Protect Attorney's Fees From Being Taken to Pay Client's Debts

Protect Attorney’s Fees From Being Taken to Pay Client’s Debts

Payee for EAJA fees, with protective client agreement

by Sarah H. Bohr

Excerpted from Social Security Issues Annotated

In Manning v. Astrue, 510 F.3d 1246 (10^th Cir. 2007), cert denied, 129 S.Ct. 486, 172 L.Ed.2d 355 (U.S. Nov. 3, 2008) (NO. 07-1468), and Reeves v. Astrue, 526 F.3d 732, 735 (11^th h Cir. 2008), cert denied, 129 S.Ct. 724 (U.S. Dec, 8, 2008) (NO. 08-5605), the Tenth and Eleventh Circuits ruled that attorneys-fee awards under the EAJA may be offset for the federally-collectable debts of the client instead of paying the attorneys’ fees. Although the courts made awards of attorney’s fees under the EAJA in both cases, in each instance the government, using the Treasury Offset Program, 31 U.S.C. § 3716, used the award to instead pay a debt owed by the party, leaving the attorney’s fee unpaid. In Manning the debt was for a student loan, and in Reeves it was for child support, but the federal government has the authority to collect a wide variety of debts using the Treasury Offset Program. While both courts acknowledged that the purpose of the Equal Access to Justice Act was to pay for attorneys’ fees, they concluded that because the right to an attorneys-fee award is given to the client rather than the lawyer, the award was the property of the client, subject to offset for the client’s debts.

The same question was considered by the Eighth Circuit in Ratliff v. Astrue, 540 F.3d 800 (8^th Cir. 2008) (Rehearing and Rehearing En Banc Denied Dec. 5, 2008), but it reached the opposite conclusion. The Eighth Circuit ruled that the EAJA fee must be paid to the attorney.

In Marre v. United States, 117 F.3d 297 (5^th Cir. 1997), the Fifth Circuit rejected a Government attempt to collect the debt of a party from an award of fees under Section 7430 of the Internal Revenue Code—a statute which uses similar language to the EAJA. The Government agrees that Marre prevents it from pursuing offsets against EAJA fees for the debts of the party in the Fifth Circuit. See Stephens v. Apfel, 539 F. Supp. 2d 802, 819 (D. Md. 2008). Given the split in the circuits, it is possible that the Supreme Court will resolve the conflict, so no one can be confident the law that currently prevails in his circuit will apply in the future.

Applicable Statute

28 U.S.C. § 2412(d) (2006) provides in relevant part:

(1) (A) Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.

Applicable Case Law

Supreme Court

The Supreme Court has not addressed whether attorneys fee awards under EAJA must pay the attorney’s fees, or if the award can be used to provide debt relief.

Fifth Circuit

In Marre v. United States, 117 F.3d 297, 304 (5^th Cir. 1997), the Fifth Circuit rejected the Government’s attempt to offset the debt of a party against an award of fees under Section 7430 of the Internal Revenue Code—a statute which uses similar language to the EAJA. The court reasoned that the real party in interest when fees are awarded is the attorney, notwithstanding that the award is to the prevailing party. The Government agrees that Marre prevents it from pursuing offsets against EAJA fees for the debts of the party in the Fifth Circuit. See Stephens v. Apfel, 539 F. Supp. 2d 802, 819 (D. Md. 2008).

Sixth Circuit

The Sixth Circuit, in King v. Comm’r of Soc. Sec., 230 Fed. Appx. 476 (6^th Cir. Mar. 28, 2007) has only addressed the question in an unpublished case, concluding that the award of attorneys fees was dependent on the obligation to use the award to pay the fees of the attorney.

Eighth Circuit

In Ratliff v. Astrue, 540 F.3d 800 (8^th Cir. 2008) (Rehearing and Rehearing En Banc Denied Dec. 5, 2008), the Eighth Circuit ruled that the EAJA fee must be paid to the attorney. While the panel opinion seemed to encourage the Government to petition for en banc rehearing, the petitions for rehearing were denied.

Tenth Circuit

In Manning v. Astrue, 510 F.3d 1246 (10^th Cir. 2007(, cert denied, 129 S.Ct. 486, 172 L.Ed.2d 355 (U.S. Nov. 3, 2008) (NO. 07-1468), the Tenth Circuit ruled that attorneys-fee awards under the EAJA may be offset for the federally-collectable debts of the client instead of paying the attorneys’ fees. Although the court made an award of attorney’s fees under the EAJA , the government, using the Treasury Offset Program, 31 U.S.C. § 3716 (2006), used the award to instead pay a debt owed by the party, leaving the attorney’s fee unpaid. In Manning the debt was for a student loan. While the court acknowledged that the purpose of the Equal Access to Justice Act was to pay for attorneys’ fees, it concluded that because the attorneys-fee award is made to the prevailing party rather than the lawyer, the award was the property of the client, subject to offset for the client’s debts. The Supreme Court has denied cert.

Eleventh Circuit

In Reeves v. Astrue, 526 F.3d 732, 735 (11^th Cir. 2008), cert denied, 129 S.Ct. 724 U.S. Dec. 8, 2008), the Eleventh Circuit agreed with the Eighth Circuit's decision in Manning, holding that attorneys-fee awards under the EAJA may be offset for the federally-collectable debts of the client without paying the attorneys’ fees. Although the court awarded attorney’s fees under the EAJA, using the Treasury Offset Program, 31 U.S.C. § 3716 (2006), it used the award to instead pay a debt owed by Reeves for child support.

Practical Pointer

Unless you live in the Fifth or the Eighth Circuit, you are likely to find that the Government will attempt to recover your client’s debts out of your EAJA fees until either your circuit or the Supreme Court rules on the question. Fortunately, in most cases the Government will agree to paying the EAJA directly to the attorney if the client signs an assignment, as set forth below. While there are occasional exceptions, in most cases the Government will agree that the EAJA fees should be paid to the attorney where the client has signed an agreement assigning the EAJA fees to the attorney.

Sample assignment language:

I hereby assign any and all rights to any attorney fees payable under the Equal Access of Justice Act to my attorneys, including __________ and ______________, and hereby consent to the payment of those fees directly to my attorneys.

Sarah H. Bohr is an appellate attorney who has specialized in Social Security law for over twenty-five years. She is a partner in Bohr & Harrington, a Jacksonville, Florida law firm offering a national Social Security brief writing service. She is past president of NOSSCR, past Chair of The Florida Bar Council of Sections, past Chair of the Public Interest Law Section, and past Chair of the Juvenile Court Rules Committee. Ms. Bohr is the author of Social Security Issues Annotated, from which this article is excerpted.