Court Opinion

ID: 3020619
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:23:13.206068+00
Date Added: 2024-06-11T15:03:30.611742
License: Public Domain

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, and
     STEVENS,* District Judge.
                               ___________

RICHARD S. ARNOLD, Chief Judge.

      Between 1984 and 1991, James Gladden was paid $77,984.30 in social
security disability insurance benefits. It has now been determined that
Mr. Gladden was not entitled to these benefits, because he had been
engaging in substantial gainful activity

      *
        The Hon. Joseph E. Stevens, Jr., United States District Judge for the Western
District of Missouri, sitting by designation.
during all or most of that period of time.       The issue of substantial
gainful activity is not now contested. Mr. Gladden did, however, ask the
Social Security Administration to waive its right to recover the
overpayment. The Secretary of Health and Human Services rejected this
request, finding that Mr. Gladden was not without fault in accepting the
money. Mr. Gladden filed suit in the District Court for a review of that
finding, but that Court, holding that the Secretary’s finding was supported
by substantial evidence, dismissed the complaint.

      We hold that the Secretary’s1 finding is not supported by substantial
evidence. Because of erroneous advice received from an official of the
Social Security Administration, Mr. Gladden reasonably believed, at least
for part of the relevant time period, that he was not engaged in
substantial activity as that term is defined by the law, and that he
therefore had a right to the payments. He therefore was without fault, as
that term is defined by the applicable statute and regulations, and is
entitled to a waiver of recovery of the overpayment. We reverse and remand
to the District Court with directions to enter judgment in favor of Mr.
Gladden.

                                         I.

      James Gladden suffered a heart attack in June 1983 at age 49. The
heart attack left him unable to return to Reynolds Metals Company, where
he had worked as a computer programmer for 25 years. He applied to the
Department of Health and Human Services for social security disability
insurance benefits in September 1983. In May 1984, an Administrative Law
Judge (ALJ) conducted a hearing to determine Gladden’s eligibility to
receive benefits.

      1
        The Secretary made the finding under review, but the action now proceeds
against the Commissioner of the Social Security Administration by virtue of the Social
Security Independence and Program Improvements Act of 1994, Pub. L. No. 103-296,
108 Stat. 1964.

                                         -2-
      After listening to Gladden’s description of his health problems and
resulting limitations, the ALJ explained that “[w]e don’t insist that you
work unless you’re capable of what they call substantial gainful activity
. . . in other words can you work eight hours a day 40 [hours] a week.” R.
104.   The ALJ determined that Gladden’s “severe dyspnea, weakness and
inability to tolerate normal stress of a work environment, would preclude
him from performing any type of substantial gainful activity on a sustained
basis.” R. 83. Considering Gladden’s “maximum sustained work capability,
age, education and work experience,” the ALJ concluded that Gladden was
“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
him two follow-up questions about the business and then departed from the
subject entirely. Gladden answered these questions truthfully. After the
ALJ’s decision, Gladden started spending more time at the computer business
to combat boredom and the isolation of being home alone. R. 46-52. The
business was in a downtown area, a more convenient location for him to visit
with friends or family, who would call or stop by to see him. He set up an
office with a couch, refrigerator, and television and received his mail and
newspaper there. Gladden ultimately came to spend the majority of his time
at the business location, including weekends, but was not actually working
there at first.    As his time at the office grew, so apparently did the
business-related tasks he performed.

      For about seven years after the original decision of the ALJ in 1984,
Gladden reported income from the business on his tax returns. In 1990, the
Social Security Administration became interested in determining how that
income was generated and began conducting a “continuing disability
investigation.” A Social Security 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

                                   -3-
time he spent at the office, stated that he spent about 40 hours there each
week, 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,
called Professional Systems, Inc. A. 64. He then filled out a “Statement
of Claimant or Other Person” form stating that he was present at the
business 40 hours a week and described his duties as talking to people,
handling public relations, hiring and firing, and helping to set fees. He
explained that he had started the business in 1977 and had invested
approximately $200,000 in it. R. 107-08.

      In April 1991, Social Security informed Gladden that it was reopening
the ALJ’s July 5, 1984, decision approving disability benefits and was
contemplating issuing a decision finding that Gladden had not been disabled
since June 10, 1983, because his business activities constituted substantial
gainful activity precluding the award of disability insurance benefits. In
June 1991, the Social Security Appeals Council held that Gladden was not,
and never had been, disabled as defined in the Social Security Act. R. 114-
16.

      On April 1, 1992, Gladden received a notice stating that he no longer
qualified for benefits “beginning December 1983,” that he had been overpaid
$77,984.30 in benefits, and that he was liable to Social Security for
repayment.    R. 125.   Gladden retained counsel and requested waiver of
overpayment. Gladden asserted that he was not at fault in accepting the
disability benefits because Social Security was aware of his ownership
interest in the business at the time of the benefits award and because the
time he spent at the office since receiving disability benefits was for
social 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.

                                   -4-
      On May 5, 1993, Gladden requested a hearing by an ALJ. The request for
a hearing was granted.     The ALJ concluded that Gladden was at fault in
accepting the overpayment of benefits. R. 20-21. Gladden unsuccessfully
sought review of the ALJ’s decision by the Appeals Council.

      Having exhausted his administrative avenues of relief, Gladden filed
a complaint in the District Court, seeking waiver of the assessed
overpayment. The District Court entered judgment against Gladden on March
11, 1997. This appeal followed. The ALJ’s findings will be affirmed if
supported by substantial evidence on the record as a whole.       Smith v.
Schweiker, 728 F.2d 1158, 1161 (8th Cir. 1984).     In determining whether
there is substantial evidence, we “must take into account whatever in the
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
“inability to engage in any substantial gainful activity by reason of any
medically 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 substantial and
     gainful:

     (a)   Substantial work activity.
     Substantial work activity is work activity that involves doing
     significant physical or mental activities. Your work may be
     substantial even if it is

                                   -5-
done on a part-time basis or if you do less, get paid less, or have less
responsibility than when you worked before.

     (b)   Gainful work activity.
     Gainful work activity is work activity that you do for pay or
     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 is
     realized.

      Moreover, the regulations provide that the activities of self-employed
individuals must be evaluated to determine whether they constitute
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 whether you
     have engaged in substantial gainful activity if you are self-
     employed.   We will not consider your income alone since the
     amount of income you actually receive may depend upon a number
     of different factors like capital investment, profit sharing
     agreements, etc.   . . . We will evaluate your work activity on
     the value to the business of your services regardless of whether
     you receive an immediate income for your services. We consider
     that you have engaged in substantial gainful activity if . . .
     (3) You render services that are significant to the operation of
     a business and receive a substantial income from the business.

     (b) What we mean by significant services. (1) . . . [I]f your
     business involves the services of more than one person, we will
     consider you to be rendering significant services if you
     contribute more than half the total time required for the
     management of the business, or you render management services for
     more than 45 hours a month regardless of the total management
     time required by the business.

      Gladden acknowledges that when Social Security began its investigation
in 1990, his activities constituted services significant to the operation
of a business. The crux

                                   -6-
of this case, however, is not the substantive issue of disability or
substantial gainful activity, but whether Gladden is entitled to have the
admitted overpayment waived because the ALJ told him he would be all right,
so to speak, as long as he did not work 40 hours a week. For this question
we must turn to the law defining fault.

      The statute provides that where an individual is determined to have
been overpaid disability benefits, but was not at fault in accepting the
overpayment, 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 the 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 adjustment
     or recovery would defeat the purpose 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, the
     Social Security Administration will consider all pertinent
     circumstances, including the individual’s age and intelligence,
     and any physical, mental, educational, or linguistic limitations
     . . . the individual has. What constitutes 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 information which he knew or should have
     known to be material; or

                                   -7-
           (c) With respect to the overpaid individual only,
           acceptance of a payment which he either 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 more requirements for entitlement to such payment . . .
     constitutes an entitlement overpayment. Where an individual .
     . . accepts such overpayment because of reliance on erroneous
     information from an official source within the Social Security
     Administration . . . with respect to the interpretation of a
     pertinent provision of the Social Security Act or regulations
     pertaining thereto . . . such individual, in accepting such
     overpayment, will be deemed to be without fault.

20 C.F.R. § 404.510a. Furthermore, in such a situation, the regulations
direct that recovery will be waived. 20 C.F.R. § 404.512(a) states: “[i]n
the situations described in . . . § 404.510a, adjustment or recovery will
be waived since it will be deemed such adjustment or recovery is against
equity and good conscience. . . .” (Emphasis in original.) Thus, someone
who relies on erroneous information from an official source meets both
requirements for waiver set forth in 42 U.S.C. § 404(b):     he or she is
without fault, and recovery 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 activity
. . . in other words can you work eight hours a day 40 [hours] a week.”
R. 104. Gladden maintains that under the ALJ’s definition, he was not at
any time engaging in substantial gainful activity. The office was a social
outlet for him, as evidenced by the couch, refrigerator, and

                                   -8-
television, and by the fact that he received his mail there, and spent
weekends there to get out of the house and meet friends.

      The Appeals Council 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 forthrightly
answered the questions put to him by the ALJ in 1984, and the ALJ did not
pursue further investigation into the matter.

      At most, the record would support a finding that at some point never
determined, Gladden’s situation became different from what it was when he
appeared before the ALJ in 1984. Gladden might be determined 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 to
Social 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 the
overpaid individual . . . depends upon whether the facts show that the
incorrect payment to the individual . . . resulted from [f]ailure to furnish
information which he knew or should have known to be material. . . .”).
On this record, however, there is no evidence of when (if ever) Gladden
began working 40 hours a week, enough to qualify him as not disabled under
the definition he had been given, nor does either side ask us to remand the
case for further proceedings on that issue.

                                   III.

      Accordingly, we hold that the Secretary’s decision to deny a waiver of
recovery of overpayment is not supported by substantial evidence.        The
judgment is reversed, and the cause remanded to the District Court with
directions to enter judgment in favor of Mr. Gladden.

     It is so ordered.

                                   -9-
A true copy.

     Attest:

           CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                            -10-