Rice v. Astrue

Case: 09-10589 Document: 00511149147 Page: 1 Date Filed: 06/22/2010

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
June 22, 2010
No. 09-10589
Lyle W. Cayce
Clerk
EVELYN D. RICE,

Plaintiff - Appellant

v.

MICHAEL J. ASTRUE, COMMISSIONER OF SOCIAL SECURITY,

Defendant - Appellee

Appeal from the United States District Court
for the Northern District of Texas

Before JONES, Chief Judge, and HIGGINBOTHAM and ELROD, Circuit
Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
This social security case brings the issue of whether a federal court may
condition the amount of its Equal Access to Justice Act award of attorney’s fees
on a future grant of attorney’s fees by the Commissioner of Social Security. The
government concedes that Congress does not permit the offset. We are
persuaded that this concession is compelled by the statutory scheme.

I.
Evelyn D. Rice, a former postal clerk, has not worked since February 18,
2003, due to a car accident, and continues to have a variety of musculoskeletal
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No. 09-10589

disorders, including fibromyalgia. She filed an application for disability
insurance benefits on October 18, 2004, but the Commissioner of Social Security
denied it, asserting there were jobs in the national economy that Rice could
perform.
Rice then hired attorney Ronald D. Honig under a contingency fee
arrangement, whereby Rice would pay Honig up to 25% of any past-due benefits.
Specifically, Rice would pay over approved Social Security Act fees for work
performed before the agency under 42 U.S.C. § 406(a) and for work performed
before a court under 42 U.S.C. § 406(b).1 And Honig would retain any attorney’s
fee awarded under the Equal Access to Justice Act (EAJA),2 to the extent it was
not offset by a § 406(b) fee.
With Honig in her corner, Rice sought judicial review in the Northern
District of Texas. After answering Rice’s complaint, the Commissioner
voluntarily moved to remand, acknowledging error in the administrative process:
the Commissioner had not proven that Rice had transferable skills needed to
engage in the type of semi-skilled work available to her. Pursuant to sentence
four of 42 U.S.C. § 405(g),3 the district court granted the motion to remand for
further proceedings.
Under a sentence four remand, the court immediately enters judgment

1
42 U.S.C. § 406 codifies a portion of the Social Security Act.
2
See 28 U.S.C. § 2412(d).
3
“In cases reviewing final agency decisions on Social Security benefits,
the exclusive methods by which district courts may remand to the
[Commissioner] are set forth in sentence four and sentence six of § 405(g) . . .
.” Shalala v. Schaefer, 509 U.S. 292, 296 (1993). We express no opinion about
attorney’s fees in sentence six remands under § 405(g).

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No. 09-10589

and terminates the civil action.4 As happened with Rice, a sentence four remand
does not necessarily mean that the claimant will get benefits; the district court
may remand for a legal error and leave for further agency findings whether
benefits are due. However, “a party who wins a sentence-four remand order is
a prevailing party,” opening the door to an EAJA award if the government’s
position was not substantially justified.5
The district court granted an unopposed motion 6 for an EAJA award of
attorney’s fees in the amount of $2,853.87, plus costs of $360.60. The court
further ordered that, “in the event that Rice’s counsel receives fee awards under
[42 U.S.C.] § 406 for work performed on Rice’s claim, regardless of whether such
awards are awarded at the administrative or judicial level, Rice’s counsel shall
promptly pay to Rice an amount equal to [the lesser of the two awards].” Rice
appealed the order insofar as it required her attorney to remit a portion of the
EAJA award if she won attorney’s fees at the administrative level under
§ 406(a).

II.
A.
i.
Attorneys representing social security claimants can often win fees in two
ways. The first type of fee in contingency agreement cases comes out of the

4
Id. at 298–99.
5
Id. at 300–02.
6
The Commissioner conceded that the agency’s position before the court
had not been substantially justified, necessary for relief under the EAJA.

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claimant’s past-due benefits.7 Congress allows both the Commissioner and the
courts to award these fees, but treats “the [two] review stages discretely: § 406(a)
governs fees for representation in administrative proceedings; § 406(b) controls
fees for representation in court.” 8
For contingency fees at the administrative level, the Commissioner “shall
approve” the agreement as long as: (1) the attorney files it with the
Commissioner in advance; and (2) the fee does not exceed the lesser of 25% of the
total past-due benefits or $6,000.9 And for contingency fees on judicial review:
Whenever a court renders a judgment favorable to a claimant . . . ,
the court may . . . allow . . . a reasonable fee for . . . representation,
not in excess of 25 percent 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 . . . to
[the] attorney out of, and not in addition to, the . . . past-due
benefits.10

7
Some attorneys do not work on a contingency basis. Upon petition to
the Commissioner, they can get fees for administrative-level work even if no
benefits are won. See 42 U.S.C. § 406(a)(1); 20 C.F.R. § 404.1725(b)(2).
8
Gisbrecht v. Barnhart, 535 U.S. 789, 794 (2002).
9
See 42 U.S.C. § 406(a)(2)(A); Maximum Dollar Limit in the Fee
Agreement Process, 74 Fed. Reg. 6080 (Feb. 4, 2009); see also Gisbrecht, 535
U.S. at 795.
10
42 U.S.C. § 406(b). This court has explained that, with § 406(b),
“Congress sought . . . to accomplish two goals. First, to encourage effective
legal representation of claimants by insuring lawyers that they will receive
reasonable fees . . . . And, second, to insure that the old age benefits for
retirees and disability benefits for the disabled . . . are not diluted by a
deduction of an attorney’s fee of one-third or one-half of the benefits received.”
Dawson v. Finch, 425 F.2d 1192, 1195 (5th Cir. 1970).

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This regime recognizes that the Commissioner and the courts operate in
different spheres. “The district court . . . may consider only court-related
services in setting allowable fees for representation before it. On the other hand,
Congress has made it equally clear that the authority for setting fees for
representation in agency proceedings rests exclusively with the
[Commissioner].”11 Despite this segregation – and despite sharp disagreement
from other courts of appeals – Fifth Circuit interpretation of § 406 “precludes the
aggregate allowance of attorney’s fees greater than twenty-five percent of the
past due benefits received by the claimant.”12 That is, fees under § 406(a) plus
fees under § 406(b) cannot exceed 25%. That structure is not at issue here.
ii.
The second type of attorney’s fees comes through the EAJA, which allows
“a party prevailing against the United States in court, including a successful
Social Security benefits claimant, [to] be awarded fees payable by the United
States if the Government’s position in the litigation was not ‘substantially

11
Brown v. Sullivan, 917 F.2d 189, 191 (5th Cir. 1990), overruled on
other grounds by Gisbrecht, 535 U.S. at 794.
12
Dawson, 425 F.2d at 1195; accord Morris v. SSA, 689 F.2d 495,
497–98 (4th Cir. 1982). Contra Clark v. Astrue, 529 F.3d 1211, 1218 (9th Cir.
2008) (“We hold that the plain text of 42 U.S.C. § 406(b) limits only the
amount of attorney’s fees awarded under § 406(b), not the combined fees
awarded under § 406(a) and § 406(b), to 25% of the claimant’s past-due
benefits.”); Wrenn ex rel. Wrenn v. Astrue, 525 F.3d 931, 936 (10th Cir. 2008);
Horenstein v. Sec’y of Health & Human Servs., 35 F.3d 261, 262 (6th Cir.
1994) (en banc), overruling Webb v. Richardson, 472 F.2d 529 (6th Cir. 1972).

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No. 09-10589

justified.’”13 In contrast to fees under § 406(b), “EAJA fees are determined not
by a percent of the amount recovered, but by the time expended and the
attorney’s hourly rate, capped in the mine run of cases at $125 per hour.” 14
Because in a sentence four remand the court terminates the “civil action,” the
prevailing party cannot receive enhanced EAJA payments for work done on the
administrative level.15

13
Gisbrecht, 535 U.S. at 796 (quoting 28 U.S.C. § 2412(d)(1)(A)).
Congress specifically provided:

[A] court shall award to a prevailing party other than the United
States fees and other expenses . . . incurred by that party in any
civil action . . . , including proceedings for judicial review of
agency action, brought by or against the United States in any
court having jurisdiction of that action, unless the court finds
that the position of the United States was substantially justified
or that special circumstances make an award unjust.

28 U.S.C. § 2412(d)(1)(A). “Congress enacted the EAJA in 1980 in response to
concerns that individuals would be deterred from seeking relief from
unreasonable government action because of the expenses incurred in
pursuing such relief.” Stephens ex. rel. R.E. v. Astrue, 565 F.3d 131, 134–35
(4th Cir. 2009) (citing S. Rep. No. 96-253, at 7 (1979)).
14
Gisbrecht, 535 U.S. at 796 (citations, quotation marks, and alterations
omitted).
15
See 28 U.S.C. § 2412(d)(1)(A); Shalala v. Schaefer, 509 U.S. 292,
295–304 (1993). Some agencies can give EAJA awards for adversary
adjudications at the administrative level, see 5 U.S.C. § 504(a), but “[i]t has
been held that proceedings before the Social Security Administration are not
adversary adjudications and are thus excluded from coverage under the
EAJA,” Clifton v. Heckler, 755 F.2d 1138, 1142–43 (5th Cir. 1985) (joining the
other circuits to so hold and citing cases); see also Sullivan v. Hudson, 490
U.S. 877, 891 (1989).

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B.
Twenty-five years ago, social security attorneys looking to collect both a
court-ordered contingency fee and an EAJA award in the same case found
themselves in a pickle, because when a court grants contingency fees under
§ 406(b) for a successful judicial challenge, it is a crime for an attorney to
“charge[], demand[], receive[], or collect[] for services rendered in connection
with proceedings before a court . . . any amount in excess of that allowed by the
court.”16 This provision would forbid attorneys from seeking to collect fees
awarded under the EAJA. Recognizing the problem, Congress endeavored to
harmonize the two types of fees by creating a savings clause.17
Through an uncodified 1985 amendment to the EAJA, “[f]ee awards may
[now] be made under both prescriptions, but the claimant’s attorney must
‘refun[d] to the claimant the amount of the smaller fee.’”18 “Thus, an EAJA
award offsets an award under Section 406(b), so that the amount of the total
past-due benefits the claimant actually receives will be increased by the EAJA
award up to the point the claimant receives 100 percent of the past-due

16
42 U.S.C. § 406(b)(2).
17
Gisbrecht, 535 U.S. at 796.
18
Id. (citing Act of Aug. 5, 1985, Pub. L. 99-80, § 3, 99 Stat. 183
(providing that § 406(b)(1) “shall not prevent an award of fees under [the
EAJA]” and that § 406(b)(2)’s criminal provision “shall not apply . . . where
the claimant’s attorney receives fees for the same work under both section
[406(b)] and [the EAJA if] the claimant’s attorney refunds to the claimant the
amount of the smaller fee”)) (third alteration in original); see also Astrue v.
Ratliff, 560 U.S. ____, ____, 2010 WL 2346547, at *6, 2010 U.S. LEXIS 4763,
at *18 (2010).

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No. 09-10589

benefits.” 19
The amendment did not provide a savings provision for administrative
level awards under § 406(a), which also makes it a crime for any person to
“knowingly charge or collect directly or indirectly any fee in excess of the
maximum fee.”20 (The “maximum fee” in contingency cases at the administrative
level is the lesser of 25% of past-due benefits or $6,000.21 ) The question is
whether an attorney may earn both a § 406(a) award of attorney’s fees at the
administrative level and an EAJA award of attorney’s fees at the judicial level.
The district court in Rice’s case said no, granting an EAJA award, but
conditioned it on Honig returning to Rice an amount equal to the lesser of the
EAJA award or any subsequent § 406(a) award made by the Commissioner.
Both Rice and the Commissioner urge that the court had no authority to order
an offset of this kind. We review de novo the district court’s legal conclusion that
it did.22

19
Gisbrecht, 535 U.S. at 796 (quotation marks and alterations omitted).
20
42 U.S.C. § 406(a)(5).
21
42 U.S.C. § 406(a)(2)(A); Maximum Dollar Limit in the Fee Agreement
Process, 74 Fed. Reg. 6080 (Feb. 4, 2009).
22
Squires-Allman v. Callahan, 117 F.3d 918, 920 (5th Cir. 1997) (“We
review a fee award under the EAJA for abuse of discretion. Underlying
findings of fact are reviewed for clear error. Underlying conclusions of law,
however, are reviewed de novo.” (citations omitted)); see also Davidson v.
Veneman, 317 F.3d 503, 505 (5th Cir. 2003). Compare Pierce v. Underwood,
487 U.S. 552, 571 (1988) (explaining that the abuse-of-discretion standard
applies to an EAJA award’s rate), with United States v. Truesdale, 211 F.3d
898, 906 (5th Cir. 2000) (explaining in an analogous context that “legal
determinations underlying the district court’s decision are . . . reviewed de

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III.
Both the Social Security and Equal Access to Justice statutes treat
administrative and judicial review as separate entities – suggesting, at first
blush, that § 406(a) administrative fees do not overlap with EAJA judicial fees.
Regarding the Social Security Act, Congress designed “the administrative and
judicial review stages discretely,”23 and “the authority for setting [§ 406(a)] fees
for representation in agency proceedings rests exclusively with the
[Commissioner],”24 while “[t]he district court . . . may consider only court-related
services in setting allowable [§ 406(b)] fees for representation before it.” 25
On sentence four remands, as here, the EAJA states the district court
“shall” grant EAJA attorney’s fees if the government’s position before the court
had not been substantially justified, and the court derives the fee from work
performed only at the judicial level. Because these EAJA fees can overlap with
§ 406(b) fees – and because § 406(b)(2) makes it a crime for an attorney to double
collect at the judicial level – Congress passed the savings clause, which requires
the attorney to refund to the client the lesser amount. Because judicial and
administrative reviews are separate, the parties urge that an EAJA award for

novo” and noting that “Judge Friendly has stated, ‘it is not inconsistent with
the discretion standard for an appellate court to decline to honor a purported
exercise of discretion which was infected by an error of law’” (citing Spawn v.
W. Bank-Westheimer, 989 F.2d 830, 839 (5th Cir. 1993) (quoting Abrams v.
Interco, Inc., 719 F.2d 23, 28 (2d Cir. 1983))) (alteration omitted)).
23
Gisbrecht, 535 U.S. at 794.
24
Brown v. Sullivan, 917 F.2d 189, 191 (5th Cir. 1990), overruled on
other grounds by Gisbrecht, 535 U.S. at 794.
25
Id.

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judicial work cannot mix with § 406(a) fees for administrative work, obviating
the need for a savings clause with respect to § 406(a).26
We agree, noting that the texts of the two § 406 criminal provisions adhere
strictly to forum lines. Section 406(a)(5) makes it a crime only to collect more for
work done at the administrative level than the maximum fee allowed by the
Commissioner,27 and § 406(b)(2) forbids only collecting more for work done at the
judicial level than that approved by the court.28 Because an attorney can win
both § 406(a) and § 406(b) fees in the same case,29 Congress can have meant

26
Put another way, the EAJA fees and § 406(a) fees are not for the
“same work.” Act of Aug. 5, 1985, Pub. L. 99-80, § 3, 99 Stat. 183.
27
Compare 42 U.S.C. § 406(a)(5) (“Any person . . . who shall knowingly
charge or collect directly or indirectly any fee in excess of the maximum fee . .
. prescribed by the Commissioner of Social Security shall be deemed guilty of
a misdemeanor . . . .” (emphasis supplied)), with 42 U.S.C. § 406(a)(1) (“The
Commissioner of Social Security may, by rule and regulation, prescribe the
maximum fees which may be charged for services performed in connection
with any claim before the Commissioner of Social Security under this
subchapter, and any agreement in violation of such rules and regulations
shall be void.” (emphasis supplied)).
28
See 42 U.S.C. § 406(b)(2) (“Any attorney who charges, demands,
receives, or collects for services rendered in connection with proceedings before
a court . . . any amount in excess of that allowed by the court thereunder shall
be guilty of a misdemeanor . . . .” (emphasis supplied)).
29
Our cases have implied as much. See Brown, 917 F.2d at 190–91
(approving the district court’s decision to grant § 406(b) fees when the
attorney had already received a § 406(a) fee); Dawson v. Finch, 425 F.2d
1192, 1195 (5th Cir. 1970) (holding that the aggregate fees under § 406(a) and
§ 406(b) may not exceed 25%). District courts within the circuit regularly
grant fees in addition to agency-level fees. See, e.g., Raposa v. U.S. Comm’r
SSA, 2009 WL 3460433, at *1–*2, 2009 U.S. Dist. LEXIS 98296, at *3–*6

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nothing else. Otherwise, an attorney could collect either a § 406(a) or a § 406(b)
fee, but not both. As long as the EAJA award is not given for work done at the
administrative level, no savings clause is needed for § 406(a).
While it is clear that the statutes do not require an offset, there remains
the question of whether the district court may take into consideration future
§ 406(a) attorney’s fees when setting an EAJA award. We hold that it may not,
hewing closely to the EAJA’s text. The statute mandates 30 payment of
“reasonable” attorney’s fees, the amount of which “shall be based upon prevailing

(W.D. La. Oct. 22, 2009); Brannen v. Barnhart, 2004 WL 1737443, at *3, 2004
U.S. Dist. LEXIS 14893, at *9 (E.D. Tex. July 22, 2004) (“When Social
Security cases are litigated administratively and judicially, prevailing
claimants and their attorneys may recover up to three attorney’s fee awards:
(1) from the Commissioner pursuant to 42 U.S.C. § 406(a); (2) from the
district court pursuant to 42 U.S.C. § 406(b); and (3) from the district court
pursuant to 28 U.S.C. § 2412(d)(1)(A). When both the second and third
awards are received, the lesser must be returned to the client.”). And the
other circuit courts of appeals have interpreted the Social Security Act to
allow both § 406(a) and § 406(b) fees for the same claim. See, e.g., Clark v.
Astrue, 529 F.3d 1211, 1218 (9th Cir. 2008); Wrenn ex rel. Wrenn v. Astrue,
525 F.3d 931, 937 (10th Cir. 2008); Horenstein v. Sec’y of Health & Human
Servs., 35 F.3d 261, 262 (6th Cir. 1994) (en banc) (“[I]n cases where the court
remands the case back to the [Commissioner] for further proceedings, the
court will set the fee – limited to 25 percent of past-due benefits – for the
work performed before it, and the [Commissioner] will award whatever fee
the [Commissioner] deems reasonable for the work performed on remand and
prior administrative proceedings.”).
30
“Except as otherwise specifically provided by statute” or “unless . . .
the position of the United States was substantially justified” or “special
circumstances make an award unjust.” 28 U.S.C. § 2412(d)(1)(A). These
exceptions – none of which the district court found here – bear on a party’s
“eligibility for a fee award.” Comm’r, I.N.S. v. Jean, 496 U.S. 154, 158 (1990);
see also Milton v. Shalala, 17 F.3d 812, 813 n.1 (5th Cir. 1994).

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market rates for the kind and quality of the services furnished.” 31 This
“statutory standard” method of calculation does not allow for consideration of
future fees granted at the administrative level, which is independent of the kind
and quality of work provided before the federal courts.32

IV.
No doubt the offset implicated a compelling policy choice, one that
persuaded the district court and coincides with the EAJA’s purpose “that the
amount of the total past-due benefits the claimant actually receives will be

31
28 U.S.C. § 2412(d)(2)(A). The Supreme Court has explained EAJA
fees “are determined not by a percent of the amount recovered, but by the
time expended and the attorney’s hourly rate, capped in the mine run of cases
at $125 per hour.” Gisbrecht v. Barnhart, 535 U.S. 789, 796 (2002) (citations,
quotation marks, and alterations omitted).
32
See In re Estate of Lee, 812 F.2d 253, 257 (5th Cir. 1987). While we
have noted that a district court can dip below Congress’s suggested rate
calculation, id., we have affirmed that it is the twelve factors set out in
Johnson v. Georgia Highway Express that bear on the determination of a
reasonable rate under the EAJA, Hall v. Shalala, 50 F.3d 367, 369 (5th Cir.
1995) (citing Johnson v. Ga. Highway Express, 488 F.2d 714, 717–19 (5th Cir.
1974)). None of Johnson’s twelve factors contemplate a reduction for future §
406(a) awards. See Johnson, 488 F.2d at 717–19 (listing the factors as: (1) the
time and labor required; (2) the novelty and difficulty of the issues; (3) the
skill required to perform the legal services properly; (4) the preclusion of
other employment by the attorney; (5) the customary fee; (6) whether the fee
is fixed or contingent; (7) the time limitations imposed by the client or
circumstances; (8) the amount involved and results obtained; (9) the
experience, reputation, and ability of the attorneys; (10) the undesirability of
the case; (11) the nature and length of the professional relationship with the
client; and (12) the award in similar cases).

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increased.”33 If the EAJA is supposed to help the claimant pocket a greater
portion of her past-due benefits, there is little reason to distinguish between
attorney’s fees taken out of benefits at the administrative or judicial level. On
the other hand, the Commissioner and, of course, social security lawyers take a
contrary policy stance, maintaining that fewer attorneys will represent social
security plaintiffs if courts offset EAJA fees with § 406(a) fees.
In the end, we accept, as we must, the choice made by Congress – which
has not left the district courts with sufficient discretion to offset an EAJA award
of attorney’s fees with a future 42 U.S.C. § 406(a) award of attorney’s fees by the
Commissioner of Social Security.
REVERSED.

33
Gisbrecht, 535 U.S. at 796 (quotation marks and alterations omitted).

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