Opinion
06 Civ. 1344 (DLC).
March 22, 2007
For Pro Se Plaintiff: Perley J. Thibodeau New York, NY.
For Defendant Jo Anne B. Barnhart: Michael J. Garcia Leslie A. Ramirez-Fisher United States Attorney's Office for the Southern District of New York New York, NY.
OPINION AND ORDER
Plaintiff Perley J. Thibodeau ("Thibodeau") brings this pro se action for review of the final decision of the Commissioner of Social Security ("Commissioner") denying his application for retirement insurance benefits ("retirement benefits") as provided for under Title II of the Social Security Act ("the Act"). The Commissioner moves for judgment on the pleadings on the ground that Thibodeau is not entitled to retirement benefits because he has failed to earn a sufficient number of quarters of coverage to qualify for such benefits. Thibodeau opposes the Commissioner's motion. For the reasons set forth below, the Commissioner's motion is granted.
Background
The following facts are taken from the administrative record and are undisputed. Thibodeau was born July 26, 1940. He is a 66-year old resident of New York in poor mental and physical health. Throughout his entire adult life, Thibodeau has suffered from depression and has never been able to maintain steady employment. Thibodeau has a twelfth grade education and has been receiving Supplemental Security Income ("SSI") benefits for over twenty years.
On June 15, 2002, Thibodeau filed an application with the Social Security Administration ("SSA") for retirement benefits. Initially, SSA granted plaintiff's application and he received retirement benefits from August 2002 until September 2003 totaling $3,250.00. Then on September 19, SSA advised Thibodeau that he had received these benefits erroneously. Based on its records, SSA had determined that Thibodeau had accrued only 39 quarters of coverage instead of the 40 quarters of coverage that are required to attain insured status. Consequently, he was not entitled to retirement benefits under the Act. On November 4, Thibodeau asked SSA to reconsider its decision.
Thibodeau received retirement benefits of $230.00 per month from August 2002 through November 2002, and $233.00 per month from December 2002 until September 2003. He received no retirement benefits after September 2003.
On reconsideration, SSA reviewed whether plaintiff's reported earnings for 2002 from self-employment were sufficient to entitle him to one additional quarter of coverage. While it was undisputed that Thibodeau earned 39 quarters of coverage from his earnings between the years 1954 and 1977, SSA questioned whether plaintiff's 2002 reported net earnings of $1,012.00 were from a bona fide trade or business. Thibodeau represented to SSA that his 2002 earnings resulted from self-employment as a hairdresser and, prior to this occasion, he had not worked as a hairdresser in over twenty-five years. He also stated that he was not licensed, that the customers were friends, and that hairdressing work was done on only two occasions.
SSA advised Thibodeau on June 20, 2004 that its initial determination was correct — Thibodeau's 2002 earnings did not qualify for an additional quarter of coverage. Thibodeau therefore had only 39 out of the 40 quarters of coverage required for insured status and was not entitled to retirement benefits. Accordingly, SSA requested a refund from Thibodeau for its $3,250.00 overpayment. The following day, Thibodeau filed a request for a hearing by an Administrative Law Judge ("ALJ"). The hearing, at which Thibodeau represented himself, was held on September 19, 2005.
The ultimate issue before the ALJ was whether Thibodeau's work as a hairdresser in 2002 was bona fide for purposes of earning the necessary 40th quarter. Thibodeau testified that he had last worked as a hairdresser around 1975 after graduating from hairdresser school. When Thibodeau approached age 62 in 2002, his local SSA district office suggested that he return to work if he desired to earn an additional quarter of coverage. He was told he needed to earn $1,000. In response, Thibodeau performed hairdressing for approximately eight individuals.
Thibodeau described the work as cutting hair, perms, and coloring, all of which took place on two occasions at a friend's apartment. Each customer paid Thibodeau "one hundred and some odd dollars" in cash. According to Thibodeau, the work "wasn't on a regular basis" and that the customers "knew of what [he] was trying to do with [his] Social Security." Thibodeau also testified that he was going to try to operate as a regular business, but that his heart disease and a double bypass surgery precluded such activity.
On November 4, 2005, the ALJ issued a decision denying Thibodeau's claim. After considering the entire record, the ALJ found that the evidence failed to show that Thibodeau had earnings from a bona fide business in 2002. Accordingly, the ALJ concluded that Thibodeau did not have income that would qualify for the 40th quarter of coverage. Having only 39 quarters of coverage, Thibodeau was not fully insured and was therefore not entitled to retirement benefits.
Thibodeau's initial 2002 tax return indicated gross receipts of $945.00 and deducted expenses of $70.00. His amended 2002 tax return indicated gross receipts of $1,095.00 and zero expenses deducted. Thibodeau, however, submitted no supporting documentation to the ALJ to show that the alleged self-employment was legitimate. He provided neither the name of any of his customers nor business records regarding services rendered.
Thibodeau filed a request for review of the ALJ decision by SSA Appeals Council on November 21, 2005, which was denied on January 12, 2006. Thibodeau then commenced this action for review of the Commissioner's denial of benefits on February 21. On September 26, the defendant moved for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. Thibodeau opposed this motion by letter dated October 24 and attached documents. The Commission replied on December 22. The defendant seeks to affirm the Commissioner's decision and dismiss the complaint on the grounds that the ALJ's determination is supported by substantial evidence that plaintiff was not entitled to retirement benefits, and that the ALJ applied the correct legal standards in evaluating plaintiff's claim.
I. Standard of Review
In reviewing a decision of the Commission, a court may "enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the [Commissioner], with or without remanding the cause for a rehearing." 42 U.S.C. § 405(g). This Court may set aside a determination of the ALJ only if it is based upon legal error or is not supported by substantial evidence. Rosa v. Callahan, 168 F.3d 72, 77 (2d Cir. 1999). "Substantial evidence" is "more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Halloran v. Barnhart, 362 F.3d 28, 31 (2d Cir. 2004) (citation omitted). Furthermore, the findings of the Commissioner as to any fact, if supported by substantial evidence, are conclusive, Diaz v. Shalala, 59 F.3d 307, 312 (2d Cir. 1995), and thus, the reviewing court does not decide the case de novo. Halloran, 362 F.3d at 31 (citation omitted).
II. Applicable Law
The Act provides for the payment of retirement insurance benefits to an individual who (1) is fully insured; (2) has attained age 62; and (3) has filed an application for benefits. 42 U.S.C. § 402(a). The Act defines a fully insured individual, inter alia, as "any individual who has not less than forty quarters of coverage." Id. § 414(a).
Under the Act, the terms "quarter" and "calendar quarter" mean a period of three calendar months ending March 31, June 30, September 30, or December 31. Id. § 413(a)(1). For years after 1978, the amount of wages and self-employment income an individual must have to be credited with a quarter of coverage is determined by the Commissioner and published in the Federal Register. Id. § 413(d)(2). For the year 2002, according to SSA's internal guidelines, the Program Operations Manual System ("POMS"), the minimum amount of income per quarter was $870.00. POMS RS 00301.250.
Income from self-employment means the gross income, as computed under the Internal Revenue Code ("Code"), "derived by an individual from any trade or business carried on by such individual, less the deductions." 42 U.S.C. § 411(a). The meaning of the term "trade or business," when used with reference to self-employment income or net earnings from self-employment, is construed under Section 162 of the Code. Id. § 411(c).
While Section 162 of the Code does not expressly define what is meant by "trade or business," the Supreme Court has
accept[ed] the fact that to be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and that the taxpayer's primary purpose for engaging in the activity must be for income or profit. A sporadic activity, a hobby, or an amusement diversion does not qualify.Comm'r of Internal Revenue v. Groetzinger, 480 U.S. 23, 35 (1987); see also Ferguson v. Comm'r of Internal Revenue, 29 F.3d 98, 101 (2d Cir. 1994) ("An activity may not be characterized as a trade or business . . . if the activity is not undertaken with an intent to profit.").
Similarly, SSA's POMS set out the factors determining the existence of a trade or business. While not binding authority, the POMS "deserve substantial deference, and will not be disturbed as long as they are reasonable and consistent with the statute." Bubnis v. Apfel, 150 F.3d 177, 181 (2d Cir. 1998). The POMS require the consideration of the following factors:
• the good faith intention of making a profit or producing income,
• continuity of operations, repetition of transactions, or regularity of activities,
• regular occupation,
• holding out to others as being engaged in the selling of goods or services.
POMS RS 01802.002.
While all the factors need not apply, a single factor is not sufficient to find the existence of a trade or business. Id.
III. The ALJ's Decision
Substantial evidence supports the ALJ's finding that Thibodeau is not entitled to retirement benefits. It is uncontested that as of 1977, Thibodeau had earned only 39 of the necessary 40 quarters of coverage. As the ALJ discussed, Thibodeau submitted no documents to support the bona fides of his self-employment in 2002. He provided neither the names of his customers nor business records reflecting the services rendered. By his own admission, Thibodeau is not a licensed hairdresser, he did not perform any hairdressing between 1977 and 2002, and he did not perform any hairdressing in 2002 with "continuity and regularity."Groetzinger, 480 U.S. at 35. To the contrary, Thibodeau engaged in the hairdressing for the sole purpose of earning an additional quarter of coverage. This presents a serious impediment to Thibodeau's claim, since "an activity may not be characterized as a trade or business . . . if the activity is not undertaken with an intent to profit." Ferguson, 29 F.3d at 101.
The ALJ's decision is further supported by "the fact that ascertaining whether an individual is `insured' within the meaning of the Social Security Act is a determination not characterized by case-specific exceptions reflecting individualized equities." Acierno v. Barnhart, 475 F.3d 77, 82 (2d Cir. 2007) (citation omitted). The ALJ's role in counting quarters of coverage is "mechanical" by design, and introducing an "array of equitable factors" would "effectively create a new and burdensome level of administrative judgment that conflicts with the agency's technical role in determining insured status."Id. While the result may appear unfortunate, the ALJ applied the correct legal standard and the decision will stand.
One issue remains to be addressed. In opposition to the Commissioner's motion, Thibodeau submitted military records which show he was discharged after less than a month's service in 1958. He claims that his military pension of $10 a month, or $30 a quarter, might entitle him to the 40th quarter of qualifying income.
Under the Act, a court may order "additional evidence to be taken before the Commissioner , but only upon a showing that there is new evidence which is material and that there is good cause for the failure to incorporate such evidence into the record in a prior proceeding." 42 U.S.C. § 405(g). Materiality is "a reasonable possibility that the new evidence would have influenced the Commissioner to decide claimant's application differently." Pollard v. Halter, 377 F.3d 183, 193 (2d Cir. 2004) (citation omitted). Thibodeau's military pension of $30 per quarter fails to bring him to the statutory threshold of income. Therefore, there is no need to remand the case.
Conclusion
For the foregoing reasons, the Commissioner's motion is granted. The Clerk of Court shall close the case.
SO ORDERED: