Court Opinion

ID: 8936186
Source: CourtListenerOpinion
Date Created: 2022-11-27 07:31:07.153605+00
Date Added: 2024-06-11T17:09:37.717649
License: Public Domain

GIBBONS, Circuit Judge,
dissenting:
Two federal entitlement programs are involved in this appeal; Federal Old-Age, Survivors, and Disability Insurance Benefits, authorized by Title II of the Social Security Act, 42 U.S.C. §§ 401-433 (1982), and Supplemental Security Income for Aged, Blind and Disabled, authorized by Title XVI, 42 U.S.C. §§ 1381-1385 (1982). The starting point for consideration of the validity of the challenged “netting” regulations adopted by the Secretary for resolution of overpayment disputes is the statutory definition of the respective entitlements. Both programs provide for entitlement to monthly benefits.1 Thus the very nature of the entitlements establishes the basic statutory accounting period.
The instant problem arises, however, out of two provisions authorizing the Secretary to take steps to recover overpayments of monthly benefits. Title II provides that
[wjhenever the Secretary finds that more or less than the correct amount of payment has been made____ proper adjustment or recovery shall be made, under regulations prescribed by the Secretary as follows:
(1) With respect to payment ... of more than the correct amount, the Secretary shall decrease any payment under this subchapter ... or shall require such overpaid person or his estate to refund the amount in excess of the correct amount ... or shall apply any combination of the foregoing.
(2) With respect to payment to a person of less than the correct amount, the Secretary shall make payment of the balance of the amount due such underpaid person.
42 U.S.C. § 404(a). The plain meaning of this section is that all excess monthly benefit payments shall be recovered by the United States, and all underpayments of monthly benefits shall be paid by the United States. A provision in Title XVI is similarly mandatory.2 The mandatory direction to the Secretary in both Titles that underpayments of monthly benefits shall be paid by the United States is unqualified. With respect to overpayment of monthly benefits, however, the otherwise mandatory requirement that they be recovered is qualified. Title II provides that notwithstanding the provision authorizing recovery of overpaid monthly 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.” 42 U.S.C. § 404(b). Title XVI contains a similar qualification of the statutory right of the United States to recover excess monthly benefits.3 Signifi*1154cantly, the qualification of the United States’ right is not merely of the right to setoff against future monthly benefits, but of the right to recover at all. The qualification applies both to adjustments and to recoveries.
In contrast, however, there is no qualification in either Title of the Secretary’s obligation to pay monthly benefits which have been withheld or underpaid. The difference in treatment of overpayments and underpayments is quite plain. It is consistent with the fundamental policy motivating Congress in enacting both Titles; namely assuring those most in need in our society that they will receive a monthly benefit which will from month to month provide for the necessities of life.
The waiver of recovery provisions, applicable only to overpayments of monthly benefits, present no particular problem in instances where the United States attempts recovery by means other than self-help. In a suit to recover overpayments, for example, the waiver issue can be presented and determined before a judgment is entered. But when the Secretary determines that recovery shall be accomplished by the self-help device of reducing future benefits — a method authorized in both Titles — the possibility arises that those entitled to monthly benefits will be deprived of those benefits without due regard for the waiver standards. Recognizing that such a result would be inconsistent with the Congressional qualification upon the government’s right to recover, the Supreme Court in Califano v. Yamasaki, 442 U.S. 682, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979) interpreted 42 U.S.C. § 404(b) as requiring the government to give beneficiaries notice and a hearing on the waiver question before seeking to recover overpaid benefits from them. The reason for this requirement lies in the plain language of the statute. Thus, in Yamasaki, the Court noted, “In contrast [with other federal statutes authorizing waiver of recovery] § 204 [§ 404] is mandatory in form. It says ‘there shall be no’ recovery when waiver is proper.” 442 U.S. at 694 n. 9, 99 S.Ct. at 2554 n. 9. No recovery means no recovery by setoff, and no recovery by suit; no recovery at all.4
*1155Both the language of the waiver of recovery provisions and the Supreme Court’s interpretation of these provisions could not be plainer. The United States may not recover overpayments in any manner until an opportunity has been afforded for a waiver hearing. Despite the plain language of the statutes, and the Yamasaki opinion, however, the Secretary has devised an ingenious scheme whereby “no recovery” becomes “some recovery.” The chosen devices are the two “netting” regulations quoted in the majority opinion. The key to the netting regulations is the Secretary’s completely artificial definition of the period for calculation of overpayments and underpayments. The statutory entitlements are monthly benefits. In calculating net overpayments or underpayments, however, the Secretary has chosen to disregard the fact that the overpayment provisions refer to such monthly benefits. Instead the Secretary has devised an entirely different period of measurement:
The period with respect to a determination of the fact or amount of any overpayment or underpayment begins with the first month of any quarter for which there is a difference between the amount paid and the amount due and ends with the month immediately preceding the calendar quarter in which the initial determination of overpayment or underpayment is made____
20 C.F.R. § 416.538 (1985).
The effect of this quaint regulation is that the period for calculating over-payments or underpayments is completely open-ended. It can involve recapture of overpayments made even a quarter century ago) More significant for this appeal, however, is the fact that the netting regulations permit the Secretary to accomplish what the waiver provisions plainly and unequivocally forbid; namely a recovery by the United States of overpayments without a hearing on waiver.5
The Secretary insists that her ingenious device for obtaining some repayments without a waiver hearing is a fair means for avoiding windfalls to beneficiaries. So it is. It is a device for avoiding windfalls, however, for which Congress made express provision. The majority attempts to justify the Secretary’s position with the observation that “[a]s federal judges, we must leave the determination of policy to those with legislative authority.” At 1150. The legislative determination was made in this case by Congress, when it determined that no recovery of an overpayment of a monthly benefit' would be permitted in the absence of a waiver determination.
*1156The attempt by the Secretary and the majority to conceal the fact that the case involves recovery of overpayments is unrealistic and unpersuasive. The scenario in the case of Angel Lugo serves to demonstrate just how unrealistic the attempt is. Lugo began receiving disability benefits under Title II in 1974. In October 1977 he was exposed to the practice, with which members of this court are all too familiar, of being purged from the disability benefits rolls. He pursued his claim, obtaining a final decision from the Secretary on March 17, 1980 that he met the disability requirements as of November 17, 1976. Thus, Lugo was entitled to the payment of monthly benefits from November 17, 1976 forward — underpayments totaling $2,798.70. Despite the mandatory language of 42 U.S.C. § 402(a)(2), he was not paid these benefits. Instead the Secretary informed Lugo that between 1974 and October 1976 he had been overpaid $6,100.60 and that the “net” overpayment was $3301.90. Since under 42 U.S.C. § 404(b) the Secretary could not, without a waiver hearing, seek to recover the $3,301.90, Lugo was informed he could seek a waiver hearing with respect to that amount. But the unadorned economic reality is that by delaying the processing of Lugo’s disability claim and applying the netting regulation, the Secretary did obtain a recovery of $2,798.70. Under section 404(b), the United States was not entitled, without a waiver hearing, to recover either the $3,301.90 or the $2,798.70. It was entitled to no recovery. Had the Secretary been able to drag out the processing of Lugo’s claim for more than the thirty months which that processing took, she would have obtained, despite the statutory prohibition, an even higher recovery. The less than satisfactory experience of this court with respect to the Secretary’s processing of disability claims suggests that the scenario in Lugo’s case, and in Pickel’s case, in which $2,208.90 was recovered, will occur with some frequency. The frequency or infrequency of the occurrence is not, of course, dispositive. What is dispositive is the Congressional decision that no recovery of overpaid monthly benefits paid pursuant to Title II and Title XVI may be obtained by the United States until after a waiver hearing.
The majority has justified an end run by the Secretary around both the waiver statutes and the Supreme Court’s decision in Califano v. Yamasaki, supra. Because the district court opinion, Lugo v. Schweiker, 599 F.Supp. 948 (E.D.Pa.1984), recognizes that the netting regulation is inconsistent with the waiver statutes and Supreme Court precedent. I would affirm.

. Section 402(a) provides: “Every [eligible] individual ... shall be entitled to an old-age insurance benefit for each month____’’ 42 U.S.C. § 402(a).
Section 1382(c)(1) provides: "An individual’s eligibility for a benefit under this subchapter for a month shall be determined on the basis of the individual’s (and eligible spouse’s, if any) income, resources, and other relevant characteristics in such month____” 42 U.S.C. § 1382(c)(1).

. Title XVI provides as follows:
Whenever the Secretary finds that more or less than the correct amount of benefits has been paid ... proper adjustment or recovery shall, subject to the succeeding provisions of this subsection, be made by appropriate adjustments in future payments to such individual or by recovery from or payment to such individual or his eligible spouse (or by recovery from the estate of either).
42 U.S.C. § 1383(b)(1).

. Title XVI provides as follows:
*1154The Secretary shall make such provision as he finds appropriate in the case of payment of more than the correct amount of benefits with respect to an individual with a view to avoiding penalizing such individual or his eligible spouse who was without fault in connection with an overpayment, if adjustment or recovery on account of such overpayment in such case would defeat the purposes of this subchapter, or be against equity or good conscience ____”
42 U.S.C. § 1383(b)(1).

. The majority somehow interprets Yamasaki as standing for the proposition that the Secretary is not required to afford beneficiaries an oral hearing before the government recoups over-payments made to beneficiaries by means of the netting regulations. Yamasaki, however, declared that in any case where an overpayment has been made "there shall be no adjustment of payments to, or recovery ... from any person” who requests waiver under § 404(b) absent notice to the persons affected and an informal hearing on the issue of fault, and on the issues of whether recovery would "defeat the purpose of the subchapter” or be "against equity and good conscience." '442 U.S. at 697, 99 S.Ct. at 2555.
In this case it is clear that the Secretary made overpayments, that the beneficiaries sought waiver, and that the Secretary recovered portions of the overpayments through the netting
procedure. It is equally clear, however, that this recovery was made without the beneficiaries having the benefit of an oral hearing to determine whether they were entitled to waiver of the overpayments. Clearly, the government’s recovery in this manner was a blatant violation of the statute and the Supreme Court’s mandate in Yamasaki.
The majority attempts to justify its holding by pointing to the language in Yamasaki that a beneficiary is not entitled to such a hearing under § 404(a). Typescript 12-13. The Yamasaki Court held that a request for reconsideration of the Secretary’s initial determination that an overpayment had occurred did not trigger the hearing requirement because such requests normally involve only allegations of computational or mathematical error which can be resolved on the basis of written submissions. 442 U.S. 695-96, 99 S.Ct. at 2554-55. This narrow holding, however, surely does not stand as precedent for the majority's refusal to find that the beneficiaries in this case were not entitled to a hearing. Rather than request reconsideration of the determination of overpayment on the basis of an alleged mathematical error under § 404(a), they sought waiver of the over-payments under § 404(b). In this situation, both the statute and Yamasaki require the government to afford the beneficiaries a hearing before the overpayments are recovered,
*1155whether the recovery is by direct recoupment or by the netting procedure we have here.
Finally, although the majority correctly notes that Congress did not intend that every time an overpayment occurs, the government must forfeit the excess funds, typescript 15, the majority ignores the fact that Yamasaki holds that every time an overpayment occurs and the government seeks to recover the excess, the beneficiary is entitled to a prerecoupment hearing upon making a request for waiver under § 404(b). 442 U.S. at 697, 99 S.Ct. at 2555.

. The majority insists that the Secretary is free to promulgate regulations establishing any period of measurement for the computation of erroneous payments, and that the court may not disturb them unless they are arbitrary, capricious, or manifestly contrary to the statute, or, at a minimum, unreasonable. At 1147. These statements by the majority completely disregard the fact that Congress specifically structured the two entitlement programs to operate on a monthly basis. Thus, benefits are determined or calculated on a monthly basis, and eligible individuals are entitled to receive payments in a particular amount on a monthly basis. The Secretary is then authorized to make a proper adjustment or recovery if the Secretary finds that "more or less than the correct amount of payment has been made____” 42 U.S.C. § 404. The majority does not dispute that the amount of such payments are calculated and paid on a monthly basis, at 1148; it merely disagrees with the conclusion that erroneous payments must be calculated on this same basis. Id. However, because individuals are only eligible to a particular amount on a monthly basis, and payments are made on this same basis, it only makes sense that the Secretary’s determination of whether an incorrect payment has been made also must be geared to this monthly basis. This conclusion is even more compelling in light of the fact that any other result would wholly undercut the fundamental policy underlying Congress’s enactment of the two Titles, not to mention the Supreme Court’s opinion in Califano v. Yamasaki, 442 U.S. 682, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979).