United States District Court, D. Rhode Island
MEMORANDUM AND ORDER
J. MCCONNELL, JR., United States District Judge.
& Nesselbush, LLP ("M&N") has sued the
Social Security Administration ("SSA") and
employees Tara Collins, Carolyn Tedino, and Jane Doe,
alleging that the Defendants have unlawfully discriminated
and retaliated against M&N through their arbitrary and
irrational conduct regarding the payment of attorney's
fees in Social Security disability cases. Defendants now move
to dismiss. ECF No. 21. For the following reasons, the motion
is GRANTED IN PART and DENIED IN PART.
facts in this case are largely undisputed; nevertheless, the
Court briefly summarizes the relevant facts in the light most
favorable to M&N.
total regulatory control over attorney's fees in Social
Security disability cases. With this power, SSA has refused
to recognize law firms when paying attorney's fees: SSA
makes those payments only to individual attorneys, not firms.
In any event, attorneys can only collect fees if SSA approves
of the fee, and unauthorized fee collection can lead to
criminal prosecution and the revocation of the right to
practice before SSA.
is a Rhode Island law firm practicing Social Security disability
law. M&N employs salaried associate attorneys. Those
associates have no right to the attorney's fees that SSA
pays them, and their salaries do not depend on the amount of
fees generated by the disability cases they handle. To
effectuate this, M&N associates sign Limited Powers of
Attorney that acknowledge the attorney's fees are
alleges that many of SSA's practices are arbitrary,
capricious, and unconstitutional. For example, while SSA does
not recognize law firms for paying attorney's fees, it
does recognize law firms for tax purposes. That is, while SSA
makes the actual payments to the individual attorneys, it
credits the fees to M&N for tax reporting. At the same
time SSA insists the attorney's fees are the
associate's property, then, it acknowledges M&N owns
the fees for tax purposes.
further complicate matters, while SSA will not pay firms for
work performed at the agency level, it does authorize payment
to firms for work performed on Social Security disability
cases if they reach federal courts. Indeed, M&N alleges
that it has received such payments in its own name.
effect of these rules causes M&N to maintain separate
bank accounts in the individual name of every associate who
works on disability cases for the firm. SSA will only deposit
attorney's fees into these accounts, and M&N then
must transfer the money into its own operating or escrow
accounts. This is an imperfect solution, however; if an
associate leaves M&N and withdraws the Limited Power of
Attorney, M&N cannot transfer the fees from that
associate's account under the threat of criminal
prosecution. The result is that the fees are left in limbo,
stuck in the joint account.
arbitrary rule M&N challenges is SSA's division of
fees under the expedited fee agreement process. In that
process, SSA divides the attorney's fee by the number of
attorneys who have worked on a case and submitted forms to
SSA. SSA divides the fee evenly, no matter how much or how
little work the attorneys performed on the case. This process
also requires M&N to maintain updated fee agreements with
its clients every time an attorney leaves or joins the firm,
so that the fee agreements reflect all attorneys who may work
on a case.
when attorneys move between law firms, SSA will only withhold
attorney's fees for the newer attorney; it does not
withhold any fees for the attorney in the prior firm even if
SSA authorizes a fee award to that attorney. Due to the
lengthy time to disposition common in Social Security cases,
firms must keep track of their associates long after they
have departed so that they can arrange for M&N to collect
associates depart private practice with a law firm to work
for SSA, however, SSA will not authorize any fees for the
associate's prior work, even if the associate completed
most or all of the work while she was still at the firm.
SSA's position is that fee collection is
"work," notwithstanding that it will not permit an
attorney to even submit a fee petition until all work is
completed on a case, and notwithstanding that SSA prohibits
attorneys from applying for attorney's fees for the time
claimed for preparing a fee petition or for any other
activities related to charging or collecting a fee.
alleges that it faced this last circumstance when three of
its associate attorneys-former Defendants Joseph Wilson, Paul
Dorsey, and Kyle Posey-left to work for SSA. The agency
refused to pay M&N for work performed by these
individuals. Yet, M&N alleges, SSA has paid attorneys
fees to other Rhode Island law firms under the same
circumstances. M&N alleges that these other firms never
experienced difficulty getting paid for the cases handled by
their associate attorneys who left for government service and
that these firms continued to receive authorization and
payments for Social Security disability cases that were in
the individual names of the associates after beginning their
Defendants now move to dismiss the Amended Complaint (ECF No.
21), which M&N opposes (ECF No. 24). Following
briefing on the motion to dismiss, the parties stipulated to
the dismissal of Defendants Dorsey, Wilson, and Posey, as
well as to Defendants Collins and Tedino in their individual
capacities. ECF Nos. 27-31! Text Order, Apr. 26, 2018.
STANDARD OF REVIEW
Rule of Procedure 12(b)(1) tests the Court's subject
matter jurisdiction. As a court of limited jurisdiction, this
Court may not-absent subject matter jurisdiction-proceed with
an action. Belsito Commc'ns, Inc. v. Decker, 845
F.3d 13, 21 (1st Cir. 2016). The party invoking jurisdiction
bears the burden of establishing the jurisdictional
requirements. Wal-Mart P.R., Inc. v. Zaragoza-Gomez,
834 F.3d 110, 116 (1st Cir. 2016).
Rule of Civil Procedure 12(b)(6) tests the plausibility of
the claims presented in a plaintiffs complaint. "To
avoid dismissal, a complaint must provide 'a short and
plain statement of the claim showing that the pleader is
entitled to relief" Garcia-Catalan v. United
States, 734 F.3d 100, 102 (1st Cir, 2013) (quoting
Fed.R.Civ.P. 8(a)(2)). At this stage, "the plaintiff
need not demonstrate that she is likely to prevail, but her
claim must suggest 'more than a sheer possibility that a
defendant has acted unlawfully."' Id. at
102-03 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). The "complaint must contain sufficient factual
matter, accepted as true, to 'state a claim to relief
that is plausible on its face."' Iqbal, 556
U.S. at 678 (quoting BellAtl Corp- v. Twombly 550
U.S. 544, 570 (2007)).
plausibility inquiry necessitates a two-step pavane."
Garcia-Catalan, 734 F.3d at 103. "First, the
court must distinguish 'the complaint's factual
allegations (which must be accepted as true) from its
conclusory legal allegations (which need not be
credited).'" Id. (quoting Morales-Cruz
v. Univ. of P.R, 676 F.3d 220, 224 (1st Cir. 2012)).
"Second, the court must determine whether the factual
allegations are sufficient to support 'the reasonable
inference that the defendant is liable for the misconduct
alleged.'" Id. (quoting Haley v. City
of Boston, 657 F.3d 39, 46 (1st Cir. 2011)). "In
determining whether a complaint crosses the plausibility
threshold, 'the reviewing court [must] draw on its
judicial experience and common sense."' Id.
(alteration in original) (quoting Iqbal, 556 U.S. at