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Reid v. Heckler

May 31, 1984


Appeal from the United States District Court for the Eastern District of Pennsylvania.

Aldisert, Weis and Rosenn, Circuit Judges.

Author: Weis


WEIS, Circuit Judge.

The Secretary of Health and Human Services has appealed from a district court order directing her to pay an attorney's fee from past-due SSI benefits awarded to a claimant under Title XVI of the Social Security Act. We conclude that the judicial review provisions of the Act confer authority on the district court to issue such an order and consequently we affirm.

Plaintiff Marguerite Reid appealed adverse administrative rulings to the district court, which determined that she was entitled to supplemental security income (SSI) under Title XVI of the Social Security Act, 42 U.S.C. §§ 1381-83 (1982). The district court then approved an application for attorney fees in the amount of $2,380, and directed the Secretary to pay that amount from the past-due benefits awarded to plaintiff. The Secretary moved for reconsideration, contending that she lacked statutory authority to remit the fees directly to the attorney. When that motion was denied, the Secretary brought this appeal.

Plaintiff was denied benefits following a hearing before an ALJ at which she was represented by Community Legal Services. When CLS advised plaintiff that a successful appeal of the decision was unlikely, she retained private counsel, Sanford H. Cohen, on a contingent fee arrangement. He, and later his partner, Faye Cohen, appealed the administrative decision to the district court. After an unfruitful remand to the Secretary, the court, on a second appeal, determined that plaintiff was entitled to benefits.

Despite her attorneys' successful efforts, plaintiff made clear that she did not intend to pay the agreed, or any, fee for legal services. It also appeared that during the pendency of the litigation, plaintiff had received financial assistance from the Pennsylvania Department of Public Welfare and had agreed to repay those sums from the SSI benefit award.In view of these developments, counsel filed a motion with the district court, asking that the past-due benefits be paid into court and that upon determination of a reasonable fee, the funds be distributed to those entitled to the money.

The district court reviewed the Cohen fee application and found that the one-third contingency fee contract exceeded the permissible limits set by 42 U.S.C. § 406(b)(1) (1982). However, giving consideration to the hours expended by the firm, the hourly rate, and the successful result achieved, the court fixed reasonable compensation at $2,715. A retainer of $335 was deducted, leaving as the amount due $2,380.

Pennsylvania agreed to pay its proportionate share of the fee for the attorneys' efforts in recovering the state's lien. The court directed the Secretary to pey the remainder of the fee directly to the attorneys and then remit the balance of past-due benefits to plaintiff.

The Secretary protested, emphasizing that unlike Title II of the Social Security Act,*fn1 neither Title XVI nor its regulations authorized the payment of fees to attorneys. See 20 C.F.R. § 416.1520(d)(3) (1982).

The court observed that without the intervention of the Cohen firm, it was unlikely that plaintiff would have recovered. The district judge found no logical policy basis for distinguishing between Title II and Title XVI as to the award of counsel fees.In addition, the court ruled that "to the extent 20 C.F.R. § 416.1520(d)(3)(1982), is construed by the Secretary to preclude an award of attorneys fees under Title XVI, it is necessarily invalid and void." Accordingly, the Secretary was directed to comply with the court's payment order.

On appeal, the Secretary contends that she lacks statutory authority to pay out any part of the past-due benefits as attorney fees, and hence must remit the full amount directly to plaintiff. The regulation is said to be consistent with the statute and therefore valid.

The reasonableness of the fee is not disputed. Moreover, it bears emphasis that the fee comes from the award of past-due benefits to plaintiff and is only for services rendered in the district court. The contested issue is whether the court could direct the Secretary to pay part of the benefits directly to the plaintiff's ...

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