AR 93-4(2): Condon and Brodner v. Bowen , 853 F.2d 66 (2d Cir. 1988)-- Attorney's Fees Based in Part on Continued Benefits Paid to Social Security Claimants--Title II of the Social Security Act

AR 93-4(2) (Rescinded 4/14/2000)

EFFECTIVE DATE: 07/29/93

Issue

Whether continued benefits paid to claimants pursuant to section 2(e) of

the Social Security Disability Benefits Reform Act of 1984 or section

223(g) of the Social Security Act (the Act) are "past-due benefits" within

the meaning of section 206(b)(1) of the Act.

Statute/Regulation/Ruling Citation

Sections 206(b)(1) and 223(g) of the Social Security Act (42 U.S.C. §§

406(b)(1) and 423(g)); sections 2(d) and 2(e) of the Social Security

Disability Benefits Reform Act of 1984, Pub. L. No. 98-460; 20 CFR

404.1703; 20 CFR 404.1728-1730; and section 5106 of Pub. L. No.

101-508.

Circuit

Second (Connecticut, New York, Vermont)

Condon and Brodner v. Bowen , 853 F.2d 66 (2d Cir. 1988)

Applicability of Ruling

This Ruling applies to cases in which a court may allow an attorney's fee

as a result of a civil action. It does not affect the way the Social

Security Administration (SSA) adjudicates cases, but only affects how SSA

calculates past-due benefits and disburses accumulated past-due benefits

within the meaning of section 206(b)(1) of the Act.

Description of Case

Plaintiffs William Condon and Leatrice

Brodner [1] , who were found

eligible for disability insurance benefits under title II of the Act since

1974 and 1972, respectively, were subsequently found no longer entitled to

such benefits as of October 1982 and March 1983, respectively. After

exhausting their administrative remedies, both plaintiffs sought judicial

review in the United States District Court for the District of Connecticut

of the decisions to terminate their benefits. While their cases were

pending in the district court, the Social Security Disability Benefits

Reform Act of 1984, Pub. L. No. 98-460 (1984 Disability Amendments) was

enacted. Under the provisions of section 2(d) of the 1984 Disability

Amendments, these cases were remanded by the court to the Secretary for

further review under a medical improvement standard

ns to terminate their benefits. While their cases were

pending in the district court, the Social Security Disability Benefits

Reform Act of 1984, Pub. L. No. 98-460 (1984 Disability Amendments) was

enacted. Under the provisions of section 2(d) of the 1984 Disability

Amendments, these cases were remanded by the court to the Secretary for

further review under a medical improvement standard. Both plaintiffs

elected to receive continued benefits pursuant to section 2(e) of the 1984

Disability Amendments.

Upon readjudication, the Secretary reinstated Condon's entitlement to

benefits as of August 1982 and Brodner's entitlement to benefits as of

June 1983. The Secretary then calculated the amounts of accumulated

past-due benefits to which the plaintiffs were entitled. Prior to

releasing the past-due benefits to the plaintiffs, the Secretary withheld

25 percent of the benefits pursuant to section 206 of the Act (42 U.S.C.

406) for the possible payment of attorney's fees.

The plaintiffs' attorney then filed petitions with the Social Security

Administration pursuant to section 206(a) of the Act (42 U.S.C. 406(a))

seeking approval to charge and collect a fee for services performed in the

administrative proceedings. The Secretary authorized a fee and certified

direct payment to the attorney out of a portion of the withheld funds and

released the balance of the withheld funds to the plaintiffs. Condon

deposited the balance of his withheld funds in an escrow account with his

attorney.

.S.C. 406(a))

seeking approval to charge and collect a fee for services performed in the

administrative proceedings. The Secretary authorized a fee and certified

direct payment to the attorney out of a portion of the withheld funds and

released the balance of the withheld funds to the plaintiffs. Condon

deposited the balance of his withheld funds in an escrow account with his

attorney.

The plaintiffs' attorney subsequently filed motions in the district court

pursuant to section 206(b)(1) of the Act (42 U.S.C. 406(b)(1)) seeking

compensation for his services in proceedings before the court. Section

206(b)(1) permits a court, whenever it renders a judgment favorable to a

claimant who was represented before the court by an attorney, to set a

reasonable fee for attorney's services not in excess of 25 percent of the

past-due benefits to which the claimant is entitled. The attorney's fee

requests were based on his calculation of the total amount of all benefits

payable or paid to the plaintiffs from the dates benefits stopped to the

dates of reinstatement, including the continued benefits.

The Secretary filed briefs opposing the plaintiffs' motions for attorney's

fees. The Secretary contended that continued benefits paid to claimants

were not past-due benefits within the meaning of section 206(b)(1) and

that the court could only award the attorney 25 percent of the accumulated

past-due benefits.

fits stopped to the

dates of reinstatement, including the continued benefits.

The Secretary filed briefs opposing the plaintiffs' motions for attorney's

fees. The Secretary contended that continued benefits paid to claimants

were not past-due benefits within the meaning of section 206(b)(1) and

that the court could only award the attorney 25 percent of the accumulated

past-due benefits.

A magistrate concluded that "interim benefits" (i.e., continued benefits)

do constitute past-due benefits for the purpose of calculating attorney's

fees, and awarded attorney fees based on both the accumulated past-due

benefits and the "interim

benefits." [2] The district court

adopted the magistrate's opinion. The funds held in escrow by Condon's

attorney were released in payment of the fee for his representation of

Condon in court. Brodner paid the attorney the fee that the district court

awarded in full. The Secretary appealed the district court's decision to

award attorney's fees to the United States Court of Appeals for the Second

Circuit. The Second Circuit affirmed the decision of the district

court.

Holding

The Second Circuit held that "interim benefits" (i.e., continued benefits)

paid to Social Security claimants pursuant to section 2(e) of the 1984

Disability Amendments in accordance with section 223(g) of the Act should

be included in the calculation of past- due benefits for the purpose of

awarding attorney's fees under section 206(b) of the Act.

ecision of the district

court.

Holding

The Second Circuit held that "interim benefits" (i.e., continued benefits)

paid to Social Security claimants pursuant to section 2(e) of the 1984

Disability Amendments in accordance with section 223(g) of the Act should

be included in the calculation of past- due benefits for the purpose of

awarding attorney's fees under section 206(b) of the Act.

Because the language of the statute did not expressly state whether or not

continued benefits are included in the definition of past-due benefits,

the court looked to congressional intent to reach its conclusion. The

court stated that "[i]n implementing section 206(b) of the Act, Congress

was seeking to 'encourage effective legal representation of claimants' by

assuring attorneys that they would receive adequate pay for representing

Social Security claimants while at the same time prohibiting attorneys

from charging claimants 'inordinately large fees.'" 853 F.2d at 70. The

court further concluded that: (1) 25 percent of the continued benefits

that attorneys could receive would not constitute the type of inordinately

large fees that Congress intended to prohibit under section 206(b)(l) and,

(2) the Secretary's reading of the statutes would undermine "the Act's

purpose of encouraging attorneys to represent Social Security

claimants."

In addition, the court specifically stated that it did not intend to

transform SSA into "a collection agency for the Social Security bar." It

noted that claimants can enter into their own private arrangements with

their attorneys, i.e., by setting up escrow accounts for possible payment

of attorney's fees, as Condon did in his action. Consequently, it should

not be necessary for SSA to become involved in the collection of

attorney's fees.

Statement as to How Condon and Brodner Differs From Social

Security Policy

ty bar." It

noted that claimants can enter into their own private arrangements with

their attorneys, i.e., by setting up escrow accounts for possible payment

of attorney's fees, as Condon did in his action. Consequently, it should

not be necessary for SSA to become involved in the collection of

attorney's fees.

Statement as to How Condon and Brodner Differs From Social

Security Policy

Under section 206 of the Act, the Secretary is authorized to withhold up

to 25 percent of the total of title II past-due benefits to which a

claimant is entitled for possible payment of attorney's fees. Although at

the time of the court's decision section 206 did not expressly define

past-due benefits, 20 CFR 404.1703 defines past-due benefits as the total

amount of benefits payable under title II of the Act to all beneficiaries

that has accumulated because of a favorable administrative or judicial

determination or decision. When calculating past-due benefits, SSA does

not consider continued benefits to be past-due benefits because: (1) they

have already been paid and are not accumulated and payable, and (2) they

result from legislation, not from an "administrative or judicial

determination or decision."

Accordingly, when computing the 25 percent withholding amount from which

attorney's fees can be paid, SSA considers only those benefits which are

payable to the claimant. Contrary to SSA's interpretation of the term

"past-due benefits," the court of appeals held that continued benefits

paid to Social Security claimants are included in past-due benefits for

the purpose of calculating attorney's fees under section 206(b).

5 percent withholding amount from which

attorney's fees can be paid, SSA considers only those benefits which are

payable to the claimant. Contrary to SSA's interpretation of the term

"past-due benefits," the court of appeals held that continued benefits

paid to Social Security claimants are included in past-due benefits for

the purpose of calculating attorney's fees under section 206(b).

Although Congress has since expressly excluded continued benefits from the

calculation of "past-due benefits" for section 206(a) purposes, the

legislative history is silent as to whether continued benefits are to be

included in the amount of money available for court allowed attorney's

fees for court services (section 206(b)

cases). [3] SSA believes its

policy of not including continued benefits in the "past-due benefit"

calculation for section 206(b) purposes addresses the overriding concern

of Congress in enacting section 223(g), i.e., to provide claimants with

"continuation of payments during appeal ... to ease the severe financial

and emotional hardships that would otherwise be suffered." H.R. Rep. No.

98-618, 98th Cong., 2d Sess. 18, reprinted in 1984 U.S. Code

Cong. & Ad. News 3038, 3055.

Explanation of How SSA Will Apply The Decision Within The Circuit

This Ruling applies to title II disability cases and the title II portion

of concurrent title II and title XVI disability cases in which a fee

petition is filed involving court services performed within the Second

Circuit (Connecticut, New York or Vermont).

Sess. 18, reprinted in 1984 U.S. Code

Cong. & Ad. News 3038, 3055.

Explanation of How SSA Will Apply The Decision Within The Circuit

This Ruling applies to title II disability cases and the title II portion

of concurrent title II and title XVI disability cases in which a fee

petition is filed involving court services performed within the Second

Circuit (Connecticut, New York or Vermont).

When a case involves: (l) a fee petition that has been filed in a federal

court based on proceedings on the issue of continuing entitlement to

disability insurance benefits and (2) a claimant who has received

continued benefits pursuant to section 2(e) of the 1984 Disability

Amendments or section 223(g) of the Act during any period considered in

the court's decision, SSA will consider both accumulated benefits and

continued benefits already paid to be "past-due benefits" within the

meaning of section 206(b)(1) of the Act.

SSA will not withhold funds from continued benefits to pay an attorney's

fee. SSA will pay the approved fee directly to the attorney from the

accumulated past-due benefits held by the Secretary, subject to the

maximum of 25 percent of the total past-due benefits amount (as defined by

the court, i.e., past-due benefits include both accumulated benefits and

continued benefits).

If the sum of accumulated past-due benefits which the Secretary certifies

for direct payment and any funds held in trust or escrow by the attorney

is less than the fee set by the court, SSA will advise the attorney to

seek payment of the balance of the authorized fee directly from the

claimant.

[1] These two cases were

consolidated for the purpose of ruling on the motions for attorney's fees

because they presented the same issue and the same attorney represented

both plaintiffs.

any funds held in trust or escrow by the attorney

is less than the fee set by the court, SSA will advise the attorney to

seek payment of the balance of the authorized fee directly from the

claimant.

[1] These two cases were

consolidated for the purpose of ruling on the motions for attorney's fees

because they presented the same issue and the same attorney represented

both plaintiffs.

[2] The benefits received by the

plaintiff were authorized by section 2(e) of the 1984 Amendments. The

characteristics of "interim" benefits under section 223(g) of the Social

Security Act (42 U.S.C.423(g)) and benefits under section 2(e) of the 1984

Amendments are not distinguishable in any manner relevant to the issue of

whether "interim" benefits are considered "past-due" benefits.

[3] Section 5106 of Pub. L. No.

101-508, the Omnibus Budget Reconciliation Act of 1990 states that for the

purposes of section 206(a) of the Social Security Act the term "past-due

benefits" excludes continued and interim benefits payable under sections

223(g) and (h), respectively, of the Act. Congress did not expressly

exclude continued benefits from "past-due benefits" for purposes of

calculating attorney fees under section 206(b) of the Act.