1 F.3d 571 (7th Cir. 1993), 92-3148, Dotson v. Shalala

Docket Nº:92-3148.
Citation:1 F.3d 571
Party Name:Harold W. DOTSON, Plaintiff-Appellant, v. Donna E. SHALALA, [*] Secretary of the Department of Health and Human Services of the United States of America, Defendant-Appellee.
Case Date:August 02, 1993
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 571

1 F.3d 571 (7th Cir. 1993)

Harold W. DOTSON, Plaintiff-Appellant,


Donna E. SHALALA, [*] Secretary of the Department

of Health and Human Services of the United States

of America, Defendant-Appellee.

No. 92-3148.

United States Court of Appeals, Seventh Circuit

August 2, 1993

        Argued April 6, 1993.

Page 572

        Thomas M. Henry, Peoria, IL (argued), for plaintiff-appellant.

        Michael C. Messer (argued), Dept. of Health and Human Services, Region V, Office of Gen. Counsel, Chicago, IL, K. Tate Chambers, Asst. U.S. Atty., Peoria, IL, for defendant-appellee.

        Before RIPPLE and MANION, Circuit Judges, and ENGEL, Senior Circuit Judge. [**]

Page 573

        ENGEL, Senior Circuit Judge.

        Harold Wayne Dotson, a Supplemental Security Income claimant, appeals the district court's grant of summary judgment in favor of Donna E. Shalala, Secretary of the Department of Health and Human Services. In granting summary judgment, the district court upheld an administrative law judge's finding that Dotson was engaging in substantial gainful activity by supporting a $200- to $300-per-day heroin and cocaine habit through illegal means. See Dotson v. Sullivan, 813 F.Supp. 651 (C.D.Ill.1992). Because we agree that illegal activity can constitute substantial gainful activity, we affirm.


        Dotson applied for Supplemental Security Income benefits on September 25, 1989, alleging disability since 1968 due to asthma, multiple allergies, and past drug abuse. The Social Security Administration denied his application on January 10, 1990, and again upon reconsideration on May 21, 1990. Dotson then requested and received a hearing before an administrative law judge ("ALJ"). At the administrative hearing, Dotson testified that he uses $200 to $300 worth of heroin and cocaine each day. Additionally, he testified that he supports his drug habit by hustling. When asked to define hustling, Dotson replied: "steal, beg, whatever, you know."

        With regard to his begging, Dotson stated that he usually panhandles at the Warner Homes, which are located in a poor neighborhood in Peoria, Illinois. As to Dotson's thievery, the following colloquy occurred during the administrative hearing:

        Q. [By ALJ] Where do you steal at?

        A. [By Dotson] You can do that anywhere. Wherever we can find a place to.

        Q. Give me an idea. Give me some examples.

        A. The mall, downtown, wherever. You just ride and look and, you know.

        Q. How long do you spend riding and looking until you find a place to steal?

        A. As long as you have to.

        Q. Like how long?

        A. Sometime--

        Q. All day long?

        A. Sometimes it takes all day.

        Q. What kinds of things have you stolen this month?

        A. This month?

        Q. Uh huh.

        A. I, well, I like to, I try to concentrate on saws.

        Q. On what?

        A. Saws.

        Q. Saws?

        A. You know, the chainsaws, the little bitty chainsaws?

        Q. Where do you find those at?

        A. Everywhere, everywhere.

        Q. And once you get them, what do you do with them?

        A. You sell them.

        Q. To who?

        A. A lot of people buy.

        Q. Well, where do you find--I wouldn't imagine there would be a lot of demand for them in Warner homes.

        A. No.

        Q. Where do you go to sell the chainsaws?

        A. Different businesses.

        Q. Like what?

        A. Small businesses.

        Q. Give me some examples.

        A. Like small stores or cleaners, different places like that.

        Q. Do you have to travel around to these places? How long does it take you to find somebody to buy a saw?

        A. Usually, they already, you have been--you kind of already know they probably want one.

        Q. So you have already canvassed these places earlier? You have gone out and--

        A. No, you have probably sold them stuff and they can give you kind of an idea

Page 574

about what else they might like, you know.

        Based on Dotson's testimony, the ALJ found that Dotson's stealing and panhandling constituted substantial gainful activity ("SGA") worth an average of approximately $5,600 per month and, accordingly, denied his claim for SSI benefits. Specifically, the ALJ found that, due to the poor area in which Dotson panhandles, the bulk of his income must come from illegal means. As to the nature of Dotson's criminal endeavors, the ALJ concluded:

In order to steal he must "case" the area in which he has determined to steal the property. He must then plan on how he is going to steal the property and then actually steal it. During the month in which the hearing was held the claimant was stealing chainsaws. Lifting and carrying the chainsaws would also be significant physical activity. The planning and execution of the larceny entails significant mental activity. From these activities the claimant earns enough money to support his cocaine habit and provide him with other money in substantial amounts exceeding $200 to $300 a day. [Emphasis in original.]

        On July 9, 1991, the Appeals Council declined to review the ALJ's decision. Dotson then filed the instant action against the Secretary of the Department of Health and Human Services ("Secretary") in federal court. On July 1, 1992, with cross-motions for summary judgment before it, the district court granted the Secretary's motion for summary affirmance and entered a separate judgment against Dotson and in favor of the Secretary. See Dotson v. Sullivan, 813 F.Supp. 651 (C.D.Ill.1992). This appeal followed.


        Dotson essentially raises four arguments. First, he believes that illegal activities undertaken solely to satisfy a drug addiction cannot constitute SGA. Second, assuming that illegal activity can constitute SGA, Dotson claims that the ALJ's finding of SGA in his case is unsupported by substantial evidence. Third, Dotson contends that if illegal activity undertaken to support a drug habit can constitute SGA, then the Secretary is required to deduct the cost of the narcotics from the claimant's income as an impairment-related work expense. Fourth and finally, Dotson believes that using illegal activities to furnish the basis for finding SGA denies him due process and equal protection of the laws under the United States Constitution.


            The Social Security Act ("Act"), as amended, 42 U.S.C. Sec. 301 et seq., provides for the payment of benefits to disabled persons. Title II of the Act governs the payment of Old-Age, Survivors, and Disability Insurance ("OASDI") benefits to disabled persons who have contributed to the Social Security program. 42 U.S.C. Sec. 401 et seq. Title XVI of the Act, the title under which Dotson filed his application for benefits, provides for the payment of Supplemental Security Income ("SSI") benefits to disabled persons who are indigent. 42 U.S.C. Sec. 1382 et seq.; see generally Bowen v. Yuckert, 482 U.S. 137, 140, 107 S.Ct. 2287, 2290, 96 L.Ed.2d 119 (1987). Both Titles II and XVI define disability as an "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months...." 42 U.S.C. Secs. 423(d)(1)(A), 1382c(a)(3)(A).

            Pursuant to statutory authority, the Secretary has promulgated regulations establishing a five-step sequential analysis for determining whether an SSI claimant is disabled. See 20 C.F.R. Sec. 416.920; Sullivan v. Zebley, 493 U.S. 521, 525, 110 S.Ct. 885, 888, 107 L.Ed.2d 967 (1990). 1 The first step of the process, and the only one relevant for purposes of this appeal, requires the Secretary to determine whether the claimant is engaging in SGA. See 20 C.F.R. Sec. 416.920(a). A finding of SGA means that the claimant is ineligible for SSI benefits. Id. at Sec. 416.920(b); Yuckert, 482 U.S. at 140, 107

    Page 575

    S.Ct. at 2290. In this case, because the ALJ found that Dotson's stealing and panhandling constituted SGA, he denied Dotson's claim for benefits without moving to the next step in the sequential analysis. 2


            Our research reveals that we are the first appellate court to address the issue of whether illegal activity can support a finding of SGA. The handful of federal trial courts faced with this question, including the district court below, have answered unanimously in the affirmative. 3 Because the ALJ and district court's determination that illegal activity can constitute SGA is a construction of the Secretary's regulations, we review this decision of law de novo. See Johnson v. Sullivan, 922 F.2d 346, 356 (7th Cir.1990).

            As the definition of disability quoted above indicates, the inability to engage in SGA is a statutory prerequisite to obtaining either SSI or OASDI benefits. Nonetheless, Congress delegated to the Secretary the responsibility for defining SGA. 42 U.S.C. Sec. 1382c(a)(3)(D) (Title XVI). In response to the Act's mandate, and as the components of the term suggest, the Secretary has defined SGA as "work activity that is both substantial and gainful." See 20 C.F.R. Sec. 416.972. Work activity is substantial if it "involves doing significant physical or mental activities." Id. at Sec. 416.972(a). Work activity is gainful if it is "the kind of work usually done for pay or profit, whether or not a profit is realized." Id. at Sec...

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