Astrue – ED Pa. – May 1, 2013
reversed SSA and held that recovery of an overpayment would be against equity
and good conscience.
An overpayment occurs where an
individual receives payment of benefits in excess of the amount due. 20 C.F.R.
§ 404.501(a). Whenever there is an overpayment of benefits, the Commissioner
has a statutory obligation to recover the overpayment. 42 U.S.C. § 404(a)(1).
However, recovery of an
overpayment is waived where two requirements are met. 42 U.S.C. § 404(b); 20
C.F.R. § 404- 506(a). First, the overpaid individual must be without fault in
causing the overpayment. Id. Fault by the agency does not relieve the overpaid
individual from proving that he was without fault. 20 C.F.R. § 404.507. Second,
recovery of the overpayment must either defeat the purpose of the Act or
be against equity and good conscience. Id.
The Commissioner’s regulations
state that to defeat the purpose of the Act under Title II means to deprive a
person of income required for ordinary and necessary living expenses. 20 C.F.R.
§ 404.507(a). The regulations state that this determination depends on whether
the person has an income or financial resources sufficient for more than
ordinary and necessary needs, or is dependent upon all of his current benefits
for such needs. Id. According to the regulations, a recovery of an overpayment
is against equity and good conscience:
1. When an individual changed
his or her position for the worse or relinquished a valuable right because of
reliance upon a notice that a payment would be made or because of the
overpayment itself; or
Was living in a separate household from the overpaid person at the time of the
overpayment and did not receive the overpayment. 20 C.F.R. § 404.509.
The plaintiff’s argument that
the regulation’s definition of “against equity and good conscience” is too
narrow involves an application of Chevron v. Natural Resources Defense
Council,467 U.S. 837, 843
(1984). Under Chevron, the Court must first decide if Congress, through the
statute, has addressed the precise question at issue. If the statute is silent
or ambiguous with respect to the specific
issue, the question for the Court is whether the agency’s answer is based on a
permissible construction of the statute. The agency’s interpretation should prevail as long as it is a
reasonable interpretation of the statute, not necessarily the only possible
interpretation nor even the one deemed most reasonable by the Courts. Id.
The text of the Social Security
Act is silent as to the meaning of the phrase equity and good conscience.
Unless otherwise defined, statutory words “will be interpreted as taking
their ordinary, contemporary
meaning.” Perrin v. United States, 444 U.S. 37, 42 (1979). The ordinary meaning
of the phrase equity and good conscience anticipates that individual cases will
be decided by applying general precepts of justice and fairness to the
particular circumstances rather than channeling the decision through rigid and
specific rules. The Court concludes that the agency’s regulation, which
rigidly defines equity and good conscience to a few discrete situations, is not
a reasonable interpretation of the statute.
There is no Third Circuit
precedent on the issue; but, three other circuits have dealt with the issue.
The Eighth Circuit in Groseclose v. Bowen, 809 F.2d 502, 506 (8th Cir. 1987)
and the Ninth Circuit in Quinlivan v. Sullivan, 916 F.2d 524, 527, (9th Cir.
1990) have held that the regulation is not an appropriate interpretation of the
equity and good conscience
language. In Valley v. Comm'r of
Soc. Sec., 427 F.3d 388 (6th Cir. 2005), the Sixth Circuit has
considered the equity and good conscience issue within the SSA’s regulatory
framework and adopted it without much comment
on the validity of the regulation itself.
The Court concludes that the
Groseclose court makes a good case that the legislative history, sparse thought
it is, suggests that Congress intended to make recovery more equitable, as opposed to rigidly
formulaic, when it included the equity and good conscience language. See Groseclose,
at 505-506 (“Provision is made for making more equitable the recovery by the
Federal Government of incorrect payment
to individuals”); (expressing concern over allowing recovery from persons who
are “perfectly innocent of any wrong doing”); (the language “broadens the Secretary’s authority to waive
adjustment or recovery of overpayments.”) (citing legislative history, internal
The plain language of the
statute, equity and good conscience, is apparently designed to give the
Secretary and reviewing Courts case by case discretion to determine when
repayment actions should be waived. Equity and good conscience is language of
unusual generality, and the regulation that tries to limit the meaning of the
phrase to only a few types of situations is an unreasonably narrow
interpretation of that language.
Under a broader interpretation
of the equity and good conscience standard, the Court concludes that the SSA’s
repayment action should be waived because it violates the equity and good conscience standard for a
number of reasons.
Repayment huge compared to
- The amount the SSA is seeking in repayment, over $87,000, is a huge sum
compared to the amount of excess earnings that the plaintiff received above the
eligibility threshold for SGA. Additionally, the reason the amount of repayment
the SSA seeks to recover grew to such a large figure is that the SSA did not
notify the plaintiff of the fact that his wages had rendered him ineligible for
benefits until years after that fact could have been discovered by the SSA.
Delay by SSA - The plaintiff was deemed
ineligible for benefits as of April 2000 and the plaintiff reapplied for and
was granted DIB in July 2004. At all times, the plaintiff would have been
eligible for DIB due to his blindness so long as he had kept his income below
the eligibility threshold for SGA. As early as 2001, when the plaintiff’s
employer made the retroactive payment that rendered him ineligible for DIB and
that payment was reported to the SSA, the SSA could have determined the
plaintiff’s ineligibility and acted accordingly. Instead, the SSA did not act
on the information until 2005, when the SSA first notified the plaintiff of the
overpayment. It is this delay that led to the accrual of the bulk of
plaintiff’s overpayments. Had the SSA acted on the plaintiff’s ineligibility
more promptly, the plaintiff could have at that time adjusted his income and
reapplied for benefits, just as he eventually did in 2004. Under this scenario,
the plaintiff would have been eligible for and legitimately received many of
the benefits the SSA now seeks to recover in this repayment action.
The plaintiff raised this
precise issue in trying to argue that this repayment action violates the equity
and good conscience standard as defined by the SSA’s own regulations. Although the plaintiff’s
argument is unavailing for that purpose, the argument does cut strongly in the
plaintiff’s favor under a broader definition of the equity and good conscience
As neither the plaintiff’s
initial ineligibility for benefits nor the SSA’s delay in acting on that
ineligibility were within the plaintiff’s control, the Court finds that it
would be against equity and good
conscience to make the plaintiff repay the large amount of benefit overpayments
that accrued as a result of that confluence of circumstances.
This conclusion is consistent
with other cases where a broader conception of the equity and good conscience
test has been applied. Villate v. Sullivan, 862 F. Supp. 514 (D.D.C. 1994; Audet v. Astrue,
4:08CV3220, 2009 WL 1664598 (D. Neb. June 11, 2009). Here, just as in Villate,
the SSA had the necessary information to cut off the accrual of the
overpayments and failed to do so, and just as in Audet,
the plaintiff did not know he was receiving overpayments because his income had
exceeded the SGA threshold.
Because of the compelling facts
and circumstances of this case, the Court concludes that recovery of the
overpayments made to Stolztfus would be against equity and good conscience.