Opinion
Civil Action 4:19-CV-1439
03-19-2021
JULIE A. HANDWERK, Plaintiff v. ANDREW M. SAUL, Defendant
WILSON, D.J.
REPORT & RECOMMENDATION
William I. Arbuckle U.S. Magistrate Judge
I. INTRODUCTION
Over ten years ago, Julie A. Handwerk (“Plaintiff”) filed an application for disability insurance benefits under Title II of the Social Security Act. Most recently, that application was remanded by this Court based on the Supreme Court's decision in Lucia v. S.E.C., 138 S.Ct. 2044 (2018) because the ALJ who presided over Plaintiff's 2017 administrative hearing was not constitutionally appointed. Now, Plaintiff's counsel seeks the award of attorney fees. The Commissioner opposes.
For the reasons set forth below, it is RECOMMENDED that Plaintiff's Motion seeking attorney fees under the Equal Access to Justice Act, 28 U.S.C. § 2412, (Doc. 26) be GRANTED.
II. BACKGROUND & PROCEDURAL HISTORY
A. Background & Procedural History of This Case
On October 14, 2010, Plaintiff filed an application for disability insurance benefits under Title II of the Social Security Act. (Admin. Tr. 421; Doc. 11-11, p. 11). In this application, Plaintiff alleged she became disabled as of September 2, 2007, when she was thirty-four years old, due to the following conditions: fibromyalgia; major depression; diabetes; and anxiety. (Admin. Tr. 119; Doc. 11-6, p. 5). Plaintiff later amended her onset date to December 1, 2006. Plaintiff alleges that the combination of these conditions affects her ability to lift, squat, bend, stand, reach, walk, sit, kneel, talk, hear, climb stairs, memorize, complete tasks, concentrate, understand, follow instructions, and get along with others. (Admin. Tr. 148; Doc. 11-6, p. 34). Plaintiff has at least a high school education and is able to communicate in English. (Admin. Tr. 434; Doc. 11-11, p. 24). Before the onset of her impairments, Plaintiff worked as a phlebotomist and certified nurse's aide. (Admin. Tr. 434; Doc. 11-11, p. 24).
On January 10, 2011, Plaintiff's application was denied at the initial level of administrative review. (Admin. Tr. 421; Doc. 11-11, p. 11). On January 21, 2011, Plaintiff requested an administrative hearing. Id.
On May 3, 2012, Plaintiff, assisted by her counsel, appeared and testified during a hearing before Administrative Law Judge Therese Hardiman (“ALJ Hardiman”). Id. On June 28, 2012, ALJ Hardiman issued a decision denying Plaintiff's application for benefits. Id. On July 26, 2012, Plaintiff requested review of ALJ Hardiman's decision by the Appeals Council of the Office of Disability Adjudication and Review (“Appeals Council”). (Admin. Tr. 7; Doc. 11-2, p. 8).
On September 27, 2013, the Appeals Council denied Plaintiff's request for review. (Admin. Tr. 1; Doc. 11-2, p. 2).
On November 25, 2013, Plaintiff appealed to this Court. Complaint, Handwerk v. Colvin, No. 3:13-CV-2860 (M.D. Pa. Nov. 25, 2013), ECF No. 1. On October 24, 2013, United States Magistrate Judge Karoline Mehalchick issued a Report recommending that ALJ Hardiman's June 2012 decision be vacated and the case remanded to the Commissioner to conduct a new administrative hearing. Report and Recommendation, Handwerk v. Colvin, No. 3:13-CV-2860 (M.D. Pa. Oct. 24, 2014), ECF No. 13. The Commissioner waived objections. Letter, Handwerk v. Colvin, No. 3:13-CV-2860 (M.D. Pa. Nov. 6, 2013), ECF No. 14. On November 10, 2014, United States District Judge William J. Nealon issued a Memorandum Opinion, and Order adopting Judge Mehalchick's recommendation. Memorandum and Order, Handwerk v. Colvin, No. 3:13-CV-2860 (M.D. Pa. Nov. 10, 2014), ECF Nos. 15, 16).
On June 9, 2015, ALJ Hardiman held a second administrative hearing. (Admin. Tr. 597; Doc. 11-13, p. 49). Then, on February 17, 2016, issued a second decision denying Plaintiff's application for benefits. (Admin. Tr. 611; Doc. 11-13, p. 63). On March 15, 2015, Plaintiff requested review of ALJ Hardiman's second decision denying her application for benefits. (Admin. Tr. 620; Doc. 11-13, p. 72). On October 7, 2016, the Appeals Council remanded Plaintiff's case to be heard by a new Administrative Law Judge with instructions to “offer the claimant the opportunity for a hearing, take any further action needed to complete the administrative record and issue a new decision.” (Admin. Tr. 621; Doc. 11-13, p. 73).
On February 16, 2017, Plaintiff appeared and testified at a third administrative hearing, this time in front of a second ALJ-ALJ Jarrod Tranguch (“ALJ Tranguch”). (Admin. Tr. 627; Doc. 11-14, p. 5). On June 28, 2017, ALJ Tranguch issued the third decision denying Plaintiff's application for benefits. (Admin. Tr. 638; Doc. 11-14, p. 16). On July 25, 2017, Plaintiff requested review of the third decision denying her application for benefits. (Admin. Tr. 690; Doc. 11-15, p. 40). On January 11, 2019, the Appeals Council remanded Plaintiff's case back to ALJ Tranguch with instructions to “take any further action needed to complete the administrative record and issue a new decision.” (Admin. Tr. 650; Doc. 11-14, p. 28). However, because Plaintiff's insured status expired over six years before the 2017 ALJ decision was issued, it did not require that a new hearing be held unless Plaintiff demonstrated to the ALJ that “the facts of the case warrant[ed] another hearing.” Id.
After corresponding with Plaintiff's counsel in January 2019, ALJ Tranguch concluded that there was no need to conduct a fourth administrative hearing. (Admin. Tr. 422, 910-911; Docs. 11-11, p. 12, 11-19, p. 43-44). On April 24, 2019, ALJ Tranguch issued a fourth decision denying Plaintiff's application for benefits. (Admin. Tr. 435; Doc. 11-11, p. 26). Although the record includes some correspondence between Plaintiff's counsel and the Appeals Council asking for an extension of time to file written exceptions, it does not include a decision by the Appeals Council that addresses the fourth decision denying Plaintiff's application for benefits.
The record in this case includes two decisions issued by ALJ Tranguch on April 24, 2019. One of these decisions was apparently transmitted without the correct notice of the procedure to appeal. Then the decision was re-issued later the same day with the correct notice attached. (Admin. Tr. 418; Doc. 11-11, p. 8).
Where, as here, a claimant is dissatisfied with an ALJ's ruling following a remand from the district court, that claimant has two options: (1) pursue the claim through the administrative process by filing written exceptions to the ALJ decision; or (2) file a complaint in district court (assuming the Appeals Council does not assume jurisdiction). 20 C.F.R. § 404.984. Because no Appeals Council decision is included in this record, I infer that Plaintiff chose the second option.
On August 19, 2019, Plaintiff initiated this action by filing a Complaint. (Doc. 1). In the Complaint, Plaintiff alleges that “[t]he ALJ in this case was not properly appointed under the Constitution.” (Doc. 1). As relief, Plaintiff requests “a judgment for such relief as may be proper, including costs and attorney's fees”. Id.
On October 24, 2019, the Commissioner filed an Answer. (Doc. 10). In the Answer, the Commissioner maintains that the decision holding that Plaintiff is not entitled to disability insurance benefits was made in accordance with the law and regulations and is supported by substantial evidence. (Doc. 10, ¶ 9). Along with her Answer, the Commissioner filed a certified transcript of the administrative record. (Doc. 11).
After Plaintiff's case was fully briefed, I issued a Report & Recommendation, recommending that Plaintiff's case be remanded to the Social Security Administration pursuant to sentence four of 42 U.S.C. § 405(g) with instructions that Plaintiff receive a new administrative hearing before a constitutionally appointed ALJ other an ALJ Tranguch or ALJ Hardiman because those ALJs were not properly appointed at the time they ruled on Plaintiff's application. (Doc. 23); see also Lucia v. S.E.C., 138 S.Ct. 2044 (2018) and Cirko ex rel. Cirko v. Comm'r of Soc. Sec., 948 F.3d 148 (3d Cir. 2020). On May 29, 2020, United States District Judge Jennifer Wilson issued an Order adopting my recommendation. (Doc. 24).
On August 6, 2020, Plaintiff filed a Motion requesting the award of attorney fees under the Equal Access to Justice Act (hereinafter “EAJA”), 28 U.S.C. § 2412. (Doc. 26). Along with her Motion, Plaintiff filed a “Statement of Attorney Time Expended” (Doc. 26-1). Plaintiff requests an award of $10,094.00 (49.0 hours billed at an hourly rate of $206.00 per hour). (Doc. 26).
On August 18, 2020, the Commissioner filed a Response. (Doc. 27). The Commissioner argues that Plaintiff is not entitled to any attorney fees under the EAJA because the Commissioner's position in opposing Plaintiff's appeal of the ALJ decision was substantially justified. (Doc. 27).
On August 25, 2020, Plaintiff filed a Reply. (Doc. 29).
On September 18, 2020, Plaintiff's Motion for attorney fees was referred to me for resolution. (Doc. 29).
B. Background On the Social Security Administration's Response to Lucia
The legal questions now at issue in this Social Security Appeal are rooted in a case that arose out of an enforcement action initiated by the Securities and Exchange Commission against an investment company, and its owner Raymond Lucia. The task of presiding over this S.E.C. action was delegated to Cameron Elliot (hereinafter “ALJ Elliot”), one of its five Administrative Law Judges. Following a hearing, ALJ Elliot concluded that Lucia had violated the law, and he issued a decision imposing sanctions. On administrative appeal to the Commission itself, Lucia argued that the hearing presided over by ALJ Elliot, and by extension the decision ALJ Elliot issued, were invalid because ALJ Elliot was an officer of the United States subject to the Appointments Clause and had not been properly appointed. Eventually, this case reached the United States Supreme Court. In 2018, the Supreme Court decided the SEC's ALJs are subject to the Appointments Clause, that ALJ Elliot had not been properly appointed at the time he issued a decision on Lucia's case, and that the only remedy for that error is that “another ALJ (or the Commission itself) must hold a new hearing to which Lucia is entitled.” Lucia v. S.E.C., 138 S.Ct. 2044, 2055 (2018). It is the Supreme Court's holding in that case, and the Social Security Administration's response to it, that will guide the Court's evaluation of Plaintiff's pending request for attorney fees.
On January 30, 2018, six months before the Supreme Court issued its decision in Lucia, the Social Security Administration's Office of General Counsel issued its first guidance on potential challenges to the appointment of its own Administrative Law Judges. Davis v. Saul, 963 F.3d 790, 792 (8th Cir. 2020). In this message, the Office of General Counsel “warned ALJs that they might receive Appointments Clause challenges and instructed them not to ‘discuss or make any findings related to the Appointments Clause issue,' because the ‘SSA lacks the authority to finally decide constitutional issues such as these.'” Id. (quoting Soc. Sec. Admin., EM-18003: Important Information Regarding Possible Challenges to the Appointment of Administrative Law Judges in SSA's Administrative Process (2018)). In the same emergency message, ALJs were directed to acknowledge the Appointments Clause issue when it was raised. Id.
On June 21, 2018, the Supreme Court issued its decision on the Lucia case. 138 S.Ct. 2044. Four days later, on June 25, 2018, the Social Security Administration's Office of Hearing Operations revised the original emergency message. “This direction continued to instruct ALJs to acknowledge, but not to address, challenges based on the Appointments Clause.” Davis, 936 F.3d at 792 (citing Soc. Sec. Admin., EM-18003 REV: Important Information Regarding Possible Challenges to the Appointment of Administrative Law Judges in SSA's Administrative Process - UPDATE (2018)).
On July 16, 2018, the Acting Commissioner of Social Security ratified the appointments of all of the Social Security Administration's ALJs and Administrative Appeals Judges (“AAJs”). SSR 19-1p, 2019 WL 1324866 at *2 (Mar. 15, 2019).
On August 6, 2018, the Social Security Administration's Office of Hearing Operations issued a third revised version of the EM-18003. Davis, 963 F.3d at 792. The third version of EM-18003 “announced that (i) the agency's Acting Commissioner recently had ratified the appointment of ALJs, thereby curing any defect related to the Appointments Clause, and (ii) ALJs should continue to acknowledge and report any Appointments Clause challenges that were raised
before the ratification date. Id. (citing Soc. Sec. Admin., EM-18003 REV 2: Important Information Regarding Possible Challenges to the Appointment of Administrative Law Judges in SSA's Administrative Process - UPDATE (2018)).
On March 15, 2019, the Social Security Administration issued a policy ruling that addresses the effect the Supreme Court's decision in Lucia has on cases pending at the Appeals Council level. SSR 19-1p, 2019 WL 1324866. SSR 19-1p provides, in relevant part that:
We interpret some challenges to the ALJ's authority to hear and decide a claim, based on the Supreme Court's decision in Lucia, as raising “a broad policy or procedural issue that may affect the general public interest” within the meaning of our regulations. Challenges to an ALJ's authority to decide a claim may raise a broadly applicable procedural issue independent of the merits of the individual claim for benefits-that is, whether the ALJ who presided over the claimant's hearing was properly appointed under the Appointments Clause of the Constitution. We will process requests for review that include a timely administrative challenge to the ALJ's authority based on the Appointments Clause in the manner described below.
The Appeals Council will grant the claimant's request for review in cases where the claimant: (1) Timely requests Appeals Council review of an ALJ's decision or dismissal issued before July 16, 2018; and (2) raises before us (either at the Appeals Council level, or previously had raised at the ALJ level) a challenge under the Appointments Clause to the authority of the ALJ who issued the decision or dismissal in the case.
When the Appeals Council grants review based on a timely-raised Appointments Clause challenge, AAJs who have been appointed by the Acting Commissioner (or whose appointments the Acting Commissioner has ratified) will vacate the hearing decision or dismissal. In cases in which the ALJ made a decision, the Appeals Council will conduct a new and independent review of the claims file
and either remand the case to an ALJ other than the ALJ who issued the decision under review, or issue its own new decision about the claim covering the period before the date of the ALJ's decision. In its review, the Appeals Council will not presume that the prior hearing decision was correct.2019 WL 1324866 at *3.
III. LEGAL STANDARDS
A. Legal Standard for Awarding Fees Under the EAJA in Social Security Cases
The EAJA creates a right to attorney's fees in certain cases where a litigant successfully challenges some government agency action, and provides that:
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.28 U.S.C. § 2412(d)(1)(A). A request for fees must be submitted to the Court within 30 days of final judgment in the action and be supported by an itemized statement. 28 U.S.C. § 2412(d)(1)(B).
A magistrate judge does not have the authority to issue a final decision on a motion for attorney fees under the EAJA without the consent of the parties. Rajaratnam v. Moyer, 47 F.3d 922 (7th Cir. 1995). In this case, the parties have not consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c). Therefore, this Motion must be resolved by Report & Recommendation.
Thus, to summarize, eligibility for a fee award in a Social Security Appeal under the EAJA requires: (1) that the plaintiff be a prevailing party; (2) that the Commissioner's position was not substantially justified; (3) that no special circumstances make the award unjust; (4) the fee application be submitted within 30 days of final judgment; and (5) the fee application be supported by an itemized statement. See Hoover v. Saul, No. 1:19-CV-579, 2020 WL 5369945 at *2 (M.D. Pa. Sept. 8, 2020) (citing Comm'r, I.N.S. v. Jean, 496 U.S. 154, 158 (1990)).
The only requirement disputed by the Commissioner in this case is whether the Commissioner's position was substantially justified. The Commissioner contends that it was, while Plaintiff argues that it was not.
B. Legal Standard for Determining Whether the Commissioner's Position Was Substantially Justified
As discussed above, the Commissioner opposes Plaintiff's Motion seeking fees under the EAJA on the ground that the Commissioner's position was substantially justified, and bears the burden of proving it. Hanover, 989 F.2d at 128. This position “includes not only the position taken in the litigation, but the agency position that made the litigation necessary in the first place.” Hanover Potato Products, Inc. v. Shalala, 989 F.2d 123, 128 (3d Cir. 1993) (citing Taylor v. Heckler, 835 F.2d 1037, 1040 (3d Cir. 1987) (“[T]he government is deemed to have two positions for EAJA purposes, both [of which] must be substantially justified . . . . [I]f either government position does not bear scrutiny, the prevailing party should be awarded attorney's fees [and other reasonable fees and expenses].”).
The Supreme Court has defined “substantial justification” under the EAJA as “‘justified in substance or in the main'-that is, justified to a degree that could satisfy a reasonable person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988). “To be ‘substantially justified' means, of course, more than merely undeserving of sanctions for frivolousness; that is assuredly not the standard for Government litigation of which a reasonable person would approve.” Id. (internal footnote omitted). The Third Circuit has held that, to demonstrate substantial justification for its position, the Government must offer: (1) a reasonable basis in the truth for the facts alleged; (2) a reasonable basis in law for the theory propounded; and (3) a reasonable connection between the facts alleged and the level theory advanced.” Hanover Potato Prods., 989 F.2d at 128.
In analyzing whether the Commissioner's position is substantially justified, the Court should examine the entirety of the government's position applying a “totality of the circumstances” test. Williams v. Astrue, 600 F.3d 299, 302 (3d Cir. 2009).
IV. ANALYSIS
A. The Commissioner's Pre-Litigation Position was Not Substantially Justified
Caselaw on attorney fees litigation mandates that the prevailing party is not entitled to fees under the EAJA where the agency's position is substantially justified. This becomes more complex in cases like this one, which arises out of district court review of agency action. In such cases, an agency is viewed to have two “positions”, pre-litigation and litigation.
The “pre-litigation” position is characterized as “the agency position that made litigation necessary in the first place.” Morgan v. Perry, 142 F.3d 670, 684 (3d Cir. 1998). Typically, in social security appeals, the Commissioner's pre-litigation position is easily identified on the face of the Commissioner's final decision. However, in this case and those like it, that position is more elusive. The issue here, that warranted remand of this case for a new administrative hearing, is not about a finding made by the ALJ. Rather, it is a challenge to the ALJ's authority preside over Plaintiff's February 2017 hearing.
As discussed above, the Court engages in a three-part inquiry to determine whether the Commissioner's position is substantially justified.
With respect to the first inquiry, the factual basis for the Social Security Administration's pre-litigation position, there does not appear to be any dispute. Both Plaintiff and the Commissioner agree that Plaintiff did not make any challenge to the constitutionality of ALJ Tranguch or ALJ Hardiman's appointment during the administrative proceedings. The Commissioner did not address the appointments clause issue in any administrative decision issued in this case.
With respect to the second inquiry, the legal theory justifying its position, the Commissioner alleges that “the legal theory advanced [by the Social Security Administration] was a long-standing and well-accepted principle that a litigant who does not timely raise an argument before an administrative agency, forfeits that argument.” (Doc. 27, p. 6). As noted by Plaintiff, however, the “forfeiture defense” was asserted by the Commissioner during the litigation of this appeal. Nothing in the record of this case suggests that a forfeiture defense was urged or acknowledged during the pre-litigation administrative proceedings in this case. Thus, I am not persuaded that the Commissioner's “forfeiture defense” has any bearing on the Court's evaluation of the pre-litigation position.
However, interwoven in the paragraph addressing the third inquiry (whether there is a reasonable connection between the facts and legal theory), the Commissioner posits a second “theory” that may be construed to justify his pre-litigation position. Specifically, he alleges that “the Commissioner reasonably did not address the appointment of the ALJ because Plaintiff never raised any objection at the administrative level.” (Doc. 27, p. 7). The Commissioner has not cited any legal authority to support this “theory.” Plaintiff did not respond to it in her reply.
In the Eastern District of Pennsylvania, the Commissioner has argued that the Social Security Administration is not required to raise the appointments clause argument sua sponte. The cases which discuss this type of argument fall into three categories.
First, in at least two cases in the Eastern District, fees were awarded based on this issue. Armstrong v. Saul, 465 F.Supp.3d 486 (E.D. Pa. June 9, 2020); Howard v. Saul, No. 19-2262, 2020 WL 3288186 (E.D. Pa. June 18, 2020). In both Armstrong and Howard, the Court concluded that the Social Security Administration's failure to address the Appointments Clause question during administrative proceedings amounted to the Administration having no pre-litigation position. In arriving at this conclusion, the Court explained:
The Commissioner's second argument, that it did not address the Appointments Clause question because Plaintiff did not raise it administratively, is problematic for the Commissioner. Essentially, the Commissioner's argument is that he did not have a pre-litigation position. Since it is the Commissioner's burden to prove that his pre-litigation position was substantially justified, Scarborough, 541 U.S. at 414, his failure to have one renders his position impossible to justify. Accordingly this court finds the Commissioner has failed to sustain his burden to prove that his pre-litigation position was substantially justified. Plaintiff is, therefore, entitled to reasonable attorney's fees under the EAJA.Armstrong, 465 F.Supp.3d at 490.
Second, at least two cases in the Eastern District addressed whether the Social Security Administration was substantially justified in not raising the Appointments Clause question during administrative proceedings that occurred before the Supreme Court issued its decision in Lucia. Culclasure v. Comm'r of Soc. Sec., No. 18-1543, 2020 WL 3172860 (E.D. Pa. June 15, 2020); Lebron-Torres v. Comm'r of Soc. Sec., No. 18-1212, 2020 WL 3488424 (E.D. Pa. June 26, 2020). In both Culclasure and Lebron-Torres, the court reasoned that the Social Security Administration was not required to raise the Appointments Clause question during administrative proceedings because the administrative proceedings in both cases were completed before Lucia was decided by the Supreme Court. In doing so, the court in Culclasure explained:
The timeline of events is important in addressing this argument. Mr. Culclasure filed for benefits in December 2014. He received a video hearing before Administrative Judge Flynn in July 2017. Administrative Judge Flynn denied Mr. Culclasure's benefit request. Mr. Culclasure appealed this decision to the Appeals Council who denied Mr. Culclasure's appeal in March 2018. Mr. Culclasure never raised the Appointments Clause issue to Administrative Judge Flynn or to the Appeals Council. A little over three months after the Commissioner resolved Mr. Culclasure's claim, the Supreme Court decided Lucia-holding administrative law judges in the Securities and Exchange Commissioner are “inferior officers” who must be appointed consistent with the Appointments Clause. This holding also carried consequences for administrative law judges in the Social Security Administration.
The Commissioner acted consistent with “settled law” as the administrative proceedings occurred before Lucia. Before Lucia, the constitutional appointment status of Social Security administrative
law judges had not been declared. While we expect the Commissioner respond [sic] to a claimant's constitutional concerns when raised and to conform to “settled law” consistent with his oath to defend the Constitution, we do not expect nor require the Commissioner to predict how the judiciary will interpret the Constitution in conducting administrative proceedings among varied interpretations. The Commissioner acted reasonable at the administrative level. We cannot award fees to Mr. Culclasure on this ground.Culclasure, 2020 WL 3172860 at *5 (internal footnote omitted).
Third, at least one case in the Eastern District of Pennsylvania addressed whether the Social Security Administration was substantially justified in not raising the Appointments Clause question during administrative proceedings that occurred after the Supreme Court issued its decision in Lucia. Rich v. Comm'r of Soc. Sec., 477 F.Supp.3d 388 (E.D. Pa. Aug. 6, 2020). In Rich, the court reasoned that the Social Security Administration was not required to raise the Appointments
Clause question sua sponte at the Appeals Council level after Lucia was decided.
In doing so, the court in Rich explained:
The timeline of events is important when addressing the Commissioner's justification at the administrative level. Ms. Rich filed for benefits in 2015. She received a video hearing before Judge Marku in April 2017. Judge Marku denied Ms. Rich's benefit request a few months later. Ms. Rich then appealed this decision to the Appeals Council. The Supreme Court decided Lucia on June 21, 2018-holding administrative law judges in the Securities and Exchange Commissioner are “inferior officers” who must be appointed consistent with the Appointments Clause. The Commissioner then affirmed Judge Marku's decision two weeks after Lucia. Ms. Rich did not raise the Appointments Clause issue to Judge Marku or to the Appeals Council.
In Culcasure, the entirety of the administrative proceedings occurred before Lucia; under those facts and circumstance, we concluded the Commissioner easily acted with “settled law.” We explained, “[b]efore Lucia, the constitutional appointment status of Social Security administrative law judges has not been declared. While we expect the Commissioner respond [sic] to a claimant's constitutional concerns when raised and to conform to ‘settled law' consistent with his oath to defend the Constitution, we do not expect nor require the Commissioner to predict how the judiciary will interpret the Constitution in conducting administrative proceedings among varied interpretations.”
Our reasoning from Culclasure supports the Commissioner's substantial justification for allowing Judge Marku to adjudicate Ms. Rich's claim. But today's issue is slightly different than Culclasure because Ms Rich's case remained pending before the Appeals Council after the Court decided Lucia. So we must decide whether the Commissioner held an affirmative sua sponte duty to raise an Appointments Clause challenge and remand Ms. Rich's case while pending before the Appeals Council. Our colleague the Honorable Elizabeth T. Hey recently reasoned an agency will lack a substantial justification for its position if the position “conflict[s] with a clearly settled legal principle articulated by the courts” or if it constitutes “bureaucratic arbitrariness.” We see no clearly settled legal principle or bureaucratic arbitrariness in the Commissioner's decision not to raise the Appointments Clause issue sua sponte. We see no support imposing a sua sponte obligation on the Commissioner to raise Appointments Clause challenges. The Commissioner acted reasonably at the administrative level. We cannot award fees to Ms. Rich on this ground.Rich, 477 F.Supp.3d at 393-394 (internal footnotes omitted).
Guided by these cases, I find that the Commissioner's pre-litigation position in this case was not substantially justified. As it was in Culclasure, Lebron-Torres, and Rich, the timeline of events is important when addressing the Commissioner's justification for his pre-litigation position in this case. However, I limit my discussion to the events that are relevant to the pending fee petition. A more complete summary of the procedural history appears in Section II. A. of this Report.
Plaintiff had an administrative hearing on February 16, 2017. Her application was denied by an ALJ on June 28, 2017. She requested Appeals Council review on July 25, 2017. Like in Rich, Plaintiff's case was pending before the Appeals Council when the Supreme Court issued its decision in Lucia on June 21, 2018. However, this is where the similarities between this case and Rich end.
Unlike in Rich, the Appeals Council remanded Plaintiff's case to an ALJ on January 11, 2019. In its remand order, the Appeals Council raised the issue of whether a new ALJ hearing was necessary, and concluded that it was not, without addressing Lucia. (Admin. Tr. 648-650; Doc. 11-14, pp. 26-28). Specifically, the Appeals Council ordered that:
In compliance with the above, the Administrative Law Judge will take any further action needed to complete the administrative record and issue a new decision. The claimant's date last insured expired before the date of the decision. Therefore, the Appeals Council does not require the Administrative Law Judge to provide the claimant another hearing (HALLEX II-5-1-3). The claimant can demonstrate to the Administrative Law Judge that the facts of the case warrant another hearing.(Admin. Tr. 650; Doc. 11-14, p. 28). Correspondence dated January 31, 2019 from Plaintiff's prior counsel suggests that ALJ Tranguch's office contacted counsel to discuss whether there was a need for a further hearing. (Admin. Tr. 910-911; Doc. 11-19, pp. 43-44). Nothing in the letter suggests that Lucia was discussed. Thus, the timeline of events in this case reveals that both the Appeals Council and ALJ Tranguch's office raised the issue of whether a hearing was necessary after Lucia was decided, without addressing the settled law under Lucia that ALJ Tranguch had not been properly appointed at the time he presided over Plaintiff's most recent administrative hearing.
In the January 31, 2019 letter, Plaintiff's prior counsel agreed that a new hearing may not be necessary. However, Plaintiff's counsel's failure to raise Lucia at that time is not relevant to the court's inquiry of whether the Commissioner's pre-litigation position was substantially justified.
Thus, considering the facts and timeline of this case, as well as considering the Commissioner's position that ALJs and AAJs are not required to raise the Appointments Clause issue sua sponte I find that their position was not reasonable in this case. I agree with Rich that, where the Administration had not cause to consider whether a new hearing be conducted, the Appointments Clause issue need not be raised sua sponte. However, this case is distinguishable. Here, the Social Security Administration raised the issue of whether a new administrative hearing was necessary twice after Lucia was decided. The Social Security Administration's decision to ignore the Supreme Court's decision in Lucia twice when it considered the issue of whether Plaintiff should receive a new hearing is not “reasonable in the main.” Therefore, I find that the Commissioner's pre-litigation position in this case was not substantially justified.
B. Remaining Arguments
The Commissioner also argues: (1) that his litigation position with respect to the Lucia issue was substantially justified, (Doc. 27, pp. 8-11); and (2) his pre-litigation and litigation positions were substantially justified as to the non-Lucia arguments raised in the district court, (Doc. 27, pp. 11-12). Plaintiff opposes these arguments in her reply. However, because the Commissioner's pre-litigation position on the Lucia issue was not substantially justified, I need not consider the Commissioner's remaining arguments.
[The next page contains the Recommendation]
V. RECOMMENDATION
Accordingly, for the reasons explained in this Report, it is RECOMMENDED that:
(1) Plaintiff's Motion requesting attorney fees under the EAJA (Doc. 26) be GRANTED.
(2) Plaintiff Julie Handwerk be awarded ten thousand and ninety-four dollars ($10,094.00) in attorney fees under the Equal Access to Justice Act.
Unless the parties stipulate to another arrangement, the fees should be made payable to Plaintiff Julie A. Handwerk, and delivered to the business address of Plaintiff's counsel.
Full or partial remittance of the awarded attorney fees be contingent upon a determination by the Government that Plaintiff owes no qualifying, pre-existing debt(s) to the Government. If such a debt(s) exists, the Government will reduce the awarded attorney fees in this Order to the extent necessary to satisfy such debt(s).
BY THE COURT
NOTICE OF LOCAL RULE 72.3
NOTICE IS HEREBY GIVEN that any party may obtain a review of the Report and Recommendation pursuant to Local Rule 72.3, which provides:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses, or recommit the matter to the magistrate judge with instructions.