United States District Court, E.D. Michigan, Southern Division
Honorable Sean F. Cox
REPORT AND RECOMMENDATION TO GRANT PETITIONER'S
APPLICATION FOR SECTION 406(b) ATTORNEY FEES [ECF NO.
ELIZABETH A. STAFFORD United States Magistrate Judge
Cohen, P.L.C., counsel for Plaintiff Jeffrey Szostek, seeks
an award of $4, 987.50 for attorney fees under 42 U.S.C.
§ 406(b) of the Social Security Act. [ECF No. 20]. The
requested amount represents 19.95 hours of work expended by
Miller Cohen on Szostek's behalf at an hourly rate of
$250.00. The amount requested is well below the 25% of past
due benefits, or $41, 735.00, which Szostek agreed to pay
Miller Cohen in their fee agreement, and which the Social
Security Administration withheld from Szosteks's awarded
benefits to account for any approved attorney fees.[ECF No.
20-4; ECF No. 20-2, PageID 957]. The Commissioner does not
object to an award in the amount Miller Cohen requests. [ECF
No. 20]. The Court RECOMMENDS that Miller
Cohen's motion be GRANTED,
notwithstanding its failure to apply for attorney fees
pursuant the Equal Access to Justice Act (EAJA).
Social Security cases, attorney's fees may be awarded
under Section 406(b)(1)(A) of the Social Security Act and the
EAJA (28 U.S.C. § 2412(d)). Minor v. Commissioner of
Social Security, 826 F.3d 878, 880 (6th Cir.
2016). Section 406(b) allows an attorney fee of up
to 25% of past due benefits pursuant to contingency-fee
agreements, but the amount must be tested for reasonableness.
Gisbrecht v. Barnhart, 535 U.S. 789, 808-09 (2002).
There is a rebuttable presumption that a contingency-fee
agreement with a cap of 25% is reasonable, and such an award
should be reduced only when there is evidence of
ineffectiveness or when an attorney would receive an
inordinate unwarranted windfall. Lasley v. Comm'r of
Soc. Sec., 771 F.3d 308, 309 (6th Cir. 2014); Hayes
v. Sec'y of Health & Human Servs., 923 F.2d 418,
421 (6th Cir. 1991). To avoid such windfalls, district courts
are expressly authorized to consider the attorney's hours
and standard rates in reviewing the reasonableness of
contingency fees. Gisbrecht, 535 U.S. at 808. It is
established in the Sixth Circuit that “a windfall can
never occur when, in a case where a contingent fee contract
exists, the hypothetical hourly rate determined by dividing
the number of hours worked for the claimant into the amount
of the fee permitted under the contract is less than twice
the standard rate for such work in the relevant
market.” Parish v. Comm'r of, Soc. Sec.,
2017 WL 3084371, at *2 (E.D. Mich. July 20, 2017) (quoting
Hayes, 923 F.2d at 422).
significant difference between Section 406(b) and EAJA
attorney fees is their source: “while fees awarded
under 42 U.S.C. § 406(b) are deducted from a
claimant's award of past-due Social Security benefits,
the United States must pay fees awarded under the EAJA out of
government funds.” Id. at 881. The EAJA
generally increases a successful Social Security
claimant's portion of past-due benefits because
“[f]ee awards may be made under both prescriptions, but
the claimant's attorney must ‘refun[d] to the
claimant the amount of the smaller fee.'”
Gisbrecht, 535 U.S. at 796 (quoting Act of Aug. 5,
1985, Pub.L. 99-80, § 3, 99 Stat. 186). See also
Drake v. Comm'r of Soc. Sec., 2016 WL 492704, at *1
(E.D. Mich. Feb. 9, 2016) (“[T]he EAJA Savings
Provision requires an attorney receiving two fee awards to
refund the smaller award to his or her client.”).
EAJA allows a maximum attorney fee of $125.00 per hour.
§ 2412(d)(2)(A)(ii). A motion for an award of EAJA fees
is due within 30 days of final judgment in the action, must
itemize “the actual time expended and the rate at which
fees and other expenses were computed, ” and must
“allege that the position of the United States was not
substantially justified.” § 2142(d)(1)(B). See
also Astrue v. Ratliff, 560 U.S. 586, 594 (2010). Here,
Miller Cohen alleged in the motion for summary judgment that
the Commissioner's decision was not substantially
justified, [ECF No. 11, PageID 859], yet it did not file a
motion for EAJA fees within 30 days of the final judgment
with the required itemizations. It states in the motion for
Section 406(b) attorney fees that it spent 19.95 hours on
this case in this Court, [ECF No. 20-5, PageID 980], which
would translate into an expected EAJA award of $2, 493.75 (at
$125.00 per hour). That amount would ordinarily be refunded
to Szostek if the Court granted Miller Cohen's motion for
Section 406(b) benefits. Gisbrecht, 535 U.S. at 796;
Drake, 2016 WL 492704, at *1.
have refused to award the full amount of the Section 406(b)
fees without affording the plaintiff the benefit of the EAJA
refund. See Allen v. Comm'r of Soc.
Sec., 2012 WL 1596661, at *5 (S.D.N.Y. Apr. 27, 2012),
report and recommendation adopted, 2013 WL 6331727
(S.D.N.Y. Dec. 5, 2013); Dickey v. Colvin, 2016 WL
7383870, at *4 (W.D. La. Nov. 29, 2016), report and
recommendation adopted, 2016 WL 7388399 (W.D. La. Dec.
20, 2016) (collecting cases). “To prevent plaintiffs
from being penalized as a result of counsels' failures to
apply for EAJA fees to which they were entitled, courts have
either reduced the Subsection (b) award by an amount equal to
the foregone EAJA fees, or taken counsels' failures to
apply for EAJA fees into account in determining a reasonable
fee for their services.” Allen, 2012 WL
1596661, at *5.
case, Miller Cohen requests a fee award of $4, 987.50, for
19.95 hours of attorney work at an hourly rate of $250. The
requested fee reflects a substantial downward adjustment from
the contracted 25% contingency fee of $41, 735.00. Indeed,
the requested award is only 12% of the full Section 406(b)
amount withheld by the Commissioner, or roughly 3% of the
past due benefits awarded Szostek. Miller Cohen thus tacitly
acknowledges that it would reap an inappropriate windfall
under the 25% contingency fee agreement given the unusually
high recovery of past due benefits, and it seemingly intends
the discounted fee to account for the fact that the EAJA fee
was not pursued. [ECF No. 20, PageID 939]. The requested fee
accounts for the time actually spent on the case and the
requested hourly rate is not inflated.
the uncollected EAJA fee from the already-reduced requested
fee would cut Miller Cohen's compensation in half and
result in a fee far below the standard hourly rate for
disability benefits attorneys in Michigan. Under these
circumstances, and when there has been no suggestion that
Miller Cohen was ineffective, the Court finds that the
reduced fee requested adequately accounts for Miller
Cohen's failure to apply for EAJA fees such that no
further reductions are necessary.