Handwerk v. Saul

Magistrate Judge William I. Arbuckle

MEMORANDUM

JENNIFER P. WILSON United States District Court Judge Middle District of Pennsylvania

Before the court is the report and recommendation of United States Magistrate Judge William I. Arbuckle recommending that Plaintiff's motion for attorney's fees be granted. (Doc. 30.) For the reasons that follow, the court declines to adopt the recommendation.

Factual Background and Procedural History

Neither party objected to the facts or procedural history stated in the report and recommendation. Because the court gives “reasoned consideration” to these uncontested portions of the report and recommendation, the court will only restate the factual background and procedural history necessary for clarity in this opinion. E.E.O.C. v. City of Long Branch, 866 F.3d 93, 99 (3d Cir. 2017) (quoting Henderson v. Carlson, 812 F.2d 874, 878 (3d Cir. 1987)). Plaintiff, Julie Handwerk, filed her original application for Social Security benefits on October 14, 2010. (Doc. 30, p. 2.) This application was denied on January 10, 2011, and

2

Plaintiff requested an administrative hearing on January 21, 2011. (Id.) After this hearing, Plaintiff's application was denied on June 28, 2012. (Id. at 3.) She requested review before the Appeals Council of the Office of Disability Adjudication and Review (“Appeals Council”), which was denied on September 27, 2013. (Id.)

On November 25, 2013, Plaintiff filed her first appeal with the court. (Id.) On October 24, 2013, United States Magistrate Judge Karoline Mehalchick issued a report and recommendation suggesting that the case should be remanded to the Commissioner for a new administrative hearing. (Id.) This recommendation was adopted on November 10, 2014, and the case was remanded to the Commissioner. (Id.) A second administrative hearing was held on June 9, 2015, and a second decision denying Plaintiff's application for benefits was issued on February 17, 2016. (Id. at 3-4.) On March 15, 2015, Plaintiff requested review of this second decision before the Appeals Council, which remanded Plaintiff's case to be heard by a new ALJ on October 7, 2016. (Id. at 4.) A third administrative hearing was held on February 16, 2017, and the ALJ issued a decision on June 28, 2017 denying Plaintiff's application for benefits. (Id.) On July 25, 2017, Plaintiff requested review of this decision. (Id.) The Appeals Council remanded the case on January 11, 2019 with instructions to “take any further action needed to complete the administrative record and issue a new decision.” (Id.) “After

3

corresponding with Plaintiff's counsel in January 2019, [the ALJ] concluded that there was no need to conduct a fourth administrative hearing[, ]” and Plaintiff's application for benefits was once again denied on April 24, 2019. (Id. at 5.)

On August 19, 2019, Plaintiff initiated the present action by filing a complaint, alleging that the ALJ was not properly appointed under the Constitution as required by Lucia v. S.E.C., 138 S.Ct. 2044 (2018).^[1] (Id.) Judge Arbuckle issued a report and recommendation on April 27, 2020 suggesting that this case should be remanded to a new, properly appointed ALJ to conduct a new administrative hearing on Plaintiff's 2010 Social Security case. (Doc. 23.) This report and recommendation was adopted without objection by the undersigned on May 29, 2020, and the case was remanded to the Commissioner. (Doc. 24.) Thereafter, on August 6, 2020, Plaintiff filed a motion for attorney's fees pursuant to the Equal Access to Justice Act (“EAJA”), which is the instant motion before the court. (Doc. 26.) On March 19, 2021, Judge Arbuckle issued a report and recommendation in which he opined that the motion for attorney's fees should be granted. (Doc. 30.) The Commissioner timely filed an objection to the report and recommendation, and Plaintiff filed a reply on the same day. (Docs. 32, 33.) Thus, this motion is ripe for disposition.

4

Standard of Review

When a party objects to a magistrate judge's report and recommendation, the district court is required to conduct a de novo review of the contested portions of the report and recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3); Sample v. Diecks, 885 F.2d 1099, 1106 n.3 (3d Cir. 1989). The district court may accept, reject, or modify the magistrate judge's report and recommendation in whole or in part. 28 U.S.C. § 636(b)(1). The district court may also receive further evidence or recommit the matter to the magistrate judge with further instructions. Id. “Although the standard is de novo, the extent of review is committed to the sound discretion of the district judge, and the court may rely on the recommendations of the magistrate judge to the extent it deems proper.” Weidman v. Colvin, 164 F.Supp.3d 650, 653 (M.D. Pa. 2015) (citing Rieder v. Apfel, 115 F.Supp.2d 496, 499 (M.D. Pa. 2000)). For the uncontested portions of the report and recommendation, the court affords “reasoned consideration” before adopting it as the decision of this court. City of Long Branch, 866 F.3d at 100 (quoting Henderson, 812 F.2d at 878).

Discussion

A. Attorney's Fees under the EAJA.

The EAJA provides, in pertinent part, that:

5

Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses . . . incurred by that party in any civil action . . . 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

28 U.S.C. § 2412(d)(1)(A) (emphasis added).

In this case, neither party contests that Plaintiff was the prevailing party in the underlying action. However, the parties dispute whether the Commissioner's position was substantially justified.

The Supreme Court has held that, in the EAJA context, the term “substantially justified” does not mean “justified to a high degree” but instead means “justified in substance or in the main-that is, justified to a degree that could satisfy a reasonable person.” Pierce v. Underwood, 487 U.S. 552, 565 (1988). In other words, “an agency position is substantially justified if it has a reasonable basis in both law and fact.” Id. (internal quotation omitted). The court of Appeals for the Third Circuit has explained that:

[U]nder 28 U.S.C. § 2412(d)(2)(D), “the position of the United States” includes not only the position taken in the litigation, but the agency position that made the litigation necessary in the first place. Thus, unless both the agency's litigation and pre-litigation positions meet the [legal standards prescribed by the EAJA], the government's position is not substantially justified

6

Hanover Potato Prod., Inc. v. Shalala, 989 F.2d 123, 128 (3d Cir. 1993) (citations omitted). The Government bears the burden of establishing that its position had a reasonable basis in law. Id.

In addition, the Third Circuit has cautioned that “[a] court must not assume that the government's position was not substantially justified simply because the government lost on the merits.” Kiareldeen v. Ashcroft, 273 F.3d 542, 554 (3d Cir.2001). In other words, “[t]he relevant legal question is ‘not what the law now is, but what the Government was substantially justified in believing it to have been.'”

Id. (quoting Pierce, 487 U.S. at 565, 566 n.2).

B. The Commissioner's Pre-Litigation Position was Substantially Justified.

Judge Arbuckle's report and recommendation found that the Commissioner's pre-litigation position was not substantially justified because the Commissioner twice had the opportunity to consider whether a new hearing was warranted before a constitutionally appointed ALJ and twice concluded that no such hearing was necessary. (Doc. 30, pp. 14-21.) Indeed, Judge Arbuckle places significant weight on the fact that the Appeals Council remanded Plaintiff's Social Security case to the ALJ after Lucia had been decided, and on the ALJ's subsequent decision to reach out to Plaintiff's counsel to determine whether a new hearing was necessary. (Id.) In Judge Arbuckle's view, the Commissioner's

7

failure to sua sponte raise the Appointments Clause issue was not “reasonable in the main” and justified an award of attorney's fees to Plaintiff. (Id. at 21.)

Based on the court's review of caselaw within this Circuit, the court finds that Judge Arbuckle's view is an outlier, despite the distinguishing features of this case in which the Appeals Council and the ALJ raised the issue of whether a new hearing was warranted post-Lucia. Initially, the court notes that where, as here, “the case turns on an unsettled or ‘close question of law,' . . . the government usually will be able to establish that its legal theory was ‘reasonable,' even if it was not ultimately accepted as legal by the courts.” Washington v. Heckler, 756 F.2d 959, 961 (3d Cir. 1985) (quoting Dougherty v. Lehman, 711 F.2d 555, 563 (3d Cir. 1983)). At the time Plaintiff's pre-litigation administrative proceedings were ongoing, “the question of whether a claimant must exhaust his or her Appointments Clause challenge before obtaining judicial review remained unsettled law.” Flynn v. Saul, No. 19-58, 2021 U.S. Dist. LEXIS 116898, at *7 (E.D. Pa. June 22, 2021).

This is because the Supreme Court held in Lucia that a new hearing should be granted if a claimant makes a timely Appointments Clause challenge to the ALJ presiding over the administrative proceedings. See 138 S.Ct. at 2055. However, the Supreme Court did not define what constitutes...