Turner v. Commissioner of Social SEC.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 12a0154p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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JOHN C. TURNER; PAMELA CAMPBELL; RITA

Plaintiffs-Appellants, --

ANN CORNS,

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Nos. 11-5012/5681/6033

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Attorney-Appellant, -

WOLODYMYR IWAN CYBRIWSKY,

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v.

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Defendant-Appellee. N

COMMISSIONER OF SOCIAL SECURITY,

Appeals from the United States District Court

for the Eastern District of Kentucky at London and Lexington.

No. 6:08-cv-391—Amul R. Thapar, District Judge; No. 5:10-cv-202—David L.

Bunning, District Judge; No. 5:10-cv-415—Joseph M. Hood, District Judge.

Decided and Filed: May 25, 2012

Before: COLE and McKEAGUE, Circuit Judges; ZATKOFF, District Judge.*

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COUNSEL

ON BRIEF: Wolodymyr Cybriwsky, Prestonsburg, Kentucky, James Roy Williams,

Cincinnati, Ohio, for Appellants. Michael E. Robinson, William Kanter, UNITED

STATES DEPARTMENT OF JUSTICE, Washington, D.C., Jerome Albanese, Mary

Ann Sloan, Dennis R. Williams, Douglas G. Wilson, Holly A. Grimes, Brian Seinberg,

Steven A. Collins, SOCIAL SECURITY ADMINISTRATION, Atlanta, Georgia, John

S. Osborn III, ASSISTANT UNITED STATES ATTORNEY, Lexington, Kentucky for

Appellee.

*

The Honorable Lawrence P. Zatkoff, United States District Judge for the Eastern District of

Michigan, sitting by designation.

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Nos. 11-5012/5681/6033 Turner, et al. v. Comm’r of Soc. Sec. Page 2

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OPINION

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COLE, Circuit Judge. Plaintiffs-Appellants John Turner, Pamela Campbell, Rita

Corns, and Attorney-Appellant Wolodymyr Iwan Cybriwsky, were denied their requests

for attorney’s fee awards under the Equal Access to Justice Act (“EAJA”), 42 U.S.C.

§ 2412 et seq. On appeal, we have consolidated these cases for review. We REVERSE

the judgments of the district courts and REMAND for further proceedings consistent

with this opinion.

I. BACKGROUND

Cybriwsky served as Turner’s attorney in an action to obtain social security

disability benefits. The representation agreement between Cybriwsky and Turner

expressly relieved Turner of the obligation to pay Cybriwsky if they “d[id] not win the

case,” but assigned to Cybriwsky any fees that the court may award Turner under the

EAJA. After holding a hearing, the Commissioner denied Turner’s benefits request.

Turner appealed this denial to the district court, which reversed the Commissioner’s

decision and remanded the case for further proceedings, pursuant to the “fourth

sentence” of 42 U.S.C. § 405(g). Thereafter, Turner filed a motion for attorney’s fees

pursuant to the EAJA.

The district court denied this motion. Turner v. Astrue, 764 F. Supp. 2d 864

(E.D. Ky. 2010). The court reasoned that, due to sovereign immunity considerations, it

could award EAJA fees only under circumstances clearly and unambiguously expressed

in the statutory text—that is, only where a plaintiff had clearly and unambiguously

“incurred” attorney’s fees. Id. at 868-69. Upon analyzing precedent from several

circuits, the district court determined that “a claimant ‘incurs’ attorney’s fees, as that

term is used in the EAJA, when he has either paid them or has a ‘legal obligation to pay

them.’” Id. at 870 (quoting Murkeldove v. Astrue, 635 F. Supp. 2d 564, 573 (N.D. Tex.

2009), vacated by 635 F.3d 784 (5th Cir. 2011)) (alterations removed). The court found

Nos. 11-5012/5681/6033 Turner, et al. v. Comm’r of Soc. Sec. Page 3

this definition consistent with the history and purposes of the EAJA and reasoned that,

if claimants could receive fee awards without first incurring legal debt, those who never

received a benefits award could simply pocket the EAJA fee award, creating a

“substantial, and substantially unjustified, windfall.” Id. at 878. The court interpreted

Turner’s representation agreement to require him to pay Cybriwsky only if Turner

received a benefits award, and found the provision assigning EAJA fees to Cybriwsky

void under the Anti-Assignment Act (“AAA”), 31 U.S.C. § 3727 (2012). Turner, 764

F. Supp. 2d at 878-79. Because it had remanded the case without awarding benefits, the

court held that Turner did not incur attorney’s fees. Id. at 871. Turner and Cybriwky

filed this appeal.

In unrelated cases, Campbell and Corns each secured contingency-fee counsel

and independently filed for past-due benefits from the Commissioner, who likewise

denied each of their claims. They appealed these decisions. After the district courts

reversed the Commissioner’s decisions and remanded the cases pursuant to the fourth

sentence of 42 U.S.C. § 405(g), each Plaintiff applied for an EAJA fee award. The

district courts subsequently denied their requests, relying on Turner to find that the

Plaintiffs had not “incurred” attorney’s fees under the EAJA. Campbell further

requested reimbursement for costs, which the district court also denied. Campbell and

Corns appealed. These cases are consolidated on appeal.

II. ANALYSIS

A. The Statutory Framework

A claimant whose request for social security benefits is denied after an

administrative hearing may appeal this decision to the district court, pursuant to

42 U.S.C. § 405(g). The fourth sentence of § 405(g) gives the district court the power

to “enter . . . a judgment affirming, modifying, or reversing the decision of the

Commissioner of Social Security, with or without remanding the cause for a rehearing,”

known as a “sentence-four remand.” On sentence-four remand, the administrative law

judge retains the discretion to grant or deny a benefits award. Shalala v. Shaefer, 509

U.S. 292, 304 (1993) (Stevens, J., dissenting).

Nos. 11-5012/5681/6033 Turner, et al. v. Comm’r of Soc. Sec. Page 4

A sentence-four remand makes the plaintiff a “prevailing party” under the EAJA,

see Shalala, 509 U.S. at 300, entitling the plaintiff to “fees and other expenses, in

addition to any costs awarded pursuant to subsection (a), incurred by that party . . . .”

28 U.S.C. § 2412(d)(1)(A). EAJA fees are awarded in excess of the benefits due, as

opposed to being deducted from the claimant’s benefits award. See Gisbrecht v.

Barnhart, 535 U.S. 789, 795-96 (2002). Because the “EAJA renders the United States

liable for attorney’s fees for which it would otherwise not be liable,” it “amounts to a

partial waiver of sovereign immunity.” Scarborough v. Principi, 541 U.S. 401, 420

(2004) (quoting Ardestani v. I.N.S., 502 U.S. 129, 137 (1991)). Fees are paid directly

to the claimant, Bryant v. Comm’r of Soc. Sec., 578 F.3d 443, 449 (6th Cir. 2009), unless

the claimant preemptively assigns the fee award to counsel.

B. Plaintiffs Have “Incurred” Fees Under the EAJA

We review the district court’s interpretation of the EAJA de novo. See Bryant,

578 F.3d at 445. Case law from multiple circuits establishes that the plain meaning of

“incurred” does not require the plaintiff to have paid counsel or to have a legal

obligation to pay counsel. Interpreting the EAJA, the Fifth Circuit recently held that a

plaintiff’s contractual obligation to pay over fees to his counsel satisfied the requirement

to “incur” EAJA fees upon a sentence-four remand. See Murkeldove v. Astrue, 635 F.3d

784, 791 (5th Cir. 2011). The Federal, Eighth, and Ninth Circuits likewise have

determined that the EAJA and other statutes awarding “incurred” fees turn on the

claimant’s obligation to pay over any fee award to his attorney, and not on the existence

of personal legal debt. See Gotro v. R & B Realty Grp., 69 F.3d 1485, 1487-88 (9th Cir.

1995) (awarding “incurred” fees upon remand to state court, without any award of

damages, where plaintiff was represented under a contingency fee agreement); Phillips

v. Gen. Servs. Admin., 924 F.2d 1577, 1583-84 (Fed. Cir. 1991) (per curiam) (awarding

“incurred” fees where plaintiff was obliged to pay over any fee award to her attorney,

regardless of the plaintiff’s extant debt to her attorney); Cornella v. Schweiker, 728 F.2d

978, 987 (8th Cir. 1984) (awarding EAJA fees “incurred” by pro bono counsel).

Nos. 11-5012/5681/6033 Turner, et al. v. Comm’r of Soc. Sec. Page 5

Indeed, it is “well-settled” that the existence of an unsatisfied contingency or pro

bono representation agreement does not preclude a fee award, even where the statute

limits fees to those “incurred” by the plaintiff in that action. See Ed A. Wilson, Inc. v.

Gen. Serv. Admin., 126 F.3d 1406, 1409 (Fed. Cir. 1997) (“It is well-settled that an

award of attorney fees is not necessarily contingent upon an obligation to pay counsel.”);

Watford v. Heckler, 765 F.2d 1562, 1567 n.6 (11th Cir. 1985) (“[I]t is well-settled that

. . . plaintiffs who are represented without charge are not generally precluded from an

award of attorneys’ fees under the EAJA.”). This uniformity in precedent creates the

clear and unambiguous meaning of “incurred” necessary to find a waiver of sovereign

immunity that includes contingency-fee actions. See Richlin Sec. Serv. Co. v. Chertoff,

553 U.S. 571, 580-81 (2008) (case law interpreting attorney’s fee provision of 42 U.S.C.

§ 1988, which does not implicate sovereign immunity, sufficient to create unambiguous

meaning of the EAJA attorney’s fee provision); Pierce v. Underwood, 487 U.S. 552,

564-66 (1988) (case law interpreting term “substantially justified” in statutes not

involving sovereign immunity sufficient to create unambiguous meaning of

“substantially justified” in the EAJA).

Allowing fee awards for sentence-four remands also furthers the EAJA’s purpose

of “eliminat[ing] for the average person the financial disincentive to challenge

unreasonable governmental actions” through fee-shifting. Comm’r, I.N.S. v. Jean,

496 U.S. 154, 163 (1990). Ninety percent of favorable district court judgments in favor

of claimants—some 5,500 cases per year—are remand orders, not benefits awards.

Social Security Advisory Board, Disability Decision Making: Data and Materials 91

(2006). Interpreting the EAJA to require a benefits award as a pre-condition for

awarding fees to contingency-fee attorneys would prevent these attorneys from receiving

EAJA fee awards except in the “highly unlikely” case that the agency awarded fees on

remand within the time-frame for filing a motion for an EAJA fee award. See

Murkeldove, 635 F.3d at 793. Because “the marketplace for Social Security

representation operates largely on a contingency fee basis,” Gisbrecht, 535 U.S. at 804,

such an interpretation would effectively preclude EAJA fee awards for work at the

district-court level, and “the financial deterrent that the EAJA aims to eliminate would

Nos. 11-5012/5681/6033 Turner, et al. v. Comm’r of Soc. Sec. Page 6

be resurrected,” Jean, 496 U.S. at 164. By contrast, permitting fee awards upon

sentence-four remands supports claimants who validly protest government error during

their original administrative hearing.

Contrary to the conclusion of the Turner court, our interpretation of “incurred”

does not create a windfall for litigants. First, the requirement that a litigant have a legal

obligation to pay over any fee award to his attorney prevents litigants from pocketing

these awards, because litigants with no obligation to pay over fees do not “incur” them.

Litigants may retain fee awards only if the assignment provision becomes void, usually

because the government requests that the court void the provision under the AAA. See

Murkeldove, 635 F.3d at 794 (“[The AAA] serves as a defense that the Government can

raise against a claim and not . . . an ex ante bar to forming a contingency-fee

agreement.”); Delmarva Power & Light Co. v. United States, 542 F.3d 889, 894 (Fed.

Cir. 2008). With the assignment provision voided, the fee award is paid directly to the

litigant and becomes subject to an administrative offset if the litigant owes a debt to the

federal government. Bryant, 578 F.3d at 446. Thus, regardless of whether the fee award

is paid directly to the litigant or is assigned to his attorney, awarding fees upon sentence-

four remands does not create a windfall for litigants.

For these reasons, litigants “incur” fees under the EAJA when they have an

express or implied legal obligation to pay over such an award to their legal

representatives, regardless of whether the court subsequently voids the assignment

provision under the AAA. Because the representation agreements for Turner, Campbell,

and Corns each contain such a provision, they have each “incurred” attorney’s fees,

entitling them to an award of fees under the EAJA.

C. Campbell’s Out-of-Pocket Expenses

The Campbell court also erred by denying Campbell’s request for costs. It

specifically noted that $367 of the award that Campbell requested would reimburse her

for “costs.” Because Campbell became a “prevailing party” upon receiving a sentence-

four remand, see Shalala, 509 U.S. at 300, she is entitled under the EAJA to

reimbursement for costs.

Nos. 11-5012/5681/6033 Turner, et al. v. Comm’r of Soc. Sec. Page 7

III. CONCLUSION

For the reasons stated above, we REVERSE the judgments of the district courts

and REMAND for further proceedings consistent with this opinion.