Court Opinion

ID: 9372837
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:01:01.360794+00
Date Added: 2024-06-11T17:16:37.974972
License: Public Domain

UNITED STATES OF AMERICA
                        MERIT SYSTEMS PROTECTION BOARD

     CHARA L. CORDOVA,                               DOCKET NUMBER
                  Appellant,                         SF-0845-21-0545-I-1

                  v.

     OFFICE OF PERSONNEL                             DATE: February 15, 2023
       MANAGEMENT,
                   Agency.

                  THIS ORDER IS NONPRECEDENTIAL 1

           Chara L. Cordova, Arcadia, California, pro se.

           Jane Bancroft, Washington, D.C., for the agency.

                                           BEFORE

                               Cathy A. Harris, Vice Chairman
                                Raymond A. Limon, Member
                                 Tristan L. Leavitt, Member

                                     REMAND ORDER

¶1         The agency has filed a petition for review of the initial decision, which
     reversed a reconsideration decision         issued by the Office of Personnel
     Management (OPM) that concluded that the appellant had received an
     overpayment of Federal Employees’ Retirement System (FERS) disability

     1
        A nonprecedential order is one that the Board has determined does not add
     significantly to the body of MSPB case law. Parties may cite nonprecedential orders,
     but such orders have no precedential value; the Board and administrative judges are not
     required to follow or distinguish them in any future decisions. In contrast, a
     precedential decision issued as an Opinion and Order has been identified by the Board
     as significantly contributing to the Board’s case law. See 5 C.F.R. § 1201.117(c).
                                                                                         2

     retirement benefits and was not entitled to a waiver of the overpayment. For the
     reasons discussed below, we GRANT the agency’s petition for review, VACATE
     the initial decision, and REMAND the matter to the Western Regional Office for
     further adjudication in accordance with this Remand Order .

                                         ANALYSIS
¶2        Neither party disputes the administrative judge’s conclusion that OPM
     proved the existence and amount of the $21,102.00 overpayment at issue, which
     occurred as a result of the appellant’s concurrent entitlement to FERS disability
     retirement benefits and Social Security Administration (SSA) disability insurance
     benefits for the period of January 1, 2018, through March 30, 2020.            Initial
     Appeal File (IAF), Tab 12 at 29-34, Tab 29, Initial Decision (ID) at 6-7; see
     5 U.S.C. § 8452(a); Johnston v. Office of Personnel Management, 70 M.S.P.R.
     109, 112-17, aff’d, 99 F.3d 1160 (Fed. Cir. 1996) (Table); 5 C.F.R. § 844.302.
     Thus, the dispositive issue in this matter is whether the appellant is entitled to a
     waiver of the overpayment.

     We vacate the administrative judge’s conclusion that the appellant is entitled to a
     waiver of the overpayment and remand the matter for further adjudication.
¶3        The appellant bears the burden of establishing her entitlement to a waiver
     by substantial evidence. 2 5 C.F.R. § 845.307(b). To establish entitlement to a
     waiver of an overpayment, the appellant must show (1) that she was without fault
     and (2) that recovery of the overpayment would be against equity and good
     conscience.   5 U.S.C. § 8470(b); Knox v. Office of Personnel Management,
     107 M.S.P.R. 353, ¶ 5 (2007); 5 C.F.R. § 845.301. Here, the administrative judge
     concluded both that the appellant was without fault in creating the overpayment
     and that recovery of the same would be against equity and good conscience. For

     2
       Substantial evidence is defined as the degree of relevant evidence that a reasonable
     person, considering the record as a whole, might accept as adequate to support a
     conclusion, even though other reasonable persons might disagree. 5 C.F.R. § 1201.4(p).
                                                                                          3

     the reasons set forth herein, we vacate these findings and remand the matter for
     further adjudication.

     The administrative judge applied an incorrect legal standard in determining
     whether the appellant was at fault in creating the overpayment.
¶4         The administrative judge concluded that the appellant was without fault in
     creating the overpayment because, although it was undisputed that she had been
     advised of her obligation to immediately inform OPM of her receipt of SSA
     benefits, she was not awarded SSA benefits until January 2020, “only several
     months before” April 25, 2020, when OPM notified her of the overpayment. ID
     at 7-8. The administrative judge reasoned that the appellant “had no control over
     the fact that, as a result of SSA’s decision to award her benefits retroactive to
     January 1, 2018, she had received two full years of FERS disability retirement
     overpayments that occurred between January 1, 2018, and December 31, 2019.” 3
     ID at 8.
¶5         In determining fault, pertinent considerations generally include the
     following: (1) whether payment resulted from any statement the appellant should
     have known to be incorrect; (2) whether payment resulted from any failure on her
     part to disclose material facts in her possession that she should have known to be
     material; and (3) whether she accepted a payment that she knew or shoul d have
     known to be erroneous. Knox, 107 M.S.P.R. 353, ¶ 6; 5 C.F.R. § 845.302(a). The
     recipient of an overpayment is deemed to be without fault if the individual
     “performed no act of commission or omission which resulted in the
     overpayment.” 5 C.F.R. § 845.302. OPM guidelines clarify that an individual is
     held to be without fault, even if she knew or should have known that the payment

     3
       We find the administrative judge’s characterization of the appellant having received
     “two full years of FERS disability retirement overpayments that occurred between
     January 1, 2018, and December 31, 2019” imprecise. ID at 8 (emphasis added).
     Indeed, although the appellant was awarded SSA benefits retroactive to January 1,
     2018, the administrative judge found that substantial evidence established that she did
     not receive any money from SSA until January 2020. See ID at 7-8.
                                                                                       4

     was erroneous, if she contacted OPM within 60 days of the receipt of an
     overpayment to question the correctness of the payment. Policy Guidelines on
     the Disposition of Overpayments under the Civil Service Retirement System and
     Federal Employees’ Retirement System (OPM Policy Guidelines), § I.B.6 (1995)
     (located at IAF, Tab 12 at 90). Here, the appellant never notified OPM of the
     overpayment. Instead, approximately 4 months (i.e., more than 60 days) after the
     appellant was awarded SSA benefits, OPM independently learned of the same.
     IAF, Tab 12 at 36. Thus, applying the correct legal standard, the appellant has so
     far failed to show that she was without fault in creating the overpayment. See
     Ewing v. Office of Personnel Management, 100 M.S.P.R. 224, ¶ 5 (2005)
     (concluding that the appellant was at fault regarding an overpayment when he
     failed to follow the directions provided in OPM’s notification); cf. Boyd v. Office
     of Personnel Management, 851 F.3d 1309, 1313 (Fed. Cir. 2017) (explaining that
     an appellant who promptly notifies OPM of an overpayment is categorically
     deemed to be “without fault”).
¶6        However, our inquiry does not end here. To this end, the appellant argued
     before the administrative judge that, at the time she was approved for disability
     retirement under FERS, she was undergoing intense psychiatric treatment that
     prevented her from understanding the paperwork she had received from OPM; in
     other words, the appellant contended that her mental condition caused her to
     accept an erroneous payment. 4     IAF, Tab 1 at 5; see 5 C.F.R. § 845.302(b)
     (stating that an individual’s mental condition may mitigate against finding fault if
     it contributed to the appellant’s acceptance of an erroneous payment). Because
     resolving the factual question of whether the appellant’s mental condition
     rendered her incapable of knowing or suspecting that she had received an
     overpayment may require credibility determinations that are best made first by
     the administrative judge, we remand the matter for further adjudication.
     4
       Although the administrative judge acknowledged this argument, ID at 4, he did not
     consider it in his analysis of fault, ID at 7-8.
                                                                                          5

     The administrative judge applied an incorrect legal standard in determining
     whether recovery would be against equity and good conscience.
¶7         The administrative judge concluded that recovery of the overpayment would
     be against equity and good conscience because it would create a substantial
     financial hardship for the appellant. ID at 8-17. In so concluding, he reasoned
     that the appellant was not required to set aside the overpayment because her
     January 2020 award of SSA benefits was retroactive and, therefore, she “was not
     aware that she was receiving an overpayment until nearly all of the overpayment
     had already occurred.” 5 ID at 8-9.
¶8         Recovery of an overpayment is against equity and good conscience if an
     appellant can establish the following:     (1) recovery would cause her financial
     hardship; (2) she relinquished a valuable right or changed positions for the worse
     because of the overpayment; or (3) recovery would be unconsci onable under the
     circumstances. 6 Markanich v. Office of Personnel Management, 104 M.S.P.R.
     323, ¶ 14 (2006); 5 C.F.R. § 845.303. In assessing these factors, the Board has
     found that Federal annuitants who know or suspect that they are receiving
     overpayments are expected to set aside the amount overpaid pending recoupment
     and that in the absence of exceptional circumstances 7—which do not include
     financial hardship—recovery in these cases is not against equity and good
     conscience. Knox, 107 M.S.P.R. 353, ¶ 8.
     5
       Again, the administrative judge’s phrasing is imprecise. As stated, although the
     appellant was awarded SSA benefits retroactive to January 1, 20 18, the administrative
     judge found that substantial evidence established that she did not receive any monetary
     benefits from SSA until January 2020. See ID at 7-8.
     6
        We discern no basis to disturb the administrative judge’s conclusions that the
     appellant failed to show either (1) that she relinquished a valuable right or changed
     positions for the worse because of the overpayment or (2) that recovery would be
     unconscionable under the circumstances. ID at 9-10. Thus, the dipositive issue for
     purposes of determining whether recovery would be against equity and good conscience
     is whether recovery of the overpayment would cause the appellant financial hardship.
     7
       OPM Policy Guidelines explain that “[e]xceptional circumstances would involve
     extremely egregious errors or delays by OPM—e.g., a failure to issue a written decision
     within 4 years of a debtor’s request for waiver.” IAF, Tab 12 at 93.
                                                                                      6

¶9         Here, it is unclear why the administrative judge concluded that the
      retroactive nature of the appellant’s SSA benefits rendered the set-aside rule
      inapplicable to her; indeed, the Board has previously found that the rule applies
      in such circumstances.     E.g., Gulan v. Office of Personnel Management,
      86 M.S.P.R. 16, ¶¶ 3-4, 9 (2000). Thus, applying the correct standard, we would
      agree with OPM’s contention that the appellant should have set aside any
      disbursement from SSA in order to repay OPM for the corresponding reductions
      that should have been taken from her disability retirement benefits. IAF, Tab 12
      at 14, 66. However, as stated, the appellant argued that her mental conditions
      precluded her from understanding correspondence from OPM. IAF, Tab 1 at 5.
      Accordingly, on remand, the administrative judge shall determine whether the
      appellant’s mental conditions precluded her from knowing or suspecting that she
      was receiving an overpayment and, therefore, whether the set-aside rule should
      apply to her. See Zucker v. Office of Personnel Management, 114 M.S.P.R. 288,
      ¶¶ 8-10 (2010) (remanding an overpayment appeal for further adjudication
      regarding the set-aside rule when the administrative judge failed to consider the
      appellant’s claim that his deteriorating mental conditions led him to erroneously
      believe that he had not received an overpayment).

      On remand, the administrative judge shall further develop the record regarding
      the appellant’s finances.
¶10        As stated, the administrative judge concluded that the appellant showed by
      substantial evidence that recovery of the overpayment would create a financial
      hardship for her. ID at 10. Although the administrative judge found that the
      appellant’s monthly living expenses exceeded her monthly income, ID at 15 -16,
      he also acknowledged that, at the time she filed her Board ap peal, she had “a
      substantial amount of personal savings,” i.e., approximately $52,000.00 as of
      October 2021, ID at 16; IAF, Tab 24 at 5. The administrative judge expressed
                                                                                           7

      uncertainty as to the source of some these savings, 8 a large portion of which
      stemmed from recent deposits. ID at 12; IAF, Tab 24 at 10, Tab 25 at 5, Tab 26
      at 6. To this end, the administrative judge acknowledged that the appellant had
      testified that some of these deposits reflected her sale of a diamond ring;
      however, he found it “largely improbable that she was able to generate nearly
      $20,000.00 from the sale of diamonds from a single ring.” ID at 12.
¶11         Financial hardship may be deemed to exist when the appellant “needs
      substantially all of [] her current income and liquid assets to meet current and
      ordinary living expenses and liabilities.” 5 C.F.R. § 845.304. However, when
      information submitted by the appellant is incomplete, the adm inistrative judge
      should request additional information so that he can make a reasoned
      determination on the question of financial hardship.           Zelenka v. Office of
      Personnel Management, 107 M.S.P.R. 522, ¶ 15 (2007).
¶12         Here, we find the information concerning the appellant’s financial status to
      be incomplete; accordingly, we vacate the administrative judge’s conclusion that
      the appellant showed by substantial evidence that recovery of the overpayment
      would create a financial hardship for her. On remand, the administrative judge
      shall further develop the record regarding the appellant’s finances and provide the
      appellant an opportunity to submit an updated Financial Resources Questionnaire
      (FRQ). 9 See Zucker, 114 M.S.P.R. 288, ¶ 9 (instructing the administrative judge

      8
        The appellant indicated on a July 7, 2021 Financial Resources Questionnaire that she
      had $39,000.00 in savings. IAF, Tab 12 at 17. Banking statements that she provided
      indicated that, as of September 2021, she had over $54,000.00 in savings. IAF, Tab 24
      at 9. The appellant also seemingly paid off a $7,528.32 car loan during the pendency of
      her appeal before the administrative judge. IAF, Tab 12 at 17, Tab 24 at 4.
      9
        To the extent the administrative judge concludes on remand that the appellant is not
      entitled to a waiver of the overpayment, this additional evidence will be relevant for
      purposes of the repayment schedule. Indeed, even if an appellant is not entitled to a
      waiver of recovery of the overpayment, she is entitled to an adjustment of OPM’s
      recovery schedule if she is able to show that recovery under that schedule would cause
      her a financial hardship. Malone v. Office of Personnel Management, 113 M.S.P.R.
      104, ¶ 4 (2010); 5 C.F.R. § 845.301.
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      to provide the appellant an opportunity to submit an updated FRQ when
      remanding an overpayment appeal).
¶13         Accordingly, we remand this appeal to the Western Regional Office for
      further adjudication. On remand, the administrative judge shall apply the legal
      standards set forth above, further develop the record as described, and, if
      necessary, hold a supplemental hearing.       See Spithaler v. Office of Personnel
      Management, 1 M.S.P.R. 587, 589 (1980) (explaining that an initial decision must
      identify all material issues of fact and law, summarize the evidence, resolve
      issues of credibility, and include the administrative judge’s c onclusions of law
      and his legal reasoning, as well as the authorities on which that reasoning rests ).

                                            ORDER
¶14         For the reasons discussed above, we remand this case to the Western
      Regional Office for further adjudication in accordance with this Remand Order.

      FOR THE BOARD:                                     /s/ for
                                                 Jennifer Everling
                                                 Acting Clerk of the Board
      Washington, D.C.