Ballard v. Sullivan

Citation905 F.2d 257
Decision Date25 May 1990
Docket NumberNo. 88-3837,88-3837
Parties, Unempl.Ins.Rep. CCH 15452A John G. BALLARD, Plaintiff-Appellee, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, * Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Ben A. Porter, Asst. Regional Counsel, Dept. of Health and Human Services, Seattle, Washington, for defendant-appellant.

Stuart W. Scarff, Neubauer & Hunsinger, Seattle, Wash., for plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington.

Before BROWNING, ALARCON and HALL, Circuit Judges.


The Secretary of Health and Human Services appeals the district court order granting Ballard retirement benefits based on his net earnings for the years 1984 and 1985. We reverse.

Ballard was receiving social security retirement benefits when he began working as a traveling salesman for LSI Cuckler. His retirement benefits depended in part on current income. Retirement benefits are reduced by a percentage of each dollar earned in excess of an "exempt amount." 42 U.S.C. Secs. 403(b)(1), (f)(3). In calculating his retirement benefits, Ballard subtracted his business and travel expenses from his gross earnings. The Secretary paid Ballard in accordance with Ballard's calculations, but later notified him of an overpayment. Upon administrative review, the Secretary ruled that the reimbursement for expenses was not deductible because Ballard's employer had failed to separate wages from expenses on Ballard's paycheck as required by 20 C.F.R. Sec. 404.1045. 1 The district court reversed the Secretary's ruling on the ground that section 404.1045 was invalid, particularly as applied to traveling salesmen. The Secretary appeals.

Our review is limited to determining whether the regulation exceeds the Secretary's statutory authority or is arbitrary and capricious. Greenhow v. Secretary of Health & Human Services, 863 F.2d 633, 638 (9th Cir.1988). Ballard argues the regulation is invalid as applied to him because it creates an arbitrary distinction between self-employed individuals and employees. 2 We rejected this argument in Greenhow, concluding that the regulation was consistent with the statute, and that "differential treatment for self-employed persons and employees is entirely reasonable." Id. at 638.

Ballard raises an additional argument not reached in Greenhow, contending section 404.1045, even if valid, should not be construed to apply to him. Ballard relies on a line of district court cases permitting traveling salesmen to deduct business expenses from their gross income for the purpose of computing retirement benefit overpayments, even though their employers did not specifically designate portions of the remuneration as reimbursement for expenses. 3

The opinions in these cases suggest no reason why salesmen should be exempt from the regulation when non-salesmen employees are not. On this issue they rely heavily on the rationale of Joyner v. Ribicoff, 206 F.Supp. 874 (W.D.Va.1962), that it is "simply inconceivable that Congress could have intended" to treat employees differently from the self-employed. Id. at 876-77. We have already held the distinction is not "inconceivable"; indeed, we have stated that it is "entirely reasonable." Greenhow, 863 F.2d at 638. The Second and Eleventh Circuits have also held, in cases involving traveling salesmen, that section 404.1045 "has a rational basis and is authorized." Davis v. Bowen, 840 F.2d 822, 824 (11th Cir.1988) (quoting and following Colby v. Harris, 622 F.2d 644, 646 (2d Cir.1980)).


* Louis W. Sullivan, M.D., has been substituted for Otis R. Bowen, M.D., pursuant to Rule 43(c)(1) of the Federal Rules of Appellate Procedure.

1 Section 404.1045 provides:

Amounts that your employer pays you specifically--either as advances or reimbursements--for traveling or for other ordinary and necessary expenses incurred, or reasonably expected to be incurred, in your employer's business are not wages. The employer must identify these travel and other expenses either by making a separate payment or by specifically stating the separate amounts if both wages and expense allowances are combined in a single payment.

2 In his brief on appeal, Ballard argued in the alternative that he had in...

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2 cases
  • Foley v. Sullivan, 91-55604
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • May 8, 1992
    ...from gross earnings, but employees cannot. We have previously held that the distinction is "entirely reasonable." Ballard v. Sullivan, 905 F.2d 257, 258 (9th Cir.1990); Greenhow v. Secretary of Health & Human Services, 863 F.2d 633, 638 (9th AFFIRMED. * The panel unanimously finds this case......
  • Knisley v. Network Associates, Inc.
    • United States
    • U.S. District Court — Northern District of California
    • August 16, 1999
    ...reimbursement. See, e.g., Lake Shore & M.S.R. Co. v. Prentice, 147 U.S. 101, 108, 13 S.Ct. 261, 37 L.Ed. 97 (1893); Ballard v. Sullivan, 905 F.2d 257, 259 (9th Cir.1990). The particular provision of the PSLRA prohibiting "remuneration" has not been interpreted in any case law that the Court......

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