Ninth Circuit En Banc Panel Reverses Magistrates’ Reductions Below Requested Fees That Were Pegged To Contingency Arrangements (Albeit Lower).
We have told you faithful readers that we are purveyors to all substantive areas of the law. Here is an important one for litigants and practitioners in the area of attorney’s fees awarded to lawyers who successfully represent Social Security disability insurance (SSDI) claimants.
The case is Crawford v. Astrue (and another two consolidated appeals), Case Nos. 06-55822, 06-55954, & 06-56284 (9th Cir. Nov. 4, 2009) (for publication), heard by an 11- member en banc panel of the Ninth Circuit.
Under 42 U.S.C. section 406(b), a court entering judgment in favor of an SSDI claimant represented by an attorney must determine a reasonable attorney’s fees, not in excess of 25% of the total of the past-due benefits, which is paid by the SSDI claimant out of the past-due benefits awarded. In 2002, the U.S. Supreme Court in Gisbrecht v. Barnhart, 535 U.S. 789, 808 (2002) rejected using a lodestar test in this area and instead held that primacy should be given to the contingency arrangement between attorney and client (no more than 25% of the awarded past-due benefits), reduced by such factors as substandard representation, dilatory conduct to increase the amount of the past-due benefits, or situations where there is a small amount of attorney time when comparatively analyzed against the benefits achieved. Well, this statutory section was at the center of the battle in Crawford.
Here is what happened in Crawford and related cases where benefits were awarded:
- Case #1—Attorney requested 16.95% of the awarded past-due benefits (requested fee of $21,000), which was a 256% enhancement over the lodestar; Result—magistrate found that a 40% enhancement was what should be awarded for a fee of $8,270 (6.68% of the past-due benefits);
- Case #2—Attorney requested 15.12% of the awarded past-due benefits (requested fee of $11,500), which was a 82% enhancement over the lodestar; Result—magistrate found that a 40% enhancement, without explanation, was what should be awarded for a fee of $8,825.53 (11.61% of the past-due benefits); and
- Case #3—Attorney requested 13.94% of the awarded past-due benefits (requested fee of $24,000), which was a 279% enhancement over the lodestar; Result—magistrate found that a 100% enhancement was what should be awarded for a fee of $12,650.40 (7.35% of the past-due benefits).
The three attorneys appealed and got a significant victory.
The majority basically decided that the magistrates were not faithful to Gisbrecht, subverting the primacy intent to amorphous reasonableness factors. It felt that the district judges had failed to “recognize the distinction between fee-shifting cases and cases involving payment by the claimant from his benefit award.” (Slip Opn., at p. 14877.) The attorneys had not even claimed close to the 25% contingency arrangement, such that the reductions made no sense to the en banc majority. Independently, the majority found that the lower courts failed to explain why they adopted the percentages actually awarded. The “end result” was that the decisions were reversed with instructions to award the fees requested by the attorneys.
The concurring/dissenting circuit judges believed that a remand was in order rather than just awarding requested fees without further reflection.
The dissenting circuit judges argued that the majority changed Gisbrecht’s primacy test into an exclusivity test with respect to weighting the impact of the contingency arrangement. They would have affirmed the rulings of the magistrate, giving deference to conclusions that the requested fees were unfair “windfalls” to the SSDI attorneys. With respect to the inadequate explanation for the awards, the dissenting judges found that elimination of billable hours was different from reductions in SSDI awards. If anything, the dissent believed that a remand was justified, not a wholesale reversal and reinstatement of the requested fees.
Quite a case.