Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-92-09500/USCOURTS-ca10-92-09500-0/pdf.json

Parties Involved:
Director, Office of Workers' Compensation Programs, United States Department of Labor
Respondent
Edward P. McConnell
Petitioner

Document Text:

PUBLISH 

FlLbD 

U ·-1 States Coμrl <?f Appeals Ill Tenth C1rcwt 

UNITED STATES COURT OF APPEALS ~PR 2 7 1993 

TENTH CIRCUIT 

EDWARD P. McCONNELL, 

Petitioner, 

v. 

DIRECTOR, OFFICE OF WORKERS' 

COMPENSATION PROGRAMS, UNITED 

STATES DEPARTMENT OF LABOR, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

ROBERT L. HOECKER 

Clerk 

No. 92-9500 

APPEAL FROM THE OFFICE OF WORKERS COMPENSATION PROGRAM 

(OWCP No. 235-09-6762) 

Submitted on the Briefs. 

Jonathan Wilderman, Wilderman & Linnet, P.C., Denver, Colorado, 

for the Petitioner. 

Marshall J . Breger, Solicitor of Labor; Donalds. Shire, Associate 

Solicitor of Labor; Patricia M. Nece, Counsel for Appellate 

Litigation; and Eileen M. McCarthy, Attorney, United States 

Department of Labor, Washington, D. C., for the Respondent. 

Before TACHA and BRORBY, Circuit Judges, and BROWN, Senior 

District Court Judge.* 

TACHA, Circuit Judge. 

* The Honorable Wesley E. Brown, United States District Court 

for the District of Kansas, sitting by designation. 

Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 1 
Edward P . McConnell appeals a decision of the Benefits Review 

Board denying his claim for waiver of overpayment recovery. We 

exercise jurisdiction under 33 U.S.C. § 92l(c) and affirm in part 

d . 1 

an reverse in part. 

I. 

In June, 1980, Edward McConnell filed a claim for benefits 

under the Black Lung Benefits Act, 30 U.S.C. §§ 901-945 (as 

amended). On August 6, 1981, the Deputy Commissioner of the 

Department of Labor ("DOL") approved McConnell's claim and 

notified his employer, Kaiser Steel Corporation ("Kaiser"), of its 

liability for these benefits. Because Kaiser contested the claim, 

the Black Lung Disability Trust Fund ("Trust Fund") began to pay 

"interim" benefits. On August 20, 1981, the Deputy Commissioner 

notified McConnell that he would receive from the Trust Fund a 

lump-sum $5,758.60 check for accrued benefits and a monthly 

$419.60 check thereafter. This letter, however, also advised 

McConnell of the provisional nature of Trust Fund payments: 

These interim benefits are temporary, pending a final 

decision on your claim. If it is later determined by an 

Administrative Law Judge, the Benefits Review Board or a 

U.S. Court of Appeals that you are not eligible to 

receive these payments, an overpayment will exist and 

you may be responsible for repayment of all money 

received from the Black Lung Disability Trust Fund. 

On November 10, 1982, an Administrative Law Judge ("ALJ") 

awarded benefits after hearing the contested claim. Kaiser 

appealed to the Benefits Review Board which, on August 28, 1986, 

1 After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34 (a ) ; 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 2 
vacated the award and remanded the case to the ALJ for 

reconsideration. On March 10, 1987, the ALJ determined on 

reconsideration that McConnell was not entitled to benefits and 

denied the claim. The ALJ's decision denying benefits, which 

McConnell did not appeal, is now final. 

On April 15, 1987, the DOL notified McConnell that the ALJ's 

decision had resulted in an overpayment of black lung benefits 

totaling $37,360. After an informal conference on March 2, 1988, 

the Deputy Commissioner found that McConnell was without fault in 

the creation of the overpayment but nevertheless declined to waive 

repayment after concluding that repayment would not deprive 

McConnell of his ordinary and necessary income and that McConnell 

had not changed his position for the worse on account of receiving 

the benefits. Instead, the DOL ordered McConnell to repay the 

full amount of the benefits. On March 22, 1990, an ALJ affirmed 

the DOL's order denying waiver and directed repayment at the rate 

of $525 per month. The Benefits Review Board affirmed the ALJ's 

decision on November 13, 1991. This appeal followed. 

II. 

The Black Lung Benefits Act provides for the compensation by 

private employers of miners afflicted with pneumoconiosis. 30 

U.S.C. §§ 901-945. In 1977, Congress created the Trust Fund in 

order to provide claimants with interim payments. See 26 U. S.C. § 

9501. 2 Section 923 (b ) of the Black Lung Benefits Act authorizes 

2 Section 950l(d) governs expenditures from the Trust Fund and 

provides, in pertinent part, for payment of benefits from the 

(Footnote Continued on Next Page ) 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 3 
the DOL to recover erroneous Trust Fund payments under the 

provisions set forth in§ 204 of the Social Security Act, 42 

U. S . C. § 404, which govern the recovery of Social Security 

"overpayments." See 30 U. S.C. § 923(c). Section 204 specifically 

limits the recovery of overpayments from persons without fault: 

In any case in which more than the correct amount 

of payment has been made, there shall be no [] recovery 

by the United States from ... any person who is 

without fault if such . . . recovery would defeat the 

purpose of this subchapter or would be against equity 

and good conscience. 

Id. § 404(b). Thus, when recovery of overpayments from a 

faultless beneficiary would defeat the purposes of the act or be 

against equity or good conscience, recovery of the overpayment is 

to be waived . Congress did not define the phrases "without 

fault," "defeat the purposes of this subchapter," or "against 

equity and good conscience." 

The Black Lung Benefits Act's implementing regulations at 20 

C.F.R. §§ 410.56la-.56lh mirror the§ 204 criteria contained in 

the Social Security Act's implementing regulations at 20 C.F . R. §§ 

404.506-.512 . The Black Lung regulations begin by restating the 

statutory mandate: 

There shall be no .. recovery in any case where 

an incorrect payment . . . has been made with respect t o 

an individual: 

(a) Who is without fault, and 

(b ) . .. recovery would either: 

(1 ) Defe at the purpose of title IV of the Act, or 

(2 ) Be against equity and good conscience. 

(Footnote Continued from Previous Page ) 

Trust Fund where the operator liable for the payments does n o t 

commence those payments within thirty days of the initial 

eligibility determination. 26 U.S.C. § 95 01(d) (1 ) . 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 4 
20 C.F.R. § 410.561a . The regulations then define the operative 

phrases. Section 410.561c defines "defeat the purpose of title IV 

of the Act" as "to deprive a person of income required for 

ordinary and necessary living expenses," id. § 410.561c, while§ 

410.561d defines "against equity and good conscience" to mean that 

the individual, because of the payment, has either "relinqui shed a 

valuable right" or "changed his position for the worse" on account 

3 of the benefits, id. § 410.561d. Section 410 . 561d provides two 

examples of situations in which recovery would be against equity 

and good conscience. Id.

4 Finally, the regulations contain two 

3 Section 410.561b provides that an individual is "without 

fault" unless the facts show that the payments resulted from 

(a) [a]n incorrect statement made by the individual 

which he knew or should have known to be incorrect; or 

(b ) [f]ailure to furnish information which he knew 

or should have known to be material; or 

(c) [w]ith respect to the overpaid individual only, 

acceptance of a payment which he either knew or could 

have been expected to know was incorrect. 

20 C.F.R. § 410.561b. The DOL concedes that McConnell was 

"without fault" in the creation of the overpayment at issue in 

this case . 

4 Section 410.561d provides in full: 

Against equity and good conscience means that 

adjustment or recovery of an incorrect payment will be 

considered inequitable if an individual , because of a 

notice that such payment would be made or by reason of 

the incorrect payment, relinquished a valuable right 

(example 1 ) ; or changed his position for the worse 

(example 2 ). In reaching such a determination, the 

individual's financial circumstances are irrelevant. 

Example 1. After being awarded benefits, an 

individual resigned from employment on the assumption he 

would receive regul ar monthly benefit payments. It was 

d i s covered 3 years later than [sic ] (due to 

Admini stration error ) his award was erroneous because he 

did not have pneumoconiosis. Due to his age, the 

(Footnote Continued on Next Page ) 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 5 
deeming provisions that operate independently of§§ 410.561b, 

410.561c, and 410.561d. Section 410.56lh(a ) provides that 

recovery is deemed to be against equity and good conscience when 

an individual is deemed to be without fault under§ 410.56lf. Id. 

§ 410.56lh(a). In turn, § 410.56lf deems an individual to be 

without fault when he "accepts such overpayments because of 

reliance on erroneous information from an official source within 

the Administration ... with respect to the interpretation of a 

pertinent provision of the Act or regulations pertaining thereto 

II Id. § 410.56lf. Thus, when an individual relies on 

erroneous information, he is per se entitled to waiver because the 

regulations deem his circumstances to satisfy both the "without 

fault" and "against equity and good conscience" elements for 

waiver under§ 410.561a . 

(Footnote Continued from Previous Page) 

individual was unable to get his job back, and could not 

get any other employment. In this situation, recovery 

or adjustment of the incorrect payments would be against 

equity and good conscience because the individual gave 

up a valuable right. 

Example 2 . A widow, having been awarded benefits 

for herself and her daughter, entered her daughter in 

college because the monthly benefits made this possible. 

After the widow and her daughter received payments for 

almost a year, the deceased worker was found not to have 

had pneumoconiosis and all payments to the widow and 

child were incorrect. The widow has no other funds with 

which to pay the daughter's college expenses. Having 

entered the daughter in college and thus incurred a 

financial obligation toward which the benefits had been 

applied, she was in a worse position financially than if 

she and her daughter had never been entitled to 

benefits. In this situation, the recovery of the 

incorrect payments would be inequitable. 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 6 
III. 

We review the Benefits Review Board's decision to determine 

whether it erred in concluding that the ALJ's decision d~nying 

waiver was supported by substantial evidence and made in 

accordance with applicable law. See Garcia v. Director, OWCP, 

869 F . 2d 1413, 1415 {10th Cir. 1989 ) . "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.'" Casias v. Secretary of Health & Human Servs., 933 

F.2d 799, 800 {10th Cir. 1991) {quoting Richardson v . Perales, 402 

U. S. 389, 401 (1971)); see also Williams v . Bowen, 844 F.2d 748, 

750 {10th Cir. 1988). The claimant bears the burden of 

establishing entitlement to waiver under the regulations. See 

Valente v. Secretary of Health & Human Servs., 733 F.2d 1037, 1042 

{2d Cir. 1984). 

McConnell contends that repayment should be waived for three 

reasons. He first argues that he is entitled to waiver under the 

deeming provisions because the DOL's initial determination of 

entitlement to benefits constituted "erroneous information" upon 

which he relied. Second, he contends that the ALJ incorrectly 

calculated his income and expenses, thereby reaching an 

erroneously high surplus figure, and that his actual surplus is so 

small that any recovery would defeat the purposes of the Act by 

depriving him of his ordinary and necessary income. Finally, 

McConnell contends that r e covery would be against equity and good 

conscience because he changed his position for the worse when he 

took a $5000 vacation to visit relatives and when his wife deeded 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 7 
three house s to her daughter in 1986. Because the DOL concedes 

that Mr. McConnell was "without fault" within the meaning of§ 

410.561b, Mr. McConnell is entitled t o waiver under§ 410.561a if 

recovery would either defeat the purposes of the Act or be against 

equity and good conscience. 

A. Waiver Under the Deeming Provisions 

McConnell argues that he twice relied on "erroneous 

information" respecting the overpayments when (1 ) the Deputy 

Commissioner initially determined that he was entitled to 

benefits, and (2) the ALJ initially awarded benefits in 1982. 

Although we find no federal court decision examining whether the 

"erroneous information" clause reaches the initial determination 

of entitlement, the Benefits Review Board consistently has 

rejected that position . See Nel son v. Director. OWCP, 14 Black 

Lung Rep. (MB) 1 -159, 1-161 (Ben. Rev. Bd. 1990); Weis v. 

Director, OWCP, 16 Black Lung Rep. (MB) 1 -56, 1-58 (Ben. Rev. Bd. 

1990 ). We agree. 

The regulations at 20 C.F.R. § 725.522 specifically 

contemplate recovery in the situations described by McConnell . 

That provision states: 

If benefit payments are commenced prior to the final 

adjudication of the claim and it is later d e termined by 

an administrative law judge, the Board, or court that 

the c laimant was ineligible to receive such payments, 

such payments shall b e considered overpayments pursuant 

to§ 725.540 of this subpart which may be recovered in 

accordance with the provisions of this subpart. 

20 C. F . R. § 725.522 (c) . The erroneous information deeming 

provision in§ 410.561f is one of the recov ery provisions referred 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 8 
to in§ 725.522(c). Thus, McConnell's construction of the deeming 

provision would waive recovery whenever the agency made an 

incorrect initial determination, thereby rendering§ 725.522 (c ) 

meaningless. See Weis, 16 Black Lung Rep. at 1-58. Furthermore, 

even were we to find McConnell's contention consonant with the 

regulations, we fail to see what was "erroneous" about the 

information he received. The letter notifying him of his benefits 

expressly--and correctly--stated that the benefits were temporary 

and subject to repayment. 5 

Having decided that the agency's initial determination does 

not constitute erroneous information, we easily conclude that the 

award of benefits by the ALJ also fails in that regard. The 

regulations speak to reversal by not just an ALJ but by the 

Benefits Review Board or the Court of Appeals. 20 C.F.R. § 

725.522(c). Clearly, then, the regulations contemplate a 

situation, such as ours, where the Deputy Commissioner's award of 

benefits is upheld by the ALJ but reversed by the Benefits Review 

Board. Thus, like the Deputy Conunissioner's initial 

determination, an ALJ's nod of approval logically cannot satisfy 

5 We acknowledge the existing body of case law which appears t o 

limit this provision to those situations where agency officials or 

employees render erroneous advice in response to the claimant's 

inquiry regarding his eligibility to receive or keep a particular 

payment. Beaudry v. Secretar:y of Health & Human Servs. , No . 90-

30093 - F , 1991 WL 319161, at *8 (D. Mass. Sept . 24, 1991) ; see also 

Valente, 733 F . 2d at 1044 (individual erroneously advised by 

Social Security employee that she could keep undeserved payments) ; 

Morris v. Harris, 663 F.2d 1 014, 1015-16 (10th Cir. 1981 ) 

(repayment not against equity and good conscience where agency 

officials advice not erroneous). Because we find that McConnell's 

argument must fail as i nherently inconsistent with the regulatory 

scheme, we d o not address these elemental restrictions to the 

deeming provisions. 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 9 
the deeming provision. In addition, the initial determination 

specified that the benefits were subject to reversal by the 

Benefits Review Board. Because the ALJ's first award necessarily 

incorporated that limitation, it was similarly devoid of 

"erroneous" information. The ALJ properly concluded that 

McConnell may not avail himsel f of the deeming provisions in this 

case. 

B. Would Recovery Defeat the Pur;:poses of the Act? 

Recovery of an overpayment defeats the purposes of the Act 

when it "deprive[s] a person of income required for ordinary and 

necessary living expense. 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." 20 C.F. R. § 410.561c(a). 

Relevant expenses include food, clothing, rent or mortgage 

payments, utilities, insurance, installment payments, medical 

expenses, support of others for whom the individual is legally 

responsible, and "[o]ther miscellaneous expenses which may 

reasonably be considered as part of the individual's standard of 

living . " Id. 

McConnell submitted his overpayment questionnaire6 detailing 

his monthly finances at the hearing before the ALJ. The 

questionnaire listed assets consisting mainly of a rental house in 

6 The record contains several questionnaires filed by McConnell 

for different years. We refer to the 1989 questionnaire, which 

was the most current document at the time of the hearing and which 

served as the basis for the ALJ's calculations. 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 10 
Raton, New Mexico, assessed at about $13,000, a 1979 pickup truck 

worth $2,000, and a checking account balance of less than $500. 

He calculated that his social security benefits, pension benefits, 

and rental income totalled $1,683.50 per month . McConnell 

estimated his monthly expenses at $1,364.57. The ALJ, while 

finding some of McConnell's reported expenses "high" and "somewhat 

unusual," did not dispute that figure. The McConnells live rentfree in a house owned by Mrs. McConnell's daughter, Glenda 

Trujillo, 7 but pay for repairs and utilities. Under McConnell's 

own calculations, then, he has a monthly surplus of almost $320 

per month. 

The ALJ, however, disputed McConnell's calculation of his 

income because it did not include his wife's social security 

benefits. Apparently, McConnell excluded his wife's social 

security benefits because she deposits them in a separate checking 

account and uses them to support Ms. Trujillo and her children and 

grandchild. The ALJ held that Mrs. McConnell's social security 

benefits had been erroneously excluded because McConnell could not 

include his wife's expenses but exclude her income . The ALJ then 

determined that, after including Mrs. McConnell's income, recovery 

of the overpayment would not defeat the purposes of the Act and 

that Mr. McConnell had excess income sufficient to repay the 

overpayment at the rate of $525 per month. On appeal, McConnell 

argues that (1) his wife's social security benefits should not be 

7 In 1986, Mrs . McConnell deeded three houses which she 

received as divorce property from her previous husband to Ms . 

Truj i l l o . Ms. Trujillo lives in one house, the McConnells live 

another, and the third is rented. 

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in 

Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 11 
counted because they are his wife's property and because they are 

used to support close relatives, and (2) his and his wife's poor 

health require a substantial "cushion" of excess income in order 

to pay anticipated medical bills. 

We first hold that the ALJ properly included Mrs. McConnell's 

benefits. In general, the regulations take a functional approach 

to discerning income and expenses and we agree that the income and 

expenses of both spouses should be included. See, e . g., Gavin v . 

~eckler, 620 F. Supp. 999, 1001 {N.D. Ill. 1985) (determining 

expenses according to household, rather than individual); Ashe v. 

Director, OWCP, 16 Black Lung Rep. (MB) 1-109, 1-112 (Ben. Rev. 

Bd. 1992) (rejecting claimant's assertion that wife's separately 

held assets should not be counted). We reject, however, 

McConnell's invitation to include the expenses of his wife's 

family. The regulations expressly provide for including "expenses 

for the support of others for whom the individual is legally 

responsible." 20 C.F.R. § 410.561c(a) (3). McConnell presented no 

evidence whatsoever that he and his wife are legally responsible 

for the support of his wife's forty-three year old, partiallyemployed daughter or her offspring. While we appreciate Mrs. 

McConnell's charity, we cannot include it as an expense under 

these regulations. See, e.g . , Hannah v. Bowen, No . C-2-87-507, 

1988 WL 252104, at *2 (S.D. Ohio Apr. 4, 1988) (excluding payment 

of son's mortgage and expenses absent any allegation of legal 

responsibility of support) . Instead, we, like the ALJ, interpret 

the regulations as sensibly counting the income and expenses of 

the household as defined by legal responsibility. Under this 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 12 
formula, Mr. McConnell's actual monthly expenses, as evidenced by 

the 1989 questionnaire, are $1,364.57 and his actual monthly 

income, including his wife's monthly Social Security payment of 

$320, is $2,003.50. 

Second, we acknowledge McConnell's argument concerning an 

income cushion but find no error. The regulations expressly state 

that recovery will defeat the purposes of the Act where the 

claimant needs substantially all of his income to cover his 

relevant expenses. 20 C.F.R. § 410.561c(b). We agree with the 

decisions that interpret this language to contemplate a small 

monthly cushion where warranted, see. e.g., Teamer v . Secretary of 

Health & Human Servs., 764 F. Supp. 1328, 1333 (N.D. Ind. 1991) 

(recovery defeats purposes of Act where individual needs 

substantially all of income); Posnack v. Secretary of Health & 

Human Servs., 631 F. Supp. 1012, 1015 (E.D.N.Y. 1986) (individuals 

are "entitled to retain sufficient monetary resources in order to 

be prepared for emergencies"), but fail to see how that principle 

affects this appeal. The McConnell's actual monthly income of 

$2,003.50 exceeds their monthly expenses of $1,364.57 by $638.93 

per month . Thus, a monthly payment of $525 still leaves a 

sufficient monthly cushion of almost $114. 

We hold that the Benefits Review Board properly concluded 

that the ALJ's determination that a monthly repayment of $525 

would not defeat the purposes of the Act is supported by 

substantial evidence . The denial of McConnell's petition for 

waiver under 20 C.F.R. § 410.561c is therefore affirmed. 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 13 
C. Would Recovery Be Against Equity and Good Conscience? 

McConnell argued below that recovery of the overpayment would 

be against equity and good conscience because he changed his 

position for the worse in reliance on the benefits. Upon 

receiving a lump sum black lung benefits payment of $5,758.60 in 

January, 1982, McConnell and his wife took a six-week car vacation 

to visit relatives on the East coast. McConnell testified to the 

ALJ that he would not have taken the vacation absent the benefits 

award and argued that his vacation expenditures thus constituted a 

change in position for the worse.

8 

The ALJ disagreed, concluding that recovery of overpayment is 

not against equity and good conscience where a claimant takes a 

vacation upon receipt of lump-sum benefits because "so spending 

the monies in these circumstances in my judgment and based on the 

interpretation of§ 410.561d on which§ 725.542(b) (2) is based, do 

not equate with the intended thrust of the regulatory examples." 

The Benefits Review Board agreed, finding that the ALJ "reasonably 

8 For the first time on appeal, McConnell argues that the 

deeding of property to his wife's daughter constitutes a change of 

position for the worse. Although waiver of recovery of 

overpayments has been granted on similar facts, see Pruiett v. 

Director, OWCP, 15 Black Lung Rep. (MB) 3-463, 3-470 (Dep't of 

Labor, Office of ALJs June 28, 1991) (claimant deeded house to 

daughter but retained life estate and accompanying obligation to 

ameliorate waste ) , McConnell did not present this argument to 

either the ALJ or the Benefits Review Board. McConnell's failure 

to raise this argument with the Board "constitutes failure to 

exhaust administrative remedies and deprives the Court of Appeals 

of jurisdiction to hear the matter." Rivera-Zurita v. I.N.S., 946 

F.2d 118, 120 n . 2 (10th Cir. 1991); see also Hix v. Director, 

OWCP, 824 F . 2d 526, 527- 28 (6th Cir. 1987) (failure to challenge 

rebuttal of disability presumption in Black Lung case precluded 

appellate review of that argument). 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 14 
found that this expenditure did not equate with the intended 

thrust of the regulatory examples of 20 C.F.R. § 410.561d." 

On appeal, McConnell reiterates his contention that the 

vacation expenses constituted a change in position for the worse. 

We read his brief to challenge not the ALJ's factual findings in 

this regard but its legal conclusion that§ 410.561d excludes 

consideration of McConnell's vacations expenses as being outside 

the "thrust" of the regulation, an issue which we review de novo. 

We begin with the specific elements of the regulation, which 

provides that recovery of an overpayment is against equity and 

good conscience when the claimant, "because of a notice that such 

payment would be made or by reason of the incorrect payment 

changed his position for the worse." 20 C.F.R. § 410 . 561d. This 

means that the claimant must demonstrate (1) a change in position 

(2) for the worse and (3) a causal relationship between the 

benefits and the change in position. 

First, a claimant "changes position" for purposes of the Act 

when he takes new action or incurs a new expense or obligation. 

See Beaudry. 1991 WL 319161 at *6; see, e.g., Morishita v. Bowen, 

No. 87-C-0881-S, 1989 WL 280360, at *2 {D. Utah July 11, 1989) 

(payment of preexisting debts not a change of position) . Although 

the individual must actually incur the expense or obligation, see 

Seigler v. Secretary of Health & Human Servs., No. 3:85-2965-

14(H) , 1986 WL 83453, at *3 {D.S.C. Nov. 28, 1986) (disruption of 

budget not a change in position because claimant neither incurred 

debts nor made substantial purchases), the change need not be 

"dramatic," see. e.g . , Cucuzzella v. Weinberger, 395 F . Supp. 

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1288, 1298 (D. Del. 1975) ($3500 per year tuition) ; see also 

Milton v. Harris, 616 F.2d 968, 975 (7th Cir. 1980 ) (change may be 

"minor") . 

Second, the new act or obligation must be for the worse. 

See, e.g., Fleming v. Califano, 484 F . Supp. 721, 726 (E.D. Pa. 

1980) (claimant failed to demonstrate that sale of house and 

purchase of investments subsequent to award of benefits were a 

change in position for the worse); Orlandini v. Weinberger, 421 F. 

Supp. 586, 591-92 (E.D. Wis. 1976) (investing benefits in personal 

business not change for the worse). 

Finally, the new act or obligation must be linked to the 

award of benefits. See Milton, 616 F.2d at 974-75 (award of 

benefit did not cause ineligibility for public housing where 

claimant elected not to apply; alleged change in position was too 

"speculative" and "remote") . Thus, it is not enough under this 

provision to simply have spent the amount received. Rather, the 

individual must show that he "spent the money in a way in which 

[he] would not have but for the receipt of the overpayments 

. . . . " Posnack, 631 F. Supp. at 1016; see also Wolter v. 

Sullivan, No. C89-1622W, 1990 WL 166527, at *2 (W.D. Wash. July 

11, 1990) (care of children not an expenditure caused by the award 

of benefits); Hannah, 1988 WL 252104, at *4 (purchase of 

unmarketable property does not support waiver where it was 

initiated prior to the overpayment) . 

Applying this analysis, it is clear that the McConnell's 

vacation satisfies the literal requirements for a "change in 

position" waiver: they spent a substantial and unrecoverable sum 

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Appellate Case: 92-9500 Document: 010110220132 Date Filed: 04/27/1993 Page: 16 
of money on an activity which they would not have undertaken 

absent the award of benefits. 9 The DOL nevertheless contends that 

the McConnell's vacation is not the~ of change in position for 

which waiver should be granted. We reject this argument for 

several reasons. 

First, neither the statute nor the regulations limits the 

types of changes in position that can trigger waiver. Although 

"college tuition" appears to be the most cited change in position 

meriting waiver, see, e.g., Robles v. Bowen, No . 87 CV 4082, 1989 

WL 113174, at *3 (E.D.N.Y. Sept. 15, 1989); Polemis v. Heckler, 

No. 84 Civ. 2804 (WK), 1986 WL 83405, at *5-*6 (S.D.N.Y. June 10, 

1986) (private college prep school); Cucuzzella, 395 F . Supp. at 

9 The transcript of the hearing before the ALJ contains two 

pages of McConnell ' s testimony concerning the trip and includes 

the following colloquy: 

Q. Did you spend this money you had received by lump sum 

payment on black lung [sic] to be able to afford to take this 

trip? 

A. I wouldn't have took it if I hadn't gotten it. 

Q. Did you have enough money to take the trip without the 

black lung payment? 

A. No. 

Although the government objected to the relevancy of this line of 

questioning, it did not contest either the fact of the trip or 

McConnell's estimate of the expense. In addition, while the 

government cross-examined McConnell thoroughly about his everyday 

income and expenses, it made no inquiry into the facts surrounding 

this vacation. Finally, whereas the DOL's brief discusses at 

length the motive behind Mrs. McConnell's transfer of real 

property to her daughter, in an attempt to establish that she did 

not rely on the benefits in taking that action, it contests the 

vacation only as being outside the general scope of the waiver 

provisions, rather than challenging reliance. We therefore find 

that the DOL has conceded that the McConnells took their vacation 

in reliance on the benefits. 

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1298, we suspect this to be a function of example 2 of the 

regulations, which is clearly illustrative and not exhaustive, 

rather than a reflection on the scope of the text. In fact, the 

text of neither the statute nor the regulations supports the 

conclusion that equitable waiver is limited to the pursuit of 

10 higher education or any other specific activity or endeavor. 

Second, we discern no valid reason to interject any such 

limitation into the regulatory scheme. Perhaps an extended 

vacation might not be as noble an expenditure as college tuition, 

but the regulation provides no basis for such a distinction. We 

note that the regulations explicitly forbid us from considering 

10 Our research failed to discover any decision either by the 

federal courts or by the Benefits Review Board discussing whether 

§ 410.561d was limited to certain types of expenditures or 

obligations. The ALJ decisions from just the past two years, 

however, contain numerous examples and, more importantly, 

demonstrate that our inquiry is no mere academic exercise. ALJ's 

have granted "change of position" waiver for the purchase of new 

cars, see, e . g., Woolsey v. Director, OWCP, No. 89-BLO-150, 1992 

BLA LEXIS 432, at *10 (March 13, 1992); Lattimer v. Director, 

OWCP, No. 90-BLO-112, 1991 BLA LEXIS 2290, at *14 (Dec. 30, 1991) ; 

Strader v. Director, OWCP, 90-BLO-116, 1991 BLA LEXIS 1037, at *6 

(May 20, 1991) ; home repairs, see, e.g., Varvel v. Director, OWCP, 

No. 90-BLO-66, 1992 BLA LEXIS 431, at *11 (Mar. 13, 1992); 

Woolsey, 1992 BLA LEXIS 432, at *10; Lattimer, 1991 BLA LEXIS 

2290, at *14; durable goods, see, e . g., Lattimer, 1991 BLA LEXIS 

2290, at *14 (furnace, freezer, and riding lawnmower); funeral 

expenses, see, e.g., Woolsey, 1992 BLA LEXIS 432, at *10; 

Grundhoefer v. Director, OWCP, No. 91-BLO-0069, 1991 BLA LEXIS 

2292, at *8 (Dec. 30, 1991) ; expensive nursing care, see Julen v. 

Director, OWCP, No. 90-BLO-100, 1991 BLA LEXIS 1036, at *6-*7 (May 

20, 1991 ) , and even new dentures, see Varvel, 1992 BLA LEXIS 431, 

at *10. Other ALJ decisions have been more restrictive. In 

Barnes v . Director, OWCP, No. 90-BLO-29, 1992 BLA LEXIS 494 (Mar. 

2 0 , 1992 ) , the ALJ concluded that the purchase of a new automobile 

and a piano for his church simply were not expenditures covered by 

either§ 410.561d or the accompanying examples. Id. at *7-*8; see 

a l s o Orban v. Director, OWCP, No. 91-BLO-0048, 1992 BLA LEXIS 117, 

at *6-*7 (Jan. 28, 1992 ) (concluding without discussion that 

eating out more frequently and purchasing new rather than used 

c ars were not changes of position for the worse ) . 

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the claimant's financial circumstances when making waiver 

determinations. See 20 C.F. R. § 410.561d ("In reaching suc h a 

determination, the individual's financial circumstances are 

irrelevant."). Under even the DOL's proposed interpretation, 

then, a financially comfortable claimant presumably could invoke 

waiver after deciding to send a child to an expensive private 

college rather than the state university or local community 

college. Given the potential for such results, we fail to see how 

the regulations could implicitly direct us to distinguish between 

supposedly "worthy" and "unworthy" claimants. 

We acknowledge that two other circuits have disregarded these 

particular regulations as an unreasonably narrow interpretation of 

the statutory mandate to grant waiver when required by "equity and 

good conscience." See Quinlivan v. Sullivan, 916 F.2d 524, 526-27 

(9th Cir. 1990); Groseclose v. Bowen, 809 F.2d 502, 505-06 (8th 

Cir. 1987). In both cases, the court went outside the parameters 

of the regulations to grant waiver to sympathetic claimants who 

technically failed to qualify. 

We face the mirror image of those situations. In this case, 

the claimant qualifies under the regulations notwithstanding the 

fact that the circumstances surrounding his overpaid benefits 

might not evoke the sympathetic response normally associated with 

"equity and good conscience . " Nevertheless, we grant the waiver. 

Because the organic statute is silent with respect to the meaning 

of the phrase "against equity and good conscience," we owe 

c onsiderable deference to the administering agency's 

interpretation. Chevron U.S . A .• Inc. v . Natural Resources Defense 

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Council. Inc., 467 U.S. 837, 843-44 (1984). Although we might not 

have adopted these particular regulations, we must respect the 

agency's role and defer to their permissible construction of the 

statute. Id. While the Eighth and Ninth Circuits may have 

correctly concluded that Congress must have intended waiver in the 

circumstances presented by those cases, we cannot conclude that 

Congress did not intend waiver on the facts before us today. 

Therefore, applying the regulations as written, 11 we hold that 

McConnell has satisfied the requirements for equitable waiver 

under§ 410.561d. 

Because both the ALJ and Benefits Review Board denied waiver 

entirely, neither addressed the scope of the waiver. As noted 

earlier, 20 C. F.R. § 410.561a mandates waiver of recovery of an 

"incorrect payment." Section 410 . 561d then states that recovery 

of an "incorrect payment" is inequitable when an individual 

changes position for the worse "because of a notice that such 

payment would be made or by reason of the incorrect payment." The 

reliance requirement, then, necessarily links the amount of waiver 

to the change of position. See Spirt v. Heckler, No. 83-2437 - MA, 

1984 WL 62786, at *2 (D. Mass Feb. 3, 1984) (granting waiver for 

amount of valuable right relinquished) . 12 The record does not 

11 Although the agency's interpretation of its own regulation is 

entitled to deference, see Department of Labor v. Occupational 

Safety & Health Review Comm., 938 F.2d 1116, 1119 (10th Cir. 

1991), the DOL's interpretation simply lacks support in the 

language of the regulation, see id. While we do not take issue 

with the wisdom of the approach the DOL advances today, that 

wi sdom belongs in the Code of Federal Regulations. 

12 Although the courts have not often considered the scope of 

waiver, ALJ decisions consistently grant partial equitable waiver 

(Footnote Continued on Next Page ) 

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reveal the exact cost of McConnell's vacatio n, taken over seven 

years prior to McConnell's hearing before the ALJ. At that time, 

McConnell testified that he spent "roughly, about three- -fortyfive hundred and five thousand I think." The DOL did not contest 

h . . 13 t 1.s testimony. The ALJ apparently credited McConnell's 

testimony, stating that he spent "about $5,000" on the trip. As 

with the reliance issue, we find that the DOL has conceded the 

amount expended on the vacation and therefore adopt the $5,000 

figure. 

After careful review of the organic statute and its 

accompanying regulations, we find that McConnell has satisfied the 

requirements of§ 410 . 561d and is therefore entitled to waiver of 

$5,000 of his total overpayment. 

IV. CONCLUSION 

We AFFIRM the Benefits Review Board's decision affirming the 

ALJ's determination that McConnell is not entitled to waiver based 

on the receipt of allegedly erroneous i nformation or because any 

recovery would defeat the purposes of the Act. Because we 

conclude that McConnell is entitled to waiver of $5,000 of h is 

overpayme nt, we REVERSE t he Be nefits Review Board's deci sion 

affirming the ALJ's determination that waive r would not be agai nst 

(Footnote Co ntinued from Previous Page ) 

as a matter of course . See , e. g., Varvel, 1 992 BLA LEXIS 431, at 

*11; Wools ey , 1992 BLA LEXIS 432, at *11; Grundhoefer, 1 991 BLA 

LEXIS 2292 , at *8; La t t i mer, 1991 BLA LEXIS 229 0, at *14 - *15 . 

13 Th e gover nme nt obj ected to the line of questioni ng in general 

a s not rel evant t o the issu e of waiv e r, but did not c onte st the 

fac t o f the vac ation or McConne l l 's e sti mate itself. 

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equity and good conscience and REMAND to the Benefits Review Board 

with instructions to direct the ALJ to reduce McConnell's 

overpayment by that amount . 

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