Kennedy v. Shalala

• Decision Date: 01 June 1993
• Docket Number: Nos. 92-2303,92-2304,s. 92-2303
• Citation: 995 F.2d 28
• Parties: , 41 Soc.Sec.Rep.Ser. 290 Barbara KENNEDY, on behalf of herself and all others similarly situated, Plaintiff-Appellee, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellant. Barbara KENNEDY, on behalf of herself and all others similarly situated, Plaintiff-Appellant, v. Donna E. SHALALA, Secretary of Health and Human Services, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 28

995 F.2d 28

61 USLW 2774, 41 Soc.Sec.Rep.Ser. 290

Barbara KENNEDY, on behalf of herself and all others

similarly situated, Plaintiff-Appellee, v. Donna E. SHALALA, Secretary of Health and Human Services,

Defendant-Appellant.

Barbara KENNEDY, on behalf of herself and all others

similarly situated, Plaintiff-Appellant, v. Donna E. SHALALA, Secretary of Health and Human Services,

Defendant-Appellee.

Nos. 92-2303, 92-2304.

United States Court of Appeals, Fourth Circuit.

Argued April 2, 1993.

Decided June 1, 1993.

Jennifer Hay Zacks, argued (Stuart M. Gerson, Asst. Atty. Gen., William A. Kolibash, U.S. Atty. and William Kanter, on brief), Civ. Div., U.S. Dept. of Justice, Washington, DC, for defendant-appellant.

Gill Wylie Deford, Nat. Sr. Citizens Law Center, Los Angeles, CA, argued (Mary A. Kenney, North Cent. West Virginia Legal Aid Soc., Morgantown, WV, on brief), for plaintiff-appellee.

Before HALL and LUTTIG, Circuit Judges, and HILTON, United States District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

LUTTIG, Circuit Judge:

On behalf of herself and all others similarly situated, Barbara Kennedy brought this suit against the Secretary of the Department of Health and Human Services challenging Social Security Ruling 82-31, which treated as unearned income to her that portion of her husband's Veteran's Affairs benefit payment designated for her support, with the result that Kennedy's Supplemental Security Income benefits were reduced by that amount. The district court invalidated the ruling as violative of Title XVI of the Social Security Act. We conclude that the ruling constitutes a reasonable interpretation of that Act and therefore reverse.

I.

Because the Supplemental Security Income ("SSI") program is intended merely to ensure subsistence, the amount of benefits paid under the program is inversely proportional to an eligible recipient's income. Generally, the amount of SSI benefits paid equals a periodically determined subsistence level of income, less a recipient's income from sources other than SSI. Among the types of other income that figure in this calculation is "unearned income," which Congress has defined to include "any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions...." 42 U.S.C. § 1382a(a)(2)(B) (emphasis added).

Kennedy's husband receives Veteran's Affairs benefits, comprising his base benefits plus an amount paid to him for the support of Kennedy, his dependent (the "augmented portion" or "augmentation"). The Secretary has determined that, for SSI purposes, the augmented portion of a veteran's benefits constitutes unearned income to the dependent on whose behalf they are paid. See Title XVI: SSI Treatment of Veterans Administration Payments to SSI Eligibles/Fiduciaries, 82-31 S.S.R. 291 (Cum.Ed.1982) [hereinafter SSR 82-31]. This determination was made in response to Whaley v. Schweiker, 663 F.2d 871 (9th Cir.1981), Tsosie v. Califano, 651 F.2d 719 (10th Cir.1981), and Webster v. Califano, No. 78-3492 (6th Cir. July 10, 1980), which invalidated the Secretary's then existing position that all VA benefits, including the augmented portions, constituted unearned income to the veteran for SSI purposes. Pursuant to SSR 82-31, the Social Security Administration informed Kennedy that her SSI benefits would be reduced in the amount of her husband's VA benefits augmentation.

An administrative law judge upheld the agency's determination, and Kennedy filed a class action in federal district court. After waiving the exhaustion requirement and equitably tolling the applicable statute of limitations, the district court certified a class of all persons similarly situated and residing in the Northern District of West Virginia and referred the matter to a magistrate-judge. 138 F.R.D. 484. The district court thereafter accepted the magistrate-judge's recommendation that SSR 82-31 was invalid because it counted as unearned income to SSI beneficiaries payments that they had never actually received, assertedly in violation of Title XVI of the Social Security Act. The district court entered summary judgment for Kennedy, and the Secretary appealed. ¹

II.

The dispute between the parties, at bottom, is quite simple. The Secretary argues that although Kennedy might not actually receive the augmentation of her husband's VA benefits, she constructively receives that augmentation, and that constructively received VA payments constitute unearned income "received" within the meaning of section 1382a(a)(2)(B). Kennedy responds that section 1382a(a)(2)(B) requires that she actually receive the payments (or at a minimum that they be actually available to her) before they can be counted as unearned income to her. While we do not believe that the Secretary's construction is compelled by the statute's language, we believe that it represents a reasonable interpretation of an ambiguous provision.

We cannot conclude, as Kennedy would have us do, that the language of section 1382a(a)(2)(B) unambiguously evinces a congressional intent to count as unearned income for SSI purposes only those VA benefits actually received by the SSI beneficiary. As a general matter, "receipt" can reasonably be understood to include not only actual but constructive receipt. See, e.g., United States v. Ladd, 877 F.2d 1083, 1087-88 (1st Cir.1989) ("The firearm cases, as we read them, show that receipt may be actual or constructive."); Baxter v. Commissioner, 816 F.2d 493, 494-95 (9th Cir.1987) (constructive receipt of income under the Internal Revenue Code). Indeed, no fewer than five other courts of appeal have held that the term "received" in section 1382a(a)(2)(B) itself includes constructive receipt, see Martin v. Sullivan, 932 F.2d 1273, 1278 (9th Cir.1990), cert. denied, --- U.S. ----, 112 S.Ct. 648, 116 L.Ed.2d 665 (1991); Healea v. Bowen, 871 F.2d 48, 51 (7th Cir.1988); Szlosek v. Secretary of Health & Human Servs., 861 F.2d 13, 13 (1st Cir.1988); Robinson v. Bowen, 828 F.2d 71, 72 (2d Cir.1987); Lyon v. Bowen, 802 F.2d 794, 798 (5th Cir.1986). ² Of course, when we are confronted with a statutory provision that is silent or ambiguous with respect to the specific issue at hand, we must defer to a reasonable interpretation of the agency charged with administering that law. See generally Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). ³

The reasonableness of the Secretary's interpretation is underscored by the unreasonableness of Kennedy's purported actual receipt requirement. Kennedy argues that the Secretary should conduct a "case-by-case review of the availability of the augmentation to the dependent," conceding that "[i]n those situations where the veteran gives the augmentation to the dependent or spends it for food, clothing, or shelter on her behalf, the Secretary could evaluate it as income to the dependent." Appellee's Br. at 23. ⁴ It is manifestly reasonable for the Secretary to decline to assume such a burden, given that the allocation to any particular dependent presumably would change as the veteran's use of his benefit payments changes, and especially given that the veteran is obliged to spend the augmentation on the dependent on whose behalf he received the additional benefit. See, e.g., Paxton, 856 F.2d at 1358 ("[T]he SSI status of VA benefits should not depend on how each veteran handles his or her family finances."); see also Whaley, 663 F.2d at 874 ("[I]t would be a fascinating exercise of bureaucratic folly to attempt to monitor the percentage of groceries consumed by the veteran and the children, the amount of heat, hot water or electricity used by each, or the percentage of space occupied by each."). It would be a precarious, if any, response to this difficulty to argue that the Secretary could resort to standard percentages, for such an approach is ultimately no different from the Secretary's decision to allocate 100% of the augmented portion to the dependent--notably, the very allocation that Whaley suggests is proper.

The Secretary's position in SSR 82-31 finds further support in, though is not necessitated by, the judiciary's response to her earlier practice of counting as unearned income to a veteran the entire amount of his VA benefits, including the augmented portions, because the veteran actually received all the benefits in his own name. Reasoning that veterans were at least expected, if not legally bound, to spend the augmented portions of their benefits on behalf of the dependents for whom they received the funds, the courts in Whaley, Tsosie, and Webster held, in decisions that the Secretary did not further challenge, that the augmented portions could not be counted as unearned income to the veteran for SSI purposes. The Secretary argues that if she were not to count the augmented portion as unearned income to Kennedy, she would not be able to count it as unearned income to anyone, a result flatly at odds with section 1382a(a)(2)(B), which requires that she count as unearned income all "payments received ..., including veterans' compensation and pensions." While those adverse rulings do not, as a matter of law (and certainly not in this circuit), compel the interpretation that the Secretary advances, see infra note 6, they do serve as further evidence of the reasonableness of that interpretation.

We recognize that our holding in this case is in conflict with that of the Ninth Circuit in Paxton, in which the court concluded that SSR 82-31 was "inconsistent with the SSI regulations." 856 F.2d at 1359. ⁵ We simply disagree with Paxton. None of the three regulatory provisions characterized by that court as inconsistent with the Secretary's position in SSR 82-31 is in fact inconsistent with that rule. For instance, that unearned income in the form of periodic payments is "usually related to prior work," 20 C.F.R. §...