Petition — Mathews v. Jimenez

i

Yupreme Court, U. &

FILED

noV5-1114]) fe > wm

ODAK, JR, CLEAR

———

In the Supreme Court of the UniteD States

OctroperR TERM, 1975

F. Davip Matuews, SecreTrary ©" HEALTH,

EDUCATION, AND WELFARE, PETITIONER

v.

EUGENIO AND ALICIA JIMENEZ, BT AL.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Ropert H, BORK,

Solicitor General,

Rex 1. Lee,

Aasiastant Attorney General,

WILLIAM KANTER,

JOHN K, VILLA,

Attorneys,

Department of Justice,

Washington, D, C. 205380,

In the Supreme Court of the United States

OCTOBER TERM, 1975

No.

I’, DAVID MATHEWS, SECRETARY OF HEALTH,

MDUCATION, AND WELFARE, PETITIONER

v.

IUGENIO AND ALICIA JIMENEZ, BT AL,

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

POR THE SEVENTH CIRCUIT

The Solicitor General, on behalf of the Secretary

of Health, Edueation, and Welfare, petitions for a

writ of certiorari to review the judgment of the

United States Court of Appeals for the Seventh

Circuit in this case,

OPINIONS BELOW

The opinion of the court of appeals (App, A,

infra, pp. la-35a) is reported at 528 F.2d 6x9,

(1)

2

The orders of the district court (App, D and App. B,

infra, pp, 40a-4da) ave not officially reported,’

JURISDICTION

The judgment of the court of appeals (App, B,

infra, pp, 86a-37a) was entered on September 12,

1975, A timely motion for rehearing was denied on

November 7, 1975 (App. C, infra, pp. 38-39a), The

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

1254(1),

QUESTIONS PRESENTED

1. Whether class relief is available in suits brought

under Section 205(@) of the Social Security Act,

2, If so, whether individuals who are not them-

selves entitled to bring suit under that provision may

nevertheless be included within the class that is

awarded relief,

STATUTE INVOLVED

Section 205(@) of the Social Security Aet, 4)

Stat, 624, as amended, 42 U.S.C, 405(g@), provides in

pertinent part;

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 de-

‘In prior proceedings in this suit, a three-judge distriet

court upheld the constitutionality of the provision of the So

celal Seeurity Aet under which respondents’ applications fo:

henefita had been denied, 358 F. Supp, 1856 (N.D, Th). This

Court on review held that provision unconstitutional and re

manded for further proceedings, 417 U.S, 628,.

cision by a civil action commenced within sixty

days after the mailing to him of notice of suel

decision or within such further time as the Sec-

retary may allow, * * * The court shall have

power to enter, upon the pleadings and tran-

script of the record, a judgment affirming, modi-

fying, or reversing the decision of the Secretary,

with or wiinout remanding the cause for a re-

hearing, * * * [Where a claim tas 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 hear-

ing before the Secretary, because of failure of

the claimant or such individual to submit proof

in conformity with any regulation preseribed

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 judgment of the court

shall be final except that it shall be subject to

review in the same manner as a judgment in

other civil actions, * * *

STATEMENT

The named respondents, Eugenio and Alicia Jime-

nez, are the illegitimate children of Ramon Jimenez,

a fully insured individual entitled to disability in-

surance benefits under Title II of the Social Security

Act, Beeause both named respondents had been born

after their father became entitled to disability bene-

fits in October 1963, they were unable to satisfy the

eligibility requirements for child's insurance bene

fits under Section 202(d) of the Act, 42 U.S.C,

402 (a),

4

After their applications for benefits had been de-

nied by the Seevetary after a hearing, the named

respondents instituted this action in the United States

District Court for the Northern District of Ilinois

on their own behalf and “on behalf of all claimants

for child’s social security insurance benefits, who

are born out of wedlock after their fathers have

become entitled to receive Social Security insurance

henefits by reason of old age, disability, or death’

(Complaint, Count II, 13), The complaint requested

reversal of the Secretary's decision denying the

named respondents’ application for benefits, a declara-

tion that the provision denying benefits to after-born

illegitimate children was unconstitutional, and an

injunetion prohibiting the Seeretary “from denying

Social Security benefits to any members of the class”

(Complaint, p. 8). A three-judge district court was

convened pursuant to 28 U S.C, 2282, and, without

considering the request for class relief, upheld the

statute as constitutional, 853 F, Supp, 1856, Re-

spondents appealed the district court’s judgment to

this Court,’

Reapondents asserted that this Court's jurisdiction was

conferred by 28 U.S.C, 1255. While it ia doubtful whether

the distriet court was empowered to grant injunctive relief

under Section 2O5(g), and therefore whether this Court had

jurisdiction over the appeal under 28 U,S.C, 1255 (see Wein.

herger V, Salfi, 422 U.S, 749, 763, n, 8), the Seeretary did not

chatlenwe thin Court's jJuriadietion, and thia Court did not

consider the question at that time, That juriadietional quea-

tion, which remained open (see Hagana Vv, Lavine, 416 US,

528, S55, 0. 5), la presently before the Court in Norton Vv,

Mathews, No, 74-0212, argued January 13, 1976,

This Court declared unconstitutional the portion of

the Act which conclusively denied benefits to after-

born illegitimates and remanded the suit to the

distriet court with directions to provide the named

respondents with an opportunity to establish their

eligibility for benefits by proving that they lived with

and were supported by their father. 417 U.S. 628.

The district court remanded the case to the Sec-

retary, who determined that the named respondents

were eligible for benefits under the standard enunci-

ated by this Court. The district court then, for the

first time, considered the request for class relief.

The court certified the suit as a class action and

ordered the Secretary “to provide benefits to all those

denied benefits since the date of the filing of this

action solely by reason of that portion of the Act

declared unconstitutional” (App. E, infra, p. 44a).

The order specifically previded that “|s|uch benefits

shall cover the period from which said persons would

originally have been entitled but for the provisions

invalidated herein * * *” (ibid.).

The Secretary appealed from that order to the

extent that it required payment of benefits to the

class for the period prior to June 1974, the month

in which this Court held the statutory bar uncon-

stitutional.’ The court of appeals affirmed, reject-

‘No appeal was taken from the district court’s order inso-

far as it ordered benefits for the period after May 1974, since

the Secretary was voluntarily reviewing prior applications to

determine which claimants may have been denied benefits on

mm

6

ing the Secretary’s argument, inter alia, that the

district court lacked jurisdiction to grant the class

relief ordered and that this Court’s earlier decision

should be given prospective effect only (App. A,

infra, pp. lla-35a).*

REASONS FOR GRANTING REVIEW

The issues presented by this case are presently

before this Court, in a slightly different context, in

Norton v. Mathews, No. 74-6212, argued January

13, 1976. Since this Court’s opinion in Norton is

likely to address these issues, this petition should be

held pending disposition of that case.

1. In Norton, we have contended that Section 205

(g) of the Social Security Act manifests a congres-

sional intention of barring class suits and permitting

adjudication only of individual claims. See pp. 12-

13 of our brief in Norton.’ If that contention is

sustained, the court of appeals here erred in affirm-

ing the award of class relief. The tota! benefits at

issue here are estimated to amount to approximately

the basis of the provisions held unconstitutional by this Court.

After these applications were reviewed and updated, all eligi-

ble claimants were paid prospectively and back to June 1974,

without being required to file new applications unless their

upplications previously had been finally adjudicated.

‘While the Secretary intends in future cases to adhere to

the position that constitutional adjudication under the Act

should be given prospective effect only, he has concluded that

the consequences of retroactivity are not sufficiently substan-

tial in the instant case to warrant review of that question by

this Court at this time.

A copy of that brief is being furnished to respondents’

counsel.

7

24 million dollars,’ and the availability vel non

of class relief in Social Security cases such as this

is a question of substantial cumulative importance

to the administration of the Social Security trust

fund.

2. We further contended in Norton that even if

Section 205(g) is construed as permitting the ad-

judication of class suits, it is nevertheless clear that

a district court exercising jurisdiction under that

provision is empowered to award relief only to in-

dividuals who are themselves entitled to bring suit

for review of a decision by the Secretary made after

a hearing and within 60 days prior to the filing of

the complaint. See generally pp. 8-18 of our brief

in Norton. The decision of the court below doubly

violates that principle by awarding relief not only

to individuals with respect to whom the Secretary

finally denied benefits after the filing of the com-

plaint in this case but also to individuals with re-

spect to whom the Secretary only initially denied

benefits but who did not sufficiently exhaust their

administrative remedies to be entitled to bring suit

in their own behalf.’ Thus the courts below departed

*In the courts below, the amount of benefits at issue was

represented, on the basis of estimates made by the Secretary

at the time, to be approximately 5 million dollars. Closer

examination of the outstanding applications has caused that

estimate to be reduced by half.

* The court of appeals reasoned that the exhaustion require-

ment of Section 205(g¢). that the claimant receive a “final

decision * * * made after a hearing,” “may be disregarded if

the Secretary’s decision rested on a legal ground that did not

necessitate any hearing’’ (App. A, infra, p. lla, n. 10). But

8

from the well-settled rule that each class member’s

claim must fall within the subject-matter jurisdic-

tion of the court. See Zahn v. International Paper

Co., 414 U.S. 291, 301. In so doing, the district

court and court of appeals here directly frustrated

one of the major purposes of the finality require-

ments of Section 205(g), @e., to protect the Social

Security trust fund against lability arising from

the untimely reassertion of abandoned claims.

CONCLUSION

For the foregoing reasons, the petition for a writ

of certiorari should be disposed of in accordance

with this Court’s opinion in Norton v. Mathews, No.

74-6212, argued January 13, 1976.

Respectfully submitted.

ROBERT H. Bork,

Solicitor General.

Rex E. LEE,

Assistant Attorney General.

WILLIAM KANTER,

JOHN K. VILLA,

Attorneys.

FEBRUARY 1976.

this Court in Weinberger Vv. Salfi, 422 U.S. 749, 766-767, made

clear that where there has becn no hearing, the decision is

final only if the Secretary concedes finality. The Secretary

has now promulgated regulations governing when a decision

made without a hearing may be considered “final” for pur-

poses of Section 205(¢). See 40 Fed. Reg. 53,585 (November

18, 1975). Those regulations require, inter alia, issuance by

the Secretary of a letter certifying finality; no such letter was

issued with respect to the members of the class defined by

the courts below.

la

APPENDIX A

IN THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

No. 75-1046

EUGENIO and ALICIA JIMENEZ, by their father

and next friend, RAMON JIMENEZ,

PLAINTIFFS-APPELLEES

v8.

CASPAR WEINBERGER, Secretary of Health,

Education and Welfare, DEFENDANT-APPELLANT

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division

No. 71 C 1436

RICHARD B. AUSTIN, Judge.

Argued April 2, 1975

Decided September 12, 1975

Before MCALLISTER, Senior Circuit Judge,*

STEVENS and SPRECHER, Circuit Judges.

* Senior Circuit Judge Thomas F. McAllister of the United

States Court of Appeals for the Sixth Circuit is sitting by

designation.

a

2a

STEVENS, Circuit Judge. This appeal is a sequel to

Jimenez v. Weinberger, 417 U.S. 628, in which the

Supreme Court held unconstitutional the portion of

the Social Security Act which had provided the basis

for the Secretary’s denial of plaintiffs’ application

for benefits. On remand, the district court granted

relief to the plaintiffs and to other similarly situated

applicants, The Secretary has appealed, question-

ing (1) whether the district court had the power to

certify the case as a class action after a decision on

the merits, and (2) if so, whether the award of

retroactive relief to the unnamed plaintiffs was

proper. Because of the novelty and importance of

the issues, we recite the procedural history of the

case in some detail.

I

Plaintiffs are the illegitimate children of a dis-

abled wage earner. On August 21, 1969, their father,

acting on their behalf applied for insurance benefits

under the Social Security Act. Because plaintiffs

were born after the onset of their father’s disability,

§ 216(h)(3)(B) of the Act, 42 U.S.C. § 416(h) (3)

(B), required the Secretary to deny their applica-

tion.’ They exhausted their administrative remedies;

' “(3) An applicant who is the son or daughter of a fully

or currently insured individual, but who is not (and is

not deemed to be) the child of such insured individual

under paragraph (2) of this subsection, shal! neverthe-

less be deemed to be the child of such insured individ-

ual if:

[Continued]

* [Continued]

** €

“(B) in the case of an insured individual entitled to

disability insurance benefits, or who was entitled to

such benefits in the month preceding the first month

for which he was entitled to old-age insurance bene-

fits—

(i) such insured individual—

(I) has acknowledged in writing that the appli-

cant is his son or daughter,

(II) has been decreed by a court to be the father

of the applicant, or

(III) has been ordered by a court to contribute

to the support of the applicant because the applicant

is his son cr daughter,

and such acknowledgement, court decree, or court or-

der was made before such insured individual’s most

recent period of disability began; or

(ji) such insured individual is shown by evidence

satisfactory to the Secretary to be the father of the

applicant and was living with or contributing to the

support of that applicant at the time such period of

disability began [.]”

Subparagraph (2)(A) of 42 U.S.C. § 416(h) provides that

the Secretary shall apply the intestate succession law of the

insured’s domicile state to determine whether an applicant

is the child of an insured individual. The plaintiffs were not

considered the children of Ramon Jimenez under Illinois law

because the parents had not intermarried and Ramon had

not formally acknowledged the children. Nor could they qual-

ify under subparagraph 2( B), as the offspring of a marriage,

commenced by a marriage ceremony, which, “but for a legal

impediment . .. would have been a valid marriage.”

Plaintiffs could not satisfy the requirements of subpara-

graph (3) (B) (i), and, because they were born after the

commencement of the disability period, even thougia they were

living with and supported by Ramon Jiruenez, they could not

qualify under subparagraph (3) (B) (ii ).

da

on June 15, 1971, which was less than 60 days after

the final adverse decision of the Secretary, they com-

menced this action, invoking the jurisdiction of the

federal court under 42 U.S.C, § 405(g)."

The complaint sought both individual and class re-

lief. The class allegations met the requirements of

subparagraph (b)(2) of Fed. R.Civ, 23 rather than

subparagraph (b)(8).° Plaintiffs prayed for a judg-

ment declaring the statutory exclusion unconstitu-

tional, enjoining the Secretary from denying benefits

‘That seetion provides, in part;

“Any individual, after any final decision of the Secretary

made after a hearing to which he was a party, irrespec-

tive 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 aa the Secretary may al-

Paragraph 3 of Count IT of the complaint reads as follows:

“Plaintiffs EUGENIO and ALICIA JIMENEZ bring

thia action individually and as a class action, pursuant to

Rule 23 of the Federal Rules of Civil Procedure on behalf

of all claimants for child's social security insurance bene-

fita, who are born out of wedlock after their fathers have

become entitled to receive Social Security insurance bene-

fits by reason of old age, disability, or death, The persons

in this class are so numerous as to make joinder of all

members unpracticable and there are questions of law

common to all member of the class, The claims of the

individual Plaintiff are typical of the claims of the class,

and the individual Plaintiff will iairly and adequately

protect the interest of the class, Separate actions by in-

dividual members of the class would create the risk of

inconsistent adjudications that would establish ineom-

patible standards of conduct for the Defendant,”

eee OE OE EE

5a

to plaintiffs or to any other members of the class,

and for such other reliéf as might be appropriate,

The Secretary’s answer admitted the facts alleged

in the complaint, averred that the statute foreclosed

relief, and denied that the case was appropriately

brought as a class action, No separate motion di-

rected at the question whether the case should be

certified as a class action was filed by either party.

The Secretary moved for summary judgment, con-

tending (1) that the case should not be treated as a

class action, and (2) that he should prevail on the

merits, The plaintiffs filed a cross motion for sum-

mary judgment, arguing the converse of both is-

sues, Thereafter, in May 1972 plaintiffs filed a mo-

tion to convene a three-judge court pursuant to 28

U.S.C, § 2282.°

The three-judge court was appointed and pro-

ceeded to decide the merits, apparently without giv-

ing any consideration to the class action issue, In

their opinion sustaining the constitutionality of the

statute, the majority said nothing about the class

action; Jimenez vy. Richardson, 353 F.Supp, 1356

(N.D. Til, 1978). In his dissent, however, Circuit

Judge Fairchild stated that he would have enjoined

'“S 2282. Injunction against enforcement of Federal

statute; three-judge court required

An interlocutory or permanent injunction restraining the

enforcement, operation or execution of any Act of Congress

for repugnance to the Constitution of the United States shall

not be pwranted by any district court or judge thereof unless

the application therefor is heard and determined by a district

court of three judwes under section 2284 of this title.”

6a

enforcement of the statutory exclusion as applied

to the unnamed plaintiffs “and others similarly situ-

ated.” /d, at 1363,

Plaintiffs appealed directly to the Supreme Court

pursuant to 28 U.S.C, §$ 1253. By accepting jurisdic-

tion, that Court implicitly decided that the three-

judge court was properly convened,’ and also, again

implicitly, that the district court had the power to

grant injunctive relief in an action brought under

$ 405(@) of the Social Security Act." The only ques-

tion formally presented by plaintiffs’ appeal was

whether the statute was constitutional; at the end

of their brief, however, plaintiffs “submitted that the

case should be remanded to the district court for con-

sideration of proper relief with respect to restitution

for members of the plaintiffs’ class.”' *

‘In this case, unlike Weinberger Vv, Salfi, 48 U.S.L.W, 4985

(U.S, June 26, 1975), the district court did not hold the fed-

eral statute unconstitutional; § 1252 did not, therefore, confer

appellate jurisdiction on the Supreme Court, Cf, footnote &

of the Salfi opinion, 43 U.S.L.W, at 4989, The Court's juria-

diction under § 12583 waa dependent on the fact that the char-

acter of the litigation in the distriet court required decision

by a three-judge court, See note 4, supra,

® Unless the district court had jurisdiction to enjoin enforce-

ment of an Act of Congress, 28 U.S.C, § 2282 would not have

required that « three-judge court be convened; absent such

“n requirement, the Supreme Court would not have had appel-

late jurisdiction pursuant to § 12638, See note 5, svpra. In his

Supreme Court brief for the Government in this case the

Solicitor General acknowledged that the Supreme Court's

jurisdiction rested on § 1253; he did not question that juris-

diction,

Brief for appellanta in No, 72-6609, O.T, 1973, pp, 44-45,

Ta

On June 19, 1974, the Supreme Court reversed on

the mevits, vacated the judgment of the district

court, and remanded the case “to provide appellants

an opportunity, consistent with this opinion, to estab-

lish their claim of eligibility as ‘children’ of the

claimant under the Social Security Act.” 417 U.S, at

637-638. Neither the opinion of the Chief Justice for

the Court, nor the dissent of Mr, Justice Rehnquist,

made any reference to the class action issue, After

the mandate issued, plaintiffs moved for the entry of

an order reconvening the three-judge court, certify-

ing the case as a class action, and granting relief to

the named as well as the unnamed plaintiffs, The

Secretary opposed that motion and filed his own

motion for remand to the agency for a final deter-

mination of the eligibility of the named plaintiffs.

After those motions had been briefed, the plaintiffs

filed a separate motion for a ruling on the named

plaintiffs’ right to relief without further administra-

tive proceedings, Without addressing any other pend-

ing issue, on October 21, 1974, the single district

judge remanded the case to the Secretary for final

disposition within three weeks, The Secretary then

found that plaintiffs were eligible for benefits and

so advised the district court.

On November 15, 1974, the single district judge

entered two orders, In the first, he declared the rele-

vant portion of the statute null and void and ordered

the Seeretary to pay benefits to the plaintiffs for the

period after August 21, 1969, the date of their orig-

inal application, In the second order, the court di-

Ra

rected the Seeretary to give notice of the resultant

change in the statute

to all those applicants for Social Security bene-

fite Who have been denied benefits aulely by Pei

son of the provisions of the Act now declared

unconstitutional, together with an explanation

of how they should proceed in order to obtain

the benefits]. |

He further ordered the Secretary

to provide benefits to all those denied benefits

since the date of the filing of this action solely

by reason of that portion of the Act declared

unconstitutional, Such benefits shall cover the

period from which said persons would originally

have been entitled but for the provisions invali-

dated herein, and payment of said benefits and

ongoing monthly benefits to all eligible persons

shall begin forthwith. |

In support of a motion for reconsideration, which

was denied, and a motion for stay pending appeal,

Which was granted in part, the Secretary added cer-

tuin factual matter to the record, There are about

7,000 members of the class; their aggreyate claims

amount to about $5,000,000, Although the Secretary

challenges the court’s power to order retroactive re-

lief to the unnamed members of the class, he repre-

sents that he is now paying them benefits for the

period after the date of the Supreme Court decision

on June 19, 1974, and that he has paid the named

plaintiffs back to the date of their original applica-

tion, as ordered by the district court. The amount

9a

in dispute therefore includes claims which were de-

nied by the Secretary after the litigation commenced

on June 15, 1971, and which acerued prior to June

19 1974

I]

The Supreme Court’s recent decision in Weinber-

ger Vv, Salfi, 43 U.S.L.W, 4985 (June 26, 1975), re-

minds us to confront at the outset the question

whether the district court had jurisdiction of the

class aspects of this litigation.”

As the Court held in Salfi, 42 U.S.C, § 405(g@) is

the only statute authorizing the district court to

grant relief from a denial of benefits under the So-

cial Security Act. The language of the statute con-

fers authority to affirm, modify or reverse a decision

of the Secretary, but contains no suggestion that a

reviewing court is empowered to enter an injunctive

decree whose operation reaches beyond the particular

applicants before the Court, 43 U.S.L.W, at 4989,

note 8 Nevertheless, as we have already noted, the

Court’s acceptance of appellate jurisdiction in this

very case Was a holding, albeit unarticulated, that

such jurisdiction does exist, Moreover, if the Court

did not believe a class action could ever be main-

tained under the Social Security Act, there would

have been no need to analyze the shortcomings of the

—=_

"Asa we have indicated on several recent oecasions, a re-

viewing court has the responsibility to raise ava sponte the

question of the district court's jurisdiction, Sehreiber Vv,

Lugar, Nos, 74-1998, 1999, at 2 (7th Cir, July 14, 1975);

Carson V, Allied News Co., 5611 F.2d 22, 23 (7th Cir, 1975),

10a

particular class which Salfi represented, Unques-

tionably §$ 405(g) conferred jurisdiction on the dis-

trict court to hear a timely claim by each individual

member of the class; we think Rule 23 provides a

procedure by which such power may be exercised in

au single appropriate proceeding, Unnamed, as well

us named, plaintiffs are “applicants before the court”

in a properly maintained class action,

In the Salfi case, the Court held that § 405(g@) did

not provide jurisdiction over the claims of the un-

named members of the class because they had not

satisfied one of the three statutory requirements for

judicial review of an adverse decision by the Secre-

tary,’ specifically, the requirement of a final decision

‘As the Court explained,

“Section 405(g) specifies the following requirements

for judicial review: (1) a final decision of the Secretary

made after a hearing; (2) commencement of a civil

action within 60 days after the mailing of notice of such

decision (or within such further time aa the Secretary

may allow); and (3) filing of the action in an appro-

priate district court, in general that of the plaintiff's

residence or principal place of business, The second and

third of these requirements specify, reapectively, a atat-

ute of limitations and appropriate venue, As such, they

are waivable by the parties, and not having been timely

raised below, see Fed, Rules Civ, Proe, &8(¢), 12¢0h) (1),

need not be considered here, We interpret the firat re-

quirement, however, to be central to the requisite grant

of subject matter furisdiction—the atatute enjpowers

district courta to review a particular type of decision

by the Secretary, that type being those which are ‘final’

and ‘made after a hearing.’ ”

43 U.S.L.W. at 4989,

| Continued |

lla

by the Secretary. The complaint was deficient be-

cause it did not contain any allegation that those

plaintiffs had “even filed an application with the

Secretary much less that he had rendered any deci-

sion, final or otherwise, review of which [was]

sought.”

In this case, although the complaint is somewhat

ambiguous, the order of the district court overcomes

this objection because it limits the class to “appli-

cants’” who have been denied benefits solely by reason

of the invalid provisions of the Act. By definition,

therefore, in this case the class is limited to persons

satisfying the requirement of a final decision by the

Secretary.” It is, however, not equally clear that the

* [Continued]

The court found that the unnamed class members had not

satisfied § 405(g)’s “final decision” requirement.

“(T]he complaint is deficient in that it contains no alle-

gations that they have even filed an application with the

Secretary, much less that he has rendered any decision,

final or otherwise, review of which is scught.”

Salfi makes it clear that the “made after a hearing” lan-

guage may be disregarded if the Secretary’s decision rested

on a legal ground that did not necessitate any hearing. In

that case, with respect to the named plaintiffs, the court con-

cluded that a “fins decision of the Secretary” had been ren-

dered, even though exhaustion of the full panoply of hearings

and appeals provided by the applicable Social Security regu-

lations had not occurred. Only a constitutional issue re-

mained with respect to these applications. The Court stated:

“Plainly [the purposes of exhaustion of administrative

remedies{| have been served once the Secretary has satis-

fied himself that the only issue is the constitutionality

of a statutory requirement, a matter which is beyond his

12a

unnamed plaintiffs in this case satisfied the second

statutory requirement for judicial review, namely,

the timely commencement of a civil action.

jurisdiction to determine, and that the claim is neither

otherwise invalid nor cognizable under a different section

of the Act. Once a benefit applicant has presented his

or her claim at sufficiently high a level of review to

satisfy the Secretary’s administrative needs, further ex-

haustion would not merely be futile for the applicant,

but would also be a commitment of administrative re-

sources unsupported by any administrative or judicial

interest.”

43 U.S.L.W. at 4990. The claims of the named plaintiffs

were, therefore, found to be properly before the court.

In this case, the district court defined the class as

“all those denied benefits since the date of the filing of

this action solely by reason of that portion of the Act

declared uneonstitutional.”

(Emphasis added). While perhaps open to differing inter-

pretations, we read this language as referring only to those

persons who were denied benefits by reason of the challenged

section of the Act and by reason of that section alone. In

other words, we do not interpret the court’s description as

including those persons who may have been denied benefits

as « result of § 216(h)(3)(B) but whose applications could

have been or were rejected for other reasons as well. Thus,

the class whose claims were properly before the district court

was made up of applicants whose applications had progressed

to a high enough level in the administrative proceedings

where it could be, and was, determined “that the claim[s]

[were] neither otherwise invalid nor cognizable under a dif-

serent section of the Act.” 43 U.S.L.W. at 4990. If the class

is defined in this way, the exhaustion concerns embodied

in $405(¢) and discussed in Selfi are satisfied. Thus, with

respect to such a class, a “final decision of the Secretary”

has been rencered, and judicial review in the district court

was appropriate.

13a

Timeliness was not an issue in Salfi because the

Secretary had waived any question of limitations. No

such waiver can be found in this record.'' The ques-

tion which is therefore presented is whether the

timely filing of suit by the named plaintiffs satisfied

the 60 day statute of limitations requirement for

the entire class. The question appears to have been

answered by American Pipe and Construction Co. v.

Utah, 414 U.S. 538, but a possibly critical difference

between that case and this must be identified.

The holding in American Pipe was that the pen-

dency of a complaint seeking relief for the class

tolled the statute of limitations applicable to the

claims of the unnamed plaintiffs for the period prior

to the entry of the district court’s order refusing to

certify the case as a class action, See 414 U.S. at

543-545, 552-553. Immediately after that order was

entered, and before the statute ran, the unnamed

parties had filed motions to intervene. The denial

of those motions was reversed by the Supreme Court.

No appeal was taken from the adverse ruling on the

certification question itself.’ We cannot, therefore,

'' The Secretary argued that the requirements of § 405(g)

had not been met by the unnamed class members in his De-

fendant’s Memorandum in Support of His Motion for Sum-

mary Judgment, at 6, and his Memorandum of Points and

Authorities in Support of Defendant’s Motion for Reconsid-

eration, at 4.

': At least the Supreme Court’s opinion made no reference

to any such appeal, or to the possibility that the refusal to

certify might be assigned as error at the time of an appeal

from the final judgment entered by the district court. The

appeal to the court of appeals in American Pipe was taken

l4a

be positive that an appeal from such an order would

continue to tol! the statute.

In this case we have no doubt that the filing of

the complaint tolled the statute at leas: until the Jate

of the three-judge district court decision on the merits.

If that decision had expressly refused to certify the

case as a class action, we think the tolling would

have continued if the plaintiffs had appealed from

such a ruling, but probably would not have continued

if they had acquiesced. Therefore, if the district

court’s failure to address the class action issue is

construed as an adverse ruling, the plaintiffs’ failure

to raise that issue on appeal to the Supreme Court

would defeat the unnamed plaintiffs’ claims.

On the other hand, if we construe the first decision

on the merits as simply failing to rule upon the class

issue, consistently with the analysis in American

Pipe, the class claims continued to pend and the

statute of limitations did not run.“ For three rea-

by the class members who were denied leave to intervene

rather than by the named plaintiff. There was no occasion

for the Court to consider any question of tolling after the

refusal to certify in a case in which the absent class members

made no timely effort to assert their rights directly.

“A contrary rule allowing participation only by those

potential! members of the class who had earlier filed motions

to intervene in the suit would deprive Rule 23 class actions

of the efficiency and economy of litigation which is a principal

purpose of the procedure, Potential class members would be

induced to file protective motions to intervene or to join in

the event that a class was later found unsuitable. In cases

such as this one, where the determination to disallow the

class action was made upon considerations that may vary

with such subtle factors as experience with prior similar

l5a

sons we think this is the proper conclusion to reach

in this case. First, one of the purposes of a statute

of limitations is to afford a defendant fair notice of

potential liability; the applications actually filed by

the class members provided such notice to the Secre-

tary. Second, since by hypothesis the plaintiffs’ claims

were denied solely for an impermissible reason, we

think it appropriate to resolve a close question in

their favor. And third, the most realistic interpreta-

tion of the action of the three-judge court is that

the majority simply saw no need to rule on the class

issue in view of its holding on the merits."*

litigation or the current status of a court’s docket, a rule

requiring successful anticipation of the determination of the

viability of the class would breed needless duplication of mo-

tions. We are convinced that the rule most consistent with

federal class action procedure must be that the commencement

of a class action suspends the applicable statute of limita-

tions as to all asserted members of the class who would have

been parties had the suit been permitted to continue as a

class action. * * * The policies of ensuring essential fairness

to defendants and of barring a plaintiff who ‘has slept on

his rights,’ Burnett v. New York Central R. Co., 380 U.S.

424, 428, are satisfied when, as here, a named plaintiff who

is found to be reprsentative of a class commences a suit and

thereby notifies the defendants not only of the substantive

claims being brought against them, but also of the number

and generic identities of the potential plaintiffs who may

participate in the judgment. Within the period set by the

statute of limitations, the defendants have the essential in-

formation necessary to determine both the subject matter and

size of the prospective litigation whether the actual trial is

conducted in the form of a class action, as a joint suit, or as

a principal suit with additional intervenors.” 414 U.S. at

553-555 (footnote omitted).

'*We do not imply approval of the district court’s failure

to certify the class. That failure, like the inadequate com-

rr rarer rr eis (i

l6a

We therefore hold that the district court acquired

jurisdiction of the class action when the complaint

was filed, and that the claims were not thereafter

barred by limitations. The question we must now

consider is whether the failure to comply with Rule

23 deprived the district court of the power to grant

class relief.

Ill

Rule 23(¢)(1) provides:

(1) As soon as practicable after the com-

mencement of an action brought as a class ac-

tion, the court shall determine by order whether

it is to be so maintained. An order under this

subdivision may be conditional, and may be,al-

tered or amended before the decision on the

merits.

Unlike other provisions of Rule 23 which differen-

tiate between class actions brought under subpara-

graphs (b)(1) and (2) and those brought under

subparagraph (b)(3), this requirement is applicable

to all class actions.

The rule unquestionably allows the district judge

to exercise his discretion in deciding upon the earliest

“nracticable” time to determine whether the case is

to be processed as a class action; but the text cer-

tainly implies, even if it does not state expressly,

pliance with Rule 23 in Indianapolis School Commissioners V.

Jacobs, 420 U.S. 128, created an unnecessary risk of moot-

ness. Since there has never been any doubt in this proceed-

ing avout the existence of a live controversy between the

real adversaries, the Jacobs problem is not presented here.

17a

that such a decision should be made in advance of

the ruling on the merits. For the explicit permis-

sion to alter or amend a certification order before

decision on the merits plainly implies disapproval of

such alteration or amendment thereafter. On the

other hand, that degree of flexibility permitted be-

fore the merits are decided also indicates that in

some cases the final certification need not be made

until the moment the merits are decided.

From an examination of the remainder of Rule

23, it is fair to infer that the timing of the certifi-

cation may well be different in (b)(3) cases than

in (b)(1) or (b) (2) cases. For in the (b) (3) situ-

ation it is imperative that the class members be

identified early enough to enable notice to be sent to

them which in turn will give them a meaningful

opportunity to request exclusion from the class."’

Commenting on this provision, which in terms ap-

plies only to (b)(3) classes, the Court stated in

American Pipe:

‘* Subparagraph (c) (2) provides:

“(2) In any class action maintained under subdivision

(b) (3), the court shall direct to the members of the

class the best notice practicable under the circumstances,

including individual notice to all members who ean be

identified through reasonable effort. The notice shall

advise each member that (A) the court wi!l exclude

him from the class if he so requests by a specified date;

(B) the judgment, whether favorable or not, will in-

clude all members who do not request exclusion; and

(C) any member who does not request exclusion may,

if he desires, enter an appearance through his counsel.”

18a

Not until the existence and limits of the class

have been established and notice of membership

has been sent does a class member have any

duty to take note of the suit or to exercise any

responsibility with respect to it in order to profit

from the eventual outcome of the case... . 414

U.S. at 552.

In that situation the class determination enables the

parties to assess the contours of any potential settle-

ment and identifies the parties who will be bound

by the judgment regardless of how the case is later

decided. It avoids the kind of ‘one-way interven-

tion” that would be “strikingly unfair’ in some

cases “ and that the Supreme Court has plainly iden-

tified as a principal concern of the draftsmen of the

amended rule."

See Sprogis Vv. United Air Lines, 444 F.2d 1194, 1207

(7th Cir, 1971) (dissenting opinion), cert, denied, 404 US.

991. In Sprogis this Court held that the district court had

power to certify the class after a decision on the merits, but

on remand the district court concluded that it would be unfair

to do so, 56 F.R.D, 420 (N.D, Tl, 1972).

'' As the Supreme Court explained in American Pipe, the

1966 amendment to Rule 283 which inserted subparagraph

(c)(1) was specifically intended to deal with post-merits

certifications:

“A recurrent source of abuse under the former Rule lay

in the potential that members of the claimed class could

in some situations await developments in the trial or

even final judgment on the merits in order to determine

whether participation would be favorable to their inter-

ests. If the evidence at the trial made their prospective

position as actual class members appear weak, or if a

judgment precluded the possibility of a favorable deter-

mination, such putative members of the class who chose

19a

But in the portions of the rule referring to (b) (1)

and (b) (2) class actions, the notice requirement and

the language describing the form of the judgment

are significantly different. The rule does not man-

date advance notice to the absent class members in

all such cases; the rule does not provide that they

be given an opportunity to request exclusion fiom

the class; '* and the language of subparagraph (c)

(3) would seem to permit the entry of a single order

determining both the merits and the identity of the

members of the class."’ Certainly there is nothing

not to intervene or join as parties would not be bound

by the judgment, This situation-—the potential for so-

called ‘one-way intervention’—aroused considerable crit-

icism upon the ground that it was unfair to allow mem-

bers of a class to benefit from a favorable judgment

without subjecting themselves to the binding effect of

an unfavorable one, The 1966 amendments were de-

signed, in part, specifically to mend this perceived defect

in the former Rule and to assure that members of the

class would be identified before trial on the merits and

would be bound by all subsequent orders and judg-

ments.”

414 U.S, at 547 (footnote omitted)

‘See Airline Stewards v, American Airlines, Ine., 490

F.2d 686, 642 (7th Cir, 1973).

' Subparagraph (c) (8) provides:

“(3) The judgment in an action maintained as a class

action under subdivision (b) (1) or (b) (2), whether or

not favorable to the class, shall include and describe

those whom the court finds to be members of the class.

The judgment in an action maintained as a class action

under subdivision (b) (3), whether or not favorable to

the class, shall include and specify or describe those to

20a

in the rule expressly depriving the district court of

power to enter such an order,

This consideration of the text of the rule leads us

to three conclusions, none of which is decisive in this

“se. First, we are persuaded that the order ulti-

mately entered by the district court on November 15,

1974, which purports simultaneously to define the

class and to adjudicate the merits, would have been

an acceptable judgment if it had been entered

promptly after the action was commenced. Second,

we do not think that mere delay in the entry of an

otherwise acceptable order—assuming no resultant

prejudice—would deprive the court of the power to

enter such order even though the delay was incon-

sistent with the command to act “as soon as prac-

ticable.” Third, in this case when the three-judge

district court entered its original order on the mer-

its, it plainly did not comply with Rule 23. Not only

did it fail to reach the class issue as soon as prac-

ticable, as required by subparagraph (c) (1), but its

judgment also omitted the description of the class

member's as required by subparagraph (c) (8)." These

preliminary conclusions lead us to the question

———

whom the notice provided in subdivision (c)(2) was

directed, and who have not requested exclusion, and

whom the court finds to be members of the class,”

“It would, of course, be possible to interpret the district

court's omission in reference to the class issues as a deter-

mination that the case should wef be maintained us a class

action, As noted above, however, we think it more reason.

able to conclude that the district court simply did not decide

the class question,

2la

whether the court’s power simultaneously to decided

the merits and to certify the case as a class action

survived the entry of the original erroneous judg-

ment and the subsequent appeal.

We have concluded that mere delay in making a

class certification, even though contrary to the man-

date to act as soon as practicable, does not deprive

the district court of the power to enter an otherwise

proper order, Nor do we believe that the entry of

an erroneous judgment, subsequently vacated on ap-

peal, necessarily terminated the court’s power to en-

tertain a class action, In this case the delay was ag-

gravated by the error, but, if we can confine inquiry

to the question whether the court had power to grant

class relief after the Supreme Court had decided the

merits, we are satisfied that such power survived

the violation of the rule. Cf. Sprogis v. United Air

Lines, 444 F.2d 1194, 1201-1202 (7th Cir, 1971)."

We hold therefore that the district court did not ex-

ceed its jurisdiction by granting relief to the class

on November 15, 1974. It may nevertheless have

been reversible error to grant such relief at that

time. We turn to that question,

‘Our holding is consistent with this court's disposition of

the class issues in Burns Vv. Elrod, 509 F.2d 1133, 1186-1137

(7th Cir, 1975). In that case, as in this, the district court

dismissed the complaint without addressing the question

whether the case should be maintained as a class action, This

court reversed, holding that the complaint was sufficient, and

directed the district court to consider the class issues upon

remand,

22a

IV

We start by noting that the prerequisites to a

class action deseribed in Rule 23(a) are clearly met

in this case and that the allegations of the complaint

satisfy the terms of subparagraph (b)(2). We have

no doubt that a timely decision of the issue would

have resulted in a certification that the case could

be maintained as a class action,”

It is also clear that reversal would almost certainly

be required if this were a class action maintained

under subdivision (b)(3) of the rule. We read the

Supreme Court’s recent opinions in Lisen,” and

Of course, the district court might have certified a

amaller class—-perhaps just the applicants within the district

—but we are not confronted by any issue concerning the size

of the class, Whether there shall be a class certification is of

course a question different from what class should be certi-

fied,

“In Bisen Vv. Carlisle & Jaequelin, 417 U.S. 156, the Court

condemned a procedure whereby a preliminary inquiry into

the merits would precede the Rule 23(¢) (1) determination,

In language which indicates that certification after a final

decision on the merits is equally inappropriate, the Court

concluded:

“We find nothing in either the languaye or history of

Rule 23 that gives a court any authority to conduct a

preliminary inquiry into the merits of a suit in order to

determine whether it may be maintained as a class ae-

tion, Indeed, such a procedure contravenes the Rule by

illowing a representative plaintiff to secure the benefits

of a class action without first satisfying the requirements

for it. He is thereby allowed to obtain a determination

on the merits of the claims advanced on behalf of the

class without any assurance that a class action mav he

maintained, This procedure is directly contrary to the

American Pipe” as rather plainly requiring that

conclusion, But in FHisen the court carefully noted

that it was there concerned only with the notice re-

quirement applicable to class actions under subdivi-

sion (b)(3), a requirement which is inapplicable to

class actions for injunctive or declaratory relief

under subdivision (b)(2).° That note implies that

command of subdivision (¢) (1) that the court determine

whether a suit denominated a class action may be main-

tained as such ‘[a]s soon as practicable after the com-

mencement of [the} action... 0"

' See footnote 14 supra; Cf, Perite v. Liberty Loan Cor-

poration, No, 74-1667 (7th Cir., Sept, 3, 1975).

"The Court's footnote 14 reads as follows:

“We ar. concerned here only with the notice require-

ments of subdivision (c) (2), which are applicable to

class actions maintained under subdivision (b) (3), By

its terms subdivision (c) (2) is inapplicable to class ac-

tions for injunctive or declaratory relief maintained un-

der subdivision (b) (2), Petitioner's effort to qualify his

suit as a class action under subdivisions (b)(1) and

(b) (2) was rejected by the Court of Appeals, See n, 4,

supra,”

In Bijeol v. Benson, No, 75-1024, April 15, 1975, slip op.

at p. 5 n. 3, we sugyested that this footnote in the Supreme

Court’s opinion in Fisen may require a reexamination of this

court's holding in Sehrader v. Selective Service System Local

Board No, 76 of Wisconsin, 470 F.2d 73, 75 (7th Cir. 1972),

that a judgment in a (b) (2) cless action is not binding on

the defendant unless prior notice has been viven to all mem-

bers of the class, It is not necessary to reexamine that hold-

ing in this case, but it is appropriate to identify the differ-

ence between the question whether such » judgment is bind-

ing on the defendant and the question whether such a jude.

ment ia binding on a member of the class, With that distinetion

in mind, we might observe that the Supreme Court's analysis

24a

it may be appropriate to examine the reasons for

the rule before interpreting it as mandating auto-

matie reversal in a (b)(1) or (b)(2) case,

The rule is largely concerned with the problem of

one-way intervention, If unnamed members of the

class may await the outcome on the merits before

deciding whether to be excluded from the class, they

will receive the benefits of a favorable judgment but

not the burden of being bound by an unfavorable

judgment. The precedential effect of the acverse

judgment in the class action would be a hurdle to

overcome, but not necessarily an insurmountable

obstacle because the same issue might be appraised

differently in a different forum. Moreover, succes-

sive suits by different members of the class would

defeat the purpose of the rule to eliminate the judi-

cial waste involved in processing repetitious litiga-

tion of the same issue. There is also a risk that the

failure to certify may result in a dismissal of an

entire case if the claim of the named plaintiff should

become moot.” Finally, the failure to certify may

make it impossible for the parties to conduct mean-

ineful settlement negotiations because of uncertainty

with respect to both the magnitude of the contingent

liability and the burdens of going forward with a

in the Blonder-Tongue case, discussed in the text, infra, may

provide an independent reason for reexamining the holding

in Schrader,

Sec Roard of School Commiasioner of the City of Indian-

apolia Vv. Jacoba, 420 U.S. 128, No such problem is presented

by this case,

25a

trial. Without doubt, orderly class action procedure

mandates compliance with subparagraph (c) (1).

On the other hand, procedural error does not war-

rant reversal unless it affects the substantial rights

of the parties. 28 U.S.C. $2111. If our holding on

the statute of limitations issue is correct, all of the

unnamed members of the plaintiff class still retain

their right to bring an independent action for the

relief already ordered by the district court. And if

we are correct in our holding that a class action may

be brought to enforce claims arising under the Social

Security Act, a reversal of the class aspect of the

district court order would no doubt be followed im-

mediately by a new class action to be brought by a

different named plaintiff. At least there would be no

legal objection to such an action. We know of no de-

fense which the Secretary could raise in such a pro-

ceeding that was not available in the district court

in this case after the remand by the Supreme Court,

or which was not argued before us on this appeal.

As a practical matter, it is difficult to identify any

substantial rights of the parties that are likely to be

affected by the difference between class relief in this

case and class relief in a case that would presumably

be filed tomorrow if this one were to be reversed. All

that appears to be at stake is the possibility that the

Secretary may benefit from a combination of past

illegal acts and a possible future lack of diligence by

potential new class representatives.

The policies of avoiding multiple litigation, and

providing an effective mechanism for the enforce-

26a

ment of relatively small claims, favor affirmance. On

the other hand, the policy underlying the doctrine of

mutuality of estoppel and the policy of encovraging

the settlement of class actions favor strict adherence

to Rule 23’s procedural requirements. But these poli-

cies carry less than their usual weight in this case.

As the Supreme Court pointed out in Blonder-

Tongue v, University Foundation, 402 U.S, 313, 320-

327, the doctrine of mutuality of estoppel has been

modified significantly in recent years. Under the rea-

soning of Justice Traynor’s famous opinion in Bern-

hard vy. The Bank of America National Trust and

Savings, 122 P. 2d 892 (Calif. 1942), from which

the Court quoted with approval in Blonder-Tongue,

it is at least doubtful that the Secretary could reliti-

gate the merits of the common question of law raised

in this case even if it had not been brought as a class

action. Certainly it would be futile for him to do so

after the decision of the United States Supreme

Court. From the standpoint of the defendant—as-

suming always that we have properly concluded that

the statute of limitations is tolled and that a class

action is maintainable—there seems to be little dif-

ference between a class determination after the rul-

ing on the merits and a test case brought by an in-

dividual litigant followed promptly by a class action

if the individual should prevail.”

** See Judge Gibbons’ thoughtful analysis of the compara-

tive significance of a test case and a judgment binding on the

class in Katz v. Carte Blanche Corp., 496 F.2d 747, 758-762

(2rd Cir. 1974).

27a

{f the district court had not committed error when

it first addvessed the merits, the Secretary would

face the same judgment that he now asks us to re-

verse. Since the applications of the members of the

class gave him notice of the magnitude of the con-

tingent liability, and since he must have recognized

the substantial character of the constitutional issue

raised by plaintiffs,“ he has not been prejudiced by

the fact that a correct judgment was not entered at

an earlier date.

From the standpoint of the plaintiffs, who have a

clear entitlement to insurance benefits for which pre-

miums have been paid by disabled wage earners, it

seems to us that there would be greater injustice in

permitting the Government to avoid its obligation

to provide equal treatment to similarly situated bene-

ficiaries because of a procedural error committed by

the district court than in allowing absent members

of the class to become formal parties to the judgment

long after their doubtful posture in the case should

have been clarified.

Similarly, the rule’s purpose to facilitate settle-

ment has little if any application to this case. For

the Secretary had an unquestioned obligation to ap-

ply the statutory exclusion until such time as it had

been authoritively held unconstitutional. Since the

“8 Not only was the constitutional claim upheld by eight

members of the Supreme Court, but previously Judges Tuttle,

Wisdom and Fairchild had all expressed the opinion that it

was meritorious. See Beaty Vv. Weinberger, 478 F.2d 300 (5th

Cir. 1973), and Jiminez Vv. Richardson, 353 F.Supp. 1356,

1362 (N.D. Ill. 1.73) (dissenting opinion).

28a

issue on the merits was not one subject to compro-

mise, the concern of Rule 23 with settlement should

not control our decision.

In sum, although we recognize the salutory policy

considerations underlying subparagraph (c)(1) and

the clear admonition by the Supreme Court to en-

force the rule in cases maintained under subpara-

graph (b)(3) and, no doubt, in most cases main-

tained under (b)(1) or (b)(2), as well, we are

persuaded that the rule contemplates some flexibility

in its enforcement and that in this case the district

court class determination, although untimely, was

not erroneous.

V

Two questions remain. The Secretary argues (1)

that the doctrine of sovereign immunity precludes re-

covery, and (2) that retroactive relief may not be

awarded for the period prior to the date of the

Supreme Court’s decision holding the statutory ex-

clusion unconstitutional. We think both these argu-

ments are adequately met by $ 405(g) of the Act

which authorizes each member of the plaintiff class

to commence a civil action to recover benefits wrong-

fully withheld. That section operates as a waiver of

sovereign immunity, and since we have held that

there has been a timely assertion of the claims of

the unnamed, as well as the named, plaintiffs, they

are entitled to the benefit of the rule first announced

by the Supreme Court in this litigation.

The Secretary nevertheless argues that, on the

basis of the test set forth in Chevron Oil Co. v.

29a

Huson, 404 U.S. 97, the Supreme Court’s opinion

should have only a prospective application.”

In Chevron Oil, the Court considered whether its

earlier decision in Rodrigue v. Aetna Casualty &

Surety Co., 395 U.S. 352, which held that the Outer

Continental Shelf Lands Act does not make ad-

miralty law applicable to actions for personal in-

juries suffered on off-shore platforms, should be ap-

plied retroactively so as to bar Huson’s claims, The

Court set forth the following test:

In our cases dealing with the nonretroactivity

question, we have generally considered three

separate factors. First, the decision to be ap-

plied nonretroactively must establish a new prin-

ciple of law, either by overruling clear past prec-

edent on which litigants may have relied, see,

e.g., Hanover Shoe vy. United Shoe Machinery

Corp., supra, at 496, or by deciding an issue of

first impression whose resolution was not clearly

foreshadowed, see, ¢.g., Allen v. State Board of

Elections, supra, at 572. Second, it has been

stressed that “we must ... weigh the merits and

demerits in each case by looking to the prior

histery cf the rule in question, its purpose and

effect, and whether retrospective operation will

further or retard its operation.” Linkletter vy.

Walker, supra, at 629, Finally, we have weighed

the inequity imposed by retroactive application,

for “{w here a decision of this Court could pro-

** This issue of the retroactivity effect of a decision holding

a portion of the Social Security Act unconstitutional was

briefed and argued, but not reached, in Weinberger Vv. Salfi,

supra.

30a

duce substantial inequitable results if applied

retroactively, there is ample basis in our cases

for avoiding the ‘injustice or hardship’ by a

holding of nonretroactivity.” Cipriano v. City

of Houma, supra, at 706.

404 U.S. at 106-107.

In Chevron Oil, the Court found that the Rodrigue

decision was not only a case of first impression but

that it also in fact had overruled clear past prece-

dent. The Court then looked to the purpose which

underlay the absorption of state law as federal law

in the Lands Act, the desire “to aid injured employ-

ees by affording them comprehensive and familiar

remedies,” and concluded that a retroactive applica-

tion of Rodrigue would defeat this purpos. Finally,

the Court concluded that a retroactive application

would produce “substantial inequitable results” in

that it would deny Huson his right to a day in court.

404 U.S. at 108.

Applying these factors to the instant case, how-

ever, compels us to reach the opposite conclusion; we

hold that the class members” are entitled to the

retroactive application of the Supreme Court’s deci-

sion.

The Secretary argues correctly that the Jimenez

decision established a new principle of law insofar as

it was the first Supreme Court ruling on the consti-

tutionality of § 216(h) (3) (B) of the Social Security

” As noted above, the Secretary has complied with the

district court order requiring retroactive payments for the

named plaintiffs back to the date of their original application.

3la

Act. Prior to that time, although there was substan-

tial disagreement among the lower courts on the

validity of the Act’s provisions dealing with illegit-

imate children,” the Secretary was bound to admin-

ister the Act as written. Thus, the Secretary was re-

quired to act under the assumption that this portion

was constitutional until ordered to comply with a

contrary decision.

Although the first of the Chevron factors suggests

a nonretroactive result, the second and third over-

whelmingly indicate the correctness of the district

court’s award. The Supreme Court’s decision in

Jimenez established that the discrimination in § 216

(h)(3)(B) against illegitimate children born after

the disability of their parent was constitutionally

repugnant. Surely a retrospective application of this

decision would only further and not retard its opera-

tion. For, the Jimenez decision holds, these children

have been wrongfully denied these insurance benefits

from the date of their applications.

Similarly, we find that the purposes behind the

entire children’s insurance benefits program support

the award of retroactive benefits in this case, As the

Court explained in Jimenez, “the purpose of the con-

—

‘\ See Watts v. Veneman, 334 F.Supp. 482 (D.D.C. 1971),

aff'd as modified, 476 F.2d 529 (D.C. Cir. 1973); Perry V.

Richardson, 440 F.2d 677 (6th Cir. 1971); Barnes V. Richard-

son, 342 F.Supp. 435 (S.D.N.Y. 1972); Norton Vv. Weinberger,

364 F.Supp. 1117 (D. Md. 1973), vacated, 418 U.S. 902; Beaty

Vv. Weinberger, 478 F.2d 300 (5th Cir. 1973), aff'd, 418 U.S.

901: Severance V. Weinberger, 362 F.Supp. 1348 (D.D.C.

1973).

32a

a wage earner who has lost his earning

power. ...” 417 U.S. at 633. The denial of these

benefits by the Secretary necessarily required these

plaintiffs and their family to consume other assets

in order to attempt to maintain their standard of

living. During his working career, plaintiffs’ father

paid a portion of his wages into the Social Security

program with the reasonable expectation that, if he

should ever become disabled, his dependents would

receive these insurance benefits. Surely the retro-

spective payment of such benefits furthers, rather

than impedes, the effectuation of the purposes of the

statute.

The provisions of the Act itself support our conclu-

sion that retroactive payments further the statutory

purpose. For § 204 of the Act, 42 U.S.C. § 404,”

provides a specific authorization for the recovery of

underpayments; there is no requirement that such

denials have been willful; any mistaken denial will

32 **(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:

* * *

“(2) With respect to payment to a person of less than

the correct amount, the Secretary shall make payment

of the balance of the amount due such underpaid person,

or, if such person dies before payments are completed or

before negotiating one or more checks representing cor-

rect payments, disposition of the amount due shall be

made in accordance with subsection (d) of this section.”

33a

give rise to retroactive recovery. Thus, Congress in-

tended that Social Security beneficiaries receive the

full and correct amount of their entitlement, even

if this requires payments to be made long after the

period of entitlement.”

Finally, in applying the third Chevron factor, it

is important to note that it is the Secretary who

must convince us that a retroactive application of

Jimenez would produce “substantial inequitable re-

°° The Secretary relies on Rothstein v. Wyman, 467 F.2d

296 (2a C 1972), cert. denied, 411 U.S. 921, where the court

held that retroactive payments by the State of New York

of improperly withheld welfare benefits need not be made.

We believe the Rothstein decision is inapposite here for sev-

eral reasons. First, the court emphasized that a major factor

in its refusal to order such repayments was the existence of a

“scheme of cooperative federalism” that underlay the match-

ing grant program and its recognition that, “It is not the

business of the federal courts needlessly to exacerbate those

problems fof federalism].” 467 F.2d at 232. Of course, no

such federalism consideration can enter into our decision in

this case.

Second, the Rothstein court found that Congress had not

spoken on the question of court-ordered retroactive payments.

Id. at 234. Here, however, in enacting 42 U.S.C. § 404, supra

n. 26, Congress has approved retroactive payment orders.

Finally, the Second Circuit noted that the entire purpose

of the welfare payments was to swiftly provide sustenance

to impoverished people, and that “As time goes by... retro-

active payments become compensatory rather than remedial.”

Id. at 235. The Social Security insurance program is not tied

to individualized need, however. The only eligibility require-

ments these plaintiffs must meet deal with their relation-

ship to the disabled insured parent. Consequently, satisfying

current needs of the beneficiary is only part of the purpose of

the Act. By contributing to the trust fund, plaintiffs’ father

established the eligibility of his children to receive the child’s

benefits regardless of their need.

34a

sults.” Thus, unless the balance of the equities clear-

ly tips in the Secretary’s favor, the general rule of

retroactivity must be applied. The Secretary has not

convinced us that such inequities will result from

such an application of Jiminez. On the one hand we

have the substantial equities in favor of paying the

benefits to the children who were admittedly entitled

to them but for the unconstitutional provision in the

statute. On the other, the Secretary argues, making

such lump sum payments might affect the abiliiy of

the Trust Fund to make current payments to indi-

viduals who are now eligible for benefits. We find

this argument unconvincing. As the Supreme Court

said in Jiminez, “[T]here is no evidence supporting

the contention that to allow illegitimates in the clas-

sification of appellants to receive benefits would sig-

nificantly impair the federal Social Security trust

fund and necessitate a reduction in the scope of per-

sons benefited by the Act.” 417 U.S. at 633."

Thus, applying the three factors set forth in Chev-

ron Oil, we conclude that the district court did not

err in ordering the Secretary to make payments to

the class members back to the date of the filing of

** Harry Ballantyne, an actuary for the Office of the Actu-

ary of the Social Security Administration, estimated that if

Jimenez were applied retroactively it would result in 7,000

persons receiving benefits at a cost of $5,000,000. Affidavit in

Support of Motion for Stay Pending Appeal. Over $5] billion

was paid out in old age, survivors, disability and health insur-

ance by the Social Security Administration in fiscal year 1973.

Dept. of Health, Education & Welfare, Social Security Bulle-

tin, November, 1974.

35a

their original applications for benefits.” The judg-

ment of the district court is, therefore,

AFFIRMED.

A true Copy:

Clerk of the United States Court of

Appeals for the Seventh Circuit

’> Our conclusion with respect to retroactivity is buttressed

by the Supreme Court’s summary affirmtance in Richardson V.

Griffin, 409 U.S. 1069. In that case a three-judge district

court had found a portion of the Social Security Act uncon-

stitutional and ordered payments of improperly withheld

benefits. See 346 F.Supp. 1226, 1237 (D. Md. 1972).

36a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Chicago, Illinois 60604

SEPTEMBER 12, 1975

Before

Hon. THOMAS F. MCALLISTER,

Senior Circuit Judge *

Hon. JOHN PAUL STEVENS, Circuit Judge

Hon. ROBERT A. SPRECHER, Circuit Judge

No. 75-1046

EUGENIO and ALICIA JIMENEZ, by their father

and next friend, RAMON JIMENEZ,

PLAINTIFFS-APPELLEES

Vs.

CASPAR WEINBERGER, Secretary of Health,

Education and Welfare,

DEFENDANT-APPELLANT

* Senior Circuit Judge Thomas F. McAllister of the United

‘

States Court of Appeals for the Sixth Circuit is sitting by

designation.

37a

Appeal from the United States District Court

for the Northern District of Illinois

Eastern Division

No. 71 C 1436

2ICHARD B. AUSTIN, Judge

OPINION BY JUDGE STEVENS

This cause came on to be heard on the transcript

of the record from the United States District Court

for the Northern District of Illinois, Eastern Divi-

sion, and was argued by counsel.

On consideration whereof, it is ordered and ad-

judged by this court that the judgment of the said

District Court in this cause appealed from be, and

the same is hereby, AFFIRMED, with costs, in ac-

cordance with the opinion of this Court filed this

date.

38a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Chicago, Illinois 60604

NOVEMBER 7, 1975

Before

Hon. THOMAS F. MCALLISTER,

Senior Circuit Judge

Hon. JOHN PAUL STEVENS, Circuit Judge

Hon. ROBERT A. SPRECHER, Circuit Judge

No. 75-1046

EUGENIO and ALICIA JIMENEZ, ETC..,

PLAIN TIFFS-APPELLEES

vs.

CASPAR WEINBERGER, Secretary of Health,

Education and Welfare,

DEFENDANT-APPELLANT

Appeal from the United States District Court

for the Northern District of Illinois

Eastern Division

(71 € 1436)

39a

On consideration of the petition for rehearing filed

in the above-entitled cause,

IT IS HEREBY ORDERED that the petition for

rehearing in the above-entitled appeal be, and the

same is hereby, DENIED.

40a

APPENDIX D

ORDERS ENTERED NOVEMBER 19, 1974, AND

DEFENDANT'S MOTION FOR RECONSIDERATION DENIED

DECEMBER 3, 1974

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

No. 71 C 1436

EUGENIO and ALICIA JIMENEZ, by their father and

next friend, RAMON JIMENEZ, individually and on

behalf of all others similarly situated, PLAINTIFFS

VU.

CASPAR WEINBERGER, Secretary of Health,

Education and Welfare, DEFENDANT

JUDGMENT AND ORDER

This matter coming on for hearing pursuant to

an Order of the Supreme Court of the United States

(Jimenez v. Weinberger, No. 72-6609, June 19, 1974)

remanding the cause to this Court, and all parties

having received due notice and being represented by

counsel, and the Court having been advised in the

premises; the Defendant Secretary having found the

Plaintiffs Eugenio and Alicia Jimenez eligible to re-

ceive benefits on the Social Security account of their

father Ramon Jimenez, and this Court having found

that the Plaintiffs were eligible for those benefits

from the date of their original application, August

4la

21, 1969; there being no genuine issue as to any

material fact, this Court hereby grants Plaintiffs’

motion for summary judgment; and having deter-

mined that the provisions of this Decree are neces-

sary to afford the named Plaintiffs the full legal and

equitable relief to which they are entitled,

IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED THAT:

1. Section 216(h)(3)(b) of the Social Security

Act (42 U.S.C. § 416(h) (3) (b)) is declared in vio-

lation of the due process clause of the Fifth Amend-

ment to the Constitution of the United States and

therefore invalid insofar as it requires illegitimate

children of insured individuals applying for child’s

Social Security benefits to have met, with their in-

sured fathers, the eligibility requirements set forth

therein, prior to their parents’ becoming disabled.

Accordingly, the following language in section 216

(h)(3)(b) is hereby declared null and void:

“and such acknowledgement, court decree, or

court order was made before such insured in-

dividual’s most recent period of disability be-

OOS 2

“and was living with or contributing to the sup-

port of that applicant at the time such period

of disability began;”

2. Defendant, his agents, employees, and succes-

sors are ordered to promulgate within 60 days new

regulations, provisions of the Social Security Hand-

book and Claims Manual, and other relevant and

42a

necessary rules and regulations, instructions and

directives (including necessary changes in computer

programs) consonant with the decision invalidating

portions of 42 U.S.C. § 416(h) (3) (b);

3. Plaintiffs Eugenio and Alicia Jimenez are en-

titled to receive child’s Social Security benefits on the

account of their father Ramon Jimenez, from the

date of their application, August 21, 1969, pursuant

to 42 U.S.C. § 416(h) (3) (b) as interpreted in para-

graph 1;

4. Defendant, his agents, employees, and succes-

sors are hereby ordered to pay to Plaintiffs Eugenio

and Alicia Jimenez, by November 27, 1974, all

monies due to them on their father Ramon’s Social

Security account, from the date of their original ap-

plication, August 21, 1969, to the present, and hence-

forth to pay to them the regular monthly benefits to

which they are entitled in accordance with this order;

5. This Court finds no just reason for delay of

enforcement of this order.

‘s/ Richard B. Austin

Judge, United States District Court

43a

APPENDIX E

ORDERS ENTERED NOVEMBER 19, 1974, AND

DEFENDANT’S MOTION FOR RECONSIDERATION DENIED

DECEMBER 3, 1974

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

No. 71 C 1436

EUGENIO and ALICIA JIMENEZ, by their father and

next friend, RAMON JIMENEZ, individually and on

behalf of all others similarly situated, PLAINTIFFS

Vv.

CASPAR WEINBERGER, Secretary of Health,

Education and Welfare, DEFENDANT

ORDER

This matter coming on for hearing pursuant to

an Order of the Supreme Court of the United States

(Jimenez v. Weinberger, No. 72-6609, June 19, 1974)

remanding this cause and pursuant to Motion of the

Plaintiffs for Entry of an Order, and to this Court’s

Judgment and Order, and all parties having received

due notice and being represented by counsel, and the

Court having considered plaintiffs’ Motions and hav-

ing determined that the several provisions of this

Decree are necessary to afford full legal and equit-

able relief;

IT IS HEREBY ORDERED AND DECREED

THAT:

eee

44a

1. Defendant, his agents, employees, and succes-

sors are ordered to, within sixty (60) days of the

Court’s entry of the Judgment and Order and this

Order, take reasonable measures to ascertain, and

give notice of the resultant change in the Social

Security Act to, all those applicants for Social Secur-

ity benefits who have been denied benefits solely by

reason of the provisions of the Act now declared

unconstitutional, together with an explanation of how

they should proceed in order to obtain the benefits;

2 Defendant, his agents, employees, and succes-

sors are ordered to provide benefits to all those de-

nied benefits since the date of the filing of this action

solely by reason of that portion of the Act declared

unconstitutional. Such benefits shall cover the period

from which said persons would originally have been

entitled but for the provisions invalidated herein, and

payment of said benefits and ongoing monthly bene-

fits to all eligible persons shall begin forthwith;

8 Defendant is further ordered to file an affidavit

with this Court six months from the date of filing

of this Order, attesting to the complete accomplish-

ment of the duties ordered herein;

4. This Court retains jurisdiction of this cause

until all the relief ordered herein has been effec-

tuated.

s/ Richard B. Austin

Judge, United States District Court

W U. S&S. GOVERNMENT PRINTING OFFICE 1976 213597 1986