Source: https://www.jameseducationcenter.com/articles/disability-attorney-fees/
Timestamp: 2019-04-25 20:03:47+00:00

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The fee agreement process for approval of attorney fees.
Attorney fees in social security disability and SSI cases are regulated. 42 U.S.C. §§ 406(a) and 1383(d)(2). The Social Security Administration (SSA) must approve your fee for work done before the agency unless one of the very limited exceptions to this rule applies. See §746. If you accept an unauthorized fee, you could be punished by a fine not exceeding $500.00 or by imprisonment not exceeding one year, or both. 42 U.S.C. § 406(a)(5). You could also lose your right to practice before the Social Security Administration. 20 C.F.R. § 404.1745.
Two alternative systems with entirely different procedures, rules and time limits govern fee approval. One system, the fee petition process, described in §§720-739, is slow, burdensome, generally stingy and leaves inordinate discretion in the hands of decision makers. The other system, the fee agreement process, which provides for streamlined approval and payment of attorney fees, works better in the vast majority of cases.
The primary problem with the fee petition system is the typically long delay before payment. Before mid-1991, when the fee agreement process took effect, it was not unusual for it to take six months from the date of the favorable decision for a fee petition to be approved and another three months for payment to be made. After the fee agreement process was instituted, attorneys report that in most hearing offices it takes even longer for a fee petition to be approved. Cynics say this is a deliberate effort by decision makers to discourage use of fee petitions and encourage use of the fee agreement process, a system that requires very little decision maker time. Those more charitable are not surprised that decision makers, who dislike the fee petition process almost as much as attorneys do and who have been busy with a large backlog of claims in recent years, give fee petition approval low priority.
The fee petition process is not only slow, it is also stingy. Attorneys seldom feel that they are paid the full value of their services under a system that steadfastly refuses to consider the contingent nature of fees and only rarely rewards outstanding work. For example, if you win tens of thousands of dollars for your client because of a brilliant inspiration that took very little time, you’re likely to be granted a fee commensurate with the small amount of time spent on the case rather than a fee commensurate with your brilliant inspiration. An arbitrary hourly rate cap, a factor not listed for consideration in the regulations, is silently applied.
The fee agreement process, designed to address the limitations of the fee petition system, is faster; and, although it contains traps for those who do not carefully follow its complicated rules, it is a vast improvement. Nevertheless, one cannot expect too much from the fee agreement process. When the fee agreement process began, many attorneys thought that at last SSA had recognized the contingent nature of fees. These attorneys also thought that by using the fee agreement process, they could represent almost all claimants without having to worry about the adequacy of fees in any single case. They thought that average fees would be adequate. But attorneys have discovered that it remains necessary to avoid using the fee agreement process in too many cases with small or non-existent back benefits because the good-paying cases may not sufficiently bring up the overall average.
Attorneys have found that the fee agreement process pays smaller fees than the fee petition process in time-consuming cases such as those involving appeals beyond the ALJ hearing level. Indeed, the more hours an attorney spends on a case, the lower the average hourly fee because under the fee agreement process, fees are limited to a maximum of $5,300. As we shall see, however, there is a way to seek higher fees in cases involving appeals beyond the ALJ hearing level by using a two-tiered fee agreement. See §703 and the two-tiered fee agreement in §178.3.1.
In a case where a second application is paid while the first is on appeal, SSA will treat the two applications as one case for purposes of applying the fee agreement cap. The attorney may spend an average amount of time on the case involving the second application and receive a $5,300 fee. After winning on the first application, the one that took years of work, the attorney will be dismayed to discover that it is SSA’s position that no additional fee is due under the fee agreement process. Because the attorney accepted the fee from the case involving the second application, SSA says the attorney elected to treat the entire case as coming under the fee agreement process. The attorney has already received a maximum fee. See §716.1.
The fee agreement process discourages appeals, especially appeals of partially favorable decisions. See §716. It discourages taking hard cases at a time when SSA says that its goal is to have ALJs hear only hard cases — with easier cases being paid at a lower level of review.
Part of the problem is that the fee agreement process places a cap on attorney fees, which is currently $5,300. The Social Security Act provides that the Commissioner of Social Security “from time to time” may increase the cap by no more than the annual COLA percentage increase. 42 U.S.C. §406(a)(2)(A). The cap has been raised only one time since 1991 when the fee agreement process was instituted. The Commissioner raised the cap to $5,300 applicable to favorable decisions issued on or after February 1, 2002. 67 Fed. Reg. 2,477 (2002). See also HALLEX I-1-2-12 A.3.
Many observers question whether a cap is appropriate at all in a hard-fought case or where lawyer creativity increases back benefits by, for example, reopening an earlier application. There are those who argue that without a cap on fees, the lawyer’s interests and the client’s interests would be congruent — both would want to maximize the recovery in each case. With a cap on fees, if the lawyer has already received a maximum fee, what is the lawyer’s interest in appealing a partially favorable decision? It is a good thing that most lawyers are motivated not only by law office economics but also by professional responsibility to the client, lawyer ethics and a desire to do the right thing. Otherwise, very few appeals of a partially favorable decision would be taken.
Another part of the problem with the fee agreement process is that the Commissioner never published regulations required by 42 U.S.C. § 406(a)(3) for dealing with appeals. Instead, decision makers rely on the HALLEX and the POMS and, for fee issues not covered, they appear to make up the rules as they go along based on principles that often ignore the realities of modern-day law practice. See §709.
Where the claimant appoints multiple representatives and all are not members of a single law firm.
SSA says that these exceptions themselves will not apply if the extra representative waives his or her fee. But this works only in a situation involving successive representatives. In the other situations, although a fee waiver will allow the fee to be paid under the fee agreement process, it will also reduce the total fee by the amount of the proportionate share of the waiving representative. See §709.
There are also exceptions for when a representative dies before a favorable decision is issued and when a state court declares the claimant legally incompetent and the claimant’s legal guardian doesnot sign the fee agreement. In addition, if a federal court issues a decision awarding benefits, SSA says that the representative’s fee for work before the agency will not be paid under the fee agreement process. Whenever an exception applies, it will be necessary for you to file a fee petition to obtain your fee. See §705.
In most cases where past-due benefits accumulate, the fee agreement process is the better fee approval system. Because it is the best way to obtain a minimum fee, the fee petition process is recommended for cases where you can predict in advance that past-due benefits will be minimal (such as where a claimant is recently disabled or offsets apply) or non-existent (such as benefit termination, overpayment or other post-entitlement cases). The fee petition process is otherwise simply too much trouble for too little reward.
Of course, if you could predict in advance which case would become a protracted one, one that you would fight for years, you would choose the fee petition process for that case. Although such predictions are usually impossible, it is possible to make a contract with your client that applies the fee agreement process, for example, through the first ALJ hearing; but after that, the fee petition process applies. See §703 and the two-tiered fee agreement at §178.3.1.
(7) there is no objection from the claimant, an auxiliary beneficiary or the decision maker.
The $4,000 cap set by the statute was raised to $5,300 by action of the Commissioner of Social Security under the authority of 42 U.S.C. §406(a)(2)(A) effective February 1, 2002. 67 Fed. Reg. 2,477 (2002). See also HALLEX I-1-2-12 A.3.
Although another increase in the cap is not expected soon, you may, if you wish, include reference in your fee agreement to the Commissioner’s authority to raise the cap by no more than the COLA applicable to Title II benefits pursuant to 42 U.S.C. § 406(a)(2)(A): “The Commissioner of Social Security may from time to time increase the dollar amount under clause (ii)(II) to the extent that the rate of increase in such amount, as determined over the period since January 1, 1991, does not at any time exceed the rate of increase in primary insurance amounts under section 415(i) of this title since such date.” The fee agreement that appears at §178.3.1 qualifies.

References: §746
 § 406
 § 404
 §703
 §178
 §716
 §716
 §406
 § 406
 §709
 §709
 §705
 §703
 §178
 §406
 § 406
 §178