Gainville v. Richardson

• Decision Date: 29 October 1970
• Docket Number: Civ. A. No. 70-204.
• Citation: 319 F. Supp. 16
• Parties: Walter GAINVILLE, Hyman Kramer, Arthur Camer, Philip Saponaro, Ralph Alms, Frank McGillvray, William Manzel, v. Elliot RICHARDSON, Secretary of Health, Education, and Welfare, and Robert M. Ball, Commissioner of the Social Security Administration.
• Court: U.S. District Court — District of Massachusetts

319 F. Supp. 16

Walter GAINVILLE, Hyman Kramer, Arthur Camer, Philip Saponaro, Ralph Alms, Frank McGillvray, William Manzel, v. Elliot RICHARDSON, Secretary of Health, Education, and Welfare, and Robert M. Ball, Commissioner of the Social Security Administration.

Civ. A. No. 70-204.

United States District Court, D. Massachusetts.

October 29, 1970.

Morris M. Goldings, Joel Z. Eigerman, Mahoney, McGrath, Atwood, Piper & Goldings, Gertrude Weiner, Boston Legal Assistance Project, Boston, Mass., for plaintiffs.

James Barnes, Atty., Civil Division, Dept. of Justice, Herbert F. Travers, Jr., U. S. Atty., James N. Gabriel, Asst. U. S. Atty., for defendant.

Before McENTEE, Circuit Judge, WYZANSKI, Chief District Judge, and GIGNOUX, District Judge.

OPINION

WYZANSKI, Chief District Judge.

This case is before the court on defendant's motion to dismiss the complaint on grounds of lack of jurisdiction and failure to state a cause of action.

This is a class action brought by seven plaintiffs claiming that, as applied to them and others in their class, § 203(f) (3) of the Social Security Act, 42 U.S.C. § 403(f) (3)—a provision for deducting earned income from old age benefits otherwise payable—denies each plaintiff the due process of law guaranteed by the Fifth Amendment.

The Social Security Act, so far as here material, provides for payments of federal old-age benefits based upon a person's record of earnings in employment covered by the Act. Eligibility depends on satisfying statutory conditions as to (1) employment in covered employment see § 210(a), 42 U.S.C. § 410 (a); (2) the requisite number of "quarters of coverage" see §§ 213-215, 42 U.S.C. §§ 413-415; and (3) attainment of the retirement age of 65 in the case of men and 62 in the case of women. See Pub.L. 87-64, Title 1 § 102(c), Act of June 30, 1961, 75 Stat. 131, 134.

Entitlement to benefits once gained is partially or totally lost if the beneficiary has earnings in excess of $1200 annually from employment. In essence, the Social Security Act provides for monthly benefits see §§ 202 and 203, 42 U.S.C. §§ 402, 403 from which there are to be deducted so-called excess earnings, that is wages and self-employment income above a certain amount. See §§ 203(b) and (f) (1), 42 U.S.C. §§ 403(b) and (f) (1). For purposes of the aforesaid provisions it is further provided in § 203 (f) (3) of the Act, 42 U.S.C. § 403(f) (3),—that is, in the section now challenged —as follows:

"* * * an individual's excess earnings for a taxable year shall be his earnings for such year in excess of the product of $140 multiplied by the number of months in such year, except that of the first $1,200 of such excess (or all of such excess if it is less than $1,200), an amount equal to one-half thereof shall not be included. The excess earnings as derived under the preceding sentence, if not a multiple of $1, shall be reduced to the next lower multiple of $1."

These are the practical effects of the quoted formula. For each month that an old age beneficiary under the age of 72 earns in excess of $140, his benefits are reduced by one dollar for every two earned up to an additional $100 in any month, and by one dollar for every one dollar earned thereafter. Thus any old age beneficiary under the age of 72 who works at a steady pace throughout the year is effectively limited to earning $1,680 in any year or else he faces the loss of some social security benefits. For every two dollars earned between $1,680 and $2,880 per year, the beneficiary forfeits one dollar of benefits. For every dollar over $2,880 earned per year, the beneficiary forfeits one dollar of benefits.

Three of the seven plaintiffs make parallel allegations. Plaintiffs Ralph Aims, Frank McGillvray and William Manzel, each allege that (1) he has made involuntary contributions to the Social Security Trust Fund, through the payment of Social Security taxes; (2) he is a fully insured individual within the meaning of 42 U.S.C. § 414(a); (3) he has been deprived and will be deprived hereafter of old age benefits to which he would otherwise be entitled in a sum in excess of $10,000 and has been deterred and will be deterred hereafter from earning income in excess of $10,000 by the application or threatened application of 42 U.S.C. § 403(f) (3). The other four plaintiffs' allegations add nothing, and in each instance fall somewhat short of the allegations of Aims, McGillvray and Manzel.¹ Hence plaintiffs will be at no disadvantage if in considering the present motion we concentrate on Aims' case as being the strongest.

Aims' claim that the threatened application to him of § 403(f) (3) has deprived and will deprive him of $10,000 in benefits to which he would otherwise be entitled, and has deterred him and will deter him from earning $10,000 arises under the Constitution and laws of the United States and involves the requisite jurisdictional amount. 28 U.S.C. § 1331.

Plaintiff Aims is not debarred from seeking judicial relief by the general doctrine that he must first exhaust his administrative remedies, nor by the more specific provisions of § 205(h) of the Social Security Act, 42 U.S.C. § 405 (h). The general doctrine is inapplicable because here plaintiff claims that the statutory provision permitting deduction is unconstitutional. Where a plaintiff attacks the constitutionality of the statute under which an administrative agency acts, and the attack does not turn upon a factual determination requiring administrative expertise, the doctrine of exhaustion of administrative remedies does not apply. Public Utilities Commission of Cal. v. United States, 355 U.S. 534, 539, 78 S.Ct. 446, 2 L.Ed.2d 470; Oestereich v. Selective Service Board, 393 U.S. 233, 242, 89 S.Ct. 414, 21 L.Ed.2d 402.

Nor are the specific provisions of § 205(h) of the Social Security Act, 42 U.S.C. § 405(h) a bar. That section merely provides that:

"No action against the United States, the Secretary of HEW, or any officer or employee thereof shall be brought under section 41 now 28 U. S.C. § 1331 to recover on any claim arising under this subchapter." emphasis added.

In the present action, while plaintiff does, perhaps improperly, seek damages, his complaint also has prayers for a declaratory judgment that § 203(f) (3) of the Social Security Act, 42 U.S.C. § 403 (f) (3) is unconstitutional, and for an injunction restraining defendant from applying that section. If he were to be successful with respect to those prayers, plaintiff would not, in the language of the statute, "recover on any claim" for benefits. For recovery of benefits he would still need to resort to the administrative process. The only effect of a declaratory judgment or injunction by this court would be to preclude the Secretary from making the challenged deduction.

There is another reason why the general doctrine of exhaustion of administrative remedies and the specific provisions of 42 U.S.C. § 405(h) do not apply. Plaintiff Aims seeks a declaratory judgment with respect to the application of 42 U.S.C. § 403(f) (3) to amounts he may earn hereafter. There is no way that that issue may be submitted for administrative determination. The only remedy is by an action for a declaratory judgment or an injunction.

We now turn to the substantive issues raised by the complaint. Plaintiffs' principal contention is that they are denied the equal protection of the laws because from old age benefits otherwise payable earned income is deductible, although unearned income is not deductible.

Plaintiffs' cardinal error is in disregarding the nature of the social insurance provided by the old age benefit system established by the Social Security Act. That system is for retirement benefits to replace lost earnings. As Secretary of H. E. W., Wilbur J. Cohen, in his letter of January 7, 1969, to Speaker John W. McCormack stated, "what people have been paying for is a retirement benefit * * * the whole purpose of a retirement system * * * is to pay benefits to partially replace lost earnings". See The Retirement Test Under Social Security, Letter from The Secretary of Health, Education, and Welfare, transmitting a report resulting from a study of the retirement test pursuant to Public Law 90-248, The Social Security Amendments of 1967. H.Doc.No. 91-40, 91st Cong., 1st Session, p. III.

From its inception in 1935 the Social Security old-age benefit system was designed to provide...