Court Opinion

ID: 8996749
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:44:33.569159+00
Date Added: 2024-06-11T17:11:04.831628
License: Public Domain

REINHARDT, Circuit Judge,
dissenting.
I agree with the majority that we have the authority to review the Secretary’s decisions in the present cases. I also agree that the Secretary has no obligation to find representative payees for Title XVI beneficiaries who are entitled to disability payments based on drug or alcohol abuse. However, my agreement ends there. I strongly disagree with the majority’s principal holding — that the Secretary’s present practices fulfill his statutory obligation to investigate prospective payees for Title II and Title XVI recipients. There is no material dispute as to what procedures the Secretary follows. However, those procedures are wholly inadequate and fail to comply with the plain meaning of the statute and the expressed legislative intent. Accordingly, I would reverse the district court’s order granting summary judgment to the defendants and instruct the court to grant that relief to the plaintiffs instead. I would then hold that the plaintiffs are entitled to retroactive duplicate payments for misappropriated funds. Finally, I would remand for trial on the question whether the Secretary fulfills his obligation to attempt to find representative payees for persons entitled to benefits because of drug or alcohol abuse. See 20 C.F.R. § 416.650.
I
I must, at the outset, disagree with the majority’s assertion “that Congress has not specifically addressed the issue of how extensive an investigation is required of the Secretary.” Ante at 538. The very statutory provisions that require the Secretary to conduct an investigation of each prospective payee also require “adequate evidence” that certifying the particular payee will be in the interest of the recipient. 42 U.S.C. § 405(j)(2); 42 U.S.C. § 1383(a)(2)(B). Therefore, a statutorily sufficient investigation is one which is calculated to produce “adequate evidence” of the representative payee’s fitness.
A proper analysis of the adequacy of the Secretary’s procedures would proceed in two steps. First, we should ask what kind of information about each prospective payee the Secretary must obtain in order to fulfill his “serious obligation to exercise caution i[n] selecting an alternate payee and to undertake reasonable efforts to assure proper use of and accountability for the benefits disbursed to that payee.” S.Rep. No. 466, 98th Cong., 2d Sess. 29 (1984) (quoted ante at 537). Second, we should decide whether the Secretary’s procedures are designed to provide that kind of information. At least in the present circumstances — where the procedures have been in use for a considerable period of time, as part of the second step we should look at whether the Secretary’s procedures in fact produce the necessary information. The majority undertakes neither of the necessary steps.
The law is well established that we must evaluate the Secretary’s procedures in light of the kind of investigation required by the nature of the case. See Brotherhood of Ry. & Steamship Clerks v. Association for the Benefit of Non-Contract Employees, 380 U.S. 650, 662, 85 S.Ct. 1192, 1198, 14 L.Ed.2d 133 (1965). The majority reasons, however, that because Congress did not specify the particular kind of investigation required, we must accept the Secretary’s procedures so long as they could be described as an “investigation” in the abstract. In doing so, the majority miscon*542strues the Supreme Court’s statement that use of the term “investigation” does not require a fixed set of formal procedures. See Railway Clerks, 380 U.S. at 662, 85 S.Ct. at 1198; Inland Empire Dist. Council v. Millis, 325 U.S. 697, 706, 65 S.Ct. 1316, 1321, 89 L.Ed. 1877 (1945). The majority also unjustifiedly expands the principle of deference to administrative agencies.
Under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984), we are required to defer to an agency’s “permissible construction of a statute” that it is charged with executing, even if we believe that there may be a better construction. Here, Congress left the Secretary some latitude to select a particular kind of investigation — so long as he chose a method that was designed to provide adequate evidence. Thus, had the Secretary chosen one set of procedures designed to produce adequate evidence, we would not be entitled to overrule his choice merely because we might prefer a different set of procedures. In other words, once we have made the threshold determination that the Secretary’s procedures are adequate we may not ask whether they are the best possible procedures. We must, however, make the threshold determination. Under Chevron, the Secretary has discretion to choose procedures, but his discretion is limited by the fact that the procedures must be designed to provide adequate evidence. The majority ignores this limitation.
Furthermore, the majority misapplies Chevron in an additional way. Under Chevron we are required to defer to those administrative policies that are promulgated as regulations. However, the procedures which the Secretary follows in deciding whether to approve a prospective payee are not set forth in any regulation. Rather, they are contained in the Social Security Administration’s “Program Operations Manual System” [“POMS”]. See Briggs v. Sullivan, 886 F.2d 1132, 1134 (9th Cir.1989) (“Briggs I’). Because these procedures have not been promulgated by regulation in the Federal Register they are not entitled to deference under Chevron. See Racine v. United States, 858 F.2d 506, 508 (9th Cir.1988). In any event, even if the procedures followed by the Secretary had been promulgated as regulations, I would hold them inconsistent with the statutory requirement of an investigation designed to provide adequate evidence.
When one undertakes the proper analysis, it becomes manifestly clear that the Secretary does not perform an adequate investigation. As I have noted, the first step is to identify the kind of information that the Secretary must obtain in order to perform an adequate investigation. Here, we need not speculate, because the Secretary himself has identified the information necessary to determining whether an applicant will be a suitable payee. As he states in his brief in our court, the information includes: (1) the prospective payee’s social security number; (2) whether the prospective payee is related to the beneficiary; (3) if the beneficiary lives with the prospective payee, the circumstances surrounding the arrangement; (4) whether the prospective payee is employed, and if not, what his source of income is; (5) whether the prospective payee is a creditor of the beneficiary; (6) whether the prospective payee has been convicted of a felony; and (7) whether the prospective payee is or has served as a payee for other individuals.
The crucial question is whether the procedures followed by the Secretary are designed to provide “adequate evidence” with respect to the necessary information about each prospective payee. The majority sets forth five elements of the “investigation” conducted by the Secretary: (1) the Secretary requires each prospective payee to fill out an application that asks questions about the subjects described above; (2) a Social Security representative interviews each prospective payee; (3) the Secretary requires each prospective payee to sign the application under penalty of perjury; (4) the Secretary verifies that an applicant’s social security number matches the name he or she has given; and (5) in some cases, a Social Security representative makes outside contacts for the purpose of verifying the information supplied by the prospective payee. See ante at 538-39.
*543The majority neglects to discuss all of the steps that the Secretary fails to take. The record contains substantial evidence that in numerous cases the Secretary makes no efforts whatsoever to verify any of the information provided by the prospective payee. Indeed, the standard procedure is for the Social Security representative not to make any outside contacts unless the representative believes that some piece of information provided by the prospective payee himself justifies such contacts. Thus, for example, if a prospective payee states that he has no criminal record, the Secretary makes no attempt to verify this information. Similarly, as a rule, the Secretary makes no effort to verify payees’ income. Furthermore, prospective payees are not even required to show identification,1 and payees are routinely approved on the very same day they apply, based entirely on the information they themselves provide. In short, in numerous cases, the Secretary’s “investigation” consists solely of recording information provided entirely by the prospective payees themselves.
In essence, the Secretary’s investigation consists almost exclusively of asking the prospective payee to answer a series of questions. That process could be described as an adequate investigation only if one were willing to assume that the typical individual applying to be a payee is forthright and honest in completely disclosing information that would lead to the Secretary rejecting his application. As a matter of simple common sense, this assumption is incorrect. As we noted when last this case was before us, beneficiaries who are required by the Secretary to receive payments through representative payees often have no choice but to rely on less than trustworthy individuals. “Faced with a pressing need to find new representatives, many [beneficiaries] turn to potentially unreliable characters — the fellow residents of homeless shelters, the most casual acquaintances, or the bartenders who provide alcohol abusers with their daily rations — to serve as their ‘trustees.’ ” Briggs I, 886 F.2d at 1136. It is precisely because the typical beneficiary is vulnerable to being preyed upon by his or her payee that Congress required the Secretary to “exercise caution,” H.R.Conf.Rep. No. 1039, 98th Cong., 2d Sess. 43, reprinted in 1984 U.S.Code Cong. & Admin.News 3080, 3101, in approving payees. Whatever else Congress may have meant by ensuring that the certification of payees be based on “adequate evidence,” 42 U.S.C. § 405(j)(2); 42 U.S.C. § 1383(a)(2)(B), it can hardly be supposed that Congress intended for the Secretary to accept a prospective payee without taking any steps at all to verify that the information provided by that individual is truthful.
Moreover, even if the Secretary’s procedures were not facially inadequate, in the present case the plaintiffs have submitted numerous affidavits documenting the inadequacy of those procedures in practice. The Secretary has approved payees who had previously been convicted of Social Security fraud as well as other felonies; he has approved payees who were serving as payees for other beneficiaries and charging those beneficiaries “fees” or extorting sexual favors from them in exchange for access to their money; and he has approved unemployed, homeless payees with no source of income.
The consequences of the Secretary’s policy are as tragic as they are predictable. Individuals who depend for their very survival on their meager benefits are lucky if they receive even a small fraction of the funds paid to their representatives. Lump sum payments earmarked for vital medical treatment, food, and shelter frequently disappear with the representative payee. In some cases, beneficiaries have had four or more successive representative payees abscond with their funds. In short, as a result of the Secretary’s policy, the neediest of citizens have been denied the means *544to their survival — means to which they are by law entitled.
The Secretary does not suggest that the evidence presented by the plaintiffs is in any way unreliable. Rather, he acknowledges that his policy has had the horrific effects to which the plaintiffs point, but contends that his “investigations" are adequate despite their effects. I strongly disagree with the majority’s implicit acceptance of the Secretary’s argument that we may judge the adequacy of the “investigations” without looking to their practical effects. Furthermore, even if I were to look only to the policy, I would disagree with the majority’s conclusion that the questioning of self-interested payees performed by the Secretary constitutes an adequate investigation. I would hold, as a matter of law, that the Secretary does not comply with his statutory duty to investigate prospective payees simply by having them fill out a form and asking a few questions, the answers to which he fails to verify.
II
Because I would hold that the Secretary’s procedures do not satisfy his statutory duty, I find it unnecessary to reach the constitutional question whether those procedures also deny the plaintiffs’ their right to due process. However, since the majority does pass on the question, it is worth pointing out a few matters.
The plaintiffs’ due process argument consists of the following steps: (1) they have a property interest in the benefits to which they are by statute entitled; (2) the government may not deprive them of their property without adequate procedures; (3) turning over their benefits to payees whose fitness the Secretary has not adequately attempted to verify constitutes a deprivation of the benefits. The plaintiffs advance a classic “procedural due process” claim.
The first part of the plaintiffs’ argument is beyond dispute. Statutory entitlements of the sort at issue in the present case have long been recognized as “property” within the meaning of the fifth and fourteenth amendments. See Goldberg v. Kelly, 397 U.S. 254, 255, 90 S.Ct. 1011, 1014, 25 L.Ed.2d 287 (1970). The second step of the plaintiffs’ argument is similarly uncontroversial, as it merely sets forth the basic requirement of due process that attaches to all property interests. See Zinermon v. Burch, 494 U.S. 113, 110 S.Ct. 975, 984-85, 108 L.Ed.2d 100 (1990); Mathews v. Eldridge, 424 U.S. 319, 332, 96 S.Ct. 893, 901, 47 L.Ed.2d 18 (1976). It is the third step that is the source of the disagreement. The majority rejects the plaintiffs’ argument that their need for enhanced procedures outweighs the government’s interest in administrative convenience.
Were it necessary for me to reach the constitutional question, I might well find that the Secretary’s procedures are inconsistent with the requirement of procedural due process. The Secretary’s interest in administrative convenience cannot justify a failure to take the minimal steps necessary to ensure that the plaintiffs actually receive their benefits. See Mathews, 424 U.S. at 332, 96 S.Ct. at 901 (setting forth a balancing test for evaluating procedural due process claims). However, even if the Secretary’s procedures could be said to meet the constitutional minimum (a doubtful proposition at best), the fact that serious constitutional questions are raised should require that — in the interest of avoiding those questions — we construe the statute as requiring more than the Secretary currently does. See United States v. Watt, 910 F.2d 587, 592 (9th Cir.1990) (applying the “cardinal principle” that statutes are to be construed so as to avoid constitutional questions) (citations omitted).
Ill
Because I disagree with the majority as to whether the Secretary fulfills his statutory obligation to “investigate” representative payees, I must also reach the plaintiffs’ argument that they are entitled to retroactive payments for the money that their payees misappropriated. I would hold that they are so entitled.
The Social Security Act provides that a payment to a representative payee “under *545conditions set forth in subsection (j)” of 42 U.S.C. § 405 “shall be a complete settlement and satisfaction of any claim, right, or interest in and to such payment.” 42 U.S.C. § 405(k). The obvious inference from this language is that when payments are not made under the conditions of subsection j — which contains the investigation requirement — those payments do not settle a beneficiary’s claim.
The regulations also support this reading. 20 C.F.R. §§ 404.2041 and 416.641 provide that the Secretary’s “obligation to the beneficiary is completely discharged when [he] make[s] a correct payment to a representative payee on behalf of the beneficiary. The payee personally, and not SSA, may be liable if the payee misuses the beneficiary’s benefits.” (Emphasis added). As the District of Colorado court concluded, a correct payment is not one made to an uninvestigated payee. Holt v. Bowen, 712 F.Supp. 813, 818 (D.Colo.1989). I agree with the court’s analysis in Holt. As I would read the regulation, the second quoted sentence — which refers to the beneficiary’s liability in the event that the payee misuses the benefits — only comes into play in cases in which the Secretary has satisfied his obligation to investigate the payee. In short, if the Secretary has made a correct payment, i.e., a payment to a properly investigated payee, then he is not liable for any misuse of funds. In light of Congress’ concern that the Secretary investigate payees, this is, in my opinion, the most reasonable interpretation of the statute and the regulation.
In fact, Congress has expressly authorized retroactive compensation for underpayments in 42 U.S.C. §§ 404(a)(1) and 1383(b)(1)(A). Both provisions provide for compensation whenever “the correct amount of payment” has not been made. The Secretary claims that the statutory references to “payment” imply that his duty is discharged when a check is sent, regardless of whether it is received by the beneficiary. Under the Secretary’s reading of the statutory language, if a check in the correct amount is sent to someone who has no connection at all to the beneficiary, his duty is discharged. This reading is, to put it charitably, strained. As under the regulations, a statutorily “correct” payment is one made in accordance with the statutory command that payees be investigated. Accordingly, I would remand for a determination of the Secretary’s liability for retroactive duplicate payments.
IV
While I agree with the majority’s conclusion that the Secretary has no legal obligation to locate suitable representative payees for Title XVI beneficiaries who are entitled to benefits because of drug or alcohol abuse, see ante at 541, I do not agree that this conclusion disposes of those beneficiaries’ claims. In my view, there is a genuine issue of material fact with respect to the question whether the Secretary satisfies his legal obligation to “try to find a new payee,” 20 C.F.R. § 404.2050; 416.650, for those beneficiaries whose previous representative payees have been found to be unsuitable. See National Medical Enterprises v. Bowen, 851 F.2d 291, 293 (9th Cir.1988) (agency regulations have the force and effect of law).
The Secretary has introduced evidence that he does in fact try to find new payees for beneficiaries who receive Title XVI payments because of drug and alcohol dependency. He argues, and the majority apparently agrees, that the fact that the efforts do not always succeed does not mean that he has failed to satisfy the regulatory requirement that efforts be made. This proposition is certainly correct. However, the plaintiffs’ principal contention is not that the efforts don’t succeed, but that in many cases no efforts are made at all.
The plaintiffs have introduced extensive evidence that conflicts with the Secretary’s evidence that he attempts to locate new payees for Title XVI recipients. For example, the declaration of Jose L. Sanchez, a Social Security Administration claims representative, states that “[i]t is common practice for [beneficiaries] to be told to find anyone they can to act as their payee or otherwise they may not receive benefits.” Mr. Sanchez states further that Social Se*546curity Administration claims representatives “are unable to make referrals or suggestions where persons can find representative payees.” Numerous other claims representatives have signed affidavits to the same effect. This evidence directly contradicts the Secretary’s evidence that claims representatives do try to find payees.
The result is a genuine issue of material fact as to whether the Secretary makes any effort to locate suitable payees. Hence, I would hold that summary judgment on this issue was improper.
V
The Supreme Court has made clear that in its view, our Constitution places no affirmative obligations on the government to alleviate the suffering of society’s most unfortunate members. See DeShaney v. Winnebago, 489 U.S. 189, 195, 109 S.Ct. 998, 1003, 103 L.Ed.2d 249 (1989). See also United States v. Kras, 409 U.S. 434, 457, 93 S.Ct. 631, 644, 34 L.Ed.2d 626 (1973) (Stewart, J., dissenting) (“The Court today holds that Congress may say that some of the poor are too poor even to go bankrupt.”). The theory which apparently underlies this view is that the people should decide whether their fellow citizens are entitled to those commodities essential to their very survival, commodities without which all of the freedoms guaranteed by the Constitution are hollow promises. However limited the Supreme Court’s construction of the Constitution may be, it is not the cause of today’s decision. Today, it is our own misconstruction of a statute that serves to deprive the homeless and the dispossessed of their rights. On this occasion, the people — through their representatives in Congress — have seen fit to alleviate the suffering of the plaintiffs who appear before us. No principle of statutory construction or of deference to agency expertise compels the majority’s decision upholding the government’s careless squandering of funds that Congress earmarked for the benefit of these individuals. The responsibility for their continued misery must, unfortunately, rest with us. I dissent.

. This fact substantially undermines the usefulness of the Secretary’s "verification” of prospective payees’ Social Security numbers. The Secretary only verifies that the number given by the prospective payee matches the name he has given. The Secretary routinely makes no effort to verify that the payee is in fact the person he claims to be.