Koolstra v. Sullivan, Civ. A. No. 89-K-480.

• Decision Date: 27 August 1990
• Docket Number: Civ. A. No. 89-K-480.
• Citation: 744 F. Supp. 243
• Parties: Theodore KOOLSTRA, Plaintiff, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant.
• Court: U.S. District Court — District of Colorado

744 F. Supp. 243

Theodore KOOLSTRA, Plaintiff, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant.

Civ. A. No. 89-K-480.

United States District Court, D. Colorado.

August 27, 1990.

Jacquelyn J. Higinbotham, Colorado Rural Legal Services, Inc., Greeley, Colo., for plaintiff.

Stephen D. Taylor, Asst. U.S. Atty., Michael J. Nortan, U.S. Atty., Denver, Colo., for defendant.

MEMORANDUM OPINION AND ORDER

KANE, Senior District Judge.

This case concerns the Secretary's authority to reopen a determination for good cause under the Social Security regulations. Theodore Koolstra commenced this action challenging the Secretary's decision to reopen a determination by the administrative law judge (ALJ) in his Social Security case. The Secretary moved to dismiss the complaint, arguing there was no subject matter jurisdiction because Koolstra had not obtained a final judgment. On August 23, 1989, I denied the motion to dismiss, ruling that there was jurisdiction under the mandamus statute, 28 U.S.C. § 1361. The parties have submitted a stipulation of facts and agree that this matter should be determined on cross-motions for summary judgment. I now grant summary judgment in favor of Koolstra.

I. Facts.

The stipulated facts reveal that Koolstra first applied for Supplemental Security Income (SSI) benefits on September 17, 1984. His claim was denied administratively. Koolstra then challenged the denial of benefits in federal district court. On January 15, 1987, the court reversed the Secretary's determination that Koolstra was not disabled by polycystic kidney disease and remanded the case to the Secretary for a determination of benefits. On remand, the Secretary found initially that Koolstra's income exceeded the eligibility limits for SSI benefits because he received in-kind support from family members. Koolstra requested further review before an ALJ. The ALJ concluded that under Social Security regulations and a recent court decision, Hickman v. Bowen, 803 F.2d 1377 (5th Cir.1986), in-kind assistance from family members could be considered a loan and therefore excluded from income under the regulations. The ALJ's decision was entered on July 26, 1988.

On October 18, 1988, the Regional Commissioner sent a letter to the Office of Appeals Operations recommending that the Appeals Council reopen the case because the regulations required that in-kind support be considered income. The letter further advised that reopening, rather than review, was necessary "because the 60-day own motion review period has elapsed due to our request for an opinion from the Office of Chief Counsel (CC), Region VIII." Stipulation of Facts, Exhibit B at 1. On February 6, 1989, the Appeals Council followed the Regional Commissioner's recommendation and reopened the ALJ's decision under 20 C.F.R. §§ 416.1488 and 416.1489, on the grounds that the decision was erroneous on its face. The Appeals Council held that, under Acquiescence Ruling 887(5), the Hickman ruling was only to be applied to cases within the Fifth Circuit. In cases in other jurisdictions,

the Social Security Administration does not consider receipt of in-kind support and maintenance as a loan, meeting the definition of what is not income, under 20 C.F.R. 416.1103(f). This section of the regulations provides that money an individual borrows is not income. It does not contemplate a loan of food or shelter. Social Security Ruling 78-26 further clarifies the Administration's position with regard to loans in supplemental security income cases (SSR 78-26, C.B.1978, p. 81).

Id., Exhibit C. at 2.

It is undisputed that Koolstra received no notice that the ALJ's decision was under reconsideration, and he was given no opportunity to file a brief or present oral argument on the issues the Appeals Council considered. However, because Koolstra had waived his right to an oral hearing before the ALJ on the condition that the ALJ's decision would be favorable, the Appeals Council remanded the case to the ALJ for further proceedings to consider "whether in-kind support and maintenance the claimant received(s) from his father and father-in-law, the value of which is presumably to be repaid, constitutes a loan and, therefore, is not income for the purpose of computing the amount of supplemental security income for which he is eligible." Id. Koolstra then commenced this action, seeking a determination that the Appeals Council's procedure in reopening his case violated his Constitutional right to due process and requesting, among other remedies, mandamus relief.¹

II. Appeals Council Reopening.

Social Security regulations govern the reopening² of cases by the Appeals Council. Under 20 C.F.R. § 416.1487 (1989), an SSI applicant may request the Appeals Council to reopen an adverse ruling by the ALJ. Although some courts have disagreed, see, e.g., McCuin v. Secretary of Health & Human Servs., 817 F.2d 161, 171 (1st Cir.1987),³ the Tenth Circuit has held that the Appeals Council may also sua sponte reopen a case decided in favor of the applicant. See Descheenie ex rel. Descheenie v. Bowen, 850 F.2d 624, 628 n. 9 (10th Cir.1988).

SSI regulations describe the conditions under which a decision will be reopened:

A determination, revised determination, decision, or revised decision may be reopened —

(a) Within 12 months of the date of the notice of the initial determination, for any reason;

(b) Within two years of the date of the notice of the initial determination if we find good cause, as defined in § 416.1489, to reopen the case; or

(c) At any time if it was obtained by fraud or similar fault.

20 C.F.R. § 416.1488 (1989). "Good cause" exists when new or material evidence is furnished to the Appeals Council, when there has been a clerical error, or when "the evidence that was considered in making the determination or decision clearly shows on its face that an error was made." Id. § 416.1489(a). Good cause is not established when the sole reason for reopening is "a change of legal interpretation or administrative ruling upon which the determination or decision was made." Id. § 416.1489(b).

Koolstra's central argument is that the Secretary violated its own regulations because there was no good cause to reopen his case.⁴ He asserts that the Appeals Council cannot reopen a case simply because it disagrees with a legal interpretation by the ALJ which follows established authority. The Secretary contends, however, that the Appeals Council has authority to reopen a decision by the ALJ to correct legal error, relying on Sheppard v. Sullivan, 906 F.2d 756 (D.C.Cir.1990), Overend v. Sullivan, 879 F.2d 673 (9th Cir. 1989), and Fox v. Bowen, 835 F.2d 1159 (6th Cir.1987).

In Sheppard, the court upheld the Appeals Council's jurisdiction to reopen sua sponte the ALJ's decision under 20 C.F.R. § 404.988. Addressing Sheppard's argument that the good cause requirement of this regulation provided no real limits on the Secretary's ability to reopen a decision, the court stated:

While we accept the SSA view that reopening for good cause encompasses clear errors of law, see Fox v. Bowen, 835 F.2d 1159, 1163-64 (6th Cir.1987), we do not read it as all-encompassing. Section 404.989(b), for instance, explicitly precludes reopening on the ground of an intervening change in legal interpretation. And while "clear" is itself one of the least clear terms in the language (perhaps most commonly a flag for the absence of any convincing argument), we take it to work some real limitation. See George v. Schweiker, 563 F.Supp. 888, 890 (D.Minn.1982). In practice, it appears that review is routine, reopening rare. See Cieutat v. Bowen 824 F.2d 348 at 355 n. 9. (5th Cir.1987)

Sheppard, 906 F.2d at 759. The Sheppard court went on to conclude that the Appeals Council ruled correctly that the applicant's disability benefits should be offset by retroactively-paid SSI benefits. Similarly, in Fox v. Bowen, 835 F.2d 1159 (6th Cir. 1987), the Sixth Circuit affirmed the Appeals Council's reopening of a case because the evidence before the ALJ did not show that the applicant was fully insured under the Act. The court rejected the applicant's contention that the Appeals Council cannot base reopening on legal error.

The regulations do not expressly preclude reopening to revise a determination based upon the application of an incorrect legal standard or the misinterpretation of law existing at the time of the determination. The regulations merely prohibit reopening when a change of legal interpretation or administrative ruling upon which the initial determination was based constitutes the sole basis for reopening. Reopening to change a legal interpretation is precluded because when a question of legal interpretation is involved the evidence considered in making the determination does not show clearly on its fact that an error was made.

Fox, 835 F.2d at 1163-64. Finally, in Overend v. Sullivan, 879 F.2d 673 (9th Cir. 1989), the Ninth Circuit affirmed the Appeals Council's reopening of the ALJ's determination for good cause due to the ALJ's legal error in attributing 1980 wages to the applicant's 1978 wage base, without further discussion of the issue.

Contrary to the Secretary's argument, this case is not analogous to Sheppard, Fox or Overend, where the primary error was the incorrect application of the law to the facts, not the correct interpretation of the law itself. In fact, a review of the record below indicates that the above cases support the conclusion that the Appeals Council was without authority to reopen Koolstra's case. Here, the Appeals Council premised reopening of Koolstra's case on the ALJ's alleged legal error in construing the statutes and regulations governing the definition of income and loans. The Appeals Council specifically relied on Acquiescence Ruling 88-7(5), in which the Secretary advised that the Hickman v. Bowen decision would apply only to cases arising in states within the Fifth Circuit —...