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First Circuit Deepens Circuit Split on SSA Fee Award Timing

November 3, 2022 | Posted in : Contingency Fees / POF, Fee Award, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Request, Fee Shifting, Fee Statute, Fees & Judicial Discretion, Fees & Timeliness, FRCP

A recent Law 360 story by Hayley Fowler, “Abortion Protesters Keep Atty Fees in 4th Circ. Picketing Row” reports that the First Circuit deepened a circuit divide on how long attorneys have to seek fees in district court after winning a Social Security Administration benefits dispute, adopting a "reasonable time" standard also used in the Tenth Circuit rather than a more rigid limit used in four other circuits.  The court affirmed a finding that the attorney in question waited too long under either approach to seek fees for successfully representing a client in a benefits dispute with the agency.

But in a matter of first impression for the circuit, the court said fee petitions brought under 42 USC § 406(b), for representation in court on disability benefits challenges must be brought within a reasonable time.  That puts the First and Tenth Circuits on one side of a divide opposite the Second, Third, Fifth and Eleventh circuits, which say such fee petitions must be brought within 14 days of judgment.

The problem with that 14-day time limit is that after a district court decides a benefits dispute, often the case is remanded to the agency for a benefits determination, making it impossible to know how much the client will recover and thus impossible to calculate a contingency fee, the court noted in an opinion written by Judge O. Rogeriee Thompson.  "In scanning the out-of-circuit precedent, we have observed that in practice, accomplishing justice in most § 406(b) cases seems to inevitably require some exercise of the district court's discretion and powers in equity," the court said.

Some of the circuits that follow the 14-day rule toll that deadline until the SSA makes a final benefits determination.  Others recognize the district court's power to grant discretionary relief from that strict deadline.  The First Circuit said it makes more sense to use the "reasonableness" standard applied to fee motions made under Federal Rule of Civil Procedure 60(b) – the rule for relief from a final judgment – rather than the 14-day time limit that comes from Federal Rule of Civil Procedure 54(d)(2), the rule for judgments that include attorney fees.

Attorney fees in disability benefits cases are not comparable to "loser pays" types of attorney fee awards typically addressed in motions for judgment under Rule 54(d)(2), the court said. Instead, the disability benefits statute allows for attorney fees of up to 25% of the awarded benefits, in what the First Circuit said "implies that the fees are awarded as a part of a district court's judgment for the claimant, rather than as a separate judgment allowing the party to recuperate costs underlying the action."  "Here it is clear to all parties that, in the event of success before the agency on remand, a subsequent amendment to the district court's judgment to award attorneys' fees is highly likely," the court said.

The dispute arose from Green & Greenberg's successful representation of a client in court and before the SSA who eventually was recognized to have a disability and awarded benefits.  The firm represented client Jose Pais on a contingency basis for 25% of his award.  After he won, the SSA set aside just over $29,000 for potential legal fees.  When the firm sought to collect its fees through the SSA, it claimed only about $7,000 for its work at the administrative level. During oral argument, the firm's David Spunzo told the court a paralegal mistakenly claimed 25% of the money available for fees, rather than 25% of the total award.

The SSA then several times notified the firm that it was continuing to retain about $22,000 from Pais's total award as the contingency fee.  By the time the firm sought the remaining amount of the available attorney fees for its work in court, 26 months after the SSA notified Pais of the benefits award, the district court determined it was too late.  The SSA did not take a position in the litigation on which approach to the timing of fee motions is correct, in-house counsel Timothy Bolen told the court during oral argument.  Bolen said the agency's role is to act as quasi-trustee for the claimant and reserve 25% of the award for potential payment of attorney fees, while the question of how much in fees to award is left to the district court.