Opinion
CASE NO. 8:01CV620
March 5, 2003
MEMORANDUM AND ORDER
This matter is before the Court on the denial, initially and on reconsideration, of the Plaintiff's request for waiver of an overpayment of disability benefits under Title II of the Social Security Act ("Act"), 42 U.S.C. § 401-433. The Court has carefully considered the record and the parties' briefs.
PROCEDURAL BACKGROUND
On October 26, 1993, the Plaintiff, Lorraine Mowinkel, filed an application for disability benefits. (Tr. 35-37.) The claim was granted based on a finding of disability due to lumbar degenerative disk disease, and Mowinkel was awarded benefits effective April 30, 1993. (Tr. 42.) On June 6, 1994, Mowinkel began working three days per week; her hours totaled twenty hours weekly. (Tr. 43.) Mowinkel complied with procedures requiring her to submit work reports to the social security office. (Tr. 43-56.)
On April 11, 1995, Mowinkel was notified that because she was performing "substantial gainful work" during a nine-month trial period, she no longer qualified for disability benefits. (Tr. 65-66.) On April 18, 1995, Mowinkel telephoned the social security office and reported that her earnings had dropped below $500 in March 1995. (Tr. 167.) As a result of Mowinkel's telephone call, the Social Security Administration ("SSA") revised its determination. On April 18 and 26, 1995, the SSA wrote Mowinkel, stating that she was entitled to continued disability benefits for an extended period of thirty-six months because her work during the same nine-month trial period was not considered "substantial gainful activity." (Tr. 72-76.) Even after the expiration of the thirty-six month period in April 1998, Mowinkel continued to receive benefits and to submit work reports and wage information, while the SSA continued to obtain wage information from Mowinkel's employers. (Tr. 80-118.)
During the time relevant to Mowinkel's case, "substantial gainful activity" was defined as receiving earnings exceeding $500 per month. 20 C.F.R. § 404.1574(b)(ii)(B)
A statement of earnings that Mowinkel provided to the SSA on July 28, 1998, reflected that Mowinkel was working between twenty to twenty-four hours per week and earned $7.45 per hour. Therefore, Mowinkel was earning more than $500 per month. (Tr. 100.) Other reports also reflected earnings exceeding $500 per month. (Tr. 117-18.) On February 4, 1999, the SSA again wrote Mowinkel, stating that it "appear[ed]" the SSA would decide that Mowinkel's disability had ended and that she was not entitled to payments for the following periods: July 1995 through December 1995; and from January 1997 forward. (Tr. 119-21.) The letter stated that the final decision would be made in ten days. (Tr. 121.)
On February 26, 1999, Mowinkel was again informed that her period of disability had ended and that she was not entitled to payments for the months of July 1995 through December 1995 and January 1997 through February 1999. (Tr. 124-27.) In a March 14, 1999 notice, the SSA stated that the amount of overpayment was $17,649. (Tr. 128-30.)
The amount was later stated as $20,491.00 by the SSA. (Tr. 168.) However, the Administrative Law Judge ("ALJ") found that the amount is $17,649.00. (Tr. 17.) At the hearing before the ALJ, the parties did not object to the $17,649 amount. (Tr. 26.)
On April 27, 1999, Mowinkel submitted a request for waiver of the overpayment. (Tr. 134-41.) The request was initially denied, and the denial included a notification of Mowinkel's right to a personal conference. (Tr. 146-47.) A personal conference was held on June 29, 1999. (Tr. 148, 167-68.) At the conference, Mowinkel stated:
[S]he reported her work to [the SSA], but [the SSA] kept sending her monthly checks in spite of her work. She understood the $500.00 per month concept in 1995. She said she thought [the SSA] knew about her earnings because she received letters stating that [the SSA] was increasing her benefits due to her work. She stated that as long as [the SSA] kept sending her the payments, she thought she was entitled to receive them.
(Tr. 168.)
On June 25, 1999, the SSA made a waiver determination. (Tr. 167-71.) The SSA admitted in the waiver determination that, had the SSA verified Mowinkel's wages and made a formal determination in a timely manner, the SSA would have decided that her benefits had ceased effective June 1995. The SSA also noted, however, that there were months between June 1995 and June 1996 when Mowinkel would have been entitled to benefits, as her earnings dropped below the $500 threshold for some months within that time period. (Tr. 167.) The waiver determination adjusted the amount of the overpayment as $20,491.00 for the following months: November 1995; February, March and July 1996; all of 1997 and 1998; and January and February 1999. Finally, the SSA determined that Mowinkel was at fault for the months before the February 1999 payment that was paid on March 3, 1999. (Tr. 169.)
Mowinkel requested a hearing before an ALJ. (Tr. 176.) The hearing was held before ALJ Emily Cameron Shattil on February 2, 2000. (Tr. 24-34.) Before the hearing, Mowinkel submitted another request for waiver that listed her assets as $31,769.55, household income as $1,443.16, and monthly household expenses as $1,418.29. (Tr. 382-89.) Mowinkel indicated that during the two years prior to January 25, 2000 she incurred expenses totaling $3765.50 for household repairs and replacement of appliances and household equipment. (Tr. 387.) Mowinkel also stated that she could not cash in her IRA, because she would not be able to pay the resulting income tax. (Tr. 388.)
At the time of the hearing, Mowinkel continued to suffer from dizziness and back pain as a result of a car accident that occurred in 1991. (Tr. 28.) Mowinkel testified that she sees a chiropractor for her condition, and that she pays the portion of the chiropractor bills not covered by insurance. (Tr. 30.) Mowinkel, who is now sixty-five years old, is divorced and lives alone. She is responsible for all of her own expenses. (Tr. 29, 35, 132.)
At the hearing before the ALJ, Mowinkel testified that during the period between December 1995 and March 1999 she properly notified the SSA of her earnings. (Tr. 26.) Mowinkel's position is that, if she were required to repay the amount in question, she would be deprived of sufficient funds for living expenses. At the time of the hearing, Mowinkel was receiving $624 per month in social security benefits and $619.16 monthly wages from her work at Albertson's, resulting in a monthly income of $1443.16. She testified that her monthly expenses totaled $1418.29. (Tr. 27.) At the time of the hearing, Mowinkel had $1000 in savings; however, she had saved this amount specifically to pay her real estate taxes in April 2000. (Tr. 30-31.) Again in August 2000, Mowinkel was to pay real estate taxes. As of the February 2000 hearing, Mowinkel lacked sufficient liquid funds to pay those August 2000 taxes. She had no specifically designated emergency fund set aside for home repairs or similar expenses. (Tr. 31.) During her working years, Mowinkel placed funds in an individual retirement account and a mutual fund. (Tr. 28.) She depends upon those funds as a primary source of living expenses during her retirement years and as an emergency fund for the payment of taxes or home repairs. (Tr. 30, 31.)
On March 1, 2000, the ALJ issued a decision. (Tr. 14-19.) The ALJ found that, although Mowinkel was not at fault for the payments received between December 1995 and February 1999, recovery of the overpayment would not be waived because such recovery would not defeat the purpose of Title II of the Social Security Act ("Act") within the meaning of 20 C.F.R. § 404.508 or be against equity and good conscience as defined in 20 C.F.R. § 4-4.509. (Tr. 15-17, 18.) The Appeals Council denied Mowinkel's request for review. (Tr. 5-6.) Mowinkel now seeks judicial review of the ALJ's determination as the final decision of the Defendant, the Commissioner of the SSA. (Filing No. 1.)
The ALJ found that Mowinkel was at fault for the payment received in March 1999. (Tr. 16, 18.) Mowinkel concedes that she is at fault for the overpayment received in March 1999. She has agreed to repay this amount. (Tr. 25.)
Mowinkel claims that the ALJ's opinion was incorrect because the ALJ erred in determining that waiver of repayment would: 1) defeat the purpose of Title II of the Act; and 2) be against equity and good conscience. Upon careful review of the record, the parties' briefs and the law, the Court concludes that the ALJ's decision denying benefits for all but the month of February 1999 is not supported by substantial evidence on the record as a whole. Accordingly, the Court will reverse the Commissioner's decision and remand this case for further proceedings consistent with this Memorandum and Order.
The payment for February 1999 is the payment that Mowinkel received in March 1999. (Tr. 16.)
STANDARD OF REVIEW
In reviewing an ALJ's decision to deny disability benefits, a district court does not reweigh evidence or revisit issues de novo. Roe v. Chater, 92 F.3d 672, 675 (8th Cir. 1996). Rather, the district court's role under 42 U.S.C. § 405(g) is limited to determining whether substantial evidence in the record as a whole supports the Commissioner's decision and, if so, to affirming that decision. O'Donnell v. Barnhart, 318 F.3d 811, 816 (8th Cir. 2003).
"Substantial evidence is less than a preponderance, but enough that a reasonable mind might accept it as adequate to support a decision." Holmstrom v. Massanari, 270 F.3d 715, 720 (8th Cir. 2001). The Court must consider evidence that both detracts from, as well as supports, the Commissioner's decision. Id. As long as substantial evidence supports the Commissioner's decision, that decision may not be reversed merely because substantial evidence would also support a different conclusion or because a district court would decide the case differently. McKinney v. Apfel, 228 F.3d 860, 863 (8th Cir. 2000).
DISCUSSION
When an individual has received an overpayment of disability payments and is determined not to be at fault in receiving those benefits, recovery by the SSA of the overpayment may be waived. Waiver may only be permitted when recovery of the overpaid amount would defeat the purpose of the Act or be against equity and good conscience. 42 U.S.C. § 404(b) (2003). The Act does not define the phrases "defeat the purpose" of the Act or "against equity and good conscience." However, the Act authorizes the Secretary to issue rules and regulations necessary to administer the Act's provisions. 42 U.S.C. § 405(a) (2003). The regulations that define the phrases "defeat the purpose" of the Act and "against equity and good conscience" are discussed below.
The issue is whether the ALJ erred in failing to determine that waiver of repayment for the amount in question is appropriate because waiver would defeat the purpose of Title II of the Act or be against equity and good conscience. The parties agree that, with regard to all amounts other than the amount received in March 1999, Mowinkel was not at fault.
Defeating the Purpose of the Act
The applicable regulations define situations in which recovery of an overpayment would defeat the purpose of the Act as depriving "a person of income required for ordinary and necessary living expenses." 20 C.F.R. § 404.508(a) (2002). The regulation further provides: "This depends upon whether the person has an income or financial resources sufficient for more than ordinary and necessary needs, or is dependent upon all of his current benefits for such needs." Id. Ordinary and necessary expenses include, but are not limited to:
(1) Fixed living expenses, such as food and clothing, rent, mortgage payments, utilities, maintenance, insurance (e.g., life, accident, and health insurance including premiums for supplementary medical insurance benefits under title XVIII), taxes, installment payments, etc.;(2) Medical, hospitalization, and other similar expenses;(3) Expenses for the support of others for whom the individual is legally responsible; and (4) Other miscellaneous expenses which may reasonably be considered as part of the individual's standard of living.Id. § 404.508(a)(1).
Section 404.508 further explains that recovery will defeat the purposes of the Act in "situations where the person from whom recovery is sought needs substantially all of [her] current income (including social security monthly benefits) to meet current ordinary and necessary living expenses." 20 C.F.R. § 404.508(b) (2002).
The Eighth Circuit Court of Appeals interpreted these regulations in deciding Coulston v. Apfel, 224 F.3d 897 (8th Cir. 2000). The Eighth Circuit reversed the district court's finding that Coulston was at fault for the overpayment. Id. at 901. The court then determined that recovery of the overpayment would have defeated the purpose of the Act, stating the following:
Coulston is far from well-off. Coulston works on-and-off as a part-time dishwasher, and he receives about $650 a month in social security benefits. Thus, his annual income skirts the poverty line. Coulston also has no savings account, so he obviously lives from check to check. In light of these circumstances, we credit Coulston's statement at the hearing that he "has a hard time making ends meet," and, because of this, we think taking even a small amount of benefits away from Coulston would defeat the purpose of social security.Id. (citations omitted).
In making its determination regarding Coulston's assets, the Eighth Circuit cited Banuelos v. Apfel, 165 F.3d 1166, 1170-71 (7th Cir. 1999) for the proposition that a court must consider a claimant's assets in determining whether recovery of an overpayment would defeat the purpose of social security. Coulston, 224 F.3d at 900. In Banuelos, the Seventh Circuit Court of Appeals determined that recovery of an overpayment would not defeat the purpose of the Act. Banuelos incurred monthly expenses of between $1,300 and $1,602.45, and he had a monthly income of $1,028. The court noted that § 404.508(a) requires a court to consider not only income, but also "financial resources" in determining whether recovery of an overpayment would defeat the purpose of social security. Banuelos, 165 F.3d at 1170. The court added that the phrase "financial resources" includes, among other things: savings; interest income; and equity in real estate. Banuelos's overpayment totaled $39,799. Banuelos's liquid assets totaled approximately $16,000. Id. at 1168. However, a complete picture of Banuelos's assets is described as follows:
In December of 1993, Banuelos agreed to receive a lump sum settlement of $200,000 in lieu of future workers' compensation benefits for his back injury. At the same time, Banuelos sold a condominium in Illinois that he and his children had been living in for a $12,000 profit and moved into a rented apartment. Of this $212,000 in workers' compensation benefits and profits from the condominium sale, Banuelos invested approximately $98,000 in a house in Guadalajara, Mexico, for his parents and sister to live in rent-free; loaned $9,500 to family and friends; invested $12,000 in a first car and $2,600 in a second car; paid off approximately $10,000 in credit card debt; deposited $19,000 in a three-month certificate of deposit, and placed the remainder in bank accounts to be spent on living expenses for Banuelos and his two children.Id.
Comparing Mowinkel to these two examples, the Court finds that Mowinkel's financial situation is much closer to Coulston's than to Banuelos's. Like Coulston, Mowinkel lives essentially from paycheck to paycheck, with $24.87 left after usual monthly expenses for unforeseen home repairs, emergency expenses, real estate taxes, etc. Mowinkel has incurred recent expensive home repairs and has had to replace household appliances and equipment. Mowinkel's only vehicle is a 1987 Oldsmobile, which Mowinkel valued at $1000 in January 2000. (Tr. 387.) Also, Mowinkel continues to see a chiropractor for injuries sustained in a 1991 car accident. She pays the remainder of her chiropractor's bill that is not covered by insurance. The Court has considered the value of her assets, and concludes that if she used those assets to repay the SSA she would be deprived of ordinary and necessary living expenses. The evidence presented to the ALJ is uncontroverted that Mowinkel depends upon those funds to cover expenses that are ordinary and necessary and cannot be covered by her monthly income alone. Mowinkel appears to live frugally. Unlike Banuelos, Mowinkel does not own two cars and a second home, support numerous other family members, and she has not recently paid off any large debts, invested any large sums, or possessed numerous bank accounts. Also, this Court notes that the ALJ based her decision in part on the almost $10,000 growth of Mowinkel's individual retirement account between June 1999 and January 2000. (Tr. 17.) This Court declines to assume similar growth and surmises that it is equally possible that since January 2000 the account, as well as her mutual fund, has substantially decreased in value.
Therefore, considering the Eighth Circuit's interpretation of the applicable regulations, the Court finds that recovery of Mowinkel's overpayments to the SSA, other than the overpayment received in March 1999, would defeat the purpose of Title II of the Social Security Act within the meaning of 20 C.F.R. § 404.508.
Against Equity and Good Conscience
The applicable regulation defines "against equity and good conscience" as a situation in which an individual changed her "position for the worse," or "relinquished a valuable right . . . because of reliance upon a notice that a payment would be made or because of the overpayment itself." 20 C.F.R. § 404.509(a)(1) (2002). The regulation further provides that "[t]he individual's financial circumstances are not material to a finding of "against equity and good conscience." Id. § 404.509(b) (emphasis added). Interpreting the phrase "against equity and good conscience," the Eighth Circuit noted that neither the Act nor its legislative history defines the phrase. Groseclose v. Bowen, 809 F.2d 502, 505 (8th Cir. 1987). The Eighth Circuit interpreted Congress's authorization allowing the Secretary to waive recovery under appropriate circumstances shows Congress's intent to foster equitable results. Id.
Similar to Mowinkel's situation, Groseclose involved a case in which recovery was sought from a person unaware of the overpayment. Groseclose and his children received benefits. Eventually, the SSA notified Groseclose's daughter that because she did not attend an educational institution full-time she was no longer entitled to receive a child's insurance benefits. The SSA did not seek to recover the overpayment from the daughter, but rather from Groseclose by withholding his own retirement insurance benefits. Id. at 503. After a discussion of the meaning of the phrase "against equity and good conscience," the Eighth Circuit concluded:
We find it difficult to imagine a more unfair or unjust situation than requiring a person who is without fault to repay overpaid benefits when that person had no knowledge of the overpayments. See United States v. Blackwell, 238 F. Supp. 342, 344-45 (D.S.C. 1965) (although having found a change in position for the worse, the court emphasized the lack of knowledge in holding that recovery would be against equity and good conscience). Moreover, recoupment in this case would be inconsistent with the policy expressed in the legislative history — that recoupment should be equitable.
. . . [T]he record demonstrates that Groseclose was not at fault; the overpayments were not the result of an incorrect statement made by him, nor were they the result of a failure on his part to provide material information. Consequently, recoupment from Groseclose in these circumstances would be against equity and good conscience as that phrase is commonly understood.Id. at 506. Accord Quinlivan v. Sullivan, 916 F.2d 524, 527 (9th Cir. 1990) (determining that "equity and good conscience" should be determined broadly to encompass more than the three limited examples provided in the regulations); Villate v. Sullivan, 862 F. Supp. 514, 520 (D.D.C. 1994) (agreeing with the Eighth and Ninth Circuits, finding a broad interpretation to the pertinent phrase appropriate, and considering among other factors the claimant's lack of knowledge of the overpayments).
Applying the broad definition of the phrase "equity and good conscience" adopted by the Eighth Circuit to Mowinkel's case, this Court finds that Mowinkel's situation squarely fits within the broadened spectrum of situations considered by the Eighth Circuit and other courts relying on an expanded interpretation of the phrase. As in Groseclose, other than the final payment that arrived in March 1999, Mowinkel was unaware of the overpayments. She submitted all required information to the SSA, and the error that resulted in numerous overpayments was the result of the SSA's negligence.
Therefore, the Court concludes that recovery of the overpayments made to Mowinkel, other than the overpayment received in March 1999, would be "against equity and good conscience" as defined in 20 C.F.R. § 404.509.
CONCLUSION
For the reasons discussed, the Court concludes that the Secretary's decision is not based on substantial evidence on the record as a whole, and the decision is reversed.
The case will be remanded for further proceedings consistent with this Memorandum and Order, pursuant to sentence four of 42 U.S.C. § 405(g). The Court directs the Secretary to waive the recovery of the overpayment, reducing the total amount of $17,649.00 by the amount of the overpayment received in March 1999. If the Secretary has withheld any funds from the Plaintiff's benefits toward the waived amount, the Secretary shall reimburse those funds. IT IS ORDERED:
1. The Secretary's decision is reversed, and this case is remanded for further proceedings consistent with this Memorandum and Order;
2. The Secretary shall waive the recovery of the overpayment, reducing the total amount of $17,649.00 by the amount of the overpayment received in March 1999;
3. If the Secretary has withheld any funds from the Plaintiff's benefits toward the waived amount, the Secretary shall reimburse those funds;
4. This decision is reached pursuant to sentence four of 42 U.S.C. § 405(g); and
5. Judgment will be entered by separate document.