UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Dennis M. Mounce

v. Case No. 10-cv-560-PB Opinion No.

Carolyn W. Colvin, Acting Commissioner, U.S. Social Security Administration

MEMORANDUM AND ORDER

Attorney Elizabeth R. Jones seeks $37,953.63 in attorney’s

fees for helping Social Security claimant Dennis Mounce win

past-due disability benefits. She has filed a motion to award

fees under

(b), arguing that either of two fee

agreements she entered into with Mounce entitle her to 25% of

his past-due benefits. Both Mounce and the Social Security

Commissioner oppose her request, arguing that the proposed fee

is unreasonably high. Because I conclude that the parties have

not adequately addressed whether Jones’s fee agreements entitle

her to the relief she seeks, I reserve judgment on the merits

and ask for further briefing as explained below. I. BACKGROUND

A. Procedural History

Dennis Mounce first applied for disability benefits in

2007. Doc. No. 14-1 at 1. His application was denied.

The next year, in June 2008, Mounce applied again for disability

benefits, and in October 2008 he hired Attorney Jones to

represent him with his claim. Id. at 1-2. At the beginning of

the representation, Jones and Mounce signed a contingency fee

agreement. That agreement applied only to Jones’s

“representation through a hearing before the Administrative Law

Judge.” Doc. No. 17-1 at 6. It provided that Jones’s attorney

fee “shall be equal to 25%” of Mounce’s past-due benefits “or

the maximum fee specified by 42 U.S.C. 406(a)(2)(A)”1 or $5,300,

“whichever is the least at the time of the ALJ decision.” Id.

If Mounce lost his claim, Jones would be paid nothing. Id.

After a June 2010 hearing, the ALJ denied Mounce’s

application. Doc. No. 17 at 1. Without signing a new fee

agreement, but with Jones’s ongoing assistance, Mounce appealed

to the Decision Review Board. In October 2010, the Board

1 The agreement states the “maximum fee specified by

(a)(20)(A),” doc. no. 17-1 at 6, but this is likely a typo, since there is no Section 406(a)(20)(A). See

(a). 2 affirmed the ALJ’s denial. Doc. No. 1 at 2. Two months later,

in December 2010, Jones continued to represent Mounce by filing

an appeal in this court. Doc. No. 1. Jones and the

Commissioner completed briefing in the case by May 2011. See

Doc. Nos. 7, 9. Then, in October 2011, after the parties had

filed their briefs but before I ruled on the case, Jones had

Mounce sign a second fee agreement. See Doc. No. 14-2 at 12.

That second agreement had two “tiers.” The first tier

stated that if Mounce won “at any administrative level” through

the first ALJ decision after the date of the agreement, Jones

would receive either 25% of Mounce’s past-due benefits or

$6,000, whichever was smaller. Doc. No. 17-1 at 7. In other

words, if the court remanded the case and the ALJ subsequently

awarded benefits, Jones would receive either 25% of those

benefits or $6,000. The second tier, however, provided a

different fee structure: if Mounce lost at the first ALJ

decision after the date of the agreement, and then wished to

appeal, the agreement stated that Jones “will ask SSA to approve

a fee no greater than 25% of all back benefits awarded in

[Mounce’s] case.”

In other words, if the next ALJ decision

was a denial, and Mounce wished to appeal again to the Appeals

Council or another entity, Jones would not be subject to a

3 $6,000 cap, and would instead “ask SSA to approve” up to 25% of

any back benefits.

The second agreement, unlike the first, also contained a

provision addressing attorney fees under the Equal Access to

Justice Act (EAJA).

It provided that “if a court awards

[Mounce] a fee under the Equal Access to Justice Act, [Mounce]

assign[s] them to [Jones].”

The provision also noted that

if Jones received both an EAJA fee and a fee from Mounce’s back

benefits, Jones would refund to Mounce the lesser of the two

sums.

The agreement contained no other reference to

Jones’s work before the court. See

In November 2011, less than a month after Mounce signed the

second fee agreement, I granted Mounce’s appeal and ordered a

remand. See Doc. No. 12. Jones then represented Mounce at two

more hearings before an ALJ. In September 2013, the ALJ denied,

yet again, Mounce’s application. Doc. No. 14-1 at 2. Mounce

chose to appeal that ruling to the Appeals Council.

In

August 2014, the Appeals Council remanded the case to a new ALJ

for yet another hearing.

While preparing for that hearing in June 2015, Jones had

Mounce sign a third fee agreement. Doc. No. 17-1 at 8. That

agreement provided that if Mounce “won at any administrative

level through the first Appeals Council decision after the date 4 of this agreement, [Mounce] agree[s] that the attorney fee will

be 25% of all past-due benefits.”

(emphasis omitted).

Other than an EAJA provision identical to that of the second

agreement, the third agreement did not mention compensation for

Jones’s work before the court. See

Two months after the third agreement was signed, in August

2015, the ALJ approved Mounce’s claim and awarded him

$151,814.50 in past-due disability benefits. Doc. No. 14 at 2.

In the decision, the ALJ attached a notice to Mounce stating: “I

do not approve the fee agreement between you and your

representative because [t]he fee agreement sets a fee that is

more than the lesser of 25 percent of the past-due benefits or

$6,000.” Doc. No. 16-2 at 4. The notice provided instructions

for reviewing this determination.

Jones, however, did not

request review from the SSA. See Doc. Nos. 17; 16-1 at 1-2.

Instead, on March 10, 2016, Jones filed a motion for

attorney fees with this court seeking 25% of Mounce’s past-due

benefits, or $37,953.63, as compensation for work done before

the court. Doc. No. 14. A month later, on April 13, 2016, the

Commissioner filed a response opposing Jones’s fee request.

Doc. No. 16. As part of her response, the Commissioner appended

a letter that Mounce had written in January 2016 to ALJ James

D’Alessandro asking D’Alessandro to deny Jones’s 25% fee 5 petition.2 See Doc. No. 16-3. The Commissioner cited Mounce’s

letter as one reason, among others, why I should reduce Jones’s

requested fee.

Mounce’s letter made a number of accusations against Jones.

Mounce claimed that he “always signed and resigned the same

basic fee agreement” with Jones and made no mention of the three

different agreements. Id. at 1. This “basic” agreement, Mounce

argued, provided that Jones would receive “$5,500-$6,000,” but

only if Mounce won his claim. Id. Sometime before he won back

benefits, however, Mounce was called into Jones’s office to sign

over a “$5,000” check in Mounce’s name from the SSA. Id.

Mounce signed over the check, but stated that he “did not

understand” why Jones was entitled to the money, since he had

not yet won his case. Id.

Mounce’s letter also described the events leading to the

signing of the third and final fee agreement. A week before his

June 2015 hearing, Mounce explained, he and his wife met with

Jones at her office. Id. During that meeting, Mounce claims

that Jones said “we needed to sign another fee agreement . . .

stating she would receive 25% of the claim . . . .” Id.

According to Mounce, “this did not go over well,” and “my wife

2 It appears that ALJ D’Alessandro had already denied Jones’s fee request several months earlier, but Mounce nonetheless addressed the letter to him. See Doc. No. 16-2 at 4-5. 6 and I started to get very upset.” Id. “My wife started crying

and we did not want to sign the paper we wanted to get up and

leave.” Id. Mounce alleges that Jones told them “this is

business” and declined to modify the agreement. Id.

Eventually Terry Daley, a partner in Jones’s law firm, was

called into the office. Id. at 2. Mounce allegedly told Daley

that the fee agreement was “grossly excessive” and that he “knew

the law stated around $6,000,” not more. Id. Mounce also

complained that Jones was “putting me and my family under duress

at this time,” and “we couldn’t believe it.” Id. Daley

allegedly asked Jones to “just accept the normal fee agreement,”

but Jones declined, explaining that she had already taken the

case to federal court and was entitled to 25% of Mounce’s back

benefits, per the agreement. Id. at 1. Mounce then asked Jones

why she had received a $5,000 fee from the Social Security

Administration when Mounce had not yet received anything. Id.

at 2. In response, according to Mounce, Jones stated that

Mounce had to sign her fee petition or “we would have to go to

the hearing without her period.” Id. The conversation finished

with Jones saying “she would be happy with $18,000.00 which,”

according to Mounce, “would be really $23,000.00 including the

$5,000.00 she was already paid way long before [m]y wife and I

7 received anything.” Id. Mounce noted that he felt “we have

been coerced into signing this fee Petition.” Id.

Jones refutes much of this account. On May 5, 2016, she

filed a reply memorandum which addressed, among other things,

Mounce’s letter. Doc. No. 17. She stated that she was unaware

that Mounce had contacted the ALJ until the Commissioner

mentioned it in her brief opposing the fee request. Id. at 1.

Jones then explained that the “$5,000” that Mounce signed over

to her was actually her award under the Equal Access to Justice

Act (EAJA), and totaled $5,875.20 – a sum reduced from $6,912

due to Mounce’s outstanding IRS debt. See id. at 2 n.1. She

pointed out that the second and third agreements explicitly

contained a provision allowing her to recover EAJA fees.3 Id. at

3. Mounce, moreover, “was not asked to pay a fee prior to being

awarded a benefit,” and “any EAJA fee paid to counsel would be

refunded to Mr. Mounce if [Jones] also received fees from Mr.

Mounce’s benefits for the same legal work.” Id. Indeed, Jones

proposes to refund the $5,875.20 EAJA fee to Mounce if her

current $37,953.63 fee is granted. Doc. No. 14 at 3.

3 Jones explained that the first fee agreement contained no EAJA provision because the agreement did not “allow for the possibility of a federal court complaint,” and “EAJA [fees are] payable only after prevailing in federal court.” Doc. No. 17 at 3. 8 Jones also provided a “line by line reply” to Mounce’s

letter and allegations of coercion. See Doc. No. 17-1 at 9-12.

She noted that Mounce agreed to sign over the check to Jones as

an assignment under the EAJA. Id. at 9-10. Jones claims that

she presented Mounce with the third fee agreement “just to be

clear about the existing terms of representation,” even though

“[i]t changed nothing” and only “reiterated that the fee was to

be 25% of all past due benefits.” Id. at 10. “Mr. Mounce

signed the agreement after being assured that I would continue

to represent him whether or not he signed it, as its main

purpose was to help him understand the existing agreement,”

Jones wrote. Id. Indeed, she added, if she had not attended

the hearing, Mounce’s claim would have been denied, and no one

would have received compensation. See Doc. No. 17 at 7. As to

the involvement of Daley, the law partner, Jones noted that “I

asked Mr Daley to join us” and “[w]e made it clear to Mr Mounce

that I would continue to represent him at the upcoming hearing

whether or not he signed the agreement, especially as it did not

change anything.” Doc. No. 17-1 at 10. Jones denied that Daley

ever asked Jones to accept $6,000 in lieu of the 25% fee. See

id.

Jones also noted that Mounce’s alleged personal troubles

may have affected his understanding of their agreement. “[P]art 9 of the reason that Mr Mounce was deprived of normalcy [in his

personal life],” she explained, “was the fact that he had been

incarcerated for almost 2 years, ending just months before the

date of the last hearing.” Id. at 10-11. She stated that she

never agreed to accept $18,000 in lieu of 25% of back benefits

and “did not attempt to estimate Mr Mounce’s potential

retroactive benefits, or agree to accept a fee of a set amount.”

Id. at 11. Finally, Jones responded to Mounce’s allegations of

coercion by stating that the third fee agreement “changed

nothing” and “was intended to clarify for Mr Mounce his already

existing obligation.” Id. at 12. “Most claimants,” she noted,

“are at the lowest point of their lives when they apply for

Social Security,” a fact to which she is “highly sensitive.”

Id. She had, however, “represented [Mounce] for 7 years,

obtained a psychological evaluation for him and purchased years

of medical records, for which he has not paid, despite now

having the ability to pay.” Id. Mounce “was never asked to ‘go

it alone’ and was not coerced.” Id.

II. ANALYSIS

Jones argues that both the second and third fee agreements

straightforwardly entitle her to 25% of Mounce’s back benefits.

She further maintains that a 25% fee is presumptively reasonable 10 because, among other things, she had a lawful fee agreement and

expended significant time, effort and risk of nonpayment on the

case. The Commissioner counters that Jones’s fee request is

unreasonably high and should be reduced, although she does not

specify how much. In support, the Commissioner advances three

arguments: (1) Jones already requested, and the ALJ denied, a

fee for Jones’s work at the administrative level; (2) Mounce

objects to the fee and claims the fee agreements were coerced;

and (3) the fee would be a “windfall.” See Doc. No. 16 at 3-6.

I find the Commissioner’s first argument unpersuasive, for

reasons I detail below. The second and third arguments appear

to hinge on whether Jones’s fee agreements entitle her to the

relief she seeks – an issue that the parties have not adequately

briefed. As such, before deciding the motion, I direct the

parties to submit further briefing in response to the two

questions I outline at the end of this order. To place these

questions in context, however, I begin with an overview of

attorney’s fees in Social Security cases. I then address the

Commissioner’s first argument, and conclude by outlining my

request for further briefing from the parties.

A. Attorney’s Fees in Social Security Cases

Attorneys who represent Social Security claimants generally

receive compensation in two ways. First, if they prevail in 11 court, attorneys can recover a fee directly from the U.S.

Government under the Equal Access to Justice Act (EAJA).4 See

(d)(1)(A). Second, if the claimant is awarded past

due benefits, either via a court order or an administrative

ruling, the attorney may recover a portion of that award. See

. Attorneys may pursue both EAJA and § 406 fees,

but if both are awarded they must remit the smaller fee to the

claimant. See Gisbrecht v. Barnhart,

(2002).

Each method of recovery is subject to caps and regulations

that aim to prevent attorneys from taking advantage of

claimants. For example, EAJA fees – which are calculated based

on hourly rates – are capped in most cases at $125 per hour.5

See

(d)(2)(A); Gisbrecht,

.

Attorneys seeking a portion of a claimant’s past-due benefits

must submit their fee requests for approval, either by the

4 The EAJA awards fees to a “prevailing party” unless the court finds that “the position of the United States was substantially justified or that special circumstances make an award unjust.”

(d)(1)(A).

5 As explained in Gisbrecht, a “higher fee may be awarded if ‘the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding involved, justifies a higher fee.’” Gisbrecht,

n.4 (citing

(d)(2)(A)(ii)).

12 Social Security Administration (SSA) or a federal court. See

generally

.

provides the statutory framework for

attorneys seeking an award from a claimant’s past-due benefits.

Section 406(a) governs attorney’s fees for representation in

administrative proceedings. See

(a). Section

406(b) applies to representation in federal court.

§

406(b). The SSA has “exclusive jurisdiction” to award

attorney’s fees for work done in administrative proceedings; the

court has “exclusive jurisdiction” for work done in court.

Clark v. Astrue,

(9th Cir. 2008); but see

Mudd v. Barnhart,

(4th Cir. 2005) (allowing

courts to consider work done before the SSA as “one factor” in

determining the reasonableness of a fee for court-related work

under Section 406(b)); Destefano v. Astrue, No. 05-CV-3534

(NGG),

, at *6 (E.D.N.Y. Mar. 4, 2008) (collecting

cases holding the same). In other words, a grant or denial of

fees for an attorney’s work in one forum may not necessarily

impact a grant or denial of fees for work done in the other.

See Clark,

.

Section 406(a) provides two methods for attorneys to obtain

fees for representation at the administrative level: the fee

petition process and the fee agreement process. See

at 13 1214. Under the fee petition process, once a claimant wins back

benefits, the attorney may petition the SSA to award a fee. See

(a)(1). The SSA, in turn, “shall . . . fix . . .

a reasonable fee” to compensate the attorney, which presently

may not exceed $10,000. Id.; 2 Barbara Samuels, Soc. Sec.

Disab. Claims Prac. & Proc. § 21:88 (2nd ed.). No fee agreement

is necessary under this process. See

(a)(1).

Under the fee agreement process, on the other hand, the

attorney and claimant must submit a signed contingency-fee

agreement to the SSA before the ALJ decides whether or not to

grant benefits. See

at § 406(a)(2)(A). If a claimant wins

back benefits, the SSA “shall approve” the fee agreement,

provided that the fee does not exceed 25% of the claimant’s

benefits or $6,000, whichever amount is smaller.6 Id.; see

Maximum Dollar Limit in the Fee Agreement Process,

-02 (Feb. 4, 2009) (increasing the maximum dollar limit to

$6,000). Notably, “[w]hen an ALJ or other decision-maker

evaluates a fee agreement, he or she is looking at the document

6 The statutory text states that a fee may not exceed the lesser of 25% of back benefits or $4,000.

(a)(2)(A)(ii)(II). It further provides, however, that the “Commissioner of Social Security may from time to time increase the dollar amount,” subject to certain restrictions.

§ 406(a)(2)(A). The Commissioner has increased the dollar amount over time, and it now stands at $6,000. Maximum Dollar Limit in the Fee Agreement Process,

-02 (Feb. 4, 2009).

14 itself not at the amount of the fee which may ultimately be

paid,” since “no one will know what the actual fee might be

until it is later calculated by the appropriate component of the

SSA.” Samuels, supra, § 21:77.

Section 406(b) governs fees in court, and guides my

analysis here. The statute permits attorneys to recover a

“reasonable fee . . . not in excess of 25 percent of the total

of [a claimant’s] past-due benefits,” payable out of, and not in

addition to, the claimant’s back benefits.

(b)(1)(A); Gisbrecht,

. Most attorneys

collect fees through a contingency-fee agreement with the

claimant, although an agreement is not strictly required. See

(b); Gisbrecht,

(“Traditionally

and today, the marketplace for Social Security representation

operates largely on a contingency fee basis.”) (internal

quotation marks omitted); Greenberg v. Colvin,

(D.D.C. 2014) (“The statute . . . does not demand a

contingent agreement . . . courts have held that fees under §

406(b) may be available where there is no contingency

arrangement between the claimant and his counsel.”).

In cases with valid fee agreements, the role of courts is

to “review” these agreements “as an independent check, to assure

that they yield reasonable results in particular cases.” 15 Gisbrecht,

. As the Supreme Court instructed in

Gisbrecht, courts look “first to the contingent-fee agreement,”

ensuring that the agreement has not exceeded Congress’s

“boundary line” of 25% of back benefits.7

If the agreement

passes this first test, courts then review the resulting fee for

reasonableness.

Where, for example, the attorney is

responsible for a delay in the case adjudication; “the benefits

are large in comparison to the amount of time counsel spent on

the case;” or the attorney would receive a “windfall,” courts

may reduce the fee.

. If a fee is reasonable under

Gisbrecht’s guidelines, courts will uphold it. See

B. The ALJ’s Decision to Deny Fees

The Commissioner first argues that I should deny or reduce

Jones’s fee request because the ALJ previously rejected her

request under Section 406(a) for work done at the administrative

level. Doc. No. 16 at 3-4. This argument is unpersuasive. As

explained above, fee awards under Section 406(a) are separate

from fee awards under Section 406(b). See

;

7 Gisbrecht resolved a circuit split over the application of the “lodestar” method in Section 406(b) cases. In the past, some circuits ignored contingent-fee agreements and applied a lodestar calculation, which multiplied the number of hours reasonably worked by a reasonable hourly rate to determine an attorney’s fee. See Gisbrecht,

. Other circuits deferred to lawful contingent-fee agreements, so long as the resulting fee was reasonable.

. Gisbrecht adopted the latter approach.

. 16 Clark,

(noting that the SSA and the court have

“exclusive jurisdiction” over their respective fee awards). The

ALJ awards fees for work done at the administrative level; the

court awards fees for work done in court – and a decision to

grant or deny fees in one forum does not necessarily influence

the other.

Here, the ALJ denied Jones’s fee request because her fee

agreement with Mounce “set[] a fee that is more than the lesser

of 25 percent of the past-due benefits or $6,000.” Doc. No. 16-

2 at 4. The parties do not dispute the validity of the ALJ’s

decision, and it appears correct: Jones’s third fee agreement,

signed two months before the ALJ’s decision, contained no $6,000

cap. See Doc. No. 14-1 at 8. As such, the ALJ was not

authorized to approve the fee. See

(a)(2)(A);

Samuels, supra, § 21:71 (noting that the “decision-maker will

act on the most recently negotiated and signed fee agreement SSA

received before the date of the favorable decision”).

The Commissioner insinuates that the ALJ’s denial of fees

should somehow influence my ruling here, but does not explain

why. See Doc. No. 16 at 3-4. I do not know why Jones drafted a

fee agreement that would not entitle her to fees under Section

406(a), but it is not my duty to speculate here. I must instead

turn my attention to the more difficult question of what fees, 17 if any, Jones may receive under Section 406(b) for work done

before this court.

C. The Validity of the Fee Agreements

The Commissioner raises two more arguments. First, she

points to Mounce’s claim that he was coerced into signing the

third fee agreement. Second, she argues that Jones’s fee is a

“windfall” under Gisbrecht and related cases. In response,

Jones disputes Mounce’s claims of coercion and contends that a)

she and Mounce had a valid fee agreement that should receive

deference under Gisbrecht, and b) the fee is not a windfall

compared to fee awards granted by other courts in similar cases.

These arguments ignore what is, in my view, a threshold

question: did Jones have an enforceable fee agreement that

entitled her to compensation under Section 406(b)? Jones

completed her work in this court before signing a fee agreement

that addressed compensation for that work. The first fee

agreement – which arguably expired prior to the court appeal –

only addressed fees at the administrative level. Moreover, the

two agreements executed after Jones completed her court work

contemplate the possibility of an EAJA award, but otherwise

appear to address only fees that could be awarded by the SSA

under § 406(a), which this court lacks jurisdiction to address.

Thus, a substantial question exists as to whether counsel’s 18 claim for fees under § 406(b) was ever subject to an enforceable

fee agreement. If no such agreement was ever executed, it

remains unclear how counsel’s fee request should be addressed in

light of Gisbrecht. See, e.g., Thomas v. Astrue,

(11th Cir. 2010) (holding unenforceable for lack of

consideration a fee agreement signed after the completion of an

attorney’s work done in court); Artrip v. Colvin, No.

2:07cv00023,

, at *2 (W.D. Va. Apr. 5, 2013)

(finding that the fee agreement between the attorney and

claimant only pertained to work before the SSA and therefore

applying the lodestar method to determine fees), Sanfilippo v.

Comm'r of Soc. Sec., No. 8:04-CV-2079-T-27MSS,

,

at *3 (M.D. Fla. May 5, 2008) (finding that no fee agreement

existed between the attorney and the claimant and instead

applying the lodestar method); Bentley v. Comm'r of Soc. Sec.,

(W.D. Mich. 2007) (same).

This case presents an unusual fact pattern and a set of

unresolved legal issues. Without a more careful treatment of

these issues, I am hesitant to rule definitively on the motion

before me. I therefore direct the parties to address the

following questions:

19 1. Did Jones and Mounce enter into any enforceable fee

agreement entitling Jones to compensation under Section

406(b)?

2. If no enforceable fee agreement was entered into that

authorized relief under § 406(b), what standard should

guide an award of fees under this Section?

III. CONCLUSION

The parties are directed to submit further briefing on the

questions raised above. Attorney Jones shall have fourteen (14)

days to submit a brief; the Commissioner shall then have

fourteen (14) days to respond. I will then carefully consider

the parties’ arguments and issue an order on Jones’s motion for

attorney’s fees (Doc. No. 14).

SO ORDERED.

/s/Paul Barbadoro Paul Barbadoro United States District Judge

June 23, 2016

cc: Elizabeth R. Jones, Esq. T. David Plourde, Esq.

20