United States District Court, D. New Mexico
PROPOSED FINDINGS AND RECOMMENDED
GREGORY B. WORMUTH, UNITED STATES MAGISTRATE JUDGE
matter comes before the Court on Plaintiff's Motion to
Reverse or Remand the Agency Decision. Doc. 17. I
have reviewed the parties' briefing on the motion
(docs. 18, 27, 32) and considered oral argument from
the parties at a motion hearing held on March 14, 2017.
Doc. 35. For the reasons explained below, I recommend
finding that the ALJ and Appeals Council erred by finding
that Plaintiff was not without fault for the overpayment of
benefits to the beneficiary Sharlene K. Iddings between
February 1999 and March 2003. I further recommend finding
that it would be against equity and good conscience to hold
Plaintiff liable for repayment due to the undisputed fact
that Plaintiff did not misuse the funds. Therefore, I
recommend that the Court grant Plaintiff's Motion and
reverse the decision of the Commissioner without remanding
this action for further proceedings.
is a non-profit organization offering comprehensive services
to people with intellectual disabilities, and such services
often include managing their clients' Social Security
disability benefits. AR at 39. In February 1999, Plaintiff
was appointed by the Social Security Administration (SSA) to
serve as representative payee for the intellectually disabled
beneficiary Sharlene K. Iddings. AR at 15.
Iddings had been receiving disability benefits since April
1990. AR at 15, 271. In June 1997, Ms. Iddings began working
at Wal-Mart under a “sheltered workshop, ” such
that her earnings at that position were not considered
substantial gainful activity (SGA) which would disqualify her
from benefits under the SSA regulations. AR at 272-73,
294-95; see also 20 C.F.R. § 404.1573(c)
(explaining that work done under special conditions, such as
in a sheltered workshop environment, may not be considered
SGA). By November 1998, Ms. Iddings's work at Wal-Mart
was no longer in a sheltered workshop context, and she was
earning above the permissible SGA levels. AR at 264, 272-75.
The SSA allows a grace period during which a beneficiary may
perform substantial gainful activity yet remain entitled to
receive benefits for the month she began earning above SGA
levels plus the following two months. AR at 260, 278.
Consequently, Ms. Iddings was no longer entitled to receive
benefits as of February 1, 1999. The SSA appointed Plaintiff
as Ms. Iddings's representative payee on or after this
date. AR at 15, 34.
served as Ms. Iddings's representative payee until March
2003, when Ms. Iddings's friend Bonnie Light became her
representative payee. AR at 15. During the time it served as
representative payee, Plaintiff reported all of Ms.
Iddings's wages to Defendant as required by the SSA
regulations. AR at 295. Nonetheless, Ms. Iddings continued to
erroneously receive benefits payments until May 2005, when
Defendant discovered its error and sought to recover the
overpayments that occurred between February 1999 and May
2005, totaling $61, 263.30. AR at 256-59. On May 18, 2005,
Defendant notified Ms. Iddings and Ms. Light of the
overpayments and its intent to seek reimbursement, but did
not notify Plaintiff. Doc. 18 at 5; AR at 260-65.
Ms. Iddings requested a waiver of the overpayment recovery,
which was denied on the basis that she could afford to repay
the agency despite a finding that she was without fault for
the overpayment due to reporting her wages. AR at 252-53.
financial difficulties, Ms. Iddings again requested a waiver
of overpayment recovery in 2009, which was the catalyst of
the events underlying the present action. AR at 235-42. When
her second waiver request was denied, Ms. Iddings requested a
hearing before an Administrative Law Judge (ALJ), which took
place on July 20, 2012. AR at 226-29, 369-419. Plaintiff
received no notice of the July 2012 hearing. During that
hearing, the ALJ determined that because Plaintiff served as
representative payee during a portion of the time period when
Ms. Iddings was overpaid, a supplemental hearing was
necessary to determine Plaintiff's liability for the
overpayment. AR at 407-08, 410. Plaintiff received notice of
the supplemental hearing and its potential liability on June
12, 2013, which was the first notice Plaintiff received of
the overpayment at issue. AR at 125. The supplemental hearing
took place on July 23, 2013. AR at 287-368. Barbara Marion,
Plaintiff's Vice President, and Janelle Moore,
Plaintiff's accounting manager, appeared to testify. AR
at 289, 290. Ms. Marion and Ms. Moore had both been employed
by Plaintiff during the relevant time period, and they
testified regarding the organization's general practices
when serving as a representative payee for a client receiving
disability benefits as well as their knowledge of the
relevant regulations governing such benefits. AR at 293-302.
No counsel appeared to represent Plaintiff.
issued her decision on December 5, 2013, finding that both
Ms. Light and Plaintiff were liable for the overpayments that
occurred during the respective time periods in which they
served as Ms. Iddings's representative payees. AR at
15-23. Since Plaintiff was held liable for the overpayments
that occurred between February 1999 and March 2003, the ALJ
held that Plaintiff owed $38, 098.30 to the agency. AR at 23.
appealed the ALJ's decision to the Appeals Council, which
issued its decision on September 25, 2015. AR at 6-9. The
Appeals Council upheld the ALJ's finding that Plaintiff
was not without fault for the overpayments that occurred
between February 1999 and March 2003 and was thus liable to
repay those funds to the agency. AR at 8. However, by the
time of the ALJ's December 2013 decision, Ms. Iddings had
already repaid a total of $10, 143.57 to the agency, bringing
the current balance owed to $51, 119.73. AR at 23, 15.
Initially, the ALJ deducted that amount solely from the
portion owed by Ms. Light and did not credit any of the
repaid funds to Plaintiff. AR at 23. The Appeals Council
overturned that aspect of the ALJ's decision and credited
the $10, 143.57 already repaid in a proportional fashion to
the amounts owed by Plaintiff and Ms. Light, resulting in a
final determination that Plaintiff owed $31,
790.24. AR at 8-9. Plaintiff filed suit in
this court on November 24, 2015, seeking judicial review of
the Appeals Council's decision. Doc. 1.
Standard of Review
to 42 U.S.C. § 405(g), a court may review a final
decision of the Commissioner only to determine whether it (1)
is supported by “substantial evidence” and (2) is
grounded in an evaluation of the evidence that comports with
the proper legal standards. Casias v. Sec'y of Health
& Human Servs., 933 F.2d 799, 800-01 (10th Cir.
1991). “In reviewing the ALJ's decision, we neither
reweigh the evidence nor substitute our judgment for that of
the agency.” Bowman v. Astrue, 511 F.3d 1270,
1272 (10th Cir. 2008) (citation and internal quotations
evidence is “more than a mere scintilla. It means such
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Casias, 933
F.3d at 800. “The record must demonstrate that the ALJ
considered all of the evidence, but an ALJ is not required to
discuss every piece of evidence.” Clifton v.
Chater, 79 F.3d 1007, 1009-10 (10th Cir. 1996).
“[I]n addition to discussing the evidence supporting
his decision, the ALJ also must discuss the uncontroverted
evidence he chooses not to rely upon, as well as
significantly probative evidence he rejects.”
Id. at 1010. “The possibility of drawing two
inconsistent conclusions from the evidence does not prevent
[the] findings from being supported by substantial
evidence.” Lax v. Astrue, 489 F.3d 1080, 1084
(10th Cir. 2007) (citation omitted).
reviewing court is generally bound by the Commissioner's
findings of fact if they are supported by substantial
evidence. Byron v. Heckler, 742 F.2d 1232, 1234
(10th Cir. 1984). Where the Commissioner has either failed to
apply the correct legal standard or to provide the court with
a sufficient basis for determining that the law was correctly
applied, however, the court is not so limited in its scope of
review, and such failure constitutes grounds for reversal.
Id. at 1235; see also Casias, 933 F.2d at
other avenues of judicial review of final decisions of the
Commissioner are foreclosed by the text of the Social
Security Act itself. See 42 U.S.C. § 405(h).
Where constitutional questions are raised, however,
“the availability of judicial review is presumed”
despite the directive of 42 U.S.C. § 405(h) that the
final decision of the Commissioner may only be reviewed as
provided by the Social Security Act. Califano v.
Sanders, 430 U.S. 99, 108-09 (1977).
asserts that: (1) Plaintiff's due process rights were
violated by the irregular procedures followed by Defendant in
seeking overpayment recovery from Plaintiff; (2) Defendant
did not apply correct legal principles in determining that
Plaintiff was liable for the overpayment; and (3)
Defendant's finding that Plaintiff was liable was not
supported by substantial evidence. See generally doc.
18. Plaintiff argues that these considerations warrant
reversal or remand of the Commissioner's decision.
Id. at 21. Defendant asserts that: (1)
Plaintiff's ability to be heard at the supplemental
hearing before the ALJ and to subsequently appeal the adverse
decision to the Appeals Council afforded Plaintiff sufficient
due process; (2) the ALJ and Appeals Council correctly
applied the relevant legal principles in determining
Plaintiff's liability; and (3) the Appeals Council's
decision was supported by substantial evidence. See
generally doc. 27.
I recommend finding that the Appeals Council's decision
must be reversed because (1) the determination of
Plaintiff's liability was founded on an incorrect
application of the SSA regulations governing fault for
overpayments and (2) Plaintiff should not be held liable as a
matter of law. Thus, I do not address the constitutional
issue. See Califano v. Yamaski, 442 U.S. 682, 692
(1979) (Where, as here, a plaintiff brings both
constitutional and statutory challenges to the
Commissioner's finding of liability, the Court
“usually should pass on the statutory claim before
considering the constitutional question.”).
Representative Payee Responsibilities
adult beneficiary is legally incompetent or either mentally
or physically incapable of managing her own benefit payments,
the SSA appoints a representative payee to receive benefits
on her behalf. 20 C.F.R. § 404.2010(a). A representative
payee has six responsibilities under the regulations,
(a) Use the benefits received on [the beneficiary's]
behalf only for [the beneficiary's] use and benefit in a
manner and for the purposes he or she determines . . . to be
in [the beneficiary's] best interests;
(b) Keep any benefits received on [the beneficiary's]
behalf separate from his or her own funds and show [the
beneficiary's] ownership of these benefits . . .;
(c) Treat any interest earned on the benefits as [the
(d) Notify [the SSA] of any event or change in [the
beneficiary's] circumstances that will affect the amount
of benefits [the beneficiary] receive[s], [the
beneficiary's] right to receive benefits, or how [the
beneficiary] receive[s] them;
(e) Submit to [the SSA], upon [the SSA's] request, a
written report accounting for the benefits received on [the
beneficiary's] behalf, and make all supporting records
available for review if requested by [the SSA]; and
(f) Notify [the SSA] of any change in his or her
circumstances that would affect performance of his/her ...