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Sixth Circuit: Counsel Failed to Present Evidence to Justify 25% Contingency Fee

December 12, 2014 | Posted in : Contingency Fees / POF, Fee Agreement, Fee Award, Fee Dispute, Fee Issues on Appeal, Fee Jurisprudence, Fee Reduction, Fee Request, Hourly Rates, Prevailing Party Issues

The U.S. Court of Appeals for the Sixth Circuit in Lasley v. Commissioner, affirmed a district court’s order awarding reduced attorneys’ fees under the Social Security Act.  The attorney failed to demonstrate that the 25 percent contingency fee agreed to by his client, a prevailing disability benefits applicant, was reasonable and not a “windfall,” as characterized by the Commissioner.  Considering the number of hours worked by the attorney and the comparative simplicity of the case, the court acted within its discretion in awarding a significantly lesser amount than the 25 percent contingency fee permitted by statute.

Pursuant to the Social Security Act, a district court may award reasonable attorneys’ fees when judgment has been rendered in favor of a claimant.  The statute permits an award of fees not in excess of 25 percent of the total of past due benefits to which the claimant is entitled.  Further, case law has interpreted that contingency fees are permitted.  Prevailing counsel bears the burden of showing that the fees sought are reasonable. 

Here, the district court agreed with the Commissioner, who opposed the prevailing attorney’s request for a 25 percent contingency fee, characterizing it a “windfall.”  The court rejected the 25 percent fee as unreasonably high and awarded a reduced sum.  On appeal, prevailing counsel argued that the court should have approved his request for the full 25 percent contingency fee as it was accepted by his client and also is permitted by statute.

The court acknowledged the contingency fee agreement and the 25 percent ceiling, yet it determined that the effective hourly rate resulting from the 25 percent fee, $733.80 grossly exceeded the standard Social Security fee requests in the region.  Moreover, the court found that the relative simplicity and brevity of the representation, 35.5 hours, were factors that weighed in favor of reducing the fee award. 

The attorney failed to present any evidence of a contrary standard rate or refute the district court’s finding regarding the relative complexity of the case as compared to other Social Security litigation.  The court thus acted within its discretion in finding that counsel failed to carry the burden of demonstrating the contingency fee’s reasonableness.  Therefore the district court’s reduced fee award was affirmed.