2003 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-10-2003

Sanfilippo v. Comm Social Security

Precedential or Non-Precedential: Precedential

Docket 02-2170

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Recommended Citation

"Sanfilippo v. Comm Social Security" (2003). 2003 Decisions. Paper 595.

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PRECEDENTIAL

Filed April 10, 2003

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 02-2170

THOMAS F. SANFILIPPO,

Appellant

v.

JO ANNE B. BARNHART,

COMMISSIONER OF SOCIAL SECURITY

On Appeal from the United States District Court

for the Western District of Pennsylvania

District Court Judge: The Honorable Gustave Diamond

(D.C. Civil No. 01-cv-00283)

Submitted Under Third Circuit L.A.R. 34.1(a)

January 17, 2003

Before: ROTH, FUENTES, and ALDISERT, Circuit Judges

(Opinion Filed: April 10, 2003)

John F. Hooper, III

4712 Clairton Boulevard

Pittsburgh, PA 15236

Counsel for Appellant

Eric P. Kressman

Social Security Administration

OGC/Region III

P.O. Box 41777

Philadelphia, PA 19101

Counsel for Appellee
OPINION OF THE COURT

FUENTES, Circuit Judge: 

Pursuant to 42 U.S.C. § 405(g), Thomas Sanfilippo

(“Sanfilippo”) sought judicial review in the United States

District Court for the Western District of Pennsylvania of

the decision of the Commissioner of Social Security

(“Commissioner”) reducing his federal disability insurance

benefits under Title II of the Social Security Act (“Act”) by

the net amount of a lump-sum workers’ compensation

settlement, prorated over a period of 4.3 years. Sanfilippo

claims that his benefits should not be offset by his presettlement compensation rate. Rather, he claims that the

lump-sum settlement should be prorated over his life

expectancy. Because we agree that the Commissioner’s use

of the pre-settlement rate in prorating the settlement over

a period of 4.3 years is based on a reasonable

interpretation of the Act and is not otherwise arbitrary or

capricious, we affirm the Order of the District Court

granting summary judgment to the Commissioner.

I. Facts and Procedural History

On February 18, 1987, Sanfilippo, an arborist, suffered

neck and back injuries while working. On April 2, 1993, he

filed an application for disability insurance benefits. On

May 28, 1996, an Administrative Law Judge (“ALJ”) issued

a decision awarding Sanfilippo benefits under the Act. In

accordance with 42 U.S.C. § 424a(a), the Social Security

Administration (“SSA”) offset Sanfilippo’s disability

insurance benefits by $243.94 per week ($195.15 per week

after the deduction of attorneys’ fees), the amount paid by

his employer pursuant to the Pennsylvania Workers’

Compensation Act. 

On July 7, 1998, the Pennsylvania Bureau of Workers’

Compensation approved a compromise and release

settlement between Sanfilippo and his employer. Under the

terms of the settlement, Sanfilippo received a lump-sum

payment of $55,000 and, in return, agreed to waive and

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release his entitlement to all future indemnity, medical and

other benefits that might be available to him under the

Pennsylvania Workers’ Compensation Act. 

In October 1998, SSA informed Sanfilippo that his

disability insurance benefits would continue to be reduced

by $195.15 per week - the amount of the lump-sum

payment prorated over a period of 4.3 years. Sanfilippo

requested reconsideration of this offset determination, and,

on May 3, 1999, SSA informed Sanfilippo that the

reduction of his disability insurance benefits had been

properly calculated. 

At Sanfilippo’s request, an ALJ held a hearing on

December 20, 1999. The ALJ granted Sanfilippo’s request

for leave to obtain additional information. On June 22,

2000, Sanfilippo submitted an amended order from the

Pennsylvania Bureau of Workers’ Compensation stating

that the lump-sum payment of $55,000 represented

payment in lieu of compensation equal to $29.59 per week

for a period of 1,487 weeks, which was Sanfilippo’s life

expectancy. On July 17, 2000, the ALJ issued a decision

reversing the reconsideration determination and holding

that Sanfilippo’s lump-sum payment should be prorated

over his life expectancy rather than a 4.3 year period. 

On September 8, 2000, the Appeals Council notified

Sanfilippo that it was reviewing the ALJ’s decision under

the error of law provision of 20 C.F.R. § 404.969. On

December 7, 2000, the Appeals Council issued a decision

reversing the determination of the ALJ. The Appeals

Council reinstated SSA’s prior determination that

Sanfilippo’s lump-sum workers’ compensation settlement

should be prorated at the periodic rate received prior to the

settlement. Pursuant to 20 C.F.R. § 404.981, the decision of

the Appeals Council became the final decision of the

Commissioner. 

On February 9, 2001, Sanfilippo filed a complaint in the

United States District Court for the Western District of

Pennsylvania, in which he challenged the decision of the

Appeals Council. On cross motions for summary judgment,

the District Court granted the Commissioner’s motion for

summary judgment. Sanfilippo now seeks appellate review

of the District Court’s decision.

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II. Jurisdiction and Standard of Review

This Court has jurisdiction over Sanfilippo’s appeal

pursuant to 42 U.S.C. § 405(g). Our review of legal issues is

plenary. Schaudeck v. Commissioner of Social Security, 181

F.3d 429, 431 (3d Cir. 1999). Our role is not to impose

upon the SSA our own interpretation of the Social Security

legislation. Rather, because Congress has delegated to the

Commissioner the responsibility for administering the

complex programs, we must defer to her construction as

long as it is reasonable and not arbitrary and capricious.

Wheeler v. Heckler, 787 F.2d 101, 104 (3d Cir. 1986).

III. Discussion

The issue before the Court on appeal is whether the

Commissioner properly prorated Sanfilippo’s lump-sum

settlement over a period of 4.3 years, or, as Sanfilippo

contends, the lump sum award should have been prorated

over his life expectancy. Sanfilippo argues that SSA’s

Program Operations Manual System (“POMS”), § DI52001.555(C)(4), is irrational, arbitrary and fails to

approximate as nearly as practicable the reduction of

disability insurance benefits prescribed by 42 U.S.C.

§ 424a(a). 

Pursuant to 42 U.S.C. § 424a(a), the Commissioner is

required to reduce, or offset, the level of a recipient’s social

security disability payments when the total of that

recipient’s disability payments and workers’ compensation

benefits exceeds eighty percent of his pre-disability

earnings. When an individual’s workers’ compensation

benefits are paid in a lump-sum, the Act requires the

Commissioner to prorate the lump-sum payment and

“approximate as nearly as practicable” the rate at which the

award would have been paid on a monthly basis. 42 U.S.C.

§ 424a(b). The Commissioner has developed internal

guidelines for calculating the rate by which lump-sum

awards may be prorated. These guidelines list three steps,

in priority order: 

1. The rate specified in the lump-sum award.

2. The periodic rate prior to the lump-sum if no rate

is specified in the lump-sum award.

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3. If workers’ compensation, the State’s workers’

compensation maximum in effect in the year of

injury. This figure can be used if no rate is

specified in the award or there was no preceding

periodic benefit.

POMS § DI-52001.555(C)(4). 

In this case, the Commissioner ultimately concluded that

the periodic rate paid prior to the lump-sum settlement was

the appropriate rate for offsetting the lump-sum amount

because the original compromise and release settlement did

not specify an offset rate. The Commissioner also found

that “effect need not be given” to the amended order of the

Pennsylvania Bureau of Workers’ Compensation “because it

was amended solely to circumvent the offset provisions.” (R.

at 10). The District Court concluded that the

Commissioner’s determination was a reasonable

interpretation of the Act and we agree. 

We owe great deference to the Commissioner’s method for

determining Sanfilippo’s workers’ compensation offset as

the United States Supreme Court has “long recognized that

considerable weight should be accorded to an executive

department’s construction of a statutory scheme it is

entrusted to administer . . . .” United States v. Mead Corp.,

533 U.S. 218, 227-28 (2001) (quoting Chevron U.S.A., Inc.

v. Natural Resources Defense Council, Inc., 467 U.S. 837,

844 (1984)). We find nothing unreasonable about the

Commissioner’s actions in this case. Because there was no

rate specified in the original agreement, the Commissioner

relied on step two of the lump-sum proration provisions

and considered Sanfilippo’s prior periodic benefit rate.

Sanfilippo’s weekly payment before the lump-sum

settlement produced a reasonable estimate of what

Sanfilippo’s future weekly rate would have been had he not

agreed to a lump-sum payment. We decline to conclude

that the Commissioner’s method, or its application to

Sanfilippo, is arbitrary and capricious. 

A. Step 2

Sanfilippo argues that the offset method contained in

step 2 is irrational based on this Court’s decision in

Sciarotta v. Bowen, 837 F.2d 135 (3d Cir. 1988). In

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Sciarotta, this Court remanded the case to the district court

to determine whether the Commissioner’s assumption that

Sciarotta’s lump-sum settlement represented his workers’

compensation carrier’s determination that he would have

received the maximum weekly benefit allowable under New

Jersey law was irrational. Id. at 140. On remand, the

district court concluded that the Commissioner’s method of

calculating the offset rate was irrational because the

Commissioner failed to provide a sufficient explanation

regarding the use of the maximum workers’ compensation

rate. See Sciarotta v. Bowen, 735 F. Supp. 148, 151-54

(D.N.J. 1989). 

Sciarotta provides no support for Sanfilippo’s position

because, as the District Court in this case correctly

emphasized, Sciarotta dealt with the rationality of the use of

the state workers’ compensation maximum as the

calculation rate under the third step of the POMS

interpretive guidelines, not the second step. See also Rodlin

v. Secretary of Health and Human Services, 750 F. Supp.

146, 152 (D.N.J. 1990) (finding Sciarotta clearly

distinguishable because “Step 2 . . . concerns the use of a

previous periodic rate to prorate the lump sum award,

while Step 3 concerns the use of the maximum periodic

rate in effect in the year of injury.”) In Sciarotta, this Court

expressed concern about the method the SSA used in

converting Sciarotta’s lump sum payment into a stream of

theoretical periodic payments, noting at the start of the

opinion that the “record is not entirely clear as to how the

SSA performed these calculations.” Sciarotta, 837 F.2d at

137 n.2. The SSA had concluded that the settlement

reflected the carrier’s determination that Sciarotta would

have received the maximum weekly benefit allowable under

New Jersey law, a conclusion permissible under step 3 of

the guidelines; however, the SSA failed to explain how it

reached this determination. Id. at 140. We remanded the

case to the district court to further develop the record and

to allow the SSA to explain how it concluded that

Sciarotta’s settlement represented the maximum allowable

payment under New Jersey law. Id. at 141. This Court

never mentioned step 1 or 2 of the guidelines in Sciarotta.

In this case, Sanfilippo received prior periodic payments,

a circumstance specifically addressed by step 2 of the

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POMS guidelines. Case law dealing with step 3 has no

relevance to the issue before us as the Commissioner never

reaches step 3 unless the settlement fails to specify a rate

(step 1) and the applicant received no prior periodic benefit

(step 2). As we explained above, by applying Sanfilippo’s

weekly payment before the lump-sum settlement, according

to step 2 of the guidelines, the Commissioner was able to

“approximate as nearly as practicable” the rate at which the

award would have been paid on a periodic basis. Federal

courts in other circuits have also recognized as reasonable

the use of step 2 to determine an offset to federal disability

benefits. See Berger v. Apfel, 200 F.3d 1157, 1161-62 (8th

Cir. 2000) (remanding to Commissioner to recalculate offset

based on more accurate assessment of periodic payment

appellant was receiving prior to settlement); Mann v.

Heckler, CIV. No. 85-0163P, 1986 WL 36270, at *2 (D. Me.

March 17, 1986), aff ’d without opinion, 802 F.2d 440 (1st

Cir. 1986). In sum, we find nothing irrational about

applying a periodic rate received prior to a lump-sum

settlement to determine the offset rate that will

“approximate as nearly as practicable” the hypothetical

future periodic rate of the lump-sum settlement. 

B. Amended Order

Sanfilippo also argues that the Commissioner was bound

by the amended order of the Pennsylvania Workers’

Compensation Bureau dated May 23, 2000, which stated

that the lump-sum payment “represents a payment in lieu

of compensation equal to $29.59 per week, for a period of

1487 weeks.” (R. at 408). Because the amended order

specifies a rate based on life expectancy, Sanfilippo asserts

that SSA should have prorated his lump-sum settlement

pursuant to step 1 of the POMS interpretive guidelines. The

District Court affirmed the decision of the Commissioner to

discount the amended order based on Social Security

Ruling 97-3, which states:

Based on section 224 of the Act, case law, and SSA

policy, SSA is not necessarily bound by the terms of a

second, or amended, stipulation in determining

whether and by what rate a disabled worker’s Social

Security disability insurance benefits should be offset

on account of a WC [workers’ compensation] lump sum

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payment. SSA will evaluate both the original and

amended stipulations and disregard any language

which has the effect of altering the terms in the original

lump-sum settlement where the terms in the amended

document are illusory or in conflict with the terms of

the first stipulation concerning the actual intent of the

parties, and where, as here, the terms of the amended

document have the effect of circumventing the WC

offset provisions of section 224 of the Act.

Social Security Ruling 97-3 (published 10/3/97). 

We agree with the decision of the District Court. The

amended order was issued almost two years after

Sanfilippo’s original compromise and release agreement and

the terms, rights, and obligations of the settlement

remained the same. The only change to the original

settlement was that the lump-sum amount was said to

represent compensation of $29.59 per week over the course

of Sanfilippo’s life expectancy. The terms in this amended

document “would have the effect of circumventing the WC

offset provisions of section 224 of the Act,” the exact

scenario that Social Security Ruling 97-3 was designed to

address and avoid. We find no legal error in the

Commissioner’s decision to not give effect to the amended

order.

IV. Conclusion

Accordingly, for the reasons stated above, we affirm the

judgment of the District Court.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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