Benjamin v. United States (In re Benjamin)

• Decision Date: 10 May 2019
• Docket Number: No. 18-20185,18-20185
• Citation: 924 F.3d 180
• Parties: In the MATTER OF Kenneth Wayne BENJAMIN, Debtor Kenneth Wayne Benjamin, Appellant v. United States of America, Social Security Administration, Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

924 F.3d 180

In the MATTER OF Kenneth Wayne BENJAMIN, DebtorKenneth Wayne Benjamin, Appellant

v.United States of America, Social Security Administration, Appellee

No. 18-20185

United States Court of Appeals, Fifth Circuit.

FILED May 10, 2019

EDITH BROWN CLEMENT, Circuit Judge:

The question presented is whether 42 U.S.C. § 405(h)—which states that no claim arising under the Social Security Act can be brought under 28 U.S.C. §§ 1331 and 1346—also bars bankruptcy courts from exercising their jurisdiction under § 1334 to hear Social Security claims. The district court answered yes, relying on the recodification canon to read into § 405(h) a bar on § 1334 jurisdiction. But because we follow § 405(h)'s plain text, we answer no and reverse.

I.

Kenneth Benjamin was the designated beneficiary of his sister's disability benefits. In September 2013, the Social Security Administration ("SSA") notified Benjamin that it had become aware of his sister's return to work. The SSA determined that her benefits had expired in April 2012. But because it did not sever her disability check until September 2013, the SSA would recoup the overpayment, which totaled $ 19,286.90. Benjamin and his sister requested reconsideration of the overpayment determination and a waiver of overpayment.

Under 20 C.F.R. § 404.506(b), the SSA should not have begun collecting the overpayment until after it had considered Benjamin's waiver request, which it did not do until July 2016. Nonetheless, in August 2014, the SSA sent Benjamin a letter (his sister had died the month before) informing him that it would withhold his full social-security check until the overpayment was recovered. Four days later, Benjamin reached an agreement with the SSA to withhold only $ 536 a month from him. The SSA recovered roughly $ 6,000 from Benjamin in this way until September 2015, when, for reasons unknown, it abruptly stopped withholding the money.

Eventually, in July 2016, the SSA turned to Benjamin's request for a waiver of the overpayment, which it denied. Benjamin asked for a personal conference with the SSA to reconsider its decision. After the conference, the SSA again ruled against Benjamin. Benjamin filed a timely appeal to an administrative law judge. The appeal has yet to be decided.

After it denied his waiver request, the SSA resumed withholding $ 536 a month from Benjamin's social-security check. The burden soon became too much: In May 2017, Benjamin filed for Chapter 7 bankruptcy. He then lodged an adversarial proceeding against the SSA in bankruptcy court. He alleged that the SSA collected $ 6,000 from him illegally and in violation of its own regulations. He demanded repayment in full. He also demanded the return of the $ 536 collected from him in May due to the collection's proximity to his bankruptcy filing.¹

The SSA moved to dismiss Benjamin's claims for lack of subject matter jurisdiction, claiming Benjamin had alleged only regulatory violations, which must first be exhausted through the administrative-appeal process. Even if the court had jurisdiction, the SSA contended that the claims should be dismissed under Rule 12(b)(6). The bankruptcy court granted the SSA's motion to dismiss for "the reasons stated in the [m]otion." Benjamin appealed to the district court, which affirmed on jurisdictional grounds. This appeal followed. The sole issue is whether the bankruptcy court had jurisdiction to hear Benjamin's claims.

II.

Whether subject matter jurisdiction exists over a given claim is a question we review de novo. Family Rehab., Inc. v. Azar, 886 F.3d 496, 500 (5th Cir. 2018). Benjamin has the burden of establishing jurisdiction. Id. As this case is at the Rule 12(b)(1) stage, he need only "allege a plausible set of facts establishing jurisdiction." Id. (quotation omitted).

III.

Under 42 U.S.C. § 405(h), federal courts' ability to hear claims arising under the Social Security Act is largely curtailed:

[1] The findings and decision of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. [2] No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, or governmental agency except as [provided in § 405(g)]. [3] No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under [Title II of the Social Security Act].²

The Supreme Court has held that § 405(h) "purports to make exclusive the judicial review method set forth in § 405(g)" for claims falling within its scope. Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 10, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000). It does so by two means (though the means are listed in inverse order). The third sentence strips district courts of the most obvious sources of federal jurisdiction for any claims arising under Title II of the Social Security Act. The second sentence then channels a certain class of those claims into § 405(g), which, in turn, grants jurisdiction to district courts to review final agency decisions made after a hearing.³ 42 U.S.C. § 405(g).

The question before us is whether § 405(h)'s third sentence bars bankruptcy courts from relying on their general bankruptcy jurisdictional grant found at 28 U.S.C. § 1334(b) to hear Benjamin's claims. The district court answered yes to this question. We disagree.

A.

The third sentence of § 405(h) states that "[n]o action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under [Title II of the Social Security Act]." Benjamin would have us read that sentence for what it says: as a bar on jurisdiction under §§ 1331 and 1346⁴—but not under § 1334. The SSA, in contrast, asks us to interpret the sentence as barring § 1334 jurisdiction as well. This is the position the district court adopted, and it is a position that has garnered the support of the Third, Seventh, Eighth, and Eleventh Circuits. Only the Ninth Circuit has adopted Benjamin's reading.

The Seventh Circuit was the first court to read § 405(h)'s third sentence as including a hidden jurisdictional bar. In Bodimetric Health Services Inc. v. Aetna Life & Casualty, the court considered whether the third sentence stripped courts of their § 1332 diversity jurisdiction to hear claims arising under the Medicare Act.⁵ 903 F.2d 480, 488-90 (7th Cir. 1990). The court began by reviewing the history of § 405(h). Id. at 488. As originally enacted in 1939, it barred all actions brought under 28 U.S.C. § 41, which at the time contained virtually all the jurisdictional grants to the federal courts—including the diversity grant—now scattered throughout Title 28. Id. (citing Social Security Act Amendments of 1939, Pub. L. No. 76-379, § 205(h), 53 Stat. 1360, 1371 (1939)).⁶ In 1976, the Office of Law Revision Counsel revised § 405(h) to its current form, and in 1984, Congress adopted the revised language by passing the Deficit Reduction Act ("DRA"). Id. at 488-89 (citing Pub. L. No. 98-369, § 2663(a)(4)(D), 98 Stat. 494, 1162 (1984)). The revision was in a section entitled "Technical Corrections." Id. at 489 (quoting 98 Stat. at 1156). In a neighboring section, Congress instructed that none of the technical changes "shall be construed as changing or affecting any right, liability, status, or interpretation which existed (under the provisions of law involved) before [their effective] date." Id. (quoting 98 Stat. at 1171-72).

This language, the Seventh Circuit said, clearly expressed Congress's "intent not to alter the substantive scope of section 405(h). Because the previous version of section 405(h) precluded judicial review of diversity actions, so too must newly revised section 405(h) bar these actions." Id. The Third and Eighth Circuits adopted the Seventh Circuit's reasoning to reach the same conclusion. See Nichole Med. Equip. & Supply, Inc. v. TriCenturion, Inc., 694 F.3d 340, 346-47 (3d Cir. 2012); Midland Psychiatric Assocs., Inc. v. United States, 145 F.3d 1000, 1004 (8th Cir. 1998).

In In re Bayou Shores SNF, LLC, the Eleventh Circuit built on this body of caselaw by deciding that § 405(h)'s third sentence barred bankruptcy jurisdiction under § 1334, 828 F.3d 1297, 1314 (11th Cir. 2016). It too relied on Bodimetric to hold that "the 1984 amendments to § 405(h) were a codification and not a substantive change." Id. at 1314. The court argued that its conclusion was supported by the recodification canon, which states that "when legislatures codify the law, courts should presume that no substantive change was intended absent a clear indication otherwise." Id. In applying this canon to § 405(h), it reasoned that the Office of Law Revision Counsel must have made an error by not including the full range of jurisdictional grants listed under the prior version. Id. at 1319. It was not concerned that "Congress enacted the error into positive law." Id. There was no evidence, the court said, that Congress had clearly expressed an intention to change decades of social-security policy and bankruptcy law by enacting the DRA: "[I]f Congress intended such an important expansion of bankruptcy court jurisdiction to be enacted in a recodification, one would expect to find some indication in the statute or legislative history stating as much." Id.

The only circuit to read § 405(h)'s third sentence according to its plain text is the Ninth Circuit. It has held that § 405(h) "only bars actions under 28 U.S.C. §§ 1331 and 1346; it in no way prohibits an assertion of jurisdiction under section 1334." In re Town & Country Home Nursing Servs., Inc., 963 F.2d 1146, 1155 (9th Cir. 1991).⁷

We must now take sides in this circuit split. With respect to the majority of our sister circuits, we reject the non-textual approach exemplified by the...