Opinion
Case No. CV 17-3669-KK
09-17-2020
DEBRA S., Plaintiff, v. ANDREW SAUL, Commissioner of Social Security, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR ATTORNEY FEES PURSUANT TO 42 U.S.C. § 406(b)
I.
INTRODUCTION
Plaintiff Debra S. ("Plaintiff")'s counsel, Eliot R. Samulon of Potter, Cohen, Samulon & Padilla ("Counsel"), filed a Motion for Attorney Fees ("Motion") pursuant to 42 U.S.C. § 406(b) ("Section 406(b)"). The Motion seeks an award of $29,993.75 for representing Plaintiff in an action to obtain disability insurance benefits, with a refund to Plaintiff of $764.00 for the Equal Access to Justice Act ("EAJA") fees previously awarded. The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge, pursuant to 28 U.S.C. § 636(c). For the reasons stated below, the Court GRANTS IN PART and DENIES IN PART the Motion.
II.
RELEVANT BACKGROUND
On May 16, 2017, Plaintiff filed the Complaint in this action. ECF Docket No. ("Dkt.") 1, Compl. Plaintiff alleged the Commissioner of the Social Security Administration ("Defendant") improperly denied Plaintiff's application for Title II Disability Insurance Benefits ("DIB"). Id. On October 25, 2017, the Court granted the parties' stipulation to remand the case for further administrative proceedings. Dkt. 20, Order; Dkt. 21, Judgment.
On November 14, 2017, the Court issued an order granting Counsel's Motion for EAJA Fees awarding fees to Counsel in the amount of $764.00. Dkt. 23, Order Granting EAJA Fees.
On July 22, 2020, on remand, the ALJ issued a fully favorable decision finding Plaintiff disabled. Dkt. 24 at 3-4, Declaration of Eliot Samulon ("Samulon Decl."), ¶ 4. On August 2, 2020, the Social Security Administration issued a Notice of Award, which did not state the total amount of benefits awarded, but informed Plaintiff it was withholding $29,993.75 as "25 percent of past-due benefits in order to pay the representative's fee." Id., ¶¶ 7-8, Ex. 3, Notice of Award.
Based on the 25% withheld, the total past-due amount appears to be $119,975.00 ($29,993.75/0.25 = $119,975.00).
On August 14, 2020, Counsel filed the instant Motion pursuant to Section 406(b) seeking attorney fees in the amount of $29,993.75. Dkt. 24, Mot. Counsel states 3.9 hours of attorney time were spent representing Plaintiff in federal court. Samulon Decl., ¶ 9, Ex. 4, Time Itemization. Counsel seeks compensation pursuant to a contingency agreement dated November 22, 2013, which provides that if Plaintiff prevails in federal court, Counsel is entitled to twenty-five percent (25%) of the past due benefits. Id., ¶ 2, Ex. 1, Attorney-Client Fee Agreement.
On August 14, 2020, Counsel served Plaintiff with the Motion and informed her of her right to file a response to the Motion within fourteen days of receipt of the copy of the Motion. Dkt. 24 at 2; Dkt. 25, POS. Plaintiff has not filed a response to the Motion.
On August 25, 2020, Defendant filed a Response to the Motion. Dkt. 26. Defendant states its role is "resembling that of a trustee for the claimants," and takes "no position on the reasonableness of the fee request." Id. at 7. Defendant, however, points out the "effective hourly rate sought by Counsel for work before this Court under [Section] 406(b) is $7,690.71 . . . . It is for the Court to determine whether the hourly rate requested by Counsel is reasonable under these circumstances, or whether it constitutes a windfall. . . . Defendant is unaware of any case which holds that an attorney fee was reasonable in any amount anywhere near the hourly rate requested by Counsel here." Id. at 4-5. Counsel did not file a reply to Defendant's Response.
On September 14, 2020, Counsel filed a declaration in response to a Court Order requesting his normal hourly billing charge for noncontingent fee cases stating his hourly rate, when he last performed legal work on an hourly basis in 2017, was $350. Dkt. 28.
The matter thus stands submitted.
III.
DISCUSSION
A. APPLICABLE LAW
Pursuant to Section 406(b):
Whenever a court renders a judgment favorable to a claimant under this subchapter who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment, and the Commissioner of Social Security may . . . certify the
amount of such fee for payment to such attorney out of, and not in addition to, the amount of such past-due benefits.42 U.S.C. § 406(b)(1)(A). Thus, "a prevailing [disability] claimant's [attorney's] fees are payable only out of the benefits recovered; in amount, such fees may not exceed 25 percent of past-due benefits." Gisbrecht v. Barnhart, 535 U.S. 789, 792, 122 S. Ct. 1817, 152 L. Ed. 2d 996 (2002).
Where a claimant entered into a contingent fee agreement with counsel, a court must apply Section 406(b) "to control, not to displace, fee agreements between Social Security benefits claimants and their counsel." Id. at 793. A court should not use a "lodestar method," under which a district court "determines a reasonable fee by multiplying the reasonable hourly rate by the number of hours reasonably expended on the case." Crawford v. Astrue, 586 F.3d 1142, 1148 (9th Cir. 2009) (en banc). Rather, where the claimant and counsel entered into a lawful contingent fee agreement, courts that use the "lodestar" method as the starting point to determine the reasonableness of fees requested under Section 406(b) improperly "reject the primacy of lawful attorney-client fee agreements." Gisbrecht, 535 U.S. at 793. Thus, courts should not apply lodestar rules in cases where the claimant and counsel reached a contingent fee agreement because:
[t]he lodestar method under-compensates attorneys for the risk they assume in representing [social security] claimants and ordinarily produces remarkably smaller fees than would be produced by starting with the contingent-fee agreement. A district court's use of the lodestar to determine a reasonable fee thus ultimately works to the disadvantage of [social security] claimants who need counsel to recover any past-due benefits at all.Crawford, 586 F.3d at 1149.
However, even in contingency fee cases, a court has "an affirmative duty to assure that the reasonableness of the fee [asserted by counsel] is established." Id. The court must examine "whether the amount need be reduced, not whether the lodestar amount should be enhanced." Id. The court may consider factors such as the character of the representation, the results achieved, the ratio between the amount of any benefits awarded and the time expended, and any undue delay attributable to counsel that caused an accumulation of back benefits in determining whether a lawful contingent fee agreement is reasonable. See Gisbrecht, 535 U.S. at 808; Crawford, 586 F.3d at 1151.
When a district court determines that a fee request is unreasonable, it must provide a "concise but clear explanation of its reasons." Crawford, 586 F.3d at 1152 (quoting Hensley v. Eckerhart, 461 U.S. 424, 437 (1983)). However, Gisbrecht does not instruct "precisely how a district court should quantify the 'downward adjustment'" when the court concludes such an adjustment is in order. Biggerstaff v. Saul, No. CV 15-853-JC, 2019 WL 4138015, at *2 (C.D. Cal. July 5, 2019); see also Ellick v. Barnhart, 445 F. Supp. 2d 1166, 1171 (C.D. Cal. 2006) (noting post-Gisbrecht decisions "vary significantly in the manner in which the decisions reduce the fees").
Additionally, the Court must determine whether a previously awarded EAJA fee should be refunded to Plaintiff in the event both Section 406(b) and EAJA fees are awarded. "Congress harmonized fees payable by the [Agency] under EAJA with fees payable under [Section] 406(b) out of the claimant's past-due Social Security benefits in this manner: Fee awards may be made under both prescriptions, but the claimant's attorney must 'refun[d] to the claimant the amount of the smaller fee.'" Gisbrecht, 535 U.S. at 796.
B. ANALYSIS
Here, consideration of the factors set forth in Gisbrecht and Crawford warrants a reduction of the fee Counsel seeks because "the benefits are large in comparison to the amount of time counsel spent on the case" such that a windfall would result. Gisbrecht, 535 U.S. at 805.
As an initial matter, the Court recognizes the record discloses no issue regarding the quality or efficiency of Counsel's representation before this Court, any misconduct or delay by Counsel, any overreaching in the making of the fee agreement or any impropriety on the part of Counsel in representing Plaintiff. Counsel assumed the risk of nonpayment inherent in a contingency agreement and obtained a favorable outcome for Plaintiff, ultimately resulting in a remand for further administrative proceedings and an award of past due benefits. See dkt. 21, Judgment; Samulon Decl., ¶ 7, Ex. 3, Notice of Award. The time expended to litigate this case, i.e. approximately 3.9 hours, was reasonable and within the approved range for social security disability cases.
However, Counsel has failed to demonstrate that a fee of $29,993.75 based on only 3.9 hours of attorney time for a non-complex matter, even in light of the risk involved and the primacy of the fee agreement, is reasonable. See Crawford, 586 F.3d at 1152-53. The award Counsel seeks would equate to an effective hourly rate of approximately $7,690.71. As discussed below, this extraordinary and unprecedented rate is simply not warranted.
The Court's calculation is achieved by dividing $29,993.75 by 3.9 hours of time.
First, Counsel fails to identify any novel or case-specific risks to support this hourly rate. Counsel states he "represented Plaintiff before the Social Security Administration beginning November 2013 with complex medical and legal issues and pursuant to a contingent-fee agreement." Dkt. 24 at 7. Counsel, however, does not provide any facts or support to demonstrate the case involved "complex medical or legal issues." Additionally, Counsel represents that his hourly rate, when he last performed legal work on an hourly basis in 2017, was $350. Dkt. 28; see Gisbrecht, 535 U.S. at 807-08 ("the court may require the claimant's attorney to submit . . . as an aid to the court's assessment of the reasonableness of the fee yielded by the fee agreement . . . [a] statement of the lawyer's normal hourly billing charge for noncontingent-fee cases"). Hence, applying Counsel's hourly rate to the instant Motion would result in a fee multiplier of 22, far beyond any multiplier ever used in this District. See Wenzel v. Colvin, No. EDCV 11-0338 JEM, 2014 WL 3810247, at *3 (C.D. Cal. Aug. 1, 2014) (declining to award a fee involving a proposed multiplier of 8.59 of normal rate, noting prior district court decision indicates "multipliers of 2 to 2.5 were common and in a few instances multipliers of 5.4 to 6.55 for exceptional results or where counsel argued novel, case-specific risky positions" but "[n]one . . . approved fees with a multiplier in the range sought here"). While the Court recognizes Counsel is entitled to a higher rate than the lodestar to reflect the contingent nature of the case, Counsel's efficiency, and the quality of the results achieved, Counsel sets forth no facts regarding the risk or complexity of the case that would support applying such a drastic multiplier.
The Court's calculation is achieved by dividing $7,690.71 by $350. --------
Second, Counsel fails to point to any cases in this District where a similar hourly rate has been awarded. Both the Court and Defendant have been unable to identify any post-Gisbrecht decisions approving fees with similar hourly rates as Counsel seeks. In fact, the Court's review of cases in the District has found most fee awards fall below an effective hourly rate of $1,600. See, e.g., Mendibles v. Saul, No. CV 18-6344-KS, 2020 WL 3628756, at *3 (C.D. Cal. Mar. 17, 2020) (approving rate of approximately $1,158, noting fee was "high" but that "[t]he Ninth Circuit has found reasonable fees with effective hourly rates exceeding $900, and the Central District of California has repeatedly found reasonable fees with effective hourly rates exceeding $1,000 per hour", citing cases). Moreover, courts both within and outside this District have consistently reduced fee awards for the sole reason that the benefits are large in comparison to the amount of time counsel spent on the case, notwithstanding the primacy of the fee agreement. See, e.g., Biggerstaff, 2019 WL 4138015, at *5 (collecting cases, reducing fee request to $1,400 per hour where effective hourly rate for combined counsel and paralegal time was $2,136.75, resulting in $17,240 less than the $50,000 award counsel sought); Wenzel v. Colvin, 2014 WL 3810247, at *2-4 (C.D. Cal. Aug. 1, 2014) (request of effective hourly rate of $1,417 constituted a windfall; awarding rate of $1,000 per hour which was consistent with the highest rates awarded by courts); Ellick, 445 F. Supp. 2d 1166 (reducing fee, which was "equivalent to roughly 4.24 times [counsel's] normal hourly rates" to 2.5 times the normal hourly rate to avoid windfall); Edwards v. Berryhill, No. EDCV 14-1798-E, 2017 WL 3913209, at *6 (C.D. Cal. Sept. 6, 2017) (reducing fees, "assuming that a reasonable de facto hourly rate for counsel is $1,100 per hour).
Accordingly, after surveying the awards previously made in this District, considering the nature of this case, contingent risk, and the fact that Counsel spent very little time on the case in comparison to the amount of benefits now owing, the Court finds a total fee of $6,142.50, representing 4.5 times Counsel's $350 hourly rate, (and equating to an effective hourly rate of $1,575), is a reasonable fee for the representation of Plaintiff before this Court. See, e.g. Daniel v. Astrue, No. EDCV 04-01188-MAN, 2009 WL 1941632, at *2-3 (C.D. Cal. July 2, 2009) (approving fees amounting to $1,491.25 per hour); see also Palos v. Colvin, No. CV 15-04261-DTB, 2016 WL 5110243, at *2 (C.D. Cal. Sept. 20, 2016) (finding "an hourly rate of $1,546.39 for attorney and paralegal services" is reasonable); Williams v. Berryhill, No. EDCV 15-919-KK, 2018 WL 6333695, at *2 (C.D. Cal. Nov. 13, 2018) (approving effective hourly rate of approximately $1,553.36). /// /// /// /// /// /// ///
IV.
ORDER
Based on the foregoing, IT IS HEREBY ORDERED (1) Counsel's Motion for Attorney Fees Pursuant to Section 406(b) is GRANTED IN PART AND DENIED IN PART AS SET FORTH ABOVE; (2) Defendant is directed to pay Counsel the sum of $6,142.50 with a reimbursement to Plaintiff for EAJA fees previously awarded in the amount of $764.00. Dated: September 17, 2020
/s/_________
HONORABLE KENLY KIYA KATO
United States Magistrate Judge