Sferrzza v. Commissioner of Social Security

Background

Louis David Sferrzza moved for attorney’s fees under Section 406(b) of the Social Security Act. He had a written contingency-fee agreement with Daniel Berger, Esq., providing for a fee equal to 25 percent of his past-due benefits. The Social Security Administration withheld $31,190.25 from past-due benefits totaling $124,761 for payment of an approved representative’s fee.

The motion asked the court to approve $27,750, which the opinion describes as approximately 22 percent of the past-due benefits. Because counsel had previously received $3,600 under the Equal Access to Justice Act, counsel sought to receive only $23,550 after that credit. The Commissioner did not object to the total requested fee but argued that reducing the Section 406(b) award by the previously paid Equal Access to Justice Act amount was inconsistent with Section 406(b) and Supreme Court precedent.

Court’s analysis

Section 406(b) permits a court to approve a reasonable attorney-fee award from a claimant’s past-due benefits, subject to a limit of 25 percent of those benefits. The court explained that contingency-fee agreements remain the primary way fees are set in successful Social Security cases, but the court must independently review the agreement to ensure that it produces a reasonable result.

The court considered whether the requested fee exceeded the 25-percent limit, whether the agreement resulted from fraud or improper pressure, and whether the fee would give counsel an improper financial benefit. It found that the requested fee was within the statutory limit, found no evidence of fraud or improper pressure, and concluded that the fee would not be an improper financial benefit. Counsel had spent 18.5 hours on the matter, which included multiple hearings and appeals, and had ultimately obtained benefits after reversing the Commissioner’s decision. The court also rejected the concern that the fee’s approximate $1,500 hourly equivalent alone showed an improper financial benefit, noting that counsel’s experience and efficiency could be considered.

The court stated that counsel must refund the smaller fee amount to the claimant when fees are awarded under both Section 406(b) and the Equal Access to Justice Act. It therefore approved the full $27,750 Section 406(b) payment rather than subtracting the $3,600 previously paid.

Disposition

Judge Ona T. Wang granted the motion. The Social Security Administration was directed to approve payment of $27,750 to the Law Offices of Daniel Berger, Esq. Upon receiving that payment, Daniel Berger was ordered to promptly refund $3,600 to Sferrzza. The clerk was directed to close the motion.