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Second Circuit Vacates ‘Windfall’ Attorney Fee Award

January 28, 2022 | Posted in : Contingency Fees / POF, Fee Award, Fee Award Factors, Fee Issues on Appeal, Fee Jurisprudence, Fee Reduction, Fee Request, Hourly Rates, Lawyering, Practice Area: Civil Rights / Public Interest

A recent Law 360 story by Khorri Atkinson, “2nd Circ. Repeals Finding $40K Atty Fee Resulted in ‘Windfall’,” reports that the Second Circuit vacated a district court ruling that halved a law firm's attorney fee request in a Social Security disability case, saying the amount in question does not constitute a "windfall" because it was well-earned.  A three-judge panel criticized U.S. Magistrate Judge Stewart D. Aaron's September 2020 finding that the $40,170 fee Binder & Binder LLP requested for work performed on a contingent basis was "unreasonable," and it vacated the reduced award of $19,350 the judge had said adequately compensates the firm.

Judge Aaron had taken issue with the firm's de facto hourly rate of $1,556.98 charged for its work in securing $160,680 in past-due disability benefits for a client.  But U.S. Circuit Judge Guido Calabresi, who authored the opinion, said the magistrate failed to consider several relevant factors that show the request fee is not a windfall.

"Rather, it is the product of efficient and effective representation, which drew upon Binder & Binder's substantial experience and expertise and was informed by the firm's representation of [the client] … through years of agency proceedings," the opinion said.  "And while a de facto hourly rate that is starkly out of line with de facto hourly rates in other social security cases may suggest a windfall, the rate here is not such an outlier."  In determining if there is a windfall, courts should consider the expertise of lawyers and examine whether they could accomplish in a relatively short amount of time what less specialized or less well-trained attorneys might take far longer to do, the panel reasoned.

In this case, Judge Calabresi said, "There is no doubt that Binder & Binder's specialization and expertise enabled them to operate especially efficiently."  The judge noted in part that the lawyers spent several hours working on the case at the federal level, drafted and reviewed highly detailed court papers, and successfully negotiated a stipulated remand with the government lawyers.

"Binder & Binder's ability and expertise allowed it to accomplish in just 25.8 hours what other lawyers might reasonably have taken twice as much time to do," the opinion said.  "And the relatively high de facto hourly rate of $1,556.98 must be viewed in this context   It would be foolish to punish a firm for its efficiency and thereby encourage inefficiency."  Another factor that should be taken into consideration is the nature and length of the professional relationship with the claimant, including any representation at the agency level, the opinion added.