Gisbrecht v. Barnhart
The Court ruled that when Social Security disability lawyers win benefits for their clients under a standard 25%-of-past-due-benefits fee agreement, judges should start with that contract as the baseline and only check it for reasonableness — not build the fee from scratch using an hours-times-rate calculation.
The decision rejects an approach used by several appeals courts that treated hourly-rate math as the required starting point, and instead confirms that contingency-fee agreements remain the normal way Social Security lawyers get paid, subject to a reasonableness check and a hard 25% cap.
“Congress, we conclude, designed § 406(b) to control, not to displace, fee agreements between Social Security benefits claimants and their counsel.”
The Court's central holding on how the fee statute relates to contingency-fee contracts.
How it got here: District courts in Oregon used an hourly-rate method to set fees; the Ninth Circuit affirmed; the claimants' attorneys asked the Supreme Court to resolve a circuit split over the correct method.
The Case in Depth
What happened
Three Social Security disability claimants each hired the same lawyers under standard contingency-fee agreements promising 25% of any past-due benefits recovered in court. All three won their benefits claims. Their attorneys then asked courts to approve fees under the 25% contracts, but the lower courts instead calculated fees using an hours-worked, hourly-rate ('lodestar') method, producing much smaller fees than the contracts called for.
The question before the Court
When a lawyer wins Social Security back-pay benefits for a client under a 25%-of-recovery contingency fee deal, should courts start by honoring that agreement or by calculating fees hour-by-hour instead?
Why it matters
Social Security disability lawyers overwhelmingly work on contingency, taking a cut of back benefits only if they win. This ruling protects that arrangement nationwide, meaning lawyers can keep taking these cases without fear that courts will slash their fees down to an hourly rate, which should preserve access to representation for benefits claimants who cannot pay by the hour.
What changes now
The case is sent back to the lower courts, which must recalculate the attorneys' fees in all three underlying cases starting from the 25% contingency-fee agreements rather than the hourly-rate calculations they used before. This is a final merits ruling that resolves a split among the federal appeals courts, so courts nationwide must now use the contract-first, reasonableness-review approach when awarding these fees.
What this does not decide
The Court did not set precise rules for how much a fee agreement can be reduced or by exactly what factors; it left specific reasonableness determinations to trial judges' discretion, reviewed only for abuse of that discretion. The dissent argued this leaves lower courts without clear, uniform criteria for adjusting fees.
Concurrences and dissents
Dissent — Justice Scalia
“That is rather like declaring the purchase of the winning lottery ticket void because of the gross disparity between the $2 ticket price and the million-dollar payout.”Scalia's objection to judging a contingency fee's fairness after the outcome is already known.
Justice Scalia argued the majority's approach is incoherent because it tells judges to start with the contingency-fee agreement but then adjust it using hours-and-rate factors that are the exact opposite of what a contingency fee is meant to avoid. He argued 'reasonable fee' can only sensibly mean either an ex ante assessment of the contract's fairness or an ex post lodestar calculation of actual work done, not a hybrid of both. He would have used the lodestar method exclusively, since it gives an objective measure of the value of the lawyer's work and avoids what he predicted would be needless satellite litigation over fee reductions.
How the Court got there
The legal reasoning, step by step
- The Court read the text of the fee statute, which allows a 'reasonable fee' up to 25% of past-due benefits, and found the words alone did not clearly require either a contract-based approach or an hours-times-rate ('lodestar') approach.
- The Court explained that the lodestar method was developed for fee-shifting statutes, where the losing side pays the winner's lawyer, and observed that this Social Security fee provision is different: the fee comes out of the claimant's own recovery, not from an opposing party, so the rationale for lodestar in fee-shifting cases doesn't transfer neatly here.
- The Court noted that contingency-fee agreements are the dominant, longstanding practice in Social Security representation, and that Congress separately authorized contingency agreements for the administrative stage of these cases, making it unlikely Congress meant to forbid them at the judicial stage.
- Because Congress wrote the statute in 1965, well before courts developed the lodestar method in the 1970s and 1980s, the Court found it unlikely Congress intended courts to use a method that did not yet exist.
- The Court concluded that the statute's real function is to let courts start from the contingency-fee agreement and then check it for reasonableness — reducing it only if, for example, the lawyer caused delay or the fee would be a windfall compared to the work performed — rather than displacing the contract with a lodestar calculation from the outset.
Doctrinal impact
Cases affected by this decision
Distinguishes Hensley v. Eckerhart (461 U.S. 424)
The Court said the lodestar method from this fee-shifting case doesn't control fees paid out of a claimant's own recovery.