Opinion ID: 212421
Heading Depth: 3
Heading Rank: 1

Heading: Murkeldove and the Vinning Plaintiffs incurred attorney's fees as contemplated by the EAJA.

Text: In order to receive an award of attorney's fees pursuant to the EAJA: (1) the claimant must be a prevailing party, (2) the claimant must incur attorney's fees, (3) the government's position must not have been substantially justified, and (4) special circumstances cannot render an award of fees unjust. 28 U.S.C. § 2412(d)(1)(A). The district court acknowledged that Murkeldove and each of the Vinning Plaintiffs is a prevailing party for purposes of the EAJA, and whether the Government's position was substantially justified is uncontested. The primary issue in this case is whether Murkeldove and the Vinning Plaintiffs incurred fees as contemplated by the EAJA. Here, the parties entered into contingency-fee agreements with their attorneys for the payment of an EAJA award. Thus, as a threshold matter, we must determine whether contingency-fee agreements are allowed under the EAJA. The Commissioner and Plaintiffs agree that Plaintiffs have incurred fees, and our analysis in United States v. Claro, 579 F.3d 452 (5th Cir.2009), supports this determination. The plaintiff in Claro sought attorney's fees and expenses pursuant to the Hyde Amendment, which incorporates the requirements articulated in section 2412 of the EAJA for determining whether a party is entitled to fees. Id. at 456. Accordingly, in Claro, we discussed at length when a party has incurred fees for purposes of the EAJA. Id. Because the EAJA does not provide a definition of the term incurred, we examined the term's ordinary meaning. 579 F.3d at 464. After examining the definition of incurred in Webster's Dictionaryto become liable or subject to, or to bring down upon one-selfand Black's Law Dictionaryto suffer to bring on oneself a liability or expense, id. at 456 (citations and brackets omitted), we concluded that the general rule is that fees are incurred when the litigant has a legal obligation to pay them. Id. at 464-65 (citing Sec. Exch. Comm'n v. Comserv Corp., 908 F.2d 1407, 1414-15 (8th Cir.1990) (holding that, under the EAJA, a litigant did not incur fees when his former employer agreed to pay his legal fees and expenses); United States v. Paisley, 957 F.2d 1161, 1164 (4th Cir.1992) (holding that, under the EAJA, a prevailing party with an unconditional right to be indemnified for his legal expenses by a solvent third party had not incurred attorney's fees); Phillips v. Gen. Servs. Admin., 924 F.2d 1577, 1583 (Fed.Cir.1991) (holding that incurred, within the meaning of the EAJA, requires an express or implied arrangement that the fee will be paid over to a legal representative)). Against this framework, we examined cases interpreting the EAJA and concluded that attorney's fees have been granted under the EAJA in the following broad circumstances: (1) under the general [situation], in which the litigant actually incurs the legal obligation to pay the fees; (2) in situations in which an indigent litigant is represented pro bono; or (3) in a limited amount of residual situations in which policy dictates allowing fees to further the goals of the EAJA. Claro, 579 F.3d at 466. In regard to the first category of cases, one of the issues inherently raised by the Hyde Amendment analysis in Claro was whether a party can incur fees as contemplated by the EAJA for work done pursuant to a contingency-fee agreement. Id. at 457. In holding that contingent-fee agreements are allowed under the Hyde Amendment, this court acknowledged that parties can incur attorney's fees pursuant to contingency-fee agreements for purposes of the EAJA. Id. at 462. This rule is not unique to Fifth Circuit jurisprudence. The Federal Circuit has also recognized that a party can incur fees as contemplated in the EAJA pursuant to a contingency-fee agreement. See Phillips, 924 F.2d at 1583 (upholding an award of EAJA fees to a client whose contract with her attorney provided that she would be personally liable for $2,500, with any additional attorney's fees to be contingent upon the success of her appeal and subsequent EAJA application). Courts have also interpreted incurred in similar fee-shifting statutes to mean that a party has a legal obligation to pay fees pursuant to a contingency-fee agreement. See, e.g., Preseault v. United States, 52 Fed.Cl. 667, 675 (2002) (citing Osprey Pac. Corp. v. United States, 42 Fed.Cl. 740, 742 (1999) (obligations under contingency-fee agreements are actually incurred under the Uniform Real Property Acquisition Policy, 42 U.S.C.A. § 4654)); Gotro v. R & B Realty Grp., 69 F.3d 1485, 1487-88 (9th Cir.1995) (holding that by choosing the words `any actual expenses, including attorney's fees, incurred' Congress did not intend to remove the discretion of the district court to award fees in [cases], such as contingent fee or pro bono cases, where the client has not actually `incurred' the obligation to pay her attorneys' fees). Accordingly, we reaffirm our holding in Claro that a party can incur fees as contemplated by the EAJA for work done pursuant to a contingency-fee agreement. Here, Murkeldove and the Vinning Plaintiffs have incurred fees because they have a legal obligation to pay their attorneys fees pursuant to contingency-fee agreements. Specifically, there are two fee agreements at issue in this case, Murkeldove's agreement and the Vinning Plaintiffs' fee agreements. Each of these agreements contain two contingency provisions, a provision regarding fees owed in the event that the claimants win their benefits cases and a provision regarding fees owed in the event EAJA fees are awarded. Relevant to this discussion, Murkeldove's EAJA provision states that: If my case is appealed to Federal Court, and if the Court orders the Social Security Administration to pay attorney fees under the Equal Access to Justice Act, such fees shall belong to my attorneys to the extent permitted by law, and I authorize that any such fees be paid directly to my attorney. Similarly, the Vinning Plaintiffs' agreements read as follows: If a federal court rules in my favor, [my attorney] will ask the Court to order SSA to pay an attorney fee under the Equal Access to Justice Act (EAJA). If the Court orders SSA to make payment under the EAJA, I assign to Ms. Dunlap all attorney fees, costs, and expenses awarded to me. Even if we determined that the Vinning Plaintiffs and Murkeldove did not have a legal obligation to pay fees pursuant to these agreements, well-established rules of statutory construction and policy considerations dictate that they should be awarded attorney's fees. We recognize that the EAJA must be strictly construed in the Government's favor. Tex. Food Indus. Ass'n, 81 F.3d at 580. However, the Supreme Court has explained that courts should enforce statutory language unless the disposition required by the text is [ ] absurd. Hartford Underwriters Ins. Co. v. Union Planters Bank, 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000). Additionally, our analysis in Claro mandates that we take policy into account when interpreting the EAJA. 579 F.3d at 466 ([W]hen policy reasons lend themselves to such a result, fee awards have been granted even when a litigant is [not] legally obligated to pay the attorney's fees.). For the following reasons, we conclude, to the extent that it prohibits contingency-fee agreements in the context of the EAJA, the district court's interpretation of incurred significantly frustrates the purpose of the EAJA. Thus, we cannot endorse this interpretation. To begin, even if one believes that the plain meaning of incurred supports the district court's interpretation, this result cuts against that view on statutory-interpretation grounds. See Hartford Underwriters Ins. Co., 530 U.S. at 6, 120 S.Ct. 1942. After the district court invalidated the parties' EAJA contingency-fee provisions, it determined that the Vinning Plaintiffs and Murkeldove could not incur fees pursuant to the other contingency-fee provision in their fee agreementspayment of attorney's fees was contingent on whether they won their benefits cases. The district court concluded that, because a determination had yet to be made in regard to their benefits, the contingency that would give rise to an obligation to pay fees had yet to occur. The district court's interpretation would mean, as a practical matter, that if a party has a contingency-fee agreement, the party will only be entitled to an EAJA award if a federal court awards benefits. Sentence four of 42 U.S.C. § 405(g) states that a court has the power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Commissioner of Social Security, with or without remanding the cause for a rehearing. Put differently, after a party appeals the Commissioner's denial of benefits, the district court can, among other things, award benefits or remand the case back to the Commissioner for further proceedings. After the district court renders judgment, a party has 30 days from the time that the judgment becomes final to seek an EAJA award. Freeman v. Shalala, 2 F.3d 552, 554 (5th Cir.1993). A court's judgment remanding the case to the agency under sentence four of 42 U.S.C. § 405(g) is such a judgment. See Shalala v. Schaefer, 509 U.S. 292, 300-01, 113 S.Ct. 2625, 125 L.Ed.2d 239 (1993). The district court's judgment becomes final when it can no longer be appealed. 28 U.S.C. § 2412(d)(2)(G). In suits to which a federal officer is a party, the time for appeal does not end until 60 days after the entry of a [Federal Rule of Civil Procedure] 58 judgment. Freeman, 2 F.3d at 554. Thus, a party has 30 days after this sixty-day time period to seek an EAJA award of fees. Id. After the thirty-day time period, an EAJA award is no longer available. Briseno v. Ashcroft, 291 F.3d 377, 379-80 (5th Cir.2002) (explaining that, after the thirty-day time period, a federal court lacks subject matter jurisdiction to grant an EAJA award). If a case is remanded, it is highly unlikely that the post-remand proceedings will be completed within the thirty-day time period for seeking an EAJA award. This is problematic because district courts only award benefits in approximately five percent of social security cases; thus, under the district court's interpretation, an EAJA award will be foreclosed to the 45% of parties whose cases are remanded. SOCIAL SECURITY ADVISORY BOARD, DISABILITY DECISION MAKING: DATA AND MATERIALS 91 (2006). Therefore, only 618 parties of the 12,360 parties that appeal the Commissioner's decision will have the opportunity to offset their litigation costs with an EAJA award. Id. This is not only the type of result that the rules of statutory construction discourage, but also significantly frustrates the purpose and efficacy of the EAJA. See Kornman & Assocs., Inc. v. United States., 527 F.3d 443, 451 (5th Cir. 2008) (We are authorized to deviate from the literal language of a statute only if the plain language would lead to absurd results, or if such an interpretation would defeat the intent of Congress.) (citing Lamie v. U.S. Tr., 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004)). In Claro, we explained that the EAJA aims to (1) eliminate financial disincentives for people who would defend against unjustified governmental action and thereby to deter unreasonable exercise of Government authority and (2) diminish the deterrent effect of seeking review of, or defending against, governmental action. Id. at 466 (citations and internal quotation marks omitted). In other words, the purpose of the EAJA is to eliminate for the average person the financial disincentive to challenge unreasonable government actions. Richard v. Hinson, 70 F.3d 415, 417 (5th Cir.1995) (citing INS v. Jean, 496 U.S. 154, 163, 110 S.Ct. 2316, 110 L.Ed.2d 134 (1990)). Here, the district court's interpretation has the opposite effect. It gives fewer parties the opportunity to offset the costs of their litigation with an EAJA award. Therefore, the average person may not have a realistic opportunity to respond to the Government's unjustified denial of their benefits, forcing parties to endure injustice rather than contest it. The district court's interpretation also weakens courts' ability to deter unjustified government action. When the Commissioner fails to properly adjudicate Social-Security claims, these actions impose a significant burden on those dependent on Social-Security benefits, by inter alia, prolonging uncertainty during periods of financial desperation and depriving those with disabilities of the financial means to support themselves and their families. Remand pursuant to sentence four of § 405(g) (hereinafter sentence-four remand) deters such unjustified actions. Sentence-four remands give a reviewing court the authority to remand a benefits case if it determines that the Commissioner incorrectly applied the relevant law or made improper findings of fact. See Rice, 609 F.3d at 833-34; see also Jackson v. Chater, 99 F.3d 1086, 1089-92, 1095, 1098 (11th Cir.1996) (To remand under . . . sentence four, the district court must either find that the decision is not supported by substantial evidence, or that the Commissioner. . . incorrectly applied the law relevant to the disability claim.); Faucher v. Sec'y of Health and Human Servs., 17 F.3d 171, 174 (6th Cir.1994) ([S]entence four of § 405(g) contemplates . . . a remand after a final decision by the district court reversing the denial of benefits by the Secretary in order to correct an error by the Secretary in applying the regulations even if the rehearing to correct the error requires the taking of additional evidence.). If parties with limited means are unable to challenge misapplications of the law and improper findings of fact, these unjustified governmental actions will go uncorrected, and the Government will have little incentive to properly adjudicate benefits cases. Here, the Commissioner and Plaintiffs stress that awarding EAJA awards for such sentence-four remands not only furthers the goals of the EAJA, but are essential for achieving those goals. We agree. If we were to endorse the district court's interpretation and hold that contingency-fee agreements are an invalid means to incur fees pursuant to the EAJA, this would have the effect of restricting rather than expanding access to courts. Richard, 70 F.3d at 417. We decline to create this precedent. The district court determined that the parties did not incur fees pursuant to their contingency-fee agreements because, the district court reasoned, the agreements violate the Assignment of Claims Act (hereinafter the Act), 31 U.S.C. § 3727, which governs the transfer or assignment of any part of a claim against the United States Government, id. § 3727(a)(1). This determination was in error. The Act provides, in relevant part, that the assignment of a claim may be made after a claim is allowed, the amount of the claim is decided, and a warrant for payment of the claim has been issued. Id. § 3727(b). In effect, the Act serves as a defense that the Government can raise against a claim and not, as the district court's analysis indicates, an ex ante bar to forming a contingency-fee agreement. See, e.g., United States v. Transocean Air Lines, Inc., 386 F.2d 79, 82 (5th Cir.1968) (holding that counsel's claim against the Government, pursuant to a contingency-fee agreement, was invalid because it was in violation of the Anti-Assignment Act, 31 U.S.C. § 203, predecessor to the Assignment of Claims Act); see also Applegate v. United States, 35 Fed.Cl. 406 (1996) (In effect . . . the Act precludes `successors-in-interest to individuals who would have been valid plaintiffs' from bringing compensation claims for takings, unless a valid, not voluntary, assignment under the Act occurred.). The Vinning Plaintiffs' and Murkeldove's agreements are not in violation of the Act. Thus, for the foregoing reasons, we conclude that they have incurred fees as contemplated by the EAJA.