Cannon v. Apfel, Comm'r of SS.

• Decision Date: 24 May 2000
• Docket Number: No. 99-1578,99-1578
• Citation: 213 F.3d 970
• Parties: (7th Cir. 2000) GLORIA CANNON, Plaintiff-Appellant, v. KENNETH S. APFEL, Commissioner of Social Security, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 970

213 F.3d 970 (7th Cir. 2000)

GLORIA CANNON, Plaintiff-Appellant, v. KENNETH S. APFEL, Commissioner of Social Security, Defendant-Appellee.

No. 99-1578

In the United States Court of Appeals For the Seventh Circuit

Argued November 2, 1999

Decided May 24, 2000

Appeal from the United States District Court for the Central District of Illinois. No. 98 C 3117--Charles H. Evans, Magistrate Judge.

Before COFFEY, FLAUM and KANNE, Circuit Judges.

COFFEY, Circuit Judge.

In January 1993, the Social Security Administration ("SSA") certified Sampson Strong ("Strong") as a "representative payee" to receive Supplemental Security Income ("SSI") payments on behalf of his minor niece, Gloria Faye Cannon ("Gloria").¹ A few weeks later, in February 1993, the SSA sent Strong a lump-sum payment of $23,202.98 in past due SSI on Gloria's behalf. But Strong neglected to use this money for Gloria's use and benefit, and on January 22, 1994, the SSA determined that Strong had misused $22,767.68 of Gloria's SSI money by spending it on himself.

Gloria sought reimbursement of her SSI benefits from the SSA, but the Commissioner denied her claim. On February 16, 1999, the district court affirmed the Commissioner's decision, stating that "there is substantial evidence to support the ALJ's finding that Defendant exercised reasonable care and was not negligent in appointing Strong as Plaintiff's representative payee."

We affirm.

I. BACKGROUND

A. The SSA's Use of Representative Payments

The Social Security Act provides that since there are beneficiaries who are unable to direct the management of their own affairs, including their finances, the SSA may make payment of their benefits to a "representative payee." See 42 U.S.C. sec.sec. 405(j)(1)(A) & 1383(a)(2)(A)(ii)(I).

The SSA's operating procedures require that it exercise "extreme care" in selecting representative payees. See Social Security Program Operations Manual System ("POMS") sec. GN 00501.005(C). Furthermore, in order to protect the funds of the beneficiaries against misuse by their representative payees, the Social Security Act provides that if the SSA is negligent in its selection of a representative payee, and that negligence results in misuse of the beneficiary's benefits, then the SSA is obligated to reimburse the beneficiary for the misused funds.² On the other hand, if the SSA is not negligent in selecting a beneficiary's payee, but the payee, nevertheless, misuses the beneficiary's benefits, then the beneficiary must collect the misused payments from the representative payee directly. See 20 C.F.R. sec. 416.641.

B. The SSA's Certification of Strong as Gloria's Representative Payee

On December 5, 1990, shortly before her death, Gloria's terminally-ill mother, Georgia Mae Cannon, signed a social security consent form naming Strong as the representative payee for the Child's Insurance Benefits ("CIB") to which her three minor children, Gloria (15 years old), Barbara (15 years old), and Emanuel (5 years old) were entitled. Shortly thereafter, on December 13, 1990, the Illinois Circuit Court for Sangamon County appointed Strong to be the legal and custodial guardian of Gloria, Barbara, and Emanuel.

After the death of their mother, Georgia, on December 18, 1990, Gloria, her sister, and her brother began living with Strong in his Springfield, Illinois apartment. A few weeks later, in January 1991, the SSA appointed Strong as Gloria's representative payee for her CIB. From January 1991 through January 1993, Strong received $3670 in CIB funds on Gloria's behalf.

On December 23, 1992, the SSA awarded Gloria SSI benefits under 42 U.S.C. sec. 1381a (but did not yet turn over the funds). Shortly thereafter, Strong applied to the SSA to be appointed as the representative payee for Gloria's SSI benefits. On January 14, 1993, Strong submitted an Application Form SSA-11-BK (Request to be Selected as Payee) and a Form SSA-8000-BK (Application for Supplemental Security Income). On those forms that Strong filled out and submitted, he stated that he was Gloria's uncle, that she was a minor, and that she (and her brother and sister) lived with him in his apartment. Furthermore, Strong claimed (falsely) that he had never been convicted of a felony.

After Strong submitted his payee application, he was interviewed by an SSA representative, where, once again, he stated that he had never been convicted of a felony.³ Contrary to Strong's assertions, he had in fact been convicted of three felonies: He was convicted in Detroit, Michigan, in 1955 for overdrawing unemployment benefits; in California, in 1970 for stealing an automobile; and in California, in 1976 for receiving stolen property. Because of its lack of diligence in engaging in a thorough investigation of Strong, the SSA did not have the benefit of this information. So, based on the fact Gloria lived with Strong, and that Strong was her uncle and court-appointed legal guardian, and that Strong had previously served as her CIB payee (on the recommendation of her now deceased mother), on January 12, 1993, the SSA certified Strong as Gloria's SSI representative. On February 22, 1993, Strong received $23,202.98 on Gloria's behalf, and continued to receive Gloria's $300 monthly SSI checks until September 1993, at which time Gloria started receiving her SSI checks directly.⁴

C. Strong's Performance as Gloria's Representative Payee

On October 13, 1993, Gloria's sister, Barbara, submitted a signed statement to the SSA stating that Strong had misused approximately $23,000 of Gloria's SSI benefits. At about this time, Gloria, obviously upset that Strong had misused the funds, appointed Linda Rockey ("Rockey") as her representative, and Rockey submitted a signed statement which stated that Gloria never received the benefits that the SSA had paid to Strong.

In response to these allegations of misuse, the SSA, which had already stopped sending Gloria's SSI checks to Strong, asked Strong for an accounting. But Strong failed to respond and provide the requested accounting information, and on January 22, 1994, the SSA determined that Strong had misused $22,767.68 of Gloria's SSI benefits. See 20 C.F.R. sec. 416.635(a); POMS sec. GN 00604.001(B)(4).⁵

In a letter dated March 27, 1995, the SSA demanded restitution from Strong, informing him, "you will have to return the $22,767.68 of the Supplemental Security Income money we sent you as Gloria Cannon's payee. We have decided that you did not use this money for her as you agreed to do. For that reason you must pay us back."⁶

D. Gloria's Claim for Reimbursement of Her Misused SSI Funds

Although Gloria was able to recover some⁷ of the misused funds from Strong,⁸ she attempted to recover the remainder of the funds directly from the SSA. See POMS sec. GN 00604.035(C). As stated before, the SSA came to its own defense, determining that it had not been negligent in selecting Strong as Gloria's representative payee, and that decision was subsequently upheld both by the ALJ and by the Appeals Council.

Thereafter, Gloria sought review of the ALJ's decision in the United States District Court for the Central District of Illinois. Gloria alleged that the SSA violated 42 U.S.C. sec. 1383(a)(2)(E) by negligently selecting Strong as her representative payee. Both parties filed motions for summary judgment. The Magistrate Judge⁹ granted the Commissioner's motion for summary judgment and denied Gloria's motion for summary judgment, finding that "there is substantial evidence to support the ALJ's finding that Defendant exercised reasonable care and was not negligent in appointing Strong as Plaintiff's representative payee."

We affirm.

II. ISSUES

On appeal, Gloria argues: (1) that the ALJ's finding that the SSA was not negligent in selecting Strong as her representative payee is not supported by substantial evidence; (2) that the SSA's administrative review of her claim violated her right to constitutional due process; and (3) that the ALJ failed to develop a fair and complete record by refusing to allow Gloria's representative to testify.

III. ANALYSIS

A. The SSA's Selection of Strong as Representative Payee

1. Standard of Review

As we have long held, we will uphold the Commissioner of Social Security's decision, if the ALJ's findings of fact are supported by substantial evidence and no error of law was committed. See Nelson v. Apfel, 131 F.3d 1228, 1234 (7th Cir. 1997); see also 42 U.S.C. sec. 405(g) ("The findings of the Commissioner of Social Security as to any fact, if supported by substantial evidence, shall be conclusive."). To determine whether substantial evidence exists, the court reviews the record as a whole but is not allowed to substitute its judgment for the ALJ's "by reconsidering facts, reweighing evidence, resolving conflicts in evidence, or deciding questions of credibility." Williams v. Apfel, 179 F.3d 1066, 1071-72 (7th Cir. 1999) (internal quotations omitted); see also Estok v. Apfel, 152 F.3d 636, 638 (7th Cir. 1998). In agency cases, a mere scintilla of proof will not suffice to uphold the SSA's findings, but the standard of "substantial evidence requires no more than 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.'" Diaz v. Chater, 55 F.3d 300, 305 (7th Cir. 1995) (quoting Richardson v. Perales, 402 U.S. 389, 401 (1971)).

2. Deference to the SSA's Determination of an Adequate Investigation

Gloria contends that the SSA was negligent because it failed to ascertain whether Strong had a criminal arrest and conviction record as part of its investigation. In determining whether the SSA has an obligation to check the criminal background of candidate representative payees, we look first to the language of the Social Security Act. See United States v. Balint, 201 F.3d 928, 932-33 (7th Cir. 2000). The relevant statute requires that the SSA investigate representative payees in a manner calculated to produce "adequate...