Clark v. McMahon

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GAIL C. CLARK, 
Plaintiff-Appellant, No. 07-35056
v.
 D.C. No.
CV-04-05237-FDB
MICHAEL J. ASTRUE, COMMISSIONER,
SOCIAL SECURITY ADMINISTRATION, OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Washington
Franklin D. Burgess, District Judge, Presiding
Submitted April 11, 2008*
Seattle, Washington
Filed June 25, 2008
Before: Carlos T. Bea and Milan D. Smith, Jr.,
Circuit Judges, and Joseph M. Hood,**
Senior District Judge.
Opinion by Judge Bea
*The panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P.34(a)(2).
**The Honorable Joseph M. Hood, Senior United States District Judge
for the Eastern District of Kentucky, sitting by designation.
7409
7412 CLARK v. ASTRUE
COUNSEL
Ralph Wilborn, Ralph Wilborn and Etta L. Wilborn, P.C.,
West Linn, Oregon; Elie Halpern, Halpern & Oliver, PLLC,
Olympia, Washington, for the plaintiff-appellant.
Jeffrey C. Sullivan, United States Attorney; Brian C. Kipnis,
Assistant United States Attorney; David Morado, Regional
Chief Counsel, David M. Blume, Assistant Regional Counsel,
Social Security Administration Office of General Counsel,
Seattle, Washington, for the defendant-appellee.
OPINION
BEA, Circuit Judge:
Social Security claimant Gail Clark appeals the district
court’s order denying, in part, her attorney’s request for attor-
ney’s fees pursuant to 42 U.S.C. § 406(b). In its decision, the
district court concluded § 406(b) limits the combined amount
CLARK v. ASTRUE 7413
of attorney’s fees that can be awarded under both § 406(a)
(which governs the award of attorney’s fees for representation
before the Social Security Administration) and § 406(b)
(which governs the award of attorney’s fees for representation
of Social Security claimants in federal district court) to 25%
of the claimant’s past-due benefits. Because the plain text of
§ 406(b) limits only the amount of attorney’s fees awarded
under § 406(b)—not the combined fees awarded under both
§ 406(a) and § 406(b)—we reverse the district court’s award
of attorney’s fees and remand for reconsideration in accor-
dance with this opinion.
I. Facts and Procedural History
On April 20, 1999, Clark filed an application for disability
insurance benefits with the Social Security Administration
(“the Administration”), pursuant to 42 U.S.C. §§ 401-34,
alleging she was disabled due to depression, back weakness,
fatigue, aches in her hips and knees, and chronic inflamma-
tion. After three hearings before the Administration and two
appeals to federal district court, an Administrative Law Judge
(“ALJ”) issued a decision on March 8, 2006, finding Clark
had been disabled since July 15, 1997, and was entitled to dis-
ability benefits starting on that date. On May 29, 2006, the
Administration issued a Notice of Awards to Clark, informing
her that her past-due benefits totaled $72,068.
Throughout her three hearings before the Administration,
Clark was represented by attorney Ann Cook. Pursuant to a
written agreement, Clark agreed to pay Ms. Cook the lesser
of $5,300 or twenty-five percent (25%) of past-due disability
benefits awarded to Clark. On March 8, 2006, the ALJ in
Clark’s final administrative hearing approved the agreement,
pursuant to 42 U.S.C. § 406(a). On May 9, 2006, the Admin-
istration paid $5,300 to Ms. Cook out of Clark’s past-due dis-
ability benefits.
7414 CLARK v. ASTRUE
Attorney Elie Halpern represented Clark during her two
appeals to federal district court. Pursuant to a written fee
agreement, Clark agreed to pay Mr. Halpern a fee equal to
twenty-five percent (25%) of past-due benefits awarded to
Clark. On November 1, 2006, Mr. Halpern filed a motion in
district court seeking approval for the payment of attorney’s
fees under the fee agreement, as required by 42 U.S.C.
§ 406(b). The district court granted Mr. Halpern’s request
only in part. Relying on cases from the Fourth and Fifth Circuits,1
the district court concluded § 406(b) limits the combined
amount of attorney’s fees awarded under both § 406(a) and
§ 406(b). Accordingly, the district court deducted $5,300—
the amount previously awarded by the Administration to Ms.
Cook under § 406(a) for her representation of Clark in Clark’s
administrative hearings—from the amount payable to Mr.
Halpern. On December 11, 2006, the district court entered a
judgment and order awarding Mr. Halpern attorney’s fees
under § 406(b) in the net amount of $6,658.32.2 Clark timely
appealed.
II. Standard of Review
We review the amount of attorney’s fees awarded by the
district court pursuant to 42 U.S.C. § 406(b) for abuse of dis-
cretion. Allen v. Shalala, 48 F.3d 456, 457 (9th Cir. 1995),
abrogated on other grounds by Gisbrecht v. Barnhart, 535
U.S. 789 (2002). The district court abuses its discretion if it
does not apply the correct legal standard or rests its decision
1
Morris v. Soc. Sec. Admin., 689 F.2d 495 (4th Cir. 1982); Dawson v.
Finch, 425 F.2d 1192 (5th Cir. 1970).
2
The district court arrived at this figure as follows: $18,017 (25% of
Clark’s past-due benefits) minus $5,300 (amount awarded to Ms. Cook
under § 406(a)) minus $6,058.68 (amount previously awarded to Mr. Hal-
pern under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412,
for his representation of Clark in this matter). The district court’s
$6,058.68 deduction for the prior EAJA award is not at issue in this
appeal.
CLARK v. ASTRUE 7415
on a clearly erroneous finding of fact. Id. Interpretation of a
statute is a question of law we review de novo. Id.III. Analysis
A. Statutory Framework
Title II of the Social Security Act, 42 U.S.C. § 401 et seq.,
governs the award and collection of fees by attorneys repre-
senting claimants seeking old-age, survivor, or disability
insurance benefits. 42 U.S.C. § 406(a) governs the award and
collection of attorney’s fees for the representation of Social
Security claimants in proceedings before the Administration.
42 U.S.C. § 406(b) governs the award and collection of fees
by attorneys for the representation of claimants in court.
1. 42 U.S.C. § 406(a)
42 U.S.C. § 406(a) provides two methods by which a
Social Security claimant’s attorney may obtain fees for the
representation of the claimant before the Administration: the
“fee petition process” and the “fee agreement process.”
The “fee petition process” is governed by § 406(a)(1).
When the Administration makes a determination favorable to
the claimant, § 406(a)(1) authorizes the Administration to “fix
. . . a reasonable fee to compensate [the claimant’s] attorney
for the services performed by him in connection with such
claim.” 42 U.S.C. § 406(a)(1). Other than the requirement that
fees be “reasonable,” neither § 406(a)(1) nor the governing
regulations limit the amount that can be awarded under the fee
petition process. Under 20 C.F.R. § 404.1725(b)(2), the
Administration “may authorize a fee even if no benefits are
payable.”
The “fee agreement process” is governed by § 406(a)(2).
Under this process, the attorney and the claimant must enter
into a written fee agreement and submit it to the Administra-
7416 CLARK v. ASTRUE
tion before the Administration issues a determination of the
claimant’s benefits. 42 U.S.C. § 406(a)(2)(A). If the Adminis-
tration issues a determination favorable to the claimant, the
Administration “shall approve” the fee agreement at the time
of the determination, provided the fee does not exceed the
lesser of 25% of the claimant’s past-due benefits or $5,300.3
Id.Here, Ms. Cook was awarded $5,300 for her representation
of Clark during Clark’s administrative hearings, pursuant to
the “fee agreement process” outlined in § 406(a)(2).
2. 42 U.S.C. § 406(b)
42 U.S.C. § 406(b) governs the fees an attorney may charge
a Social Security claimant for representation in court:
Whenever a court renders a judgment favorable to a
claimant under this subchapter who was represented
before the court by an attorney, the court may deter-
mine and allow as part of its judgment a reasonable
fee for such representation, not in excess of 25 per-
cent 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).
B. Circuit Split
The issue presented here is one of first impression in the
Ninth Circuit: Does 42 U.S.C. § 406(b) limit only the attor-
ney’s fees awarded under § 406(b) for representation before
the court to 25% of the claimant’s past-due benefits, or does
3
Pursuant to 42 U.S.C. § 406(a)(2)(A)(iii), the Commissioner of the
Social Security Administration increased the original $4,000 statutory
limit to $5,300, effective February 1, 2002. See Maximum Dollar Limit in
the Fee Agreement Process, 67 Fed. Reg. 2477 (Jan. 17, 2002).
CLARK v. ASTRUE 7417
§ 406(b) limit the combined total of attorney’s fees awarded
under both § 406(a) and § 406(b) to 25% of past-due bene-
fits? Other circuits that have addressed this issue have reached
different results. Based on the plain text of the statute, the
Sixth and Tenth Circuits have held § 406(b)’s cap on attor-
ney’s fees applies only to fees awarded under § 406(b), and
does not limit the combined fees awarded under both § 406(a)
and § 406(b). Wrenn ex rel. Wrenn v. Astrue, 525 F.3d 931,
936 (10th Cir. 2008); Horenstein v. Sec’y of Health & Human
Servs., 35 F.3d 261, 262 (6th Cir. 1994) (en banc), overruling
Webb v. Richardson, 472 F.2d 529 (6th Cir. 1972). Based pri-
marily on legislative history, however, the Fourth and Fifth
Circuits have held § 406(b) limits the combined attorney’s
fees awarded under both § 406(a) and § 406(b) to 25% of the
claimant’s past-due benefits. Morris v. Social Sec. Admin.,
689 F.2d 495, 497-98 (4th Cir. 1982); Dawson v. Finch, 425
F.2d 1192, 1195 (5th Cir. 1970).
Because the plain text of § 406(b) limits only the award of
attorney’s fees for representation of a Social Security claimant
before the district court, we follow the Sixth and Tenth Cir-
cuits, and hold the district court erred in concluding § 406(b)
limits the total amount of attorney’s fees awarded under both
§ 406(a) and § 406(b).
C. The Statutory Text
Section 406(a) grants the Social Security Administration
exclusive jurisdiction to award attorney’s fees for representa-
tion of a Social Security claimant in proceedings before the
Administration. Similarly, § 406(b) grants federal courts
exclusive jurisdiction to award attorney’s fees for representa-
tion of the claimant in court. See MacDonald v. Weinberger,
512 F.2d 144, 146 (9th Cir. 1975).4
4
“Under 42 U.S.C. § 406(b)(1), a District Court may award a reasonable
fee to an attorney for representing a Social Security claimant before the
court. The court has no authority to award an attorney’s fee for representa-
tion of a claimant before the Secretary, that power being granted by 42
U.S.C. § 406(a) to the Secretary alone.”
7418 CLARK v. ASTRUE
This exclusive grant of jurisdiction is mandated by the text
of § 406(b), which states:
Whenever a court renders a judgment favorable to a
claimant under this subchapter who was represented
before the court by an attorney, the court may deter-
mine and allow as part of its judgment a reasonable
fee for such representation, not in excess of 25 per-
cent of the total of the past-due benefits to which the
claimant is entitled. . . .
42 U.S.C. § 406(b)(1) (emphases added). The statute autho-
rizes the court to award a reasonable fee “for such representa-
tion.” The phrase “such representation” refers to
representation “before the court.” Thus, § 406(b) empowers
courts to award attorney’s fees based only on representation
before the court.
[1] Just as § 406(b) grants the district court authority to
award attorney’s fees only for representation before the court,
not before the Administration, Weinberger, 512 F.2d at 146,
§ 406(b) imposes a statutory limit on the award of attorney’s
fees only for representation before the court, not before the
Administration. Nowhere does § 406(b) purport to impose a
limit on the combined attorney’s fees awarded under both
§ 406(a) and § 406(b). To the contrary, the statute limits only
the award of attorney’s fees for “such representation”—i.e.,
representation before the court—to 25% of past-due benefits.
Attorney’s fees awards for representation before the Adminis-
tration are governed by the separate provisions of § 406(a).
[2] Moreover, as discussed supra in Section III.A.1,
§ 406(a)(1) authorizes the Administration to award attorney’s
fees (under the “fee petition process”) in any amount—
including amounts greater than 25% of past-due benefits—so
long as the fees are “reasonable.” If a fee award under
§ 406(a) can be greater than 25% of past-due benefits, it fol-
lows that the combined amount of fees awarded under both
CLARK v. ASTRUE 7419
§ 406(a) and § 406(b) must be capable of exceeding 25% of
past-due benefits. Thus, the district court’s conclusion (and
the Administration’s contention on appeal)—that the com-
bined amount of attorney’s fees awarded under § 406(a) and
§ 406(b) cannot exceed 25% of past-due benefits—is funda-
mentally in conflict with the express provisions not only of
§ 406(b), but also of § 406(a).
[3] Our interpretation of § 406(b) also accords with the
Commissioner of Social Security’s Hearings, Appeals, and
Litigation Manual (“HALLEX”), which states, in relevant
part:
Section 206(b)(1) [42 U.S.C. § 406(b)(1)] . . . of the
Act authorizes a Federal court, which renders a title
II and/or, after February 27, 2005, a title XVI judg-
ment favorable to the claimant who was represented
before the court by an attorney, to authorize a rea-
sonable fee for such representation. The attorney’s
fee may not exceed 25 percent of title II and/or title
XVI past-due benefits. This fee is in addition to the
fee, if any, the Social Security Administration (SSA)
authorizes for proceedings at the administrative
level. . . .
HALLEX I-1-2-71 (emphasis added).
We have previously held that HALLEX is strictly an inter-
nal Agency manual, with no binding legal effect on the
Administration or this court. Moore v. Apfel, 216 F.3d 864,
868-69 (9th Cir. 2000). Nevertheless, as an Agency manual,
HALLEX is “entitled to respect” under Skidmore v. Swift &
Co., 323 U.S. 134 (1944), to the extent that it has the “power
to persuade.” See Christensen v. Harris County, 529 U.S. 576,
587 (2000). For the reasons discussed supra, we are per-
suaded by the interpretation of § 406(b) put forth in HALLEX
—i.e., that an award of attorney’s fees under § 406(b) is sepa-
7420 CLARK v. ASTRUE
rate from, and in addition to, any fees awarded by the Admin-
istration under § 406(a).
D. Legislative History
[4] Because the statutory text of § 406(b) is clear, we need
not delve into legislative history to make our decision. See
Rubin v. United States, 449 U.S. 424, 430 (1981) (“When we
find the terms of a statute unambiguous, judicial inquiry is
complete, except in rare and exceptional circumstances.”)
(citation and internal quotation marks omitted). Further, we
find unconvincing the legislative history upon which the
Fourth and Fifth Circuits relied in holding § 406(b) limits the
combined total of attorney’s fees awarded under both § 406(a)
and § 406(b) to 25% of past-due benefits.
In Dawson v. Finch, the Fifth Circuit noted that the 1965
amendment adding § 406(b) to the Social Security Act was
enacted, in part, to prohibit attorneys from charging Social
Security claimants inordinately large fees:
“Another problem that has arisen is that attorneys
have on occasion charged what appeared to be inor-
dinately large fees for representing claimants in Fed-
eral district court actions arising under the social
security program. Usually, these inordinately large
fees result from a contingent fee arrangement under
which the attorney is entitled to a percentage (fre-
quently one-third to one-half of the accrued bene-
fits).”
Dawson, 425 F.2d at 1194 (quoting Hearing on H.R. 6675
Before the S. Comm. on Fin., 89th Cong., 1st Sess. 513 (1965)
(supplemental report submitted by the Dep’t of Health, Educ.,
and Welfare)). Based largely on this expression of congressio-
nal intent, the Fifth Circuit concluded in Dawson: “We are
fully convinced that 42 U.S.C.A. 406 precludes the aggregate
allowance of attorney’s fees [under § 406(a) and § 406(b)]
CLARK v. ASTRUE 7421
greater than twenty-five percent of the past due benefits
received by the claimant.” Id. at 1195.
The Fifth Circuit’s conclusion, however, is not supported
by the legislative history upon which the court relied. In the
testimony quoted above, the Department of Health, Educa-
tion, and Welfare expressed its disapproval of inordinately
large fees for representation “of claimants in Federal district
court actions[.]” Id. at 1194 (emphasis added). Accordingly,
Congress passed § 406(b), which imposed a limit on attor-
ney’s fees for representation “before the court.” 42 U.S.C.
§ 406(b). Nowhere did Congress (or even a congressional
committee) express a desire to limit the aggregate fees
awarded both for representation of a claimant in court and for
representation of the claimant before the Administration.
In Morris v. Social Security Administration, 689 F.2d 495(4th Cir. 1982), the Fourth Circuit also relied on the legisla-
tive history quoted above in holding that 42 U.S.C. § 406 pro-
hibits a combined award of fees, for representation before
both the Administration and before the court, in excess of
25% of the claimant’s past-due benefits. In an attempt to bol-
ster its legislative history-based analysis, the Fourth Circuit in
Morris also analyzed Congress’s 1968 amendment to 42
U.S.C. § 406(a).5 The court interpreted the amendment as pro-
5
The 1968 amendment added the following paragraph to 42 U.S.C.
§ 406(a):
Whenever the Secretary, in any claim before him for benefits
under this title, makes a determination favorable to the claimant,
he shall, if the claimant was represented by an attorney in con-
nection with such claim, fix (in accordance with the regulations
prescribed pursuant to the preceding sentence) a reasonable fee
to compensate such attorney for the services performed by him
in connection with such claim. If as a result of such determina-
tion, such claimant is entitled to past-due benefits under this title,
the Secretary shall, notwithstanding section 205(i), certify for
payment (out of such past-due benefits) to such attorney an
amount equal to whichever of the following is the smaller: (A) 25
7422 CLARK v. ASTRUE
hibiting the Secretary of the Social Security Administration
from authorizing an award of attorney’s fees under § 406(a)
(for representation of a claimant before the Administration) in
excess of 25% of past-due benefits: “[A]fter the 1968 amend-
ment, neither the Secretary nor the district court was autho-
rized to approve an attorney’s fee in excess of twenty-five
percent of the successful claimant’s past-due benefits.” Mor-
ris, 689 F.2d at 497. Based on this interpretation of the
amendment, the court further reasoned the “obvious intent of
Congress” was to limit the total fees that could be awarded
under § 406(a) and § 406(b) to 25% of past-due benefits. Id.
at 498.
The 1968 amendment, however, did not prohibit the
Administration from authorizing attorney’s fees under
§ 406(a) in excess of twenty-five percent of past-due benefits.
Instead, the amendment added a new provision that allowed
some or all of an attorney’s fees to be paid directly to the
attorney from the claimant’s past-due benefits. This provision,
which governs only the logistics of an attorney receiving pay-
ment for his services, was added “to encourage effective legal
representation of claimants by insuring lawyers that they will
receive reasonable fees directly through certification by the
Secretary.” Dawson, 425 F.2d at 1195. The amended provi-
sion does not limit the total amount of attorney’s fees the
Administration may authorize under § 406(a):
Under 406(a), the Secretary first makes a determina-
tion of a “reasonable” fee to compensate the attor-
ney. In addition to this, the Secretary is required to
per centum of the total amount of such past-due benefits, (B) the
amount of the attorney’s fee so fixed, or (C) the amount agreed
upon between the claimant and such attorney as the fee for such
attorney’s services.
Soc. Sec. Amendments of 1967, Pub. L. 90-248, tit. I, § 173, 81 Stat. 821,
877 (1968) (emphasis added).
CLARK v. ASTRUE 7423
withhold up to 25% of the total amount of past-due
benefits and pay that amount directly to the attorney.
The two calculations are independent of one another.
The attorney is free to then attempt to collect the dif-
ference between the 25% paid directly to him and
the “reasonable” amount authorized by the Secretary.6
Guadamuz v. Bowen, 859 F.2d 762, 769 n.11 (9th Cir. 1988).
The correct interpretation of the 1968 amendment—i.e., the
amendment left untouched the Administration’s authority to
award attorney’s fees under § 406(a)(1) in excess of 25% of
past-due benefits—does not support the Fourth Circuit’s hold-
ing in Morris; it instead supports the holding we make today.
While amending § 406(a), Congress chose not to impose a
categorical ceiling on the Administration’s authority to award
attorney’s fees for representation before the Administration.
As discussed supra in Section III.C, if a fee award under
§ 406(a) can be greater than 25% of past-due benefits, it fol-
lows that the combined amount of fees awarded under both
§ 406(a) and § 406(b) must be capable of exceeding 25% of
past-due benefits.
IV. Conclusion
[5] We hold that the plain text of 42 U.S.C. § 406(b) limits
only the amount of attorney’s fees awarded under § 406(b),
6
The payment certification process for attorneys representing claimants
before the Administration (which has been modified slightly since it was
added to the Social Security Act in the 1968 amendment) is currently gov-
erned by 42 U.S.C. § 406(a)(4). Under § 406(a)(4), if a claimant repre-
sented by an attorney is entitled to past-due benefits, the Administration
shall:
certify for payment out of such past-due benefits . . . to such
attorney an amount equal to so much of the maximum fee as does
not exceed 25 percent of such past-due benefits. . . .
42 U.S.C. § 406(a)(4).
7424 CLARK v. ASTRUE
not the combined fees awarded under § 406(a) and § 406(b),
to 25% of the claimant’s past-due benefits. Accordingly, we
reverse the district court’s award of attorney’s fees and
remand for a renewed exercise of the district court’s discre-
tion in accordance with this opinion.
REVERSED AND REMANDED.