United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
JEFFREY COLE, District Judge.
Plaintiff's counsel has filed a second motion for approval of attorney's fees to be paid to him out of the plaintiff's past-due benefits pursuant to 42 U.S.C. §406(b). On remand from this court, an Administrative Law Judge for the Social Security Administration determined that plaintiff was disabled and entitled to benefits, including $71, 449.00 in past-due benefits. Plaintiff and her counsel had a contingency fee agreement whereby she would pay counsel 25% of any such award which, in this case, would come to $17, 862.25.
There were some concerns with counsel's previous motion. First, there was some wording in the motion that made it appear that a result of an error, the agency failed to withhold the 25% fee and sent the full amount to the plaintiff. Counsel said he wanted the court's approval to charge his client. Of course, if this were the case, counsel's remedy would be against his client in a separate proceeding. And so, the previous order could not have been clearer: the question was, had the agency withheld a portion of the plaintiff's recovery for fees or not? [Dkt. # 41, at 1-2].
This time around, counsel did not answer that question directly, but did state:
While the undersigned did represent at the administrative level, and the normal procedure of the Administration is to pay counsel 406(a) fees of $6000.00, in this case no 406(a) fees have been paid to counsel. Plaintiff informs the Court of this fact as normally, there is an offset sought from the 406(b) fees, based on the amount of the 406(a) fees received by counsel. At this point there is no offset in this case. If the Commissioner were to pay the undersigned counsel the $6000.00 for 406(a) fees for work at the administrative level, an additional $11, 862.25 would be owing under section 406(b).
[Dkt. #43, ¶6].
As counsel does not indicate that he wants to charge his client this time around, but will be receiving his fee from the agency as is the normal procedure, we take this as answering our inquiry.
We were also concerned with the fact that counsel had filed his motion without the approval of the agency. Given the local rule mandating consultation with an opponent before the filing of a fee petition, N.D.Ill. L.R. 54.3, and the fact that most §406(b) petitions come with the imprimatur of the agency - i.e., a statement in the motion indicating that the government has no objection to the amount of fees sought in the motion. With the agency serving as a trustee of sorts for the plaintiff, see Gisbrecht v. Barnhart, 535 U.S. 789, 798 n.6 (2002), the agency's approval is, while not dispositive, certainly influential. Counsel's previous motion gave the impression that the agency was opposed to the amount he sought. Either that, or simply had not consulted the agency before filing. It turns out it was the latter, and counsel now - the second time around - assures us that the agency does not oppose the amount sought.
The final issue was the amount sought and the manner in which counsel went about supporting it. While Gisbrecht held that the lodestar method does not rule the day in these cases, an attorney must still show that, even within the 25% contingency fee boundary, the amount he seeks as recompense is reasonable. 535 U.S. at 807. He is not entitled to a "windfall", and so, his customary hourly fee is still relevant to the reasonableness inquiry. 535 U.S. at 808. Here, the fee counsel seeks amounts to $622 per hour - a bit more than double his customary hourly rate of $300 and well over double the $250 rate he charges for the associate who did 25.2 of the 28.7 hours of work in this case. Cognizant of this high rate, counsel spent a large portion of the research and analysis in his original motion on this issue. But he was able to find only one case from this area in which the court approved such a high hourly rate. [Dkt. # 41, at 3].
Counsel resorted to asserting that attorneys taking disability cases to district court have just a 35% success rate at obtaining an award of benefits, as a result of the district courts remanding 48% of ALJ denials, of which 60% result in a grant of benefits (in a further 6%, the district courts order an award of benefits. See Maritnez v. Astrue, 630 F.3d 693, 695 (7th Cir. 2011). The idea that counsel clearly wanted to get across, and that had been accepted in the one case that supported a rate comparable to what he sought here, was that the high risk reduced the effective rate he would receive. But, in our previous order, we pointed out that, once a social security attorney loses a case at the district court level, he has a great opportunity to win at the appellate court level, as the Seventh Circuit reverses about 70% of the benefit denials it sees. [Dkt. #41, at 4]. That made the risk not so great as counsel suggested, or so it seemed.
The reasonableness of contingency fee awards is all about risk and reward. As Justice Scalia has explained, it is:
obvious that the reasonableness of a contingent-fee arrangement has to be determined by viewing the matter ex ante, before the outcome of the lawsuit and the hours of work expended on the outcome are definitively known. For it is in the nature of a contingent-fee agreement to gamble on outcome and hours of work-assigning the risk of an unsuccessful outcome to the attorney, in exchange for a percentage of the recovery from a successful outcome that will (because of the risk of loss the attorney has borne) be higher, and perhaps much higher, than what the attorney would receive in hourly billing for the same case.
Gisbrecht, 535 U.S. at 809-810(Scalia, J., dissenting)(emphasis in original)).
This time around, counsel submits that he has performed a Westlaw search of all Illinois district court opinions from January 1, 2014, through June 1, 2015, with the defendant Colvin. He states that the search came up with 459 opinions but that a similar search of Seventh Circuit cases resulted in just 30 opinions. In other words, according to counsel, only a small percentage of losses at the district court level are ever appealed. So, his gamble is ...