JOHN P. REDDINGTON, PETITIONER V. OTIS R. BOWEN, SECRETARY OF
HEALTH AND HUMAN SERVICES

   No. 87-875

   In the Supreme Court of the United States

   October Term, 1987

   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Fourth Circuit

   Brief for the Respondent in Opposition

            TABLE OF CONTENTS
   Questions Presented
   Opinions below
   Jurisdiction
   Statement
   Argument
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. 1a-3a) is reported
at 825 F.2d 408 (Table).  The order of the district court (Pet. App.
4a-16a) is reported at 640 F. Supp. 1005.

                             JURISDICTION

   The judgment of the court of appeals was entered on July 23, 1987,
and a petition for rehearing was denied on August 26, 1987 (Pet. App.
39a-40a).  The petition for a writ of certiorari was filed on November
24, 1987.  The jurisdiction of this Court is invoked under 28 U.S.C.
1254(1).

                          QUESTIONS PRESENTED

   1. Whether the Appeals Council properly reopened the Administrative
Law Judge's decision finding petitioner eligible for old-age insurance
benefits under the Social Security Act, based on its finding of a
clear error in the ALJ's decision.

   2. Whether the Appeals Council correctly determined that petitioner
had not accrued sufficient quarters of covered employment to be
eligible for old-age insurance benefits.

                               STATEMENT

   1. a. In order to be eligible for old-age insurance benefits under
the Social Security Act, an individual must have a sufficient number
of quarters of covered employment to be "fully insured." 42 U.S.C.
402(a).  Petitioner's application was denied by the Social Security
Administration (SSA) at the initial determination and reconsideration
stages on the ground that he did not have 31 quarters of coverage, as
required by 42 U.S.C. 411(a)(1).  Pet. App. 5a, 21a.

   Petitioner then sought a hearing before an Administrative Law Judge
(ALJ) in SSA's Office of Hearings and Appeals.  The ALJ held that
petitioner had 36 quarters of coverage and therefore was entitled to
benefits (Pet. App. 19a-29a).  Critical to this determination was the
ALJ's inclusion of 12 quarters for the years 1978, 1979 and 1980 (id.
at 28a-29a).  During those years, petitioner received payments from a
partnership, Greenmount Associates (GMA), of which he was a general
partner (id. at 6a, 22a, 25a-26a).  GMA owned and operated apartment
complexes, and the partnership agreement provided for guaranteed
payments to petitioner in return for management services (id. at 6a,
14a-15a).  At the initial determination and reconsideration stages,
SSA had concluded that this income was either rental income, which is
excluded for coverage (see 42 U.S.C. 411(a)(1)), or self-employment
income that, because of offsetting losses, yielded no net income
giving rise to covered quarters (Pet. App. 23a-24a).  The ALJ agreed
that if petitioner was a self-employed "independent contractor" during
this period, as petitioner contended (id. at 26a), he would have no
net income (and thus no quarters of coverage) for that period, because
of offsetting expenses and losses (id. at 27a).  However, the ALJ
concluded that petitioner was an employee of GMA from 1978 through
1980;  that his income should be regarded as "wages" (with no offset
for expenses and losses);  and that he therefore was entitled to 12
quarters for those years (id. at 27a-29a).

   b. The ALJ's decision was rendered on May 23, 1983 (Pet. App. 29a).
 A covering notice informed petitioner that the Appeals Council could,
on its own motion, grant review of the ALJ's favorable decision within
60 days (id. at 17a-18a, citing 20 C.F.R. 404.969) and that the
Appeals Council could reopen and revise the ALJ's decision even after
60 days if new and material evidence was discovered, if a clerical
error had been made, or if "there is an error as to the decision on
the face of the evidence on which it is based" (Pet. App. 18a, citing
20 C.F.R. 404.988).

   The Appeals Council did not choose to review the ALJ's decision on
its own motion within 60 days.  But the Appeals Council subsequently
did decide to reopen the ALJ's decision, because an error was brought
to the Appeals Council's attention by the Northeastern Program Service
Center, the component of SSA responsible for completing the paperwork
necessary to determine the amount, if any, of benefits that would be
payable pursuant to the ALJ's decision.  By memorandum dated June 20,
1983, the Service Center referred the case back to the Office of
Hearings and Appeals because, in its view, the ALJ's decision was
"clearly contrary to the act and regulations" (Pet. App. 46a).  The
memorandum explained that under IRS Rev. Rul. 69-184, 1969-1 C.B. 256,
which construed the provisions of the Federal Insurance Contributions
Act (FICA), 26 U.S.C. (& Supp. III) 3101 et seq. that address the
subject of payments made to a partner, members of a partnership are
not to be treated as employees of the partnership, and income received
by a partner who performs services for the partnership therefore
cannot be treated as wages but instead must be treated as either
income from a trade or business or self-employment income (Pet. App.
47a).

   By letter dated December 9, 1983, the Appeals Council notified
petitioner that, after considering the June 20, 1983, memorandum from
the Service Center, it was reopening the ALJ's decision because it was
erroneous on its face (Pet. App. 43a-45a).  /1/ After affording
petitioner an opportunity to submit additional evidence or legal
arguments on the coverage question (id. at 44a), the Appeals Council
rendered a new decision on January 24, 1984 (id. at 32a-38a).  The
Appeals Council concluded that petitioner did not have the requisite
number of covered quarters because:  (i) under FICA, a partner cannot
be treated as an employee of partnership;  (ii) income received by a
partner for services rendered to the partnership may be considered
self-employment income only if the partnership is engaged in a trade
or business;  and (iii) in this case, the only income received by GMA
(and therefore by petitioner) was rental income, which is excluded
form self-employment earnings by 42 U.S.C. 411(a)(1) (Pet. App.
36a-37a).

   2. a. Petitioner then sought judicial review in the United States
District Court for the Eastern District of North Carolina, which
granted summary judgment in favor of the Secretary (Pet. App. 4a-16a).
 Relying on Zimmermann v. Heckler, 774 F.2d 615, 617 (4th Cir. 1985),
the court rejected petitioner's contention that the Appeals Council
was without authority to reopen the ALJ's decision on its own motion
(Pet. App. 8a).  The court explained that the Secretary's regulations
provide for reopening within four years of the initial determination
for "good cause," and that in this case there was "good cause" because
the ALJ "clearly erred in characterizing the claimant as an 'employee'
of GMA" (ibid.).  On the merits, the district court stated that it was
a close question whether petitioner's income from GMA must be excluded
as rental income under 42 U.S.C. 411(a)(1) (Pet. App. 11a-14a).  But
the court found it unnecessary to resolve that questions, because
offsetting losses from GMA and other partnerships would in any event
prevent petitioner from being credited with any net self-employment
income (and therefore with any quarters of coverage) for 1979 and 1980
(id. at 15a).

   b. The court of appeals affirmed (Pet. App. 1a-3a;  825 F.2d 408
(Table)), adopting "the sound reasoning of the district court" with
respect to both the Appeals Council's reopening authority and
petitioner's failure to establish coverage for the years 1979 and 1980
(id. at 2a).  District Judge Hoffman, sitting by designation,
concurred in the panel's ruling on the question of the Appeals
Council's reopening authority because he was bound by the Fourth
Circuit's prior decision in Zimmermann.  However, he noted that the
First Circuit held in McCuin v. Secretary of Health & Human Services,
817 F.2d 161 (1987), that only the claimant may request reopening.
Pet. App. 3a.

                               ARGUMENT

   The courts below correctly held that the Appeals Council was
authorized, on its own motion, to reopen the ALJ's decision finding
petitioner entitled to old-age insurance benefits.  The majority of
the courts of appeals have sustained the Secretary's interpretation of
this own regulations to permit reopening on the Secretary's motion as
well as on the motion of the claimant.  By contrast, the First Circuit
held in McCuin that the regulations should be construed to permit only
the claimant to request reopening.  However, this circuit conflict
does not warrant review, because the Secretary has announced his
intention to revise the governing regulations to make clear that a
decision may be reopened on the Secretary's own motion in appropriate
circumstances.

   1. Contrary to petitioner's contention (Pet. 10-13), the court of
appeals was clearly correct in sustaining the Secretary's
interpretation of his own regulations to permit reopening of a
decision on the Secretary's motion as well as on the motion of the
claimant.  This Court has consistently held that judicial deference to
administrative determinations is at its height where, as here, the
question concerns the interpretation of the agency's own regulations.
See Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 566 (1980);
United States v. Larionoff, 431 U.S. 864, 872 (1977);  Udall v.
Tallman, 380 U.S. 1, 16 (1965).  Such deference is especially
warranted in this case, because the Secretary's interpretiation is
manifestly reasonable and is supported by the decisions of three other
courts of appeals.  See Fox v. Bowen, No. 86-2608 (6th Cir. Dec. 28
1987), slip op. 6;  Cieutat v. Bowen, 824 F.2d 348, 352-353 (5th Cir.
1987);  Higginbotham v. Heckler, 767 F.2d 408, 410 (8th Cir. 1985);
Munsinger v. Schweiker, 709 F.2d 1212, 1214-1215 (8th Cir. 1983);
Zimmermann v. Heckler 774 F.2d 615, 617 (4th Cir. 1985).  See also
Butterworth v. Bowen, 796 F.2d 1379, 1384-1385 (11th Cir. 1986).

   a. The language of the basic reopening regulation does not support
petitioner's contention that only the claimant may request reopening.
The relevant regulation, 20 C.F.R. 404.988, provides that a
determination or decision "may be reopened" within 12 months of the
initial determination for any reason (20 C.F.R. 404.988(a)), within
four years for good cause (20 C.F.R. 404.988(b)), and at any time for
certain enumerated reasons, such as if the decision was obtained by
fraud or fault (20 C.F.R. 404.988(c)).  In conferring this authority,
Section 404.988 does not refer only to those determinations or
decisions that are adverse to the claimant (the ones that claimants
presumably would seek to have reopened);  it refers without limitation
to the reopening of any "determination, revised determination,
decision, or revised decision." See Cieutat, 824 F.2d at 353.
Moreover, some of the conditions for reopening, such as where the
prior decision was obtained by fraud (20 C.F.R. 404.988(c)(1)), would
almost invariably be invoked only by SSA on its own motion.  Fox, slip
op. 7;  Cieutat, 824 F.2d at 356 n.12;  Munsinger, 709 F.2d at 1215.

   b. Contrary to the view of petitioner (Pet. 12-13) and the First
Circuit in McCuin (817 F.2d at 174), this interpretation of the basic
reopening regulation is not undermined by the preceding regulation, 20
C.F.R. 404.987.  Subsection (a) of Section 404.987 informs the
claimant that he must seek Appeals Council review of the ALJ's
decision within 60 days.  But it further states that "a determination
or a decision made in your case may be reopened and revised" even
after 60 days have passed.  As in 20 C.F.R. 404.988, this language is
not limited to those determinations and decisions that are adverse to
the claimant or to situations in which the claimant might request
reopening.  Subsection (b) of 20 C.F.R. 404.987 then informs the
claimant:  "You may ask that a determination or a decision to which
you were a party be revised." In McCuin, the First Circuit read the
reference to "You" as an indication that the Secretary intended to
vest the claimant with exclusive control over reopening.  See 817 F.2d
at 174.  But as the Sixth Circuit has recognized, "(t)he language in
the section directed to 'you' was adopted in the 1980 recodification
in an effort to make the regulations clearer and easier for public
use" (Fox, slip op. 7, citing 45 Fed. Reg. 52078 (1980)).  This
statement of the claimant's rights in no way limits the authority of
SSA to take action (such as the reopening in this case) that is not
dependent upon any action by the claimant.

   c. Nor does SSA's authority to reopen an ALJ decision render
superfluous the provision in 20 C.F.R. 404.969 allowing the Appeals
Council to review an ALJ decision within 60 days, as suggested by
petitioner (Pet. 7, 9, 11, 14) and the First Circuit in McCuin (817
F.2d at 169-170).  The reopening regulations apply to determinations
and decisions rendered at any level of the four-stage administrative
review process;  by contrast, the Appeals Council's authority to
review a decision on its own motion within 60 days applies only to
decision that were rendered by an ALJ.  Any potential overlap between
the two procedures therefore exists for only a small percentage of
SSA's decisions.  At the initial determination and reconsideration
stages, there is no provision for own-motion review by an appellate
body like the Appeals Council.  Therefore, if SSA's own-motion
reopening authority were read out of the regulations, as petitioner
proposes, SSA would be deprived of the only means by which it can
correct erroneous awards of benefits at the initial determination and
reconsideration stages.  /2/

   Moreover, own-motion reopening authority does not render own-motion
review authority meaningless even at the ALJ stage.  Direct review and
reopening are separate procedural devices that are governed by
distinct regulatory provisions and have differing purposes and
timetables.  The 60-day limitation on Appeals Council review of an
ALJ's decision becomes final;  reopening permits correction of a
substantial error in an otherwise final decision.  Direct review is a
routine procedure;  reopening is an extraordinary one.  Cieutat, 824
F.2d at 355-356 & nn. 9-11;  Butterworth, 796 F.2d at 1385.  See also
Califano v. Sanders, 430 U.S. 99, 101-102, 107-109 (1977).  The
difference between the two procedures is thus analogous to the
difference in a civil case between an appeal and a motion for relief
form judgment under Fed. R. Civ. P. 60(b).  Review and reopening also
differ greatly in their practical operation.  We have been informed by
the Department of Health and Human Services that the Appeals Council
currently has the resources to screen only between 5% and 15% of all
unappealed ALJ decisions for possible own-motion review within 60
days.  This sample approach enables the Appeals Council to exercise
some direct supervision and quality control over ALJ decisions within
the 60-day period.  See DeLong v. Heckler, 771 F.2d 266, 268 (7th Cir.
1985);  H.R. Conf. Rep. 96-944, 96th Cong., 2d Sess. 57-58 (1980);  S.
Rep. 96-408, 96th Cong., 1st Sess. 53 (1979).  But it does not
foreclose the Appeals Council from thereafter correcting an error in
an individual ALJ decision that was not screened for possible review
but instead was brought to tis attention by another component of SSA
that discovered the error in the course of implementing the ALJ's
decision, as in this case.

   d. An interpretation of the regulations that permitted only a
claimant to seek to reopen a prior decision also would introduce
anomalies and asymmetry into the regulatory scheme.  It is
inconceivable, for example, that the Secretary intended to preclude
SSA from reopening and revising a decision that the claimant procured
by fraud, and yet the logic of petitioner's position would seem to
require that conclusion.  Similarly, it would be incongruous to
suppose that the Secretary intended to afford the claimant a right to
have SSA reopen a facially erroneous adverse decision, but to deny SSA
the authority to reopen a decision that is favorable to the claimant
if it contains a comparably obvious and serious error.  That is
especially so in light of the fact that a decision finding a claimant
eligible for old-age, survivors or disability benefits typically
results in monthly payments to the claimant for the indefinite future.
 There is no reason to believe that the Secretary intended to obligate
SSA to perpetuate an error in a determination of entitlement by
continuing to pay benefits even after the error has become apparent.
Compare Fed. R. Civ. P. 60(b)(5) (providing for relief from judgment
when "it is no longer equitable that the judgment should have
prospective application").  /3/

   e. If there could be any remaining doubt regarding the proper
construction of the reopening regulations, it is dispelled by the
consistent administrative practice for virtually the entire history of
the Social Security program.  In 1940, the Social Security Board
promulgated regulations to establish the four-stage administrative
review process that remains in effect to this day.  5 Fed. Reg
4169-4174.  The 1940 regulations also contained a separate subsection
providing for reopening and revision of decisions that had been
rendered at any of the four stages of review.  As relevant here, that
subsection provided that "(a)ny decision of a referee or the Appeals
Council * * * may be revised by the Appeals Council or upon the
petition of any party, when it clearly appears that there was an error
of fact or law in such decision or that such decision was procured by
fraud or misrepresentation" (20 C.F.R. 403.711(b) (emphasis added), as
added, 5 Fed. Reg. 4174 (1940)).

   This own-motion reopening authority in the 1940 regulation was
carried forward over the next four decades.  In fact, the First
Circuit acknowledged in McCuin that "(p)rior to 1980, the regulations
clearly gave the Appeals Council the right to reopen on its own
initiative after the sixty-day time limit" (817 F.2d at 174, citing 20
C.F.R. 404.956, 404.957 (1978)).  The First Circuit also acknowledged
in McCuin that when the procedural regulations were revised in 1980 to
make them more understandable, the Secretary stressed that "'no
substantive changes have been made'" (817 F.2d at 174, quoting 45 Fed.
Reg. 52078 (1980)).  This disclaimer refutes any notion that the
current regulations should be construed to have dispensed, sub
silentio, with SSA's longstanding authority to reopen decisions on its
own motion.  See Fox, slip op. 7;  Butterworth, 796 F.2d at 1385.  /4/

   f. The court of appeals' ruling in this case is consistent with the
rulings by three other courts of appeals that the Secretary may reopen
an administrative decision on his own motion.  See cases cited at page
6, supra.  The First Circuit reached a contrary conclusion in McCuin.
However, for a number of reasons, this circuit conflict does not
warrant review by the Court at this time:

   First, the question presented concerns the interpretation of the
Secretary's regulations.  There is no suggestion that the Social
Security Act itself bars the Secretary from reopening a decision on
his own motion.  To the contrary, 42 U.S.C. (Supp. III) 405(b)(1),
which directs the Secretary to hold hearings upon request, also
provides that "(t)he Secretary is further authorized, on his own
motion, * * * to conduct such investigations and other proceedings as
he may deem necessary or proper for the administration of (the Act)"
(emphasis added).  Moreover, 42 U.S.C. 405(a) confers on the Secretary
"'exceptionally broad authority'" to establish implementing
procedures, and those regulations must be sustained unless they are
arbitrary and capricious.  Bowen v. Yuckert, No. 85-1409 (June 8,
1987), slip op. 6-7 (quoting Heckler v. Campbell, 461 U.S. 458, 466
(1983)).  At the very least, the reopening regulations at issue here
are not an arbitrary or capricious means for implementing the
Secretary's duty under 42 U.S.C. (& Supp. III) 405(b) to conduct
investigations and proceedings on his own motion to ensure the
"proper" administration of the Act.  /5/

   Second, because the question on which the courts of appeals are
divided concerns the interpretation of the Secretary's own
regulations, the question can be conclusively resolved by the
Secretary by amending the regulations, without any need for
intervention by this Court.  It was for this reason that the Solicitor
General, with the concurrence of the Secretary, chose not to ask the
Court ot review the First Circuit's decision in McCuin, even though
McCuin conflicted with decisions of other courts of appeals and was,
in our view, clearly wrong.  Instead, as the Sixth Circuit noted in
Fox v. Bowen, the Secretary has formally announced his intention "to
revise his regulations to make it clear that the Social Security
Administration may reopen a final decision on its own initiative."
Slip op. 7, citing 52 Fed. Reg. 14720 (1987);  see also id. at 40296.
When the interpretation of the current regulations will be of no
continuing importance.

   Third, petitioner was not subjected to any novel or unfair
procedure in this case, because the decision below merely sustains the
exercise of authority that has existed since 1940 and because
petitioner was specifically notified in advance of that authority.
The decision in McCuin, by contrast, did constitute a marked departure
from past practice.  The fact that the Secretary chose to forgo
petitioning for certiorari in McCuin -- and therefore chose to
tolerate the curtailment of his reopening authority in the First
Circuit pending his revision of the governing regulations -- does not
create any fundamentally unfair disparity in the treatment of
claimants in different circuits.  That is especially so in light of
the discretionary nature of reopening (see Califano v. Sanders, 430
U.S. at 108) and the availability of other measures for correcting at
least some errors even in the First Circuit -- e.g., by devoting more
resources to screening ALJ decisions for possible own-motion review by
the Appeals Council within 60 days, or by terminating benefits on the
basis of a new decision rather than reopening and revising the
original decision.

   Fourth, the substantive basis for the reopening in this case
likewise was neither unreasonable nor unfair to petitioner.  The
Appeals Council reopened the ALJ's decision because, as the district
court observed, "the ALJ erred as a matter of law in characterizing
(petitioner's) income for the years 1978 through 1980 as 'wages'"
(Pet. App. 11a).  Indeed, petitioner contended before the ALJ that he
performed services for GMA not as an employee, but as a self-employed
independent contractor (id. at 26a).  And in 1980, petitioner
"characterized his fixed salary as guaranteed payments and included
the same in a Schedule K-1 'Partner's Share of Income' form" (id. at
11a n.4).  Moreover, although petitioner now asserts (Pet. 14-15) that
the ALJ's "findings of fact" support the notion that he was an
employee of GMA, petitioner does not address the Appeals Council's
holding, which was affirmed by the district court and court of
appeals, that SSA is foreclosed as a matter of law from treating
petitioner as an employee of his partnership.  Because petitioner
therefore has essentially conceded the correctness of that legal
ruling, the effect of the court of appeals' holding on the reopening
issue in this case is merely to protect the Secretary's ability to
prevent petitioner from receiving old-age insurance benefits to which
has is not entitled.  That result presents no occasion for this Court
to grant review.

   g. Petitioner also suggests (Pet. 10, 12) that review is warranted
because the decision below conflicts with the Eleventh Circuit's
decision in Butterworth.  However, there, as here, the court rejected
the contention that the current regulations prohibit the Secretary
from reopening a decision on his own motion.  796 F.2d at 1384-1385.
To be sure, the Eleventh Circuit went on to hold in Butterworth that
any reopening of an ALJ's decision after 60 days must be accomplished
by the ALJ, not the Appeals Council.  796 F.2d at 1385-1389.  In our
view, however, this latter holding was clearly erroneous (see also
Cieutat, 824 F.2d at 356-357 n.13), because the Appeals Council, from
its inception in 1940, has had the authority to reopen an ALJ's
decision.  See 20 C.F.R. 403.711(b), as added, 5 Fed. Reg. 4174 (1940)
(quoted at page 11, supra).  Indeed, petitioner does not actually
argue in favor of the Butterworth rule.  In any event, the question of
which component in SSA can exercise the Secretary's reopening
authority is even less worthy of review at this time than is the
question whether the Secretary has that authority at all under
existing regulations.  The allocation of reopening authority within
SSA (and specifically to the Appeals Council) is a matter to be
addressed in the Secretary's intended revision of the reopening
regulations.  See 52 Fed. Reg. 40296 (1987).

   2. Petitioner argues (Pet. 13-14) that even if the Appeals Council
is authorized to reopen an ALJ's decision after 60 days, the Appeals
Council exceeded its authority in this case because the reopening was
based on a determination that the ALJ erred as a matter of law in
concluding that Petitioner was an employee of GMA from 1978 to 1980.
In petitioner's view, errors of law can be corrected only by direct
review within 60 days under 20 C.F.R. 404.970(a)(2).  However,
petitioner's reliance on that regulation is nothing more than a
variant of his basic (albeit erroneous) contention that the Appeals
Council's reopening authority is governed by the limitations on its
review authority.

   The relevant reopening regulations, 20 C.F.R. 404.989(a)(3), states
that good cause for reopening will be found if an error clearly
appears on the face of the evidence.  Nothing in that provision
suggests that reopening is limited to situations in which the ALJ
committed a clear error of fact rather that law.  Past administrative
practice also refutes such a distinction, because the 1940 version of
the reopening regulations expressly provided that a hearing decision
could be revised on the Appeals Council's own motion "when it clearly
appears that there was an error of fact or law in such decision" (20
C.F.R. 403.711(b), as added, 5 Fed. Reg 4174 (1940)), and that
practice has been followed ever since.  See OHA Handbook Section
1-922-30.  Nor would such a distinction make sense:  where the
undisputed facts render the claimant ineligible under the Act itself,
there is no reason to believe that the Secretary nevertheless intended
to bind SSA to pay benefits out of the Trust Fund.  In any event,
petitioner's alternative construction of the reopening authority does
not warrant this Court's attention, because it has not been adopted by
any court of appeals and it was specifically rejected by the First
Circuit in McCuin (817 F.2d at 171).  /6/

   3. Petitioner presents virtually no argument on the merits of the
coverage issue.  He does state in passing that the ALJ's decision that
he was an employee of GMA rested on "findings of fact." See Pet.
14-15.  That observation is irrelevant, however, because the Appeals
Council set aside the ALJ's decision not on the basis of any
disagreement with his factual findings, but because of the ALJ's
erroneous legal conclusion that a partner in petitioner's position may
be treated as an employee of the partnership (Pet. App. 10a).  As
noted above (see pages 4-5, 15, supra), both courts below sustained
this ruling by the Appeals Council, and petitioner does not address it
here.  There accordingly is no occasion for this Court to consider
that issue.  /7/

   4. Finally, petitioner contends (Pet. 16-18) that the courts below
should have decided whether he is entitled to quarters of coverage for
employmemt prior to 1951.  However, petitioner fails to answer the
finding by the district court and court of appeals that this issue was
not properly preserved in administrative proceedings (Pet. App. 2a-3a,
9a n.3).  Moreover, as the district court observed, it makes no
difference for present purposes whether petitioner should be credited
with nine quarters of coverage for pre-1951 employment, because the
exclusion of the eight quarters for 1979 and 1980 renders him
ineligible for old-age insurance benefits in any event (Pet. App.
9a-10a n.3).  Finally, the court of appeals made clear that its
decision does not foreclose petitioner from seeking correction of his
earnings records for years prior to 1951, pursuant to 42 U.S.C. (&
Supp. III) 405(c) (Pet. App. 3a).  Especially in the absence of any
ruling by the courts below, petitioner's claims concerning his
employment prior to 1951 do not warrant review at this time.

                              CONCLUSION

   The petition for a writ of certiorari should be denied.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   RICHARD K. WILLARD

      Assistant Attorney General

   JOHN F. DALY

      Attorney

   FEBRUARY 1988

   /1/ Under 20 C.F.R. 404.988(b), SSA, on the basis of a finding of
"good cause," may reopen a decision within four years of the initial
determination on the claim for benefits.  The four-year period runs
from the date of the initial determination even where, as here, the
claimant sought review of the initial determination by requesting
reconsideration and an ALJ hearing.  The standards for finding "good
cause" to reopen are contained in 20 C.F.R. 404.989.  In this case,
the Appeals Council relied on 20 C.F.R. 404.989(a)(3), which provides
that good cause will be found if "(t)he evidence that was considered
in making the determination or decision clearly shows on its face that
an error was made."

   /2/ Congress recognized the need for the Secretary to revise
determinations rendered at the first two stages of the administrative
review process when it enacted the Social Security Disability
Amendments of 1980, Pub. L. No. 96-265, 94 Stat. 441.  Under the
disability programs, a state agency decides at the initial
determination and reconsideration stages whether a person is under a
disability.  42 U.S.C. 421(a).  However, a decision by the state
agency that a person is under a disability is actually implemented by
SSA, which has the independent responsibility for determining whether
the claimant satisfies other criteria (such as being fully insured
under Title II) before certifying the claims for payment under 42
U.S.C. 405(i).  In Section 304(c) of the 1980 Amendments (94 Stat.
455), Congress directed SSA to review 65% of the state disability
determinations in favor of the claimant before those determinations
are implemented by SSA.  See 42 U.S.C. 421(c)(2) and (3).  In
addition, Congress made clear in 42 U.S.C. 421(c)(1) that the
Secretary may, "on his own motion," review any determination by a
state agency, either in favor of or adverse to the claimant and either
"before or after any action is taken to implement such determination."

   /3/ For this very reason, when Congress enacted the Social Security
Disability Benefits Reform Act of 1984, Pub. L. No. 98-460, 98 Stat.
1794, it specifically provided that SSA may terminate benefits if it
concludes that the prior finding of disability "was in error" (42
U.S.C. (Supp. III) 423(f)(4)).  See H.R. Rep. 98-618, 98th Cong., 2d
Sess. 12 (1984)("benefits which were improperly allowed orignially
should not be continued").  As fortiori, the procedural framework does
not obligate SSA to pay benefits to an ineligilbe recipient even where
the error is identified before an benefits have been paid.

   /4/ SSA's intention to retain own-motion reopening authority under
the current regulations is evident in other respects as well.  For
example, the Office of Hearings and Appeals Handbook explains that
"(i)n certain situations there are equitable reasons for both the
claimant and SSA for reopening a determination or decision after it
has become 'final and binding'" (id. Sections 1-920).  The OHA
Handbook further states that an ALJ's own motion or on the motion of a
party and that "(a)n ALJ's decision may also be reopened and revised
by the AC (Appeals Council)"(id. Section 1-925;  see also id. Sections
1-922-30 and 1-922-31).  Moreover, the standard notice that was sent
to petitioner informed him that the Appeals Council could review the
ALJ's favorable decision on its own motion within 60 days and that
even after 60 days the Appeals Council could reopen the decision if,
inter alia, there was a clear error on the face of the evidence (Pet.
App. 17a-18a).

   /5/ The First Circuit in McCuin suggested that due process concerns
would be raised in some circumstances if the regulations were
construed to permit the Secreatry to reopen a decision on his own
motion, because that interpretation would deprive administrative
decisions of their finality.  See 817 F.2d at 171-175.  With all
respect, we believe that the First Circuit's due process concerns are
without merit, at least in the vast majority of cases to which the
reopening regulations are applied.  The analogous provisions for
relief from judgment under Fed. R. Civ. P. 60(b) plainly do not
violate the Due Process Clause merely because they may result in the
reopening of a judgment that had become "final" when the time for
taking an appeal expired.  Furthermore, to the extent that the First
Circuit was concerned about possible unfairness to a claimant as a
result of the reopening of a decision after benefits were paid, any
such unfairness may be remedied by waiver of recoupment of
overpayments where recovery would defeat the purposes of the Act or
"be against equity and good conscience." 42 U.S.C. 404(b).  See
Califano v. Yamasaki, 442 U.S. 682 (1979).

   In any event, there can be no plausible claim in this case that the
Appeals Council's reopening of the ALJ's decision violated
petitioner's due process rights, especially since the notice
transmitting the ALJ's decision specifically informed him of that
possibility.  In fact, peitioner does not appear to argue that his due
process rights were violated;  he merely quotes a passage from the
McCuin decision that discusses certain due process issues as a general
matter.  See Pet. 11.  It would, moreover, be premature for the Court
to address any possible due process issues that could arise from
particular applications of the reopening regulations in other
circumstances, especially in view of the Secretary's plans to revise
those regulations.

   /6/ Contrary to petitioner's contention (Pet. 12, 14), the district
court in Call v. Heckler, 647 F. Supp 560 (D. Mont. 1986), did not
hold that errors of law can never support own-motion reopening.  The
court held only that the Secretary cannot reopen a prior decision on
the ground that the ALJ abused his discretion.  See 647 F. Supp. at
562.

   /7/ Petitioner also does not challenge the rationale of the Appeals
Council's decision after the case was reopened -- i.e., that
petitioner was ineligible for quarters of coverage as a self-employed
independent contractor because the only income derived by GMA (and
therefore by petitioner) was rental income from real estate, which is
specifically excluded from the definition of self-employment income
under 42 U.S.C. 411(a)(1).  See Pet. App. 37a.  Petitioner does point
out (Pet. 15) that the district court did not resolve the
rental-income issue and instead affirmed the Appeals Council's
decision on the ground that petitioner did not in any event have net
self-employment income giving rise to covered quarters in 1979 and
1980.  See Pet. App. 14a-15a.  But petitioner likewise makes no effort
to challenge this ruling by the district court.  He merely observes
(Pet. 15) that this ground for rejecting petitioner's claim was not
discussed in the Appeals Council's decision.  But it was discussed by
the ALJ, who found that because of offsetting losses and expenses,
petitioner had no net self-employment income if he was an independent
contractor from 1978 to 1980 (Pet. App. 27a).  The Appeals Council did
not overturn that finding.  As a result, the courts below did not
dispose of the case on a ground that was rejected or not considered in
the administrative proceedings.  This factbound issue therefore does
not warrant further review.