SSR 68-47c: SECTION 206(a). -- REPRESENTATION OF CLAIMANT -- ATTORNEY'S FEES -- AUTHORITY TO REGULATE AND APPROVE AMOUNT

20 CFR 404.972, 404.975, and 404.976

SSR 68-47c

RANDOLPH v. U.S.A., 389 U.S. 570 (U.S.D.C. MD. N. Car.); U.S. Supreme Court granted Govt. motion to affirm D.C. decision (88 U.S.C. 695, 1/15/68)

Held, section 206(e) of the Social Security Act and regulations thereunder providing for regulation of the fees of attorneys appearing before the Secretary of HEW, do not violate the "due process" clause of the constitution, since they fall within the reasonable exercise of the Congressional power to subject attorneys' fees to regulation; they do not violate Article III, section 2 of the constitution, as an encroachment on the judiciary, since they relate only to attorneys' fees in connection with claims before an executive office; they do not deprive the claimant of a constitutional right to counsel, since claimants for social security benefits have no constitutionally protected right to counsel in pursuing their claims through the administrative procedures of the social security system; nor are they an unconstitutional delegation of legislative power to the Secretary, but rather a lawful delegation of discretion to him to set maximum fees for services performed in connection with claims before his department, which discretion is exercised based upon a recommendation emanating from that level of the administration best able to judge what the proper compensation should be in each case, i.e., that administrative division where the services were actually rendered.

PER CURIAM

In this action an individual attorney attacks as unconstitutional the statutory and regulatory restrictions placed on the fees of attorneys representing claimants seeking social security benefits.

The plaintiff in his complaint filed December 16, 1966, seeks a declaratory judgment that 42 U.S.C. § 406(a)[1] and the administrative regulation issued by the Secretary of Health, Education and Welfare pursuant to such statute, 20 C.F.R. 404.976,[2] are void as being repugnant to the constitution, in that:

1. Claimants for social security benefits are effectively deprived, in the prosecution of social security claims, of their right to retained counsel as guaranteed by the due process clause of the Fifth Amendment.

2. These restrictions are an unreasonable encroachment of the judicial branch in violation of Article III, Section 2 of the Constitution.

3. The statute is an unconstitutional delegation of legislative power to an administrative agency.

4. No valid and legally effective rule or regulation has actually been promulgated by the Secretary of Health, Education, and Welfare as authorized by 42 U.S.C. § 406.

Plaintiff seeks an injunction against the United States of America to restrain enforcement of 42 U.S. C. § 406 and a mandatory injunction to compel the Secretary of Health, Education and Welfare to deal directly with attorneys representing claimants seeking social security benefits and to recognize the honor liens of attorneys for their fees.

The government in a motion filed April 17, 1967, moved to dismiss the complaint on the grounds that:

1. The complaint fails to state a claim against the defendant from which relief can be granted.

2. The plaintiff has no standing to bring the action and the complaint fails to allege a justiciable controversy.

The essential facts are as follows: On or about October 1, 1965, the plaintiff was retained by Mrs. Novella B Holder to prosecute her claim for social security disability benefits on a contingent fee based on one-third of any past due benefits recovered. Mrs. Holder's claim had twice been previously denied by the Social Security Administration prior to plaintiff's retention and was again administratively denied on April 8, 1966. A hearing was requested on April 25, 1966, and held before a Hearing Examiner, on July 12, 1966. As a result, the claimant was found to have been under a disability since December 1, 1961, and subsequently received past due benefits in the amount of $4,866.40. The plaintiff filed with the Social Security Administration a Petition For Order Approving Counsel Fees in which was noted the amount of work done and the complicated medical problems involved in representing the claimant. The fee requested was $1,577.33, which was the plaintiff's computation of one-third of the total past due benefits. On October 24, 1966, the plaintiff received an authorization to charge a fee in the amount of $750.00.

At the outset, plaintiff concedes that statues regulating the fees of attorneys appearing before administrative agencies have survived attacks which were based on the attorney's right to contract as guaranteed by the Fourteenth Amendment.[3] However, plaintiff asserts his challenge on more novel grounds: first, that the statute violates the due process clause of the Fifth Amendment which guarantees the claimant the right to counsel[4], and secondly, that it encroaches on the powers of the judiciary as set forth in Article 3, Section 2 of the Constitution.[5] For instance, two not so novel grounds are also urged upon the Court: that the statute is an unconstitutional delegation of legislative authority, and that a proper administrative regulation has not been promulgated by the Secretary of Health, Education, and Welfare.

This Court finds that the statute survives these attacks despite their novelty and grants the defendant's motion to dismiss on the grounds that the plaintiff has failed to state a claim upon which relief can be granted.

In plaintiff's main thrust be asserts that every social security claimant has the constitutional right to counsel in administratively pursuing his claims, and that this right is thwarted by 46 U.S.C. § 406 and its progeny, 20 C.F.R. 404.976, which require that any attorney's fee larger than a very minimum figure must be approved by the Social Security Administration. The statute also provides for criminal sanctions if a greater fee is charged. The plaintiff contends that these statutory and regulatory restrictions of attorney's fees so effectively discourage attorneys from handling social security cases that the claimants are deprived of the assistance of counsel.

Even assuming arguendo that the plaintiff's conclusion, that claimants are effectively deprived of counsel under these fee restrictions is correct, this Court cannot accept the plaintiff's initial premise, which is that claimants for social security benefits have a constitutionally protected right to counsel in pursuing their claims through the administrative procedures of the social security system.

It is readily acknowledged that the interest of a claimant is of sufficient substance to fall within the protection from arbitrary governmental action afforded by the due process clause. Fleming v. Nester, [sic.] 363 U.S. 603, 80 S. Ct. 1367, 4 L. Ed. 2d 1435 (1960). However, the Supreme Court in the above case also stated that such benefits did not have the due process protection of an accrued property right. Within the bounds of reasonable action, the social security system is a child of Congress and, as such, subject to its regulation. If for a valid reason, Congress can prohibit attorneys completely from the administrative processing of claims, then certainly Congress can subject attorney's fees to regulations.

As a practical matter, attorneys should be encouraged to assist in the presentation of complicated claims. The attorney's absence in such cases is lamented in a number of opinions which comment on the chaotic records of such cases on appeal to the Federal Courts.[6] Nevertheless, if such fee restrictions place too great a burden on attorneys, the change in such restrictions should be attempted through legislative channels and should not be accomplished through judicial fiat when such restrictions do not offend due process.

Next, the plaintiff urges that these restrictions on attorney's fees violate Article III, Section 2, of the Constitution as an encroachment on the judiciary. However, these restrictions do not relate to the regulation of fees of attorneys prosecuting claims before the courts which might raise the question of encroachment on the judiciary. These restrictions relate only to attorney's fees in connection with claims before an executive officer, thus precluding any question of judicial encroachment.

The argument, that 46 U.S.C. § 406 is an unconstitutional delegation of legislative power because it provides the Secretary with full discretion to regulate attorney's fees, is without merit. It is well accepted that while Congress may not delegate the discretion of what a law shall be, it may lawfully delegate the discretion of how a law will be administered. The cases cited by the plaintiff to uphold his argument[7] have little persuasive force now in light of subsequent decisions. Congress can legislate only so far as it is reasonable and practical, and it must be able to clothe executive officers with the discretion to fill in the details so as to accomplish its purposes.[8] In order to insure flexibility in the administration of the legislation,[9] no specific standards need be set for each subsidiary executive action. The legislative intent of 46 U.S.C. § 406 is clear. Congress intended to allow the Secretary the discretion of setting maximum fees for services performed in connection with any claims before his Department. To require a strict standard to be set by Congress, would rob the Executive officer of the flexibility needed to properly administer the statutory scheme embodied in the Social Security Act.

Lastly, the plaintiff contends that the Secretary has not prescribed by rule or regulation the maximum attorney's fees as authorized by statute, but has attempted to vest his subordinate administrative officials with the absolute discretion to arbitrarily fix such fees. Since 20 C.F.R. 404. 976 does not lay down strict standards to be followed in the determination of fees, the plaintiff asserts that it is not a valid rule or regulation. The flexibility needed in legislative enactment by Congress is no less needed in the promulgation of executive regulations. The discretion to set fees is exercised based upon a recommendation immunating [sic]] from the level of the administration best able to judge what the proper compensation should be in each case, i.e., that division of the administration where the services were actually rendered. To require the Secretary to prescribe rigid standards in the setting of attorney's fees would serve to straitjacket the Social Security Administration in an area where adaptability is a continuing necessity.

Accordingly, an order will be entered.


[1] 42 U.S.C. § 406:

"* * * The Secretary may, by rule and regulation, prescribe the maximum fees which may be charged for services performed in connection with any claim before the Secretary under this title, and any agreement in violation of such rules and regulations shall be void. . . ."

[See 206 of the SSA, [42 U.S.C. 406] as amended by the Social Security Amendments of 1967 (P.I. 90-248, enacted January 2, 1968) also provides that the Secretary may, in any claim where he makes a determination favorable to the claimant, and the claimant was represented by an attorney, fix a reasonable attorney's fee. If the claimant is entitled to past-due benefits, the Secretary may certify for payment to the attorney, out of such past-due benefits an amount equal to whichever of the following is the smaller: (1) 15 per cent of the total amount of such past-due benefits, (2) the amount of the attorney's fee so fixed, or (3) the amount agreed upon between the claimant and the attorney as the latter's fee for services.] [Ed.]

[2] 20 C.F.R. 404.976:

"An attorney who is admitted to practice before a court of a State, Territory, District, or insular possession, or before the Supreme Court of the United States or an inferior Federal court, and who is not otherwise prohibited by law from charging or receiving such a fee, may upon petition therefor and good cause shown, charge and receive such fee for services rendered in any proceeding under Title II of the Act before the Bureau of Old-Age and Survivors Insurance, or a hearing examiner, or the Appeals Council, * * * as may be approved by such Bureau, hearing examiner, or Appeals council, respectively: Provided, That no such approval shall be required for charging or receiving a fee for such services in a total amount not greater than the following: Representation before the Bureau only, $20; representation before a hearing examiner and/or the Appeals Council only, $30; representation before the Bureau and a hearing examiner and/or the Appeals Council only, $50. This limitation shall be applicable whether the fee is paid by a party to the proceeding or by some else."

[3] Calhoun v. Massey, 253 U.S. 170, 40 S. Ct. 474, 64 L. Ed. 843 (1920); Hines v. Lowrey 305 U.S. 85, 59 S. Ct. 31, 83 L. Ed. 56 (1938).

[4] Fifth Amendment:

"No person shall . . . be deprived of life, liberty, or property, without due process of law; . . ."

[5] Article III, Section 2:

"The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority; . . ."

[6] Farley v. Celebrezze, 3 Cir., 315 F.2d 704 (1963); Butler v. Fleming, 5 Cir., 288 F.2d 591 (1961).

[7] Panama Refining Co. v. Rhyne, 292 U.S. 388, 55 S. Ct. 241, 79 L. Ed. 446 (1935); Scheckter Poultry Corp. v. U.S. 295 U.S. 495, 55 S. Ct. 847, 79 L. Ed. 1570 (1935).

[8] Carlson v. Landen, 342 U.S. 524, 72 S. Ct. 525, 96 L. Ed. 547 (1961).

[9] Yakus v. U.S. 321 U.S. 414, 64 S. Ct. 660, 88 L. Ed. 834 (1944).


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