OTIS R. BOWEN, SECRETARY OF HEALTH AND HUMAN SERVICES, PETITIONER V. MARY ALICE GALBREATH No. 86-1146 In the Supreme Court of the United States October Term, 1986 Petition for a Writ of Certorari to the United States Court of Appeals for the Eighth Circuit The Solicitor General, on behalf of the Secretary of Health and Human Services, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Eighth Circuit in this case. TABLE OF CONTENTS Opinions below Jurisdiction Statutes involved Question presented Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-8a) is reported at 799 F.2d 370. The opinion of the district court (App., infra, 9a-10a) is unreported. JURISDICTION The judgment of the court of appeals (App., infra, 11a) was entered on August 14, 1986. On November 3, 1986, Justice Blackmun extended the time within which to file a petition for a writ of certiorari to and including January 11, 1987 (a Sunday). The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTES INVOLVED The relevant provisions of Title II of the Social Security Act, 42 U.S.C. 405(g), 406(a) and (b)(1), and 407, and of Title XVI of the Social Security Act, 42 U.S.C. 1383(c)(3) and (d)(1), are set forth in the Appendix, infra, 12a-15a. QUESTION PRESENTED Title XVI of the Social Security Act, 42 U.S.C. (& Supp. II) 1381-1383, provides supplemental security income (SSI) benefits to financially-needy persons who are aged, blind, or disabled. The question presented is whether federal courts may direct the Secretary of Health and Human Services to withhold attorney's fees from court-ordered past-due SSI benefits and pay those fees directly to the needy person's attorney. STATEMENT This case concerns Title XVI of the Social Security Act, 42 U.S.C. (& Supp. II) 1381-1383, particularly its relationship to Title II of that Act, 42 U.S.C. (& Supp. II) 401-432, with which Title XVI overlaps both substantively and structurally. Title II is one of the earliest federal programs enacted by Congress to provide old-age, survivor, and disability benefits for insured individuals. See 42 U.S.C. (& Supp. II) 403, 423. Title II benefits do not depend on a showing of financial need. Title XVI is a relatively new federal program, enacted in 1972. It provides supplemental security income (SSI) benefits to individuals who are aged, blind, or disabled and who are financially needy. See 42 U.S.C. (& Supp. II) 1382(a). An individual's Title II benefits, if any, are included in his income for purposes of determining his financial eligibility for Title XVI benefits. See 42 U.S.C. 1382a(a)(2)(B), 1382(c)(3). The precise question here is whether 42 U.S.C. 406(b)(1), a provision of Title II authorizing attorney's fees to be set off against court-ordered past-due disability benefits, has any application in Title XVI, which has no analogous provision. 1. In August 1983, after the Secretary had denied her application for SSI benefits, respondent brought this suit in federal district court challenging the Secretary's determination (App., infra, 2a). In February 1985, the district court reversed the Secretary's decision and ordered that SSI benefits, including past-due benefits, be paid to respondent. The Secretary accordingly mailed respondent a check for $7,954, the full amount of her past-due benefits, in July 1985 (id. at 2a, 9a-10a). Respondent's lawyer subsequently moved the district court for an award of attorney's fees. On October 15, 1985, the district court ordered "that an attorney's fee in the amount of $1,988.50 payable from (respondent's) past due benefits is hereby allowed to (her) attorney, pursuant to 42 U.S.C. Section 406(b)(1)" (App., infra, 10a). Section 406(b)(1) provides that, where a court orders the payment of disability benefits under Title II, "the court may determine and allow as part of its judgment a reasonable (attorney's) fee * * *, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled" (App., infra, 13a). That Section further provides that the attorney's fees are to be paid "out of, and not in addition to, the amount of such past-due benefits" (ibid.). The district court accordingly ordered the Secretary to "compute, certify and pay" out of respondent's past-due Title XVI benefits a fee in the amount of $1,988.50 -- 25% of the amount to which she was entitle -- to her lawyer (App., infra, 10a). /1/ 2. The court of appeals affirmed (App., infra, 1a-8a). The court acknowledged (id. at 7a-8a) that Title XVI, unlike Title II, nowhere explicitly authorizes a district court to order the Secretary to pay attorney's fees out of a claimant's past-due SSI benefits. The court further acknowledged that Congress had expressly determined not to allow the Secretary to withhold attorney's fees from past-due SSI benefits in administrative proceedings -- something Title II also permist (see 42 U.S.C. 406(a)) -- because "'withholding of attorney fees from (an) individual's benefits * * * would be contrary to the purpose of the (Title XVI) program'" (App., infra, 4a, quoting H.R. Rep. 92-231, 92d Cong., 1st Sess. 156 (1971)). And the court acknowledged (App., infra, 4a) that Congress, while incorporating many provisions of Title II into Title XVI by reference, had failed to incorporate the provision (42 U.S.C. 406(b)(1)) upon which the district court predicated its decision. The court of appeals nevertheless concluded that, "(a)bsent express statutory prohibition, (a) district court possesses the inherent power to withhold and certify for payment an attorney's fee from SSI benefits," stating that such authority "is an integral part of the court's power of judicial review under (42 U.S.C.) 405(g)." App., infra, 7a-8a. The court recognized that its holding to this effect conflicts with a recent decision of the Sixth Circuit, which "held that (a) district court is without authority to order the payment of attorney's fees from past-due SSI benefits." App., infra, 5a (citing McCarthy v. Secretary of Health & Human Services, 793 F.2d 741, 744-745 (1986)). REASONS FOR GRANTING THE PETITION The decision of the court of appeals incorporates into Title XVI by judicial fiat a provision of Title II that Congress specifically declined to incorporate by legislative enactment. That decision frustrates congressional intent, since it requires the reduction of benefits to financially needy persons in a fashion that Congress stated "would be contrary to the purpose of the (Title XVI) program" (H.R. Rep. 92-231, supra, at 156). The decision below squarely conflicts with a recent decision of the Sixth Circuit, and it presents a recurring issue of great practical concern to the Secretary. This Court's review is therefore warranted. 1. Unlike Title II, Title XVI of the Social Security Act nowhere explicitly authorizes a district court to order the Secretary to withhold a portion of a claimant's past-due SSI benefits for payment of an attorney's fee directly to the claimant's lawyer. The language and structure of Title XVI, moreover, as well as its legislative history, belie any assertion that Congress implicitly intended to allow, let alone require, such withholding by the Secretary in derogation of a claimant's basic subsistence needs. a. Both Title II and Title XVI generally prohibit the assignment to another person of an individual's benefits. See 42 U.S.C. 407 and 1383(d)(1). In Title II, Congress lifted this bar in two relevant instances, neither of which Congress chose to repeat in Title XVI. Pursuant to 42 U.S.C. 406(a), the Secretary may prescribe a reasonable attorney's fee to which a successful claimant's counsel is entitled for services performed before the Secretary, and must withhold a corresponding portion of the claimant's past-due Title II benefits and pay that sum directly to the claimant's counsel. Similarly, pursuant to 42 U.S.C. 406(b)(1), a court may prescribe a reasonable attorney's fee to which a successful claimant's counsel is entitled for services performed in court, order the Secretary to withhold that amount out of the claimant's past-due Title II benefits, and instruct the Secretary to pay that sum directly to the attorney. Although Congress incorporated much of Title II into Title XVI -- both when enacting Title XVI in 1972 and when amending it in 1976 (see, e.g., 42 U.S.C. 1383(c)(3) and (d)(1) -- in neither instance did Congress incorporate the provisions of Title II that authorize the withholding of a claimant's past-due benefits for payment as attorney's fees. Significantly, Congress did provide in Title XVI that the Secretary may "prescribe the maximum fees which may be charged for services performed in connection with any claim before the Secretary," a sentence taken verbatim from the parallel section in Title II. Compare 42 U.S.C. 1383(d)(2) (fourth sentence) with 42 U.S.C. 406(a) (fourth sentence). But Congress omitted from Section 1383(d)(2) the further authorization, set forth in the next sentence of Section 406(a), for the withholding from the claimant's benefits of attorney's fees determined in accordance with that limitation. As explained in the House Report, Congress deliberately omitted any withholding authority in the context of Title XVI administrative proceedings because it concluded that "to withhold such fees would be contrary to the purpose of the program" (H.R. Rep. 92-231, supra, at 156). Just as Congress declined to incorporate in Title XVI the Title II provision authorizing the offset of attorney's fees in administrative proceedings (Section 406(a)), so Congress declined to incorporate in Title XVI the Title II provision authorizing the offset of attorney's fees in judicial proceedings (Section 406(b)(1)). And it is logical to assume that the reason Congress declined to do so is the reason that it gave in 1972 -- that withholding of attorney's fees out of SSI benefits "would be contrary to the purpose of the (Title XVI) program." Unlike Title II benefits, which are based on a person's disability and insured status, Title XVI benefits are based on a person's financial need. For that reason, Congress evidently determined that an up-front reduction in past-due benefits by as much as 25% would be unacceptable in the SSI context, since it could impose hardships on receipients who are by definition below the basic subsistence level. Instead, Congress left it to the SSI recipient and his lawyer to arrange for the latter's compensation in some less burdensome fashion, such as payment in installments over an extended period of time. In sum, the district court's order in this case, upheld by the court of appeals, is directly contrary both to the structure of the statute and to congressional intent. Congress deliberately declined to incorporate into Title XVI any authority to withhold portions of a claimant's past-due SSI benefits for direct payment to the claimant's counsel. The Secretary's construction of Title XVI is entitled to deference and should have been upheld. b. The Eighth Circuit in this case (App., infra, 4a-5a, 7a-8a), like other courts that have ruled against the Secretary on this question, /2/ relied on a 1976 amendment to Title XVI to support the view that courts possess inherent or implicit authority to order the withholding of past-due SSI benefits to pay a claimant's attorney. Prior to its amendment in 1976, Section 1631(c)(3) of Title XVI, 42 U.S.C. (Supp. II 1972) 1383(c)(3), provided: The final determination of the Secretary after a hearing under paragraph (1) shall be subject to judicial review as provided in section 405(g) of this title to the same extent as the Secretary's final determinations under section 405 of this title; except that the determination of the Secretary after such hearing as to any fact shall be final and conclusive and not subject to review by any court. In 1976, Congress amended the statute to delete the "except" clause. Act of Jan. 2, 1976, Pub. L. No. 94-202, Section 1, 89 Stat. 1135. The effect of this amendment was to make the Secretary's factual findings in SSI cases subject to judicial review, whereas such findings had previously been final and conclusive. As the Senate Report noted, the result of deleting the "except" clause was that Section 405(g) thenceforth applied identically to the Secretary's disability and SSI determination, so that "the same rules of judicial review (apply) to title XVI cases as apply to title II cases." S. Rep. 94-550, 94th Cong., 1st Sess. 4 (1975). According to the Eighth Circuit (App., infra, 8a), one effect of this 1976 amendment was to empower courts for the first time to offset attorney's fees against past-due SSI benefits, on the theory that "the authority to provide for the payment of attorney's fees is an integral part of the court's power of judicial review under Section 405(g)." This conclusion completely misapprehends the significance of the 1976 amendment. The sole purpose and effect of that amendment was to make the Secretary's factual findings in SSI cases subject to judicial review. There is absolutely no suggestion in the legislative history that Congress intended by this action to modify the careful and deliberate manner in which it had addressed the subject of attorney-fee withholding four years earlier, when it stated that the withholding of attorney's fees in Title XVI cases "would be contrary to the purpose of the (Title XVI) program." H.R. Rep. 92-231, supra, at 156. Indeed, the withholding of attorney's fees in Title II cases is authorized by Section 406(b)(1), not by Section 405(g), and it is simply illogical to assume that Congress in 1976 meant to incorporate the former Section into Title XVI by amending a reference to the latter. /3/ At bottom, the court of appeals' decision to incorporate Section 406(b)(1) into Title XVI rests on its belief that Congress must have intended this result because, in the court's view, withholding of attorney's fees is equally sound policy in Title XVI as in Title II. See App., infra, 8a; see also Reid v. Heckler, 735 F.2d at 762 ("The need for competent representation is perhaps even more acute (in Title XVI cases) than in Title II cases because the claimants in Title XVI matters are, by definition, in financial straits."). But Congress reached precisely the opposite policy determination when it concluded that withholding of attorney's fees "would be contrary to the purpose of the (Title XVI) program" because of the hardship that such a reduction in past-due benefits would impose on the program's needy recipients. H.R. Rep. 92-231, supra, at 156. The Secretary has properly deferred to that congressional policy judgment, and the court of appeals had no license to arrive at a different accommodation of the competing interests. 2. As the court of appeals acknowledged (App., infra, 5a), its decision squarely conflicts with the Sixth Circuit's recent decision in McCarthy v. Secretary of Health & Human Services, 793 F.2d 741 (1986). Numerous district court decisions have also upheld the Secretary's view. See, e.g., Brown v. Bowen, No. 84-4284-RV (N.D. Fla. May 22, 1986); Franklin v. Secretary of Health & Human Services, 525 F. Supp. 398, 399 (E.D. Mich. 1981); Baim v. Harris, 515 F. Supp. 227 (N.D. Ohio 1981). The Fourth Circuit in dictum has endorsed the Secretary's reading of Title XVI. See Motley v. Heckler, 800 F.2d 1253, 1255 (1986) (per curiam). And the question presented here is currently pending in three other circuits. See Clay v. Secretary of Health & Human Services, No. 86-1995 (1st Cir.); Howard v. Bowen, No. 86-2014 (7th Cir.); Cain v. Bowen, No. 86-8717 (11th Cir.). Due to the sharply conflicting rulings among the courts that have thus far considered the question, the Secretary faces the onerous task of administering a nationwide federal program differently in different parts of the country. In certain jurisdictions, the Secretary currently may be required to withhold a portion of a claimant's past-due SSI benefits for payment as attorney's fees, but in other jurisdictions the Secretary is forbidden to withhold such amounts. Because HHS litigates thousands of SSI benefit cases in court each year (approximately 8,000 in 1985), the number of individual claimants whose benefits may be affected is potentially great, and the burden on the Secreatry of administering such a patchwork scheme is substantial. This Court has repeatedly stressed that courts should defer to the reasonable construction of a statute by the administrative agency charged with its implementation. See e.g., Connecticut Department of Income Maintenance v. Heckler, 471 U.S. 524 (1985); American Paper Institute, Inc. v. American Electric Power Service Corp., 461 U.S. 402, 423 (1983). The Secretary's construction of Title XVI is longstanding, is faithful to the language and structure of the statute, and is a reasonable interpretation of congressional intent. Yet both the Third and Eighth Circuits have ignored this Court's precepts and have rejected the Secretary's construction. Review by this Court is needed to settle the existing and rapidly growing conflict in the courts, thereby relieving the administrative burden that the Secretary now faces and restoring uniformity to the Title XVI program. CONCLUSION The petition for a writ of certiorari should be granted. Respectively submitted. CHARLES FRIED Solicitor General RICHARD K. WILLARD Assistant Attorney General Albert G. LAUBER, JR. Deputy Solicitor General RICHARD J. LAZARUS Assistant to the Solicitor General WILLIAM G. KANTER JEFFERICA J. JENKINS Attorneys JANUARY 1987 /1/ Since the Secretary had previously paid respondent the full amount of her past-due benefits (App., infra, 2a), and since Section 406(b)(1) states that an award of attorney's fees must be paid "out of" past-due benefits, it would be necessary for the Secretary to recoup $1,988.50 from respondent in order to comply with the district court's directive. See 42 U.S.C. (Supp. II) 1383(b) (authorizing HHS to recoup erroneous overpayments of SSI benefits). /2/ See, e.g., Reid v. Heckler, 735 F.2d 757 (3d Cir. 1984); Adams v. Secretary of Health & Human Services, 596 F. Supp. 449, 453 (N.D. N.Y. 1984); see also Dolin v. Harris, 501 F. Supp. 97, 98 (D.Md. 1980). /3/ The court of appeals likewise erred in relying (App., infra, 3a, 6a) on Celebrezze v. Sparks, 342 F.2d 286, 288 (5th Cir. 1965), which held that Section 405(g) endowed the courts with inherent power to provide for the payment of attorney's fees from past-due Title II benefits. Four months after the decision in Sparks, Congress codified its result by adding Section 406(b) to Title II. Social Security Amendments of 1965, Pub. L. No. 89-97, Section 332, 79 Stat. 403. But Congress has never acted to add a similar provision to Title XVI, thereby evidencing its intent, explicit in the 1972 legislative history, that such a provision "would be contrary to the purpose of the (Title XVI) program." H.R. Rep. 92-231, supra, at 156. The rationale of the Sparks decision has thus been superseded by subsequent legislative developments. Indeed, other aspects of the decision below make it clear that the Eighth Circuit itself did not rely on the rationale of the Sparks decision, i.e., that the courts have inherent rather than statutory authority to offset attorney's fees. If that had been the Eighth Circuit's rationale, there would have been no basis for its endorsement of the district court's holding that "the maximum allowable (attorney's fee) is twenty-five percent of past due benefits." App., infra, 10a; see id. at 8a. That 25% limitation is derived from Section 406(b)(1), and thus it is clear that the court of appeals elected to incorporate that provision of Title II into Title XVI, relying on such supposed statutory authority rather than on any inherent judicial authority to provide for the payment of attorney's fees out of SSI benefits. Indeed, the district court's decision is explicit to this effect. See App., infra, 10a ("Therefore, IT IS ORDERED that an attorney's fee * * * payable from the plaintiff's past due benefits is hereby allowed to * * * plaintiff's attorney, pursuant to 42 U.S.C. Section 406(b)(1)."). APPENDIX