# Petition for Writ of Certiorari — Bowen v. Johnson

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1987
- **Citation:** 482 U.S. 922

## Text

wt —~ 1 A AO Vy Supreme Court, U.S.
Go UN EAD FILED
No. FEB BF 1908
pemprerrrrmaen NOL, JR,
CLERK

In the Supreme Court of the United States
OCTOBER TERM, 1985

OTIS R. BOWEN, SECRETARY OF HEALTH
AND HUMAN SERVICES, PETITIONER

EDNA JOHNSON, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

CHARLES FRIED
Solicitor General
Department of Justice
Washington, D.C. 20530
(202) 633-2217

QUESTIONS PRESENTED

1. Whether, in this class action brought under 42
U.S.C. 405(g) to challenge regulations promulgated
by the Secretary of Health and Human Services un-
der the Social Security disability programs, the dis-
trict court properly exercised jurisdiction over the
claims of class members who did not exhaust their
administrative remedies or obtain a final decision
of the Secretary within 60 days of the filing of the
complaint.

2. Whether the court of appeals correctly invali-
dated regulations issued by the Secretary, 20 C.F.R.
404.1520(c) and 416.920(c), which provide that a
person seeking Social Security disability benefits will
be found not to be disabled if he does not have a medi-
cally “severe” impairment that significantly limits
his ability to do basic work activities.

© (I)

II

PARTIES TO THE PROCEEDING

‘rhe petitioner is the Secretary of Health and Hu-

man Services. The named respondents, Edna Johnson

| and James Montgomery, represent the following class
certified by the district court (App., infra, 41a):

All persons in Illinois who are filing or have filed
applications for disability benefits under Title II
and/or Title XVI of the Social Security Act, and
whose benefits are being or have been denied pur-
suant to the policies set forth in 20 C.F.R.
$$ 404.1520(¢) and .1522, 416.920(c) and .922
(1982); and the Social Security Rulings cum. ed.
82-55 (1982); and all recipients of such benefits
who are making or have made claims for con-
tinued benefits (through participation in a Con-
tinuing Disability Interview), and whose benefits
are being or have been terminated pursuant to
the same policies.

TABLE OF CONTENTS

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a i icici tniicepheeeeneeopennneanannesenscasenss
Statutory and regulatory provisions involved _......__....
NINE Siceteceercestscnstscsecescnsrapecesessenccconssesseereqeonssesesecoonencses
Reasons for granting the petition

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SR eins i aiaeadiaincaniaenigubiateessniatedaaninbine
net SOS a

TABLE OF AUTHORITIES
Cases:

Bunch v. Heckler, 778 F.2d 396 _.......-.....-0-0-- cee.
Califano v. Yamasaki, 442 U.S. 682 0.00000.
Heckler v. Ringer, No. 82-1774 (May 14, 1984)...
Mathews v. Eldridge, 424 U.S. 319 0...
Yuckert v. Heckler, 774 F.2d 1365, petition for

13
11

9
11

cert. pending, No. 95-1409 (filed Feb. 21, 1986). 13, 14

(IIT)

IV

Statutes, regulations and rules: Page
Social Security Act, 42 U.S.C. (& Supp. I) 301
et seq.:
§ 205(g), 42 U.S.C. 405(g) -................. 5, 6, 7, 9, 11, 12
§ 223(a) (1) (D), 42 U.S.C. 423(a) (1) (D)...... 3
§ 223 (d) (1) (A), 42 U.S.C. 423(d) (1) (A) -..2, 3, 99a
§ 223 (d) (2) (A), 42 U.S.C. 423(d) (2) (A) -..... 2,4
§ 223(d) (2) (C), 42 U.S.C. 423(d) (2) (C)_.3, 8, 100a
§ 1614(a), 42 U.S.C. 1382(a) ............................ 3
§ 1614(a) (3) (A), 42 U.S.C. 1382c(a) (3)
AES canshansnriseneqstiniincacuianasiinsihaliiinpbataeaniniaaminaananidil 2, 3, 100a
§ 1614(a) (3)(B), 42 U.S.C. 1382c(a) (3)
STI oc seticdarsabatiaseretnanbansecsianbineneniscmenibinaneuseets 2, 4, 100a
§ 1614(a) (3) (G), 42 U.S.C. 1382c(a) (3)
SI cin icries seoe ca ecen eaipinigenkapeicebdadsibidaicasinaisanaieens 3, 8, 101la
Social Security Disability Benefits Reform Act of
1984, Pub. L. No. 98-460, 98 Stat. 1794 et seq..... 8
§ 4, 98 Stat. 1800-1801 ...................... spldatnacieusaii 2, 8, 10
Fk eS sees t5 8, 10la
a I, II accictistreneconepebeeiutintinanesedinpeseitia 8
EE I CI 2. sacs annnnankgiesinmbanieinendinnnon 8
I ainsi aidsaciin tceiecesticilameneeienibittcihiceialenpiisoesaieci 11
20 C.F.R.
TE RAR 2,4,101a
i = eassaseneminsaecininns 4
i seteebbeneeeunian 3, 4, 6
I ceeiensabentionndoannseent 5
I aaeeeeaeie 5
eee 5
ETO OC cae 2,101a
asi Malaccan 4
ae ic aha niaareaseh 4
I i sacniasoniaseneebeniniinn 6
ne ERIE ISR ge ot OOP eR renee LENO ei 3,4, 10la
ETI IRE RES cI SERS 8 AIO 4
SEE TREE car oven civ 3, 4, 6
PO pipet 5
I oon ne a ee

5
I re ie aes 5

V

Statutes, regulations and rules—Continued: Page
ates chic cn, LT ALLEL SER 8 3, 104a
Section 416.921(a) iii sae 4
Section 416.921(b) = jnllecccandsstddaeeaten 4
Section 416.922 ............. ROE ES Rea ae na 6
Fed. R. Civ. P.:
gene. -, ET ECL eS ER, 7
NOM UD ellctiins acento eee 7

Miscellaneous:
H.R. Rep. 98-618, 98th Cong., 2d Sess. (1984) _. 10

Iu the Supreme Court of the United States

OCTOBER TERM, 1985

No.

OTs R. BOWEN, SECRETARY OF HEALTH
AND HUMAN SERVICES, PETITIONER

v.

EDNA JOHNSON, ET AL.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

The Solicitor General, on behalf of the Secretary of
Health and Human Services, petitions for a writ of
certiorari to review the judgment of the United
States Court of Appeals for the Seventh Circuit in

this case.
OPINIONS BELOW

The opinion of the court of appeals (App., infra,
la-27a) is reported at 769 F.2d 1202. The order deny-
ing the Secretary's petition for rehearing with sug-
gestion for rehearing en bane and the opinion dissent-
ing from that order (App., infra, 28a-36a) are reported
at 776 F.2d 166. The December 7, 1983 order of the
district court certifying the plaintiff class (App.,

(1)

2

infra, 39a-49a) is reported at 100 F.R.D. 70, and the
September 19, 1984 order of the district court grant-
ing the plaintiffs’ motion for summary judgment
(App., infra, 50a-64a) is reported at 593 F. Supp. 375.
The December 17, 1984 order of the district court
denying the Secretary’s motion to alter or amend the
judgment (App., infra, 65a-76a); the March 15, 1985
order of the district court prescribing procedures and
time limits for reopening claims, denying the Secre-
tary’s motion for a stay pending appeal, and denying
plaintiffs’ motion for contempt (App., infra, 78a-
95a); and the March 1985 supplemental order of the
district court (App., infra, 96a-98a) are unreported.

JURISDICTION

The judgment of the court of appeals was entered
on July 30, 1985 (App., infra, 37a-38a), and the peti-
tion for rehearing was denied on October 30, 1985
(App., infra, 28a-36a). By order dated January 22,
1986, Justice Stevens extended the time within which
to file a petition for a writ of certiorari to and in-
cluding February 27, 1986. The jurisdiction of this
Court is invoked under 28 U.S.C. 1254(1).

STATUTORY AND REGULATORY
PROVISIONS INVOLVED

Sections 223(d)(1)(A) and (2)(A), 1614(a) (3)
(A) and (B) of the Social Security Act, 42 U.S.C.
423(d)(1)(A) and (2)(A), 1382c(a)(3)(A) and
(B); Sections 223(d)(2)(C) and 1614(a)(3)(G)
of the Social Security Act, as added by Section 4 of
the Social Security Disability Benefits Reform Act of
1984, Pub. L. No. 98-460, 98 Stat. 1800-1801 (to be

3

codified at 42 U.S.C. 423(d)(2)(C), 1382c(a) (3)
(G)); and 20 C.F.R. 404.1520, 404.1521, 416.920 and
416.921 are reproduced at App., infra, 99a-106a.

STATEMENT

This is a class action brought on behalf of Illinois
residents to challenge two regulations that are inte-
gral parts of the five-step sequential evaluation proc-
ess established by the Secretary of Health and Hu-
man Services to determine whether a person seeking
disability benefits under the Social Security Act is
disabled. The regulations, 20 C.F.R. 404.1520(¢c) and
416.920(c), provide that if the claimant does not
have a medically “severe” impairment—defined to
mean an impairment that significantly limits a per-
son’s ability to do basic work activities that are neces-
sary for most jobs—the claimant will be found not
to be disabled.

1. Title II of the Social Security Act provides,
inter alia, for the payment of insurance benefits to a
person who is “under a disability.” 42 U.S.C.
423(a)(1)(D). Disability benefits also are provided
under the Supplemental Security Income program es-
tablished by Title XVI of the Act. 42 U.S.C. 1382(a).
The term “disability” is defined under both programs
to mean the “inability to engage in any substantial
gainful activity by reason of any medically deter-
minable physical or mental impairment which can be
expected to result in death or which has lasted or
can be expected to last for a continuous period of not
less than 12 months” (42 U.S.C. 423(d)(1)(A),
1382c(a)(3)(A)). The Act further provides that an
individual “shall be determined to be under a dis-
ability only if his physical or mental impairment or
impairments are of such severity that he is not only
unable to do his previous work but cannot, consider-

4

ing his age, education, and work experience, engage
in any other kind of substantial gainful work which
exists in the national economy” (42 U.S.C. 423
(d) (2) (A), 1382c(a) (3) (B)).

To implement these statutory definitions, the Sec-
retary has established a five-step “sequential evalua-
tion” process to be followed in determining whether
a claimant is disabled. 20 C.F.R. 404.1520, 416.920.
At step 1, the decision-maker (the state agency, ad-
ministrative law judge (ALJ), or Appeals Council)
determines whether the individual is engaged in work
that constitutes substantial gainful activity. If so, he
is found not to be disabled. 20 C.F.R. 404.1520(b),
416.920(b). If the claimant is not engaged in sub-
stantial gainful activity, the decision-maker must de-
termine at step 2 whether he has a medically “se-
vere” impairment. 20 C.F.R. 404. 1520(c), 416.920(c).
An impairment is not “severe” if it does not “sig-
nificantly limit’ the claimant’s physical or mental
ability to do “basic work activities’ (20 C.F.R.
404.1521(a), 416.921(a)), which include walking,
standing, lifting, etec.; capacities for seeing, hearing
and speaking; understanding and carrying out simple
instructions; using judgment; responding appropri-
ately to supervision and co-workers; and dealing with
changes in a routine work setting. 20 C.F.R.
404.1521(b), 416.921(b). If the claimant’s impair-
ment does not significantly limit his ability to do
these basic work activities, he is found not to be dis-
abled without specific consideration of his age, edu-
eation, and work experience. 20 C.F.R. 404.1520(¢),
416.920(c).

If the claimant does have a “severe” impairment,
the decision-maker then must determine at step 3
whether the impairment is equal in severity to one of
the listed impairments that are deemed to be disabling

5

on medical grounds alone. 20 C.F.R. 404.1520(d),
416.920(d). If the impairment is not so severe as
to meet the listings, the claimant will be found not to
be disabled at step 4 if he is still able to do his past
work. 20 C.F.R. 404.1520(e), 416.920(e). But if
the claimant cannot do his past work, the decision-
maker must determine at step 5 whether, in light of
the claimant’s age, education, and work experience,
he can perform other work that exists in the national
economy. 20 C.F.R. 404.1520(f), 416.920(f).

2.a. This class action was brought in the United
States District Court for the Northern District of
Illinois to challenge the severity step of the sequential
evaluation process (App., infra, 39a-41a). One of the
two named plaintiffs, Edna Johnson, applied for SSI
disability benefits on March 24, 1982. After the state
agency determined that she was not disabled, she re-
quested an ALJ hearing. The ALJ denied her claim
on the ground that each of her impairments was not
severe, and the Appeals Council affirmed. The other
named plaintiff, James Montgomery, had been awarded
disability benefits in 1976 on the basis of diabetes and
heart disease. On January 8, 1982, Montgomery was
notified that he was no longer considered disabled and
that his benefits would be terminated effective Octo-
ber 1981. Montgomery appealed, and the ALJ con-
cluded that he still was disabled. However, the Ap-
peals Council granted review on its own motion and
concluded that neither his heart disease nor his dia-
betes was a severe impairment. The Appeals Council
therefore held that Montgomery was not disabled.
App., infra, 5a-6a, 54a-55a.

After their claims were denied by the Appeals
Council, Johnson and Montgomery sought judicial re-
view pursuant to 42 U.S.C. 405(g). An amended

6

class complaint was filed on August 11, 1983. The
plaintiffs challenged the regulations requiring a
claimant to demonstrate a “severe” impairment (20
C.F.R. 404.1520(¢c), 416.920(c)), as well as compan-
ion regulations that then provided that the combined
effect of unrelated impairments would not be consid-
ered unless each impairment, considered separately,
was severe (20 C.F.R. 404.1522, 416.922). On De-
cember 7, 1983, the district court certified a class con-
sisting of (i) all persons in Illinois “who are filing or
have filed applications” for Title II or SSI disability
benefits and whose claims are being or have been
denied pursuant to the challenged severity policies,
and (ii) all recipients of Title II or SSI disability
benefits in Illincis “who are making or have made
claims for continued benefits * * * and whose benefits
are being or have been terminated pursuant to the
same policies” (App., infra, 41a). Although the
named plaintiffs had obtained a decision from the Ap-
peals Council before seeking judicial review pursuant
to 42 U.S.C. 405(g), the district court held that the
class could include unnamed class members who had
not exhausted their administrative remedies (App.,
infra, 42a-47a).

b. In an opinion dated September 19, 1984, the
district court held that the severity step of the se-
quential evaluation process is invalid to the extent
that it permits the denial of a claim where the claim-
ant is unable to perform his own past work. The
court relied on judicial decisions stating that a claim-
ant establishes a prima facie case of disability if he
shows that he cannot perform his past work, and that
the burden then shifts to the Secretary to establish
that there are other jobs in the national economy that
the claimant can do. In the court’s view, the severity

7

regulations impermissibly increase the showing the
claimant must make to establish a prima facie case of
disability because they substitute an inability to per-
form “basic work activities” for an inability to per-
form past work. App., infra, 58a-61a. The district
court also held that the Secretary must consider the
combined effect of unrelated impairments, even if
those impairments, considered separately, are not
severe. Id. at 6la-62a.

As relief, the district court enjoined the Secretary
from enforcing the relevant regulations insofar as
they do not recognize a prima facie case of disability
where the claimant is unable to do his past work and
do not consider the combined effect of nonsevere im-
pairments. The court also ordered the Secretary to
“hold new disability hearings for class members’; to
reinstate benefits pending the hearing determinations
to those class members whose benefits were termi-
nated; and to grant retroactive benefits to any class
members who are found after a new hearing to be
disabled. Finally, the court remanded the claims of
Johnson and Montgomery to the Secretary for re-
determination without application of the challenged
policies. App., infra, 63a-64a.

ec. In a December 17, 1984 order denying the Sec-
retary’s motion to alter or amend the judgment (App.,
infra, 65a-76a), the district court rejected the Secre-
tary’s contention that it had improperly awarded re-
lief to persons who had not sought judicial review
within 60 days of the final decision on their claims,
as required by 42 U.S.C. 405(g). The court held that
compliance with the 60-day filing requirement is not
a jurisdictional prerequisite and that the Secretary
had waived the 60-day issue under Fed. R. Civ. P.
8(c) and 12(h)(1) because it was not “sufficiently
raise[d]” in the answer to the amended complaint or

8

the memorandum on class certification. App., infra,
69a.

The district court also rejected the Secretary’s con-
tention that the validity of the severity step of the
sequential evaluation process was confirmed by the
intervening enactment of the Social Security Dis-
ability Benefits Reform Act of 1984, Pub. L. No. 98-
460, 98 Stat. 1794 et seg. Section 4 of that Act (98
Stat. 1800) requires the Secretary, effective Decem-
ber 1, 1984, to consider the combined effect of impair-
ments in determining whether the claimant’s impair-
ments are severe.’ The district court acknowledged
that Congress approved the sequential evaluation
process and the severity step when it passed the 1984
Act. But in the court’s view, Congress’s action did
not undermine its September 19 holding that the
severity regulations’ focus on the claimant’s ability to
do “basic work activities,” rather than his ability to
do his prior work, was inconsistent with the Social
Security Act. App., infra, 73a-74a.

d. On March 25, 1985, the district court ordered
the Secretary to provide for the reopening and re-

1 Subsections (a) and (b) of Section 4 of the 1984 Act (98
Stat. 1800) add a new paragraph (C) to Section 223(d) (2)
of the Social Securify Act (to be codified at 42 U.S.C. 423
(d) (2) (C)) and a new paragraph (G) to Section 1614 (a) (3)
of that Act (to be codified at 42 U.S.C. 1382c(a) (3) (G)).
Each paragraph requires the Secretary, when considering
whether a claimant’s impairment or impairments “are of a
sufficient medical severity that [they] could be the basis of
eligibility,” to “consider the combined effect of all of the indi-
vidual’s impairments without regard to whether any such
impairment, if considered separately, would be of such sever-
ity.” Subsection (c) (98 Stat. 1801) of Section 4 provides that
these amendments “shall apply with respect to determinations
made on or after the first day of the first month beginning
after 30 days after the date of the enactment of this Act.”

9

determination of the claims of all Illinois residents
whose claims for disability benefits were filed or pend-
ing at any time on or after February 26, 1979—more
than four years before this suit was filed. The March
25 order prescribed detailed procedures and time
limits for implementing that relief. Jd. at 90a-95a.°

3.a. The court of appeals affirmed (App., infra,
la-27a). The court of appeals first rejected the Sec-
retary’s argument that the district court granted relief
to class members over whom it had no jurisdiction
under 42 U.S.C. 405(g). In the court’s view, re-
spondents’ challenge to the severity regulations was
“sufficiently collateral” to the class members’ claims
for benefits to justify a judicial “waiver” of the ex-
haustion requirement under 42 U.S.C. 405(g), be-
cause more than “ ‘ministerial details’ ”’ would remain
to be adjudicated on the claims of the individual class
members if the severity regulations were invalidated.
App., infra, 1la, quoting Heckler v. Ringer, No. 82-
1774 (May 14, 1984), slip op. 11. The court further
believed that the class members’ failure to exhaust
their administrative remedies could be excused on the
basis of “futility,” because the challenged severity
policies were embodied in published regulations that
were not likely to be altered in the course of admin-
istrative appeals on the claims of individual class
members. App., infra, lla. The court of appeals
similarly agreed with the district court that the 60-
day filing requirement in 42 U.S.C. 405(g) is not
jurisdictional and that the Secretary did not suffi-
ciently raise the class members’ failure to comply

2 The district court also denied the Secretary’s motion for a
stay pending appeal (App., infra, 78a-89a), but the court of
appeals thereafter granted a stay (id. at 7a).

10

with that requirement to preserve it as a defense.
App., infra, 1la-13a.

On the merits, the court of appeals held that the
Title II and SSI severity regulations are invalid to
the extent they permit the Secretary to deny benefits
to a claimant who has established that he is unable
to perform his own past work. App., infra, 13a-18a,
22a, 27a. Like the district court, the court of appeals
believed that the disability determination must be a
two-step process, “with the first step placing the bur-
den on the claimant to demonstrate inability to per-
form past work,” and the burden then shifting to
the Secretary to show that there are other jobs in
the national economy that the claimant is able to do
(id. at 15a-16a). The court of appeals also rejected
the Secretary’s contention that Congress endorsed the
severity step of the sequential evaluation process when
it enacted Section 4 of the Social Security Disability
Benefits Reform Act of 1984, which requires the Sec-
retary to consider the combined effect of nonsevere
impairments when deciding whether the claimant’s
impairments are severe. See page 8 & note 1, supra.
The court relied on statements in the House Report
expressing concern that the criteria for determining
whether an impairment is nonsevere were too strin-
gent and observing that the Secretary intended to
reevaluate those criteria. App., infra, 18a-20a, quot-
ing H.R. Rep. 98-618, 98th Cong., 2d Sess. 7-8
(1984) .°

3 Although Congress had established an effective date of
December 1, 1984 for the new statutory requirement that the
Secretary consider the combined effect of several unrelated
impairments (see note 1, supra), the court of appeals also
held that the class members whose claims had been denied
prior to that date were entitled to have their claims reopened
to permit a reconsideration of multiple impairments. App.,
infra, 22a-27a.

11

b. The Secretary’s petition for rehearing with
suggestion for rehearing en bane was denied by an
equally divided court (App., infra, 28a-36a). In a
dissenting opinion joined by three other judges, Judge
Easterbrook disagreed with the panel’s decision on
the jurisdictional issues as well as the merits (id. at
29a-36a). He stressed that under Califano v. Yama-
saki, 442 U.S. 682, 701, 704 (1979), every member
of a class in an action brought under 42 U.S.C. 405
(g) must independently satisfy the “final decision”
and 60-day filing requirements. With respect to the
former, Judge Easterbrook observed that a court of
appeals cannot “waive” the “final decision” require-
ment under 28 U.S.C. 1291 simply in order “to hear
an interesting and important legal issue in mid-case”’
(App., infra, 30a), and he concluded that a court
likewise cannot waive the “final decision” require-
ment under 42 U.S.C. 405(g). Judge Easterbrook
explained that this Court’s finding of jurisdiction in
Mathews v. Eldridge, 424 U.S. 319, 330-332 (1976),
was consistent with the practice of finality under
28 U.S.C. 1291, because the asserted right to a pre-
termination hearing was “irremediable on appeal”
and “has nothing to do with the merits” of the claim.
By contrast, the question in this case regarding the
validity of the severity regulations “has everything
to do with the merits of a claim for benefits, and if
the Secretary is wrong the validity of the Step Two
rule is reviewable on appeal” (App., infra, 30a-31a).

With respect to the 60-day filing requirement in
42 U.S.C. 405(g), Judge Easterbrook observed that
“Tt]ime limits in suits against the United States are
not ordinary statutes of limitations,” but instead
“are substantive conditions on the consent to suit,
and they apply unless they are expressly surrendered”’

12

(App., infra, 32a). In this case, he believed that
“Tbjelatedly raising the point in district court is not
an active surrender. It is closer to an act of negli-
gence by the government’s lawyer, an act that ought
not eliminate a statutory limit on litigation against
the United States” (id. at 33a).

On the merits, Judge Easterbrook concluded that
the severity regulations serve a useful screening func-
tion and are a reasonable exercise of the Secretary’s
broad discretion to establish rules for the administra-
tion of the Social Security Act. App., infra, 36a. He
also was of the view that the 1984 Act suggests that
“Congress knew of and approved the sequential proc-
ess in which ‘severity’ is one step” (id. at 36a).*

REASONS FOR GRANTING THE PETITION

This case presents important questions concerning
(i) the jurisdiction of a district court in a class
action brought under 42 U.S.C. 405(g), and (ii) the
validity of the severity step of the sequential evalua-
tion process established by the Secretary for the ad-
judication of claims for disability benefits under the
Social Security Act. Because these issues are before
the Court in other cases, we do not believe that this
case warrants plenary review. Rather, we suggest
that the petition be disposed of as appropriate in
light of the Court’s rulings in the other cases.

The question whether the courts below properly ex-
cused the failure by the unnamed class members to
comply with the “final decision” and 60-day filing re-
quirements in 42 U.S.C. 405(g) is closely related to

* The court of appeals has stayed its mandate pending cer-
tiorari insofar as it affirmed those portions of the district
court’s judgment that required the reopening of closed claims.

13

the jurisdictional issues presented in Bowen v. City
of New York, No. 84-1923 (argued Feb. 26, 1986),
and Bowen v. Owens, No. 84-1905 (argued Feb.
26, 1986). Similarly, the question of the validity of
the severity regulations is presented in Bowen v.
Yuckert, petition for cert. pending, No. 85-1409 (filed
Feb. 21, 1986).

In Yuekert, the Ninth Circuit held that the sever-
ity regulations are invalid because (i) they do not
provide for the claimant to establish a prima facie
case of disability simply by showing that he cannot
perform his own past work, and (ii) they do not
provide for a specific consideration of the claimant’s
age, education, and work experience in every case.
Yuckert v. Heckler, 774 F.2d 1365, 1369-1370 (1985),
petition for cert. pending, No. 85-1409 (filed Feb. 21,
1986). By contrast, the court of appeals in the in-
stant case invalidated 20 C.F.R. 404.1520(c) and
416.920(c) only to the extent that they do not pro-
vide for the claimant to establish a prima facie case
by showing an inability to perform his prior work.
App., infra, 22a. Application of the severity regu-
lations has been sustained by the Seventh Circuit
where the claimant does not show that he is unable
to perform his past work. Bunch v. Heckler, 778 F.2d
396, 398 n.4 (1985).° Because the Ninth Circuit’s
holding in Yuckert invalidates step 2 of the sequential
evaluation process on broader grounds, it is a more
appropriate vehicle in which to resolve the dispute
concerning the legality of the severity regulations.

° The district court expressly rejected the contention that
the Secretary is required to consider the claimant’s age, educa-
tion, and work experience at step 2 of the sequential evalua-
tion process (App., infra, 58a).

14

CONCLUSION

The petition for a writ of certiorari should be held
and disposed of as appropriate in light of the Court’s
decisions on the jurisdictional issues in Bowen v.
City of New York, No. 84-1923, and Bowen v. Owens,
No. 84-1905, and in light of the Court’s disposition of
the petition for a writ of certiorari raising the ques-
tion of the validity of the severity regulations in
Bowen v. Yuckert, petition for cert. pending, No. 85-
1409.

Respectfully submitted.

CHARLES FRIED
Solicitor General

FEBRUARY 1986

APPENDIX A

UNITED STATES COURT OF APPEALS
SEVENTH CIRCUIT

Nos. 85-1254, 85-1490
EDNA JOHNSON, ET AL., PLAINTIFFS-APPELLEES
v.

MARGARET M. HECKLER, SECRETARY OF HEALTH
AND HUMAN SERVICES, DEFENDANT-APPELLANT

Argued June 14, 1985
Decided July 30, 1985

Before BAUER and WOOD, Circui Judges, and
GRANT, Senior District Judge.*

BAUER, Circuit Judge.

In this class action, applicants for and recipients of
Social Security Disability Insurance Benefits chal-
lenge regulations promulgated by the Secretary of
Health and Human Services. Plaintiff-applicants al-
lege that the Secretary’s regulations governing the

* The Honorable Robert A. Grant, Senior Judge of the
United States District Court for the Northern District of

Indiana, is sitting by designation.

(la)

2a

sequential evaluation for determining disability claims
violate the Social Security Act and the Constitution
by denying benefits at a threshold step even to those
claimants who meet their prima facie burden under
the Act, and by declining to consider the combined
impact of nonsevere impairments in determining
whether the threshold step is met. On September 19,
1984, 593 F. Supp. 375, after cross motions for sum-
mary judgment, the district court enjoined the Secre-
tary from applying the challenged regulations and
ordered her to redetermine class members’ eligibility
for benefits. On December 17, 1984, 607 F. Supp.
875, the district court denied the Secretary’s motion
for reconsideration based on the passage of the Social
Security Disability Benefits Reform Act of 1984. We
granted the Secretary’s motion for a stay pending
appeal and now affirm the district court.

I.

In this case plaintiffs essentially challenge a thresh-
old step, known as “step two,” in the Secretary’s so-
cial security disability evaluation process. Effective
February 1979 the Secretary amended the regulations
promulgated by her under the Social Security Act to
establish a five-step sequential evaluation process for
determining eligibility for disability benefits. 43
Fed. Reg. 55349 (1978) (codified at 20 C.F.R.
$§ 414.1520 & 416.920). The regulations provide:

(b) If you are working. If you are working
and the work you are doing is substantial gainful
activity, we will find that you are not disabled
regardless of your medical condition or your age,
education, and work experience.

(c) You must have a severe impairment. If
you do not have any impairment(s) which sig-

ee

3a

nificantly limits your physical or mental ability
to do basic work activities, we will find that you
do not have a severe impairment and are, there-
fore, not disabled. We will not consider your age,
education, and work experience.

(d) When your impairment meets or equals a
listed impairment in Appendix 1. If you have an
impairment which meets the duration require-
ment and is listed in Appendix 1, or we deter-
mine that the impairment is equal to one of the
listed impairments, we will find you disabled
without considering your age, education, and
work experience.

(e) Your impairment must prevent you from
doing past relevant work. If we cannot make a
decision based on your current work activity or
on medical facts alone, and you have a severe im-
pairment, we then review your residual func-
tional capacity and the physical and mental de-
mands of the work you have done in the past. If
you can still do this kind of work, we will find
that you are not disabled.

(f) Your impairment must prevent you from
doing any other work, (1) If you cannot do any
work you have done in the past because you have
a severe impairment, we will consider your resid-
ual functional capacity and your age, education,
and past work experience to see if you can do

other work. If you cannot, we will find you dis-
abled.

20 C.F.R. 404.1520(b)-(f) (1).

The Secretary explained that the denials of claims
under the step two severity regulation, 20 C.F.R.
§ 414.1520(c), were

4a

justified on the basis of medical considerations
alone when the degree of a medically determin-
able impairment is found to be not severe. A
non-severe impairment may consist of one or
more separate conditions that do not significantly
limit the individual’s physical or mental capacity
to perform basic work related functions. .. .
When there is no significant limitation on the
ability to perform these types of basic work re-
lated functions, an impairment will not be con-
sidered to be severe even though it may prevent
the individual from doing work the individual
has done in the past.

SSR 82-26. Social Security Rulings (SSR) are bind-
ing on all Social Security Administration (SSA) per-
sonnel, including state agency adjudicators, Admin-
istrative Law Judges (ALJs), the Appeals Council.
20 C.F.R. § 422.408. On August 20, 1980, the Secre-
tary promulgated a list setting forth examples of im-
pairments that were automatically to be held non-
severe regardless of whether they prevented the
claimant’s performance of his “past work.” See SSR
82-55."

&

1The examples given in SSR 82-55 of per se non-severe
impairments include, inter alia, osteoarthritis corroborated by
x-ray findings with the symptoms of pain and stiffness, hyper-
tension, history of chest pain, colostomy, peptic ulcer, chronic
liver disease, chronic renal disease, diabetes mellitus, epilepsy,
and IQ of 80 or greater. The ruling emphasizes a national,
generic concept of the level of health required for most jobs;
“to be found disabled, an individual must have a severe medi-
cally determinable impairment. That standard cannot be satis-
fied by any impairment(s) that is compatible with the ability
to perform basic work-related functions as required in most of
the numerous jobs in the national economy.” SSR 82-55.

5a

The plaintiffs also challenge the Secretary’s regu-
lations concerning the combination of non-severe im-
pairments in the determination of disability. On Au-
gust 20, 1980, the Secretary further amended the dis-
ability regulations to provide that at step two of the
process, § 414.1520(c), she would “consider the com-
bined effects of unrelated impairments [in determin-
ing disability] only if all were severe.” 45 Fed. Reg.
55574 (1980) (codified at 20 C.F.R. § 404.1522).

The named plaintiffs in this case demonstrate the
effect of the Secretary’s 1979 and 1980 amendments
to her regulations and rulings. Named plaintiff Edna
Johnson applied for Supplemental Security Income
benefits on March 24, 1982. At that time Johnson
suffered from diabetes, mellitus, lumbago, a duodenal
ulcer, Echazski’s ring of the esophagus, and anxiety
neurosis. Johnson was a nurse’s aide who had com-
pleted two years of high school. The job of nurse’s
aide requires “medium” exertional capacities. U.S.
Dept. of Labor, Dictionary of Occupational Titles &
Selected Characteristics (1981) (DOT). Johnson
presented unrebutted evidence that due to her im-
pairments, for which she had been hospitalized five
times since 1970, she retained a residual functional
capacity to perform only sedentary work and thus did
not retain the capacity to perform her past work.
After a hearing, an ALJ considered each of her im-
pairments in turn and held that each one, taken sepa-
rately, was “not severe,” pursuant to step two of the
regulation. The ALJ did not consider Johnson’s in-
ability to perform her past work as sufficient to sat-
isfy the step two threshold test. Consequently, the
ALJ denied benefits and the Appeals Council affirmed.

James Montgomery, the second named plaintiff,
was afforded disability benefits by the Secretary in

6a

November 15, 1976, due to diabetes and heart disease.
On January 8, 1982, the Secretary informed Mont-
gomery that he was no longer considered disabled and
that his benefits ceased in October, 1981. At the hear-
ing, held after Montgomery appealed the termination
of his benefits, Montgomery presented unrebutted evi-
dence that he suffered from hypertension, ischemic
heart disease with angina pectoris, diabetes, mild
obesity, degenerative osteoarthritis of the spine, and
the effects of fractures of the hip, leg, and foot. Prior
to the onslaught of his illnesses, Montgomery had
worked for 28 years as a butcher, cutter, and boner
in a meat packing plant. He has a sixth grade edu-
cation. Montgomery presented uncontroverted evi-
dence that he retained the residual functional capacity
to perform no more than sedentary work due to his
combined impairments. Montgomery’s past job re-
quired “heavy” exertional capacity, although a butch-
er’s job could also be classified as “medium.” There- -
fore, Montgomery did not retain the residual func-
tional capacity to perform his past work.

The ALJ reversed the reconsideration decision to
terminate benefits, finding Montgomery still disabled.
On its own motion, the Appeals Council reversed the
AlLJ’s decision and reinstated the previous termina-
tion. The Council held that each of Montgomery’s
impairments considered singly were non-severe and
did not consider the combined effects of the impair-
ments or Montgomery’s inability to perform his past
work.

On August 11, 1983, Johnson and Montgomery filed
an amended class complaint challenging the step two
regulation on statutory and constitutional grounds
and seeking a redetermination of the denial of bene-
fits. The class was certified on December 7, 1983,
and defined as:

Ta

[a]ll persons in Illinois who are filing or have
filed applications for disability benefits under
Title II and/or Title XVI of the Social Security
Act, and whose benefits are being or have been
denied pursuant to the policies set forth in 20
C.F.R. §§ 404.1520(c), 404.1522, 416.920(c) and
416.922 (1982), and Social Security Rulings
cum. ed. 82-55 (1982); and all recipients of such
benefits who are making or have made claims for
continued benefits . . . and whose benefits are
being or have been terminated pursuant to the
same policies.

Johnson v. Heckler, 100 F.R.D. 70, 72 (N.D.III.
1983).

On September 19, 1984, the district court held that
the step two regulation and rulings violated the Act
and required the Secretary to consider the ‘‘combined
effect” of non-severe impairments. On September 17,
1984, the district court denied the Secretary’s motion
to alter or amend its earlier order based on the pas-
sage of the Social Security Disability Benefits Reform
Act of 1984. Pub. L. 98-460.

On March 5, 1985, pursuant to the 1984 Act, the
Secretary amended 20 C.F.R. § 404.1520(c) &
416.920(a) to direct her adjudicators to consider the
combined effect of all of an individual’s impairments
in determining the existence of a severe impairment
at step two. 50 Fed. Reg. 8726, 8727 (March 5,
1985). The amended regulations applied to “all Title
II and Title XVI disability determination [made]...
on or after December 1, 1984.” Id. at 8727. On April
17, 1985, this court stayed “the effect of” the Sep-
tember 19, 1984, order pending this appeal, 604 F.
Supp. 1070.

8a

II. JURISDICTIONAL ISSUES

The Secretary first argues that the district court
lacked jurisdiction because the plaintiff class has
failed to exhaust its administrative remedies. Some
of the plaintiff class members have not yet had a final
administrative hearing. The district court waived the
exhaustion requirement because it held that the plain-
tiff class had met both the futility and collateral claim
tests for waiver. We think the district court was
correct.

Congress has required that a Social Security claim-
ant exhaust his administrative remedies before seek-
ing judicial review. See 42 U.S.C. § 405(g). See also
Heckler v. Day, USS. , 104 S.Ct. 2249, 2251,
81 L.Ed.2d 88 (1984). Section 405(g) has been in-
terpreted by the Supreme Court to contain two parts:
first, a claim for benefits must have been filed; second,
the Secretary must have made a final decision on that
claim. Mathews v. Eldridge, 424 U.S. 319, 328, 96
S.Ct. 893, 899, 47 L.Ed.2d 18 (1976). The first re-
quirement is not waivable. The second requirement
of a final decision, however, may be waived either by
the Secretary or by the courts. Heckler v. Ringer,
466 U.S. 602, 104 S.Ct. 2018, 2023, 80 L.Ed.2d 622
(1984); Mathews v. Eldridge, 424 U.S. at 328, 96
S.Ct. at 899; Giacone v. Schweiker, 656 F.2d 1238,
1241-43 (7th Cir. 1981). A court may waive the ex-
haustion requirement when the plaintiff’s claims are
entirely collateral to his claim of entitlement and
when the plaintiff’s interest in having the issue re-
solved promptly is sufficiently great so as to render
deference to the agency’s judgment inappropriate.
Giacone, 656 F.2d at 1243. Waiver also is appropri-
ate where the pursuit of administrative remedies
would be futile because the Secretary’s position on

9a

the statutory issues is “final.” Kuehner v. Schweiker,
717 F.2d 813, 817 (3d Cir. 1983), remanded on other
grounds, U.S. , 105 S.Ct. 376, 83 L.Ed.2d
312 (1984); Wright v. Califano, 587 F.2d 345, 349
(7th Cir. 1978).

The Supreme Court’s most recent ruling concerning
the exhaustion requirements of collateralness and
futility is Heckler v. Ringer, 466 U.S. 602, 104 S.Ct.
2013, 80 L.Ed.2d 622 (1984). The claim in Ringer
arose from a January 1979 administrative instruc-
tion issued by the Secretary to all fiscal intermediaries
in the Medicare system announcing that no payment
was to be made for Medicare claims for bilateral ca-
rotid body resections (BCBRs) on the ground that
such services were not ‘“‘reasonable and necessary for
the treatment of illness.” Until October 1980, ALJs
were not bound by the instruction and consistently
ruled in favor of BCBR claims. On October 28, 1980,
however, the Secretary issued a formal ruling pro-
hibiting ALJs and the Appeals Council from ordering
Medicare payments for BCBRs. Four Medicare claim-
ants for whom BCBRs had been prescribed to relieve
pulmonary problems brought suit. Three plaintiffs
had had a BCBR before October 28, 1980, and filed
claims for reimbursement with a fiscal intermediary
of the Medicare program, while the fourth plaintiff
never had the surgery, claiming he could not afford
it. The plaintiffs sought a declaratory judgment that
the Secretary’s refusal to fund BCBRs was unlawful
and an injunction compelling her to provide payment
for the BCBRs.

The district court dismissed the complaint for lack
of jurisdiction holding that plaintiff’s failure to ex-
haust administrative remedies could not be waived
because the plaintiffs’ claim was essentially one for
benefits and thus could not be collateral. The Ninth

10a

Circuit reversed, holding, inter alia, that the claims
were collateral and that exhaustion would be futile.

The Supreme Court reversed. The Court separated
the plaintiffs into two groups. The Court held that
Ringer, who had neither had the surgery nor filed a
claim, had not satisfied the nonwaivable exhaustion
requirement of § 405(g) because he had never given
the Secretary an opportunity to rule on a concrete
“claim” for reimbursement. Ringer, 104 S.Ct. at
2025. As to the other plaintiffs, the Court held that
exhaustion of remedies was not futile because, on
presenting a claim to the Secretary through the ALJ,
the ALJ would not be bound by the October 28, 1980,
ruling because the plaintiffs had had their BCBRs be-
fore October 28, 1980. 45 Fed.Reg. 71427 (1980).

The plaintiffs in this case are differently situated
than were the plaintiffs in Ringer. First, all plain-
tiffs in the present class have met the sine qua non
requirement of having filed a claim, see Johnson v.
Heckler, 100 F.R.D. at 72-73 & n. 3, so that they,
unlike Ringer, have given the Secretary an opportu-
nity to rule on concrete “claims,” Ringer, 104 S.Ct.
at 2025, and thus meet the nonwaivable exhaustion
requirement. Second, plaintiffs’ claims are demon-
strably more collateral and render exhaustion more
futile than was the case for the other Ringer plain-
tiffs. The Ringer plaintiffs had already had surgery
and were “at bottom” simply seeking reimbursement.
Ringer, 104 8.Ct. at 2021. The plaintiffs in this case,
however, do not seek the payment of benefits. Rather,
they challenge the constitutional and statutory valid-
ity of portions of the Secretary’s sequential evalua-
tion process.

The district court’s ruling will not guarantee the
payment of disability benefits to plaintiffs as the

lla

Ninth Cireuit ruling would have guaranteed Medi-
care payments to the Ringer plaintiffs. Some but not
all the class members in this case will be able to sat-
isfy the step two severity regulations of the sequen-
tial evaluation process as the district court ordered
it defined. Some may meet that test and yet fail to
prove their disability at another level. Some may
have their impairments combined and yet be unable
to prove disability at another level. Under the dis-
trict court’s rulings, far more than mere “ministerial
details,” Ringer, 104 S.Ct. at 2021-22, would have to
be adjudicated before the plaintiffs could be awarded
benefits. Thus the plaintiffs’ claims are sufficiently
collateral to their benefit claims to justify waiver.

Furthermore, the futility test is met under the cir-
cumstances of this case. As the district court cor-
rectly noted,

[t]he experience of the two named plaintiffs, who
did exhaust, illustrates the futility of exhaus-
tion—the Secretary’s published policies are not
likely to be influenced or changed by the admin- .
istrative appeals of any single individual; thus
the issue is unsuited to resolution in the hearing
process. That the challenged policies are pub-
lished both in the federal regulations and in So-
cial Security Rulings further suggests the final
nature of the Secretary’s position. Finally, the
validity of the policies challenged here has been
raised in other litigation, giving the Secretary an
ample opportunity to reconsider [but] she has
not done so.

Johnson v. Heckler, 100 F.R.D. at 74 (citations omit-
ted).

The Secretary’s second jurisdictional argument
arises from the sixty-day provision of section 205(g)

12a

of the Act which provides that claimants must seek
judicial review of the final decisions of the Secretary
“within sixty days after the mailing . . . of notice ~
of such decision or within such further time as the
Secretary may allow.” 42 U.S.C. §405(g) (1982).
The district court rejected the Secretary’s claim,
raised for the first time on her motion to alter or
amend the court’s order, that the sixty-day provision
was an absolute jurisdictional bar to the plaintiffs’
suit because some claimants did not seek the admin-
istrative or judicial review necessary to meet the
sixty-day requirement. The district court reasoned
that the sixty-day provision is a statute of limita-
tions waivable by the parties and that the Secretary
did not sufficiently raise the sixty-day provision as a
defense in order to preserve it. We affirm the district
court’s reasoning.

The Supreme Court has ruled in two cases that
the sixty-day limitation is not jurisdictional, Mathews
v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d
18 (1976); Weinberger v. Salfi, 422 U.S. 749, 95
S.Ct. 2457, 45 L.Ed.2d 522 (1975), but “is waiv-
able by the parties.” Eldridge, 424 U.S. at 328 n. 9,
96 S.Ct. at 899 n. 9. This court has followed Salfi,
see Wilson v. Edelman, 542 F.2d 1260 (7th Cir.
1976), as have other circuits, see, e.g., City of New
York v. Heckler, 742 F.2d 729, 737-38 (2d Cir.
1984); Lopez v. Heckler, 725 F.2d 1489, 1508 (9th
Cir.), vacated on other grounds, U.S. , 105
S.Ct. 583, 83 L.Ed.2d 694 (1984); Mental Health
Ass’n of Minnesota v. Heckler, 720 F.2d 965, 973
n. 19 (8th Cir.1983).

Under the Federal Rules of Civil Procedure, Rule
8(c) and 12(h)(1), a party must raise a statute of
limitations defense in the answer or other responsive

13a

pleadings. Failure to raise the defense results in its
waiver. 5 WRIGHT & MILLER FEDERAL PRACTICE AND
PROCEDURE, CIVIL 1278 (1985 Supp.). The Secretary
did not raise the sixty-day defense in her answer.
She in fact admitted in the second paragraph of her
answer that the court had jurisdiction under § 405
(gz), and in her memorandum in opposition to class
certification she focused only on the plaintiffs’ failure
to exhaust administrative remedies. The district
court properly held therefore that the Secretary had
waived the statute of limitations defense.

Ii]. THE STEP TWO SEVERITY
REGULATION

The Social Security Act is one of the most im-
portant and far-reaching enactments ever passed by
Congress, affecting the life of a iost every Ameri-
can. The Act is subject to constant amendment in
the light of the changing socioeconomic conditions of
our society, and is composed of numerous specialized
programs, two of which are involved in this case: Old
Age, Survivors and Disability Insurance (OASDI),
Title II, 42 U.S.C. §§ 401 et seg., and Supplemental
Security Income for the Aged, Blind, and Disabled
(SSI), Title XVI, 42 U.S.C. §§ 1881 et seg. The SSI
program grew out of state-administered programs
and is not an offshoot of OASDI; generally speaking,
SSI provides additional income to disabled recipients
who are in some cases able to work despite the con-
tinuation of their impairments. Despite the differ-
ences in the two programs, see generally, H.REP. No.
98-618, 98 Cong.2d Sess. (1984), reprinted in 1984
U.S.CoDE Conc. & AD.NEWS 3038, 3065-71, they
nonetheless share a common definition of disability.

l4a

Both OASDI and SSI provide that
(1) The term “disability” means—

(A) inability to engage in any substantial gain-
ful activity by reason of medically deter-
minable physical or mental impairment
which can be expected to result in death or
which has lasted or can be expected to last
for a continuous period of not less than 12

months... .
(2) For purposes of paragraph (1)(A)—
(A) an individual . . . shall be determined to

be under a disability only if his physical or
mental impairment or impairments are of
such severity that he is not only unable to
do his previous work but cannot, consider-
ing his age, education and work experi-
ence, engage in any other kind of substan-
tial gainful work which exists in the na-
tional economy, regardless of whether such
work exists in the immediate area in which
he lives, or whether a specific job vacancy
exists for him, or whether he would be
hired if he applied for work. For purposes
of the precetling sentence . . . “work which
exists in the national economy” means work
which exists in significant numbers either
in the region where such individual lives or
in several regions of the country.

42 U.S.C. § 423(d)(1)(A), (2)(A) & 42 U.S.C.
§ 1382c(a)(3)(A), (B) & (C). The definition of
disability as defined in 42 U.S.C. § 423(d)(1) (A)
was first promulgated in 1954, and was incorporated
into the full-fledged disability insurance program cre-

l5a

ated in the Social Security Amendments of 1956,
P.L. 84-880. See H.Rep. No. 7225, 84th Cong., 2d
Sess. (1956), U.S.Code Cong. & Admin.News 1956,
p. 3877. The further definition of eligibility for dis-
ability insurance provided in 42 U.S.C. § 423(d) (2)
(A) was added in 1967. S.Rep. No. 744, 90th Cong.,
Ist Sess. 46-50, reprinted in 1967 U.S.CopE Conc. &
AD.NEWS 2834, 2880-83. For a thorough discussion
of the history of the disability provisions, see Stone
v. Heckler, 752 F.2d 1099, 1104-05 (5th Cir.1985),
and Chico v. Schweiker, 710 F.2d 947, 948-49 (2d
Cir.1983).

Pursuant to this history and statutory definition
the courts of all twelve circuits have unanimously
held that, while the ultimate burden of proving dis-
ability lies with the claimant, the plaintiff makes a
prima facie showing when he demonstrates an im-
pairment which prevents him from performing his
previous work. The burden then shifts to the Secre-
tary to show that the claimant remains capable of
performing other work in view of the vocational fac-
tors of age, education, and work experience: “[o]nce
an impairment of sufficient, severity is demonstrated

. which precludes the type of work previously en-
gaged in, the burden of going forward shifts to the
Secretary.” Whitney v. Schweiker, 695 F.2d 784, 786
(7th Cir.1982). See also Francis v. Heckler, 749 F.2d
1562, 1564 (11th Cir. 1985) ; Channel v. Heckler, 747
F.2d 577, 579 (10th Cir.1984); Smith v. Califano,
592 F.2d 1235, 1236-37 (4th Cir.1979); O’Banner v.
Secretary, 587 F.2d 321, 323 (6th Cir.1978) ; Bastien
v. Califano, 572 F.2d 908, 912, (2d Cir.1978); Hall
v. Secretary, 602 F.2d 1872, 1375 (9th Cir.1979) ;
Lewis v. Weinberger, 515 F.2d 584, 587 (5th Cir.
1975); Hernandez v. Weinberger, 493 F.2d 1120,

OE

l6a

1123 (1st Cir.1974); Stark v. Weinberger, 497 F.2d
1092, 1097-98 (7th Cir.1974) ; Garrett v. Richardson,
471 F.2d 598, 603-04 (8th Cir.1972); Choratch v.
Finch, 438 F.2d 342, 343 (3d Cir.1971); Meneses v.
Secretary, 442 F.2d 803, 807 (D.C.Cir.1971). All the
circuits agree that it is the language of the Act itself
which requires “that disability determinations be
made according to a two-step process,” Valencia v.
Heckler, 751 F.2d 1082, 1086 (9th Cir.1985), with
the first step placing the burden on the claimant to
demonstrate an inability to perform past work.

The plaintiffs’ argument is, therefore, apparent:
the Secretary’s step two policies on their face violate
the Act because they deny benefits even to the plain-
tiff who has carried his prima facie burden and per-
mit the denial of benefits at step two where the
claimant’s impairment does not significantly impair
the claimant’s physical or mental ability to do basic
work activities. On its face, the plaintiffs argue, this
reculation is not designed to determine whether the
claimant can meet, or has met, his prima facie bur-
den of proving his inability to do his own past work.
The Secretary has promulgated a list of twenty illus-
trative impairments to be considered per se non-
severe under step two. See SSR 82-55. The Secre-
tary denies benefits to claimants with these impair-
ments regardless of whether they have shown an
inability to do their past work. The Secretary’s rul-
ing confirms this interpretation: step two permits the
denial of benefits “even though [the impairment]
may prevent the individual doing work that the indi-
vidual has done in the past.” SSR 82-56.

Plaintiffs argue, moreover, that step two does not
provide for the individualized assessment of disability
guaranteed by the Act. The Act provides that an

17a

individual will be found disabled when his “physical
or mental impairment or impairments are of such
severity that he is not only unable to do his previous
work, but cannot, considering his age, education, and
work experience, engage in any other kind of sub-
stantial gainful work....” 42 U.S.C. §§ 423(d) (2)
& 1382c(a)(3)(B) (emphasis added). The Supreme
Court has recognized that “disability hearings will
be individualized determinations.” Heckler v. Camp-
bell, 461 U.S. 458, 467, 103 S.Ct. 1952, 1957, 76
L.Ed.2d 66 (1983). Step two, by contrast, permits
the Secretary to label a claimant as not disabled, even
though his impairments in fact prevent him from
doing his past work. Such summary dispositions
were in fact made in the cases of the two named
plaintiffs in this case.

The plaintiffs suggest that if the second step
merely screened out claimants whose impairments
were so slight or “de minimus” that they could never
prevent any claimant from doing his past work, the
second step would in fact comport with the Act. Sev-
eral circuits have in fact interpreted step two to per-
mit a denial of benefits only when disabilities are
“de minimus.” In Taylor v. Schweiker, 739 F.2d
1240 (7th Cir. 1984), this circuit seemed to charac-
terize the step two severity test as an “initial screen-
ing device which eliminates [claims] . . . only when
the limitations alleged . . . can be viewed as slight.”
Taylor, 739 F.2d at 1243 n.2. The court in Taylor
reversed the ALJ’s finding of non-severity and re-
manded the case because the Secretary’s second step
test had precluded consideration of evidence that
might have established the claimant’s disability.

Similarly construing step two to permit only a “de
minimus” assessment, the Fifth Circuit stated:

SSSSSSScG—ceEek._ee

18a

we will in the future assume that the ALJ and
Appeals Council have applied an incorrect stand-
ard to the severity requirement unless the cor-
rect standard is set forth by reference to this
opinion or another of the same effect or by an
express statement that the construction we give
to 20 C.F.R. § 404.1520(c) (1984) is used. Un-
less the correct standard is used, the claim must

be remanded to the Secretary for reconsidera-
tion.

Stone v. Heckler, 752 F.2d 1099, 1106 (5th Cir.
1985). See also Brady v. Heckler, 724 F.2d 914
(lith Cir. 1984). Cf. Delgado v. Heckler, 722 F.2d
570 (9th Cir. 1983) (acknowledging without decid-
ing the potential conflict between the regulations and
the statutory burden of profit. Chico v. Schweiker,
710 F.2d 947 (2d Cir. 1988) (same). Plaintiffs ar-
gue, however, that the Secretary’s regulations do
not utilize and in fact do not permit a “de minimus”
reading and therefore must be invalidated.

The Secretary argues on appeal that her broad
authority to regulate permits her to adopt step two,
that for the policy reason of promoting efficiency step
two is necessary, and, finally,that Congress through
the 1984 Amendment to the Act “endorsed the work-
ings of the sequential evaluation process.” Appel-
lant’s Br. at 29. It is the 1984 Amendment argument
on which the Secretary relies most heavily.

Step two of the sequential evaluation process was
not, however, the focal point of the 1984 Amend-
ment, contrary to the Secretary’s sweeping asser-
tions. To the extent that Congress in the 1984
Amendment addressed step two, Congress disap-
proved of the Secretary’s “severity” regulations and

19a

relied on the upcoming revision of the evaluation
process to remedy its disapproval:

The Committee is concerned that the considera-
tion of eligibility for disability benefits be con-
ducted using criteria that clearly reflect the in-
tent of Congress that all those who are unable
to work receive benefits. It is of particular con-
cern that the Social Security Administration has
been criticized for basing terminations of bene-
fits solely and erroneously on the judgment that
the person’s medical evaluation is “slight,” ac-
cording to very strict criteria, and is therefore
not disabling, without making any further eval-
uation of the person’s ability to work.

The Committee believes that in the interests
of reasonable administrative flexibility and effi-
ciency, a determination that a person is not dis-
abled may be based on a*judgment that the per-
son has no impairment, or that the impairment
or combination of impairments are slight
enough to warrant a presumption that the per-
son’s work ability is not seriously affected. The
current “sequential evaluation process” allows
such a determination, and the committee does
not. wish to eliminate or seriously impair use of
that process. However, the Committee notes
that the Secretary has already planned to re-
evaluate the current criteria for non-severe im-
pairments, and urges that all due consideration
be given to revising those criteria to reflect the
real impact of impairments upon the ability to
work.

H. Rep. No. 98-618, 98th Cong., 2d Sess. 7-8, re-
printed in 1984 U.S. CoDE Cona. & AD. NEws 3044-

20a

45. The House Report reflects a Congressional sus-
picion that the Secretary’s step two regulations did
not comport with the original intent of the Social
Security Act, but stops short of condemning the reg-
ulations, relying instead on the Secretary’s promised
reevaluation of the regulations, The suspicion evi-
denced in the House Report’s analysis of step two is
derivative of the general puvpose of the 1984 Amend-
ment, which was to help “insure that no beneficiary
loses eligibility for benefits as a result of careless or
arbitrary decision making by the Federal govern-
ment.” Jd. at 3039. The theme of the 1984 Amend-
ment was in fact remedial. Noting that it was
“deeply concerned about the erosion of public faith
and confidence in the social security disability pro-
grams,” id., the committee expressed hope that the
1984 Amendment would ensure that “the program
will be administered according to the law, rather
than by constantly shifting and possibly arbitrary
policies.” Id. at 3040.

The legislative history of the 1984 Amendment
cuts against, rather than supports, the Secretary’s
arguments in this case. The House Report supports
at least a “de minimus” interpretation of the regu-
lation and at most evidences a skepticism about the
over-all validity and workability of the step two se-
verity regulation. The Secretary cites no substantive
responsive legislative history of the 1984 Amendment
to the contrary. Thus we are convinced that Con-
gress did not in the 1984 Amendment “endorse” step
two and, to the contrary, expressed disapproval of
the regulation. Moreover, on its face, the step two
severity regulation conflicts with the Social Security

Act’s purposes and the plain language of the statute’s
definitions of disability.

2la

The Secretary’s argument that step two is a rea-
sonable exercise of her broad rule-making authority
necessary to the proper and efficient functioning of
“an already overburdened agency,” Appellant’s Br.
at 34, quoting Heckler v. Campbell, 461 U.S. at 468,
103 S.Ct. at 1958, is a fall-back argument merely,
and a thoroughly unpersuasive one. The district
court rejected the Secretary’s reliance on her broad
rule-making authority, reasoning that, to merit defer-
ence, the Secretary’s regulations and rules must be
consistent with the Act. The district court’s conclu-
sion is firmly grounded in the law: an agency’s “‘in-
terpretation of the statute cannot supercede the lan-
guage chosen by Congress.” Mohasco Corp. v. Silver,
447 U.S. 807, 825, 100 S.Ct. 2486, 2497, 65 L.Ed.2d
532 (1980). See also United States v. Larionoff,
431 U.S. 864, 873, 97 S.Ct. 2150 2156, 53 L.Ed.2d
48 (1977). Because we have held the Secretary’s
regulations to be inconsistent with the statute, no
deference to her rule-making authority is required.

The Secretary’s efficiency arguments. therefore,
are a totally inappropriate basis upon which to jus-
tify unlawful activity and add no support to her
argument that we must defer to her statutory man-
date to promulgate regulations. The extent to which
the need for efficiency and an easing of the “burdens”
on the ALJs affects our standard of review of dis-
ability decisions in this circuit is still a matter of
debate. Compare Stephens v. Heckler, 766 F.2d 284
(7th Cir. 1985), with Zblewski v. Schweiker, 732
F.2d 75 (7th Cir. 1984). Zblewski stresses the need
for a “minimum level of articulation,” Zblewski, 732
F.2d at 78, in ALJ findings, while Stephens argues
that, in light of the “burdens” on the ALJs, “sketchy
opinions can be enough.” Stephens, at 287. What is

22a

not debatable, however, is that efficiency arguments
provide absolutely no basis for the Secretary to vio-
late Congressional mandates to implement properly
the disability benefits program of this nation.

In summary then, we affirm the district court’s
order holding that 20 C.F.R. §§ 404.1520(c) &
416.920(c) (1982), and SSR 82-55 & SSR 82-56 vio-
lated 42 U.S.C. §423(d) and § 1882c(a) (3) (A),
(B), (C), and enjoining the defendants from en-
forcing the step two rules and regulations. See also
Dixon v. Heckler, 589 F.Supp. 1494 (S.D.N.Y. 1984)
(class action lawsuit also invalidating the step two
rules and regulations) ; Smith v. Heckler, 595 F.Supp.
1173 (E.D. Cal. 1984) (same). See also Moody v.
Heckler, 612 F.Supp. 815 (C.D. Ill. 1985) (single
plaintiff action holding that the step two severity
regulation violates the Social Security Act).

IV. THE COMBINATION REQUIREMENT

The parties agree that the 1984 Amendment spe-
cifically requires the Secretary to combine non-severe
impairments at the step two stage of the sequential
evaluation process in determining eligibility for dis-
ability benefits effective December 1, 1984. 50 Fed.
Reg. 8726-29 (March 5, 1985). The Secretary ar-
gues that the Reform Act created this right for the
first time and that therefore she should not be re-
quired to redetermine the claims of the class mem-
bers denied benefits prior to December 1, 1984. In
its original decision, announced before the enact-
ment of the Reform Act, the district court held that
the plain meaning of the statute as construed by
other courts required the Secretary to consider the
combined effect of all of the claimants’ impairments
and declared invalid the regulations of the Secretary

23a

which stated “we will consider the combined effects
of unrelated impairments only if all are severe and
expected to last 12 months.” 42 U.S.C. §§ 404.1522
& 416.922. The district court also declared invalid
SSR 82-55, which states “‘[i]nasmuch as a nonsevere
impairment is one which does not significantly limit
basic work-related functions, neither will a combina-
tion of two or more such impairments significantly
restrict the basic work related functions to do most
jobs.” In its order dated December 17, 1984, the -
district court refused to alter or amend its prior
ruling, in light of the 1984 Amendment, holding that
Congress intended to clarify the Act through the
1984 Amendment and that therefore its prior order
could be applied retroactively to members of the
plaintiff class. We cannot, as the Secretary now
urges, find any error in either of the district court’s
decisions.

In determining whether the Act prior to the 1984
Amendment required impairments to be cumulated at
the step two severity test of the sequential disability
evaluation process, we must look “first, as always, to.
the language of the statute.” Heckler v. Turner,
US. : , 105 S.Ct. 1138, 1144, 84 L.Ed.2d
138 (1985). “‘There is, of course, no more persuasive
evidence of the purpose of a statute than the words
by which the legislature undertook to give expres-
sion to its wishes.” United States v. American Truck-
ing Ass’n, 310 U.S. 534, 543, 60 S.Ct. 1059, 1063,
84 L.Ed. 1345 (1940). For decades, the Act has
decreed that, in applying the basic definition of dis-
ability, the Secretary shall determine a claimant to
be disabled “if his physical or mental impairment or
impairments are of such severity that he is not only
unable to do his previous work but cannot... engage

24a

in any other kind of substantial gainful work.” 42
U.S.C. §§ 423(d) (2) (A) & 1382c(a)(3)(B) (em-
phasis added). The Act further defines a physical or
mental impairment as one that “results from .. .
abnormalities . .. demonstrable by medically accepta-
ble clinical and laboratory diagnostic techniques.” 42
U.S.C. § 423(d)(3) & 1382c(a)(8)(C) (emphasis
added). The Act does not use the singular “physical
or mental impairment” or “abnormality”; rather
Congress, through the Act, included the possibility of
multiple “impairments” constituting a disability.
Moreover, when the amendments to the statutory
definition of disability were passed in 1968, the Sec-
retary agreed that the Act required her to consider
the combined. effects of the non-severe impairments
in determining whether a claimant was disabled. See
33 Fed. Reg. 11749, 11750 (1968), codified at 20
C.F.R. § 404.1501(a) (1) (1969) (defining disability
as “inability to engage in any substantial gainful ac-
tivity by reason of .. . impairment or impairments’ )
(emphasis added). The “contemporaneous adminis-
trative construction of [an] Act is persuasive evi-
dence of the original understanding.” United States
v. Sheffeld Board of Commissioners, 485 U.S. 110,
131, 98 S.Ct. 965, 979, 55 L.Ed.2d 148 (1978). Other
federal courts also have construed the Act in a man-
ner consistent with the Secretary’s original construc-
tion, requiring the Secretary to consider the combined
effect of non-severe impairments. See, e.g., Brady v.
Heckler, 724 F.2d 914, 921 (11th Cir. 1984) ; Felshina
v. Schweiker, 707 F.2d 71, 73 (2d Cir. 1983); Camp
v. Schweiker, 648 F.2d 1325, 1333 (8th Cir. 1981);
Brenem v. Harris, 621 F.2d 688, 690 (5th Cir. 1980) ;
Hicks v. Gardner, 393 F.2d 299, 302 (4th Cir. 1968).
The district court found that the regulations and
rulings of the Secretary were contrary to the plain

25a

meaning of the statute, calling “dubious” the logic of
her ruling which finds that a combination of non-
severe impairments cannot be severe. See SSR 82-55.
Johnson v. Heckler, 593 F. Supp. at 381. The court
indicated that the “proper interpretation” of the stat-
ute required that the Secretary not “fragmentize” the
impairments, but rather “treat them in combination.”
Id., quoting Griggs v. Schweiker, 545 F. Supp. 475,
477 (S.D.W.Va.1982). The court therefore declared
the regulations and rulings invalid. Our analysis
above confirms the correctness of the district court’s
conclusion.

The 1984 Amendment does not change the propriety
of the court’s decision, as the court correctly held in
denying the Secretary’s motion to alter or amend.
Even if we had only the general statements of pur-
pose of the 1984 Amendment discussed above, the
conclusion that the 1984 Amendment was meant to
clarify the original interpretation of Congress that
non-severe impairments must be combined to deter-
mine whether a disability exists would be obvious. As
the earlier discussion indicated, the 1984 Amendment
was remedial in character and intended to liberalize
the present policies so as to “restore confidence” in
social security programs. 1984 U.S. CoDE Conc. &
AD. NEWS, 98th Cong., 2d Sess. 3040. Indeed, the
stated agenda of the Congress was to ensure that
those disabiity decisions which had been made pur-
suant to “constantly shifting and possibly arbitrary
policies” would instead be “administered according to
the law.” /d.

The specific references in the 1984 Amendment’s
legislative history to the amendment of the multiple
impairments section confirms this general assessment
of the purposes of the 1984 Amendment. In the en-
actment of the 1984 Amendment, the House bill was

26a

passed in lieu of the Senate bill. Section 103 of the
House bill concerned the combination of impairments
at step two. In its overview, the House Committee
stated that “sections 101-103 of the bill are designed
to clarify the criteria that must be used in evaluating
whether new applicants or current beneficiaries are
disabled. The criteria laid out in present law are few
and brief.” H.Rep. No. 98-618, 98th Cong. 2d Sess.,
reprinted in 1984 U.S. CoDE Cona. & AD. NEws, 3043
(emphasis added). Moreover, “[t]here is no statu-
tory provision concerning the consideration of the
combined effects of a number of different impair-
ments.” See also H. CONF. REP. No. 98-1039 at 29,
id. at 3087. The Committee further stated that

[t]he committee further emphasizes that the
foregoing discussion does not constitute any
change in the current definition of disability, but
rather is a clarification of the intent of Congress
that disability benefits should be granted to those
who are unable to work because of a medically
determinable impairment. Sections 101 and 103
of the bill provide statutory standards for deter-
mining disability.
H. Rep. No. 98-618. Jd. at 3046 (emphasis added).
This subsequent legislation interpreting the earlier
Social Security Act is “entitled to great weight in
determining the meaning of the earlier statute.” Re-
gents of the University of California v. Bakke, 438
U.S. 265, 349, 98 S.Ct. 2733, 2778, 57 L.Ed.2d 750
(1978). This review, therefore, of the legislative his-
tory of the 1984 Amendment convinces us that the
original intent of Congress was to ensure that non-
severe impairments were combined in determining
whether a disability exists. The plain language of the
statute yields the same conclusion. The district court’s

27a

order declaring §§ 404.1522 & 416.922 and SSR 82-55
invalid because they are inconsistent with §§ 423(d)
(2)(A) & 1882¢e(a)(38)(B) of the Act is therefore
affirmed, and the Secretary is ordered on remand to
redetermine the plaintiffs’ disability claims consider-
ing the effects of combining all non-severe impair-
ments at step two of the sequential evaluation process.

In conclusion, then, we affirm the district court’s
denials of the Secretary’s summary judgment motions
on jurisdictional grounds. We also affirm the district
court’s order enjoining the Secretary from enforcing
20 C.F.R. §§ 404.1520(a)-.1522 & 416.920(c)-.922
and SSRs 82-55 & 82-56 insofar as they violate the
Act. We affirm the district court’s order directing the
Secretary to hold new hearings for all class members,
including the named plaintiffs, in conformance with
the law as expressed in this opinion, and to reinstate
benefits and/or grant retroactive benefits as is ap-
propriate pursuant to this opinion.’

AFFIRMED.

2 Because we have found that the Secretary’s regulations are
inconsistent with the Act, we need not address the plaintiffs’
broader constitutional claims that the Secretary’s regulations
deny the plaintiffs due process.

28a
APPENDIX B

IN THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

Nos. 85-1254 & 85-1490

EDNA JOHNSON and JEROME MONTGOMERY, on their
own behalf and on behalf of all others similarly
situated, PLAINTIFFS-APPELLEES

Vv.

MARGARET M. HECKLER, SECRETARY, U.S. DEPART-
MENT OF HEALTH AND HUMAN SERVICES, DEFEND-
ANT-APPELLANT

On Suggestion of Rehearing En Banc

DECIDED OCTOBER 30, 1985

Before BAUER and Woop, Circuit Judges, and
GRANT, Senior District Judge.*

PER CURIAM. On September 9, 1985, the appellant
filed a petition for rehearing and suggestion of re-
hearing en banc in this case. All of the judges on the
panel have voted to deny the petition for rehearing.
One of the judges in regular active service requested
a vote on the suggestion of rehearing en bane, which
failed to receive the votes of a majority. Judges
Eschbach, Posner, Coffey, Easterbrook, and Ripple
voted to grant rehearing en banc.

The petiiton for rehearing is

DENIED.

* The Honorable Robert A. Grant, Senior District J udge for
the Northern District of Indiana, is sitting by designation.

29a

EASTERBROOK, Circuit Judge, with whom ESCHBACH,
PosSNER, and Correy, Circuit Judges, join, dissent-
ing. The court denies rehearing en banc in this case
by an equal division of the judges. Our inability to
proceed is not likely to be the end, however. This case
has three issues: (1) whether a court may rule on
substantive questions in pending disability cases prior
to the Secretary’s decision; (2) whether a court may
order the reopening of cases when the suit is filed
more than 60 days after the administrative decision
became final; (3) whether the regulations (the Step
Two rules) used to determine the existence of a
“severe” impairment are unlawful. The Supreme
Court has granted review of the first two issues. City
of New York v. Heckler, 742 F.2d 729 (2d Cir. 1984),
cert. granted, 54 U.S.L.W. 3223 (U.S. Oct. 7, 1985) ;
Owens v. Heckler, No. CV-2436-WMB (C.D. Cal.
Aug. 28, 1984), prob. jur. noted, 54 U.S.L.W. 3252
(U.S. Oct. 15, 1985). The third issue affects tens of
thousands of administrative cases every year and de-
serves review independently.

1. Califano v. Yamasaki, 442 U.S. 682, 701, 704
(1979), holds that every member of a class must in-
dependently satisfy all requirements of suit. That
means that a court must ask, with respect to the class
members whose claims are pending before the Secre-
tary, whether they could have filed individual suits
seeking declaratory judgments that the Step Two
rules violate the statute. The answer is no. The
pertinent statute, 42 U.S.C. § 405(g), states that a
person may sue only after a “final decision of the
Secretary”. When a person still has a claim pending
there is no “final decision.”

The panel concluded that the final decision require-
ment is “waivable” by the court. “Waiver” does not

30a

ewme naturally to a finality requirement. Finality in
the sense of “the last order in the case” is familiar
under 28 U.S.C. § 1291, and no one thinks a court
may “waive” this requirement to hear an interesting
and important legal issue in mid-case. See, e.g.,
Richardson-Merrell, Inc. v. Koller, 105 S. Ct. 2757
(1985); Coopers & Lybrand v. Livesay, 437 U.S. 463
(1978). Finality in the sense of administrative ex-
haustion is a bit different, for here finality is designed
for the protection of the administrave process. Again
a court may not excuse the lack of finality. FTC v.
Standard Oil Co., 449 U.S. 232 (1980). If any one
may waive the requirement, that must be the Secre-
tary rather than the court. Weinberger v. Salfi, 422
U.S. 749, 766 & n.9 (1975), accordingly held that the
Secretary may, by regulation, stipulate that an in-
terim step is “final.” See also Heckler v. Ringer, 104
S. Ct. 2013, 2017 & n.2 (1984). But the regulation
on the point, 20 C.F.R. §§ 404.923-404.928, allows
immediate review only when the claimant attacks the
constitutionality of part of the Act and all other is-
sues have been settled.

The Supreme Court used the language of “waiver”
to assess jurisdiction to hear social security cases in
Mathews v. Eldridge, 424 U.S. 319 (1976). The use
of “waiver” in E/dridge was consistent with the prac-
tice of finality under § 1291. The question in Eldridge
concerned a constitutional entitlement to a _pre-
termination hearing. If that question is not review-
able immediately, it never is. The decision therefore
could be said to be “final” in the same sense a col-
lateral order is final: (a) it is irremediable on ap-
peal, and (b) it has nothing to do with the merits.
See Mitchell v. Forsyth, 105 S. Ct. 2806, 2815-17
(1985). Here, however, the question at issue has

3la =

everything to do with the merits of a claim for bene-
fits, and if the Secretary is wrong the validity of the
Step Two rule is reviewable on appeal. The panel
held the Step Two regulations invalid precisely be-
cause they affect the merits of cases. And it also
pointed out (769 F.2d at 1208) that in many of the
class members’ cases the Step Two regulations will
be irrelevant: the claimants may meet the regulations
as they are, or they may fail on other grounds. This
decision is about as intertwined with the merits as
they come. Under Richardson-Mervrell it cannot be
“collateral.”

The Fourth Circuit has said that a court may excuse
administrative exhaustion only when the question is
“wholly collateral” to the claim for benefits, see Hyatt
v. Heckler, 757 F.2d 1455, 1460 (1985), and that is
the right approach. Accord, Hatcher v. Heckler, 772
F.2d 427, 430-82 (8th Cir. 1985).| Ringer, in which
the Supreme Court held review impermissible because
the regulation attacked by the plaintiff was “inter-
twined” with the merits of the case (see 104 S. Ct. at
2023-24), all but compels it. As the Court said, the
“waiver” approach “is inapplicable here where re-
spondents do not raise a claim that is not wholly
‘collateral’ to their claim for benefits under the Act.”
104 S. Ct. at 2023 (emphasis added).

It is tempting to say: Who cares? Once the court
has held the regulations invalid in a case in which the
plaintiff did exhaust, the other claimants still in the
works get the benefit. Perhaps, but the real problem
lies in future decisions. The decision does not (and
under Yamasaki cannot) turn on the fact that these
plaintiffs are rolled in a class rather than filing indi-
vidual suits. The holding of this case is that any-
time a claimant challenges a regulation of the Secre-

82a

tary—a regulation an ALJ cannot alter—the claim-
ant may seek review of that regulation without ob-
taining a final decision on the merits. That cannot be
squared with Ringer. There are thousands of regula-
tions, millions of claimants. This decision could mul-
tiply substantially the number of suits filed in pur-
suit of benefits. The finality requirement of § 405(¢)
was intended to prevent this.

2. The panel also held that the class may contain
people who did not file suit within 60 days of receiv-
ing a final decision, as § 405(g) requires. This means
that closed cases must be reopened, and in substantial
numbers. The rationale is that the 60 day rule is a
“statute of limitations,” which is waived if not
pleaded in the answer to the complaint, 769 F.2d at
1208-09. Although two of the Supreme Court’s cases
(Salfi and Eldridge) use the words “statute of limita-
tions” in referring to the 60 day rule, neither case
concerned the appropriate characterization of the
time limit. Several other circuits preceded our panel
in following the Supreme Court’s dictum, but I think
they have given the Court’s casual words altogether
too much weight. See Reiter v. Sonotone Corp., 442
U.S. 330, 341-42 (1979); Zenith Radio Corp. v.
United States, 487 U.S. 448, 459-62 (1978).

The problem with the characterization is that this
is a suit against the United States. Time limits in
suits against the United States are not ordinary stat-
utes of limitations. They are substantive conditions
on the consent to suit, and they apply unless expressly
surrendered. Soriano v. United States, 352 U.S. 270,
275-76 (1957) ; Munro v. United States, 303 U.S. 36,
41 (1938); Finn v. United States, 123 U.S. 227, 232-
33 (1887). Cf. Lehman v. Nakshian, 4583 U.S. 156,
160 (1981) (the United States is immune from suit

83a

save as its consents, “and the terms of its consent
define the court’s jurisdiction to entertain the suit’).
Belatedly raising the point in the district court is
not an active surrender. It is closer to an act of negli-
gence by the government’s lawyer, an act that ought
not eliminate a statutory limit on litigation against
the United States.

3. The decision on the merits of the Step Two
rules has substantial continuing importance. In ad-
ministering any program of this scope, the Secretary
must lay down rules that confine the discretion of the
administrative law judges. There are more than 800
ALJs in the social security system, each with a dif-
fi .ent approach to disability cases. In order that
the program not deteriorate into inconsistent and
arbitrary decisions turning more on the ALJ’s char-
ity than on legal criteria, there must be rules. The
rules must have teeth to be effective. Yet all rules
with teeth also may yield error. When the Secretary
strives for generality and consistency, she creates a
risk that some people who might have qualified for
benefits under an approach of unguided case-by-case
decisionmaking will lose out. See DeLong v. Heckler,
771 F.2d 266, 268 (7th Cir. 1985) ; Stephens v. Heck-
ler, 766 F.2d 284, 285-86, 288-89 (7th Cir. 1985) ;
Garrison v. Heckler, 765 F.2d 710, 714 (7th Cir.
1985); cf. Jerry L. Mashaw, Bureaucratic Justice:
Managing Social Security Disability Claims 106-23
(1983).

The panel’s decision holding the definition of “se-
vere” impairment invalid points to this potential for
error. The potential is there; it is there whenever
rules exist. Yet unless the rules create too many
improper denials of benefits, they do more good than
harm. The rules involved here do not create a very

34a

large risk of erroneous denial. The Secretary’s regu-
lations are meek. They make the test whether an
impairment “significantly” limits the ability to work.
In cases such as Taylor v. Schweiker, 739 F.2d 1240,
1248 n.2 (7th Cir. 1984), and Wallschlaeger v.
Schweiker, 705 F.2d 191 (7th Cir. 1983), we charac-
terized this as a useful screen to focus attention on a
threshold requirement, to filter out people without a
hope of getting benefits, and to direct the attention of
the ALJs to those with serious cases. The ALJs have
a hard enough time as it is; I do not think claimants
as a whole will gain from a judicial order that hin-
ders this intelligent process through which the claim-
ants with the best cases receive the most attention.
(The panel’s decision does not specify whether it bars
the use of any Step Two hurdle or whether it just
thought this step too high. I assume it meant the
former, because the way the regulation is worded it
is hard to imagine a lower step that would serve any
purpose. )

If there were something in the statute that forbade
the Step Two rules or the sequential process in gen-
eral, that would be that. But the statute calls for the
Secretary to determine disability and is all but empty
of advice about how to do this. The Secretary has
had to make it up as she goes along. The argument
that the Step Two rules focus attention in a way that
will lead people to slip through the cracks could be
made against every other regulation in C.F.R. The
Supreme Court has held, however, that because of
the vague nature of the mandate ‘he Secretary has
especially broad authority to issue regulations. E.g.,
Herweg v. Ray, 455 U.S. 265, 275 (1982) ; Schweiker
v. Gray Panthers, 453 U.S. 34, 44 (1981). Some er-
ror is inevitable. How much is too much—and there-

35a

fore how much rulishness is best—are administrative
matters. Only someone with knowledge of the entire
process, including other occasions for error and ways
in which risks of error may be offset, is in a good
position to make such a decision. That someone is the
Secretary.

The Vocational Grid is much more restrictive, and
it creates a much greater chance of slipping through
the cracks than do the Step Two rules. Yet the Court
sustained the Grid as a useful though imperfect way
to carry on an almost impossibly difficult task. Heck-
ler v. Campbell, 461 U.S. 458 (1983). It remarked:
“Where, as here, the statute expressly entrusts the
Secretary with the responsibility for implementing a
provision by regulation, our review is limited to de-
termining whether the regulations promulgated ex-
ceed the Secretary’s statutory authority and whether
they are arbitrary and capricious.” Jd. at 466. The
Court cited a series of cases in which it has sustained
other regulations concerning the Social Security Act.
See Herweg and Gray Panthers. Alli of those regula-
tions have the defect the panel found in the Step Two
rules—the potential to deny benefits to people who
might get them after a fuller inquiry.

More recently the Court has held that unless the
statute in express terms settles a dispute, a court
ought not interfere with the program of implemen-
tation selected by the responsible agency. Chevron,
U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 104 S. Ct. 2778, 2782-83 (1984). Nothing in
the social security statute addresses phased decision-
making such as the Step Two rules. No debates in
Congress indicate dissatisfaction with the way the
Secretary is proceeding. To the extent the 1984
amendments bear on the question, they support the

36a

Secretary’s position. Section 4(a)(1) of the amend-
ments requires: “If the Secretary does find a medi-
cally severe combination of impairments, the com-
bined impact of the impairments shall be considered
throughout the disability determination process.”
This suggests that Congress knew of and approved
the sequential process in which “severity” is one step.
I therefore think we should leave questions like this
to the administrators, who both tailor the rules to the
entire program and bear political responsibility for
the results.

A true Copy:

Es > nicelaeeniedcceanss PORES OR IE
Clerk of the United States Court of
Appeals for the Seventh Circuit

37a

APPENDIX C

UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
CHICAGO, ILLINOIS 60604

July 30, 1985
Before
Hon. WILLIAM J. BAUER, Circuit Judge
HON. HARLINGTON Woop, JR., Circuit Judge
HON. ROBERT A. GRANT, Senior District Judge *

Nos. 85-1254 and 85-1490

EDNA JOHNSON and JEROME MONTGOMERY, on their
own behalf and on behalf of others similarly
situated, PLAINTIFFS-APPELLEES,

v8.

MARGARET M. HECKLER, Secretary, U.S. Department
of Health and Human Services, DEFENDANT-APPELLANT

Appeals from the United States District Court
for the Northern District of Illinois,
Eastern Division

No. 83 C 4110—Judge Nicholas J. Bua

*The Honorable Robert A. Grant, Senior Judge of the
United States District Court for the Northern District of
Indiana, is sitting by designation.

a

88a
JUDGMENT—ORAL JUDGMENT

This cause was heard on the record from the United
States District Court for the Northern District of
Illinois, Eastern Division, and was argued by counsel.

On consideration whereof, IT IS ORDERED AND
ADJUDGED by this Court thatthe judgment of the
said District Court in this cause appealed from be,
and the same is hereby AFFIRMED, with costs, in
accordance with the opinion of this Court filed this
date.

39a

APPENDIX D

UNITED STATES DISTRICT COURT
N.D. ILLINOIS, E.D.

No. 83 C 4110

EDNA JOHNSON and JEROME MONTGOMERY, on their
behalf and on behalf of all others similarly sit-
uated, PLAINTIFFS

Vv.

MARGARET HECKLER, SECRETARY, DEPARTMENT OF
HEALTH and HUMAN SERVICES, DEFENDANT

Dec. 7, 1983

MEMORANDUM OPINION AND ORDER
BUA, District Judge.

Plaintiffs Edna Johnson and Jerome Montgomery
have moved to maintain this suit as a class action
pursuant to Fed. R. Civ. P. 23. For the reasons set
forth below, plaintiffs’ motion is hereby granted.

Background

Named plaintiffs Edna Johnson and Jerome Mont-
gomery bring this action to challenge certain inter-
related regulatory policies of defendant, the Secre-
tary of the Department of Health and Human Serv-
ices (the Secretary), governing the evaluation of dis-
ability claims brought under the Old Age, Survivors

40a

and Disability Insurance (“OASDI’’) program and
the Supplemental Security Income (“SSI’’) program.
The Secretary’s sequentia! regulatory scheme, by
which she evaluates disability claims under either
program, 20 C.F.R. §§ 404.1520 et seq. and 416.920
et seqg., interprets the statutory disability require-
ments of 42 U.S.C. §§ 423(d) and 1382c(a) (8) (A),
(B), (C) to require each claimant to initially estab-
lish that he or she has a “severe physical or mental
impairment.” In determining whether a claimant
has a “severe” impairment, it is defendant’s policy:
(1) to refuse to consider vocational factors and re-
sidual functional capacities, 20 C.F.R. §§ 404.1520
(c) and 416.920(c);* and (2) to refuse to combine
“nonsevere” impairments, 20 C.F.R. §§ 404.1522,
416.922 ° and Social Security Ruling (“SSR”) 82-55
(1982). Plaintiffs allege in their First Amended
Complaint that these two interrelated regulatory pol-
icies violate their statutory rights under 42 U.S.C.
§$ 423(d) and 1382c(a)(38)(A), (B), (C). In ad-
dition, plaintiffs allege that the Secretary’s policies
violate their constitutional right to equal protection
under the due process clause of the Fifth Amend-
ment to the U.S. Constitution.

The proposed definition of the class, as stated in
plaintiffs’ amended motion for class certification, in-
cludes:

120 C.F.R. §§ 404.1520 and 416.920 (1982) were promul-
gated as final regulations to be effective in February, 1979.
40 Fed. Reg. 55363 and 55371 (November 29, 1978) to be
codified as 20 C.F.R. §§ 404.1503(c) and 416.903(c). These
regulations were recodified as 404.1520(c) and 416.920(c) in
45 Fed. Reg. No. 163 (August 20, 1980).

220 C.F.R. 404.1522 and 416.922 (1982) were promulgated
in August, 1980. 45 Fed. Reg. 55566 et seq. (August 20, 1980).

4la

All persons in Illinois who are filing or have filed
applications for disability benefits under Title II
and/or Title XVI of the Social Security Act, and
whose benefits are being or have been denied
pursuant to the policies set forth in 20 C.F.R.
§§ 404.1520(c) and .1522, 416.920(c) and .922
(1982), and Social Security Rulings cum. ed.
82-55 (1982); and all recipients of such benefits
who are making or have made claims for con-
tinued benefits (through participation in a Con-
tinuing Disability Interview), and whose benefits
are being or have been terminated pursuant to
the same policies. —

To satisfy the prerequisites for certification of a
class action, plaintiffs have the burden of showing
that:

(1) the class is so numerous that joinder of all
members is impracticable, (2) there sre ques-
tions of law or fact common to the class, 3) the
claims or defenses of the representative parties
are typical of the claims or defenses of the class,
and (4) the representative parties will fairly
and adequately protect the interests of the class.

Fed.R.Civ.P. 23(a).

Once these four prerequisites are met, plaintiffs
must further satisfy one of the requirements under
Rule 23(b). Plaintiffs assert that their claim is cog-
nizable under Rule 23(b)(2) as it is one in which:

the party opposing the class has acted or refused
to act on grounds generally applicable to the
class, thereby making appropriate final injunc-
tive relief or corresponding declaratory relief
with respect to the class as a whole.

Fed.R.Civ.P. 23(b) (2).

42a

I. Prerequisite Under Fed.Civ.P. 23 (a)
A. Numerosity

Plaintiffs estimate that the proposed class contains
well in excess of 15,300 persons. This calculation is
based on government statistics, and, although ad-
mittedly imprecise, is a reasonable way of gauging
the size of the class.* Plaintiffs’ sources and estimates
constitute sufficient evidence that joinder is imprac-
ticable. Vergara v. Hampton, 581 F.2d 1281, 1284
(7th Cir. 1978).

The Secretary, however, contends that the proposed
class contains an unknown, but potentially substan-
tial, number of individuals over whom this Court has
no jurisdiction, and that consequently, plaintiffs have
not shown that the class is so numerous that joinder
is impracticable. The gist of the jurisdictional chal-
lenge is that class members have failed to exhaust
their administrative remedies under the Social Se-
curity Act.

The jurisdiction of this Court over appeals from
Social Security rulings derives from the Social Se-

® The Social Security Administration published statistics on
Illinois’ share of disabled workers receiving OASDI benefits in
1980. Plaintiffs applied to this figure the percentage of all
OAS-DI disability claimants nationally who had benefits de-
nied or terminated because their impairments were considered
“not severe.” The source for this second number was a report
of the U.S. House of Representatives Ways and Means Com-
mittee. The resulting figure approximated the number of
OASDI recipients in Iilinois whose benefits were terminated.
Assuming a margin of error as great as 50 percent, the num-
ber is still well over 7,000. Furthermore, plaintiffs point out
that their estimate is understated because it covers only one
year of a three and a half year period, and does not include
any of the class members whose claims arose under SSI.

43a

curity Act, 42 U.S.C. §405(g).* Section 405(g) per-
mits appeals to federal district courts by those who
claimed benefits under Titles II or XVI, but who had
such claims denied or terminated by the Secretary.
A threshold requirement for an appeal to this Court
under § 405(g) is a “final decision of the Secretary
made after a hearing.”

The U.S. Supreme Court, in a series of decisions,
has viewed § 405(g) as containing two components:
(1) a claim for benefits must have been filed; and
(2) the Secretary must have made a final decision on
that claim. See e.g., Mathews v. Eldridge, 424 U.S.
319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1975) ; Califano v.
Yamasaki, 442 U.S. 682, 99 S.Ct. 2545, 61 L.Ed.2d
176 (1979). The first of these requirements is viewed
as a sine qua non to the exhaustion of a claimant’s
exhaustion of administrative remedies. The second
requirement, however, unlike the first, may be waived
under appropriate circumstances. Jd. 424 U.S. at
330, 96 S.Ct. at 900.

* Plaintiffs also invoke this Court’s jurisdiction under 42
U.S.C. § 1283(c) (3). Section 1383(c) (3), which pertains to
Title XVI (Supplemental Security Income For Aged, Blind, &
Disabled), is the counterpart to 3 405(g) (which pertains to
Title II (Federal Old-Age, Survivors, & Disability Insurance
Benefits). The language of § 1383(c) (3) clearly subjects it to
the principles contained in § 405(g). Section 1383(c) (3)
reads as follows:

The final determination of the Secretary after a hearing
under paragraph (1 shall be subject to judicial review as
provided in section 405(g) of this title to the same extent
as the Secretary’s final determinations under section 405
of this title; except that the determination of the Secre-
tary after such hearing as to any fact shall be final and
conclusive and not subject to review by any court.

44a

It is the second requirement of § 405(g)—that of
a final administrative hearing—that forms the basis
for the Secretary’s objection to plainciffs’ amended
class definition.© The Secretary contends that the
claims of an unknown, but potentially great number
of class members have not yet been finally disposed
of in administrative hearings. The Secretary em-
phatically maintains that she has not waived the
final hearing requirement as to these claimants, and
as a result, a significant number of proposed class
members may not invoke the jurisdiction of this
Court. Plaintiffs argue, however, that the Secretary’s
nonwaiver is not an insurmountable obstacle to this
Court’s jurisdiction over the affected class members,
because under certain conditions, the court itself has

5 The Secretary had challenged plaintiffs’ class, as originally
defined, under both prongs of § 405(g). She claimed that not
only had many members of the class failed to receive final
hearings on their claims, they had never properly filed claims
for benefits in the first place. The Secretary relied on a recent
opinion by Justice Rehnquist, sitting as Circuit Justice,
Heckler v. Lopez, —— U.S. ——, 104 S.Ct. 10, 77 L.Ed.2d 1431
(1983) (Rehnquist, Circuit Justice) petition for rehearing
en bane pending. Justice Rehnauist suggested that, when bene-
fits had been terminated, as opposed to initially denied, a claim-
ant’s initial application for benefits was not_enough to estab-
lish a “claim” for purposes of § 405(g). Rather, a claimant
must have also filed a claim or application for continued bene-

_fits. The policy in the Seventh Circuit has been that the initial
application for benefits meets the jurisdictional criteria in
2ither case. See, e.g., Wright v. Califano, 603 F.2d 666, 668-70
(7th Cir. 1979). In response to the Secretary’s argument,
plaintiffs amended the definition of their class. This Court
holds that the definition, as amended, conforms both to the
policy in the Seventh Circuit and the more stringent policy
enunciated by Justice Rehnquist. Hence, the Secretary’s chal-
lenge under the first prong of § 405(¢) is rendered moot.

45a

the authority to waive a final administrative hearing
under § 405(g).

The Supreme Court and the Courts of Appeals, in-
cluding the Seventh Circuit, have made it clear that
if the Secretary refuses to waive exhaustion, the
court should do so under certain conditions. Mathews
v. Eldridge, 424 U.S. at 328-30, 96 S.Ct. at 899-900;
Giancone v. Schweiker, 656 F.2d 1238, 1241-43 (7th
Cir.1981); Wright v. Califano, 587 F.2d 345, 348-
50 (7th Cir.1978) ; Caswell v. Califano, 583 F.2. 9,
14 (1st Cir.1978). Under these decisions, judicial
waiver of complete administrative exhaustion is ap-
propriate when plaintiffs’ legal claims are collateral
to the demand for benefits, and plaintiffs’ interest in
propmpt judicial review is so great that deference to
the agency’s judgment is inappropriate. Mathews v.
Eldridge, 424 U.S. at 328-80, 96 S.Ct. at 899-900;
Giancone v. Schweiker, 656 F.2d at 1243-44; Wright
v. Califano, 587 F.2d at 349; Caswell v. Califano,
583 F.2d at 14-15. Judicial waiver of complete ad-
ministrative exhaustion is also appropriate when the
Secretary’s position on the policies being challenged
is fixed (i.e., the Secretary cannot change it) or is
final (i.e., the Secretary is unlikely to change it).
Liberty Alliance For The Blind v. Califano, 568 F.2d
333, 345-46 (3rd Cir.1977).

While plaintiffs need meet only one of these tests
for judicial review of the exhaustion requirement, in
the instant case this Court finds that they meet both.
First, plaintiffs challenge the validity of two policies
of the Secretary on the basis that they violate the
Social Security statute and the Fifth Amendment.
The plaintiffs’ claims, if successful, will not result in
the payment of benefits to class members; rather,
the result will be a change in the Secretary’s policies
and procedures in evaluating a disability claim. As

46a

such, the issue presented is collateral to claims for
benefits. Moreover, plaintiffs’ interest in prompt ju-
dicial review is substantial. All of the class members
are applicants for or recipients of disability bene-
fits. These persons are not working, but are on fixed
incomes with many of them dependent upon their
benefits or public assistance as their sole source of
income. An erroneous termination or denial of dis-
ability benefits to such persons places substantial
financial and nonfinancial burdens on them. “[I]t is
simply not true that a claimant for disability benefits,
not infrequently in dire financial circumstances due
to his disability, is truly made whole by retroactive
payments which he has had to survive perhaps well
over a year without.” Caswell v. Califano, 583 F.2d
at 14.

Second, because the Secretary’s position appears
to be final on the challenged policies, exhaustion of
administrative remedies would be futile. The experi-
ence of the two named plaintiffs, who did exhaust,
illustrates the futility of exhaustion—the Secretary’s
published policies are not likely to be influenced or
changed by the administrative appeals of any single
individual; thus the issue is unsuited to resolution in
the hearing process. Liberty Alliance For The Blind
v. Schweiker, 568 F.2d at 345-6. That the chal-
lenged policies are published both in the federal reg-
ulations and in Social Security Rulings further sug-
gests the final nature of the Secretary’s position.
Finally, the validity of the policies challenged here
has been raised in other litigation giving the Secre-
tary ample opportunity to reconsider, and she has
not done so. E.g., Chico v. Heckler, 710 F.2d 947
(2d Cir.1983); Scruggs v. Schweiker, 559 F.Supp.
100 (D.Tenn.1982).

47a

For all the aforementioned reasons, this Court
hereby waives the final hearing requirement under
§ 405(g), and assumes jurisdiction over the unnamed
members of plaintiffs’ proposed class. Because the
class proposed by plaintiffs contains by definition in-
dividuals over whom this Court has jurisdiction un-
der § 405(g), the Secretary’s challenge to the numer-
osity of the class must fail.

B. Common Questions of Law and Fact

The Secretary also claims that the common ques-
tion of law raised by plaintiffs is too intertwined
with the subordinate factual circumstances of each
class members to be separated out for purposes of
class certification. The Secretary appears to have
misread plaintiffs’ complain, however. What plain-
tiffs are seeking in this Court’s ruling on the validity
of two administrative policies for determining eli-
gibility for benefits, not-an adjudication as to whether
individual class members are entitled to benefits
thereunder. Hence, the class as defined by plaintiffs
meets the legal-factual commonality requirement.

C. Typicality of Claims

“The typicality requirement refers to the nature
of the representatives’ claim or defense and not to
specific facts from which it arose or to the relief
sought.” Long v. Thornton Tp. High School District
205, 82 F.R.D. 186, 190 (N.D.II1.1979). The test is
whether the named plaintiffs’ claim and that as-
serted on behalf of the class are “based on the same
legal theory.” Jd. at 190. In this case plaintiffs chal-
lenge the Secretary’s denial of benefits solely because
of the application of the regulatory policies at issue
here. The legal theory on behalf of the class is
identical.

’

eS eee

48a

D. Representativeness of Named Plaintiffs

“Adequacy of representation depends on two fac-
tors: (a) the plaintiffs’ attorney must be qualified,
experienced and generally able to conduct the pro-
posed litigation; and (b) the plaintiff must not have
interests antagonistic to those of the class.” Susman
v. Lincoln American Corp., 561 F.2d 86, 90 (7th
Cir.1977). In this case, plaintiffs’ attorneys have re-
peatedly been found to be adequate class counsel.
See, e.g., Wright v. Califano, 587 F.2d 345 (7th Cir.
1978); Jimenez v. Weinberger, 523 F.2d 689 (7th
Cir.1975). As to the second factor under Fed.R.Civ.
P. 23(a)(4), the named plaintiffs have instituted
this litigation to declare the Secretary’s regulatory
policies illegal and to enjoin their application. If the
prayed for relief is granted, both the named and un-
named plaintiffs will benefit equally. The Secretary
does not allege, nor does this Court find any facts
suggesting that plaintiffs’ interest in the case is in-
consistent with the interests of the class as a whole.

II. Requisites Under Fed.R.Civ. P. 23 (a)

In addition to meeting the requirements of Fed.R.
Civ.P. 23(a), a class action must qualify under one
of the subsections of 23(b). The Secretary’s regu-
latory policies challenged here affect equally all mem-
bers of the class. Indeed, plaintiffs have defined the
class by reference to the scope of the Secretary’s
policies at issue.

Thus, there is ample support for plaintiffs’ asser-
tion that the Secretary has acted or refused to act on
grounds generally applicable to the class, thereby
making injunctive or declaratory relief with respect
to the class as a whole appropriate. Alliance to End

Kee

49a

Repression v. Rochford, 565 F.2d 975, 978 (7th Cir.
1977) ; Dixon v. Quern, 76 F.R.D. 617, 620 (N.D.
[1].1977).

Conclusion

Plaintiffs have met their four-part burden under
Fed.R.Civ.P. 23(a) for certification of a class action.
The objections raised by defendant to numerosity and
commonality of issues have been considered and re-
jected in the foregoing discussion. The remaining
two prerequisites of 23(a), typicality of claims and
representativeness of named plaintiffs have also been
met. Furthermore, the requirements of Fed.R.Civ.P.
23(b)(2) are satisfied in that the Secretary’s two
eligibili‘y policies are generally applicable to the pro-
posed class, making appropriate injunctive and de-
claratory relief with respect to the class as a whole.
Therefore, plaintiffs’ motion for class certification is
granted.

IT IS SO ORDERED.

50a

APPENDIX E

UNITED STATES DISTRICT COURT
N.D. ILLINOIS, E.D.

No. 83 C 4110

EDNA JOHNSON and JEROME MONTGOMERY on their
own behalf and on behalf of others similarly situ-
ated, PLAINTIFFS

Vv.

MARGARET HECKLER, SECRETARY, DEPARTMENT OF
HEALTH AND HUMAN SERVICES, DEFENDANT

Sept. 19, 1984

ORDER
BUA, District Judge.

Plaintiffs in this class action are or have been ap-
plicants for or recipients of disability benefits under
Title II and/or Title XVI of the Social Security Act
(the ‘“‘Act”). They have been denied benefits on the
ground that their disabilities are not severe enough
to prevent them from working. They challenge the
validity of the applicable regulations, 20 C.F.R.
§§ 404.1520 (c), 416.920(c), 404.1522, 416.922 (1983) -
and Social Security Ruling (“SSR”) 82-55 (cum. ed.
1982), as violative of the Act and the equal protec-

5la

tion component of the Due Process Clause of the
Fifth Amendment to the United States Constitution.
The defendant is the Secretary of the Department of
Health and Human Services (“HHS”), who ad-
ministers the Old-Age and Survivors Disability In-
surance (“OASDI’’) and Supplemental Security In-
come (“SSI’’) programs through the Social Security
Administration (“SSA”), and promulgates regula-
tions and rulings interpreting the applicable statute.

Plaintiffs submitted a motion for summary judg-
ment, pursuant to Fed.R.Civ.P. 56, seeking declara-
tory and injunctive relief. The Secretary submitted
a cross-motion for summary judgment. For the rea-
sons stated herein, the plaintiffs’ motion for summary
judgment is granted and the Secretary’s cross-motion
is denied.

I. THE CHALLENGED REGULATIONS
AND THE ACT

Plaintiffs challenge the above regulations on two
grounds: (1) 404.1520(c) and 416.920(c) do not
consider vocational factors (age, education, and work
experience) and residual functional capacities; and
(2) 404.1522, 416.922, and SSR 82-55 do not combine
“nonsevere” impairments. Before proceeding to con-
sider the validity of these regulations, an overview
of the rogulations and the Act is helpful.

The OASDI and SSI programs provide for the pay-
ment of benefits to disabled persons. Under both pro-
grams, a person is considered disabled if he or she is
unable

to engage in any substantial gainful activity by
reason of any medically determinable physical or
mental impairment which can be expected to

saa

52a

result in death or which has lasted or can be
expected to last for a continuous period of not
less than 12 months. .

42 U.S.C. §§ 423(d)(1)(A) & 1882c(a) (38) (A).

The Act provides that “for purposes of” applying this
definition, an individual

shall be determined to be under a disability only
if his physical or mental impairment or impair-
ments are of such severity that he is not only un-
able to do his previous work but cannot, consider-
ing his age, education, and work experience, en-
gage in any other kind of substantial gainful
work which exists in the national economy... .

42 U.S.C. §§ 423(d)(2)(A) & 1882c(a) (3) (B).

The Secretary is authorized to establish rules and
regulations, consistent with the Act governing the
determination of disability claims. 42 U.S.C. §§ 405
(a) & 1883(d) (1).

Pursuant to this authority, the Secretary estab-
lished a five-step sequential procedure for determin-
ing whether a claimants is disabled. 20 C.F.R.
§§ 404.1520, 416.920 (1983). Under the existing reg-
ulations, if the claimant is found not to be disabled
under any one of the sequential tests, the analysis
ends and the remaining steps of the analysis are not
completed. See §§ 404.1520(a), 416.920(a). As the
first step, the Secretary ascertains whether the claim-
ant is working; if so, a finding of “not disabled’
follows. In the second step, the Secretary determines,
solely on the basis of medical factors, whether the
claimant has a “severe” impairment which “signifi-
cantly limits [his] physical or mental ability to do
basic work activities.” §§ 404.1520(c), 416.920(c).
The regulation specifically provides that at this sec-

——

53a

ond step the Secretary “will not consider your age,
education, and work experience.” Plaintiff’s first
ground relates to this refusal to consider vocational
factors in the second step and the resulting possi-
bility that vocational factors will be foreclosed if the
inquiry stops after the second step.

If the claimant is determined to have a “severe”
impairment under this definition, the Secretary next
considers (Step 3) whether the impairment is one
which is listed in Appendix 1 of the regulations; if
so, the claimant is found to be disabled without re-
quirement of further proof that the impairment pre-
vents him from working. The fourth step comes into
play if the claimant’s impairment, though deemed
“severe” under the second step, is not a “listed” im-
pairment under the third step. In such cases, the
Secretary determines (Step 5) whether, considering
the claimant’s age, education, and work experience,
his impairment prevents him from doing any other
work available in the national economy. If the claim-
ant cannot, he is found to be disabled and his claim
is approved. See Canon v. Harris, 651 F.2d 518, 517
(7th Cir.1981).

The Secretary acknowledges that the effect of the
sequential procedure is that denials of claims at the
second step occur “on the basis of medical considera-
tions alone.” SSR 82-56 (cum. ed. 1982). To im-
plement this policy, SSR 82-55 lists 20 impairments
which are nonsevere per se on the basis of medical
evidence alone. SSR 82-55 is binding on all SSA per-
sonnel, including administrative law judges and the
Appeals Council.

The challenged regulations, 20 C.F.R. $§ 404.1522
and 416.922 (1983) provide: “We will consider the
combined effects of unrelated impairments only if all

54a

are severe.” In addition to these regulations, SSR
82-55 instructs Social Security administrators not to
consider the combined effects of nonsevere impair-
ments because inasmuch “as a nonsevere impairment
is one which does not significantly limit basic work-
related functions, neither will a combination of two
or more such impairments significantly restrict the
basic work-related functions needed to do most jobs.”

II. CHALLENGED REGULATIONS APPLIED
TO THE NAMED PLAINTIFFS

The named plaintiffs were found “not disabled”
under the severity regulation (the second step of the
sequential procedure), and thus were denied benefits
on the grounds that the medical evidence alone failed
to establish the existence of a “severe” impairment—
one which significantly limited their ability to per-
from basic work activities. The application and ef-
fect of the challenged regulations is illustrated by the
cases of the named plaintiffs.

Plaintiff Edna Johnson was denied SSI disability
benefits. Examining the Administrative Record in
the light most favorable to the Secretary, “the claim-
ant has the following impairment(s): diabetes, lum-
bago, anxiety, neurosis and chronic duodenal ulcer.”
(J. 15). While the Administrative Law Judge
(“ALJ”) acknowledged and examined each of these
impairments, it appears from the record that he held
each impairment separately did not significantly limit
the ability to perform basic work-related functions
(J. 14). The ALJ did not expressly consider the com-
bined effect of her impairments. The ALJ never con-
sidered the severity of Johnson’s impairments in
light of her vocational factors. The ALJ concluded
that her claim is being denied on medical considera-

aa ceili

55a

tions alone without consideration of vocational fac-
tors. (J. 15). For support, the ALJ cited § 416.920
(c).

Plaintiff Jerome Montgomery was denied con-
tinued OASDI disability benefits. Examining the rec-
ord in the light most favorable to the Secretary, the
“claimant has the following impairments: atypical
chest pain, hypertension, diabetes mellitus, and status
post fractures of the left hip, leg and foot” (M. 10).
The Appeals Council (“AC”) held each impairment
to be nonsevere per se according to SSR 82-55 (M.
9). Even though the AC concluded that the claim-
ant’s impairments “did not constitute a severe im-
pairment ... either singly or in combination” (M.
9), the record reveals that the AC held each impair-
ment to be nonsevere without considering the com-
bined effects of the nonsevere impairments. In addi-
tion, the AC did not consider the severity of Mont-
gomery’s impairments in light of his vocational fac-
tors (M. 8).

The plaintiff class, as defined, includes Title II and
Title XVI claimants who, like the named plaintiffs,
were and are denied benefits as a result of the ap-
plication of the challenged regulations to them at the
second step. See Order of December 7, 1983. 100
F.R.D. 70.

If. THE SEVERITY REGULATION

The challenged policies of refusing to consider vo-
cational factors of age, education and work experi-
ence, and refusing to combine the effects of non-
severe impairments are embodied in the second step
of the sequential procedure. The second step has been
called the severity regulation since it determines
whether a claimant’s impairment is severe so as to con-

56a

tinue to the next steps in the procedure. While the
Seventh Circuit Court of Appeals has never addressed
the validity of the severity regulation, other Circuit
Courts acknowledge the conflict between the severity
regulation and the letter of §§ 423(d)(2)(A) &
1382¢(a) (3)(B). Delgado v. Heckler, 722 F.2d 570,
574 (9th Cir.1983); Chico v. Schweiker, 710 F.2d
947, 953 (2d Cir.1983). In Chico, Judge Friendly
noted:

the close question of the validity of the ‘severity’
regulation, involving as it does a seeming con-
fiict between the lette* of § 423(d) (2) (A), on
the one hand, and, on the other, the Secretary’s
understandable desire to supply . . . some thresh-
old that a claimant must pass before the Social
Security Administration is required either to
apply the Appendix 2 guidelines or to call voca-
tional experts. . . .

710 F.2d at 953.

In view of the Secretary’s authority under § 405
(a) to establish regulations implementing the dis-
ability provisions of the Act, our review “is limited
to determining whether the regulations promulgated
exceeded the Secretary’s statutory authority and
whether they are arbitrary and capricious.” Heckler
v. Campbell, 461 U.S. 458, 103 S.Ct. 1952, 76 L.Ed.
2d 66 (1983). However, it is clear that “regulations,
in order to be valid must be consistent with the stat-
ute under which they are promulgated,” United States
v. Larinoff, 431 U.S. 864, 873, 97 S.Ct. 2150, 2156,
53 L.Ed.2d 48 (1977), and the agency’s interpreta-
tion of the statute cannot supercede the language
chosen by Congress.” Monhasco Corp. v. Silver, 447

—

U.S. 807, 825, 100 S.Ct. 2486, 2497, 65 L.Ed.2d 532
(1980).

The starting point for this analysis, as Chico points
out, is the language of the statutory definition of
“disability.” 710 F.2d at 593. The statutes, §§ 425
(d) (2) (A) & 1382ce(a) (3) (B) speak of an impair-
ment (or impairments) which is “of such severity
that” the claimant “is not only unable to do his pre-
vious work but cannot, considering his age, educa-
tion and work experience,” perform any substantial
gainful work.

According to the plaintiffs’ interpretation of the
statute, vocational factors of age, education and work
experience should be considered twice in a disability
evaluation. In the second step, these factors are con-
sidered along with medical factors to determine the
claimant’s ability to do his previous work in light of
his impairments. In the fifth step, the vocational fac-
tors relate to the Secretary’s burden to show that
the claimant can still perform some type of substan-
tial gainful activity existing in the national economy.

By contrast, the plaintiffs point out that the se-
verity regulation in the second step restricts to medi-
eal factors alone the claimant’s attempt to establish
that his impairment is severe, i.e., that it signifi-
cantly limits his ability to perform “basic work-
related activities.” The regulation states that the
SSA “will not consider your age, education, and work
experience” at the second step. Plaintiffs conclude
that the severity regulation is facially inconsistent
with the statute’s mandate to the Secretary to con-
sider vocational factors of age, education, and work
experience and residual functional capacity. Dixon,
et al. v. Heckler, 589 F.Supp. 1494 (S.D.N.Y.1984) ;
Smith, et al. v. Heckler, Civ. No. S-83-1609 (E.D.

57a

58a

Cal. June 6, 1984). Dixon and Smith are both class
action cases in which the courts found the severity
regulation to be inconsistent with the statute since
it wrongfully precludes a finding as to whether the
claimant is able to do his past relevant work or
whether, considering vocational factors, claimant can
do other work.

The Court disagrees that the statute mandates con-
sideration of vocational factors and residual func-
tional capacity at the second step. However, the se-
verity regulation is invalid since it impermissibly in-
creases the claimant’s burden of proof as defined in
the statute. Hundrieser v. Heckler, 582 F.Supp. 1231
at 1240 (N.D.IIl. 1984).

By substituting “basic work activities” in the sec-
ond step for “previous work,” the severity regulation
increases the showing which a claimant must make
in order to establish a prima facie case of disability.
The Secretary in SSR 82-56 acknowledges that an
impairment which does not prevent basic work ac-
tivities may prevent past work. Under the severity
regulation, the Secretary states: ‘When there is no
significant limita

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_0347%3A1. Public record. Not legal advice.