Does 42 U.S.C. § 406(b) limit attorney’s fees to 25 percent for fees incurred in representing a claimant before a court and before the Social Security agency; or, does the 25-percent limit only apply to fees related to representation before the agency?
This case asks the Supreme Court to decide how to calculate attorney’s fees for representation in court and before the Social Security Administration (“SSA”) under 42 U.S.C. § 406(b). Richard Culbertson sought an attorney’s fee of 25 percent of the past-due benefits awarded to the Social Security claimants whom he represented in court. Culbertson contends that § 406(b)’s 25-percent cap applies only to his representation before a court. The Court of Appeals applied § 406(b)’s 25-percent cap to the sum of attorney’s fees under § 406(a) and § 406(b). Berryhill agrees with Culbertson’s position, while the Supreme Court-appointed amicus curiae supports the Court of Appeals. This case will impact Social Security claimants’ protections from overbilling and the financial incentives allowing claimants to access competent legal representation.
Questions as Framed for the Court by the Parties
Whether fees subject to 42 U.S.C. § 406(b)’s 25-percent cap related to the representation of individuals claiming Social Security benefits include, as the U.S. Courts of Appeals for the 6th, 9th, and 10th Circuits hold, only fees for representation in court or, as the U.S. Courts of Appeals for the 4th, 5th, and 11th Circuits hold, also fees for representation before the agency.
This case consolidated four actions brought by Richard Culbertson, who represented claimants Katrina Wood, Celalettin Akarcay, Bill Westfall, and Darleen Schuster, each of whom was denied disability benefits by the Commissioner of Social Security (“Commissioner”). Culbertson successfully challenged these decisions, winning benefits for each of his clients.
In Wood’s case, a magistrate judge awarded Culbertson attorney’s fees under the Equal Access to Justice Act (“EAJA”). The EAJA entitles an attorney who has succeeded in a civil suit against the Government to collect attorney’s fees from the Government directly. Culbertson was also awarded attorney’s fees by the Commissioner under 42 U.S.C. § 406(a). Both of these fees were distributed from a fund containing the standard withholding of 25 percent of the claimant’s awarded past-due benefits. Under § 406(a), an attorney may collect up to 25 percent of a client’s past-due benefits when filing a claim for those benefits to the Commissioner of Social Security.
Culbertson then asked the judge for attorney’s fees, as per 42 U.S.C. § 406(b). Under § 406(b), an attorney may collect as much as 25 percent of the client’s past-due benefits when making a claim for those benefits in court. To calculate what he was owed under § 406(b), Culbertson subtracted the attorney’s fees he received under the EAJA from 25 percent of the past due benefits Wood received. However, the judge disagreed with this calculation and subtracted the amount Culbertson collected under § 406(a) in addition to what he received under the EAJA from 25 percent of Wood’s award.
In the cases of Akarcay and Schuster, Culbertson had already collected fees under the EAJA, and requested additional fees under § 406(b). However, in both cases the judge refused to award Culbertson fees under § 406(b) until the Commissioner determined how much Culbertson was owed under § 406(a). In Westfall’s case, the judge did grant Culbertson a fee award under § 406(b) in addition to that which he received under the EAJA, but ruled that the Commissioner could not grant an additional fee later under § 406(a). Culbertson challenged these four decisions in the Eleventh Circuit Court of Appeals, arguing that the judge should not have capped the total fees he could receive under § 406 to 25 percent of the claimants’ awarded benefits. He also noted that the Sixth, Ninth, and Tenth Circuits had held similarly. The Eleventh Circuit disagreed and cited the Fourth and Fifth Circuits’ holdings that the aggregate fees that could be collected under § 406 should be capped at 25 percent of a claimant’s benefits.
Culbertson then appealed the Eleventh Circuit’s ruling to the Supreme Court. In its brief in response to Culbertson’s appeal, the Government reversed its position stating that it agreed with Culbertson’s argument that fees collected under both § 406(a) and (b) should not be capped in the aggregate to 25 percent of a claimant’s benefits. The Government conceded that after a more careful reading of § 406 it decided that its earlier reading of the text was incorrect. In response to the Government’s change in position, the Supreme Court appointed another amicus curiae, Amy Weil, to write in support of the Eleventh Circuit’s ruling.
§ 406(B)’S TEXT AND STRUCTURE
Richard Culbertson argues that the plain text of § 406(b) and the structure of § 406 confirm that the 25 percent cap on attorney’s fees applies only to fees incurred in representation before the court. Culbertson notes that the language of § 406(b) has a clear meaning, which controls interpretation of the statute. Culbertson asserts that § 406(b)’s cap on attorney’s fees for “such representation” must refer to representation before a court because court representation is the only kind of representation mentioned in that section. Culbertson also points out that Congress would have mirrored the language in in § 406(a), which specifies representation “before the Commissioner for benefits” and “fees . . . in the aggregate,” if Congress intended § 406(b) to cap the total attorney’s fees.
Furthermore, according to Culbertson, the separate regulation mechanisms under § 406(a) and § 406(b) confirm that § 406(b)’s 25-percent cap does not apply to § 406(a). Culbertson notes that § 406(a), which governs attorney’s fees for representation before agencies, already imposes a “reasonableness” test. Therefore, Culbertson argues, there is no need for § 406(b) to regulate attorney’s fees that fall under § 406(a). Culbertson maintains that § 406(a) allows attorney’s fees above 25 percent of benefits, so applying § 406(b)’s 25-percent cap to agency representation conflicts with § 406(a). Moreover, Culbertson emphasizes that the SSA’s Program Operations Manual System (“POMS”), which guides Social Security administrators, anticipates situations where attorney’s total fees for § 406(a) and (b) representation exceeds 25 percent.
Nancy Berryhill on behalf of the United States also argues that § 406(b)’s 25-percent cap should apply only to attorney’s fees for court proceedings. Berryhill notes that the 25-percent cap cannot apply to aggregated fees because POMS authorizes the SSA to pay out attorney’s fees greater than 25-percent for agency representation alone. Furthermore, according to Berryhill, the determinative cases in the Eleventh Circuit’s decision, Dawson v. Finch and Morris v. Social Security Administration, incorrectly interpreted § 406(b). Berryhill asserts that the court in Dawson did not analyze the text of § 406(b) and relied on congressional testimony that actually limits § 406(b) to court representation. Berryhill challenges the interpretation of § 406(a) in Morris, which held that the statute prohibits attorneys from receiving fees greater than 25 percent. .
In contrast, Amy Weil, the court-appointed amicus curiae arguing in support of the Eleventh Circuit’s decision, argues that combined attorney’s fees under § 406(a) and § 406(b) may not exceed 25 percent of a claimant’s benefits. . Weil begins by noting that the statute does not specify whether the 25-percent cap applies to aggregated fees. . Thus, Weil stresses that legislative history and Congressional intent are persuasive. Weil contends that the Supreme Court’s past rulings support a holistic reading of the § 406’s language. . Weil asserts that because the Social Security Act’s purpose is to provide a remedy for claimants, the language of the statute should be read to favor claimants.
In response to Culbertson’s structural argument, Weil admits that both § 406(a) and § 406(b) provide different ways of regulating attorney’s fees. Yet, Weil contends that Culbertson’s interpretation of § 406 would lead to absurd results. According to Weil, if the sum of attorney’s fees can exceed 25 percent of benefits, the agency lawyer and the court lawyer would be racing against each other to receive their respective fees. Weil asserts that Congress would not have intended to create such a race between lawyers. Weil also argues that Culbertson’s interpretation of § 406(b) allows the sum of attorney fees up to 75 percent of a claimant’s benefits. Weil maintains that, under § 406(b), a court can allow an attorney’s fee up to 25 percent of the claimant’s benefits whenever a court rules in favor of a claimant. According to Weil, § 406(b) does not define the word “court”; therefore, under Culbertson’s “plain language” approach, court attorneys for the district court and the appellate court can charge up to 50 percent, in addition to the 25 percent of benefits for agency representation.
Weil maintains that the POMS is merely a guide, which does not provide a legal opinion on whether the 25-percent cap applies to combined § 406(a) and (b) fees. Furthermore, Weil notes that Berryhill agreed with Dawson and perpetuated the 25-percent aggregate rule for 35 years. Weil argues that the Commissioner acts contrary to the interests of the claimants because her new interpretation of § 406(b) may reduce the benefits claimants retain.
§ 406(B)’S LEGISLATIVE HISTORY AND CONGRESS’S INTENT
Culbertson contends that Congress enacted § 406(b) to limit excessive attorney’s fees incurred in court proceedings. Culbertson asserts that limiting the 25-percent cap on in-court representation fees would still protect the majority of claimant’s benefits. Culbertson argues that future benefits comprise the majority of a claimant’s total award and would be wholly retained by complainants under his interpretation.
Berryhill argues that SSA and reviewing courts’ “discretion to prevent unduly large fees” sufficiently protects claimants from overbilling by attorneys. Berryhill explains that the SSA requires attorneys to disclose all of the fees that the attorneys are charging for the matter and that the SSA approves only “reasonable fee[s]”. Furthermore, Berryhill states that the claimant can request that the SSA reduce the fee. Berryhill maintains that, even without a 25-percent cap on the aggregate fees, Congress granted reviewing courts discretion to determine reasonable fee amounts based on the “overall fee burden on the claimant.”
Weil counters that although § 406 is silent on the scope of § 406(b)’s 25-percent gap, the legislative history of § 406 shows that § 406 limits both court and agency attorney’s fees to a total of 25 percent of benefits. According to Weil, Congress amended § 406 in 1965, capping court fees at 25 percent, to protect Social Security claimants from attorney’s fees that had been cutting their benefits by up to half. Thus, Weil continues, Congress could not have intended the subsequent 1968 amendment to allow an attorney’s fee of up to 50 percent of a claimant’s benefits. Weil suggests that existing safeguards are insufficient to prevent excessive attorney’s fees, citing fee awards of near 50 percent of past-due benefits in circuits rejecting the 25-percent aggregate rule. Weil emphasizes that § 406(b) must cap aggregated fees to fulfill Congress’s intent to prevent lawyers from taking advantage of Social Security claimants. Lastly, Weil adds that a broad interpretation of the attorney’s fees provisions would further the claimant-protection purpose of the Social Security Act.
VULNERABILITY OF CLAIMANTS
The National Organization of Social Security Claimants’ Representatives (“NOSSCR”) acknowledges that many Social Security claimants are financially restricted. However, NOSSCR also notes that attorneys who represent claimants have limited means to collect attorney’s fees. According to the NOSSCR, even if an attorney is not limited to a 25-percent cap, the Social Security Act prohibits an attorney from initiating legal processes against a claimant to obtain legal fees under § 406(a) and (b). The NOSSCR also asserts that because of many claimants’ financial limitations, initiating a legal proceeding against them would be futile due to their inability to pay. Additionally, Culbertson argues that if a claimant receives a future windfall, it is not unreasonable for their attorney to recoup the remainder of their fee that exceeded 25 percent of the claimant’s benefits.
Berryhill also claims that attorneys have always directly collected fees from their clients under the Social Security Act. She further contends that Congress already provided sufficient restrictions on attorney’s fees in § 406(a) and (b) to prevent excessive attorney’s fees. According to Berryhill, § 406 considers both a reasonable attorney’s fee and economic security for claimants.
Weil argues that Social Security claimants are particularly vulnerable due to their mental disabilities, physical disabilities, lack of education, old age, and the stress associated with interrupted benefits. She suggests that the Social Security Act prioritizes preventing claimants from overbilling by attorneys, rather than ensuring attorneys are adequately compensated. Based on these concerns, Weil argues, it is untenable that Congress would allow claimants to be charged 50 percent of their benefits—a result that has occurred in jurisdictions where courts do not abide by a 25-percent aggregate cap. Weil also contends that allowing fees that exceed 25 percent of a claimant’s benefits would lead to instances where attorneys would sue their highly vulnerable clients. Because the Commissioner of Social Security (“Commissioner”) only withholds 25 percent of a successful claimant’s benefits, Weil maintains, an attorney attempting to collect a fee greater than 25 percent of a claimant’s benefits must sue the claimant in order to collect the remainder of his or her fee. Moreover, Weil claims, this could lead to attorneys mistreating their clients indefinitely for future benefits or income, thus contravening the goals of the Social Security Act.
ADEQUATE INCENTIVES FOR REPRESENTATION
Culbertson argues that capping attorney’s total fees at 25 percent of a claimant’s past-due benefits will discourage attorneys from representing claimants. Culbertson asserts that Social Security claimants rely on contingent fee agreements to employ counsel. He further asserts that claimants frequently employ different counsel for representation before the Commissioner and in court to appeal the Commissioner’s decisions. Culbertson contends that attorneys representing a claimant before the Commissioner often charge a fee of 25 percent of the claimant’s benefits and thus use up the benefits withheld by the Commissioner. Culbertson concludes that, under a 25-percent cap on the aggregated fees, there would be no financial incentive for an attorney to represent a claimant on appeal. Culbertson adds that, because the majority of Social Security claims are initially denied by the agency, a lack of funds for appeal will discourage attorneys from accepting Social Security cases.
Weil counters that a 25 percent cap is unlikely to disincentivize attorneys from representing Social Security claimants. Weil presents data showing an increase in the number of Social Security cases brought over a three-year period in circuits that have adopted a 25-percent aggregate cap. She explains that this is likely due to the high hourly rate that these attorneys are able to charge. Furthermore, she argues, attorneys are also often eligible for EAJA awards in addition to the awards that they may receive under § 406. Weil explains that EAJA awards are paid by the Government and calculated based on hours worked. Weil notes that attorneys retain any EAJA fees that exceed a § 406 fee award. She emphasizes that EAJA payments have more than doubled in the last seven years, collectively exceeding $41 million in 2017.
- Supreme Court to Hear Case on SSDI Attorney’s Fees Cap, Rogers, Hofrichter & Karrh, LLC (June 1, 2018).
- Mike Fox, Clinic Brings Attorneys’ Fees Case to Supreme Court, University of Virginia School of Law (May 21, 2018).