643 F.2d 68 (2nd Cir. 1981), 354, Ellis v. Blum

Docket Nº:354, Docket 80-6133.
Citation:643 F.2d 68
Party Name:Catherine ELLIS, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. Barbara BLUM, individually and in her capacity as Commissioner of the New YorkState Department of Social Services, Sidney Houben, individually and in hiscapacity as Director of the Bureau of Disability Determinations of the New YorkStateDepartmen
Case Date:February 18, 1981
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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643 F.2d 68 (2nd Cir. 1981)

Catherine ELLIS, individually and on behalf of all others

similarly situated, Plaintiffs-Appellants,


Barbara BLUM, individually and in her capacity as

Commissioner of the New YorkState Department of Social

Services, Sidney Houben, individually and in hiscapacity as

Director of the Bureau of Disability Determinations of the

New YorkStateDepartment of Social Services, H. Williams,

individually and in her capacity asDisability

Analyst/Specialist of the Bureau of Disability

Determinations of theDepartment of Social Services, and

Patricia Harris, in her capacity asSecretary of theUnited

States Department of Health and Human Services, Defendants-Appellees.

No. 354, Docket 80-6133.

United States Court of Appeals, Second Circuit

February 18, 1981

Argued Oct. 14, 1980.

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[Copyrighted Material Omitted]

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Martin A. Schwartz, White Plains, N. Y. (Westchester Legal Services, Inc., White Plains, N. Y., Judith A. Kaufman, New York City, of counsel), for plaintiffs-appellants.

Nancy E. Friedman, Asst. U. S. Atty., S.D. New York, New York City (John S. Martin, Jr., U. S. Atty., S.D. New York, Peter C. Salerno, Asst. U. S. Atty., New York City, of counsel), for defendants-appellees.

Before FRIENDLY, MANSFIELD and MESKILL, Circuit Judges.

FRIENDLY, Circuit Judge:

As argued to us, this appeal from an order of the District Court for the Southern District of New York dismissing plaintiff's amended complaint for want of jurisdiction presented a veritable nightmare of jurisdictional and mootness problems. While the case was under advisement, Congress passed and the President signed the Federal Question Jurisdictional Amendments Act of 1980, 94 Stat. 2369, abolishing the amount-in-controversy requirement in federal question cases, 28 U.S.C. § 1331(a), with respect to all defendants. 1 Section 4 of the Act provides that it "shall apply to any civil action pending on the date of enactment of this Act." Although, as will be seen, this amendment does not provide a quick answer to all the problems presented, it somewhat simplifies them and, in our view, mandates a reversal and remand to the district court for further proceedings.


The administrative scheme forming the background of this case can be outlined briefly as follows: § 421 of Title II of the Social Security Act, 42 U.S.C. § 401 et seq., empowers the Secretary of Health and Human Services (Secretary) to enter into agreements with state agencies delegating authority to them to make initial determinations as to eligibility for disability benefits. Such an agreement exists between the Secretary and the State of New York, and delegates that authority to the Bureau of Disability Determinations (BDD) of the New York State Department of Social Services (NYSDSS), with the oversight of the Social Security Administration (SSA).

In a majority of cases a state agency, such as BDD, is directed periodically to

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assess a beneficiary's continued eligibility for benefits. If the agency's tentative assessment after investigation is that the beneficiary has ceased to be disabled, the beneficiary must be so informed by a pretermination notice, which also advises the beneficiary that he or she has at least ten days to submit additional evidence supporting a claim of continuing disability. At the expiration of this period, the state agency makes a formal determination which is then reviewed by the SSA. If the SSA agrees with the state agency, it notifies the beneficiary in writing of the termination and of the opportunity for de novo reconsideration by the state agency. Various other avenues also exist for administrative and judicial review of an adverse decision, but benefits are discontinued effective two months after the month in which the disability is found to have ceased. Thus, the pretermination notice and the ensuing ten-day period for submission of additional evidence constitute the only opportunities a beneficiary has to learn of the case against him or her and to contest it prior to the cut-off of disability payments.

The pretermination notices at the center of this litigation are of two kinds: written and telephonic. The procedures for written notices, as announced in the SSA's Disability Insurance State Manual (Manual), a guide for state agencies to the policies of the Secretary and her interpretations of the Act and regulations, provide that a written pretermination notice should contain a summary of the evidence and the rationale for the proposed termination of benefits. The procedures for telephonic notices have been revised during the period at issue in this case. Prior to May, 1979, a telephonic pretermination notice, as prescribed by the Manual, consisted solely of a telephone call to the beneficiary conveying the same information as a written notice, including a brief summary of the evidence and a statement of the reasons for termination. As of that date the SSA changed its policy, supplementing the telephone contact with a follow-up letter to be sent within a day of the call. This letter recapitulates the content of the phone conversation with the important exception that it does not set out a summary of the evidence or a statement explaining the agency's decision to terminate.

The Complaint and Proceedings Below

This action was brought on September 7, 1979, and the plaintiff's motion to amend the complaint was granted on June 13, 1980. A summary of the amended complaint is as follows:

The action is a class action seeking injunctive and declaratory relief as well as compensatory damages for injuries suffered by the named plaintiff. The alleged class consists of New York residents who were or are recipients of disability benefits whose benefits have been terminated or threatened with termination without prior adequate written notice containing a summary of the evidence leading to the proposed termination and an explanation of the determination that the recipient is no longer under a disability. Plaintiff Catherine Ellis is such a recipient; her sole source of income has been such monthly benefits of $385.50. The complaint named four defendants: Barbara Blum, individually and as Commissioner of the NYSDSS; Sidney Houben, individually and as Director of BDD; H. Williams, individually and as Disability/Analyst Specialist of BDD; and Patricia Harris, as Secretary of the United States Department of Health, Education and Welfare (now Health and Human Services). We will sometimes refer to the first three as the state defendants, without thereby implying that they were engaged in state action.

After typical class action allegations, the amended complaint went on as follows: In November, 1978, prior to the institution of the revised procedure for telephonic pretermination notices, plaintiff Ellis received the first of three pretermination notices a telephone call from an individual who represented herself to be an employee of the SSA. The caller informed Ellis that her disability benefits would terminate as it was the opinion of the SSA that she was no longer disabled. Due to the anxiety caused

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by the call, Ellis suffered an epileptic seizure. Plaintiff did not submit any evidence to contest the proposed termination because she was unable to remember what evidence the SSA told her it was relying upon. She did contact her local Social Security office and was told by an employee not to worry about the telephone call, and that she was not "cut off". However, in January, 1979, she received a written formal Social Security Termination Notice from the SSA informing her that the medical evidence in her case indicated that she had become able to do substantial gainful work in October, 1978 and that the last disability payment to which she was entitled was the one she had received for the month of December, 1978.

Plaintiff thereupon retained Westchester Legal Services, Inc. Counsel protested termination, complaining of the impropriety of the telephone notice as a means by which to advise plaintiff of the opportunity to submit medical evidence of continued disability. By letter dated April 5, 1979, the HEW's Regional Counsel advised that plaintiff's benefits would be reinstated retroactive to January, 1979, 2 and that her case would be returned to BDD for reconsideration but that HEW counsel had no basis for believing that the result would be different. On or about April 24, 1979, plaintiff received a second pretermination notice, this time from BDD in a form letter which stated that she had "regained ability to engage in substantial gainful activity in October 1978", the date having been typed in the blank space that followed the form notice. The notice also informed her that she had ten days to submit evidence before a final determination would be made. After a telephone conversation with plaintiff's counsel, BDD on May 8, 1979 retracted the April 24 notice, saying it was "premature on our part" and that BDD was "continuing to further develop this case."

On August 20, 1979, Ellis received still another pretermination notice from BDD dated August 15, 1979. This informed her that she had "regained ability to engage in substantial gainful activity in June, 1979." The following sentence was typed in a space which had been left blank for the agency to fill in with a summary of the evidence and an explanation of the proposed termination: "Medical evidence in file indicates you retain the capacity to perform your customary work activity." The form also stated that unless plaintiff submitted further evidence within ten days, BDD would forward the record to the SSA where a "formal determination" would be made and benefits terminated as of August 31, 1979. As in all prior instances no further information was given and...

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