790
Syllabus
recovery, $5,461.50 from Miller's, and $6,550 from Sandine's. Offsetting the EAJA awards against the lodestar determinations, the court determined that no portion of Gisbrecht's or Sandine's past-due benefits was payable to counsel, and that only $296.75 of Miller's recovery was payable to her counsel. The Ninth Circuit consolidated the cases and affirmed.
Held: Section 406(b) does not displace contingent-fee agreements within the statutory ceiling; instead, § 406(b) instructs courts to review for reasonableness fees yielded by those agreements. Pp. 799-809.
(a) Section 406(b)'s words, read in isolation, could be construed to allow either the Ninth Circuit's lodestar approach or petitioners' position that the attorney-client fee agreement should control, if not "in excess of 25 percent of . . . the past-due benefits." Because the statute's text is inconclusive, this Court takes into account, as interpretive guides, the origin and standard application of the proffered approaches. Pp. 799-800.
(b) The lodestar method, though rooted in accounting practices adopted in the 1940's, did not gain a firm foothold in the federal courts until the mid-1970's. The lodestar method today holds sway in federal-court adjudication of disputes over the amount of fees properly shifted to the loser in the litigation. Fees shifted to the losing party, however, are not at issue here. Pp. 800-802.
(c) Section 406(b) authorizes fees payable from the successful party's recovery. Characteristically in Social Security benefits cases, attorneys and clients enter into contingent-fee agreements specifying that the attorney's fee will be 25 percent of any past-due benefits to which the claimant becomes entitled. Contingent-fee arrangements, though problematic, particularly when not exposed to court review, are common in the United States in many settings, and Social Security representation operates largely on a contingent-fee basis. Before 1965, the Social Security Act imposed no limits on contingent-fee agreements drawn by counsel and signed by benefits claimants. Arrangements yielding exorbitant fees reserved for lawyers one-third to one-half of the accrued benefits; the longer the litigation persisted, the greater the buildup of past-due benefits and, correspondingly, of legal fees awardable from those benefits if the claimant prevailed. Attending to these realities, Congress provided for a reasonable fee, not in excess of 25 percent of accrued benefits, as part of the court's judgment, and specified that no other fee would be payable. Violation of these limitations was made a criminal offense. In addition to protecting claimants against inordinately large fees, Congress sought to ensure that attorneys successfully representing Social Security claimants would not risk nonpayment by
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