Patrick Lasley v. Comm'r of Social Security
771 F.3d 308
6th Cir.2014Background
- Attorney Mark Naegel represented a prevailing Social Security disability claimant under a contingency agreement allowing up to 25% of past-due benefits as attorney’s fees.
- Naegel sought $26,049.73 (25% of past-due benefits) under 42 U.S.C. § 406(b) after securing benefits for his client.
- The Social Security Commissioner opposed the full fee as an unreasonable "windfall," given counsel’s reported 35.5 hours of work.
- The magistrate judge recommended, and the district court adopted, awarding a reduced § 406(b) fee of $12,780 (the Commissioner’s proposed amount), finding the contingency fee unreasonable based on effective hourly rate and case simplicity.
- Naegel appealed, arguing the district court erred by disregarding the Sixth Circuit’s presumption favoring contingency fees that comply with the 25% cap and the Hayes “floor” analysis.
- The Sixth Circuit affirmed, holding the district court reasonably applied Gisbrecht and Hayes principles and did not abuse its discretion in reducing the fee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court erred by rejecting a § 406(b) 25% contingency fee | Naegel: contingency agreement within statutory 25% cap is presumptively reasonable under Sixth Circuit precedent | Commissioner: 25% amount is a windfall given only 35.5 hours of work; court should reduce | Court: No error; court may review agreement for reasonableness and reduce to avoid windfall |
| Whether Hayes presumption/floor required acceptance of fee | Naegel: Hayes creates a rebuttable presumption and a floor such that rates below twice the standard are per se reasonable | Commissioner: Even with Hayes, court may consider other factors to rebut presumption | Court: Hayes provides guidance but does not prevent courts from rebutting presumption; district court appropriately applied it |
| Whether Gisbrecht forbids reductions based on hourly rate | Naegel: Gisbrecht emphasizes primacy of fee agreements | Commissioner: Gisbrecht allows courts to adjust fees to prevent windfalls and consider hours and customary rates | Court: Gisbrecht requires courts to test fee agreements for reasonableness and permits downward adjustments when benefits are large relative to time spent |
| Whether the degree of reduction was an abuse of discretion | Naegel: (no separate or persuasive argument challenging reduction magnitude) | Commissioner: reduction to $12,780 justified by effective hourly rate, delay, case brevity, and opposition | Court: Affirmed; district court acted within discretion and Naegel failed to meet burden of showing reasonableness |
Key Cases Cited
- Gisbrecht v. Barnhart, 535 U.S. 789 (Sup. Ct.) (courts must review contingency-fee agreements and reduce fees that produce windfalls)
- Hayes v. Sec’y of Health & Human Servs., 923 F.2d 418 (6th Cir.) (rebuttable presumption and "floor" guidance for reasonableness of § 406(b) contingency fees)
- Rodriguez v. Bowen, 865 F.2d 739 (6th Cir. en banc) (courts should disallow attorney windfalls when reviewing fee agreements)
- Damron v. Comm’r of Soc. Sec., 104 F.3d 853 (6th Cir.) (district court’s § 406(b) fee determinations reviewed for abuse of discretion)
- Wells v. Sullivan, 907 F.2d 367 (2d Cir.) (endorses preventing windfalls and considering hours in fee review)