City of New York v. Heckler

Decision Date27 August 1984
Docket NumberD,No. 1095,1095
Citation742 F.2d 729
Parties, Unempl.Ins.Rep. CCH 15,500 CITY OF NEW YORK, New York City Health and Hospitals Corp., State of New York, Cesar Perales, Commissioner, N.Y.S. Dept. of Social Services, William F. Morris, Acting Commissioner, N.Y.S. Office of Mental Health, Jane Does I and II, Richard Does I, II, III & IV, Plaintiffs-Appellees, v. Margaret M. HECKLER, Secretary of Health and Human Services, John A. Svahn, Commissioner of U.S. Social Security Administration, Defendants-Appellants. ocket 84-6037.
CourtU.S. Court of Appeals — Second Circuit

Howard S. Scher, Atty., Appellate Staff, Civ.Div., Dept. of Justice, Washington, D.C. (Richard K. Willard, Acting Asst. Atty. Gen., William Kanter, Atty., Appellate Staff, Civ.Div., Dept. of Justice, Washington, D.C., Raymond J. Dearie, U.S. Atty., Brooklyn, N.Y., on the brief), for defendants-appellants.

Thomas W. Bergdall, New York City (Frederick A.O. Schwarz, Jr., Corp. Counsel, Lois M. May, New York City, Robert Abrams, Atty. Gen., Paul M. Glickman, Howard L. Zwickel, New York City, Ambrose Doskow, Richard L. Claman, Jan G. Zager, Rosenman Colin Freund Lewis & Cohen, New York City, Leonard Rubenstein, Mental Health Law Project, Washington, D.C., Jane Stevens, Brooklyn Legal Services, Brooklyn, N.Y., on the brief), for plaintiffs-appellees.

Before LUMBARD, NEWMAN and PRATT, Circuit Judges.

JON O. NEWMAN, Circuit Judge:

The Secretary of Health and Human Services appeals from a judgment of the District Court for the Eastern District of New York (Jack B. Weinstein, Chief Judge) invalidating a procedure used by the Social Security Administration ("SSA") in the determination of original and continuing eligibility of claimants for disability benefits. City of New York v. Heckler, 578 F.Supp. 1109 (E.D.N.Y.1984). The ruling affects a class of persons with severe mental illnesses. The class is estimated to include more than 50,000 New York residents. The Secretary raises no challenge on appeal to the District Court's invalidation of the challenged procedure, which has since been abandoned. However, the appeal presents substantial and complicated issues concerning the jurisdiction of the District Court to adjudicate the class members' challenge and to award relief. For reasons that follow, we affirm the judgment of the District Court.

Background

The invalidated procedure concerns one aspect of the elaborate process by which people are determined to be eligible for disability benefits under the Social Security Disability Insurance ("DI") program, established by Title II of the Social Security Act ("the Act"), 49 Stat. 622, as amended, 42 U.S.C. Sec. 401 et seq. (1982), and the Supplemental Security Income ("SSI") program established by Title XVI of the Act, 76 Stat. 197, as amended, 42 U.S.C. Sec. 1381 et seq. (1982). More specifically, we are concerned with the five-step "sequential evaluation" process adopted by the Secretary to govern determination of initial and continuing eligibility for disability benefits under both DI and SSI programs.

The first step in the sequential process is a decision whether the claimant is engaged in "substantial gainful activity." If so, benefits are denied. 20 C.F.R. Secs. 404.1520(a), (b), 416.920(a), (b) (1983). If not, the second step is a decision whether the claimant's medical condition or impairment is "severe." If not, benefits are denied. 20 C.F.R. Secs. 404.1520(c), 416.920(c). If the impairment is "severe," the third step is a decision whether the claimant's impairments meet or equal the "Listing of Impairments" set forth in subpart P, app. 1, of the social security regulations, 20 C.F.R. Secs. 404.1520(d), 416.920(d). These are impairments acknowledged by the Secretary to be of sufficient severity to preclude gainful employment. If a claimant's condition meets or equals the "listed" impairments, he or she is conclusively presumed to be disabled and entitled to benefits. If the claimant's impairments do not satisfy the "Listing of Impairments," the fourth step is assessment of the individual's "residual functional capacity," i.e., his capacity to engage in basic work activities, and a decision whether the claimant's residual functional capacity permits him to engage in his prior work. If the residual functional capacity is consistent with prior employment, benefits are denied. 20 C.F.R. Secs. 404.1520(e), 416.920(e). If not, the fifth and final step is a decision whether a claimant, in light of his residual functional capacity, age, education, and work experience, has the capacity to perform "alternative occupations available in the national economy." Decker v. Harris, 647 F.2d 291, 298 (2d Cir.1981); 20 C.F.R. Secs. 404.1520(f), 416.920(f). If not, benefits are awarded.

The procedural irregularity challenged in this litigation concerns the fourth step of the sequential evaluation process--the determination of residual functional capacity. In disregard of the regulatory requirement to conduct an individualized assessment of the residual functional capacity of each claimant, SSA, informally and without public disclosure, adopted an administrative practice that effectively imposed a presumption upon the determination of eligibility for DI benefits: Claimants whose mental impairments were not as severe as those in the Listing of Impairments were presumed to retain a residual functional capacity sufficient to perform at least unskilled work. 1 This presumption was conclusive as to most claimants with mental impairments that were "severe" but not "listed." The practical effect of the presumption was to end the sequential process for most class members at the third step. The only class members who might progress through the fourth and fifth steps and receive benefits were those over 50 with extreme vocational deficiencies and "severe" but unlisted mental impairments. These class members, despite the presumption concerning residual functional capacity, might be found eligible for benefits by virtue of the medical-vocational "grid" regulation, 20 C.F.R. subpart P, app. 2 (1983) but the force of the presumption could still adversely affect their claims. 2

The presumption concerning residual functional capacity was applied throughout the elaborate administrative process by which claims for initial and continuing disability benefits are determined. The presumption guided determinations made by the New York State Office of Disability Determinations, pursuant to its contract with the SSA and review decisions made at the regional and national levels by SSA officials. Upon the de novo reviews conducted by administrative law judges, the presumption was not required to be applied, but the District Court found that ALJ's often relied on determinations of residual functional capacity that were tainted by use of the presumption earlier in the review process.

On February 8, 1983, the City of New York and the New York City Health and Hospitals Corporation, the Commissioner of the New York State Department of Social Services, and the Acting Commissioner of the New York State Office of Mental Health, suing on their own behalf and as parens patriae, and eight named individuals brought this class action against the Secretary and the Commissioner of SSA on behalf of

All individuals residing in the State of New York who have applied for or received Title II and/or Title XVI benefits on or after April 1, 1980, and who have been found by defendants to have a mental impairment which is severe ... and whose applications for benefits have been or will be denied or whose benefits have been or will be terminated, on the basis of defendants' determination that such persons are capable of substantial gainful activity.

Plaintiffs sought declaratory and injunctive relief enjoining the Secretary from continuing to apply the unwritten presumption concerning residual functional capacity. The complaint invoked jurisdiction under the Social Security Act, 42 U.S.C. Sec. 405(g) (1982), and the mandamus statute, 28 U.S.C. Sec. 1361 (1982). 3

The Secretary unsuccessfully resisted class certification on the ground that the District Court lacked jurisdiction over most members of the proposed class. Following class certification, the Secretary filed her answer, denying plaintiffs' allegations and renewing her jurisdictional arguments. The answer did not specifically assert that the claims of some class members were time-barred by the 60-day rule of section 405(g), which permits judicial review only of decisions of the Secretary made within 60 days of the filing of a complaint in a district court. Though the answer was not amended to assert a time bar, the Secretary referred to this argument at the outset of trial and in her post-trial brief.

The District Court rejected the Secretary's jurisdictional contentions. On the merits Chief Judge Weinstein ruled that "from 1978 until at least the early months of 1983" SSA engaged in a covert policy to deny class members an individualized assessment of each claimant's capacity to engage in substantial gainful activity in violation of the strictures of the Social Security Act and regulations enacted thereunder. 578 F.Supp. at 1115. As relief the Court ordered the Secretary (i) to reopen all disability determinations rendered after April 1, 1980, in which disability benefits were denied or terminated, and (ii) to "reinstate benefits of all class members until the claimant's eligibility is properly determined." Id. at 1125. These reinstated benefits have been referred to in the litigation as "interim" benefits. The Court stayed its judgment for ten days to permit an application for a stay pending appeal to this Court. Id.

Following the Secretary's motion for a stay pending appeal or, in the alternative, for clarification of the rationale for denying a stay, Chief Judge Weinstein entered an amended judgment modifying the judgment to limit...

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