## Facts

- Social Security disability claimants prevailed in federal court on Title II benefits claims.
- Each claimant had a standard contingent-fee contract agreeing to pay counsel 25% of past-due benefits recovered.
- Counsel obtained attorney’s fees under the Equal Access to Justice Act (EAJA) after prevailing against a position not substantially justified.
- Counsel also sought fees under 42 U.S.C. § 406(b)(1)(A), which permits a court to award a “reasonable fee” not exceeding 25% of past-due benefits, payable from (not in addition to) the claimant’s recovery.
- The district court declined to honor the contingent-fee agreements and instead calculated § 406(b) fees using a lodestar method (hours × rate), producing smaller awards and, after EAJA offsets, largely eliminating payment from past-due benefits.
- The Ninth Circuit affirmed, treating lodestar as required for § 406(b) determinations and viewing the 25% figure only as a ceiling.

## Issues

1. Whether 42 U.S.C. § 406(b) requires courts to calculate fees using a lodestar approach, or instead permits courts to use contingent-fee agreements (up to 25%) subject to reasonableness review.
2. How § 406(b) reasonableness review should operate when counsel also receives EAJA fees.

## Decision

- The Supreme Court reversed and remanded.
- Section 406(b) does not displace contingent-fee agreements within the 25% cap; it requires courts to review the resulting fee for reasonableness.
- The Ninth Circuit’s lodestar-first approach was rejected because § 406(b) regulates fees taken from a claimant’s recovery, not fee-shifting paid by the losing party.
- Courts must begin with the contingent-fee contract and then test the requested fee for reasonableness, reducing it when warranted.
- When both EAJA and § 406(b) fees are awarded, counsel must refund the smaller fee to the claimant to prevent double recovery.

## Legal Principles

- Under 42 U.S.C. § 406(b), a court may award a “reasonable fee” for successful Social Security representation in court, capped at 25% of past-due benefits and payable from the claimant’s recovery.
- Lawful contingent-fee agreements are the starting point for § 406(b) fee determinations; the statute imposes judicial review as an independent check on excess.
- A reduction from the contract amount may be appropriate when:
  - the representation is substandard or the results do not justify the contractual fee,
  - counsel caused delay that increased past-due benefits (and thus the potential fee),
  - the fee would be a windfall because benefits are large compared to the time counsel spent.
- EAJA and § 406(b) awards are compatible: EAJA shifts fees to the government; § 406(b) compensates counsel from the claimant’s recovery, with a required refund to the claimant of the lesser award.

## Conclusion

The Court held that § 406(b) preserves contingent-fee agreements up to 25% of past-due benefits, requiring courts to start with the contract and reduce only unreasonable fees, while preventing double recovery through the EAJA refund rule.


Gisbrecht v. Barnhart, 535 U.S. 789 (2002)