Argument analysis: Justices struggle with cap on attorney’s fees for successful representation of Social Security disability claimants

At Wednesday’s oral argument in Culbertson v. Berryhill, the justices undertook to resolve a split among the courts of appeals as to whether the Social Security Act imposes an aggregate cap of 25 percent on attorney’s fees for successful representation before both the agency and a court, or whether a separate 25 percent cap applies to attorney’s fees for successful representation before a court.

Daniel Ortiz, representing the petitioner, Richard Culbertson, an attorney who successfully represented several Social Security disability claimants both before the Social Security Administration and in federal court, argued in favor of a separate cap. Anthony Yang, representing the respondent, Nancy Berryhill, the acting social security commissioner, also argued in favor of a separate cap. Because both the petitioner and respondent argued in favor of a separate cap and thus reversal and remand, the Supreme Court appointed Amy Weil to argue in favor of an aggregate cap in support of the judgment below.

Ortiz presented the case as turning on the meaning of two words, “such representation,” in 42 U.S.C. § 406(b). Section 406(b) provides in relevant part:

Whenever a court renders a judgment favorable to a claimant under [Title II of the Social Security Act] who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment.

Ortiz argued that both the dictionary meaning of the word “such” and common sense confirm that the 25 percent cap on attorney’s fees in Section 406(b) references explicitly and solely work done in the court.

Yang similarly focused on the text of Section 406(b). He argued that there is “one and only one operative provision in this case:” Section 406(b)(1)(A), and the text of the statute fully resolves the case.

Undoubtedly, the text of Section 406(b) supports Ortiz and Yang’s position that Section 406(b) imposes a separate cap on attorney’s fees. Indeed, Justice Brett Kavanaugh said to Yang that “you obviously have a good textual argument.”

Weil faced a much more difficult textual argument. Looking at Section 406 as a whole, rather than Section 406(b) in isolation, she argued that the statute “is not a model of clarity. It’s a piecemeal statute that was enacted over a series of amendments over a course of 50 years.” She contended that the best interpretation of the statute as a whole is that it imposes a 25 percent aggregate cap on agency and court fees.

Justice Elena Kagan told Weil she was “struggling with” Weil’s textual argument. “I don’t quite get the argument.” Kavanaugh, who appeared more sympathetic to Weil’s position, nevertheless pointed several times to the missing words “in the aggregate” in Section 406(b) and noted that those words were used in another part of the statute. Weil elicited laughter when she responded: “That is unfortunate. This is not the best written statute.”

If, in deciding the case, the justices focus solely on the language of Section 406(b) in isolation, Ortiz and Yang will undoubtedly win. Oral argument, however, was not limited to the text of the statute. Instead, many of the justices asked about the practical implications of holding that Section 406(b) imposes a separate cap. How much might be awarded in attorney’s fees? Could fees be 50 percent or even reach 75 percent? How would attorneys recover fees that exceed 25 percent? Do attorneys actually recover fees that exceed 25 percent? What happens “in the normal case?” May attorneys look to Equal Access to Justice Act fees to recover fees that exceed 25 percent?

Apart from these practical questions, Justice Sonia Sotomayor raised concerns about whether clients are being adequately represented. She said she was “troubled by these fee disputes.” Was the client in this case advised of the potential conflict of interest and advised to seek separate counsel? Ortiz was unable to provide Sotomayor with any such assurance but did note that the client in this case, Katrina Wood, was “informed of what was happening” and consented.

Justice Ruth Bader Ginsburg asked if there is a cap on the amount that can be taken from the plaintiff’s recovery. Ortiz explained that the agency will set aside (withhold) a maximum of 25 percent of claimants’ past-due benefits for payment of attorney’s fees under both Sections 406(b) and 406(a). This amount was referred to as the 25 percent pool, pot or fund throughout oral argument. Initially, Kavanaugh thought this 25 percent cap was mandated by the statute and that the cap suggested that Congress must have thought that Section 406 imposed an overall limit on attorney’s fees of 25 percent. Ortiz and Yang explained that the statute did not mandate a 25 cap on the pool but that the agency used its discretion to impose the cap.

Sotomayor was “troubled by the idea of attorneys attempting to collect fees directly from their clients.” She asked all three attorneys how attorney’s fees that exceed the 25 percent fund are to be collected. “Are we going to have people garnishing something or attaching something that belongs to clients?” Ginsburg too asked “where would you go” to get the fees that exceed 25 percent.

Ortiz responded that if the claimant can’t pay more than the 25 percent withheld by Social Security, “you would take your lumps and leave. The lawyer at that point would swallow the loss in fees, is typically what happens.” Ortiz contended, however, that in the case of say, Bill Gates, the attorney could go after the client to collect the remaining fee.

Ginsburg wanted to know the practical consequences of the court’s agreeing to a separate cap when an attorney “can’t get more than 25 percent out of the Social Security benefits themselves.” Ortiz responded that the practical implication of the aggregate rule is that attorneys are less willing to take on these cases knowing that they will not be paid for work in court because the pool has been expended.

Justice Neil Gorsuch seemed to find this response compelling. He asked Weil whether a rational Congress could think that in an unusual case it might be necessary to allow attorney’s fees that exceed 25 percent. Weil responded that such a scheme would not be irrational, but that is not the approach that Congress took. Gorsuch also suggested that cases that go to court are the hardest and thus the most in need of incentives for lawyers to represent clients.

Kagan was troubled by the possibility of attorneys’ fees of 75 percent if the case goes to a court of appeals. She asked, “could that possibly have been what Congress wanted?” Yang assured her that the government’s view is that the Section 406(b) 25 percent cap is for all court proceedings, including appeals, and that normally, fees should not exceed 50 percent.

Kavanaugh expressed concern about fees of 50 percent. He noted that attorney’s fees are coming “right of the claimant’s pocket” and “it’s unusual to have a 50 percent chunk out of a claimant’s” pocket.

Justice Stephen Breyer announced that this was a “tough statute” for him. He was concerned that an attorney’s fees are based solely on a claimant’s past-due benefits and that the value of future benefits may far exceed the value of past-due benefits on which the attorney’s fee is based. Gorsuch also asked about the value of future benefits relative to past-due benefits.

Asked by Sotomayor what a lawyer can do to recover attorney’s fees that exceed the 25 percent pool withheld by the agency, Weil offered a couple of potential ways in which attorneys may try to recover fees. Chief Justice John Roberts noted that Ortiz had said that lawyers don’t go after recipients. He wanted to know who is right. Weil contended she was right. She asserted that the lawyers are“not asking for a Pyrrhic victory. They’re asking for the money.”

Editor’s Note: Analysis based on transcript of oral argument.