Social security - overpayment - against equity and good conscience

Stoltzfus v. Astrue – ED Pa. – May 1, 2013

http://www.paed.uscourts.gov/documents/opinions/13D0379P.pdf

The court 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  

2. 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 (6^th 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 citations omitted).

 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 excess earnings - 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 standard.

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.