110 F. Supp.2d 24 (2000) | Cited 0 times | D. Massachusetts | August 23, 2000


The present matter is an action under Section 205(g) of the SocialSecurity Act (the "Act"), 42 U.S.C. § 405 (g), to review a finaldecision of the Commissioner of the Social Security Administration("Commissioner") requiring Jack Setian ("Plaintiff") to repay anoverpayment of benefits in the amount of $41,907.60. The particular issueconcerns the Commissioner's conclusion, through an Administrative LawJudge ("ALJ"), that requiring Plaintiff to refund the overpayment wouldnot defeat the purpose of the Act. See 42 U.S.C. § 404 (b). Plaintiffseeks to reverse that decision, while the Commissioner seeks itsaffirmance. For the reasons which follow, the court will deny bothmotions and order that the matter be remanded for further proceedings.


The procedural and factual background of this matter is familiar to thecourt and will be summarized only. In 1988, the Social SecurityAdministration ("Administration") notified Plaintiff of its intent torecoup a $41,907.60 overpayment of benefits accrued from April of 1971through June of 1988. Unable to bar the recoupment after lengthyadministrative proceedings, Plaintiff filed suit in 1996 and the case wasassigned to District Judge Michael A. Ponsor. (See C.A. No. 96-30190.)Judge Ponsor referred the matter to this court for a report andrecommendation.

On June 24, 1997, the court recommended that Judge Ponsor do threethings: (1) deny the Commissioner's then extant motion to affirm thedecision requiring Plaintiff to repay the overpayment; (2) allowPlaintiff's motion to reverse the Commissioner's decision insofar asPlaintiff sought a declaration that the overpayment was received withoutfault on his part; and (3) remand the matter for further proceedings todetermine whether re-coupment of the overpayment would defeat the purposeof the Act or be against equity and good conscience. Judge Ponsor adoptedthe recommendations and remanded the case accordingly. See Setian v.Callahan, 973 F. Supp. 46 (D.Mass. 1997).

Presently before the court is the decision issued by the ALJ uponremand. With the parties' consent, the matter has been assigned to thiscourt for all purposes pursuant to 28 U.S.C. § 636 (c).

On November 24, 1998, the ALJ, bound by Judge Ponsor's decision,entered a finding that Plaintiff was indeed overpaid the benefits butthat he was without fault in causing or accepting the overpayment. TheALJ determined, however, that recovery of the overpayment would notdefeat the purpose of the Act or be against equity and good conscience.The ALJ concluded, therefore, that recovery of the overpayment would beallowed.

In reaching her conclusion, the ALJ looked to Plaintiff's financialsituation. First, the ALJ compared Plaintiff's work record and currentmonthly earnings of $1,321 with his monthly expenses for rent, food,utilities, insurance, car payments and other debts. Based on thisanalysis alone, the ALJ found that neither Plaintiff's income nor hiscombined income with his wife was sufficient to meet his family's monthlyexpenses and debt repayment obligations.

The ALJ then looked at two other "resources" in which Plaintiff had afinancial interest: a savings account and a house. As for the account,the ALJ found that Plaintiff, jointly with his brother, had savings of atleast $15,000, an amount which, at times, had been tapped to meetPlaintiff's living expenses. The ALJ also found that Plaintiff, althoughresiding in a trailer owned by his wife, had a $52,000 equity ownershipinterest in a house in which his niece lives rent-free. The ALJdetermined that the savings account and the house each had a "liquidationvalue" and, as such, were resources which could be used to repay thebenefits received in error.1

The ALJ authorized the recoupment despite Plaintiff's argument that hisbrother not only held the passbooks but drew on the account only to meetthe needs of their mother. The ALJ also did not consider Plaintiff'sargument that a sale of the house would adversely affect his residencystatus for employment purposes.


The findings of the Commissioner as to any fact, if supported bysubstantial evidence, shall be conclusive. See 42 U.S.C. § 405 (g).The Supreme Court has defined substantial evidence as "more than a merescintilla." Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 28L.Ed.2d 842 (1971) (quotations omitted). Thus, even if the record couldsupport multiple conclusions, a court must uphold the decision "`if areasonable mind, reviewing the evidence in the record as a whole, couldaccept it as adequate to support [his] conclusion.'" Ortiz v. Secretaryof Health & Human Services, 955 F.2d 765, 769 (1st Cir. 1991)(quoting Rodriguez v. Secretary of Health & Human Services,647 F.2d 218, 222 (1st Cir. 1981)); see also Richardson, 402 U.S. at401, 91 S.Ct. 1420. Stated another way, a court must affirm the decisionso long as it is supported by substantial evidence, even if the recordcould arguably justify a different result. Rodriguez Pagan v. Secretaryof Health & Human Services, 819 F.2d 1, 3 (1st Cir. 1987).


The Commissioner may recoup an overpayment even from a person who iswithout fault in its causation, as here, except in two situations: (1)where recoupment "would defeat the purpose of [the Act]"; or (2) wheresuch adjustment or recovery "would be against equity and goodconscience." 42 U.S.C. § 404 (b). Only the first situation ispresently at issue.2 Thus, the key question is whether the ALJ hadsubstantial evidence on which to conclude that recovery of theoverpayment wouldnot "defeat the purpose of" the Act. The court believes that she didnot.

Because the Act is silent as to what is meant by "defeat the purposeof," the court must first look to the agency's regulations. See K MartCamp. v. Corp. v. Cartier, Inc., 486 U.S. 281, 291-92, 108 S.Ct. 1811,100 L.Ed.2d 313 (1988). According to the applicable regulation, thisphrase is generally tied to an individual's "ordinary and necessary livingexpenses" as contrasted with his "income or financial resources":

General[ly,][d]efeat the purposes of [the Act] . . . means . . . to deprive a person of income required for ordinary and necessary living expenses. This depends upon whether the person has income or financial resources sufficient for more than ordinary and necessary needs, or is dependent upon all, of his current benefits for such needs.

20 C.F.R. § 404.508 (a). The regulation goes on to state that"[a]djustment or recovery will defeat the purposes of [the Act] in (butis not limited to) situations where the person from whom recovery issought needs substantially all of his current income (including socialsecurity monthly benefits) to meet current ordinary and necessary livingexpenses." 20 C.F.R. § 404.508 (b). At bottom, it is the claimant'sburden to prove that recovery of the overpayment would deprive him ofincome for ordinary and necessary living expenses. See Banuelos v.Apfel, 165 F.3d 1166, 1170 (7th Cir. 1999); Adams v. Secretary of Health& Human Services, 653 F. Supp. 249, 250 (C.D.Ill. 1986).

Here, there are two regulation-based questions that must be addressed.The initial question is whether it was proper for the ALJ to have evenconsidered Plaintiff's non-income assets, i.e., the house and the savingsaccount, in light of subsection (b) of the regulation which directs theALJ to look only to the claimant's "current income." The Seventh CircuitCourt of Appeals, the only circuit court which appears to have addressedthis issue, recently held that an individual's entire financial picture,including non-income assets, must be considered in the "defeat thepurpose of" calculus. See Banuelos, 165 F.3d at 1170. Indeed, subsection(a) of the regulation specifically mentions "financial resources" inaddition to "income" as evaluative factors. Thus, it appears appropriatefor the ALJ to have inquired about the house and the savings account.

The second, thornier question is whether the ALJ thoroughly evaluatedPlaintiff's non-income assets. As indicated, the regulation requires aninquiry as to whether income and financial resources are sufficient for"more" than ordinary and necessary needs. 20 C.F.R. § 404.508 (a). Itdoes not, however strictly mandate that a claimant exhaust all availablefunds to repay an overpayment. See Posnack v. Secretary of Health &Human Services, 631 F. Supp. 1012, 1015 (E.D.N.Y. 1986); Hansen v.Harris, 507 F. Supp. 900, 902 (W.D.Ark. 1981). Thus, a claimant "isentitled to retain sufficient monetary resources in order to be preparedfor emergencies without thereby making [him]self liable for repayment."Posnack, 631 F. Supp. at 1015.

The court finds that the ALJ failed to sufficiently analyze how and inwhat manner Plaintiff's non-income assets could assist him and his wifein meeting their ongoing needs. The ALJ also failed to explain howPlaintiff could access any equity interest he may have in the house.Instead, the ALJ simply assumed that Plaintiff had the ability toliquidate the assets. To be sure, the administrative record is somewhatconfused, in no small part due to an inadequate presentation at theadministrative hearing by Plaintiff's advocate. Still, as the SupremeCourt recently reiterated, because "Social Security proceedings areinquisitorial rather than adversarial[,] . . . [i]t is the ALJ's duty toinvestigate the facts and develop the arguments both for and againstgranting benefits." Sims v. Apfel, ___ U.S. ___, 120 S.Ct. 2080, 2085,147 L.Ed.2d 80 (2000)(emphasis added). In this court's opinion, that admonition applies to thequestion of recoupment as well.

The ALJ also failed to consider whether Plaintiff's share of the assetsmight be too insignificant an amount to be liquidated. In this regard,Social Security Rule 85-3a at one time indicated that recovery of anoverpayment could pose a hardship if the refund would deplete theclaimant's resources below $5,000. See Teamer v. Secretary of Health& Human Services, 764 F. Supp. 1328, 1333 (N.D.Ind. 1991). Althoughthat ruling has been rescinded without replacement, the applicableregulation still demands a searching inquiry. Thus, the "substantiallyall" language in subsection (b) of section 404.508 "does not dictate thatsimply because [a claimant has] . . . nominal savings, [he] should berequired to repay an overpayment . . . and place [himself] in aprecarious financial position, unable to cope with unforseen expenses oremergencies." Teamer, 764 F. Supp. at 1333. See also Coker v. Harris,508 F. Supp. 996, 997-98 (M.D.Ga. 1981) (waiver granted despite savingsof over $5,000); Hansen, 507 F. Supp. at 902-03 (recovery waived whereclaimant had nominal monthly income, $1,500 in savings and a partialinterest in a home valued at approximately $10,000); Frasier v. Harris,495 F. Supp. 260, 263 (D.Col. 1980) (waiver granted where recovery wouldcause claimant to deplete savings). But see Milton v. Harris, 616 F.2d 968,973-74 (7th Cir. 1980) (denial of waiver where claimant "had savings ofover $40,000 and $17,000 worth of equity in . . . real estate, . . .received $3,500 per year in interest from her savings, and . . . hadbegun to operate a business that was meant to show a profit in sixmonths"); Posnack, 631 F. Supp. at 1016 (no waiver where claimant had$40,000 in savings at 1986 value). The point is that the ALJ should haveengaged in a more searching inquiry as to the amount of assets availableto Plaintiff and how their liquidation would affect his overall financialsituation.

In sum, the court — mindful of its obligation to not substituteits judgment for that of the ALJ — nonetheless believes that theALJ's conclusion that Plaintiff has income or financial resourcessufficient for more than his ordinary and necessary needs is not groundedon substantial evidence in the record. Accordingly, a remand of the caseto more fully consider the issue is necessary.


For the reasons stated, Plaintiff's motion to reverse the Commissioner(Docket No. 12) and the Commissioner's motion to affirm his decision(Docket No. 14) are both denied and the matter is remanded for furtherproceedings consistent with this opinion.


1. There was no evidence that the house was bought or the savingsaccount opened with Plaintiff's overpaid benefits. Plaintiff's motherapparently transferred her house and savings account to her sons in aneffort to protect those assets for her benefit in the event she had tomove to an assisted living environment. It appears, in fact, thatPlaintiff's mother is now a nursing home resident.

2. Although Plaintiff asserted administratively as well as in hiscomplaint here that recovery of the overpayment would also be againstequity and good conscience, he has failed to present any argument insupport of this contention. Plaintiff's "equity and good conscience"argument, therefore, has been waived. Cf. Airport Impact Relief Inc. v.Wykle, 192 F.3d 197, 205 (1st Cir. 1999) ("Issues adverted to in aperfunctory manner, unaccompanied by some effort at developedargumentation, are deemed waived for purposes of appeal.")

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