MCNEISH v. BERRYHILL

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CARLENE MCNEISH, :

:

Plaintiff, : CIVIL ACTION NO. 18-582

:

v. :

:

ANDREW M. SAUL, Commissioner of :

Social Security Administration, :

:

Defendant. :

MEMORANDUM OPINION

Smith, J. July 20, 2020

The plaintiff seeks attorney’s fees under the Equal Access to Justice Act (“EAJA”), 28

U.S.C. § 2412(d), having prevailed before this court in arguing that the administrative law judge

(“ALJ”) who originally heard her social security claim was not constitutionally appointed. The

Commissioner opposes the motion. For the reasons set forth below, the court concludes that the

plaintiff is not entitled to attorneys’ fees.

I. PROCEDURAL HISTORY AND APPLICABLE RECORD

The plaintiff, Carlene N. McNeish, filed an application for social security income under

Title XVI of the Social Security Act on September 25, 2013. Admin. R. at 94, Doc. No. 9-3. The

Social Security Administration initially denied her application on May 29, 2014. Id. at 115–18,

Doc. No. 9-4. After holding a hearing on March 29, 2016, the ALJ issued a decision on April 28,

2016, concluding that the plaintiff did not qualify as disabled under the Social Security Act. Id. at

54–81, Doc. No. 9-2; id. at 95–111, Doc. No. 9-3. The plaintiff requested that the Appeals Council

review the ALJ’s decision. Id. at 160–62, Doc. No. 9-4. The Appeals Council denied the plaintiff’s

request for review. Id. at 1–7, Doc. No. 2.

On February 9, 2018, the plaintiff filed an application for leave to proceed in forma

pauperis and a proposed complaint seeking judicial review of the ALJ’s decision. Doc. No. 1. The

court granted the plaintiff leave to proceed in forma pauperis and directed the clerk to docket the

complaint on February 15, 2018. Doc. No. 2.

On June 21, 2018, the Supreme Court rendered a decision in Lucia v. Securities and

Exchange Commission, 138 S. Ct. 2044 (2018). In Lucia, the Court addressed whether ALJs

working for the Securities and Exchange Commission(“S.E.C.”) are “Officers of the United

States” or “simply employees of the Federal Government.” Id. at 2051. This distinction is pivotal

because “[t]he Appointments Clause prescribes the exclusive means of appointing ‘Officers.’” Id.

Under the Appointments Clause “[o]nly the President, a court of law, or a head of department” can

appoint officers. Id. The Court held that S.E.C. ALJs are officers, and, therefore, their

appointments must comport with the Appointments Clause of the Constitution. Id. at 2055.

On August 6, 2018, the plaintiff filed a brief in support of her request for judicial review.

Doc. No. 14. In the brief, the plaintiff “raise[d] a new issue” based on Lucia, which the Court

decided after the plaintiff filed the complaint. Pl.’s. Br. and Statement of Issues in Supp. of Request

for Judicial Review at 2. The plaintiff argued that “Social Security ALJs are covered by the Lucia

holding.” Id. at 2. Because the ALJ who decided the plaintiff’s case “had not been appointed as

required by the holding in Lucia,” she argued that the court should remand the case “to an ALJ

who has been constitutionally appointed as required by Lucia.” Id.

On November 26, 2019, the Honorable Magistrate Judge Marilyn Heffley issued a report

and recommendation, which recommended that this court remand the plaintiff’s case to a properly

appointed ALJ.1 See R. & R. at 1, 28, Doc. No. 23. On January 3, 2020, the Commissioner objected

1 Judge Heffley alternatively recommended that should the court not remand the case on constitutional grounds, the

court should deny the plaintiff’s claims challenging the merits of the ALJ’s decision. See R. & R. at 1, 28.

to the report and recommendation on the grounds that the plaintiff waived her constitutional

challenge to the appointment of the ALJ by not raising the argument at the administrative level.

Def.’s Obj. to the Mag. J.’s R. & R. at 4–14, Doc. No. 28.

Soon after the Commissioner filed his objection, the Third Circuit Court of Appeals

rendered a decision in Cirko ex rel. Cirko v. Commissioner of Social Security, 948 F.3d 148 (2020).

In Cirko, the Third Circuit held that “the special character of both the agency and the constitutional

claim at issue” supported permitting those appealing social security benefit determinations to make

Appointments Clause challenges in federal court without exhausting those claims before the Social

Security Administration. 948 F.3d at 159.

This court issued an order adopting Judge Heffley’s report and recommendation and

overruling the Commissioner’s objection based on the newly-released Cirko decision on February

26, 2020. Doc. No. 32. The plaintiff then filed the instant motion for attorneys’ fees on May 13,

2020. Doc. No. 33. The Commissioner filed a response in opposition to the motion on May 21,

2020. Doc. No. 34. The plaintiff filed a reply to the response on May 26, 2020. Doc. No. 35. The

court held oral argument on the motion on July 1, 2020. The motion for attorney’s fees is now ripe

for disposition.

II. DISCUSSION

A. Standard of Review

The EAJA “remove[s] an obstacle to contesting unreasonable governmental action through

litigation posed by the expense involved in securing the vindication of a party’s rights in the

courts.” Dougherty v. Lehman, 711 F.2d 555, 562 (3d Cir. 1983) (citation and internal quotation

marks omitted). To achieve this aim, the EAJA permits courts to award attorney’s fees to a

“prevailing party” unless a 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 “substantially justified” position is not a position “justified to a high degree, but rather

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) (internal quotation marks omitted). “The

Government’s ‘position’ includes its position taken in litigation and the agency position that made

the litigation necessary.” Diaz v. Comm’r of Soc. Sec., 410 F. App’x 430, 432 (3d Cir. 2010) (citing

Hanover Potato Prods., Inc. v. Shalala, 989 F.2d 123, 128 (3d Cir. 1993)). This means that a court

must consider the position the Commissioner took during the pre-litigation administrative process

and the litigation in federal court. See, e.g., Marant v. Saul, Civ. A. No. 18-4832, 2020 WL

3402416, at *3 (E.D. Pa. June 19, 2020) (analyzing Commissioner’s pre-litigation position, even

though “[p]ost-Cirko, most of the judges who have addressed the propriety of EAJA fees in Lucia

cases have not focused on the Commissioner’s pre-litigation position”).

The Commissioner has the burden of proving that his position was substantially justified.

See Scarborough v. Principi, 541 U.S. 401, 405 (2004) (“The burden of establishing that the

position of the United States was substantially justified . . . must be shouldered by the

Government.” (internal citation and quotation marks omitted)). To meet this burden, the

Commissioner must show that “its position was grounded in a reasonable basis in fact and law

with a reasonable connection between the two,” Diaz, 410 F. App’x at 432, meaning there is “(1)

a reasonable basis in 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 legal theory

advanced.” Morgan v. Perry, 142 F.3d 670, 684 (3d Cir. 1998) (citation omitted).

When the government loses “because its legal theory is rejected,” “there is no per se rule

that imposes counsel fees on the government.” Marant, 2020 WL 3402416, at *3 (quoting

Washington v. Heckler, 756 F.2d 959, 961 (3d Cir. 1985)). If “the case turns on an unsettled or

close question of law . . . the government will usually be able to establish that its legal theory was

reasonable, even if not ultimately accepted as a legal rule by the courts.” Id. (quoting Washington,

756 F.2d at 961 (internal quotation marks omitted)). If, instead, “the government’s legal position

clearly offends established precedent . . . its position cannot be said to be ‘substantially justified.’”

Id. (quoting Washington, 756 F.2d at 961–62).

B. Analysis

To grant the plaintiff’s motion for attorney’s fees, the court must ask two questions. First,

is the plaintiff the prevailing party? Second, was the Commissioner’s pre-litigation and litigation

position substantially justified? See Morgan, 142 F.3d at 684.

The court answers the first question affirmatively. The parties agree that the plaintiff is the

prevailing party.2 The plaintiff argued that the ALJ was not properly appointed, and she prevailed

on this point. Doc. Nos. 23 & 32. The second question necessitates a deeper analysis. The court

turns to the second question and considers the Commissioner’s pre-litigation position and litigation

position in turn.

1. The Commissioner’s Pre-Litigation Position

The pre-litigation position related to the Commissioner’s inaction—his failure to properly

appoint an ALJ at the administrative level. Because such inaction is not based in any facts, but

only in law, the court does not engage in the three-part analysis outlined above in evaluating the

Commissioner’s pre-litigation position. Morgan, 142 F.3d at 684 (“(1) a reasonable basis in truth

2 Although the Commissioner did not discuss it in his brief, the Commissioner’s counsel acknowledged that the

plaintiff was a prevailing party during oral argument.

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 legal theory advanced.”). Instead, the court only

analyzes whether the Commissioner had a reasonable basis in law for failing to provide a properly

appointed ALJ to hear the plaintiff’s case. The court determines that the Commissioner’s pre-

litigation position was substantially justified.

When the ALJ and Appeals Council rendered their decisions prior to both Lucia and Cirko,

the Appointments Clause jurisprudence was unclear and “lack[ing] guidance.” Lucia, 138 S. Ct.

at 2065 (Sotomayor, J., dissenting). In Marant, Judge Hey discusses the way in which “[t]he pre-

Lucia landscape on the ALJ Appointments Clause issue stands in sharp contrast to other situations

where courts have found a pre-litigation position based on an interpretation of the law was not

justified.” 2020 WL 3402416, at *4. Judge Hey points to Natural Resources Defense Council v.

United States Environmental Protection Agency, 703 F.2d 700, 712 (3d Cir. 1983), a case in which

the Third Circuit found that the government’s pre-litigation position was not substantially justified,

and, therefore awarded EAJA fees to the plaintiff. Id. In National Resources Defense Council, the

government dispensed with notice and comment rulemaking even though “[t]he law was already

settled that this could not lawfully be done.” Id. (quoting National Resources Defense Council,

703 F.2d at 712). Here, in contrast, the Commissioner’s pre-litigation position was not in flagrant

violation of settled law.

The plaintiff argues the Commissioner’s pre-litigation position was not substantially

justified for three reasons: (1) It was the Commissioner’s failure to provide a constitutionally

appointed ALJ to hear her case that forced her to retain an attorney and file this action; (2) the ALJ

handling her case had an affirmative duty to raise the Appointments Clause issue and failed to

abide by that duty; and (3) the Commissioner had ample reason to know that his failure to appoint

ALJs in conformity with the Appointments Clause was unconstitutional based on the Supreme

Court’s decision in Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991). Pl.’s Br.

in Reply to Def.’s Resp. to Mot. for Att’y Fees (“Pl.’s Reply”) at 4–5, 6, 7, Doc. No. 35. The court

evaluates each of the plaintiff’s arguments in turn.

While the court sympathizes with the plaintiff’s argument that the Commissioner’s failure

to properly appoint the ALJ compelled her to engage in this litigation, the court can deem the

government’s pre-litigation position substantially justified, even when the government’s pre-

litigation position is the impetus for the litigation. See Williams v. Astrue, 600 F.3d 299, 301–02

(3d Cir. 2009) (finding that even though ALJ’s misstatement of record caused plaintiff’s federal

court litigation, “the government’s position was substantially justified”); see also Roanoke River

Basin Assoc. v. Hudson, 991 F.2d 132, 139 (4th Cir. 1993) (noting that court could find

government’s position to be substantially justified if “the government acted reasonably in causing

the litigation” (emphasis added)).

The plaintiff contends that the ALJ had a duty to flag the Appointments Clause argument

because “the Commissioner’s ALJs, unlike those in other administrative adjudicatory systems,

have a duty to raise issues sua sponte in all cases.” Pl.’s Reply at 6. The court disagrees. The

plaintiff cites Ventura v. Shalala, 55 F.3d 900 (3d Cir. 1995) to support this contention. Id. Ventura

comports with the notion that “ALJs have a duty to develop a full and fair record in social security

cases” by “secur[ing] relevant information regarding a claimant’s entitlement to social security

benefits.” Id. at 902; see also Cirko, 948 F.3d at 156 (explaining that “ALJs must ‘look[ ] fully

into the issues,’ ‘[a]ccept[ ] as evidence any documents that are material to the issues,’ and ‘decide

when the evidence will be presented and when the issues will be discussed,’” whereas “claimants

need not even state their case or present written arguments” (alterations in original) (quoting 20

C.F.R. § 404.944, 949)). However, ALJs’ duty to develop a full and fair record does not amount

to a duty to raise arguments about unsettled questions of law.

Regarding the plaintiff’s final argument, she incorrectly contends that Freytag gave rise to

the Commissioner’s obligation to appoint ALJs pursuant to the Appointments Clause. Although

Freytag laid the groundwork for Lucia, see Lucia, 138 S. Ct. at 2053 (“Freytag says everything

necessary to decide this case.”), it had a limited reach because it only established that “special trial

judges” (STJs) of the United States Tax Court qualify as officers rather than employees. Freytag,

501 U.S. at 881–82. After Freytag, “the Court’s Appointments Clause jurisprudence [still]

offer[ed] little guidance on who qualifies as an ‘Officer of the United States.’” Lucia, at 138 S. Ct.

at 2064–65 (Sotomayor, J., dissenting). Although there are similarities between STJs and ALJs,

the question of whether Freytag extended to ALJs was “an unsettled . . . question of law” such that

the Commissioner here can “establish that [his] legal theory was reasonable, even if not ultimately

accepted as a legal rule by the courts.” Washington, 756 F.2d at 961.

2. The Commissioner’s Litigation Position

The court now turns to the question of whether the Commissioner’s litigation position was

substantially justified. The Commissioner took the position during litigation that the plaintiff had

waived her Appointments Clause argument, because she failed to raise this argument at the

administrative level. See Def.’s Resp. to Request for Review of Pl. at 2–9, Doc. No. 17. The court

analyzes this position to determine whether the Commissioner presents “(1) a reasonable basis in

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 legal theory advanced.” Morgan, 142 F.3d

at 684. The court finds that the Commissioner’s litigation position was substantially justified

because (1) it is undisputed that the plaintiff did not raise her Appointments Clause challenge

during administrative proceedings; and (2) many courts, including courts in this district, had

concluded Social Security Administration claimants needed to raise such a challenge during

administrative proceedings, otherwise the plaintiff waived the challenge.

The plaintiff argues that it would be “absurd” to find that the Commissioner’s litigation

position was substantially justified because such a finding would stand for “[t]he notion that a

government official may violate the Constitution with impunity until or unless a citizen

complains[.]” Pl.’s Reply at 5. She argues that even if she had objected, she would not have

received relief because “no relief whatsoever was afforded to claimants who objected to

unconstitutionally appointed ALJs until . . . March 2019.” Id. at 5, n.4. The Commissioner argues

it was reasonable to raise the waiver objection because he raised this objection after Lucia, but

before Cirko, “when 34 out of the 35 district courts that had decided the issue, including the Eastern

District of Pennsylvania, had rejected attacks on the validity of an SSA ALJ’s appointment where

the claimant failed to make the constitutional challenge at the administrative level[.]” Def.’s Resp.

to Pl.’s Appl. for Att’y Fees Under the Equal Access to Justice Act at 6, Doc. No. 34 (citation

omitted).

Based on these arguments, the “dispute appears to turn on the second element: whether the

Commissioner had a reasonable basis in law for claiming [the plaintiff] waived or failed to exhaust

his Appointments Clause challenge.” Cortese v. Comm’r of Soc. Sec., Civ. A. No. 18-3437, 2020

WL 2745741, at *5 (E.D. Pa. May 27, 2020). For this reason, the court centers this analysis of the

Commissioner’s litigation position around his basis in law for claiming the plaintiff waived her

argument. At the time that the Commissioner filed his objection, “[n]umerous district courts

around the country . . . had previously agreed with the Commissioner’s position that Appointments

Clause challenges are subject to exhaustion requirements.” Holmes v. Berryhill, Civ. A. No. 19-

784, 2020 WL 2126787, at *2 (E.D. Pa. May 4, 2020) (citations omitted); see Cortese, 2020 WL

2745741, at *5 and n.50 (quoting Holmes, 2020 WL 2126787, at *2). In this district, there was a

split on the issue of whether a plaintiff must exhaust an Appointments Clause claim. Compare

Culclasure v. Comm’r of Soc. Sec. Admin., 375 F. Supp. 3d 559, 572–74 (E.D. Pa. 2019) (finding

that plaintiff did not forfeit his Appointments Clause claim and even if he did, court “would excuse

it because it would have been futile to make an argument before [the] ALJ . . . who could not have

decided a constitutional challenge[.]”), and Kellett v. Berryhill, Civ. A. No. 18-4757, 2019 WL

2339968, at *8 (E.D. Pa. June 3, 2019) (finding plaintiff did not need to raise Appointments Clause

claim at administrative level), with Muhammad v. Berryhill, 381 F. Supp. 3d 462, 471 (E.D. Pa.

2019) (finding plaintiff forfeited Appointments Clause claim due to failure to exhaust at

administrative level), Marchant ex rel. A.A.H. v. Berryhill, Civ. A. No. 18-345, 2019 WL 2268982,

at *8 (E.D. Pa. May 28, 2019) (“We find that she has waived her Appointments Clause challenge,

and she is not entitled to a rehearing on these grounds.”), and Cox v. Berryhill, Civ. No. 16-5434,

2018 WL 7585561, at *2 (E.D. Pa. Dec. 18, 2018) (“Plaintiff has forfeited [this] issue by failing

to raise it during her administrative proceedings.” (alteration in original) (internal quotation marks

omitted)).

In claiming that the plaintiff waived her Appointments Clause argument, the Commissioner

“reasonably relied on . . . precedent throughout this proceeding” that weighed in his favor on the

issue of waiver and provided “valid and legitimate legal explanations for pursuing his defense.”

Cortese, 2020 WL 2745741, at *5. This reasonable reliance contrasts with cases in which the

government’s positions is not substantially justified because it “relie[s] on a legal theory contrary

to existing law.” See id. at *4–5 (citing Roberts v. Berryhill, 310 F. Supp. 3d 529 (E.D. Pa. 2018)

and Healey v. Leavitt, 485 F.3d 63 (2d Cir. 2007) as cases in which the government propounded a

legal theory that wholly lacked support, and, therefore was not substantially justified). Because

there was well-reasoned legal precedent to support the Commissioner’s litigation position, the

court finds the litigation position was substantially justified.

The majority of judges in this district agree with this court’s finding that the

Commissioner’s litigation position was substantially justified. Compare Wojciechowski v. Saul,

Civ. A. No. 18-3843, 2020 WL 3542248 (E.D. Pa. June 30, 2020) (denying attorney’s fees under

the EAJA because the Commissioner’s position was substantially justified), Brito v. Saul, Civ. A.

No. 19-2160, 2020 WL 3498099 (E.D. Pa. June 29, 2020) (same), Lebron-Torres v. Comm’r of

Soc. Sec. Admin., Civ. A. No. 18-1212, 2020 WL 3488424 (E.D. Pa. June 26, 2020) (same),

Marant, 2020 WL 3402416 (same), Hill v. Saul, Civ. A. No. 18-5564, 2020 WL 3250484 (E.D.

Pa. June 16, 2020) (same), Diaz v. Saul, Civ. A. No. 18-5075, 2020 WL 3127941 (E.D. Pa. June

12, 2020) (same), and Holmes, 2020 WL 2126787 (same), with Byrd v. Saul, Civ. A. No. 18-5248-

RAL, 2020 WL 3469031 (E.D. Pa. June 25, 2020) (granting plaintiff’s motion for attorney’s fees

pursuant to EAJA) and Howard v. Saul, Civ. A. No. 19-2262, 2020 WL 3288186 (E.D. Pa. June

18, 2020) (same). In Byrd, the court came to a different conclusion than most of the judges who

have addressed this issue in this district, and found that the Commissioner’s litigation position was

not substantially justified because the Commissioner’s litigation position and other Eastern District

of Pennsylvania judges’ analyses did not account for Sims v. Apfel, 530 U.S. 103 (2000). 2020 WL

3469031, at *2–3. In Sims, the Supreme Court found that claimants need not exhaust issues before

the Social Security Administration’s Appeals Council to obtain judicial review of those claims.

See Cirko, 948 F.3d at 155 (explaining holding in Sims). However, Sims did “not dictate the

answer” to whether a claimant must exhaust an issue before a Social Security Administration ALJ.

Id. Therefore, this court disagrees with the Byrd analysis and finds that Sims does not vitiate the

finding that the Commissioner’s litigation position was substantially justified prior to Cirko.

III. CONCLUSION

Although the plaintiff was the prevailing party, the Commissioner’s pre-litigation and

litigation position was substantially justified. Therefore, in accordance with the decisions of the

majority of other judges in this district, the plaintiff is not entitled to attorney’s fees under the

EAJA.

BY THE COURT:

/s/ Edward G. Smith

EDWARD G. SMITH, J.