Obenchain v. Comm'r of The Soc. Sec. Admin.
| Decision Date | 24 June 2022 |
| Docket Number | 1:20-CV-168-JVB-JPK |
| Parties | SHELLY OBENCHAIN, Plaintiff, v. COMMISSIONER OF THE SOCIAL SECURITY ADMINISTRATION, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
REPORT AND RECOMMENDATION
This matter is before the Court for a report and recommendation on the Commissioner's Renewed Motion seeking dismissal pursuant to Rule 12(b) of the Federal Rules of Civil Procedure of the complaint filed by Plaintiff James Obenchain[1]. See (DE 25, 28). For the reasons that follow, the undersigned RECOMMENDS that the Commissioner's Renewed Motion be GRANTED.
BACKGROUND[2]
Plaintiff filed an application pursuant to Title II of the Social Security Act on August 8, 2016, alleging disability beginning September 25, 2015 and seeking benefits. The Social Security Administration (“SSA”) denied Plaintiff's application initially on October 24, 2016 and upon reconsideration on January 12, 2017. On January 24, 2017 Plaintiff filed a written request for a hearing before an administrative law judge (“ALJ”). A hearing was held on December 14, 2017, at which Plaintiff appeared and testified. The ALJ who conducted the hearing issued a written decision on June 19, 2018, finding that Plaintiff was not disabled. Notice of the ALJ's unfavorable decision was mailed to Plaintiff the same day. See (DE 1 ¶¶ 14-18; DE 1-1).
On June 21, 2018, two days after the ALJ issued his written decision, the Supreme Court decided Lucia v. S.E.C., ___ U.S. ___, 138 S.Ct. 2044 (2018). Lucia held that the appointment of Securities and Exchange Commission (“SEC”) ALJs by lower level staff violated the Appointments Clause of the U.S. Constitution because those ALJs exercised “significant discretion” in carrying out their “important functions.” Id. at 2053. Because SEC ALJs had not been so appointed, and because the plaintiff in Lucia had made a “timely challenge” by “contest[ing] the validity of [the ALJ's] appointment before the [SEC], and continued pressing that claim in the Court of Appeals and th[e] [Supreme] Court,” the Lucia Court “held that the appropriate remedy … [was] a new hearing before a properly appointed official.” Id. at 2055 (internal quotation marks and citations omitted).
Like SEC ALJs, Social Security ALJs were at the time of the Lucia decision also were appointed by lower level staff rather than the head of the agency. Anticipating that Lucia-type challenges would be raised by Social Security claimants, the Acting Commissioner of Social Security issued an order on July 16, 2018 ratifying the appointments of all Social Security ALJs, thereby foreclosing any future Appointments Clause challenges to ALJ decisions issued after that date.[3] The SSA did not take any action at that time concerning ALJ decisions like the present one, which had been issued before the ratification order was entered.
On August 15, 2018, Plaintiff filed a request with the SSA Appeals Council for review of the ALJ's unfavorable decision. (DE 14-1 at 33). Although Lucia had already been decided, Plaintiff did not raise an Appointments Clause challenge to the ALJ's decision in his request for review.[4] Seven months later, on March 15, 2019, the SSA issued SSR 19-1p to explain how the agency “will adjudicate cases pending at the Appeals Council in which the claimant has raised a timely challenge to the appointment” of an ALJ under the Appointments Clause in light of the Supreme Court's decision in Lucia.[5] The SSA stated in SSR 19-1p that it would grant a claimant's request for review based on an Appointments Clause challenge to a preratification ALJ decision if the claimant raised it either before the Appeals Council or previously at the ALJ level.[6] Plaintiff does not contend that he made any attempt to amend his then pending Appeals Council petition to add an Appointments Clause challenge either before or after the March 15, 2019 issuance of SSR 19-1p.
On July 29, 2019, the Appeals Council denied Plaintiff's request for review. (DE 1 ¶ 23; DE 1-2 at 1). The letter notifying Plaintiff of that decision instructed Plaintiff that if he disagreed with the Appeals Council's action, he could ask for court review by filing a civil action. (DE 1-2). The letter informed Plaintiff of the deadlines applicable to such an action, and, specifically, that he needed to file a district court action within 60 days of his receipt of the letter.[7] In addition, Plaintiff was informed that the SSA would assume he received the Appeals Council's letter within five days after the mailing date shown on the letter, unless Plaintiff provided evidence that he did not receive it in that time period.[8] The letter also informed Plaintiff that he could file a written request for additional time if needed. Plaintiff does not contend that he received the Appeals Council's letter more than five days after July 29, 2019, or that he requested additional time to file a civil action. As a result, the deadline for Plaintiff to have filed a civil action seeking judicial review of the ALJ's decision was October 2, 2019.
Plaintiff filed the present action on April 19, 2020, more than six months after the October 2, 2019 deadline to seek judicial review under 42 U.S.C. § 405(g). The complaint does not claim entitlement to direct review of the ALJ's July 19, 2018 decision. Instead, the complaint mounts a collateral attack on the ALJ's decision, asserting it is a “nullity” as a result of the Supreme Court's decision in Lucia, and seeking a writ of mandamus[9] to require the Commissioner to afford Plaintiff a new hearing before a properly appointed ALJ. See (DE 1, Prayer for Relief ¶ 1). In addition to mandamus relief, the complaint also seeks a court order directing the Commissioner to file the administrative record and to produce certain documents, as well as directing that briefing in this matter proceed according to the requirements of the local rule applicable to actions for judicial review under 42 U.S.C. § 405(g). See (DE 1, Prayer for Relief ¶¶ 2-4).
In lieu of filing the administrative record, the Commissioner filed an “Opposition To And Motion To Dismiss Plaintiff's Complaint, amended on September 1, 2020 (“original motion”), which sought dismissal of Plaintiff's complaint for “lack of subject matter jurisdiction” under both 42 U.S.C. § 405(g) and the mandamus statute, 28 U.S.C. § 1361. (DE 14 at 1). The Commissioner's arguments for dismissal in the original motion relied heavily on Plaintiff's failure to raise an Appointments Clause challenge during the administrative proceedings, which the Commissioner asserted was a waiver or forfeiture under the principle known as issue exhaustion.[10] See (DE 15 at 4-17).
Whether issue exhaustion required a claimant to raise an Appointments Clause challenge to a preratification ALJ decision in the administrative proceedings was a contested question at the time the Commissioner filed her original motion. As the Commissioner pointed out in her memorandum in support of that motion, the Eighth and the Tenth Circuits had held that Appointments Clause challenges to SSA ALJs are forfeited if they are not raised during the administrative proceedings,[11] while the Third Circuit had held that the issue could be raised for the first time in the district court.[12] Shortly after the Commissioner filed that memorandum, the Sixth and Fourth Circuits issued decisions joining the Third Circuit,[13] creating a 3-2 circuit court split against imposing an issue exhaustion requirement. The Seventh Circuit, in the meantime, had not yet ruled on the issue, but was about to entertain two appeals in which it was raised.
Following the Commissioner's filing of the original motion, this Court entered an order asking the parties to weigh in on whether the case should be stayed pending a decision by the Seventh Circuit in the two appeals in which the issue exhaustion question had been raised. The parties diverged somewhat in their views regarding the necessity of a stay.[14] Nevertheless, following a hearing to discuss the parties' conflicting viewpoints, the Court ultimately entered a stay without objection from either side. See (DE 21). Thereafter, the Supreme Court granted certiorari on the issue exhaustion question, following which the Seventh Circuit entered a stay of the two appeals pending before it in which the issue had been raised.
On April 22, 2021, the Supreme Court resolved the circuit split on the issue exhaustion question when it ruled in Carr v. Saul, 141 S.Ct. 1352, that a Social Security claimant does not forfeit his or her Appointments Clause challenge by failing to raise the issue in the administrative proceedings. The Court based its holding on the nonadversarial nature of SSA proceedings and the absence of any SSA rule or regulation advising claimants of an issue exhaustion requirement. Id. at 1359-60.[15] Following the Supreme Court's ruling, the Seventh Circuit summarily ruled to the same effect, i.e., no issue exhaustion requirement applied to Appointments Clause challenges in Social Security cases. Hekter v. Saul, 2021 WL 5768688, at *1 (7th Cir. May 10, 2021).
In light of the Seventh Circuit's decision in Hekter, the Court lifted the stay in this case on November 16, 2021, at which time the Commissioner withdrew her original motion. The Commissioner then filed the Renewed Motion and memorandum in support, and Plaintiff...
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