Grice v. Colvin, Case No.: GJH-14-1082

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
PartiesMARY L. GRICE, et al. Plaintiff, v. CAROLYN W. COLVIN, (Acting Commissioner of the Social Security Administration) Defendant.
Docket NumberCase No.: GJH-14-1082
Decision Date31 March 2015

MARY L. GRICE, et al. Plaintiff,
CAROLYN W. COLVIN, (Acting Commissioner
of the Social Security Administration) Defendant.

Case No.: GJH-14-1082


March 31, 2015


Plaintiffs bring this case against Carolyn W. Colvin, the acting Commissioner of the Social Security Administration (the "SSA"). Plaintiffs present several allegations of constitutional and statutory violations stemming from the SSA's taking of a portion of Plaintiffs' tax refunds to satisfy overpayments the SSA determined it had made to Plaintiffs in excess often years ago. This Memorandum Opinion and accompanying Order address Defendant's Motion to Dismiss. ECF No. 25. A hearing was held on March 6, 2015. For the reasons stated below. Defendant's Motion to Dismiss is GRANTED, in part, and DENIED, in part. Plaintiff Theodore Verbich's claims are dismissed for failure to exhaust administrative remedies. Claims brought by Plaintiffs Mary Grice, John Jones, and Denise Hart shall proceed with limited exceptions.1

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A. Statutory Authority

The Debt Collection Improvement Act of 1996, Pub. L, No. 104-134, § 31001(b), 110 Stat. 1321, requires federal agencies to submit delinquent debts to the U.S. Department of the Treasury (the "Treasury") for tax offsets. See 31 U.S.C. § 3720A. There is no federal law imposing a statute of limitations for the collection of these debts through tax offsets. However, before 2009, the Treasury had implemented a regulation-imposed limitation often years. See 31 C.F.R. § 285.2(d)(1)(ii)(2009) (explaining that a debt must be "referred for offset within ten years after the agency's right of action accrues"). Consistent with the Treasury's regulation, the SSA also promulgated a regulation that it would "refer an overpayment to the Department of the Treasury for offset against tax refunds no later than 10 years after [the SSA's] right to collect the overpayment first accrued." 20 C.F.R. § 404.520(b)(2011). An overpayment occurs when the SSA pays more than the correct amount to a social security beneficiary. See 42 U.S.C. § 404(a)(1).

In 2009, the Treasury revised its regulation to eliminate the ten-year limitation for collecting debts through tax offsets. Now, "[c]reditor agencies may submit debts . . . for collection by tax refund offset irrespective of the amount of time the debt had been outstanding." 31 C.F.R. § 285.2(d)(6)(i). The Treasury also specifically notes that the regulation is retroactive: ". . . all nontax debt, including debts that were delinquent for ten years or longer prior to December 28, 2009 may be collected by tax refund offset." Id. The SSA amended its regulations in October 2011 to conform to the Treasury's regulations. See ECF No. 25-1 at 21 (citing 76 Fed. Reg. 65107-01, 65107 (Oct. 20, 2011)). Since that amendment, the SSA ". . . will refer

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overpayments to the Department of the Treasury for offset against Federal tax refunds regardless of the length of time the debts have been outstanding." 20 C.F.R. § 404.520(b).

The SSA's authority to collect overpayment debts is found in 42 U.S.C. § 404(a)(1). which authorizes the SSA to recover overpayments made to an individual under the old-age. survivors, or disability insurance programs. The statute permits the SSA to recoup the overpayment by. among other means, reduction in tax refunds. See 42 U.S.C. § 404(a)(1)(A). The SSA's ability to recoup overpayments is limited by 42 U.S.C. § 404(b). which provides that ". . . there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience." The SSA's regulations require that, once the SSA determines that an overpayment was made, the SSA must send written notice to the allegedly overpaid individual. See 20 C.F.R. § 404.502a. The notification must include:

(a) The overpayment amount and how and when it occurred;
(b) A request for full, immediate refund, unless the overpayment can be withheld from the next month's benefit:
. . .
(e) An explanation of the right to request waiver of adjustment or recovery and the automatic scheduling of a file review and pre-recoupment hearing (commonly referred to as a personal conference) if a request for waiver cannot be approved after initial paper review:
(f) An explanation of the right to request reconsideration of the fact and/or amount of the overpayment determination:
(g) Instructions about the availability of forms for requesting reconsideration and waiver:
(h) An explanation that if the individual does not request waiver or reconsideration within 30 days of the date of the overpayment notice, adjustment or recovery of the overpayment will begin;
(i) A statement that an SSA office will help the individual complete and submit forms for appeal or waiver requests; and
(j) A statement that the individual receiving the notice should notify SSA promptly if reconsideration, waiver, a lesser rate of withholding, repayment by installments or cross-program adjustment is wanted.

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After receiving notice of the initial determination, the allegedly overpaid individual has the right to request reconsideration of the overpayment decision. See 20 C.F.R. § 404.907. A reconsideration request must be made within sixty days of the initial determination of overpayment, but the time may be extended for good cause if. for instance, the individual never received notice of the initial overpayment decision. See 20 C.F.R. § 404.909 & 20 C.F..R. § 404.911. If the allegedly overpaid individual requests reconsideration, the SSA is to review the case and issue written notice of its decision. See 20 C.F.R. § 404.913 & 20 C.F.R. § 404.922. If the individual does not agree with the reconsideration decision, he or she can request a hearing before an administrative law judge. See 20 C.F.R. § 404.921. After the hearing, the administrative law judge will issue a decision on the issue, which can be appealed to the SSA's Appeals Council. See 20 C.F.R. § 404.955. The Appeals Council can decide to review the case or deny the request for review. See id. Once the Appeals Council has denied the request for review or reviewed the case and issued a decision, the allegedly overpaid individual can file an action in a federal district court within sixty days of the decision. See 20 C.F.R. § 404.981.

Instead of or in addition to reconsideration, an allegedly overpaid individual can ask the SSA to waive the overpayment. An individual's overpayment can be waived if the individual shows that he or she is without fault in causing the overpayment and that "adjustment or recovery would either defeat the puipose of title II of the Act or be against equity and good conscience." See 20 C.F.R. § 404.506(c). If waiver of the overpayment is requested, the SSA must decide if a waiver may be approved. See id. If waiver cannot be approved simply on review of the information and documentation provided to the SSA. the individual is then notified that a tile review and a personal conference will take place. See id. During the personal conference, the

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individual and their representative can review the "'claims file and applicable law and regulations with the decisionmaker . . ." See 20 C.F.R. § 404.506(d). After the personal conference, the SSA is to issue a written decision that specifies the "findings of fact and conclusions in support of the decision to approve or deny waiver" and advises the individual of the right to appeal the decision. See 20 C.F.R. § 404.506(g). If the individual does not appear for the conference, the SSA will make a decision on the waiver request based on the written evidence. See 20 C.F.R. § 404.506(h). If the waiver request is denied without a conference, the individual can request reconsideration of the decision. See id. Both the denial of the waiver request after a personal conference and the decision on reconsideration can be appealed to an administrative law judge. See 20 C.F.R. § 404.930(a). After that, the appeals process is the same process (administrative law judge. Appeals Council, federal court) described above.

In addition to providing initial notice of overpayment, the SSA has issued regulations that it must follow before requesting that the Treasury offset a taxpayer's income tax refunds to satisfy an outstanding overpayment due to the SSA. See 20 C.F.R. § 404.520. The SSA first sends the individual written notice that they have an outstanding overpayment due to the SSA and that the overpayment will be collected through a tax offset unless, within sixty days of the notice, the allegedly overpaid person: (1) repays the overpayment; (2) provides evidence that the overpayment is not past due or legally enforceable; or (3) asks for waiver of the overpayment. See 20 C.F.R. § 404.521. If the individual asserts that the overpayment is not past due or not legally enforceable, the individual is entitled to inspect or copy the SSA records related to the overpayment by notifying the SSA of that intention. See 20 C.F.R. § 404.524(a). The SSA will then schedule a date for inspection or mail copies of the records to the overpaid individual. See 20 C.F.R. § 404.524(b). After review of the records and any additional evidence, the SSA will

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make a decision on whether the overpayment is past due and legally enforceable. See 20 C.F.R. § 404.522(c). The decision will include written findings and supporting rationale for the findings. See 20 C.F.R. § 404.523(a). Also, unlike a decision on waiver or reconsideration, this decision is the SSA's final decision on overpayment. Specifically, the regulation states that ''[i]ssuance of these findings concerning whether the overpayment or part of the overpayment is past due and legally enforceable is the final Agency action with respect to past-due status and enforceability of the...

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