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Category: Fee Caps / Fee Limits

Article: Fee Award Highlights Patent Litigation in Claims Court

April 15, 2019

A recent Law 360 article by Matthew Rizzolo and Steve Meil of Ropes & Gray LLP, “Fee Award Highlights Patent Litigation in Claims Court,” reports on patent attorney fee awards in the U.S. Court of Federal Claims.  This article was posted with permission.  This article was originally published in Law 360.  The article reads:

Subject to certain exceptions, patent litigation in the United States typically adheres to the “American rule”: Each party pays its own attorney fees, win or lose.  But many may not be aware that assertions of patent infringement against the United States government itself are not governed by this same rule, making it easier for some successful plaintiffs to recover attorney fees at the conclusion of litigation.

A recent ruling from the U.S. Court of Federal Claims awarding a plaintiff more than $4 million in attorney fees explains the different standard in detail, and may lead to increased interest in bringing patent claims against the government.

Section 1498 Actions and Attorney Fees

Under 28 U.S.C. § 1498, the Court of Federal Claims has exclusive jurisdiction over patent infringement suits brought against the federal government.  Because “infringement” by the government is generally treated as a Fifth Amendment taking of a license to use a patented invention, plaintiffs in such suits cannot receive injunctive relief, but are limited only to “reasonable and entire compensation” for the use or manufacture of the patented invention by or for the government.

Originally, the statute did not clarify whether “reasonable and entire compensation” included costs and attorney fees; the Court of Federal Claims has also found that Section 1498 claims are not directly analogous to other takings claims.  It therefore determined that the Equal Access to Justice Act (the statute that typically provides for attorney fee awards in claims against the government) did not apply to Section 1498 claims, leaving patent owners with no avenue to obtain attorney fees even in the most egregious Section 1498 cases.

Recognizing this disparity between the taking of real property and intellectual property, in 1996 Congress amended Section 1498(a) to expressly provide awards of “reasonable costs, including reasonable fees for expert witnesses and attorneys.”  The sponsors of the amendment noted that without the ability to recover fees, small businesses in particular may be unable to afford the expense of defending patents against government expropriation.

Accordingly, Congress limited the awards to certain types of plaintiffs: independent inventors, nonprofit organizations, and small businesses with less than 500 employees.  Congress further limited the awards to exclude cases where “the position of the United States was substantially justified” (mirroring the language of the Equal Access to Justice Act), or where “special circumstances make an award unjust.”

The ability to recover attorney fees as a “default” stands in sharp contrast to typical patent infringement suits, where plaintiffs — even small businesses or nonprofits — recover fees only “in exceptional cases.”   As Congress observed, however, suits against the government “authorize the government to take a license in any patent,” making such suits more analogous to takings of real property than to private infringement suits.

The Fee Award in Hitkansut v. United States

Yet in the near quarter-century since Section 1498 was amended, the Court of Federal Claims has handed down only three decisions on awards of attorney fees.  The previous cases, decided well over a decade ago, both resulted in the Court of Federal Claims denying fees.  But on March 15, 2019, the court for the first time awarded a successful plaintiff attorney fees under Section 1498.

In Hitkansut LLC et al. v. United States, the court had previously found that the government used Hitkansut’s patented invention, and awarded $200,000 in compensatory damages.  While Hitkansut had sought nearly $6 million in compensatory damages, the court found that much of these requested damages were not appropriate under the law.  The court’s prior infringement and damages findings were affirmed on appeal, and Hitkansut subsequently sought to recover its attorney fees and litigation expenses: $4.51 million.  In a thorough and detailed opinion, the court granted Hitkansut the vast majority of its fee request.

The court first addressed the fact that Hitkansut had engaged in a contingency fee arrangement with its attorneys.  The government argued that this meant that Hitkansut had not “actually incurred” any fees, disqualifying it from any award.  But the court observed that the fee arrangement was irrelevant, noting that “[a]ccepting the government’s argument would ... dissuade litigation by the very class of people the fee-shifting provision of 28 U.S.C. § 1498(a) exists to help.”  Because “[t]he patent owners most likely to use contingent arrangements are those ... specifically identified by the statute,” the court found that the fact of a contingent arrangement should not impact an award of costs.

The court then considered whether the government’s position in the suit was “substantially justified.”  Adopting the standard from the Equal Access to Justice Act, the court explained that a position is “substantially justified” when it is “justified to a degree that could satisfy a reasonable person, which is no different from the ‘reasonable basis both in law and fact’ formulation.”  In the court’s view, an award depends on whether the government can demonstrate that the positions it took “were such that a reasonable person could conclude that its position was supportable,” taking into account both pre- and post-litigation conduct.

Applying this standard, the court found that the government’s positions on both non-infringement and invalidity lacked substantial justification.  Regarding potential infringement, the court observed that the government had (1) altered its research activity in line with disclosures Hitkansut had made to the government under a confidentiality agreement; (2) represented the opposite of claims their employees had made in invention disclosures and in depositions; and (3) advanced arguments inconsistent with the court’s claim construction.

As for validity, the court found the government’s arguments to be “unsupported by the facts”: the government failed to demonstrate either part of the Alice test, and its own witnesses’ testimony undermined its obviousness and enablement arguments.  Finally, the court found that the government’s success in arguing matters secondary to the “primary issue” of infringement did not alter whether its overall position was supportable.  It concluded that, “the government’s position may not be substantially justified even though it may have taken certain reasonable stances during the dispute.”

Having decided that fees should be awarded, the court then turned to what constitutes “reasonable” fees under Section 1498(a).  The court first denied the portion of fees expended in pursuing other similar suits as “not reasonably related” to the case, and reduced fees where they exceeded prevailing local rates.  The court then considered whether to increase or decrease the total fee, where “the most critical factor is the degree of success obtained.”

The government argued that (1) because damages were reduced to 5% of those sought, fees should be reduced proportionately; and (2) the requested fees should be capped at the amount of damages.  But the court rejected both of these arguments, finding the reduction in damages was unrelated to the primary issue of infringement, and that the remaining award — even where Hitkansut proved infringement of only some of the claims — indicated a sufficient degree of success.

Notably, the court found that the purpose of the fee-shifting portion of the statute is “to accommodate suits where the cost to bring the suit could not be recovered from the damages awarded.”  As a result, there was no reason that fees could not greatly exceed actual damages — even where, as here, the fees exceeded compensatory damages by a factor of 20.

Possible Implications

While the court’s decision in Hitkansut is likely to be appealed, it may lead to increased consideration from patent owners in bringing Section 1498 patent actions against the government (currently, only a handful of such suits are filed each year).  A common refrain among patent owners in recent years has been that it is too expensive to enforce patents.  Indeed, the high cost of litigation leads many patentees, especially those with a relative lack of resources, to outsource enforcement to patent assertion entities, or rely on contingency arrangements and/or litigation funders to assist with litigation.

For those patent owners who believe that their patents may be used by the U.S. government and/or government contractors, the court may be an avenue to seek compensation for infringement, with the knowledge that they may have a substantial chance at recovering their attorney fees and other expenses — in sharp contrast to suits against private entities.

Additionally, the prospect of a substantial fee award may lead to the government entering into settlements in these cases at higher levels than it may have previously.  And the increased attention for Section 1498 actions may come from more than just independent inventors or nonprofit organizations — given that many nonpracticing entities, even publicly traded ones, likely fall below the 500-employee threshold, they may also increase their activity at the Court of Federal Claims.

Finally, the Hitkansut court’s decision to award fees in the face of the plaintiff’s contingency arrangement may also attract firms who work on alternative fee and contingency arrangements, as well as litigation funding entities, to explore becoming involved in Section 1498(a) actions.

Matthew J. Rizzolo is a partner and Steve Meil is an associate at Ropes & Gray LLP.  For the full text of this article, including footnotes, visit https://www.law360.com/articles/1149324/fee-award-highlights-patent-litigation-in-claims-court.

$20M in Fees to Class Counsel in Madoff Ponzi Suit

March 15, 2019

A recent Law 360 story by Rick Archer, “Lead Class Attys in Madoff Ponzi Suit Awarded $20M,” reports that a New York federal judge awarded nearly $20 million in fees to the counsel for a class that received a $1 billion settlement for money lost through Bernard Madoff's Ponzi scheme, saying objectors to the award were rehashing rejected arguments.  Saying the objectors' claims that class counsel is being compensated for work unconnected to the case "go well beyond the mandate" set forth in a 2017 Second Circuit ruling on the fee award, U.S. District Judge Colleen McMahon accepted a magistrate judge's findings and approved the new attorneys fee award on the Tremont Fund settlement.

Tremont, part of Massachusetts Mutual Life Insurance Co., was the second-largest Madoff feeder fund.  The $1 billion settlement reached in 2011 stemmed from allegations by trustee Irving Picard that the company continued to pour money into Bernard L. Madoff Investment Securities LLC despite obvious red flags.  In August 2105, U.S. District Judge Thomas Griesa issued an oral order approving a complex plan of allocation to the plaintiffs that included a 3 percent fee award for the plaintiffs' counsel, capped at 2.5 times the lodestar.  Based on the size of the settlement fund at the time, the award would have been $18.7 million and capped at about $40 million.

Several Tremont investors objected to the plan and the fee request, in particular, on the grounds that there was little risk involved in reaching the settlement and because class counsel had already received substantial fees from a previous settlement in the litigation.  Judge Griesa rejected those objections, and in June 2017, the Second Circuit upheld his ruling on the settlement distribution but remanded the fee award, saying the lodestar multiplier was not justified by the "limited risk" plaintiffs' counsel had run.

After Judge Griesa's death in December 2017, the case was remanded to Judge McMahon, who asked U.S. Magistrate Judge Gabriel Gorenstein to issue a report.  Judge Gorenstein's report was issued in February, saying that while plaintiffs' counsel was now requesting a lodestar of 1.67, which would produce a $33.2 million fee cap, he had found that the risk factors did not justify any modifier and set the cap at approximately $19.9 million.

A group of Tremont investors filed a new objection to the fees, arguing new evidence provided last year showed that 75 percent of the fees Judge Griesa used to calculate the lodestar were for work unconnected with the fund distribution, but class counsel argued that the Second Circuit had rejected those claims and had remanded solely to recalculate the lodestar multiplier cap.  In her ruling, Judge McMahon said the only reason the case had been remanded was to revise the lodestar cap down.  "In his excellent report, Judge Gorenstein anticipated and answered every objection raised by the Tremont Fund objectors. I find no flaw in his reasoning," she said.

The case is In re: Tremont Securities Law litigation, case number 1:08-cv-11117, in the U.S. District Court for the Southern District of New York.

Florida Legislation Would Limit Attorney Fees in ‘AOB’ Cases

February 12, 2019

A recent Daily Business Review story by Jim Saunders, “Plan to Limit Attorney Fees in’AOB’ Cases Stalls in Committee,” reports that, in what could be a glimpse of the battles to come over the heavily lobbied issue, a Senate committee bottled up a proposal that would limit attorney fees in cases involving the insurance practice known as “assignment of benefits.”  The Senate Banking and Insurance Committee tabled a bill (SB 122) sponsored by Chairman Doug Broxson, R-Gulf Breeze, after it became apparent the measure would fail if brought up for a vote.  Though the 2019 legislative session does not start until March 5, it was at least an initial blow to the insurance industry and other business groups pushing to limit attorney fees in so-called AOB cases.

Sen. Tom Lee, R-Thonotosassa, joined three Democrats in opposing the bill, making it impossible for Broxson to patch together a majority on the eight-member committee.  Insurers and their allies argue that fee limits are needed because of an increase in AOB litigation that is driving up consumers’ property-insurance premiums.  But Lee said there are “some bad actors on both sides of the equation” and indicated he thought Broxson’s bill could end up hurting consumers who need homes repaired for such things as water damage.

“We are going to kill the patient while we try to cure the problem,” Lee said.  Sen. Keith Perry, however, said the bill “is a step in the right direction” and argued consumers will face higher insurance rates if lawmakers don’t solve the problem.  “We owe it to the working-class people of the state of Florida to do something,” Perry, R-Gainesville, said.

Assignment of benefits is a decades-old practice that has become highly controversial in recent years.  Lawmakers have repeatedly considered proposals to address the issue but have not been able to reach agreement.  In assignment of benefits, homeowners in need of repairs sign over benefits to contractors, who ultimately pursue payments from insurance companies.  Insurers contend that the practice has become riddled with fraud and litigation, while plaintiffs attorneys and other groups say it helps make sure claims are properly paid.

Under state law, insurance policyholders are entitled to have their attorney fees paid if they prevail in cases against insurers.  In 1972, a Florida Supreme Court ruling also extended the right to recover attorney fees to people, such as contractors, who have been assigned insurance benefits, according to a Senate staff analysis.

But Broxson’s bill would have prevented continuing to extend the right to attorney fees to contractors.  The staff analysis said that such a change would “make the assignment of post-loss benefits less valuable.  The assignee [the person assigned the benefits] would have to pay his or her own attorney fees to enforce the insurance contract.”

Revisiting the American Rule: Fee-Shifting Strategies for NY Litigators

February 11, 2019

A recent the New York Law Journal article by Robert S. Friedman, “Revisiting the American Rule: Fee-Shifting Strategies for NY Litigators,” examines fee-shifting options in the context of the American Rule in which parties presumptively pay their own fees regardless of the outcome, including the offer of judgment rules under FRCP 68 and CPLR 3220.  This article was posted with permission.  The article reads:

What is the definition of “success” in a business litigation?  This is the first question a litigator should ask their client in the initial meeting.  In some cases, there are business goals that go beyond dollars and cents.  However, in most cases, businesses will define success by comparing the aggregate cost to either the total recovery (if a plaintiff) or the reasonable exposure (if a defendant).  The expense of modern day litigation mandates that a business litigator not only provide a forecast for various stages of a commercial case but also consider proactive strategies for managing expenses.  Many companies also seek modified fee arrangements including flat fees, capped fees and structures that provide an incentive for both success on the merits and in controlling expenses.  The growth of litigation funding has added more spice to the recipe.  In this environment, fee-shifting strategies take on added importance and should be considered early and often in appropriate cases.

This article examines fee-shifting options in the context of the American Rule in which parties presumptively pay their own fees regardless of the outcome, including the offer of judgment rules under FRCP 68 and CPLR 3220.  Many of these opportunities are misunderstood and underutilized.  In doing this analysis, it is helpful to begin with an overview of the historical background for fee-shifting in the United States.

Historical Background

The “American Rule” provides that each side in a litigation bears its own attorney fees in the absence of a statute or contractual prevailing party provision.  This is in contrast to the “English Rule” where the loser pays.  There is much commentary as to which system is better. See, e.g., Steven Baicker-McKee, The Award of E-Discovery Costs to the Prevailing Party: The Analog Solution in a Digital World, 63 Clev. St. L. Rev. at 420; Robert G. Bone, To Encourage Settlement: Rule 68, Offers of Judgment, and the History of the Federal Rules of Civil Procedure, 102 Nw. U. L. Rev. 1561, 1597-99 (2008).  Proponents of the American Rule claim that a loser-pays regime will disincentivize plaintiffs from bringing legitimate claims.  The counter is that the American Rule provides no push for parties to take a reasonable settlement position and serves to perpetuate frivolous litigation.

The American Rule has a long tradition in U.S. jurisprudence dating back to 1796. Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306 (1796).  In the many years since, lawmakers and commercial actors have chipped away at the Rule.  Federal and state legislators have enacted statutes that provide for varying degrees of fee-shifting.  There are approximately 200 federal statutes and 2,000 state statutes that provide for some form of fee shifting.  Steven Baicker-McKee, The Award of E-Discovery Costs to the Prevailing Party: The Analog Solution in a Digital World, 63 Clev. St. L. Rev. at 419 & n.153-54.  In addition, at least nine states have offer of judgment rules that, contrary to FRCP 68, specifically allow for the recovery of attorney fees.  New Jersey is one of these states.  New York is not.

Strategic Options Under Federal and State Law

Federal Litigation: FRCP 68 provides that a defendant in a lawsuit may make an offer of judgement to the plaintiff; if the plaintiff accepts this offer, the court will automatically enter judgment against the defendant according to the offer’s terms.  However, if the plaintiff declines the offer, plaintiff is liable for costs that the defendant incurs during subsequent litigation if the plaintiff fails to obtain a judgment that is more favorable than the offer of judgement.  It is well-established that costs do not include attorney fees under Rule 68 and a party achieving a result below an offer of judgment under Rule 68 is therefore, not entitled to attorney fees.  See, e.g., Delta Air Lines v. August, 450 U.S. 346, 352 (1981).  The result is that Rule 68 is rarely used by civil defendants because attorney fees are usually the most significant expense and the upside of an offer of judgment is therefore limited.

There remain opportunities, however, to use Rule 68 strategically.  In Marek v. Chesney, 473 U.S. 1 (1985), the U.S. Supreme Court held that, while attorney fees are not recoverable as part of costs, where there is statutory fee-shifting, a Rule 68 offer of judgment can establish the baseline for a successful litigant otherwise entitled to legal fees.  Marek v. Chesney 473 U.S. 1, 11 (1985).  Thus, for example, a civil defendant can stop the clock on statutory attorney fees by making an offer of judgment early in a litigation.  With the proliferation of statutory attorney fee provisions, this can be a powerful tool for defendants’ counsel in cases where the attorney fee award is the prime driver of the litigation.  See also Stancyzk v. City of New York, 752 F.3d 273, 281 (2d Cir. 2014).

Moreover, the Second Circuit has held that where there is a contractual claim for attorney fees, and the plaintiff accepts an offer of judgment that provides for dismissal of all claims that could have been made arising out of the contract, any claim for attorney fees is dismissed as well, and the question of who is the prevailing party under the contractual fee shifting agreement becomes moot.  See Steiner v. Lewmar, 816 F.3d 26, 34 (2d Cir. 2016).

Another possible tool for litigants arises out of Local Civil Rule 54.2 of the Southern and Eastern Districts of New York, which provides that the court may by motion or on its own initiative require a party to file a bond covering costs or risk dismissal of the action.  Courts have held that costs in this context includes attorney fees authorized by statute or authorized by a contractual provision.  See Kensington Int’l v. Republic of Congo, 2005 U.S. Dist. LEXIS 4331 (S.D.N.Y. March 21, 2005) (Preska, J.) (citing cases).  One court has suggested that if the party moving to require a Local Civil Rule 54.2 bond from the other side likewise offers to post its own bond in an equal amount, both including attorney fees, and the other side rejects the proposal, then the attorney fees provision would not be enforceable against the moving party from that point on. See RBFC One v. Zeeks, 2005 U.S. Dist. LEXIS 19148, *8 (S.D.N.Y. Sept. 2, 2005).  Accordingly, a party may use Local Rule 54.2 to establish a baseline for success and attempt to push a recalcitrant or unreasonable adversary to put its money where its mouth is.

The New York State Analog. CPLR 3220 is the New York cousin of Rule 68.  The legislative history seems to indicate an intent to exclude attorney fees as recoverable under 3220.  In the initial draft of the CPLR during the overhaul from the Civil Practice Act in 1957, the provision for an offer to liquidate damages conditionally provided that “[i]f the damages awarded [claimant] do not exceed the sum offered, he shall pay the reasonable expenses incurred by his opponent in preparing for the trial of the question of damages, including reasonable attorney’s fees.  The expenses shall be determined by the court.” (emphasis added).  See Advisory Committee on Practice and Procedure of the Temporary Commission of the Courts, First Preliminary Report 109 (1957).  The fact that the express mention of the recovery of attorney fees was removed from the final language of the CPLR, not just with regard to the CPLR 3220, but also tenders and offers of compromise under CPLR 3219 and CPLR 3221, respectively, weighs against the argument that “expenses” under CPLR 3220 includes reasonable attorney fees.  See also Weinstein Korn and Miller, 7 New York Civil Practice: CPLR 3220.03 (2018).  In addition, New York courts are historically strong adherents to the American Rule. 214 Wall Street Associates v. Medical Arts-Huntington Realty, 99 A.D.3d 988 (2d Dep’t 2012) internal citations omitted.

On the other hand, there is case law supporting the inclusion of attorney fees under CPLR 3220.  In Abreu v. Barkin and Associates Realty, 115 A.D.3d 624 (1st Dep’t 2014), the First Department directed the trial court to hold a hearing on the amount of the defendant’s legal fees after a 3220 offer was made.  The Court stated that “Susan Barkin is entitled to a hearing on the amount of her individual fees, if any, under CPLR 3220.  Defendant made an offer to liquidate.  Plaintiff then withdrew her claims against Barkin in a stipulation on the record at trial.  Having failed to obtain a more favorable judgment than the offer, plaintiff became liable for costs and fees.”  The Second Department, however, has held the opposite. Saul v. Cahan, 153 A.D.3d 947, 953 (App. Div. 2017).  Accordingly, there remains an open question and apparent conflict between the First and Second Departments which may require clarification from the Court of Appeals.

Notwithstanding the above, litigators may be able to use CPLR 3220 when there is a contractual prevailing party provision.  In McMahan v. McMahan, 53 Misc. 3d 1030, 1036 (Sup. Ct., Westchester Co. 2016), the court held that the term “costs” in CPLR 3220 includes attorney fees that are properly recoverable in the action by agreement of the parties.  The court further held that when attorney fees are recoverable by agreement, and the offer of judgment is silent as to the treatment of attorney fees, the offer must be deemed to include attorney fees as an element of costs.  Id. at 1036.  The import of this decision in the ability of parties to create a baseline to determine the prevailing party remains to be seen.

Conclusion

The American Rule has an honored history in New York.  Still, there are opportunities for creative litigators facing unreasonable adversaries to implement strategies which put attorney fees in play.  These strategies can lead to faster, more efficient and just resolutions.

Robert S. Friedman is a partner at Sheppard, Mullin, Richter & Hampton and heads the New York litigation group.  Bradley Rank, the managing attorney of the New York office, and Aditya Mitra, a law clerk awaiting admission, contributed to the preparation of this article.  Reprinted with permission from the “February 8, 2019” edition of the “New York Law Journal”© 2019 ALM Media Properties, LLC.  All rights reserved.  Further duplication without permission is prohibited. ALMReprints.com877-257-3382 - reprints@alm.com.

SCOTUS Rules for Separate Fee Awards in Social Security Benefit Cases

January 8, 2019

A recent Law 360 story by Emily Brill, “High Court Grants Win to Social Security Atty in Fee Row,” reports that the U.S. Supreme Court ruled 9-0 that the Social Security Act allows disability benefit recipients’ attorneys to receive entirely separate fee awards for their work before the Social Security Administration and their work in court.   The high court reversed the Eleventh Circuit, which held that Social Security disability attorneys should receive smaller awards for litigating cases if they’ve already been paid for their agency-level work.

In an opinion delivered by Justice Clarence Thomas, the court held that the wording of Social Security Act sections 406(a) and 406(b) entitles attorneys to separate fee awards for their work at each level of the disability claim dispute process.  The court also pointed out that 406(a) and 406(b) put forth different methods for calculating fees, so it didn’t make sense for the Eleventh, Fourth and Fifth circuits to hold that 406(b)’s cap on court-stage fees should apply to agency fees, which are calculated under 406(a). 

“Subsections (a) and (b) address different stages of the representation and use different methods for calculating fees.  Given this statutory structure, applying §406(b)’s 25 [percent] cap on court-stage fees to §406(a) agency-stage fees, or the aggregate of §§406(a) and (b) fees, would make little sense,” the court wrote.  “Had Congress wanted agency-stage fees to be capped at 25%, it presumably would have said so directly.”

The high court’s decision affirmed the line of thinking adopted by the Sixth, Ninth and Tenth circuits, which all held that Section 406(b)'s language capping court fees at 25 percent of the total disability benefit award does not apply to fees for agency-level work, which are capped at 25 percent of total benefits or $4,000, whichever is less. 

The case arose from a dispute between Richard Culbertson, a Florida Social Security benefits attorney, and a Florida federal judge over the amount of fees owed to Culbertson after he prevailed in four cases involving Social Security claimants.  Culbertson represented his four clients before both the Social Security Administration and a Florida federal judge. In each case, the Social Security commissioner denied his client benefits, and the judge reversed that decision.

Culbertson said he was entitled to two sets of fees — one set for representing his client before the SSA, as allowed for in 42 USC 406(a), and the other for representing his client before the court, as allowed for in 42 USC 406(b).  In each of the four cases, the judge denied his request.

When the case went to the Eleventh Circuit, the appellate court referred to its own precedent when deciding which fees to give Culbertson.  The Eleventh Circuit, like the Fourth and Fifth Circuits, had held that because both Section 406(a) and Section 406(b) limit the fees that can be taken from a claimant’s benefit award to 25 percent of the total award, attorneys are limited to just one set of fees totaling no more than 25 percent of the benefits awarded.

Culbertson argued that Section 406 limits only the amount of fees that can be taken from a client's benefit award; it does not limit the amount of fees that can be authorized, he said.  He said that the Equal Access to Justice Act provides another method for Social Security attorneys to receive fees — from the government — so fees do not need to be limited only to what a client can provide.  Therefore, when an attorney represents a client before both the SSA and a court, federal statutes authorize fees for each type of work done and it is improper to lump both fees together and apply a single cap, Culbertson argued.  The high court agreed with Culbertson, writing that the statutory language of Section 406 supported his argument.

“Section 406(b) provides that a court rendering a favorable judgment to a claimant ‘represented before the court by an attorney’ may award ‘a reasonable fee for such representation, not in excess of 25 percent’ of past-due benefits.  Here, the adjective ‘such’ … refers to the only form of representation ‘already described’ in §406(b) — i.e., ‘represent[ation] before the court.’  Thus, the 25% cap applies only to fees for representation before the court, not the agency,” Justice Thomas wrote for the unanimous court.

Culbertson himself was pleased with the outcome of the suit, telling Law360 that he thinks it will have a positive impact on Social Security claimants' ability to obtain legal representation.  "Right now, it’s difficult for people who’ve been denied disability to find attorneys that will take their case to federal court.  There’s very few of us in central Florida.  This will help those people to be able to find attorneys willing to take their cases and be paid a reasonable fee for that service," Culbertson said. 

The case is Richard Allen Culbertson, Petitioner v. Nancy A. Berryhill, Acting Commissioner of Social Security, case number 17-773, in the U.S. Supreme Court.