Petition — Mathews v. Elliot

Seo 2ne Court, U. &

| FILED

we¥ “1234 | FEB 27 1976

et MICHAEL RUDAK, JR. CLE

In the Supreme Court of the United States

OCTOBER TERM, 1975

F. DAVID MATHEWS, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

v.

EVELYN ELLIOTT, ET AL.

F. DAVID MATHEWS, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

Vv.

FANNIE BUFFINGTON, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ROBERT H. BORK,

Soliciter General,

Rex E. LEE,

Assistant Attorney General,

WILLIAM KANTER,

ROBERT S. GREENSPAN,

Attorneys,

Department of Justice,

Washington, D.C. 20530.

INDEX

Page

ERE ES See Ae 2

RRL Ce SAO See 2

Questions presented 2

Constitutional and statutory provisions and

regulations involved _........-_---_ 2

Statement —___. Seip ceiaeniintadnneictiiiala ddl Nasi 3

Reasons for allowing the writ i)

a 11

EE See an GS Oe la

Appendix B EK Se

Appendix C sientieteabibniglanataiiviippeinihaaaimiamaiactian +>: ae

I a ee |

TET

CITATIONS

Cases:

Bowman v. Loperena, 311 U.S. 262 _ 5

Federal Trade Commission v. Minneapo-

lis-Honeywell Co., 344 U.S. 206 5

Mathews v. Eldridge, No. 74-204, decided

February 24, 1976 — )

Pfister v. Northern Illinois Finance Corp.,

f° eee ee 5

United States v. Adams, 383 U.S. 39 5

Constitution and statutes:

United States Constitution, Fifth Amend-

ment th PR ME Tae et fi M 9.3

II

Constitution and statutes—Continued Page

Social Security Act, Title II, 49 Stat. 622,

et seqg., as amended and added, 42

U.S.C. 401, et seq.: |

Section 203(f), 42 U.S.C. 403(f)_. 6

Section 203(h), 42 U.S.C. 403(h)_. 6

Section 204, 42 U.S.C. 404... si, 9a

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

SII asuieessiiesaensceiieatl Puisonmaate 3, 4, 92a-93a

Section 204(b), 42 U.S:C. 404(b)... 3, 4,

93a-94a

Section 205(g), 42 U.S.C. 405(g)__ 10

i: SI, a eigesaeniies 7

Miscellaneous:

20 C.F.R. 404.907-404.913 ete: 4

20 C.F.R. 404.907-404.917 ss 8 Ta-92a

I 4

Social Security Claims Manual:

Section SEGG(Q) Ge

Section 5503.3 Sane ee

Section 5503.5 4, 86a

Iu the Supreme Court of the United States

OCTOBER TERM, 1975

No.

F. DAVID MATHEWS, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

Vv.

EVELYN ELLIOTT, ET AL.

F. DAVID MATHEWS, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

Vv.

FANNIE BUFFINGTON, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

The Solicitor General, on behalf of the Secretary

of Health, Education, and Welfare, petitions for a

writ of certiorari to review the judgments of the

United States Court of Appeals for the Ninth Cir-

cuit in these consolidated cases.

(1)

2

OPINIONS BELOW

The opinion of the court of appeals (App. A, in-

fra, pp. la-45a) is not yet reported. The opinion

of the district court (App. C, infra, pp. 50a-79a) in

Elliott v. Weinberger is reported at 371 F. Supp.

960. The order (App. D, infra, pp. 8la-84a) of the

district court (no opinion having been delivered) in

Buffington v. Weinberger is not yet reported.

JURISDICTION

The judgments of the court of appeals (App. B,

infra, pp. 46a-49a) were entered on October 1, 1975.

On December 17, 1975, Mr. Justice Rehnquist ex-

tended the time for filing a petition for a writ of

certiorari to and including February 28, 1976. The

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

1254(1).

QUESTIONS PRESENTED

1. Whether the district courts lacked jurisdiction

over these class actions

2. Whether the Due Process Clause requires that

an oral 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 pro-

vides in pertinent part:

No person shall be * * * deprived of * * *

property, without due process of law * * *.

Section 204 of the Social Security Act, 49 Stat.

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

of the Department of Health, Education, and Wel-

fare, are set forth in pertinent part in App. E, infra,

pp. 85a-94a.

STATEMENT

1. Section 204(a)(1) of the Sociai 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 Secretary

fof Health, Education, and Welfare] * * * [by]

decreas[ing] any payment under this subchapter [ re-

lating 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 con-

cerns the constitutional validity, under the Due

Process Clause, of the procedures used by the Secre-

tary in enforcing and giving effect to these statutory

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 deter-

4

mination and given an opportunity to contest the

determination in writing and, in addition or in the

alternative, to request that the Secretary waive re-

covery in accordance with Section 204(b) of the Act.

He is invited to discuss his case with the local Social

Security office. See 20 C.F.R. 404.907-404.913 (App.

E, infra, pp. 87a-91a). Adjustment or recovery is

deferred pending review of the initial determination.

Sections 5503.3 and 5503.5 of the Social Security

Claims Manual (App. E, infra, pp. 85a-87a). If the

Secretary decides upon review that the initial deter-

mination of an overpayment was correct and that

waiver of recovery is not warranted, recovery is ef-

fected by decreasing the beneficiary’s subsequent

monthly benefit payments until the overpayment has

been recouped, as provided by Section 204(a)(1) of

the Act (App. E, infra, pp. 92a-94a).

Following the Secretary’s decision upon this initial

review, the beneficiary is entitled to further admin-

istrative review, including a full evidentiary hear-

ing. 20 C.F.R. 404.917 (App. E, infra, p. 92a). If,

following the hearing, it is determined that there had

been no overpayment, or that the beneficiary was en-

titled to waiver of recovery, the beneficiary’s with-

held payments are repaid and his subsequent pay-

ments restored to the appropriate level.

2. This petition arises out of two lawsuits ini-

tiated, respectively, in the United States District

Court for the Western District of Washington (Buf-

fington, et al. v. Weinberger, No. 734-73C2, affirmed

in part, reversed in part, No. 74-3118, C.A. 9, peti-

5

tion for rehearing pending), and the United States

District Court for the District of Hawaii (£lliott,

et al. v. Weinberger, Civ. No. 72-3629, affirmed in

part, reversed in part, No. 74-1611, C.A. 9, petition

for rehearing pending). Both cases present the same

issues, and were consolidated by the court of appeals

for decision.*

The named respondents in Buffington, Mrs. Buf-

fington and Mrs. Biner, are recipients of social secur-

ity retirement benefits.* ‘The Secretary determined

that respondents had received an overpayment and

1 Respondents submitted an untimely petition for rehearing

in the court of appeals, which the court filed for disposition

on the merits. The untimely filing of a petition for rehearing

in the court of appeals, if entertained on the merits, ordinarily

extends the time for filing a petition for certiorari. Bowman

v. Loperena, 311 U.S. 262; Pfister v. Northern illinois Finance

Corp., 317 U.S. 144. However, this Court has also suggested

that the time may not be extended with respect to mat-

ters ruled upon by the court of appeals which are not

put in issue by either party in the petition for rehearing.

Federal Trade Commission Vv. Minneapolis-Honeywell Co., 344

U.S. 206; see also United States v. Adams, 383 U.S. 39. In the

instant case, the government did not seek rehearing with re-

gard to jurisdiction or to that portion of the court of appeals’

decision holding that an evidentiary hearing was required in

overpayment cases involving matters of credibility. Respond-

ents seek by rehearing to extend that requirement to all over-

payment cases, whether testimonial evidence is necessary or

not. Accordingly, the district court’s jurisdiction and that por-

tion of the court of appeals’ judgment which requires a pre-

recoupment hearing in cases involving matters of credibility

are not subject to review on the petition for rehearing.

2 The issues in both Buffington and Elliott are identical.

For the sake of conciseness, we describe the facts in Buffing-

ton in the text and discuss those in Elliott in related footnotes.

6

sought to recoup it. The determination was made on

the basis of annual reports of excess earnings filed

pursuant to a statutory directive (42 U.S.C. 403(h)),

which requires a beneficiary to file such reports when

his earnings exceed the statutory maximum (see 42

U.S.C. 403(f)).°

The amount of Mrs. Buffington’s overpayment was

$78.60. She was notified of the overpayment on

October 3, 1973, and the $78.60 was withheld from

her November 1973 check. She then requested re-

consideration by the Secretary, who sustained the

overpayment determination (App. A, infra, p. 9a).

On October 22, 1974, the district court ordered the

Secretary to restore to respondent the amount re-

couped from her until she was given the opportunity

for a hearing (App. D, infra, p. 84a).

The amount of respondent Biner’s overpayment

was $2,216.20, representing the total amount of bene-

fits she had received during 1972. After the Secre-

* The finding of overpayments to three of the named re-

spondents in Elliott, Mr. Silva, Mr. Vaquilar, and Mrs. Ortiz,

also were based upon reports of excess earnings (App. C,

infra, pp. 54a-55a). The overpayments to the other named

respondents had been mistakenly made for other reasons:

Mrs. Elliott received both retirement and disability benefits

when she was entitled only to disability payments; Mr.

Gaines received duplicate checks for the same benefit period;

and Mrs. Yamasaki was overpaid due to a processing error

(App. C, infra, pp. 57a-59a). All of the respondents sought

reconsideration and waiver from the Secretary but initiated

this lawsuit before those requests could be acted upon. All

monies recovered from respondents have been restored to

them by order of the district court (App. C, infra, p. 78a).

a

7

tary’s initial determination of an overpayment, Mrs.

Biner twice requested reconsideration and also re-

quested that the overpayment be waived. After con-

sidering Mrs. Biner’s submissions, the Secretary ad-

hered to his decision that recovery of the overpa~-

ment was appropriate (App. A, infra, pp. 10a-12a).*

After the institution of this suit, Mrs. Biner received

an oral hearing before an administrative law judge,

who sustained the Secretary's decision (id. at 12a).

On December 11, 1973, respondents Buffington and

Biner brought this suit as a class action, contending

that the Secretary’s procedures for recovering over-

payments fail to provide due process since they do

not afford claimants a pre-recoupment oral hearing.

The district court determined that it had jurisdiction

under the Mandamus Act, 28 U.S.C. 1361, and cer-

tified the case as a class action of nationwide extent,

defining the class to consist of all individuals eligible

for old age and survivors’ benefits whose benefits

have been or will be reduced or otherwise adjusted

*In denying Mrs. Biner’s request for waiver, the Secretary

found Mrs. Biner at fault in retaining the benefit checks. Mrs.

Biner had worked throughout 1972 and had earned over

$7,000 for the year—a sum that precluded eligibility for any

benefit payments. Mrs. Biner did not, however, file a report

of excess earnings for that year. The Secretary subsequently

learned from Mrs. Biner’s employer that she had excess earn-

ings, and requested that she file an earnings report. When

she did so, the overpayment was deter.nined. On the basis

of these facts, the Secretary concluded that Mrs. Biner was not

without fault in receiving the overpayment and therefore

refused to waive recoupment (Affidavit of Forbus, Deputy

Director, Bureau of Retirement and Survivors’ Insurance,

Social Security Administration; App. A, infra, pp. 10a-12a).

8

without notice and opportunity for a prior hearing

(App. A, infra, p. 15a; district court order of April

4, 1974).° The district court declared the Secretary’s

recoupment procedure unconstitutional and enjoined

the Secretary from recovering any overpayment from

members of the class “without affording them an

opportunity for a hearing before any recoupment or

adjustment is effected” (App. D, infra, p. 82a).

In the Elliott case, the respondents brought suit

challenging the constitutionality of the Secretary’s

recoupment procedures on the same basis as the re-

spondents in Buffington. The district court in Elliott

declared the recoupment procedure unconstitutional

and enjoined the Secretary from recovering overpay-

ments from beneficiaries residing in Hawaii (App.

C, infra, pp. 54a-55a, 73a, 78a).

The court of appeals consolidated these cases for

decision and affirmed the holdings of the district

courts with regard to jurisdiction and the propriety of

class relief. The court further affirmed the holdings

that the Secretary’s recoupment procedures are un-

constitutional but vacated and remanded the cases

to the district courts for the entry of more limited

orders that would require a prior oral hearing only

where the Secretary’s determination might turn upon

the credibility of witnesses.°

° The class order was later modified so as to exclude groups

of beneficiaries whose claim to a prior hearing was already

the subject of litigation in other courts (App. A, infra, p.

15a; district court order of October 29, 1974).

¢ For purposes of convenience, the court distinguished two

categories of overpayment disputes, “reconsideration” cases

9

REASONS FOR ALLOWING THE WRIT

The questions presented by this petition are iden-

tical to those raised by the petition for a writ of cer-

tiorari pending before the Court in Mathews v.

Mattern, et al., No. 75-649,’ and this petition should

be granted for the reasons advanced in support of

the petition in Mattern."

and “waiver” cases. “Reconsideration” cases generally involve

the correctness of the Secretary’s determination that an over-

payment 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

decided on the basis of documentary evidence. In “waiver”

cases, however, the court concluded that issues of credibility

are often involved in determining whether a claimant was at

fault in receiving an overpayment. The court determined,

however, that the constitutional necessity of a prior hearing

turns upon the particular facts of each case and not upon

whether the case is one of “reconsideration” or “waiver”

(App. A, infra, pp. 36a-43a).

" We are furnishing counsel for the respondents with copies

of our petition in Mattern, and with copies of our briefs in

Mathews v. Eldridge, No. 74-204, decided February 24, 1976,

and Norton v. Mathews, No. 74-6212, upon which we in part

rely in Mattern.

* When we filed our petition for certiorari in Mattern, we

informed the Court that the Secretary was in the process of

complying with the outstanding injunctions in these cases by

informing all overpaid beneficiaries that upon request they

would receive an evidentiary hearing before recoupment is

initiated. The Secretary had not then had an opportunity to

analyze the response to the new procedure. An analysis has

now been made of the first few months’ experience with that

procedure, and we are informed that the number of requests

for pre-recoupment hearings has not been as great as antici-

pated.

10

Moreover, this Court in Mathews v. Eldridge, No.

74-204, decided February 24, 1976, rejected on the

merits a claim that due process requires an eviden-

tiary hearing before Social Security disability pay-

ments may be terminated. The decision below ap-

pears inconsistent with Eldridge on that issue.’

® Although the Court found that the district court had

jurisdiction under 42 U.S.C. 405(g) to consider Eldridge’s

constitutional claims, that finding was based in substantial

part on the fact that he had “at least a colorable claim that

because of his physical condition and dependency upon the

disability benefits, an erroneous termination would damage

him in a way not recompensable through retroactive pay-

ments” (slip op., p. 9; footnote omitted). No similar claim

can be asserted by respondents here. Moreover, even if the

district court below had jurisdiction over some of the named

plaintiffs under Eldridge, for the reasons discussed in our

Norton brief it lacked jurisdiction over the class members

and the named plaintiffs in Eliott who failed to exhaust the

Secretary’s pre-recoupment procedures (see Eldridge, supra,

slip op., pp. 6-10).

A NS Te we

11

CONCLUSION

For the foregoing reasons, and those set forth in

the petition for a writ of certiorari in Mathews v.

Mattern, supra, the petition for a writ of certiorari

should be granted and these cases disposed of in ac-

cordance with the disposition of Mattern.

Respectfully submitted.

ROBERT H. BORK,

Solicitor General.

REx E. LEE,

Assistant Attorney General.

WILLIAM KANTER,

ROBERT S. GREENSPAN,

Attorneys.

FEBRUARY 1976.

rr

la

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 74-1611

EVELYN ELLIOTT and BENITO MOLINA, Individually

and on behalf of all others similarly situated,

PLAINTIFFS-APPELLEES

v8.

CASPAR W. WEINBERGER, Individually and in his

capacity as Secretary, United States Department

of Health, Education and Welfare; and SuNG DAI

SEU, individually and in his capacity as Pacific

Area Manager, Social Security Administration,

Department of Health, Education and Welfare,

DEFENDANTS-APPELLANTS

No. 74-3118

FANNIE BUFFINGTON and FRANCES BINER,

Individually and on behalf of all others

similarly situated, PLAINTIFFS-APPELLEES

v8.

CASPAR WEINBERGER, Individually and in his capacity

| as Secretary of the Department of Health,

; Education and Welfare, DEFENDANTS-APPELLANTS

OPINION

[October 1, 1975]

a Om >

2a

74-1611, Appeal from the United States District

Court for the District of Hawaii

74-3118, Appeal from the United States District

Court for the Western District of Washington

Before: BROWNING and TRASK, Circuit Judges, and

WILLIAMS,* District Judge

WILLIAMS, District Judge:

These consolidated appeals by the Secretary of the

Department of Health, Education and Welfare (here-

inafter referred to as the “Secretary”) challenge the

judgments of two district courts requiring, inter alia,

the Secretary to provide old-age and disabled social

security beneficiaries the opportunity to request a

hearing prior to the initiation of recoupment proce-

dures, the purpose of such procedures being the recov-

ery of monies paid to such beneficiaries allegedly in

excess of their legal monthly entitlements. In both

these class action suits plaintiffs-appellees asserted

that the procedures utilized by the Secretary in re-

couping excess payments denied them due process of

law under the fifth amendment because their benefits

were reduced or suspended without adequate notice

of the reason for the recoupment, without adequate

notice of their right to reconsideration, waiver, or

partial adjustment of the Secretary’s recoupment de-

* Honorable Spencer Williams, United States District Judge

for the Northern District of California, sitting by designation.

RN eee St A CNA LAD ALLEL AN eS ts gc al

—

OO 8 A RINE ee

Ne ee ee ee ee ee

cision, and without affording them the opportunity

to have a pre-recoupment hearing. Elliott v. Wein-

berger, 371 F. Supp. 960, 964 (D. Haw. 1974);

Buffington v. Weinberger, Civil No. 734-73C2 (W.D.

Wash., Oct. 22, 1974). The district courts held that

mandamus jurisdiction was established under 28

U.S.C. § 1361,’ and that the recoupment procedures

violated the due process rights of these complaining

recipients. In addition to providing a hearing to any

recipient who requested one, the Secretary was order-

ed to supply the recipients adequate notice informing

them of their right to such a hearing, and the hear-

ing, if requested, had to precede recoupment. While

we are in substantial agreement with the general

principle that a hearing must be afforded recipients

prior to recoupment of their monthly benefits, we do

not believe that such a hearing is constitutionally

compelled unless the issues raised in a recipient’s re-

quest for review of the Secretary’s initial overpay-

ment and recoupment determination are incapable

of resolution upon written submission and/or docu-

mentary proof.

1In Elliott v. Weinberger, plaintiffs asserted that jurisdic-

tion additionally existed under 28 U.S.C. §1331(a) and 5

U.S.C. § 701 et seq. The court in Elliott, however, expressly

declined to decide whether jurisdiction could be properly

predicated upon these sections, but noted in passing that sup-

port existed for either jurisdictional base. In Buffington Vv.

Weinberger, the court found both § 1361 and § 701 et seq.

to furnish the necessary jurisdictional basis.

4a

The Statutory and Procedural Background

The Social Security Act vests the Secretary with

the power to recover lost funds in the event over-

payments are made to recipients of old-age or dis-

ability benefits. 42 U.S.C. § 404 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 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 Sec-

retary shall decrease any payment under

this subchapter to which such overpaid per-

son is entitled, or shall require such over-

paid person or his estate to refund the

amount in excess of the correct amount, or

shall decrease any payment under this sub-

chapter 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 forego-

Me 6 as :

(b) In any case in which more than the cor-

rect amount of payment has been made, there

shall be no adjustment of payments to, or recov-

ery 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.

Ce ee

oe ee ee

5a

The challenged government procedures are as fol-

lows: As of January 1, 1974,’ all recipients subject

to recoupment receive, thirty days before actual re-

coupment begins, form letters which set forth the

reasons for the proposed recoupment, the availability

of reconsideration (when a recipient asks for recon-

sideration, the correctness of the overpayment deter-

mination itself is being challenged), the condition for

waiver (when a beneficiary requests that his over-

payment be waived, he is, in effect, conceding the

debt but asking that it be forgiven or reduced), and

the need to consult the local Administration office

within thirty days if they wish to complain.’

2 At the time these suits were filed, those beneficiaries whose

overpayments were determined from their “annual earnings

reports” were not entitled to advance notice of recoupment.

Rather, recoupment began immediately, subject to later con-

sideration of the beneficiary’s request for reconsideration or

waiver. Plaintiffs Silva, Ortez, Vaquilar, Biner and Buffiing-

ton all had recoupment procedures initiated against them on

the basis of earnings reports filed with the Secretary. Follow-

ing January 1, 1974 it has been the Secretary’s practice to

provide all such beneficiaries the same pre-recoupment notice

as in other overpayment cases.

* Social Security Claims Manual § 5503(a) requires the Sec-

retary to inform overpaid beneficiaries of their “right to re-

quest reconsideration” and of the applicable waiver provisions

of the Social Security Act. Contrary to the Secretary’s con-

tention, the form letter notice does not apprise a beneficiary

of his “right” to waiver consideration. Nor does the Claims

Manual require such disclosure. Only the “conditions” of

waiver need be revealed. Even as to reconsideration, the

form letter fails to make clear that such re-appraisal is a

matter of right rather than a mere possibility.

6a

The initial overpayment and recoupment notice

sent to beneficiaries makes no mention of the forms

needed for reconsidera.ion or waiver, nor sets forth

information about how to complete them. However,

the beneficiary can obtain review of his case by set-

ting forth, in a letter, the reasons why he opposes

the overpayment determination or seeks waiver. When

reconsideration or waiver consideration is required,

the Administration’s decision is based upon a claim-

ant’s ex parte presentation of documentary evidence

offered in support of his claim for relief. No oral

hearing is given prior to the commencement of re-

coupment.

Furthermore, it is the Secretary’s policy to im-

mediately defer recoupment action upon the filing of

a request for reconsideration or waiver. Claims

Manual § 5503(b), (c). Any deferral of recoupment

beyond thirty days after the date of the initial no-

tice lies completely within the discretion of the Ad-

ministration. Although appellants claim that it is

the Secretary’s policy to defer recoupment indefinitely

once a request for reconsideration or waiver has been

filed (Claims Manual § 5503(c)), in plaintiff Biner’s

case social security checks were not forthcoming in

either November or October of 1973, notwithstand-

ing the fact that Biner filed a waiver request in mid-

October 1973. Appellants attribute this oversight to

administrative error.

If, after review of the information supplied by the

beneficiary, the Secretary adheres to his initial de-

termination that recoupment is appropriate, he noti-

1 rere

Tt NET ROO Cn Ala ee

7a

fies the beneficiary to this effect and resumes the

withholding of benefits to satisfy the overpayment.

If dissatisfied with this decision, the beneficiary may

request an administrative hearing de novo, in which

the beneficiary is provided an opportunity to present

oral testimony and to cross-examine witnesses be-

fore an independent hearing examiner. 20 C.F.R.

§ 404.928-.929. However, recoupment is not sus-

pended pending the outcome of this de novo hearing.

The beneficiary is further entitled to appeal the hear-

ing examiner’s determination to the Appeals Council

of the Social Security Administration (20 C.F.R.

§ 404.945), and to judicial review of the Appeals

Council’s decision pursuant to 42 U.S.C. § 405(g).

The Facts

In Elliott, plaintiffs Silva, Ortiz and Vaquilar

(subclass one) were determined to have been over-

paid by the Secretary based upon their own annual

earnings reports. They all received the form letter

previously mentioned indicating the reasons for the

overpayment determination, the specific amount over-

paid and the amount by which the recipient’s subse-

quent benefit checks would be reduced or suspended

altogether. These plaintiffs were additionally ap-

prised of the possibility of reconsideration and the

conditions of waiver. All of them contacted the Ad-

ministration’s local offices within thirty days of re-

ceipt of the letter. At the time the Elliott court ren-

dered its decision, the Secretary had completed re-

8a

coupment against two of these plaintiffs, but as to

the other had deferred recoupment pending disposi-

tion of the suit.

Plaintiffs Elliott, Gaines and Yamasaki (subclass

two) received notices more than thirty days before

recoupment was to begin, the notice disclosing infor-

mation similar that contained in the notices sent to

subclass one plaintiffs.‘ Plaintiff Elliott was notified

that the overpayment determination was predicated

upon “her receipt of both retirement and disability

benefits when she was entitled to only disability bene-

fits.” Elliott, supra at 965. “Duplicate payments”

was the reason given Gaines for his overpayment,

and plaintiff Yamasaki was told that “a processing

error’ caused an overpayment to be sent to her. All

subclass two plaintiffs contacted their district office

within thirty days after receipt of the overpayment

notice. Recoupment against Elliott and Gaines was

deferred pending resolution of this case, whereas re-

coupment against Yamasaki has been completed.

Elliott, supra at 965-66.

As to plaintiffs Buffington and Biner, their claims

arose out of factual situations similar to those per-

taining to three of tne named plaintiffs in Elliott.’

Both Buffington and Biner are recipients of social

security old-age benefits. Based on “annual earnings

reports” submitted by plaintiffs, the Secretary de-

termined that they had received overpayments of

‘For a discussion of the major difference see note 2 supra.

* See note 2 supra.

ae ee

we) Ra ate oe PME ns 4 ane ~

CP ME) ete AR ER cate RE OE ee A Ril CTE TE, Sek gears nN TE I Oe ee

9a

benefits, and consequently sought to recoup the over-

payments from plaintiffs’ future benefits.’

In 1973 Mrs. Buffington was entitled in her own

right to old-age social security benefits of $80.50 per

month. Based upon her husband’s earnings record,

she was also entitled to wife’s benefits of $15.70 a

month, resulting in total monthly benefits of $96.20

(she actually was receiving $89.90 per month due

to monthly Medicare deductions of $6.30). In Sep-

tember 1973, plaintiff’s husband filed an annual

earnings report which showed that he had received

earnings in 1972 which exceeded the statutory limit.

Accordingly, the Secretary determined Mrs. Buffing-

ton to have been in receipt of a total overpayment of

$78.60. Notice of the overpayment was sent to Mrs.

Buffington on October 3, 1973, indicating that the

overpayment would be withheld from her next benefit

check. In early November she received a social se-

curity check in the amount of $11.30. Mrs. Buffing-

ton subsequently submitted a request for reconsidera-

tion to the local administrative office. On July 24,

1974 her request was denied and the original over-

payment determination was sustained.

* Pursuant to 42 U.S.C. § 403(b), deductions from social

security benefits must be made when a beneficiary’s earnings

exceed the amount prescribed by statute. To determine whether

deductions are appropriate in any given case, a beneficiary

who earns more than the statutory maximum is required

to file an “annual earnings report” which sets forth the amount

of wages earned by the beneficiary during the preceding year.

The social security application form, and certain pamphlets

sent to beneficiaries, advise the claimants of the filing re-

quirement.

10a

Mrs. Biner was found entitled to old-age social

security benefits in November 1970. In November

1972, however, she notified her claims representative

that she intended to cease working in December

1972.’ The Social Security Administration in 1972

sent Mrs. Biner three checks in a total amount of

$2,216.20, representing benefits for all of 1972."

However, the Administration subsequently dis-

covered, as a result of a cross check with Biner’s

former employer, that Biner had earned income in

* There is considerable dispute as to whether plaintiff Biner

also informed the district office that her earnings would not

exceed the statutory maximum in 1972. The Secretary con-

tends that plaintiff represented to her claims representative

that she would not have earnings above $1,680 for the year

1972, and that based upon this representation the Secretary

issued Mrs. Biner $2,216.20 in excess benefit checks. Plaintiff

Biner, on the other hand, claims that her purpose in con-

tacting the local office was to ensure that she would begin re-

ceiving her benefits promptly after her retirement in Decem-

ber 1972, and, as such, would only have had cause to inform

the office of the date of her retirement, not the amount of

income she earned during 1972. In any event, she exceeded

the earnings maximum in 1972—the year for which she

received the benefit checks at issue here.

® It is unclear whether Mrs. Biner knew or should have had

reason to know that these checks represented benefit pay-

ments for the year 1972. The Secretary contends that enclosed

with at least the first check was a letter which indicated that

the check was intended as back payment for 1972. Excerpts

of this letter which are quoted in the affidavit of the Deputy

Director of the Bureau of Retirement and Survivors Insurance

of the Social Security Administration do not bear this out.

Buffington Tr. 311. On the other hand, Mrs. Biner asserts that

no explanation whatsoever was furnished by the Administra-

tion articulating the purpose in its sending this check.

" ee _

lla

excess of the statutory amount for 1972. Thereupon,

the Secretary requested Mrs. Biner to file an annual

earnings report, which she submitted on August 28,

1973; and it was upon this basis that the overpay-

ment was determined.

In the latter part of September 1973, Mrs. Biner

was notified that she had been overpaid, and con-

sequently, her benefits would be suspended until the

entire amount had been recouped. She was also

supplied with a facsimile of the form letter referred

to earlier. She received no benefit checks for October

1973. In Mid-October 1973 Mrs. Biner received a

letter from the Administration containing “waiver”

forms which she was instructed to fill out and return

to the district office if she wished to do so. Mrs.

Biner completed the forms and mailed them to the

local office. However, submission of this request for

waiver consideration did not halt recoupment pro-

ceedings. Moreover, on November 19, 1973 Mrs.

Biner was informed that she was at fault in retain-

ing the checks and, consequently, no waiver would

be permitted. She was also informed that the original

suspension of her benefits had been adjusted so that

$50.00 per month would be withheld from her regu-

lar benefit payments.

During the latter part of 1973 Mrs. Biner twice

requested reconsideration of the Secretary’s over-

payment decision. Again, recoupment was not halted.

On April 8, 1974, however, the Secretary adhered

to his initial determination that recoupment was ap-

propriate, and continued to deduct amounts from

12a

Mrs. Biner’s subsequent benefit checks. In late May

or early June of that year, Mrs. Biner requested and

was granted on October 21, 1974 an administrative

hearing to review the propriety of the Secretary's

recoupment decision. After oral hearings, the admin-

istrative law judge sustained the Secretary’s decision.

Appeal of the judge’s ruling is presently pending.

The District Courts Properly Exercised Jurisdiction

Under 28 U.S.C. § 1361

The Secretary contends that the district courts

erred in assuming jurisdiction over these cases pur-

suant to the Federal Mandamus statute, 28 U.S.C.

§ 1361. Mandamus has traditionally been viewed

as appropriate to compel officials to comply with the

law only when the claim is clear and certain and the

duty of the officer is ministerial and “so plainly pre-

scribed as to be free from doubt.” United States v.

Walker, 409 F.2d 477, 481 (9th Cir. 1969).

Typically, mandamus has been limited to cases

in which statutory or regulatory duties were sought

to be enforced. Recently, however, in Knuckles v.

Weinberger, 511 F.2d 1221 (9th Cir. 1975), this

court held section 1361 to supply the necessary juris-

dictional basis when a constitutional duty is made

clear by subsequent judicial interpretation. In

Knuckles we conclude that a district court had sec-

tion 1361 jurisdiction to consider constitutional claims

asserted against the Department of Health, Educa-

tion and Welfare’s summary suspension of social

security payments. In so holding, we made it clear

A tt et Ct tr OR 2 Se =

be DAL we AN had ni a

~ ee ee, ee ee eee eee

Pe ee “Te *

18a

that it is not essential to a finding of jurisdiction that

the constitutional duty sought to be enforced be clear

beyond all doubt from the outset of the litigation

See also Brown v. Weinberger, 382 F. Supp 1092

(D. Ma. 1974). All that is required is that plaintiffs

avoid asserting unsubstantial claims. Mead v Parker

464 F.2d 1108 (9th Cir 1972); Byse & Fiocea “See.

tion 1361 of the Mandamus and Venue Act of 1962

and ‘N on-Statutory’ Judicial Review of Federal Ad-

ministrative Action,” 81 Harv. L. Rev. 308 (1967)

If we were bound to first determine the existence of

a duty on the part of the Secretary as a prerequisite

to iinding jurisdiction under § 13861—~an approach

urged upon us by the Secretary—we would, in es-

sence, be disposing of these cases on their aute~

an exercise wholly inappropriate in deciding the

threshold question of jurisdiction.

In the instant cases, the allegations contained in

the complaints present substantial constitutional

claims, namely, that Goldberg v. Kelly, 397 U.S. 254

(1970), compels the conclusion that the procedures

instituted by the Secretary deprive plaintiffs of their

property without due process of law. While section

404 of the Social Security Act vests the Secretar

with discretion in establishing procedures to camer

overpayments, he may not institute procedures which

violate the fifth amendment. Precedents clearly dem-

onstrate that the applicability of the Goldberg ration-

ale to the instant circumstances is not so tenuous as

to seriously call into question the substantiality of

l4a

plaintiff’s claims here. The district courts therefore

properly assumed jurisdiction under § 1361 to decide

whether the Secretary had abused his discretion.’

Accord Frost v. Weinberger, 515 F.2d 57 (2d Cir.

1975); Mattern v. Weinberger, Civil No. 74-1776

(3d Cir., June 3, 1975) (slip opinion) ; Martinez v.

Richardson, 472 F.2d 1121 (10th Cir. 1973).

The Class Action

The district court in Elliott certified the Silva,

Ortiz and Vaquilar plaintiffs as representatives of a

subclass of old-age beneficiaries resident in Hawaii

subject to actual or possible recoupment of overpay-

ments as a result of their own annual income reports.

The Elliott, Gaines and Yamasaki plaintiffs were

certified as a subclass representing recipients of old-

age and disability benefits resident in Hawaii who

were subject to actual or possible recoupment for

reasons other than the filing of annual income reports.

The court ordered (1) the posting of a notice in

every local social security office; (2) the publishing

of an advertisement in a non-legal section of two

newspapers of general circulation; and (3) the in-

clusion of a notice of the suit in every letter from the

Administrating informing the recipients of its over-

payment determination. The notice informed the

members of the class of the pendency of the suit, of

° Having found an adequate jurisdictional basis under the

Mandamus Act, it is unnecessary to decide whether the Ad-

ministrative Procedure Act or 28 U.S.C. § 1331(a) also furn-

ish an independent source of jurisdiction.

ee et ee ee eee

lda

their right to intervene, and of their right to question

the adequacy of their representation. Elliott Tr. 199-

201. The Government takes no issue with the Elliott

court’s class certification order or with the adequacy

of the notice provided.

The Buffington court certified the two named plain-

tiffs as representatives of a nation-wide class of per-

sons eligible for social security old-age and survivors’

benefits under 42 U.S.C. § 402 “whose benefits have

been or will be reduced or otherwise adjusted with-

out prior notice and opportunity for a hearing.”

The court excepted from the class residents of Hawaii

and the Eastern District of Pennsylvania and those

individuals involved in other litigation challenging

the Secretary’s procedures in recouping benefits with-

out prior notice and hearing. Buffington Tr. 422-

24. No notice whatsoever was provided members

of the certified class.

The Secretary contends that the failure to order

that notice be provided to the class was a violation

of due process and that the class order must be de-

clared invalid, reducing the effect of the judgment

solely to the two individuals named as plaintiffs. The

Secretary further argues that the district court

abused its discretion in certifying a nation-wide class.

We disagree.

There is little doubt that the district court’s cer-

tification order satisfied the terms of Fed. Rule of

Civ. Pro., Rule 23(c)(1) and (3). Furthermore,

contrary to the Secretary’s suggestion, this action is

plainly of the type described in Rule 23(b) (2), not

fs

16a

23 (b)(3). Although plaintiffs seek recovery of

monies recouped from their monthly benefit checks,

their primary purpose in bringing this action is to

enjoin the Secretary from recouping such sums with-

out providing social security beneficiaries a proceed-

ing hearing. It is only logical that as a necessary

part of their claim plaintiffs would seek to recover

money which they believed to have been retrieved

pursuant to the procedures sought to be enjoined.

In short, pecuniary recovery is purely incidental to

this suit’s principal purpose, and consequently this

action is properly certifiable under 23 (b) (2). Rob-

inson v. Lorillard Corp., 444 F.2d 791 (4th Cir.

1971). In similar cases, too numerous to cite here,

class certification of an essentially (b)(2) action

was not precluded simply because monetary benefits

were an inevitable by-product of the recovery of the

injunctive and declaratory relief prayed for. See

eases cited in 3B Moore’s Federal Practice, {| 23.40,

at 23-652 to 23-654 (1974), and 1974 Cum. Supp.

at 82 n.19. In any event, the Buffington court’s judg-

ment did not award plaintiffs damages.

Under Rule 23(c)(2) notice is mandatory in a

(b)(3) class action. And the Supreme Court has

so held. Eisen v. Carlisle & Jacquelin, 417 U.S.

156 (1974). The Secretary contends that the Hisen

rationale should be extended to cover all class ac-

tions, including, naturally, (b) (2) actions. However,

even the Eisen Court acknowledged that the notice

requirements of subdivision (c)(2) are inapplicable

to (b)(2) class actions. Jd. at 177 n.14. Rather,

2 we ctiies

17a

Rule 23(d)(2) operates to make notice discretion-

ary with the court in (b) (2) actions.

The weight of authority supports an intergeete-

tion—consistent with due process requirements—of

Rule 23 which does not require notice in every (b)

(2) class action. Compare Katz v. Carte Blanche

Corp., 496 F.2d 747, 756 (3d Cir.), cert. denied, 419

U.S. 885 (1974) ; Woodward v. Rogers, 344 F. Supp.

974, 980 n.10 (D.D.C. 1972), aff'd, 486 F.2d 1317

(D.C. Cir. 1973); Yaffe v. Powers, 454 F.2d 1362,

1366 (1st Cir. 1971); Souza v. Scalone, 64 F.R.D.

654, 659 (N.D. Cal. 1974) ; Johnson v. City of Baton

Rouge, La., 50 F.R.D. 295, 299 (E.D. La. 1970);

Northern Natural Gas Co. v. Grounds, 292 F. Supp.

619 (D. Kan. 1968) ; 3B Moore’s Fed. Prac. { 23.55,

at 23-1152; 7A Wright & Miller, Fed. Prac. & Proc.,

Civ.: § 1786 (1973) [notice not required in (b) (2)

action] with Schrader v. Selective Service Sys. Loc.

Bd. No. 76, 470 F.2d 73, 75 (7th Cir. 1972), cert.

denied, 409 U.S. 1085 (1972); Zielstra v. Tarr, 466

F.2d 111 (6th Cir. 1970) [notice required].

The seminal case upon which most, if not all,

courts requiring notice rely is the Second Circuit’s

decision in EHisen v. Carlisle & Jacquelin, 391 F.2d

555, 564-65 (2d Cir. 1968), in which the court by

way of dicta stated that “notice is required as a

matter of due process in all representative actions.”

Id. at 564. However, in Frost v. Weinberger, 515

F.2d 57, 65 (2d Cir. 1975), the Second Circuit re-

jected its earlier pronouncement in ELisen and specifi-

cally rule that LHisen’s statements with respect to

18a

notice only applied to class actions brought under

provisions of Rule 23 other than (b)(2). Indeed,

even before Frost some district courts in the Second

Circuit resisted Eisen’s inflexible due process ap-

proach to (b)(2) actions, and instead read Eisen to

say that notice was required in class actions when

due process so required. Lynch v. Household Fin.

Corp., 360 F. Supp. 720, 722 n.38 (D. Conn, 1973).”

1 Likewise, district courts in the Sixth Circuit have not

uniformly chosen to follow the decision in Zielstra v. Tarr,

supra; one court finding Zielstra’s statement that due process

required notice in all class actions purely dictum, “since the

Court of Appeals held that the District Court did not have

subject matter jurisdiction of the case which was on appeal.”

Watson Vv. Branch County Bank, 380 F. Supp. 945, 960 n.11

(W.D. Mich. 1974). Cf. Alexander v. AVCO Corp., 380 F.

Supp. 1282, 1286 (M.D. Tenn. 1974).

It is unclear where the Fifth Circuit stands on the notice

question. In Johnson Vv. Georgia Highway Express, Inc., 417

F.2d 1122, 1125 (5th Cir. 1969), without Jiscussing due

process requirements, the court implied that notice in (b) (2)

actions is not required. In Justice Godbold’s specially con-

curring opinion he states that 23(b) (2) “does not require

notice.” Jd. at 1127 n.1. Acting in apparent harmony with

Johnson, the Fifth Circuit affirmed a Florida district court

decision which held notice to be inappropriate in (b) (2) class

actions. Mungin Vv. Florida East Coast Ry. Co., 318 F. Supp.

720, 732 (M.D. Fla. 1970), aff'd, 441 F.2d 728 (5th Cir.

1971), cert. denied, 404 U.S. 987 (1971). On the other hand,

the Fifth Circuit upheld a district court decision in which

Eisen was followed and notice was found necessary in a

(b) (2) aetion. Pasquier v. Tarr, 318 F. Supp. 1350, 1353-54

(E.D. La. 1970), aff'd, 444 F.2d 116 (5th Cir. 1971). Per-

haps it is fair to infer that at least the Fifth Circuit does not

ascribe to the procrustean view that notice is required in all

representative actions, rather whether vel non notice is man-

dated depends on the circumstances involved and the applica-

bility of relevant due process considerations.

19a

Contrary to the Secretary’s suggestion that the dis-

tinction between (b)(2) actions having monetary

repercussions and (b)(3) actions is one solely of

form of relief sought and not one of substance, rele-

vant authorities have oft stated that the need for

notice in a (b) (2) class action is de minimis simply

because of its fundamental differences from a (b) (3)

suit. As the Advisory Committee in its Note accom-

panying the proposed revised, now adopted, Rule 23

implies, the strict (c)(2) notice requirement is in-

apposite to a (b)(2) class because (b)(2) classes

will tend to be more cohesive and unified so that ade-

quate representation reduces the need for notice. See

39 F.R.D. 106.

In representative actions brought under the oth-

er provisions of Rule 23(b) [provisions other

than 23(b) (3) ], the class generally will be more

cohesive—for example, in many instances each

member will be affected as a practical matter by

a judgment obtained by another member if indi-

vidual actions were instituted. Similarly, it is

less |. ely that there will be special defenses or

issues relating to individual members of a Rule

23(b)(1) or Rule 23(b)(2) class, than in the

case of a Rule 23(b) (3) class. This means that

there is less reason to be concerned about each

member of the class having an opportunity to

be present. 7A Wright & Miller, supra, § 1786,

at 143.

To the extent that absent class members might, as a

matter of policy disfavor the position taken by named

plaintiffs, defendants are usually more than adequate

20a

stand-in for the purpose of presenting the policy ar-

guments to the court.

Thus, in suits under subdivisions (b)(1) or (b)

(2), once the court determines that the members

are adequately represented as required by Rule

23(a)(4), it is reasonably certain that the

named representatives will protect the absent

members and give them the functional equiva-

lent of a day in court.

In keeping with this philosophy, class members

in Rule 23(b)(1) and Rule 23(b)(2) actions

are not provided an opportunity by the rule to

exclude themselves from the action as is true in

Rule 23(b)(3) actions. [Air Line Stew. v.

American Airlines, Inc., 490 F.2d 636, 642 (7th

Cir. 1973); Johnson City v. City of Baton

Rouge, supra; Van Gemert v. Boeing Co., 259

F. Supp. 125, 130 (S.D.N.Y. 1966)]. Because

they do not have the alternative of bringing a

separate suit, notice really serves only to allow

those members the opportunity to decide if they

want to intervene or to monitor the representa-

tion of their rights. [Souza v. Scalone, supra, 64

F.R.D. at 659; Watson v. Branch County Bank,

supra, 380 F. Supp. at 959].

We are of the opinion that the better reasoned

view counsels against requiring, under due process

principles, notice in every (b)(2) action. Only when

the purposes in providing class members an oppor-

tunity to signify whether representation by named

plaintiffs is fair and adequate or to intervene to pres-

ent additional claims or to otherwise come into the

lal:

tag woe

2la

action to, for example, submit views as amici curiae,

are in need of being served, does due process require

the direction of some sort of notice to absent mem-

bers of a (b)(2) class. In the instant case no such

special circumstances exist to impel us to overturn

the Buffington court’s decision not to provide notice.

There is no question but that plaintiffs here are

represented by skilled and experienced counsel. Their

record here and at the district court level is testimony

to this commendation. When, as here, absent mem-

bers’ interests are adequately assured of being repre-

sented because there are no money damages involved,

no significant factual dispute is in need of resolution,

the only issues raised are constitutional, and there is

no serious question as to the competency of counsel,

notice to the class serves no apparent purposes.

Lynch v. Household Fin. Corp., supra; Woodward v.

Rogers, supra. The presentation of additional indi-

vidual claims would have complicated the suit and

protracted it to the detriment of the class as a whole.

The named plaintiffs’ claims are typical of the class,

and additional plaintiffs are unnecessary. The con-

stitutional issues involved in the suit have been ex-

haustively briefed by counsel and fully canvassed in

the cases and commentaries, thus rendering additional

supplementation by absent members as amici curiae

superfluous. Watson v. Branch County Bank, supra.

For all intents and purposes, the class members of

22a

the instant class have received their functional equiv-

alent to a day in court.”

The Secretary’s claim that the Buffington court

abused its discretion in certifying a nation-wide class

is similarly unpersuasive. In reviewing the designa-

tion of a class by the trial judge the appellate court

should allow the broadest discretion. City of New

York v. International Pipe & Ceramics Corp., 410

F.2d 295 (2d Cir. 1969). Furthermore, nothing in

Rule 23 indicates that a class should not be designated

because it is too large. Certification of a national

class action is not unknown in the federal courts.

See Woodward v. Rogers, supra. The Secretary does

not cite, nor can we find, any authority which sup-

ports his rather novel theory limiting (b)(2) class

actions because of their numerosity and manageability

problems. By its terms, Rule 23 makes manage-

ability an issue important only in determining the

propriety of certifying an action as a (b)(3), not a

™ That Buffington’s class determination forecloses absent

members from bringing individual suits thereafter, in and

of itself, is not a factor militating against certification of a

(b) (2) class action. If it were otherwise, no class actions

could ever be certified under (b) (2). This is so because in

(b) (2) actions absent members, regardless whether they

receive notice or not, cannot excuse themselves from the

litigation or avoid the res judicata effects of the judgment

entered therein. Compare Air Line Stew. v. American Air-

lines, Inc., supra, 490 F.2d at 642, with Schrader v. Selec-

tive Service Sys. Loc. Bd. No. 76, supra, 470 F.2d at 75. In-

deed, (b) (2) actions are generally preferred for their wider

res judicata effects. Bing v. Roadway Express, Inc., 485 F.

2d 441, 447 (5th Cir. 1973).

23a

(b) (2), class action. And as a practical matter, since

plaintiffs seek no damages, and because notice is not

required to be directed to these class members, there

simply are no manageability problems here involved.

In short, the Buffington suit strikes us as the classic

type of action envisioned by the drafters of Rule 23

to be brought under subdivision (b) (2). The Secre-

tary has acted on grounds generally applicable to all

members of the class and finai injunctive and decla-

ratory relief with respect to the whole class is appro-

priate. Even if we required the Buffington suit to

proceed on behalf of the named plaintiffs only, the in-

junctive relief awarded in this suit would necessarily

operate in favor of all social security old-age and

survivor benefit recipients. It would be a practical

absurdity were the Secretary to provide the ¢i2 proc-

ess safeguards enunciated herein to the exclusion of

all save the named plaintiffs. The Administration

would be besieged with suits seeking the vindication

of each and every social security recipient of old-age

and survivors’ benefits subject to the Secretary’s re-

coupment procedures. With a copy of this decision

in their hands, ever-watchful legal-assistance attor-

neys would wreak havoc on the administration of the

Secretary’s recoupment programs. Multiplicity of ac-

tions based on the same constitutional claims ad-

vanced here would be the inevitable result. Obviating

such unnecessary duplication is the very purpose for

which Rule 23(b)(2) was designed. Maintenance of

the instant case as a class action is not only proper,

24a

but it also will effectuate the interests both of judi-

cial administration and of justice.

The Merits

The principal case upon which plaintiffs rely is

Goldberg v. Kelly, 397 U.S. 254 (1970). There the

Supreme Court held that a pre-termination eviden-

tiary hearing was required before a welfare recipi-

ent’s benefits could be terminated. Stressing the

recipient’s “brutal need” in continued payments, the

Court found that in the balance

the interest of the eligible recipient in uninter-

rupted receipt of public assistance, coupled with

the State’s interest that his payments not be

erroneously terminated, clearly outweighs the

State’s competing concern to prevent any in-

crease in its fiscal and administrative burdens.

Goldberg, id. at 266.

Plaintiffs contend that the Goldberg decision compels

a finding that pre-recoupment hearings are constitu-

tionally necessary when the Secretary determines that

overpayments have been made to social security old-

age and disability beneficiaries and seeks to recoup

those overpayments.

On the other hand, the Secretary argues that, for

the following reasons, Goldberg should be read nar-

rowly, and thus determined inapposite to the cases

here: (1) the Secretary’s present “written hearing”

is adequate to establish the “probable validity” of

the Administration’s overpayment determination;

(2) the impact upon a social security recipient of a

25a

reduction in or suspension of his or her monthly

payments is not severe enough to warrant providing

the recipient an oral hearing prior to recoupment;

(3) to require such a hearing would result in vast

disruption of the Social Security System; (4) in

waiver consideration cases no property interest is in-

volved invoking due process safeguards; and (5) no

factual issues are presented in reconsideration cases

necessitating oral pre-recoupment hearings.”

In Mattern v. Weinberger, Civil No. 74-1776 (3d

Cir. June 3, 1975) (slip opinion), all the arguments

"In a footnote, the Secretary postulates that since the

plaintiffs in Elliott whose overpayments were determined by

information other than that disclosed in annual earnings

reports have as yet had their reconsideration and/or waiver

claims acted upon by the Secretary (due to the district

court’s order prohibiting the Secretary from so acting), “the

court’s failure to await the Secretary’s action on those writ-

ten requests was plain error.” Appellants’ Brief in Elliott,

at 17 n.19. In other words, the Secretary contends that the

district court failed to observe the requirement that admin-

istrative remedies must be exhausted as a requisite to the

initiation of proceedings in a federal court.

However, the case here is to be distinguished from the

normal situation in which federal jurisdiction is sought to

be invoked to review administrative action. Most often, the

courts are asked to scrutinize the merit of an administrative

determination, and in that instance, the available avenues

of administrative review must ordinarily be exhausted. On

the other hand, where, as here, the procedures which the

agency contends must be exhausted are themselves the sub-

ject of attack, exhaustion is unnecessary. Finnerty v. Cowen,

508 F.2d 979 (2d Cir. 1974) ; Martinez v. Richardson, supra,

472 F.2d 1121; Marsh v. County School Bd., 305 F.2d 94

(4th Cir. 1962): Francois v. Busheil, 325 F. Supp. 531 (N.D.

Cal, 1971).

26a

advanced here by the Secretary to distinguish the

cases at bar from Goldberg, as well as the arguments

propounded here by the Secretary, in connection with

the burden that requiring pre-recoupment oral hear-

ings would impose on the Administration, were fully

considered and for the most part rejected. This Court

concurs with the Third Circuit’s opinion and shares

in its conclusion that Goldberg requires the Secretary

to provide social security beneficiaries with a pre-

recoupment oral evidentiary hearing along the param-

eters and with the qualifications outlined in the Mat-

tern decision.

It cannot be seriously maintained that some form

of process is not due social security beneficiaries

whose old-age or disability payments are subject to

suspension or reduction under the Secretary’s recoup-

ment procedures. Plaintiffs’ interests in their monthly

benefits amounts to a statutory entitlement and,

therefore, constitutes a property interest protected

under the Due Process Clause of the fifth amendment.

Goss v. Lopez, 419 U.S. 565, 573 (1975); Board of

Regents v. Roth, 408 U.S. 564, 577 (1972); 42 U.S.C.

§ 401 et seq. Thus, they may be deprived of their

property interests only by due process of law. /d.

That the deprivation of such property interests does

not subject the persons entitled thereto to a “severe

detriment or grievous loss” is of no moment in deter-

mining whether due process comes into play.

[F Jor in determining ‘whether due process re-

quirements apply in the first place, we must look

not to the “weight” but to the nature of the in-

27a

terest at stake.’ [citations omitted.] [T]he

length and consequent severity, while another

factor to weigh in determining the appropriate

form of hearing, ‘is not decisive of the basic

right’ to a hearing of some kind. [citation omit-

ted.] 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 ac-

count must be taken of the Due Process Clause.

[citations omitted.] Roth at 576 (emphasis orig-

inal.)

A suspension or reduction in old-age or disability

benefits imposed in order to recover an alleged over-

pay. ent is not a de minimis deprivation outside the

protection of the due process clause. See Goss, id.

(wherein the Court found a 10-day suspension from

school not to be de minimis).

The Secretary contends that where a recipient ad-

mits that an overpayment has been made but seek

to gain a waiver of recoupment under 42 U.S.C.

§ 404(b), the recipient has no property interest in

the amounts overpaid deserving of due process pro-

tection. This argument is untenable. In Board of

Regents v. Roth, supra at 577, the Supreme Court

observed that,

the welfare recipients in Goldberg v. Kelly, su-

pra, had a claim of entitlement to welfare pay-

ments that was grounded in the statute defining

eligibility for them. The recipients had not yet

shown that they were, in fact, within the statu-

tory terms of eligibility. But we held that they

28a

had a right to a hearing at which they might

attempt to do so.

Thus, the social security beneficiaries here who con-

cede they have been overpaid nonetheless possess a

property interest in their right to demonstrate they

are eligible for waiver under the terms of 42 U.S.C.

§$ 404(b). Section 404(b) provides a recipient of an

overpayment with a statutory right not to have his

payments reduced or suspended if he is “without

fault” and the recovery would “defeat the purpose”

of the Act or “would be against equity and good con-

science.” It is not a matter of “governmental benefi-

cence,” as the Secretary puts it, in his waiving re-

coupment. Rather, it is a question of complying with

the statute. Indeed, under section 404(b) waiver is

not discretionary, but mandatory, viz., it provides

that “there shall be no” recoupment under the condi-

tions specified. “Thus, the fact that [plaintiffs] may

not have been entitled to receive the overpayment(s |

does not mean that [they have] no claim of entitle-

ment to retain [them] (or at least to receive the full

amount of [their] future monthly payments).” Mat-

tern v. Weinberger, supra at 26. (emphasis original.)

More difficult, however, is determining the form of

process to which plaintiffs are due. The Secretary

contends that, except in the “most extraordinary”

circumstances as epitomized by Goldberg v. Kelly, the

Supreme Court has not required trial-type hearings

prior to a deprivation of a property interest where,

as here, the preliminary pre-deprivation procedures

29a

are sufficient to establish the “probable validity” of

the administrative claim.

In Mattern, the Third Circuit voiced what we be-

lieve to be the crucial flaws in the Secretary’s analy-

sis.

First, the Secretary relies primarily on a line

of cases which, while having some relevance on

the issue, did not purport to overrule or modify

Goldberg and are not controlling here. Mitchell

v. W. T. Grant Co., 416 U.S. 600 (1974); Fu-

entes v. Shevin, 407 U.S. 67 (1972); Sniadach

v. Family Finance Corp., 395 U.S. 337 (1969).

Of these three decisions, only Mitchell indicated

that ‘probable validity’ may be determined in

the absence of a prior oral hearing; Fuentes and

Sniadach, in fact, required prior oral hearings.

Thus, Mitchell, rather than Goldberg, represent

the exception to the rule. . . . In Goldberg, the

Supreme Court considered a state welfare pro-

cedure 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 submit written information in rebuttal. He

also had a right to a full oral hearing after ter-

mination. 397 U.S. at 258-60. The Court, how-

ever, held that this procedure was insufficient

and required an oral hearing prior to termina-

tion. Since the procedure invalidated in Gold-

berg would seem to be at least effective in ensur-

ing ‘probable validity’ as the procedure used here,

and since the Court in Mitchell did not purport

to mouify Goldberg, we refuse to extend the rea-

soning of Mitcheil outside the creditor/debtor

30a

context and to permit ex parte determination of

‘probable validity’ in social welfare cases.

Furthermore, even if Mitchell’s ‘probable va-

lidity’ analysis were applicable to social welfare

cases, the procedure here may not pass muster.

. . . The Court upheld the Louisiana sequestra-

tion statute challenged in Mitchell partly because

it provided for an immediate hearing after the

writ issued. Jd. at 618. Thus, the constitution-

ality of a procedure establishing ‘probable va-

lidity’ 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. Mattern, supra at 14-16.

(emphasis original. )

As evidenced in the case of plaintiff Biner, however,

attending review of the Administration’s initial over-

payment determination exists a delay of several

months between the time recoupment commences and

the time a recipient is provided a hearing.

Finally, if the Secretary’s pre-recoupment pro-

cedures 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 erroneous determination. See

Mitchell, supra at 618; Arnett v. Kennedy, 416

U.S. 134 (1974), at 170 (Powell, J., concurring)

and 188 (White, J., concurring in part and dis-

senting in part.) However, the Secretary’s own

figures undercut his contention that the proce-

dures at issue here are effective to minimize er-

roneous decisions to recoup. In 1970, the only

year from which figures have been made avail-

3la

able to us [as is also the case here], over one-

third of all persons seeking a post-recoupment

hearing (560 out of 1600) obtained reversals.

Therefore, because of a combination of factors

—the fact that the Supreme Court has given no

indication that Mitchell’s ex parte ‘probable va-

lidity’ approach is applicable outside the credi-

tor/debtor context, and that such an approach

appears to have been at least implicitly rejected

in Goldberg v. Kelly; the substantial delay be-

tween the initiation of recoupment and an oral

hearing; and the significant reversal rate fol-

lowing 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 de-

termination in question. Mattern, id. at 16-17.

The Secretary also contends that oral hearings are

not compelled here because unlike the welfare recipi-

ents in Goldberg whose benefits were terminated,

social scurity beneficiaries whose monthly payments

are suspended or reduced through recoupment pro-

cedures are not thereby necessarily left destitute. In

the Secretary’s view, the severity of the impact visited

upon plaintiffs here is not of the same quantum as

that involved in Goldberg, and therefore, the oral

hearing required in Goldberg is here unnecessary.

However, the line of precedent following the Gold-

berg decision does not support the Secretary’s posi-

tion.

It is axiomatic that the requisites of due process

vary according to specific factual contexts. Goldberg,

32a

supra at 262-63. And it is true that of significant im-

portance in determining the formality and procedural

requisites of the process due in particular circum-

stances is the relative weight of the property interest

involved. Board of Regents v. Roth, supra at 570;

Crow v. California Dept. of Human Resources De-

velop., 490 F.2d 580 (9th Cir. 1973), vacated 95 S.Ct.

1110. That is not to say, however, that the relative

weight of the interest involved is dispositive of the

question whether an oral hearing is to be afforded

in the first place. In its most recent pronouncements

concerning the subject, it has become quite clear that

the Supreme Court envisions due process to generally

require a pre-deprivation hearing of some type as long

as the interest at stake is not de minimis, irrespective

of the severity of the impact resulting from that de-

privation. Goss v. Lopez, supra; North Georgia Fin-

ishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 606

(1975); Fuentes v. Shevin, supra at 88-89; Bell v.

Burson, 402 U.S. 535 (1971).”

The government does not contend, nor can it be

said, that the interest of these plaintiffs in receiving

their monthly social security benefits is de minimis.

As a threshold determination, therefore, it is our

opinion that, excluding for the moment consideration

of any competing interests on the part of the govern-

ment, a hearing of some sort should be afforded

plaintiffs prior to the recoupment of their social secur-

** We share the Third Circuit’s view that Judge Friendly’s

contrary holding in Frost v. Weinberger, 515 F.2d 57 (2d

Cir. 1975), is distinguishable and should not be followed.

33a

ity old-age and disability benefits. Of similar resolve

were the courts in Mattern v. Weinberger, supra;

Eldridge v. Weinberger, 493 F.2d 1230 (4th Cir.

1974), aff'g 361 F. Supp. 520 (W.D. Va. 1973), cert.

granted, 43 U.S.L.W. 3383 (January 14, 1975); Wil-

liams v. Weinberger, 494 F.2d 1191 (5th Cir. 1974),

aff'g 360 F. Supp. 1349 (N.D. Ga. 1973).

As previously noted, due process is a flexible con-

cept, and fashioning the specific parameters of the

hearing required thereunder depends on striking an

appropriate accommodation of the competing interests

involved. Goss, supra at 579. The Secretary suggests

that affirmance of the district courts’ holdings that

due process requires a full Goldberg type hearing

prior to recoupment of overpayments made to social

security beneficiaries would impose a heavy fiscal

burden on the Department of HEW. Since the De-

partment already provides overpaid recipients elab-

orate post-recoupment procedures, including the op-

portunity for a de novo hearing, it appears that any

burden in having to establish a new system, wherein

the opportunity for a hearing must be provided be-

fore rather than after recoupment, will be minimal.

The major fiscal difficulty envisioned by the Secretary

is the likelihood that the availability of pre-recoup-

ment hearings will result in the filing of a far greater

number of requests for reconsideration or waiver.

During oral argument counsel for the Secretary

cited statistics that show that the number of hear-

ings on termination of welfare benefits has increased

from 19,000 per year to 68,000 per year since the

34a

decision of the Supreme Court in Goldberg. Without

further clarification, these statistics are of little

value. They do not disclose what change, if any, has

taken place in the success rate of welfare beneficiaries

who receive a hearing. If the effect of Goldberg were

to cause the filing of a large number of frivolous

requests for hearings by people seeking to delay

termination, there might be reason to question the

wisdom of Goldberg. But if, in fact, the percentage

of successful contests has remained constant or de-

clined slightly, then Goldberg has resulted in a lar-

ger number of correct determinations of the issue of

whether welfare benefits should be terminated, and,

as such, Goldberg has benefited rather than bur-

dened the system.

If requiring pre-recoupment hearings would result

in the filing of frivolous requests in order to delay

recoupment, the present procedure should also encour-

age frivolous written requests for reconsideration or

waiver. This is so because the present practice of the

Secretary is to delay recoupment until after a deter-

mination by the Department that the request should

not be granted. But the statistics provided by the

Secretary show a high rate of success among those

requesting either reconsideration or waiver. “Of

those who do contest the initial overpayment deter-

mination, about sixty-nine per cent succeed in getting

the Administration to reverse itself.” Elliott v. Wein-

berger, 371 F. Supp. at 967. One may reasonably

wonder what happened to the frivolous, delay-moti-

vated requests for reconsideration or waiver?

As evidenced by plaintiff Biner’s case, the present

procedure involves a substantial delay anywhere from

four to five months between the time a recipient re-

quests an administrative de novo hearing upon his

or her claim for waiver or reconsideration and the

time the hearing is held and the matter is disposed

of. Thus, a decision that hearings must be held prior

to recoupment would mean that the government could

not collect payments for several months after the

initial determination that recoupment was necessary.

However, the present system has the evil of denying

benefits for an equally long time from beneficiaries

who are successful, after a full hearing, in reversing

the Secretary’s initial determination. Which system

is preferable should depend upon the success rate of

recipients who take their case to the hearing stage.

Relevant statistics indicate this rate to be very high

—more than one third of those recipients who avail

themselves of the opportunity to have their griev-

ances resolved at the de novo hearing succeed in per-

suading the Administration to reverse its original

recoupment decision. Elliott, supra at 967. Since

the success rate is significantly high, the government

is being allowed to temporarily recoup payments when

it has no claim to them. See Fusari v. Steinberg,

95 S.Ct. 533 (1975), in which the Supreme Court

found “significant” in determining the requisites of

due process a 19.4 to 26.1 per cent reversal rate of

appealed denials of unemployment compensation bene-

fits. A system which delayed the start of recoupment

36a

pending the outcome of a hearing, the purpose of

which is to determine the propriety of that recoup-

ment, would provide a net benefit to society.”

As alluded to earlier, the Secretary draws a dis-

tinction between reconsideration cases and waiver con-

sideration cases, contending that they raise somewhat

different legal issues. Under the present procedures,

when a recipient asks that the Secretary’s overpay-

ment determination be reconsidered, he is challenging

the correctness of the overpayment determination it-

self. Contrariwise, when a social security beneficiary

asks that recoupment be waived, he, in essence, is

conceding that he was overpaid, but asks that recov-

ery of the excess benefits involved be foregone.

The Secretary contends that in the vast majority

of recoupment cases issues are presented which are

“In Fusari v. Steinberg, supra, the Court discussed the

manner in which the delay in payment of unemployment in-

surance benefits pending a hearing affected the balancing

required to determine the requirements of due precess.

In this context, the possible length of wrongful depriva-

tion of unemployment benefits [between 100 and 126

days] is an important factor in assessing the impact of

official action on the private interests. [citations omit-

ted.] Prompt and adequate administrative review pro-

vides an opportunity for consideration and correction

of errors made in initial eligibility determinations. Thus,

the rapidity of administrative review is a significant

factor in assessing the sufficiency of the entire process.

95 S.Ct. at 540.

Fusari appears to require that the existence of a substantial

delay between the initial administrative determination and

the conclusion of a full hearing be weighed as a factor tilt-

ing the scales toward providing a pre-recoupment hearing.

37a

uniquely suited to resolution by written submissions

and documentary proof, thus obviating the need to

provide full-blown, Goldberg type hearings. Al-

though we agree that in those cases where factual

disputes are as well suited to disposition by docu-

mentary proof and written submissions as by oral

hearings, due process does not require a pre-recoup-

ment oral hearing, we cannot divine, as does the

Secretary, that in virtually all reconsideration and

waiver cases the only issues raised are those adapt-

able to such facile resolution. The Third Circuit’s

analysis of those cases arising in the recoupment

context in which such documentary disposition is per-

missible under due process principles is extremely

well reasoned and warrants quotation here.

Implicit in Goldberg v. Kelly is the recogni-

tion of the fact that issues likely to arise in

welfare termination cases can only be resolved

through an oral hearing. One of the plaintiffs

was a woman whose benefits had been termi-

nated because she allegedly failed to cooperate

with welfare officials in suing her estranged

husband. Another was a man whose benefits

were terminated because he refused to accept

drug counseling and rehabilitation, though he

claimed that he did not in fact use drugs.

Goldberg, supra at 256 n.2. 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 claim-

ant. As the Court noted, “where credibility and

veracity are at issue, as they must in many

38a

termination proceedings, written submissions are

a wholly unsatisfactory basis for decision.” /d.

at 269.

Similarly, in Goss v. Lopez, supra, the ques-

tion of whether a student had engaged in dis-

ruptive 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 revoca-

tion of a driver’s license. By contrast, the Su-

preme Court in Mitchell held that no prior op-

portunity 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 delinquency,” which “are

ordinarily uncomplicated matters that lend them-

selves to documentary proof.” Jd. at 609. Thus,

“t]he nature of the issues at stake minimize the

risk” of an erroneous ex parte determination.

Id. at 609-10 Mattern, supra at 23-24.

* * * *

We agree with the Secretary that “reconsider-

ation” cases are generally well suited to resolu-

tion by documentary proof, and that claimants

in most cases of this type are not constitutionally

entitled to a prior oral hearing.'*!

28. We decline to establish a flat rule

that all “reconsideration” cases may be de-

cided prior to recoupment without oral hear-

ing, since we do not have sufficient basis

for knowing all the types of cases which

the Secretary may classify as being of the

“reconsideration” type. The crucial distinc-

tion is not whether the cases are labeled

“reconsideration” or “waiver,” but whether

they lend themselves to resolution by docu-

mentary 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 re-

coupment in a particular case is dependent

upon the label used nor that we necessarily

accept the Secretary’s categorization in toto.

[As exemplified by the cases at bar] most of

these disputes involve matters of a purely arith-

metical nature—whether the computation of an

earnings statement is correct; whether a com-

puter’s calculation of the amount of benefits re-

ceived 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

hearing would be of much benefit to the claim-

ant. Consequently, the Secretary’s pre-recoup-

ment procedures permitting written evidence and

providing for an examination of written docu-

ments, when coupled with a right to a post-

recoupment oral hearing, satisfy due process.

We had one caveat, however. Because we can-

not envision all the situations in which “re-

consideration” cases are likely to arise, we ac-

knowledge the possibility that there may be cases

where the opportunity to appear in person might

be important in making an accurate determina-

tion. Thus, while many “reconsideration” cases

can be decided without a prior oral hearing, we

believe that, as a matter of due process, the

40a

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 credibility. We are mind-

ful 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 “reconsideration”

case raises such an issue, he should be entitled

to a hearing.

If, however, a claimant merely denies receiv-

ing duplicate checks or claims that his earnings

were of a certain amount, cancelled checks bear-

ing his endorsement or earnings records main-

tained by the social security office would seem

to constitute hard proof incapable of oral re-

buttal. Mattern, supra at 24-25.

If plaintiff Biner had simply denied receiving the

checks here in dispute or had claimed that they did

not represent an overpayment, she would not have

been constitutionally entitled to a hearing prior to

recoupment. Cancelled checks bearing her endorse-

ment would have been persuasive proof that she had

received and negotiated them, and a comparison of

the salary listed in her earnings report with the

statutory maximum—showing the former to exceed

the latter—would be strong evidence that the checks

represented an overpayment. “Furthermore, [plain-

tiff Biner] came forth with no written evidence to

support a contention that she had not in fact been

paid [$2,216.20] or that the check[s] did not repre-

4la

sent an overpayment.” Jd. at 25-26. In her two re-

quests for reconsideration, she simply stated that “I

do not believe there was any overpayment.” Buffing-

ton Tr. 112, 113.

Consequently, if she had made solely those con-

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

oral hearing would be helpful. In all cases, how-

ever, a claimant should be informed, prior to ini-

tiation of recoupment, of the basis on which an

adverse determination is made and should be

offered the opportunity to explain or rebut any

written evidence against her.”

* * * *

The Secretary also contends that “waiver”

eases, like “reconsideration” cases, lend them-

selves to resolution by documentary proof. We

disagree. One of the factors to be considered in

a “waiver” case is whether the claimant is “‘with-

out fault,” and the Supreme Court has clearly

indicated that determinations as to fault must be

made at an oral hearing. Mattern, supra at

26-27.

As in Mattern, the “facts of [plaintiff Biner’s case]

graphically illustrate the need for an oral hearing.”

Id. While conceding that it may have been at fault

in issuing Mrs. Biner the checks which represented

1° Like the district court in Elliott we have serious doubts

as to the adequacy of the Secretary’s summary explanation

of some of its overpayment determinations as the result of

“processing error.” Elliott Tr. 285. The strictures of due

process would seem to compel a more elaborate description

of the type of error which gave rise to the Secretary’s deter-

mination in the first instance.

42a

overpayments for the year of 1972, the Administra-

tion nonetheless believed that the letter enclosed with

the first check sent to Biner and the fact that she

received checks while she was employed put her on

notice that continued retention of those checks was

improper and precluded a finding on its part that

she was “without fault” within the meaning of the

Social Security Act. Buffington Tr. 212-13. How-

ever, whether Biner knew that she was not entitled

to these checks seems to be a matter difficult to re-

solve without hearing her side of the story. “Simi-

larly, a finding of fault could not rest on the am-

biguous [letter included with the first overpayment

check sent to Biner] at least without giving [her]

an opportunity to explain in person what she thought

it meant.” Jd. at 27.

Another requirement that a claimant in

waiver case must meet is that recoupment would

either frustrate the purposes of the Act or be

against equity and good conscience. As defined

by the Secretary’s regulations, these terms re-

fer to such matters as difficulty in meeting neces-

sary living expenses or a change of position by

the recipient. [20 C.F.R. §§ 404.508, 404.509]

We do not see how a resolution of such ques-

tions can reliably be determined in the absence

of oral testimony.

While we believe that claimants in “waiver”

eases have a constitutional right to a pre-re-

coupment oral hearing, that right may not at-

tach in all cases. Where a claimant in a

“waiver” case raises no disputed issue of fact,

43a

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 constitu-

tional requirement of a hearing may be limited

to some extent by principles analogous to sum-

mary judgment in civil litigation. See Mills v.

Richardson, 464 F.2d 995 1001 (2d Cir. 1972).

Id. at 27-28.

* * * *

In sum, we conclude that the recoupment pro-

cedure established by the Secretary is constitu-

tionally deficient in that it does not provide for

pre-recoupment oral hearings in the situations

we have indicated are necessary. We do not

believe that due process requires pre-recoupment

oral hearings in all cases, but the Secretary’s

existing procedure makes no distinction between

the various types of cases and issues that are

likely to arise. To the extent that a hearing is

required, we agree with the district court[s]

that the full panoply of procedural safeguards

need not be provided and that the pre-recoup-

ment hearing need not take the form of a ju-

dicial or quasi-judicial trial. Jd. at 28-29.

We are therefore of the opinion that to the extent

indicated below the specific requirements outlined in

the lower court’s opinions are those which are com-

pelled by the Due Process Clause of the fifth amend-

ment. Specifically, the Secretary is required to pro-

vide a pre-recoupment hearing in the situations

noted previously which affords the complainant the

following rights:

44a

1. to present his case orally and to submit evi-

dence with witnesses or documents;

2. to cross-examine witnesses against him;

3. to be represented by counsel if he wishes or

to retain the informal assistance of a friend;

4. to have an independent hearing officer pre-

side during the hearing who is totally unin-

volved with the initial overpayment and recoup-

ment decisions;

5. to receive an opinion written by the hearing

officer which sets forth his decision and the rea-

sons and evidence in support of it;

6. to review his file five days before the hear-

ing ;

7. to receive adequate notice at least thirty

days prior to the commencement of recoupment:

(1) explaining the reasons recoupment is sought;

(2) apprising him that in the event he, in writ-

ing, requests reconsideration or waiver of the

Secretary’s initial overpayment and recoupment

determination, the Administration will subse-

quently inform him of the form of review to

which he is entitled pursuant tw the opinion

herein rendered; and (3) informing him that

recoupment will not begin until his request has

been finally disposed of by way of the required

review procedure.”

1° The court in Elliott found the Secretary’s form of notice

deficient insofar as it failed to apprise recipients of the ap-

propriate forms which must be completed in order to invoke

the Administration’s review procedures. To remedy the situ-

ation, the court ordered the Secretary to specify in his ini-

tial overpayment notice those forms the recipient must. re-

45a

The judgments of the district courts are affirmed

in part and reversed in part, and the cases are re-

manded for the entry of new judgments consistent

with this opinion.

quest from the local office to perfect his appeal rights. Al-

though any written submission will trigger commencement

of the Administration’s reconsideration and/or waiver pro-

cedures, given the writing capabilities of many of these old-

age and disabled beneficiaries and the subleties which may

inhere in determining whether an oral hearing is required

in any given situation, it would be prudent of the Secretary

to furnish recipients information as to the forms involved

in cases of this sort and encourage their utilization. We do

not hold that providing information as to such forms is a

matter of constitutional imperative, however.

It is to be noted that any recipient who fails to notify the

local office of his desire to have his overpayment and recoup-

ment determination reviewed within the thirty day period

will be deemed to have waived his right to seek that review

by way of written submissions or by way of an oral hearing.

46a.

APPENDIX B

JUDGMENT

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 74-3118

DC# 734-73C2

FANNIE BUFFINGTON and FRANCES BINER, Individ-

ually and on behalf of all others similarly situated,

PLAINTIFFS-APPELLEES,

Vv.

CASPAR WEINBERGER, Individually and in his capacity

as Secretary of the Department of Health, Educa-

tion and Welfare, DEFENDANTS-APPELLANTS.

APPEAL from the United States District Court

for the Western District of Washington (Seattle).

THIS CAUSE came on to be heard on the Tran-

script of the Record from the United States District

Court for the Western District of Washington and

was duly submitted.

ON CONSIDERATION WHEREOF, It is now

here ordered and adjudged by this Court, that the

judgment of the said District Court in this Cause

47a

be, and hereby is AFFIRMED IN PART AND RE-

VERSED IN PART, AND REMANDED.

A TRUE Copy

ATTEST:

‘{[February 19, 1976]

EMIL E. MELFI, JR.

Clerk

by /s/ [Ilegible}

puty

[SEAL]

Filed and entered October 1, 1975

48a

JUDGMENT

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 74-1611

DC# 72-3629

EVELYN ELLIOTT and BENITO MOLINA, Individually

and on behalf of all others similarly situated,

PLAINTIFFS-APPELLEES,

Vv.

CASPAR W. WEINBERGER, Individually and in his ca-

pacity as Secretary, United States Department of

Health, Education and Welfare; etc., et al.,

DEFENDANTS-APPELLANTS.

APPEAL from the United States District Court

for the District of Hawaii (Honolulu).

THIS CAUSE came on to be heard on the Tran-

script of the Record from the United States District

Court for the District of Hawaii and was duly sub-

mitted.

ON CONSIPERATION WHEREOF, It is now

here ordered and adjudged by this Court, that the

judgment cf the said District Court in this Cause

be, and hereby is AFFIRMED IN PART AND RE-

49a

VERSED IN PART, AND REMANDED TO THE

DISTRICT COURT.

A TRUE Copy

ATTEST:

[February 19, 1976]

EMIL E. MELFI, JR.

Clerk

by /s/ pee

[SEAL |

Filed and entered October 1, 1975

50a

APPENDIX C

IN THE

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF HAWAII

Civil No. 72-3629

EVELYN ELLIOTT and BENITO MOLINA, Individually

and on behalf of all others similarly situated,

PLAINTIFFS

v8.

CASPAR WEINBERGER, Individually and in his ca-

pacity as Secretary, United States Department of

Health, Education and Welfare; and SuNG DAI

Seu, Individually and in his capacity as Pacific

Area Manager, Social Security Administration,

Department of Health, Education and Welfare,

DEFENDANTS

FINDINGS OF FACT AND

CONCLUSIONS OF LAW

Under 42 U.S.C. § 404(a) and (b),* the Secretary

of the Social Security Administration (hereinafter

1§ 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, as

follows:

[Footnote continued on page 51a]

a —

5la

the “Administration”) may effect or waive recoup-

ment of overpayments made to social security recip-

ients. The Administration has promulgated proce-

dures and regulations governing recoupment and

? [Continued]

(1) With respect to payment to a person of more

than the correct amount, the Secretary shall decrease

any payment under this subchapter to which such over-

paid 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 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 Depart-

ment of Defense of an individual in the line of duty

while he is a member of the uniformed services (as

defined in section 410(m) of this title) on active duty

(as defined in section 410(1) of this title) shall not be

considered an incorrect payment for any month prior to

the month such Department notifies the Secretary that

such individual is alive.

(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.

(b) In any case in which more than the correct amount

of payment has been made, there shall be no adjustment of

payments to, or recovery by the United States from, any per-

son who is without fault if such adjustment or recovery would

defeat the purpose of this subchapter or would be against

equity and good conscience.

52a

waiver in its Claims Manual § 5503° and in the

2 The CLAIMS MANUAL § 5503(a) provides that stand-

ard form letters sent to recipients subject to recoupment con-

tain:

(1) The incorrect payment made and how and when it

occurred.

(2) The right to request reconsideration of the over-

payment determination.

(3) The required recovery.

(4) The proposed adjustment or the demand for repay-

ment where adjustment is not possible.

(5) The waiver provisions of the law (Social Security

Act, secs. 204(b) or 1870(c)).

(6) The availability of partial adjustment or partial

refund.

(7) The need to notify the DO [Department Office]

promptly if the person feels that the circumstances

in the case would justify reconsideration, waiver,

partial adjustment, or partial refund.

§ 5503(b) provides:

Delay in Withholding Benefits to Recover Overpayments.

Before we start to adjust the overpayment against

the benefits due a beneficiary, he or his payee wil! norm-

ally be given reasonable opportunity to contest the cor-

rectness of the determination or to establish that a basis

exists for waiver or partial adjustment. The notice

to the beneficiary will advise him that adjustment will

be deferred for a longer period when the facts in a given

case, including but not limited to time case is being

being worked, cutoff dates, mailing time, etc., indicate

that a 30-day period would be inadequate for considera-

tion of the matter and reply by the beneficiary and re-

viewing office processing time.

The only exceptions to this rule are:

(1) the overpayment is based on an annual report

by the beneficiary; or

[Footnote continued on page 53a]

53a

Code of Federal Regulations, 20 C.F.R. §§ 404.901

? [Continued]

(2) the overpayment results from the superendorse-

ment procedures under Section 205(n) of the Act where-

by payment of a combined check is made to the survivor.

. . . In the above two situations immediate adjustment

action is taken.

§ 5503(c) provides:

If 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 liable

requests reconsideration of the substantive determina-

tion and it appears that the determination 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 substan-

tive determination is affirmed the Reconsideration Deter-

mination will cover both issues (§ 8737). (Emphasis

original).

When development is initiated for reconsideration of

the overpayment determination, for waiver, or for par-

tial adjustment, withholding to recoup the overpayment

will be further deferred and payment will be continued

until development has been completed, if the beneficiary

is otherwise entitled to benefits. If development will not

be completed before the expiration of the initial 30-day

deferral period, the DO will . . . advise the reviewing

office.

After this case was heard, the Administration reported

that by January 1, 1975, overpayments based on beneficiaries’

annual reports [§ 5503(b)(1)] will not be an exception to

the rule of § 5505(b).

o4a

et seg. (1973).* The Plaintiffs in this class action

claim that these procedures and regulations deny

them due process of law under the Fifth Amendment

because their benefits are reduced or suspended with-

out adequate notice of the reasons for the recoup-

ment, without adequate notice of their right to re-

consideration, waiver, or partial adjustment,* and

without a hearing prior to the recoupment. Defend-

ants contest the Plaintiffs’ constitutional and juris-

dictional claims.

Facts:

This court has divided the Plaintiff class into two

subclasses. Represented by Plaintiffs Silva, Ortiz,

and Vaquilar, the first subclass consists of all social

security old-age beneficiaries, resident in the State of

® §§ 404.901 et seq. of Social Security Administration Reg-

ulations No. 4, set forth a four-step administrative review

including an initial determination (§ 404.905); a reconsidered

determination (§ 404.914); an administrative hearing de

novo before an independent administrative law judge

(§ 404.917); review by the Appeals Council of the Social

Security Administration, (§ 404.945). After exhaustion of

these administrative remedies, 42 U.S.C. § 405(g) provides

for judicial review.

The initial overpayment determination notice must state

the basis of the determination and inform the recipient of

his right to reconsideration (§ 404.907). The initial deter-

mination is final unless a written request for reconsideration

is filed (§ 404.908). The reconsideration decision is final

unless a hearing is requested in writing (§ 404.914).

‘ Partial adjustment is a recoupment method whereby part

of monthly benefits are withheld. It is permitted (not man-

dated) by 20 C.F.R. § 404.502a if certain conditions are met.

55a

Hawaii, whose exposure to recoupment is based upon

their own annual earnings reports.’ Represented by

Plaintiffs Elliot, Gaines, and Yamasaki, the second

subclass consists of all social security old-age and dis-

ability benefit recipients, resident in the State of

Hawaii, whose exposure to recoupment is based upon

evidence other than annual earnings reports.*

Named Plaintiffs of subclass one all received an

Administration form letter indicating that based upon

their annual earnings reports for the preceding year,

a specified overpayment had occurred and that their

subsequent benefit payments would be reduced or

totally suspended over a specified period. There was

some notice of the right to reconsideration and

waiver.’ Plaintiffs believed themselves to be not liable

‘Recipients of old age retirement benefits are required to

file annual earnings reports; and under 42 U.S.C. § 403(b)

and (f), their monthly benefits may be reduced if their re-

ported annual earnings are in excess of specified levels. Dis-

ability recipients are not required to file annual earnings

reports.

* The exposure of Plaintiffs Elliott and Gaines to recoup-

ment is based upon the Administration’s discovery of its

own alleged error. Plaintiff Yamasaki’s exposure is based

upon information supplied to the Administration by the

insurance carrier of her unemployment compensation insur-

ance.

7 The pertinent parts of the form letter are as follows:

“If you believe that this determination is not correct,

you may request that your case be reexamined. If you

want the reconsideration, you must request it not later

than 6 months from the date of this notice. You may

make any such request through any social security office.

56a

for any overpayment, not at fault in causing the

overpayment, and unable to repay the amount due;

they personally contacted local Social Security Ad-

ministration offices within thirty days of receipt of

the form letter. At that time, none were advised that

appropriate forms requesting waiver, reconsideration,

and partial adjustment were available to initiate ad-

ministrative action, and none actually filed the re-

If additional evidence is available, you should submit it

with your request.

To recover the overpayment, we shall withhold your

benefits beginning‘with the check you would normally

receive in . The next check that you will

receive after the full overpayment has been withheld

will be for $——. It will be sent to you about

Thereafter, your regular monthly benefits of $—— will

be resumed.

Under social security law, any overpayment must be

withheld from benefits or paid back unless both of the

following are true:

1. The overpayment wasn’t your fault in any way and

you cashed the check(s) because you thought they

were correct, and

2. You couldn’t meet your necessary living expenses if

you had to pay back the overpayment or have it

withheld from your social security benefits; or it

would be unfair for some other reason.

To decide whether repayment would cause you financial

hardship, we shall need a statement of your assets, and

monthly income, and expenses. If you think you meet

both conditions, call, write, or visit any social security

office within 30 days from the receipt of this letter.

Please take this letter with you if you visit the office.

Unless we hear from you within 30 days, we shall with-

hold benefits as indicated above.”

57a

quisite forms within thirty days.‘ Currently, the

Administration has completed recoupment against

two of these Plaintiffs while deferring recoupment

against the other pending the disposition of this case.

Plaintiffs of subclass one have done all that reason-

ably could be expected of them to exhaust their

administrative remedies.’

Named Plaintiffs of subclass two received overpay-

ment notices more than thirty days before recoup-

ment was to begin. The notice to Plaintiff Elliott set

forth that the overpayment determination was based

*One Plaintiff (Vaquilar) did immediately ask for and

receive a partial adjustment of the amount to be withheld

monthly. Moreover, acting on advice of counsel, he com-

pleted and filed the requisite forms requesting waiver and

reconsideration more than thirty days after receipt of the

overpayment notice. However, trial testimony indicates that

timely completion of the forms would not have changed the

Administration’s disposition of the first subclass cases.

® The general rule is that a litigant must exhaust his ad-

ministrative remedies, if such remedies exist, before invok-

ing federal jurisdiction. Myers v. Bethlehem Shipbuilding

Corp., 303 U.S. 41, 50-51 (1938). However, the exhaustion

requirement is excused if a) the administrative remedy is

wholly inadequate, and the federal question is plain, or b)

exhaustion would cause irreparable harm, as by prejudicial

delay. See Martinez v. Richardson, 472 F.2d 1121, 1125

(10th Cir. 1973) and authorities cited therein. See also

Note, Federal Jurisdiction Over Challenges To State Welfare

Programs, 72 COL. L. REV. 1404, 1438-40 (1972). In this

case, exhaustion of administrative remedies is excused on

either of the above grounds. The federal question is clear;

obtaining administrative relief on the due process issues

raised would be a lengthy process during which many of

the aged and disabled Plaintiffs in both subclasses would

suffer and some would die.

58a

upon her receipt of both retirement and disability

benefits when she was entitled to only disability bene-

fits. The notice to Plaintiff Gaines indicated that

“duplicate payments” over specified dates was the

reason for the overpayment finding.“ The notice to

Plaintiff Yamasaki specified “a processing error’ as

the cause of the overpayment.” All three named

Plaintiffs received some notice of the right to recon-

sideration and waiver.” The Plaintiffs believed them-

selves to be not liable for any overpayment, not at

fault in causing the overpayment, and unable to re-

pay the amount claimed; they contacted local Admin-

istration offices within thirty days after receipt of

the overpayment notice. At that time, none were ad-

vised that appropriate forms requesting waiver, re-

consideration, and partial adjustment were available

to instigate administrative action, and none actually

filed the requisite forms within thirty days.“ Pres-

ently, recoupment against Elliott and Gaines has

been deferred pending a final disposition of this case,

Affidavit of Bernard Popick, para. 12.

" Plaintiff’s Exhibit, P-15.

2 Affidavit of Nancy Yamasaki, Exhibit A.

18 The pertinent parts of the initia] notice were virtually

the same as those reprinted in note 7, supra.

’ The three subclass two Plaintiffs, acting upon advice of

counsel, eventually did complete and file the requisite forms

after the initial thirty days had elapsed. Trial testimony

indicates, however, that timely completion of the fornrs would

not have altered the Plaintiffs’ current status. See also note

9, supra.

59a

while recoupment against Plaintiff Yamasaki has

been completed. Plaintiffs of subclass two have done

all that reasonably could be expected of them to ex-

haust their administrative remedies.

In summary, the Administration’s regulations and

procedures, and the Plaintiffs’ histories in this case,

show that recipients in both subclasses subject to

recoupment receive recoupment notices which set out

the basic reason for the recoupment, the possibility

of reconsideration, the conditions for waiver, and the

need to consult the local Administration office within

thirty days if they wish to complain. For subclass

one Plaintiffs, (at least until January, 1975), recoup-

ment begins immediately after the initial overpay-

ment decision is made. For subclass two Plaintiffs,

the notice is sent thirty days before actual recoup-

ment begins. In practice, actual adjustment may at

the discretion of the Payment Center be extended be-

yond 30 days when more time is needed to consider

and process the matter. After the first determina-

tion is made, if reconsideration or waiver is request-

ed, recoupment is further deferred until those issues

are determined on the basis of any documentary evi-

dence submitted. Finally, a post-recoupment hearing

is possible should the claimant wish to seek additional

review.”

The initial overpayment and recoupment notice

sent to beneficiaries does not set forth the forms

15 See 42 U.S.C. § 405(b) (1969), and 20 C.F.R. § 404.917

(1973).

60a

needed for reconsideration and waiver, or informa-

tion about how to complete them. The information

and forms missing in the initial notice are not gen-

erally made available when the claimant consults his

local Administration office. When reconsideration or

waiver consideration is requested, the Administra-

tion’s decision is based upon a claimant’s ex parte

presentation of documentary evidence on an issue

which he may understand only nebulously. Many of

these claimants are elderly and disabled people whose

capacities may frustrate an effective documentary

presentation of their case. No oral hearing is given

prior to the beginning of recoupment, and any de-

ferral of recoupment beyond 30 days after the date

of the initial notice lies completely within the discre-

tion of the Administration. Should a claimant con-

vince the Administration to reverse itself ex parte on

the overpayment issue, a reduced or suspended pay-

ment may ensue with a refund coming a month or

more later.

Statistics provided by the Defendant ” in this case

indicate the following:

(a) In 1970 there were overpayments in ap-

proximately 1,250,000 cases.

(b) Of these 1,250,000 overpayments, there

were requests for reconsideration in approxi-

mately 12,000 cases.

16 Affidavit of Bernard Popick, Director of the Bureau of

Disability Insurance of the Social Security Administration,

Department of Health, Education, and Welfare, para. 36.

6la

(c) Of the 12,000 reconsideration determina-

tions with respect to overpayments, there were

approximately 8,250 reversals and approxi-

mately 3,750 affirmances.

(d) Of the 3,750 reconsideration affirmances

with respect to overpayments, there were re-

quests for hearing in approximately 1,600 cases.

(e) Of the 1,600 cases that went to hearirg

with respect to overpayments, there were re-

versals in approximately 560 cases and affirm-

ances in 1,040 cases.

Stated another way, these statistics mean:

(a) less than one per cent of the beneficiaries

in overpayment status contest the matter.

(b) Of those who do contest the initial over-

payment determination, about sixty-nine per

cent succeed in getting the Administration to

reverse itself.

(c) about forty-three per cent of those whose

overpayment status is affirmed upon reconsidera-

tion seek an oral (post-recoupment) hearing.

(d) of those who get an oral hearing, more than

one-third succeed in getting the Administration

to reverse itself.

(e) overall, of that small percentage of claim-

ants questioning the overpayment determination,

about seventy-three per cent (8,250 + 560 out

of 12,000) finally succeed in obtaining relief.

It is quite clear froi the above that when the claim-

ant feels he has a strong enough case to question the

Administration’s initial overpayment determination,

62a

there is a very substantial chance that the Adminis-

tration will eventually reverse itself. What is saddest

and perhaps most important about this fact is that

many social security recipients, like the Plaintiffs

here, depend upon their full monthly benefit pay-

ments for subsistence." Erroneous recoupments often

cause the aged and infirm drastic hardship.“

Jurisdiction:

The Defendants have moved for dismissal for lack

of subject-matter jurisdiction. Plaintiffs assert that

federal jurisdiction exists under 28 U.S.C. § 1331(a)

(1966), 28 U.S.C. $1361 (Supp. I, 1972), and 5

U.S.C. §701 et seg. (1967) (hereinafter the

“A.P.A.”). While § 1361 may have been intended

to increase the availability of mandamus jurisdic-

tion beyond that under common law,” even under the

The Administration’s own CLAIMS MANUAL § 5000

states, ““Most people who get an RSDI check depend upon it

for the necessities of life.”

1° For example, Plaintiff Elliott was forced to seek emer-

gency welfare assistance from the State of Hawaii after her

social security payment for June 1972 was withheld.

”§ 1361 states: “The district courts shall have original

jurisdiction of any action in the nature of mandamus to

compel an officer or employee of the United States or any

agency thereof to perform a duty to the plaintiff.”

20 Whether § 1361 was supposed to expand mandamus juris-

diction beyond common law rules is an open question. Compare

Burnett v. Tolson, 474 F.2d 877, 880 n. 5 and n. 6 (4th Cir.

1973) with Peoples v. U. S. Dept. of Agriculture, 427 F.2d

561, 565 (D.C. Cir. 1970). See generally, TB J. MOORE,

FEDERAL PRACTICE § 1361, at 536 (2d ed. 1973).

63a

traditional rules for mandamus writs, § 1361 applies

to this case.** At common law, mandamus would is-

sue when three elements coexisted, namely, 1) a clear

right in the plaintiff to the relief sought; 2) a clear

duty on the part of the defendant to do the act in

question; * and 3) the lack of another adequate rem-

edy. Carter v. Seamans, 411 F.2d 767, 773 (5th Cir.

1969).

As to the third requirement, the Plaintiffs, if de-

nied federal jurisdiction, may not have an adequate

remedy elsewhere, see Burnett v. Tolson, supra note

20, at 82-83. The state courts may not be able to

issue the requested injunctive relief, see State of

™ The court does not decide the 28 U.S.C. §1331(a) and

5 U.S.C. § 701 et seq. issues raised by the Plaintiffs, but notes

in passing that support exists for either jurisdictional base.

5 U.S.C. § 706(2) applies to this case, and the A.P.A. has been

viewed as a jurisdictional grant independent of other stat-

utes. Bass v. Richardson, 338 F. Supp. 478, 482 (S.D. N.Y.

1971); (for authorities pro and con) see generally, Aguayo

v. Richardson, 473 F.2d 1090, 1101-02 (2d Cir. 1973); Mills

v. Richardson, 464 F.2d 995, 1001 n. 9 (2d Cir. 1972). Al-

though the amount in controversy requirement may preclude

§ 1331(a) jurisdiction, some courts have indicated that when

the deprivation of constitutional rights is at issue, the jur-

isdictional amount is automatically satisfied. Accord, Spoek v.

David, 469 F.2d 1047 (3d Cir. 1972); Cortright v. Resor, 325

F. Supp. 797, 809 (E.D. N.Y. 1971). Contra, Lynch v. House-

hold Finance Corp., 405 U.S. 538, 547 (1972). See generally,

Burnett v. Tolson, supra note 20, at 880 n. 4.

22 This traditional requirement is sometimes stated as a

duty plainly and positively ascertained, and free from doubt.

Wilber v. U.S. ex rel. Kadrie, 281 U.S. 206, 218-19 (1930);

Prairie Band of Pottawatomie Tribe of Indians v. Udall, 355

F.2d 364, 367 (10th Cir. 1966).

64a

Alabama v. Rogers, 187 F.Supp. 848, 852 (M.D.

Ala. 1960); R. Arnold, The Power of State Courts

to Enjoin Federal Officers, 73 YALE L. J. 1385

(1964), and any removal to a federal court from a

state court would lie within the defendants’ sole

discretion. Moreover, the first and second require-

ments are met when the application of a Supreme

Court ruling to the instant case clearly shows the

existence of plaintiff’s constitutional right and its

denial by the defendant. Mead v. Parker, 464 F.2d

1108 (9th Cir. 1972); Burnett v. Tolson, supra note

20; Daigle v. Warner, 348 F.Supp. 1074 (D.C. Ha-

waii 1972), rev’d on non-jnrisdiction grounds, ——

F.2d (9th Cir. 1973).* While the applicability

of the relevant Supreme Court ruling should be

beyond doubt in the opinion of the district court

judge, it need not be so certain as to preclude a

different opinion from another court. For example,

in Daigle, supra, the Chief Judge of this District

Court under § 1361 applied Argersinger v. Hamlin,

407 U.S. 25 (1972) to summary courts-martial. The

Ninth Circuit later reversed, differing with the Dis-

28 In Mead, a case wherein the adequacy of a prison library

was challenged, the Ninth Circuit held that § 1361 jurisdiction

applied because Gilmore v. Lynch, 319 F. Supp. 105 (N.D.

Cal. 1970) aff'd sub nom. Younger v. Gilmore, 404 U.S. 15

(1971) had established constitutional standards for prison

libraries. In Burnett, the Fourth Circuit asserted § 1361 jur-

isdiction in a case wherein the prior refusal to allow pamphlet

distribution in a public area on a military base was said to be

governed by Flower v. U.S., 407 U.S. 197 (1972) which

declared unconstitutional the arrest (under 18 U.S.C. § 1382)

of a leafleteer previously barred from a military base.

65a

trict Court’s use of Argersinger without attackir~ its

assertion of § 1361. In this case, the Plaintiffs rely

upon Goldberg v. Kelly, 397 U.S. 254 (1970) (herein-

after “Goldberg”) to establish the existence of the

constitutional right to adequate notice and prior hear-

ings in Administration recoupment cases. One court

has already approved § 1361 jurisdiction and the

application of Goldberg to the termination and re-

coupment of medicare benefits under Administra-

tion regulations similar to those involved in this case.

Martinez v. Richardson, supra note 9. Accordingly,

the applicability of Goldberg to this case is sufficiently

apparent to establish for § 1361 jurisdictional pur-

poses the plaintiff’s clear right and the defendant’s

clear duty.”

* In Knuckles v. Weinberger, F. Supp. —— (N.D. Cal.

(1973), wherein the regulations under § 404 of the Act were

challenged on due process grounds, Judge Wollenberg distin-

quished the Mead case, and ruled that § 1361 jurisdiction did

not exist because the applicability of Goldberg to this type

of case was not certain enough to support mandamus juris-

diction. With all due respect to Judge Wollenberg, I disagree

that the application of Goldberg is unclear, and that Mead is

distinguishable. The court’s awareness in Mead that the

library in question was more deficient than the one in Gilmore

does not necessarily reflect an understanding that § 1361

jurisdiction applies only when the constitutional infirmity

is absolutely identical to (in kind) and exceeds (in degree)

that ruled upon in a Supreme Court case. Rather the aware-

ness of the greater library deficiency in Mead may have been

directed towards the statement of claim issue in the case:

“We have no doubt that, under Gilmore v. Lynch, supra, and

Johnson V. Avery 1969, 393 U.S. 483, 89 S.Ct. 747, 21 L.E.2d

718, the named petitioners have stated a prima facie case

under both theories,” supra, at 1111. When discussing § 1361

66a

Due Process and Hearings Prior to Recoupment:

Goldberg establishes the principle that when the

impact of an erroneous administrative decision upon

the individual is so severe as to deprive him of the

means by which to live, due process requires that the

individual have an opportunity to be heard and to

cross-examine witnesses before any adverse decision

is effected. Specifically, Goldberg held that a hearing

had to be afforded the individual before his state

welfare benefits were terminated. In reaching its

decision, the Goldberg Court focused upon three con-

siderations: The impact of an erroneous decision

upon the individual, the government’s interest in ful-

filling the purpose of welfare legislation by protect-

ing against administrative mistakes, and the govern-

ment’s interest in conserving the public fise and

minimizing administrative burdens. The toldberg

Court found that “termination of [welfare] aid pend-

ing resolution of a controversy over eligibility may

deprive an eligible recipient of the very means by

which to live while he waits,” at 264. It also found

that important governmental interests were served

by ensuring that welfare was given to eligible re-

cipients without interruption. Finally, it found that

jurisdiction, the Mead court stated (without mentioning

Gilmore) that although § 1343 would not apply, .. . “the

wrong done, if any, is just as much a violation of the federal

Constitution as if done by a state official,” supra, at 1111. The

court’s qualification of the wrong by “if any” suggests that

the Plaintiff’s right and the Defendant’s duty need not be as

absolutely certain as Judge Wollenberg would seem to require.

67a

the additional burden on the government’s adminis-

tration and fise did not outweigh the first two con-

siderations in favor of providing a prior hearing.

The application of Goldberg to this case is simply

inescapable.” Since most social security recipients

*In Richardson v. Wright, 405 U.S. 208 (1972) (Bren-

nan, Douglas, and Marshall, JJ., dissenting), three Justices

dissented to the Court’s decision to decline ruling on the

application of Goldberg to the termination of social security

disability benefits. The dissenters also expressed the view

that Goldberg should be so applied. Accord, Note, Procedural

Due Process and the Termination of Social Security Dis-

ability Benefits, 446 S. CAL. L. REV. 1263 (1973). Goldberg

has also been applied in public housing cases. See e.g., Caul-

der v. Durham Housing Authority, 433 F.2d 998 (4th Cir.

1970), cert. denied, 401 U.S. 1003 (1971).

The cases cited by the Defendant are clea’ _listinguish-

able. It is true that in Kelly v. Wyman, 294 ¢.Supp. 893,

901 n. 20 (S.D. N.Y. 1968), aff’d sub nom. Goldberg, the

court did suggest in dicta that its ruling might not apply

to the federally administered Old-Age, Survivors, and Dis-

ability Insurance Program. However, this was not an issue

in the case, and the Supreme Court in Goldberg expressed

no opinion on the issue. In Torres v. N.Y. State Dep’t. of

Labor, 333 F.Supp. 341 (S.D. N.Y. 1971), aff’d, 405 U.S.

949, reh. denied —— U.S. ——, 41 U.S.L.W. 3475 (March

6, 1973), the court ruled that due process did not require a

hearing prior to the suspension or termination of unemploy-

ment benefits; but in that case, the two named Plaintiffs

were afforded a hearing prior to termination of their bene-

fits, and new regulations made the issue moot as to other

plaintiffs. Messer v. Finch, 314 F.Supp. 511 (E.D. Ky. 1970)

held that social security disability benefits could be sus-

pended without a prior hearing, but that judgment was va-

cated for mootness, 400 U.S. 987 (1971). Anderson v. Finch,

322 F.Supp. 195 (N.D. Ohio 1971) refused to apply Gold-

berg to sociai security benefits. The Sixth Circuit remanded

68a

depend upon their full benefits for the necessities

of life,” the adverse impact of an erroneous suspen-

sion or reduction upon them is great.” Starvation

for reconsideration in light of Goldberg. 454 F.2d 596 (6th

Cir. 1972).

Recently, when the recipient of unemployment compensa-

tion was given an informal personal interview prior to the

termination of benefits and the record reflected the absence

of a factual dispute or the misapplication of rules and regu-

lations, the Ninth Circuit reversed the lower court and held

that a full evidentiary hearing prior to benefit termination

as in Goldberg was not required. Crow v. Cal. Dep’t. of

Human Resources Dev., No. 71-1045 (9th Cir., Dec. 14,

1973). The court distinguished Goldberg on the grounds that

“grievous loss” was not involved in terminations of unem-

ployment compensation. Crow is clearly inapplicable to the

case at hand: The Plaintiffs received no prior informal hear-

ing and this court has found that recipients of social security

benefits are likely to suffer “grievous loss” when benefits

are erroneously terminated.

*6 See note 17, supra.

** The Supreme Court has found an adverse impact suffi-

cient to impose a prior hearing requirement in circumstances

far less dire than when necessities of life are concerned,

namely, when a deprivation of property was _ involved.

Though a hearing was afforded only three days after the

repossession of goods (i.e., a stove and stereo), the Court

held that due process was violated because there was no

hearing prior to the repossession. Fuentes v. Shevin, 407

U.S. 67 (1972). Similarly, when a state revoked the license

of uninsured motorists involved in accidents and the only

prior hearing given did not consider the motorist’s possible

fault, the Court ruled, “. . . before the State may deprive

petitioner of his driver’s license and vehicle registration it

must provide a forum for the uetermination of the question

whether there is a reasonable possibility of a judgment being

rendered against him as a result of the accident.” Bell v.

Burson, 492 U.S. 535, 542 (1971).

_ 69a

may be slower if benefits are reduced or suspended

rather than terminated as in Goldberg,” but some

recipients will suffer nonetheless. As the Goldberg

Court noted, the government has an interest in

welfare as a guard “against the societal malaise that

may flow from a widespread sense of unjustified

frustration and insecurity,” at 265. So is the Social

Security Act “. . . designed for the protection of

society, and enacted to alleviate the burdens which

rest on large numbers of the population because of

the insecurities of modern life, particularly those ac-

companying old age, unemployment, and disability,

.. .” Sayers v. Gardner, 380 F.2d 940, 942 (6th

Cir. 1967).” As with welfare, the same govern-

mental interests that counsel the provision of social

security benefits, counsel as well its uninterrupted

provision to those eligible to receive it, and pre-re-

coupment hearings are indispensable to that end.

See Goldberg, at 265. Finally, Goldberg suggests

that the government’s objection to pre-recoupment

28 It has been suggested that Goldberg may be distinguish-

able from other cases because it involved terminations of

benefits, not reductions. See Wheeler v. Montgomery, 397

U.S. 280, 284-85 (1970) (Chief Justice Burger dissenting) ;

Daniel v. Goliday, 398 U.S. 73 (1970). However, at least

one court has intimated that reductions in grants as recoup-

ment for past advances would be covered by Goldberg. Hag-

ans v. Wyman, 462 F.2d 928 (2d Cir. 1972), cert. to 2d Cir.

granted sub nom. Hagans v. Lavine, —— U.S. ——, 37 L.

Ed.2d 396 (1973).

2 See also Note, Procedural Due Process and The Termi-

nation of Social Security Disability Benefits, supra note 25.

70a

hearings on administrative and fiscal burden grounds

cannot outweigh tae arguments in favor of such

hearings.” This seems especially true in this case:

The Administration’s own statistics indicate that

only a small percentage of overpayment cases will

need to be contested beyond the “paper” hearing

stage." Pre-recoupment hearings may also reduce

the number of post-recoupment hearings necessary.”

There are other compelling reasons why the man-

date of Goldberg must be applied to social security

cases. At the heart of the right to due process lies

so“ | fiscal considerations are always relevant, but seldom

if ever decisive in cases of this sort.” Crow v. Cal. Dep’t. of

Human Resources, 325 F. Supp. 1314, 1317 (N.D. Cal. 1970)

(termination of unemployment compensation without a prior

hearing), cert. denied 408 U.S. 924 (1972), rev’d on other

grounds, F.2d —— (9th Cir. 1973).

31 See text accompanying note 16, supra. While the court

finds that a prior oral hearing is constitutionally necessary

when requested, the Administration may still use its current

“paper” hearing wherein documents filed by the claimant

are reviewed to select out those cases which may be reversed

without a hearing. The Administration has claimed that the

increased cost of continuing benefits until a hearing is had

could be $35 million. However, this figure makes two dubious

assumptions, namely that everyone subject to recoupment will

request a hearing, and that all will take two years to complete

the appeals process. The first assumption is questionable in

light of current statistics on recipients who contest overpay-

ment determination. See text accompanying note 16, supra.

The second “two year” assumption assumes that the current

time for the full appeals process could not be shortened some-

what by the Administration itself.

32 Compare, Richardson v. Wright, supra note 25, at 223

(dissenting opinion).

Tila

the recognition of the need for a fair determination

of issues and the hope of minimizing mistakes. In

this case, the chance of administrative error is

great.” In Kelly v. Wyman, supra note 25, the

district court was impressed by the fact that post-

termination hearings resulted in administrative re-

versals 36% of the time; in this case, reversals at

the post-recoupment hearing stage occur more than

one-third of the time.“* Furthermore, the procedural

safeguards which Goldberg found constitutionally in-

sufficient for lack of a prior hearing were more

stringent than those of the Administration.” It is

thus not surprising that one court has approved the

application of Goldberg to procedures similar to those

here at issue. See Martinez v. Richardson, supra note

9. But see Mills v. Richardson, supra note 21, at

1001 (dicta).

*8 See text accompanying note 16, supra. These figures of

course should not be taken to impugn the competence of the

Administration; rather, they attest to its fairness and the

complexity of making initial overpayment determinations.

* See text accompanying note 16, supra.

*5 Under the procedure challenged in Goldberg, a welfare

termination decision was made only after the recipient dis-

cussed the case with a caseworker, (a safeguard not present

in this case). A unit supervisor then reviewed the case-

worker’s termination decision. If the supervisor concurred,

the recipient was given seven days to request another review

by a higher official. Like the Plaintiffs here, the welfare

recipient could submit a written statement supporting his

case to this higher official. If the higher official felt termina-

tion was unwarranted, welfare aid stopped immediately. The

welfare recipient, like the Plaintiffs here, could then request

a post-termination hearing.

72a

Attempts to distinguish Goldberg on the ground

that fact issues are not present in recoupment cases,

or on the ground that the evidence involved is more

reliable, are futile. Issues of fact arise in virtually

all contested recoupment situations.” To predict when

an issue of fact will not be present on a case by

case basis is impossible. Although the district court

in Kelly v. Wyman, supra note 25, at 905, may have

been influenced in its decision by the fact that wel-

fare terminations sometimes were based upon rumors

or “tips”, the Goldberg Court did not base its de-

cision on the possibility that flimsy evidence might

underlie a termination decision. However reliable

the evidence may be, when the adverse administra-

tive determination depends upon the resolution of

factual issues and the application of legal rules to

8° The Goldberg Court apparently limited its holding to

situations where issues of fact are present, at 268 n. 15.

However, subsequent cases suggest that hearings are required

by due process even if no issues of fact are present. In

Yee-Litt v. Richardson, 353 F. Supp. 996 (N.D. Cal. 1973),

aff'd —— U.S. ——, 93 S.Ct. 2753, 37 L.Ed.2d 152 (1973)

the plaintiffs challenged on due process grounds a California

regulation which authorized the termination of welfare aid

whenever a Chief Referee determined that only issues of

policy and no issues of fact or judgement were present.

Juage Carter held that under Goldberg this regulation vio-

lated due process “because of the inherent difficulties in

using this fact policy distinction,” at 999. Similarly, in

Mother’s & Children’s Rights Organization v. Sterrett, 467

F.2d 797 (7th Cir. 1972), the Court held that even when

welfare benefit terminations were based upon pure ques-

tions of law, reasonable opportunity for argument had to

be given, although a ful! evidentiary hearing was not neces-

sary.

73a

the facts found that is enough to invoke due process

hearing requirements.”

Therefore, the court finds that the Administra-

tion’s recoupment regulations and procedures here

challenged violate the Plaintiff’s right to due process

of law, and orders that henceforth when requested *

the Plaintiffs of both subclasses be given an oral hear-

ing prior to recoupment.” At the hearing, the cor-

rectness of the overpayment determination and the

recipient’s statutory right to waiver under 42 U.S.C.

§ 404(b) (1969) must be examined. However, since

under 20 C.F.R. § 404.502(c) (1973), partial ad-

justment is not a mandate, but lies within the un-

57 See Richardson v. Wright, supra note 25, at 216 (dis-

senting opinion).

** The Plaintiffs due process right to a hearing may of

course be waived by them. It is for the Administration to

decide whether obtaining written waivers of the right to a

hearing in all, some, or no cases is advisable, but the court

notes in passing that written waivers would minimize liti-

gation over whether a recipient knowingly and intelligently

decided not to request a hearing.

*° At first blush the need for a prior hearing in annual

report cases (subclass one) may be doubtful because the re-

ports are filed by the claimants themselves and overpaynients

are determined by the mechanical application of a statutory

earnings standard. However, this is but another way of

saying that annual report cases involve “more reliable” evi-

dence than others. Even if this supposed reliability were a

factor, nothing makes a report more unreliable than when

its own author says it is a mis‘ake. In fact, it may be that

because overpayments based on annual reports present rela-

tively straight forward fact issues, the claimant will seek

an oral hearing only when a mistake is clear.

74a

fettered discretion of the Administration even when

the requisite conditions are met, a hearing need not

be given on the partial adjustment issue.“

The pre-recoupment hearing need not take the

form of a judicial or quasi-judicial trial, but it must

allow the claimant to present his case orally, to

submit evidence with witnesses or documents, and to

cross-examine witnesses against him. Representa-

tion by legal counsel or other persons is neither re-

quired nor prohibited. The hearing officer should

* The Plaintiffs have no due process right to a hearing

on partial adjustment because they have no protected prop-

erty interest in it. In Bd. of Regents of State Colleges v.

Roth, 408 U.S. 564 (1972), when a university did not re-

hire a teacher and was under no contractural, statutory, ad-

ministrative or other obligation to decide the rehiring issue

according to any procedure or standard, but could exercise

its unfettered discretion, the Court held that the teacher

had no constitutional right under the Fourteenth Amend-

ment to a statement of reasons and a hearing on the uni-

versity’s decision not to rehire him. The Court indicated

that a right to procedura] due process exists only when @

protected interest of liberty or property is involved. As to

a protected property interest, the Court stated, “To have a

property interest in a benefit, a person clearly must have

more than a unilateral expectation of it. He must, instead,

have a legitimate claim of entitlement to it,” at 577. There

is no interest of liberty at stake in a partial adjustment de-

termination; and even if a claimant meets the conditions for

partial adjustment, he has no “legitimate claim of entitle-

ment to it” since the Administration in its discretion can

still rule against him.

Furthermore, since no due process right covers the par-

tial adjustment problem, this court cannot say that partial

adjustment or the form needed to file for it, must as a con-

stitutional matter be mentioned in the initial overpayment

notice.

75a

not have participated in making the determination

under review; he should base his decision solely on

the legal rules and evidence adduced at the hearing;

he should state the reasons for his decision and the

evidence relied upon. Goldberg, at 266-71.

Due Process and Notice:

Since a constitutional right can be waived only

knowingly, the Plaintiffs must be notified of their

due process right to request and receive a pre-

recoupment hearing on the overpayment and waiver

issues. Notice of that right must be stated plainly

and obstrusively in the initial overpayment letter.

Furthermore, the initial notice must describe the

claimant’s right at any hearing to be represented

by a lawyer or other person, present evidence, present

witnesses in his behalf, cross-examine adverse wit-

nesses, be afforded a fair and impartial hearing

examiner, examine all documents prior to and dur-

ing the hearing, and be given a prompt decision

by the decisionmaker.

Due process also requires timely, adequate, and

detailed notice of the reasons for an initial overpay-

ment determination. Goldberg, at 267. In Goldbevy,

the Court found, “New York employs both a letter

and a personal conference with a caseworker to

inform a recipient of the precise questions raised

about his continued eligibility. Evidently the re-

cipient is told the legal and factual bases for the

Department’s doubts. This combination is probably

the most effective method of communicating with

76a

recipients,” at 268. Since the Administration’s cur-

rent procedures do not include a caseworker in-

terview, the social security recipient may not be

as fully apprised of the legal and factual bases for

the overpayment finding as the welfare recipient was

in Goldberg.

In annual report overpayment cases involving sub-

class one Plaintiffs, the recipients are presumed to

be familiar with their own reports and the reasons

for filing them. The reverse side of the current

initial notice explains basically how withheld amounts

are determined, and the notice’s invitation to consult

local Administration offices when questions arise is

a necessary and added protection. Subclass two Plain-

tiffs present a more difficult notice problem. The

myriad circumstances and diverse information which

may underlie an overpayment determination make

it impossible for this court to define what is and is

not adequate notice for all subclass two cases. To

indicate (as the reason for the overpayment de-

cision) a “duplicate payment” over specified periods

may be enough notice for the claimant, but a stated

reason such as “processing error’ may not be.“

However, it is reasonable to assume that subclass

two Plaintiffs, and subclass one Plaintiffs, who doubt

the overpayment, will consult their local Administra-

tion office for clarification.

However, in light of the foregoing, the Adminis-

tration’s initial notice does not complete its duty to

* See text accompanying notes 11-12, supra.

77a

inform the subclass one and two Plaintiffs about the

reasons for an overpayment determination. Those

Plaintiffs who consult their local Administration of-

fice to contest or inquire about the alleged over-

payment must receive any additional information

which the Administration has.** The Administration

must inform the Plaintiffs requesting a hearing about

all the pertinent details, laws, and regulations sup-

porting the Administration’s case far enough in ad-

vance to afford the claimant sufficient time to pre-

pare for the hearing.”

Finally, while the Administration’s current notice

adequately informs the recipient of the possibility

of reconsideration and waiver, it does not indicate

what requisite forms must be completed. The record

indicates that even those recipients seeking aid at a

local office are not provided with information about

or copies of the reconsideration and waiver forms.

These deficiencies must be remedied. Claimants fail-

*? Normally when an administrative agency is about to

take action adverse to a citizen, due process requires that

the citizen be informed of the evidence upon which the agency

relies so that he can rebut that evidence effectively. See

Langevin v. Chenango Court, Inc., 447 F.2d 296, 300 (2d

Cir. 1971); Escalera v. N. Y. City Housing Authority, 425

F.2d 853, 862 (2d Cir. 1970); cert. denied, 400 U.S. 853

(1970).

*® While the text for procedural due process is one of fun-

damental fairness in the light of the total circumstances,

due process always requires that a reasonable opportunity

be given the individual to prepare for and meet the case

against him. See e.g., Whitfield v. Simpson, 312 F.Supp.

889, 894 (E.D. Ill. 1970).

78a

ing to file the required forms may lose their case

for failure to comply with administrative procedures.

Therefore, the initial overpayment notice should spec-

ify the reconsideration and waiver forms which must

be requested from the local office. The local office

also has the duty to inform inquiring claimants about

the requisite forms, to provide them with those forms

if requested, and to assist in their completion. Ac-

cordingly :

Judgment may be entered providing that Defend-

ant Weinberger, his successor, his agents and em-

ployees at the Social Security Administration’s Pay-

ment Centers, and all persons in active concert or

participation with them shall be restrained and en-

joined from reducing, terminating, or suspending

social security old age and disability benefits accruing

to Plaintiffs and their class without affording them

an opportunity for a hearing before any reduction,

termination, or suspension is effectuated;

That Defendant Weinberger, his successors, his

agents and employees at the Social Security Ad-

ministration’s Payment Centers, and all persons in

active concert or participation with them shall re-

store any and all money withheld since June 22,

1972, without a prior hearing, from Plaintiffs

NANCY YAMASAKI, ISABELLE ORTIZ, JOHN

V. VAQUILAR, RAYMOND GAINES, and JOR-

DAN S. SILV pending the holding of a pre-adjust-

ment hearing in each of their individual cases;

That the Defendants shall submit to this court,

for its approval, a copy of the proposed notice to be

79a

given to the members of the class informing them

of the judgment herein, and a copy of the revised

rules, reguiations, and procedures which they will

adopt to conform with the dictates of the judgment

herein; and

That this court will retain jurisdiction over this

case to order any further action it may deem ap-

propriate and just in light of the decision herein.

The foregoing constitutes the Findings of Fact

and Conclusions of Law required by Rule 52(a) of

the Federal Rules of Civil Procedure.

DATED: Honolulu, Hawaii, February 4, 1974.

/s/ Samuel P. King

United States District Judge

80a

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF HAWAII

Civil Action File No. 72-3629

EVELYN ELLIOTT, ET AL, PLAINTIFFS

vs.

CASPAR WEINBERGER, ET AL, DEFENDANTS

JUDGMENT

This action came on for trial (hearing) before the

Court, Honorable SAMUEL P. KING, United States

District Judge, presiding, and the issues having been

duly tried (heard) and a decision having been duly

rendered,

It is Ordered and Adjudged: Judgment be entered

in favor of Plaintiffs.

Dated at Honolulu, Hawaii, this 19th day of Feb-

ruary, 1974

/s/ Walter A.Y.H. Chinn

WALTER A.Y.H. CHINN

Clerk of Court

8la

APPENDIX D

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF

WASHINGTON, AT SEATTLE

Civil Action No. 734-73C2

[Filed October 22, 1974]

FANNIE BUFFINGTON and FRANCES BINER, individ-

ually and on behalf of ALL OTHERS SIMILARY

SITUATED, PLAINTIFFS

—vS8 a

CASPAR WEINBERGER, Secretary of Health,

Education, and Welfare, DEFENDANT

SUMMARY JUDGMENT

This action having come on regularly for hearing

before this Court on cross-motions for summary judg-

ment, plaintiffs being represented by Jeff Spence, of

Seattle Legal Services, and defendant being repre-

sented by Charles Mansfield, Assistant United States

Attorney, and Richard Wetmore, Assistant Regional

Attorney, Department of Health, Education, and Wel-

fare, the Court having considered the documents in

the file and the arguments of counsel and being fully

advised, now hereby ORDERS that:

1. This Court has jurisdiction over the subject

matter of this lawsuit, pursuant to 28 USC § 1361,

and 5 USC § 701 et seq.

82a

2. Defendant, his successors, his agents, employees

and all persons in active concert or participation with

them shall be restrained and enjoined from reducing

or adjusting social security benefits accruing to plain-

tiffs and their class pursuant to 42 USC § 402 with-

out affording them an opportunity for a hearing be-

fore any recoupment or adjustment is effected.

3. The hearing shall be conducted by an employee

of the Social Security Administration who has had

no prior knowledge of the events leading to the deter-

mination of overpayment and decision to recover such

overpayment or adjust the beneficiary’s payments.

The decision maker shall issue a written decision, a

copy of which will be sent to the beneficiary, and

representative if any. The decision maker shall spe-

cify findings of fact and conclusions in support of the

decision, and in particular shall s.ate the basis for a

finding of overpayment and whether there was fault

on the part of the beneficiary. If there is no fault,

the decision shall indicate whether recovery of the

overpayment will defeat the purpose of Title II of the

Social Security Act or be against equity and good

conscience, as those terms are defined by the applic-

able regulations promulgated by the Social Security

Administration. A notice advising a beneficiary of

his or her right to appeal the decision will be mailed

with a copy of the decision.

4. The requirements of such hearing shall include

at least the following:

Si eatin

83a

a. The recipient shall have the opportunity to per-

sonally appear, be heard, and cross-examine any wit-

nesses ;

b. The recipient shall have the opportunity to be

represented by an attorney or other representative;

ec. The recipient shail have the opportunity to sub-

mit documentation for consideration at the hearing;

d. The recipient shall have the opportunity to ex-

amine his or her claim file at least five days prior to

the date of hearing;

e. No transcript is required to be made of the

hearing.

5. Any party aggrieved, in whole or in part, with

the decision of the decision maker shall have the right

to further administrative appeal.

6. Defendant, his agents and employees and all

persons in active concert or participation with them

shall be restrained and enjoined from recouping or

adjusting social security benefits accruing to plain-

tiffs and their class pursuant to 42 USC § 402 with-

out affording them adequate notice of their opportun-

ity for a pre-adjustment hearing described above and

of any other administrative relief to which they may

be entitled. If a request for a pre-adjustment hearing

is not made within thirty (30) days of the date of

mailing of the notice the beneficiary shall be presumed

to have waived his or her right to the hearing.

7. Such notice shall include at least the following:

a. A statement of alleged overpayment, an explana-

tion of basis for overpayment, and proposed action

for recoupment of the overpayment;

84a

b. A statement of beneficiary’s right to hearing;

c. Instructions and forms for requesting a hear-

ing including an explanation that if a hearing is not

requested recoupment of the alleged overpayment will

begin ;

d. A statement of any other administrative relief,

such as waiver or partial adjustment;

e. A statement that local office will assist recipient

in completing and submitting the forms.

8. All benefits which have been withheld from the

named plaintiffs shall be restored pending the oppor-

tunity for a hearing as described above.

ANDREW J. YOUNG

Regional Attorney

RICHARD H. WETMORE

Assistant Regional Attorney

DHEW-Office of the Regional

Attorney

1321 Second Avenue MS 624

Seattle, Washington 98101

(206) 442-0470

85a

APPENDIX E

I. PERTINENT PROVISIONS OF THE SOCIAL 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 individual(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 (So-

cial Security Act, secs. 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 bene-

86a

ficiary, he or his payee will normally be given

reasonable 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

adjustment will be deferred for a longer period

when the facts in a given case, 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

report by the beneficiary ;[*] or

[* The Social Security Administration now provides the

30-day deferral period to this class of beneficiaries also.]

(2) the overpayment results from the super-

endorsement procedures under Section 205(n)

of the Act whereby payment of a combined

check is made to the survivor ... In the above

two situations immediate adjustment action is

taken.”

Section 5503.5 provides in pertinent part:

If the person responds raising some question

about the correctness of the determination of

overpayment, or raises a question about re-

covery, 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 liable

requests reconsideration of the substantive de-

termination and it appears that the determina-

87a

tion 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 reconsidera-

tion. This is necessary since, if the substantive

determination is affirmed the Reconsideration

Determination will cover both issues (§ 8737).

Where reconsideration of the overpayment de-

termination, waiver, or partial adjustment de-

velopment is initiated, witholding to recoup the

overpayment will be further deferred and pay-

ment will be continued until development has

been completed, if the beneficiary is otherwise

entitled to benefits. If development will not be

completed before the expiration of the 30-day

period, the DO will utilize teletype to advise the

reviewing office. (Emphasis in original)

Il. PERTINENT PROVISIONS OF THE CODE OF FEDERAL

REGULATIONS, TITLE 20

20 C.F.R. Part 404 provides in pertinent part:

§ 404.907 Notice of initial determination.

Written notice of an initial determination

shall be mailed to the party to the determination

at his last known address, except that no such

notice shall be required in the case of a de-

termination that a party’s entitlement to benefits

has ended because of such party’s death (see

§ 404.905(d)). If the initial determination dis-

allows, 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 receiving the requisite support

from an insured individual, or that a party’s

entitlement to benefits has ended, or that a re-

88a

duction, deduction, or adiustment 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 F.R. 10554, May 25, 1972]

$ 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.

§ 404.909 Reconsideration and hearing.

Any party who is dissatisfied with an initial

determination may request that the Administra-

t'»n 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 dissatisfied 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]

89a

$ 404.910 Reconsideration; right to reconsider-

ation.

The Administration shall reconsider an initial

determination if a written request for recon-

sideration is filed, as. provided in § 404.911, by

0: “or the party to the initial determination (see

§ 404.905). The Administration shall also re-

consider an initial determination (unless the de-

termination is with respect to the revision of

the Administration’s earnings records) if a writ-

ten request for reconsideration is filed, as pro-

vided 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 en-

titlement to a lump sum, or representative of a

decedent’s estate, who makes a showing in writ-

ing that his or her rights with respect to monthly

benefits, a lump sum, a period of disability, or

entitlement to hospital or supplementary medi-

cal 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(g)) of a deceased

individual if a written request for reconsidera-

tion is filed, as provided in § 404.911, by a per-

son as a widow, divorced wife, surviving di-

vorced wife, surviving divorced mother, widower,

child, parent, an individual alleging equitable

entitlement to a lump sum, or representative of

the decedent’s estate.

[31 F.R. 16766, Dec. 31, 1966]

90a

§ 404.911 Time 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 Re-

gional 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(i) 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-

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

9la

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 de-

termination 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.

[25 F.R. 1677, Feb. 28, 1960, as amended at 28

F.R. 14492, Dee. 31, 1963]

§ 404.915 Notice of reconsidered determination.

Written notice of the reconsidered determina-

tion shall be mailed to the parties at their last

known addresses. The reconsidered determina-

tion shall state the basis therefor and inform

the parties of their right to a hearing (see

§ 404.917).

92a

§ 404.916 Effect of reconsidered determination.

[he 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. |

§ 404.917 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 reconsid-

eration 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

(c) The individual has filed a written request

for a hearing under the provisions described in

§ 404.918.

[31 F.R. 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

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