LaBeaux for LaBeaux v. Sullivan

• Court: U.S. District Court — Northern District of Iowa
• Writing for the Court: Ana Maria Martel, Asst. U.S. Atty., N.D. Iowa, Cedar Rapids, Iowa, for defendant
• Citation: LaBeaux for LaBeaux v. Sullivan, 760 F.Supp. 761 (N.D. Iowa 1991)
• Decision Date: 05 March 1991
• Docket Number: No. C90-2019.,C90-2019.
• Parties: Isaiah LaBEAUX, Jr., for Gerome P. LaBEAUX, a minor, Plaintiff, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant.

760 F. Supp. 761

Isaiah LaBEAUX, Jr., for Gerome P. LaBEAUX, a minor, Plaintiff, v. Louis W. SULLIVAN, M.D., Secretary of Health and Human Services, Defendant.

No. C90-2019.

United States District Court, N.D. Iowa, E.D.

March 5, 1991.

Harry W. Zanville, Zanville Law Office, Waterloo, Iowa, for plaintiff.

Ana Maria Martel, Asst. U.S. Atty., N.D. Iowa, Cedar Rapids, Iowa, for defendant.

ORDER

HANSEN, District Judge.

This matter is before the court on plaintiff's motion for summary judgment seeking reversal of the final decision of the Secretary of Health and Human Services and request for oral argument, filed September 11, 1990, and defendant's brief in support of the Secretary's decision, filed October 29, 1990.

In this action, plaintiff seeks reversal of the final decision of the Secretary terminating plaintiff's supplemental security income (SSI) benefits under Title XVI of the Social Security Act (Act), 42 U.S.C. §§ 1381-83c. Plaintiff has exhausted all administrative remedies, and the action is properly before the court at this time. The nature of this court's review of the Secretary's final decision is set forth in 42 U.S.C. § 405(g).

The court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Secretary, with or without remanding the cause for a rehearing. The findings of the Secretary as to any fact, if supported by substantial evidence, shall be conclusive....

42 U.S.C. § 405(g).

The pertinent facts of this case are as follows. Plaintiff, Gerome P. LaBeaux, was born on January 2, 1982, suffering severe brachial plexus and neurological and cerebral injuries. Plaintiff's brief, filed September 11, 1990, at 1. His parents, Dorothy and Isaiah LaBeaux, as co-conservators, brought a law action in the Iowa District Court for Black Hawk County alleging that Gerome LaBeaux had suffered serious and permanent injuries caused by the negligence of Dr. Thomas F. Thornton and St. Francis Hospital. Id. The parties entered into a settlement agreement, approved by the court on December 6, 1985, which provided for the following payments in exchange for binding releases:

1. An immediate $112,500 cash payment.

2. The sum of $750 paid monthly through a structured settlement annuity to plaintiff with 20 years guaranteed or for his life to be divided as follows:

a. $550 per month for 14 years to plaintiff's conservatorship for his pain and suffering.

b. $200 per month to be divided equally between plaintiff's parents as compensation for the "impairment of the companionship and enjoyment of their son as allowed by Rule 8 of the Iowa Rules of Civil Procedure."

3. Payment of $15,000 on January 1, 1991 and $20,000 on January 1, 1996 to be equally divided between plaintiff's parents as allowed by Rule 8.

4. Payment of $95,960.25 to plaintiff's attorneys pursuant to a 33% contingency fee agreement and approved by the court pursuant to Iowa Code § 147.138 (1985).

Tr. 344-46.

In February 1984, the Secretary had determined that plaintiff was eligible for SSI benefits because of his severe mental retardation. Tr. 322. On March 26, 1987, plaintiff was notified that he had been overpaid $5,377 in SSI benefits from December 1985 through March 1987, because he had received the $550 per month from his settlement agreement. Tr. 353. The determination of overpayment and "unearned income" was affirmed at the reconsideration level on July 19, 1988. Tr. 364. Plaintiff's request to waive the overpayment was also denied. Tr. 389. Both determinations were timely appealed, and two hearings were held on May 24, 1989, and August 3, 1989. The Administrative Law Judge (ALJ) found that plaintiff's settlement income was unearned income precluding receipt of SSI benefits and that his representative payee(s) were not without fault as to the overpayment. Tr. 21.

Plaintiff claims that the ALJ erred in ruling that the settlement proceeds in the amount of $550 per month are unearned income within the meaning of Title XVI of the Social Security Act. He further contends that should this court determine that those proceeds are unearned income, the Secretary's refusal to waive recoupment of the overpayment is not supported by substantial evidence.

Unearned income

Plaintiff first claims that there is no provision in the Social Security Act or in the promulgated regulations which includes the receipt of compensation from a personal injury suit as income and that the ALJ's decision to cancel his benefits because of the settlement proceeds was therefore based on an unreasonable interpretation of the Act.

It is the duty of the court to review the Secretary's determination of eligibility for benefits to determine if it is based on erroneous legal standards or an incorrect application of the law. Nettles v. Schweiker, 714 F.2d 833, 835-36 (8th Cir. 1983). The Secretary's interpretation of a statute that he is charged with administering is entitled to substantial deference. Savage v. Toan, 795 F.2d 643, 645 (8th Cir.1986) (citing Connecticut Dep't of Income Maintenance v. Heckler, 471 U.S. 524, 532, 105 S.Ct. 2210, 2214, 85 L.Ed.2d 577 (1985)). If the Secretary's interpretation is reasonable, judicial approval is proper, even though there are other reasonable interpretations. Id.

In order to determine whether the Secretary's consideration of plaintiff's settlement proceeds as unearned income was reasonable, it is necessary to examine several provisions of the Social Security Act and its regulations. Title XVI of the Act was enacted "for the purpose of establishing a national program to provide supplemental security income to individuals who ... are ... disabled." 42 U.S.C. § 1381. An individual is eligible for SSI benefits if his annual income and resources are less than a certain amount. 42 U.S.C. § 1382(1). The Act divides income into two categories, earned income and unearned income. See 42 U.S.C. §§ 1382a(a)(1), (2). Earned income means "only" wages, net earnings from self-employment, any refund of federal income taxes relating to earned income credit, and remuneration for services in a sheltered workshop or work activities center. 42 U.S.C. § 1382a(a)(1). Unearned income, on the other hand, is defined more broadly as "all other income," including:

(A) support and maintenance furnished in cash or kind ...;

(B) any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old-age survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits;

(C) prizes and awards;

(D) the proceeds of any life insurance policy ...;

(E) gifts ..., support and alimony payments, and inheritances; and

(F) rents, dividends, interest, and royalties.

42 U.S.C. § 1382a(a)(2). The Secretary has defined an award as "usually something you receive as the result of a decision by a court, board of arbitration, or the like." 20 C.F.R. § 416.1121(f).

The Secretary's definition of income is an expansive one: "anything you receive in cash or in kind that you can use to meet your needs for food, clothing, or shelter." 20 C.F.R. § 416.1102. A reciprocal definition of what is "not income" is set forth in 20 C.F.R. § 416.1103: "Some things you receive are not income because you cannot use them as food, clothing, or shelter...." This section further provides some examples of items which are not income: medical care and services, social services, receipts from the sale, exchange or replacement of a resource, income tax refunds, payments by credit life or credit disability insurance, proceeds of a loan, bills paid for the applicant/recipient, replacement of income already received, weatherization assistance, and receipt of certain noncash items. 20 C.F.R. § 416.1103(a)-(j). Plaintiff claims that because tort compensation is not specifically listed as an exclusion under § 416.1103, the Secretary's determination that the settlement proceeds are unearned income for the purposes of assessing eligibility for SSI is contrary to law.

In so asserting, plaintiff relies primarily upon the Ninth Circuit's en banc opinion in Grunfeder v. Heckler, 748 F.2d 503 (9th Cir.1984). In Grunfeder, the Ninth Circuit held that reparation payments made by the German government pursuant to the German Restitution Act were not income to be used in determining eligibility for SSI benefits. Id. at 509. The court based its conclusion on Congress's "historical concern for Holocaust victims," Congress's and the Secretary's treatment of analogous payments (e.g., exclusion of federal reparations payments to the Blackfeet, Gros Ventre, and Alaskan Native Americans from SSI eligibility determinations), and principles of international comity. Id. This court believes that none of the same concerns present in these reparations cases are at issue when examining whether the inclusion of compensation for personal injury as unearned income is reasonable.

The court further notes that plaintiff places special emphasis upon the concurring opinion of Judge Ferguson in Grunfeder, who would hold that since compensation traditionally has been excluded from the definition of income, this "longstanding definition" should not be modified unless Congress specifically states otherwise. Id. at 510. However, the Supreme Court's opinion in Lukhard v. Reed, 481 U.S. 368, 107 S.Ct. 1807, 95 L.Ed.2d 328 (1987) directly belies that contention. In Lukhard, respondents, recipients of personal injury awards who were disqualified from Virginia's Aid to Families With Dependent Children (AFDC), claimed that Virginia's policy of treating personal injury awards as income was inconsistent with the AFDC statute or the Department of Health and Human Services' (HHS) regulations. They, as does plaintiff in the case at bar, sought to derive support from the fact that personal injury awards are not treated as...