Inman v. Shalala

Decision Date19 July 1994
Docket Number93-2941,Nos. 93-2305,s. 93-2305
Citation30 F.3d 840
PartiesBernice INMAN, on behalf of herself and all others similarly situated, Plaintiff-Appellee, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Kenneth J. Falk, Legal Services Organization of Indiana, Inc., Indianapolis, IN, Jamie Andree, Legal Services Organization of Indiana, Inc., Bloomington, IN (argued), Gil Deford, Kim Savage, Nat. Sr. Citizens Law Center, Los Angeles, CA, for plaintiff-appellee.

Jeffrey L. Hunter, Asst. U.S. Atty., Indianapolis, IN, William Kanter, Jennifer H. Zacks (argued), Dept. of Justice, Civ. Div., Appellate Section, Washington, DC, John M. Sacchetti, Claire S. Hoffman, Dept. of Health & Human Services, Office of Gen. Counsel, Baltimore, MD, for defendant-appellant.

Before PELL, MANION, and KANNE, Circuit Judges.

MANION, Circuit Judge.

Bernice Inman is a veteran's wife whose Supplemental Security Income (SSI) benefits were reduced because of Social Security Ruling 82-31. That ruling deemed the portions of veterans' benefits earmarked for dependents to be their unearned income for the purpose of calculating SSI benefits. Inman filed a class action lawsuit on behalf of herself and all similarly situated dependents against the Secretary of the Department of Health and Human Services, challenging 82-31. The district court granted summary judgment for Inman, determining that 82-31 was not a valid interpretation of 42 U.S.C. Sec. 1382a(a)(2)(B). We reverse.

I. Background

This case concerns the interrelationship between veterans' benefits and SSI benefits. To understand the current dispute, it would be helpful to first review a brief history of the broader conflict.

In 1972, Congress created the SSI program to guarantee a minimum subsistence income level for aged, blind, and disabled persons. 42 U.S.C. Secs. 1381-1383d; Schwieker v. Wilson, 450 U.S. 221, 223, 101 S.Ct. 1074, 1077, 67 L.Ed.2d 186 (1981). As the name (Supplemental Security Income) implies, SSI benefits are meant to supplement other sources of income. Congress designates a minimum subsistence income level, and a qualifying person whose income falls below that level can receive checks from the federal government to make up the difference. See Kennedy v. Shalala, 995 F.2d 28, 29 (4th Cir.1993) ("[g]enerally, the amount of SSI benefits paid equals a periodically determined subsistence level of income, less a recipient's income from sources other than SSI.").

A person's income, therefore, is the essential variable in determining whether he is entitled to SSI benefits, and if so, how much. See 20 C.F.R. Sec. 416.1100 ("the amount of income you have is a major factor in deciding whether you are eligible for SSI benefits and the amount of your benefit."). The regulations generally define income as "anything you can use to meet your needs for food, clothing, or shelter." 20 C.F.R. Sec. 416.1102. The statute separates income into two categories: "earned income," which includes wages and the like, 42 U.S.C. Sec. 1382a(a)(1); and "unearned income," which includes "any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions...." 42 U.S.C. Sec. 1382a(a)(2)(B).

Veterans' benefits received by a veteran for his benefit are clearly considered unearned income under the statute. But a problem arises when a veteran receives increased veterans' benefits to support dependents. See 38 U.S.C. Sec. 1521. Originally, the Social Security Administration considered these increased benefits as the veteran's unearned income for the purpose of calculating SSI. But in Whaley v. Schweiker, 663 F.2d 871 (9th Cir.1981), the Ninth Circuit concluded that this interpretation was contrary to the legislative purpose underlying SSI, which the court broadly construed as "the intent to help families like Whaley's to maintain minimally adequate income levels." 663 F.2d at 874. The court was not persuaded by the facts that "the personal veterans' benefit ... and the children's benefits were both delivered to Whaley in one check payable to him" and "Whaley was not legally required to expend the children's benefits for the purpose for which they were given." Id. The court simply found it fundamentally unfair to count the portion of the check earmarked for dependents as Whaley's unearned income.

In response to Whaley, the Secretary promulgated a new interpretation: if the dependent portion could not be counted as unearned income for the veteran, then it should be counted against the dependent. See Title XVI: SSI Treatments of Veterans Administration Payments to SSI Eligibles/Fiduciaries, 82-31 S.S.R. 291 (Cum.Ed.1982) (previously and hereafter referred to as Social Security ruling 82-31 or just 82-31). So, for instance, if a veteran was receiving veterans' benefits, a portion of which were earmarked for his wife, who was receiving SSI benefits, then the Social Security Administration would count the earmarked portion as unearned income for the wife, thereby reducing her SSI benefits. Those are exactly the facts the Ninth Circuit faced in Paxton v. Secretary, 856 F.2d 1352 (9th Cir.1988). But the court determined that 82-31, like its predecessor, violated the statutory scheme, ruling that the veterans' benefits could not be counted as unearned income for the wife under 42 U.S.C. Sec. 1382a(a)(2)(B). This, combined with the court's previous decision in Whaley, meant that the veterans' payments, which were going to the veteran or his dependent, could not be assessed against either. The court explained away this oddity: "The calculation of income for SSI purposes is not a zero-sum mathematical problem in which all forms of public assistance must be used to reduce some family member's SSI benefits." Paxton, 856 F.2d at 1357.

The Social Security Administration disagreed and did not change its interpretation in response to the court's decision. In various jurisdictions the Secretary has been litigating the issue addressed in Paxton. So far, in addition to the Ninth Circuit, three circuits have determined whether veterans' benefits earmarked for dependents can be counted as the dependent's unearned income when calculating SSI. The Fourth Circuit, the Second Circuit, and the Tenth Circuit have all deferred to the Secretary's interpretation in 82-31, and in doing so, have sharply disagreed with Paxton. Kennedy v. Shalala, 995 F.2d 28 (4th Cir.1993); White v. Shalala, 7 F.3d 296 (2d Cir.1993); Ryder v. Shalala, 25 F.3d 944 (10th Cir.1994).

The case now before us is very similar to Paxton, Kennedy, White, and Ryder. Bernice Inman has received SSI benefits since July, 1986. Her husband receives veterans' benefits, a portion of which are supposed to be used for Bernice's support. Bernice filed a class-action lawsuit challenging the Secretary's interpretation contained in 82-31. Generally, Bernice asserted that the portion of her husband's veterans' benefits intended for her support should not be counted as her unearned income when calculating SSI. The district court, ruling without the benefit of Kennedy, White, and Ryder--which had not yet been decided--applied Paxton, and determined 82-31 to be invalid. The Secretary has appealed.

II. Analysis

Essentially, 82-31 is a Social Security Administration ruling which interprets how veterans' benefits intended for dependents should be appraised under 42 U.S.C. Sec. 1382a(a)(2)(B). A court reviewing an agency's interpretation of a statute must first look to the statute in question: if the statute addresses the precise question at issue and its meaning is clear, the text controls. Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984). But if "the court determines Congress has not directly addressed the precise question at issue," then "the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843, 104 S.Ct. at 2781-82. This analytic framework raises two questions in this case. First, does 42 U.S.C. Sec. 1382a(a)(2)(B) specifically address whether portions of veterans' benefits earmarked for dependents should be counted as their "unearned income" for SSI purposes? And second, if a statute does not specifically address the issue, then is 82-31 a permissible interpretation of the statute?

42 U.S.C. Sec. 1382a(a)(2)(B) defines unearned income for SSI purposes as "any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and benefits...." This definition addresses veterans' benefits, but only in the most general terms. It does not specifically address how these benefits should be regarded when they are apportioned between the veteran and his dependents. All circuits which have considered this issue so far have determined, either explicitly or implicitly, that Sec. 1382a(a)(2)(B) does not specifically address this issue; indeed no circuit has purported to apply the plain meaning of Sec. 1382a(a)(2)(B) to resolve this question. See Ryder, 25 F.3d at 946; White, 7 F.3d at 302; Kennedy, 995 F.2d at 29-30; Paxton, 856 F.2d at 1358; see also Whaley, 663 F.2d at 874. We agree that the statute does not specifically address the precise question of how to ascribe the dependent's portion. And because the Social Security Administration has interpreted the statute in 82-31, we cannot "simply impose our own construction on the statute, as would be necessary in the absence of administrative interpretation." Chevron, 467 U.S. at 843, 104 S.Ct. at 2782. We are left, therefore, to determine whether 82-31 is a permissible interpretation of the statute.

Bernice argues that 82-31 is not a permissible interpretation of the statute, at least as applied to her and the other class members....

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