McDonald v. Secretary of Health and Human Services

• Decision Date: 03 May 1989
• Docket Number: No. 88-2177,88-2177
• Parties: , Unempl.Ins.Rep. CCH 14888A Claire McDONALD, et al., Plaintiffs, Appellees, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 1468

884 F.2d 1468

27 Soc.Sec.Rep.Ser. 18, Unempl.Ins.Rep. CCH 14888A

Claire McDONALD, et al., Plaintiffs, Appellees, v. SECRETARY OF HEALTH AND HUMAN SERVICES, Defendant, Appellant.

No. 88-2177.

United States Court of Appeals First Circuit.

Heard May 3, 1989.

Decided Sept. 7, 1989.

Etzion Brand, Office of the General Counsel, Social Sec. Div. Dept. of Health and Human Services, with whom Frank L. McNamara, Jr., U.S. Atty., Nicholas C. Theodorou, Asst. U.S. Atty., Boston, Mass., Donald A. Gonya, Chief Counsel for Social Sec., Randolph W. Gaines, Deputy Chief Counsel for Social Sec., and A. George Lowe, Baltimore, Md., Chief, Disability Litigation Branch, were on brief, for defendant, appellant.

Sarah F. Anderson, Boston, Mass., with whom Nancy Lorenz, Greater Boston Legal Services, Linda L. Landry, Lynn, Mass., Neighborhood Legal Services, and Laura M. Rosenthal, Massachusetts Law Reform Institute, were on brief, for plaintiffs, appellees.

Before CAMPBELL, Chief Judge, TORRUELLA and SELYA, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

The Secretary of Health and Human Services ("HHS") appeals from the award of attorneys' fees to plaintiffs in a suit that had challenged certain Social Security regulations. The fees were awarded by the district court under the Equal Access to Justice Act ("EAJA"). Enacted in 1980, EAJA provides that in some circumstances the United States shall be ordered by the court to pay the attorneys' fees of a party that prevails against it. The relevant portion of EAJA provides,

Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses ... incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.

28 U.S.C. Sec. 2412(d)(1)(A) (Supp.1987).

Under EAJA, then, absent special circumstances, the government must foot the legal bills of its adversaries in civil cases (other than tort actions), but only if the adversaries "prevail" and if the government's position is not "substantially justified."

I. BACKGROUND

The class action suit against HHS that resulted in the EAJA award contested HHS procedures for determining eligibility for Social Security disability benefits. Because the course of the underlying litigation bears directly on the attorneys' fees issue, we must review it in some detail.

Two Social Security programs, Old Age Survivors and Disability Insurance ("OASDI") and Supplemental Security Income ("SSI"), both provide for the payments of benefits to disabled persons. ¹ Under the Social Security Act ("the Act"), "disability" refers to the inability to do gainful work. A person is considered to be disabled only if "his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy...." 42 U.S.C. Sec. 423(d)(2)(A) (1982). The plaintiffs brought suit in 1984, in order to challenge two aspects of HHS's method of determining such disability, the "severity regulation" and the pre-1984 "combination of impairments regulation."

1. The Severity Regulation.

The more important of the two challenges was directed at the HHS policy of screening out claimants with "non-severe" impairments at Step 2 of a five-step determination process that was introduced in 1978. The HHS regulations describe this screening step as follows:

You must have a severe impairment. If you do not have any impairment or combination of impairments which significantly limits your physical or mental ability to do basic work activities, we will find that you do not have a severe impairment and are, therefore, not disabled. We will not consider your age, education, and work experience....

20 C.F.R. Sec. 404.1520(c) (1988) (emphasis supplied in last sentence). If a claimant is found at this step not to have a "severe impairment," then his or her claim will not proceed to the remaining stages of the determination process, which include explicit consideration of age, education, and work experience. Plaintiffs contended that this regulation was inconsistent with the Act, because it allowed HHS to deny benefits to claimants without specifically considering their age, education, and work experience, as mandated by the Act. The district court accepted this argument. On motion for summary judgment, the court held that the Step 2 severity regulation was "inconsistent with the Social Security Act" and thus "invalid as written." McDonald v. Heckler, 624 F.Supp. 375, 380 (D.Mass.1985). It accordingly enjoined the Secretary of HHS from enforcing the Step 2 regulation. Because the district court found the regulation to be invalid on its face, it did not specifically find that it was invalid "as applied."

This court reviewed the district court's judgment in McDonald v. Secretary of Health and Human Services, 795 F.2d 1118 (1st Cir.1986), which we will refer to as McDonald I. We found that the Step 2 severity regulation was valid if used by HHS as a de minimis screening step. Such a de minimis interpretation of the regulation had been provided by Social Security Ruling 85-28, which was issued in October 1985 "in response to the considerable judicial criticism of the severity regulation." McDonald I at 1124. Although SSR 85-28 had been issued about a month before the district court's order, the district court did not refer to it in its opinion. SSR 85-28 provided that a finding of "non-severe" is to be made at Step 2 only if "medical evidence establishes only a slight abnormality or combination of slight abnormalities which would have no more than a minimal effect on an individual's ability to work even if the individual's age, education, or work experience were specifically considered...." In light of SSR 85-28, we vacated the district court's injunction barring the Secretary from applying the severity regulation. We remanded the cases of the individual plaintiffs to the district court, id. at 1126, and we directed that the other class members ² exhaust their administrative remedies before seeking review in the district court. Id. Although we upheld the severity regulation as written, we expressed doubt about whether it had been properly applied before the issuance of SSR 85-28. Id. at 1124. A year after our opinion in McDonald I, the Supreme Court upheld the severity regulation as written. Bowen v. Yuckert, 482 U.S. 137, 107 S.Ct. 2287, 96 L.Ed.2d 119 (1987).

2. The "Combination of Impairments" Regulation.

Since 1967, the Social Security Act has required the Secretary to find a claimant disabled "if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work, but cannot ... engage in any other kind of substantial gainful work." 42 U.S.C. Sec. 423(d)(2)(A) (emphasis supplied). In 1980, however, a new HHS regulation provided that HHS would "consider the combined effects of unrelated impairments only if all are severe[.]" 20 C.F.R. Sec. 404.1522 (1981) (emphasis supplied). A 1984 amendment to the Social Security Act countermanded this interpretation, requiring the Secretary to consider "the combined effect of all of the individual's impairments," whether or not each would be deemed "severe" if considered separately. 42 U.S.C. Sec. 423(d)(2)(C) (Supp.1987). The present plaintiffs challenged HHS's refusal prior to December 1, 1984 (the amendment's effective date) to consider the combined effect of impairments, claiming that this policy was in violation of the Act even before the amendment. The district court granted plaintiffs' motion for summary judgment on this claim. The court directed HHS to consider on remand the combined effect of non-severe impairments when evaluating the claims of class members who had received a final decision from HHS before December 1, 1984. McDonald v. Heckler, 629 F.Supp. 1138, 1140 (D.Mass.1986). On appeal, in McDonald I, we affirmed this order, noting that the Secretary's rationale--that if one non-severe impairment does not significantly limit the ability to work, neither will the combination of two or more non-severe impairments--defied common sense. McDonald I, 795 F.2d at 1127.

The next stage of the litigation involved the proceedings on remand and their sequelae. In considering these events it is useful to treat separately the two sets of plaintiffs in the case: the four individually named plaintiffs, and the thousands of unnamed members of the plaintiff class certified by the district court.

A. Individually Named Plaintiffs.

The four individually named plaintiffs were claimants for disability benefits whose claims had been denied as "non-severe" at Step 2 of the determination process. In McDonald I we remanded their cases to the district court for determination of whether "the proper standards, as set forth in Ruling 85-28 and this opinion" had been applied by the Secretary when their claims were denied. 795 F.2d at 1126. The district court, in turn, remanded the named plaintiffs' claims to HHS, which in all four cases reversed its earlier rulings and awarded disability benefits. These determinations were not challenged on appeal.

B. Class Plaintiffs.

In June, 1985, in its first published opinion in this case, the district court had certified the following class:

All persons residing in Massachusetts who have filed or will file applications for disability benefits under Title II or Title XVI of the Social Security Act, and whose benefits have been or will be denied on the grounds that they do not have a severe...