Petition — Mathews v. Mattern

Supreme Court brief1976

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me: 75-649

Yu the Supreme Court of the Waited States

OcTOBER TERM, 1975

F. Davip MATHEWS, SECRETARY OF HEALTH,

EpUcATION, AND WELFARE, PETITIONER

ARLENE MATTERN, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT

ROBERT H. BORK,

Solicitor General,

REX E. LEE,

Assistant Attorney General,

HARRIET S. SHAPIRO,

Assistant to the Solicitor General,

WILLIAM EKANTER,

ROBERT S. GREENSPAN,

Attorneys,

Department of Justice,

Washington, D.C. 20530.

Page

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IOI 5 cicccnisciertnintgntcionigilinisiatbiientiabassiantninne 1

Constitutional and statutory provisions and

I oc oceitnetieminnnann 2

SN Sicaceitadinicsteeecdaliiatiemnbaidiesiieciatnieicinirempebinanatidnaitiens 2

Reasons for granting the writ------------~--- i)

II, iso salle tet eemeincipeseeanoneell 16

PE Daemannnantiensrcnesneinnie la

IE Diccncniusncnsemnnsnishunninenanindn 9a

PE | aCe Le hcmmauhiaaeeds 41a

EE Piicudibutibbitdigtbnncnsiaesinenaaen 67a

CITATIONS

Cases:

Arnett v. Kennery, 416 U.S. 154.--------- 13

Buffington v. Weinberger, C.A. 9, No. T4

3118, decided October 1, 1975__------ 9,14, 15

Elhott vy. Weinberger, C.A. 9, No. T4&

1611, decided October 1, 1975_____- 8, 9, 14,15

Goldberg v. Kelly, 397 U.S. 254-----_-_- 7, 9,15

Mitchell v. W. T. Grant Co., 416 U.S. 600_ 13

Richardson vy. Perales, 402, U.S. 389_____- 14

Weinberger v. Salfi, No. 74-214, decided

UE Ee TET inscnesleeeetisinideesenstiebonmsabaianiicinnn’ _ 9

Constitution and regulations:

United States Constitution, Fifth Amend-

IEE cccsdscsliciiamnmnuntnabepdibaiendndilaidatiieaiabinniein 2

595-380—75——-1

Page

Mandamus Act, 28 U.S.C. 1361__..--_---_---- 7

Social Security Act, Title IT, 49 Stat. 622, et

seq., as amended and added, 42 U.S.C. 401,

et seq.:

Section 202(e)(1)(B) (ii), 42 U.S.C. 402

(e)(1)(B)Gi) ---.-----.------------- 4

Section 204, 42 U.S.C. 404_____-_________ 2, 73a

Section 204(a)(1), 42 U.S.C. 404(a)(1)--- 2,3

Section 204(b), 42 U.S.C. 404(b)_-----_- 3

Section 205(g), 42 U.S.C. 405(g)_------_- 9, 10

Section 223(c) (2), 42 U.S.C. (Supp. ITT)

IIIT. ‘cicistischieghsepdnstiahdiabeeniatsenightiniendiatabinann: 4

er a SE Cncicddimamnckanaaminnsainens 69a

Rf ee ee ne ere 5, 15

20 C.F.R. 404.907-404.913___---__-_-_-_- 3, 69a, 72a

20 C.F.R. 404.907-404.917_.__---_-__-_-___- 69a-T3a

ee rs Se ilitinaeninaastinediinnmaanmenne 4, T3a

Social Security Claims Manual:

EE enna 67a

IER - TI artnciisicncisantainentnainuiaicipinanniain 3, 67a

FE attcenentediaatannen 3, 68a

GF OU 4

Gu the Supreme Court of the Wuited States

OcToBER TERM, 1975

No.

F. Davin MaTuHews, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

ARLENE MATTERN, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT

The Solicitor General, on behalf of the Secretary

of Health, Education, and Welfare, petitions for a

writ of certiorari to review the judgment of the

United States Court of Appeals for the Third Cir-

cuit in this case.

OPINIONS BELOW

The opinion of the court of appeals (App. A, infra)

is reported at 519 F. 2d 150. The opinion and order

of the district court (App. C, infra) are reported at

377 F. Supp. 906.

JURISDICTION

The judgment of the court of appeals (App. @,

tufra) was entered on June 3, 1975. On Angust 21,

(1)

1975, Mr. Justice Brennan extended the time for

filimg a petition for a writ of certiorari to and in-

cluding October 1, 1975. On September 23, 1975, Mr.

Justice Brennan further extended the time for filing

the petition to and including October 31, 1975. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

QUESTIONS PRESENTED

1. Whether the district court lacked jurisdiction to

hear this case,

2. Whether the Due Process Clause requires that an

oval hearing be held before, rather than after, a

Social Security beneficiary’s payments are reduced

in order to recoup an erroneous overpayment.

CONSTITUTIONAL AND STATUTORY PROVISIONS AND

REGULATIONS INVOLVED

The Fifth Amendment of the Constitution provides

in pertinent part:

No person shall he

property, without due process of law

Section 204 of the Social Seeurity Act, 49 Stat. 624,

as amended, 42 U.S.C. 404, and the regulations of the

Department of Health, Education, and Welfare, are

set forth in pertinent part in Appendix D, infra,

°° ° deprived of * ~~

= *

STATEMENT

1. Section 204(a2)(1) of the Social Security Act,

42 U.S.C. 404(a)(1), provides that in the event of

an erroneous overpayment to a Social Security bene-

ficiary, “proper adjustment or recovery shall be

made, under regulations prescribed by the Secre-

tary [of Health, Education, and Welfare] * * *

[by] decreas[ing] eny payment under this subchap-

ter [relating to old-age, survivors, and disability

insurance | to which such overpaid person is entitled.”’

Section 204(b) of the Act further provides, however,

that “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.”’ This case

concerns the constitutional validity, under the Due

Process Clause, of the procedures used by the Sec-

retary in enforcing and giving effect to these statu-

tory provisions. :

Under the Secretary’s procedures, once the Secre-

tary has initially determined that an overpayment has

been made, the recipient is notified of the determina-

tion and given an opportunity to contest the determi-

nation in writing and, in addition or in the alternative,

to request that the Secretary waive recovery in ac-

cordance with Section 204(b) of the Act. He is invited

to discuss his case with the local Sociai Security office.

See 20 C.F.R. 404.907-404.913; App. D. infra, pp.

69a-—T2a. Adjustment or recovery is deferred pending

review of the initial determination. Sections 5503.3 and

5903.5 of the Social Security Claims Manual; App. D,

infra, pp. 67a-69a. If the Seeretary decides upon re-

view that the initial determination of an overpayment

was correct and that waiver of recovery is not war-

ranted, recovery is effected by decreasing the bene-

ficiary’s subsequent monthly benefit payments until

the overpayment has been recouped, as provided by

Section 204(a)(1) of the Act.

Following the Secretary’s decision upon this initial

review, the beneficiary is entitled to further adminis-

trative review, including a full evidentiary hearing.

20 C.F.R. 404.917; App. D, infra, p. 73a. If, follow-

ing the hearing, it is determined that there had been

no overpayment, or that the beneficiary was entitled

to waiver of recovery, the beneficiary’s withheld pay-

ments are repaid and his subsequent payments re-

stored to the appropriate level.

2. Respondent, Arlene Mattern, is a recipient of

disabled widows’ benefits pursuant to Section 202(e)

(1)(B)(Gi) of the Act... Her period of disability

commenced May 18, 1971, and her entitlement to

benefit payments commenced in December 1971, due

to a statutorily prescribed six-month waiting period.’

Payment was, however, delayed pending reconsidera-

tion of her application for benefits.

On January 14, 1972, respondent informed her

local Social Security district office that she was in

financial distress and requested immediate payment

of benefits.’ At that time the district office records

erroneously indicated that respondent was entitled to

benefits as of May 1971. The district office accordingly

> The facts are set forth in the opinions of the court of appeals

(App. A, infra, pp. 5a-7a) and the district court (App. C, infra,

pp. 42a—48a).

* The Act has since been amended to provide for a five-month

waiting period, 42 U.S.C. (Supp. ITI) 423(¢) (2).

* The Social Security Claims Manual, Section 5860 e¢ seq., pro-

vides for expedited handling of cases where prompt action is

necessary to meet the essential needs of the claimant,

forwarded respondent’s request to the regional office

(the Philadelphia Payment Center), which certified

payment to Mrs. Mattern for $1063.80—an amount

covering the period from May to December 1971.

Mrs. Mattern was advised of the forthcoming spe-

cial payment in a letter of January 28, 1972. That let-

ter also stated that a possibility existed of duplicate

payments, and that if she received more than one

check, she should return one of them to the district

office. Prior to receipt of either this explanatory letter

or the special payment, Mrs. Mattern received her

first regular monthly benefit payment of $119.30, on

about January 26, 1972.

District office records indicate that Mrs. Mattern’s

sister called the office on the latter date; she was

advised that the check for $119.30 was correct and

that the forthcoming special payment of $1063.80

was incorrect and should be returned. The records

also indicate that a district office representative tele-

phoned Mrs. Mattern on January 28, 1972, and ad-

vised her that she was not entitled to the special

payment and should return it. Mrs. Mattern did not

return the check and denied receiving any phone call

advising her to do so.

On July 14, 1972, the Secretary notified respondent

that an overpayment had been determined and that

her future benefit payments would be withheld until

the overpayment was recouped.‘ Respondent was fur-

ther informed that she was entitled to contest the Sec-

*The Secretary ultimately decided instead to recoup the over-

payment by reducing future benefit payments by $30.00 per month.

See 20 C.F.R. 404.502(c).

retary’s finding of an overpayment or to request the

Secretary to waive the overpayment if she was not at

fault in receiving it and recoupment would cause her

serious financial hardship or be, unfair for some other

reason; she was advised to submit any available docu-

mentary evidence with her written request. Respond-

ent was informed that unless she sought reconsider-

ation or waiver within 30 days, recoupment would

begin.

On August 7, 1972, respondent requested the Sec-

retary to waive recovery of the overpayment, con-

tending that she had received no telephone call

advising her of the incorrect payment, and that

she was, therefore, without fault in cashing it.’ The

Secretary rejected her allegation of lack of fault,

finding, inter alia, that she had heen informed of the

impropriety of the payment by telephone on January

28, 1972.° The Secretary adhered to this determination

upon review.

Respondent did not request further administra-

tive review, in which she would have been entitled

tu a full evidentiary hearing under the Secretary’s

regulations. Instead, on December 29, 1972, respond-

ent commenced this suit as a class action in the United

States District Court for the Eastern District of

Pennsylvania, contending that the Secretary’s pro-

° Respondent also alleged that recovery would cause her hard-

ship. The Secretary has not disputed that allegation.

* The Secretary also concluded that the portion of the January

28 letter advising respondent of the possibility of duplicate pay-

ments should have put her on notice that she had received an

incorrect payment, in view of her earlier receipt of the monthly

benefit check of $119.30,

cedures for recovering overpayments fail to provide

due process since they do not afford claimants a pre-

recoupment oral hearing. The district court deter-

mined that it had jurisdiction under the Mandamus

Act, 28 U.S.C. 1361, and certified the case as a class

action on behalf of the class of “all persons eligible

for Social Security OASDI benefits within the * * *

Eastern District of Pennsylvania, whose benefits

may be terminated, reduced or otherwise adjusted

in order to recoup an over-payment” (App. C, infra,

p. 65a). Relying on Goldberg v. Kelly, 397 U.S, 254,

the district court declared the Secretary’s recoupment

procedure unconstitutional and enjoined the Secre-

tary from recovering the overpayment that had been

made to respondent until she had been given “an

opportunity to present her case at a hearing’’ (App.

C, infra, p. 64a). The injunction was later extended

to the other members of the class.’

* The district court’s order of June 10, 1974, permanently en-

joining the recoupment of overpayments before a hearing, pro-

vided that the order would not apply to the following persons:

(2) beneficiavies presently residing in the Eastern District of

Pennsylvania whose claims are not serviced by the Philadelphia

program center, unless the names of such persons are specifically

brought to the attention of the defendant and his agents and

attorneys;

(b) beneficiaries who have received an administrative recoup-

ment hearing between January 1, 1973 and April 30, 1974, and

who have waived their right to further appeal ;

coupment hearing, between January 1, 1973 and April 30, 1974,

following a final reconsideration and administrative determina-

tion to recoup benefits and notilication of the right to request such

hearing.

The injunction as to the class was stayed pending appeal.

The court of appeals affirmed the district court's

holdings with regard to jurisdiction and the pro-

priety of class relief, and also agreed that the Secre-

tary’s recoupment procedures are unconstitutional,

but vacated and remanded the case to the district

court for the entry of a more limited order that

would require a prior oral hearing * only in situations

where the Secretary’s decision might turn upon the

credibility of witnesses.’ The court of appeals deter-

mined that this was such a ease, for respondent’s

claim that she was not at fault rested upon her denial

that she had received the telephone call advising her

that she was not entitled to the special payment and

should return it.”°

*In describing the type of hearing required, the court of ap-

peals emphasized that “the pre-recoupment hearing need not take

the form of a judicial or quasijudicial trial” (App. A, infra, p.

35a). The court identified seven essential elements of such hear-

ings, including “an opportunity for all parties to receive and chal-

lenge the de -ision maker’s report before it becomes final” (#d. at

36a—37a).

* For purposes of convenience, the court distinguished two eate-

gories of overpayment disputes, “reconsideration” cases and

“waiver” cases. The former generally involve the correctness of

the Secretary’s determination that an overpayment has occurred

(e.g., whether the computation of an earnings statement is correct,

or whether two benefit checks have been received rather than one),

and ordinarily can be resolved by analysis of documentary evi-

dence, In “waiver” cases, however. issues of credibility are often

involved in determining a claimant’s allegation of lack of “fault”

in receiving an overpayment. The court determined, however, that

the constitutional necessity of a prior hearing turns upon the par-

ticular facts of each case and not upon whether the case is one of

“reconsideration” or “waiver” (App. A, infra, pp. 29a-36a).

*° On October 1, 1975, subsequent to the decision below, the

Ninth Circuit, in the consolidated cases of E//iott y. Weinberger,

REASONS FOR GRANTING REVIEW

This case raises questions similar to those now

before the Court in Mathews v. Eldridge, No. 74-204,

arened October 6, 1975. As in Eldridge, the district

court’s assertion of jurisdiction here is inconsistent

with this Court’s decision in Weinberger v. Salfi, No.

74-214, decided June 26, 1975, Also as in Eldridge,

although the competing factors to be weighed here

may be somewhat different, the court of appeals’

decision on the constitutional merits represents an

unwarranted and improper extension of the rule of

Goldberg v. Kelly, 397 U.S. 254, to the Social Security

program and, if not reversed, would impose a sub-

stantial and costly burden upon the administration

of that program that would be wholly disproportion-

ate to the relatively insubstantial private interests

that would thereby be served.

1. This Court in Salfi held that the district courts

have no jurisdiction over ¢laims, such as respondent’s,

arising under Title II of the Social Security Act,

“save as provided [by Section 205(g¢) of] the Act”

No. 74-1611, and Buffington v. Weinberger, No, 74-8118, held the

Secretary’s pre-recoupment procedures unconstitutional on

grounds similar to those relied upon by the court of appeals in the

instant case and sustained an injunction entered by the district

court restraining the Secretary from enforcing his regulations

throughout the nation with respect to old age and survivors’ bene-

fits (with the exception of the Eastern District of Pennsylvania,

which is involved in this case). The effect of the rulings in the

instant case and in ///iott and Buffington is to subject the Secre-

tary to a nationwide injunction against recovering overpayments

without first affording beneficiaries a pre-recoupment oral hear-

ing. The government intends to file a petition for a writ of cer-

tiorari in those cases?

(slip op., p. 6). In turn, Section 205(g) confines the

courts’ jurisdiction to “any final decision of the Sec-

retary made after a hearing * * *.” The interim de-

cision of the Secretary sought to be reviewed here—

the order reducing respondent’s monthly payments

pending further administrative review—was not a

‘‘final decision of the Secretary,” nor was it made

“after a hearing.”

Respondent could have obtained administrative re-

view of the Secretary’s interim decision, and a full

evidentiary hearing would have been afforded at that

final review stage. It is the Secretary’s final decision

at that stage, and not his intermediate decision

challenged here, that is judicially reviewable under

Section 205(g). We have elaborated upon this ques-

tion in our supplemental and reply brief, and our

separate reply brief, in Eldridge, and also in our brief

in Norton v. Mathews, No. 74-6212, question of juris-

diction postponed until the hearing on the merits,

June 30, 1975, upon all of which we rely here.”

2. The Secretary’s present procedures governing the

recovery of Social Security overpayments provide a

fair and reliable basis for determining whether an

overpayment has been made and, if so, whether re-

covery should be waived. The social costs entailed by

the requirement of a pre-recoupment evidentiary hear-

ing would significantly outweigh any social benefits

‘Copies of these briefs are being furnished to respondent’s

counsel,

that would accrue from such a requirement. Accord-

ingly, the Secretary’s procedures afford due process

and should be sustained.

a. The present procedures are fair and reliable.

The Secretary’s pre-recoupment procedures afford

the beneficiary an ample opportunity to present his

case and avoid any improper reduction of benefits in

the vast majority of cases. The process begins with an

initial determination by the Secretary that an over-

payment has been made. The beneficiary is notified

by mail of the determination, and is advised of his

right to request reconsideration or waiver. If the

beneficiary responds within 30 days, recoupment is

deferred until the Secretary has acted on the request.””

In seeking reconsideration or waiver, the beneficiary

may consult personally with officials at the Social

Security district office, which is generally located near

his home. The beneficiary may also include whatever

documentation he wishes in support of his claim, and

printed forms are made available to facilitate the pre-

sentation of the beneficiary's case.

It is only after the Secretary has made a fuil

evaluation of the beneficiary’s case, and has adhered

to his initial determination that recoupment is appro-

priate, that the process of recovering the overpay-

#2 Any objection at all within the 30-day period is sufficient to

postpone recoupment. Even if the beneficiary does not make a

request for reconsideration or waiver within that period, any such

request made within six months will result in a resumption of

benefits until the request has been acted on (App. D, infra. pp.

67a-69a, 71a).

ment actually begins. As soon as the beneficiary is

advised of the Secretary’s determination, he may re-

quest a full evidentiary hearing with respect to his

claim.

This procedure assures that the beneficiary knows

the basis for the Secretary’s proposed action and en-

ables the beneficiary to present his objections to that

action before it is taken. Although these objections

must be submitted in written form, the beneficiary can

discuss his case with local Social Security officials,

who are responsible for assisting him in providing

all the information necessary to evaluate his case.

Finally, any beneficiary who is still dissatisfied with

the Secretary’s decision upon initial review has the

right to a full evidentiary hearing after recoupment

has started. If the Secretary’s decision is reversed

after that hearing, the beneficiary receives full restitu-

tion of any benefits previously withheld.

These procedures, we submit, adequately protect the

heneficiary’s interest in avoiding improper reduction

of payments. The court of appeals’ decision to the con-

trary rests in large part upon the assumption that

requests for waiver, made on the ground that the reci-

pient was not at fault in receiving the overpayment

and that recoupment would defeat the purposes of the

act or be inequitable, cannot be properly evaluated,

even as a preliminary matter, without a prior oral

hearing to resolve questions of credibility. Two fac-

tors, however, actually underscore the essential fair-

ness of the Seeretary’s procedures in such cases.

First, the beneficiary can personally appear before

and consult with the local Social Security officials

who are responsible for developing the facts concern-

ing his claim (App. D, infra, pp. 68a-69a). Thus, the

heneficiary does in fact have an opportunity for a pre-

recoupment face-to-face confrontation with officials

who may evaluate his creaibility in the course of gath-

ering the facts necessary for regional office review.

Second, waiver eases by definition involve situations

in which the beneficiary acknowledges that he was not

entitled to receive the payment but requests the See-

retary to forgive repayment. In such circumstances,

the Constitution does not bar the Secretary from pro-

ceeding to collection, subject to a possible return of

the moneys if the beneficiary’s equitable contentions

are sustained upon a subsequent oral hearing. Cf.

Arnett v. Kennedy, 416 U.S. 134, 150-158: Mitchell vy.

W. T. Grant Co., 416 U.S. 600.

b. The social costs of granting pre-recoupment oral

hearings would significantly outweigh any social bene-

fits of such a procedure.

The adverse impact upon the Social Security Ad-

ministration of the decision here may well exceed

that of the court of appeals’ decision in Eldridge.

Approximately 1,250,000 overpayments are made each

year.” To require an oral hearing before recoupment

in any significant percentage of these cases would

** In contrast, approximately 33,500 decesions that disability has

terminated are made each year (E/dridge Supp. and Reply Brief,

p- 14,n. 7).

significantly increase the complexity and cost of the

administrative process without any comparable off-

setting advantages. Cf. Richardson v. Perales, 402

U.S. 389. For not only will the additional hearings

be extremely costly, but the risk of unrecoverable over-

payments will increase.

We estimated that slightly more than 9,000 hear-

ings a year are at stake in Eldridge (Hidridge Supp.

and Reply Brief, p. 18); a substantially larger nun-

ber may be at stake here. There are currently ap-

proximately 50,000 waiver requests annually, of which

roughly half ordinarily are granted. Of the 25,060

which are denied, it is impossible to say with any

precision how many involve issues of credibility. In

any event, in view of the volume of cases involved,

it is not feasible to make a case-by-case review to

determine whether a hearing is constitutionally neces-

sarv under the standards established by the court of

appeals. Therefore, under the compulsion of the out-

standing injunctions in Buffington and Elliott (see

note 10, supra), the Secretary is informing all over-

paid beneficiaries that upon request they will receive

an evidentiary hearing before recoupment is initiated.

The Secretary has not yet analyzed the response

to the new procedure, but any substantial increase in

the number of hearings held will entail a significantly

increased expenditure of funds and employment of

manpower to conduct these proceedings. In addition,

prolonging the pre-recoupment period probably will

increase the losses incurred as a result of unrecovered

overpayments, which in fiscal year 1971 alone

amounted to 5 million dollars.”

In contrast, individual beneficiaries who are deter-

mined to be entitled to waiver are unlikely to benefit

appreciably from the more elaborate and expensive

procedures required by the courts below. Under the

Secretary’s regulations, such beneficiaries are mace

whole for any incorrect pre-hearing recoupment by

the simple expedient of a return of the recouped

moneys. Moreover, the impact of a pre-hearing re-

conpment order upon such a beneficiary is unlikely to

be severe, for the Secretary adjusts the amount de-

ducted from a_beneficiary’s monthly payment to

alleviate severe financial need.” The pre-hearing

economic impact on the individual is thus even less

here than where the Secretary orders the interim

termination of disability benefits as in Eldridge.

** The delay will be greater, and the effect therefore more severe,

if the beneficiary must be accorded an opportunity to object to

a proposed decision before it becomes final (see note 8, supra).

No such opportunity is required either by Goldberg v. Kelly,

supra, or by the Ninth Circuit's decision in Buffington and E/liott.

** The regulations permit repayment of as little as $10 a month,

20 C.F.R. 404.502(c). The monthly deductions here were adjusted

to $30 a month so that recovery of the total amount would be

achieved over 36 months.

595-380

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be granted.

Respectfully submitted.

Rosert H. Bork,

Solicitor General.

Rex E. Ler,

Assistant Attorney General.

Harrier 8. S4aprro,

Assistant to the Solicitor General.

WILLIAM KANTER,

Rosert 8. GREENSPAN,

Attorneys.

OcTOBER 1975.

APPENDIX A

United States Court of Appeals, Third Circuit

No. 74-1776

ARLENE MATTERN, ON BEHALF OF HERSELF AND ALL

OTHERS SIMILARLY SITUATED, APPELLEE

CaspaR W. WEINBERGER, SECRETARY OF HEALTH,

EpuCATION AND WELFARE, APPELLANT

Argued January 24, 1975; Decided June 3, 1975

Before Van Dusen, Gippons AND Hunter, Circuit

Judges.

Opinion of the Court

Hunter, Circuit Judge:

This appeal involves a challenge to the constitu-

tionality of the procedure established by the Secretary

of Health, Education and Welfare, pursuant to section

204 of the Social Security Act,' for the recoupment of

142 U.S.C. § 404 (1970):

“(a) Whenever the Secretary finds that more or less than the

correct amount of payment has been made to any person under

this subchapter, proper adjustment or recovery shall be made,

under regulations prescribed by the Secretary, as follows:

“(1) With respect to payment to a person of more than the

correct amount, the Secretary shall decrease any payment under

(la)

(2a)

alleged overpayments of benefits. The district court,

377 F. Supp. 906 (E.D.Pa., 1974), found the recoup-

ment procedure violative of due process since it per-

mitted an adjustment or reduction of social security

payments without affording the beneficiary the right

to a prior oral hearing. While we are in substantial

agreement with the opinion of the district court, we

vacate and remand for entry of a new order consistent

with this opinion.

I. RECOUPMENT PROCEDURE

Section 204(a) of the Act directs the Secretary to

recover overpayments of social security benefits

through recoupment of future benefit payments. Sec-

tion 204(b), however, requires the Secretary to

‘“‘waive” recoupment under certain circumstances. It

provides that there shall be no recoupment where the

overpaid beneficiary is “without fault”’* and the re-

coupment either would ‘‘defeat the purpose” of Title

II of the Act * or would be ‘‘against equity and good

conscience.” * Pursuant to these statutory directives,

the Secretary has promulgated regulations providing

for a four-step process of administrative review: an

this subchapter to which such overpaid person is entitled, or shall

require such overpaid person or his estate to refund the amount in

excess of the correct amount, or shall decrease any payment under

this subchapter payable to his estate or to any other person on the

basis of the wages and self-employment income which were the

basis of the payment to such overpaid person, or shall apply any

combination of the foregoing.

* * * * *

“(b) In any case in which more than the correct amount of pay-

ment has been made, 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.”

Footnotes 2 and 3 on p. 3a; footnote 4 is on p. 4a.

(3a)

initial determination that there has been an overpay-

ment and that there is no basis for waiver of recovery

(20 C.F.R. § 404.905) ; a reconsideration of that initial

*“Fault” is defined in 20 C.F.R. § 404.507, which provides:

“*Fault’ as used in ‘without fault’ (see §§ 404.506 and 405.355)

applies only to the individual. Although the Administration may

have been at fault in making the overpayment, that fact does not

relieve the overpaid individual or any other individual from whom

the Administration seeks to recover the overpayment frora liability

for repayment if such individual is not without fault. In determin-

ing whether an individual is at fault, the Administration will con-

sider all pertinent circumstances, including his age, intelligence,

education, and physical and menial condition. What constitutes

fault (except for ‘deduction overpayment’—see § 404.510) on the

part of the overpaid individual or on the part of any other in-

dividual from whom the Administration seeks to recover the over-

payment depends upon whether the facts show that the incorrect

payment to the individual or to a provider of services or other

person, or an incorrect payment made under section 1814(e) of the

Act [42 U.S.C. § 1395f(e)], 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

“(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.”

* The phrase “defeat the purpose” of Title II is defined in 20

C.F.R. § 404.508, which provides:

“(a) General ‘Defeat the purpose of title IT [42 U.S.C. § 401

et seq.],’ for purposes of this subpart, means defeat the purpose

of benefits under this title, i.e., to deprive a person of income re-

quired for ordinary and necessary living expenses, This depends

upon whether the person has an income or financial resources suf-

ficient for more than ordinary and necessary needs, or is dependent

upon all of his current benefits for such needs. An individual’s

ordinary and necessary expenses include:

“(1) Fixed living expenses, such as food and clothing, rent,

mortgage payments, utilities, maintenance, insurance (e.g., life,

accident, and health insurance including premiums for supple-

(4a)

determination upon request by the recipient (Jd.

§ 404.914) ; an administrative hearing de novo before

an administrative law judge (Jd. § 404.917) ; and re-

view by the Appeals Council of the Social Security

Administration (Id. § 404.945). Judicial review is

then available, under section 205(g) of the Act, 42

U.S.C. §405(g), to claimants who have exhausted

their administrative remedies.

While a claimant thus has a right to a full eviden-

tiary hearing at the third step in the administrative

process, such a hearing is not available until after the

recoupment process has begun. When a claimant 1s

‘ notified of the initial adverse determination and of

mentary medical insurance benefits under title XVIII [42 U.S.C.

§ 1395 et seq.]), taxes, installment payments, etc. ;

“(2) Medical, hospitalization, and other similar expenses ;

“(3) Expenses for the support of others for whom the individual

is legally responsible; and

“(4) Other miscellaneous expenses which may reasonably be

considered as part of the individual’s standard of living.

“(b) When adjustment or recovery will defeat the purpose of

title II [42 U.S.C. $401 et seq.]. Adjustment or recovery will

defeat the purpose of title II [42 U.S.C. § 401 et seq.] in (but is

not limited to) situations where the person from whom recovery

is sought needs substantially all of his current income (including

social security monthly benefits) to meet current ordinary and

necessary living expenses.”

*“<Against equity and good conscience’ is defined in 20 C.F.R.

& 404.509, which provides:

“Against equity and good conscience” means that adjustment

or recovery of an incorrect payment (under title IT or title XVIII

[42 U.S.C. § 401 et seq. or § 1395 et seq.]) will be considered in-

equitable if an individual, because of a notice that such payment

would be made or by reason of the incorrect payment, relinquished

a valuable right (examples (1), (2), and (5)) or changed his posi-

tion for the worse (examples (3), and (4)). In reaching such a

determination, the individual's financial circumstances are

irrelevant.”

(5a)

his right to seek reconsideration, he is given thirty

days in which to submit, in writing, his reasons why

he disagrees with the determination that he has been

overpaid or why he seeks a “waiver” under section

204(b) of the Act. Once such a request for reconsid-

eration or waiver has been filed, even if the thirty

days has expired, the recoupment procedure is auto-

matically deferred until such reconsideration is com-

pleted.’ If the Secretary adheres to his initial determi-

nation, the claimant is so notified and benefits begin to

be withheld. At that time, the claimant is notified of

his right to seek an administrative hearing de novo,

with the right to present oral testimony and to cross-

examine witnesses. A request for an oral hearing, un-

like a request for reconsideration, will not toll recoup-

ment. While the record is not entirely clear, it appears

that there is usually a delay of several months from

the time benefits are first withheld to the time a claim-

ant is able to obtain an oral hearing.

Il. Tue Facts

At the time this suit was filed, plaintiff Arlene Mat-

tern was fifty-three years old and physically disabled.

In 1971, she applied for disabled widow’s benefits pur-

suant to 42 U.S.C. § 402(e)(1)(B) (ii), on the social

security earnings record of her deceased husband. Her

application was approved, and she became eligible for

benefits as of May 18, 1971, with a monthly entitle-

ment of $119.30. Because of a mandatory waiting pe-

riod of six months,’ plaintiff was not scheduled to

begin receiving payments until December 1971. How-

® Social Security Claims Manual, § 5503(c).

*The Act has since been amended to provide for a five-month

waiting period. 42 U.S.C. § 423(c) (2) (1970).

(6a)

ever, when plaintiff informed the social security office

that she was in financial distress, she was issued, in

February 1972, a check totalling $1063.80, which cov-

ered the period from May to December 1971. This

payment was improper, since it had been issued in

disi gard of the mandatory six-month waiting period.

Plaintiff was advised of the forthcoming special

check in a letter of January 28, 1972. That letter also

informed her that there was a possibility of duplica-

tion of payment and that if she should receive more

than one check, she should return one of them to the

social security district office. Prior to the receipt of

either the special check or the January 28 letter, plain-

tiff had received her first monthly payment of $119.30.

According to records maintained by the district office,

plaintiff’s sister called the office on January 26, 1972,

and was told that the $119.30 check was correct but

that the impending special check of $1063.80 had been

erroneously issued. The records also indicate that, on

January 28, a district office representative phoned

plaintiff to tell her that the special check being mailed

was incorrect and should be returned. Plaintiff never

returned the check, and denies that she ever received

a phone call instructing her to return it.

Several months later, on July 14, 1972, plaintiff was

sent a letter advising her that she had _ received

%1063.80 more in social security benefits than she was

entitled to and that since she had failed to return the

check an adjustment would be made in her forth-

coming benefit payments. Plaintiff was also informed

of the ‘‘reconsideration” and “waiver” provisions of

the law. On August 7, 1972, plaintiff requested the

Secretary to waive recoupment of overpayment by

filing both a “refund” and a ‘‘without fault” question-

naire, in which she listed her monthly expenses and

(7a)

stated that she had no other source of income, that

she had been ill, that she had spent the check on her

bills and that she had never received any letter or

phone eal] advising her that the $1063.80 check had

been sent in error. The district office rejected her re-

quest for waiver, on the ground that she was not with-

out fault in causing the overpayment. In making this

initial determination, the district office relied on its

letter of January 28, advising plaintiff that if she

received more than one check, she should return one

of them. It also relied on its records indicating that

plaintiff had been notified by phene on January 28

that the $1063.80 check was incorrect and should be

returned.

[1] Plaintiff subsequently filed a request for recon-

sideration and, in accordance with the Secretary’s

procedures, recoupment was deferred until completion

of the reconsideration. On January 3, 1973, the dis-

trict office reaffirmed its initial decision, and deter-

mined that her payments would be reduced by $30 per

month until the full amount of the overpayment was

recovered. In the meantime, plaintiff had filed this

class action in the Eastern District of Pennsylvania.

As a result of a stipulation between the parties, the

plaintiff has continued to receive her full benefits until

final disposition of her suit. The district court de-

clared the recoupment procedure unconstitutional, and

the Secretary appeals.’

‘It appears from the record that the Secretary appealed from

the wrong order. The notice of appeal indicates that he was ap-

pealing from the district court’s order of April 30, 1974, which

granted plaintiff's motions for a class action determination and

for summary judgment, rather than from the final order of

June 10, 1974, which granted injunctive relief. However, we be-

lieve that this defect is not fatal and that we can treat the appeal

(8a)

II1. Jurispicrion

Plaintiff asserted several bases of jurisdiction in

her complaint,’ but the district court found that only

one of them was appropriate—the Mandamus Act, 28

U.S.C. § 1361 (1970).° Since we agree that jurisdiction

is available under the Mandamus Act, we need not

consider the other jurisdictional rulings made by the

district court.

[2] It is well established that, in order for jurisdie-

tion to lie in mandamus, a plaintiff must allege that

the defendant owes him a clear, ministerial and non-

discretionary duty. As we said in Richardson vy.

United States, 465 F. 2d $44, 849 (3d Cir., 1972),

rev'd on other grounds, 418 U.S. 166, 94 S. Ct. 2940, 41

L. Ed. 2d 678 (1974):

In order for mandamus to issue, a plaintiff

must allege that an officer of the Government

owes him a legal duty which is a specific, plain

ministerial act “devoid of the exercise of judg-

ment or discretion’’ [citations omitted]. An act

is ministerial only when its performance is posi-

tively commanded and so plainly prescribed as

to be free from doubt.

as having been taken from the underlying judgment. We believe

that it is reasonable to infer that the intent of the Secretary was to

appeal from the final judgment, and at oral argument counsel for

plaintiff denied that his client had been prejudiced in any way.

See Peabody Coal Co. v. Local Union Nos. 1734, 1508 and 1548.

U.M.W., 484 F. 2d 78, 81-82 (6th Cir., 1973); Lumberman’s

Mutual Ins. Co. v. Massachusetts Bonding & Ins. Co., 310 F. 2d

627, 629 (4th Cir., 1962). Cf. Hodge v. Hodge, 507 F. 2d 87, 89

(3d Cir., 1975).

*28 U.S.C. §§ 1331 (a), 1343(4), 1346 and 1361 (1970).

®* This Act provides:

“The district courts shall have original jurisdiction of any ac-

tion in the nature of mandamus to compel an officer or employee

of the United States or any agency thereof to perform a duty

owed to the plaintiff.”

(9a)

The Secretary challenges the district court’s holding

that it had jurisdiction in mandamus on the ground

that the duty which plaintiff seeks to compel is not a

“ministerial act” which is “so plainly prescribed as to

be free from doubt.’? After noting that the district

court relied on Goldberg v. Kelly, 397 U.S. 254, 90

S.Ct. 1011, 25 L.Ed. 2d 287 (1970), in holding that due

process mandated a pre-recoupment oral hearing, and

after distinguishing Goldberg on the merits, the Sec-

retary concludes that “the broad and indeterminate

scope of the due process clause, as applied to the novel

circumstances involved here, in no way discloses a

plain and indisputable obligation that the Administra-

tion afford the hearings which the plaintiff has

sought.’’ (Br. at 34).

[3, 4] We believe that the Secretary’s position is in

error. Its chief deficiency is that in effect it confuses

the issue of jurisdiction under the Mandamus Act

with the process of resolving the merits of plain-

tiff’s claim. We fully recognize that this case presents

complex constitutional issues which have not yet

heen definitively settled, and we agree that Goldberg

v. Kelly is not plainly controlling. The complexity

1° We also agree with the district court that the Mandamus Act

encompasses constitutional obligations as well as statutory duties.

See Burnett v. Tolson, 474 F. 2d 877 (4th Cir., 1973); Mead v.

Parker, 464 F. 2d 1108 (9th Cir., 1972). In Richardson, supra,

we held that mandamus was available to enforce a constitutional

duty allegedly arising under the “Statement and Account” clause

of the Constitution, Art. I, $9, cl. 7, even though Congress had

enacted a law expressly exempting the Central Intelligence

Agency from the requirement to publish a statement and account

of its receipts and expenditures. We also observed in Richardson

that “mandamus should be construed liberally in cases charging

a violation of a constitutional right.” Richardson, supra 1465 F.

2d at 851.

(10a)

and novelty of the issues on the merits, however,

do not necessarily deprive the federal courts of

mandamus jurisdiction. A determination with respect

to jurisdiction involves a threshold inquiry into

whether the plaintiff has alleged a cause of action

under the particular jurisdictional statute. Here,

plaintiff allezes that the due process clause inyposes

an obligation on the Secretary to provide her with an

oral hearing before adjusting her benefits. Thus, the

duty alleged involves no element of discretion or room

for judginent on the part of the Secretary,” and if

we agree with plaintiff’s contention on the merits, the

result will be to place the Secretary under a binding,

non-discretionary duty to provide a pre-recoupment

oral hearing. Furthermore, the facet that the existence-

of the duty may become absolutely clear only after an

interpretation of the due process clause and a con-

sideration of the merits of the case does not deprive

us of mandamus jurisdiction. See Roberts vy. United

States, 176 U.S. 221, 229-31, 20 S.Ct. 376, 44 L.Ed.

443 (1899): Chaudoin vy. Atkinson, 494 F. 2d 1323,

1330 (38d Cir., 1974); Carey .v. Local Board No. 2,

Hartford, Connecticut, 297 F. Supp. 252, 255 ©).

Conn.), aff'd per curium, 412 F. 2d 71 (2d Cir,

't This case is therefore distinguishable from Jarrett v. Resor,

426 F. 2d 215 (9th Cir. 1970), on which the Secretary relies.

Jarrett held that mandamus does not lie to compe] the Army to

grant a soldier a discharge as a conscientious objector. That case

thus involved an exercise of judgment as to whether that particu-

lar plaintiff had met the iegal criteria for being a conscientious

objector and would largely involve an evaluation of the sincerity

of the claimant’s beliefs. By contrast, the plaintiff here is not

challenging an exercise of judgment, but is alleging a failure to

comply with the mandates of the due process clause.

(lla)

1969)."* Acceptance of the Secretary's reasoning would

lead to an oddly circular result—if mandamus juris-

diction were unavailable because, prior to ruling on

the merits, the Secretary’s dutv is not clear, then a

court would never have jurisdiction to determine

whether his duty was clear in the first place.”

[5] Furthermore, we note that this is not a case

where a plaintiff seeks to tmpose a wholly novel obli-

gation on Government officials through the device of

mandamus. While Goldberg v. Kelly may not be

plainly controlling on the merits, it is a landmark

precedent which imposes, under certain circumstances,

'? See also Schlagenhauf v. Holder, 379 U.S. 104, 110, 85 S.Ct.

234. 18 L.Ed. 2d 152 (1969), where the Supreme Court indicated

that mandamus was appropriate to settle novel and important

problems; and Garfield v. Goldsby, 211 U.S. 249, 29 S.Ct. 62, 53

L.Ed. 168 (1908), where the Supreme Court held that mandamus

was available to compel the Secretary of the Interior to restore

plaintiff Indian to the rolls, because the Secretary, in the absence

of statutory authority and in violation of due process of law, had

stricken plaintiff's name from the rolls without providing notice

and an opportunity to be heard.

*8 While the Secretary purports to disciaim advocating a “plain

meaning” rule for purposes of determining mandamus jurisdiction

(Brief at 34-35 n, 25), we believe that that is essentially what he

does advocate, since he proceeds to contend that Goldberg v. Kelly

is distinguishable, that the case law fails to establish an indisput-

able duty to provide pre-recoupment hearings, and that the result

of an inquiry into the extent of the Secretary’s obligations (ap-

parently through examining legal precedents) “still leaves the

issue in doubt.” While we acknowledge that there is no binding

precedent directly on point, we believe for the reasons already

stated that that fact does not deprive us of mandamus jurisdiction.

Jurisdiction depends on whether a plaintiff has alleged a cause

of action, and if we rule in plaintiff’s favor on the merits, the

result of our inquiry will be to remove any doubt as to the Secre-

tary’s constitutional obligations in recoupment cases.

(12a)

a constitutional obligation on administrators of social

welfare programs to provide oral hearings, and thus it

is at least arguably controlling in this case. Our task

here is essentially to determine whether the same con-

stitutional duty imposed by Goldberg in welfare ter-

mination cases is also applicable to social security

eases involving recoupment of overpayments. Under

these circumstances, we agree with the district court

that the applicability of Goldberg is sufficiently ap-

parent, in determining the threshold issue of manda-

mus jurisdiction, for us to say that plaintiff has

alleged a clear duty on the part of the Secretary. We

therefore believe that, since plaintiff here has relied

on a closely analogous Supreme Court decision in

alleging a clear constitutional duty owed her by the

defendant, and since acceptance of her legal theory on

the merits would establish such a clear duty, then

jurisdiction to consider the merits exists under the

Mandamus Act.

TV. Tue Criass ActTIOon

[6] The Secretary raises two separate arguments

challenging the propriety of the district court’s order

certifying the action as a class action. First, he con-

tends that the district court erred in failing to provide

notice to all the members of the class. Unlike the

recent Supreme Court decision in Eisen v. Carlisle &

Jacquelin, 417 U.S. 156, 94 S.Ct. 2140, 40 L.Ed. 2d 732

(1974), this action was not maintained under Rule

23(b)(3) of the Federal Rules of Civil Procedure, but

rather under Rule 23(b)(2). Thus, the mandatory

notice provision of Rule 23(¢)(2) does not apply. The

Secretary, however, contends that some form of notice

to all class members is constitutionally required, rely-

ie.

(13a)

ing on Lisen v. Carlisle & Jacquelin, 391 F. 2d 555 (2d

Cir., 1968). Recently, however, this Circuit has de-

clined to follow the Second Cireuit view and has held

that notice to the absent class members is not constitu-

tionally required in an action maintained under Rule

23(b)(2). Wetzel v. Liberty Mutual Insurance Co.,

508 F. 2d 239, 254-57 (3d Cir., 1975). We adhere to

that view.”

The Secretary’s second contention is that the class

order was overbroad.” The Secretary bases this con-

tention on a distinction he draws between two sub-

classes of recoupment eases. The first he terms ‘‘recon-

sideration” cases, in which a claimant merely denies

that he in fact received an overpayment or disputes

the amount he was allegedly overpaid. The second he

terms “waiver” cases, in which the claimant concedes

that he received an overpayment but seeks to rely on

the provisions of section 204(b) of the Act,” i.e., he

contends that he was not at fault and that the recoup-

ment would frustrate the purposes of the Act or would

be against equity and good conscience. The Secretary

further asserts that the plaintiff was only seeking to

“waive” recoupment and thus could not represent indi-

viduals seeking ‘‘reconsideration.” He therefore con-

1* We also note that the Second Circuit recently indicated that it

did not int id to require notice in class actions brought under

Rule 23(b) (2). Frost v. Weinberger, 515 F. 2d 57 (2nd Cir., 1975).

16 The initial class order, issued on April 30, 1974, defined the

class as “consisting of all persons eligible for Social Security

OASDI benefits within the counties encompassed by the Eastern

District of Pennsylvania, whose benefits may be terminated, re-

duced or otherwise adjusted in order to recoup an over-payment.”

Subsequently, in its order of June 10, 1974, gianting final injunc-

tive relief, the district court further limited the class in a manner

not relevant to this appeal.

16 See note 1, supra.

(14a)

tends that, to the extent that the class encompassed

“roeonsideration” eases as well as “waiver” cases, it

was overbroad.

As we discuss in greater detail infra, we agree that

“reconsideration” and “waiver” cases present some-

what different legal issues, and thus we conclude that

the final judgment must be modified to take these dif-

ferences into account. However, we believe that a dis-

tinction must be made between requiring entry of a

new judgment after ruling on the merits, which would

have the incidental effect of limiting the class, and

direct!v modifying the scope of the class prior to a

ruling on the merits, which the Secretary appears to

ask us to do. While this may seem at first glance to

be a distinction without a difference, we believe that

there would be a significant difference in this case. If

we accept the Secretary’s contentions that the class

order was overbroad to the extent that it included

“reconsideration” cases and that we should limit the

class to “waiver” cases (on the ground that plaintiff

sought only “waiver” of recoupment), then we could

not even consider the constitutionality of the Sec-

retary’s recoupment procedure in “reconsideration”

cases. Cf. Kauffman vy. Dreyfus Fund, Inc., 454 F.. 2d

727 (3d Cir., 1970), cert. denied, 401 U.S. 974, 91 S. Ct.

1190, 28 L. Ed, 2d 323 (1971). If, however, we accept

the class as defined by the trial judge, then we must

consider the constitutionality of recoupment in both

“waiver” and “reconsideration” cases, drawing what-

ever distinction we think is appropriate in terms of

the relief granted.

[7] We conclude, however, that under established

legal prineiples, we must aecept the district court’s

definition of the class, and that we must therefore

consider the constitutionality of all types of recoup-

(15a)

ment cases. While the Secretary argues basically that

there were two distinct subclasses in recoupment cases

and that plaintiff was a member of only one of them,

the district court defined the class to include recipi-

ents in essentially all cases where benefits were re-

couped without a prior oral hearing.” Since such an

order concerned the size of the class and since the

Secretary made no motion in the district court, based

on Fed. R. Civ. P. 23(a), to limit the class to ‘‘ waiver”

plaintiffs, the order was within the discretion of the

district court and thus its decision should be affirmed.

Wetzel, supra 508 F. 2d at 253; Brown v. United

States, 508 F. 2d 618, 627 (3d Cir., 1974); Carey v.

Greyhound Bus Co., 500 F. 2d 1372, 1380 (5th Cir.,

1974).

For the foregoing reasons, we believe that the dis-

trict court did not err in concluding that the class in-

eluded all recoupment cases rather than merely

“waiver” cases. While “waiver” and “reconsideration”

cases require somewhat differing legal analysis, as we

note énfva, they are not so different that the district

court committed reversible error in treating the class

aus a single large class encompassing all recoupment

cases. Furthermore, as indicated above it does not ap-

pear that the Secretary, in his motion in opposition to

plaintiff's motion for a class action in the district

court, raised the contention that the class order, if

granted, should be limited solely to ‘‘waiver” cases.

Under these cireumstanees, we cannot conclude that

the district court erred in defining the class as broadly

as it did.”

17 See note 14, supra.

18 Thus, we need not decide whether, on the facts of this case,

plaintiff sought only “waiver” of recoupment.

595-380 —75.-—3

(l6a)

V. The Merits "

[8] The chief precedent upon which plaintiff relies

is Goldberg ». Kelly, supra, In that ease, the Supreme

Court held that due process requires that welfare

officials provide notice and an oral hearing prior to

any termination of benefits. he Court relied heavily

on the welfare recipients’ ‘*brutal need” for continued

payments. A ‘crucial factor,” in its view, was that

“termination of aid pending resolution of a contro-

versy over eligibility may deprive an eligible recipient

of the very means by which to live while he waits.”

Adopting a balancing test, the Court concluded that

‘the interest of the eligible recipient in uninterrupted

receipt of public assistance, coupled with the State's

interest that his payments not be erroneously termi-

nated, clearly outweighs the State’s competing con-

cern to prevent any increase in fiscal and administra-

*® In addition to holding that due process required an oral hear-

ing prior to the recoupment of benefits, the district court con-

cluded that ex parte, summary decisions on recoupment are con-

trary to the “purpose” of the Social Security Act. This conclusion

as to the Act’s “purpose” was dictum, however, since the district

court stated that mandamus jurisdiction would require a showing

that the Secretary was under a clear, non-diseretionary duty,

which in turn depended upon an analysis of the due process issue.

347 F.Supp. at 916-17. We agree that mandamus jurisdiction can-

not rest on something as nebulous as an act’s “purpose,” at least

where the act, as here, does not by its terms require a hearing. In

any event, we question whether the mere fact that the “purpose”

of the Act may be “compassionate” can be any basis for concluding

that its purpose can be furthered only by requiring oral pre-re-

coupment hearings. But ef. California Dept. of Human Resources

Development v. Java, 402 U.S, 121, 91 S.Ct. 1347, 28 L.Ed.2d 666

(1971).

OO ae ae

ne ORE ae eae

(17a)

tive burdens.” Goldberg, supra, 397 U.S. at 266, 90

S.Ct. at 1019.

The Seeretary, however, contends that (roldbery is

distinguishable and that it must be read in the light of

subsequent decisions which have further refined the

requirements of due process. The Secretary’s first

argument is that, except in most unusual circum-

stances as evidenced by Goldberg vy. Kelly, the Su-

preme Court has not required oral evidentiary

hearings prior to a deprivation of a property interest

Where the preliminary pre-deprivation proceedings

are sufficient to establish the “probable validity’’ of the

administrative claim. Pointing to its procedures pro-

viding for an initial determination and a reeonsidera-

tion, coupled with the right to submit written

responses and documentary proof, the Secretary con-

tends that the pre-recoupment procedure followed by

the Social Security Administration is sufficient to

establish the “probable validity’? of a decision to re-

coup, and that a post-recoupment oral hearing there-

fore satisfies due ocess, We see several basic

problems with this analysis, however.

First, the Secretary relies primarily on a line of

eases Which, while having some relevance on the issue,

did not purport to overrule or modify Goldberg and

are not controlling here. Mitchell vy. W. T. Grant Co.,

416 U.S. 600, 94S. Ct. 1895, 40 L. Ed. 2d 406 (1974):

Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32

lL. Ed. 2d 556 (1972); Sniadach v. Family Finance

Corp., 395 U.S. 337, 89 8. Ct. 1820, 23 L. Ed. 2d 349

(1969). Of these three decisions, only Mitchell in-

dicated that “probable validity”? may be determined in

the absence of a prior oral hearing; Fuentes and

Sniadach, in facet, requived prior oral hearings. Thus,

Mitchell, rather than Goldberg, represents the excep-

(18a)

tion to the rule. Also, those three cases, unlike Gold-

berg, involved creditors’ ex parte seizure of property

belonging to debtors,” and thus present somewhat dif-

ferent legal considerations than state termination or

reduction of benefits under social welfare programs.

At no point did the Court in Mitchell indicate that ex

parte proceedings to determine ‘“‘probable validity”’

were permissible outside of the creditor/debtor con-

text. In Goldberg, the Supreme Court considered a

state welfare procedure in which a claimant had a

right, after being interviewed by his caseworker and

prior to termination of benefits, to receive a written

explanation of the reasons for termination and to sub-

mit written information in rebuttal. He also had a

right to a full oral hearing after termination. 397 U.S.

“© The Secretary also cites Bell v. Burson, 402 U.S. 535, 91 5. Ct.

1586, 29 L. Ed. 2d 90 (1971), but that case is not on point, since the

Court there, as in Fuentes and Sniadach, held that some kind of

hearing was required before the revocation of a driver’s license.

While it said that the purpose of the hearing was only to deter-

mine the “reasonable possibility” of the driver’s wrongful conduct,

and while it left the scope of such a hearing undefined, it still

required an oral hearing prior to revocation. See footnote 31 infra.

The Secretary also cites Arnett v. Kennedy, 416 U.S. 134, 94

S. Ct. 1633, 40 L. Ed. 2d 15 (1974), but that case contained five

separate opinions, none of which represented a majority view.

Only three Justices (Powell, Blackmun and White) indicated that

an ex parte determination of “probable validity” might satisfy

due process in the context of employee discharges. The plurality

opinion held that there was no due process right to a hearing

prior to discharge, because the “property interest” involved, unlike

those in Goldberg, Bell and Sniadach, “was itself conditioned by

the procedural limitations which had accompanied the grant of

that interest.” Jd. at 155, 94 S. Ct. at 1645. Consequently, the

plurality held that there was no claim of entitlement to the job.

Ifowever, a majority of the Court rejected the plurality’s view.

Jd. at 166-67, 94 S. Ct. 1633 (Powell. J.. concurring), and 211, 94

S. Ct. 1633 (Marshall, J., dissenting).

ee eee ee

Pores

(nd te

(19a)

at 258-60, 90 5. Ct. 1011. The Court, however, held that

this procedure was insufficient and required an oral

hearing prior to termination. Since the procedure in-

validated in Goldberg would seem to be at least as

effective in ensuring “probable validity’? as the pro-

cedure used here,*' and since the Court in Mitchell did

not purport to modify Goldberg, we refuse to extend

the reasoning of Mitchell outside the creditor/debtor

context and to permit ex parte determination of “prob-

able validity” in social welfare cases.

Furthermore, even if Mitchell’s *‘probable validity”

analysis were applicable to social welfare cases, the

procedure here may not pass muster. The Supreme

Court summarized this approach in Mitchell, supra,

416 U.S. at 611, 94S. Ct. at 1902, by stating that Snia-

dach and Fuentes

merely stand for the proposit‘on that a hearing

must he had before one is finally deprived of his

property and do not deal at all with the need

for a pretermination hearing where a full and

mmmediate post-termination hearing is provided.

(Emphasis added.)

The Court upheld the Louisiana sequestration statute

challenged in Mitchell partly because it provided for

an immediate hearing after the writ issued. 7d. at 618,

94 8. Ct. 1895.” Thus, the constitutionality of a proce-

“* Both procedures permit written submissions and documentary

proof, but the procedure here, unlike the one invalidated in Gold-

berg, does not require a Government official to discuss the case

with the beneficiary in person prior to a decision to recoup. See

397 U.S. at 258, 90 S. Ct. 1011.

*? The Court in Mitchell, noted that the Florida statute invali-

dated in Fuentes provided the buyer with a right to a hearing only

“eventually,” and that under the Pennsylvania statute invalidated

in the same case, a buyer may never get a hearing. Mitchell, supra

at 615-16, 94S. Ct, 1895.

(20a )

dure establishing “probable validity” without a full

oral hearing prior to the property deprivation may

depend in part on whether there is an immediate right

to an oral hearing afterward.” As we noted previously,

liowever, there seems to be a delay of several months

from the time recoupment has begun to the time a

recipient is provided a hearing.

Finally, if the Seeretary’s pre-recoupment proce-

dures are to be upheld on the ground that they are

sufficient to determine ‘probable validity,” they would

have to be effective in minimizing the risk of an erro-

neous determination. See Mitchell, supra at 618, 94

S. Ct. 1895; Arnett v. Kennedy, 416 U.S. 134, 94 8. Ct.

1653 (1974), at 170, 94 S.Ct. 1633 (Powell, J., con-

curring) and 188, 948. Ct. 1633 (White, J., concurring

in part and dissenting in part). However, the Secre-

tary’s own figures undercut his contention that the

procedures at issue here are effective to minimize erro-

neous decisions to recoup.’ In 1970, the only year from

which figures have been made available to us, over

*s Similarly, the recent Supreme Court decision in North

Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S. Ct.

719, 42 L. Ed. 2d 751 (1975), distinguishe | J//ftche// in part be-

cause the Georgia garnishment statute. unlike the Louisiana se-

questration statute upheld in Métche//, did net provide for an im-

mediate hearing. /d. at 4194. See also Fusari v. Steinberg, 419 U.S.

579, 386, 95S. Ct. 533. 42 L. Ed. 2d 521 (1975), where the Supreme

Court indicated that the length of the period of deprivation of

benefits and the rapidity of administrative review were important

factors bearing on the constitutionality of termination procedures.

** We also note that pre-recoupment procedures lack some of the

institutional safeguards that the Court in I/itche/l indicated were

important, such as the requirements that the party seeking the

writ file an affidavit setting forth specific facts and that the pre-

deprivation decision be made by a neutral magistrate.

(2la)

one-third of all persons seeking a post-recoupment

hearing (560 out of 1600) obtained reversals.”°

[9] Therefore, because of a combination of fac-

tors—the fact that the Supreme Court has given no

indication that Mitchell’s ex parte “probable validity”’

approach is applicable outside the creditor/debtor eon-

text, and that such an approach appears to have been

at least implicitly rejected in Goldberg v. Kelly; the

substantial delay between the initiation of recoupment

and an oral hearing; and the significant reversal rate

following post-recoupment hearings—we conclude that

the pre-recoupment procedures cannot be defended on

the ground that they are sufficient to establish the

“probable validity’? of the determination in question.

The Secretary also seeks to distinguish Goldberg by

arguing that the impact of a termination of welfare

benefits is more severe than a recoupment of a social

security overpayment, since welfare recipients, unlike

social security beneficiaries, are by definition destitute

and since a beneficiary, whose payments have merely

heen reduced, is still obtaining some assistance. Gold-

berg, as noted previously, rested in large part on wel-

fare recipients’ “brutal need’’ for continued payments,

noting that “[t]he extent to which procedural due

process must be afforded the recipient is influenced by

the extent to which he may be ‘condemned to suffer

grievous loss.’’ Goldberg, supra, 397 U.S. at 262-63,

90 S.Ct. at 1017, quoting Joint Anti-Fascist Refugee

Committee v. McGrath, 341 U.S. 123, 168, 71 8. Ct. 624,

9) L.Ed. 817 (1951) (Frankfurter, J., concurring).

The Secretary also relies on Torres v. New York State

*® The Secretary’s figures, however, make no distinction bet ween

“reconsideration” and “waiver” cases.

(22a)

Dept. of Labor, 321 F. Supp. 432 (S.D.N.Y.1971),

vacated and remanded, 402 U.S. 968, 91 S. Ct. 1685, 29

L. Ed. 2d 133 (1971), adhered to, 333 F. Supp. 341

(S.D.N.Y.1971), affirmed, 405 U.S. 949, 92 S. Ct. L185,

31 L. Ed. 2d 288 (1972), in which the Supreme Court

affirmed without opinion a three-judge district court

decision, which had held that a state may deny a claim

for unemployment insurance without a prior oral

hearing since the denial of unemployment compensa-

tion does not necessarily result in severe economic

harm to the claimant.”

Since Goldberg and Torres, however, the Supreme

Court has indicated, though not with complete con-

sistency, that the requirements of due process do not

depend on the severity of the impact resulting from

the deprivation. In Fuentes, supra at 88-89, 92 8S. Ct.

at 1998, the Court rejected the contention that Gold-

berg carved out a rule of “necessity,” and stated that

that decision was “in the mainstream of past cases,

having little or nothing to do with absolute ‘necessi-

ties’ of life but establishing that due process requires

an opportunity for a hearing before a deprivation of

property takes effect.” The Court in Fucntes relied in

part on Bell v. Burson, 402 U.S. 535, 91 8. Ct. 1586, 29

*6 Plaintiff seeks to discount the precedential effect of Torres

by pointing to language in Fusari, supra, indicating that a sum-

mary affirmance aflirms only the result and not the reasoning of

the lower court, However, since we see no way in which Z'orves and

(foldberg are distinguishable on the due process issue other than

by comparing the severity of the impact, we believe that the

Supreme Court’s summary affirmance should be construed as an

acceptance of this distinction, at least to the extent that Torres is

given any precendential weight. Compare Doe v. I/odgson, 478

F. 2d 537, 539 (2d Cir, 1973), with Edelman v. Jordan, 415 U.S.

651, 670-71. 94 S. Ct. 1347, 39 L. Ed. 2d 662 (1974), and DiVlenburg

v. Wramer, 469 F, 2d 1222, 1225 (9th Cir. 1972).

(23a)

L. Ed. 2d 90 (1971), which had held that there must be

an opportunity for a hearing on the issue of fault be-

fore ‘*mere” suspension of a driver’s license. The

Court in Fuentes observed that drivers’ licenses were

not ‘‘necessities” like welfare or wages, but were

nevertheless sufficiently important to be entitled to

protection under due process. More recently, im

Mitchell, supra, 416 U.S. at 610, 94 S. Ct. 1895, the

Supreme Court seemed to retract somewhat by indi-

cating that one of the factors to take into account, in

deciding whether a prior hearing was required, was

the impact of the deprivation.

In its most recent pronouncements, however, the

Supreme Court has indicated that severity of impact

is not a prerequisite. In North Georgia Finishing,

supra, the Court reaffirmed much of the Fuentes anal-

ysis (419 U.S. at 605, 95 S. Ct. 719), and held that

commercial estabiishments have the same due process

rights as consumers (419 U.S. at 606, 95 S. Ct. 719).

Furthermore, in Goss v. Lopez, 419 U.S. 565, 95 8. Ct.

729, 42 L. Ed. 2d 725 (1975), the Supreme Court held

that due process requires an oral hearing prior to dis-

ciplinary suspensions from school. In rejecting the

school board’s argument that a prior hearing was not

required because students suspended for ten days did

not suffer “grievous loss,’’ the Court stated:

“Appellee’s argument is again refuted by our

prior decisions; for in determining ‘whether due

process requirements apply in the first place, we

must not look to the “weight’’ but to the nature

of the interest at stake.’ Board of Regents v.

Roth, supra, [408 U.S.] at 570-71 [92 8. Ct.

2701, at 2705-2706, 33 L. Ed. 2d 548]. Appellees

were excluded from school only temporarily, it

is true, but the length and consequent severity

of a deprivation, while another factor to weigh

(24a)

in determining the appropriate form of hearing,

‘Is not decisive of the basie right’ to a hearing

of some kind. Fuentes v. Shevin, 407 U.S. 67,

86 [92 S. Ct. 1983, 1997, 32 L. Ed. 2d 996} (1972).

The Court's view has been that as long as a

property deprivation is not de minimis, its

gravity is irrelevant to the question whether

account must be taken of the Due Process

Clause. Goss, supra at 575, 95 S. Ct. at 737.”

[10] We therefore believe that we are constrained

by Supreme Court’s most recent pronouncements not

to base our decision on our perception of the severity

of the impact of recoupment on social security recipi-

ents, provided we determine that the impact is not

de minimis. The impact in this ease is surely more

than de minimis, since we believe that Congress, in

enacting a program providing disabled widow’s hene-

fits, recognized that recipients like Mrs. Mattern were

im need of assistance. We also note that the facts of

this case indicate that Mrs. Mattern was both disabled

and without any other source of ineome.”’

We are aware of the recent Second Circuit decision,

Prost v. Weinberger, 515 F. 2d 57 (2d Cir. 1975), but

decline to follow it. First, we note that that decision

is distinguishable in several respects. At issue in

Frost was whether a hearing was required before a

reduction in benefits to surviving legitimate children.

Such a reduction was required because of the compet-

ing claims of illegitimate children of the wage earner

* The “Refund Questionnaire” which plaintiff filled out stated

that she had no other source of income besides her monthly dis-

ability check (54a). We observe, however, the Refund Question-

naire was dated August 7, 1972, and there is the possibility that

plaintiff could have applied for, and received, welfare payments

since that date.

ee a ee ee re ~

~ ewan nee te MP tate

(25a)

and because of the statutory ceiling on total payments

allowable. 42 U.S.C. § 403(a) (1970). Thus, as the

court in Frost noted, the controversy was not so much

one between the Government and beneficiaries as be-

tween two groups of beneficiaries, with the Social

Security Administration having “no financial stake”

and being “totally disinterested as between the two

sets of claimants.” Untike Goldberg, therefore, where

the only interest conflicting with that of the plaintiffs

was the Governmental interest in protecting its

resources, in Irost there were “important private

interests as well,” 7.e., the interest of the illegitimate

children to promptly receive payments to which they

were entitled. Such a competing private interest, of

course, Is not present here, Furthermore, the court in

Frost noted that the type of hearing that would be

required would place unusual burdens on the Social

Security Administration because of the possibility

that legitimate and illegitimate children, all of whom

would have to be present or represented at a hearing

might be living in different areas. The court further

noted that ‘ta paternity hearing may demand an in-

quiry into the habits of a father long before married

or long after his departure from the matrimonial

household.” These factors convinced the court in Frost

that a paternity hearing would be less prompt and

more protracted than the brief hearings likely to arise

in welfare-ternination cases, and thus the court con-

cluded that those factors ent ‘tin favor of allowing the

SSA to act preliminarily on the basis of something

less than a full-seaie hearing.” Those factors are not

present here, and we believe that the hearings are

likely to be as simple as those in welfare termination

CASES.

(26a)

We also note that the court in Frost relied heavily

on the analysis that a prior oral hearing was required

only in cases where the deprivation was severe.” As

we stated earlier, however, we do not read the post-

Goldberg decisions as making due process require-

ments turn on the severity of the impact. The opinion

in Frost nowhere mentioned the Supreme Court deci-

sious in Beli vy. Burson, Fuentes v. Shevin, North @eor-

gia Finishing or Goss vy. Lopez, which we read as re-

quiring prior hearings wherever the impact 1s more

than de minimis. The court in Frost relied heavily on

Arnett v. Kennedy, supra, but as we observed previ-

ously (see note 19 supra), that decision presented five

separate opinions, each offering different rationales

and none representing a majority view. Only three of

the Justices (Powell, Blackmun and White) indicated

that the right to a hearing would turn, at least in

*8 We note this language in the Frost case:

“The Court’s decisions can be fairly summarized as holding that

the required degree of procedural safeguards varies directly with

the importance of the private interest affected and the need for

and usefulness of the particular safeguard in the given circum-

stances and inversely with the burden and any other adverse con-

sequences of affording it.

* ., Anelement crucial to Goldberg was that the benefiis at issue

were awarded on the basis of need and represented the last source

of income available to the families. The benefits here at issue are

not based upon need; .... [pp. 66-67 of 515 F. 2d]

“|. [1]n cases where a reduction in such benefits would place a

family below the subsistence level, other forms of government

assistance would become available, however, unattractive resort to

them may be. The weights in favor of departing from the ordina ry

principle that something less than a full-scale evidentiary hearing

suffices before administrative action, when a full hearing is pro-

vided promptly thereafter, are thus substantially less than in

Goldberg [p. 67 of 515 F.2d)”

Oe eee

)

;

(27a)

part,” on the severity of the impact. 416 U.S. at 169,

945, Ct. 1633 (Powell, J., concurring) and 201-02, 94

S. Ct. 1633 (White, J., concurring in part and dissent-

ing in part). Given the fact that a majority of the

Court in Arnett did not employ the rational adopted

in Frost, we continue to adhere to our reading of Bell,

* We note that in Arnett, the separate opinions of Justices

Powell (with whom Justice Blackmun joined) and White did not

rely solely on the fact that they perceived the impact on a <is-

charged Government worker to be less severe than that on a wel-

fare recipient whose benefits have been terminated. Justice Powell

also relied on the potential disruption to Government efliciency

and mor ‘le if the Government were required to retain a disruptive

or otherwise unsatisfactory employee pending a hearing, 416 U.S.

at 168, 94 S.Ct. 1633, a factor which, of course, is not present in

this case. Justice White likewise placed several factors in the bal-

ance, 416 U.S. at 190, 94 S.Ct. 1633. One of them was the risk that

the initial deprivation may be wrongful. In fact, this was essen-

tially the reason he dissented in part. (The fatal defect, in his

view, was the lack of an impartial hearing examiner). As we noted

earlier, the significant reversal rate in recoupment cases after a

hearing is empirical] evidence that there is indeed a serious risk

that the initial deprivation may be wrongful. Also, if the Govern-

must continue to pay a worker pending a hearing, those payments

cannot be recovered even if the Government should prevail. 416

U.S. at 193, 94 S.Ct. 1633. Here, however, the Social Security

Administration, if it prevails at the hearing, should be able to

recoup the full amount of the overpayment (provided the claim-

ant does not die before the completion of recoupment).

Finally, we believe that if Arnett is construed to have turned

on the fact that a discharged Government employee did not suffer

a sufficiently serious deprivation, that decision must necessarily

have overruled Perry v. Sindermann, 408 U.S. 593, 603. 92

S.Ct. 2694, 33 L.Ed. 2d 570 (1972), a result which none of the

Justices in the Arnett majority purported to accomplish. A col-

lege professor who has a de facto claim to tenure and who is

entitled to a hearing under Perry is no more reduced to a state of

“brutal need” by the nonrenewal of jis contract than is a dis-

charged OEO civil servant.

(28a)

Fuentes, North Georgia Finishing and Goss v. Lopez.

We also note that two other Circuits have concluded

that due process requires a hearing in cases involving

termination of social security payments. Eldridge v.

Weinberger, 493 F. 2d 1230 (4th Cir. 1974), aff’g 361

F. Supp. 520 (W.D. Va. 1973), cert. granted, 419 U.S.

1104, 95 S. Ct. 773, 42 L. Ed. 2d 800 (1975) ; Williams

v. Weinberger, 494 F. 2d 1230 (5th Cir. 1974), aff’y

360 F. Supp. 1849 (N.D. Ga. 1973).

Another contention raised by the Secretary is more

econvineing. This argument is that recoupment cases

present issues which are well adapted to resolution by

written submissions and documentary proof. Conse-

quently, he argues, an oral hearing would be super-

fluous and should not be constitutionally required. As

we will expiain in greater detail below, the applica-

hility of this argument to reconpment cases necessi-

tates a discriminating analysis of the different types

of cases and of the different types of factual disputes

likely to arise. However, we do accept the Secretary's

basic premise that due process should not require a

pre-recoupment oral hearing where factual disputes

are as well suited to resolution by documentary proof

and written submissions as by oral hearings.

Implicit in Goldberg v. Kelly is the recognition of

the fact that issues likely to arise in welfare termina-

tion cases can only be resolved through an oral hear-

ine. One of the plaintiffs was a woman whose benefits

had been terminated beeause she allegedly failed to

cooperate with welfare officials in suing her estranged

husband. Another was a man whose benefits were ter-

minated beeause he refused to accept drug counseling

and rehabilitation, though he claimed that he did not

—— . .

Oe Bs SO bee

ee eed

2 le! ee ee ae

(29a)

in fact use drugs. Goldberg, su pra, 397 U.S. at 256 n. 2,

9) S. Ct. 1911. It is obvious that resolution of those

factual disputes could only be made at an oral hearing,

where the trier of fact could evaluate the credibility

of the claimant. As the Court noted, “where credibility

and veracity are at issue, as they must be in many ter-

mination proceedings, written submissions are a

wholly unsatisfactory basis for decision.” Id. at 269,

90S. Ct. at 1021.

Similarly, in Goss v. Lopez, supra, the question of

whether a student had engaged in disruptive conduct

justifying suspension could not possibly be determined

without an oral hearing. See also Bell v. Burson,

supra, Which required an oral hearing to determine

fault before revocation of a driver’s license. By econ-

trast, the Supreme Court in Mitchell held that no

prior opportunity whatsoever need be given the debtor

to oppose repossession of his property, in part because

the issue “turns on the existence of the debt, the lien,

and the delinquencey,’? which “are ordinarily uncom-

plicated matters that lend themselves to documentary

proof.” Jd. 416 U.S. at 609, 94 S. Ct. at 1901. Thus,

“(t]he nature of the issues at stake minimize the risk”’

of an erroneous cx parte determination. Id. at 609-10,

94 S. Ct. at 1901. See also Burr v. New Rochelle Mu-

nicipal Housing Authority, 479 F. 2d 1165, 1169 (2d

Cir., 1973), where the court stated that an oral hear-

ing was not required prior to deciding whether to

increase the rents of public housing tenants, since “the

opportunity to present oral evidence is not particu-

larly valuable where technical financial data is at

issue.”’

[11] Application of the above principle to recoup-

ment cases is more complex. As noted previously, the

Secretary draws a, distinction between “reconsidera-

tion” and ‘‘waiver” cases, arguing that they present

(30a)

somewhat different legal issues. We agree with the

Secretary that ‘‘reconsideration” cases are generally

well suited to resolution by documentary proof, and

that claimants in most cases of this type are not con-

stitutionally entitled to a prior oral hearing.” Most

of these disputes invoive matters of a purely arith-

metical nature—whether the computation of an earn-

ings statement is correct; whether a computer's calcu-

lation of the amount of benefits received is accurate ;

whether two benefit checks have been received rather

than one. In such circumstances, an examination of

social security records and cancelled checks would seem

to be sufficient, and it is hard to see how an oral hear-

ing would be of much benefit to the claimant. Con-

sequently, the Secretary’s pre-recoupment procedures

permitting written evidence and providing for an

examination of written documents, when coupled with

a right to a post-recoupment oral hearing, satisfy due

process.

We add one caveat, however. Because we cannot

envision all the situations in which “reconsideration”

cases are likely to arise, we acknowledge the possi-

hility that there may be cases where the opportunity

to appear in person might be important in making an

2 We decline to establish a flat rule that a// “reconsideration”

cases may be decided prior to recoupment without an oral hearing,

since we do not have sufficient basis for knowing all the types of

cases which the Secretary may classify as being of the “recon-

sideration” type. The crucial distinction is not whether the cases

are labeled “reconsideration” or “waiver,” but whether they lend

themselves to resolution by documentary proof. Thus, while we

shall use those terms as suggested by the Secretary for purposes

of convenience, we do not mean to imply that the constitutionality

of recoupment in a particular case is dependent upon the label

used nor that we necessarily accept the Secretary's categorizations

in toto.

oes, VA Nalin are RS se nll lie itil a

(31a)

accurate determination. Thus, while many “reconsid-

eration” cases can be decided without a prior oral

hearing, we believe that, as a matter of due process,

the Secretary should establish procedures which would

provide for an oral hearing where a case does not

hinge on documentary evidence and where a claimant

raises issues which necessitate an evaluation of his

eredibility. We are mindful of the concern expressed

in Goldberg that many claimants lack the education

or ability to frame written submissions in a persuasive

light, and thus if a claimant in a ‘‘reeonsideration”

case raises such an issue, he should be entitled to a

hearing.

If, however, a claimant merely denies receiving

duplicate checks or claims that his earnings were of

a certain amount, cancelled checks bearing his endorse-

ment or earnings records maintained by the social

security office would seein to constitute hard proof in-

‘capable of oral rebuttal. In this case, for example, if

plaintiff had merely denied receiving the $1,063.80

check or had claimed that the check did not represent

an overpayment, she would not have been constitu-

tionally entitled to a hearing prior to recoupment. A

‘cancelled check bearing her endorsement would be

persuasive proof that she had received and cashed it,

and the date of issue, coupled with the statutory six-

month waiting period, would be persuasive proof that

the check represented an overpayment. Furthermore,

the plaintiff in this case, though given the opportunity

to do so, came forth with no written evidence to sup-

port a contention that she had not in fact been paid

$1,063.80 or that that check did not represent an over-

payment. Consequently, if she had made solely those

contentions, it is hard to see how a pre-recoupment

oral hearing would be helpful. In all eases, however,

595-380— 75 4

(32a)

a Claimant should be informed, prior to initiation of

recoupment, of the basis on which an adverse determi-

nation is made and should be offered the opportunity

to explain or rebut any written evidence against her.

[12] With respect to “waiver’’ cases, the Secretary

admits that resolution of factual disputes is more

complex than in “reconsideration’’ cases, but offers

essentially two reasons why pre-recoupment oral hear-

ings in such cases should not be constitutionally re-

quired. First, relying on Board of Regents v. Roth,

408 U.S. 564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972),

and Perry v. Sindermann, 408 U.S. 593, 92 S. Ct. 2694,

33 L. Ed. 2d 570 (1972), he argues that a recipient has

no “claim of entitlement’’ to an overpayment and thus

the due process clause “does not require the Secre-

tary—in deciding to make a gift of funds improperly

received by the beneficiary—to also stay his hand

pending a hearing”’ on the waiver request (Br, at 24).

We reject this analysis. Section 204(b) of the Act”

vives a recipient of an overpayment a statutory right

not to have his payments reduced under certain enu-

merated circumstances (if he is without fault, ete.),

and in “waivine’’ recoupment the Secretary is not

merely making a “gift,”’ but is complying with the

statute. Thus, the fact that plaintiff may not have

heen entitled to receive the overpayment does not mean

that she has no claim of entitlement to retain it (or at

least to receive a full amount of her future monthly

payments).

[13] The Secretary also contends that “waiver’’

eases, like “reconsideration”’ cases, lend themselves to

*! See note 1 supra.

* The statute does not make “waiver” discretionary, but rather

uses mandatory language: “there shall Le no” recoupment under

the conditions specified.

(33a)

resolution by documentary proof. We disagree. One

of the factors to be considered in a “waiver” case is

whether the claimant is “without fault,” and the Su-

preme Court has clearly indicated that determinations

as to fault must be made at an oral hearing.** The facts

of this case graphically illustrate the need for an oral

hearing. In determining that plaintiff was not without

fault, the Secretary relied on basically two factors—

its records indicating that plaintiff had been informed

of the overpayment by telephone, and its letter of

January 28, 1972. Plaintiff denies that she received

such a phone call, and we do not see how resolution of

this factual dispute could possibly be made without

allowing her to tell her story in person and enabling a

trier of fact to evaluate her credibility. Similarly, a

finding of fault could not rest on the ambiguous Janu-

ary 28 letter, at least without giving plaintiff an op-

portunity to explain in person what she thought it

meant. Another requirement that a claimant in a

waiver case must meet is that recoupment would

“Cf, Mitchell, supra, at 416 U.S. 617, 94S. Ct. at 1905, where

the Supreme Court in discussing and distinguishing Fuentes, said:

“As in Bell v. Burson, where a driver's license was suspended

without a prior hearing, when the suspension was premised on a

fault standard, ... in Fuentes this fault standard for replevin

was thought illsuited for preliminary ez parte determination.”

* That letter told her that a special check in the amount of

$1063.80 was being mailed to her, and proceeded to say:

“We have taken steps to avoid duplication of payment, Ilow-

ever, should you receive more than one check because of these dual

actions, please return one of them to the social security district

office immediately.”

(51a). We believe it is perfectly reasonable for plaintiff to have

believed that this letter was referring to the possibility that she

might receive two $1063.80 checks. Since she only received one

such check, we do not see how a finding of fault can be based on

this letter.

(34a)

either frustrate the purposes of the Act or be against

equity and good conscience. As defined by the Secre-

tary’s regulations, these terms refer to such matters

as difficulty in meeting necessary living expenses or a

change of position by the recipient.” We do not see

how a resolution of such questions can reliably be de-

termined in the absence of oral testimony.

While we believe that claimants in ‘*waiver” cases

have a constitutional right to a pre-recoupment oral

hearing, that right may not attach im all cases. Where

a claimant in a “*waiver” case raises no disputed issue

of fact, or where, accepting his version of the facts

as true, we could say as a matter of law that he was

not entitled to retain the overpayment, then again it

is hard to see how a pre-recoupment hearing would be

of benefit.” Thus, the constitutional requirement of a

hearing may be limited to some extent by principles

analogous to summary judgment in civil litigation.

See Mills vy. Richardson, 464 F. 2d 995, 1001 (2d Cir.,

1972). For example, if plaintiff in this case had

admitted receiving a telephone call telling her that the

impending $1,063.80 check was in error and that she

should return it, and if she merely alleged hardship,

then as a matter of law, she would not be without

fault and the recoupment could proceed in advance of

an oral hearing. The reason for this is that, under see-

tion 204(b) of the Act, a claimant seeking to waive re-

coupment must establish two things: that he is with-

out fault and that the recoupment would defeat the

purpose of the Act or be against equity and good con-

science. Thus, if plaintiff’s written response had con-

*° See notes 3 and 4 supra.

°° The Supreme Court explicitly left open this issue in Gold-

berg, supra 397 U.S. at 268 n.15, 90 S.Ct. 1011.

(35a)

ceded one of these two elements, she would have no

legal right to retain the overpayment.”

[14] In sum, we conclude that the recoupment pro-

cedure established by the Secretary is constitutionally

deficient in that it does not provide for pre-recoup-

ment oral hearings in the situations we have indicated

are necessary. We do not believe that due process re-

quires pre-recoupment oral hearings in all eases, but

the Secretary’s existing procedure makes no distine-

tion hetween the various types of cases and issues that

ure likely to arise. To the extent that a hearing is re-

quired, we agree with the district court that the full

panoply of procedural safeguards need not be pro-

vided and that the pre-recoupment hearing need not

take the form of a judicial or quasijudicial trial, In

Richardson vy. Perales, 402 U.S. 389, 399-401, 91 S.

Ct. 1420, 1426, 28 L. Ed. 2d. 842 (1971), the Court has

explained the informal nature of social security hear-

ings in this language:

The Social Security Act has been with us

since 1935. Act of August 14, 1935, 49 Stat. 620.

It affects nearly all of us. The system’s admin-

istrative structure and procedures, with essen-

tial determinations numbering into the millions,

are of a size and extent difficult to comprehend.

But, as the Government’s brief here accurately

pronounces, “Such a system must be fair—and

it must work.”’

“Congress has provided that the Secretary

“‘shall have full power and authority to

* Furthermore, like the district court, we conclude that a hear-

ing is not required where the claimant has made a knowing, intel-

ligent and voluntary waiver of the right.

(36a)

make rules and regulations and to establish

procedures . . . necessary or appropriate to

earry out such provisions, and shall adopt rea-

sonable and proper rules and regulations to

regulate and provide for the nature and ex-

tent of the proofs and evidence and the method

of taking and furnishing the same m order

to establish the right to benefits hereunder.

§ 205(a), 42 U.S.C. § 405(a).”

' “Brom this it is apparent that (a) the Con-

gress granted the Secretary the power by regu-

lation to establish hearing procedures; (b) strict

rules of evidence, applicable in the courtroom,

are not to operate at social security hearings so

as to bar the admission of evidence otherwise

pertinent; and (¢) the conduct of the hearing

rests generally in the examier’s discretion.

There emerges an emphasis upon the informal

rather than the formal. This, we think, 1s as it

should be, for this administrative procedure,

and these hearings, should be understandable to

the layman claimant, should not necessarily be

stiff and comfortable only for the trained attor-

ney, and should be liberal and not strict in tone

and operation. This is the obvious intent of Con-

gress so long as the procedures are funda-

mentally fair.”

[15, 16] We therefore believe that due process re-

quires only an informal, oral hearing which provides

the following safeguards :*

1) an impartial decision maker separated from those

making the previous administrative determinations in

the case ;”

°8 We note with approval the type of procedure followed in

Brower v. Wohlgemuth, 371 F.Supp. 863 (E.D. Pa. 1974). -

%In Twigger v. Schultz, 484 F. 2d 856, 859 (3d Cir. 1975),

Judge Gibbons pointed out: . .

wh more reasonable construction of the entire Act, which we

(37a)

2) timely and adequate notice to the recipient of the

reasons for recoupment;

3) an effective opportunity for the recipient to con-

front and cross-examine adverse witnesses ;

4) an effective opportunity for the recipient to pre-

sent his own arguments and evidence orally;

2) an opportunity to retain counsel or have the in-

formal assistance of a friend, if the recipient desires ;

6) a report written by the decision maker which in-

formally states the reasons and the evidence relied on

in reaching his decision ;"°

7) an opportunity for all parties to receive and chal-

lenge the decision maker's report before it becomes

final.’

adopt, is that there may be presiding officers other than those listed

in §7(a), but that the procedural safeguards of the Act, and spe-

cifically the separation of functions safeguard of § 5(c). apply to

such presiding officers to the same extent as to those presiding

officers listed in § 7(a).”

See also Withrow v. Larkin, —~ U.S. ——, 95 S, Ct. 1456. 1464-

1468, 43 L. Ed. 2d 712 (1975).

Due process does not require that the decision maker be an ad-

ministrative law judge appointed under 5 U.S.C. § 3105 for “pro-

_ ceedings required to be conducted in accordance with” 5 U.S.C.

S§ 556 and 557. Of course, statutory criteria exceeding due process

requirements are nevertheless controlling as to the credentials of

the presiding administrator.

“ The presiding administrator’s decision must rest solely on the

evidence adduced at the hearing, in conformance with the hearing

rules for receiving evidence. See Richardson v. Perales, supra, 402

U.S. at 400, 91 S. Ct. 1420; Goldberg v. Kelly, supra, 397 U.S. at

271, 90 S. Ct. 1011. The report “need not amount to a full opinion

or even formal findings of fact and conclusions of law.” Goldberg

v. Kelly at 271, 90 S. Ct. at 1022.

** Such report could be submitted in draft form to all concerned

for comment before final adoption.

(38a )

See Goldberg v. Kelly, supra, 397 U.S. at 267-71, 90

S.Ct. 1011.

Although we are in partial agreement with the dlis-

trict court decision, we believe that the judgment of

the district court should be vacated and 1smanded so

that the district court can enter a new order defining

the class in light of our ruling on the merits and in

light of any further developments which have oc-

enrred since the final class determination on June 10,

LO7TA.

Accordingly, the judgment of the district court will

he vacated and the ease remanded for entry of an ap-

propriate judgment in accordance with this opinion.

Wh Cotta a mi

eee

APPENDIX B

United States Court of Appeals for the Third Circuit

No. 74-1776

ARLENE M. MATTERN

CaspaR WEINBERGER, SECRETARY OF HEALTH,

EpucaTION AND WELFARE, APPELLANT

(D.C. Civil Action No, 72-2522

On Appeal From THE Untrep Srates District Courr

FOR THE EASTERN Distrrictt or PENNSYLVANIA

Present: Van Dusen, Gibbons and Hunter, Circuit

Judges.

JUDGMENT

This cause came on to be heard on the record from

the United States District Court for the Eastern Dis-

trict of Pennsylvania and was argued by counsel.

On consideration whereof, it is now here ordered

and adjudged by this Court that the judgment of the

said District Court, entered June 12, 1974, be, and

the same is hereby vacated, and the cause is remanded

to the said District Court for entry of an appropriate

judgment in accordance with the opinion of this

Court.

Attest:

THomas F. Quinn, Clerk.

June 3, 1975.

(29a)

a — >

Ce ee

APPENDIX C

In The United States District Court For The Eastern

District of Pennsylvania

(Civil Action No, 72-2522; April 30, 1974)

ARLENE M. MAtTrern

Caspar WEINBERGER, UNITED States SECRETARY OF

HEALTH, Epucation, AND WELFARE

Opinion and Order

TROUTMAN, J.

This action challenges the procedure utilized by the

secretary of Health, Education, and Welfare [the

Secretary], pursuant to Section 204 of the Social

security Act [the Act], to adjust or reduce social

security benefits in order to recoup an alleged over-

pavinent. Specifically, plaintiff, on behalf of herself

and others similarly situated, secks injunctive and

declaratory relief, requiring the Secretary to conduct

an evidentiary hearing prior to adjusting er reducing

social security benefits to which plaintiff is entitled

under Title IL of the Act. 42 U.S.C. $401 et seq.

Plaintiff challenges the failure to provide an oral

hearing prior to the recoupment of an alleged over-

payment on the grounds that it is contrary to the pur-

pose of the Act and violative of the Fourteenth

Amendment to the Constitution. Presently before

the Court are (1) defendant’s motion to dismiss the

(tia)

(42a)

complaint for lack of jurisdiction, (2) plaintiff's

motion for a class action determination, (3) plaintiff's

motion to convene a three-judge court and (4) cross-

motions for summary judgment.

The relevant facts are not in dispute and are as

follows: Plaintiff, at the time this action was filed, was

fifty-three years old and is presently disabled. In 1971,

she filed an application for disabled widow’s benefits

pursuant to 42 U.S.C. §402(e) (1) (B) (ii) on the social

security earnings record of her deceased husband. Her

application was initially denied, but, upon reconsider-

ation, she was found entitled to benefits effective De-

cember 1971.' Thereafter, plaintiff informed the social

security office that she was in financial distress. Upon

investigation, the office forwarded a request for a

critical case payment to the Philadelphia payment

center on the basis of plaintiff's alleged condition of

hardship. The payment center failed to consider the

statutory waiting period and erroncously certified pay-

ment of monthly benefits retroactive to May 1971

rather than December 1971. A check in the amount of

$1063.80 was issued to plaintiff. Prior to the receipt of

this check, plaintiff received another check in the

amount of $119.30, representing her monthly entitle-

ment. According to defendant, plaintiff was notified

that the special check for $1063.80 was in error and

should be returned.

Upon plaintiff’s failure to return the check, she was

notified of the alleged over-payment and the Secre-

‘It was determined that plaintiff established a period of dis-

ability beginning on May 18, 1971. She was not entitled .o bene-

fits as of that date, because the Act, at that time, provided for a

six-month waiting period between the onset date and entitlement

to benefits. The Act. as amended in 1972. provides for a five-month

waiting period, 42 U.S.C. § 425(¢) (2).

(43a)

tary’s intent to adjust or reduce the amount of her

monthly check in order to recoup the overpayment.

Vlaintiff, thereafter requested waiver of the recovery

action and completed a ** without fault” questionnaire.

In her response, plaintiff admitted receiving the check

for $1063.80, which she cashed to pay her bills, but de-

nied the receipt of any notice that the check was not

correct until she received the letter, indicating the Sec-

retary’s intent to recoup the over-payment. By letter

dated October 20, 1972, plaintiff was advised that re-

covery of the overpayment could not be waived be-

cause she was not without fault and she was further

advised of her right to request reconsideration of this

determination. On November 20, 1972, plaintiff filed

a request for reconsideration, and as a result of this

request, the adjustment action was not implemented

pursuant to Section 5503.5 of the Claims Manual. On

December 29, 1972, plantiff commenced this civil ac-

tion. Subsequently, the reconsideration decision up-

held the initial determination on the ground that

plaintiff was not without fault and, therefore, liable

for recovery of the overpayment. In order to alleviate

undue hardship, recovery by partial adjustment of $30

per month was recommended, commencing with her

January 1973 benefit. As a result of this notice, the

parties entered into a stipulation continuing plain-

tiff’s full benefits until the disposition of this action.

Section 204 of the Act, 42 U.S.C. § 404, authorizes

the Seeretary, under regulations prescribed by him,

to recover incorrect overpayments or to adjust bene-

fits to provide for such recovery. Section 204 provides

in pertinent part:

(a) Whenever the Secretary finds that more

or less than the correct amount of payment has

been made to any person under this sub-

(44a)

chapter, proper adjustment or recovery shall

be made, under regulations prescribed by the

Secretary, as follows:

(1) With respect to payment to a person of

more than the correct amount, the Secretary

shall decrease any payment under this sub-

chapter to which such overpaid person is en-

titled, or shall require such overpaid person

or his estate to refund the amount in excess of

the correct amount, or shall decrease any pay-

ment under this subchapter payable to his estate

or to any other person on the basis of the wages

and self-employment income which were the

basis of the payments to such overpaid

person, or shall apply any combination of

the foregoing... .”

(b) In any ease in which more than the

eorrect amount of payment has been made,

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.

Under subsection (b) of Section 204, no adjustment

or recovery shall be made where such person is with-

out fault? and such adjustment or recovery would

2 “Pault” is defined in 20 CFR § 404, 507 which provides:

“ ‘Fault’ as used in ‘without fault’ (see $$ 401.506 and 405.355)

applies only to the individual. Although the Administration may

have been at fault in making the overpayment, that fact does not

relieve the overpaid individual or any other individual from

whom the Administration seeks to recover the overpayment from

liability for repayment if such individual is not without fault.

In determining whether an individual is at fault. the Administra-

tion will consider all pertinent circumstances, including his age,

intelligence. education, and physical and mental condition. What

constitutes fault (except for ‘deduction overpayments’—see § 404.

510) on the part of overpaid individual or on the part of any other

(45a)

defeat the purpose of Title IT of the Act* or would

be against equity and good conscience.*

individual from whom the Administration seeks to recover the

overpayment depends upon whether the facts show that the in-

correct payment to the individual or to a provider of services or

other person, or an incorrect payment made under section 1814 (e)

of the Act [42 U.S.CLA. § 1395f(e) ], 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 |

“(e) With respect to the overpaid individual only, acceptance

of a payment which he either knew or could have been expected

to know was incorect.” .

* The phrase “defeat the purpose” of Title II is defined in 20

CFR § 404.508, which provides: :

“(a) General. ‘Defeat the purpose of title IT [42 U.S.C.A. § 401

et sey. |,’ for purposes of this subpart, means defeat the sauneen of

benefits under this title, i.e., to deprive a person of income required

for ordinary and necessary living expenses. This depends upon

whether the person has an income or financial resources sufficient

for more than ordinary and necessary needs, or is dependent upon

all of his current benefits for such needs. An individual’s ordinary

and necessary expenses include : . a

“(1) Fixed living expenses, such as food and clothing, rent

mortgage payments, utilities, maintenance, insurance (eg. life,

accident, and health insurance including premiums for supple-

mentary medical insurance benefits under title XVIII [42 U.S.C.A

$1595 et seq.|). taxes, installment payments, ete. ; _

“(2) Medical, hospitalization, and other similar expenses ;

“(3) I:xpenses for the support of others for whom the indi-

vidual is legally responsible ; and

“(4) Other miscellanecus expenses which may reasonably be

considered as part of the individual’s standard of living.

. “(b) When adjustment or recovery will defeat the purpose of

title IT [42 U.S.CLA. $401 et seq.]. Adjustment or recovery will

defeat the purpose of title IT [42 U.S.C_A. § 401 et seq.] in (but is

not limited to) situations where the person from whom recovery is

sought needs substantially all of his current income (including

(46a)

See also 20 CFR § 404.506. 20 CFR § 404.901 et seq.

of the Social Security Administration regulation sets

forth a four-step administrative process by which a

claimant may obtain review of a decision to adjust

benefits in order to recoup an overpayment. Following

an initial determination that an over-payment has

heen made and that there is no basis for waiver of

recovery, the claimant may obtain reconsideration pur-

suant to 20 CFR 404.914. Subsequent to a reconsid-

ered determination, an individual may request a hear-

ing de novo before an administrative law judge, 20

CFR 404.917, and review by the Appeals Council of

the Social Security Administration. 20 CFR 404.945.

Thereafter, a claimant may seek judicial review in the

district courts pursuant to §205(g) of the Act. 42

U.S.C. § 405(g). During the period that a claimant is

pursuing his administrative remedies, there 1s no pro-

vision in the Act or in the regulations, requiring that

a hearing must be conducted prior to implementation

of any adjustment or recovery. Section 5503.5 of the

Claims Manual provides that where reconsideration of

an initial determination is requested, “withholding to

recoup the overpayment will be further deferred and

social security monthly benefits) to meet current ordinary and

necessary living expenses.”

‘Against equity and good conscience” is defined in 20 CFR

$ 404.509, which provides:

“*Against equity and good conscience’ means that adjustment

or recovery of an incorrect payment (under title II or title XVII

[42 U.S.C.A, § 401 et seq. or § 1395 et seq.]) will be considered in-

equitable if an individual, because of a notice that such payment

would be made or by reason of the incorrect payment, relinquished

a valuable right (examples (1), (2) and (5) or changed his posi-

tion for the worse (examples (3). and (4)). In reaching such a

determination, the individual’s financial circumstances are

irrelevant.”

(47a)

payment will be continued” until a decision upon re-

consideration is made. Thus, under the regulations and

provisions of the Claims Manual, adjustment of bene-

fits in order to recoup an overpayment may be imple-

mented following a decision upon reconsideration and

there is no provision for a hearing de novo before an

administrative law judge prior to the implementation

of the adjustment.

I. JURISDICTION

In plaintiff’s amended complaint, jurisdiction has

heen asserted under 28 U.S.C. § 1331, 28 U.S.C.

§ 1345(4), 28 U.S.C. § 1346 and 28 U.S.C. § 1361. In

his motion to dismiss for lack of jurisdiction, defend-

ant argues that none of the above provisions confer

jurisdiction on this court and that plaintiff's action

is harred by Sections 205(g) and 205(h) of the Act.

42 U.S.C, § 405(g) (h).*

* Section 205(g) of the Act provides:

“(g) Any individual, after any final decision of the Secretary

made after a hearing to which he was a party, irrespective of the

amount in controversy, may obtain a review of such decision by a

civil action commenced within sixty days after the mailing to him

of notice of such decision or within such further time as the Sec-

retary may allow. Such action shall be brought in the district court

of the United States for the judicial district in which the plaintiff

resides or has his principal place of business, or, if he does not

reside or have his principal place of business within any such

judicial district, in the United States District Court for the Dis-

trict of Columbia. As part of his answer the Secretary shall file

a certified copy of the transcript of the record including the evi-

dence upon which the findings and decision complained of are

based. The court shal] have power to enter, upon the pleadings and

transcript of the record, a judgment affirming, modifying, or re-

versing the decision of the Secretary, with or without remanding

595-380—-75——-5

(48a)

Section 205(g) provides that in order to obtain judi-

cial review of a decision of the Secretary, it must be_

a final decision made after a hearing to which the

claimant was a party, thereby requiring exhaustion of

the cause for a rehearing. The findings of the Secretary as to any

fact, if supported by substantial evidence, shall be conclusive, and

where a claim has been denied by the Secretary or a decision is

rendered under subsection (b) of this section which is adverse

to an individual who was a party to the hearings before the

Secretary, because of failure of the claimant or such individual to

submit proof in conformity with any regulation prescribed under

subsection (a) of this section, the court shall review only the

question of conformity with such regulations and the validity of

such regulations. The Court shall, on motion of the Secretary

made before he files his answer, remand the case to the Secretary

for further action by the Secretary, and may, at any time, on good

cause shown, order additional evidence to be taken before the

Secretary, and the Secretary shall, after the casé is remanded,

and after hearing such additional evidence if so ordered, modify

or affirm his findings of fact or its decision, or both, and shall file

with the court any such additional and modified findings of fact

and decision, and a transcript of the additional record and testi-

mony upon which his action in modifying or affirming was based.

Such additional or modified findings of fact and decision shall be

reviewable only to the extent provided for review of the original

findings of fact and decision, The judgment of the court shall be

final except that it shall be subject to review in the same manner

as judgment in other civil actions. Any action instituted in ac-

cordance with this subsection shall survive notwithstandmg any

change in the person occupying the office of Secretary or any .

vacancy in such office.”

Section 205 (h) of the Act, 42 U.S.C. § 405(h) provides:

“(h) The findings and decisions of the Secretary after a hear-

ing shall be binding upon all individuals who were parties to such

hearing. No findings of fact or decision of the Secretary shall be

reviewed by any person, tribunal, or governmental agency except

as herein provided. No action against the United States, the Sec-

retary, or any officer or employee thereof shall be brought under

sectiun 41 of Title 28 to recover on any claim arising under this

subchapter.”

(49a)

administrative remedies, Section 205(h) specifically

provides that no action against the Secretary shall be

brought under Section 41 [now 28 U.S.C. § 1331] to

recover on any claim arising under Title II of the Act.

Defendant argues that Section 205(g) provides the

exclusive means by which a claimant.can obtain judi-

cial review of a decision of the Secretary. Since plain-

tiff did not seek a de novo hearing before an admin-

istrative law judge following the denial of her request

for reconsideration, it is argued that plaintiff's action

is barred for failure to exhaust her administrative

remedies. In addition, defendant argues that this ac-

tion is barred by the specific language in Section 205

(h). We conclude that neither the doctrine of exhaus-

tion of remedies nor the specific provision of Section

205(h) bar plaintiff’s action under the facts of this

case. |

First, exhaustion is inapplicable beeause plaintiff

claims that the statute and regulations promulgated

thereunder are constitutionally insufficient in that they

fail to provide a hearing prior to recoupment of an

over-payment, Where a plaintiff attacks the constitu-

tionality of the statute under which an administrative

agency acts, the attack docs not turn upon a factual

determination requiring administrative expertise and

the doctrine of exhaustion of administrative remedies,

therefore, does not apply. See Gainville v. Richardson,

[319] F.Supp. 16, 18 (D. Mass, 1970), and cases cited

therein.

Secondly, the prohibition of Section 205(h), har-

ring any action against the Seeretary under Section

1331 of Title 28, is inapplicable in that plaintiff is

not seeking to ‘‘recover on any claim” arising under

Title If of the Act. The merits of plaintiff’s claim

are not before the Court and we are not asked to

BEST COPY AVAILABLE

(50a)

review any decision of the Secretary. Plaintiff’s sole

claim is that she is entitled to a hearing prior to a

determination to reduce or adjust her benefits, and

plaintiff seeks declaratory and injunctive relief to

remedy the constitutional deficiencies in the Secre-

tary’s procedure. Thus, plaintiff’s action is barred by

neither Section 205(g) nor Section 205(h). Gainville

v. Richardson, supra, at 18.°

Plaintiff initially argues that this Court has juris-

diction under 28 U.S.C. §1331(a),’ providing original

jurisdiction over actions arising under the Constitu-

tion, laws or treaties of the United States, where the

amount in controversy exceeds $10,000. It is undis-

puted that the amount in controversy in this case is

$1063.80. In order to meet the $10,000 amount in con-

6In Johnson v. Robinson, 415 U.S. 361 (1974). the Supreme

Court considered the threshold issue whether 38 U.S.C. § 211(a),

which pro! ibit judicial review of the decisions of the Admin-

istrator of Veterans’ Affairs deprived the Court of jurisdiction

over plaintiff's constitutional claim challenging the denial of

educational benefits to conscientious objectors under the Vet-

erans’ Readjustment Act of 1966. 38 U.S.C. §§ 1651-1697. The

Court held that Section 211(a) does not bar judicial consider-

ation of questions concerning the constitutionality of veterans’

benefits legislation but bars only actions seeking review of de-

cisions of law or fact that arise in the administration of the

act. To the extent Section 211(a) is similar to Section 205(h)

of the Social Security Act, the analysis utilized by the Supreme

Court in Johnson supports our conclusion that Section 205(h)

does not bar judicial consideration of questions concerning the

constitutionality of social security administration regulations and

procedures.

728 U.S.C. § 1331(a) provides:

“(a) The district courts shall have original jurisdiction of all

civil actions wherein the matter in controversy exceeds the sum

of value of $10,000, exclusive of interest and costs, and arises under

the Constitution, laws, or treaties of the United States.”

(5la)

troversy requirement of Section 1331, plaintiff claims

in her memorandum that she suffered physical and

emotional distress as a result of the Secretary’s action.

Plaintif€’s amended complaint does not, however, it-

clude a request for any relief to compensate her for

her suffering. Assuming arguendo, that this claim

were properly before the Court, we would, nonethe-

less, conclude that it “appear[s]* to a legal certainty

that the claim is really for less than the jurisdictional

amount’. St. Paul Mereury Indemnity Co. v. Red

Cab Co., 303 U.S. 283, 289 (1938) ; Nelson v. Keefer,

451 F. 2d 289, 292-293 (3d Cir. 1971). In addition

plaintiff can find no solace in the fact that she pur-

ports to represent a class, for the claims of the class

are not of the nature which would permit their ag-

gregation under Snyder v. Harris, 394 U.S. 339

(1969) to satisfy the jurisdictional amount require-

ment.” Thus Section 1331(a) does not confer juris-

diction in this ease, in that the $10,000 amount in eon-

troversy requirement has not been satisfied.

Secondly, plaintiff asserts 28 U.S.C. ¢ 1243(4), pro-

viding jurisdiction, without regard to amount in con-

troversy, to secure equitable or other relief under anv

Act of Congress providing for the protection of civil

rights, as the jurisdictional basis of her claim. Plain-

tiff’s claim, however, arises under the Social Security

* Under Snyder v. Harris, supra. aggregation of claims to satisfy

the amount in controversy requirement is permissible “only (1) in

cases in which a single plaintiff seeks to aggregate two or more

of his own claims against a single defendant and (2) in cases in

which two or more plaintiffs unite to enforce a single title or right

in which they have a common and undivided interest.” 394 USS. at

335. Under this test, plaintiff argues that the members of the

class have a “common and undivided interest” in the Social Secur-

ity Trust Fund. We find this contention to be without merit.

(52a)

Act and it has consistently been held that the Social

Security Act is not an Act of Congress providing for

the protection of civil rights. Russo v. Kirby, 453 F.

2d 548 (2d Cir. 1971); McCall v. Shapiro, 416 B. 2d

246 (2d Cir. 1968). Thus, this Court lacks jurisdiction

over plaintiff’s claim under Section 1343(4).

Plaintiff’s allegation that 28 U.S.C. § 1346(a) (2)°

provides jurisdiction likewise must fail. The Tucker

Act confers concurrent jurisdiction in the District

Court and the Court of Claims of any claim against the

United States, not exeeeding $10,000 in amount,

founded upon the Constitution or any Act of Con-

gress. Plaintiff seeks declaratory and. injunctive re-

lief, and this provision has been construed by the

Supreme Court as authorizing only actions for money

judgments and not suits for equitable relief against the

United States. Richardson v. Morrts, 41 U.S.L.W. 3390

(1973). Accordingly, Section 1346(a) (2) does not. con-

fer jurisdiction upon this Court. .

The final jurisdictional provision under which plain-

tiff brings her action is the Mandamus Act, 28 U.S.C.

§1361, which provides:

The district courts shall have original juris-

diction of any action in the nature of mandamus

to compel an officer or employee of the United

*28 U.S.C. § 1346(a) (2) provides: ROTTS

“(a) The district courts shall have original jurisdiction, concur-

rent with the Court of Claims, of :

* +. * 7

“(2) Any other civil action or claim against the United States,

not exceeding $10,000 in amount, founded either upon the Con-

stitution, or any Act of Congress, or auy regulation of an execu-

tive department, or upon any express or implied contract with the

United States, or for liquidated or unliquidated damages in cases

not sounding in tort.”

(53a)

States or any agency thereof to perform a duty

owed to the plaintiff,

The legislative history of the mandamus statute re-

veals that the statute’s construction turns upon tradi-

tional mandamus law, and the Court of Appeals in

Richardson v. United States, 465 F. 2d 844 (3d Cir.

1972), cert. granted 41 U.S.L.W. 3458 (1973), sum-

marized the prior law:

In order for mandamus to issue, a plaintiff

must allege that an officer of the Government

owes him a legal duty which is a specific, plain

ministerial act “devoid of judgment or disere-

tion”’. [citations omitted] An act is ministerial

only when its performance is positively com-

manded and so plainly preseribed as to be free

from doubt. 465 F. 2d at 849.

Applying these standards to the facts of the instant

case, neither the provision of the Act in question nor

the regulations promulgated thereunder compel the

Secretary to conduct a hearing prior to the recoup-

ment of an over-payment. While the statute and ree-

ulations are silent on this issue, they must be read in

conjunction with the requirements imposed upon goy-

ernmental bodies by the due process cause of the

Fifth Amendment, and our examination of these pro-

visions must be coneluded in conjunction with the de-

cisions of the Supreme Court construing the due

process clause. The Mandamus Act does not’ distin-

guish between a statutory duty owed to the plaintiff

by the Secretary and a constitutional duty owed by

the Secretary. Whether the Secretary owes plaintiff

a duty under the Fifth Amendment of the Constitu-

tion can be determined only after an analysis of the

requirements of the due process clause and their ap-

plication to the statutory and regulatory provisions

at issue. In the instant case, plaintiff relies upon

(54a)

Goldberg v. Kelly, 397 U.S. 254 (1970), to establish the

existence of the constitutional right to a prior hear-

ing in administrative recoupment eases. She argues

that Goldberg imposes the constitutional duty upon

the Secretary to conduct a hearing prior to the ad-

justment or reduction of her benefits in order to

recoup an over-payment and that this duty is minis-

terial and devoid of discretion in that it is com-

pelled by the Constitution. The denial of the oppor-

tunity for such a prior hearing, according to plaintiff,

eives rise to jurisdiction under the Mandamus Act.

We agree with the Court in Elliott v. Weinberger, 371

F. Supp. 960 (D. Hawaii 1974), that the applicability

of Goldberg and its progeny is sufficiently apparent to

establish jurisdiction under Section 1361. See also

Martinez v. Richardson, 472 F. 2d 1121 (10th Cir.

1973).”°

An alternative basis for sustaining jurisdiction under Sec-

tion 1361 is found in Chaudoin v. Athinson 494 F. 2d 1323 (3d Cir.

1974) where the Court of Appeals stated:

«.. a request for relief under Section 1361 requires ‘the court

[to] utilize all relevant legislative and other materials to deter-

mine the scope of discretion or power delegated to the officer.”

In so holding, the Court relied on Carey v. Local Board No. 2,

Hartford, Connecticut, 297 F. Supp. 252 (D. Conn. 1969), aff'd.

412 F. 2d 71 (2d Cir. 1969), where the Court held that the fact

that the duty involved becomes clear only after the construction

of the statute does not preclude relief under 28 U.S.C. § 1361. In so

holding, the Court relied on Roberts v. United States, 176 U.S.

221 (1900), where it was stated:

“Unless the writ of mandamus is to become practically value-

less, and is to be refused even where a public officer is commanded

to do a particular act by virtue of a particular statute, this writ

should be granted. Every statute to some extent requires construc-

tion by the public officer whose duties may be defined therein.

Such officer must read the law, and he must, therefore, in a cer-

(55a)

Il. THe Crass Action

In her amended complaint, plaintiff purports to

represent a class consisting of “all persons eligible

for Social Security OASDI benefits, and whose bene-

fits have been or will be reduced, terminated or

otherwise summarily adjusted by defendant without

notice and opportunity for a prior administrative

tain sense, construe it, in order to form a judgment from its

language what duty he is directed by the statute to perform... .

If the law directs him to perform an act in regard to which no

discretion is committed to him, and which, upon the facts existing,

he is bound to perform, then that act is ministerial, although de-

pending upon a statute which requires in some degree, a construc-

tion of its language.”

We read Chaudoin and Carey to permit the court to review the

appropriate constitutional provisions, legislative material and

judicial decisions in order to determine whether under any of

these three alternatives the basis of jurisdiction is provided under

the Mandamus Act. Accordingly, we must proceed to determine

whether the Secretary owes plaintiff a duty under the Fifth

Amendment to the Constitution and the decisions of the courts

construing that Amendment to conduct a hearing prior to the ad-

justment of her benefits and we may assume jurisdiction under

Section 1361 for the purpose of making this determination.

Also significant is the recent decision of the Supreme Court in

Christian v. New York State Dept. of Labor, 414 U.S. 614

1974), where plaintiffs challenged the Unemployment Com-

pensation for Federal Employees Program, 5 U.S.C. § 8501 et seq.

on the ground that they were denied benefits without a prior

hearing. The district court dismissed the constitutional claims

against the federal defendants, and on appeal, plaintiffs attacked

this ruling arguing that mandamus jurisdiction lies where the act

of a federal official, although authorized by statute, is alleged to

violate the Constitution, relying on Garfield v. United States ex rel.

(oldsby, 211 U.S. 249 (1908). At oral argument the Solicitor Gen-

eral conceded jurisdiction under the Mandamus Act. The Court

therefore, did not pass on this issue, despite the fact that the Court

may sponte pass on jurisdictional questions.

(56a)

hearing.” Preliminarily, we note at the time this action

was filed plaintiff was not a member of the class she

purports to represent, in that her benefits had not as

vet been reduced. By subsequent administrative ae-

tion, however, her request for reconsideration was

denied and the adjustment was scheduled for imple-

mentation. It was only by the subsequent stipulation

hetween the parties that her benefits have been per-

mitted to continue.

Tn order to establish her right to maintain a class

action, it is plaintiff’s burden to satisfy all of the re-

quirements of Rule 23(a) and one of the subdivision

of 23(b). Philadelphia Electric vy. Anaconda Brass Co.,

43 F.R.D. 452, 457 (B.D. Pa. 1968). With respect to

Rule 23(a), defendant’s affidavit reveals that in 1970

there were 1,250,000 over-payment cases, from which

12,000 requests for reconsideration were filed, and 1600

requests for hearings were filed. This alone establishes

that the class is so numerous that joinder of all mem-

bers is impractical. The scle issue in this action is

whether adjustment of social security benefits in order

to recoup an over-payment may be accomplished ab-

sent a prior hearing, and this issue presents questions

of law and fact common to the class. Plaintiff’s claim

in this respect is typical of the claims of the class.

Finally, there is no issue of adequate representation,

and we recognize the competency of plaintiff’s counsel.

Plaintiff is proceeding under Rule 23(b)(2) which

concerns the request for injunctive or declaratory re-

lief and is specifically designed for situations seeking

the vindication of constitutional rights. Upon a finding

that plaintiff has satisfied the requirements of Rule 23

(a) and Rule 23(b) (2), plaintiff’s motion for a class

action determination will be granted as modified in our

order.

(57a)

Jil. THe TuHree-Jupce Court

Plaintiff requests the convening of a three-judge

court on the ground that she is challenging the con-

stitutionality of Section 204 of the Act, 42 U.S. § 404.

Plaintiff, however, does not challenge the right of the

Secretary to recoup over-payments, but merely chal-

lenges the procedure by which it is done. The lan-

guage of the statute is silent on the methods by

which over-payments are recovered, and it specificaily

provides that over-payments are to be recovered

“under regulations prescribed by the Secretary”.

Thus, plaintiff’s attack is directed toward the con-

stitutional deficiency of the regulations in failing to

provide an evidentiary hearing in advance of recoup-

ment. Under such circumstances, a three-judge court

is not required, Mills v. Richardson, 464 F. 2d 995,

1001 (2d Cir. 1972) and, accordingly, plaintiff's mo-

tion for the convening of a three-judge court will be

denied,

IV. Tue Merits

The issue before the Court, as previously indicated,

is whether the failure of the regulations promulgated

pursuant to Section 204 to provide an opportunity

for an evidentiary hearing prior to the adjustment of

security benefits in order to recoup an over-paymert

is (1) contrary to the purpose of the Act and (2) un-

constitutional under the Fifth Amendment to the Con-

stitution.

V. Tue Purpose oF THE AcT

The general purpose of the old-age, survivor and

disability insurance provisions of Title IT of the Act

is to protect workers and their dependents from the

(58a)

risk of loss of income due to the insured’s old age,

death or disability. Delno v. Celebreeze, 347 F. 2d 159,

161 (9th Cir. 1965). In the event an over-payment is

made, Section 204(a) of the Act authorizes the Secre-

tary to adjust or decrease such benefits in order to

1ecover the over-payment. Section 204(b), however,

contains a provision providing for the waiver of ad-

justment of reeovery under certain circumstances.

Where an individual is found without fault and ad-

justment or recovery would either defeat the purpose

of Title IIT or be against equity or good conscience,

adjustment or recovery may be waived. In the regu-

lations, 20 CFR § 404.508, “defeat the purpose of

title II” means ‘‘to deprive a person of income re-

quired for ordinary and necessary living expenses.”’

The manifest purpose of Section 204(b) of the Act

is to render more equitable the recovery of incorrect

payments to individuals, and the Seeretary goes to

great length to justify its “paper hearings.” It is

conceivable that the determination that an overpay-

ment has been made can be readily determined in an

ex parte proceeding by the examination of Social Se-

curity records and cancelled checks. The critical ques-

tion of “fault’’ and whether recovery would “defeat

the purpose”’ of the Act or be “against equity and good

conscience’’ are less susceptible to a summary deter-

mination in an ex parte proceeding. In her amended

complaint, plaintiff alleges that she has no other source

of income and is totally disabled. She further alleges

that if her benefits were reduced as proposed she

would be unable to provide the bare necessities of life.

Considering the ‘‘compassionate”’ purpose of the waiv-

er provision, it appears incongruous that its purpose

would mandate that the critical determinations be

made summarily on an ex parte basis. Rather, the pur-

(59a)

pose of the Act contemplates that an individual who

seeks to present evidence tending to establish the ap-

plicability of the waiver provision must be given an

opportunity to do so prior to adjustment or reduction

of benefits. Accordingly, we conclude that the failure

of the regulations to provide a hearing prior to re-

coupment is contrary to the purpose of Title II of

the Act.

This conclusion, however, does not end our inquiry

for only a finding that the Secretary owes plaintiff a

constitutional duty which is so positively commanded

as to be devoid of judgment or discretion will support

jurisdiction under Section 1361. We must, therefore,

proceed to an analysis of the due process issue.

THE DUE PROCESS ISSUE

The requirements of procedural due process apply

only to the deprivation of interests encompassed with-

in the Fifth and Fourteenth Amendments’ protection

of liberty and property. Board of Regents v. Roth, 408

U.S. 564 (1972). Thus, the threshold question pre-

sented is whether the nature of plaintiff’s asserted

property i/evest is within the range of interests pro-

tected by the Due Process Clause of the Fifth Amend-

inent. Initially, we note that plaintiff does not claim a

property interest in the amount of the overpayment

nor does she challenge the Secretary's right to recoup

an overpayment by means of a civil suit." We are con-

* Section 5501 of the Claims Manual provides that the Social

Security Administration shall recoup overpayments by withhold-

ing benefits or by requesting the overpaid person to refund the

amount in excess of the correct payment. Where waiver is not ap-

plicable and the overpaid person refuses to make a refund, Sec-

tion 5503.9 of the Claims Manual provides that the Secretary

should consider recovery by civil suit.

(60a)

cerned solely with the monthly social security benefits

to which plaintiff is entitled pursuant to 42 U.S.C.

§ 402(e) (1) (B) (ii). Piaintiff was found qualified by

the Social Security Administration to receive dis-

abled widow’s insurance benefits on the social security

record of her deceased husband. As long as she con-

tinues to satisfy the statutory requirements of the

Act, plaintiff is entitled to receive benefits pursuant

thereto. Plaintiff’s property interest in her monthly

benefits amounts to a statutory entitlement and, there-

fore, constitutes a property interest protected by the

Due Process Clause of the Constitution.

The basic principles of due process are well estab-

lished: Parties whose rights are affected are entitled

to be heard; and in order that they may enjoy that

right they must first be notified. Fuentes v. Shevin,

407 U.S. 67 (1972). It is equally fundamental that

the right to notice and an opportunity to be heard

“must be granted at a meaningful time and in a mean-

ingful manner”’. Fuentes v. Shevin, supra, at 80; Arm-

strong v. Manzo, 380 U.S. 545, 552 (1965). In the in-

stant case, the regulations permit the adjustment of

benefits following the summary reconsideration deci-

sion on the question of waiver, and they permit the

implementation of the adjustment prior to an eviden-

tiary hearing before an administrative law judge. To

the extent that the regulations fail to provide an op-

portunity for evidentiary hearing before an adminis-

trative law judge prior to the reduction of benefits,

we conclude that the procedure utilized to recoup

over-payments is constitutionally deficient in that it

fails to provide an evidentiary hearing “at a mean-

ingful time”. Plaintiff’s benefits are a matter of statu-

tory entitlement and may not be terminated, reduced

(61a)

or otherwise adjusted absent an opportunity for a

prior hearing. Goldberg v. Kelly, 397 U.S. 254 (1970).

The Secretary argues that Goldberg v. Kelly, su pra,

and its progeny are inapplicable to Title IT of the

Act and asserts several reasons in support of his

argument. First, the Secretary contends that Goldbera

and Sniadach v. Family Finance Corp., 395 U.S. 337

(1969) are distinguishable from cases arising under

Title Il in that the decisions in Goldberg (termina-

tion of welfare benefits) and Sniadach (garnishment

of wages) were based on need. Under Title II, the

question whether one is entitled to benefits has noth-

ing to do with one’s financial situation or need. Gold-

berg and Sniadach, however, merely emphasized the

special importance of welfare benefits and wages, and

they did not carve out a rule of necessity. Fucntes v.

Shevin, supra, at 89. The Court in Fucutes clearly

rejected the narrow interpretetion that the Secretary

urges us to adopt, holding:

... Both decisions were in the mainstream

of past cases, having litile or nothing to do

with the absolute ‘necessities’ of life but estab-

lishing that due process requires an oppor-

tunity for a hearing before a deprivation of

property takes effect. (citations omitted) 407

U.S. at 88.

It is, therefore, apparent that under the present law

need or necessity do not constitute the sine qua non

upon which the right to procedural due process is

founded.”

**In his argument, the Secretary relied heavily on Torres v.

New York State Dept. of Labor, 321 F. Supp. 432 (S.D.N.Y.

1971), vacated and remanded 402 U.S. 968 (1971), adhered to 333

F. Supp. 341 (S.D.N.Y. 1971) aff'd. 405 U.S. 949 (1972). In

(62a)

Secondly, the Secretary argues that the weight of

judicial authority supports his position that Gold-

berg is inapplicable to cases arising under Title II.

In Richardson v. Wright, 405 U.S. 208 rehearing

denied, 405 U.S. 1033 (1972), the Supreme Court was

faced squarely with the question whether Goldbery

applied to cases arising under the Act. In the light of

new regulations adopted by the Secretary, the Court

remanded the case for reconsideration under the new

regulations. The Secretary relies on Wright for the

proposition that an evidentiary hearing is not a per se

requirement prior to the adjustment of social security

benefits in order to recoup an over-payment. We be-

lieve that the Secretary is reading too much into that

decision, but it is significant in that all cases decided

subsequent thereto were based on the new regulations

adopted by the Secretary. The Secretary also relies on

Anderson vy. Finch, 322 F. Supp. 195 (N.D. Ohio

1971), remanded 454 F. 2d 596 (1972) and Messer v.

Finch, 314 F. Supp. 511 (E.D. Ky. 1970) judgment

vacated for mootness, 400 U.S. 987 (1971), in support

of his argument. These cases, however, were decided

prior to Fuentes, and since Fuentes, the weight of

Torres, the lower court upheld the constitutionality of the New

York State Unemployment Compensation statutes. The Court

held that Goldberg did not apply to unemployment compensation

because the need was not a factor in that program.

Torres was decided prior to Fuentes, and since Fuentes, three-

judge courts in Pregent v. New Hampshire Department of Em-

ployment, 361 F. Supp. 782 (D. [N.] H. 1973) and in Steinberg v.

Fusari, 364 F. Supp. 922 (D. Conn. 1973), rejected the 7'orres

rationale in the light of Fuentes and held that an evidentiary

hearing is required prior to the termination of unemployment

benefits. See also Wheeler v. Vermont, 3235 F. Supp. 856 (D. Vt.

1971). The Steinberg case came out of the same Circuit as did

Torres and was apparently overlooked by the Secretary.

(63a)

judicial authority establishes that procedural due

process requires an evidentiary hearing prior to ter-

mination or adjustment of social security benefits.

iiliott v. Weinberger, 42 U.S.L.W. 2442 (D. Hawaii,

Feb. 4, 1974), (hearing required prior to adjustment

of social security benefits in order to recoup an over-

payment) ; Lidridge v. Weinberger, 361 F. Supp. 520

(W.D. Va. 1973) (hearing required prior to termina-

tion of social security benefits) ; Williams v. Weinber-

ger, 360 F. Supp. 1349 W.D. Ga. 1973) (hearing

required prior to termination of social security bene-

fits). But see Jarbo v. Weinberger 374 F. Supp. 310,

(D.W. Wash. 1973).

Finally, the Secretary argues that a preerecoupment

trial type hearing would impose an insuperable burden

upon the Title IT program. In support of this argu-

ment, the Secretary notes that in 1970 there were

1,250,000 over-payment cases and alludes to the finan-

cial and administrative burden involved. Such burden

cannot override plaintiff’s manifest due process right

to a prior hearing. The Supreme Court in Goldberg

and Fuentes has specifically rejected this argument

where a hearing is clearly required by the Due Process

Clause. Moreover, the Court in Eldridge v. Wein-

berger, supra, at 525-527, specifically rejected this ar-

gument in the context of a social security case. See

also Richardson v. Wright, supra at 223-226 (Bren-

nan, J., dissenting) ; Elliott v. Weinberger, supra. A

prior hearing always imposes some costs in time, effort

and expense, but these costs cannot outweigh the con-

stitutional right to such a hearing. Fuentes v. Shevin,

supra, at 90 n.22,

We conclude that the Secretary owes plaintiff a eon-

stitutional duty to afford an opportunity for an evi-

595-280 —75-——-6

(64a)

dentiary hearing prior to the adjustment of social

security benefits in order to recoup an overpayment.

This duty, arising out of the Due Process Clause of the

Fifth Amendment, is so positively commanded by the

cases construing that amendment as to be free from

doubt. Accordingly, our conelusion in this respect

supports our jurisdiction under the mandamus statute,

28 U.S.C. § 1361.

Once it is determined that the protection of due

process applies, the next consideration is what due

process safeguards are required. It is at this point that

due process is flexible to the extent that only such

precedural protection is required as a particular situ-

ation demands. Morrissey v. Brewer, 408 U.S. 471

(1972). Consideration of what procedures due process

may require under any given set of circumstances

must begin with a determination of the precise na-

ture of the governmental function involved as well as

the private interest that has been affected by gov-

ernmental action. Cafeteria d: Restaurant Workers

Union v. McElroy, 367 U.S. 886, 895 (1961). In bal-

ancing the interest of the respective parties, we now

become more sensitive to defendant’s argument of ad-

ministrative burden. Plaintiff does not seek to have us

impose the full panoply of procedural safeguards

upon the Secretary, rather she seeks only an oppor-

tunity to present her case at a hearing prior to any

adjustment of her benefits. Accordingly, our consider-

ation of this case will be so limited. We hold that a

recipient of social security benefits is entitled by the

Due Process Clause of the Fifth Amendment to an

opportunity to a hearing prior to the adjustment of

his social security benefits in order to recoup an over-

payment. The recipient must be accorded notice of his

right to a hearing in a conspicuous manner and given

sufficient time to exercise this right. We do not hold

(65a)

that a hearing must be held in every case, in that a

voluntary, intelligent and knowing waiver of the right

may obviate the need for a hearing. This, of course,

presupposes adequate notice of the right to a hearing.

Moreover, we see no reason why the opportunity for

a hearing cannot be afforded within the present proce-

dural framework of the Social Security Administra-

tion. The procedures followed in a general determina-

tion of qualification to Title IL benefits as followed in

this case need not be varied except to suspend the im-

plementation of the adjustment of benefits until an

opportunity for a hearing is afforded.

For the foregoing reasons, defendant’s motion for

summary judgment will be denied and plaintiff’s mo-

tion for summary judgment will be granted.

ORDER

AND NOW, this 30th day of April, 1974, IT IS

ORDERED that:

1. defendant’s motion to dismiss the complaint for

lack of jurisdiction is DENIED; a)

2. plaintiff’s motion for a class action determination

is GRANTED; the class consisting of all persons

eligible for Social Security OASDI benefits within

the counties encompassed by the Eastern District of

Pennsylvania, whose benefits may be terminated, re-

duced or otherwise adjusted in order to recoup an

over-payment ;

3. plaintiff’s motion for the convening of a three-

judge court is DENIED; .

4. defendant’s motion for summary judgment is

DENIED; and

5. plaintiff's motion for summary judgment 1s

GRANTED.

[s] E. Mac Troutman.

APPENDIX D |

I. PERTINENT PROVISIONS OF THE SocraL Security

CLAIMS MANUAL

Section 5503(a) provides in pertinent part:

When it is determined that an incorrect pay-

ment has been made, the person liable should be

notified in writing (see § 5508 for sample let-

ters). The notice will inform the person of:

“(1) The incorrect payment made, how, and

when it occurred. (If the overpayment resulted

from the entitlement of another beneficiary, the

adversely affected individuals(s) must be in-

formed of the name, relationship to the WE,

and basis for entitlement of the new

beneficiary. )

**(2) The right to request reconsideration of

the overpayment determination.

“(3) The required recovery.

“(4) The proposed adjustment or the demand

for repayment where adjustment is not possible.

“(5) The waiver provisions of the law (Social

Security Act, sees. 204(b) or 1870(c)).

“(6) The availability of partial adjustment

or partial refund.

“(7) The need to notify the DO promptly if

he feels that the circumstances in his case

would justify waiver, partial adjustment, or

partial refund.”’

Section 5503.3 provides in pertinent part:

Delay in Withholding Benefits to Recover

Overpayments. Before we start to adjust the

overpayment against the benefits due a benefici-

ary, he or his payee will normally be given rea-

(67a)

(68a)

sonable opportunity to contest the correctness of

the determination or to establish that a basis

exists for waiver or partial adjustment. The

notice to the beneficiary will advise him that ad-

justment will be deferred for a longer period

when the facts in a given ease, including but not

limited to time case is being worked, cutoff

dates, mailing time, ete., indicate that a 30-day

period would be inadequate for consideration

of the matter and reply by the beneficiary and

reviewing office processing time.

The only exceptions to this rule are:

“(1) the overpayment is based on an annual

(69a)

issues (§ 8737). Where reconsideration of the

overpayment determination, waiver, or partial

adjustment development is initiated, withhold-

ing to recoup the overpayment will be further

deferred and payment will be continued until

development has been completed, if the bene-

ficiary is otherwise entitled to benefits. If devel-

opment will not be completed before the expira-

tion of the 30-day period, the DO will utilize

teletype to advise the reviewing office. (Empha-

sis in original)

IT. PERTINENT PROVISIONS OF THE Cope or Frnrnar

report by the beneficiary; [*1 or ReGutations, Trre 20

[* The Social Security Administration now provides the 30-day

deferral period to this class of beneficiaries also] 20 C.F.R. Part 404 provides in pertinent part:

‘*(2) the overpayment results from the super-

endorsement procedures under Section 205

(n) of the Act whereby payment of a com-

bined check is made to the survivor . . . In the

above two situations immediate adjustment ac-

tion is taken.”

Section 5503.5 provides in pertinent part:

Tf the person responds raising some question

about the correctness of the determination of

overpayment, or raises a question about

recovery, waiver or partial adjustment, the DO

will obtain the necessary evidence and prepare

a recommendation to the reviewing office for

disposing of the case. Thus, if the person lable

requests reconsideration of the substantive

determination and it appears that the deter-

mination will be affirmed, the DO will develop

the possibility of waiver of adjustment or

recovery of the overpayment at the same time

it receives evidence to resolve the request for

reconsideration. This is necessary since, if the

substantive determination is affirmed the Re-

consideration Determination will cover both

§ 404.907 Notice of initial determination.

Written notice of an initial determination

shall he mailed to the party to the determina-

tion at his last known address, except that no

such notice shall be required in the ease of a

determination that a party’s entitlement to

benefits has ended because of such party’s death

(see § 404.905(d)). Tf the initial determination

disallows, in whole or in part, the application or

request of a party, or if the initial determina-

tion is to the effect that a husband, widower, or

parent was not reeeiving the requisite support

from an insured individual, or that a party’s

entitlement to benefits has ended, or that a re-

duction, deduction, or adjustment is to be made

in benefits or a lump sum, or that a period of

disability established for a party has termi-

nated, the notice of the determination sent to

the party shall state the basis for the determi-

nation. Such notice shall also inform the party

of the right to reconsideration (see § 404.910).

Where more than the correct amount of pay-

ment has been made, see § 404.502a.

[37 FR. 10554, May 25, 1972]

(70a)

§ 404.908 Effect of initial determination.

The initial determination shall be final and

binding upon the party or parties to such deter-

mination unless it is reconsidered in accordance

with §§ 404.910-404.916, or it is revised in ac-

cordance with § 404.956

§ 494.909 Reconsideration and hearing.

Any party who is dissatisfied with an initial

determination may request that the Administra-

tion reconsider such determination, as provided

in § 404.910. If a request for reconsideration is

filed, such action shall not constitute a waiver

of the right to a hearing subsequent to such re-

consideration if the party requesting such re-

consideration is dissatified with the determina-

tion of the Administration made on such recon-

sideration; and a request for a hearing may

thereafter be filed, as is provided in § 404.917.

[25 F.R. 1677, Feb, 26, 1960, as amended at 28 F.R. 14492,

Dec. 31, 1963]

§ 404.910 Reconsideration; right to recon-

sideration.

The Administration shall reconsider an initial

determination if a written request for recon-

sideration is filed, as provided in § 404.911,

by or for the party to the initial determination

(see § 404.905). The Administration shall also

reconsider an initial determination (unless the

determination is with respect to the revision of

the Administration’s earnings records) if a

written request for reconsideration is filed, as

provided in § 404.911, by an individual as a

wife, widow, divorced wife, surviving divorced

wife, surviving divorced mother, husband,

widower, child, parent, individual alleging

equitable entitlement to a lump sum, or repre-

sentative of a decedent’s estate, who makes a

showing in writing that his or her rights with

respect to monthly benefits, a lump sum, a

(71a)

period of disability, or entitlement to hospital

or supplementary medical insurance benefits,

may be prejudiced by such determination. The

Administration shall also reconsider an initial

determination relating to the revision of the

Administration’s record of the earnings (see

§ 404.905(¢)) of a deceased individual if a

written request for reconsideration is filed, as

provided in § 404.911, by a person as a widow,

divorced wife, surviving divorced wife, surviv-

ing divorced mother, widower, child, parent, an

individual alleging equitable entitlement to a

lump sum, or representative of the decedant’s

estate.

[31 F.R. 16766, Dec. 31, 1966]

§ 404.911 Lie and place of filing request.

The request for reconsideration shall be made

in writing and filed at an office of the Adminis-

tration or, in the case of an individual in the

Philippines, at the Veterans’ Administration

Regional Office in the Philippines or, in the case

of an individual having 10 or more years of

service in the railroad industry (see Subpart O

of this Part 404) or of an individual entitled

to an annuity on the basis of an award under

the Railroad Retirement Act prior to October

30, 1951, who requests in writing reconsidera-

tion with respect to his application to establish

a period of disability under section 216(4) of

the act, at an office of the Railroad Retirement

Board, within 6 months from the date of mail-

ing notice of the initial determination, unless

such time is extended as provided in § 404.612

or § 404,953.

[25 F.R. 6468, July 9, 1960, as amended at 28 F.R. 14492,

Dec. 31, 1963]

§ 404.912 Parties to the reconsideration.

The parties to the reconsideration shall be the

person who was the party to the initial deter-

(72a)

mination (see § 404.905), and any other person

referred to in § 404.910 upon whose request the

initial determination is reconsidered.

§ 404.913 Notice of reconsideration.

If the request for reconsideration is filed by a

person other than the party to the initial deter-

mination, the Administration shall, before such

reconsideration, mail a written notice to such

party at his last known address, informing him

that the initial determination is being reconsid-

ered. In addition, the Administration shall give

such party a reasonable opportunity to present

such evidence and contentions as to fact or law

as he may desire relative to the determination.

[25 F.R. 1677, Feb. 28, 1960, as amended at 28 F.R. 14492,

Dec. 31, 1963]

§ 404.914 Reconsidered determination.

The Administration shall, when a request for

reconsideration has been filed, as provided in

$§ 404.910 and 404.911, reconsider the initial

determination in question and the findings upon

which it was based; and upon the basis of the

evidence considered in connection with the ini-

tial determination and whatever other evidence

is submitted by the parties or is otherwise ob-

tained, the Administration shall make a recon-

sidered determination affirming or revising, in

whole or in part, the findings and determination

in question.

f25 F.R. 1677, Feb, 28, 1960, as amended at 28 F.R. 14492,

Dec. 31, 1963]

§ 404.915 Notice of reconsidered determina-

tion.

Written notice of the reconsidered determina-

tion shall be mailed to the parties at their last

known addresses. The reeonsidered determina-

tion shall state the basis therefor and inform

(73a)

the parties of their right to a hearing (see

§ 404.917).

§ 404.916 Effect of reconsidered determination.

The reconsidered determination shall be final

and binding upon all parties to the reconsidera-

tion unless a hearing is requested in accordance

with § 404.918 and a decision rendered or unless

such determination is revised in accordance

with § 404.956.

§ 401.917 Hearing; right to hearing.

An individual has a right to a hearing about

any matter designated in § 404.905, if:

(a) An initial determination and a recon-

sideration of the initial determination have been

made by the Administration; and

(b) The individual is a party referred to in

§ 404.919 or § 404.920; and

(¢) The individual has filed a written request

for a hearing under the provisions described in

§ 404.918.

[31 FR. 16766, Dec. 31, 1966]

ILL. Pertinent Statutory Provision

42 U.S.C. 404:

OVERPAYMENTS AND UNDERPAYMENTS

(a) Whenever the Secretary finds that more

or less than the correct amount of payment has

been made to any person under this subchapter,

proper adjustment or recovery shall be made,

under regulations prescribed by the Secretary,

tt tn: eT sect § | "4

1 ith respect to payment to a per-

nt Bot: than the correct amount, the

Secretary shall decrease any payment

under this subchapter to which such over-

paid person is entitled, or shall require

BEST COPY AVAILABLE

(74a)

such overpaid person or his estate to re-

fund the amount in excess of the correct

amount, or shall decrease any payment

under this subchapter payable to his

estate or to any other person on the basis

of the wages and self-employment income

which were the basis of the payments to

such overpaid person, or shall apply any

combination of the foregoing. A payment

made under this subchapter on the basis

of an erroneous report of death by the

Department of Defense of an individual

in the line of duty while he is a member

of the uniformed services (as defined in

section 410(in) of this title) on active

duty (as defined in section 410(/) of this

title) shall not be considered an incor

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