Court Opinion

ID: 9611252
Source: CourtListenerOpinion
Date Created: 2023-08-22 03:54:13.563735+00
Date Added: 2024-06-11T15:00:55.031479
License: Public Domain

BEA, Circuit Judge, with whom RAWLINSON and N.R. SMITH, Circuit Judges,
join, dissenting:
This is a case about how much an attorney should get paid for successfully representing someone who claims the government incorrectly withheld social security disability benefits (“SSDI”). In each of these cases here on appeal, the plaintiffs filed a claim with the government that they were disabled and therefore eligible for SSDI. The social security agency disagreed with each of them. After the government denied the claims, each claimant hired an attorney to appeal the government’s decision. The contract between the claimants and their attorneys stated the claimants would pay the attorneys 25 percent of the benefits they receive if their appeal succeeded. In SSDI cases, successful plaintiffs are entitled to an award in an amount equal to the sum of the monthly payments they would have received had the government approved their disability claim when plaintiffs initially filed them. Congress, however, decided that contracts between SSDI claimants and their attorneys must be reviewed by a judge, and that the attorneys must prove to the judge that the amount of fees they request are “reasonable.” In each of these cases, the district courts decided the requested fees were unreasonable and awarded the attorneys a smaller share of the disabled claimants’ recovered benefits than what the attorneys sought.
The majority decides the attorneys’ fee requests were reasonable. Therefore, the disabled clients must pay their attorneys a larger share of their disability benefits than the district courts decided was reasonable. The majority reaches this decision regardless of the fact that the district courts were more familiar than we are with the difficulty, if any, of these cases and how much work the attorneys did on each case. Essentially, we disagree with how the majority reads Gisbrecht v. Barnhart, 535 U.S. 789, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002), the most recent decision from the Supreme Court on the topic of attorneys fees in SSDI cases. We think the majority faults the district courts for doing something — namely considering the amount of time the attorneys worked on each case — that the Supreme Court required them to do. Under Gisbrecht, we think the district courts did not abuse their discretion by finding the requested fee amounts were unreasonable, or in awarding the attorneys a lower amount of fees based on the amount of time the attorneys spent on each case. Therefore, we would affirm the decisions below.
The magistrate judges below did not abuse their discretion by awarding attorneys’ fees of less than the amounts requested. See Clark v. Astrue, 529 F.3d 1211, 1213 (9th Cir.2008). A lower court abuses its discretion if it (1) applies an incorrect legal standard or (2) makes factual findings that are illogical, implausible, or bereft of support in the record. Id. at 1214. The magistrate judges here carefully applied the method outlined in Gisbrecht v. Barnhart, 535 U.S. 789, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002), and each opinion was fully supported by the record. The majority chastises the magistrate judges for not following Gisbrecht, but then fails to follow it themselves. Therefore, we think the majority has itself abused its own discretion in ignoring the standard of review, re-weighing the evidence, and engaging in appellate fact finding. As the Supreme Court emphasized, district court judges and magistrates, not appellate *1155court judges, are “accustomed to making reasonableness determinations in a wide variety of contexts, and their assessments in such matters, in the event of an appeal, ordinarily qualify for highly respectful review.” Id. at 808, 122 S.Ct. 1817.
The statute governing this case states that the court may allow “a reasonable fee for such representation, not in excess of 25 percent of the total past-due benefits....” 42 U.S.C. § 406(b). Gisbrecht requires that the trial judge perform an independent “check” of contingent fee arrangements “to assure that they yield reasonable results in particular cases.” Gisbrecht v. Barnhart, 535 U.S. 789, 807, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002). The sole issue of this case is whether the trial judges’ rulings constitute an abuse of discretion in their application of 42 U.S.C. § 406(b) as interpreted by the Court in Gisbrecht.
In Gisbrecht, the Supreme Court held district courts must not solely consider the lodestar method (reasonable hours spent multiplied by a reasonable hourly rate) for calculating reasonable attorneys’ fees in SSDI cases. The lodestar method was designed to balance the interests of opposing parties under fee-shifting statutes. Attorneys representing SSDI claimants are paid fees from the recovery for the disabled client, not from the opposing party. SSDI claimants typically cannot afford an attorney’s hourly fee. Thus, virtually all attorneys charge a contingency fee in these cases. Again, 42 U.S.C. § 406(b) sets the maximum percentage that may be charged for representing a claimant in district court at 25 percent of past benefits recovered.
To determine the amount of attorney’s fees to be awarded when the claimant is successful, a court first looks at any contingent-fee agreement for reasonableness “based on the character of the representation and the results the representative achieved.” Gisbrecht, 535 U.S. at 808, 122 S.Ct. 1817. The Supreme Court gave two examples of when a district court should reduce an attorney’s recovery under such a contingent fee arrangement: (1) when the attorney is responsible for an unreasonable delay in recovering benefits for the claimant (because the attorney should not profit from the accumulation of unpaid benefits during the delay); and (2) “when the benefits are large in comparison to the amount of time counsel spent on the case.” Id.
There is no claim here that any of the attorneys in the three cases before us purposely delayed proceedings so as to pile up unpaid benefits into a larger pot to divide with the client. Instead, at issue here is whether the benefits to counsel are large in comparison to the amount of time counsel spent on the case. To make that determination, Gisbrecht permits the trial court to require “the claimant’s attorney ... submit ... as an aid to the court’s assessment of the reasonableness of the fee yielded by the fee agreement, a record of the hours spent representing the claimant and a statement of the lawyer’s normal hourly billing charge for noncontingent-fee cases.” Id. The Supreme Court specifically left it to a district court’s discretion to decide what a reasonable amount of time to be spent on a case entailed.
The magistrate judges here each followed the process outlined in Gisbrecht. First they examined the contingency fee agreements. Then each compared the amount of the requested fee award to the amount of time the attorneys spent. To aid the magistrate judges in making such a comparison, the attorneys submitted a record of their hours and, statistics on the average hourly rate for comparable attorneys in lieu of their own hourly billing charge because they take cases only on a contingency basis.
*1156After considering this information, the magistrate judges found that to grant the attorneys the full amount of their requested contingency fees would result in windfalls for the attorneys. The magistrate judges consequently granted smaller attorneys’ fee awards based on computations of the amount of hours spent plus a substantial bonus percentage.
The majority’s reasoning as to why the magistrate judges were wrong here is inadequate. First, the majority states the magistrate judges erred because they failed to give “primacy” to the contingent-fee agreements. See Op. at 1150. We do not know what the majority might mean by this term. But it cannot be the meaning of “primacy” as used in Gisbrecht.1
In Gisbrecht, the Supreme Court reversed us because we “rejected the primacy of lawful attorney-client fee agreements.” Id. at 793, 122 S.Ct. 1817. This statement is easily understood in context. Prior to the enactment of § 406(b), contingent-fee agreements were the most prevalent method by which SSDI claimants paid their attorneys. Id. at 803, 122 S.Ct. 1817. Our error was that we had rejected this most frequently used method attorneys and SSDI claimants used to negotiate fees. The Supreme Court held it was unlikely Congress intended § 406(b) to ban contingency fee agreements altogether and replace them solely with courts’ application of the lodestar method, particularly because the lodestar method was developed years after Congress enacted § 406(b). Id. at 806, 122 S.Ct. 1817.
When the majority attempts to clarify the meaning of “primacy,” it ends up replacing “primacy” with “exclusivity.” That interpretation is simply contrary to Gisbrecht, which encourages district courts to assess the reasonableness of the time the attorney spent on a case. The actual amount of time spent on a case provides the trial judge with a reference amount to use in determining whether the attorney would receive a windfall. A windfall can be identified only by comparing the requested amount with a reference amount. Here, the trial judges were given three amounts by the parties: the contingent fee amount, the amount requested by the attorney, and the reference — or “lodestar”— amount. The trial judges found the requested amounts to be a “windfall” — another way of saying the requested amounts were not reasonable — and considered an upward adjustment from the reference amount. Therefore, the judges here spent time explaining why the court needed to increase the reference amount.
The majority, perhaps recognizing that “primacy” is a thin reed from which to hang its opinion, dismisses the magistrate judges’ discussion of the contingency fee agreements as mere lip-service to, or parroting of, Gisbrecht. This is quite a cavalier assault on the sincerity of our magistrate judges, hardly the “highly respectful review” the Supreme Court instructed us to apply to those most “accustomed to making reasonableness determinations.” Gisbrecht, 535 U.S. at 808, 122 S.Ct. 1817.
The majority says it is skeptical whether the magistrate judges adequately considered the contingency fee agreement because they each used the term “enhancement” when they compared the requested amount of attorneys’ fees to the amount of time spent and the reasonable hourly rate. But, the choice of the term “enhancement” is supported by Gisbrecht itself. In describing the approved method of determining reasonableness, Gisbrecht relied on *1157several other opinions, including McGuire v. Sullivan, 873 F.2d 974, 979, 981 (7th Cir.1989), which refer to “enhancements” and “risk enhancements” over a lodestar figure when discussing whether a contingent-fee agreement is reasonable. Thus, the use of this one word does not reflect an improper analysis.
The second reason the majority may doubt the magistrate judges’ decisions is that the fees award were each significantly lower than the requested amount. In other words, the majority does not like the final result. That the judges in the majority would have awarded higher fees, however, does not mean the magistrate judges abused their discretion and erred in applying Gisbrecht.
The magistrate judges found awarding the requested fees would result in a windfall for the attorneys.2 The majority does not discuss how the magistrate judges erred in their findings that the requested fees would be a windfall for the attorneys; nor does the majority even discuss what properly defines the discretionary range in which the magistrates could find a windfall. It is the magistrate judges, however, and not this court, who best know the cases, the pleadings, the effort invested by each attorney, and all other relevant factors in assessing whether the requested fee awards were reasonable. This familiarity is decisive. If the magistrate judges found that the attorneys did not assume a significant risk in accepting representation, then awarding a significant fee based on the risk of litigation would indeed be a “windfall.”
The majority devotes all of three sentences to discussing what would be reasonable fees and why. It asserts (1) the fees requested were reasonable because the attorneys requested less than the full 25% allowed under the contingency fee agreement; (2) the attorneys will not receive a percentage of the SSDI claimants future benefits; and (3) the “attorneys assumed significant risk in accepting these cases, including the risk that no benefits would be awarded or that there would be a long court or administrative delay in resolving the case.” Op. at 1152. The attorneys’ choices to reduce their requested fees tell us only that they too were somewhat loath to seek the full amount of fees as written in the contracts. An attorney must still show the requested amount is reasonable, not merely that the requested amount is less than an admittedly higher, unreasonable amount.3
The second reason is a red herring; future benefits are never available under § 406(b) and cannot contribute to assessing whether a particular fee request under § 406(b) is reasonable.
The third reason is directly contrary to the specific findings of the magistrate judge in Washington. There, the magis*1158trate judge found the facts of the case weighed heavily in favor of the SSDI claimant, which demonstrated the attorney took on “very little risk” of losing the case. Yet, the majority says not a word about why the magistrate judge abused his discretion in making this factual finding. So much for application of our standard of review. In Crawford and Trejo, the magistrate judges did not make explicit findings about the risk of losing the case, but considered the difficulty of the case in assessing the quality of the representation. Most importantly, every SSDI ease involves risk of loss. If that factor is sufficient to show requested attorneys fees are reasonable, district courts will be reduced to rubber stamping contingency fee requests.
Similarly, there is no support for the majority’s position that reversing the magistrate judges’ orders is necessary to assure SSDI claimants have a corps of attorneys from which to choose, to be sure to receive adequate representation. This musing by the majority lacks any support in this record. Further, if a redistribution of money, awarded to palliate the claimant’s disability, between the disabled claimant and his attorney is needed to make available adequate plaintiffs’ counsel, that is a policy consideration to be addressed by Congress, not the courts.
Perhaps the strongest contention in support of reversing the decisions below is that the magistrate judges did not precisely explain the computations that led to their fee awards. The magistrate judges applied either a 40% or 100% risk-factor upward enhancement to the lodestar amount computed in each case. Admittedly, the magistrate judges appear to reach those specific numbers, as opposed to say, 45% or 103%, by judicial fiat; they do not explain how they reached these percentages. Instead, in Crawford and Washington, the magistrate judges explained that they increased the attorney fees by 40% above the lodestar, because (a) there was no excessive delay and (b) plaintiffs counsel was able to persuade the Commissioner to stipulate to a remand, ultimately leading to the favorable decision. However, the judges refused to increase the fee by 256% (that requested in Crawford) or 82% (that requested in Washington) because (1) counsel in Crawford did not meet his burden to show the risk of accepting the representation justified his requested amount4; (2) counsel did not have to do much work to persuade the Commissioner to stipulate to a remand in Washington', and (3) counsel incurred little risk in Washington, because it was so clear that the ALJ had erred. In Trejo, the magistrate judge increased the fees by 100% because (1) the attorney provided high quality representation and (2) although there was excessive delay in reaching the ultimate decision, it was not due to plaintiffs counsel. However, the judge refused to increase the fee by 279%, because (1) counsel did not provide data on her firm’s success rate; (2) there was no evidence the attorney was precluded from other employment due to acceptance of the case; and (3) the case did not require short time limitations.
In Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir.2008), we held district courts must provide a specific explanation for reductions of requested fee awards greater than 10%. Moreno, however, involved a district court reducing an *1159attorneys’ fee request based on the district court’s determination the attorney did redundant work and should not have been remunerated for specific hours the attorney claimed to have spent on the case. See id. at 1112-14. When a district court disregards and eliminates some of an attorneys’ billable hours, the court can easily explain its reductions arithmetically. When a district court determines a contingent risk factor, however, arithmetic is insufficient.
For example, in Trejo the attorney requested $24,000, which was 14% of the $172,223 award for unpaid benefits to the SSDI claimant. The magistrate awarded $12,650.40, or 7.3% of the unpaid benefits, by taking the number of hours multiplied by the average hourly rate of comparable attorneys ($6,325.20) and then doubling that fee to take the attorney’s risk of not getting paid into account. Would the majority require the magistrate judge to explain exactly how he arrived at 100%? The Supreme Court made it clear we should rely on the lower courts’ expertise to make reasonableness determinations.
Lastly, even though the Supreme Court overruled this Circuit in Gisbrecht, it remanded “for recalculation of counsel fees payable from the claimant’s past-due benefits.” Id. at 793. The majority here criticizes and overrules the magistrate judges for failing to follow Gisbrecht. Then, by judicial fiat, it refuses to follow Gisbrecht’& direction. It states merely, “[b]ecause we have held that the fees are reasonable, nothing remains for the district courts to do in these cases, except to award those fees” and then awards the fees requested by the attorneys in each of these cases. See Op. at 1152 . The appellate court, at most, can determine what the trial court did was error, but should remand to the district court to determine whether, upon according “primacy” to the contingency agreements, the district court determines the fees requested were reasonable.
If we overrule the district court, we (like the Supreme Court did in Gisbrecht) should remand these cases to those courts to make the reasonableness determination in these cases. Gisbrecht did not hold that contingent fee agreements, if not in excess of 25 percent of past-due benefits, are presumptively reasonable. Gisbrecht, 535 U.S. at 792, 122 S.Ct. 1817. Gisbrecht instead gives the attorney for the plaintiff the burden of showing that “the fee sought is reasonable for the services rendered.” Id. at 807, 122 S.Ct. 1817. For these reasons alone, even if the magistrate courts in these decisions applied Gisbrecht incorrectly, we can only remand after giving them clarifying instructions. The Supreme Court has shown that remand is the correct procedure when district courts misapply the law in determining attorneys fees in SSDI cases, because district judges and magistrate judges, not appellate court judges, are “accustomed to making reasonableness determinations in a wide variety of contexts.” Gisbrecht, 535 U.S. at 808, 122 S.Ct. 1817.
For these reasons, we respectfully dissent.

. Primacy is defined as "the state of being first (as in importance, order, or rank).” Merriam-Webster's Online Dictionary (2009). To date, no other circuits have addressed the meaning of "primacy” in Gisbrecht.

. "Windfall” seems like a good term to apply to a fee award if “the benefits are large in comparison to the amount of time the attorney spent on the case." Id. at 807, 122 S.Ct. 1817.

. SSDI is not the only field of the law where attorney contingency fee contracts are subject to court supervision based on reasonableness. Personal injury contingency fee contracts for representation of minors and all sorts of probate court matters come to mind. In these cases, courts review contingency fee agreements for reasonableness and use many of the factors found in lodestar analyses, such as the amount of time spent on the case. See, e.g., Padilla v. McClellan, 93 Cal.App.4th 1100, 1107, 113 Cal.Rptr.2d 680 (2001) (assessing the "type and difficulty of the matter, counsel's skill vis-a-vis the skill required to handle the case, counsel’s age and experience, the time and attention counsel gave to the case, and the outcome"). See also Revised Code of Washington § 4.24.005 (providing for judicial review of attorneys’ fees based on factors such as "time and labor required,” in all tort actions).

. The district court found, in part, counsel failed to meet his burden because he failed to provide data on the success rate of his firm. The success rate of plaintiff’s specific firm is not relevant; it is the success rate of all attorneys who take on similar representations that matters for the purpose of determining contingent risk. Otherwise, the courts would punish successful attorneys and reward incompetent attorneys.