for Respondent at 43. Ratliff argues that the fee award is intended as payment for the attorney’s successful services and thus the prevailing party is obligated to pay the fees to the attorney. See id. at 45. Ratliff explains that because the award belongs to the attorney, it is not subject to an offset. See id. She notes “treasury regulations foreclose offset of payments made for the benefit of a person who does not owe a debt to the government.” See id.

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Conclusion

This case will determine whether the prevailing party or the prevailing party’s attorney in a Social Security case should receive the award of attorney’s fees. Though both parties engage in a textual and historical analysis of the Equal Access to Justice Act (“EAJA”), they reach different conclusions regarding who is the rightful recipient of the award. The Supreme Court must decide whether the language of EAJA is unambiguous and the award should go to the “prevailing party” or whether public policy considerations behind EAJA’s enactment suggest Congress intended that the successful attorney receive the award.

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Authors

Prepared by: Barbara Bispham and Kate Hajjar

Edited by: Lauren Jones

Additional Sources

California Attorney's Fees: EAJA Federal Circuit Court Split: U.S. Supreme Court to Hear Case on Whether Social Security Disability Fee Awards Are Payable to Client or Client’s Attorney

California Attorney's Fees: Special Fee Shifting Statute: Split among Federal Circuit Courts on Whether EAJA Fee Awards Are Payable to Claimant Rather than Attorney, Allowing Offsets by Government Entities

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