Court Opinion

ID: 171283
Source: CourtListenerOpinion
Date Created: 2010-08-14 18:31:13+00
Date Added: 2024-06-11T17:25:12.762615
License: Public Domain

FILED
                                                             United States Court of Appeals
                                                                     Tenth Circuit
                     UNITED STATES COURT OF APPEALS October 7, 2008

                            FOR THE TENTH CIRCUIT               Elisabeth A. Shumaker
                                                                    Clerk of Court

    MICHAEL A. SCHERFFIUS,

                Plaintiff-Appellant,

    v.                                                   No. 07-2189
                                                 (D.C. No. CIV-05-1046-DJS)
    MICHAEL J. ASTRUE, Commissioner                       (D. N.M.)
    of Social Security,

                Defendant-Appellee.

                             ORDER AND JUDGMENT *

Before LUCERO, HARTZ, and HOLMES, Circuit Judges.

         Michael Armstrong, the attorney for plaintiff Michael Scherffius, appeals

the district court’s reduction of his request for attorney fees under 42 U.S.C.

§ 406(b). We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

*
       After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
                                  B ACKGROUND

      After the Commissioner of the Social Security Administration denied

Mr. Scherffius’s application for disability insurance benefits, the attorney who

had represented him before the agency declined to pursue further review but

suggested that he reapply for benefits with a disability-onset date of August 20,

2005. Mr. Scherffius then entered into a contingent-fee agreement with

Mr. Armstrong. Mr. Armstrong filed a complaint in the district court in

September 2005, and the parties consented to proceed before a magistrate judge.

Mr. Armstrong moved to reverse or remand the agency’s decision, arguing that

the administrative law judge (ALJ) failed to address medical evidence of

Mr. Scherffius’s severe mental impairments and that the ALJ’s hypothetical

questions to a vocational expert did not relate all of Mr. Scherffius’s impairments.

Apparently persuaded by these arguments, the Commissioner filed a motion to

reverse and remand the case for further administrative proceedings, which the

district court granted. The court also granted Mr. Scherffius’s motion for an

award of $5,381.46 in attorney fees under the Equal Access to Justice Act,

28 U.S.C. § 2412(d) (EAJA), for Mr. Armstrong’s work in the district court.

      On remand the Commissioner entered a favorable on-the-record decision on

August 31, 2006. Based on an application filed September 20, 2005 (while the

district-court case was still pending), the Social Security Administration Appeals

Council had found Mr. Scherffius to be disabled as of October 13, 2004. The

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August 2006 decision moved the disability date back to December 4, 2001. 1 The

total amount of the past-due benefits was $60,213, of which the agency withheld

25 percent ($15,053.25) to pay any attorney fees that might properly be awarded

under 42 U.S.C. § 406.

      Mr. Armstrong filed a motion in the district court under § 406(b)(1)(A) for

an award of $15,000 in fees for his work before the court. That statute permits a

reasonable fee to be paid out of a claimant’s past-due benefits for work an

attorney performs before the court, not to exceed 25 percent of the past-due

benefits. The pertinent language states:

             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). The amount Mr. Armstrong requested was based on

the contingent-fee agreement under which Mr. Scherffius had agreed to pay him

25% of any award of past-due benefits. The motion was supported by

documentation of the 33.9 hours Mr. Armstrong had spent on the case in the

district court and an affidavit stating, among other things, that Mr. Armstrong

generally provided no legal services on an hourly basis. Mr. Armstrong also

1
      Mr. Scherffius died shortly after the award of benefits.

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stated that he did not intend to seek an award under 42 U.S.C. § 406(a) for work

performed before the agency (typically $5,300), and he acknowledged his

obligation to return to Mr. Scherffius’s estate the lesser of his EAJA award or any

§406(b) award the court might grant. In a role “resembling that of a trustee” for

Mr. Scherffius, Gisbrecht v. Barnhart, 535 U.S. 789, 798 n.6 (2002), the

Commissioner declined to assert a position on the reasonableness of the amount

requested. The record does not reflect any position taken by Mr. Scherffius’s

estate.

          The district court granted the motion but reduced the amount of the award.

Following Gisbrecht’s guidance that “[i]f the benefits are large in comparison to

the amount of time counsel spent on the case, a downward adjustment is . . . in

order,” id. at 808, the court noted that the case did not involve “novel or difficult

issues,” that the Commissioner had agreed to a remand after Mr. Armstrong had

filed an initial brief, and that the requested sum would result in an hourly rate of

$442.48 ($15,000 divided by 33.9 hours). App. at 3. The court awarded $6,780,

which would amount to a $200 hourly rate, and directed Mr. Armstrong to return

the $5,381.46 EAJA award to Mr. Scherffius’s estate. The court viewed as

irrelevant Mr. Armstrong’s election not to petition for an award under § 406(a)

for services at the agency level.

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                                   D ISCUSSION

      We review the district court’s award of attorney fees under § 406(b) for an

abuse of discretion. See McGraw v. Barnhart, 450 F.3d 493, 505 (10th Cir.

2006); see also Gisbrecht, 535 U.S. at 808 (district-court decisions “qualify for

highly respectful review”). A district court can abuse its discretion in a number

of ways, such as by “applying an erroneous legal standard” or rendering an

“arbitrary, capricious, whimsical, or manifestly unreasonable” decision. Reed v.

Mineta, 438 F.3d 1063, 1066 (10th Cir. 2006) (internal quotation marks omitted).

      In Gisbrecht the Supreme Court rejected the approach of setting attorney

fees under § 406(b) simply by conducting a “lodestar calculation (hours

reasonably spent on the case times [a] reasonable hourly rate),” 535 U.S. at 792, a

method that this circuit had employed, see, e.g., Hubbard v. Shalala, 12 F.3d 946,

948 (10th Cir. 1993). Rather, it recognized “the primacy of lawful attorney-client

fee agreements,” 535 U.S. at 793, and held “that § 406(b) does not displace

contingent-fee agreements within the statutory [25%] ceiling; instead, § 406(b)

instructs courts to review for reasonableness fees yielded by those agreements,”

id. at 808-09. The Court stated that the attorney “must show that the fee sought is

reasonable for the services rendered,” and that “§ 406(b) calls for court review of

[contingent-fee] arrangements as an independent check, to assure that they yield

reasonable results in particular cases.” Id. at 807. As examples of proper

occasions for reducing § 406(b) requests, it mentioned (1) when “the character of

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the representation and the results the representation achieved” were substandard,

(2) when “the attorney is responsible for delay” that causes benefits to accrue

“during the pendency of the case in court,” and (3) when “the benefits are large in

comparison to the amount of time counsel spent on the case.” Id. at 791.

      Mr. Armstrong argues that the district court focused on the effective hourly

rate resulting from a $15,000 award, thereby applying the lodestar method that

Gisbrecht rejected. He asserts that the district court should have used the six-

factor test applied in McGuire v. Sullivan, which considers the “‘time and labor

required; skill required; contingency of fee; amount involved and result attained;

experience, reputation, and ability of attorney; and awards in similar cases.’”

873 F.2d 974, 983 (7th Cir. 1989) (quoting Blankenship v. Schweiker, 676 F.2d
116, 118 (4th Cir. 1982)). He asserts that he is a skilled, experienced

social-security attorney with a good reputation in the district court, and that he

efficiently analyzed the record and filed a successful brief in the district court,

obtaining great success for Mr. Scherffius. He further states that the amount he

requested is in line with awards in similar cases, even when measured against the

effective hourly rate. He also suggests that the district court should have

considered the risk of nonpayment in social security cases in general, which he

calculates to be 65%, and the risk in this particular case, where Mr. Scherffius’s

prior counsel had abandoned the case after the administrative denial of benefits;

but in district court Mr. Armstrong, although pointing out that he had been

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employed under a contingent-fee arrangement, did not argue this 65%-

nonpayment factor or make any other argument regarding the risk he faced of not

being paid in this case.

      We are not persuaded. To begin with, we reject Mr. Armstrong’s assertion

that the district court solely applied the lodestar method. As we read the court’s

order, the court first determined that the effective $442 hourly rate would be a

windfall for obtaining a voluntary remand in a substantively easy and routine

case. Only after rejecting the proposed fee as unreasonable did the court proceed

to set a fee that it found reasonable. Basing that fee on the unchallenged hours

asserted by Mr. Armstrong and a relatively generous hourly rate was not a

violation of Gisbrecht’s prohibition against routinely setting fees using a lodestar

approach without consideration of the contractual fee. Thus, the court did not

abuse its discretion “by applying an erroneous legal standard.” Reed, 438 F.3d

at 1066.

      Nor is there any reason to believe that the district court failed to consider

any of the proper factors advanced by Mr. Armstrong in support of the proposed

fee. Indeed, the court’s explicit rejection of the suggestion that it should take into

account Mr. Armstrong’s decision not to seek fees for legal work before the

agency (a rejection not challenged on appeal) implies that it considered

Mr. Armstrong’s other arguments. And Mr. Armstrong does not argue on appeal

that the district court was insufficiently knowledgeable of attorney practice and

                                         -7-
fees in its jurisdiction to make an informed decision regarding the value of

Mr. Armstrong’s services in this case. We see no need in this circumstance for

the district court to engage in the empty gesture of stating that it considered the

arguments made by Mr. Armstrong before reaching its decision.

        Perhaps it would have been helpful if the district court had explained how it

arrived at a $200 hourly rate, although doing so would only have provided further

opportunity for Mr. Armstrong to complain about a lodestar computation. In any

event, Mr. Armstrong, who bore the burden of persuasion regarding the fee

amount, made such an explanation problematic because he did not state his

normal hourly fee (he swore that he does not provide services on an hourly basis)

or provide information on the hourly fees charged by attorneys of like skill on

like cases.

        In light of the factors suggested by Mr. Armstrong in evaluating a fee

request and our duty to be “highly respectful” of the district court’s fee decision,

Gisbrecht, 535 U.S. at 808, we see no abuse of discretion in the fee award in this

case.

        The judgment of the district court is AFFIRMED.

                                                Entered for the Court

                                                Harris L Hartz
                                                Circuit Judge

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