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 IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

STEVEN P. SCHELLING, : CIVIL ACTION

Plaintiff :

:

VS. :

:

JO ANNE B. BARNHART, :

Commissioner of Social Security, :

Defendant : NO. 04-2312

 REPORT AND RECOMMENDATION

LINDA K. CARACAPPA

UNITED STATES MAGISTRATE JUDGE

Plaintiff, Steven Schelling, brought this action under 42

U.S.C. § 405(g), seeking judicial review of the final decision of

the Commissioner of Social Security (Commissioner) denying his

request for a waiver of the recovery of an overpayment of

disability insurance benefits (DIB). The parties have filed crossmotions for summary judgment. For the reasons which follow, it is

recommended that summary judgment be granted in favor of the

Commissioner.

 BACKGROUND AND PROCEDURAL HISTORY

Plaintiff is a fifty-one year-old male born on May 22, 1953

(Tr. 36). He has a college education having majored in business

administration and elementary education (Tr. 25). 

Plaintiff was receiving supplemental security income (SSI)

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benefits based on a June 1982 application when on November 29,

1985, he was informed by letter from the Social Security

Administration (SSA) that he had completed a nine-month trial work

period and a determination would have to be made whether this

amounted to substantial gainful activity (Tr. 85-86). This letter

explained to the plaintiff that an individual is entitled to

receive benefits for the month that disability ceases and for two

additional months thereafter, and that in his case he would be

entitled to benefits until July 1985 (Tr. 85-86).

On December 30, 1985, the SSA informed plaintiff that it

issued a final determination that he demonstrated the ability to

perform substantial gainful activity in May of 1985 and, therefore,

benefits should have ceased as of July 1985 (Tr. 84). In a letter

dated February 13, 1986, SSA informed the plaintiff that he

received an overpayment of benefits from September 1985 through

January 1986, and must refund such (Tr. 76-83).

Plaintiff again was granted benefits in November 1987 based on

a January 1988 Disability Insurance Benefits (DIB) application (Tr.

116), and he received such through September 1992 (Tr. 177). In a

decision dated May 17, 2001, SSA determined that plaintiff had been

overpaid a total of $20,712.00, $4503.00 of which was waived. The

decision stated that plaintiff had been overpaid for his first

period of disability due to the fact that he was working. It added

that “[B]ecause of this prior entitlement, Mr. Shelling knew or

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should have known that work affected entitlement to benefits. Mr.

Shelling did report his work; however, there is a signed statement

in his file dated may 1992 which states that he was advised by the

District Office to hold onto the checks until a decision was made

on his work. Mr. Schelling cannot be found without fault in

causing the overpayment” (Tr. 177-178).

SSA denied plaintiff’s request for a waiver of the overpayment

on May 15, 2001 (Tr. 172), and he then requested a hearing before

an administrative law judge (ALJ). Plaintiff appeared for a

hearing on May 7, 2002, but the ALJ continued it because he was

unrepresented (Tr. 14-18). On September 16, 2002, another hearing

was commenced. Plaintiff, again, appeared unrepresented, but chose

to proceed (Tr. 19-35). 

The ALJ issued a decision on January 10, 2003 denying

plaintiff’s request to waive the recovery of the overpayment of

benefits (Tr. 11-13). The Appeals Council then denied plaintiff’s

request for review making the ALJ’s decision the final decision of

the Commissioner (Tr. 4-6). Presently, plaintiff has appealed that

decision to this court. 

 DISCUSSION 

The role of this court, on judicial review, is to determine

whether the Commissioner's decision is supported by substantial

evidence. 42 U.S.C. § 405(g); Pierce v. Underwood, 587 U.S. 552

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(1988). "Substantial evidence” is not "a large or significant

amount of evidence but rather such relevant evidence as a

reasonable mind might accept to support a conclusion.” Id. at 664-

65. “The Court is bound by the ALJ's findings of fact if they are

supported by substantial evidence in the record.” Plummer v.

Apfel, 186 F.3d 422, 427 (3d Cir. 1999). 

42 U.S.C. § 404 (b) of the Social Security Act (Act) provides

in relevant part that when a person is overpaid benefits:

“. . . there shall be no adjustment of payments to, or

recovery by the United States from, any person who is

without fault if such adjustment or recovery would defeat

the purpose of this subchapter or would be against equity

and good conscience. In making for purposes of this

subchapter any determination of whether any individual is

without fault, the Commissioner of Social Security shall

specifically take into account any physical, mental,

educational, or linguistic limitation such individual may

have.”

The Social Security Regulations provide that “[W]hen a waiver

is requested, the individual gives SSA information to support

his/her contention that he/she is without fault in causing the

overpayment.” 20 C.F.R. § 404.506(c). 

“Although the Administration may have been at fault in making

the overpayment, that fact does not relieve the overpaid individual

. . . from liability for repayment if such individual is not

without fault.” 20 C.F.R. § 404.507. This section further states

that an overpaid individual is not “without fault” when such

overpayment resulted from:

“(a) An incorrect statement made by the individual which

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he knew or should have known to be incorrect; or

 (b) Failure to furnish information which he knew or

should have known to be material; or

 (c) With respect to the overpayment individual only,

acceptance of a payment which he either knew or could have

been expected to know was incorrect.”

At first glance, this case looks like an easy decision in

favor of the plaintiff. Social Security is seeking to recover an

overpayment of benefits that it should have discovered and ceased

before it became an issue from an individual who has an income of

only approximately $750.00 a month. This would surely seem to be

“against equity and good conscience” under 42 U.S.C. § 404(b). 

However, this section makes it clear that a person must first

be “without fault” in order for any overpayment of benefits to be

waived on the basis of being “against equity and good conscience.”

Here, the record and plaintiff’s own actions and testimony support

the ALJ’s decision that the plaintiff is not “without fault” for

the overpayment.

Plaintiff testified at the administrative hearing that he

reported his wages at least four times, but the checks were not

stopped until he closed the checking account where the checks were

being deposited. He asserts that because the checks didn’t stop

even after he reported his wages, he believed he was entitled to a

new nine-month trial work period. He added further that he

believed he fulfilled his obligation to Social Security by

reporting changes in his work status (Tr. 27-30).

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In his summary judgment motion, he argues that the issue of

whether a claimant is entitled to two nine-month trial work periods

is a complicated one for a lay person to understand, and the ALJ

should have taken this into consideration. However, Goldfin v.

Weinberger, 381 F.Supp. 171 (E.D. Pa. 1974) held that even though

there may have been an honest mistake in relation to the receipt of

an overpayment of benefits, the recipient may nonetheless be at

“fault” within the meaning of 42 U.S.C. § 404(b).

Here, plaintiff is not “without fault” under 20 C.F.R. §

404.507(c) since he “knew or could have been expected to know” that

the overpayment was incorrect. First, he had already been notified

by the SSA on February 13, 1986 that he had received an overpayment

of benefits from September 1985 through January 1986 (Tr. 76-83).

He, thus, had prior knowledge that he was not entitled to receive

benefits during the time he was working. As noted above, he had

become re-entitled to benefits effective November 1987, but he

began working in April 1988 and continued to accept and cash checks

through September 1992 (Tr. 116, 177). He went on, however, to

cash benefit checks for more than four years, well beyond another

nine-month trial work period that he believed he was entitled.

In addition, plaintiff’s actions indicated that he “knew” or

should “have known” that the overpayment was incorrect. He

contacted Social Security four times to inform them that he was

working, an indication that he was aware that he should not have

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1In addition, plaintiff’s assertion that the ALJ failed to

properly develop the record is without merit. A reading of the

hearing transcript clearly shows that the ALJ asked the plaintiff

pertinent questions regarding the overpayment, and gave him every

opportunity to explain his position for believing he was “without

fault.”

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been receiving benefits while he was working. Moreover, he

acknowledged that he was told by Social Security to hold the checks

until it investigated the matter, but he cashed them regardless

(Tr. 30-31). Accordingly, plaintiff cannot be found to be “without

fault” for the overpayment.

In conclusion, the ALJ considered and analyzed all the

relevant evidence, and indicated both the evidence relied upon and

his rationale in making his determination. Cotter v. Harris, 650

F.2d 481 (3d Cir. 1981). Accordingly, the Commissioner's motion

for summary judgment should be granted.1

Therefore, the court makes the following:

 RECOMMENDATION

AND NOW, this day of , 2005,

IT IS RESPECTFULLY RECOMMENDED that Plaintiff’s Motion for Summary

Judgment be DENIED and the Commissioner’s Motion for Summary

Judgment be GRANTED.

 ______________________________

 LINDA K. CARACAPPA

 UNITED STATES MAGISTRATE JUDGE

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