The opinion of the court was delivered by: David G. Bernthal U.S. Magistrate Judge
Wednesday, 18 January, 2012 03:43:08 PM
Clerk, U.S. District Court, ILCD
Plaintiff Roger Wattles began his quest for Social Security benefits in September 2000. His first unsuccessful effort resulted in a trip to this Court in 2004. (Case No. 04-2030). Plaintiff succeeded in obtaining an order for remand. In addition, Senior U.S. District Judge Harold A. Baker awarded attorney fees under the Equal Access to Justice Act (herein after "EAJA") in the sum of $5,624.56. The claim was denied upon remand, resulting in Plaintiff's return to this Court for the instant case. Prior to the filing of motions for summary judgment, the parties settled the case by stipulating that the claim should be remanded. In addition, EAJA fees were agreed to. Upon that remand, benefits were awarded.
Now before the Court is the Motion for Approval of Attorney's Fees Pursuant to 42 U.S.C. § 406(b) (#18), in which Plaintiff, through his attorney,*fn1 seeks court approval for payment of fees pursuant to a written contract between Plaintiff and counsel. The Commissioner has filed Defendant's Response to Plaintiff's Motion for Attorney Fees Pursuant to 42 U.S.C. § 406(b) (#20).
Plaintiff and Attorney Traver entered into a written contract regarding fees on May 14, 2010. A copy of the contract is attached as "Exhibit 2" to the Brief in support of the motion (#19-2). According to that contract, Plaintiff agreed that, "David F. Traver will charge and receive as his fee an amount equal 25% of the past-due benefits, which are awarded to my family and me if my case is won. If I do not receive past-due benefits, the fee I would have to pay would be 0, because 25% of nothing is nothing." (#19-2).
In awarding benefits, the Commissioner determined that Plaintiff was entitled to $185,822 in past-due benefits. If the Court were to apply the agreed upon percentage, a fee of $45,455.50 would result. However, Attorney Traver has reduced that figure by the amount of EAJA fees awarded in this case and its predecessor, resulting in a difference of $39,470.94. Attorney Traver has made a voluntary reduction of $19,470.94, such that the attorney fee sought is actually $20,000.
Plaintiff has given specific written approval in the form of a letter dated August 2, 2011, (#19-4) in which he stated, "I truly believe he (referring to Attorney Traver) has earned the fee of $20,000 that he is asking for." Defendant, on the other hand, as he is entitled to do, has filed written opposition in which he argues that the fee requested is not reasonable and would amount to a windfall to Attorney Traver.*fn2
Defendant's right to challenge the fee request is well established and not contested here. In bringing the challenge, Defendant focuses exclusively on the hourly rate that would be achieved if one divided the fee claimed by the hours involved in representation of Plaintiff in this case.*fn3 The Commissioner has calculated the hourly rate achieved through this procedure would fall between $2,500 and $3,125, depending upon which hours are properly attributed to the work done here. The Commissioner cites McGuire v. Sullivan, 873 F.2d 974, 981 (7th Cir. 1989) but does not undertake the analysis modeled by that case. The Commissioner simply and persistently argues that the hourly rate equivalent of the fee sought is just too high. This Court concludes that the approach taken by the Commissioner is an over simplification and fails to follow established precedent.
The Seventh Circuit has rejected this so called "lodestar" method as the sole basis for evaluating a fee where a contingent fee agreement is in effect. In McGuire, the Court stated, "If courts regularly invalidated reasonable contingency agreements in favor of a lodestar fee, then attorneys would no longer enter into such agreements. Without the greater incentive for attorneys to take these cases stemming from the potential of an enhanced fee payment, claimants who have difficult cases and who cannot afford to guarantee payment might not be able to secure representation." McGuire, 873 F.2d at 980. The Court went on to state, "We follow the McKittrick court's reasoning that simply determining a reasonable hourly rate is inappropriate when an attorney is working pursuant to a reasonable contingency contract. A court may award a fee up to that provided in the contract, so long as the court has reviewed its reasonableness." Id., (citing McKittrick v. Gardner, 378 F.2d 872, 875-76 (4th Cir. 1967)).
In determining the reasonableness of the fee, the court must consider multiple factors, including what are commonly referred to as the Blankenship factors, including but not limited to: time and labor required; skill required; contingency of fee; amount involved and result attained; experience, reputation, and ability of attorney; and awards in similar cases. Blankenship v. Schweiker, 676 F.2d 116, 117-18 (4th Cir. 1982).
Here, the parties did enter into a contingent fee arrangement. The 25 percent contingent fee is consistent with 42 U.S.C. § 406. In the contract itself, Plaintiff declared:
I have shopped for the best available attorney at the lowest reasonable fee and understand that I am able to ask the Appeals Council for an extension of time to begin my action in District Court to give me more time to shop. I have carefully ...