Directly paying a claimant the attorney fees awarded under the Equal Access to Justice Act (EAJA) (1) deprives Social Security claimants' access to the courts. In Reeves v. Barnhart, the United States District Court for the Middle District of Alabama held that attorney fees, awarded pursuant to EAJA in a Social Security claim, must be made payable to the claimant. (2) Pursuant to the Federal Debt Collection Act of 1982, (3) the attorney fees would then be subject to an offset for any outstanding debt the claimant owes to the federal government. (4) The decision in Reeves is indicative of a recent trend where courts hold that the EAJA fee should be made payable to the claimant instead of the attorney. (5) The holding in Reeves is based on one section of the EAJA which states, "a court shall award to a prevailing party ... fees and other expenses." (6) However, the "savings provision" of the EAJA also states that where the claimant's attorney receives two fees, "the claimant's attorney refunds to the claimant the amount of the smaller fee." (7) The decision in Reeves deviates from the established practice to pay the attorney fee directly to the attorney. (8)
The holding in Reeves raises some serious issues. First, do attorney fees under the EAJA belong to the plaintiff or the attorney? Congress' intent regarding the owner of the attorney fee is somewhat contradictory. The statutory language lends support to payment of the attorney fee to the claimant. Yet, the language of the saving provision suggests payment of the attorney fee to the attorney. From the inception of the act, Congress was aware that some courts made the attorney fee payable to the attorney, and, despite this knowledge, did not clarify its intention. Until Congress amends the statute, the Middle District of Alabama should adhere to precedent by paying the attorney fee directly to the attorney.
The second issue raised by Reeves is whether making attorney fees payable to a claimant undermines the purpose of the EAJA, which is to provide equal access to the courts. Social Security claimants are usually out of work and therefore cannot afford legal services. If the claimant is paid the attorney fees, the fees become subject to the claimant's outstanding debt pursuant to the Debt Collection Act. (9) As a result, attorneys might never receive the entire fee for their services. Attorneys would be discouraged from representing Social Security claimants, thus, depriving claimants of access to the courts. However, if the attorney fees are made payable to the attorneys, the purpose of both the EAJA and the Debt Collection Act are accomplished. If the EAJA fee is made payable to the attorneys directly, attorneys will be more likely to represent Social Security claimants because of the assurance of payment. Also, since Social Security benefits are subject to the Debt Collection Act, the government might be able to collect the outstanding debts of both the claimant and the attorney. Thus, the court should order the EAJA fee to be made payable to the attorney.
The first section of this Note will discuss background information, including the Social Security process; attorney fees, and the EAJA; the Debt Collection Act; and the historical development of Reeves. The second section is a statement of the case including a recitation of the facts and procedural posture, and the court's holding and reasoning. The third section is a detailed analysis of the case including an examination of whether the EAJA fee should be made payable to the attorney or to the claimant, and whether paying attorney fees to the claimant undermines the purpose of the EAJA by discouraging attorneys from representing claimants. The final section is a summary of the issues and a conclusion.
Social Security Disability Process
When an employer compensates an employee, the employer is required to withhold Social Security payroll taxes from the paycheck under authority of the Federal Insurance Contributions Act (FICA). (10) The government then contributes these FICA withholdings to the social insurance system to pay for things such as disability insurance and retirement. (11) By working and paying FICA taxes, a person earns "credits" that qualify him for this insurance policy. (12) The number of credits a person needs to qualify for disability insurance benefits depends on the person's age when he becomes disabled. (13) As of 2008, one credit is issued for each $1,050 a person earns, up to the maximum of four credits per year. (14)
The process for filing a Social Security Disability claim is a long and complicated one. Once a person feels that he is no longer able to work, he can apply for Social Security Disability benefits. (15) The initial application process lasts three to five months. (16) The Social Security Administration only approves thirty-six percent of claims at the initial level. (17) On average, of the sixty-four percent denied at the initial level, only twenty-two will appeal the decision. (18) A person turned down at the initial level can appeal the decision by filing a request for reconsideration. (19) Once turned down at the reconsideration level, a person can file a request for hearing before an administrative law judge. (20) An average claimant then waits fifteen months for his hearing. (21) If the administrative law judge issues an unfavorable decision after the heating, the claimant can file a request for review of hearing decision with the Appeals Council. (22) The average processing time for a request for review is seven months, but the process can take as long as thirty months. (23) If the Appeals Council denies review, the claimant can file a civil suit in federal district court. (24) Therefore, a social security claimant who has a claim in federal district court has usually been out of work, fighting the process for about three years.
Attorney Fees and Equal Access to Justice Act
There are two basic rules regarding the payment of attorney fees: the English Rule and the American Rule. (25) The English Rule provides that in a law suit, the losing party is responsible for the cost of litigation. (26) The American Rule provides that "each party to litigation must bear its own attorney fees and may not recover those fees from an adversary." (27) The purpose of the American Rule is to "avoid stifling legitimate litigation by the threat of the specter of burdensome expenses being imposed on an unsuccessful party." (28)
Although the American Rule avoids the threat of burdensome expenses on an unsuccessful party, the American Rule also tends to cut off access to the courts based on monetary income. As a result, the current system provides several exceptions to the American Rule, including (1) where a fee-shifting statute exists, (2) where the non-prevailing party has acted in bad faith, (3) where the non-prevailing party has willfully disobeyed a court order, and (4) where the plaintiff acts as a private attorney general. (29)
In 1980, Congress enacted the EAJA, a fee-shifting statute, in response to concerns that persons "may be deterred from seeking review of, or defending against, unreasonable governmental action because of the expense involved in securing the vindication of their rights." (30) Congress designed the EAJA to rectify this situation by shifting fees to the government by providing award of a reasonable attorney fee when a claimant successfully litigates against the government. (31) However, due to fear of enormous cost to the government, Congress considered EAJA as a "three year experiment" set to expire on October 1, 1984. (32)
In 1985, five years after enacting the EAJA, Congress made the EAJA permanent and amended the EAJA to include another provision pertinent to the area of Social Security:
Section 206(b) of the Social Security Act (42 U.S.C. 406(b)(1)) shall not prevent an award of fees and other expenses under section 2412(d) of title 28, United States Code. Section 206(b)(2) of the Social Security Act shall not apply with respect to any such award but only if, where the claimant's attorney receives fees for the same work under both section 206(b) of that Act and section 2412(d) of title 28, United States Code, the claimant's attorney refunds to the claimant the amount of the smaller fee." (33) In enacting this "Savings Clause," Congress stated:
It is Congresses intent that when fee awards are made ... the EAJA award should be used as a set off to reduce the payment which the claimant would otherwise owe the attorney. Thus, under the amendment an attorney for a Social Security or SSI claimant would be precluded from receiving both EAJA and Social Security Act fees. Without this amendment it was argued, "double dipping" was possible. Such double payments are inappropriate and deprives the plaintiff of the benefits intended by EAJA. Because the Committee is aware of the important function served by the counsel in these cases, the Committee permits the attorney to seek recovery under both authorizations. The attorney, however, may keep the larger fee, but must return the amount of the smaller fee to the claimant. (34) C. The Debt Collection Act
Congress authorized federal agencies to collect outstanding debt owed to the government through an administrative offset by enacting the Debt Collection Act in 1982. (35) An administrative offset is a deduction from funds that the United States is to pay to a person in the amount that the person owes (36) to the United States. (37)
To achieve the goals of the Debt Collection Act, the Financial Management Service, a bureau of the Department of Treasury, operates a centralized debt collection program called the Treasury Offset Program (TOP). (38) The TOP maintains a database that stores delinquent debtor information. (39)...