Finnerty v. Cowen
| Decision Date | 16 December 1974 |
| Docket Number | No. 78,D,78 |
| Citation | 508 F.2d 979 |
| Parties | Kathleen M. FINNERTY, Individually and on behalf of all other persons similarly situated, Plaintiff-Appellant, v. James L. COWEN, Individually and as Chairman of the Railroad Retirement Board, and Caspar Weinberger, Individually and as Secretary of Health, Education, and Welfare, Defendants-Appellees. ocket 74-1668. |
| Court | U.S. Court of Appeals — Second Circuit |
Jonathan A. Weiss, New York City (Toby Golick, Legal Services for the Elderly Poor, Jamaica, N.Y., Ellen Zweibel and Rolf N. Olsen, Jr., Lwa Students, New York City, Michael Lynch, Albany, N.Y., on the brief), for plaintiff-appellant.
William J. Dreyer, Asst. U.S. Atty. (James M. Sullivan, Jr., U.S. Atty. for the Northern District of New York, on the brief), for defendants-appellees.
Before DANAHER, * FEINBERG and MULLIGAN, Circuit Judges.
Plaintiff Kathleen M. Finnerty, an elderly widow, receives benefits under both the Social Security and Railroad Retirement Acts. Both acts provide for a reduction of benefits when a recipient has certain types of income in excess of an amount fixed by Congress. After both the Social Security Administration and the Railroad Retirement Board reduced plaintiff's benefits for this reason, she brought suit in the United States District Court for the Northern District of New York, challenging the constitutionality of the reductions. 1 Chief Judge James T. Foley dismissed her complaint for failure to exhaust administrative remedies and for lack of subject matter jurisdiction. For reasons set forth below, we reverse and remand the proceeding to the district court.
In 1960, when she reached the age of 62, Mre. Finnerty was of found entitled to retirement insurance benefits of $42.40 a month under the Social Security Act. By 1970, this had been increased to $82.70 a month. In 1966, Mrs. Finnerty's husband, a retired New York Central employee, died, and she was awarded a widow's insurance annuity of $63.40 a month under the Railroad Retirement Act. That rate was increased at various times so that in 1970 Mrs. Finnerty was entitled to $75.35 a month and in 1972, $82.85 a month. Benefits under the two Acts are coordinated, according to appellant, so that each month appellant receives no more than her maximum entitlement had she been eligible under only one Act. 2
Not surprisingly, Mrs. Finnerty has found it necessary from time to time to supplement her income with part-time jobs. In 1970, she received from such work more than the $1,680 the Social Security Act then permitted a recipient to earn annually, while continuing to receive full benefits. Under provisions of that Act, 42 U.S.C. 403, 404, the Social Security Administration thereafter required appellant to repay one half of her 'excess earnings' for the month in which her earnings exceeded the permissible amount. 3 In June 1972, the Railroad Retirement Board, referring to information received from the Social Security Administration, also took action because of the excess earnings in 1970. By letter dated June 1, 1972, the Board notified Mrs. Finnerty that she had been overpaid for the year 1970 and that to recoup the excess her railroad annuity would be withheld, effective immediately, for two months. See 45 U.S.C. 228i(a). Appellant apparently admits that she received advice that she could appeal the overpayment determination. The June 1, 1972 letter did not, however, advise appellant that she might be eligible for waiver of recoupment under the statute and relevant Board regulations or that the regulations provided for other, less drastic methods of repayment. Mrs. Finnerty took no administrative appeal.
In December 1973, appellant commenced the action now before us against Caspar Weinberger, Secretary of Health, Education, and Welfare, and James L. Cowen, Chairman of the Railroad Retirement Board. Appellant alleged that the procedure under which the Board recouped the alleged overpayment denied her due process and violated the relevant statute and regulations 4 because she received no prior notice or opportunity for a hearing or advice as to the right to apply for waiver of recoupment or chance to do so. The other principal claim in the complaint was that the 'double deduction' from appellant's benefits was improper. Both the Railroad Retirement and Social Security Acts require that one half of excess employment earnings be remitted. The amount forfeited is identical under both programs; the Railroad Retirement Act in 45 U.S.C. 228e(i)(1)(ii) merely incorporates by reference a section of the Social Security Act, 42 U.S.C. 403(f). According to appellant, beneficiaries situated as she is thus lose all their excess employment earnings, although they receive no greater benefits than persons entitled to benefits under only one program. The latter forfeit only half those earnings. Appellant claimed that this unconstitutionally discriminates against persons eligible for benefits under both programs. 5
As already noted, chief Judge Foley dismissed the complaint on the grounds of failure to exhaust administrative remedies and lack of subject matter jurisdiction. This appeal followed.
Addressing ourselves first to the exhaustion requirement, there is no doubt that a recipient of benefits under the Railroad Retirement Act must ordinarily utilize administrative appeals before coming to federal court to contest the merits of an administrative determination. 6 Appellant argues, however, that this is not the usual case. Her principal attack is on the procedures used by the Railroad Retirement Board. Thus, appellant points out, she received no notice, hearing or advice as to waiver before suspension of benefits in June 1972. Nor did the Board inquire whether she then had sufficient funds to meet her current daily needs; whether she was waiting for her June check to pay rent and medical bills, or to purchase medicine and food; or whether it would be less of a hardship for her to repay any overpayments actually established gradually over the next few months. According to appellant, the administrative process within the Railroad Retirement Board could not resolve whether these administrative procedures violated the Constitution or the relevant statute and regulations. Similarly, the agency itself could not declare unconstitutional those portions of the Railroad Retirement and Social Security Acts that allegedly discriminate against persons in Mrs. Finnerty's class. Thus, appellant argues, she was not required to pursue any administrative remedies.
We believe that appellant is correct. Federal agencies like the Board 'have neither the power nor the competence to pass on the constitutionality of administrative or legislative action,' Murray v. Vaughn,300 F.Supp. 688, 695 (D.R.I.1969), citing Oestereich v. Selective Service Bd., 393 U.S. 233, 242, 89 S.Ct. 414, 393 U.S. 233 (1968) (Harlan, J., concurring), since the agency is not called upon to determine facts or to apply its expertise. 7 Indeed, appellees seem to concede this general proposition but argue that the doctrine of exhaustion should apply here because there were 'at least two unresolved issues of fact and law central to the appellant's complaint.' 8 The first is that 'due to appellant's own failure to file a statement of earnings,' the Board was never given a chance to consider that recoupment only for the overpayment in March 1970 was appropriate. 9 The other is that there might have been a substantial issue of statutory construction, on which agency expertise would be useful, involving plaintiff's claim that the interrelationship of the Social Security and Railroad Retirement Acts unconstitutionally deprived her of benefits. 10 Neither argument justifies dismissal of plaintiff's complaint to allow exhaustion. Even if the first contention is true, there was still some recoupment, which plaintiff says was effected by illegal procedures. The second argument deals only with plaintiff's claim of a worsened position because she was obtaining benefits under both statutes. More importantly, appellees do not indicate on what issues agency expertise would be valuable in evaluating this claim.
Appellees also rely principally on two recent decisions, involving constitutional challenges to sections of the Social Security Act, which required exhaustion of administrative remedies: Bartley v. Finch, 311 F.Supp. 876 (E.D.Ky.1970), aff'd as to judgment of constitutionality, 404 U.S. 980, 92 S.Ct. 442, 30 l.Ed.2d 364 (1971); and Shisslak v. Richardson, 1A CCH Unemployment Ins.Rep. P16,238 (D.Ariz.1971). In Bartley, however, there was no discussion of the futility of exhaustion on constitutional claims. As to Shisslak, in view of the later reversal of that decision, 462 F.2d 1370 (9th Cir. 1972), we doubt that it now clearly supports the proposition for which it is cited. In any event, we agree with other recent opinions dispensing with the exhaustion requirement in situations where the very administrative procedure under attack is the one which the agency says must be exhausted. See McKart v. United States, supra; Martinez v. Richardson, 472 F.2d 1121, 1125 (10th Cir. 1973); Marsh v. County School Bd., 305 F.2d 94 (4th Cir. 1962); Francois v. Bushell, 325 F.Supp. 531, 533 (N.D.Cal.1971). Accordingly, we hold that it was error to dismiss the complaint in this case on the ground that plaintiff failed to exhaust her administrative remedy.
Turning next to the question of jurisdiction, the district judge considered and rejected plaintiff's allegation that 'six separate statutes' provided a proper jurisdictional basis. 11 More sensibly, in this court appellant presses only three-- 28 U.S.C. 1337 (commerce clause), 28 U.S.C. 1361 (mandamus), and 28 U.S.C. 1331 (federal question). Since we agree that the first provides the necessary jurisdiction, there is no need to consider the others, although we note that 28 U.S.C....
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