Petition — Califano v. Mattern

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2 Supreme Court, U.S

48-699 FILED

} OCT 26 1978

No.

a ee

In the Supreme Court of the United States

OCTOBER TERM, 1978

JOSEPH A. CALIFANO, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

ARLENE MATTERN, ETC.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

WADE H. MCCREE, JR.

Solicitor General

Department of Justice

Washington, D.C. 20530

oe atid. ea Aad ore,

INDEX

Page

i 1

EEE 2

Ee 2

Constitutional and statutory provisions and

EEE 2

is 2

Reasons for granting the petition res 10

Conclusion ____._ _. ee lie. 10

EE la

EA 21a

en 59a

EEE 85a

EI 110a

ee 1l3a

CITATIONS

Cases:

Califano v. Aznavorian, prob. juris. noted,

a Je 10

Califano v. Elliott, cert. granted, No. 77-

1511 (October 2, 1978) aa i0

Goldberg v. Kelly, 397 U.S. 254 6

Liberty Alliance for the Blind v. Califano,

ee 8

Constitution, statutes and regulations:

United States Constitution, Fifth Amend-

WS sass cee ce

Social Security Act, 42 U.S.C. 401 et seq.:

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

CRY UEP: |e

Section 204(b), 42 U.S.C. 404(b)__

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

BB TR I inka reais coer

20 C.F.R. 404.907-404.913

0. 60 a a

Page

Iu the Supreme Coot of the United States

OCTOBER TERM, 1978

No.

JOSEPH A. CALIFANO, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, PETITIONER

ARLENE MATTERN, ETC.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

OPINIONS BELOW

The initial opinion of the court of appeals (App.

B, infra, 21a-58a) is reported at 519 F.2d 150. The

second opinion of the court of appeals (App. A, infra,

la-20a) is not yet reported. The initial opinion of the

district court (App. C, infra, 59a-84a) is reported

at 377 F. Supp. 906. The second opinion of the dis-

trict court (App. D, infra, 85a-109a) is reported at

427 F. Supp. 1318.

(1)

JURISDICTION

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

infra, 110a-11la) was entered on June 30, 1978. On

September 18, 1978, Mr. Justice Brennan extended

the time for filing a petition for a writ of certiorari to

and including October 28, 1978. The jurisdiction of

this Court is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1. 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.

2. Whether Section 205(g) of the Social Security

Act authorizes courts to grant class-wide injunctive

relief in social security cases.

CONSTITUTIONAL AND STATUTORY PROVISIONS

AND REGULATIONS INVOLVED

1. The Fifth Amendment of the Constitution pro-

vides in pertinent part:

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

property, without due process of law * * *.

2. The pertinent statutory and regulatory provi-

sions involved in this case are set forth in App. F,

infra, 113a-150a.

STATEMENT

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

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

an erroneous overpayment to a Social Security bene-

ficiary, “proper adjustment or recovery shall be made,

under regulations prescribed by the Secretary [of

Health, Education and Welfare] * * * [by] decreas-

[ing] any payment under this subchapter [relating

to old-age, survivors’, and disability insurance] to

which such overpaid person is entitled.” Section 204

(b) of the Act further provides, however, that “there

shall be no adjustment of payments to, or recovery

by the United States from, any person who is with-

out fault if such adjustment or recovery would defeat

the purpose of this subchapter or would be against

equity and good conscience.”

Once the Secretary initially has determined that an

-overpayment has been made, the recipient is notified

and given an opportunity both to contest the determi-

nation in writing and to request that the Secretary

waive recovery. He is invited to discuss his case with

the local Social Security office. See 20 C.F.R. 404.907-

404.913 (App. F, infra, 144a-147a). With one minor

exception, adjustment or recovery is deferred pending

review of the initial determination (App. F, infra,

120a-121a, 128a, 133a). If the Secretary decides on

review that the initial determination of an overpay-

ment is correct and that waiver of recovery is not

warranted, the beneficiary’s monthly benefit pay-

ments are reduced until the overpayment has been

recouped (id. at 149a-150a).

Following the Secretary’s decision on this initial

review, the beneficiary is entitled to further adminis-

trative review, including a full evidentiary hearing.

20 C.F.R. 404.917 (App. F, infra, 148a-149a). If fol-

lowing the hearing, the Secretary determines that

there has been no overpayment, or that the beneficiary

is entitled to waiver of recovery, the beneficiary’s

withheld payments are repaid and subsequent pay-

ments are restored to the appropriate level.

2. Respondent is a recipient of disabled widows’

benefits.. She became eligible in December 1971, but

initial payment was delayed during reconsideration

of her eligibility. In January 1972 respondent in-

formed her local Social Security district office that

she was in financial distress and requested immediate

payments of benefits.* The district office’s records er-

roneously indicated that respondent’s eligibility began

in May 1971, and it forwarded respondent’s request

to the regional office for payment of benefits covering

May to December 1971.

A letter dated January 28, 1972, informed respond-

ent that she would receive a special payment of

$1,063.80 for the May to December period. That

letter also stated that a possibility existed of dupli-

cate payments, and that if she received more than

1The facts are set forth in the opinions of the court of

appeals and the district court (App. B, infra, 25a-27a; App. C,

infra, 60a-61a).

2 The Social Security Claims Manual provides for expedited

handling of cases where prompt action is necessary to meet

the essential needs of the claimant.

one check she should return one of them to the dis-

trict office. Before receiving either this explanatory

letter or the special payment, however, respondent

received her first regular monthly benefit payment

of $119.30, covering December 1971. She received

this check on or about January 26, 1972.

District office records indicate that respondent’s

sister called the office on January 28 and was told

both that $119.30 was the correct amount and that

the special payment check for $1,063.80 was incorrect

and should be returned. The records also indicate

that a district office representative telephoned re-

spondent on January 28, 1972, and told her that she

was not entitled to the special payment and should

return it. Respondent did not return the check and

denied receiving the call shown in the’ records.

On July 14, 1972, the Secretary notified respondent

that the check for $1,063.80 was an overpayment and

that her future payments would be reduced until the

overpayment was recouped. The Secretary’s letter

told respondent that she was entitled to contest the

Secretary’s finding of an overpayment or to request

the Secretary to waive the overpayment if she was

not at fault in receiving it and recoupment would

cause her serious financial hardship or be unfair for

some other reason; the letter instructed her to submit

any available documentary evidence, with her written

request, within 30 days.

On August 7, 1972, respondent requested the Sec-

retary to waive recovery of the overpayment, con-

tending that she was without fault in cashing it.* The

Secretary determined that respondent was at fault

because she had been informed of the possibility of

duplicate checks in general and of the error in issu-

ing the $1,063.80 check in particular. After reaffirm-

ing this decision on administrative reconsideration,

the Secretary began recouping the overpayment at

the rate of $30.00 per month by reducing respondent’s

benefit payments.

Respondent did not request further administrative

review, in which she would have been entitled to a

full evidentiary hearing. Instead, on December 29,

1972, respondent commenced this suit as a class ac-

tion in the United States District Court for the

Eastern District of Pennsylvania, contending that the

Secretary’s procedures for recovering overpayments

violate the Due Process Clause because they do not

afford claimants a pre-recoupment oral hearing.

The district court held that it had jurisdiction

under 28 U.S.C. 1361 and certified the case as a

class action on behalf of the class of “all persons eli-

gible for Social Security OASDI benefits within the

* * * Eastern District of Pennsylvania, whose bene-

fits may be terminated, reduced or otherwise ad-

justed in order to recoup an over-payment” (App.

D, infra, 83a). Relying on Goldberg v. Kelly, 397

U.S. 254 (1970), the district court declared the Sec-

retary’s recoupment procedure unconstitutional and

8’ Respondent also alleged that recovery would cause her

hardship. The Secretary has not disputed that allegation.

enjoined the Secretary from recovering the overpay-

ment to respondent until she had been given an op-

portunity to present her case at a hearing. The in-

junction was later extended to most other members

of the class.

The court of appeals agreed with the district court

concerning jurisdiction, the propriety of class relief,

and the basic constitutional questions, but it remand-

ed the case to the district court for the entry of a

more limited order that would require a prior oral

hearing only when the Secretary’s decision might

turn on the credibility of witnesses (App. B, infra,

48a-55a). The Secretary sought review by this Court,

which vacated the court of appeals’ judgment and re-

manded for further consideration in light of Mathews

v. Eldridge, 424 U.S. 319 (1976). See 425 U.S. 987

(1976). The court of appeals in turn sent the case

back to the district court.

3. The district court held that this case is not

materially different from Eldridge, in which this

Court concluded that the Due Process Clause does not

require an oral hearing prior to termination of Social

Security disability benefits. It accordingly disavowed

its prior approach and entered summary judgment

for the Secretary, upholding the constitutionality of

the recoupment procedures (App. D, infra, 105a-

109a). Expressing doubts about the extent of its juris-

diction, the district court also revoked the certification

of the case as a class action (id. at 99a-101la, 109a).

The court of appeals reversed (App. A, infra,

la-20a) and held for the second time that the Secre-

tary’s procedures are unconstitutional. It first re-

iterated its holding that the district court had juris-

diction both to award benefits and to enter an

injunction. This time, however, it relied on 42 U.S.C.

405(g) rather than 28 U.S.C. 1361 as the source of

jurisdiction (App. A, infra, 7a-9a & n.9). It con-

cluded that Section 405(g) is a source of jurisdiction,

despite respondent’s admitted failure to pursue the

administrative process to completion, because re-

spondent’s due process arguments are essentially col-

lateral to the issues raised by her particular claim

to benefits.‘

Turning to the constitutional question, the court first

distinguished Eldridge on the ground that, “[u]n-

like the disability benefits * * * considered in Eld-

ridge,” respondent’s benefits (disabled widow’s bene-

fits) “are partly need-based” (App. A, infra, 11la).°

The court therefore ruled that the private interest

affected here is of greater significance than the pri-

*The court of appeals instructed the district court to re-

consider the question of class certification in light of this

jurisdictional holding and Liberty Alliance for the Blind v.

Califano, 568 F.2d 333 (3d Cir. 1977), which held that a class

action may be maintained in social security cases as long as

one member of the class satisfies the jurisdictional require-

ment of 42 U.S.C. 405(g). See App. A, infra, 8a and 20a.

5 The court referred to the fact that the benefits “are sub-

ject to reduction when the recipient receives income from a

number of other sources” (ibid.).

eed he

vate interest in Eldridge. The court next concluded

that the social security disability determinations in-

volved in Eldridge did not turn on the credibility of

witnesses, but that such questions frequently would

arise when the Secretary is asked to “waive” an

overpayment.® Accordingly, the court thought that a

prior oral hearing would be more useful in recoup-

ment cases than it would be in making the decision

on the existence or extent of disability.

Finally, the court found the governmental interest

in recovering overpayments prior to an oral hearing

to be insubstantial (App. A, infra, 15a-16a). The

court concluded that the burden on the agency of

providing a prior oral hearing in overpayment cases

would be less severe than it would have been in the

circumstances presented in Eldridge, and that a delay

in beginning recoupment would not jeopardize the

Secretary’s ability to recover from subsequent benefit

payments. It held that the Constitution requires an

oral hearing prior to recoupment in “waiver” cases,

*The court distinguished two categories of overpayment

disputes: “reconsideration” cases and “waiver” cases. The

former generally involve the correctness of the Secretary’s

determination that an overpayment has occurred (e.g., whether

the computation of an earnings statement is correct, or

whether two benefit checks have been received rather than

one), and ordinarily can be resolved by analysis of docu-

mentary evidence. In “waiver” cases, the claimant requests

the Secretary to forgive the overpayment on the ground that

the claimant was not “at fault” in receiving it. See App. A,

infra, 18a-14a.

which may involve issues of credibility, but not in

“reconsideration” cases (App. A, infra, 18a-19a).

REASONS FOR GRANTING THE PETITION

This case presents the same questions that are

pending before this Court in Califano v. Elliott, cert.

granted, No. 77-1511 (October 2, 1978). We there-

fore believe that the disposition of this petition should

be governed by the Court’s decision in Elliott.

CONCLUSION

The Court should defer disposition of the petition

pending its decision in Elliott.

Respectfully submitted.

WADE H. MCCREE, JR.

Solicitor General

OCTOBER 1978

™ We have furnished a copy of our petition in Elliott to coun-

sel for respondents, together with a copy of our brief in

Califano v. Aznavorian, prob. juris. noted, 435 U.S. 921

(1978), a case to which our petition referred.

APPENDIX A

UNITED STATES COURT OF APPEALS

For tHe Turp Cmovrir

No. 77-1629

ARLENE M. MATTERN,

Appellant,

F. DAVID MATHEWS, Secretary of Health,

Education and Welfare,

Appellee.

AppEAL From THE Unitep States District Court FoR THE

Eastern District or PENNSYLVANIA

D.C. Civil No. 72-2522

Argued February 17, 1978

Before Grssons, Hunter, Circuit Judges and

Strapieton, District Judge *

Auan LINDER Davip W. Marston

Central Pennsylvania U.S. Attorney

Legal Services WittuM Kanter

53 North Duke Street Rosert 8S. GREENSPAN

Lancaster, Pennsylvania U.S. Department of Justice,

17602 Washington, D.C.

Steven L. Jones

Department of Health

' Education, and Welfare

Room 612, Altmeyer Bldg.

6401 Security Blvd.

Baltimore, Maryland 21235

Attorney for Appellant Attorneys for Appellee

* Honorable Walter K. Stapleton, United States District Judge for the

District of Delaware, sitting by designation.

OPINION

(Filed June 30, 1978)

Hunter, J.

In this appeal we again examine the constitutionality

of the procedures established by the Secretary of Health,

Education and Welfare for recoupment of alleged over-

payments under section 204 of the Social Security Act.

When this case was first presented to the district court,

the administrative procedures were found to violate due

process since they permitted an adjustment or reduction

of social security payments without affording the bene-

ficiary the right to a prior oral hearing. Mattern v. Wein-

berger, 377 F. Supp. 906 (E.D. Pa. 1974). On review, we

affirmed that decision with certain modifications. Mattern

v. Weimberger, 519 F.2d 150 (3d Cir. 1975). The Supreme

Court granted the Secretary’s petition for certiorari, and

vacated and remanded the case for reconsideration in light

of its decision in Mathews v. Eldridge, 424 U.S. 319

(1976). Mathews v. Mattern, 425 U.S. 987 (1976). We

remanded the case to the district court, which reversed its

earlier ruling and held the existing procedures satisfied

the requirements of due process. Mattern v. Mathews, 427

1. 42 U.S.C. § 404 (1970) :

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

amount of payment has been made to any person under this subchapter,

proper adjustment or recovery shall be made, under regulations prescribed

by the Secretary, as follows:

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

amount, the Secretary shall decrease any payment under this sub-

chapter to which such overpaid person is entitled, or shall require

such overpaid person or his estate to refund the amount in excess of

the correct amount, or shall decrease any payment under this 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

payment to such overpaid person, or shall apply any combination of

the foregoing. .

* * * ” * *

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

has been made, there shall be no adjustment of payments to, or recovery

by the United States from, any person who is without fault if such

adjustment or recovery would defeat the purpose of this subchapter or

would be against equity and good conscience.

—s

F. Supp. 1318 (E.D. Pa. 1977). We reverse, since we do

not believe that Eldridge and subsequent cases substan-

tially alter the result in our original decision.

I. Tue Sratutory Backcrounp AND REGULATIONS

Section 204 of the Social Security Act permits the

Secretary to recover overpayments of benefits paid under

Title II of the Act, 42 U.S.C. §§ 401 et seq., by withholding

a portion of future benefits until the amount of the over-

payment is recouped. Id. §404(a). The right of recovery,

however, is limited by section 204(b), id. § 404(b). That

section provides that there may be no recoupment when

the overpaid beneficiary is ‘‘without fault’’* and the re-

coupment either would ‘‘defeat the purpose’ of Title I

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

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

“Fault” as used in “without fault” (see §§ 404.506 and nig oan

only to the individual. Although the Administration may have been -

fault in making the overpayment, that fact does not relieve + Nag on

individual or any other individual from whom the cng gamete a :

to recover the overpayment from liability for repayment if such n -

is not without fault. In determining whether an individual is at - t, the

Administration will consider all pertinent circumstances, including his age,

intelligence, education, and physical and mental condition. tinny — *

tutes fault (except for “deduction overpayments —see § 404.5 »} = -

part of the overpaid individual or on the part of any other indivi = ro “

whom the Administration seeks to recover the overpayment 6 1 ea

whether the facts show that the incorrect payment to the individual or >

a provider of services or other person, or an incorrect — made

under section 1814(e) of the Act [42 U.S.C. § 1395f(e) ], resulted rom:

(a) An incorrect statement made by the individual which he knew

or should have known to be incorrect; or

(b) Failure to furnish information which he knew or should have

known to be material; or

i spect to the overpaid individual only, acceptance of

a stttan ane Se either knew or could have been expected to know

was incorrect. .

3. The phrase “defeat the purpose” of Title II is defined in 20 C.F.R.

508, which provides : ;

ae eaeh “Defeat the purpose of title II [42 U.S.C. §§401 et

seq.],” for purposes of this subpart, means defeat the purpose of benefits

under this title, ie, to deprive a person of income required for ordinary

and necessary living expenses. This depends upon whether the person a

an income or financiai resources sufficient for more than ordinary =

necessary needs, or is dependent upon all of his current benefits for suc

needs. An individual’s ordinary and necessary expenses include :

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

gage payments, utilities, maintenance, insurance (e.g., life accident,

science.’’*

The Secretary’s regulations provide the procedure for

recovery of overpayments made to recipients of old-age or

disability benefits. First, an initial determination is made

that an overpayment has occurred and that section 204(b)

provides no basis for a ‘‘waiver’’ of recoupment (20 C.F.R.

§ 404.905). All recipients subject to recoupment are then

sent letters which set forth the reasons for the proposed

recoupment, the availability of reconsideration of the de-

termination of overpayment, the conditions for ‘‘waiver’’

under section 204(b), and the need to consult with a local

Administration office within thirty days if the recipient

feels that circumstances would justify reconsideration or

‘‘waiver’’ (Social Security Claims Manual 45503; 20

C.F.R. § 404.907). Full benefits are paid during the thirty

day period (Claims Manual § 5503.3).

Once a request for reconsideration or ‘‘waiver’’ and

supporting documents have been filed, the Secretary may

further delay recoupment until the case has been recon-

sidered (Claims Manual §§ 5503.3, 5503.5). If the Secretary

adheres to his initial determination after the reconsidera-

3. (Cont’d.)

and health insurance including premiums for supplementary medical

insurance benefits under title XVIII [42 U.S.C. §§1395 et seq.]),

taxes, installment payments, etc. ;

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

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

is legally responsible; and

(4) Other miscellaneous expenses which may reasonably be con-

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

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

Adjustment or recovery will defeat the purpose of title II in (but is not

limited to) situations where the person from whom recovery is sought

needs substantially all of his current income (including social security

monthly benefits) to meet current ordinary and necessary living expenses.”

4. “Against equity and good conscience” is defined in 20 C.F.R. § 404.509,

which provides :

“Against equity and good conscience” means that adjustment or re-

covery of an incorrect payment (under title II or title XVIII [42 U.S.C.

§§ 401 et seg. or §§ 1395 et seqg.}) will be considered inequitable if an

individual, because of a notice that such payment would be made or by

reason of the incorrect payment, relinquished a valuable right (examples

(1), (2), and (5)) or changea his position for the worse (examples (3),

and (4)). In reaching such a determination, the individual’s financial

circumstances are irrelevant.

tie.

tion (20 C.F.R. 4 404.914), the claimant is so notified and

benefits begin to be withheld. Only at that time, after

benefits have been reduced, does the claimant have the right

to an evidentiary de novo hearing (20 C.F.R. § 404.917).

At the hearing, the beneficiary has the right to introduce

oral testimony and to cross-examine witnesses. (20 C.F.R.

§§ 404.917-404.934). A request for a hearing does not delay

recoupment. While the record in this case is not clear, it

appears that a delay of several months usually occurs be-

tween the time benefits are witheld and the first opportunity

for a hearing. The hearing is first reviewable by the

Appeals Council of the Social Security Administration (20

C.F.R. § 404.945) and then by a federal district court under

section 205(g) of the Act, 42 U.S.C. § 405(g).

II. Facts

The facts giving rise to this case are fully described

in our original opinion, 519 F.2d at 15455. Briefly, the

named plaintiff in this suit, Arlene Mattern, applied in 1971

for disabled widow’s benefits under 42 U.S.C. § 402(e) (1)

(B) (ii), based on the social security earnings of her hus-

band. Her application was approved and benefits were

scheduled to begin in December 1971, after the statutory

waiting period of six months.°

In January and February of 1972, plaintiff received

two checks. She received her first regular benefits check

in the amount of $119.30. Next, she received a special check

for $1063.80 for benefits covering the period May to Decem-

ber, 1971. The latter check was erroneously issued.

The Social Security Administration contends that

plaintiff was told to return the special check in a letter

dated January 28, 1972 and in a telephone conversation on

that day. District office records also show that the plain-

tiff’s sister was told that plaintiff should return the special

check. Plaintiff counters that the letter was ambiguous and

was not understood to request the return of the $1063.80

5. The Act has since been amended to — for a five-month waiting

period. 42 U.S.C. §423(c)(2) (Supp. V 1975).

check, and that she never received the phone calls. The

check was never returned.

On July 14, 1972, plaintiff was sent a letter advising her

that she had received $1063.80 more than she was entitled

to and that an adjustment would be made in her forthcoming

benefit payments. On August 7, 1972, plaintiff requested

the Secretary to ‘‘waive’’ recoupment of the overpayment.

‘‘Refund”’ and ‘‘without fault’’ questionnaires were filed

to support the request. Plaintiff listed her monthly ex-

penses and stated that she had no other source of income,

that she had been ill, that she had spent the proceeds of the

check on her bills, and that she had never received any

letter or phone call advising her that the $1063.80 check

had been sent in error. The district office made an initial

determination that Mrs. Mattern was not ‘‘without fault’’

and so denied the request for ‘‘waiver.’’ The office relied

on both the January 28 letter and office records of the phone

calls. Plaintiff then filed a request for reconsideration,

which was denied on January 3, 1973. The office deter-

mined that plaintiff’s benefits amount would be reduced by

$30 per month until the full amount of the overpayment

was recovered.

Prior to the reconsideration, plaintiff filed this class

action in the District Court for the Eastern District of

Pennsylvania, seeking injunctive relief for her claim that

the procedures followed by the Secretary violated due

process by failing to provide for a hearing before the re-

duction of benefits. The district court originally held that

the due process clause required a hearing prior to the ad-

justment of social security benefits. Mattern v. Wein-

berger, 377 F. Supp. 906 (E.D. Pa. 1974). Appeals by the

Secretary eventually resulted in the district court recon-

sidering its decision in light of Mathews v. Eldridge, supra.

In this second decision, the district court found jurisdiction

under either 28 U.S.C. § 1361 or 42 U.S.C. § 405(g), or both,

and held that due process does not require a hearing before

recoupment commences by the withholding of benefits. Ac-

anil

atc ok

cordingly, the court granted a motion by the Secretary for

summary judgment. The court also denied plaintiff’s

renewed motion for class certification. Mattern v. Mathews,

427 F. Supp. 1318 (E.D. Pa. 1977). Plaintiff filed a timely

notice of appeal.

III. JurispictTion

The Secretary argues that we are without jurisdiction

to decide this case at this time. In our first opinion in this

case, we found jurisdiction under the Mandamus Act.* 519

F.2d at 155-57. In its reconsideration of the case, the dis-

trict court found that Eldridge had lowered the jurisdic-

tional barriers to review under section 205(g) of the Social

Security Act,’ thus casting doubt on the propriety of the

extraordinary mandamus jurisdiction. It therefore as-

sumed jurisdiction at least under section 205(g).

The Secretary argues that section 205(h) of the Act

prohibits the exercise of mandamus jurisdiction by this

court.’ He interprets recent Supreme Court cases as in-

dicating that section 205(g) is the exclusive avenue of

judicial review of decisions and procedures of the Sec-

retary. Califano v. Sanders, 430 U.S. 99, 109 (1977) ; Wein-

berger v. Salfi, 422 U.S. 749, 764 (1975). See also Norton

v. Mathews, 427 U.S. 524 (1976). The Secretary then con-

6. 28 U.S.C. § 1361 (1970) :

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 owed to the plaintiff.

7. 42 U.S.C. §$405(g) (1970), which provides, in part:

Any individual, after any final decision of the Secretary made after a

hearing to which he was a party, irrespective of the amount in controversy,

may obtain a review of such decision by a civil action commenced within

sixty days after the mailing to him of notice of such decision or within

such further time as the Secretary may allow... .

8. Id. § 405(h):

The findings and decisions of the Secretary after a hearing shall be

binding upon all individuals who were parties to such hearing. No findings

of fact or decision of the Secretary shall be reviewed by any person,

tribunal, or governmental agency except as herein provided. No action

against the United States, the Secretary, or any officer or employee thereof

shall be brought under section 41 of Title 28 to recover on any claim

arising under this subchapter.

cludes that plaintiff’s case is not ripe for review under

section 205(g).

At the outset, we would note that it is far from clear

that section 205(h) bars mandamus jurisdiction in this

ease. Several other courts, after considering the Supreme

Court cases cited by tue Secretary, have found jurisdiction

under section 1361 in cases involving Social Security pro-

cedures. See, e.g., Elliott v. Weinberger, 564 F.2d 1219,

1225-28 (9th Cir. 1977), petition for cert. filed, 46 U.S.L.W.

3680 (U.S. April 21, 1978); White v. Mathews, 559 F.2d

852, 855-56 (2d Cir. 1977), cert. denied, 46 U.S.L.W. 3541

(U.S. Feb. 22, 1978) ; Caswell v. Califano, 435 F. Supp. 127,

131-33 (D. Me. 1977). Like the district court below, how-

ever, we do not need to reach the question of mandamus

jurisdiction.

We hold that we have jurisdiction over this case under

section 205(g), as interpreted by our recent decision in

Liberty Alliance of the Blind v. Califano, 568 F.2d 333 (3d

Cir. 1977). Before we may take jurisdiction under this

section, plaintiff must satisfy two conditions. First, a

claim for benefits must have been presented to the Sec-

retary. Second, there must have been a final decision after

a hearing. 42 U.S.C. § 405(g); see Mathews v. Diaz, 426

U.S. 67, 75-77 (1976) ; Mathews v. Eldridge, supra, 424 U.S.

at 328-29; Liberty Alliance of the Blind v. Califano, supra,

568 F.2d at 344.

The first requirement was met by the plaintiff. The

second requirement, which is essentially an exhaustion re-

quirement, was not met, but is waivable either by the Sec-

retary, Mathews v. Diaz, supra, 426 U.S. at 76-77, or by

the court on its own determination, Mathews v. Eldridge,

supra, 424 U.S. at 330-32. Liberty Alliance of the Blind v.

Califano, supra, 568 F.2d at 344; see Wemmberger v. Salfi,

supra, 422 U.S. at 765-67. In Eldridge the Court discussed

two factors in reaching its conclusion that further ex-

haustion should not be required. First, the claim presented

in that case, the right te a hearing before disability benefits

+ toni

‘ RR ania STS =

are terminated, was said to be collateral to the substantive

claim of entitlement to benefits. 424 U.S. at 330. We hold,

and the Secretary concedes, that Mrs. Mattern’s assertion

of the right to a prior hearing is collateral to her claim for

benefits. Second, the Supreme Court found that plaintiff

had raised ‘‘at least a colorable claim . . . an erroneous

termination [of disability benefits] would damage him in

a way not recompensable through retroactive payments.’’

424 U.S. at 331 (footnote omitted). We find that the plain-

tiff in this case, in light of the financial hardship she alleges

as a basis for ‘‘waiver’’ of recoupment, has made a color-

able showing of irreparable harm from the interim reduc-

tion of benefits. We therefore find that this is a case

where the claimant’s interest in having the constitutional

issue resolved promptly is so great that further deference

to agency procedures is inappropriate. Mathews v.

Eldridge, supra, 424 U.S. at 330; see Liberty Alliance of

the Blind v. Califano, supra, 568 F.2d at 345-46; De Lao v.

Califano, 560 F.2d 1384, 1388 (9th Cir. 1977); Johnson v.

Mathews, 539 F.2d 1111, 1116-17 (8th Cir. 1976).°

IV. Dus Process

The Secretary does not dispute that plaintiff’s interest

in social security benefits is a property right for purposes

of the fifth amendment’s due process clause. The Supreme

Court in Eldridge considered this issue settled. 424 U.S.

at 332. The question presented in this case is what process

must be afforded a claimant before benefits are reduced in

order to recoup an alleged overpayment. Basically, plain-

9. + has argued that we should assume mandamus jurisdiction

because of uncertainties about the availability of injunctive relief under section

205(g), 42 U.S.C. §405(g) (1970). The Secretary has not contended that

injunctive relief is unavailable under that section.

While Congress has the power to limit the equitable powers of the federal

courts, such a limitation will not be found in the absence of a clear legislative

statement. Porter v. Warner Holding Co., 328 U.S. 395, 398 (1946); Hecht

Co. v. Bowles, 321 U.S. 321, 330 (1944). Since there is no language in

Section 205 clearly indicating this congressional intent, we conclude that a

district court has the power to enter an injunctive decree under that section.

In re Letourneau, 559 F.2d 892, 894 (2d Cir. 1977); Johnsen v. Mathews,

539 F.2d 1111, 1125 (8th Cir. 1976).

10a

tiff contends that due process requires that a recipient of

benefits have a right to an oral hearing prior to the reduc-

tion of benefits, instead of afterwards as is now provided

by the Secretary’s regulations and practice.

The Supreme Court, in remanding this case to us, di-

rected that we consider the matter in light of Eldridge. In

that case, the Court set out a three-part balancing test for

determining the specific process which is constitutionally

required :

More precisely, our prior decisions indicate that iden-

tification of the specific dictates of due process gen-

erally requires consideration of three distinct factors:

first, the private interest that will be affected by the

official action; second, the risk of an erroneous dep-

rivation of such interest through the procedures used,

and the probable value, if any, of additional or sub-

stitute procedural safeguards; and finally, the Gov-

ernment’s interest, including the function involved and

the fiscal and administrative burdens that the addi-

tional or substitute procedural requirement would

entail. See, e.g., Goldberg v. Kelly, [897 U.S. 254,]

263-271 [1970].

424 U.S. at 334-35.

A. The Private Interest

One of the three factors involved in the balancing test

in Eldridge is the plaintiff’s interest which will be affected

by the Secretary’s action. The Court in Eldridge was

dealing with the decision of the Secretary to terminate

disability benefits. The Court in large part compared this

interest to the ‘‘brutal need’’ of the welfare recipient in

continued benefits, which formed the basis of the Court’s

decision in Goldberg v. Kelly, 397 U.S. 254, 263-64 (1970),

that a hearing is required prior to a termination of benefits.

While the plaintiff’s interest in Eldridge was found to be

substantial, it was not considered to be as strong as that

Ee ee

lla

presented to the Court in Goldberg. First, unlike welfare

payments, disability benefits under 42 U.S.C. § 423 are not

need-based. Further, even if disability benefits are er-

roneously terminated, the claimant could turn to welfare

payments. The Eldridge court, nevertheless, did not find

this difference to be determinative of the question whether

a prior hearing was needed, and emphasized that ‘‘the de-

gree of difference [between the interest of the welfare and

disability benefits recipients] can be overstated.’’ 424 U.S.

at 341.

The district court found that plaintiff’s interest not

to have benefits temporarily reduced was weaker than the

interest in Eldridge not to have benefits temporarily

terminated. We disagree with this analysis. Unlike the

disability benefits under 42 U.S.C. § 423 considered in

Eldridge, the benefits involved in this case are in part

need-based and are subject to reduction when the recipient

receives income from a number of other sources. See 42

U.S.C. § 403; Elliott v. Weinberger, supra, 564 F.2d at

1231. Further, when a recipient has claimed a ‘‘waiver’’

of recoupment, he is claiming that recoupment would defeat

the purpose of the Act or would be against equity and good

conscience. 42 U.S.C. § 404(b). The Secretary’s regula-

tions interpret the statutory prohibition of recoupment in

terms of financial hardship to the recipient. See notes 2-4

supra. Therefore, when a waiver is erroneously denied by

the Secretary prior to a hearing, the recipient faces a par-

ticularly severe impact.’®

Even though the recipient subject to recoupment is

faced only with a reduction of benefits, his need for full

benefits, particularly if he qualifies for a ‘‘waiver,’’? may

often be greater than the need of the disability benefits re-

cipient. Nevertheless, we do not believe that the plaintiff’s

10. Although we do not know precisely how long the average claimant

must wait for a hearing on a request for reconsideration or “waiver,” admin-

istrative delays appear to be comparable to the “torpidity” considered by the

Eldridge Court, 424 U.S. at 342. The length of deprivation of benefits is

entitled to some weight in evaluating the plaintiff’s interest in a pre-recoupment

hearing. See Fusari v. Steinberg, 419 U.S. 379, 389 (1975).

12a

interests here are as strong as those involved in Goldberg.

The victims of erroneous recoupment, like the claimant in

Eldridge, generally have resort to welfare and other bene-

fits. We conclude that the private interest, particularly

in the ‘‘waiver’’ cases, falls between that considered in

Eldridge and that in Goldberg. See Eliott v. Wemberger,

supra, 564 F.2d at 1231; cf. Tatum v. Mathews, 541 F.2d

161, 165 (6th Cir. 1976) (Supplemental Security Income

program, 42 U.S.C. §4 1381 et seq.) ; Johnson v. Mathews,

supra, 539 F.2d at 1121-22 (same).

B. Utility of Prior Hearing

The second factor to be considered under Eldridge is

the ‘‘fairness and reliability of the existing . . . pro-

cedures, and the probable value, if any, of additional pro-

cedural safeguards.’’ 424 U.S. at 343. In that case the

Court was faced with the termination of disability benefits,

which under the statute and regulations would require a

‘medical assessment of the worker’s physical and mental

condition.’’ Id. The Court found:

This is a more sharply focused and easily documented

decision than the typical determination of welfare en-

titlement. In the latter case, a wide variety of infor-

mation may be deemed relevant, and issues of witness

credibility and veracity often are critical to the

decisionmaking process. Goldberg noted that in such

circumstances ‘written submissions are a wholly un-

satisfactory basis for decision.’ 397 U.S., at 269.

By contrast, the decision whether to discontinue

disability benefits will turn, in most cases, upon ‘rou-

tine, standard, and unbiased medical reports by phy-

sician specialists’ Richardson v. Perales, 402 U.S.

[389,] 404 [(1971)], concerning a subject whom they

have personally examined.... The potential value of

an evidentiary hearing, or even oral presentation to

the decisionmaker, is substantially less in this context

than in Goldberg.

ill

Pn Sate ne

13a

424 U.S. at 343-45. The court noted that the claimant’s

access.to information in files and the opportunity to submit

further information after an initial decision lessened the

risk of an erroneous determination. The court also looked

to the low percentage of all disability terminations which

are reversed after administrative appeal, but noted that

‘‘although we view such information as relevant, it is cer-

tainly not controlling in this case.’’ Jd. at 347.

In our first decision in this case we relied to a large

extent on the utility of a hearing as the determinant of

what process should be due. In that opinion we separately

analyzed ‘‘reconsideration’’ and ‘‘waiver’’ cases, and found

a prior hearing generally not required in the former and

generally required in the latter.

After a recipient of social security benefits receives a

notice of an initial determination of overpayment and re-

coupment, he may request reconsideration of that decision.

In our previous opinion, we agreed with the Secretary that

‘* ‘reconsideration’ cases are generally well suited to reso-

lution by documentary proof.’’ 519 F.2d at 165. The

decision of whether in fact an overpayment was made will

usually turn on arithmetic calculations, such as whether

the administration correctly computed an earnings state-

ment, or whether two checks were received instead of one.

We therefore concluded:

In such circumstances, an examination of social secu-

rity 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 claimant.

Id.

We distinguished ‘‘waiver’’ cases. While some of the

issues involved in the determination of whether the Secre-

tary is barred from recoupment by section 204(b) are sus-

ceptible of documentary proof, a substantial number are

not. A ‘‘waiver’’ depends on fault, financial dependence,

and detrimental reliance. Jd. at 166-67, Elliott v. Wein-

l4a

berger, supra, 564 F.2d at 1232. Particularly the finding

of fault and to a lesser extent the other two factors rest on

a complex analysis of facts and of credibility. We noted

that when credibility determinations were involved, the

Supreme Court had indicated that written submissions were

insufficient for an accurate determination and that an oral

hearing would be needed. 519 F.2d at 164-67.

We believe that this analysis of the utility of a pre-

recoupment hearing in reconsideration and waiver cases is

fully consistent with Eldridge. Both our prior decision

and the Supreme Court’s analysis of due process focused

on the nature of the evidence likely to be needed for a

decision by the Secretary. When that evidence is well

suited to evaluation in written form, there is little need for

a prior oral hearing. When the Secretary’s determination

of a claim rests, for example, on credibility, an oral hearing

is crucial to the truth-finding process and thus is an im-

portant element in deciding what procedures the Constitu-

tion requires. See Goldberg v. Kelly, supra, 397 U.S. at

268-69; Kennedy v. Robb, 547 F.2d 408, 414-15 (8th Cir.

1976), cert. denied, 430 U.S. 913 (1977). See generally

Board of Curators v. Horowitz, 46 U.S.L.W. 4179, 4181-82

& n.4 (U.S. March 1, 1978); Stretton v. Wadsworth Vet-

erans Hospital, 537 F.2d 361, 368-69 (9th Cir. 1976). This

distinction is the same as was drawn by the Eldridge Court

to contrast the need for a hearing prior to the termination

of disability payments with the pre-termination hearing

held to be required in Goldberg.“ Accord, Elliott v. Wein-

berger, supra, 564 F.2d at 1231-34.

11. The Eldridge Court also viewed evidence of reversal rates as relevant

to evaluation of the utility of a prior hearing. In that case, appealed recon-

siderations were reversed at a rate of 58%. Since several decisions of the

Secretary were reversed prior to this hearing stage, however, the court looked

to the “overall reversal rate,” ie. the number of reversals after hearing in

relation to all denials of benefits. This overall rate was 3.3%. 424 U.S. at

346 & n.29. See also Fusari v. Steinberg, 419 U.S. 379, 383 n.6 (1975).

According to information submitted to this Court, the reversal rates for

recoupment decisions are similar to those in Eldridge. In 1970, approximately

1,250,000 overpayments were discovered. From these recoupment determina-

tions, 1,600 recipients requested a hearing. Hearings resulted in 560 reversals.

The reversal rate in the hearing was theretore 35%, and the “overall reversal

rate” less than 1%. See Elliott v. Weinberger, 371 F. Supp. 960, 966-67

‘15a

C. Governmental Interest

The third part of the Eldridge balancing test is the

government’s interest, including the governmental function

involved and the fiscal and administrative burdens that a

pre-recoupment hearing would involve. In large part we

believe that the government interest involved in this case

is similar to that analyzed in Eldridge. We do find some

distinctions between this case and Eldridge, which indicate

that our requiring a prior hearing would impinge less on

the administration of social security benefits.

The Eldridge Court did not have clear evidence of the

administrative burden of imposing a requirement of a

hearing prior to the termination of disability payments.

The Court commented that ‘‘[n]o one can predict’’ the

increased demand for hearings if a hearing were required

before termination instead of afterwards. It then reasoned,

‘the fact that full benefits would continue until after such

hearings would assure the exhaustion in most cases of this

attractive option.’’ 424 U.S. at 347. Further, the Court

faced widely varying estimates of the probable additional

costs of pre-termination hearings, and so concluded that

experience with constitutionalizing administrative pro-

11. (Cont’d.)

(D. Haw. 1974), aff'd, 44 U.S.L.W. 2175 (9th Cir. Oct. 1, 1975), vacated and

remanded, 425 U.S. 987 (1976), on remand 564 F.2d 1219 (9th Cir. 1977),

etition for cert. filed, 46 U.S.L.W. 3680 (U.S. April 21, 1978). The Secretary

advised the court that the Social Security Administration no longer keeps

specific figures for overpayment appeals. However, the Secretary indicated

his belief that these percentages have not substantially changed. ;

One of the elements in this appeal is the right to a hearing on claims for

“waiver,” under 42 U.S.C. §402(b) (1970). In order to implement the

decision in Buffington v. Weinberger, Civ. No. 734-73C2 (W.D. Wash. Oct.

22, 1974), aff'd sub nom. Elliott v. Weinberger, 44 U.S.L.W. 2175 (9th Cir.

Oct. 1, 1975), vacated & remanded, 425 U.S. 987 (1976), on remand, 564

F.2d 1219 (9th Cir. 1977), petition for cert. filed, 46 U.S.L.W. 3680 (U.S.

April 21, 1978), the Secretary instituted a system of informal hearings

(“personal conferences”) before denying “waiver” requests. The order applied

to a nationwide plaintiff class, excepting those residing ‘in the District of

Hawaii and the Eastern District of Pennsylvania (where other similar suits

were pending). In 1977, 42,880 waiver requests were considered, of which

19,535 were granted in the first instance. Of those denied, 1,212 resulted in

a personal conference. After a conference, 350 decisions were reversed. Thus,

the reversal rate after the pre-recoupment hearing was 29%, while the overall

rate of increase of waivers granted was less than 2%.

While this data is relevant to our inquiry, we would echo the Eldridge

Court’s warning against reliance on “bare statistics,” 424 U.S. at 346-47, and

do not find this information controlling in this case.

16a

cedures suggested that the additional cost ‘‘would not be

insubstantial.’’ Id.

First, on the basis of materials submitted to this court,

we have reason to question whether the assumption in

Eldridge about increased numbers of requests for hearings

should be applied to our analysis of a right to a pre-

recoupment hearing.’*® Although we agree that it is im-

possible to predict accurately the increased burden of pro-

viding hearings, we believe it likely that this burden would

be less than was assumed in the circumstances considered

in the Supreme Court’s decision.

Second, we believe that the Secretary faces much less

risk of loss of erroneous payments to recipients than was

present in Eldridge. In that case, the hearing under dis-

cussion would determine whether the recipient was still

eligible for benefits, after the Secretary had made an

initial determination of ineligibility. If payments were

made pending the hearing, the Secretary faced a substan-

tial risk of paying benefits to an ineligible recipient without

hope of recovering those funds. In contrast, the hearing

we are considering is to determine whether the Secretary

will be permitted to recoup an overpayment by deducting

the amount from a continuing stream of benefits being paid

to a concededly eligible recipient. In the general case, a

delay in beginning recoupment will not jeopardize the Sec-

retary’s ability to recover from later payments. Thus, we

believe that the Secretary’s interest in preserving public

funds is far less than was before the Supreme Court in

Eldridge. See generally Goldberg v. Kelly, supra, 397 U.S.

at 265.

12. Under a district court order, the Secretary has had some experience

with providing an informal hearing prior to a decision denying a request that

recoupment be “waived.” See note 11 supra. In 1977, 42,880 “waiver” requests

were filed, of which 23,345 were denied in the first instance. Of those denials,

only 1,212 persons availed themselves of the right to a “personal conference”

before their benefits were reduced. These figures do not show a great increase

in the requests for hearings in comparison to the statistics for 1970, when

1,600 requests were made for a post-recoupment hearing for both waiver and

reconsideration cases. While the 1977 figures are of course not necessarily

predictive of future requests for hearings, the Secretary has not argued that

this number is expected to rise. See also Elliott v. Weinberger, supra, 564

F.2d at 1235.

acta me wenetenemnasenne ene aiden

17a

D. Conclusion

In our prior consideration of this case, we looked pri-

marily at the utility of a pre-recoupment hearing. In light

of the differences we found in the determination of a re-

consideration and a ‘‘waiver’’ case, we distinguished the

process which would be required in each. For reconsidera-

tion cases, where we found that documentary evidence was

often sufficient for an accurate determination of whether

an overpayment had been made, we concluded: om

Consequently, the Secretary’s pre-recoupment pro-

cedures permitting written evidence and providing for

an examination of written documents, when coupled

with a right of a post-recoupment oral hearing, satisfy

due process.

519 F.2d at 165. We did, however, add a caveat to this

holding. Because we could not envision all of the sorts of

inquiries which might be called ‘‘reconsiderations’’ under

the regulations, we insisted that pre-recoupment oral hear-

ing be provided when the Secretary’s decision did not rest

on documentary evidence, but instead involved an evalua-

tion of the claimant’s credibility. Jd. at 165-66.

For ‘‘waiver’’ cases, in which we believed that cred-

ibility determinations would generally be crucial to the

Secretary’s decision, we held that the Secretary would gen-

erally be required to give a pre-recoupment oral hearing.

We did limit the right to a prior ‘hearing, however, to those

cases in which such a requirement would serve a useful

function:

While we believe that claimants in ‘‘waiver’’ cases

have a constitutional right to a pre-recoupment oral

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

a claimant in a ‘‘waiver’’ case raises no disputed

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

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

was not entitled to retain the overpayment, then again

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

18a

be of benefit. Thus, the constitutional requirement of

a hearing may be limited to some extent by princi-

ples analogous to summary judgment in civil litigation.

Id. at 167 (footnote omitted).

We find that our analysis of due process in our first

consideration of this case is substantially consistent with

the three-factor balancing test set forth in Eldridge. Ac-

cord Elliott v. Weinberger, supra.

We believe that the plaintiff’s private interest in hav-

ing a pre-recoupment hearing, particularly in ‘‘waiver’’

cases, is somewhat greater than that which was before the

Supreme Court in Eldridge, and that the government’s

interest in delaying the hearing is somewhat less. The

most substantial difference between the recoupment pro-

cedure and the termination of disability is the value of a

prior hearing to the fact-finding which the Secretary must

perform. Generally, reconsideration cases may ade-

quately be determined on the basis of documentary evi-

dence, while generally we believe that a hearing is the only

adequate proceeding for determination of a ‘‘waiver’’ case.

We hold that when the claimant has filed only for

reconsideration, the balance of the three factors yields the

same result as was reached in Eldridge—that a post-

recoupment hearing will suffice. We adhere to our former

opinion regarding reconsideration cases except in one

respect. In the prior opinion, we said that if a recon-

sideration case should arise which rested on credibility

evidence, a hearing would be constitutionally required.

We do not believe that this qualification is consistent with

Eldridge, which declares that procedural due process is

to be shaped according to ‘‘the risk of error inherent in

the truth-finding process as applied to the generality of

cases, not the rare exceptions.’’ 424 U.S. at 344.

When the recipient claims a ‘‘waiver,’’ i.e. that the

Secretary is barred from recouping an overpayment by

section 204(b), we adhere fully to our prior decision. Be-

cause of the similarity of the ‘‘waiver’’ inquiry to that

san. OS LAST STL,

19a

considered by the Supreme Court in Goldberg v. Kelly,

supra, and in light of the analysis of the Eldridge deci-

sion, we hold that the due process clause requires a pre-

recoupment oral hearing when a recipient has filed a

legally sufficient claim of entitlement to ‘‘waiver”’’ of re-

coupment under section 204(b).

To the extent that a hearing is required, we do not

believe that a full judicial or quasi-judicial proceeding is

necessary. A court must be flexible in fitting procedural

requirements to the circumstances of a case. Board of

Curators v. Horowitz, supra, 46 U.S.L.W. at 4181; Cafe-

teria Workers v. McElroy, 367 U.S. 886, 895 (1961). After

considering all factors under the analysis in Eldridge, we

find that an informal, oral hearing will provide adequate

safeguards to recipients of Title I] benefits who are sub-

ject to recoupment. We adhere fully to the minimum

standards for such a hearing which we eee in our

earlier opinion:

We therefore believe that due process requires

only an informal oral hearing which provides the fol-

lowing safeguards:

1) an impartial decisionmaker separated from

those making the previous administrative determina-

tions in the case;

2) timely and adequate notice to the recipient of

the reasons for recoupment;

3) an effective opportunity for the recipient to

confront and cross-examine adverse witnesses ;

4) an effective opportunity for the recipient to

present his own argument and evidence orally;

5) an opportunity to retain counsel or have the

informal assistance of a friend, if the recipient

desires ;

6) a report written by the decisionmaker which

informally states the reasons and the evidence relied

on in reaching his decision;

20a

7) an opportunity for all parties to receive and

challenge the decisionmaker’s report before it be-

comes final.

519 F.2d at 168-69 (footnotes omitted). Accord Elliott v.

Weinberger, supra, 564 F.2d at 1235; see Goldberg v. K elly,

supra, 397 U.S. at 267-71.

V. Ciass Action

The district court denied plaintiff’s motion for a class

action. The only reason indicated for its departure from

its certification of the class in its first consideration of

the case, 377 F. Supp. at 915-916, was a citation to Wein-

berger v. Salfi, supra. Apparently the court was con-

cerned over the compatibility of a class action with juris-

diction under section 205(g) of the Act, 42 U.S.C. § 405(g).

In Liberty Alliance of the Blind v. Califano, supra,

which was decided after the trial judge’s consideration of

this case, we indicated that a class action could be main-

tained under section 205(g). Since we will reverse and

remand this case, the district court should reconsider class

certification in light of Liberty Alliance. See also John-

- son v. Mathews, supra; Caswell v. Califano, supra.

The judgment of the district court will be reversed

and the case remanded for further proceedings consistent

with this opinion. .

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit.

2la

APPENDIX B

United States Court of Appeals, Third Circuit

No. 74-1776

ARLENE MATTERN, ON BEHALF OF HERSELF AND ALL

OTHERS SIMILARLY SITUATED, APPELLEE

Vv.

CaspaR W. WEINBERGER, SECRETARY OF HEALTH,

EDUCATION AND WELFARE, APPELLANT

Argued January 24, 1975; Decided June 3, 1975

Before Van Dusen, GIBBONS AND HUNTER, Circuit

Judges.

Opinion of the Court

Hunter, Circuit Judge:

This appeal involves a challenge to the constitu-

tionality of the procedure established by the Secretary

of Health, Education and Welfare, pursuant to section

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

149 U.S.C. § 404 (1970) :

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

correct amount of payment has been made to any person under

this subchapter, proper adjustment or recovery shall be made,

under regulations prescribed by the Secretary, as follows:

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

correct amount, the Secretary shall decrease any payment under

22a

alleged oveipayments of benefits. The district court,

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

ment procedure violative of due process since it per-

mitted an adjustment or reduction of social security

payments without affording the beneficiary the right

to a prior oral hearing. While we are in substantial

agreement with the opinion of the district court, we

vacate and remand for entry of a new order consistent

with this opinion.

I. RECOUPMENT PROCEDURE

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

recover overpayments of social security benefits

through recoupment of future benefit payments. Sec-

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

“waive” recoupment under certain circumstances. It

provides that there shall be no recoupment where the

overpaid beneficiary is “without fault”? and the re-

coupment either would ‘‘defeat the purpose” of Title

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

conscience.” * Pursuant to these statutory directives,.

the Secretary has promulgated regulations providing

for a four-step process of administrative review: an

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

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

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

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

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

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

combination of the foregoing.

* *

* : a *

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

ment has been made, there shall be no adjustment of payments to,

or recovery by the United States from, any person who is without

fault if such adjustment or recovery would defeat the purpose of

this subchapter or would be against equity and good conscience.”

Footnotes 2 and 3 on p. 8a ; footnote 4 is on p. 4a.

23a

initial determination that there has been an overpay-

ment and that there is no basis for waiver of recovery

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

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

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

applies only to the individua]. Although the Administration may

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

relieve the overpaid individual or any other individual from whom

the Administration seeks to recover the overpayment from liability

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

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

sider all pertinent circumstances, including his age, intelligence,

education, and physical and mental condition.. What constitutes

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

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

dividual from whom the Administration seeks to recover the over-

payment depends upon whether the facts show that the incorrect

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

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

Act [42 U.S.C. § 1395f(e)], resulted from:

“(a) An incorrect statement made by the individual which he

knew or should have known to be incorrect; or

“(b) Failure to furnish information which he knew or should

have known to be material; or

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

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

know was incorrect.”

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

C.F.R. § 404.508, which provides:

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

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

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

quired for ordinary and necessary living expenses. This depends

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

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

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

ordinary and necessary expenses include:

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

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

accident, and health insurance including premiums for supple-

24a

determination upon request by the recipient (ld.

§ 404.914) ; an administrative hearing de novo before

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

view by the Appeals Council of the Social Security

Administration (Id. § 404.945). Judicial review is

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

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

their administrative remedies.

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

tiary hearing at the third step in the administrative

process, such a hearing is not available until after the

recoupment process has begun. When a claimant is

notified of the initial adverse determination and of

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

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

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

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

is legally responsible; and

“(4) Other miscellaneous expenses which may reasonably be

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

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

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

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

not limited to) situations where the person from whom recovery

is sought needs substantially all of his current income (including

social security monthly benefits) to meet current ordinary and

necessary living expenses.”

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

§ 404.509, which provides:

“Against equity and good conscience” means that adjustment

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

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

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

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

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

tion for the worse (examples (2), and (4)). In reaching such a

determination, the individual’s financial circumstances are

irrelevant.”

= SS

25a

his right to seek reconsideration, he is given thirty

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

he disagrees with the determination that he has been

overpaid or why he seeks a “waiver” under section

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

eration or waiver has been filed, even if the thirty

days has expired, the recoupment procedure is auto-

matically deferred until such reconsideration is com-

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

nation, the claimant is so notified and benefits begin to

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

his right to seek an administrative hearing de novo,

with the right to present oral testimony and to cross-

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

like a request for reconsideration, will not toll recoup-

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

that there is usually a delay of several months from

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

ant is able to obtain an oral hearing.

II. THe Facts

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

tern was fifty-three years old and physically disabled.

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

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

security earnings record of her deceased husband. Her

application was approved, and she became eligible for

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

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

riod of six months,’ plaintiff was not scheduled to

begin receiving payments until December 1971. How-

5 Social Security Claims Manual, § 5508(c).

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

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

26a

ever, when plaintiff informed the social security office

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

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

ered the period from May to December 1971. This

payment was improper, since it had been issued in

disregard of the mandatory six-month waiting period.

Plaintiff was advised of the forthcoming special

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

informed her that there was a possibility of duplica-

tion of payment and that if she should receive more

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

social security district office. Prior to the receipt of

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

tiff had received her first monthly payment of $119.30.

According to records maintained by the district office,

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

and was told that the $119.30 check was correct but

that the impending special check of $1063.80 had been

erroneously issued. The records also indicate that, on

January 28, a district office representative phoned

plaintiff to tell her that the special check being mailed

was incorrect and should be returned. Plaintiff never

returned the check, and denies that she ever received

a phone call instructing her to return it.

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

sent a letter advising her that she had received

$1063.80 more in social security benefits than she was

entitled to and that since she had failed to return the

check an adjustment would be made in her forth-

coming benefit payments. Plaintiff was also informed

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

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

Secretary to waive recoupment of overpayment by

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

naire, in which she listed her monthly expenses and

AN tN TIT i tt kt om nt

27a

stated that she had no other source of income, that

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

bills and that she had never received any letter or.

phone call advising her that the $1063.80 check had

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

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

out fault in causing the overpayment. In making this

initial determination, the district office relied on its

letter of January 28, advising plaintiff that if she

received more than one check, she should return one

of them. It also relied on its records indicating that

plaintiff had been notified by phone on January 28

that the $1063.80 check was incorrect and should be

‘returned.

[1] Plaintiff subsequently filed a request for recon-

sideration and, in accordance with the Secretary’s

procedures, recoupment was deferred until completion

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

trict office reaffirmed its initial decision, and deter-

mined that her payments would be reduced by $30 per

month until the full amount of the overpayment was

recovered. In the meantime, plaintiff had filed this.

class action in the Eastern District of Pennsylvania..

As a result of a stipulation between the parties, the

plaintiff has continued to receive her full benefits until

final disposition of her suit. The district court de-

clared the recoupment procedure unconstitutional, and.

the Secretary appeals.’

7It appears from the record that the Secretary appealed from:

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

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

granted plaintiff’s motions for a class action determination and

for summary judgment, rather than from the final order. of

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

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

28a

III. JurRispicTIon

Plaintiff asserted several bases of jurisdiction in

her complaint,* but the district court found that only

one of them was appropriate—the Mandamus Act, 28

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

is available under the Mandamus Act, we need not

consider the other jurisdictional rulings made by the

district court.

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

tion to lie in mandamus, a plaintiff must allege that

the defendant owes him a clear, ministerial and non-

discretionary duty. As we said in Richardson v.

United States, 465 F. 2d 844, 849 (3d Cir., 1972),

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

L. Ed. 2d 678 (1974):

In order for mandamus to issue, a plaintiff

must allege that an officer of the Government

owes him a legal duty which is a specific, plain

ministerial act “devoid of the exercise of judg-

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

1s ministerial only when its performance is posi-

tively commanded and so plainly prescribed as

to be free from doubt.

‘as having been taken from the underlying judgment. We believe

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

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

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

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

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

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

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

(3d Cir., 1975).

*28 U.S.C. §§ 1831(a), 1343(4), 1846 and 1361 (1970).

® This Act provides:

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

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

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

owed to the plaintiff.”

29a

The Secretary challenges the district court’s holding

that it had jurisdiction in mandamus on the ground

that the duty which plaintiff seeks to compel is not a

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

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

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

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

process mandated a pre-recoupment oral hearing, and

after distinguishing Goldberg on the merits, the Sec-

retary concludes that “the broad and indeterminate

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

circumstances involved here, in no way discloses a

plain and indisputable obligation that the Administra-

tion affc’ the hearings which the plaintiff has

sought.’’ (Br. at 34).

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

error. Its chief deficiency is that in effect it confuses

the issue of jurisdiction under the Mandamus Act

with the process of resolving the merits of plain-

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

complex constitutional issues ** which have not yet

been definitively settled, and we agree that Goldberg

v. Kelly is not plainly controlling. The complexity

————e

10 We also agree with the district court that the Mandamus Act

encompasses constitutional obligations as well as statutory duties.

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

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

we held that mandamus was available to enforce a constitutional

duty allegedly arising under the “Statement and Account” clause

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

enacted a law expressly exempting the Central Intelligence

Agency from the requirement to publish a statement and account

of its receipts and expenditures. We also observed in Richardson

that “mandamus should be construed liberally in cases charging

a violation of a constitutional right.” Richardson, supra 465 F.

2d at 851.

30a

and novelty of the issues on the merits, however,

do not necessarily deprive the federal courts of

mandamus jurisdiction. A determination with respect

to jurisdiction involves a threshold inquiry into

whether the plaintiff has alleged a cause of action

under the particular jurisdictional statute. Here,

plaintiff alleges that the due process clause imposes

an obligation on the Secretary to provide her with an

oral hearing before adjusting her benefits. Thus, the

duty alleged involves no element of discretion or room

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

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

result will be to place the Secretary under a binding,

non-discretionary duty to provide a pre-recoupment

oral hearing. Furthermore, the fact that the existence

of the duty may become absolutely clear only after an

interpretation of the due process clause and a con-

sideration of the merits of the case does not deprive

us of mandamus jurisdiction. See Roberts v. United

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

443 (1899); Chaudoin v. Atkinson, 494 F. 2d 1323,

1330 (8d Cir., 1974); Carey v. Local Board No. 2,

Hartford, Connecticut, 297 F. Supp. 252, 255 (D.

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

11 This case is therefore distinguishable from Jarrett v. Resor,

426 F. 2d 213 (9th Cir. 1970), on which the Secretary relies.

Jarrett held that mandamus does not lie to compel the Army to

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

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

lar plaintiff had met the legal criteria for being a conscientious

objector and would largely involve an evaluation of the sincerity

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

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

comply with the mandates of the due process clause.

3la

1969). Acceptance of the Secretary’s reasoning would

lead to an oddly circular result—if mandamus juris-

diction were unavailable because, prior to ruling on

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

court would never have jurisdiction to determine

whether his duty was clear in the first place.*

[51 Furthermore, we note that this is not a case

where a plaintiff seeks to impose a wholly novel obli-

gation on Government officials through the device of

mandamus. While Goldberg v. Kelly may not be

plainly controlling on the merits, it is a landmark

precedent which imposes, under certain circumstances,

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

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

that mandamus was appropriate to settle novel and important

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

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

was available to compel the Secretary of the Interior to restore

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

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

stricken plaintiff’s name from the rolls without providing notice

and an opportunity to be heard.

18 While the Secretary purports to disclaim advocating a “plain

meaning” rule for purposes of determining mandamus jurisdiction

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

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

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

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

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

parently through examining legal precedents) “still leaves the

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

precedent directly on point, we believe for the reasons already

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

Jurisdiction depends on whether a plaintiff has alleged a cause

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

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

tary’s constitutional obligations in recoupment cases.

32a

a constitutional obligation on administrators of social

welfare programs to provide oral hearings, and thus it

is at least arguably controlling in this case. Our task

here is essentially to determine whether the same con

stitutional duty imposed by Goldberg in welfare ter-

mination cases is also applicable to social security

cases involving recoupment of overpayments. Under

these circumstances, we agree with the district court

that the applicability of Goldberg is sufficiently ap-

parent, in determining the threshold issue of manda-

mus jurisdiction, for us to say that plaintiff has

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

therefore believe that, since plaintiff here has relied

on.a closely analogous Supreme Court decision in

alleging a clear constitutional duty owed her by the

defendant, and since acceptance of her legal theory on

the merits would establish such a clear duty, then

jurisdiction to consider the merits exists under the

Mandamus Act.

IV. THe Cuass AcTION

[6] The Secretary raises two separate arguments

challenging the propriety of the district court’s order

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

tends that the district court erred in failing to provide

notice to all the members of the class. Unlike the

recent Supreme Court decision in Eisen v. Carlisle d&

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

(1974), this action was not maintained under Rule

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

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

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

Secretary, however, contends that some form of notice

to all class members is constitutionally required, rely-

33a

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

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

clined to follow the Second Circuit view and has held

that notice to the absent class members is not constitu-

tionally required in an action maintained under Rule

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

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

that view.”*

The Secretary’s second contention is that the class

order was overbroad.” The Secretary bases this con-

tention on a distinction he draws between two sub-

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

sideration” cases, in which a claimant merely denies

that he in fact received an overpayment or disputes

the amount he was allegedly overpaid. The second he

terms “waiver” cases, in which the claimant concedes

that he received an overpayment but seeks to rely on

the provisions of section 204(b) of the Act,” 2.e., he

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

ment would frustrate the purposes of the Act or would

be against equity and good conscience. The Secretary

further asserts that the plaintiff was only seeking to

“waive” recoupment and thus could.not represent indi-

viduals seeking ‘‘reconsideration.” He therefore con-

14 We also note that the Second Circuit recently. indicated that it

did not intend to require notice in class actions brought under

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

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

class as “consisting of all persons eligible for Social Security

OASDI benefits within the counties encompassed by the Eastern

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

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

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

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

not relevant to this appeal.

1¢ See note 1, supra.

34a

tends that, to the extent that the class encompassed

“reconsideration” cases as well as “waiver” cases, it

was overbroad.

As we discuss in greater detail infra, we agree that

“reconsideration” and “waiver” cases present some-

what different legal issues, and thus we conclude that

the final judgment must be modified to take these dif-

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

tinction must be made between requiring entry of a

new judgment after ruling on the merits, which would

have the incidental effect of limiting the class, and

directly modifying the scope of the class prior to a

ruling on the merits, which the Secretary appears to

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

be a distinction without a difference, we believe that

there would be a significant difference in this case. If

we accept the Secretary’s contentions that the class

order was overbfoad to the extent that it included

“reconsideration” cases and that we should limit the

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

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

not even consider the constitutionality of the Sec-

retary’s recoupment procedure in “reconsideration”

cases. Cf. Kauffman v. Dreyfus Fund, Inc., 434 F. 2d

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

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

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

consider the constitutionality of recoupment in both

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

ever distinction we think is appropriate in terms of

the relief granted.

[7] We conclude, however, that under established

legal principles, we must accept the district court’s

definition of the class, and that we must therefore

consider the constitutionality of all types of recoup-

35a

ment cases. While the Secretary argues basically that

there were two distinct subclasses in recoupment cases

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

the district court defined the class to include recipi-

ents in essentially all cases where benefits were re-

couped without a prior oral hearing.” Since such an

order concerned the size of the class and since the

Secretary made no motion in the district court, based

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

plaintiffs, the order was within the discretion of the

district court and thus its decision should be affirmed.

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

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

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

1974).

Fer the foregoing reasons, we believe that the dis-

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

cluded all recoupment cases rather than merely

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

cases require somewhat differing legal analysis, as we

note infra, they are not so different that the district

court committed reversible error in treating the class

as a single large class encompassing all recoupment

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

pear that the Secretary, in his motion in opposition to

plaintiff's motion for a class action in the district

court, raised the contention that the class order, if

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

Under these circumstances, we cannot conclude that

the district court erred in defining the class as broadly

as it did.*

17 See note 14, supra.

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

plaintiff sought only “waiver” of recoupment.

595-380—75——3

36a

V. Tue Menits *

[8] The chief precedent upon which plaintiff relies

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

Court held that due process requires that welfare

officials provide notice and an oral hearing prior to

' any termination of benefits. The Court relied heavily

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

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

‘termination of aid pending resolution of a contro-

versy over eligibility may deprive an eligible recipient

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

Adopting a balancing test, the Court concluded that

“the interest of the eligible recipient in uninterrupted

receipt of public assistance, coupled with the State’s

interest that his payments not be erroneously termi-

nated, clearly outweighs the State’s competing con-

cern to prevent any increase in fiscal and administra-

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

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

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

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

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

court stated that mandamus jurisdiction would require a showing

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

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

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

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

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

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

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

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

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

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

(1971).

37a

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

S.Ct. at 1019.

The Secretary, however, contends that Goldberg is

distinguishable and that it must be read in the light of

subsequent decisions which have further refined the

requirements of due process. The Secretary’s first

argument is that, except in most unusual circum-

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

preme Court has not required oral evidentiary

hearings prior to a deprivation of a property interest

where the preliminary pre-deprivation proceedings

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

administrative claim. Pointing to its procedures pro-

viding for an initial determination and a reconsidera-

tion, coupled with the right to submit written

responses and documentary proof, the Secretary con-

tends that the pre-recoupment procedure followed by

the Social Security Administration is sufficient to

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

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

fore satisfies due process. We see several basic

problems with this analysis, however.

First, the Secretary relies primarily on a line of

eases which, while having some relevance on the issue,

did not purport to overrule or modify Goldberg and

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

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

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

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

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

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

dicated that “probable validity’? may be determined in

the absence of a prior oral hearing; Fuentes and

Sniadach, in fact, required prior oral hearings. Thus,

Mitchell, rather than Goldberg, represents the excep-

38a

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

berg, involved creditors’ ex parte seizure of property

belonging to debtors,” and thus present somewhat dif-

ferent legal considerations than state termination or

reduction of benefits under social welfare programs.

At no point did the Court in Mitchell indicate that ex

parte proceedings to determine ‘‘probable validity”’

were permissible outside of the creditor/debtor con-

text. In Goldberg, the Supreme Court considered a

state welfare procedure in which a claimant had a

right, after being interviewed by his caseworker and

prior to termination of benefits, to receive a written

explanation of the reasons for termination and to sub-

mit written information in rebuttal. He also had a

right to a full oral hearing after termination. 397 US.

°° The Secretary also cites Bell v. Burson, 402 U.S. 535, 91 S. Ct.

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

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

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

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

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

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

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

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

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

separate opinions, none of which represented a majority view.

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

an ex parte determination of “probable validity” might satisfy

due process in the context of employee discharges. The plurality

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

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

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

the procedural limitations which had accompanied the grant of

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

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

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

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

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

39a

at 258-60, 90 8. Ct. 1011. The Court, however, held that

this procedure was insufficient and required an oral

hearing prior to termination. Since the procedure in-

validated in Goldberg would seem to be at least as

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

cedure used here,” and since the Court in Mitchell did

not purport to modify Goldberg, we refuse to extend

the reasoning of Mitchell outside the creditor/debtor

context and to permit ex parte determination of “prob-

able validity”’ in social welfare cases.

Furthermore, even if Mitchell’s ‘probable validity”

analysis were applicable to social welfare cases, the

procedure here may not pass muster. The Supreme

Court summarized this approach in Mitchell, supra,

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

dach and Fuentes

merely stand for the proposition that a hearing

must be had before one is finally deprived of his

property and do not deal at all with the need

for eb artgehoenar emo hearing where a full and

immediate post-termination hearing i i

(Emphasis added.) rie coca

The Court upheld the Louisiana sequestration statute

challenged in Mitchell partly because it provided for

an immediate hearing after the writ issued. Jd. at 618

94 S. Ct. 1895.** Thus, the constitutionality of a proce-

* Both procedures permit written submissions and documenta ry

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

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

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

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

weit 3 he Court in Afitchell, noted that the Florida statute invali-

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

“eventually,” and that under the Pennsylvania statute invalidated

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

“at 615-16, 94 S. Ct. 1895.

40a

dure establishing “probable validity” without a full

oral hearing pvricr to the property deprivation may

depend in part on whether there is an immediate right

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

however, there seems to be a delay of several months

from the time recoupment has begun to the time a

recipient is provided a hearing.

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

dures are to be upheld on the ground that they are

sufficient to determine ‘probable validity,” they would

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

neous determination. See Mitchell, supra at 618, 94

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

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

curring) and 188, 94 8. Ct. 1633 (White, J., concurring

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

tary’s own figures undercut his contention that the

procedures at issue here are effective to minimize erro-

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

which figures have been made available to us, over

23 Similarly, the recent Supreme Court decision in North

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

719, 42 L. Ed. 2d 751 (1975), distinguished Mitchell in part be-

cause the Georgia garnishment statute, unlike the Louisiana se-

questration statute upheld in A/itchel?, did not provide for an im-

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

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

Court indicated that the length of the period of deprivation of

benefits and the rapidity of administrative review were important

factors bearing on the constitutionality of termination procedures.

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

institutional safeguards that the Court in Afitchell indicated were

important, such as the requirements that the party seeking the

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

deprivation decision be made by a neutral magistrate.

4la

one-third of all persons seeking a post-recoupment

hearing (560 out of 1600) obtained reversals.”

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

tors—the fact that the Supreme Court has given no

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

approach is applicable outside the creditor/debtor con-

text, and that such an approach appears to have been

at least implicitly rejected in Goldberg v. Kelly; the

substantial delay between the initiation of recoupment

and an oral hearing; and the significant reversal rate

following post-recoupment hearings—we conclude that

the pre-recoupment procedures cannot be defended on

the ground that they are sufficient to establish the

“probable validity’’ of the determination in question.

The Secretary also seeks to distinguish Goldberg by

arguing that the impact of a termination of welfare

benefits is more severe than a recoupment of a social

security’ overpayment, since welfare recipients, unlike

social security beneficiaries, are by definition destitute

and since a beneficiary, whose payments have merely

been reduced, is still obtaining some assistance. Gold-

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

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

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

process must be afforded the recipient is influenced by

the extent to which he may be ‘condemned to suffer

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

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

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

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

The Secretary also relies on Torres v. New York State

28 The Secretary’s figures, however, make no distinction between

“reconsideration” and “waiver” cases.

42a

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

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

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

(S.D.N.Y.1971), affirmed, 405 U.S. 949, 92 S. Ct. 1185,

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

affirmed without opinion a three-judge district court

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

for unemployment insurance without a prior oral

hearing since the denial of unemployment compensa-

tion does not necessarily result in severe economic

harm to the claimant.” _

Since Goldberg and Torres, however, the Supreme

Court has indicated, though not with complete con-

sistency, that the requirements of due process do not

depend on the severity of the impact resulting from

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

at 1998, the Court rejected the contention that Gold-

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

that decision was “in the mainstream of past cases

having little or nothing to do with absolute ‘necessi-

ties’ of life but establishing that due process requires

an opportunity for a hearing before a deprivation of

property takes effect.” The Court in Fuentes relied in

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

* Plaintiff seeks to discount the precedential effect of Zorres

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

mary affirmance affirms only the result and not the reasoning of

the lower court. However, since we see no way in which Jorres and

Goldberg are distinguishable on the due process issue other than

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

Supreme Court’s summary affirmance should be construed as an

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

given any precendential weight. Compare Doe v. Hodgson, 478

F. 2d 587, 539 (2d Cir. 1973), with Edelman v. Jordan, 415 U.S.

651, 670-71, 94S. Ct. 1847, 39 L. Ed. 2d 662 (1974), and Dillenburg

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

43a

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

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

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

Court in Fuentes observed that drivers’ licenses were

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

nevertheless sufficiently important to be entitled to

protection under due process. More recently, in

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

Supreme Court seemed to retract somewhat by indi-

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

deciding whether a prior hearing was required, was

the impact of the deprivation.

In its most recent pronouncements, however, the

Supreme Court has indicated that severity of impact

is not a prerequisite. In North Georgia Finishing,

supra, the Court reaffirmed much of the Fuentes anal-

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

commercial establishments have the same due process

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

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

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

that due process requires an oral hearing prior to dis-

ciplinary suspensions from school. In rejecting the

school board’s argument thai a prior hearing was not

required because students suspended for ten days did

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

“Appellee’s argument is again refuted by our

prior decisions; for in determining ‘whether due

process requirements apply in the first place, we

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

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

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

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

were excluded from school only temporarily, it

is true, but the length and consequent severity

of a deprivation, while another factor to weigh

44a

mn determining the appropriate form of hearing,

is not decisive of the basic right’ to a hearing

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

86 [92 S. Ct. 1983, 1997, 32 L. Ed. 2d 556] (1972).

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

property deprivation is not de minimis, its

gravity is irrelevant to the question whether

account must be taken of the Due Process

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

[10] We therefore believe that we are constrained

by Supreme Court’s most recent pronouncenients not

to base our decision on our perception of the severity

of the impact of recoupment on social security recipi-

ents, provided we determine that the impact is not

de minimis. The impact in this case is surely more

than: de minimis, since we believe that Congress, in

enacting a program providing disabled widow’s bene-

fits, recognized that recipients like Mrs. Mattern were

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

this case indicate that Mrs. Mattern was both disabled

and without any other source of income.”

We are aware of the recent Second Circuit decision

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

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

is distinguishable in several respects. At issue in

Frost was whether a hearing was required before a

reduction in benefits to surviving legitimate children.

Such a reduction was required because of the compet-

ing claims of illegitimate children of the wage earner

77 The “Refund Questionnaire” which plaintiff filled out stated

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

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

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

plaintiff could have applied for, and received, welfare payments

since that date. :

Lo ee nS

45a

and because of the statutory ceiling on total payments

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

court in Frost noted, the controversy was not so much

one between the Govérnment and beneficiaries as be-

tween two groups of beneficiaries, with the Social

Security Administration having “no financial stake”

and being “totally disinterested as between the two

sets of claimants.” Unlike Goldvery, therefore, where

the only interest conflicting with that of the plaintiffs

vas the Governmental interest in protecting its

resources, in Frost there were ‘important private

interests as well,” z.¢., the interest of the illegitimate

children to promptly receive payments to which they

were entitled. Such a competing private interest, of

course, is not present here. Furthermore, the court in

Frost noted that the type of hearing that would be

required would place unusual burdens on the Social

Security Administration because of the possibility

that legitimate and illegitimate children, all of whom

would have to be present or represented at a hearing

might be living in different areas. The court further

noted that ‘‘a paternity hearing may demand an in-

quiry into the habits of a father long before married

or long after his departure from the matrimonial

household.” These factors convinced the court in Frost

that a paternity hearing would be less prompt and

more protracted than the brief hearings likely to arise

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

cluded that those factors cut ‘‘in favor of allowing the

SSA to act preliminarily on the basis of something

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

present here, and we believe that the hearings are

likely to be as simple as those in welfare termination

cases.

46a

We also note that the court in Frost relied heavily

on the analysis that a prior oral hearing was required

only in cases where the deprivation was severe.™ As

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

Goldberg decisions as making due process require-

ments turn on the severity of the impact. The opinion

in #rost nowhere mentioned the Supreme Court deci-

sions in Bell v. Burson, Fuentes v. Shevin, North Geor-

gu Finishing or Goss v. Lopez, which we read as re-

quiring prior hearings wherever the impact is more

than de minimis. The court in Frost relied heavily on

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

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

separate opinions, each offering different rationales

and none representing a majority view. Only three of

the Justices (Powell, Blackmun and White) indicated

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

*® We note this language in the Frost case:

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

tle required degree of procedural safeguards varies directly with

the importance of the private interest affected and the need for

and usefulness of the particular safeguard in the given circum-

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

sequences of affording it. |

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

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

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

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

“... {I]n cases where a reduction in such benefits would place a

family below the subsistence level, other forms of government

assistance would become available, however, unattractive resort to

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

principle that something less than a full-scale evidentiary hearing

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

vided promptly thereafter, are thus substantially less than in

Goldberg [p. 67 of 515 F.2d]”

47a

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

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

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

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

Court in Arnett did not employ the rational adopted

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

29We note that in Arnett, the separate opinions of Justices

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

rely solely on the fact that they perceived the impact on a dis-

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

fare recipient whose benefits have been terminated. Justice Powell

also relied on the potential disruption to Government efficiency

and morale if the Government were required to retain a disruptive

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

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

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

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

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

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

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

earlier, the significant reversal rate in recoupment cases after a

hearing is empirical evidence that there is indeed a serious risk

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

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

cannot be recovered even if the Government should prevail. 416

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

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

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

ant does not die before the completion of recoupment).

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

on the fact that a discharged Government employee did not suffer

a sufficiently serious deprivation, that decision must necessarily

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

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

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

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

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

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

charged OEO civil servant.

48a

Fuentes, North Georgia Finishing and Goss v. Lopez.

We also note that two other Circuits have concluded

that due process requires a hearing in cases involving

termination of social security payments. Eldridge v.

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

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

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

v. Weinberger, 494 F. 2d 1230 (Sth Cir. 1974), aff’g

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

Another contention raised by the Secretary is more

convincing. This argument is that recoupment cases

present issues which are well adapted to resolution by

written submissions and documentary proof. Conse-

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

fluous and should not be constitutionally required. As

we will explain in greater detail below, the applica-

bility of this argument to recoupment cases necessi-

tates a discriminating analysis of the different types

of cases and of the different types of factual disputes

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

basic premise that due process should not require a

pre-recoupment oral hearing where factual disputes

are as well suited to resolution by documentary proof

and written submissions as by oral hearings.

Implicit in Goldberg v. Kelly is the recognition of

the fact that issues likely to arise in welfare termina-

tion cases can only be resolved through an oral hear-

ing. One of the plaintiffs was a woman whose benefits

had been terminated because she llegedly failed to

cooperate with welfare officials in suing her estranged

husband. Another was a man whose benefits were ter-

minated because he refused to accept drug counseling

and rehabilitation, though he claimed that he did not

a+ Ae eee eens

49a

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

90 S. Ct. 1011. It is obvious that resolution of those

factual disputes could only be made at an oral hearing,

where the trier of fact could evaluate the credibility

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

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

mination proceedings, written submissions are a

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

90 S. Ct. at 1021.

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

whether a student had engaged in disruptive conduct

justifying suspension could not possibly be determined

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

supra, Which required an oral hearing to determine

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

trast, the Supreme Court in Mitchell held that no

prior opportunity whatsoever need be given the debtor

to oppose repossession of his property, in part because

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

and the delinquency,’’ which “are ordinarily uncom-

plicated matters that lend themselves to documentary

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

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

of an erroneous ex parte determination. Jd. at 609-10,

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

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

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

ing was not required prior to deciding whether to

increase the rents of public housing tenants, since “the

opportunity to present oral evidence is not particu-

larly valuable where technical financial data is at

issue.”’

[11] Application of the above principle to recoup-

ment cases is more complex. As noted previously, the

Secretary draws a distinction between “reconsidera-

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

50a

somewhat different legal issues. We agree with the

Secretary that “reconsideration” cases are generally

well suited to resolution by documentary proof, and

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

stitutionally entitled to a prior oral hearing.” Most

of these disputes involve matters of a purely arith-

metical nature—whether the computation of an earn-

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

lation of the amount of benefits received is accurate;

whether two benefit checks have been received rather

than one. In such circumstances, an examination of

social security records and cancelled checks would seem

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

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

sequently, the Secretary’s pre-recoupment procedures

permitting written evidence and providing for an

examination of written documents, when coupled with

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

process.

We add one caveat, however. Because we cannot

envision all the situations in which “reconsideration”

cases are likely to arise, we acknowledge the possi-

bility that there may be cases where the opportunity

to appear in person might be important in making an

8° We decline to establish a flat rule that all “reconsideration”

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

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

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

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

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

themselves to resolution by documentary proof. Thus, while we

shall use those terms as suggested by the Secretary for purposes

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

of recoupment in a particular case is dependent upon the label

used nor that we necessarily accept the Secretary’s categorizations

in toto. .

5la

accurate determination. Thus, while many “reconsid-

eration” cases- can be decided without a prior oral

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

the Secretary should establish procedures which would

provide for an ora] hearing where a case does not

hingé on documentary evidence and where a claimant

raises issues which necessitate an evaluation of his

credibility. We are mindful of the concern expressed

in Goldberg that many claimants lack the education

or ability to frame written submissions in a persuasive

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

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

hearing.

If, however, a claimant merely denies receiving

duplicate checks or claims that his earnings were of

a certain amount, cancelled checks bearing his endorse-

ment or earnings records maintained by the social

security office would seem to constitute hard proof in-

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

plaintiff had merely denied receiving the $1,063.80

check or had claimed that the check did not represent

an overpayment, she would not have been constitu-

tionally entitled to a hearing prior to recoupment. A

cancelled check bearing her endorsement would be

persuasive proof that she had received and cashed it,

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

month waiting period, would be persuasive proof that

the check represented an overpayment. Furthermore,

the plaintiff in this case, though given the opportunity

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

port a contention that she had not in fact been paid

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

payment. Consequently, if she had made solely those

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

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

595-380—75——_-4

52a

a claimant should be informed, prior to initiation of

recoupment, of the basis on which an adverse determi-

nation is made and should he offered the opportunity

to explain or rebut any written evidence against her.

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

admits that resolution of factual disputes is more

complex than in “reconsideration’’ cases, but offers

essentially two reasons why pre-recoupment oral hear-

ings in such cases should not be constitutionally re-

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

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

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

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

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

the due process clause “does not require the Secre-

tarvy—in deciding to make a gift of funds improperly

received by the hbeneficiary—to also stay his hand

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

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

gives a recipient of an overpayment a statutory right

not to have his payments reduced under certain enu-

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

and in “waiving’’ recoupment the Secretary is not

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

statute.“ Thus, the fact that plaintiff may not have

been entitled to receive the overpayment does not mean

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

least to receive a full amount of her future monthly

payments).

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

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

" See note 1 supra.

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

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

the conditions specified.

53a

resolution by documentary proof. We disagree. One

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

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

preme Court has clearly indicated that determinations

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

of this case graphically illustrate the need for an oral

hearing. In determining that plaintiff was not without

fault, the Secretary relied on basically two factors—

its records indicating that plaintiff had been informed

of the overpayment by telephone, and its letter of

January 28, 1972. Plaintiff denies that she reccived

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

this factual dispute could possibly be made without

allowing her to tell her story in person and enabling a

trier of fact to evaluate her credibility. Similarly, a

finding of fault could not rest on the ambiguous Janu-

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

portunity to explain in person what she thought it

meant.“ Another requirement that a claimant in a

Waiver case must meet is that recoupment would

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

the Supreme Court in discussing and distinguishing Fuentes, said:

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

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

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

was thought illsuited for preliminary ex parte determination.”

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

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

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

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

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

office immediately.”

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

believed that this letter was referring to the possibility that she

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

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

this letter.

54a

either frustrate the purposes of the Act or be against

equity and good conscience. As defined by the Secre-

tary’s regulations, these terms refer to such matters

as difficulty in meeting necessary living expenses or a

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

how a resolution of such questions can reliably be de-

termined in the absence of oral testimony.

While we believe that claimants in ‘‘waiver” cases

have a constitutional right to a pre-recoupment oral

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

a claimant in a ‘‘waiver” case raises no disputed issue

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

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

not entitled to retain the overpayment, then again it

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

of benefit.“ Thus, the constitutional requirement of a

hearing may be limited to some extent by principles

analogous to summary judgment in civil litigation.

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

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

admitted receiving a telephone call telling her that the

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

should return it, and if she merely alleged hardship,

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

fault and the recoupment could proceed in advance of

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

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

coupment must establish two things: that he is with-

cut fault and that the recoupment would defeat the

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

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

85 See notes 3 and 4 supra.

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

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

55a

ceded one of these two elements, she would have no

legal right to retain the overpayment.”

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

cedure established by the Secretary is constitutionally

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

ment oral hearings in the situations we have indicated

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

quires pre-recoupment oral hearings in all cases, but

the Secretary’s existing procedure makes no distine-

tion between the various types of cases and issues that

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

quired, we agree with the district court that the full

panoply of procedural safeguards need not be pro-

vided and that the pre-recoupment hearing need not

take the form of a judicial or quasijudicial trial. In

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

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

explained the informal nature of social security hear-

ings in this language:

The Social Security Act has been with us

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

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

istrative structure and procedures, with essen-

tial determinations numbering into the millions,

are of a size and extent difficult to comprehend.

But, as the Government’s brief here accurately

pronounces, “Such a system must be fair—and

it must work.”’

“Congress has provided that the Secretary

“shall have full power and authority to

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

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

ligent and voluntary waiver of the right.

56a

make rules and regulations and to establish

procedures ... necessary or appropriate to

carry out such provisions, and shall adopt rea-

sonable and proper rules and regulations to

regulate and provide for the nature and ex-

tent of the proofs and evidence and the method

of taking and furnishing the same in order

to establish the right to benefits hereunder.’

§ 205(a), 42 U.S.C. § 405(a).”

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

gress granted the Secretary the power by regu-

lation to establish hearing procedures; (b) strict

rules of evidence, applicable in the courtroom,

are not to operate at social security hearings so

as to bar the admission of evidence otherwise

pertinent; and (c) the conduct of the hearing

rests generally in the examiner’s discretion.

There emerges an emphasis upon the informal

rather than the formal. This, we think, is as it

should be, for this administrative procedure,

and these hearings, should be understandable to

the layman claimant, should not necessarily be

stiff and comfortable only for the trained attor-

ney, and should be liberal and not strict in tone

and operation. This is the obvious intent of Con-

gress so long as the procedures are funda-

mentally fair.”

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

quires only an informal, oral hearing which provides

the following safeguards :*

1) an impartial decision maker separated from those

making the previous administrative determinations in

the case ;*

38 We note with approval the type of procedure followed in

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

In Twigger v. Schultz, 484 F. 2d 856, 859 (3d Cir. 1973),

Judge Gibbons pointed out:

“A more reasonable construction of the entire Act, which we

57a

2) timely and adequate notice to the recipient of the

reasons for recoupment; _

3) an effective opportunity for the recipient to con-

front and cross-examine adverse witnesses;

4) an effective opportunity for the recipient to pre-

sent his own arguments and evidence orally;

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

formal assistance of a friend, if the recipient desires;

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

formaliy states the reasons and the evidence relied on

in reaching his decision ;*°

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

lenge the decision maker’s report before it becomes

final.”

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

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

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

such presiding officers to the same extent as to those presiding

officers listed in § 7(a).”