Goan v. Comm'r Of Soc. Sec.
| Decision Date | 19 April 2011 |
| Docket Number | Case No. 09-13494 |
| Parties | RICHARD E. GOAN, by Mildred Goan, as representative and surviving spouse of Richard Goan, deceased, and MILDRED GOAN, individually, Plaintiffs, v. COMMISSIONER OF SOCIAL SECURITY, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
United States District Judge
Mark A. Randon
This matter is before the Court on Plaintiffs' Objections to the Magistrate Judge's Report and Recommendation of Plaintiffs Motion for Summary Judgment and Defendant's Motion for Remand. (Dkt. No. 32.) Defendant has filed a response to Plaintiffs' objections. (Dkt. No. 33.) For the reasons that follow, the Court ADOPTS the Magistrate Judge's Report and Recommendation, DENIES Plaintiffs' Motion for Summary Judgment, GRANTS Defendant's Motion for Remand and REMANDS this matter to the Commissioner for further proceedings consistent with this Opinion and Order.
The history of this case is unfortunately lengthy and it is with regret but not hesitation thatthis Court concludes that the matter cannot end here. The main issue in the case remains whether Richard Goan, who is now deceased, was overpaid Social Security Retirement Benefits for the period 1994-1998 due to the fact that he was still providing "substantial services" to a family-owned business at the same time he was receiving his retirement benefits. A corollary issue is whether Mr. Goan's widow, Mildred Goan, who now receives widow's benefits on Mr. Goan's social security account, should be held contingently liable for any part of the amounts allegedly overpaid. Implicit in the resolution of the second issue are determinations of whether Mr. or Mrs. Goan was at fault in incurring the alleged overpayment and whether requiring recovery of the overpayment would defeat the purposes of the Social Security Act or would work an unconscionable hardship on Mrs. Goan. The parties agree that Administrative Law Judge ("ALJ") Robert Milton Erickson,
the third ALJ in an eleven year saga to have addressed Plaintiffs' claims, applied the wrong legal standard in evaluating Plaintiffs' claim for benefits. ALJ Erickson applied the "substantial gainful activity" test applicable to claims for disability benefits rather than the "substantial services" test applicable to claims for retirement benefits. The parties do not dispute the fact that the two tests are not at all similar and that they require consideration of completely different factors. In fact Plaintiffs concede that application of the disability standard constitutes reversible error which could require a remand but they urge the Court to conclude that a remand is not necessary here because, they argue, there is sufficient evidence in the record for this Court to reverse the decision of the ALJ and immediately award benefits.
Defendant responds that ALJ Erickson applied the wrong legal standard, that this resulted in reversible error and that questions of fact remain to be decided under the appropriate legal standard which preclude a final determination and award of benefits by this Court. The Court agreesthat application of the wrong legal standard constitutes reversible error and requires a remand in this case for further proceedings, because the ALJ's decision left unresolved multiple issues of fact that this Court is neither qualified nor authorized to resolve in the first instance. The Court agrees with the Magistrate Judge's conclusion that this matter must be remanded to the Commissioner for further proceedings and evaluation of the evidence under the appropriate legal standard.1
On or about August 26, 1993, at the age of 65, Richard Goan, now deceased, filed an application with the Social Security Administration ("SSA") to receive retirement benefits. (Dkt. No. 8, Transcript of Administrate Proceedings, Testimony of Richard Goan at a July 17, 2000 Hearing on Application for Benefits, 20, 72-75.) At the time, the SSA applied an earnings test to all persons under the age of 70 who continued to work while receiving retirement benefits, denying such persons full benefits if they continued to provide "substantial services" to a company while allegedly retired. 20 C.F.R. § 404.434(c). In the case of a closely held family-owned business, the SSA will reapportion salaries paid to family members and employees to reflect the true nature of the services rendered by a "retired" individual under the age of 70. Berger v. Sec'y of Health and Human Servs., 835 F.2d 635, 639 (6th Cir. 1987) ()
On May 27, 1999, the SSA notified Mr. Goan that he had been overpaid retirement benefits for the years 1994-1998 because he had provided "substantial services" to his family-owned business which resulted in an earned income in excess of the wages paid to him by the company. (Tr. 105-109.) In reaching its conclusion, the SSA noted that Mrs. Goan, whose services for the company did not change during this time from prior years, began receiving a salary in 1994 far in excess of what she had received in prior years and in an amount roughly equivalent to the decreased wages paid to Mr. Goan. The SSA concluded that Mrs. Goan's salary for the years 1994-1998 should be attributable to Mr. Goan which rendered Mr. Goan ineligible for the great portion of the benefits he had received in those years, resulting in an overpayment of benefits to Mr. Goan of $49,823.00. (Tr. 108.) The Goan's challenged the calculation of overpayment and, on review of its prior determination, the SSA concluded that the amount of benefits overpaid was even higher than previously calculated, and advised Mr. Goan on February 12, 2000 that in fact Mr. Goan had been overpaid $60,711.50. (Tr. 136-139.)
In March, 2000, Mr. Goan requested an administrative hearing, contesting the determination of the SSA that he had been overpaid retirement benefits, insisting that his income never exceeded the eligibility amount in any of the years 1994-1998. (Tr. 140-141.) On July 17, 2000, a hearing was held before ALJ Anthony J. Roshak. (Tr. 9-15.) ALJ Roshak received evidence and testimony from Mr. Goan, Mrs. Goan, their son Jeffrey Goan, who had returned to Michigan from California to work in the family business, and also heard testimony from the company accountant, Mr. Kenneth Olen. In a February 13, 2001 decision, ALJ Roshak, following the mandate of Berger and examining the substance of the family business, concluded that Mr. Goan "had never retired fromthe family business, and should have been in questionable retirement status until the attainment of age 70." (Tr. 15.) ALJ Roshak examined all of the relevant factors under the "substantial services" test and concluded that the company's realignment of wages among the family members beginning in the year that Mr. Goan first applied for retirement benefits, among other factors, made it "crystal clear that this was a scheme for [Mr. Goan] to indicate that he had retired and thus be entitled to Social Security Retirement Insurance Benefits [n]twithstanding that he remained very involved with the corporate business as an officer, director and stockholder." (Tr. 14.) ALJ Roshak ruled that Mr. Goan was overpaid $60,711.50 for the period 1994-1998. (Tr. 15.)
The Goans appealed this decision to the SSA Appeals Council. On June 25, 2001, while this appeal was pending, Richard Goan passed away and Mrs. Goan became a substitute party in the proceeding and received notice from the SSA that she was entitled to receive widow's benefits based on the earnings records of her deceased husband but that she may be contingently liable for the overpayment made to her deceased husband. (Tr. 644-647, 653, 679, 661.) On October 18, 2002 the Appeals Council denied the appeal and upheld ALJ Roshak's finding that Mr. Goan's salary for the years in which he received SSA retirement benefits was not commensurate with his services. (Tr. 661-662.) The Appeals Council concluded that accordingly the wages reported by Mr. and Mrs. Goan would be reallocated. In its decision, the Appeals Council noted that the amount for which Mrs. Goan remained contingently liable was $38,658.60, not the $60,711.50 that was referred to by ALJ Roshak, based on recalculation in connection with the increase in her widow's benefits resulting from the reapportionment and increase of her husband's income in the years 1994-1998. (Tr. 661-662.) The Appeals Council noted that the amount may be subject to further revision and that the claim file was being sent to the Great Lakes Program Service Center for recalculation. (Tr.662.)
On December 18, 2002, Mrs. Goan filed a timely appeal in Federal District Court which was assigned to the Honorable Robert Cleland. (Tr. 652, 672.) On September 10, 2003, on stipulation of the parties, the case before Judge Cleland was remanded to the ALJ for further proceedings. Plaintiffs had alleged in the district court that the Appeals Council failed to consider new and material evidence in reviewing the ALJ's decision, in particular the testimony of Mrs. Goan, Jeffrey Goan and the company accountant. (Tr. 655, 671-673, 722-35.) In response to the District Court remand, the Appeals Council, in a notice dated April 27, 2004, directed that the case be remanded to the ALJ, in light of any new evidence or argument, to decide the issue of the amount of Mr. Goan's earnings for the years 1994-1998, including consideration of whether any of the earnings...
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