Newlin v. Saul

Background

Joseph Nathaniel Newlin sought disability insurance benefits. After two administrative decisions denying his application and two federal-court actions, the case was remanded to the Social Security Administration for further proceedings. Newlin ultimately received an award finding that he became disabled on October 31, 2010, and was entitled to benefits beginning in April 2011. His past-due benefits totaled $297,955.52.

Newlin had signed a contingency-fee agreement with David F. Chermol’s firm. The agreement provided for a fee of 25 percent of past-due benefits awarded on Newlin’s account, including benefits awarded to auxiliary beneficiaries. The Commissioner withheld $74,488.88 from Newlin’s benefits for attorneys’ fees. The firm later learned that two auxiliary beneficiaries had received a combined $60,903 in past-due benefits, from which no attorney fee had been withheld.

Motions and Positions

Chermol filed one motion seeking $74,488.88 under Section 406(b)(1) of the Social Security Act and a second motion seeking an additional $13,057 for work related to the auxiliary benefits. The firm did not seek the full 25 percent attributable to one of the auxiliary beneficiaries. The total requested amount was therefore $87,545.88.

The Commissioner conceded that the first motion was timely and did not object to a fee within the 25-percent statutory limit. The Commissioner noted, however, that the requested amounts produced effective hourly rates of $1,176.76 for the first request and $1,383.03 for the combined requests, which some courts had considered potential windfalls. The Commissioner deferred to the court on whether the second motion was timely.

Timeliness

Section 406(b) fee applications generally must be filed within 14 days after notice of the benefits calculation, with an additional three days under the applicable mailing rule. The court found that circumstances justified extending the filing period for the second motion. Chermol and his staff had made 21 calls over seven months trying to obtain all the benefit notices. After learning on November 2, 2021 that the auxiliary notices existed, Chermol filed the second motion seven days later. The court found that he acted diligently and that the delay resulted from the Social Security Administration’s staggered issuance and delivery of the notices. The court therefore deemed the second motion timely.

Reasonableness of the Fees

Under Section 406(b), a court may approve a fee of up to 25 percent of past-due benefits, but the fee must be reasonable. The court evaluated the request under factors including whether the contingency fee stayed within the statutory limit, whether the agreement resulted from fraud or improper pressure, and whether the fee would be an unreasonable windfall.

The court considered four factors identified by the Second Circuit: counsel’s ability and efficiency; the length and nature of the attorney-client relationship, including work at the administrative level; the claimant’s satisfaction and the result achieved; and the uncertainty and risk involved in obtaining benefits. Chermol had spent 63.3 hours on the two federal-court appeals and more than 175 hours on the administrative proceedings. The court found that his experience and efficiency supported the requested fee, that the firm had represented Newlin for at least five years, and that the case produced substantial benefits for Newlin and his two auxiliary beneficiaries. Newlin did not object and affirmatively supported the requested fees. The court also found that the result was uncertain because two administrative judges had denied Newlin’s applications and two federal-court actions were required.

The court concluded that the total requested fee was reasonable and would not be a windfall to the firm. It awarded $87,545.88 under Section 406(b). Because Newlin’s lawyer had also received $11,568 under the Equal Access to Justice Act, the body of the opinion directed the firm to refund that amount to Newlin.

Disposition

The court granted the motions, awarded the firm $87,545.88 in Section 406(b) fees, and directed a refund of previously awarded fees. The conclusion contains an apparent inconsistency: it says the firm must refund $6,000 to “Ms. DeJesus,” a person not otherwise identified in the opinion, while the introduction, discussion, and earlier order direct a refund of $11,568 to Newlin.