Opinion
Case No. 4:18-cv-00457-SMR-SBJ
2022-10-14
Billy Jo A. MCDONALD, Plaintiff, v. Kilolo KIJAKAZI, Acting Commissioner of Social Security Administration, Defendant.
Wes Lance Kappelman, Kappelman Law Firm, Ames, IA, Corbett Allen Luedeman, RSH Legal, Cedar Rapids, IA, for Plaintiff. David L.D. Faith, United States Attorney's Office, Des Moines, IA, for Defendant.
Wes Lance Kappelman, Kappelman Law Firm, Ames, IA, Corbett Allen Luedeman, RSH Legal, Cedar Rapids, IA, for Plaintiff. David L.D. Faith, United States Attorney's Office, Des Moines, IA, for Defendant. ORDER ON PLAINTIFF'S MOTION FOR ATTORNEYS' FEES UNDER 42 U.S.C. § 406(B) STEPHANIE M. ROSE, CHIEF JUDGE
Before the Court is Plaintiff's Motion for Attorneys' Fees pursuant to 42 U.S.C. § 406(b)(1). [ECF No. 20]. For the reasons below, Plaintiff's Motion is GRANTED in part and DENIED in part.
I. BACKGROUND
On November 29, 2018, Plaintiff Billy Jo A. McDonald filed suit seeking reversal of the Social Security Commissioner's determination that she was ineligible for Social Security Disability benefits. [ECF No. 1]. On March 18, 2020, the Court reversed the Commissioner's decision on the ground that the Administrative Law Judge ("ALJ") improperly relied only on the professional opinion of Dr. Steven Zorn - who used a form template and provided no description of Plaintiff's limitations - to support its judgment. [ECF Nos. 14; 15]. The ALJ discounted opinions from other medical providers that supported the opposite outcome without explanation, which was legal error. [ECF No. 14 at 12-13]. The Court remanded the case to the agency to properly weigh the evidence. Id. at 14.
On June 1, 2020, Plaintiff filed a Motion for Attorneys' Fees under the Equal Access to Justice Act ("EAJA"), which the Court granted. [ECF Nos. 16; 18]. On July 21, 2022, Plaintiff filed a Motion for Attorneys Fees under 42 U.S.C. § 406(b)(1) after succeeding before the agency. [ECF No. 20]. Defendant filed a response stating that the Social Security Commissioner is not a party in interest on a motion for attorneys' fees under § 406(b). [ECF No. 21] (citing Gisbrecht v. Barnhart, 535 U.S. 789, 798 n.6, 122 S.Ct. 1817, 152 L.Ed.2d 996 (2002)). However, the Commissioner provided relevant legal standards to assist the Court in its analysis. Id. at 1.
II. DISCUSSION
The Social Security Act ("Act") allows an attorney to recover a "reasonable fee" for his or her successful representation of a claimant in federal court, as long as the fee does not exceed 25% of the total past due benefits awarded to the claimant. 42 U.S.C. § 406(b)(1)(A); Culbertson v. Berryhill, — U.S. —, 139 S. Ct. 517, 522, 202 L.Ed.2d 469 (2019) (holding the 25% cap applied to fees awarded under § 406(b), not to aggregate fees including those awarded under § 406(a)). Fees paid under § 406(b) are "payable 'out of, and not in addition to, the amount of [the] past-due benefits.' " Gisbrecht, 535 U.S. at 795, 122 S.Ct. 1817 (alteration in original) (citation omitted).
In Gisbrecht, the Supreme Court set forth guidelines to determine the reasonableness of Social Security Act fee requests when a contingent-fee agreement is present:
Courts that approach fee determinations by looking first to the contingent-fee agreement, then testing it for reasonableness, have appropriately reduced the attorney's recovery based on the character of the representation and the results the representative achieved. If the attorney is responsible for delay, for example, a reduction is in order so that the attorney will not profit from the accumulation of benefits during the pendency of the case in court. If the benefits are large in comparison to the amount of time counsel spent on the case, a downward adjustment is similarly in order. In this regard, the court may require the claimant's attorney to submit, not as a basis for satellite litigation, but as an aid to the court's assessment of the reasonableness of the fee yielded by the fee agreement, a record of the hours spent representing the claimant and a statement of the lawyer's normal hourly billing charge for noncontingent-fee cases.
Id. at 808, 122 S.Ct. 1817 (internal citations omitted).
A. Fee Agreements
Plaintiff and her attorney agreed to the following contingent-fee structure: If Plaintiff's appeal was successful, then Plaintiff's attorneys would be paid either 25% of past-due benefits or the fees awarded under the EAJA", whichever was greater. [ECF No. 20-1 at 2-3 (Attorney Fee Agreement)]. In 2020, Plaintiff signed a modified agreement to allow both Wes Kappelman and Corbett Luedeman to represent her and split fees. [ECF No. 20-1 at 1 (Civil Action Addendum)]. Plaintiff now requests $34,496.00 in attorneys' fees. [ECF Nos. 20 at 3-4; 20-2]. The amount requested is supported with the Social Security Administration's calculation sheet, which states, "[y]our total past-due benefits are $161,984.00." [ECF No. 20-2 at 3]. Kappelman spent 13.8 hours on the case, which means he would receive $2,499.71 per hour were the Court to grant the requested fee. Id.
According to the agreement, Kappelman would represent McDonald in federal court and Luedeman would represent her before the administrative agency. [ECF No. 20-1 at 1].
The amount requested, $34,496.00, is reached by taking 25% of the past-due benefits, in this case $40,496.00, and subtracting $6,000.00 that Luedeman is seeking under 42 U.S.C. § 406(a) for his representation of Plaintiff before the agency. [ECF No. 20].
B. Relevant Factors
Kappelman secured considerable Social Security Disability benefits for Plaintiff, but several factors should receive additional analysis and consideration: 1) the possibility of a windfall; 2) the reimbursement rate; 3) the number of hours worked; and 4) complexity of the factual and legal issues. For the reasons below, the Court believes a reduction to $850.00 an hour is reasonable.
i. Windfall
The first factor to consider when examining the reasonableness of a proposed contingent fee agreement is whether the attorney would receive a "windfall" were the Court to provide the requested compensation. Gisbrecht, 535 U.S. at 808, 122 S.Ct. 1817 (quoting Rodriquez v. Bowen, 865 F.2d 739, 747 (6th Cir. 1989)). Although Gisbrecht does not define the term "windfall," it is understood to apply when the benefits are "unexpectedly large" compared to the time spent on the case. Mitchell v. Barnhart, 376 F. Supp. 2d 916, 921 (S.D. Iowa 2005) (opining that a windfall would apply to an attorney seeking suddenly awarded benefits after signing of a contingent fee agreement but before commencement of litigation). Courts should be hesitant to categorize contingent fee agreements as a windfall simply because the attorney makes a large amount of money, as they receive an increased amount to account for the considerable risk inherent with Social Security cases. Id.
The facts do not suggest Kappelman would receive a windfall were he awarded the requested amount. He represented his client through the federal proceeding, from initiation through favorable ruling. Upon reversal of the ALJ's decision by this Court, which was reached in significant part due to Kappelman's effective representation, McDonald saw a significant increase in her likelihood of success on her claim. In other words, the Court cannot say Kappelman receiving a significant share of past due benefits owed would constitute a windfall given that meaningful representation occurred. The Court turns to consider the remaining factors.
ii. Hourly Rate
The second and third factors are considered together by reviewing the hourly rate an attorney would receive if the contingency fee agreement were enforced as written. McDaniel v. Kijakazi, No. C19-4043-LTS, 2021 WL 9439799, at *1 (N.D. Iowa July 14, 2021) (discussing how the requested fee amount is divided by the number of hours). Because attorneys in these cases face significant risk of not being paid, courts allow hourly rates of up to $1,000 an hour. Williams v. Colvin, No. 2:10-CV-04103-NKL, 2014 WL 4771716, at *3 (W.D. Mo. Sept. 24, 2014) (collecting cases). However, the average hourly rate is considerably lower than the high end of these rates. Higareda v. Colvin, 4:15CV3135, 2017 WL 1450581, at *2 (D. Neb. Apr. 24, 2017) (discussing how an hourly rate of $581.71 per hour is reasonable for an attorney with "substantial experience in this field, including a number of years working almost exclusively on Social Security disability cases."); Sedlak v. Saul, 8:18CV515, 2020 WL 5849685, at *2 (D. Neb. Oct. 1, 2020) (holding an hourly rate of $784.19 per hour is reasonable); Ernst v. Saul, Civ. No. 4:14-cv-00331-SMR-TJS, 2021 WL 9455484 (S.D. Iowa Jan. 29, 2021) (finding an hourly rate of approximately $623.49 is reasonable).
Plaintiff's counsel submitted a full accounting of the time he spent working on the case, which is 13.8 hours. [ECF No. 20-4 at 1]. Plaintiff requests $34,496.00 in attorneys' fees, which yields a rate of $2,499.71 per hour. Id. This rate is roughly two and a half times the highest rate of attorneys' fees awarded by courts. [ECF No. 20-5 at 5] (citing Owens v. Saul, No C17-86-LTS (N.D. Iowa Apr. 9, 2020) (unpublished)). This rate is anywhere between three to six times the traditional rate of reimbursement for attorneys' fees. Roark v. Barnhart, 221 F. Supp. 2d 1020, 1026 (W.D. Mo. 2002) (awarding an hourly rate of $341.77 an hour). Considering these cases, the Court cannot say that the requested hourly rate by Kappelman is reasonable.
iii. Complexity of the Case
A district court evaluating a request for approval of a fee should consider the "complexity of the case." Gisbrecht, 535 U.S. at 794 n.3, 122 S.Ct. 1817 (citing 20 C.F.R. § 404.1725(b)(1)(ii)). This relates to the "overall complexity of the case" and "the lawyering skills necessary to handle it effectively." Webster v. Astrue, 4:10CV3229-JFB, 2012 WL 2576366, at *2 (D. Neb. July 3, 2012) (citing Mudd v. Barnhart, 418 F.3d 424, 428 (4th Cir. 2005)). Courts may consider the complexity of the medical issues, the length of the record, and the materials submitted to the Court to aid its analysis. Miller v. Kijakazi, Civil No. 19-2842 (JRT/TNL), 2021 WL 5216903, at *2 n.2 (D. Minn. Nov. 9, 2021).
This factor supports a reduced fee. No information suggests the record is so voluminous as to create considerable trouble for Kappelman. [ECF No. 7]. McDonald's medical conditions are numerous, but not particularly complex. See [ECF No. 9]. Additionally, the arguments presented to the Court, which focus on the failure of the ALJ to consider medical evidence that contradicts its analysis, are standard arguments in a proceeding that challenges the denial of Social Security benefits. Id. This factor weighs in support of a reduction of the awarded fee.
iv. Fee Reduction
Plaintiff seeks roughly $2,500 an hour for his work on this case. [ECF No. 20]. Although Plaintiff and her attorneys signed a contingent fee agreement allowing Kappelman to earn 25% of the past due benefits, the record shows that awarding the full amount would not be a "reasonable fee" under the statute. A reduction in the awarded fee from $2,499.71 per hour to $850.00 per hour is appropriate. This rate multiplied by the 13.8 billed hours would yield a total fee of $11,730.00. This amount balances the complexity of the record, the time spent on the case, and the fact Kappelman risked the possibility he would receive no pay for the completed work.
III. CONCLUSION
Plaintiff's Motion for Attorneys' Fees under 42 U.S.C. § 406(b) is GRANTED in part and DENIED in part. Plaintiff's counsel is awarded fees in the amount of $11,730.00. Plaintiff's counsel is ORDERED to refund to Plaintiff the attorneys' fees previously received under the EAJA.
IT IS SO ORDERED.