Introduction

The case of Jason Kertz v. Carolyn W. Colvin, decided by the United States Court of Appeals for the Eighth Circuit on January 17, 2025, addresses critical issues surrounding attorney fee awards in Social Security disability cases. This commentary delves into the background of the case, the central legal questions, the parties involved, and the broader implications of the court’s decision.

Summary of the Judgment

Jason Kertz appealed the denial of his Social Security Disability Insurance (SSDI) claim, which was initially rejected by an administrative law judge (ALJ) and upheld by the Social Security Administration (SSA) Appeals Council. Upon remand, a second hearing resulted in a favorable decision for Kertz, awarding him $96,349 in past-due benefits. However, the SSA withheld 25% ($24,087.25) as potential attorney fees based on his contingent-fee agreement with his attorney, Nicholas Coleman.

Coleman sought the full 25% fee under 42 U.S.C. § 406(b)(1)(A), but the district court awarded only $10,667.50, deeming the full amount unreasonable. Coleman appealed, arguing that the district court improperly applied the Supreme Court’s guidelines from GISBRECHT v. BARNHART. The Eighth Circuit affirmed the district court’s partial award, holding that the reduction was appropriate and did not constitute an abuse of discretion.

Analysis

Precedents Cited

The judgment heavily relies on precedents that interpret the reasonableness of attorney fees under SSA statutes, particularly:

• GISBRECHT v. BARNHART, 535 U.S. 789 (2002):

This Supreme Court decision resolved a circuit split by stating that contingent-fee agreements are the primary means of setting attorney fees in SSA cases. However, §406(b) mandates an independent review to ensure fees are reasonable, preventing attorneys from obtaining windfalls.

• Rodriquez v. Bowen, 865 F.2d 739 (6th Cir. 1989):

This case emphasized that courts should prevent attorneys from profiting excessively, especially in cases lacking substantive legal or factual challenges.

• Culbertson v. Berryhill, 586 U.S. 53 (2019):

Although not fully explored in the judgment, this case clarifies that there is no aggregate 25% cap on total attorney fees under §§406(a) and (b).

Legal Reasoning

The court’s reasoning centered on whether the 25% contingent fee requested by Coleman was reasonable under §406(b)(1)(A). Applying the guidelines from Gisbrecht, the court assessed:

• Time Expended: Coleman spent approximately 25.1 hours on the case, performing tasks such as filing briefs and motions.
• Contingent Fee Agreement: The agreed 25% fee was based on the total past-due benefits awarded.
• Comparison to Hourly Rates: The court calculated an effective hourly rate of $425 based on the awarded fee, which exceeded Coleman’s typical non-contingent rate of $350.
• Character of Representation: The attorney’s limited involvement, with no substantive legal battle, indicated that the full 25% fee was disproportionate.

Given these factors, the court determined that awarding the full contingent fee would result in an unjust enrichment of the attorney, thus warranting a reduction to $10,667.50.

Impact

This judgment reinforces the Supreme Court’s stance in Gisbrecht that while contingent fees are permissible, they are subject to rigorous scrutiny to ensure fairness and prevent excessive compensation. The decision:

• Sets a clear precedent that court reviews of contingent fees under §406(b) must independently assess reasonableness, beyond the fee agreements.
• Emphasizes the importance of the attorney’s actual contribution and time spent in determining fee awards.
• May influence future cases by encouraging courts to adopt a more analytical approach to prevent windfalls, potentially leading to more frequent fee reductions in similar contexts.

Complex Concepts Simplified

Social Security Administration (SSA) Fee Provisions

The SSA allows for attorney fee awards to individuals who successfully challenge benefit denials. These fees can be awarded under two statutes:

• Equal Access to Justice Act (EAJA) 28 U.S.C. § 2412(d)(1)(A): Permits the award of attorney fees if the claimant prevails and the government's position is not substantially justified.
• 42 U.S.C. § 406(b)(1)(A): Allows for an attorney to receive up to 25% of the past-due benefits as a contingent fee.

Importantly, an attorney cannot receive both full EAJA and §406(b) fees simultaneously; typically, the beneficiary receives the higher of the two, potentially increasing their total benefits received.

Contingent-Fee Agreement

A contingent-fee agreement is a contractual arrangement where the attorney’s fee is contingent upon winning the case, often set as a percentage of the benefits awarded. In SSA cases, this is capped at 25% under §406(b).

The "Lodestar" Method

The lodestar method is a traditional approach for determining reasonable attorney fees based on the number of hours worked multiplied by a reasonable hourly rate. Gisbrecht clarified that while this method can inform fee assessments, it does not override contingent-fee agreements.

Conclusion

The Eighth Circuit’s affirmation in Jason Kertz v. Carolyn W. Colvin underscores the judiciary's role in meticulously evaluating attorney fee requests under SSA statutes to ensure fairness and prevent excessive compensation. By adhering to the Supreme Court’s guidance in GISBRECHT v. BARNHART, the court balanced the interests of claimants and attorneys, reinforcing the principle that contingent fees must reflect the actual services rendered and the outcomes achieved.

This decision serves as a pivotal reference for future SSA litigation, guiding courts to perform thorough, case-specific analyses of fee agreements. It also protects beneficiaries from disproportionate fee deductions, ensuring that they receive the full benefit of their awarded claims while attorneys are fairly compensated for their legitimate efforts.