Appendix — Bowen v. Hyatt
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rer Supreme Court, U.S,
FILED
MAY 22 1987
Jn the Supreme Court of the
OCTOBER TERM, 1986
Otis R. BOWEN, SECRETARY OF HEALTH
AND HUMAN SERVICES, PETITIONER
v.
PATRICK M. HYATT, ET AL
+
APPENDIX TO PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
CHARLES FRIED
Solicitor General
Department of Justice
Washington, D.C. 20530
(202) 633-2217
TABLE OF CONTENTS
Appendix A (court of appeals’ opinion dated
SEN hee wre hile EOS oi eae ee
Appendix B (court of appeals’ order denying
popomrams Gated 2/12/67) oie civscecis
Appendix C (court of appeals’ decision dated
SN ase ar ay ree on reer ee
Appendix D (district court’s decision dated
ic is hase eee a eden RVR REE R CRS
Appendix E (district court’s judgment dated
EP vgn ech Ge RAE Oe eee OaD
Appendix F (district court’s certifying order dated
Ty EE ee eee ee ere ee et eee
Appendix G (district court’s amended order dated
RI ee occa yen pana eb dS ties
Appendix H (district court’s amended order dated
rn eae Se Sahel ag 5
Appendix I (district court’s order dated 9/11/85) ..
Appendix J (statutory and regulatory provisions in-
Sy re ete re a eee eb ek eee ee
Appendix K (social security ruling) .............
(I)
APPENDIX A
UNITED STATES COURT OF APPEALS
FOURTH CIRCUIT
Nos. 84-1381 and 85-2240
PATRICK H. HyYATT; HERMAN O. CAUDLE AND
Mary P. LOVINGOOD, ON BEHALF OF THEMSELVES AND ALL
OTHERS SIMILARLY SITUATED, NORTH CAROLINA
DEPARTMENT OF HUMAN RESOURCES, DISABILITY
DETERMINATION SERVICES, APPELLEES,
v.
MARGARET M. HECKLER, OR HER SUCCESSOR IN OFFICE,
SECRETARY OF THE UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES, APPELLANT.
PATRICK H. Hyatt SSN: 248-50-1848;
HERMAN O. CAUDLE; MARY P. LOVINGOOD ON BEHALF OF
THEMSELVES AND ALL OTHERS SIMILARLY SITUATED; NORTH
CAROLINA DEPARTMENT OF HUMAN RESOURCES,
DISABILITY DETERMINATION SERVICES, APPELLEES,
v.
MARGARET HECKLER, OR HER SUCCESSOR IN OFFICE,
SECRETARY OF THE UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES, APPELLANT.
Submitted Oct. 6, 1986
Decided Dec. 5, 1986
Before RUSSELL and HALL, Circuit Judges, and
BUTZNER, senior Circuit Judge.
BUTZNER, Senior Circuit Judge:
The Supreme Court vacated the judgment of this court!
and remanded this class action for further consideration in
' Hyatt v. Heckler, 757 F.2d 1455 (4th Cir.1985), vacated and
remanded sub nom. Hyatt v. Bowen, U.S. , 106 S.Ct. 2886,
90 L.Ed.2d 974 (1986).
(la)
2a
light of Bowen v. City of New York, U.S. , 106
S.Ct. 2022, 90 L.Ed.2d 462 (1986). The remand requires
us to reconsider issues arising out of the Social Security
Administration’s policy of declining to apply the law of
this circuit to disability claims involving diabetes mellitus,
hypertension, and pain. We now affirm those provisions
of the district court’s judgment that remanded to the
Secretary of Health and Human Services the disability
claims of the members of subclasses who had not ex-
hausted their administration remedies or sought judicial
review within 60 days of an adverse administrative deci-
sion.? Affirmance overrules that part of our judgment
which directed the district court to dismiss these claims.
See 757 F.2d at 1460-61 (Part Il). We also affirm the
district court’s award of attorney fees, which we had
previously vacated. In all other respects we reinstate our
prior judgment.
Bowen y. City of New York approved waiver of exhaus-
tion of administrative remedies and tolling of the 60-day
filing requirement for a class of claimants suffering from
mental illness. Relying on unpublished internal memoran-
da that mandated a presumption inconsistent with
established regulations, the Social Security Administration
had denied benefits to mentally ill persons who were not
aware of the basis of the agency’s decisions. See 106 S.Ct.
2032. The Secretary contends that the claimants’ mental
impairment was the critical factor justifying waiver and
tolling. He argues that consequently Bowen v. City of New
York is not applicable to the case before us, and he urges
us tO reinstate Our initial judgment.
> The district court’s opinions are reported as Hyatt v. Heckler, 579
F.Supp. 985, and 586 F.Supp. 1154 (W.D.N.C.1984).
3a
Although waiver of the exhaustion requirement and
tolling of the period of limitation will rarely be ap-
propriate, we are not persuaded by the Secretary’s argu-
ment that the principles the Supreme Court explained
must be confined to claims involving mental impairments.
The criteria that the Court specified are necessarily restric-
tive. Nevertheless, they may be applied to comparable
agency procedures that are unlawfully imposed on a class
of claimants.
Bowen v. City of New York establishes that exceptional
circumstances may justify waiver of the requirement im-
posed by 42 U.S.C. § 405(g) that a claimant must exhaust
all administrative remedies by obtaining a final decision
from the Secretary before seeking judicial review. After a
person has presented a claim for benefits to the Secretary,
exhaustion of administrative remedies may be excused if
the claim is collateral to the claim for benefits, the
claimants would be irreparably harmed, and relief is con-
sistent with policies underlying the exhaustion require-
ment. See 106 S.Ct. at 2031-33. The Court cautioned that
waiver would not be available if a claimant alleges mere
deviation from applicable regulations in particular ad-
ministration proceedings. As the court emphasized, ex-
haustion is not to be excused by every allegation of ir-
regularity in the agency proceedings. 106 S.Ct. at 2032.
The Court also held that the provision of section 405(g)
requiring a claimant to commence a civil action for
judicial review within 60 days of a final decision is a period
of limitation subject to equitable tolling. 106 S.Ct. at
2029-31. This decision overrules those parts of Hyatt v.
Heckler, 757 F.2d at 1460-61, Hunt v. Schweiker, 685
F.2d 121, 123 (4th Cir.1982), and Teague v. Califano, 560
F.2d 615, 618 (4th Cir.1977), that held the 60-day require-
ment to be jurisdictional.
4a
Martin v. Secretary of Health, Education and Welfare,
492 F.2d 905, 909 (4th Cir.1984), held that end organ
damage is not a prerequisite to the establishment of
disability from hypertension or diabetes. Myers v.
Califano, 611 F.2d 980, 981-82 (4th Cir.1980), held that
administrative law judges should evaluate the effect of
pain on a claimant’s ability to work when the pain results
from a medically diagnosed physical ailment even though
the pain’s intensity is shown only by subjective evidence.
The separation of powers doctrine requires administra-
tive agencies to follow the law of the circuit whose courts
have jurisdiction over the cause of action. In the absence
of a controlling decision by the Supreme Court, the
respective courts of appeals express the law of the circuit.
See PPG Industries, Inc. v. NLRB, 671 F.2d 817, 823 n. 9
(4th Cir.1982).
On the basis of ample evidence the district court found
that the Secretary instructed the North Carolina disability
determination service and administrative law judges to
follow the Secretary’s regulations instead of circuit court
decisions which conflict with the Secretary’s interpretation
of the Social Security Act. Also, the Secretary directed ad-
ministrative law judges not to cite conflicting court deci-
sions. 579 F.Supp. at 993-996.) The Secretary’s policy of
nonacquiescence in the law of the circuit is well
documented, and it has been the subject of congressional
ciicism. See Hyatt v. Heckler, 757 F.2d at 1459-60;
H.R.Rep. 1039, 98th Cong., 2d Sess. 36-38, reprinted in
3 The Supreme Court and the district court have described the ad-
ministrative procedures for determining disability claims. See Bowen
v. City of New York, 106 S.Ct. at 2024-26; Hyatt v. Heckler, 579
F.Supp. at 992-93.
Sa
1984 U.S. Code Cong & Admin.News 3038, 3096.* The
district court found, citing examples, that the Social
Security Administration had applied the policy of nonac-
quiescence to members of several subclasses by failing to
apply the law of the circuit in evaluating diabetes, hyper-
tension, and pain.
In regard to hypertension and diabetes claimants, the
Secretary’s regulation SSR 82-55 prevented state
employees from making any attempt to determine an in-
dividual’s actual capacity to perform work. The district
court also found that a number of claimants were denied a
complete evaluation of their actual ability to engage in
substantial gainful activity solely because of the
Secretary’s regulation SSR 82-58. State employees and
physicians applying this regulation found claimants who
suffered from medically diagnosed ailments not disabled
because their subjective complaints of pain, no matter
how severe or disabling, were not fully supported by ob-
jective clinical findings. 579 F.Supp. at 993-94.
Again citing examples, the district court found that both
initial claimants and those whose benefits had been ter-
minated suffered irreparable harm because the Social
Security Administration failed to apply the law of the cir-
cuit. The district court found that the unjustified denial of
benefits deprived many claimants of necessities and caused
them to suffer anxiety, depression, and decline in health.
579 F.Supp. at 995.
The district court held that subclasses of claimants who
had been denied benefits because the Social Security Ad-
+ Other cases criticizing the Secretary’s nonacquiescence policy are
Stieberger v. Bowen, 801 F.2d 29, 32-33 (2d Cir.1986); Anderson vy.
Heckler, 756 F.2d 1011, 1013 (4th Cir.1985); Layton v. Heckler, 726
F.2d 440, 442 (8th Cir.1984); Lopez v. Heckler, 725 F.2d 1489, 1497,
1503 (9th Cir.1984) vacated on other grounds and remanded, Heckler
v. Lopez, 469 U.S. 1082, 105 S.Ct. 583, 83 L.Ed.2d 694 (1984);
Childress v. Secretary of Health and Human Services, 679 F.2d 623,
630 (6th Cir. 1982).
a ne einai
6a
ministration had declined to apply the law of the circuit
were entitled to have their claims reconsidered by the agen-
cy. It included in its remand to the Secretary members of
the subclasses who had not exhausted their administrative
remedies or who had not sought judicial review within 60
days. See 579 F.Supp. at 996-99.
In this action, as in Bowen v. City of New York, the
claim is collateral to the claims for benefits. The class
neither sought nor obtained benefits in the district court.
Instead, they asked only that their claims for benefits be
remanded to the Secretary for reconsideration in accord-
ance with the Social Security Act as interpreted by the
court of appeals of this circuit.
The claimants would be irreparably injured if the ex-
haustion requirements were enforced against them.
Evidence supports the district court’s findings of the
claimants’ anxiety and distress. Moreover, as the district
court noted, even if a claimant persevered through the ad-
ministrative proceedings, retained a lawyer, and succeeded
in obtaining from a district court a ruling consistent with
the law of the circuit, the award would likely be dimin-
ished by allowance of a fee of as much as 25%. Thus,
retroactive benefits are not fully compensatory. See 579
F.Supp. at 995, 998.
For reasons similar to those explained in Bowen vy. City
of New York, the relief granted by the district court is con-
sistent with the policies underlying exhaustion. The court
made no awards. It allowed the agency to determine each
claimant’s eligibility for benefits. See 106 S.Ct. 2032.
The Court’s observation in Bowen v. City of New York,
106 S.Ct. at 2032, applies to this case: “We should be
especially sensitive to this kind of harm where the govern-
ment seeks to require claimants to exhaust administrative
remedies merely to enable them to receive the procedure
7a
they should have been afforded in the first place.” The
district court’s reasoning is consistent with the analysis of
the issue in Bowen v. City of New York, and its findings of
historical fact are not clearly erroneous. We therefore con-
clude that the district court’s judicial waiver of the exhaus-
tion of administrative remedies satisfies the critera
prescribed by the Supreme Court.
IV
Bowen v. City of New York explains that equitable toll-
ing of the 60-day requirement is justified “where consistent
with congressional intent and called for by the facts of the
case.” 106 S.Ct. at 2029. Although the Secretary usually
retains authority to determine tolling, a court may act
“where the equities in favor of tolling the limitations
period are ‘so great that deference to the agency’s judg-
ment is inappropriate.’ ” 106 S.Ct. at 2030. The Court
held that tolling is consistent with congressional intent in
enacting the Social Security Act. 106 S.Ct. at 2030. The
question remains whether the equities of this case warrant
tolling.
The equities justifying tolling are similar to those the
Supreme Court identified. The Court explained that
claimants “who permitted their administrative or judicial
remedies to expire were entitled to believe that their
Government’s determination of ineligibility was the con-
sidered judgment of an agency faithfully executing the
laws of the United States.” 106 S.Ct. at 2030.
State or federal administrative agencies notified the
Hyatt claimants that their applications for benefits had
been denied. But the agencies did not tell the claimants
that the Secretary’s interpretation of the Social Security
Act, rather than the court of appeal’s interpretation, was
the basis for denial. Nor did the agencies inform the
claimants that the employees who denied their claims
should have followed the law of the circuit in evaluating
—————E7E
8a
their disabilities. In these respects the claimants’ plight was
similar to that of the claimants in Bowen v. City of New
York to whom the Court referred, quoting with approval
the Second Circuit’s opinion:
“Though they knew of the denial or loss of beneifts,
they did not and could not know that those adverse
decisions had been made on the basis of a systematic
procedural irregularity that rendered them subject to
court challenge. Where the Government’s secretive
conduct prevents plaintiffs from knowing of a viola-
tion of rights, statutes of limitations have been tolled
until such time as plaintiffs had a reasonable oppor-
tunity to learn the facts concerning the cause of ac-
tion. Since in this case the full extent of the Govern-
ment’s clandestine policy was uncovered only in the
course of this litigation, all class members may pursue
this action notwithstanding the 60-day requirements.”
106 S.Ct. at 2030.
The Secretary protests, however, that the nonac-
quiescence policy was not a secret because both the regula-
tions dealing with hypertension, diabetes, and pain and
the decisions explaining the law of the circuit were pub-
lished. Therefore, the Secretary says, Bowen v. City of
New York provides no precedent for this case.
We cannot accept the Secretary’s argument. The
Secretary never published the agency’s informal policy of
not following the law of the circuit with respect to
hypertension, diabetes, and pain. On the contrary, as the
district court found, the Secretary directed administrative
law judges not to cite the conflicting court decisions. See
579 F.Supp. at 996. The effect of the unpublished nonac-
quiescence policy on North Carolina clamants was not
disclosed until this case was tried. See 579 F.Supp. 993-94,
The evidence did not reveal mere irregularities or errors
in individual cases. Instead, it depicted a systematic, un-
published policy that denied benefits in disregard of the
a
9a
law. It is unrealistic to believe that publication of both the
agency’s regulations and the court of appeals’ decisions
would alert lay persons to the Secretary’s nonaquiescence
in circuit law. The Hyatt claimants, no less than those in
Bowen v. City of New York, were entitled to believe that
agencies charged with evaluating claims according to law
had faithfully performed their duties.
V
The claimants also request affirmance of the injunctive
relief the district court granted. The Secretary has
responded by pointing out that this request is outside the
scope of the Supreme Court’s remand.
Because Bowen v. City of New York does not deal with
injunctive relief, we agree with the Secretary that the re-
mand does not embrace this issue. Moreover, an injunc-
tion is unnecessary. After the district court decided this
case, the Secretary “obsoleted without replacement” SSR
82-55 which had conflicted with the law of the circuit
regarding diabetes and hypertension. See SSR 85-III-Il
(1985). Therefore, on remand claims involving these im-
pairments will be evaluated in accordance with the law of
the circuit. Claims involving pain will be evaluated in ac-
cordance with section 3(a) of the Benefits Reform Act of
1984, 42 U.S.C. § 423(d)(S)(A).>
Vi
Invoking the Equal Access to Justice Act, 28 U.S.C.
§ 2412, the district court awarded attorneys’ fees in the
amount of $187,299.30 and reimbursement for expenses
of $7,598.00. The court fully explained the reasons for
> Hyatt v. Heckler, 757 F.2d at 1458-59, explains that the statutory
pain standard enacted by Congress supersedes the law of the circuit
for the purposes of remand of pending claims.
10a
the award in Hyatt v. Heckler, 586 F.Supp. 1154
(W.D.N.C. 1984), and its order entered September 10,
1985. The Secretary asserts that counsel are not entitled to
any fees or reimbursement because the claimants are not
prevailing parties and the Secretary’s position was substan-
tially justified. In any event, the Secretary argues, the
award is too high.
The Secretary’s contention that the claimants have not
prevailed is premised on our initial decision. See
Secretary’s Brief on Remand p. 17. We have modified that
decision, and there now can be no doubt that the claimants
are the prevailing parties. As events have unfolded, the
denial of injunctive relief is of litth moment. Without the
injunction the claimants have achieved their principal goal
of reconsideration of their claims. Furthermore, even
before the Supreme Court’s remand, other class members
prevailed on significant issues. On the basis of the
Secretary’s mMOst recent census approximately 2,200 initial
applicants are entitled to relief because of this case. This
figure will undoubtedly be increased by affirmance of the
district court’s judgment on the exhaustion of adminis-
trative remedies and tolling issues. Not all these claimants
will ultimately succeed in obtaining benefits. But they have
succeeded in having their claims evaluated free of the
Secretary’s nonacquiescence policy. This result, of course,
was the goal of the class action.
We also reject the Secretary’s argument that the class of
terminated claimants obtained relief by congressional
enactment and not as a result of this action. Indeed, by the
terms of the 1984 Act, were it not for this class action,
only the named plaintiffs would have received the benefit
of Section 2 of the Act.°®
® Social Security Disability Benefits Reform Act of 1984, Pub.L.
No, 98-460, 98 Stat. 1797-98 (1984), 42 U.S.C. § 423 note
(Supp. 1986).
———
lla
The Supreme Court has approved a “generous formula-
tion” to determine who are prevailing parties: “[P]laintiffs
may be considered ‘prevailing parties’ for attorney’s fees
purposes if they succeed on any significant issue in litiga-
tion which achieves some of the benefit the parties sought
in bringing suit.” Hensley v. Eckerhart, 461 U.S. 424, 433,
103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983). Applying this
criterion, we conclude that the claimants are prevailing
parties.
We also conclude that the Secretary’s position was not
substantially justified. The primary issue, on which the
outcome of the case depended, was the Secretary’s policy
of nonacquiescence in the law of the circuit. In Anderson
v. Heckler, 756 F.2d 1011 (4th Cir.1985), we held that
Secretary’s policy of nonacquiescence entitled the claimant
to attorney’s fees. Anderson affords sound precedent, and
we perceive no factual or legal ground for departing from
_R
After the district court awarded attorney fees, the
Supreme Court decided in Pennsylvania v. Delaware
Valley Citizen’s Council, the , 106 S.Ct. 3088,
92 L.Ed.2d 439 (1986), that an allowance based on the
reasonable hourly rate for a lawyer’s services normally
precludes enhancing the fee for the superior quality of per-
formance. Relying on the Supreme Court’s ruling, the
> Chilicky v. Schweiker, 796 F.2d 1131, 1137-38 (9th Cir.1986), on
which the Secretary relies, provides no reason for denying attorney
tees. Chilicky granted immunity from damages to the Secretary and
other federal and state officials who administered the social security
disabi'ity program. Granting immunity in Chilicky does not establish
that the Secretary's position in Ayam was substantially justified within
the meaning of the Equal Access to Justice Act. The Secretary has
cited no authority, nor has he called our attention to any legislative
history, that discloses congressional intent to make an award of at-
torney fees dependent on the responsible officials’ lack of qualified
immunity.
12a
Secretary contends that the district court erred by allowing
four lawyers fees based on an hourly rate of $95.
The Secretary’s reliance on Delaware Valley is mis-
placed. That case dealt with the allowance of a fee pur-
suant to the Clean Air Act, 42 U.S.C. § 7604(d), which
provides simply that the fee be “reasonable.” In contrast,
the district court’s allowance of fees is authorized by the
Equal Access to Justice Act, 28 U.S.C. § 2412(d)(2)(A),
which specifies the principal eleinents of a reasonable fee
as follows:
[A]ttorney fees shall not be awarded in excess of $75
per hour unless the court determines that an increase
in the cost of living or a special factor, such as the
limited availability of qualified attorneys for the pro-
ceedings involved, justified a higher fee.
The district court properly applied the statute. Although
expert testimony disclosed that the prevailing hourly rate
in the community for comparable federal litigation was
about $125, the district court reduced the rate to $75. Tak-
ing judicial notice of statistics that the Secretary does not
question the court adds a cost of living allowance of $8,
bringing the rate to $83. An enhancement of $12 brought
the rate to $95 based on the court’s finding that lawyers
with the expertise of claimants’ counsel “are not readily
available.” 586 F.2d at 1158. This finding satisfies the
“special factor” recognized in § 2412(d)(2)(A) as a
justification for increasing the basic $75 rate.
The district court’s award is not excessive. We find no
error of fact or law and affirm the fee and expense award
for reasons adequately stated by the district court in its
opinion, 586 F.Supp. 1154, and its order of September 11,
1985. On remand the district court should remove the 5%
discount that it imposed as a result of our previous re-
mand. The court should also award a reasonable fee for
counsel’s appellate services.
. A ere mene eran ae eee = .
l3a
Vi
In summary, we affirm that part of the judgment of the
district court that judicially waived the exhaustion of ad-
ministrative remedies, tolled the period of limitation, and
remanded the claims of designated subclasses to the
Secretary. We also affirm the district court’s allowance of
attorney’s fees and expenses. In all other respects we
reinstate Our prior judgment. The case is remanded for
further proceedings consistent with this opinion.
l4a
APPENDIX B
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 84-1381
No. 85-2240
PATRICK H. HYATT; ET AL, APPELLEES,
V.
MARGARET M. HECKLER, ETC., APPELLANT.
On Petition for Rehearing with Suggestion for
Rehearing In Banc.
FILED FEB. 12, 1987
ORDER
The appellant’s petition for rehearing and suggestion for
rehearing in banc were submitted to this Court. As no
member of the Court requested a poll on the suggestion
for rehearing in banc, and
As the panel considered the petition for rehearing and is
of the opinion that it should be denied,
IT IS ORDERED that the petition for rehearing and
suggestion for rehearing in banc are denied.
Entered at the direction of Judge Butzner, with the con-
currence of Judge Russell and Judge Hall.
For the Court,
/S/ JOHN M. GREACHEN
John M. Greachen
Clerk
lSa
APPENDIX C
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 84-1381
Patrick H. Hyatt: Herman O.
Caudle and Mary P. Lov-
ingood, on behalf of them-
selves and all others similarly
situated, North Carolina
Department of Human
Resources, Disability Deter-
mination Services,
Appellees,
VS.
Margaret M. Heckler, or her
successor in office, Secretary
of the United States Depart-
ment of Health and Human
Services
Appellant.
Appeal from the United States District Court for the West-
ern District of North Carolina, at Charlotte. James B.
McMillan, District Judge. (C/A 83-655)
Argued: June 7, 1984 Decided: March 20, 1985
l6a
No. 84-1695
Patrick H. Hyatt; Herman O.
Caudle and Mary P. Lov-
ingood, on behalf of them-
selves and all others similarly
Situated, North Carolina
Department of Human
Resources, Disability Deter-
mination Services,
Appellees,
BY
Margaret M. Heckler, or her
successor in office, Secretary
of the United States Depart-
ment of Health and Human
Services,
Appellant.
Appeal from the United States District Court for the
Western District of North Carolina, at Charlotte. James B.
McMillan, District Judge. (C/A 83-655).
Submitted: August 9, 1984 Decided: March 20, 1985
Before RUSSELL and HALL, Circuit Judges, and
BUTZNER, Senior Circuit Judge.
17a
BUTZNER, Senior Circuit Judge:
The Secretary of Health and Human Services appeals
from the district court’s order enjoining the Secretary to
cease her policy of not following the decisional law of this
circuit regarding the initiation and termination of disability
benefits. The Secretary also assigns error to the district
court’s certification of a class whose claims are to be
reopened and readjudicated in accordance with the stan-
dards laid down by this circuit.' In a related appeal. the
Secretary questions the award of attorneys’ fees.
After the parties argued this appeal, Congress enacted the
Social Security Disability Benefits Reform Act of 1984,
which became effective October 9, 1984.2 The parties’ sup-
plemental briefs disclose that many of the issues raised on
appeal have been affected significantly by the new legisla-
tion. Furthermore, Heckler v. Day, 104 S. Ct. 2249 (1984),
and Heckler v. Ringer, 104 S. Ct. 2013 (1984), which were
decided after entry of the district court’s order, provide con-
trolling precedent for aspects of this legislation. The 1984
Act and the recent Supreme Court opinions require us to
vacate the district court’s judgment and remand the case.
'The district court’s opinion is reported as Hyatt v. Heckler, 579 F.
Supp. 985 (W.D.N.C. 1984). The district court subsequently revised the
published draft of the certification order. The revised subclasses are: ini-
tial claimants who allege disability from diabetes or hypertension, A(1 )(a),
or pain, A(1)(b); claimants whose benefits were terminated, A(2) and B.
2Pub. L. No. 98-460, 98 Stat. 1794 (1984).
18a
I.
Terminated Benefits
The district court directed the Secretary to adjudicate the
termination of benefits in accordance with circuit prece-
dent. It certified subclasses of North Carolina residents who
were entitled to this relief.
We conclude that the 1984 Act controls the claims of all
members of the subclasses who assert that their benefits
have been terminated unlawfully. Section 2 of the 1984 Act°
deals with the issue of medical improvement and prescribes
the standard of review for the termination of disability bene-
fits. These standards are broad enough to encompass all
impairments or combination of impairments, whether physi-
cal or mental, that provided the basis for the initial award of
benefits.
Section 2(d) of the Act deals with class actions relating to
medical improvement pending, as this one was, on Septem-
ber 19, 1984, for judicial review of the termination of bene-
fits. This section provides that the claims of named class
members are to be remanded to the Secretary for adjudica-
tion in accordance with the provisions of the Act. Also, the
claims of unnamed class members are to be remanded to the
Secretary, who is directed to notify them of their right to
request administrative review.
The government protests that some subclass members
whose benefits were terminated are not entitled to a remand
because they have not satisfied the requirements of section
205(g) of the Social Security Act, 42 U.S.C. §405(g). This
attack on the district court’s certification order, however,
does not survive the enactment of the 1984 legislation. By
directing remand of cases pending September 19, 1984, the
‘See Dotson v. Schweiker, 719 F.2d 80 (4th Cir. 1983); Myers v
Califano, 611 F.2d 980 (4th Cir. 1980); Martin v. Secretary, 492 F.2d 905
(4th Cir. 1974).
19a
Act created an exception to the normal exhaustion require-
ments for actions, such as this, relating to medical improve-
ment. The import of this provision was explained by Senator
Dole:
The effective date provision does, however, permit all
class members of certified class actions to seek review
of their cases under the medical improvement standard
established by this act, even where they may not have
pursued their appeal rights in accordance with section
205 and the Secretary's regulations.
130 Cong. Rec. $11454 (daily ed. Sept. 19, 1984).
Members of one of the subclasses, whose benefits are sub-
ject to termination, insist that they are entitled to have
claims involving pain evaluated by the Secretary on remand
according to this circuit’s case law.* This contention is fore-
closed by section 3(a) of the 1984 Act which prescribes an
interim statutory standard for the evaluation of pain in all
determinations made prior to January |, 1987. Because their
cases were pending when the 1984 legislation was enacted,
the new statutory standard is applicable to their claims. See
Bradley v. Richmond School Board, 416 U.S. 696, 711-16
(1974); United States v. Schooner Peggy, 5 U.S. (1 Cranch)
102, 110 (1801). Contrary to the claimant’s contention, they
have no vested constitutional right to have their claims eval-
uated by standards that were in effect prior to the 1984 Act.
See Richardson v. Belcher, 404 U.S. 78, 80-81 (1971).
Another subclass included claimants whose benefits were
terminated because the Secretary did not follow this circuit’s
precedent for evaluating hypertension or diabetes mellitus.°
The district court, concluding that this policy of nonacquies-
cence was unlawful, required the Secretary to follow circuit
precedent with regard to these impairments.
4See Myers v. Califano, 611 F.2d 980 (4th Cir. 1980).
>See Martin v. Secretary, 492 F.2d 905 (4th Cir. 1974).
20a
Congress is aware of the Secretary's policy of nonacquies-
cence. As proposed by the House, the 1984 Act would have
required the Secretary to acquiesce or petition for certiorari.
The Senate bill would have required the Secretary to report
her decisions of nonacquiescence to the Congress and to
print her explanation in the Federal Register.°®
The conferees deleted both the House and the Senate
provisions, but they did not intend that deletion should be
interpreted as approval of nonacquiescence. On the con-
trary. they noted that questions had been raised concerning
the constitutionality of nonacquiescence, as well as the
application of the policy, even if constitutional. “By refusing
to apply circuit court interpretations and by not promptly
seeking review by the Supreme Court, the Secretary forces
beneficiaries to re-litigate the same issue over and over again
in the circuit, at substantial expense to both beneficiaries
and the federal government. This is clearly an undesirable
consequence.” Conference Report at 38, 130 Cong. Rec. at
H9831. The conferees reaffirmed that Congress intended the
Secretary to resolve policy conflicts promptly to assure uni-
form administration of the program. This objective, they
pointed out. may be achieved by diligently pursuing appeals
or by seeking a legislative remedy.’ The conferees urged
“that a policy of non-acquiescence be followed only in situa-
tions where the Administration has initiated or has the rea-
sonable expectation and intention of initiating the steps nec-
essary to receive a review of the issue in the Supreme
Court.” Conference Report at 37, 130 Cong. Rec. at H9831.
°See H.R. Rep. No. 1039, 98th Cong., 2d Sess. 36-38. reprinted in
130 Cong. Rec. H9831 (daily ed. Sept. 19, 1984) (hereinafter cited as
Conference Report).
7 Also, section 10 of the Act directs the Secretary to establish pursu-
ant io the Administrative Procedure Act uniform standards for determin-
ing disability.
2la
When the Conference Report is read in conjunction with
Heckler v. Day, 104 S. Ct. 2249 (1984), it becomes apparent
that the injunction must be vacated. In Day, the Court
vacated an injunction entered in a class action requiring the
Secretary to adjudicate all claims and pay benefits within
specified times. The Court held that the injunction was “an
unwarranted judicial intrusion into this pervasively regu-
lated area....” 104S. Ct. at 2258. Its opinion rested to a’
great extent on Congress’s rejection of legislation imposing
mandatory deadlines on disability reviews.
The controversy over nonacquiescence presents an analo-
gous Situation. The conferees deleted a provision of the
House bill that would have required acquiescence in circuit
precedent in the absence of appeal. See Conference Report
at 37, 130 Cong. Rec. at H9831. Following the reasoning of
Day, we cannot approve an injunction imposing the same
restraints that Congress rejected.
Vacating the district court’s injunction does not leave
claimants without a remedy. In the unlikely event that the
Secretary spurns the Conference Report, the district courts
reviewing the Secretary’s decision are bound to apply circuit
precedent construing the Social Security Act. But this review
would be long and wasteful to the claimant and the govern-
ment. Both the district court and the conferees spoke force-
fully to avoid the harm and extravagance of the poiicy of
routine nonacquiescence. The Secretary should not deem
vacation of the injunction as approval of the policy.
We decline the claimants’ request that we instruct the
district court to retain jurisdiction for review of the Secre-
tary’s orders on remand terminating disability. Section
2(d)(4) provides that the Secretary’s decision of a remanded
case shall be regarded as a new decision subject to review
only in conformity with section 205 of the Social Security
Act. Section 2(d)(5) prohibits certification of a class relating
to medical improvement after September 19, 1984. These
22a
provisions persuade us that Congress intended that judicial
review of remanded cases should not be the subject of a class
action. Individual review provides an adequate remedy.
We direct the district court to remand to the Secretary the
claims of the named plaintiffs and the unnamed class mem-
bers designated in subclasses A(2) and B, except those whose
claims have been mooted by award of benefits pendenvre lite.
After remand to the Secretary, the district court should relin-
quish jurisdiction over the claims of the plaintiffs and
unnamed class members.
Il.
Initial Benefits
We find merit in the government's challenge to the district
court’s jurisdiction Over some members of the subclasses
composed of claimants for initial benefits. The 1984 Act did
not provide initial claimants the same right of reconsidera-
tion that it granted claimants whose benefits were termi-
nated. Initial claimants, therefore, must be limited to those
who meet the requirements of section 205(g) of the Social
Security Act, 42 U.S.C. §405(g). Califano v. Yamasaki, 442
U.S. 682, 698-701 (1970).
Ordinarily section 405(g) requires exhaustion of adminis-
trative remedies before a claimant can seek judicial review.
The Court has recognized an exception to this requirement
for a claimant who has presented to the Secretary a claim
that raises a legal issue wholly collateral to a claim for bene-
fits and who has made a colorable showing that his injury
cannot be remedied if exhaustion is required. .Wathews vy.
Eldridge, 424 U.S. 319, 326-32 (1976). The district court
applied this exception to the general rule and held that
exhaustion of remedies was not required.
In Heckler v. Ringer, 104 S. Ct. 2013, 2023 (1984), the
Court held that a claim that the Secretary was applying an
improper standard for entitlement was not wholly collateral
23a
to a claim for benefits. Consequently, exhaustion was
required. Here, too, the claims that the Secretary has applied
improper standards with respect to pain, diabetes, and
hypertension are inextricably intertwined with claims for
benefits within the meaning of the exhaustion requirement
of section 405(g) as interpreted by the Supreme Court in
Ringer. Consequently, exhaustion of administrative reme-
dies is necessary for members of the subclasses composed of
claimants of initial benefits.
Section 405(g) also requires a claimant to file an action for
judicial review within 60 days after the Secretary’s final
decision. In this circuit, the 60-day requirement is consid-
ered to be jurisdictional, and unnamed class members are
not exempt from compliance. Hunt v. Schweiker, 685 F.2d
121 (4th Cir. 1982). We cannot accept the suggestion that we
should overrule Hunt, for, as a panel of the court, we lack
authority to do this.
On remand, we direct the district court to dismiss the
initial claims for disability of class members who have not
exhausted their administrative remedies or who have not
sought timely judicial review of the Secretary's final deci-
sion. The district court should remand to the Secretary all
initial claimants in subclasses A(1)(a) and (b) who have satis-
fied the requirements of section 405(g). Those who raise the
issue of pain should be reconsidered by the Secretary in the
light of the interim statutory pain standard of section 3(a) of
the 1984 Act for the reasons we stated in Part I.
The Act does not address the diabetes and hypertension
standards. Nevertheless, we will not assume that the Secre-
tary will disregard the views expressed in the Conference
Report about the Secretary's policy of nonacquiescence in
circuit law. The Secretary should have an opportunity to
reconsider these claims in light of circuit precedent and the
legislative history of the 1984 Act. The claimants are entitled
|
24a
to a decision On this issue, so, if necessary, they can seek
review On an unequivocal administrative record.
After remand, the district court should relinquish jurisdic-
tion over the members of these subclasses for reasons men-
tioned in Part I. Section 405(g) provides an adequate proce-
dure for judicial review of individual claims in each of the
three districts of North Carolina where the claimants reside.
Ill.
Identification of Unnamed Class Members
The district court’s order provided for identification of,
and notice to, unnamed class members. Section 2(d) of the
1984 Act supersedes the district court’s directions to the
Secretary with respect to class members whose benefits were
terminated.
The district court should amend its order and notice with
respect to claimants for initial benefits by providing that the
Secretary should identify and notify those members of sub-
classes A(1)(a) and (b) who have met the requirements of
§405(g).
lV.
Mandamus
The appellees contend that the court had mandamus juris-
diction over the claims © all plaintiffs under 28 U.S.C.
§1361. They argue that this independent ground obviates the
need to satisfy the jurisdictional prerequisites of $405. In
Heckler v. Ringer, 104 S. Ct. at 2022, the Court noted that
mandamus would issue only to a plaintiff who had
exhausted all other avenues of relief, and only if the defen-
dant owed the plaintitf a clear nondiscretionary duty. The
Court concluded that §405(g) provided an adequate remedy
for challenges to the Secretary's denial of claims including
25a
objections based on the Secretary's policies. For these rea-
sons, we hold that mandamus is inappropriate. See also
Starnes v. Schweiker, 748 F.2d 217 (4th Cir. 1984).
Vv.
Intervention
The district court allowed the North Carolina Department
of Human Resources, Disability Determination Services to
intervene pursuant to Rule of Civil Procedure 24(b). The
department’s complaint challenges the Secretary's policy of
nonacquiescence in Fourth Circuit precedent in the same
areas as the class action. It seeks declaratory and injunctive
relief prohibiting the Secretary from following this policy in
North Carolina. The department claims standing to sue
because of its role in administering the disability program
and as parens patriae. The Secretary contends that the
department lacks standing.
Ordinarily, rule 24(b) authorizes a district court to permit
an agency to intervene in an action that involves a statute
that it administers. But in this instance, which involves the
standards the Secretary uses for determining disability bene-
fits, sections 405(g) and 405(h) limit actions against the Sec-
retary to an individual who seeks review of a final decision
made after a hearing to which he was a party. In Lowther v.
Montgomery County, 561 F.2d 1120 (4th Cir. 1977), we held
that neither a county nor an unincorporated association was
an individual entitled to sue under $405(g). The depart-
ment’s function of determining disability does not distin-
guish its situation from the plaintiffs’ in Lowther. A claim of
Standing analogous to the department’s was rejected in
D'Amico v. Schweiker, 698 F.2d 903 (7th Cir. 1983). There
administrative law judges who sought to challenge the Secre-
tary’s instruction pertaining to the repayment of Social Secu-
rity benefits were denied standing to sue. The benefi-
claries — not the adjudicators — are the proper parties to
26a
seek review under section 405(g). Lowther and D'Amico fore-
close the department’s standing in its own right.
The department also lacks standing to sue the federal gov-
ernment in its capacity as parens patriae. With respect to a
citizen's rights in relation to the federal government, the
United States — not the state — occupies the status of
parens patriae. Massachusetts v. Mellon, 262 U.S. 447, 485-
86 (1923).
On remand, the district court should dismiss the depart-
ment’s complaint in intervention.
VI.
Attorneys’ Fees
The Secretary has appealed the district court’s order
awarding attorneys’ fees (No. 84-1695). We vacate the
award and remand this issue to the district court for recon-
sideration in light of this opinion.
VIL.
Summary
On remand, we direct the district court to take the follow-
ing action:
|. Vacate its order of injunctive and declaratory relief,
except as provided in paragraph 5 below.
2. Remand to the Secretary for reconsideration pursuant
to the Social Security Disability Benefits Reform Act of
1984 the claims of named parties and unnamed members of
subclasses A(2) and B whose benefits were terminated,
except those who have been granted awards pendente lite.
3. Dismiss the claims of initial claimants in subclasses
A(1)(a) and (b) who have not met the requirements of sec-
tion 3405(g).
27a
4. Direct the Secretary to identify and notify claimants for
initial benefits in subclasses A(1)(a) and (b), who meet the
requirements of §405(g), in accordance with procedures and
a notice prescribed by the district court.
5. Remand to the Secretary for reconsideration pursuant
to the interim pain standard of section 3(a) of the 1984 Act
the claims of initial claimants in subclass A(1)(b) who have
met the requirements of section 405(g).
6. Remand to the Secretary for reconsideration of her
policy of nonacquiescence in light of the 1984 Act's legisla-
tive history and circuit precedent the claims of initial claim-
ants in subclass A(1)(a) who have met the requirements of
§405(g).
7. After remand, relinquish jurisdiction of all remanded
claims and dismiss the claimants without prejudice to their
right to seek timely review of the final decisions of the Secre-
tary on remand in their respective judicial district pursuant
to §405(g).
8. Dismiss the complaint in intervention of the North
Carolina Department of Human Resources, Disability
Determination Services.
9. Reconsider the award of attorneys’ fees in light of this
opinion.
The judgments in 64-1381 and 84-1695 are vacated, and
the cases are remanded. Each party shall bear its own costs.
APPENDIX D
IN THE DISTRICT COURT OF
THE UNITED STATES
FOR THE WESTERN DISTRICT OF
NORTH CAROLINA
Charlotte Division
C-C-83-655-M
PaTRICK H. HYATT;
HERMAN O. CAUDLE and
MARY P. LOVINGOOD, on
behalf of themselves and
all others similarly
Situated,
Plaintiffs,
and
NORTH CAROLINA
DEPARTMENT OF HUMAN
RESOURCES, DISABILITY
DETERMINATION SERVICES,
Plaintiff-Intervenor,
-VS-
MARGARET M. HECKLER,
or her successors in office,
Secretary of the United
States Department of
Health and Human
Services,
Defendant.
FINDINGS OF FACT
CONCLUSIONS OF LAW
AND
DECISION THAT THE
UNITED STATES
SECRETARY OF
HEALTH AND HUMAN
SERVICES SHOULD
(1) STOP DENYING CLAIMS FOR SOCIAL SECURITY DIS-
ABILITY BENEFITS BASED ON HYPERTENSION OR DIABE-
TES MELLITUS UPON THE THEORY THAT WITHOUT
END-ORGAN DAMAGE (TO HEART, EYES, KIDNEYS OR
BRAIN) THE CLAIMANT DOES NOT HAVE A “SEVERE
IMPAIRMENT™
(2)
(3)
29a
STOP DENYING CLAIMS FOR SOCIAL SECURITY DISABIL-
ITY BENEFITS BASED ON PAIN, UPON THE THEORY THAT
SUBJECTIVE MANIFESTATIONS OF PAIN CANNOT BE
CONSIDERED DISABLING UNLESS THEY ARE SUP-
PORTED BY OBJECTIVE CLINICAL FINDINGS
STOP TERMINATING SOCIAL SECURITY BENEFITS WITH-
OUT SUBSTANTIAL EVIDENCE THAT THE RECIPIENT'S
DISABILITY HAS CEASED
— ALL OF WHICH THE SECRETARY PERSISTS IN DOING,
IN CONSCIOUS AND WILFUL DISREGARD OF PERTINENT
AND CONTROLLING DECISIONS OF THE UNITED STATES
COURT OF APPEALS FOR THE FOURTH JUDICIAL CIR-
CUIT OF THE UNITED STATES.
INDEX
FREER IRE RDE GPE OMG D sahenncenseniznsineniviconncnbiaciminnncanhines
I. THE PARTIES AND THE ISSUES...........
II. CASE HISTORIES OF THE
ITf.
INDIVIDUAL PLAINTIFFS AND
OTHERS
CRD FROG Wile MING cess nciacecccadarsiénsacosatansans
ER I SR BN cic cance esnunccnensenancnnas
(C) Miary F. LOVitOd ....n....0c0sccsinscescconsosces
(d) Other Representative
enn SI in gaS cs aatsanaseaancduvanianns
HOW SOCIAL SECURITY CLAIMS
ARE HANDLED, REVIEW AND
TERMINATION, 1982-84 STYLE.............
css na acaacelaiseccuuceavamecuabadoainanene
PYOCEGING .....20.0:: ace Mea a ilar deadantontucaansias
Irreparable Harm ..................... Lis AOE
ME II vcs ken bcecipaccttsmadeaseseeacsens
BO BOCUORIIY S FOGIOD cccaiccsecicesisscsscsancsres
CR ROE I IRON aiencaessiccssnpesciccsnasiemninsinncens
I].
DEFENDANT'S MOTION TO DISMISS
FOR LACK OF JURISDICTION ....00000...
THE SUBSTANTIVE LEGAL MERITS
Se ee i PI or tticstntan canscaa cash oniasenshageneataon
Sea I ics recnnss tia cihaecaensnelonuabinahitbnsasisauseaneomnecael
3la
FINDINGS OF FACT
I.
The Parties and the Issues
1. This is a class action against the Secretary of the United
States Department of Health and Human Services, challeng-
ing the policy of the Social Security Administration (SSA)
denying Social Security benefits and terminating Social
Security benefits, in the cases described below, in open vio-
lation of applicable decisions of the Fourth Circuit Court of
Appeals.
2. The individual plaintiffs and class members are appli-
cants for or former recipients of disability benefits under
Titles If and XVI of the Social Security Act, 42 U.S.C. $$401
et seq; 1381 et seg. The North Carolina Department of
Human Resources, Disability Determination Services
(DDS), has been authorized to intervene as a party plaintiff.
See, Nuesse v. Camp, 385 F.2d 694 (D. C. Cir. 1967); Fed. R.
Civ. P. 24€a); (b).
3. Plaintiffs contend that the Secretary, acting pursuant to
an express policy of refusal to comply with federal circuit
court decisions with which she disagrees, has promulgated
standards of eligibility for disability benefits which directly
contradict controlling decisions of the Fourth Circuit Court
of Appeals.
4. First, plaintiffs contend that the Secretary’s regulation
SSR 82-55 disregards the Fourth Circuit's holding in .Vartin
v. Secretary of Department of Health, Education and Welfare,
492 F.2d 905 (4th Cir. 1974), by requiring that medical
impairments such as diabetes mellitus and hypertension
shall not be considered disabling unless they are accompa-
nied by end-organ damage (/.e., damage to heart, eyes, kid-
neys or brain).
5. Second, plaintiffs contend that the Secretary’s regula-
tion SSR 82-58 disregards the Fourth Circuit’s holding in
32a
Myers v. Califano, 611 F.2d 980 (4th Cir. 1980), by provid-
ing that subjective manifestations of pain shall under no
circumstances be considered disabling unless they are sub-
Stantiated by objective clinical findings.
6. Finally, plaintiffs contend that the Secretary’s regula-
tions SSR 82-49c and SSR 81-6 disregard the holding of
Dotson v. Schweiker, 719 F.2d 80 (4th Cir. 1983), by provid-
ing that a person currently receiving benefits is not entitled
to a presumption of continuing disability, and may be found
to be no longer disabled, despite the absence of evidence that
the recipient's condition has changed for the better since the
date when he or she was last determined to be disabled.
7. Plaintiffs have argued that SSA's policy of “non-
acquiescence” is contrary to the Social Security Act: to the
separation of powers doctrine; to principles of res judicata,
stare decisis, and collateral estoppel: to the due process and
equal protection guarantees of the Fifth Amendment to the
United States Constitution; and to the Administrative Pro-
cedure Act. They seek both declaratory and injunctive relief
requiring the Secretary to adhere to the decisions of the
Fourth Circuit Court of Appeals in determining eligibility
for Social Security disability payments.
8. Pursuant to specific orders of court dated December 16.
1983, and January 13, 1984, all issues were consolidated
under Ratle 65(a)(2), and the case was heard on January 18.
1984, on (1) defendant's motion to dismiss; (2) plaintiffs’
motion for injunctive relief; (3) plaintiffs’ motion for class
certification; and (4) the merits of the case. The court
received all competent evidence offered on all issues by all
parties.
33a
Il.
Case Histories of the Individual Plaintiffs
(a) Patrick H. Hyatt
9. Plaintiff Patrick Hyatt is 47 years old, has a tenth grade
education, and last aorked in 1973 as a long haul truck
driver. He lives in Mecklenburg County, North Carolina,
with his wife and two daughters. Between 1969 and 1974
plaintiff underwent a series of back operations, including
several lumbar laminectomies with removal of ruptured
intervertebral discs. Since the time of his original surgery,
plaintiff has suffered from continuous, disabling back and
leg pain.
10. On January 7, 1974, plaintiff was found by the Social
Security Administration to be disabled due to degenerative
disc disease, post-lumbrosacral fusion problems, and depres-
sive reaction. He received Social Security disability benefits
from March, 1973, until September, 1981.
11. On September 10, 1981, DDS notified Hyatt that his
disability had ceased during July, 1981; his benefits were
terminated. DDS did not inform Hyatt that his condition
had improved since he was last determined by SSA to be
totally disabled. On October 5, 1981, plaintiff requested
reconsideration of this decision. On January 8, 1982, after
reconsideration, DDS upheld its original decision, informing
Hyatt that although he suffered from “discomfort,” he did
not suffer from objective physical impairments that would
prevent him from doing work activity.
12. On December 10, 1982, Mr. Hyatt received a hearing
before a Social Security Administration administrative law
judge (ALJ). At the hearing, plaintiff testified that his severe
pain precluded him trom engaging in even the slightest exer-
tional activities; this evidence was substantiated by wit-
nesses. In connection with the hearing, the ALJ received as
evidence numerous reports rendered by plainuffs regular
treating physician, Dr. Jerry M. Petty, a neurosurgeon.
34a
Among his other findings, Dr. Petty stated that “Mr. Hyatt is
totally and permanently disabled for any type work and has
been for quite some time.” Tr. 160. Dr. Petty’s reports fol-
lowing Mr. Hyatt’s frequent visits throughout the past ten
years document Hyatt’s continuing and severe pain.
13. The ALJ also considered a report made by Dr. Ronald
C. Demas, to whom plaintiff was referred for a consultive
examination by DDS. Dr. Demas diagnosed plaintiff as suf-
fering from probable chronic low back strain, post
laminectomy changes. Tr. 148. Dr. Demas does not appear
to have considered the disabling effects of plaintiff's subjec-
tively experienced pain.
14. On January 7, 1983, the ALJ rendered his decision.
He determined that plainuff's back condition constituted a
severe impairment, but stated that plaintiff retained the
residual functional capacity to preform sedentary work. The
ALJ did not accord plaintuff a presumption of continuing
disability, and he did not make any finding whether plain-
uff's condition had improved since He was last found
disabled.
15. In his decision. the ALJ took notice of plaintiff's
severe pain, but found that it was not disabling. The ALJ
stated that Dr. Petty was “overly impressed with the claim-
ant’s complaints of pain,” and stated that the job of SSA was
to determine whether a claimant is disabled “on the basis ot
medical evidence and other findings.” Tr. 23-24. The ALJ
then proceeded to lind that Hyatt’s pain is not disabling
when he limits his physical exertion. There is no evidence in
the file to support this finding.
16. On June 2, 1983, the SSA Appeals Council denied
review of the ALJ decision. Following that action, plaintiff
instituted this suit to review the Secretary's final decision
pursuant to 42 U.S.C. $405(g).
35a
17. At the trial, Mr. Hyatt testified that his disability
benefits amounted to $425 per month before they were ter-
minated. Since the payments were terminated, plaintiff has
received no income for himself. He receives $202 per month
in AFDC payments to provide support for his two children,
and the family also receives food stamps. The family’s
monthly rent is $175.
18. Mr. Hyatt and his family have experienced severe
financial distress since his benefits were terminated. Mr.
Hyatt was forced to sell his home because he fell behind on
the mortgage payments, and a number of his personal pos-
sessions, including an automobile and two chairs, have been
repossessed by the finance company. Mr. Hyatt testified that
he has fallen behind on a number of bills, including all the
utility bills; the family has been unable to buy clothing, or to
afford a diet that includes meat.
(b) Herman O. Caudle
19. Plaintiff Herman O. Caudle was 56 years old at the
time this suit was filed. He had a 10th grade education, and
had worked in the past as a salesclerk, night watchman, and
maintenance man. Until the time of his death on October
24, 1983, Mr. Caudle lived with his wife in Winston-Salem,
North Carolina.
20. SSA originally found that Mr. Caudle was entitled to a
period of Social Security disability benefits beginning in
May, 1981, due to hypertension, control less than satisfac-
tory, with Grade II retinopathy, exogenous obesity, passive-
dependent personality, and depressive reaction with sleep
disorder. The evidence before the court established also that
Mr. Caudle weighed about 270 pounds, and suffered for a
period of years from hypertension which his doctors were
unable to control through medication. Exh. 25, p. 4; Exh. 11,
- &,
;
36a
21. In March. 1983, DDS informed Mr. Caudle that his
disability had ended. DDS attirmed its initial determination
upon reconsideration. Plaintiff Caudle then requested a
hearing before an ALJ. A hearing was held on August 17,
1983, and on August 24, 1983. the ALJ issued his decision
that Mr. Caudle was no longer disabled because he did not
sutfer from a “severe impairment.”
+?
22. In reaching his decision, the ALJ did not accord Cau-
dle a presumption of continuing disability, and did not make
any finding that Caudle’s condition had improved since he
was last found by SSA to be disabled.
23. The ALJ found from the evidence before him that
Caudle suffered from hypertension, under less than satistac-
tory control with Grade II-III retinopathy, but he found that
Caudle suffered from no end-organ damage (/.e., damage to
eyes, heart, kidneys, or brain).
24. The ALJ further found that plaintiff's subjective com-
plaints were not substantiated by objective clinical findings.
25. On October 21. 1983, Mr. Caudle filed a umely
request with the Appeals Council for review of the ALJ's
decision: three days later he was dead, apparently from the
hypertension and other ailments which had disabled him tor
several years
26. Counsel for plaintiffs introduced the affidavit of plain-
tiff Caudle’s regular treating physician, Dr. Mary Fennell
Lyles. assistant professor of internal medicine at Bowman
Gray School of Medicine. Dr. Lyles, who treated Caudle
from 1979 until his death in 1983, discussed the severity of
Caudle’s hypertension. which she stated showed no medical
improvement, and in fact showed a progressive deteriora-
tion, despite a course of aggressive therapy She also stated
37a
“Anxiety, depression, and financial stress all further
complicated management of Mr. Caudle’s blood pres-
sure. I attribute a large portion of this emotional dis-
tress to worry over his benefit status, especially since
May of 1983." Exh. I 1. p. |.
27. Dr. Lyles further stated that Dr. Joyce Reynolds, med-
ical examiner at Forsyth Memorial Hospital, had reported
her opinion that Mr. Caudle had died a cardiac death as a
complication of his hypertension. Dr. Lyles supported the
finding of Dr. Reynolds with her own opinion that “Mr.
Caudle’s disabling condition, severe hypertension, led to
aggravation of his angina and eventually to myocardial
infarction which was the probable cause of death.” Exh. 11.
p. 2.
28. Dr. Lyles added that she had attempted to hospitalize
Mr. Caudle before his death, to perform intensive diagnostic
procedures. Mr. Caudle had refused hospitalization due to a
lack of insurance coverage and the threatened loss of his
disability benefits. Dr. Lyles concluded that her patient “did
not receive optimal treatment because his benefits were cut
off.” Exh. Ll, p. 3.
29. Counsel for plaintiffs also introduced the affidavit of
Herman Caudle’s widow, Mary Devers Caudle. Mrs. Caudle
stated in her affidavit that Mr. Caudle’s physical condition
had not improved, but instead had continued to decline.
from the time when he was originally awarded disability
benefits. Additionally, she stated, Mr. Caudle grew very wor-
ried and upset about the termination of his benefits, spend-
ing more and more time alone in his room, and causing Mrs.
Caudle great concern. Mrs. Caudle stated her belief that
“worrying about Social Security shortened Herman's life.”
Exh. 10. p. 2.
P)
(c) Mary P. Lovineood
30. Plaintutf Mary Lovingood is 57 years old, and cannot
o
read or write. In the past she worked as a pie maker and a
38a
poultry cleaner. She lives with her husband in Charlotte,
North Carolina.
31. SSA originally found that Ms. Lovingood was disabled
due to chest pain, high blood pressure, and back and leg
pain. Lovingood received Social Security disability benefits
from 1974 until October, 1983. Her benefits were termi-
nated pursuant to a notice by DDS in August, 1983, that she
was no longer disabled.
32. In the explanation accompanying the notice of termi-
nation sent to Ms. Lovingood, DDS stated:
“Although you may have pain in your back and legs at
times, the report show [sic] that you are able to stand,
walk, and use your legs in a normal manner.
The explanation further stated:
“Although your blood pressure is higher than normal. it
has not damaged your heart, kidneys or eyes [end-
organs].”
Exh. 25, p. 2.
33. DDS did not accord Ms. Lovingood a presumption of
continuing disability based on her prior entitlement to bene-
fits, nor did it make any finding that her condition had
improved since she was initially found to be disabled.
34. On September |, 1983, Ms. Lovingood requested
reconsideration of the DDS decision and her request was
denied. She then filed a request for a hearing before an ALJ
on October 15, 1983. Apparently, that request is stll
pending.
35. Ms. Lovingood’s affidavit was received in evidence. In
her affidavit, plaintiff states that her condition has nor
improved since SSA originally found that she was disabled.
In addition, Ms. Lovingood states that she has grown anx-
ious and depressed since learning that her disability dDenetfits
would be terminated. The termination of Ms. Lovingood’s
benefits reduced her family income by approximately 30 per
39a
cent: she and her husband now live on his income of $530
per month. and will experience difficulty in paying the costs
of their food, rent, utilities, insurance, and medical bills.
Ms. Lovingood did not elect to continue receiving her disa-
bility payments pending appeal of her case to an ALJ,
because she was afraid she would be unable to repay SSA if
She ultimately lost her case.
(d) Other Representative Class Members
36. Affidavits of several declarants were received in evi-
dence. From these affidavits and other evidence, the court
finds the following facts:
37. SSA has engaged in a consistent practice of terminat-
ing Social Security disability benefits without making any
finding that a recipient's condition has improved since he or
she was originally determined to be disabled. Exhs. 8-24.
38. The loss of Social Security benefits often causes for-
mer recipients to suffer severe financial hardship. Many for-
mer recipients have become completely dependent on
others, such as the public welfare system, private charities,
or their children, for support. Still others have suffered the
loss of their homes (Exh. 16); their utilities (Exh. 19); or
their automobiles (Exh. 13).
39. The termination of benefits to disabled persons whose
conditions have not changed has often resulted in the inabil-
ity of these persons to secure proper medical treatment for
the very conditions from which they are disabled, or other
conditions. Exh. 20 (claimantin debt for medicine); Exh. 14
(inability to purchase medicine); Exh. !3 (appointments
with private treating physician no longer affordable); Exhs.
14. 16 (eve examinations and glasses not affordable); Exh. 2]
(needed dental treatments cancelled).
40. Persons whose disability benefits are terminated with-
out any demonstration that weir conditions kave improved
often experience deep emotional distress due to resultant
40a
financial pressures, “hich tends only to aggravate the sever-
ity of their physical or emotional disabilities. Exhs. 17-20:
ea.
41. On several known occasions, former recipients of disa-
bility benefits have died, shortly after their benefits were
terminated without any showing of improvement, from the
very conditions which SSA had determined were not disa-
bling severe impairments. Exhs. 15, 17, 18, 24.
III.
How Social Security Claims are Handled;
Reviews and Terminations, 1982-84 Style.
Background
42. Title II of the Social Security Act provides for disabil-
ity insurance benefits (SSDI) for disabled workers. 42 U.S.C.
$401 et seg. SSDI benefits are based upon an individual's
earnings record and are paid without regard to financial
need. Title XVI of the Social Security Act provides for sup-
plemental income (SSI) for persons who are both poor and
disabled. 42 U.S.C. §1381 er seg. SSI benefits are paid to
eligible poor persons whose income and resources fall below
a certain level.
43. The disability standards for both the SSDI and SSI
programs are identical. Disability is defined as the “inability
to engage in any substantial gainful activity by reason of any
medically determinable 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 twelve (12) months.” 42 U.S.C. $423 (d)(1)(A); $1382
(cian 3A).
44. The Social Security Administration (SSA), pursuant to
contract, has entrusted initial disability determinations to
the North Carolina Department of Human Resources, Disa-
bility Determination Services (DDS). In making disability
4la
determinations. DDS. the state agency. follows, and is only
authorized to follow, disability standards promulgated by
the federal agency. SSA. These standards are established by
directives in the Programs Operation Manual System
(POMS) utilized by DDS employees, and tn various SSA
rulings (SSRs) and policy statements.
45. An initial claimant for disability benefits will be
referred to DDS, the state agency. for review. If the claim is
denied, the claimant may request reconsideration by DDS.
It the claim is still denied, the claimant may request a hear-
ing before a federal SSA Administrative Law Judge (ALJ). A
claimant who receives an adverse decision from an AL, inay
appeal the decision to the SSA Appeals Council. Finally, a
claimant who is denied benefits by the Appeals Council may
seek relief from that decision by suing in federal court. 42
U.S.C. §405 (g).
46. A claimant who is found disabled at any stage of this
procedure is entitled to benefits. However, a person is eligi-
ble for benefits only as long as the disability continues. A
recipient of disability benefits is subject to a “continuing
disability investigation” (CDI) at least once every three
years. 42 U.S.C. $421 (h)(1).
47. The procedure for review of eligibility for benefits and
possible termination 1s essentially similar to the procedure
followed in initial applications for benefits. See 20 C.F.R.
$404.900 er seg. §416.901 et seq. A recipient is contacted by
DDS and told that his or her case is being reviewed to
determine whether he or she is still disabled. If DDS deter-
mines that the recipient is no longer disabled, DDS sends the
recipient a letter informing him or her of the determination;
SSA terminates payments of benefits shortly thereafter. A
recipient may request reconsideration from DDS, and may
seek further review of a termination of benefits from (in
turn) an ALJ, the Appeals Council, and the federal courts.
42a
(An SSI recipient treed not seek reconsideration from DDS,
but instead may appeal directly to an ALJ.)
48. Persons whose benefits have been terminated are cur-
rently offered the option of continuing to receive benefits
pending appeal at the ALJ level. 42 U.S.C.A. §423(g)(1)
(West Supp. 1983) (“aid paid pending” program). However,
if the ALJ affirms the termination, all benefit payments are
terminated, and the benefits paid pending appeal may be
considered overpayments subject to recoupment by the Sec-
retary of Health and Human Services.
Procedure
49. The Secretary develops guidelines for substantive dis-
ability determinations. These guidelines are published as
Social Security regulations, 20 C.F.R. §400 et seq.; Social
Security rulings (SSRs); and Programs Operating Manual
Systems (POMs). They are used as a controlling reference by
DDS (state) and SSA (federal) employees who perform disa-
bility evaluations upon claimants.
50. Under the contract between the SSA and North Caro-
lina, the North Carolina Department of Human Resources.
Disability Determination Services, makes initial disability
determinations both for new applicants and for those recipi-
ents whose continuing disability status is reviewed. The state
employees are controlled by the federal regulations in mak-
ing disability determinations and may not vary from them.
if, for example, a DDS consulting physician expresses the
opinion that a claimant is disabled, that opinion will be
rejected by the state and federal examiners unless the medi-
cal impairments fit precisely within the guidelines estab-
lished by the defendant.
51. SSA and DDS employees who evaluate claims for
disability payments are charged with the duty of determin-
ing whether a claimant suffers from a “severe impairment”
which limits the claimant’s ability to engage in, or wholly
43a
prevents a claimant from engaging in, substantial gainful
activity.
52. SSA has published SSR 82-55, which is the same docu-
ment as POM 2107. These documents are entitled, “Medical
Impairments That Are Not Severe.” According to these doc-
uments SSA has determined that the following impairments
are not “severe,” ad thus not disabling:
44a. Hypertension without significant organ damage,
past or present.
]7.{a]. Diabetes mellitus, adult onset, controlled on pre-
scribed therapy, without significant end-organ damage
or recent episodes of acidosis.
These regulations are codified in 20 C.F.R. Subpart P,
Appendix |, §4.00 C, which states:
Hypertensive vascular disease does not result in severe
impairment unless it causes severe damage to one or
more of four end-organs: heart, brain, kidneys, or eyes
(retinae).
53. DDS employees who evaluate the condition of disabil-
ity claimants automatically determine that individuals who
suffer from hypertension or diabetes mellitus are not dis-
abled from those illnesses, unless those individuals also suf-
fer from clinically substantiated end-organ damage. In such
cases, DDS employees do not make any attempt to deter-
mine an individual’s actual ability to perform work.
54. The Secretary »ffered no evidence to indicate that
either diabetes mellitus or hypertension is not disabling
unless it has already resulted in end-organ damage.
55. Carl Young, Supervisor of the Quality Assurance Unit
of DDS, testified at the trial and submitted an affidavit
which supports his testimony. Mr. Young supervised an
evaluation of a random sample of 407 cases closed by DDS
in late December, 1983. The closed cases included those of
original applicants whose claims for benefits were denied,
44a
and cases of former recipients whose benefits were termi-
nated. From this evaluation, Mr. Young determined that 15
percent of all denials in the sample involved either hyperten-
sion or diabetes mellitus without any significant end-organ
damage. From all of the testimony, the court finds that a
substantial number of persons in North Carolina have been
denied a complete evaluation of their actual ability to per-
form substantial gainful activity, solely because their ill-
nesses have not yet resulted in significant damage to their
eyes, kidneys, hearts or brains.
56. Symptoms, including pain, must be strictly judged by
a guideline (SSR 82-58 and POM 2205) entitled “Evaluation
of Symptoms”:
“POLICY STATEMENT: Symptoms will not have a sig-
nificant effect on a disability determination or decision
unless medical signs or findings show that a medical
condition is present that could reasonably be expected to
produce the symptoms which are alleged or reported.
However, once such a medical condition (e.g., disc dis-
ease) 1s objectively established, the symptoms aré still
not controlling for purposes of evaluating disability.
Clinical and laboratory data and a well-documented
medical history must establish findings which may rea-
sonably account for the symptom ina particular impair-
ment. Objective cinical findings which can be used to
draw reasonavie conclusions about the validity of the
intensity and persistence of the symptom and about its
effect on the individual’s work capacity must be pre-
seni. For example, in cases of back pain associated with
disc disease, typical associated findings are muscle
spasm, sensory loss, motor loss, and atrophy. There
must be an objective basis to support the overall evalua-
tion of impairment severity. /¢ is not sufficient to merely
establish a diagnosis or a source for the symptom.”
{Emphasis added. ]
57. DDS employees who evaluate the condition of disabil-
ity claimants do not consider subjective claims of pain
which seem to them to be disproportionate to the clinical
medical evidence before them. These employees disregard
45a
statements by the individual being evaluated concerning the
severity or intensity of his or her pain, unless those state-
ments are supported by objective clinical findings.
58. Dr. George M. Cooper, a medical consultant for DDS,
testified — and the court finds — that chronic severe pain
may limit a claimant’s functional capacity to a greater extent
than would be indicated by objective clinical findings alone.
An evaluating physician may be convinced, on the basis of
his or her professional judgment and an analysis of all the
evidence, that a claimant is totally disabled, yet the physi-
cian may be required by the Secretary’s regulations to find
the claimant not disabled due to a lack of objective clinical
findings to support the claimant’s complaints of pain.
59. Carl Young (see 9/55, above) further testified that 16.4
percent of all the denials of benefits evaluated by his office
in late December, 1983, involved claims of significant pain,
the intensity of which was not supported by objective
clinical findings. From this testimony the court finds that a
significant number of persons in North Carolina have been
denied a complete evaluation of their actual ability to engage
in substantial gainful activity solely becaus2 their subjective
complaints of pain, no matter how severe or disabling, were
not fully supported by objective clinical findings.
Terminations
60. The Secretary has admitted, in SSRs 31-6, 82-64 and
82-49c, and through testimony in this court that she does
not comply with the mandate of the Fourth Circuit in Dot-
son V. Schweiker, 719 F. 2d 80 (4th Cir. 1983), and that SSA
continues to terminate disability benefits witho it any dem-
Onstration that the recipient’s condition has impioved since
the time that he or she was originally found disab'ed.
61. Since October 5, 1981, in North Carolina, L‘DS has
adjudicated approximately 165,000 claims, of which a>prox-
imately 99.000 were denials or terminations. During '983,
46a
prior to September 7, 1983, DDS had terminated the Social
Security disability benefits of approximately 106 North
Carolinians per week. The total number of terminations
since October 15, 1981, is approximately 15,000.
62. Aileen Webster, witness for the plaintiffs, testified
She also filed an affidavit which contains the substance of
her oral testimony. That affidavit is as follows:
I, Aileen Webster. being duly sworn, aver and say
|. [| have been emploved by Disability Determination
Services (“DDS”) for the past |8 years, serving as a
disability specialist, a supervisor and, for the last five
years, as a section chief.
2. In connection with my duties as Section Chief, |
directed a review of the files of those 821 recipients
who, as of approximately November |, 1983, would
have been terminated for medical reasons but for the
moratorium. Specifically, | instructed supervisors to
review the medical evidence available at the time each
such claim was initially allowed and the medical evi-
dence currently available with respect to each such
claim and to determine, using common sense guide-
lines, whether there had been any medical improve-
ment. On the basis of that review, the supervisors
reported to me that 60.2% of the recipients who would be
terminated for medical reasons under the present guide-
lines had not expertenced any medical improvement in
their condition. [Emphasis added. |
This 12 day of January, 1984.
s/ Aileen Webster
63. The court finds the facts to be as the above evidence
tends to show: Large numbers (whether 60.2% or somewhat
more or less) of the persons undergoing review of disability
under the Secretary's present guidelines are being cut off the
Social Security rolls without eivdence that their conditions
have improved and without any presumption that their disa-
bilities continue. Those persons would continue to draw
benefits if the Secretary were following relevant decisions of
the Fourth Circuit Court of Appeals.
47a
Irreparable Harm
64. The termination and the unjustified denial of Social
Security disability benefits cause irreparable harm to eligible
persons. Many become unable to pay for medicines, cloth-
ing, food, fuel, transportation and shelter. Termination and
denial of benetits cause anxiety, depression and decline in
health. Some former recipients have died following termina-
tion of benefits: posthumous reinstatement after appeal
doesn't help them.
65. If the Social Security Administration were to provide
DDS with the files of disability claimants who reside in
North Carolina, DDS employees would be able to determine
by reviewing the files whether they showed (a) hypertension
or diabetes mellitus without significant end-organ damage:
(b) a subjective claim of disabling pain unsupported by
objective clinical medical findings: or (c) a termination of
benefits without any evidence that a claimant’s condition
had improved since he or she was last found disabled. The
court is satisfied from the evidence that the work and
expense necessary to locate and reevaluate the files of those
affected will produce no serious hardship upon the state or
federal administrators.
The Moratorium
66. On September 7, 1983, James M. Hunt, Jr., the Gov-
ernor of North Carolina, was sufficiently concerned about
the terminations of disability benefits payments in North
Carolina that he issued Executive Order No. 97 entitled
“Moratorium on Terminating Social Security Disability
Benefits.” Temporarily, such terminations have ceased.
_
67. In addition, the Social Security Administration on
December 7, 1983, ordered a nationwide temporary halt of
terminations of benefits due to Congress’ failure to extend
certain provisions of section 2, P.L. 97-455, which has
expired. Nevertheless. in both North Carolina and the rest of
ee
48a
the nation, disab:litv termination decisions are still being
made at a rapid rate; the temporary natronwide halt only
relates to notifications to individuals that their eligibility for
benefits has ceased. Benefits are still being paid to those who
are considered no longer eligible, but those payments could
be terminated any day at the discretion of the Governor or
the Secretary. Moreover, North Carolina residents whose
benefits were terminated pursuant to SSA's policies prior to
September 7, 1983, are not eligible to receive benefits under
the Governor’s order, and the cases of others who have filed
claims to have their benefits restored are currently wending
their way through the lengthy DDS and SSA appeals process.
The Secretary's Position
68. The Secretary of HHS accepts the decision of no court
short of the Supreme Court as precedent binding on her. She
views decisions of the United States circuit courts and dis-
trict courts as binding only on the litigants involved in a
case, and not as precedent which she must follow in other
similar cases. When a conflict arises between the decisions of
lower courts and the opinions of the Secretary, the Secretary
considers herself entitled to follow her own interpretations
of the Social Security Act rather than those rendered by
lower courts.
69. The Secretary has instructed all administrative lav.
judges handling Social Security disability cases to make “rea-
sonable efforts” to follow district or circuit court decisions
regarding procedural or evidentiary matters. However, SSA
has instructed its ALJs that when district court or circuit
court decisions interpreting the Act, Social Security regula-
tions, or SSA rulings conflict with the Secretary's interpreta-
tions, the ALJs should not consider these court decisions
binding in future cases and should not cite such lower court
decisions in their opinions. ALJ decisions relying on federal
case law are often reversed by the SSA Appeals Council for
that reason. ALJs have been informed that “the federal
49a
courts do not run SSA's programs.” Associate Comm’r.,
Office of Hearings and Appeals, Wemorandum to Admintis-
trative Law Judges (January 7, 1982).
70. The Secretary's refusal to comply with court decisions
with which she disagrees is a continuing policy from which
SSA deviates only by publishing new regulations and rulings
that conform to judicial precedent. 1-161, SSA Precedents.
CONCLUSIONS OF LAW
4a
Defendant’s Motion To Dismiss
For Lack Of Jurisdiction.
71. Defendant has moved to dismiss the complaints with
respect to all named and Class plaintiffs except Mr. Hyatt, on
grounds that the court lacks subject matter jurisdiction over
the actions with respect to these claims. Defendant relies on
42 U.S.C. §405(g), which provides in pertinent part:
“Any individual, after any final decision of the Secretary
made after a hearing to which he was a party, irrespec-
tive of the amount in controversy, may obtain a review
of such decision by a civil action commenced within
sixty days after the mailing to him of notice of such
decision or within such further time as the Secretary
may allow.” [Emphasis added. ]
72. Despite its literal language, the relief afforded by this
Statute is not confined to individual Social Security claim-
ants who file individual suits in district courts. The Supreme
Court has held that $405(g) provides an appropriate jurisdic-
tional basis tor claims challenging the constitutionality of
provisions of the Social Security Act. Weinberger v. Salfi,
422 U.S. 749 (1975). The Court has also held that this stat-
ute provides jurisdiction over a claim challenging SSA's pro-
cedures. Vathews v. Eldridge,,424 U.S. 319 (1976). Finally,
the Court has held that §405(g) permits federal courts to
entertain class actions and to grant injunctive relief.
Califane v Yamasaki, 442 U.S. 682 (1979)
50a
73. Defendant claims that only plaintiff Hyatt has
received a “final decision” of the Secretary which this court
has the authority to review under the statute, in that his is
the only claim that has been presented to the SSA Appeals
Council for review. The “final decision” requirement of
$405(g) consists of two elements. The first element, which is
purely jurisdictional in the sense that it cannot be waived, is
the requirement that a claim for benefits shall have been
presented to the Secretary. The second element, which can
be waived either overtly or constructively by the Secretary,
is the requirement that the administrative remedies be
exhausted. Vfatthews v. Eldridge, 424 U.S. at 328: Wein-
berger v. Salfi, 422 U.S. at 763-64; Aldrich v. Schweiker, 555
F. Supp. 1080, 1087 (D. Vt. 1982).
74. The first, non-waivable, element of the finality
requirement of $405(g) has been satisfied with respect to the
claims of all the named and proposed class plaintiffs. The
named plaintiffs have all presented claims for benefits to the
Secretary. The class proposed includes only those claimants
who (a) have presented initial claims for benefits or who, (b)
by joining in the proposed class or otherwise, will have noti-
fied the Secretary that they believe their benefits should not
be terminated. See, Mathews V. Eldridge, supra, at 323-24,
329 (jurisdictional requirement satisfied by answering state
agency questionnaire, and by writing letter in response to
tentative determination of disability cessation); Mathews vy.
Diaz, 426 U.S. 67, 75 (1976) (claim filed with Secretary by
Espinosa, after he had joined in District Court suit, satisfied
jurisdictional requirement); Kennedy v. Harris, 87 F.R.D.
372, 376 (S.D. Cal. 1980) (mere termination of benefits ful-
fills requirement of presenting a claim).
75. The Secretary’s claim that only she may waive the
$405(g) formal prerequisite to suit was rejected by the
Supreme Court when it stated:
Sla
Salfi suggested that under §405(g) the power to deter-
mine when finality has occurred ordinarily rests with
the Secretary since ultimate responsibility for the integ-
rity of the administrative program is [hers]. But cases
may arise where a claimant’s interest in having a partic-
ular issue resolved promptly is so great that deference
to the agency's judgment is inappropriate.”
Mathews v. Eldridge, 424 U.S. at 330.
76. In Mathews v. Eldridge, the Supreme Court estab-
lished a method for determining whether a court may infer
waiver of the Social Security Act’s exhaustion requirement.
First, a court may infer waiver when the plaintiff's claim is
entirely collateral to his individual claim for benefits. 424
U.S. at 330-31. Further, the exhaustion requirement may be
deemed waived when the damages upon which a plaintiff's
claim for relief is based are of such a nature that he cannot
adequately be compensated by the relief that would accrue
from a judicial proceeding following exhaustion. /d. at 331.
Finally, federal courts have held that exhaustion may be
inferred when the Secretary's position with respect to the
litigant’s claim is so fixed that further pursuit of administra-
tive remedies would be futile. Weinberger v. Salfi, supra, at
767; Liberty Alliance of the Blind v. Califano, 568 F.2d 333,
345 (3d Cir. 1977).
77. Plaintiffs have satisfied all the above tests for waiver,
and have provided additional reasons why the Social Secu-
rity Act’s exhaustion requirement should be waived. First,
and most significantly, plaintiffs’ claims in this case are not
confined to direct claims for the payment of benefits.
Instead, plaintiffs seek to affect the procedures by which the
Secretary determines eligibility for benefits. Of course,
plaintiffs’ claims are generated from a belief that benefits
would be awarded to them if SSA were to apply lawful stan-
dards to the review of their cases. Nevertheless, that fact
does not convert their suit into a direct claim for benefits, in
which the court would be asked to review the record of each
52a
individual case to determine whether the Secretary's deci-
sion is Supported by substantial evidence. In Mathews v
Eldridge. supra, the Supreme Court held that a plaintiffs
due process claim to a pre-deprivation hearing was collateral
to a substantive claim for benefits. 424 U.S. at 330. That the
plaintiff in Eldridge hoped ultimately to have his benefits
reinstated did not affect the court's decision concerning the
essential nature of his claim.
78. Smith v. Sehwetker, 709 F.2d 777 (2d Cir. 1983),
relied on by the Secretary, does not affect this decision. In
Smith, a panel of the Second Circuit Court of Appeals deter-
mined that a claim concerning the Secretary's application of
a medical improvement standard, similar to a claim made in
this case, was not collateral to the plaintiffs’ substantive
claims for benefits. In rejecting the plaintiffs’ argument that
exhaustion of the claim could be inferred, the court stated:
“Exhaustion, moreover, would frame the issue in a
much clearer fashion than is possible when it is posed
as an abstraction. While the legal issue raised by plain-
uffs may seem well-defined to them, it seems rather
unformulated to us. What is meant by evidence of med-
ical improvement, for example, is somewhat
ambiguous.”
709 F.2d at 780.
79. Unlike the abstract claims presented to the Second
Circuit panel in Smith, the claims raised by plaintiffs in this
case are all-too-sadly concrete. Plaintiffs here challenge the
Secretary's refusal to follow three well-reasoned opinions by
the Fourth Circuit Court of Appeals which this court is
bound to follow. Where a legal standard has been clearly
enunciated, this court is authorized, and indeed required. to
determine whether the Secretary’s posture with regard to
that standard comports with the constitutional principles of
Separation of powers and due process. In addition, in this
case, the court has received in evidence numerous docu-
ments from which this court as factfinder can decipher the
53a
Secretary's questioned policies which are systematically
applied to all claims for benefits.
80. The plaintiffs have further demonstrated that the
harm they suffer cannot adequately be relieved by individual
judicial review following complete administrative exhaus-
tion of their claims. The Secretary has argued that whatever
harm plaintiffs may suffer from a possible misapplication of
the law to their cases will be compensated by the ultimate
retroactive payment of benefits upon successful litigation in
federal court. This claim overlooks several serious aspects of
plaintiffs’ situation.
81. First, as plaintiff Hyatt testified at the trial of this
case, termination of disability benefits means for many of
the members of plaintiffs’ class the difference between exis-
tence at a bare subsistence level, and the ability to pay the
utility bills to keep warm in freezing temperatures, or to
purchase an occasional item of clothing or piece of meat.
Even more seriously, the evidence reveals that many persons
whose disability benefits are terminated lose the ability to
pay for desperately needed medications and health care.
Indeed, many former recipients (some of whose benefits
were later reinstated on appeal) attested to the severe physi-
cal and mental stress occasioned by the termination itself. In
some cases, this severe stress was closely followed by death.
No amount of retroactive benefits can compensate for years
of deprivation and anxiety — which may even ultimately
result in death — resulting from the Secretary’s wrongful
practices. Another reason that retroactive benefits are not
fully compensatory is that one-quarter of the amount ulti-
mately awarded following district court litigation is often
paid, pursuant to 42 U.S.C. §406(b)(1), to the lawyer who
successfully represents the claimant in federal court.
82. Finally, the Secretary's argument overlooks the fact
that the only claimants who will be retroactively compen-
sated for the Secretary's application of an unlawful standard
Sda
of review are those “with the temerity to request... review.”
Aldrich v. Schwetker, 555 F. Supp. 1980, 1088 (D. Vt. 1982),
quoting, Spear v. Harris, No. 80143, slip. op. at 7 (D. Vt. July
31, 1980). The possibility of the application of a double
standard to members of a group of potential disability pay-
ment recipients who are similarly situated provides further
necessity for an inference of waiver. See Rivera v. Heckler,
568 F.Supp. 235, 242 (D. N.J. 1983).
83. This case adequately questions and attacks the legality
of the Secretary's rulings and guidelines for the determina-
tion of eligibility for benefits. To require each plaintiff to
exhaust her administrative remedies would serve no useful
purpose. Weinberger v. Salfi, supra, at 767.
84. Although the Secretary insists that her challenged rul-
ings fit within the letter of the law, she has made no repre-
sentation that they are subject to change at any time in the
near future. The particular rulings in question, then,
represent the Secretary’s fixed position, to which the court
has no doubt that the Secretary would adhere in reviewing
each individual, substantive claim for benefits.
85. A requirement of exhaustion in this case would be the
mere enforcement of formality, and a waste of administra-
tive and judicial resources. See, Kuehner v. Schweiker, 717 F.
2d 813, 817-818 (3d Cir. 1983); Graham v. Heckler, 573
F.Supp. 1573, 1577-78 (N.D. W.Va. 1983). It would only
add hardship to hardship.
II.
The Substantive Legal Merits
Of The Case
86. The principle of separation of powers embodied in the
United States Constitution is that federal courts retain the
ultimate authority to interpret the law. Varbury v. Vladison,
5 U.S. 137 (1803).
55a
87. Decisions of the Fourth Circuit Court of Appeals
interpreting the Social Security Act are binding upon the
Social Security Administration when it decides claims of
people who live within the territorial jurisdiction of this
circuit. See, PPG Industries, Inc. v. N.L.R.B., 671 F.2d 817,
823 n. 9 (4th Cir. 1982). (The NLRB, a federal adjudicative
agency, was required to determine unfair labor practice cases
arising within the circuit in accordance with the decisions of
the Court of Appeals interpreting the National Labor Rela-
tions Act.)
88. In reaching its decision in PPG /ndustries, the Fourth
Circuit expressed the position that has been adopted by the
great majority of circuit courts addressing the question of an
agency's refusal to follow the law of the circuit in which it
functions. Lopez v. Heckler, 713 F.2d 1432 (9th Cir. 1983);
Ithaca College v. NLRB, 623 F.2d 224 (2d Cir. 1980); Mary
Thompson Hospital, Inc. v. NLRB, 621 F.2d 858 (7th Cir.
1980); Allegheny General Hospital vy. NLRB, 608 F.2d 965
(3d Cir. 1979); Federal-Mogul Corp. v. NLRB, 566 F.2d
1245, 1252 (Sth Cir. 1978). But see, Yellow Taxi Company of
Minneapolis V. NLRB, No. 80-1481 (D.C. Cir. November 4,
1983) (NLRB not required to conform its rulings to every
decision by court of appeals, but when law has been firmly
established, Board is required to give court great deference).
As the Court stated in A/legheny Hospital, supra:
A decision by this court, not overruled by the United
States Supreme Court, is a decision of the court of last
resort in this federal judicial district. Thus our judg-
ments. .. are binding on ail inferior courts and litigants
in the Third Judicial District, and also on administra-
tive agencies when they deal with matters pertaining
thereto. ..{T]he Board is not a court nor is it equal to
this court in matters of statutory interpretation. Thus, a
disagreement by the NLRB with a decision of this court
is simply an academic exercise that possesses no author-
itative effect... For the Board to predicate an order on
its disagreement with this court’s interpretation of a
statute is for it to Operate outside the law.
56a
608 F.2d at 970. quoted in Ithaca College v. NLRB. supra,
623 F.2d at 228-29.
89. the law of this Circuit is that the Secretary may not
require end-organ damage as an exclusive precondition to
the establishment of a disability from hypertension or diabe-
tes. Wartin v. Secretary of Dept. of Health. Ed. & Welf. 402
F.2d 905 (4th Cir. 1974). In Martin, the Fourth Circuit
found that neither medical evidence nor the Social Security
Act required a finding that a person is not disabled from
hypertension or diabetes simply because he has not yet expe-
rienced end-organ damage.
90. The Secretary’s regulations SSR 82-55 and POM 2107
directly contravene the law of the Fourth Circuit by mandat-
ing that disability claimants who suffer from hypertension or
diabetes must conclusively be found not disabled unless they
exhibit significant end-organ damage.
91. SSA operated outside the law of this circuit by evaluat-
ing the disability status of plaintiffs Herman Caudle and
Mary Lovingood according to regulations which dictate that
claimants who suffer from diabetes or hypertension, but who
have not yet experienced any end-organ damage, are conclu-
sively deemed not disabled from either of those two
conditions.
92. The law of this Circuit requires the Secretary to evalu-
ate the disabling effects of a disability claimant’s pain even
though the intensity of the pain is shown only by subjective
evidence. Myers v. Califano, 611 F.2d 980 (4th Cir. 1980). In
Myers, the Fourth Circuit reversed a denial of disability
benefits which had rested on an SSA regulation requiring
that impairments “must be demonstrable by medically
acceptable clinical and laboratory diagnostic techniques.” /d.
at 983.
57a
93. The Secretary's regulations SSR 82-58 and POM 2205
directly contravene the law of the Fourth Circuit by mandat-
ing that symptoms will not have a significant effect on a
disability determination unless they are supported by objec-
tive clinical findings.
94. The fact that the Secretary's regulations may have
changed since the time of the .V/yers decision makes no dif-
ference for purposes of this analysis: the current regulations
are as repugnant to the law as the regulation evaluated in
Mvers. In Myers, the court found that the claimant had
established a sufficient case of disability in that the intensity
of her pain, which was substantiated only by subjective evi-
dence, “had a specific physical cause.” /d. The Secretary's
regulation expressly contradicts the holding of Wyers, as it
states: “It is not sufficient to merely [sic] establish a diagno-
sis Or a source for the symptom.”
95. SSA expressly refused to follow the law of this Circuit,
in evaluating the disability status of plaintiffs Patrick Hyatt
and Mary Lovingood, when it failed to consider the disa-
bling effects of the pain experienced by these plaintiffs not-
withstanding the fact that such pain was not supported by
objective clinical findings.
96. In Dotson v. Schweiker, 719 F.2d 80 (4th Cir. 1983),
reh. denied, ___ F.2d ____ (4th Cir. Jan. 11, 1984), the
Fourth Circuit. following the Administrative Procedure Act
and applying a “familiar principle” of the presumptive con-
tinuing validity of judicial and administrative decisions,
held that a previous determination of disability gives rise to
a presumption that a claimant is still disabled. In order to
rebut this presumption and justify termination of benefits,
the Secretary is required to come forward with evidence that
a claimant’s condition has improved since the last disability
determination. The rule adopted by the Fourth Circuit in
Dotson has been applied by every federal court which has
|
58a
directly considered the standards applicable to the termina-
tion of disability benefits. Parti v. Schweiker, 669 F.2d 582
(9th Cir. 1982); Kuzmin v. Schweiker, 714 F.2d 1233 (3d Cir.
1983); Simpson v. Schweiker, 691 F.2d 966 (11th Cir. 1982):
Doe v. Heckler, F. Supp. , No. M-83-2218 (D.
Md. Dec. 13, 1983); Graham v. Heckler, 573 F. Supp. 1573
(N.D.W.Va. 1983); Trujillo v. Schweiker, 558 F. Supp. 1058
(D. Colo. 1983). 7
97. Since Dotson did not invent, nor claim to invent, any
new rule of law, defendant's claim that it should not apply to
pre-Dotson claims has no merit.
98. As she admits, the Secretary continues to determine,
without any showing that the recipients’ conditions have
improved, that persons receiving benefits are no longer dis-
abled. Thus the Secretary has explicitly chosen to disregard
the law of the Fourth Circuit with respect to terminations of
benefits. -
99. Following her own regulations, and in direct contra-
vention of the law of this Circuit, the Secretary terminated
the disability benefits of plaintiffs Patrick Hyatt, Herman
Caudle, and Mary Lovingood without any evidence that the
condition of these plaintiffs had improved.
100. The Secretary contends that the Fourth Circuit’s
decision in Dotson is not binding law until the time for
appeal has run on that case. No authority is cited to support
this proposition. This court is bound by decisions of the
Fourth Circuit Court of Appeals from the day they are
issued; hence, in this case, the court is bound to apply the
law as it stands in this circuit. As the Second Circuit stated
in a similar case:
“When [the NLRB] disagrees in a particular case, it
should seek review in the Supreme Court. During the
interim before it has sought review or while review is
still pending, it would be reasonable for the Board to
stay its proceedings in another case that arguably falls
59a
within the precedent of the first one. However, the
Board cannot, as it did here, choose to ignore the deci-
sion as if it had no force or effect. Absent reversal, that
decision is the law which the Board must follow.”
Ithaca College v. NLRB, supra, at 228.
101. The Secretary has shown the court that she 1s abiding
by the Dotson decision with respect to Dotson, the individ-
ual plaintiff in that case (who is now deceased); that she has
not decided whether to appeal that case; and that she is
currently appealing another case in the Fourth Circuit which
raises the identical issues decided by the court*in Dotson.
These actions, the Secretary contends, show “awareness and
respect” for the Fourth Circuit’s opinion in Dotson. Sec’y’s
Supplemental Memo of Points and Authorities in Oppos. to
Plaintiffs’ Motions for Prelim. Inj. and Class Cert., 12.
102. The Secretary's position concerning the Dotson deci-
sion can hardly be characterized as “respectful.” Respect for
the law means obeying the law. In taking the position that
the Dotson decision need not be followed by her, the Secre-
tary has disobeyed the law of this Circuit.
103. This court can understand why the Secretary might
choose to appeal this issue in a case other than Dotson’s;
Dotson died, shortly after the Fourth Circuit’s decision was
rendered, from the very condition which the Secretary con-
tended was not disabling. However, the Secretary may not
continue an unlawful practice while she pursues, in an unre-
lated case, the issues conclusively determined by Dotson.
Such a position, if accepted by a court, would allow the
Secretary forever to escape the mandates of the law by aban-
doning appeals before a case reaches the Supreme Court for
decision, but continuing to assert that she is litigating the
issue by defending claims that have only freshly entered the
federal court system.
104. A cabinet member is not above the law of the land,
but is obligated to follow it. The Secretary is free to argue her
60a
position in any case she chooses, but, absent express author-
ity from Congress or the federal courts, she can not offer an
appeal in a newly-filed and unrelated case as an excuse to
evade the law in wus case.
105. The Secretary finally contends that her right to disre-
gard decisions of the Fourth Circuit Court of Appeals has
recently been confirmed by the Supreme Court in its opinion
in United States v. Mendoza, 52 U.S.L.W. 4019 (January 10.
1984). In \/endoza, a unanimous Supreme Court held that
the government cannot be collaterally estopped from re/iti-
galing a constitutional issue adjudicated against it at the
district court level in a different lawsuit brought by a differ-
ent party.
106. In ‘fendoza, a United States district court in Califor-
nia refused to hear the merits of a defense raised by the
government to a due process claim arising out of the Nation-
ality Act of 1940. The court’s reason for refusing to hear the
merits of the government’s defense was a prior decision
untavorable to the government rendered in a similar case by
a different California United States district court. The
Supreme Court held that nonmutual collateral estoppel may
not lie against the government in such a case.
107. \fendoza is not in point. The pertinent holding of
\fendoza was only that the government must be allowed to
challenge a law in court on its merits, mot that an officer of
the government may disobey court decisions with which he
or she disagrees. This court has not refused io hear the mer-
its of anything defendant wanted to present; on the contrary
it has proceeded to the merits without unnecessary delay,
and has heard everything defendants had to offer. The plain-
tiffs have claimed that the Secretary does not follow the law
of the Fourth Circuit, and have cited authority, squarely in
point, to support this claim. The Secretary has asserted that
she dves follow the law of the Circuit or, that where she does
6la
not follow it. she is not required to. The Court has consid-
ered the Secretarv’s case, has searched for its merits. and
finds none.
108. Plaintiffs say (brief in support of injunctive relief,
pp. 8-10) that their rights to “procedural due process” have
been denied. Defendant responded in a footnote. Procedural
due process does appear to be a valid additional basis of
decision. See Wathews v. Eldridge. 424 U.S. 319, 322 (1976)
(interest in continued receipt of disability benefits is a prop-
erty interest protected by the Fifth Amendment): Goldberg v.
Kelly, 397 U.S. 254, 271 (1970) (conclusion of agency as to
eligibility for welfare benefits must rest upon legal rules and
evidence presented at a hearing). | have always been puzzled
as to how much one clarifies the concept of due process of
law (“that process which is due”) by calling that process
“procedural.” Moreover, the quest for procedural due pro-
cess in this context leads inevitably for its identification
back to the cases of Myers. Martin and Dotson. Theretore.,
although “procedural due process” is an additional valid
basis for this decision, I will not add more to what has
already been written.
DECISION
Plaintiffs have established a clear entitlement to have
their claims for disability benefits reviewed pursuant to pro-
cedures that comport with the controlling decisions of this
circuit interpreting the Social Security Act. The court will
order relief consistent with this decision.
This !4 day of February, 1984.
/s/ JAMES B. MCMILLAN
JAMES B. MCMILLAN
U'nited States District Judge
62a
APPENDIX E
IN THE DISTRICT COURT OF THE UNITED
STATES FOR THE WESTERN DISTRICT OF
NORTH CAROLINA
Charlotte Division
C-C-83-655-M
Patrick H. Hvatt: Herman O.
Caudle and Mary P. Lov-
ingood, on behalf of them-
selves and all others similarly
Situated,
Plaintiffs,
and
North Carolina Department
of Human Resources, Disa-
bility Determination JUDGMENT
Services,
Plaintiff-Intervenor,
-VS-
Margaret M. Heckler, or her
successors in office. Secretary
of the United States Depart-
ment of Health and Human
Services,
Defendant.
Pursuant to the findings of fact and conclusions of law
previously entered, IT IS HEREBY ORDERED,
ADJUDGED AND DECREED:
|. Defendant's motion to dismiss the action for lack of
jurisdiction is DENIED.
2. Plaintiffs’ motion for certification of a class is
ALLOWED. The procedure for defining and notifying the
63a
class and instituting class action proceedings is being set out
in a separate order.
IT IS HEREBY FURTHER ORDERED that the Secre-
tary of Health and Human Services is restrained and
enjoined:
|. To cease immediately her policy of refusing to follow
the law of the Fourth Circuit in implementing the Social
Security Act in North Carolina.
2. To begin immediately to follow the law of the Fourth
Circuit within North Carolina as it is expressed in V/artin v.
Secretary of Health, Education and Welfare, 492 F. 2d 980
(4th Cir. 1974), Myers v. Califano, 611 F. 2d 905 (4th Cir.
1980), and Dotson v. Schweiker, 719 F. *d 80 (4th Cir. 1983),
and to issue written directives to SSA and DDS officials and
other persons responsible for the administration of Social
Security disability programs in North Carolina, ordering
such persons to follow Fourth Circuit standards.
3. Within thirty (30) days from the date of entry of this
sudgment, to provide the North Carolina Department of
Human Resources, Disability Determination Services, with
sufficient information with regard to disability claims to
enable DDS to identify the persons who may be entitled to
relief under this judgment.
IT IS HEREBY FURTHER ORDERED, ADJUDGED
AND DECREED:
|. The case of plaintiff Hyatt is remanded for reconsidera-
tion by the Secretary in light of the findings of fact and
conclusions of law previously entered.
2. A class action order will be entered.
3. Defendant shall provide plaintiffs access to the claims
files sufficient to enable them to verify compliance with this
judgment.
64a
4. The Secretary shall pay to the North Carolina Depart-
ment of Human Resources. Disability Determination Serv-
ices, any costs incurred by DDS in implementing the terms
of this judgment.
5. Defendant shall pay to plaintiffs’ counsel their costs
and reasonable attorneys’ fees and expenses incurred in this
case.
This 14 day of February, 1984.
/s/ JAMES B. MCMILLAN
James B. McMillan
United States District Judge
65a
APPENDIX F
IN THE DISTRICT COURT OF
THE UNITED STATES
FOR THE WESTERN DISTRICT OF
NORTH CAROLINA
Charlotte Division
; C-C-83-655-M
PaTRICK H. HyatT: HERMAN O. CAUDLE
and Mary P. LOVINGOOD, on behalf
of themselves and all others
similarly situated,
Plaintiffs,
and
ORDER
NORTH CAROLINA DEPARTMENT OF
CERTIFYING
HUMAN RESOURCES, DISABILITY ;
. A CLASS
DETERMINATION SERVICES,
ae AND
Plaintiff-Intervenor,
REQUIRING
-VS-
NOTICE
MARGARET M. HECKLER, or her
successors in office, Secretary of
the United States Department of
Health and Human Services.
Defendant.
Pursuant to the findings of fact. conclusions of law and
judgment previously entered, and after consideration of fur-
ther argument and briefs, the class is defined as follows:
A. The Martin and Myers subclass —
(1) All North Carolina residents who, since Septem-
ber 10, 1981, have applied for disability benefits (SSI or
SSDI benefits) under the Social Security Act and whose
claims were denied, either in an initial determination or
another level of the administrative appeal procedure,
because:
————
66a
(a) the Secretary or DDS relied upon an absence or
lack of end-organ damage. current or past. as determin-
ing that the claimant’s hypertension or diabetes mel-
litus was not a severe impairment; or
(b) the Secretary or DDS relied upon an absence or
lack of clinical findings as determining that the claim-
ant’s pain was not disabling; and
(2) All North Carolina residents whose benefits under
the statute have, since September 10, 1981, been termi-
nated or are subject to being terminated by the Secretary
or DDS on grounds that they were not disabled under the
Act for one or both of the reasons noted above in (a) and
(b); and
B. The Dotson subclass —
All North Carolina residents whose Social Security dis-
ability benefits have, since October 6, 1982, been termi-
nated or are subject to being terminated on grounds that
the recipients were not disabled under the Act, without
findings, and substantial evidence to support those find-
ings, that, since the Secretary’s most recent determination
of disability as defined in the Act, there has been improve-
ment in their medical condition sufficient that they are no
longer disabled.
The court finds that the class meets the requirements for
certification of a class action under Federal Rule of Civil
Procedure 23(a) and 23(b)(2):
1. The class is so numerous (many thousands of claimants
whose benefits have been terminated or whose applications
have been denied) that joinder of all members is
impracticable.
2. The claims of the members of the class as defined above
present substantial common questions of law and fact. The
claims have one significant and all-important feature of
67a
commonality, in that it is the procedures under which the
determina‘.ons are made (/.e., in disregard of controlling
court decisions) which all potential claimants are entitled to
attack.
3. The claims of class representatives Hyatt. Caudle and
Lovingood are typical of the claims of the class members.
4. The court finds that the named class representatives
will fairly and adequately represent and protect the interests
of the class.
5. The defendant has acted or refused to act on grounds
generally applicable to the class, thereby making appropriate
final injunctive relief or corresponding declaratory relief
with respect to the class as a whole.
6. The exhaustion requirements of 42 U.S.C. §405(g) are
met; the class includes only those persons who have
presented or will have presented, in appropriate fashion,
within the appropriate time limits, claims for benefits which
come within the claims specified in the class designations.
7. The date of September 10, 1981 in paragraphs A.(1)
and (2) is chosen because that is the date on which class
representative Hyatt was notified that his disability had
ceased. and on which he first became eligible to file a claim
for reconsideration. Class members should be entitled to
participate in this action as if they had filed claims on or
since the date Hyatt became eligible to file a claim.
8. The date of October 6, 1982, is chosen for the beginning
date of the group described in paragraph B. because that
date is one year before the decision of the Fourth Circuit
Court of Appeals in Dotson v. Schweiker, 719 F.2d 80 (4th
Cir. 1983). See 20 C.F.R. $404.988 and §416.1488 (Secretary
may reopen disability cases up to one year following final
determination).
ee
68a
Defendant objects to the use of October 6, 1982, as the
beginning date, arguing that the principle stated in Dotson is,
even now, not the law in this Circuit. Instead, in a stated
“spirit of cooperation with plaintiff's counsel,” defendant
proposes January 11, 1984, as the beginning date.
That proposal does not sound like cooperation.
As already stated by this court in its conclusions of law,
numbers 97 and 100, the Secretary was already bound to
apply the “medical improvement” standard before Dotson
was decided.
Since Dotson did not invent, nor claim to invent, any new
rule of law, defendant's claim that it should not apply to
pre-Dotson claims has no merit.
Hyatt v. Heckler, C-C-83-655, slip op. at 37 (W.D.N.C.
Feb. 14, 1984). See also Dotson v. Schweiker, 719 F.2d 80, 82
(4th Cir. 1983) (The Dotson court relied in part on section
4(c) of the Administrative Procedure Act, 5 U.S.C. §556(d),
an established rule of law that the proponent of a position
has the burden of proof.) In addition, October 1982 is an
appropriate beginning date because that is when the Secre-
tary issued SSR 82-49c, her ruling of “non-acquiescence”™
with respect to Parti v. Schweiker, 669 F.2d 582 (9th Cir.
1982), which also applied a medical improvement standard.
9. The Secretary is further ORDERED to direct her agents
at the North Carolina Disability Determination Services to
mail, within sixty (60) days of the entry of this order, the
Notice attached as Appendix A to the last known address of
each North Carolina resident whose disability benefits were
stopped on or after October 6, 1982. Along with the notice
shall be mailed the postage-prepaid reply form attached as
Appendix B and addressed to the North Carolina Disability
Determination Services.
The Secretary has complained that sixty days are not
enough time in which to mail notices to these class members,
69a
arguing that her resources are limited because she “is cur-
rently attempting to comply with a number of injunctive
orders in major class action lawsuits nationwide.” Defend-
ant further suggests that any deadline imposed by the court
will adversely affect current beneficiaries or claimants who
are not members of this class. Defendant's burdens are
caused by her own apparent violations of the law. Sixty days
should be ample time for her to comply.
10. The Secretary is further ORDERED to review the files
of all North Carolina applicants for disability benefits since
September 10, 1981, and all North Carolina residents whose
benefits were stopped since September 10, 1981. exclusive of
persons identified pursuant to paragraph 9. supra, to deter-
mine if their claims involved allegations of hypertension or
diabetes or pain, or any condition with which pain is com-
monly associated, including, but not limited to, chronic back
pain. To the last known address of each person so identified,
the Secretary shall within one hundred and twenty (120)
days of the entry of this order, send the Notice attached as
Appendix C and the postage-prepaid reply form attached as
Appendix D and addressed to the North Carolina Disability
Determination Services.
Ll. Since all cases relevant to this action which are pend-
ing before administrative law judges or the Appeals Council
have been processed under an erroneous view of the law
which the Secretary has refused to change, potential class
members who respond to either Notice will be given the
option of having the North Carolina Disability Determina-
tion Services reassess their case at the initial level, or at
whatever appellate level their case has reached. If the claim-
ant has already had a hearing, an opportunity for a supple-
mentary hearing shall be afforded. Counsel for all parties are
directed to submit to the court within thirty (30) days of the
entry of this order, proposed contents of the follow-up
notices informing claimants of their options.
70a
12. In addition to providing individual notice to potential
class members, the Secretary is FURTHER ORDERED to
publicize this decision by means of: Public service
announcements on radio stations and television stations
throughout North Carolina; posters in all Social Secunty
offices, Offices of Hearings and Appeals, and Departmeats
of Social Services; and press releases to newspapers through-
out North Carolina.
13. SSA and DDS shall keep records of the names and
pertinent information regarding the persons who respond to
the notices required by paragraphs 10 and 12, supra. Each
agency shall forward such information to the other agency.
Lists of the names and pertinent information shall be sup-
plied by each agency to plaintiffs’ counsel, Legal Services, on
the first of each month following the entry of this order.
14. Persons who respond to either of the individual
notices or to the public notices, but who are then determined
by Disability Determination Services or the Secretary not to
be members of the class, shall be given an immediate oppor-
tunity to appeal that determination. If the number of appeals
is large, or the determinations are not promptly made, the
court will consider appointing a Special Master.
15. Copies of all directives which the Secretary has
already sent to her agents concerning implementation of this
order, or the court’s February 14, 1984 order, shall be sent
immediately to plaintiffs’ counsel. Copies of future such
directives shall be sent as and when they are issued.
Tila
16. All relief ordered in the judgment entered Febru-
ary 14. 1984 shall be afforded to the class members defined
herein.
This 26 day of March 1984.
/s/ JAMES B. MCMILLAN
James B. McMillan
United States District Judge
72a
APPENDIX G
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT
OF NORTH CAROLINA
CHARLOTTE DIVISION
Civil Action No. C-C-83-655-M
Patrick H. HYATtT. HERMAN
O. CAUDLE and Mary P.
LOVINGOOD, on behalf of
themselves and all others
similarly situated,
Plaintiffs-Appellees.
and ORDER
NorTH CAROLINA DEPART- |
MENT OF HUMAN RESOURCES,
DISABILITY DETERMINATION
SERVICES.
Plaintiff-Intervenor,
Vv.
MARGARET M. HECKLER. or
her successors in office. Sec-
retary of the United States
Department of Health and
Human Services.
Defendant-Appellant.
This matter comes before the Court upon the order of
remand issued by the United States Court of Appeals for the
Fourth Circuit, Hvar v. Heckler, 757 F.2d 1455 (1985), peti-
tions for rehearing denied. The March*27 order of this
Court. and the Fourth Circuit’s instructions focus on the
following class of plaintiffs:
eo ed Re tite ahhe Shale
73a
A. The Martin and Myers subclass
(1) All North Carolina residents who, since September
10, 1981, have applied for disability benefits (SSI or SSDI
benefits) under the Social Security Act and whose claims
were denied, either in an initial determination or another
level of the administrative appeal procedure, because:
(a) the Secretary or DDS relied upon an absence or
lack of end-organ damage, current or past, as determin-
ing that the claimant’s hypertension or diabetes mellitus
was not a severe impairment; or
(b) the Secretary or DDS relied upon an absence or
lack of clinical findings as determining that the claim-
ant’s pain was not disabling; and
(2) All North Carolina residents whose benefits under
the statute have since September 10, 1981, been termi-
nated or are subject to being terminated by the Secretary
or DDS on grounds that they were not disabled under the
Act for one or both of the reasons noted above in (a) and
(b); and
B. The Dotson subclass
All North Carolina residents whose Social Security disa-
bility benefits have, since October 6, 1982, been termi-
nated or are subject to being terminated on grounds that
the recipients were not disabled under the Act, without
findings, and substantial evidence to support those find-
ings, that, since the Secretary’s most recent determination
of disability as defined in the Act, there has been improve-
ment in their medical condition sufficient that they are no
longer disabled.
In compliance with the Fourth Circuit’s opinion and
order,
iii
74a
IT IS HEREBY ORDERED:
1. General. The Court vacates the injunctive and declara-
tory relief it has heretofore ordered. The Secretary shall
reconsider the claims of terminee class members (subclasses
A(2) & B) pursuant to the Social Security Disability Reform
Act of 1984. The claims of initial-applicant class members
who have not met the requirements of Section 405(g) are
dismissed. The Secretary shall reconsider the remaining
claims of persons determined to be in subclasses A(1)(b) (the
Myers initial applicants) pursuant to the interim pain stan-
dard of Section 3(a) of the 1984 Act. She shall reconsider the
claims of persons determined to be in subclass (A)(1 (a) (the
Martin initial applicants), reevaluating her policy of non-
acquiescence in light of the 1984 Act’s legislative history and
circuit precedent. The complaint in intervention of the
North Carolina Department of Human Resources, Disabil-
ity Determination Services is dismissed. The Court will con-
sider the matter of attorneys fees by way of separate order.
2. Jurisdiction. This Court will retain jurisdiction in this
case solely for the purpose of assuring that individual class
members are properly recognized for purposes of obtaining
relief pursuant to this order. The Court will relinquish juris-
diction to monitor or review the Secretary's actions in
administering new hearings or decisions that occur during
the reconsideration of individual claims following remand.
Relinquishing such jurisdiction is done without prejudice to
class members’ rights to seek timely review of the final deci-
sions of the Secretary on remand in their respective judicial
districts in separate actions pursuant to $405(g).
3. Review of Class Identification Procedures. Within the
next 15 days, the Secretary shall: (1) turn over to plaintiffs’
counsel a list of the names and addresses of all potential
Dotson subclass members heretofore notified of possible
class eligibility; and (2) permit plaintiffs’ counsel to examine
in Charlotte relevant documents concerning the Secretary's
Oe
75a
computer programs, checklists and other aspects of her
effort to identify Dotson subclass members. Similarly, within
thirty days, the Secretary shall develop her plan for identify-
ing Martin and Myers subclass members and make available
in Charlotte to plaintiffs’ counsel all relevant information
about that plan (including the list of persons deemed entitled
to receive the initial notice), as well as relevant documents.
If, after reviewing any portion of the documents made avail-
able by the Secretary, plaintiffs’-counsel deem it necessary to
discuss the Secretary’s procedures with persons knowledgea-
ble about them, the Secretary shall promptly make such per-
sons available in Charlotte for discussions with plaintiffs’
counsel. If, after reviewing these identification programs,
plaintiffs’ counsel have any substantial dispute with the Sec-
retary about the procedures she has used or proposes to use,
they shall inform the Court, and the Court will resolve such
dispute.
4. Review of Individual Class Members’ Cases. The Court
hereby remands to the Secretary and relinquishes jurisdic-
tion over the claims of all individuals whom the Secretary
already has determined to be in the class. As to other persons
who have indicated interest, or in the future indicate inter-
est, in participating in class relief, the Secretary shall within
30 days of receiving such indication (absent extraordinary
circumstances) decide whether the person is a class member.
If the Secretary finds that the person is a class member, his
or her case thereupon shall be automatically and immedi-
ately remanded for a new hearing, and this Court will relin-
quish jurisdiction over it. If the Secretary decides that the
person is not a class member, then (1) within 20 days there-
after, the Secretary shall so notify plaintiffs’ counsel and
make available the person's file to plaintiffs’ counsel in
Charlotte; (2) the Secretary and plaintiffs’ counsel shall con-
fer if plaintiffs’ counsel disagrees with the Secretary's deci-
sion; and (3) the parties will submit the dispute to this Court
for resolution if they cannot resolve it themselves.
76a
5. Resolution of Existing Questions Concerning Class
Membership. The following directives are made to clarify
who is and who is not in the class entitled to relief under this
Court's initial certification order as modified by the Court of
Appeals:
(a) The group of terminee class members comprises all
persons as to whom the Secretary has — from September
10, 1981 to present, at any level of review — made or
upheld a decision that benefits should be terminated on
the ground that the person is no longer disabled. Pursuant
to the agreement of the parties no terminee shall be
excluded on the ground that his or her case does not
involve pain, hypertension or diabetes.
(b) The group of initial applicant class members com-
prises all persons who — from August |, 1983 to pre-
sent — were sent an Appeals Council decision affirming a
denial of benefits. As set forth in the March 27 order, any
such person is entitled to relief “if their claim involved
allegations of hypertension or diabetes or pain, Or any
condition with which pain is commonly associated,
including, but not limited to chronic back pain.”
(c) Rejected applicants who were sent Appeals Council
decisions before August |, 1983, who seek class relief
should get such relief if:
(1) They did not actually receive notice of the adverse
Appeals Council decision until after August 5, 1983;
(ii) There was good cause, within the meaning of 20
CFR §404.911, for the failure to file a timely law-
suit, ¢g., 20 CFR $404.982; or
(iit) The Secretary has explicitly or implicitly granted a
waiver or extension of the sixty day period of
340 5(g).
77a
The Secretary, however, need not take this group of per-
sons into account in formulating her computer program
designed to generate the overinclusive pool of class mem-
bers to whom initial notices are sent.
(d) No terminee shall be excluded from class relief
because he or she brought an individual action and lost.
Any initial applicant who brought an individual action
and lost shall not receive relief, provided that the case has
been finally disposed of (including by the running of all
appeal periods) as of the date of this order. Class members
who now have individual cases that have not been finally
disposed of shall have the right to choose between
obtaining a new review as a class member or proceeding
with their own individual action. The Secretary shall
promptly review all individual Social Security cases pend-
ing in North Carolina, and in each such case shall file and
serve either Attachment Al or Attachment A2, as
appropriate.
(e) No person should be excluded from relief solely
because the file shows that he or she has performed some
work unless the record conclusively shows that the person
has actually engaged in substantial gainful activity within
the meaning of 20 C.F.R. §$§404.1571-1576. If there is any
possibility that a decisionmaker considered medical con-
dition as well as work activity in making the adverse deter-
mination, and the person otherwise qualifies for class
membership, the person is in the class.
(f) The class includes every person who otherwise meets
the class requirements and now lives in North Carolina or
has lived in North Carolina at any time after the class
inception date (/.e., September 10, 1981, for both
terminees and initial applicants). In formulating proce-
dures for identifying the pool of persons entitled to an
initial notice, the Secretary need not review individual
files to determine every past residence of each person who
\
78a
might be in the class. The Secretary. however. shall fully
utilize centralized sources of information that might iden-
tify persons who have resided in this state during the time
period identified above.
6. Notice. The Secretary shall send Attachment B as the
initial notice to terminees. She shall send Attachment C as
the initial notice to applicants. When the Secretary informs
persons they have not been accepted for class membership.
she shall send them Attachment D (for terminees) or E (for
initial applicants) setting forth their right to review of the
decision in this Court. The Court reaffirms its March 27
order that: “In addition to providing individual notice to
potential class members. the Secretary is further ordered to
publicize this decision by means of: public service
announcements on radio stations and television stations
throughout North Carolina: posters in all Social Security
offices and offices of Hearings and Appeals, and Depart-
ments of Social Services; and press releases to newspapers
throughout North Carolina.” If plaintiffs’ counsel is able to
set up a “hot-line,” all notices sent out after its establishment
shall be modified to prominently notify the recipient of such
“hot-line.”
7. Program Monitoring Information. The Secretary should
provide to plaintiffs’ counsel within 30 days the names of all
persons who thus far have responded to her notices. From
now on, each time the Secretary receives back a written
response from a person she notifies, she should photocopy
the person's name and address and send it to plaintiffs’
counsel. The Secretary must also continue her stated present
practice of sending a copy of every rejection letter to plain-
tiffs’ counsel. and should also begin similarly sending copies
of “acceptance” letters or periodic tabulations of the names
and addresses of persons who have been reinstated. The
Court will be tolerant of minor, unintentional failures to
provide such notices, but the Court expects copies of all of
SS LT Oe RR ens I Otte OT
79a
the notices described in this paragraph to be sent promptly
to plaintiffs’ counsel.
8. Instructions on Remand. Section 2(d)(4) of the 1984 Act
provides that the Secretary’s decisions regarding claims in
subclasses A(2) and B are reviewable “in conformity with the
time limits, exhaustion requirements and other provisions of
Section 205 of the Social Security Act and regulations issued
by the Secretary in conformity with such section.” The Sec-
retary is, therefore, directed to afford the members of these
subclasses opportunity to seek the four levels of administra-
tive review (initial determination, reconsideration, ALJ
hearing, and Appea!s Council review) set forth in 20 CFR,
Part 404, Subpart J.
The Fourth Circuit's decision directs this Court to remand
the claims of persons within Subclass A(1)(b) to the Secre-
tary “for reconsideration pursuant to the interim pain stan-
dard of Section 3(a) of the 1984 Act” and to remand the
claims of persons within subclass A(1)(a) to the Secretary for
“reconsideration of her policy of non-acquiescence in light
of the 1984 Act’s legislative history and circuit precedent.”
With respect to claims of persons within subclass A(1)(a),
the Fourth Circuit specified that a purpose of the remand is
the development of “an unequivocal administrative record.”
The 1984 Act does not mandate any particular form of
remand with respect to these class members. The following
specific instructions are fairly within the scope of the general
instructions to this Court by the Court of Appeals, and
indeed are necessary to achieve the aims of the Fourth Cir-
cuit in formulating those instructions:
(a) The Secretary must give these claimants an opportu-
nity for a new hearing before an administrative law judge
(“ALJ”), and an opportunity to present additional evi-
dence in support of their claims; and,
80a
(b) The Secretary must direct her decisionmakers that, if
any of the claims present allegations or evidence that the
claimant's hypertension or diabetes mellitus limits his or
her ability to work, the decisionmakers must expressly
consider these impairments in their decisions, expressly
stating the standards under which their disabling effect are
being evaluated.
9. The Court emphasizes that certain provisions in this
Order retlect compromises of the parties reached in the
unique setting of this case, and that this Order in no way
reflects a precedent of this Court or a statement of policy by
either party relevant in any other context.
This 25 day of June, 1985.
s/ JAMES B. MCMILLAN
Honorable James B. McMillan
8la
APPENDIX H
IN THE DISTRICT COURT OF
THE UNITED STATES
FOR THE WESTERN DISTRICT OF
NORTH CAROLINA
Charlotte Division
C-C-83-655-M
PATRICK H. HYATT: HERMAN O. CAUDLE
and Mary P. LOVINGOOD. on behalf
of themselves and all others
similarly situated,
Plaintiffs.
and
NORTH CAROLINA DEPARTMENT OF
HUMAN RESOURCES, DISABILITY AMENDED
DETERMINATION SERVICES, ORDER ALLOWING
Plainuff-Intervenor, ATTORNEYS’ FEES
-VS-
MARGARET M. HECKLER, or her
successors in office, Secretary of
the United States Department of
Health and Human Services,
Defendant.
Following is the April 6, 1984 order allowing attorneys’
fees, as amended. Additions to the text are enclosed in
brackets, and deletions from the text are marked through
with dashes.
I
Plaintiffs brought this class action suit against defendant
in the fall of 1983, seeking injunctive relief for defendant’s
wilful violation of the law. The North Carolina Department
of Human Resources, Disability Determination Services.
later intervened. On February 14, 1984, this Court ordered
the defendant to stop acting in violation of specified “con-
trolling decisions of the United States Court of Appeals for
the Fourth Circuit of the United States.”
82a
Plaintiffs and intervenor have now moved for an attor-
neys’ fee award under the Equal Access to Justice Act
(EAJA), 28 U.S.C. §2412.
II
(The EAJA, 28 U.S.C. §2412(b), confers discretion on a
court to find the United States liable for “fees and expenses
to the same extent that any other party would be liable under
the common law... .”] The EAJA [further] provides that.
unless otherwise provided by statute, a prevailing party ina
case brought by or against the United States is entitled to
fees, expenses and costs unless the United States establishes
that its position in the litigation was “substantially justified
or that special circumstances make an award unjust.” 28
U.S.C. §2412(d)(1 (A).
(Intervenor is entitled to fees and expenses under 28
U.S.C. §2412(b). The United States has acted in bad faith,
vexatiously and wantonly in this action (see discussion page
3, infra), and those actions justify an award of fees. See. e.g.
Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240.
258-259 (1975).]
Plaintiffs are clearly prevailing parties in this litigation.
Just as clearly, the EAJA may apply to actions of the Secre-
tary for Health and Human Services. See Guthrie vy.
Schweiker, 718 F.2d 104 (4th Cir. 1983). Therefore, the
court must determ'ne whether the government's position
was “substantially justified.” The burden is on the Secretary
to show that her action met that standard. See, e.g.. Phillips
v. Heckler, 574 F. Supp. 870 (D.C.N.C. 1983); Ulrich vy.
Schweiker, 548 F. Supp. 63 (D. Idaho 1982). The “substan-
tially justified” standard is essentially one of reasonableness,
Tyler v. Business Services, Inc. v. NLRB, 695 F. 2d 73 (4th
Cir. 1982), although “it can be concluded that the applicable
standard which this court must apply is slightly above one
based on reasonableness.” }Folverton v. Schweiker, 533 F.
Supp. 420, 424 (D. Idaho 1982). If the court finds that the
83a
Secretary’s position was not “substantially justified,” then
the court must determine whether “special circumstances”
would make an award of fees unjust. Finally, the court must
determine what amount of fees, if any, should be awarded.
IT]
The government’s position in this case is neither “substan-
tially justified” nor “reasonable.” To the contrary, the Secre-
tary’s position is not even marginally justifiable, and it fairly
may be characterized as outrageous, at best, both before this
case was filed and during the course of this suit. The court
found on February 14, 1984, as a matter of fact and of law,
that the Secretary has consciously and wilfully disregarded
the law. The court now reaffirms that conclusion. The gov-
ernment’s defense in this court, on both jurisdictional and
Substantive grounds, of the Secretary’s actions is equally
unjustifiable. As this court held in its February 14, 1984
decision, the Secretary’s jurisdictional defense is wholly
without merit, and it has no substantive defense for its
unlawful actions and practices. The court therefore con-
cludes that the Secretary’s position in this court is not sub-
Stantially justified.
There are no “special circumstances” to make a fee award
unjust.
(Plaintiffs, therefore, as well as intervenor, are entitled to
fees and costs under the EAJA. Based on the bad faith shown
by the United States in this case, piaintiffs are entitled to
recover under either §2412(b) or §2412(d). Since plaintiffs’
petition is based on §2412(d), however, the court will calcu-
late fees on that basis. ]
Counsel have submitted affidavits with their petitions for
fees which cover the time, effort and costs incurred in pursu-
ing the case before this court.
The court has analyzed the petitions in light of Blum v.
Stenson, U.S. , 52 U.S.L.W. 4377 (March 20,
84a
1984), Hensley v. Eckerhart, —=S—-US. ___, 52: U-S.L.W.
4552 (Mav 16, 1983), and of the factors discussed in John-
son v. Georgia Highway Express, 488 F. 2d 714 (Sth Cir.
1974), Barber v. Kimbrell’s, Inc., 577 F. 2d 216 (4th Cir.
1978), and Anderson v. Morris, 658 F. 2d 246 (4th Cir.
1981). Based on that analysis, the court will determine the
fee to be awarded by making an initial estimate of a reasona-
ble attorneys’ fee, and then by making an adjustment in that
estimate, if appropriate.
A. Initial estimate of the various reasonable attorneys’ fees.
“The initial estimate of a reasonable attorney’s fee is
properly calculated by multiplying the number of hours
reasonably expended on the litigation times a reasona-
ble hourly rate.”
Blum v. Stenson, __—s- U.S. at ___—, 52 U.S.L.W. at 4377.
The “reasonable hourly rate” is to be determined by consid-
ering an appropriate market rate for comparable legal serv-
ices in the community. A court should consider a number of
factors, including special skill and expertise and quality of
representation when finding a reasonable hourly rate. /d. at
4380. This court will also consider the factors set forth in
Johnson v. Georgia Highway Express, supra, which were
cited with approval by the Fourth Circuit in Barber v. Kim-
brell’s, Inc., supra, and Anderson v. Morris, supra, in ascer-
taining the reasonable hourly rate applicable to the services
rendered in this case. The burden is on the fee applicant to
produce satisfactory evidence, including affidavits, that the
requested rates are consistent with prevailing rates in the
community for similar legal services. Blum v. Stenson, —__
U.S. at, 52. U.S.L.W. at 4379, fn. 11. Although the fee
applicants in this case submitted motions, affidavits and
supporting memoranda before the Blum decision was
announced, and therefore based their applications on the
procedure required by Georgia Highway Express and Ander-
son vy. Morris. the information supplied is sufficient to
inform and assist this court in the exercise of its discretion.
85a
At the outset, the court [again] notes that the statutory
basis for an attorneys’ fee award in this case is 28 U.S.C.
32412, also known as the Equal Access to Justice Act
(EAJA). (28 U.S.C. §2412(d)(2)(B), which applies to plain-
tiffs, states that:]
{A]ttorney fees shall not be awarded in excess of $75
per hour unless the court determines that an increase in
the cost of living or a special factor, such as the limited
availability of qualified attorneys for the proceedings
involved, justifies a higher fee.
The court takes judicial notice of /mpro Products, Inc. v.
Block, 569 F. Supp. 1389 (D.D.C. 1983) which considered
the maximum rate allowable under the EAJA to be $83 per
hour, based on an increase in the cost of living during 1981-
82. The court in that case based its determination, at least in
part, on Price Index — All Urban Consumer, U.S. Depart-
ment of Labor, Bureau of Labor Statistics, Washington,
D.C., April 22, 1983. Although personal experience makes
this judge certain that the cost of living has risen further
since publication of the Price Index, the court will not, with-
out further evidence of that fact, increase the $83 per hour
rate. Therefore, this court concludes that the maximum rate
to be awarded [to plaintiffs] under the EAJA in this case,
absent additional “special factors,” is $83 per hour. [An
award to intervenor is not restricted by the limitations stated
in §2412(d)(2)(B). The court, however, in its discretion, will
calculate intervenor’s fee award based on the same consider-
ations used to determine plaintiffs’ fee award.]
Francis Pinckney, long an able attorney in this area and
currently the president of the Mecklenburg County Bar
Association, has submitted an affidavit which sets forth
what he considers to be the prevailing fees in this legal com-
munity. Pinckney states that a reasonable fee range for an
attorney with three or more years experience in federal liti-
gation is $85 to $125 per hour. He further states that $60 per
hour is a reasonable fee for a first-year associate with a year
86a
of experience clerking for a United States Court of Appeals
Judge. Finally. he states that $25 to $35 per hour is a reason-
able fee range for summer law clerks and for paralegals spe-
cializing in litigation.
Six of the attorneys to whom fees are due (Bishop, Bryan,
Fillette. Harper, Hayes and Wester) have more than three
years of experience in federal litigation. Absent the limita-
tions of the EAJA, therefore, each would be due a fee com-
puted at more than $85 per hour.
A number of other factors support the application of an
hourly rate at or near the higher end of the fee ranges articu-
lated by Pinckney.
1. The special skill and experience of counsel. — Each of
the six attorneys named above displayed great skill in this
case. Although the length of experience of this group varies
from four years to fourteen, those lawyers with the least
amount of time practicing “the trade,” attorneys Hayes and
Harper, have developed substantial expertise in the field
which was the subject matter of this lawsuit. Attorney
Spence, although not as experienced as the other attorneys,
also displayed commendable skill in his work in drafting
documents presented to the court.
2. The quality of representation. — Counsel did an excel-
lent job of representing the plaintiffs and the intervenor.
3. The results obtained in this suit. — Plaintiffs and the
intervenor achieved substantially everything they sought in
pursuing this litigation. The order of this court will affect
favorably thousands of disabled people in a significant way.
Furthermore, the prospective effect of this court’s order will
serve to prevent untold hardship from afflicting countless
other disabled people.
4. The novelty and difficulty of the questions raised, and the
skill performed in rendering legal services. — Although the
legal questions were clear, the defendant was intransigent
87a
throughout the course of the case. Counsel for plaintiffs and
intervenor displayed great skill in presenting their positions
and in refuting the contentions of defendant.
5. Loss of other income on account of this case. — A num-
ber of the attorneys and staff who worked on this case have
never expected to be compensated. Those people, members
of the law firm of Fleming, Robinson, Bradshaw & Hinson,
P.A., offered their services to plaintiffs as part of the Volun-
teer Lawyers Program (VLP) of the Mecklenburg County Bar
and of Legal Services of Southern Piedmont, Inc. The Vol-
unteer Lawyers Program, from its inception, has had a pol-
icy that participating pro bono attorneys should seek the
award of fees where appropriate in VLP cases. but that any
fees awarded by a court should accrue directly to the VLP
for utilization by the Program for further provision of free
legal services to eligible residents of Mecklenburg County.
The court concludes, therefore, that this factor should have
no effect on the award.
6. Time limitations imposed by the client or the circum-
stances. — The circumstances of this case put a premium on
fast action by counsel in seeking a court order stopping the
defendant from failing to follow the law. The amount of
benefits awarded or not awarded to each individual plaintiff
may be small in the abstract, but the effects of withholding
those payments from the plaintiffs are immediate and sub-
stantial. To the extent that this court’s order prevents any
future denial or cessation of deserved benefits, quick action
by counsel afforded the plaintiffs greater relief than plain-
uiffs might otherwise have obtained.
7. Reputation and ability of counsel. — These characteris-
tics of counsel were, and continue to be, excellent.
8. The undesirability of the case within the legal commu-
nity. — This factor should have no effect on the award.
88a
9. Nature and length of the professional relationship. —
This tactor does not affect the award.
All of the above factors would support a determination
that the applicable hourly rate for attorneys Bryan and
Wester should be at or near $125 per hour. The EAJA limits
the rate, prima facie, however, to $83 per hour.
Attorney Spence’s hourly rate is hereby determined to be
$60 per hour. The rate for Bryan and Wester is hereby deter-
mined to be $83 per hour.
Attorneys Bishop, Fillette, Harper and Hayes, like Bryan
and Wester, nothing else appearing, would also be entitled to
charge $125 per hour. In addition, they are particularly
experienced in litigation under the Social Security Act, and
lawyers with their level of such expertise are not readily
available. This “special factor,” which is recognized in 28
U.S.C. §2412(d) (2) (A), justifies a higher hourly rate than
otherwise allowed under the EAJA. See Hoopa Valley Tribe
v. Watt, 569 F. Supp. 943 (N.D. Cal. 1983). The court there-
fore determines that Fillette and Hayes should be compen-
sated at a rate of $95 per hour, and that Bishop and Harper
should be compensated at the rate of $90 per hour.
The services of paralegal Vorhoff and law students Foster,
Cassada, and Loeb should be compensated at the rate of $25
per hour.
ere ae ee
89a
10. The time and labor expended. — The affidavits sub-
mitted demonstrate that the following hours were spent on
this case:
Attorneys Hours
Bishop 117.40
Bryan 221.80
Fillette 25.00
Harper 258.00
Hayes 64.25
Spence 310.00
Wester 148.90
Law Students
Cassada 107.30
Foster 63.50
Loeb 128.70
Paralegal
Vorhotf 45.30
Based on all of the above factors, the court's initial esti-
mate of a reasonable attorneys’ fee for plaintiffs, which
includes an award for law clerks and paralegal, is
$89,728.85. The court’s initial estimate of a reasonable
attorney's fee for intervenor is $10,566.00.
B. The suitability of an upward adjustment in the fee
award.
This case is a prime example of a situation in which a
substantially enhanced award is justified. Although the
“results obtained” in a suit
normally should not provide an independent basis for
increasing the fee award
*s
in some cases of exceptional success an enhancement
award may be justified.
Blum at 4381 (emphasis added). See also Hensley v. Eck-
erhart, _ U.S. __, 51 U.S.L.W. 4552 (May 16, 1983).
90a
The contingent nature of the fee award also justifies an
upward adjustment of the fee award. at least as to the plain-
tiffs’ attorneys. C/ Blum v. Stenson, 52 U.S.L.W. at 4381.
See alsv 52 U.S.L.W. at 4381 (Brennan and Marshall. JJ..
concurring). The plaintiffs’ attorneys served their clients
without hope of any payment unless they prevailed in the
lawsuit. The unusual circumstances of this case make the
contingent fee arrangement especially significant.
Despite the fact that this case is one in which an enhanced
award is particularly appropriate. the limitations of the
EAJA prevent such an upward adjustment of the fee. None
of the parties have submitted any authority in support of the
assertion that a court may enhance the award to the extent
that the hourly rate limitations would be exceeded.
Taking all of the above factors into consideration, the
court is of the opinion that a fee of $89.728.85 for plaintiffs’
counsel, and a fee of $10,566.00 for intervenor’s counsel. are
reasonable. and should be paid.
IT IS THEREFORE ORDERED, ADJUDGED AND
DECREED:
|. That the reasonable value of the services rendered by
plaintiffs’ counsel which are properly taxable under the
Equal Access to Justice Act is $89,728.85.
2. That the sum of $89,728.85 shall be paid to Legal
Services of Southern Piedmont. Inc. by the United States as
counsel's full and only fee for representing plaintiffs in this
civil action to this date.
3. That defendant shall also pay to Legal Services of
Southern Piedmont, Inc. the plaintiffs’ expenses and costs of
$2.056.26.
4. That the reasonable value of the services rendered by
intervenors counsel which are properly taxable under the
Equal Access to Justice Act 1s $10,566.00.
—
9la
5. That the sum of $10,566.00 shall be paid to Attorney
Jeffrey Bishop as his full and only fee for representing inter-
venor in this civil action to this date.
6. That defendant shall also pay to intervenor’s attorney
the intervenor’s expenses and costs of $315.49.
This 8 day of May, 1984.
/s/ JAMES B. MCMILLAN
JAMES B. MCMILLAN
United States District Judge
92a
APPENDIX I
UNITED STATES DISTRICT COURT
W.D. NORTH CAROLINA,
CHARLOTTE DIVISION.
No. C-C-85-655-M.
PATRICK H. Hyatt; HERMAN O. CAUDLE AND
Mary P. LOVINGOOD, ON BEHALF OF THEMSELVES AND ALL
OVHERS SIMILARLY SITUATED, PLAINTIFFS
AND
NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES,
DISABILITY DETERMINATION SERVICES, PLAINTIFFS-
INTERVENORS
Vv.
MARGARET M. HECKLER, OR HER SUCCESSOR IN OFFICE,
SECRETARY OF THE UNITED STATES DEPARTMENT OF
HEALTH AND HUMAN SERVICES, DEFENDANT.
Sept. 11, 1985.
ORDER
McMILLAN, District Judges.
This case is before the court on plaintiffs’ second and third
motions for aitorney fees.
The background to this case is set Out in this court’s
orders reported at 579 F.Supp. 985 (W.D.N.C.1984) and
586 F.Supp. 1154(W.D.N.C., 1984), vacated and remand-
ed, 757 F.2d 1455 (4th Cir. 1985), and the order of remand
filed June 25, 1985, and will not be repeated in detail here.
Oe en ee
93a
In its decision reported at 586 F.Supp. 1154, the court
set in detail the Blum v. Stenson, 465 U.S. 886, 104 S.Ct.
1541, 79 L.Ed.2d 891 (1984) and Johnson v. Georgia
Highway Express, 488 F.2d 714 (Sth Cir. 1974) factors and
their applicability to a fee award in this case. There is no
need to repeat that litany once again. The issue presented
to the court at this time is whether plaintiffs’ fee award
should be reduced to account for the issues on which the
Appeals Court reversed this court’s judgment and on
which defendant might therefore be said to have prevailed.
Before addressing the specific issue of reduction of the
award, the court will address the proposition advanced by
defendant that plaintiffs are no longer prevailing parties as
a result of the Fourth Circuit’s decision. She argues that
because the injunction against non-acquiescence was
vacated, and because that was “all plaintiffs were asking
for in bringing this suit,” the plaintiffs are no longer
prevailing parties and should be awarded no attorney fees.
The court does not accept that contention. It defies the im-
agination to concoct an interpretation of this suit that
would make plaintiffs anything but prevailing parties. In-
deed, as discussed below, the court finds that, despite cer-
tain modifications of the original judgment, plaintiffs’
achievements remain so substantial as to justify the court
in finding that they have obtained excellent results and to
award all but a small portion of the fees requested.
In vacating this court’s injunction against the
defendant’s policy of non-acquiescence, the Fourth Circuit
specifically stated that “the Secretary should not deem
vacation of the injunction as approval of the policy [of
nonacquiescence]}” and that “we will not assume that the
Secretary will disregard the views expressed in the Con-
ference Report [to the 1984 Social Security Disability
Reform Act] about the Secretary’s policy of nonac-
quiescence in circuit law.” (Hyatt v. Heckler, supra, 757
F.2d at 1460, 1461). The defendant appears to have taken
ae
94a
the admonitions of the courts and Congress to heart. On
June 3, 1985, defendant issued a news release announcing
that the Social Security Administration was abandoning,
in the overwhelming majority of cases, its “practice of
routinely not applying a circuit court’s interpretation
beyond the decision in the particular case.” In its Interim
Circular No. 185, apparently issued simultaneously for in-
clusion in the Office of Hearings and Appeals Handbook,
defendant states
SSA has been subject to increasing litigation in recent
years involving a myriad of program issues. One of
the most troubling questions which has been raised by
Congress, the Courts, and by the public at large has
been the issue of nonacquiescence. Recently, nonac-
quiescense has been the subject of various law suits
challenging its legality. Moreover, Congress, in enact-
ing the 1984 Disability Amendments, indicated in a
Conference Report on that legislation that the
Secretary should seek a resolution of the issue. These
developments have led to a reexamination of the
agency’s practices. As a result, the Secretary has
decided to modify the long-standing policy and has
established a procedure described below. These pro-
cedures require that particular circuit court decisions
will be considered prior to a final decision of the
Secretary being rendered on the case.
The nexus between this suit and the modification of the
Secretary’s admittedly “long-standing policy” of nonac-
quiescence is thus admitted by the Secretary herself.
More fundamentally, plaintiffs have achieved the result
for which the suit was originally filed and pursued. In
order to be a prevailing party, “what always must occur is
the establishment of a right or the proscription of a
wrong.” Smith vy. University of North Carolina, 632 F.2d
316, 347 (4th Cir.1980). Plaintiffs have been granted the
right to new hearings under lawful standards.- This relief
ee a. See Pree |
95a
would not have been achieved for most of the plaintiffs
benefited by the order on remand filed June 25, 1985, had
the suit not been filed and prosecuted to this point.
Although the intervening legislation made the remands of
the Dotson class “automatic,” the members of the class
who were not already in federal court benefited only
because a class action had been filed in their behalf. The
Myers and Martin class members would not have been
guaranteed new hearings at all. The scope of the recon-
sideration of the claims of the latter two classes’ members
is beyond that which would have been required by an in-
dividual remand in those cases already filed in federal
court. Plaintiffs’ filing of the Hyatt suit, the motions for
class certification and injunctive and declaratory relief,
were all necessary to bring to the plaintiffs’ classes the
relief obtained by the issuance of the June 25, 1985, order
of remand.
Defendants’ exclusive focus on the vacation of the in-
junction against nonacquiescence is misplaced. That ap-
proach attempts to trivialize what has been a more than
significant effort on behalf of and victory for the rights of
the plaintiffs.
Defendant further argues that plaintiffs are not prevail-
ing parties because the classes gaining benefits from this
suit have shrunk drastically because of the reversal by the
Fourth Circuit of the inclusion in the Martin and Myers
classes of persons who did not exhaust administrative
remedies or received adverse decisions from the Appeals
Council more than 60 days prior to the filing of this suit but
did not file suit pursuant to the requirements of 42 U.S.C.
§ 405(g). The Secretary brings forward figures (not
previously presented to the court) that the original Hyatt
classes, in total, may have included over 60,000 persons en-
titled to receive review of their claims but that the class has
now shrunk to “only” between 10,000 and 15,000 people.
96a
Although this reduction might entitle defendant to some
reduction in the amount of fees awarded should it be
found that a substantial portion of counsel’s time was
spent solely on those individuals’ claims, this development
does not change pl
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