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Wheeler v. Heckler

argued: March 3, 1986.


On Appeal from the United States District Court for the District of New Jersey (Newark) Civil No. 83-2494

Author: Adams

ADAMS, Circuit Judge

This case presents a labyrinthine question concerning the calculation of attorney fees for representation of a Social Security disability insurance claimant. The district court concluded that the method employed by the Social Security Administration (SSA) for determining the attorney fee in this proceeding was not consistent with the relevant statute, 42 U.S.C. § 406 (b)(1) (1982), and ordered a different calculation. Because we believe that SSA's resolution of the problem is within its discretion, we will reverse the judgment of the district court.


A disabled American may qualify for either or both of two federal benefits programs as a result of his or her disability. Title II of the Social Security Act provides for disability insurance (SSID), under a program funded by worker and employer contributions. The Supplemental Security Income (SSI) arrangement, Title XVI of the Act, does not depend on a claimant's insured status, but instead provides a minimum income for the aged, blind and disabled who meet is requirements.

Creola T. Wheeler, a New Jersey resident and the claimant in this case, applied for SSDI benefits in June 1982. In December of that year, she retained an attorney, Jeffrey G. Paster, Esquire, to assist her in demonstrating her eligiblity, and agreed to pay him the greater of $100 per hour or 25% of retroactive benefits awarded, so long as benefits were obtained. The agency denied the requested benefits, and Wheeler and her attorney pursued an appeal in the district court. There they prevailed, and the district court ordered in January 1984 that benefits be awarded. The district court later issued an order concerning the attorney fee; it is only that ruling which has been appealed by the Secretary of Health and Human Services.

While the SSDI application was pending, Wheeler's financial condition worsened, and she applied for an SSI stipend in addition to SSDI benefits. This second application was not at issue in the district court proceeding, but because the same disability standard governs both SSDI and SSI eligibility determinations the district court's decision that Wheeler was entitled was also eligible for SSI. Accordingly, the Secretary soon approved a retroactive SSI award. This SSI determination had a significant impact on the attorney fee calculation.

The Secretary found that Wheeler was entitled to $5,207 in retroactive SSDI benefits, for the period from November 1982 through December 1983. Normally, Wheeler's attorney would be entitled to have withheld 25% of these past-due benefits as compensation for his representation in the district court. 42 U.S.C. § 406(b)(1) (1982). But another statute, 42 U.S.C. § 1320a-6 (1982), requires that when retroactive SSDI benefits are awarded the sum owed must be reduced by the amount of SSI benefits received for the same period that would not have been collected if the SSDI income had been timely received. SSA applied this offset provision here, calculating the retroactive SSI applied this offset provision here, calculating the retroactive SSI amount as $1,995.04, and thereby reducing the SSDI award from $5,207 to $3,211.96.

These computations apparently had no direct impact on Wheeler; she remained entitled to a total award of $5,207. But they did adversely affect attorney Pastor. Because § 406(b)(1) permits a 25% retainer only on retroactive SSDI awards, the Secretary withheld as an attorney fee 25% of $3,211.96 ($802.99), rather than 25% of $5,207 ($1,301.75).

Paster filed a motion in the district court to compel calculation of the attorney fee based on the gross SSDI awards before the SSI offset; he represented that his client had refused to honor the retainer agreement.*fn1 The district court granted the motion and ordered SSA to pay a fee larger than the amount the agency had withheld. 607 F. Supp. 646 (D.N.J. 1985).*fn2

The present appeal requires that we review the propriety of the Secretary's practice of determining the SSDI-based attorney fee following the SSI offset. This question has divided the federal courts that have considered it. The only court of appeals to address the issue upheld the administrative procedure. Burnett v. Heckler, 756 F.2d 621 (8th Cir. 1985). Several district courts, in contrast, have rejected the Secretary's interpretation. See, e.g., Kovar v. Heckler, 622 F. Supp. 967 (N.D. Ohio 1985); Sepulveda v. Secretary of Department of Health and Human Services, No. 83 Civ. 4382 (E.D.N.Y. Oct 18, 1985); Motley v. Heckler, 605 F. Supp. 88 (W.D. Va. 1985); Carlisi v. Secretary of Health and Human Services, 583 F. Supp. 135 (E.D. Mich. 1984); Booe v. Heckler, [1984 Transfer Binder] Unempl. Ins. Rep. (CCH) P 15,352 (S.D. Ind. Jan. 23, 1984).*fn3 As this is a case of statutory construction, the scope of our review of the district court's decision is plenary. Chrysler Credit Corp. v. First National Bank and Trust Co., 746 F.2d 200, 202 (3d Cir. 1984) (per curiam).


Our task of statutory construction begins with the attorney fee provision itself. Section 406(b)(1), applicable to SSDI applications, states:

Whenever a court renders a judgment favorable to a claimant under this subchapter who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the ...

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