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Who Should Receive Attorney’s Fees?

During Monday’s oral argument in Astrue v. Ratliff, the Court focused on the narrow question before the Court: should an attorney’s fee be awarded to a prevailing claimant or instead to the claimant’s attorney.

Under the Equal Access to Justice Act, a court can award to a party who prevails in an action against the United States the “fees and other expenses…incurred by”  that party if the position of the United States was not “substantially justified.”  [You can read my preview of the case, which has more background, here.]

Representing the federal government, Assistant to the Solicitor General Anthony Yang fielded numerous hypothetical questions that were intended to test the government’s position.  Justice Alito asked whether the government’s claim on attorney’s fees should be given priority over another creditor who would otherwise be repaid; if so, why?  Yang responded that when another creditor has a claim on a fee, it can seek the fee as well.  In response to Justice Ginsburg, who wondered whether the fee would be awarded to the prevailing party even if the party were in prison, Yang answered that it would be.

In a subsequent hypothetical, posed by Justice Breyer, Yang retreated from a position he briefly adopted.  Justice Breyer asked whether – before making a claim against the government – a lawyer could reach an agreement with his or her client and an agency in which the agency would agree “that if I [the lawyer] get an EAJA fee, then I get to keep it and I don’t have to give it to my client.”  Yang indicated that he was unaware of such a scenario ever actually occurring but he acknowledged that it was possible.  Keeping in mind that EAJA fees are only awarded when the government has taken a position which is not “substantially justified,” Chief Justice Roberts observed that if he were a lawyer, and the government agreed to pay him if he prevailed in a case, his first action in the case would be to submit the agreement as evidence, as the agreement is the equivalent of the government admitting that it has taken a position which is not substantially justified.  Yang thus retreated from his earlier position, suggesting instead that a lawyer could, in advance of a case, negotiate a debt-repayment agreement between his client and the government.  Justice Sotomayor then postulated that requiring a lawyer to do the work and negotiate a debt repayment agreement for his client before a case even begins would discourage lawyers from taking on Social Security cases.  This, said Sotomayor, is illogical.

Arguing on behalf of respondent Catherine Ratliff, James Leach quickly faced questions from Justice Kennedy, who repeated a theory premised on what he termed “the law of offsets.”  The government does not benefit by reclaiming EAJA fees through the debt offset program “because the money is [not] created to offset the debt,” suggested Justice Kennedy, because “it’s just being paid from one account to the other.”  Ratliff’s position, Justice Kennedy continued, “is just contrary to the standard law of offsets.”  The Court also discussed who should benefit from EAJA fees, and what it would mean to benefit.  Although Leach asserted that the statute “is subject to the regulation which looks to who’s entitled to the benefit,” and that attorneys should be considered the beneficiaries,  Justice Scalia countered that even when the government withholds the money to compensate outstanding debts, the plaintiff has in effect benefitted by avoiding a financial obligation to her lawyer.  In response, Leach noted that in veterans and Social Security cases, which account for ninety percent of EAJA claims, lawyers are prohibited from receiving fees in the form of pay-as-you-go payments.  This, he explained, would mean that “the attorney has never been paid” if the EAJA fee is withheld, and thus cannot benefit from the fee.

Leach also returned to Justice Breyer’s hypothetical: whether a lawyer could enter into a repayment agreement before taking a case, thereby ensuring that he would be compensated for his services. Leach countered that such agreements are fanciful.  First, Supplemental Security Income benefits are limited to “aged, blind, and disabled people who have little or no money.”  A claimant who met these criteria would have difficulty producing the money to enter a debt-repayment agreement.  Second, the attorney only has sixty days from when the agency acts to file a case in federal court – in Leach’s view, not enough time for an attorney to meet with his client, review the case, and enter an agreement with the government.