The opinion of the court was delivered by: Arthur Nakazato United States Magistrate Judge
AN ORDER RE PETITION FOR ATTORNEYS FEES 42 U.S.C. §406(b)
Plaintiff's counsel, Jimmy O. Ewenike of the Law Offices of Jimmy Ewenike, ("Counsel"), has filed a petition for attorneys fees (dkt. #29) ("Petition") pursuant to 42 U.S.C. § 406(b). Counsel seeks an award of §406(b) fees in the gross amount of $16,828.38, subject to an offset for the $6,000.00 in EAJA fees previously paid, resulting in a net award of $10,828.38. (Petition at 1:18-20.) The Petition is supported by Counsel's attached declaration that is inaccurately referred to as "Affidavits" and identifies the wrong person as the Plaintiff in the caption. Counsel's supporting declaration and the attached exhibits establish that, after this Court's remand, the Social Security Administration ("SSA") awarded Plaintiff back benefits in the total amount of $67,313.52. A recap of Counsel's time spent is attached to Counsel's declaration. The recap incorrectly reports that he spent 45.2 hours of time representing Plaintiff in this case; in fact, the Court finds the time spent in the recap correctly adds up to 48.2 hours, not 45.2. (Petition at 1:19, Ewenike Decl., ¶ 9, Appendix 1.) The Commissioner has filed a response to the Petition with his analysis (dkt. #31). Counsel filed no reply.
Under § 406(b), the Court may award a "reasonable" amount of attorneys fees to a successful claimant's counsel, but the fee cannot exceed 25 percent of the total of the past-due benefits awarded to the claimant.
In Gisbrecht v. Barnhart, 535 U.S. 789, 122 S.Ct. 1817 (2002), the Supreme Court resolved a division among the circuits over the method used to calculate § 406(b) fees. The Gisbrecht majority found § 406(b) is designed to control, not displace, contingency fee agreements in social security cases. 535 U.S. at 793, 807. In doing so, the Court rejected the lodestar method*fn1 used in the Ninth Circuit and several other circuits as the exclusive means for determining the reasonableness of § 406(b) fees. The Court explained the lodestar method was primarily "designed to govern the imposition of fees on the losing party" in fee-shifting cases, therefore, its use in social security cases was not entirely compatible because the attorney's fees sought under § 406(b) are "paid directly with funds withheld from their clients' benefits awards[.]" Id. at 804 n. 13, 807; see also, Short v. Sullivan, 1992 WL 38404, *2 (N. D. Ill., filed Feb. 25, 1992) ("For every dollar a court approves in fees, a corresponding decrease in the claimant's award occurs. Thus, courts must balance two competing policies in reviewing attorneys' petitions for fees in social security cases.")
On the other hand, Gisbrecht did not find contingency fee agreements that capped fees at or below § 406(b)'s statutory ceiling of 25 percent of the back benefits awarded were reasonable per se or presumptively reasonable despite its finding that "[t]raditionally and today, 'the marketplace for Social Security representation operates largely on a contingency fee basis.'" Id. at 792, 804. Instead, Gisbrecht held § 406(b) instructs lower federal courts to make a reasonableness check that initially credits the contingency fee agreement within the 25 percent statutory ceiling and then places the burden upon the successful claimant's attorney to show "the fee sought is reasonable for the services rendered." 535 U.S. at 807. However, the type of check to be used was left to the sound discretion of the district courts since Gisbrecht found "[j]udges of our district courts are accustomed to making reasonableness determinations in a wide variety of contexts, and their assessments in such matters, in the event of an appeal, ordinarily qualify for highly respectful review." Id. at 808. Nonetheless, Gisbrecht provided some guidance by identifying the following examples as factors that, standing alone or in combination, warrant a reduction: (1) the result achieved; (2) counsel's "substandard" character of representation;*fn2 (3) delay by counsel (justifying a reduction to prevent counsel from profiting from the accumulation of benefits while the case is pending due to any foot-dragging); (4) "if the benefits are large in comparison to the amount of time counsel spent on the case [thereby resulting in a windfall], a downward adjustment is similarly in order." ("windfall factor"); and (5) counsel's record of the hours spent representing the claimant and counsel's normal hourly billing rate for non-contingency work. Id. at 808 (emphasis added). Another factor to consider is the attorney's risk of loss in taking the case on a contingency basis. Id. at 805; see Black v. Astrue, No. 05-56628, 2007 WL 1202886, *1 (9th Cir. (Cal.) Apr. 24, 2007).*fn3
Recently, the Ninth Circuit affirmed two of the undersigned Magistrate Judge's orders that partly granted § 406(b) fee requests. Crawford v. Astrue, 554 F.3d 454 (9th Cir. 2008). In doing so, the Crawford majority approved of the Gisbrecht methodology and factors this Court has considered in ruling on § 406(b) motions. Id. 554 F.3d at 861-864. The Crawford majority also stated:
We read Gisbrecht not to prohibit a district court from making lodestar- type calculations, but only from relying exclusively on such calculations and refusing to consider the contingency-fee agreement.
. . . [W]hat Gisbrecht held was that "§ 406(b) does not displace contingency-fee agreements within the statutory ceiling; instead, § 406(b) instructs courts to review for reasonableness fees yielded by those agreements." The methodology by which a district makes such reasonableness determinations is for that court to select in the exercise of its sound discretion. In making these determinations, it would be preferable for a district court to begin with the contingency-fee agreement and decrease from there, rather than increase from a lodestar calculation. It does not seem to be an abuse of discretion, however, to use the latter approach as long as the court takes the necessary factors into consideration.
Crawford, 545 F.3d at 862.
In light of Crawford, this Court shall apply its same Gisbrecht methodology here.
B. The Contingency Fee Agreement
The Petition is supported by a copy of the mutually executed contingency fee agreement between Plaintiff and Counsel's law firm. (Petition, Ewenike Decl., ¶8, Attach. 2.) Plaintiff agreed to pay Counsel attorney fees corresponding to 25 percent of the back benefits awarded for work before the Court -- the statutory maximum. As discussed above, the SSA ultimately awarded Plaintiff back benefits of $67,313.52. Consequently, under the terms of the fee agreement, Plaintiff is contractually obligated to pay Counsel total attorneys fees of $16,828.38 ($67,313.52 x .25 = $16,828.38). The ...