Linquist v. Bowen

Decision Date18 June 1986
Docket NumberNo. 80-0698-CV-W-9.,80-0698-CV-W-9.
Citation633 F. Supp. 846
PartiesLois LINQUIST and Alberta E. Burns, Plaintiffs, v. Otis R. BOWEN, Secretary of the Department of Health and Human Services, and United States Railroad Retirement Board, Defendants.
CourtU.S. District Court — Western District of Missouri

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Jacqueline Guidry, Law Center for Senior Citizens, Johnny Lee Nixon, Legal Aid of Western Missouri, Kansas City, Mo., Gill Deford, Neal S. Dudovitz, Alfred J. Chiplin, Nat. Senior Citizens Law Center, Los Angeles, Cal., Eileen Sweeney, Nat. Senior Citizens Law Center, Washington, D.C., Alan F. Polack, Lakeshore Legal Services, Inc., Mt. Clemens, Mich., for plaintiffs.

Judy Strong, Asst. U.S. Atty., David M. Glass, Sheila Lieber, Dept. of Justice, Civil Div., Washington, D.C., for defendants.

MEMORANDUM AND ORDER

BARTLETT, District Judge.

This case currently is pending on cross motions for summary judgment. Assuming that various procedural problems are resolved favorably to plaintiffs, this case presents the question whether plaintiffs who receive benefits under both the Social Security Act (SSA) and the Railroad Retirement Act (RRA) can have their benefits reduced by more than fifty percent of the amount their earned income in any year exceeds the exempt earnings amount. Plaintiffs state that during 1974 (Burns) and 1977 (Linquist) both the Secretary of the Department of Health, Education and Welfare in her capacity as Administrator of the Social Security Act (Secretary) and the Railroad Retirement Board (Board) reduced their benefits by fifty percent of their excess earnings resulting in a loss of $1 of benefits for every $1 in excess earnings. Plaintiffs argue that this dollar-for-dollar loss of benefits violates: 1) the intent of Congress; 2) the equal protection and due process clauses of the United States Constitution; and 3) the principles of equitable estoppel. Plaintiffs seek a determination that the Administration and the Board jointly can offset against benefits no more than fifty percent of plaintiffs' excess earnings.

FACTS

In 1977 plaintiff Lois Linquist (Linquist) received survivor benefits under the RRA based on the work record of her deceased husband and primary benefits under the SSA based on her own work record.

During 1977 Linquist earned $3,415. Under both the SSA and RRA $3,000 was the amount of exempt earnings in 1977. Therefore, Linquist had $415 in excess earnings. On March 8, 1978, the Board notified Linquist that the Board had overpaid her $207 in 1977, approximately fifty percent of her excess earnings for 1977. Linquist was directed either to refund the overpayment to the Board or the overpayment would be recouped from her annuity benefits. One week after being notified of the overpayment, Linquist paid $207 to the Board. Linquist did not appeal the Board's action.

Approximately seven months later on October 11, 1978, the Secretary notified Linquist that her Social Security benefits had been overpaid $207 as a result of her excess earnings in 1977. Linquist was advised that $207 would be deducted from her Social Security benefits for November, 1978.

Having already repaid fifty percent of her excess earnings to the Board, Linquist administratively appealed the Secretary's determination that she was obligated to repay the remaining fifty percent of her excess earnings to Social Security. Linquist filed an extensive brief supporting her challenge to the Secretary's threatened action. The Administrative Law Judge (ALJ) refused to grant Linquist's request that the Secretary waive recovery of the overpayment, giving only cursory treatment to plaintiff's legal arguments.

On June 5, 1980, the Appeals Council concluded that there was no basis for reviewing the hearing decision. In its form order, the Appeals Council concluded that there was no error of law and there was no "broad policy or procedural issue which may affect the general public interest." Having exhausted all administrative remedies provided under the SSA, Linquist filed a complaint in this Court asserting that she should not have to repay the SSA the remaining fifty percent of her excess earnings after already having paid fifty percent to the Board.

The identical claims of Alberta E. Burns (Burns) arose differently. In 1974 Burns received primary benefits from Social Security based on her own work record and survivor benefits from the Board based on the work record of her deceased husband. During 1974 Burns also earned $3,800. In 1974 $2,400 was the amount of exempt earnings under both the SSA and RRA. Therefore, Burns' excess earnings for 1974 were $1,400.

On November 18, 1975, Burns was notified by Social Security that she had been overpaid by $744, approximately fifty percent of her 1974 excess earnings.1 Social Security collected the overpayment by withholding Burns' benefits for January, February and part of March 1976. Burns did not appeal administratively this action by Social Security.

On March 27, 1978, Burns was notified by the Board that her 1974 excess earnings had created a $700 overpayment in Railroad Retirement benefits. The Board recouped the $700 overpayment by suspending Burns' annuity benefits for four and one-half months beginning in June 1978. Because the $700 recoupment by the Board took the remaining fifty percent of Burns' 1974 excess earnings, she contested the Board's action under applicable administrative procedures. On December 11, 1980, the Board issued its final determination denying Burns' appeal.

On December 8, 1981, Burns was granted leave to intervene in this action. Burns also sought review of the Board's December 11, 1980, decision in the United States Court of Appeals for the District of Columbia. On February 25, 1983, the District of Columbia Court of Appeals rejected Burns' contention that the Board improperly recouped the remaining fifty percent of her excess earnings for 1974. Burns v. United States Railroad Retirement Board, 701 F.2d 193 (D.C.Cir.1983).2

I. JURISDICTION
A. Exhaustion of Administrative Remedies

There is no dispute that each plaintiff has exhausted the administrative remedies provided by the agency that offset against benefits the second fifty percent of each plaintiff's excess earnings. However, neither plaintiff has exhausted the administrative remedies of the agency that offset against benefits the first fifty percent of her excess earnings. For this reason, defendants argue that neither plaintiff has exhausted available administrative remedies.

Both the SSA and RRA require exhaustion of administrative remedies before judicial review is sought. A person can obtain judicial review of a Social Security decision only after the Secretary has rendered a final decision. 42 U.S.C. § 405(g). Similarly, judicial review of Board decisions can occur only after all administrative remedies have been exhausted. 45 U.S.C. § 355(f).

In Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), the Court concluded that the claimant was not required to raise with the Secretary of Health, Education and Welfare his constitutional claim to a pretermination hearing before asserting it in federal court.

The fact that Eldridge failed to raise with the Secretary his constitutional claim to a pretermination hearing is not controlling. As construed in Salfi, § 405(g) requires only that there be a "final decision" by the Secretary with respect to the claim of entitlement to benefits. Indeed, the named appellees in Salfi did not present their constitutional claim to the Secretary. Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 O.T.1974, No. 74-214, App. 11, 17-21. The situation here is not identical to Salfi, for, while the Secretary had no power to amend the statute alleged to be unconstitutional in that case, he does have authority to determine the timing and content of the procedure challenged here. 42 V.S.C. § 405(a) sic. We do not, however, regard this difference as significant. It is unrealistic to expect that the Secretary would consider substantial changes in the current administrative review system at the behest of a single aid recipient raising a constitutional challenge in an adjudicatory context. The Secretary would not be required even to consider such a challenge.
. . . . .
Eldridge's constitutional challenge is entirely collateral to his substantive claim of entitlement.

Id. at 329-30, 96 S.Ct. at 900 footnote omitted.

In Jensen v. Schweiker, 709 F.2d 1227 (8th Cir.1983), appeal after remand sub nom. Jensen v. Heckler, 766 F.2d 383 (8th Cir.1985), cert. denied sub nom., Jensen v. Heckler, ___ U.S. ___, 106 S.Ct. 311, 88 L.Ed.2d 288 (1985), the Court relying on Eldridge concluded that Jensen was not barred from raising his constitutional challenge to a statute prohibiting payment of Social Security benefits to a person in prison on a felony conviction because the claim had not been raised before the Secretary.

This Circuit has followed Eldridge in holding that a federal court has jurisdiction to hear a challenge to a Social Security regulation under § 405(g) as long as the challenge is collateral to the substantive claim and presents a colorable constitutional claim. Gipson v. Harris, 633 F.2d 120, 122 (8th Cir.1980); see Himmler v. Califano, 611 F.2d 137, 148 (6th Cir.1979).
. . . . .
Eldridge requires a claim to be collateral to the substantive issue of entitlement and to present a colorable constitutional challenge. Whether a claim is collateral to the substantive claim of entitlement depends on whether the claim is unrelated to any controverted factual question of entitlement. Here, under § 423(f) Jensen is clearly not entitled to benefits. Further, there is no dispute that Jensen meets all other requirements of the Act and would, but for his incarceration, be receiving benefits. Like the situation in Eldridge, 424 U.S. at 331-32, 96
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