4th Cir.: EAJA fees go to claimants, not lawyers

The Fourth Circuit held that attorneys’ fees under the Equal Access to Justice Act (EAJA) are payable to litigants and not directly to their lawyers – and that, consequently, these fees can be offset by litigants’ debts to the government.

 The decision, which came in consolidated Social Security benefits cases, wades into an emerging circuit split. The court admitted its result is counterintuitive, and had already led lawyers to refuse to take cases of people have such debts, but said its holding was required by the plain language of the EAJA. Stephens ex rel. R.E. v. Astrue, --- F.3d ----, 2009 WL 1241572 (May 7, 2009) (No. 08-1527 (lead case)).

 

          Two statutes provide for fees in Social Security cases, with differing language. The Social Security Act itself provides for “payment for [a claimant’s] attorney.” 42 U.S.C. § 406(b)(1)(A).  The EAJA provides fees in suits by or against the United States generally, and says they shall be awarded “to a prevailing party.” 28 U.S.C. § 2412(d)(1)(A). A saving provision states that fees may be awarded under both statutes at once, provided that “the claimant’s attorney refunds to the claimant the amount of the smaller fee.” § 2412 (note). Finally, the Debt Collection Improvement Act of 1996 provides for administrative offset of legally enforceable nontax debts to the government from any federal payments (including “fees”) to such debtors. 31 U.S.C. § 3716(c)(6). The result is that a litigant’s debts offset fees if they are paid to the litigant, but not if they are paid to the attorney directly.  It had long been the practice of the Commissioner to pay all fees directly to attorneys, but the agency recently started awarding EAJA fees only to claimants. The 34 claimants here challenged this practice.

 

          The Eighth and Fifth Circuits (as well as the Sixth in an unpublished decision) have held that EAJA fees are payable to attorneys, while the Tenth, Eleventh and Federal Circuits have held that they are payable only to litigants. The Fourth Circuit agreed with the latter courts that  the EAJA’s direction to award fees “to a prevailing party,” as well as the requirement that a “party” submit a statement of fees, and its textual lumping of fees together with other costs, all pointed to payment to litigants. Additionally, the court noted that Congress had deliberately used differently language to require payment to attorneys in the Social Security Act; that precedent denies attorneys themselves standing to apply for EAJA fees; and that Supreme Court precedents have spoken of fees under the similar 42 U.S.C. § 1988 as running to litigants.  The court rejected the argument that the saving provision’s reference to refunds indicates EAJA fees belong to lawyers, saying that provision presupposes the litigants will first use an EAJA award to pay the lawyers, then get any refund.

 

          The court admitted that it might better serve the statute’s purpose to pay fees directly to attorneys and avoid administrative offset, but it said the statutory language clearly ruled this out. The court also stated that the claimants’ “real problem lies with the Debt Collection Improvement Act, not the EAJA,” since prior to the DCIA the question of payment to litigants versus lawyers would have had no practical impact.

 

          As noted, the EAJA governs fees for claims against the federal government generally, and this decision impacts any litigant in the Fourth Circuit who owes enforceable nontax debts to the government. Congress could solve this problem either by amending the EAJA to provide for payment directly to attorneys, or by amending the DCIA to exempt attorneys’ fees.

 

          The other circuit decisions are Reeves v. Astrue, 526 F.3d 732 (11th Cir. 2008); Manning v. Astrue, 510 F.3d 1246, 1252 (10th Cir. 2007) cert. denied, 129 S.Ct. 486 (2008); FDL Techs. Inc. v. United States, 967 F.2d 1578 (Fed. Cir. 1992) (over dissent); Ratliff v. Astrue, 540 F.3d 800 (8th Cir. 2008) (with five judges dissenting from denial of rehearing en banc); King v. Comm'r of Soc. Sec., 230 F. App'x 476 (6th Cir. 2007); Marre v. United States, 117 F.3d 297 (5th Cir. 1997).