7th Circuit affirms withheld attorney fees in disability cases

Attorneys who successfully represented two clients seeking Social Security disability benefits won’t get paid, the 7^th Circuit Court of Appeals ruled, because their indigent clients owed debts to the federal treasury.

Ruling jointly on two Indiana cases posing the same question, the appellate panel affirmed district court rulings that withheld attorney fees for the de la Torre Law Office LLC. The cases are Staci Harrington v. Nancy A. Berryhill, 17-3179, and Andrew Banks v. Nancy A. Berryhill, 17-3194.

The firm represented Banks and Harrington beginning in 2014, who were both initially denied benefits but who prevailed on judicial review of Social Security’s administrative decision. The firm then was awarded $11,001 in fees in Banks’ case and $11,851 in Harrington’s, as provided by the Equal Access to Justice Act.

But when Social Security submitted payment vouchers to the Treasury Department, it claimed the awards of fees as a payment intercept or offset allowed by the Debt Collection Improvement Act of 1996 (“DCIA”), 31 U.S.C. § 3716. Banks had been delinquent on child support in Allen County, and Harrington had an outstanding debt to the Department of Education that exceeded the sum of her attorney fees. The award of legal fees instead was applied toward those debts.   

Both plaintiffs appealed, asking the 7^th Circuit “to do what the district courts would not do: compel the government to reverse Treasury’s administrative offsets, reinstate their prior debts, and pay their lawyers.” But the panel declined.

Judge Michael S. Kanne wrote for the panel that found the district courts properly awarded attorney fees, but didn’t wade into broader questions the cases pose.

“…(W)e hold that a reduction of a litigant’s prior debts to the government by administrative offset constitutes payment to the prevailing party under EAJA,” Kanne wrote.

The panel declined to exercise ancillary jurisdiction to reach a determination on whether the offset was lawful or constitutional. “A new suit under the Administrative Procedure Act (“APA”), 5 U.S.C. § 701 et seq., is the proper vehicle for this litigation,” it found.

“We stress that our decision today indicates no opinion on the merits of the various legal theories the plaintiffs have proposed to us. These are important questions that deserve their day in court. In particular, we sympathize with the practical effects that administrative offsets have on the ability of indigent petitioners to bring meritorious lawsuits before federal courts,” Kanne wrote. “… Nevertheless, Justice Sotomayor and her colleagues determined that regardless of the policy outcomes, the text of the law clearly required upholding the offsets. They left questions of policy to Congress.

“… Another court sitting under another statutory grant of jurisdiction may determine that some provision of the Constitution or a statute forbids administrative offsets of EAJA awards. But this case is not a suitable vehicle in which to assess those questions, and we will not do so,” the panel concluded.