Gralin Vinning v. Michael Astrue, Commissio ( 2011 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 15, 2011
Nos. 09-10902, 09-11093
Lyle W. Cayce
Clerk
McCLENON MURKELDOVE, JR.
Plaintiff-Appellant
v.
MICHAEL J. ASTRUE, COMMISSIONER OF SOCIAL SECURITY
Defendant-Appellee
GRALIN VINNING
Plaintiff-Appellant
v.
MICHAEL J. ASTRUE, COMMISSIONER OF SOCIAL SECURITY
Defendant-Appellee
JOANN BROWN
Plaintiff-Appellant
v.
MICHAEL J. ASTRUE, COMMISSIONER OF SOCIAL SECURITY
Defendant-Appellee
MARY ANN KENNAN-CROOM
Plaintiff-Appellant
v.
MICHAEL J. ASTRUE, COMMISSIONER OF SOCIAL SECURITY
Nos. 09-10902, 09-11093
Defendant-Appellee
ELEANOR S. HOWARD
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
USDC Nos. 4:08-CV-172, 4:08-CV-059-A,
4:08-CV-155-A, 4:08-CV-324-A, 4:08-CV-522-A.
Before STEWART, PRADO, and ELROD, Circuit Judges.
CARL E. STEWART, Circuit Judge:
Plaintiff-Appellant, McClenon Murkeldove, Jr., sought past-due benefits
from the Social Security Commissioner, and his claim was denied. He
subsequently appealed the decision to the district court. After the district court
reversed the Social Security Commissioner’s decision and remanded the case for
further proceedings, Murkeldove applied for attorney’s fees pursuant to 28
U.S.C. § 2412(d)(1)(A), a subsection of the Equal Access to Justice Act (EAJA).
The district court denied his request. Murkeldove appealed the district court’s
judgment.
In unrelated cases, Plaintiffs-Appellants Gralin D. Vinning, JoAnn Brown,
Mary Ann Keenan-Croom, and Eleanor S. Howard independently filed for past-
due benefits from the Social Security Commissioner. Each of their claims were
denied. They individually appealed the decisions, and their cases were heard by
the same district court judge that decided Murkeldove’s case. After the district
court reversed the Social Security Commissioner’s decisions and remanded the
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Nos. 09-10902, 09-11093
cases for further proceedings, each party applied for an EAJA award of
attorney’s fees. Because the four cases raised common issues, the district court
consolidated the cases for its review. The district court subsequently denied
their requests. The parties appealed the district court’s judgment.
The four cases consolidated by the district court were in turn consolidated
by this court with Murkeldove v. Astrue, No. 4:08-CV-172, for briefing and oral
argument purposes. At issue on appeal is whether the parties have “incurred”
attorney’s fees for purposes of the EAJA. Furthermore, in regard to Murkeldove
only, even if he incurred EAJA attorney’s fees, whether “special circumstances”
would make an EAJA award unjust. The Commissioner and Plaintiffs agree
that Plaintiffs are entitled to EAJA awards because they have incurred fees.
They also agree that EAJA awards in such circumstances are essential for
achieving the goals of the EAJA.
For the following reasons, we VACATE the district court’s judgments and
REMAND the cases for further proceedings consistent with this opinion.
I. BACKGROUND
A. Relevant Facts
This case involves five consolidated actions. In the first case, the district
court reversed the decision of the Social Security Commissioner (hereinafter,
Commissioner), denying McClenon Murkeldove’s claims for disability insurance
benefits, under Title II of the Social Security Act, 42 U.S.C. §§ 416(I), 423(d), and
supplemental security income benefits, under Title XVI of the Social Security
Act, 42 U.S.C. §§ 1382, 1382c. The case was then remanded to the
Commissioner for further proceedings pursuant to sentence four of 42 U.S.C.
§ 405(g), which permits judicial review of a final decision by the Commissioner
and grants a court the ability to affirm, modify, or reverse the decision with or
without remanding the benefits case for rehearing.
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Nos. 09-10902, 09-11093
Subsequently, Murkeldove filed an application for attorney’s fees and costs
pursuant to the EAJA, which the Commissioner did not oppose. The district
court denied the motion and explained that, “[t]he contingent fee contract
between Murkeldove and his lawyers contemplates payment of a fee by
Murkeldove only in the event his lawyers are successful in obtaining for him an
award of Social Security benefits.” The district court concluded that the
contingency that would obligate Murkeldove to pay attorney’s fees—an award
of past-due benefits—had yet to occur. Thus, Murkeldove had yet to “incur”
attorney’s fees for purposes of the EAJA, which would entitle him to an award
of fees. The district court further held that, even if it determined that
Murkeldove was entitled to an EAJA award, “special circumstances” would make
an award of attorney’s fees unjust. Murkeldove appealed the district court’s
judgment to this court.
In four unrelated cases, the same district court that decided Murkeldove’s
case reversed the Commissioner’s decisions in Vinning v. Astrue,
No. 4:08-CV-059-A; Brown v. Astrue, No. 4:08-CV-155-A; Kennan-Croom v.
Astrue, No. 4:08-CV-324-A; and Howard v. Astrue, No. 4:08-CV-522-A
(collectively, Vinning v. Astrue). The district court remanded each case back to
the Commissioner for further proceedings pursuant to sentence four of 42 U.S.C.
§ 405(g). Shortly after, the parties in each of those cases (collectively, the
Vinning Plaintiffs or Plaintiffs) filed individual motions for attorney’s fees
pursuant to the EAJA. As with Murkeldove, the Commissioner did not oppose
the Plaintiffs’ requests for fees. Because the Plaintiffs’ motions raised common
issues, the district court consolidated the requests for fees pursuant to Federal
Rule of Civil Procedure 42. After reviewing the Plaintiffs’ contingency-fee
agreements, which were identical because the parties shared the same counsel,
the district court concluded that the agreements did not obligate them to pay
attorney’s fees unless they won their benefits cases on remand. Because they
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Nos. 09-10902, 09-11093
had yet to receive a final determination on their benefits cases, the district court
held that they had not “incurred” attorney’s fees for purposes of the EAJA and
denied their motions for fees. The Plaintiffs appealed the district court’s
judgment.
After Murkeldove and the Vinning Plaintiffs filed their notices of appeal,
they jointly filed an unopposed motion to consolidate their cases in this court for
purposes of briefing and oral argument pursuant to Federal Rule of Appellate
Procedure 3. This court granted the motion. On appeal, the Commissioner
agrees with Murkeldove and the Vinning Plaintiffs that the district court erred
and supports their requests for fees.
B. Statutory Scheme
Provisions in two statutes—the Social Security Act, 42 U.S.C. § 406, and
the Equal Access to Justice Act, 28 U.S.C. § 2412—govern the award of
attorney’s fees in Social Security actions. Case law on this issue continues to
clarify what is otherwise a complex statutory scheme. Because this case centers
on our application of these statutory provisions, we preface our analysis with a
brief discussion of each.
1. The Social Security Act
Sections 406(a) and 406(b) of the Social Security Act provide for the
discretionary award of attorney’s fees out of the past-due benefits recovered by
a successful claimant in a Social Security action. Section 406(a) allows an
attorney to receive fees “[f]or representation of a benefits claimant at the
administrative level.” Gisbrecht v. Barnhart, 535 U.S. 789, 794 (2002) (citing 42
U.S.C. § 406(a) and explaining that after a petition for fees has been filed, the
Commissioner may allow reasonable fees “for services performed in connection
with any claim before” it). These fees may be awarded even if the benefits
claimant is unsuccessful. 20 CFR § 404.1725(b)(2) (“We may authorize a fee
even if no benefits are payable.”). “As an alternative to fee petitions, the Social
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Nos. 09-10902, 09-11093
Security Act . . . accommodates contingent-fee agreements filed with the agency
in advance of a ruling on a claim for benefits.” Gisbrecht, 535 U.S. at 795. If the
Commissioner awards the claimant benefits, the Commissioner will approve the
agreement, “if the fee specified in the agreement does not exceed the lesser of”:
(1) “25 percent of the total amount of . . . past-due benefits” or (2) $4,000.
§§ 406(a)(2)(A)(ii), (iii). Pursuant to section 406(a), it is a crime for an attorney
“to charge or collect any fee in excess of the maximum fee, prescribed by the”
Commissioner. Id. § 406(a)(5).
Similarly, section 406(b) governs the award and collection of fees by
attorneys for the representation of claimants in court. Section 406(b) provides:
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
42 U.S.C. § 406(b)(1)(A). Attorneys often obtain these fees from their clients
pursuant to a contingency-fee agreement. Gisbrecht, 535 U.S. at 800 (explaining
that “contingent-fee contracts . . . are the most common fee arrangement
between attorneys and Social Security claimants.”). An award pursuant to
section 406(b) not only must be reasonable, but also, like a section 406(a) award,
is limited to 25% of the claimant’s award of past-due benefits. Id. Section 406(b)
further states: “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 . . . shall be guilty of a misdemeanor.” Id.§ 406(b)(1)(A)(2).
If a party receives an award pursuant to section 406(a) for administrative
work and section 406(b) for work before a court, the aggregate of the fees cannot
exceed 25% of past-due benefits. Rice v. Astrue, 609 F.3d 831, 838 n.29 (5th Cir.
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Nos. 09-10902, 09-11093
2010) (citing Dawson v. Finch, 425 F.2d 1192, 1195 (5th Cir. 1970)).1 Although
the language of the Social Security Act indicates that section 406(a) and section
406(b) are the only means by which a Social Security benefits claimant may
obtain an award of attorney’s fees, a claimant can also seek fees pursuant to the
EAJA for work by the claimant’s attorney in court.
2. The EAJA
In 1980, Congress enacted the EAJA. Gisbrecht, 535 U.S. at 795. The
EAJA provides that “a court shall award to a prevailing party2 other than the
United States fees and other expenses . . . incurred by that party in any civil
action, brought by or against the United States in any court having jurisdiction
of that action.” 28 U.S.C. § 2412(d)(1)(A). The EAJA further provides that, even
if a court determines that a “prevailing party” is entitled to attorney’s fees, the
court can decide not to award attorney’s fees if it “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). And, unlike an award pursuant to
1
There is currently a Circuit split on the issue of whether the Social Security Act,
pursuant to the cap articulated in section 406(b), limits the combined total of attorney’s fees
awarded under section 406(a) and section 406(b) to 25% of past-due benefits. See Clark v.
Astrue, 529 F.3d 1211, 1214–15 (9th Cir. 2008) (collecting cases). However, it is well-
established in this Circuit that there is such a limitation. See Dawson v. Finch, 425 F.2d 1192,
1195 (5th Cir. 1970) (explaining that the cap articulated in section 406(b) has two aims: “First,
to encourage effective legal representation of claimants by insuring lawyers that they will
receive reasonable fees directly through certification by the Secretary. And, second, to insure
that the old age benefits for retirees and disability benefits for the disabled, which are usually
the claimant’s sole means of support, are not diluted by a deduction of an attorney’s fee of
one-third or one-half of the benefits received.”).
2
On June 16, 2010, Judge John McBryde, presiding judge over the underlying
litigation, submitted a letter to this court, calling to its attention the Supreme Court’s recent
decision in Astrue v. Ratliff, 130 S.Ct. 2521 (2010). Judge McBryde explained that Ratliff is
relevant to four cases that, at the time, were all pending in this court, including Murkeldove
v. Astrue and Vinning v. Astrue. We have reviewed Ratliff, and it does not address the issues
raised by the district court’s judgment. In Ratliff, the Court interpreted the phrase “prevailing
party” in the EAJA and whether an attorney or the attorney’s client is entitled to receive fees
pursuant to this provision. Ratliff, 130 S.Ct. at 2525. The Court held that an attorney’s client
is the recipient of an EAJA award. Id. at 2526.
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Nos. 09-10902, 09-11093
sections 406(a) and 406(b), an EAJA award is not limited to a particular amount.
The Supreme Court explained: “EAJA fees are determined not by a percent of
the amount recovered, but by the ‘time expended’ and the attorney’s ‘hourly
rate,’ § 2412(d)(1)(B), capped in the mine run of cases at $125 per hour,
§ 2412(d)(2)(A).” Gisbrecht, 535 U.S. at 796. Furthermore, as previously noted,
an award of fees pursuant to section 406(a) and section 406(b) is taken out of a
claimant’s past-due benefits. However, an EAJA fee award comes directly from
the government agency involved in the suit. See Ann C. Chalstrom, Comment,
Collecting Attorney’s Fees in Social Security Disputes: Procedures, Analysis, and
Retroactive Application of Equal Access to Justice Timing Requirement, 5 ELDER
L. J. 117, 124 (1997).
As previously noted, section 406(b) purports to establish the exclusive
method for paying an attorney who represents a Social Security claimant in
federal court and makes it a crime for an attorney to obtain an amount “in excess
of that allowed by the court.” 42 U.S.C. § 406(b)(1)(A)(2). Thus, the EAJA on its
face is at odds with the Social Security Act, and for many years, attorneys would
not seek an EAJA award in the Social Security context. See Rice, 609 F.3d at835–36. To reconcile the discord between section 406(b) and the EAJA, Congress
amended the EAJA in 1985. The amendment, commonly referred to as the
“Savings Clause,” provides that an award of fees pursuant to section 406(b)
“shall not prevent an award of fees” under the EAJA. Pub. L. No. 99-80, § 3, 99
Stat. 183 (1985). The Savings Clause further provides that the Social Security
Act’s criminal prohibition on charging, demanding, receiving, or collecting fees
in excess of those allowed under section 406(b) shall not apply to EAJA awards
provided that, if the attorney receives fees under both section 406(b) and the
EAJA, the attorney will return the smaller amount to the claimant. Id.Against this statutory framework, we review the district court’s judgments
denying Murkeldove and the Vinning Plaintiffs’ requests for fees.
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Nos. 09-10902, 09-11093
II. DISCUSSION
A. Standard of Review
We review a district court’s decision to grant or deny a party’s request for
attorney’s fees pursuant to the EAJA for an abuse of discretion. Pierce v.
Underwood, 487 U.S. 552, 570 (1988). We noted in Houston Agricultural Credit
Corp. v. United States that the abuse of discretion standard under the EAJA
requires the court to conduct “a highly deferential review of district courts’
tentative findings of fact,” but to closely scrutinize “the district courts’ rulings
on questions of law.” 736 F.2d 233, 235 (5th Cir. 1984) (citing Spencer v.
N.L.R.B., 712 F.2d 539, 565 (D.C. Cir. 1983) (citations and internal quotation
marks omitted). Because the district court’s determination turns on its
interpretation of the EAJA and statutory interpretations are conclusions of law,
we review the district court’s interpretation de novo. See Teemac v. Henderson,
298 F.3d 452, 456 (5th Cir. 2002). However, we do so with the understanding
that the “EAJA is a partial waiver of sovereign immunity, and it must be strictly
construed in the government’s favor.” Tex. Food Indus. Ass’n v. USDA, 81 F.3d
578, 580 (5th Cir. 1996) (citation omitted).
B. Analysis
1. Murkeldove and the Vinning Plaintiffs “incurred” attorney’s fees
as contemplated by the EAJA.
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
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Nos. 09-10902, 09-11093
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 oneself”—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,” withing 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
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Nos. 09-10902, 09-11093
“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
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Nos. 09-10902, 09-11093
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
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Nos. 09-10902, 09-11093
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 (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. 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.
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Nos. 09-10902, 09-11093
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 (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
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Nos. 09-10902, 09-11093
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 (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 (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
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Nos. 09-10902, 09-11093
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
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Nos. 09-10902, 09-11093
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.
2. Special Circumstances do not make an award of EAJA
attorney’s fees to Murkeldove unjust.
Under the EAJA, a prevailing party is entitled to attorney’s fees incurred
for representation at court. Even so, the court may deny a request for fees if
“special circumstances” render an award unjust. 28 U.S.C. § 2412(d)(1)(A).
Pursuant to the “special circumstances” exception, the district court determined
that, even if it were to grant Murkeldove an award of EAJA attorney’s fees, such
an award would be unjust. Thus, our analysis of the district court’s
determination necessitates a brief discussion of what is meant by the phrase
“special circumstances” as contemplated in the EAJA. As we noted more than
20 years ago: “There is a dearth of case law interpreting the ‘special
circumstances’ exception of the EAJA.” State of La. ex. rel. Guste v. Lee, 853 F.2d
1219, 1224 (5th Cir. 1988) (citing James B. Nobile, Comment, Determining Fees
17
Nos. 09-10902, 09-11093
for Fees Under the Equal Access to Justice Act: Accomplishing the Act’s Goals, 9
CARDOZO L. REV. 1091, 1099 n.37 (1988)). This remains true today. However,
in Lee, we discussed the meaning of “special circumstances” as contemplated in
the EAJA.
We explained that the “special circumstance” provision has two purposes:
(1) it acts as a “safety valve . . . to insure that the government is not deterred
from advancing in good faith the novel but credible extensions and
interpretations of the law that often underlie vigorous enforcement efforts” and
(2) “it gives courts discretion to deny awards where equitable considerations
dictate an award should not be made.” Lee, 853 F.2d at 1224. Relevant to the
case at bar, we interpreted the second purpose to mean that a district court
should examine the totality of the circumstances to determine on a case-by-case
basis whether “equitable considerations” exist. See id. The second purpose
seems to underlie the district court’s determination. Thus, the district court
correctly examined the totality of the circumstances to determine if awarding
Murkeldove attorney’s fees would be unjust. However, the reasoning underlying
the district court’s analysis runs afoul of our recent decision in Rice v. Astrue,
609 F.3d 831 (5th Cir. 2010).
Following Murkeldove’s request for an EAJA award, the district court
ordered his attorneys to file a document explaining what they planned to do with
the fee award if granted. The district court took issue with statements made in
the attorneys’ reply that an EAJA award will not impact the amount of fees
Murkeldove owed his attorneys, unless he received a section 406(b) award for
work conducted at the district court. Because the district court denied
Murkeldove’s request for a section 406(b) award in a previous order, it took these
statements to mean that an EAJA award would allow Murkeldove’s attorney to
collect more fees than Murkeldove was obligated to pay pursuant to their
contingency-fee agreement—“25% of total past-due benefits awarded.” In other
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Nos. 09-10902, 09-11093
words, the district court apparently reasoned that, on remand, Murkeldove’s
attorneys could collect fees pursuant to section 406(a) for work done at the
administrative level, which could total up to 25% of Murkeldove’s past-due
benefits. And, if granted, his attorneys could also receive an EAJA award for
work done in the district court. Thus, the total amount of fees Murkeldove pays
his attorneys, the court explained, could exceed the percentage of past-due
benefits that Murkeldove contracted to pay them. This, the district court held,
constituted special circumstances that rendered an EAJA award unjust. We find
the district court’s holding problematic for several reasons.
To begin, Murkeldove’s fee agreement permitted his attorneys to collect
more than 25% of his past-due benefits. As previously noted, there are two
provisions in Murkeldove’s contingency-fee agreement regarding the payment
of fees—a provision regarding fees owed in the event that he won his benefits
case and a provision regarding fees owed in the event EAJA fees are awarded.
Thus, the amount of attorney’s fees Murkeldove was obligated to pay exceeded
“25% of the total past-due benefits awarded.” The agreement also stated: “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.” Therefore, awarding Murkeldove an EAJA award does not
contradict his fee agreement with his attorneys.
This result is also permitted under the law. In Rice v. Astrue, we clarified
the limitations on fees, if any, on a Social Security claimant’s receipt of two fee
awards. Specifically, we discussed scenarios in which a claimant receives: (1) a
section 406(a) and section 406(b) award, (2) a section 406(b) and an EAJA award,
and (3) a section 406(a) and an EAJA award. First, we explained that, if a party
receives an award pursuant to section 406(a) for administrative work and
section 406(b) for work before a court, the aggregate of the fees cannot exceed
25% of past-due benefits. Rice, 609 F.3d at 838 n.29 (citing Dawson, 425 F.2d
19Nos. 09-10902, 09-11093
at 1195.)). We further noted that, pursuant to the Supreme Court’s decision in
Gisbrecht, if a party receives attorney’s fees pursuant to section 406(b) and an
EAJA award, the Savings Clause3 requires the attorney to refund to the
claimant the amount of the smaller fee. Id. at 836 (citing Gisbrecht, 535 U.S. at
789 (quoting the Savings Clause, Pub. L. No. 99-80, § 3, 99 Stat. 183 (1985))
(internal quotation marks omitted). Finally, we agreed with the fee claimant in
Rice that: “Because judicial and administrative reviews are separate, . . . an
EAJA award for judicial work cannot mix with § 406(a) fees for administrative
work.” Id. at 837. We explained, in sum, that if a party receives attorney’s fees
pursuant to section 406(a) and an EAJA award, the total of the award is not
limited to 25% of a claimant’s past-due benefits. Id. The only limitation is that
the section 406(a) award does not exceed 25% of past-due benefits, id., and the
EAJA award is calculated pursuant to the mandates in the statute. See
Gisbrecht, 535 U.S. at 796 (explaining that “EAJA fees are determined not by a
percent of the amount recovered, but by the time expended and the attorney’s
hourly rate”).
Thus, pursuant to Murkeldove’s fee agreement and the law, it is
permissible for his attorneys to collect fees pursuant to section 406(a) and the
EAJA totaling more than 25% of his past-due benefits. To this end, in light of
3
Specifically, the Savings Clause explains that an award of fees pursuant to section
406 (b)
. . . shall not prevent an award of fees and other
expenses under section 2412(d) of title 28, [section
406(b)] shall not apply with respect to any such
award but only if, where the claimant’s attorney
receives fees for the same work under both [section
406(b)] and section 2412(d). . . the claimant’s
attorney refunds to the claimant the amount of the
smaller fee.
Pub. L. No. 99-80, § 3, 99 Stat. 183 (1985).
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Nos. 09-10902, 09-11093
our decision in Rice, Murkeldove’s attorneys were correct—an EAJA award will
only impact Murkeldove’s obligation to pay fees if he also receives a section
406(b) award. As explained above, if Murkeldove’s attorneys were to receive
both an EAJA award and a section 406(b) award, they would merely be required
to return the smaller of the two fees. Thus, the district court’s determination
that special circumstances would make an EAJA award unjust was a legal error
and, as such, was an abuse of discretion. See, e.g., Russell v. Nat’l Mediation
Bd., 775 F.2d 1284, 1290 (5th Cir. 1985) (noting in the context of reversing a
district court’s finding of special circumstances under EAJA for abuse of
discretion that “[b]ecause our concern here is with the district court’s legal
argument, we employ a de novo standard of review”).
III. CONCLUSION
For the foregoing reasons, we VACATE the district court’s judgments and
REMAND the cases for further proceedings consistent with this opinion.
21