Mudd v. Barnhart ( 2005 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
STEPHEN L. MUDD, 
Plaintiff-Appellee,
v.
 No. 04-1416
JO ANNE B. BARNHART,
Commissioner of Social Security,
Defendant-Appellant.

Appeal from the United States District Court
for the Western District of Virginia, at Lynchburg.
Glen E. Conrad, District Judge.
(CA-02-32-6)
Argued: March 16, 2005
Decided: August 15, 2005
Before MICHAEL and KING, Circuit Judges, and
James R. SPENCER, Chief United States District Judge
for the Eastern District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Michael wrote the opinion, in
which Judge King and Judge Spencer joined.
COUNSEL
ARGUED: Joshua Paul Waldman, UNITED STATES DEPART-
MENT OF JUSTICE, Civil Division, Appellate Staff, Washington,
D.C., for Appellant. James E. Hutchins, Mathews, Virginia, for
Appellee. ON BRIEF: Peter D. Keisler, Assistant Attorney General,
2 MUDD v. BARNHART
John L. Brownlee, United States Attorney, William Kanter, Michael
E. Robinson, UNITED STATES DEPARTMENT OF JUSTICE,
Civil Division, Appellate Staff, Washington, D.C., for Appellant.
OPINION
MICHAEL, Circuit Judge:
After the Social Security benefits claimant in this case lost at the
administrative level, the district court awarded him benefits and
awarded his lawyer the agreed-upon contingent fee (twenty-five per-
cent of past-due benefits). The Commissioner of Social Security
appeals only the district court’s denial of her motion to alter or amend
the fee order. Under the governing statute, 42 U.S.C. § 406(b), a dis-
trict court may award fees to a successful claimant’s lawyer for his
representation before the court. The Commissioner argues that the
district court erred when it considered the time spent and work done
by the lawyer in representing the claimant at the administrative stage
as one factor in determining that the contingent-fee agreement was
reasonable. We conclude that the court’s consideration of the lawyer’s
agency-related work was appropriate because it assisted the court in
reaching a better understanding of factors such as the overall com-
plexity of the case, the lawyering skills required, and the significance
of the result achieved. Inasmuch as the district court approved a fee
for court-related work only, we affirm.
I.
Stephen L. Mudd filed an application for disability insurance bene-
fits under the Social Security Act. He alleged that by late 1997 hepati-
tis C and severe depression rendered him disabled for all forms of
substantial gainful employment. The Social Security Administration
(the agency) denied Mudd’s claims at the initial consideration and
reconsideration stages, and he then proceeded to an evidentiary hear-
ing before an administrative law judge. The ALJ found that Mudd
"retains sufficient functional capacity for several specific light work
roles existing in significant number in the national economy." J.A. 10.
The ALJ thus concluded that Mudd is not disabled and not entitled
MUDD v. BARNHART 3
to benefits. The agency’s Appeals Council adopted the ALJ’s opinion
as the final decision of the Commissioner. Mudd sought review of the
final administrative decision by filing an action against the Commis-
sioner under 42 U.S.C. § 405(g) in the U.S. District Court for the
Western District of Virginia. In the summary judgment proceedings
that followed, the district court reversed the Commissioner and
entered judgment in Mudd’s favor. The court concluded that the
Commissioner’s final decision was not supported by substantial evi-
dence because "the undisputed administrative record establishes dis-
ability for all forms of substantial gainful employment." J.A. 13.
Mudd’s lawyer represented him under a contingent-fee agreement
that is standard in Social Security cases: it provides that the lawyer
is to receive twenty-five percent of all past-due benefits recovered.
After Mudd won in district court, his lawyer petitioned the court
under 42 U.S.C. § 406(b) for approval of $12,231.50 in attorney’s
fees, representing the full contingent fee, or twenty-five percent of the
$48,926 in recovered past-due benefits. The Commissioner objected
to the fee petition, characterizing it as unreasonable. According to the
Commissioner, the amount requested ($12,231.50) divided by the
number of hours spent in court-related work (16.6) yielded "a wind-
fall to counsel" in the form of an hourly rate of $736.84. J.A. 30. The
district court concluded that the contingent-fee agreement was reason-
able in this case and approved the requested amount. The Commis-
sioner then filed a Fed. R. Civ. P. 59(e) motion to alter or amend the
judgment (or fee order), arguing that the court erred when it consid-
ered "time [the lawyer] spent representing Plaintiff before the
Agency" in evaluating the fee petition. J.A. 37. In denying the Com-
missioner’s motion, the district court emphasized that it "did not
intend to award any fee falling outside the boundaries of 42 U.S.C.
§ 406[b]," J.A. 54, which governs the fee a claimant’s lawyer may
receive for court representation. The court said that while it consid-
ered the services rendered by Mudd’s lawyer at the administrative
stage, that consideration was simply one factor in the court’s evalua-
tion of the overall reasonableness of the contingent-fee agreement.
The Commissioner appeals the order denying her Rule 59(e)
motion. Although we normally review a district court’s award of
attorney’s fees for abuse of discretion, see Smyth ex rel. Smyth v.
Rivero, 282 F.3d 268, 274 (4th Cir. 2002), our review in this appeal
4 MUDD v. BARNHART
is de novo because the issue centers on the legal interpretation of 42
U.S.C. § 406(b), see Yamaha Motor Corp., U.S.A. v. Jim’s Motorcy-
cle, Inc., 401 F.3d 560, 567 (4th Cir. 2005).
II.
A.
The statutory basis for an award of fees to a lawyer representing
a client who obtains Social Security benefits is set forth in 42 U.S.C.
§ 406. Section 406 "establish[es] the exclusive regime for obtaining
fees for successful representation of Social Security benefits claim-
ants. Collecting or even demanding from the client anything more
than the authorized allocation of past-due benefits is a criminal
offense." Gisbrecht v. Barnhart, 535 U.S. 789, 795-96 (2002). As the
Supreme Court explains, "[t]he statute deals with the administrative
and judicial review stages discretely: § 406(a) governs fees for repre-
sentation in administrative proceedings; § 406(b) controls fees for
representation in court." Id. at 794. Section 406(b) provides that
whenever a court renders judgment for a claimant, "the court may
determine and allow as part of its judgment a reasonable fee" for rep-
resentation of the claimant before the court. 42 U.S.C. § 406(b)(1)(A).
This reasonable fee is not to exceed twenty-five percent "of the total
of the past-due benefits to which the claimant is entitled by reason of
[the] judgment," and the fee is payable "out of, and not in addition to,
the amount of such past-due benefits." Id. Courts are "without juris-
diction to decree compensation for professional representation" at the
administrative level, Robinson v. Gardner, 374 F.2d 949, 950 (4th
Cir. 1967), because the Commissioner "alone is empowered to make
awards for services rendered in agency proceedings," Morris v. SSA,
689 F.2d 495, 497 (4th Cir. 1982).
B.
Gisbrecht clarified the legal framework to be used for awarding
attorney’s fees under § 406(b) for the successful in-court representa-
tion of a Social Security benefits claimant who has signed a
contingent-fee agreement. In Gisbrecht the Supreme Court considered
two alternatives regarding "the appropriate starting point for judicial
determinations of ‘a reasonable fee for [representation before the
MUDD v. BARNHART 5
court].’" 535 U.S. at 792 (quoting 42 U.S.C. § 406(b)) (alteration in
original). Thus, the Court asked: "Is the contingent-fee agreement
between claimant and counsel, if not in excess of 25 percent of past-
due benefits, presumptively reasonable? Or should courts begin with
a lodestar calculation?" Id. (Under the lodestar method a court first
determines the number of hours reasonably spent on the case; that
number is multiplied by a reasonable hourly rate, and the product is
the lodestar amount. Id. at 797-98.) Prior to Gisbrecht a minority of
circuits adopted the reasonableness approach, while a majority,
including the Fourth Circuit, used the lodestar method. Id. at 799.
Gisbrecht held that the lodestar approach was inappropriate for evalu-
ating a contingent-fee agreement under § 406(b). Id. at 793. The
Court thus embraced "the primacy of lawful attorney-client fee agree-
ments," concluding that "§ 406(b) [was designed] to control, not to
displace, fee agreements between Social Security benefits claimants
and their counsel." Id. As long as the agreement does not call for a
fee above the statutory ceiling of twenty-five percent of awarded past-
due benefits, noted the Court, § 406(b) simply instructs a court to
review the agreement for reasonableness. Id. at 807.
Gisbrecht thus rejected case law from the majority of circuits
(including ours) that prescribed the lodestar method for awarding fees
under § 406(b) in the routine situation involving a contingent-fee
agreement. See, e.g., Craig v. Sec’y, Dep’t of Health & Human Servs.,
864 F.2d 324 (4th Cir. 1989). The Gisbrecht decision instructs courts
to "approach [§ 406(b)] fee determinations by looking first to the
contingent-fee agreement, then testing it for reasonableness." 535
U.S. at 808. The Court did not provide a definitive list of factors to
be considered because it recognized that the "[j]udges of our district
courts are accustomed to making reasonableness determinations in a
wide variety of contexts." Id. Nevertheless, the Gisbrecht Court noted
that a reduction in the contingent fee may be appropriate when (1) the
fee is out of line with "the character of the representation and the
results . . . achieved," (2) counsel’s delay caused past-due benefits to
accumulate "during the pendency of the case in court," or (3) past-due
benefits "are large in comparison to the amount of time counsel spent
on the case." Id.
C.
The Commissioner contends that the district court erred in this case
when it considered time the lawyer spent representing Mudd before
6 MUDD v. BARNHART
the agency as a factor in its determination that the contingent-fee
agreement was reasonable under § 406(b). In denying the Commis-
sioner’s Rule 59(e) motion to alter or amend the judgment (or fee
order), the district court emphasized that it reviewed the contingent-
fee agreement for reasonableness under Gisbrecht and awarded a fee
that fell within the boundaries of § 406(b). The district court thus
understood that it could only award attorney’s fees for representation
in court, or for court-related work. The court did consider, as one fac-
tor in its reasonableness determination, the time spent and work per-
formed by counsel on the case when it was pending at the agency
level. This was appropriate insofar as it gave the district court a better
understanding of factors relevant to its reasonableness inquiry, such
as the overall complexity of the case, the lawyering skills necessary
to handle it effectively, the risks involved, and the significance of the
result achieved in district court. Because it appears that, in the end,
the district court’s fee allowance to Mudd’s lawyer was limited to
compensation for court-related work, we affirm the order denying the
Commissioner’s motion to alter or amend the judgment.
AFFIRMED