Day v. Shalala

BATCHELDÉR,

concurring in part and dissenting in part.

Although I concur in much of the majority’s opinion, I must dissent from those portions which result- in the reopening of any claims. For the reasons which follow, I would hold that no class can be certified and the entire case should have been.remanded to the district court to be dismissed.

The majority limits the potential class members to those claimants who detrimen *1068 tally relied on the inadequate Title II reconsideration denial notices used before February 1990, by filing new applications when they should have continued the administrative appeals process. Citing Bowen v. City of New York, 476 U.S. 467 , 106 S.Ct. 2022 , 90 L.Ed.2d 462 (1986), the majority holds that since the only practice of the BDD which constitutes grounds for reopening claims is the inadequate Title II reconsideration notice, and since the use of this notice form was not clandestine or secretive, these claimants may not invoke the doctrine of equitable tolling to extend the 60-day time limitation for those appeals. Therefore, the majority holds that the class excludes any claimants whose applications for reconsideration were denied more than sixty days before the filing of the amended complaint in this class action on December 4, 1987.

However, the majority goes on to hold, again citing City of New York , that the failure of these class members to exhaust their administrative appeals must be excused because the claims raised in this lawsuit are collateral to the actual claims for benefits, the claimants have made a colorable claim that they would suffer irreparable harm if forced to exhaust, and requiring these claimants to exhaust the appeals process would be futile because to do so “would make it impossible for any plaintiff ever to obtain a remedy for an agency’s use of inadequate denial notices.” Maj. op. at 1060.

I do not believe that City of New York supports the reasoning of the majority with regard to the exhaustion requirement. In City of New York , the Court held that the 60-day limitation on seeking judicial review of a final decision of the Secretary was not jurisdictional and could therefore be waived. Because the Secretary in that case was using an internal and clandestine policy that rendered the denials of benefits subject to court challenge and could not have been known to the claimants, the Court held that the time for seeking judicial review of the final decisions denying benefits should be tolled. 476 U.S. at 480-81 , 106 S.Ct. at 2030-31 . The Court further held that for the same reason, claimants who had failed to obtain a final decision from the Secretary 1 and whose time to do so had expired, were excused from the requirement to exhaust their administrative appeals. Id. The Court ■ then turned to those claimants who, at the time the suit was filed, may still have had time to exhaust their administrative remedies. Looking first to Mathews v. Eldridge, 424 U.S. 319, 328 , 96 S.Ct. 893, 899 , 47 L.Ed.2d 18 (1976), the Court noted that the two factors which had caused it to waive the exhaustion requirement in that case were also present in City of New York : the claims in the lawsuit were collateral to the claims for benefits that class members had presented administratively, and the claimants would suffer irreparable injury were the exhaustion requirement now enforced against them. But the Court went on to discuss the purposes of exhaustion:

The ultimate decision of whether to waive exhaustion should not be made solely by mechanical application of the Eldridge factors, but should also be guided by the policies underlying the exhaustion requirement. The purposes of exhaustion would not be served by requiring these class members to exhaust administrative remedies. This case is materially distinguishable from one in which a claimant sues in district court alleging mere deviation from the applicable regulations in his particular administrative proceeding ... Thus, our holding today does not suggest that exhaustion is to be excused whenever a claimant alleges an irregularity in the agency proceedings.

These claimants stand on a different footing from one arguing merely that an agency incorrectly applied its regulation. Rather, the District Court found a system-wide, urirevealed policy that was inconsistent in critically important ways with established regulations.

City of New York, 476 U.S. at 484 , 106 S.Ct. at 2032 .

Clearly, the Court did not base the waiver of exhaustion on the Eldridge factors alone. Rather, it premised the entire analysis on the fact that the policy of the Secretary that had resulted in the denials of benefits to all of the *1069 claimants was secretive, clandestine and illegal, and could not have been challenged by the claimants in the course of the administrative process because they could not have known about it. As the Court pointed out, “[u]nder these unique circumstances, there was nothing to be gained-from permitting the compilation of a detailed factual record, or from agency expertise.” City of New York, 476 U.S. at 485 , 106 S.Ct. at 2033 .

The claimants before us cannot be said to be in a situation similar to that of the claimants in City of New York . We hold in this case that “anyone who received a denial notice knew what the notice said,” that the use of the inadequate notice therefore cannot be characterized as “a practice of which affected claimants ‘as well as counsel, social workers and advisers for a long time were unaware,’ ” Maj. op. at 1059, quoting City of New York , and that this case involves no secretive or clandestine policy. Rather, the inadequate notice is much more closely akin to an incorrect application of a regulation which could have been challenged in the course of the administrative process.

For these reasons, and because there are no other “unique circumstances” that would justify waiver of the exhaustion requirement in this case, I would hold that none of the claimants in the case before us is entitled to be excused from the requirement of exhaustion of administrative appeals. Accordingly, I would hold that this Court lacks jurisdiction to hear this case.

Even if the exhaustion requirement were waived for these claimants,- however, I would hold that there is no class which can be certified because the claims of those claimants who are included in the class by the majority opinion are barred by res judicata. The majority finds that the notice accompanying Title II denials of reconsideration prior to 1990 was inadequate and thus violated the procedural due process rights of those whose claims were denied on reconsideration. The majority goes on to hold that those individuals who, no earlier than sixty days prior to the filing of the amended complaint- in this action, were “denied benefits at the reconsideration level then received the inadequate notice, and thereafter filed a' new application rather than continuing the appeal process, and then were presented by the Secretary with a claim of res judicata or received less in retroactive benefits than he or she would have had they successfully appealed,” are entitled to reopen their claims. Maj. op. at 1065-66. In a footnote, the majority notes that such a claimant who pursued in the courts an appeal of the res judicata bar would not be entitled to reopen his claim, having already had the benefit of judicial review. Maj. op. at 1066 n. 17. I cannot agree with the majority’s reasoning.

The majority relies on Gonzalez v. Sullivan, 914 F.2d 1197 (9th Cir.1990), in finding that the notice accompanying the denials on reconsideration prior to 1990 was inadequate to explain properly the appeal rights of the claimant. I have no quarrel with the-conclusion that the notice was inadequate. However, Gonzalez was a case in which -the claimant, upon denial of his claim and receipt of a notice substantially identical to the one at issue here, filed a new claim and, when faced with the res judicata bar, appealed that decision. The Ninth Circuit held that the notice was inadequate, that the claimant had a property right in the benefits under the Social Security Act, and that -the inadequate notice was a violation of the claimant’s procedural due process rights because it misled him into believing that the filing of a new claim was a substitute for filing an appeal of the denial of his first claim. Therefore, the court ruled that it had jurisdiction to review the refusal of the Secretary to reopen the first claim because of the res judicata bar, and that the application of the bar was error.

Unlike Gonzalez , the case before us is not on appeal from an adverse decision based on res judicata; rather it is a class action seeking, inter alia, a judgment permitting the members of the class to attack collaterally denials of claims. And while the notice in those eases may have been inadequate, I do not believe that a collateral attack on the decision is a permissible remedy.-

With the decision in this case, this Circuit holds that the notice which accompanied denials of claims on reconsideration during the relevant time period failed to satisfy the requirements of procedural due process. For *1070 purposes of this litigation, the claimants who received this inadequate notice fall into two groups: 1) claimants who neither appealed the denial nor filed a new claim, and 2) claimants who did not appeal the denial but filed new claims that were then denied on the basis of res judicata. This second group includes two sub-groups: a) claimants who did not appeal the res judicata decision, and b) claimants who did. As to each of these groups, the inquiry must be what process was due them and whether they received it.

Group One, who are not included by the majority in the class entitled to relief, have not yet confronted the res judicata bar. Nothing prevents them from filing new applications, and when they do, the law of this Circuit will be that, because the notice which they received when their initial claims were denied on reconsideration was inadequate, the res-judicata bar will not apply.

All of the members of Group Two confronted the res judicata bar when their new claims, to the extent they included the substance of the first claims, were denied as being barred. Each of these claimants could have raised a constitutional challenge based on the inadequacy of the notice and appealed the res judicata decision at that point in the proceedings. See Califano v. Sanders, 430 U.S. 99, 109 , 97 S.Ct. 980, 986 , 51 L.Ed.2d 192 (1977). Those claimants who did not appeal were not precluded from doing so; they chose not to pursue an appeal. A decision which is not appealed is just as final and binding as a decision which is affirmed on appeal. See Carver v. Secretary, 869 F.2d 289 (6th Cir.1989).

It is important to keep clearly in mind that the res judicata decisions at issue here are the decisions of the Secretary in the proceedings on the second claims according-preclu-sive effect to the decisions in the proceedings on the first claims. The plaintiffs here maintain that there is a procedural due process violation relative to their first claims, namely, that the notice which accompanied the denials on reconsideration did not adequately advise the claimants that those denials would become preclusive unless appealed. There is no claim made that these plaintiffs were in any way prejudiced or denied any procedural due process by the notice which they received when their second claims were denied on grounds of res judicata, and in fact, we have specifically held that the only notice which- was inadequate was the one which accompanied the Title II denials on reconsideration. Nothing precluded these claimants from raising the inadequacy of the notice and proceeding through the administrative appeals process on the denials of their second claims and obtaining final decisions, which, because of the constitutional challenge, would have been renewable by the district court. Califano, 430 U.S. at 109 , 97 S..Ct. at 986.

What process was due but denied to these claimants who did not appeal the denial of the second claim? None. They were entitled to be notified of their right to appeal. They received that notice. They chose not to appeal. The essence of what the plaintiffs seek in the case before us today, is a judgment from this Court that inadequate notice provided in the, administrative appeals process on one claim excuses the failure to proceed pursuant to adequate notice in the appeals process on a subsequent claim.

Similarly, those claimants who, upon receiving the notice that their second claims had been denied on res judicata grounds, exhausted their administrative appeals and sought and obtained judicial review of those denials have also received all of the process that they were due.

The majority holds, and I agree, that those latter claimants, who sought and obtained judicial review of the denials of their second claims are barred from seeking review in this action. Having “had the benefit of judicial review, [they] are not entitled to a second bite at the apple” and must abide by the bad result which the court, in their separate appeals, has decreed. Maj. op. at 1066 n. 17. Certainly, this is a correct statement of the law.

A judgment merely voidable because based upon an erroneous view of the law is not open to collateral attack, but can be corrected only by a direct review and not by bringing another, action upon the same cause [of action].’ We have observed that ‘[the] indulgence of a contrary view would result in creating elements of uncertainty- *1071 and confusion and in undermining the conclusive character of judgments, consequences which it was the very purpose of the doctrine of res judicata to avert.’ [citations omitted.]

Federated Department Stores Inc. v. Moitie, 452 U.S. 394, 398 , 101 S.Ct. 2424, 2428 , 69 L.Ed.2d 103 (1981).

I would further hold, however, that those claimants'who failed to pursue through the administrative process the denials of their second claims are also barred from seeking judicial review through this action, first because, as set out above, I would find that their failure to exhaust their administrative appeals cannot be excused, and secondly because, once these denials became final by virtue of the last administrative action that was not appealed, the fact that they may have been based on an erroneous view of the law does not open them to collateral attack. Id.