Marasco & Nesselbush, LLP v. Collins

United States Court of Appeals
For the First Circuit
No. 20-1397
MARASCO & NESSELBUSH, LLP,
Plaintiff, Appellant,
v.
TARA COLLINS, individually and in her official capacity as
Supervisory Attorney of ODAR; CAROLYN TEDINO, individually and
in her official capacity as Regional Management Officer for the
Boston Region of the Social Security Administration; SOCIAL
SECURITY ADMINISTRATION, by and through Andrew M. Saul,
Commissioner of the Social Security Administration; JANE DOE, in
her individual capacity and official capacity as an Employee of
the Social Security Administration,
Defendants, Appellees,
JOSEPH P. WILSON, individually in his capacity as a former
Associate at M&N and in his official capacity as Attorney
Advisor for ODAR; PAUL E. DORSEY, individually in his capacity
as a former Associate at M&N and in his official capacity as
Attorney Advisor for ODAR; KYLE E. POSEY, individually in his
capacity as a former Associate at M&N and in his official
capacity as Attorney Advisor for Social Security Administration,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. John J. McConnell, Jr., U.S. District Judge]
Before
Howard, Chief Judge,
Lipez and Thompson, Circuit Judges.
Timothy K. Baldwin, with whom Robert C. Corrente, Caroline R.
Thibeault, and Whelan Corrente & Flanders LLP were on brief, for
appellant.
Dennis Fan, with whom Ethan P. Davis, Acting Assistant
Attorney General; Aaron L. Weisman, United States Attorney;
Charles W. Scarborough, Attorney, Civil Division, Appellate Staff,
U.S. Department of Justice; Royce Min, General Counsel, Social
Security Administration; Michael J. Pelgro, Regional Chief
Counsel, Social Security Administration; Timothy S. Bolen,
Assistant Regional Counsel, Social Security Administration, and
Amy Rigney, Attorney, Social Security Administration, were on
brief for appellees.
July 16, 2021
LIPEZ, Circuit Judge. Appellant Marasco & Nesselbush,
LLP ("M&N"), a law firm, brought this action to challenge what it
describes as "the Social Security Administration's byzantine and
irrational rules that govern payment of attorney's fees in Social
Security disability cases." The district court dismissed M&N's
claims for mandamus and relief under the Administrative Procedure
Act ("APA"), and it granted summary judgment for the Social
Security Administration ("SSA") on M&N's equal protection and due
process claims. We affirm dismissal of one APA claim, vacate
dismissal of the other, and conclude that certain of the payment
rules challenged by M&N are arbitrary and unenforceable. Given
the availability of relief under the APA, we affirm dismissal of
M&N's claim for mandamus relief and vacate the avoidable ruling on
the constitutional claims.
I.
M&N is a Rhode Island law firm whose partners and
associate attorneys regularly represent claimants seeking Social
Security disability benefits. A detailed framework created by
statute and regulations, and fleshed out in two agency manuals,
specifies the procedures for obtaining benefits, including who may
represent Social Security claimants and how representatives may
obtain fees for work they perform for claimants. See, e.g., 42
U.S.C. § 406 ("Representation of claimants before Commissioner");
20 C.F.R. §§ 404.1705 ("Who may be your representative"); 404.1725
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("Request for approval of a fee"); Program Operations Manual System
("POMS") § GN 03910.020 ("Qualifications for and Recognition of
Representatives"); POMS § GN 03920.017 ("Payment of
Representative's Fee"); Hearings, Appeals, and Litigation Law
Manual ("HALLEX") § I-1-2-3 ("Representative(s) Who May Charge and
Collect a Fee"). The two SSA manuals -- POMS and HALLEX -- each
contain numerous provisions that guide the agency's decision-
making while also informing the public of the requirements and
procedures for seeking benefits.1
We describe below the primary aspects of this agency
framework, as relevant to M&N's claims.
A. SSA Representation
Pursuant to regulation, as elaborated by the POMS and
HALLEX manuals, only individual attorneys, and not law firms, may
serve as "representatives" of claimants in agency proceedings.2
1The homepage on the POMS public website explains that "[t]he
POMS is a primary source of information used by Social Security
employees to process claims for Social Security benefits." POMS,
https://secure.ssa.gov/apps10/ (last visited July 13, 2021). The
introductory section of HALLEX states that, inter alia, "HALLEX
defines procedures for carrying out policy and provides guidance
for processing and adjudicating claims at the hearing, Appeals
Council, and civil action levels." HALLEX § I-1-0-1 ("Purpose").
2 Claimants also may appoint non-attorney individuals as
representatives, see, e.g., 42 U.S.C. § 406(a)(1), but this
opinion addresses the regulatory scheme only with respect to
attorneys. In addition, the framework at issue here applies only
to representation by attorneys during administrative proceedings,
not for any legal work that may later be performed in court if the
agency denies benefits. See id. § 406(b).
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See, e.g., 20 C.F.R. § 404.1705(a) (stating that a claimant may
"appoint as [his/her] representative . . . any attorney in good
standing who" meets certain requirements); POMS § GN 03920.001.A
("A claimant may appoint an individual, attorney or non-attorney,
to represent him/her in matters before SSA."); HALLEX § I-1-1-10.E
("An organization cannot represent a claimant because SSA does not
recognize entities or other organizations as representatives.").
When claimants retain a representative, they must notify the SSA
in writing, and the agency provides a form for that purpose --
SSA-1696, titled "Appointment of Representative."3 See POMS § GN
03905.030.A; HALLEX §§ I-1-1-10.A, I-1-2-3.A. A claimant may
retain more than one representative, but separate written notices
must be filed for each representative and the claimant "must
specify a principal representative." HALLEX § I-1-1-10.D.
Consistent with these rules, SSA claimants who seek
representation from M&N initially complete an SSA-1696 to appoint
one of the firm's two partners, Joseph Marasco or Donna Nesselbush,
as both their "representative" and their "main representative."
Subsequently, when an associate is assigned to assist with a case,
the client completes a new SSA-1696 to appoint the associate as an
3 Unlike non-attorney representatives, attorneys are not
required to sign a notice of appointment, see HALLEX § I-1-1-10.A,
but they are "strongly encourage[d]" to do so, id. § I-1-1-10.B.
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additional representative, with the M&N partner assigned to the
case identified on the associate's form as the main representative.
B. Attorney's Fees for SSA Representation
By statute, attorneys who successfully represent Social
Security disability claimants are entitled to a "reasonable fee"
for their services. See 42 U.S.C. § 406(a)(1). In some
circumstances, attorneys also are eligible for fees despite the
SSA's rejection of their clients' benefits claims. See 20 C.F.R.
§ 404.1725(b)(2); see also Gisbrecht v. Barnhart, 535 U.S. 789,
794-95 (2002) (noting the fees mandate for favorable
determinations and the regulatory provision permitting fees "if
the benefits claimant was unsuccessful"). With exceptions not
relevant here, attorneys are required to obtain SSA authorization
to collect fees for their work on behalf of claimants in agency
proceedings. See 42 U.S.C. § 406(a)(1) (stating that the
Commissioner of Social Security shall "fix . . . a reasonable fee
to compensate" attorneys for representing claimants who are
awarded benefits); 20 C.F.R. § 404.1720(b)(1) (stating that a
"representative must file a written request with [the SSA] before
he or she may charge or receive a fee for his or her services").
If attorneys serving as representatives follow
prescribed procedures, the SSA will directly pay at least a portion
of the authorized fees from funds it withholds for that purpose
from claimants' past-due benefits. See 42 U.S.C. § 406(a)(4)
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(providing for certification of an attorney's fee from a claimant's
past-due benefits); 20 C.F.R. § 404.1720(b)(4) (stating that,
subject to requirements specified elsewhere, the agency "will pay
the authorized fee, or a part of the authorized fee, directly to
the attorney . . . out of the past-due benefits"). Pursuant to
statute, the maximum amount of fees that the SSA may pay from
withheld funds is 25 percent of the past-due benefits. 42 U.S.C.
§ 406(a)(4).4 The procedures challenged by M&N primarily concern
the payments drawn from the withheld past-due benefits.
Particularly significant in this case is the rule that
"[o]nly the claimant's duly appointed representative(s) may charge
or collect a fee for services he or she provided in a matter before
the Social Security Administration (SSA)." HALLEX § I-1-2-3.A.
Because the SSA's rules allow only individuals to serve as
representatives, the agency pays fees from claimants' past-due
benefits only to individual attorneys. See POMS § GN 03910.042.A.3
("NOTE: SSA recognizes and pays fees directly only to individual
representatives, not entities."). The agency applies that
limitation even when it recognizes that the fees at issue will be
4 In a separate subsection, the statute also provides for
withholding and payment of up to 25 percent of a claimant's past-
due benefits for representation in court. See 42 U.S.C.
§ 406(b)(1)(A). The Supreme Court recently held that the 25
percent cap applies separately to each subsection. See Culbertson
v. Berryhill, 139 S. Ct. 517, 519 (2019) (holding that "the statute
does not impose a 25% cap on aggregate fees").
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transferred to the representing attorneys' employers -- i.e.,
their law firms -- because the individual attorneys have been paid
for their SSA work as part of their regular salaries. See, e.g.,
HALLEX § I-1-2-3.A ("If a law firm or other entity is involved,
only the duly appointed individual(s) in that firm or entity may
file a fee agreement or petition and receive fee authorization and
payment for services performed."); POMS § GN 03910.042.A.3
(providing for the registration of "[a] firm or other entity" that
employs a representative).
The SSA's awareness of a law firm's ultimate entitlement
to the fees is reflected in the agency's reporting to the Internal
Revenue Service. When the proper documents have been filed with
the SSA, the law firm will be sent a 1099-MISC form "indicating
the amount of any fees paid directly to their employees," POMS
§ GN 03913.001.D.1, and the individual attorney who received the
payments will be provided "an informational Form 1099-MISC that
reflects a representative's income passed to the firm,"
Defendants' Response to Plaintiff's Statement of Undisputed Facts,
at ¶ 24, Dkt. 47, No. 1:17-cv-00317-JJM-LDA (May 30, 2019).
Indeed, the SSA "recommend[s] that firms and organizations
employing individual representatives register with [SSA], even
though [SSA] do[es] not pay fees directly to firms and
organizations." POMS § GN 03913.001.D.1.
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Pursuant to statute and regulation, the SSA provides two
methods for attorneys to seek fees: fee agreements made between
the attorneys and their clients, and fee petitions. See POMS §§ GN
03920.001, 03920.017; 03905.035.B. The procedures differ in
multiple ways. For example, a fee agreement must be submitted to
the SSA before the agency reaches a benefits determination, and
the agreed-upon fee is payable only if the claimant is successful.
See 42 U.S.C. § 406(a)(2)(A). By contrast, a fee petition is
submitted to the SSA after the attorney completes his or her
representation, and fees are payable regardless of success. See
20 C.F.R. § 404.1725. In fee agreement cases, the SSA does not
consider the actual hours spent or the services provided when
deciding whether to approve the agreement, see POMS
§ GN 03940.003.C.1, but those factors are among the criteria
considered when the SSA evaluates fee petitions, see POMS § GN
03930.105.B.1, 4; HALLEX § I-1-2-57.A.2, 5.
By statute, the fee specified in an agreement may not
exceed the lesser of $6,000 or 25 percent of the claimant's award
of past-due benefits. See 42 U.S.C. § 406(2)(A); 74 Fed. Reg.
6080 (Feb. 4, 2009). The agreed-upon fee is also the maximum that
the representative may collect, either directly from the SSA (from
the client's withheld benefits) or from the client. See POMS § GN
03920.001.B.2. Through the petition process, the SSA may award
any amount deemed "reasonable" based on the specified regulatory
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criteria. See POMS § GN 03920.001.B.1 (referencing 42 U.S.C.
§ 406(a)(1)); 20 C.F.R. §§ 404.1720(b)(2), 404.1725; HALLEX § I-
1-2-57. However, as with fee agreements, the SSA will directly
pay an attorney who submits a fee petition a maximum of 25 percent
of the claimant's past-due benefits; any remaining authorized
amount would need to be collected from the client. See, e.g.,
POMS §§ GN 03920.050.C; 03905.035.B.
As an indication of the complexity of the framework,
different rules apply to each method of obtaining fees when a
claimant has more than one representative. In fee agreement cases,
all representatives seeking fees must sign a single agreement; in
fee petition cases, each representative must file a separate
petition for the services he or she performed. HALLEX § I-1-2-
3.B. When issuing payments from a claimant's award of past-due
benefits in fee agreement cases, the SSA will split the authorized
amount "in equal shares to each appointed representative without
regard to his or her services." POMS § GN 03920.050.D.2.5 For
fee petitions, by contrast, the SSA will "apportion (i.e., prorate)
the withheld amount among the eligible representatives."
Id. § 03920.050.D.1. In other words, for fee petitions, the SSA
M&N states in its complaint that, pursuant to this rule,
5
"[i]f an associate attorney's involvement in the case consisted of
answering one five-minute phone call, while the partner worked 50
hours on the case, the SSA would still authorize" half the
available fee to each.
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will use the individual fee amounts that were authorized to compute
each representative's percentage of the total amount of authorized
fees; the SSA will award the available withheld benefits based on
those percentages. Id.
C. M&N's SSA Fee-Collecting Experience6
For both fee agreements and fee petitions, the SSA -- as
noted above -- will make payments only to individuals, not to
firms. M&N has thus devised a system for ensuring that fees paid
to its salaried associates are properly transferred to the firm.
First, M&N associates sign a "Limited Power of Attorney"
authorizing the partners to recover any representative's fees that
the SSA pays to the individual attorneys.7 Second, M&N establishes
6 Unless noted otherwise, we draw the facts concerning M&N
from the undisputed portions of its Statement of Undisputed Facts.
All references to M&N's "complaint" and citations to its complaint
refer to the First Amended Complaint.
7 In pertinent part, that document states: "I acknowledge
that I am a salaried employee of Marasco & Nesselbush, and I
warrant that I do not represent any Social Security clients outside
of the employ of Marasco & Nesselbush." It further authorizes
M&N's partners:
[t]o duly execute my name on drafts issued by
the Social Security Administration to me as
payment of attorneys fees for legal services
rendered to clients of Marasco & Nesselbush,
while I was employed by Marasco & Nesselbush
as an associate and further to execute my name
on all fee petitions or fee related documents
relative to the above stated limited purpose
. . . [and] [t]o take all reasonable steps to
deposit said drafts/attorney fees [into]
Marasco & Nesselbush bank accounts.
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joint bank accounts with each associate for receipt of the SSA
electronic fee deposits. Third, after the SSA deposits fees into
those joint accounts, and pursuant to the Limited Power of
Attorney, M&N transfers the funds to the firm's operating account.
As described below, however, M&N's system does not
always successfully retrieve all fees to which the firm claims
entitlement based on the SSA work performed by its associates --
a problem that M&N attributes to the SSA's allegedly irrational
framework. M&N also claims burdens from fee issues that arise
when it hires attorneys who had been representing Social Security
disability claimants at other firms.
1. Attorney's Fees for SSA Work Performed by M&N
Associates Who Leave the Firm
M&N alleges that it regularly has problems obtaining
attorney's fees from the SSA for work done by its associates when
those associates move to other firms or obtain jobs with the SSA
or another government agency. The difficulties, as depicted in
M&N's complaint, stem both from the intricacies of the SSA's
procedures and from the lag in time that frequently occurs between
fee requests and payment.8 We briefly describe the alleged
complications for the two primary scenarios that M&N identifies.
8M&N's complaint states that "[t]he fee petition method is
very slow; it can sometimes take years after the claimant is
awarded benefits to receive authorization for attorney's fees, and
then several more months for the attorney to actually receive the
fee." Compl. ¶ 20; see also id. ¶ 45 ("Social Security disability
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a. Changing Law Firms. If M&N associates leave the
firm during the pendency of a Social Security case on which they
have worked -- a sometimes lengthy period -- M&N must maintain
ties with those former employees and seek their cooperation in
submitting fee petitions so that M&N can be paid for work the
associates performed (and for which the associates previously were
paid through their salaries). M&N also must keep escrow accounts
open for these former employees. Meanwhile, those departed
associates may go to other firms that also represent SSA clients
and continue representing clients for the new firm. Likewise,
newly hired associates at M&N may have previously worked for
clients of other firms, having left their old jobs with fees
pending. In both scenarios -- i.e., involving former M&N
associates and newly hired M&N associates -- the SSA has
erroneously credited past fees to the associates' current
employers' tax ID numbers rather than to the tax ID numbers of the
cases often remain pending for several years, and young associates
often change firms.").
As an example of how payment timing can affect M&N's access
to fees, M&N's Statement of Uncontested Material Facts describes
the submission of fee petitions in April 2018 by partner Nesselbush
and associate Valerie Diaz for their joint representation of a
successful claimant. The SSA hired Diaz in July 2018. The
agency's decision on the fee award was issued in November 2018,
and it rejected Diaz's petition because -- as required when she
changed jobs -- she had withdrawn as counsel and "'waived the right
to charge and collect a fee.'"
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firm where the associates worked when the compensable work was
performed. The SSA also has incorrectly credited payments for new
representation work to the previous employer's tax ID number.9 M&N
alleges that this "quagmire" has required the annual hiring of an
accountant "to straighten out the income and file corrected
1099's."
Relatedly, M&N points to the SSA rule that fees will not
be paid from past-due benefits to an attorney who has withdrawn
from a case "prior to a favorable decision." POMS § GN
03920.017.A. Hence, if a new M&N associate takes over representing
a client from a departed associate while proceedings are ongoing,
M&N would be able to collect fees for its former associate's work
only from the client. See id. However, M&N reports "very limited
success" in its attempts to collect fees from claimants. Compl.
¶ 93.10
M&N's complaint gave a specific example of two associates
9
who recently had been hired from another firm where they also had
handled Social Security disability cases. Compl. ¶ 57. M&N
reported that fees for the attorneys' pre-M&N cases were coming
into M&N accounts and that fees related to the attorneys' work at
M&N were being misdirected to the prior firm.
The agency is aware of this difficulty. In testimony before
10
a House committee in 2000, an SSA deputy associate commissioner
stated that "[o]btaining payment from clients is often difficult
for attorneys, who sometimes have to expend considerable resources
to get paid." Attorney Fee Implementation: Hearing Before SubComm.
on Social Security of the H. Comm. On Ways & Means, 106th Cong.
(June 14, 2000), 2000 WL 799529. See also Gisbrecht, 535 U.S. at804-05 & n.13 (noting that Congress authorized the payment of
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b. Moving to Government Employment
M&N describes as particularly "bizarre" the SSA's rules
for fee payments when an attorney leaves the firm to work for the
government. Compl. ¶ 60. The SSA requires attorneys who accept
government employment to waive all fees that were not authorized
before they started their government jobs. As a result, M&N has
been unable to collect fees for work performed by such attorneys,
even when all work in a case has been completed and a request for
fees is pending with the SSA at the time the former associate
enters government service.11 M&N thus loses access to fees that
the SSA -- through its handling of 1099s, as described above --
would have recognized as income to the firm. According to the
SSA, fee waivers are required in these circumstances pursuant to
federal laws that bar government employees from receiving
compensation during their employment "for any representational
attorney's fees from past-due benefits to ensure that appropriate
fees would be paid).
11 The waiver requirement currently appears to affect only
fees sought through the petition process for attorneys who leave
for government work. In August 2017, the SSA implemented a new
policy to exclude from the division of fees pursuant to an
agreement any attorney who has waived his right to a fee. Hence,
if a departed associate and an M&N partner work together on a case,
and the associate waives his or her fee, it appears that the
partner would be entitled to collect from the claimant's past-due
benefits 100 percent of the amount specified in the fee agreement
(if that amount otherwise meets SSA requirements). See POMS GN
§ 03920.050.D.2, D.2.c. (Ex. 4). The impact of the new policy is
further discussed in Section III.C.2.b.
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services . . . rendered" in agency proceedings affecting the
interests of the United States. 18 U.S.C. § 203(a); see also id.§ 205(a) (subjecting federal employees to penalties for
undertaking such representation).
2. Specific Fee-Collecting Problems
M&N's complaint and Statement of Undisputed Facts
contain detailed accounts of its efforts to obtain fee payments
for work completed by three former associates who were hired by
the SSA in 2015: Joseph Wilson, Paul Dorsey, and Kyle Posey. At
the time the three attorneys left M&N, the SSA had not yet
authorized fees for some cases on which they had worked. In some
instances, fee petitions had been submitted, but not yet acted
upon; in other cases, the representation work had been completed,
but the benefits decision had not yet been issued; and in other
cases, M&N attorneys continued to represent claimants who
previously had been represented by Wilson, Dorsey, or Posey.
Compl. ¶¶ 51-55. In due course, M&N sought fees for the three
associates' work in each of these cases.12
In response to its inquiries, M&N was told by defendant
Tara Collins, a supervisor for the SSA's Office of Hearing
In its Statement of Undisputed Facts, M&N reported similar
12
problems in obtaining attorney's fees for representative services
provided by two other M&N associates, Jennifer Belanger and Valerie
Diaz, who were hired by the SSA in July 2018.
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Operations ("OHO") in Lawrence, Massachusetts,13 that the former
associates were required to waive pending fees in their cases
because of "[t]he criminal ethics statute at issue, 18 U.S.C.
§ 203."14 Collins also told M&N that the firm was not entitled to
the former associates' portion of the fees from cases those
associates worked on with M&N partners.15 M&N partner Nesselbush
then asked Collins for guidance on how to collect those fees,
noting that the associates had already been paid "for their work
. . . represent[ing] our clients." The answer, simply, was that
M&N could not collect the fees directly from the SSA. Defendant
Carolyn Tedino, the Regional Management Officer for the SSA in
Boston, explained in a letter that the "SSA will not authorize to
any co-representative the share of a co-representative who waived
a fee. SSA releases the waived share to the claimant(s)." In
other words, even though an M&N partner is listed as a co-
representative on its former associates' appointment forms,
13This office previously was known as the Office of Disability
Adjudication and Review ("ODAR").
14 Although Collins's email message applied only to the two
attorneys she supervised at the office in Lawrence -- Wilson and
Dorsey -- the substance she conveyed applied to all three former
M&N associates. The third attorney, Kyle Posey, was hired by the
SSA to work in its Boston Regional Office. Compl. ¶ 73.
15In email messages that Dorsey and Wilson subsequently sent
to M&N, they reported that they had been told that "'[t]he simple
act of receiving and endorsing a check over to the contracting
firm could constitute seeking, receiving, and/or agreeing to
receive fees in violation of § 203.'"
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neither the partner nor the firm could be paid, from the past-due
benefits, the fees attributable to the associates' specific work.
M&N nonetheless persisted in asking that the fees earned
by Wilson, Dorsey, and Posey be paid in the name of M&N or in the
name of the partner listed as the main representative in each of
their cases. In some instances -- presumably in error, given the
agency's position -- the SSA paid fees in the individual attorney's
name and deposited them into the departed attorney's M&N bank
account. However, because Wilson and Dorsey had revoked their
M&N powers of attorney, at the SSA's insistence, for fees that
were not yet authorized when they began their government jobs, the
firm converted the former associates' M&N accounts into escrow
accounts instead of transferring the funds into its operating
account.16
In other instances, the SSA denied fees for work
performed by M&N's former associates. For example, Nesselbush
submitted a fee petition in early 2016 seeking $25,456.50 for work
she and Posey performed for a claimant. An administrative law
judge authorized payment of $19,092.50 for Nesselbush's services,
but rejected fees for the 53.20 hours of work performed by Posey.
The SSA subsequently affirmed the exclusion of fees for Posey's
16In its Statement of Undisputed Material Facts, M&N reported
that certain fees paid to associates in 2015, after they began
government work, remain "stuck in an escrow account."
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work, advising Nesselbush that no further review was available.
The result was similar when Marasco submitted a fee petition
seeking $6,000 in fees for work he and Dorsey performed on behalf
of another disability claimant. The SSA authorized a $2,000 fee
for Marasco, specifically excluding Dorsey's work from its
consideration. In a decision upholding that amount, an
administrative law judge noted that the objections Marasco raised
to the SSA's fee policies were "outside the scope of [his] review
and therefore [would] not be addressed in [his] Order."
At the time M&N filed its amended complaint, in December
2017, the firm estimated that the disputed attorney's fees at issue
in this case totaled approximately $50,000. Compl. ¶ 99. Three
years later, at oral argument in this appeal, M&N stated that about
$70,000 in fees were at issue for work performed by associates who
left the firm for government employment, including $15,000 held in
escrow.
D. Other Law Firms
M&N alleged in its complaint that other law firms in
Rhode Island had not experienced the same difficulties in receiving
payment from the SSA for work performed by associates who left for
government service. According to M&N, two such firms used a
similar approach of paying associate attorneys by salary, with all
fees generated in the individual names of the associates therefore
viewed by the firms as their property. M&N alleged that the SSA
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"routinely paid the attorney's fees without incident" for former
associates of these firms "who, at the time of payment, worked at
the SSA." Compl. ¶ 106.
II.
A. Nature of the Action
M&N filed this lawsuit against the SSA and several agency
officials, including Collins and Tedino, and former M&N associates
Wilson, Dorsey, and Posey.17 The firm's fifty-six-page First
Amended Complaint alleges that the SSA's "byzantine and irrational
rules" on attorney's fees "discourage law firms from practicing in
the field of Social Security disability law and thereby diminish
the payment of disability benefits to deserving claimants." Compl.
at 1-2. Taken together, the complaint's ten counts reflect M&N's
contention that it has been denied its right to tens of thousands
of dollars in attorney's fees by arbitrary and capricious SSA rules
that the agency adopted unlawfully. Among its requests for relief,
the firm seeks a writ of mandamus requiring the SSA to authorize
M&N's receipt of fees for work performed on its behalf by Wilson,
Dorsey, and Posey, and a declaratory judgment that, inter alia,
(1) the SSA must authorize payment of attorney's fees to M&N for
17 The parties stipulated to dismissal of claims brought
against the agency officials in their individual capacities and
against the former associates, and those claims are therefore not
at issue in this appeal.
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an associate's work when the associate leaves the firm, (2) M&N
must receive attorney's fees disbursements from the SSA in its own
name, and (3) the POMS and HALLEX attorney's fees provisions cited
in the complaint are void because they were not adopted through
the APA's notice-and-comment provisions.
B. The District Court's Opinions
The defendants moved to dismiss the complaint and, in
July 2018, the district court dismissed M&N's mandamus (Count IV)
and APA claims (Counts VIII and IX).18 The court held that
sovereign immunity bars any claim for mandamus that seeks payment
of fees, see Marasco & Nesselbush, LLP v. Collins ("M&N I"), 327
F. Supp. 3d 388, 393 (D.R.I. 2018), and it concluded that the
firm's challenges to the agency's fee-paying procedures were
statutorily barred because the rules qualify as "action
. . . committed to agency discretion by law," id. at 396 (quoting
5 U.S.C. § 701(a)(2)).
However, the court found that M&N had adequately pled
its constitutional claims (Counts V, VI, and VII). With respect
to procedural due process, the court held that M&N had properly
asserted a protected property interest in the disputed attorney's
18As noted above, the parties agreed to dismiss the claims
against Dorsey, Wilson, and Posey, as well as the claims against
the SSA defendants as individuals. See Marasco & Nesselbush, LLP
v. Collins, 327 F. Supp. 3d 388, 393 & n.3 (D.R.I. 2018). The
court's 2018 decision covered the remaining six claims.
- 21 -
fees and plausibly alleged that the defendants had interfered with
that interest by "provid[ing] no process at all" for obtaining the
fees. Id. at 394. On the substantive due process claim, the court
ruled that "a rational finder of fact could conclude that SSA's
actions were arbitrary and/or irrational." Id. The court noted
various rules that could be found irrational, including "that SSA
recognizes law firms for tax purposes but not for attorney['s]
fees" and "that attorneys who leave M&N to work for SSA are not
paid." Id. Finally, concerning equal protection, the court noted
that M&N had sufficiently stated a claim for two types of harm:
that the SSA singled out M&N for adverse treatment relative to
other law firms -- a so-called "class of one" claim -- and that
the SSA irrationally discriminated against M&N "based on its status
as a law firm as compared to SSA's treatment of individual
attorneys." Id. at 395.
In March 2020, after both parties moved for summary
judgment on the three remaining claims, the district court granted
the SSA's motion and denied M&N's motion. The court concluded
that "M&N's procedural due process claim fails because M&N does
not have a property interest in representative attorney's fees
authorized by the SSA." Marasco & Nesselbush, LLP v. Collins ("M&N
II"), 444 F. Supp. 3d 317, 326 (D.R.I. 2020). That is so, the
court explained, because the SSA "made a reasonable choice within
the statutory grant of its authority" "not to recognize entities
- 22 -
like M&N as representatives." Id. Nor do the agreements between
M&N and its associates give the firm a protectible property
interest, the court explained, because the SSA has complete
discretion to grant or deny a fee request and a violation of
procedural due process requires "more than a 'unilateral
expectation' of a property interest." Id. at 327 (quoting Town of
Castle Rock v. Gonzales, 545 U.S. 748, 756 (2005)).
On the substantive due process claim, the court held
that M&N had not shown that the SSA's framework for disbursing
attorney's fees lacked a rational basis. Noting the agency's
assertion that recognizing only individuals as representatives
allowed efficient management and oversight of the benefits
process, the court observed that the question for rational basis
review is not whether the agency chose "'the best means to
accomplish' its purpose." Id. at 329 (quoting Mass. Bd. of Ret.
v. Murgia, 427 U.S. 307, 316 (1976)). Accordingly, M&N's evidence
suggesting that it "would be no more difficult" to meet the
agency's objectives if law firms served as representatives was
insufficient to dispel the rationality of the SSA's choice. Id.
at 328-29.
The court held that the same failure to show the
irrationality of the SSA framework doomed M&N's equal protection
claim based on the agency's discrimination against law firms. Id.
at 331-32. The court also rejected the "class of one" claim,
- 23 -
finding that the claim required evidence of bad faith or malicious
intent and that M&N had not presented such evidence. Id. at 330-
31.
On appeal, M&N challenges the rulings on each of the six
claims addressed by the district court. Although certain of M&N's
contentions appear to take issue with the SSA's refusal to
recognize law firms as representatives -- in addition to
challenging the agency's fees-payment procedures -- M&N clarified
at oral argument that it is targeting only the latter. We,
accordingly, consider M&N's claims only insofar as they challenge
rules on obtaining payment of fees.
III.
We address in this section M&N's assertions of error in
the district court's dismissal of its causes of action for mandamus
(Count IV) and violation of the APA (Counts VIII and IX).
A. Standard of Review
The SSA moved to dismiss M&N's complaint based on both
Rule 12(b)(1), for lack of subject-matter jurisdiction, and Rule
12(b)(6), for failure to state a claim. The district court did
not specify the rule on which it relied to dismiss the three
counts, and we similarly need not distinguish between them. A
court's inquiry is largely the same under both rules: the well-
pleaded facts must be taken as true and viewed in the light most
favorable to the plaintiff, and all reasonable inferences from
- 24 -
those facts must be drawn in the plaintiff's favor. See Lyman v.
Baker, 954 F.3d 351, 359-60 (1st Cir. 2020) (noting that "the same
basic principles apply in both situations," although the inquiries
under the two rules are "conceptually distinct" (quoting
Hochendoner v. Genzyme Corp., 823 F.3d 724, 730-31 (1st Cir.
2016))).19 We review dismissals granted under both rules de novo,
see In re Fin. Oversight & Mgmt. Bd. for P.R., 919 F.3d 638, 644
(1st Cir. 2019), as we do "the question of whether a claim is
justiciable under the APA," Union of Concerned Scientists v.
Wheeler, 954 F.3d 11, 16 (1st Cir. 2020).
As we explain below, however, we have chosen to go beyond
the question of dismissal on M&N's arbitrary-and-capricious APA
claim based on the undisputed portions of the record developed in
support of the parties' motions for summary judgment. From that
perspective, too, our review is de novo. See Shurtleff v. City of
Bos., 986 F.3d 78, 85 (1st Cir. 2021). We may grant judgment only
"when the record demonstrates that there is no genuine issue as to
any material fact and confirms that the movants are entitled to
19A key difference is that, if a Rule 12(b)(1) motion contests
factual allegations of the complaint, the court must engage in
judicial factfinding to resolve the merits of the jurisdictional
claim. See Valentin v. Hosp. Bella Vista, 254 F.3d 358, 363-65
(1st Cir. 2001). Rule 12(b)(6) motions, on the other hand, are
always facial, not factual, challenges to the complaint.
Cebollero-Bertran v. P.R. Aqueduct & Sewer Auth., No. 20-1096,
2021 WL 2699040, at *3 (July 1, 2021).
- 25 -
judgment as a matter of law." Id. (noting that the same standard
applies to cross-motions for summary judgment).
B. Mandamus
The district court dismissed M&N's mandamus count on the
ground that sovereign immunity bars the claim. In support of its
ruling, the court cited cases in which attorneys sought fees
payments from the SSA itself. See M&N I, 327 F. Supp. 3d at 393.
On appeal, the SSA defends the court's decision by arguing that
M&N may not "compel" the SSA to pay attorney's fees through the
mandamus process. M&N, however, is not seeking a monetary remedy
from the SSA itself. Rather, its mandamus count seeks to compel
the SSA to release the fees already in M&N's possession for work
performed by its former associates now working for the agency and
to authorize other fees for work performed by those attorneys while
they were employed by the firm.
The Supreme Court has on multiple occasions expressly
refrained from deciding whether the review provisions of the Social
Security Act bar a mandamus claim against the SSA under 28 U.S.C.
§ 1361.20 See, e.g., Your Home Visiting Nurse Servs., Inc. v.
Shalala, 525 U.S. 449, 456 n.3 (1999). We have not previously
20 Section 1361 grants jurisdiction to district courts over
"any action in the nature of mandamus to compel an officer or
employee of the United States or any agency thereof to perform a
duty owed to the plaintiff." 28 U.S.C. § 1361.
- 26 -
decided the question, although we long ago observed that mandamus
relief "might be available in those extreme situations where no
other remedy was available." Matos v. Sec'y of Health, Educ. &
Welfare, 581 F.2d 282, 286 n.6 (1st Cir. 1978).21
We again have no occasion to decide the issue. Even if
permitted, mandamus relief is unavailable here because, as
explained below, M&N has another avenue for obtaining relief. "A
writ of mandamus is an extraordinary remedy that is available only
when certain conditions are met," In re Fin. Oversight & Mgmt. Bd.
for P.R., 985 F.3d 122, 127 (1st Cir. 2021), including that a party
has "exhausted all other avenues of relief," Heckler v. Ringer,
466 U.S. 602, 616 (1984). We therefore affirm dismissal of M&N's
mandamus cause of action.
C. The Administrative Procedure Act
M&N presses two different APA claims: a contention that
the agency improperly adopted portions of its attorney's fees
framework without the required notice-and-comment procedures and
a challenge to aspects of that framework as arbitrary and
capricious. We consider each in turn.
21 Most other circuits have concluded that mandamus
jurisdiction is available "to review otherwise unreviewable
procedural issues" arising under the SSA. Family Rehab., Inc. v.
Azar, 886 F.3d 496, 505 & n.21 (5th Cir. 2018) (quoting Wolcott v.
Sebelius, 635 F.3d 757, 764 (5th Cir. 2011)); see also Wolcott,
635 F.3d at 765 (collecting cases).
- 27 -
1. The Notice and Comment Requirement
M&N claims that the SSA violated the APA by adopting its
rules on the payment of fees without adhering to the notice and
comment requirements that apply to an agency's "substantive rules
of general applicability." 5 U.S.C. § 552(a)(1)(D); see also id.§ 553; N.H. Hosp. Ass'n v. Azar, 887 F.3d 62, 70 (1st Cir. 2018)
(noting that "[f]ailure to abide by the[] [notice and comment]
requirements renders a rule procedurally invalid").22 Although the
district court dismissed this challenge along with the APA
arbitrary-and-capricious claim based on "the breadth of discretion
afforded to [the] SSA" on matters related to the representation of
claimants, M&N I, 327 F. Supp. 3d at 397, the notice and comment
process is a statutory obligation that does not depend on the scope
of the agency's discretion. A rule subject to notice-and-comment
procedures "cannot stand" if the process was not followed, unless
a "lawful excuse" exists for neglecting that statutory obligation.
Azar v. Allina Health Servs., 139 S. Ct. 1804, 1808 (2019). To
that end, we proceed to assess the merits of M&N's notice and
comment claim because we disagree with the district court that it
is unreviewable.
22"The APA generally requires that before a federal agency
adopts a rule it must first publish the proposed rule in the
Federal Register and provide interested parties with an
opportunity to submit comments and information concerning the
proposal." N.H. Hosp. Ass'n, 887 F.3d at 70 (citing 5 U.S.C.
§ 553).
- 28 -
M&N correctly points out that "the vast majority" of the
provisions governing disbursement of attorney's fees appear only
in the HALLEX and POMS manuals and were adopted without public
notice and comment. In response, the SSA asserts that the manuals
contain "interpretive rules, general statements of policy, or
rules of agency organization, procedure or practice" and, as such,
are exempt from notice-and-comment procedures. 5 U.S.C.
§ 553(b)(A).
In our view, the fees-paying procedures that appear in
the POMS and HALLEX guides -- at least for the most part -- either
reiterate requirements that appear in regulations that did go
through the notice-and-comment process or consist of elaborations
that are fairly characterized as "rules of agency organization,
procedure or practice" exempt from that process. As noted, the
governing statute directs the Commissioner to pay a "reasonable
fee" to "an attorney" so as "to compensate such attorney for the
services performed." 42 U.S.C. § 406(a)(1). The regulations
specify, inter alia, that the agency determines "the amount of the
fee, if any, a representative may charge or receive," 20 C.F.R.
§ 404.1720(b)(2); the content of the required written request for
approval of a fee, id. § 404.1725(a); the factors the agency will
consider in evaluating such a request, id. § 404.1725(b); and the
limits for payments the agency will make from claimants' past-due
benefits, id. § 404.1730(b).
- 29 -
In other words, these regulations, together with § 406,
create the entitlement and parameters for the fees, the details of
which, including payment procedures, are set forth in the HALLEX
and POMS manuals. The interpretive rules therefore do not
"create[] rights, assign[] duties, or impose[] obligations, the
basic tenor of which is not already outlined in the law itself."
N.H. Hosp. Ass'n, 887 F.3d at 70 (quoting La Casa Del Convaleciente
v. Sullivan, 965 F.2d 1175, 1178 (1st Cir. 1992)); see also
Powderly v. Schweiker, 704 F.2d 1092, 1098 (9th Cir. 1983) (noting
that interpretive rules "do not change any existing law or policy
nor do these provisions remove any previously existing rights").
Rather, the challenged provisions "merely . . . advise the public
of the agency's construction of the statutes and rules which it
administers." N.H. Hosp. Ass'n, 887 F.3d at 70 (quoting Perez v.
Mortg. Bankers Ass'n, 575 U.S. 92, 97 (2015)) (internal quotation
marks omitted); see also Powderly, 704 F.2d at 1098 (noting that
interpretive rules "only explain what the more general terms of
the Act and regulations already provide").
The rule specifying that approved fees may be released
only to individuals -- though consequential -- does not affect
either eligibility for a fee or the amounts authorized; it merely
prescribes how approved fees are to be disbursed. As such, we
view it as administrative rather than substantive. See N.H. Hosp.
Ass'n, 887 F.3d at 74 (distinguishing "interstitial, minor, or
- 30 -
confirmatory pronouncements guiding agency operation[s]" from "a
new policy" that impacted the amount of Medicaid reimbursements to
hospitals). Importantly, even if the rule is not subject to the
notice-and-comment process, it is subject to review under the
arbitrary and capricious standard -- as applied below. See Perez,
575 U.S. at 105-106.
The SSA's ability to adjust certain mechanics of its
fees-paying framework without engaging in the notice-and-comment
process enables the agency to respond nimbly to flaws that become
apparent with experience -- for example, by making the modification
described above in the agency's handling of fee agreements when
one co-representative waives his or her share of the agreed-upon
amount. See supra note 11.23 Of course, whether the SSA properly
uses that flexibility -- or fails in some instances to do so, see
infra -- is irrelevant in assessing whether a challenged rule is
sufficiently substantive to require notice-and-comment procedures.
Here, we are satisfied that the individual-only disbursement rule
goes primarily to methodology, not substance.
A closer question is presented by the SSA's rule barring
payment of fees for work completed by attorneys before they depart
23In all likelihood, the prior rule could not have withstood
arbitrary-and-capricious review. Among other factors, it would be
difficult to defend a rule that eliminates as much as one-half of
an agreed-upon fees payment without regard for the role played by
each attorney.
- 31 -
for government service if those fees were not yet authorized when
they changed jobs. That rule does impact the entitlement to fees
and, at times, appears to operate at odds with the statutory
command to pay attorneys a reasonable fee for successful
representation. See 42 U.S.C. § 406(a)(1) (providing for "a
reasonable fee" "whenever the Commissioner of Social Security
. . . makes a determination favorable to the claimant"). On the
other hand, this rule, too, might be viewed as simply an
administrative mechanism for implementing the statutory fees
mandate consistently with other federal laws. See 18 U.S.C.
§ 203(a) (barring government employees from receiving fees for
representing a party against the government). Ultimately, we
choose to bypass the question whether the government-attorney rule
is procedurally unsound because, as explained below, we conclude
that it is arbitrary and, for that reason, unenforceable.
M&N has not identified specific rules beyond those that
we have discussed that are still in place and warrant notice-and-
comment treatment.24 Accordingly, we conclude that the SSA was not
required to engage in the notice-and-comment rulemaking process
24M&N complains, for example, about the requirement that all
representatives must sign the same fee agreement. Not only does
this rule plainly fall outside the notice-and-comment requirement,
but it also easily survives arbitrary-and-capricious review.
Requiring a single document is a rational way to avoid confusion
about how many representatives are entitled to share in the fees
authorized pursuant to an agreement.
- 32 -
for the rule specifying that fee payments may be disbursed only to
individual representatives for the work they performed. As
explained above, we do not consider whether the agency should have
gone through that process for the rule barring certain payments to
attorneys hired by the government.
2. Arbitrary and Capricious Review
a. Reviewability
Under the APA, agency action may not be challenged in
court if judicial review is precluded by statute, 5 U.S.C.
§ 701(a)(1), or if the disputed action "is committed to agency
discretion by law," id. § 701(a)(2). When judicial review is
permitted, the court may, inter alia, "compel agency action
unlawfully withheld or unreasonably delayed" and set aside agency
action that is "arbitrary, capricious, [or] an abuse of
discretion." Id. § 706(1), (2)(A). The district court concluded
that § 701(a)(2) applies here, and it dismissed M&N's APA claims
on the ground that Congress gave the SSA broad discretion to
"prescribe rules and regulations governing the recognition of
agents . . . representing claimants before the Commissioner of
Social Security." M&N I, 327 F. Supp. 3d at 396-97 (quoting 42
U.S.C. § 406(a)(1)).
Even when an agency is afforded broad discretion,
however, that authority is rarely absolute. We recently observed
that "[t]here is a 'strong presumption' of judicial review under
- 33 -
the APA." Union of Concerned Scientists, 954 F.3d at 17 (quoting
Mach Mining, LLC v. EEOC, 575 U.S. 480, 486 (2015)); see also
Weyerhaeuser Co. v. U.S. Fish & Wildlife Serv., 139 S. Ct. 361,
370 (2018) ("A court could never determine that an agency abused
its discretion if all matters committed to agency discretion were
unreviewable."). The Supreme Court has described the exception to
the presumption of reviewability for agency action as "quite
narrow[], restrict[ed] . . . to those rare circumstances where the
relevant statute is drawn so that a court would have no meaningful
standard against which to judge the agency's exercise of
discretion." Dep't of Commerce v. New York, 139 S. Ct. 2551, 2568
(2019) (quoting Weyerhaeuser Co., 139 S. Ct. at 370). The Court
gave as examples of such circumstances "a decision not to institute
enforcement proceedings or a decision by an intelligence agency to
terminate an employee in the interests of national security." Id.
(citation omitted).
The practices challenged here as arbitrary and
capricious are far different from the traditionally discretionary
judgments highlighted by the Supreme Court. Indeed, M&N's
complaints do not relate to the agency's decisions on benefits
eligibility -- the core of the SSA's discretionary responsibility
and authority -- or even to decisions on the appropriate amount of
attorney's fees for the work performed in individual benefits
cases. Rather, M&N challenges general rules that it claims prevent
- 34 -
or unreasonably complicate the collection of reasonable fees that
it should be paid for work performed, in effect, by the firm.
To be specific about the nature of that challenge, we
reiterate that M&N is not objecting to the SSA's rule barring law
firms from serving as claimants' representatives. Rather, our
focus is solely on certain rules governing fees payments for the
work of individual attorneys. On that issue, we have identified
two practices that M&N challenges: (1) the refusal to authorize
attorney's fees attributable to the work of attorneys who left
private practice for government jobs if those fees were not
approved before the attorneys' departures and (2) the refusal to
pay fees from past-due benefits to law firms on behalf of their
salaried associates.25
We see no barrier to judicial review of these challenges.
As described above, the SSA asserts that the prohibition against
paying fees to newly hired government employees is required by the
statutes barring federal employees from receiving compensation for
work performed in actions against the government, see 18 U.S.C.
§ 203, and from serving as attorneys in any such actions, see id.§ 205. The judgment on whether a fees payment would conflict with
25M&N also challenges as arbitrary the payment of attorney's
fees to other law firms in circumstances in which M&N has been
denied payments. We take up M&N's allegations concerning
differential treatment of law firms below, in our discussion of
its equal protection claims.
- 35 -
federal ethics laws does not implicate the agency's substantive
authority over the Social Security system and, hence, is not
"peculiarly within [the SSA's] expertise." Union of Concerned
Scientists, 954 F.3d at 18 (quoting Lincoln v. Vigil, 508 U.S.
182, 191 (1993)). Nor is the scope of the federal ethics laws "an
area so traditionally left to [SSA] discretion as to constitute an
exception to the normal rule of justiciability." Id.In addition, M&N asserts that the agency's refusal to
make direct payments to law firms for their salaried associates'
representation of SSA claimants improperly interferes with the
collection of the "reasonable fee" that, pursuant to statute, the
SSA must pay for services provided in connection with successful
benefits claims. See 42 U.S.C. § 406. We think it self-evident
that courts are well equipped to judge whether rules limiting to
whom attorney's fees are payable improperly deny the "reasonable
fee" mandated by § 406(a)(1). As with the ethics-related rule,
the payment mechanisms are collateral to the SSA's discretion to
manage the complex benefits system created by the Social Security
Act. See generally Schweiker v. Gray Panthers, 453 U.S. 34, 43
(1981) (noting "the exceptionally broad authority" conferred on
the SSA "to prescribe standards for applying certain sections of
the Act" (emphasis added)). We are thus persuaded that the
agency's rules on the permissible methods for paying authorized
- 36 -
fees also are subject to "the normal rule of justiciability."
Union of Concerned Scientists, 954 F.3d at 18.26
Accordingly, the district court erred in concluding that
the APA forecloses M&N's claim challenging certain of the SSA's
payment rules as arbitrary and capricious. We could, at this
juncture, simply remand the case to the district court for
consideration of that claim. However, the parties litigated the
rationality of the challenged rules on the merits in the context
of their cross-motions for summary judgment on M&N's
constitutional claims, and the parties have therefore developed
the record and presented their legal and factual arguments on that
issue. Accordingly, we think it appropriate to consider ourselves
whether the challenged rules survive arbitrary-and-capricious
review under the APA. Moreover, as explained below, doing so is
consistent with our obligation to avoid unnecessary constitutional
decisions.
26In Union of Concerned Scientists, we noted the need for a
"set of statutory or regulatory requirements to guide us in
assessing the propriety of an agency's procedures" apart from "the
reasoned decision-making standards of the APA
alone." 954 F.3d at 21. With Congress's objectives as reflected
in § 406(a)(1) -- to pay attorneys representing SSA claimants "a
reasonable fee" -- and in 18 U.S.C. §§ 203 and 205 -- barring
government employees from compensation and representation in cases
against the United States -- federal courts have ample basis and
guidance to evaluate the rules challenged here.
- 37 -
In turning to that evaluation, we begin by noting that,
notwithstanding the preference for judicial review of agency
action, "[t]he scope of review under the 'arbitrary and capricious'
standard is narrow[,] and a court is not to substitute its judgment
for that of the agency." Motor Vehicle Mfrs. Ass'n of U.S., Inc.
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).
Nonetheless, an agency rule ordinarily will not survive
if the agency has relied on factors which
Congress has not intended it to consider,
entirely failed to consider an important
aspect of the problem, offered an explanation
for its decision that runs counter to the
evidence before the agency, or is so
implausible that it could not be ascribed to
a difference in view or the product of agency
expertise.
Id.; see also Dep't of Homeland Sec. v. Regents of Univ. of Calif.,
140 S. Ct. 1891, 1905 (2020) (noting that the APA "requires
agencies to engage in 'reasoned decisionmaking'" (quoting Michigan
v. EPA, 576 U.S. 743, 750 (2015))). Pursuant to this "'highly
deferential'" standard of review, courts should uphold an agency
determination if it is "supported by any rational view of the
record." Atieh v. Riordan, 797 F.3d 135, 138 (1st Cir. 2015)
(quoting River Street Donuts, LLC v. Napolitano, 558 F.3d 11, 114
(1st Cir. 2009)). From that perspective, we turn to the two rules
we have identified.
- 38 -
b. Former Associates in Government Positions
On appeal, the SSA offers little justification for the
rule barring payments to attorneys whose fees were not approved
before their move to government employment.27 It cursorily asserts
that "[g]overnment-wide ethics statutes preclude SSA officers and
employees from representing claimants and receiving compensation
for such representation before the agency," citing 18 U.S.C.
§§ 203(a)(1) and 205(a)(2). Section 203(a) addresses the receipt
of compensation by government employees and states, in relevant
part, that an individual will be subject to penalties if he or she
(1) demands, seeks, receives, accepts, or
agrees to receive or accept any compensation
for any representational services, as agent or
attorney or otherwise, rendered or to be
rendered either personally or by another--
. . .
27 It appears that this prohibition is not explicitly set
forth in either the POMS or HALLEX manuals, except insofar as the
manuals specify that individuals must submit their own fee requests
and that payments may be made only to individuals. Rather, the
rule arises from the SSA's practice of requiring fee waivers for
new government employees with pending fee requests. In its brief
to this court, the SSA cited as support for the practice -- in
addition to the two ethics statutes discussed above -- two sections
of a regulation titled "Rules of conduct and standards of
responsibility for representatives." 20 C.F.R. § 404.1740. One
cited section, (b)(3)(iv), states, inter alia, that
representatives have a duty to "[o]nly withdraw representation at
a time and in a manner that does not disrupt the processing or
adjudication of a claim." The other section, (b)(8), requires
representatives to disclose to the agency when they "ha[ve] been
disqualified from participating in or appearing before any Federal
program or agency." Neither provision addresses the obligation to
forgo fees.
- 39 -
(B) at a time when such person is an
. . . employee . . . in any agency of the
United States.
18 U.S.C. § 203(a)(1) (emphasis added). Section 205 contains a
similar prohibition, but it covers the representation work itself
rather than compensation for such work. See 18 U.S.C. § 205(a)(2).
The SSA does not explain to us how a statute that by its
terms bars compensation to attorneys for "representational
services . . . rendered . . . at a time" when they are working for
the government supports its prohibition on fees for work completed
before that employment began. However, in 2015, in response to
M&N's inquiry about fees due for work performed by Wilson and
Dorsey, defendant Tara Collins relied on a 1998 opinion from the
federal Office of Legal Counsel ("OLC") to elaborate on why the
fees could not be paid. The opinion reports that the OLC has long
viewed § 203 to "prohibit[] an individual entering government
employment from maintaining a contingent interest in fees
recoverable in a proceeding involving the United States."
Application of 18 U.S.C. § 203 to Maintenance of Contingent
Interest in Expenses Recoverable in Litigation Against the United
States, 22 Op. O.L.C. 1, 2 (1998). Collins specifically invoked
a sentence contained in a footnote attached to that quoted
statement: "A rule against retaining a contingent interest in fees
reflects that a contingent fee covers the entire representation up
to the payment, the amount remains uncertain until then, and the
- 40 -
fee thus compensates, in part, for representational services
performed after the employee began working for the United States."
Id. at 2 n.2.
Even with that elaboration drawn from the record,
however, we find the SSA's reasoning to be inscrutable at best
and, given the information available to the agency, facially
irrational. Through the fee petition process, an attorney
"request[s] a fee for the services he or she actually provided."
HALLEX § I-1-2-53.A (emphasis added). Importantly, the
information required in a fee petition includes "[t]he dates
services began and ended." POMS § GN 03930.020.D.3; see also 20
C.F.R. § 404.1725(a)(1). The fee petition process itself thus
allows the agency to confirm that the work underlying the fee
request was performed before an attorney's government employment
began. Fees awarded through this process are not properly labeled
"contingent." As we have described, the statute governing SSA
representation, § 406, mandates "a reasonable fee" for the services
performed by an attorney who successfully represents a claimant,
and fees also may be requested via petition if no benefits are
awarded. Hence, even though the exact amount remains within the
SSA's discretion, based on the factors prescribed in its rules,
the petition procedures set forth a fee-for-service model that
easily permits the SSA to determine a reasonable fee without
running afoul of the ethics requirements -- and which § 406(a)
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requires it to do for successful representation. See generally
Weisbrod v. Sullivan, 875 F.2d 526, 528 (5th Cir. 1989) (noting
that both the governing statute, 42 U.S.C. § 406, and the
regulation listing the factors for determining an award, 20 C.F.R.
§ 404.1725(b), "appear to be aimed at ensuring that an attorney
receives a fair fee for the work he or she performs while at the
same time not unduly dissipating the claimant's benefits"); see
also Gisbrecht, 535 U.S. at 805 (similar).
In fact, the SSA framework expressly references
contingency fees as a distinct payment arrangement, recognizing
that a "representative and claimant [may] enter[] into a
contingency contract." HALLEX § I-1-2-57.A.6; see also POMS § GN
03930.020.A.28 When such an agreement is made, and the agency
At least in the past, contingency-fee contracts were widely
28
used in SSA benefits cases. In Gisbrecht, the Supreme Court cited
a 1988 SSA report for its observation that "[s]uch contracts are
the most common fee arrangement between attorneys and Social
Security claimants." 535 U.S. at 800; see also id. at 804("Traditionally and today, 'the marketplace for Social Security
representation operates largely on a contingency fee basis.'"
(citing the same SSA report)). Although Gisbrecht was reporting
on agreements for representation in court, Congress anticipated
that the "streamlined process" of fee agreements -- adopted later
for administrative representation -- would be similarly popular in
that context and "generally replace the fee petition process."
Power v. Barnhart, 292 F.3d 781, 786 (D.C. Cir. 2002) (quoting
H.R. Conf. Rep. No. 101-964, at 933 (1990)) (emphasis omitted).
More recent SSA data shows that fee petitions did decrease in
popularity, with the percentage of fees paid from withheld benefits
pursuant to that process steadily declining from about 30 percent
in 1995 to roughly 12 percent in 2000. See SSA's Processing of
Attorney Fees: Hearing Before Subcomm. on Social Security of the
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denies the benefits claim, the SSA will not authorize a "fee for
services if the representative petitions." HALLEX § I-1-2-57.A.6
(emphasis added); see also id. § I-1-2-51 (stating that, "[u]nder
the fee petition process, each representative who wants to charge
and collect a fee for his or her services, must file a fee petition"
(emphasis added)); POMS § GN 03930.020.A (stating that "any
representative may request a fee for the services he or she
actually provided . . . using the fee petition process," except,
inter alia, where the representative had a contingency fee contract
and benefits were denied (emphasis added)).
In other words, the SSA itself views contingency fees
and the fees paid via the petition process "for the services . . .
actually provided" as two different forms of payment.29 For the
H. Comm. on Ways & Means, 107th Cong. (May 17, 2001). The record
does not reveal the current popularity of fee agreements.
29 The SSA's rules also contemplate other fee arrangements.
For example, the agency recognizes that a representative and
claimant may agree to rely on "the fee agreement process, if SSA
favorably decides the claim at a certain level," but will rely on
"the fee petition process, if the claim progresses beyond the level
specified in the agreement." POMS § GN 03920.001.C.2 ("Two-tiered
Arrangement"). The SSA similarly recognizes that the claimant and
representative may sign a non-contingent fee agreement, in which
the claimant's lack of success would mean that the representative
could not obtain a fee based on the statutory provision regarding
agreements. See 42 U.S.C. § 406(a)(2). However, if the agreement
was not "a contingency fee contract," the representative could
nonetheless submit a fee petition after his or her representation
ends. See POMS § GN 03930.020.A; HALLEX § I-1-2-51; id. § I-1-2-
53.A; id. § I-1-2-57.A.6 (Exception).
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latter, fee payments would violate § 203 only if they were for
"representational services performed after the employee began
working for the United States." 22 Op. O.L.C. at 2 n.2. We thus
see no justification for rejecting fees for services that the SSA
can readily determine were completed before the associate
attorneys changed employers.
It may be that the SSA is reading the temporal element
of § 203 -- referencing the time when a person is a government
employee -- to apply not only to when "representational services"
were "rendered," but also to when the employee receives
compensation for those services. But the SSA offers no support
for that reading of the statute, and the OLC legal guidance -- in
the opinion invoked by the SSA itself -- is unequivocally to the
contrary. In discussing § 203, the OLC stated that the provision
applies when an employee "receive[s] something of value in exchange
for the representational services performed on the client's behalf
during the officer's or employee's government tenure." 22 Op.
O.L.C. at 3 (emphasis omitted and added). In addition, in its
examination of the statute's legislative history and underlying
policies, the OLC noted that § 203 -- enacted in 1962 when Congress
revised various ethics provisions -- "differed from its
predecessor . . . principally in targeting payments for
representational services performed on behalf of a client during
an employee's government tenure (without regard for the timing of
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the payment), rather than targeting payments received during an
employee's government tenure (without regard for the timing of the
services)." Id. at 4-5 (emphasis added). The OLC noted that § 203
"corrected one of" the "perceived defects" in the predecessor
provision -- "namely, its coverage of payments for services wholly
completed prior to the employee's entry into government service."
Id. at 7 & n.7.
The OLC opinion also cautioned that, because a violation
of § 203 can trigger criminal penalties, the statute should not be
construed to extend more broadly "than that clearly warranted by
the text." Id. at 4 (quoting Crandon v. United States, 494 U.S.
152, 160 (1990)); see also id. at 9 (stating that "the possibility
of administrative difficulties cannot compel an interpretation of
§ 203 that would criminalize more conduct than that which the
statutory text clearly reaches"). That well-known principle of
statutory construction further undermines the agency's reliance on
§ 203 to deny attorney's fees for representative services
performed before attorneys begin working for the government.
In sum, when fees sought through the SSA's petition
process would not be for representation services that "remained to
be performed after the [attorneys'] entry into government
service," § 203 presents no barrier to the payments. Id. at 7.
The same is true, of course, for fees payable under fee agreements
when the representation is both complete and successful, and only
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the agency's approval of the fee is pending. See POMS § GN
03910.060.B (noting that representation ends, inter alia, when the
SSA "complete[s] all actions on a pending claim, matter, or issue
and no appeal is filed within the appeal period"). As we
understand the current rule regarding fee agreements, however, the
SSA does not prevent firms with procedures like M&N's from
obtaining the full agreement amount regardless of the stage of the
proceedings. That is, if an associate departing for government
work waives his or her fees, the co-representatives would become
eligible to receive the full amount specified in the agreement
from the claimant's past-due benefits even if the departing
attorney "withdrew from the case before [the] SSA favorably decided
the claim." HALLEX § I-1-2-12.B.2. As noted above, an M&N partner
is always a co-representative for SSA cases taken by the firm.
We therefore conclude that the SSA's practice of denying
fees for representation work that was completed before attorneys
began government service is arbitrary for fees requested via the
petition process and, to the extent applicable, for fees specified
in an agreement. Moreover, where the representation is successful,
denying such fees is inconsistent with § 406's directive to pay
the claimant's attorney a reasonable fee. Nor has the SSA offered
any rationale for refusing to pay such fees directly from
claimants' past-due benefits, subject to the statutory limit on
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the amounts payable and consistent with otherwise applicable
rules.30
c. The Payment Process
The SSA insists that fee payments processed by the agency
from claimants' withheld benefits may be directed only to
individual attorneys. As it did in the district court, the SSA
defends this rule by invoking its reasons for limiting
representative status to individuals. The SSA asserts that,
because only representatives are entitled to attorney's fees, its
reasonable choice to limit representation to individuals
necessarily makes reasonable the rules foreclosing payments
directly to M&N. In considering the rationality of the rule, the
district court similarly focused on the agency's choice to limit
In its brief, the SSA suggests a variety of measures that
30
law firms could adopt to avoid fee-collection problems when
associates plan to leave the firm for government work, including
requesting that the departing attorneys provide sufficient notice
to "wrap up their cases and fee requests prior to departure" and
arrange start dates for their new jobs "that substantially
prejudice[] neither employer." However, departing associates do
not control the timing of the SSA's decision-making and, as noted
above, M&N alleges that the wait for SSA fee authorizations can be
lengthy. Hence, the efficacy of these proposed measures would, at
best, be limited. The SSA's suggestion that M&N could assess its
departing associates the amount of attorney's fees that are
uncollectible because of their departures strikes us as both
inappropriate and impractical. In short, the SSA unreasonably
attempts to place the burden of its unsupportable practice on the
associate attorneys and their firms.
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representation to individuals.31 It credited the SSA's explanation
that "its regulatory scheme of recognizing individuals rather than
law firms is to enable the SSA to 'ensure quality, protect the
rights of claimants, and ensure that claimants have the information
they need to make sound decisions with respect to their benefits.'"
M&N II, 444 F. Supp. 3d at 327 (quoting Defs.' Cross-Mot. for Summ.
J. 37, No. 1:17-cv-00317-JJM-LDA, ECF No. 45 (filed May 30, 2019)).
The question before us, however, is not the
reasonableness of the limitation on who may represent claimants.
Rather, assuming the rationality of that limitation, we are asked
to decide whether the SSA's framework is nonetheless arbitrary in
refusing to apply in its payment rules the practical
reality -- which it recognizes for tax purposes -- that law firms
ordinarily are the ultimate recipients of fees paid to salaried
associates. None of the reasons offered by the SSA for insisting
on representation by individuals supports that inconsistency. We
fail to see, for example, how a fees payment made directly to law
firms -- but linked to the representation provided by individual
attorneys -- would conflict with the agency's choice to allow only
individuals to serve as representatives.
31 The district court's discussion of the rule's asserted
arbitrariness was in the context of M&N's substantive due process
claim because the court had dismissed the APA claim. See M&N II,
444 F. Supp. 3d at 327-28.
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The SSA maintains that its payment rules generally, and
any distinctions in how the rules affect attorneys with varying
employment circumstances, "have been based in practical
realities," and reflect the agency's responsibility "to apply its
'good judgment'" in distributing the 25 percent of a claimant's
past-due benefits that it may withhold for the direct payment of
fees. Appellee's Br. at 29 (quoting Culbertson v. Berryhill, 139
S. Ct. 517, 523 (2019)). But the agency does not explain what
"practical realities" justify an approach that demonstrably
burdens the entities that supply the individual representatives.
Indeed, a 2015 report prepared by the SSA's Office of the Inspector
General stated that about 60 percent of the agency's direct
representative fee payments in 2013 "related to affiliated firm
income." Office of the Inspector General, Agency Payments to
Claimant Representatives (A-05-15-15017), 4 (July 2015). The
"practical realities" would thus seem to weigh toward easing the
participation of an important source of support for SSA
claimants.32
32 The distinction between allowing entities to serve as
representatives and allowing fees payments to law firms was
recognized in a congressional response to a 2008 proposed
rulemaking in which the SSA considered allowing entities to
represent claimants. The statement, made by the chair of the House
Subcommittee on Social Security on the committee's behalf, was
quoted in the SSA's Cross-Motion for Summary Judgment in this case:
While it may be more efficient in some cases
to pay the fee directly to an entity that is
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The intricacy of the SSA's framework for representation
of claimants and attorney's fees cannot justify refusing to
alleviate the payment barriers, which affect both attorneys who
change firms and attorneys who move to government employment --
transitions that regularly occur. Indeed, because the specific
payment procedures are set forth in the POMS and HALLEX manuals,
see, e.g., POMS § GN 03910.042.A.3 (stating that, even when
"representative[s] [are] associated with [an] entity," the SSA
"pays fees directly only to individual representatives"); HALLEX
§ I-1-2-3.A (similar), the payment mechanics can be -- and have
been -- revised internally and informally. See, e.g., supra note
11. Moreover, as described above, the SSA already has registration
procedures in place to identify when a representative is associated
with a law firm.
Neither § 406 nor the regulations promulgated under it
prevent the SSA from making direct payments from past-due benefits
in a way that ensures the compensation reaches the entities that
the employer of a representative eligible for
direct payment, actually authorizing that
entity to act as an individual's
representative would weaken the chain of
accountability and create more problems than
it would solve.
Defs.' Cross-Mot. for Summ. J. 34, No. 1:17-cv-00317-JJM-LDA, ECF
No. 45 (filed May 30, 2019) (quoting Michael R. McNulty, Comment
on Revisions to Rules on Representation of Parties, Docket No.
SSA-2007-0068 (Nov. 6, 2008)) (emphasis omitted and added).
- 50 -
are, in fact, financing the representation of claimants. The
agency's position that only "representatives" may be paid, and
that representatives must be individuals, does not foreclose
mechanisms in which the fees remitted to individual attorneys would
reliably and efficiently reach the law firms at whose expense the
compensated services were performed. Indeed, a firm's inability
to access its associates' share of fees undermines the statutory
objective to ensure "a reasonable fee" for the representation
services provided to SSA claimants. 42 U.S.C. § 406(a)(1).33
It is not our role to determine what those mechanisms
should be. However, we can see multiple ways of adjusting the
current approach without disturbing the agency's judgment that
only individuals should represent claimants. As noted above, the
SSA already expects law firms to disclose an attorney-
representative's association with a firm. In such cases, the
associate-representative could advise the SSA that any fees
To be clear, the problem is not only the refusal to pay
33
fees at all -- in the context of associates moving to government
employment -- but also the agency's arbitrary denial of payments
from past-due benefits for work the agency knows was financed by
a law firm. The latter occurs when, for example, an associate
withdraws from an ongoing case being handled by his or her firm,
moves to another law firm, and submits a petition for the
representation services provided for a claimant at the behest (and
expense) of the original firm. At present, fees for that withdrawn
attorney's work may be obtained only from the claimant, see POMS
§ GN 03920.017.A -- a route that typically is unproductive, see
supra note 10.
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authorized from the claimant's past-due benefits are jointly
payable to the firm. In other words, the SSA could simply honor
the limited power of attorney that M&N and other firms require
their associates to execute, in which the associates relinquish
payments made to them for representing SSA claimants. This
approach could not only avoid issues when associates move to
government jobs, but it also could clear up the confusion when
attorneys change firms. Payments could be steered to the law firms
where the associates were employed when they performed the
representation services. Alternatively, the SSA could treat the
services performed by an associate representative as subsidiary to
the work of a designated "main representative" and transmit all
fees for the co-representation to the main representative.
In short, we conclude that the SSA's current approach,
insisting on the administrative transfer of funds from past-due
benefits exclusively to individuals, without regard for who bore
the cost of the representation, is not supported by "any rational
view of the record." Atieh, 797 F.3d at 138. That disregard
frustrates, rather than advances, the statutory mandate to provide
a reasonable fee for the representation of Social Security
disability claimants.
Accordingly, having found arbitrary the rule disallowing
direct fee payments to law firms on behalf of their associates, we
hold that the SSA must revise its payment procedures consistent
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with our discussion above. That is, going forward, the agency
must provide a reasonably reliable means for law firms to obtain
directly from claimants' past-due benefits the fees payments that,
pursuant to existing SSA and federal tax rules, would be recognized
as income to the firms. As explained infra, the SSA also must
take appropriate action with respect to the specific fees that M&N
seeks in its complaint.
IV.
We now briefly turn to M&N's challenges to the district
court's rejection of its constitutional claims, which alleged
violations of its rights to equal protection and substantive and
procedural due process. As a remedy for each of these claims, M&N
sought essentially the same three declaratory judgments: (1) the
SSA's rules and regulations unconstitutionally deprive the firm of
its property and are therefore unenforceable; (2) the SSA must
disburse to M&N attorney's fees for the work of its associates
when they leave the firm; and (3) the attorney's fees generated by
Wilson, Dorsey, and Posey while they worked at M&N are the property
of the firm.
We find it unnecessary and, indeed, inappropriate for us
to reach these claims. Under the doctrine of constitutional
avoidance, "federal courts are not to reach constitutional issues
where alternative grounds for resolution are available." Vaquería
Tres Monjitas, Inc. v. Pagan, 748 F.3d 21, 26 (1st Cir. 2014)
- 53 -
(quoting ACLU v. U.S. Conference of Catholic Bishops, 705 F.3d 44,
52 (1st Cir. 2013)); see also Nw. Austin Mun. Util. Dist. No. One
v. Holder, 557 U.S. 193, 205 (2009) (stating that the Court
ordinarily "will not decide a constitutional question if there is
some other ground upon which to dispose of the case" (quoting
Escambia Cty. v. McMillan, 466 U.S. 48, 51 (1984) (per curiam)).
We are satisfied that the relief available under the APA adequately
addresses M&N's remedial requests and that, hence, resolving the
constitutional questions would be inconsistent with our obligation
to avoid doing so where a non-constitutional disposition is
possible.
We do offer, however, two observations concerning M&N's
constitutional claims. First, with respect to equal protection,
the record provides no basis for viewing any payment
inconsistencies among law firms as other than bureaucratic errors.
Second, with respect to the substantive due process claim, the
Supreme Court has advised restraint in characterizing governmental
action as "arbitrary in a constitutional sense." Collins v. City
of Harker Heights, 503 U.S. 115, 128 (1992); see also id. at 125(noting the Court's "reluctan[ce] to expand the concept of
substantive due process"); Cty. of Sacramento v. Lewis, 523 U.S.
833, 846 (1998) ("[O]nly the most egregious official conduct can
be said to be 'arbitrary in the constitutional sense . . . .'"
(quoting Collins, 503 U.S. at 129)). Hence, our assessment that
- 54 -
the SSA acted arbitrarily within the context of the APA would not
necessarily lead to such a determination under the Constitution.
V.
In sum, we conclude that the SSA's rule barring payments
to attorneys for work completed before they enter government
service is both arbitrary and, in some circumstances, in conflict
with the statutory mandate to pay "a reasonable fee" for successful
representation of SSA claimants. 42 U.S.C. § 406(a)(1). Hence,
that rule must be eliminated. In addition, the SSA must adjust
its rules, as described above, to ensure that the law firms that
employ salaried associates to represent SSA claimants may receive
direct payment of the attorney's fees to which the firms'
associates are entitled for representation performed while
employed by those law firms. See id. § 406(a)(2), (4).
Consistent with these holdings, the SSA should release
any fees currently held in escrow by M&N that would have been
properly obtained by the firm if the required changes described
above had been in effect when the payments were transmitted. In
addition, upon resubmission by M&N, the SSA must revisit fee
requests that it denied for representation services that were
completed by Wilson, Dorsey, and Posey before they began government
employment and that were denied based on 18 U.S.C. §§ 203 and 205.
We further conclude that, given the availability of a
remedy under the APA, M&N is not entitled to mandamus relief in
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this case. Finally, because M&N has achieved under the APA
substantially the remedy that it sought in this action, and to
which it is entitled, we do not address its constitutional claims
other than to vacate the grant of summary judgment for the SSA on
those claims.
Given the intricacy of the SSA's fees framework, we
recognize that our directives may leave uncertainty concerning
some aspects of the required changes in the agency's rules or the
implementation of the prescribed actions. Accordingly, we remand
the case to the district court for resolution promptly of any such
lingering questions, with appropriate input from both parties.
The judgment of the district court is therefore affirmed
in part (Count IV: mandamus and Count IX: APA notice-and-comment)
and vacated in part (Counts V, VI, VII: the constitutional claims
and Count VIII: APA arbitrary-and-capricious). Judgment is
granted for M&N on Count VIII, and the case is remanded for further
proceedings, if needed. So ordered. Costs to appellant.
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