Greenberg v. Colvin , 63 F. Supp. 3d 37 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
__________________________________
)
EPHRAIM GREENBERG, individually )
on behalf of himself, and on behalf of )
all others similarly situated, )
) Civil Action No. 13-1837 (RMC)
Plaintiff, )
)
v. )
)
CAROLYN W. COLVIN, in her official )
capacity as Acting Commissioner of the )
Social Security Administration, and )
)
THE SOCIAL SECURITY )
ADMINISTRATION, )
)
Defendants. )
_________________________________ )
OPINION
Ephraim Greenberg asks the Court to certify a class of individuals who have had
their Old Age, Survivors, and/or Disability Insurance Benefits reduced under the Windfall
Elimination Provision of the Social Security Act because they receive Old Age Benefits from the
National Insurance Institute of Israel. Defendants do not oppose the motion for class
certification and both parties agree that the Social Security Administration should not apply the
Windfall Elimination Provision to a beneficiary who receives an Old Age pension from the
National Insurance Institute of Israel. However, Plaintiff and Defendants do not agree on the
legal bases for attorney fees for counsel to the proposed class. Plaintiff seeks attorney fees under
a provision of the Social Security Act or, alternatively, under the common benefit or common
fund doctrine. Defendants argue that Plaintiff’s counsel is entitled only to attorney fees under
the Equal Access to Justice Act. Because the terms and implementation of any settlement
1
agreement depend upon the resolution of the fee dispute, the parties seek a ruling on the question
now.
The consent motion to certify the class under Federal Rule of Civil Procedure
23(b)(3) will be granted. The Court also will grant Plaintiff’s motion seeking a determination
that counsel is entitled to attorney fees under the fee provision of the Social Security Act, 42
U.S.C. § 406(b).
I. FACTS
A. The Windfall Elimination Provision and National Insurance Institute of Israel Old
Age Benefits
This case involves a statutory provision implemented by the Social Security
Administration (SSA), known as the Windfall Elimination Provision (WEP), 42 U.S.C.
§§ 415(a)(7), (d)(7), 20 C.F.R. § 404.213(a). Pursuant to WEP, SSA reduces a beneficiary’s Old
Age, Survivors, and/or Disability Insurance Benefits (OASDI Benefits or SSA Benefits) in
instances where, for the same months that a claimant is entitled to SSA Benefits, that claimant is
also entitled to a monthly pension “based in whole or in part on [ ] earnings in employment
which was not covered under Social Security.” Compl. [Dkt. 1] ¶ 24 (quoting 20 C.F.R.
§ 404.213(a)). SSA’s regulations also provide that “[p]ensions from noncovered employment
outside the United States include pensions from social insurance systems that base benefits on
earnings but not on residence or citizenship.” Id. ¶ 25 (quoting 20 C.F.R. § 404.213(a)).
SSA applied WEP to reduce OASDI Benefits in cases where recipients also
receive Old Age benefits from the National Insurance Institute of Israel (NII Old Age benefits).
NII Old Age benefits are guaranteed to all residents of Israel who have reached a certain age,
2
subject to residency requirements and payment into the system for a minimum time period. 1
“Neither entitlement to the benefits, nor the amount of benefits to which an individual is entitled,
is dependent on the individual’s work history or prior earnings (if any).” Id. ¶ 2. Thus, even if
an otherwise qualified resident of Israel has never been employed or collected earnings, s/he may
satisfy the criteria and be entitled to NII Old Age Benefits.
Several years prior to the filing of the Complaint in this case, SSA applied WEP
to reduce the retirement benefits of Rabbi Jerome Berger because he received NII Old Age
benefits. In 2001, Rabbi Berger appealed SSA’s determination and then filed suit in this Court.
See Berger v. Barnhart, No. 04-0431 (D.D.C. 2004)). 2 While the Berger suit was pending, SSA
sought a remand to the agency. On September 3, 2004, the SSA Appeals Council determined
that Rabbi Berger’s Israeli pension did not trigger WEP because, for qualified individuals, NII
Old Age benefits are based solely on residency status and payments into the NII system, but not
on earnings. The Appeals Council further directed SSA to recalculate Rabbi Berger’s social
security benefits without regard to his NII benefits.
In 2005, Martin H. Gerry, Deputy Commissioner for Disability and Income
Stability Programs for SSA, responded to an inquiry from Mordechai Biser, Associate General
Counsel for Agudath Israel of America, concerning the Berger case. Mr. Gerry wrote:
On remand, [SSA] found that we had incorrectly applied the WEP
to Mr. Berger’s benefits because the NII pension is based on
residency in Israel, not on employment that was not covered by the
U.S. Social Security system. . . .
1
For a complete description of the specific requirements, see NII’s Old Age benefits “Conditions
of Entitlement,” available at:
http://www.btl.gov.il/English%20Homepage/Benefits/Old%20Age%20Insurance/Conditions/Pag
es/default.aspx (last visited Aug. 5, 2014).
2
The law firm of Kelley Drye represented Rabbi Berger and now represents Plaintiff in this
action.
3
We agree that other beneficiaries who are also receiving the NII
pension may have had the WEP erroneously applied and that we
should recalculate the current benefit amounts of all such
beneficiaries and pay any back benefits due. We have begun the
process of identifying such persons in our files, and we will take
appropriate actions to correct any misapplication of the WEP.
Compl. ¶ 36. However, SSA continued to apply WEP to the SSA Benefits of individuals who
also receive NII Benefits.
B. Plaintiff’s Complaint and the Parties’ Settlement Agreement
On November 21, 2013, Plaintiff filed a class action complaint alleging that
Defendants repeatedly and unlawfully applied WEP to reduce his and other similarly situated
claimants’ SSA Benefits based on their receipt of NII Old Age benefits. Plaintiff alleges that his
SSA Benefits should not be subject to WEP reduction.
Soon after Plaintiff filed his Complaint, the parties began settlement discussions.
They filed a joint status report on April 2, 2014, stating that they had reached a partial resolution
of Plaintiff’s claims on a class-wide basis and that both parties agreed that SSA should not apply
WEP to a beneficiary who receives a NII Old Age pension. They reported that SSA had agreed
to take the following actions: (1) rescind the practice of applying WEP to NII Old Age benefits;
(2) recalculate all Social Security benefits where WEP had been applied because a beneficiary
received NII Old Age benefits; and (3) pay all benefits that would have been paid had WEP not
been applied. After the final settlement terms are reviewed and approved by the Department of
Justice, the parties have agreed to submit the settlement agreement to the Court for approval.
C. The Proposed Class Definition
Plaintiff seeks class certification under Federal Rule of Civil Procedure 23(b)(2)
or 23(b)(3) of a class that is comprised of: “All beneficiaries (including their estate or heir(s) as
4
applicable) whose OASDI Benefits payment(s) were reduced since September 3, 2004 through
application of WEP based on their receipt of Old Age Benefits from NII.” Id. Plaintiff states:
In this definition:
“Beneficiary” or “beneficiaries” means a person or persons, or his/her
Representative Payee(s) as provided under the Act who has received or
is receiving OASDI Benefits payment(s), or, if such person(s) or
Representative Payee(s) is (are) dead, the estate of such person(s) or
Representative Payee(s).
“Representative Payee” means a person who has been selected or
appointed to receive payments on behalf of any Beneficiary of OASDI
Benefits payment pursuant to the Act and its regulations.
“Reduced” refers to a reduction in an OASDI Benefits payment, as well
as any determination that an OASDI Benefits overpayment was made by
SSA and that the recipient would have to repay the overage and/or that
the overage would be subtracted from OASDI Benefits payment(s) or
other benefits.
Id. SSA estimates that the size of the class is no more than 1,666 individuals.
II. CLASS CERTIFICATION
A. Legal Standards
Under Federal Rule of Civil Procedure 23(e), “[t]he claims, issues, or defenses of
a certified class may be settled . . . only with the court’s approval.” Fed. R. Civ. P. 23(e). “A
class may be certified for settlement purposes only, and such ‘settlement-only’ classes have
become increasingly prominent.” Radosti v. Envision Emi, LLC, 717 F. Supp. 2d 37, 50 (D.D.C.
2010) (citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 618 (1997)). “When presented
with a settlement-only class, a court must determine whether the proposed class satisfies the
requirements of [Rule] 23, with one exception: the court does not need to consider whether ‘the
case, if tried, would present intractable management problems.’” Alvarez v. Keystone Plus
Constr. Corp., No. 13-602, 2014 WL 1400846, at *3 (D.D.C. Apr. 11, 2014) (citing AmChem,
521 U.S. at 620 and Thomas v. Albright, 139 F.3d 227, 234 (D.C. Cir. 1998)).
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The “party requesting class certification under Rule 23 bears the burden of
showing the existence of a class, that all prerequisites of Rule 23(a) are satisfied and the class
falls within one of the categories of Rule 23(b).” Bynum v. District of Columbia, 214 F.R.D. 27,
30-31 (D.D.C. 2003) (citations omitted). Rule 23(a) requires a class to satisfy four criteria:
1) numerosity, so that joinder of all persons would be impractical; 2) commonality of questions
of law and fact; 3) typicality of the named party’s claims and defenses to the members of the
class; and 4) adequacy of representation of the class by the named party and counsel. Fed. R.
Civ. P. 23(a); Amchem, 521 U.S. at 614. Plaintiffs must also demonstrate that a class is
maintainable under Rule 23(b)(1), (2), or (3). Amchem, 521 U.S. at 614. A plaintiff satisfies
Rule 23(b)(3) by showing that: “(1) the questions of law or fact common to the members of the
class predominate over any questions affecting only individual members; and (2) a class action is
superior to other available methods for the fair and efficient adjudication of the controversy.”
Fed. R. Civ. P. 23(b)(3).
B. Analysis
In this case, the motion for class certification is unopposed. Nonetheless, the
Court reviews the standards for certification below and finds that Plaintiff has met his burden
under Rule 23. See In re Livingsocial Mktg. & Sales Practice Litig., 298 F.R.D. 1, 8 (D.D.C.
2013) (reviewing requirements of Rule 23 before certifying a class for settlement purposes);
Radosti, 717 F. Supp. 2d at 51 (starting with analysis of Rule 23(a) certification factors “since
the settlement class must comport with the requirements of Rule 23”).
1. Existence of a Class
“It is axiomatic that for a class action to be certified a ‘class’ must exist.” Barnes
v. District of Columbia, 242 F.R.D. 113, 120 (D.D.C. 2007) (citing Simer v. Rios, 661 F.2d 655,
6
669 (7th Cir. 1981)); see also Lewis v. Nat’l Football League, 146 F.R.D. 5, 8 (D.D.C. 1992)
(clearly defined class is necessary “to ensure that the class is neither amorphous, nor imprecise”
(internal citation omitted)). At this juncture, the Court is satisfied that Plaintiff’s proposed class
definition—persons who have had their OASDI Benefits payments reduced since September 3,
2004 through application of WEP because they also receive NII Old Age Benefits—is tailored
properly because it allows an individual “to determine, simply by reading the definition, whether
he . . . is a member of the proposed class.” Bynum, 214 F.R.D. at 32; see also Fed. R. Civ. P.
23(c)(1)(C) (“An order [on class certification] may be altered or amended before final
judgment.”).
2. Rule 23(a) Requirements
a. Numerosity
“Courts in this District have generally found that the numerosity requirement is
satisfied and that joinder is impracticable where a proposed class has at least forty members.”
Hardy v. District of Columbia, 283 F.R.D. 20, 24 (D.D.C. 2012) (quoting Cohen v. Chilcott, 522
F. Supp. 2d 105, 114 (D.D.C. 2007)); see also Lindsay v. Gov’t Emps. Ins. Co., 251 F.R.D. 51,
55 (D.D.C. 2008) (“Typically, a class in excess of 40 members is sufficiently numerous to satisfy
[the numerosity] requirement.”); Vista Healthplan, Inc. v. Warner Holdings Co. III, Ltd., 246
F.R.D. 349, 357 (D.D.C. 2007) (citing cases).
As noted above, the class proposed here would encompass as many as 1,666
persons whose OASDI Benefits payments may have been reduced. This class far exceeds the
generally accepted size of 40 people, thereby rendering joinder impracticable and satisfying the
numerosity requirement.
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b. Commonality
Rule 23(a)(2) requires that there be questions of law or fact common to the class.
Fed. R. Civ. P. 23(a)(2). It is not necessary that “every issue of law or fact be the same for each
class member.” Bynum, 214 F.R.D. at 46. Rather, “[t]he commonality test is met when there is
at least one issue, the resolution of which will affect all or a significant number of the putative
class members.” Meijer, Inc. v. Warner Chilcott Holdings Co. III, 246 F.R.D. 293, 300 (D.D.C.
2007) (quoting In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12, 26 (D.D.C.
2001)); see also Garcia v. Johanns, 444 F.3d 625, 631 (D.C. Cir. 2006).
As Plaintiff has articulated, there are many questions of fact and law common to
the class, including whether: (1) NII Old Age Benefits are based on prior employment earnings;
(2) SSA’s policy of applying WEP to reduce claimants’ OASDI Benefits payments based on
their receipt of NII Old Age Benefits is unlawful; (3) the members of the proposed Class are
entitled to an injunction prohibiting SSA from continuing this policy; and (4) the members of the
proposed Class are entitled to an injunction ordering SSA to recalculate their past OASDI
Benefits payments and to pay those amounts. Accordingly, the Court finds that the commonality
requirement is met.
c. Typicality
Under Rule 23(a)(3), “the claims or defenses of the representative parties [must
be] typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “The typicality
requirement is satisfied ‘if each class member’s claim arises from the same course of events that
led to the claims of the representative parties and each class member makes similar legal
arguments to prove the defendant’s liability.’” Vista Healthplan, Inc., 246 F.R.D. at 358
(quoting Lorazepam I, 202 F.R.D. at 27). Plaintiff’s claim and those of putative class members
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all arise from the same course of conduct: SSA’s application of WEP to reduce OASDI Benefits
because Plaintiff and class members receive NII Old Age benefits. The claim is also based on
the same legal theory: SSA’s conduct is unlawful under the Social Security Act and SSA’s own
regulations. The fact that Plaintiff and the putative class members may have different damage
amounts does not preclude a finding of typicality. See, e.g., In re Vitamins Antitrust Litig., 209
F.R.D. 251, 261 (D.D.C. 2002) (“The typicality requirement does not mandate that . . . damages
of the named plaintiffs must be the same as those of the absent class members.”). Therefore, as
Plaintiff’s claims can easily be described as typical of the proposed class, the Court finds the
required typicality.
d. Adequacy of Representation
Certified classes must have adequate representation. See Fed. R. Civ. P. 23(a)(4).
This requirement addresses both adequacy of the named plaintiff and adequacy of counsel. The
requirement is met when: (1) there is no conflict of interest between the legal interests of the
named plaintiff and those of the proposed class; and (2) counsel for the class is competent to
represent the class. Twelve John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir.
1997).
Mr. Greenberg’s interests are neither antagonistic to nor in conflict with the
interests of the putative class members. To the contrary, his claims mirror those of the class.
Additionally, the Court is satisfied that Kelley Drye can fairly and adequately represent the class.
The law firm has ample experience in this area and can represent the interests of the class in a
satisfactory manner. See infra II.B.5. Defendants do not argue otherwise.
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3. Rule 23(b) Requirements
Plaintiff seeks to certify the class pursuant to Rule 23(b)(3). 3 This Rule requires
the Court to consider whether “questions of law or fact common to class members predominate
over any questions affecting only individual members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P.
23(b)(3).
a. Predominance
“In order to meet the predominance requirement of Rule 23(b)(3), a plaintiff must
establish that the issues in the class action that are subject to generalized proof, thus applicable to
the class as a whole, . . . predominate over those issues that are subject only to individualized
proof.” Amchem, 521 U.S. at 623; see also Alvarez, 2014 WL 1400846, at *6. “Significantly,
the common issues need only be predominant, not dispositive of the litigation.” Vista
Healthplan, Inc, 246 F.R.D. at 359 (citing Lorazepam I, 202 F.R.D. at 29). The predominance
requirement is linked to the commonality requirement in that “[p]laintiffs must show that the
common issues identified by the Court . . . as sufficient under Rule 23(a)(2) predominate over
any non-common issues.” Chilcott, 522 F. Supp. 2d at 116 (citing Vitamins I, 209 F.R.D. at
262).
Here, common questions predominate over any issues that are not common
among the class. Mr. Greenberg’s central theory of liability—that SSA has a general policy of
applying WEP to NII Old Age Benefits, thereby reducing the amount of OASDI Benefits
3
In the alternative, Plaintiff seeks to certify the class either as a Rule 23(b)(2) class or as a
hybrid 23(b)(2)/(b)(3) class. However, because Plaintiff is not seeking monetary relief that is
only “incidental,” certification under Rule 23(b)(2) alone is inappropriate. See Walmart Stores,
Inc. v. Dukes, 131 S. Ct. 2541, 2557 (2011). Further, “[b]ecause the class[ ] will be certified
under Rule 23(b)(3), the Court need not reach [the] request” to certify the class as a hybrid.
Hardy, 283 F.R.D. at 26 n.3.
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received—is common to every class member. Alvarez, 2014 WL 1400846, at *7. Moreover,
predominance is not negated by the fact that each class member will be entitled to a different
damages figure in the amount their OASDI Benefits were improperly reduced. See id. (“[E]ven
the minor differences between the class members—such as the amount of total damages—are
susceptible to generalized proof since a common formula is used to calculate the individual
damages.”); Bynum, 214 F.R.D. at 39 (The fact that “the award that each individual class
member is entitled to may vary significantly . . . . would not preclude a finding that common
questions of law and fact predominate over individual questions.”). Accordingly, the Court
concludes that the predominance requirement is met in this case.
b. Superiority
The superiority requirement of Rule 23(b)(3) is satisfied when a court finds that
maintaining the present action as a class action will be superior to other available methods of
adjudication. Fed. R. Civ. P. 23(b)(3). This requirement “ensures that resolution by class action
will ‘achieve economies of time, effort, and expense, and promote . . . uniformity of decision as
to persons similarly situated, without sacrificing procedural fairness or bringing about other
undesirable consequences.’” Vista Healthplan, 246 F.R.D. at 359 (quoting Amchem, 521 U.S. at
615).
In this case, a class action is clearly the superior method to adjudicate the claim.
The central issue is whether SSA erroneously applied WEP to beneficiaries who also receive NII
Old Age benefits. SSA has already admitted the error and merely wants to settle the legal issue
and pay any SSA benefits owed. Any class member who wishes to prosecute his own claim may
opt out of the Class. Because the class is certified only for settlement, the Court “need not
11
inquire whether the case, if tried, would present intractable management problems.” Amchem,
521 U.S. at 620.
4. Notice
In certifying a class under Rule 23(b)(3), “the court must direct to class members
the best notice that is practicable under the circumstances, including individual notice to all
members who can be identified through reasonable effort. The notice must clearly and concisely
state in plain, easily understood language:
(i) the nature of the action;
(ii) the definition of the class certified;
(iii) the class claims, issues, or defenses;
(iv) that a class member may enter an appearance through an attorney if the
member so desires;
(v) that the court will exclude from the class any member who requests
exclusion;
(vi) the time and manner for requesting exclusion; and
(vii) the binding effect of a class judgment on members under Rule 23(c)(3).
Fed. R. Civ. P. 23(c)(2)(B).
Using its records, SSA has already identified the beneficiaries to whom notice should
be sent, though not all may ultimately prove to be class members. The parties have requested a brief
conference to discuss with the Court the timing for submitting the notice plan and the specific notice
provisions. The Court will set a date for this conference in a separate scheduling order. See LCvR
23.1(c) (“In certifying a class action as maintainable under Rule 23(b)(3), the court may include in its
order the provisions for notice pursuant to Rule 23(c)(2) or may postpone a determination of the
matter.” (emphasis added)).
5. Appointment of Class Counsel
Under Rule 23(g), in appointing class counsel a court must consider: (1) the work
counsel has done in identifying or investigating potential claims in the action; (2) counsel’s
12
experience in handling class actions, other complex litigation, and the types of claims asserted in
the action; (3) counsel’s knowledge of the applicable law; (4) the resources that counsel will
commit to representing the class; and (5) any other matter pertinent to counsel’s ability to fairly
and adequately represent the interests of the class. Fed. R. Civ. P. 23(g)(1).
Here, Kelley Drye has a significant history of investigating the claims in this
action and handling similar matters. Indeed, Ira Kasdan of Kelley Drye represented the plaintiff
in the Berger litigation, where he challenged the same SSA policy at issue here. Further, there is
no dispute as to whether Kelley Drye attorneys are appropriate to serve as class counsel.
Therefore, Kelley Drye will be appointed as class counsel.
C. Certification of the Class
Plaintiff has demonstrated the existence of a class and has met the requirements of
Rule 23(a) by showing numerosity, commonality, typicality, and adequacy. Moreover, Plaintiff
has satisfied the criteria of Rule 23(b)(3): that common questions of law and fact predominate
and that a class action is a superior method of adjudication. Accordingly, the Court finds that
certification is proper under Rule 23 and certifies a class for the purpose of effectuating the
settlement agreement between the parties.
III. ATTORNEY FEES
Although the parties agree about the merits of the case, they dispute the
appropriate law to be applied in calculating attorney fees. Plaintiff argues that the Court should
award attorney fees under Section 406(b) of the Social Security Act, 42 U.S.C. § 406(b)
(hereinafter, Section 406(b) or § 406(b)). 4 Defendants contend that the Equal Access to Justice
Act (EAJA), 28 U.S.C. § 2412(d), is the proper statutory authority for an award of fees in a class
4
Alternatively, Plaintiff contends that attorney fees are warranted under the common fund
doctrine. The Court declines to reach this issue as it is unnecessary to the decision.
13
action concerning Social Security benefits. 5 The Court has identified no precedents on the
question. Resolution is necessary at this juncture so that information about attorney fees can be
included in any notice of a proposed settlement to the class. See Fed. R. Civ. P. 23(g) (court may
provide directions about attorney fees and costs when appointing class counsel). Moreover, SSA
will be able to issue payments more efficiently to class members pursuant to the terms of the
settlement agreement once it knows whether a fee award must be withheld from those payments
under § 406(b). For the reasons set forth below, the Court finds that Plaintiff’s counsel may seek
a fee award from past-due benefits owed to class members in an amount no greater than twenty-
five percent of any individual’s payment. The Court will determine the amount of a reasonable
fee at a later date.
A. Legal Standards
1. Section 406(b) of the Social Security Act
Section 406(b) provides that “[w]henever a court renders a judgment favorable to
a claimant . . . 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.”
42 U.S.C. § 406(b)(1)(A). Fees awarded under § 406(b) are withheld by SSA and are paid
directly out of the claimant’s benefits. Gisbrecht, 535 U.S. at 802; Buljina, 828 F. Supp. 2d at
112. Contingent fee agreements, under which an attorney may recover some percentage of the
5
It is not entirely clear whether Defendants contend that § 406(b) precludes attorneys’ fees in all
class actions, or only those involving a contingent fee agreement. As explained below, § 406(b)
does not require contingent fee agreements. However, it is true that “Social Security claimants
most commonly hire attorneys on a contingency basis.” Buljina v. Astrue, 828 F. Supp. 2d 109,
112 (D.D.C. 2011); see also Gisbrecht v. Barnhart, 535 U.S. 789, 805 (2002) (noting “the
prevalence of contingent-fee agreements between attorneys and Social Security claimants”).
14
proceeds if the claimant prevails, are permissible under § 406(b) so long as a court reviews such
arrangements “to ensure that they do not yield a ‘windfall’ to the plaintiff’s attorney.” Buljina,
828 F. Supp. 2d at 112-13 (quoting Gisbrecht, 535 U.S. at 807 & n.17).
2. The Equal Access to Justice Act
“Under EAJA, a party prevailing against the United States in court, including a
successful Social Security benefits claimant, may be awarded fees payable by the United States
if the Government’s position in the litigation was not substantially justified.” Gisbrecht, 535
U.S. at 796 (internal citations omitted). “Unlike § 406(b) awards, EAJA fee awards ‘are
determined not by a percent of the amount recovered, but by the time expended and the
attorney’s [hourly] rate,’ subject to a specified cap, and are paid by the government, not the
claimant.” Parrish v. Comm’r of Soc. Sec. Admin., 698 F.3d 1215, 1218 (9th Cir. 2012) (quoting
Gisbrecht, 535 U.S. at 796). An attorney who successfully represents a Social Security benefits
claimant in court may receive fees under both EAJA and § 406(b), but must “‘refund to the
claimant the amount of the smaller fee.’” Gisbrecht, 535 U.S. at 796 (quoting Act of Aug. 5,
1985, Pub. L. 99-80, § 3, 99 Stat. 186).
B. Analysis
1. Statutory Interpretation
Given the lack of judicial consideration of this issue, the Court turns to general
principles of statutory interpretation to discern the boundaries of § 406(b). “Statutory
construction must begin with the language employed by Congress and the assumption that the
ordinary meaning of that language accurately expresses the legislative purpose.” Engine Mfrs.
Ass’n v. S. Coast Air Quality Mgmt. Dist., 541 U.S. 246, 252 (2004); see also FTC v. Tarriff, 584
F.3d 1088, 1090 (D.C. Cir. 2009) (finding that unless otherwise defined, the words of a statute
15
must be construed according to their common meaning). Here, § 406(b) explicitly states that
when the Court renders a favorable judgment awarding a claimant past-due Social Security
benefits, it may also determine and allow a reasonable fee for the claimant’s attorney. 42 U.S.C.
§ 406(b). Nothing in the language of this provision remotely suggests that Congress intended to
deprive courts of the ability to set reasonable attorney fees in class action lawsuits.
The fact that § 406(b) refers to a singular claimant does not render it inapplicable
to class actions. “Statutory interpretation focuses on ‘the language itself, the specific context in
which that language is used, and the broader context of the statute as a whole.’” AT&T Mobility
LLC v. Concepcion, 131 S. Ct. 1740, 1754 (2011) (quoting Robinson v. Shell Oil Co., 519 U.S.
337, 341 (1997)). Here, the language and context of § 406(b) suggest that attorney fees are
allowable in cases with multiple claimants. While no court has explicitly found that the language
of § 406(b) extends to class actions, the Supreme Court has held that § 405(g) of the Social
Security Act allows for class relief, despite the fact that it authorizes a singular “individual,”
“plaintiff,” or “claimant” to challenge a decision of the Social Security Commissioner. Califano
v. Yamasaki, 442 U.S. 682, 700 (1979) (“The fact that the statute speaks in terms of an action
brought by ‘any individual’ or that it contemplates case-by-case adjudication does not indicate
that the usual Rule providing for class actions is not controlling, where under that Rule
certification of a class action otherwise is permissible.”). 6 Under traditional canons of statutory
construction, courts “presume ‘identical words used in different parts of the same act are
6
Defendants argue that the construction of “claimant” in Yamasaki is inapplicable in the
§ 406(b) context because the Supreme Court, in finding that numerous claimants could be joined
in a Social Security class action because they were pursuing a common challenge, did not
consider the attorney-client relationship. However, the fact that attorney fees were not at issue in
Yamasaki does not change the principles of statutory construction, which militate in favor of an
interpretation allowing an attorney to represent and collect fees from multiple claimants pursuing
a common challenge.
16
intended to have the same meaning.’” Adena Reg’l Med. Ctr. v. Leavitt, 527 F.3d 176, 180 (D.C.
Cir. 2008) (quoting Atl. Cleaners & Dyers, Inc. v. United States, 286 U.S. 427, 433 (1932)).
Accordingly, given that the statute consistently refers to individual claimants and the Supreme
Court has construed such language to allow class actions, the Court finds that the use of the term
“claimant” in § 406(b) does not render attorney fees unavailable in class actions to recover SSA
Benefits. 7
2. Legislative Purpose
In order to further “determine legislative intent and to clarify the meaning of [the]
statute[ ] so as to avoid ambiguity and absurd or unreasonable results,” a court may also look to
legislative history. United Air Lines, Inc. v. Civil Aeronautics Bd. (Holding Co.
Reorganizations), 569 F.2d 640, 647 (D.C. Cir. 1977). The legislative history of § 406(b)
indicates the provision was motivated by two main concerns: first, that attorneys were collecting
“inordinately large fees” in social security cases; and second, that attorneys should be able to
collect reasonable fees. Gisbrecht, 535 U.S. at 805. 8 As stated by the Tenth Circuit: “[i]t is
7
The Supreme Court has also counseled against adopting a “too technical construction of
[§ 406(b)].” Hopkins v. Cohen, 390 U.S. 530, 534 (1968). Hopkins held that under § 406(b), a
claimant’s attorney could properly recover a fee based on past-due benefits received by the
claimant’s entire family, rather than just the benefits received by the claimant alone. Rejecting a
strict interpretation of the statute, the Court held that nothing in the legislative history of § 406(b)
restricts the ability of an attorney to collect up to twenty-five percent of only benefits accrued to
the claimant, as distinguished from his dependents. Id. at 534-35.
8
The legislative history states, in its entirety:
It has come to the attention of the committee that attorneys have upon
occasion charged what appear to be inordinately large fees for representing
claimants in Federal district court actions arising under the social security
program. Usually, these large fees result from a contingent-fee arrangement
under which the attorney is entitled to a percentage (frequently one-third to
one-half) of the accrued benefits. Since litigation necessarily involves a
considerable lapse of time, in many cases large amounts of accrued benefits,
and consequently large legal fees, are payable if the claimant wins his case.
17
apparent . . . that [with §406(b),] Congress desired to encourage attorneys to represent Social
Security claimants.” McGraw v. Barnhart, 450 F.3d 493, 499-500 (10th Cir. 2006). Thus, a
“broader reading of § 406(b)(1),” to include fee recovery in class action cases, “is the more
appropriate reading” to promote representation in Social Security cases while ensuring that
attorney fees remain reasonable. Id. After considering the statutory language and legislative
history, this Court cannot find “the necessary clear expression of congressional intent to exempt
actions brought under [§ 406(b)] from the operation of the Federal Rules of Civil Procedure.”
Yamasaki, 442 U.S. at 700.
3. Defendant’s Arguments
Defendants set forth various arguments, all of which are unavailing, in an attempt
to persuade the Court that attorney fees in a Social Security class action suit are inappropriate
under § 406(b). Presuming that a contingent fee agreement is a necessary predicate for an award
under § 406(b), Defendants argue that fees here are improper because absent class members have
not entered into explicit contingency arrangements with Kelley Drye. The statute, however, does
not demand a contingent agreement; it merely states that the court may award reasonable
attorney fees, not in excess of twenty-five percent of total past-due benefits, to a lawyer who has
represented a successful claimant in court. See 42 U.S.C. § 406(b). Indeed, courts have held that
The committee bill would provide that whenever a court renders a judgment
favorable to a claimant, it would have express authority to allow as part of its
judgment a reasonable fee, not in excess of 25 percent of accrued benefits, for
services rendered in connection with the claim; no other fee would be payable.
Any violation would be made subject to the same penalties as are provided in
the law for charging more than the maximum fee prescribed in regulations for
services rendered in connection with proceedings before the Secretary-up to
$ 500, or a year’s imprisonment, or both. In order to assure the payment of the
fee allowed by the court, the Secretary would be permitted to certify the
amount of the fee to the attorney out of the amount of the accrued benefits.
McGraw, 450 F.3d at 500 (quoting 1965 U.S.C.C.A.N. 1943, 2062).
18
fees under § 406(b) may be available where there is no contingency arrangement between the
claimant and his counsel. See Thomas v. Astrue, 359 Fed. App’x 968, 975 (11th Cir. 2010)
(finding that district court should determine reasonable fee under § 406(b) even where there is no
valid contingency agreement); Artrip v. Colvin, No. 07-0023, 2013 WL 1399046, at *2 (W.D.
Va. Apr. 5, 2013) (absence of fee agreement for work performed in court “does not foreclose
plaintiff’s counsel from seeking a fee under 42 U.S.C. § 406(b)”); 9 Tantillo v. Barnhart, No. 04
Civ. 2223, 2011 WL 2680536, at *7 (E.D.N.Y Jul. 8, 2011) (“[E]ven without the [contingent fee
agreement], [counsel] had the right under § 406(b) to apply for a 25% contingent fee for work in
the district court. The presence of an agreement is one factor that [the judge] could and did
consider, but he still had the ability under § 406(b) to award the fee that he in fact awarded.”),
vacated in part on other grounds, 2011 WL 6114755 (E.D.N.Y. Dec. 7, 2011). Accordingly,
Defendants’ argument that an attorney cannot seek fees from past-due benefits without an
individual contingent fee agreement with each class member carries no weight.
Defendants also maintain that § 406(b) requires an attorney to represent a
claimant in his individual capacity and that absent class members have not authorized class
counsel to do so. The Court is not persuaded, however, that “the creation of an attorney-client
relationship under § 406(b) is predicated upon an express authorization by a claimant to retain an
attorney for his or her individual claim.” Defendants’ Opposition to Plaintiff’s Motion for
Determination of Attorney Fees (Def. Mem.) [Dkt. 17] at 8. To start, Defendants provide no
legal authority for this proposition. Furthermore, in class actions brought in various other
9
In Artrip, because there was no contingency agreement for work performed in court, the court
calculated attorney fees using the lodestar method, “whereby a reasonable fee is determined by
multiplying the number of hours reasonably expended on the litigation by a reasonable hourly
rate to assess the reasonableness of the fee.” 2013 WL 1399046, at *2. However, Gisbrecht is
clear that when a contingency fee agreement does exist, relying on the lodestar approach is
inappropriate. 535 U.S. at 806.
19
contexts, there is no requirement that absent class members give their express authorization
before an attorney can represent them in court. To the contrary, courts routinely find that “class
counsel represents all class members as soon as a class is certified.” Kleiner v. First Nat’l Bank
of Atlanta, 751 F.2d 1193, 1207 n.28 (11th Cir. 1985). See also Palumbo v. Tele-
Communications, 157 F.R.D. 129, 133 (D.D.C. 1994) (“[I]n certifying a class action, the Court
confers on absent persons the status of litigants and ‘creates an attorney-client relationship
between those persons and a lawyer or group of lawyers.’”) (quoting Kingsepp v. Wesleyan
Univ., 142 F.R.D. 597, 599 (S.D.N.Y. 1992)); Harris v. Vector Mktg. Corp., 716 F. Supp. 2d
835, 846 (N.D. Cal. 2010) (“Although not all courts are in agreement, most courts have held that,
‘[o]nce a class has been certified, the rules governing communications [with class members]
apply as though each class member is a client of the class counsel.’” (quoting Manual of
Complex Litig. § 21.33, at 300 (4th ed. 2004))). There is no reason why counsel’s representation
in a class action under § 406(b) should be any different.
Given that class counsel represents absent class members who choose not to opt-
out, allowing class counsel to seek a contingent fee without an explicit signed agreement from
each absent class member is not “unprecedented and unwarranted,” as Defendants suggest. Def.
Mem. at 8. Rather, courts consistently award attorneys’ fees in class actions where the absent
class members are not apprised of the proposed fee arrangement until after either a preliminary
settlement has been reached or the court has decided in favor of the plaintiffs. 10 In such cases,
courts have not required individual fee agreements, but have deemed it sufficient to notify absent
10
The Court recognizes that the cases cited here do not address § 406(b), but rather involve fee
payments made out of a common fund. In those cases, counsel’s fees were not awarded under a
fee-shifting regime, but rather out of plaintiffs’ recovery, like § 406(b). The Court finds these
cases persuasive in their instruction that attorney fees in a class action may be awarded in the
absence of individual fee agreements as long as absent class members are aware of the
arrangement and are given the opportunity to object.
20
class members of the proposed arrangement and allow for objections. See, e.g., Kifafi v. Hilton
Hotels Ret. Plan, No. 98–1517, 2013 WL 6053754, at *2-3, *8 (D.D.C. Nov. 18, 2013) (after
deciding in favor of class, court ordered parties to notify class members of increase in benefits
and request for attorney fees, resulting in reduction of each class member’s benefit increase, and
to provide instructions for class members to object to requested fee award, which were
considered when Court determined reasonableness of award); Trombley v. Nat’l City Bank, 826
F. Supp. 2d 179, 204-05 (D.D.C. 2011) (proposed settlement agreement in class action provided
that attorney fees would not be greater than twenty-five percent of settlement, gave notice to
class members of opportunity to object, and court considered objections when determining fee);
Bynum v. District of Columbia, 412 F. Supp. 2d 73, 85-86 (D.D.C. 2006) (approving attorney fee
award where proposed settlement agreement notified class members that fees would be paid
from fund and court considered individual objections). Pragmatic concerns also support this
conclusion. As noted by Plaintiff, “[a]s a practical matter, the attorney will not be able to secure
a fee agreement from each class member.” Memorandum of Law In Support of Plaintiff’s
Motion for Determination of Attorneys’ Fees (Pl. Mem.) [Dkt. 15-2] at 25 (citing Wright &
Miller, 7B Fed. Prac. & Proc. Civ. § 1803.1 (3d ed. 2013)). Requiring individualized
authorization would be overly burdensome and undermine the efficiency that a class action is
designed to promote. Thus, the Court finds that in this context, where the parties have reached a
potential settlement, class counsel may seek fees under § 406(b) so long as notice is provided to
absent class members and they are given an opportunity to opt out or object.
The Court also rejects Defendants’ related argument that § 406(b) fees are
improper because the Court is unable to review individual contingent agreements for
reasonableness. In this case, prior to any final approval of the settlement or award of attorney
21
fees, the Court will hold a hearing to determine the reasonableness of the agreement and the fee
award. Any concerns about the reasonableness of the fee arrangement between counsel and class
members can be raised as objections and considered prior to determining a fee award. As set
forth in Gisbrecht, the Court will “look[ ] first to the contingent-fee agreement, . . . test[ ] it for
reasonableness,” and may “appropriately reduce[ ] the attorney’s recovery based on the character
of the representation and the results the representative achieved.” 535 U.S. at 808.
Regarding the Court’s review of the agreement, Defendants argue that a Fairness
Hearing is insufficient because, at that point, absent class members will be unable to object to the
application of § 406(b) and “[a]s a result, the propriety of pursuing a fee award under § 406(b)
rather than EAJA will not be addressed.” Def. Mem. at 10. However, the Court has considered
the propriety of such awards herein and finds that fees under § 406(b) are appropriate. The
statute does not require a court to choose between EAJA and § 406(b); rather, it provides that an
attorney representing a Social Security claimant may be awarded fees under both EAJA and
§ 406(b) as long as he “refund[s] to the claimant the amount of the smaller fee.” Gisbrecht, 535
U.S. at 796. While Defendants argue that there is a conflict of interest in allowing class counsel
to be awarded fees from individual class members’ benefits, that conflict is clearly one
contemplated by Congress and approved by the Supreme Court. 11 There is no greater conflict of
interest here than in any other Social Security case where the attorney seeks § 406(b) fees from
an individual plaintiff, as § 406(b) fees are always collected from the successful plaintiff’s
11
Specifically, Defendants maintain that allowing an award under § 406(b) would present a
conflict of interest because absent class members have not consented to class counsel’s
representation for their individual claims and have not authorized counsel to seek fees under
§ 406(b). The Court finds that absent class members are represented by class counsel and that no
other explicit authorization is required to allow attorneys to seek fees to which they are legally
entitled under § 406(b). Absent class members may opt out or raise objections, which will be
considered by the Court at a later time.
22
recovery. Buljina, 828 F. Supp. 2d at 112 (Ҥ 406(b) authorizes the attorney of a successful
claimant to recover directly from her client.”). Furthermore, Plaintiff has stated that class
counsel here may seek EAJA fees as well, which would reduce the fees to be paid by class
members. See Gisbrecht, 535 U.S. at 796 (“[A]n 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 benefits.”).
While acknowledging that contingent fee agreements may be proper under
Gisbrecht, Defendants contend that class counsel here “do not bear a risk of loss that warrants a
contingent fee” because both parties “have provisionally agreed to file a stipulation of settlement,
subject to approval by the Department of Justice.” Def. Mem. at 5. The Court disagrees that
“[t]he settlement of this action removes any litigation risk.” Id. As Plaintiff points out, there are
various potential issues “that may prevent a settlement, including the Justice Department’s
failure to approve the settlement terms, or even a change in the law.” Reply in Support of
Plaintiff’s Motion for Determination of Attorneys’ Fees [Dkt. 18] at 4. And, when Plaintiff filed
suit, it was not a foregone conclusion that SSA would agree to a settlement. Indeed, SSA
previously stated that it had acted erroneously and would recalculate the amount of any past-due
benefits accordingly, but did not change its policy, thereby requiring the instant lawsuit.
Moreover, in determining what percentage of past benefits will constitute a
reasonable attorney fee, the Court may consider the relative amount of risk faced by Plaintiff’s
counsel. See Buljina, 828 F. Supp. 2d at 113-14 (observing risk of loss as a factor to be
considered when determining reasonableness of contingency fee). If the Court is ultimately
persuaded that the risk of loss to Plaintiff’s counsel was not substantial, it may reduce the fee
23
award accordingly. See Damron v. Comm’r of Soc. Sec., 104 F.3d 853, 856-57 (6th Cir. 1997)
(finding it appropriate to reduce requested rate under § 406(b) where fee agreement was not
signed until after judgment entered in favor of plaintiff); Porter v. Comm’r of Soc. Sec., No. 8:06
Civ. 1150, 2009 WL 2045688, at *4-5 (N.D.N.Y Jul. 10, 2009) (noting that fee was not truly
contingent because agreement was signed after plaintiff prevailed and thus requested fees could
be reduced for that reason alone); Morrison v. Comm’r of Soc. Sec., No. 1:04 Civ. 454, 2008 WL
828863, at *3 (W.D. Mich. Mar. 26, 2008) (finding that failure to sign contingency agreement
until after court remanded to agency is sufficient reason to decrease fee requested because there
was zero risk of loss); cf. Coppett v. Barnhart, 242 F. Supp. 2d 1380, 1383 (S.D. Ga. 2002) (“A
contingency fee is more likely to be reasonable the greater the risk that the claimant would not
prevail.” (citing McGuire v. Sullivan, 873 F.2d 974, 985 (7th Cir. 1989))).
IV. CONCLUSION
For the reasons stated above, Plaintiff’s unopposed motion to certify the class
under Rule 23(b)(3) will be granted. The Court also determines that counsel is entitled to
attorney fees no greater than twenty-five percent of each beneficiary payment under 42 U.S.C.
§ 406(b). A memorializing Order accompanies this Opinion.
Date: August 8, 2014
/s/ __
ROSEMARY M. COLLYER
United States District Judge
24