## The Hon. Joseph E. Stevens, Jr., United States District Judge for the Western * 

## District of Missouri, sitting by designation. United States Court of Appeals 

### FOR THE EIGHTH CIRCUIT

_____________ No. 97-2109EA

_____________ James Gladden, * * Appellant, * * On Appeal from the United v. * States District Court * for the Eastern District * of Arkansas. John J. Callahan, Acting Commissioner, * Social Security Administration, * * Appellee. *

___________ Submitted: November 20, 1997 Filed: April 6, 1998

___________ Before RICHARD S. ARNOLD, Chief Judge, McMILLIAN, Circuit Judge, an d STEVENS, District Judge.

*

___________ RICHARD S. ARNOLD, Chief Judge.

Between 1984 and 1991, James Gladden was paid $77,984.30 in socia l securitydisability insurance benefits. It has now been determined that Mr. Gladd en was not entitled to these benefits, because he had bee n engaging in substantial gainful activity

## TheSecretary made the finding under review, but the action now proceed s 1 

## against the Commissioner of the Soci al Security Administration by virtue of the Social Security Independence and Program Improvements Act of 1994, Pub. L. No. 103-296, 108 Stat. 1964. -2- during all or most of that period of time. The issue of substantia l gainful activity is n ot now contested. Mr. Gladden did, however, ask the Social Security Administration to waive its right to recover th e overpayment. The Secretary of Health and Human Services rejected thi s request, finding that Mr. Gladden was not without fault in accepting the money. Mr. Gladden f iled suit in the District Court for a review of that finding, but that Court, holding that the Secretary’s finding was supporte d by substantial evidence, dismissed the complaint. We hold that the Secretary’s finding is not suppor ted by substantial 1 evidence. Because of erroneous advice received from an official of th e Social Security Admin istration, Mr. Gladden reasonably believed, at least for pa rt of the relevant time period, that he was not engaged i n substa ntial activity as that term is defined by the law, and that h e therefore had a right to the payments. He there fore was without fault, as that term is defined by the applicable statute and regulations, and i s entitled to a waiver of recovery of the overpayment. We reverse and reman d to the Di strict Court with directions to enter judgment in favor of Mr
. Gladden.
I.
James Gladden suffered a heart attack in June 1983 at age 49. Th e heart attack left him unable to return to Reynolds Metals Company, where he ha d worked as a computer programmer for 25 years. He applied to th e Depart ment of Health and Human Services for social security disabilit y insurance benefits inSeptember 1983. In May 1984, an Administrative Law Judge (ALJ) conducted a hearing to determine Gladden’s eligibility t o receive benefits.

## -3- After listening to Gladden’s description of his health problems an d resu lting limitations, the ALJ explained that “[w]e don’t insist that yo u work unless you’re capable of what they call substantial gainful activit y . . . in other words can you w ork eight hours a day 40 [hours] a week.” R. 10 4. The ALJ determined that Gladden’s “severe dyspnea, weakness an d inab ilityto tolerate normal stress of a work environment, would preclud e him from performing any type o f substantial gainful activity on a sustained bas is.” R. 83. Considering Gladden’s “maximum sustained work capability, age, edu cation and work experience,” the ALJ concluded that Gladden wa s “disabled,” meriting an award of benefits.
At the hearing, Gladden disclosed that he owned a computer business, which he would occasionally visit for an hour or two. R. 94. The ALJ asked hi mtwo follow-up questions about the business and then departed from th e sub ject entirely. Gladden answered these questions truthfully. After the ALJ’s decision, Gladden starte d spending more time at the computer business to combat boredom and the isolation of being home alone. R. 46-52. Th e business was in a downtown area, a more convenient locati on for him to visit with friends or family, who wo uld call or stop by to see him. He set up an office with a couch, refrigera tor, and television and received his mail and newspaper there. Gladden ulti mately came to spend the majority of his time at the business location, including weekends, but was not actually working there a t first. As his time at the office grew, so apparently did th e business-related tasks he performed. For about seven ye ars after the original decision of the ALJ in 1984, Gladden reported income from t he business on his tax returns. In 1990, the Soc ial Security Administration became interested in determining how tha t incom e was generated and began conducting a “continuing disabilit y investigation.” A Social Secu rity representative called Gladden to ask him about the matter. Gladden explained that he did what he wanted to do during the day, and in response to a question about how much

## -4-

time he spent at the office, s tated that he spent about 40 hours there each wee k, without differentiating between recreational and business hours. R. 51. Gladden completed a “Work Activity Report” in which he explained that he did not work there, but rather was simply the owner of the business , cal led Professional Systems, Inc. A. 64. He then filled out a “Statement of Claimant or Other Person” form stating that he was present at th e busine ss 40 hours a week and described his duties as talking to people , han dling public relations, hiring and firing, and helping to set fees. He explained that he had started the business in 1977 and had investe d approximately $200,000 in it. R. 107-08. In April 1991, Soc ial Security informed Gladden that it was reopening the A LJ’s July 5, 1984, decision approving disability benefits and wa s contemplating issuing a decisi on finding that Gladden had not been disabled since June 10, 1983, because his business activities cons tituted substantial gainful activity precluding th e award of disability insurance benefits. In Ju ne 1991, the Social Security Appeals Council held that Gladden was not , and never had been, disabled as defined in the Social Sec urity Act. R. 114- 16. On April 1, 1992, Gladden received a notice stating that he no longer qualified for benefits “beginn ing December 1983,” that he had been overpaid $77,984.30 in benefits, and that he was liable to Social Security fo r repayment. R. 125. Gladden retained counsel and requested waiver o f ove rpayment. Gladden asserted that he was not at fault in accepting th e disabi litybenefits because Social Security was aware of his ownershi p int erest in the business at the time of the benefits award and because the time he spent at the office since receiving disability benefits was fo r soc ial rather than business purposes. He pointed out that the ALJ who had found him disabled had defined“substantial gainful activity” as working 40 hours a week.

## -5- OnMay 5, 1993, Gladden requested a hearing by an ALJ. The request fo r a hearing was granted. The ALJ concluded that Gladden was at fault i n acce pting the overpayment of benefits. R. 20-21. Gladden unsuccessfull y sought review of the ALJ’s decision by the Appeals Council. Having exhausted his administrative avenues of relief, Gladden file d a complaint in the District Court, seeking waiver of the assesse d ove rpayment. The District Court entered judgment against Gladden on March 11, 1997. T his appeal followed. The ALJ’s findings will be affirmed i f supportedby substantial evidence on the record as a whole. Smith v
. Schweiker , 728 F.2d 1158, 1161 (8th Cir. 1984). In determining whethe r th ere is substantial evidence, we “must take into account whatever in th e record detracts from its weight.” Id . at 1162 (citation omitted).
II. Title 42 U.S.C. § 423 (d) (1) (A) (1994) defines “disability” as the “i nabilityto engage in any substantial gainful activity by reason of an y med ically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” Title 20 C.F.R. § 404.1572 defines “substantial gainful activity.” What we mean by substantial gainful activity. Substantial gainful activity is work that is both substantia l and gainful:

(a) Substantial work activity
. Subst antial work activity is work activity that involves doin g signif icant physical or mental activities. Your work may b e substantial even if it is

## -6-

done o n a part-time basis or if you do less, get paid less, or have les s responsibility than when you worked before. (b) Gainful work activity
. Gain ful work activity is work activity that you do for pay o r profit. Work activity is gainful if it is the kind of work that is usually done for pay or profit whether or not a profit i s realized.
Moreover, the regulations provide that the ac tivities of self-employed indiv iduals must be evaluated to determine whether they constitut e substantial gainful activity. Title 20 C.F.R. § 404.1575 provides that: (a) If you are a self-employed person
. We will consider your activities and their value to your business to decide whethe r you hav e engaged in substantial gainful activity if you are self

employed. We will not consider your income alone since th e amount of income you actually receive may depend upon a numbe r of di fferent factors like capital investment, profit sharin g agreements, etc. . . . We will evaluate your work activity on the value to the business of yourservices regardless of whether you re ceive an immediate income for your services. We consider that you h ave engaged in substantial gainful activity if . .
. (3) You render services that are significant to the operation of a b usiness and receive a substantial income from the business
. (b) What we mean by significant s ervices . (1) . . . [I]f your busine ss involves the services of more than one person, we will conside r you to be rendering significant services if yo u con tribute more than half the total time required for th e management of the business, or you render management service s for more tha n 45 hours a month regardless of the total managemen t time required by the business. Gladden acknowledges that when Social Securit y began its investigation in 199 0, his activities constituted services significant to the operatio n of a business. The crux

## -7-

of th is case, however, is not the substantive issue of disability o r subs tantial gainful activity, but whether Gladden is entitled to have th e admitted overpayment waived be cause the ALJ told him he would be all right, so to speak, as long as he didnot work 40 hours a week. For this question we must turn to the law defining fault.
The st atute provides that where an individual is determined to hav e been ov erpaid disability benefits, but was not at fault in accepting th e ove rpayment, recovery of the overpayment can be waived. Title 42 U.S.C. § 404 provides: (b) No recovery from persons without fault. In any case in which more than th e correct amount of payment has been made, there shall be no adjustment or recovery by the United States from any person who is without fault if such adjustmen t or recovery would defeat the purp ose of this subchapter or would be against equity and good conscience.
Fault is defined in the regulations as follows:

. . . In determining whether an individual is at fault, th e Soc ial Security Administration will consider all pertinen t circum stances, including the individual’s age and intelligence, and any physical, mental, educati onal, or linguistic limitations . . . the individual has. What c onstitutes fault on the part of the overpaid individual . . . depends upon whether the facts show that the incorrect payment to the individual . . . resulted from: (a) An incorrect statement made by the individual which he knew or should have known to be incorrect; or (b) Failure to furnish informati on which he knew or should have known to be material; or

## -8- (c) With respect to the overpaid individual only , acceptance of a payment which he eit her knew or could have been expected to know was incorrect. 20 C.F.R. § 404.507. The regulations also state: A benefit payment . . . to . . . an individual who fails to meet one or mor e requirements for entitlement to such payment . .
. const itutes an entitlement overpayment. Where an individual
.

. . accepts such overpayment because of reliance on erroneou s infor mationfrom an official source within the Social Securit y Administr ation. . . with respect to the interpretation of a pertinent provision of the Social Security Act or regulation s per taining thereto . . . such individual, in accepting suc h overpayment, will be deemed to be without fault.

20 C.F. R. § 404.510a. Furthermore, in such a situation, the regulation s direct that recovery will be w aived. 20 C.F.R. § 404.512(a) states: “[i]n the situations described in . . . § 404.510a, adjustment or recovery wil l be waived since it will be deemed such adjustment or recovery is agains t equity and good conscience
. . . .” (Emphasis in original.) Thus, someone who r elies on erroneous information from an official source meets bot h require ments for waiver set forth in 42 U.S.C. § 404(b): he or she i s without fault, andrecovery would be against equity and good conscience.
At the 1984 hearing, the ALJ instructed, “[w]e don’t insist that you work unless you’re capable of what they call substantial gainful activit y

. . . in other words can you work eight hours a day 40 [hours] a week. ” R. 104. Gl adden maintains that under the ALJ’s definition, he was not a t any time engaging in substanti al gainful activity. The office was a social outlet for him, as evidenced by the couch, refrigerator, and

## -9-

televisio n, and by the fact that he received his mail there, and spen t weekends there to get out of the house and meet friends. The Appeals Counci l found that Gladden’s “fail[ure] to disclose [his] full role in the computer store business” caused him to be at fault. R
. 157. To the contrary, the record reflects that Gladden forthrightl y answered the questions put to him by the ALJ in 1984, and the ALJ did no t pursue further investigation into the matter.
At most, the record would support a finding that at some point never dete rmined, Gladden’s situation became different from what it was when h e appeared before the ALJ in 1984. Gladden might be determ ined to be at fault for accepting overpayment from such a date forward if the evidence shows he should have recognized that his changed circumstances warranted notice t o Soc ial Security, or at least an inquiry about any effect of that change on his eligibility. 20 C.F.R. § 404.507(b) (“[F]ault on the part of th e overpaid individual . . . depends upon whether the facts show that th e incorrect payment to the individual . . . resulted from [ f]ailure to furnish informati onwhich he knew or should have known to be material. . . .”)
. On thi s record, however, there is no evidence of when (if ever) Gladde n beg an working 40 hours a week, enough to qualify him as not disabled under the definition he had been giv en, nor does either side ask us to remand the case for further proceedings on that issue.
III. Accordingly, we hold that the Secretary’s dec ision to deny a waiver of recov eryof overpayment is not supported by substantial evidence. Th e judgment is reversed, and the cause remanded to the District Court wit h directions to enter judgment in favor of Mr. Gladden.
It is so ordered.

## -10- A true copy.
Attest: CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.