Schoolcraft v. Sullivan

• Decision Date: 09 October 1992
• Docket Number: No. 91-1643,91-1643
• Citation: 971 F.2d 81
• Parties: , Unempl.Ins.Rep. (CCH) P 16817A, 3 NDLR P 32 Daniel J. SCHOOLCRAFT; Theodore Thomas, and Joseph Drumbeater, individually and on behalf of all others similarly situated, Appellants, v. Louis W. SULLIVAN, M.D., Secretary of Department of Health and Human Services; Walter Roers, in his official capacity as Director of the Disability Determination Services; R. Jane Brown, in her official capacity as Commissioner of the Minnesota Department of Jobs and Training, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 81

971 F.2d 81

38 Soc.Sec.Rep.Ser. 238, Unempl.Ins.Rep. (CCH) P 16817A,

3 NDLR P 32

Daniel J. SCHOOLCRAFT; Theodore Thomas, and Joseph

Drumbeater, individually and on behalf of all

others similarly situated, Appellants, v. Louis W. SULLIVAN, M.D., Secretary of Department of Health and Human Services; Walter Roers, in his official capacity

as Director of the Disability Determination Services; R.

Jane Brown, in her official capacity as Commissioner of the

Minnesota Department of Jobs and Training, Appellees.

No. 91-1643.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 13, 1991.

Decided July 2, 1992.

Rehearing and Rehearing En Banc Denied Oct. 9, 1992.

Laurie N. Davison, Minneapolis, Minn., argued (M. Francesca Chervenak, Kathleen M. Davis, and Barbara J. Kuhn, on the brief), for appellants.

Howard S. Scher, Dept. of Justice, Washington, D.C., argued (Donald Notvik, Asst. Atty. Gen., St. Paul, Minn., on the brief), for appellees.

Before LAY, ^* Chief Judge, ARNOLD, ^** Circuit Judge, and STUART, ^*** Senior District Judge.

LAY, Chief Judge.

This is an appeal from the district court's ¹ award of summary judgment dismissing a class action ² complaint filed by three individuals, Daniel J. Schoolcraft, Theodore Thomas and Joseph Drumbeater, against Louis W. Sullivan, Secretary of the Department of Health and Human Services (Secretary), and Walter Roers and R. Jane Brown in their official capacities as Director of Minnesota's Disability Determination Services and Commissioner of the Minnesota Department of Jobs and Training, respectively. Plaintiffs challenged the procedures and standards applied by defendants to disability claims involving chronic alcoholism or some other drug dependency. See Schoolcraft v. Sullivan, 753 F.Supp. 1478 (D.Minn.1991). At the time the class action was filed, January 25, 1990, each of the plaintiffs had applied for disability benefits by reason of chronic alcoholism. The district court awarded summary judgment to the defendants and dismissed the complaint for lack of subject matter jurisdiction based upon the plaintiffs' failure to exhaust their administrative remedies. Consequently, the court concluded that plaintiffs' motion for class certification was moot. Jurisdiction was alleged under 42 U.S.C. § 405(g) (1988), 28 U.S.C. §§ 1331, 1343(3) and 1361 (1988). ³

The initial determination of a claim for disability benefits is made by a state agency pursuant to regulations, guidelines and standards established by the Secretary. 42 U.S.C. §§ 421(a), 421(k)(1), 1383(a) (1988). If the initial determination is adverse, the claimant may request a de novo reconsideration of the claim by the same state agency. 20 C.F.R. § 404.904-.909 (1991). In Minnesota, the Disability Determination Services of the Minnesota Department of Jobs and Training (DDS) has been designated to handle these first two stages of the administrative adjudication process. The DDS acts under the authority and control of the Secretary. 42 U.S.C. §§ 421(a), 421(k)(1), 1383b(a) (1988); 20 C.F.R. §§ 404.1503(a), 416.903(a) (1991). Failure to seek a reconsideration renders the initial decision binding on the claimant. If the reconsideration is adverse, the claimant is entitled to a hearing by the Secretary and may request a de novo hearing before an administrative law judge (ALJ). 42 U.S.C. §§ 405(b)(1), 421(d), 1383(c)(1) (1988); 20 C.F.R. § 404.967-.981 (1991). Failure to request a hearing before an ALJ renders the adverse reconsideration a final decision. If the ALJ's decision is adverse to the claimant, the claimant may appeal that decision, within sixty days, to the Social Security Administration Appeals Council (Appeals Council). A final decision exists once the Appeals Council has denied review or has issued its own decision. After exhausting these remedies, a claimant may file a complaint in federal district court requesting an award of benefits pursuant to section 405(g). See 42 U.S.C. §§ 421(d), 1383(c)(3). In the present case, plaintiffs have admittedly not exhausted their administrative remedies.

This suit is not for benefits. ⁴ Unlike the plaintiffs in Heckler v. Ringer, 466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984), in which the relief sought was a change in the Secretary's policy so that the claimants would not have to resort to the administrative process to receive benefits, the relief sought by plaintiffs would not determine whether they would receive benefits. The relief sought is that defendants apply the same standards to plaintiffs' claims for benefits at each stage of the administrative process. See 42 U.S.C. § 421(k)(1) ("[t]he Secretary shall establish by regulation uniform standards which shall be applied at all levels of determination, review, and adjudication in determining whether individuals are disabled...."). Plaintiffs allege that defendants do not follow the five-step analysis required by the Secretary's regulations. ⁵ Specifically, plaintiffs allege that at the third step of the analysis the adjudicator is also or alternatively required to consider whether the claimant is addicted to alcohol and has "lost the voluntary ability to control its use." See Adams v. Weinberger, 548 F.2d 239 (8th Cir.1977). Plaintiffs argue that Adams established an alternative to section 12.90 listings. See supra note 5. Although the ALJ and Appeals Council typically employ the Adams analysis at stage three, the state defendants allegedly do not. The record shows that at least two individuals who evaluate claims at the state level testified that neither the Secretary nor the Social Security Administration (SSA) had instructed DDS employees that they must determine whether a claimant can voluntarily control his or her use of alcohol when evaluating a claim for disability benefits due to drug dependency. These DDS employees were not aware of any such requirement and had never applied the Adams standard when evaluating such claims. Plaintiffs assert that as the Adams standard is considered by the ALJ and the Appeals Council it ought to be considered at the initial and reconsideration adjudications conducted by the state DDS at the direction of the SSA and the Secretary.

Although to some extent the merits relate to the jurisdictional issue, resolution of the merits does not determine the question of jurisdiction. We address only whether the district court erred in its jurisdictional ruling.

Section 405(g)

In order for the district court to have subject matter jurisdiction under section 405(g), ⁶ a claimant must have presented a claim for benefits to the Secretary and exhausted the administrative remedies prescribed by the Secretary. See, e.g., Weinberger v. Salfi, 422 U.S. 749, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975). The second element of jurisdiction, the exhaustion of the administrative remedies, although jurisdictional, is nonetheless deemed waivable. See, e.g., Mathews v. Eldridge, 424 U.S. 319, 331 n. 11, 96 S.Ct. 893, 900 n. 11, 47 L.Ed.2d 18 (1976) (jurisdictional requirement of exhaustion under section 405(g) relates to the requirement of finality). As the district court notes, in the instant case the claimants, as defined in plaintiffs' motion for class certification, all satisfy the jurisdictional requirement that a claim for benefits has been made to the Secretary. The putative class consists entirely of individuals who have not exhausted the administrative remedies available to them, however. Therefore, in order for their claims to be heard in federal court, exhaustion must be waived.

Under Bowen v. City of New York, 476 U.S. 467, 106 S.Ct. 2022, 90 L.Ed.2d 462 (1986), waiver of administrative exhaustion may be admitted only under special circumstances. The Secretary urges that such circumstances are present only where the challenged policy was adopted in secret and where (1) the issues were entirely collateral to the claim for benefits; (2) the injury could not be remedied by a retroactive payment; and (3) exhaustion would be futile. City of New York, 476 U.S. at 483, 106 S.Ct. at 2031, aff'g, City of New York v. Heckler, 742 F.2d 729 (2d Cir.1984), aff'g, 578 F.Supp. 1109 (E.D.N.Y.1984). We agree that waiver of administrative remedies is the exception to the general rule. However, we find the present case presents an exceptional circumstance and waiver should be allowed. ⁷

City of New York began as a class action challenging the SSA's internal policy of determining disability benefits based on a general listing of impairments instead of individual assessments. The district court declared that policy illegal, and the Secretary appealed the court's decision to grant relief to claimants who had failed to exhaust administrative remedies. The Supreme Court divided the class into two groups. Relief for the first group, for whom administrative remedies were no longer available when the internal policy became public, was affirmed with little explanation other than noting that requiring exhaustion would be unfair because the claimants could not have challenged the unknown policy. City of New York, 476 U.S. at 478-82, 106 S.Ct. at 2029-31; see also Pittson Coal Group v. Sebben, 488 U.S. 105, 123, 109 S.Ct. 414, 425, 102 L.Ed.2d 408 (1988). In addition, notwithstanding the fact that the second group of plaintiffs still had time to exhaust their administrative remedies at the time the suit was filed and the Secretary's secret policy was revealed, the Court found jurisdiction to review their claims under section 405(g). City of New York, 476 U.S. at 482-86, 106 S.Ct. at 2031-33. In view of these factors, the district court erred in ruling that a secret policy is a prerequisite to waiver of exhaustion. Accord Marcus v. Sullivan, 926 F.2d 604 (7th Cir.1991); Bailey v. Sullivan, 885 F.2d 52 (3d Cir.1989).

City of New York, relying on Mathews v. Eldridge, 424 U.S. 319, 331, 96 S.Ct. 893, 900, 47 L.Ed.2d 18 (1976), requires that claimants show (1) their claims are collateral to their...