Ruppert v. Bowen
| Decision Date | 29 March 1989 |
| Docket Number | D,Nos. 495,563,s. 495 |
| Parties | Mary RUPPERT, Angela Mauro, Alan Green, Cheryl Karnett, Jocelyn Hill, Thomas Ferguson, Edward and Rose Faicco, Victoria Shaw, Peter Lo Brutto, Jacqueline Ferguson, Aaron Green, Appellants, v. Otis BOWEN, Secretary of the United States Department of Health and Human Services, and Cesar Perales, as Commissioner of the New York State Department of Social Services, Appellees. ockets 88-6018, 88-6176. |
| Court | U.S. Court of Appeals — Second Circuit |
Charles Robert, Robert, Huber, Lerner & Bigler, Rockville Centre, N.Y. (Laura Enteen, Long Island Advocacy Center, New Hyde Park, N.Y., of counsel), for appellants.
Michelle J. Ritholz, Sp. Asst. U.S. Atty. (Andrew J. Maloney, U.S. Atty. for the Eastern District of New York, Robert L. Begleiter, Anne E. Stanley, Asst. U.S. Attys., Mary Fisher Bernet, Asst. Atty. Gen. (Robert Abrams, Atty. Gen. of the State of New York), for appellee Cesar Perales.
of counsel), for appellee Secretary of Health and Human Services.
Ellen M. Saideman (Herbert Semmel, of counsel), for amicus curiae New York State Comm'n on Quality of Care for the Mentally Disabled.
Before OAKES, Chief Judge, KAUFMAN and CARDAMONE, Circuit Judges.
Eleven appellants challenge the method used by the Social Security Administration (SSA) to calculate their benefits under the Supplemental Security Income (SSI) program, which provides income to the elderly, blind, and disabled. 1 They appeal a decision of the United States District Court for the Eastern District of New York, Leonard D. Wexler, Judge, and we assume familiarity with Judge Wexler's detailed opinion. Ruppert v. Secretary, HHS, 671 F.Supp. 151 (E.D.N.Y.1987). There, Judge Wexler considered a variety of arguments presented by the appellants and by other plaintiffs who did not appeal because they were successful before him. The disputes here are centered around the valuation of food, clothing, and shelter that SSI recipients' family members provided them. We affirm in large part. We will present an overview of the regulatory framework and of each appellant's factual situation before addressing in detail the legal questions.
The SSI program is authorized by the labyrinthian provisions of Title XVI of the Social Security Act, 42 U.S.C. Secs. 1381-1383c (1982 & Supp. IV 1986). Section 1382(a) defines "eligible individual" as someone who is aged, blind, or disabled and whose income and resources are less than amounts specified. An eligible individual's yearly income cannot exceed the federal benefit rate, and her resources cannot exceed other specified amounts, which vary depending on whether she lives with a spouse, whether the spouse is eligible, and the year in question. For example, the maximum resource amount is now $3,000 for an eligible person living with an ineligible spouse. 42 U.S.C. Secs. 1382(a)(1)(B), 1382(a)(3)(A) (Supp. IV 1986). The benefit is payable at a fixed annual rate which is reduced by the amount of other income the individual receives, id. Sec. 1382(b), although certain types of income are excluded from consideration, id. Sec. 1382a(b). The benefit in 1986 was $336 per month, 20 C.F.R. Sec. 416.410, although the benefit is subject to cost-of-living increases, 42 U.S.C. Sec. 1382f, and may well be higher today.
Section 1382a defines "income" to include both earned and unearned income, and it defines "unearned income" to include "support and maintenance furnished in cash or in kind." 42 U.S.C. Secs. 1382a(a); 1382a(a)(2)(A). The receipt of support in kind affects benefit calculations in one of two ways. If an individual receives both food and shelter from someone in whose household she lives, the "one-third reduction rule" applies. The recipient's benefit payments are reduced because she is regarded as having income equal to one-third of the federal benefit rate in addition to that received from any other source. Id. Sec. 1382a(a)(2)(A); 20 C.F.R. Secs. 416.1130(c), 416.1131. Someone who does not pay a pro rata share of her household's expenses is considered to be living in someone else's "household." 20 C.F.R. Secs. 416.1132-.1133. When the one-third reduction rule applies, any contributions the SSI recipient makes toward household expenses are ignored, unless, of course, those payments equal a pro rata share of the household's expenses, in which case the one-third reduction rule would not apply at all. Id. Sec. 416.1133.
If an individual receives in-kind support without meeting the terms of the one-third reduction rule, SSA applies what may be called the "presumed maximum value" (PMV) rule. Id. Sec. 416.1130(c). The PMV is one-third of the federal benefit rate plus the "general income exclusion," which is $20 per month. Id. Secs. 416.1140, 416.1124(c)(12); 42 U.S.C. Sec. 1382a(b)(2)(A) (Supp. IV 1986). The recipient is assumed to have additional income equal to the PMV. 20 C.F.R. Sec. 416.1140. When the PMV rule is used, however, the recipient has the opportunity to prove that the actual value of the support is less than its presumed value. Id. Sec. 416.1140(a)(2). Actual value is defined as the current market value or the amount paid by the provider for the item. Id.
The threshold for application of the two valuation rules, one-third reduction and PMV, is a determination that the recipient received "in-kind support and maintenance." The regulations explain:
In-kind support and maintenance means any food, clothing, or shelter that is given to you or that you receive because someone else pays for it.... You are not receiving in-kind support and maintenance in the form of room or rent if you are paying the amount charged under a business arrangement. A business arrangement exists when the amount of monthly rent required to be paid equals the current market rental value....
Id. Sec. 416.1130(b). When someone pays less than market value for food, clothing, or shelter and the PMV rule applies, she has "in-kind support and maintenance" income equal to the PMV amount, or whatever lesser amount she can prove to be the actual value of the bargain. No matter how much support the recipient receives, however, the PMV is the maximum that can be deducted from her benefits.
There is a special rule for recipients in the three states within the jurisdiction of the Court of Appeals for the Seventh Circuit, which decided Jackson v. Schweiker, 683 F.2d 1076 (1982):
In the States in the Seventh Circuit (Illinois, Indiana, and Wisconsin), a business arrangement exists when the amount of monthly rent required to be paid equals or exceeds the presumed maximum value described in Sec. 416.1140(a)(1). In those States, if the required amount of rent is less than the presumed maximum value, we will impute as in-kind support and maintenance, the difference between the required amount of rent and either the presumed maximum value or the current market value, whichever is less.
20 C.F.R. Sec. 416.1130(b). Since the "presumed maximum value described in Sec. 416.1140(a)(1)" is one-third of the federal benefit rate ($336 in 1986) plus $20, i.e., $132 per month in 1986, an SSI recipient in the Seventh Circuit could not have imputed income from below-market rent unless her actual rent was quite low.
There follows (in alphabetical order) a brief description of the individual appellants' situations as they existed when evaluated by the SSA:
Rose Faicco and her now deceased husband, Edward Faicco, were both over age sixty-five. An administrative law judge (ALJ) determined that they were each overpaid $262.20 between November 1982 and March 1983, during which period they rented a house in Franklin Square, New York, from their daughter, who did not live there. Although the house's monthly expenses were $951, the Faiccos paid rent of $350 per month, which was reduced to $250 per month when the daughter's variable rate mortgage decreased. The ALJ found that the Faiccos had either received subsidized rent or, because they did not pay their pro rata share of the expenses, lived in their daughter's household. Because the value of the housing was $951, the ALJ held, each of the Faiccos had PMV income resulting in overpayment of benefits. Judge Wexler accepted the ALJ's findings, including the finding that the Faiccos were not without fault in obtaining the overpayments and hence ineligible for waiver of adjustment or recovery of the sum overpaid. Ruppert, 671 F.Supp. at 182-83.
Jacqueline and Thomas Ferguson, who are brother and sister, lived with their father Thomas Ferguson had signed a similar written agreement to pay his father $269 per month for food and lodging. An ALJ found that Thomas was not actually paying a proportionate share of the household's expenses. Judge Wexler accepted the ALJ's determination that Thomas was therefore subject to the one-third reduction rule, noting that even the amount of rent he agreed to pay would not cover his share of the condominium expenses and that it was "questionable" whether the agreement had ever been enforced. Id. at 181-82.
in a four-room condominium in Medford, New York. Id. at 181-82, 191-92. Thomas was disabled due to deafness, while Jacqueline had epilepsy. An ALJ found that Jacqueline was subject to the one-third reduction rule because she paid only $100 per month toward the total household expenses of $658. The ALJ rejected Jacqueline's argument that her father had lent her $169 per month in food and rent, even though she had signed an agreement to pay $269 per month to her father. Although the ALJ relied on the fact that no cash was lent, Judge Wexler affirmed because he determined that the agreement was illusory and that she was not "without fault." Id. at 191-92
Aaron Green, who is retarded, lived with his parents and paid them for rent and food. Judge Wexler accepted an ALJ's determination that although...
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