Petition for Writ of Certiorari — Benjamin v. Richardson

Supreme Court brief1971

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SUBJECT INDEX

Page

Table of Cases and Other Citations............... ili

TEE ORCE CET. TECTER CCT TELE ETE 2

SE” 6i5 SkaGhb aad 26656 06SR 060 Soa sean Ces 3

Questions Presented for Review ................. 3

Statutes and Constitutional Provisions Involved... 4

SS GE ON GUD i vc bcccckcaceccsennen ans 4-7

Reasons for Granting Writ of Certiorari.......... 7-30

A. This Court Should Settle the Meaning of

Section 224 of the Social Security Act...... 7-18

1. A Michigan “Redemption” Settlement is

Not a Commutation of or a Substitute

for Periodic Payments ............... 7-9

2. The Secretary and the Lower Court

Limit “Lump Sum” in Section 224 to

Claimant’s Attorneys Fees and Past

SE IO snc cccchsdenkoandens 10-14

3. The Lower Court’s Construction of Sec-

tion 224 Conflicts with this Court’s Rules

of Statutory Construction and with the

Purposes of the Statute .............. 14-18

B. Section 224 of the Social Security Act is

Contrary to the Fifth Amendment of the

United States Constitution. This Court has

Other Cases involving these issues before it 18-26

1. Arbitrary Discrimination .............. 18-22

2. Impairment of Contractual Obligations

3. The Rights-Privilege Distinction of Flem-

ming v. Nestor, Upon Which the Lower

23.

Court Opinions in Lofty and in the In-

stant Case are Based, Has Been Aban-

doned by this Court ..................

C. The Secretary’s Failure to Apply Section

159 Of Public Law 90-248 in Computing

Claimant’s Earnings Presents Another Im-

portant Federal Question .................

Conclusion Of es Om oP ae REE ne eo a eeeeee

Appendix A: Opinions of Courts and Agencies....

Court of Appeals, Sixth Circuit ..............

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SI TI 4 6 5 6.046605 ba cnnccecsencanins

Hearing Examiners ...........0sececeeeeees

EE Sha Vicccsannkeesganene bane der

SE UG bsU dG eeE Ra hWioneeked ba-shOuss bacedas

24-26

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INDEX TO AUTHORITIES CITED

Table of Cases

Page

Bartley v. Richardson, Sup. Ct. No. 703, review

sought of 311 F. Supp. 876 (E.D. Ky., 1970). .18, 19, 31

Belcher v. Richardson, 8S. Ct. No. 1091, reviewing

317 F. Supp. 1294 (S.D. W. Va. 1970). .2, 18-20, 26, 31

Bolling v. Sharpe, 347 U.S. 497 (1954)............ 22

California Dept. of Human Resources Development

v. Java, — U.S. —, 39 Law Week 4481 (1971) 22

Daniel v. Goliday, 398 U.S. 73, (1970)............ 26

Davidson v. Gardner, 370 F. 2d 803 (6th Cir. 1967) 17

Delno v. Celebrezze, 347 F. 2d 159 (9th Cir. 1965) 17

Ewing v. Black, 172 F. 2d 331 (6th Cir. 1949).... 17

Flemming v. Nestor, 363 U.S. 603 (1960)........ 24-26

Fox v. Employment Sec. Commis., 379 Mich. 579

NEE | 4 ctb andes shaakeheeadanegaeeaaneusees 22

Goldberg v. Kelley, 397 U.S. 254 (1970).......... 26

Heikkila, v. Celebrezze, 222 F. Supp. 629 (N.D. Calif.

ER rere re Pm rye pat at ar ON mene 25

Helvering v. Davis, 301 U. S. 619 (1937)........... 14

Kennedy v. Mendoza-Martinez, 372 U.S. 144 (1963) 25

Lofty v. Richardson, Sup. Ct. No. 1758, review

sought of 440 F. 2d 1144 (6th Cir. No. 20484,

SEE | sNkudedeaceeeshcedsawananes 2, 6, 7, 13, 19, 24, 31

Miley v. Finch, — F. Supp. —, CCH Un. Ins. Reps.

Fedl. Para. 15,848 (‘2.D. Mich 1970).......... 12-14

Nebbia v. New York State, 291 U.S. 507 (1933).. 22

A. H. Phillips, Inc. v. Walling, 324 U.S. 490 (1945) 17

Porter v. Shibe, 158 F. 2d 68 (10th Cir. 1946).... 22

Quaker City Cab Co. v. Pennsylvania, 277 U.S. 389

CRUE... cavaWbbachece sucewéekensede¥eeseUunn 21, 22

Reynolds v. Gardne., 271 F. Supp. 676 (W.D. Va.

1966), aff'd 381 F. 2d 380 (4th Cir. 1967)...... 17

Rusk v. Cor*. 369 U.S. 367 (1962)........... ive “Se

St. Luke’s Hospital Assoc. of Cleveland, Ohio v.

United States, 333 F. 2d 157 (6th Cir. 1964).. 17

Sayers v. Gardner, 380 F. 2d 940 (6th Cir. 1967)... 14,15

Schwing v. United States, 165 F.2d 518 (3d Cir.

BOE carcedseneues scene sb0eeenerascssacees 17

Shapiro v. Thompson, 394 US. 618 (1969)........ 25

Sherbert v. Verner, 374 U.S. 398 (1963).......... 25

Slone v. Finch —- F. Supp. —, CCH Un. Inc. Rep.

Fedl. Para. 16,093 (S.D. Ohio, 1970).......... ll

Charles C. Steward Machine Co. v. Davis, 301 U.S.

3, BPR rer rt errr errr errr re le

Swann v. Adam, 385 U\S. 440 (1967)............. 25

United States v. American Trucking Ass’n, 310 U.S.

Se CE Wu ceWecwbesendhdnbecesabenees dees 16, 17

United States v. Brown, 381 US. 437 (1965)...... 25

United States v. Silk, 331 U.S. 704 (1947)......... 14,17

Page

Wehmeier v. W.E. Wood Co., 377 Mich. 176 (1965)

8, 9, 12, 13

Wells v. Rockefeller, 394 U.S. 542 (1969)........ 25

Wheeler v. Montgomery, 397 U. S. 280 (1970).... 26

Constitution, Statutes, Rules and Miscelianeous

Constitution of the United States:

Article I, Section 10.............ccceeeeeeees 98

ere DO a k.nn deen dkncncccnaascodsaas 7, 18-26

Fourteenth Amendment ..................... 22, 23

16A Corpus Juris Secundum, “Constitutional Law,”

Us Ge 6 ocak sc doeénnsakscassassnenstessanne 23

82 Corpus Juris Secundum, “Statutes,” Secs. 346

| Pree rr Perr rer oe. rrr ere rr re 61

Federal Rules of Civil Procedure:

BOE SD nc dO Svncndcvebenacaddaucadewadeos

SD POE a Sab ee nvkkened es dewasnedieakad 6

The Legal Process, Hart and Sacks (1957 Cam-

bridge Tentative Ed.) ...........cccccccceece 16

Public Law 90-248, Section 159 (1967)........ 3, 6, 7, 27-30

Social Security Act (42 U.S.C.A. Sees. 301 e¢ seq.):

Section 201(%) (42 U.S.C.A. See. 401(b)...... 19

Page

Section 202 (a) and (n) (42 U.S.C.A. Sec. 402

i Fer erere eT Peer reer ry eee 10, 17, 24

Section 205(g) (42 U.S.C.A. Sec. 405(g)...... 5

Section 215 (42 U.S.C.A. Sec. 415)............ 27

Section 223 (42 U.S.C.A. Sec. 423).......... 16, 23, 26

Section 224 (42 U.S.C.A. Sec. '424a) ...... 3, 5-7, 3-14,

16, 18-31

Section 303 (a)(1) (42 U.S.C.A. See. 503(a)(1)) 22

Supreme Court Rules:

Fe APPT Eee ST TTT eee CTT CTT Te 2

Title 28, U.S.C. Section 1254 (1)............eceee 3

2 U.S. Congressional & Administrative News, 1967 27, 28

U.S. Senate Hearings on H.R. 6675............... 20

Workmen’s Compensation Act of Michigan, Part

II, ‘Sec. 22 (Comp. Laws Sec. 412.22, Mich. Stat.

Be WU Se ns Aa keh edaee a eede aes 7-9

IN THE

Supreme Court of the United States

—— mw aw ew mr me “TERM, 1971

———

Supreme Court No, ...........00

Court of Appeals No. 20714

—~——

JOHNNEY BENJAMIN,

Petitioner,

ELLIOTT RICHARDSON, SECRETARY OF HEALTH,

EDUCATION AND WELFARE,

Respondent.

—p—

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

SIXTH CIRCUIT

To the Honorable, the Chief Justice of the

Umited States and the Associate Justices of

the Supreme Court of the Umted States: R

The petitioner, by his attorneys, prays that a Writ of

Certiorari issue to review the opinion and judgment of the

United States Court of Appeals for the Sixth Circuit en-

tered in this matter on April 29, 1971.

Petitioner asks that this Petition be considered along |

with that in Lofty v. Richardson, Supreme Court No. 1758.

The Petition in Lofty was filed on May 28, 1971. Counsel

for petitioner Lofty concurs with this request.

OPINIONS BELOW

Said opinion and judgment of the United States Court of

Appeals for the Sixth Circuit is not yet officially reported.

(See Appendix A, pp. 35-35). Petitioner, in accordance with

Rules 23" (a) and (i) also includes the following opinions

in Appendix A: 1. July 13, 1970 Order of District Court

Judge Damon Keith Denying Motion for Rehearing of

Plaintiff’s Motion for Summary Judgment,....F. Supp.

.... (E.D. Mich) (pp. 43-48); May 20, 1970 Memoranda

Opinion and Order of Judge Keith....F. Supp.... (35-

43); March 17, 1969 Decision of Appeals Council (48-53) ;

December 3, 1968 Decision of Hearing Examiner Fenster

(53-60) ; and April 12, 1968 Decision of Hearing Examiner

Ferguson (61-69)* Petitioner also therein includes the lower

Court opinion in the companion case of Lofty v. Richard-

son, Swpreme Court No. 1758 certiorari to 440 F. 2d 1144

(6th Cir. March 4, 1971) (70-84). Another companion case

is Belcher v. Richardson, Supreme Court No. 1091 appeal

from 317 F. Supp. 1294 (S.D. W. Va., 1970). This Court

agreed to hear Belcher on March 1, 1971.

1 Petitioner will herein usually be called “claimant.” Petitioner

was often referred to as “plaintiff’ befcre the District Court. Re-

spondent will usually be called “the Secretary.”

2 Petitioner only includes the portion of the first Hearing Ex-

aminer’s Decision relevant to the last question presented to this Court.

This portion shows claimant’s combined earning from two jobs (65).

JURISDICTION

The jurisdiction of this court is invoked under Title 28

U.S.C. Section 1254 (1).

QUESTIONS PRESENTED FOR REVIEW

1. Was the total ‘‘redemption” settlement received by

claimant a lump sum payment exempt under Section 224

(b) from the reduction provisions of Section 224(a) of

the Social Security Act?

2. Assuming arguendc that claimant’s total ‘“‘redemp-

tion” settlement was not exempt under Section 224 (b) of

said Act, should the Secretary have allocated part of claim-

ant’s lump sum settlement to future medical expenses

rather than strictly limiting claimant’s lump sum settle-

ment to substitute for weekly payments, past medical ex-

penses and attorneys fees?

3. Does Section 224 of the Act, as construed by the Sec-

retary, deprive claimant of property without due process

of law in that it arbitrarily discriminates against workmen’s

compensation claimant who has paic into the trust fund

the same amount of money as other claimants and by effec-

tively nullifying claimant’s private settlement agreement.

4, May the Secretary fail to apply Section 159 of Public

Law 90-248 in computing the earning of claimant, who had

been working two jobs when injured?

STATUTES AND CONSTITUTIONAL PROVISIONS

INVOLVED

Section 224 of the Social Security Act [Title 42, U.S.C.

Section 424a], Section 159 of Public Law 90-248, and the

Fifth Amendment to the Constitution of the Nuited States.

The relevant portions of the Statute are included in Ap-

pendix B.

STATEMENT OF THE CASE

Claimant was shot in the back on April 20, 1966 while

employed by the Log Cabin Bar in Detroit, Michigan.

(53, 65) He received Workmen’s Compensation bene-

fits from April 20, 1966 through April 1, 1967, which in-

‘cluded weekly payments of $58.13 and furnishing of hos-

pital and medical care. The benefits received by plaintiff

were voluntarily paid by his employer’s Workmen’s Com-

pensation insurer, and no determination of his employer’s

liability for such benefit was ever made under the Michi-

gan Workmen’s Compensation Act. (56)

A dispute arose between claimant and his employer’s

insurer over the correct amount of his weekly compensa-

tion payment, and claimant filed an application for ad-

justment of claim with the Workmen's Compensation De-

partment. While his application was pending, claimant’s

weekly benefits were terminated by his employer’s in-

surer. The employer’s insurer filed an Answer to claim-

ant’s application denying all liability. Settlement nego-

tiations were then carried on between aitorneys for the

parties. Thereafter, on September 7, 1967, the Michigan

Workmen’s Compensation Department approved a “re-

demption” settlement agreement entered into by the claim-

ae i

ant and his employer’s insurer providing for the lump

sum payment to him of $10,000.00. On September 27, 1967,

payments were made by the employer’s insurer pursuant

to said redemption agreement, (53, 56, 57)

Claimant was working two jobs when shot. (65) His

regular day-time job was at a car dealer’s and he also

worked evenings at the bar. His combined monthly earn-

imgs at his two occupations before his jury were $709.00.

(65) The monthly combination of full workmen’s com-

pensation and Social Security disability benefits would be

only $372.90.

Claimant was found to be disabled in the decision of

Hearing Examiner Milton C. Ferguson on April 12, 1968

(69) He thereupon became entitled to benefits on his

application for a period of disability and for disability

insurance benefits. Thereafter, his disability benefits were

reduced because of the receipt of Workmen’s Compensa-

tion benefits. The reduction was predicated on Section 224

of the Act (85-89) Claimant sought review of the reduction

in his benefits. Examiner Fenster fownd in part:

“.. . this lump sum award had all the earmarks

of a settlement of a lawsuit rather than a substitute

for periodic payments.” (58; emphasis ours)

The Examiner concluded that claimant was entitled to

his full benefits without reduction. (60)

Thereafter, the Social Security Administration Appeals

Council on its own motion reversed the decision of Hear-

ing Examiner Fenster, and applied the reduction provi-

sions of Section 224. (48-53)

Although evidence of claimant’s two jobs and of his

combined earnings was presented to the Appeals Council,

it did not recompute claimant’s average monthly earnings

from and after February 1, 1968, as required by Section

159 of Public Law 90-248.

The decision of the Appeals Council became the final

decision of the Secretary subject to review under Section

205 (g) of the Act. [Title 42, U.S.C. Sec. 405(g¢)] Claim-

ant brought an action in the District Court against the Sec-

retary challenging the decision that his disability benefits

were subject to reduction pursuant to Section 224. Claim-

ant’s action further challenged the Secretary’s failure to

apply Section 159 of Public Law 90-248 in computing

plaintiff’s earnings.

Claimant and the Secretary both Moved for Summary

Judgment. The District Court, on May 28, 1970, denied

claimant’s Motion and granted the Secretary’s Motion

for Summary Judgment. (35-43)

Claimant, pursuant to Rules 52 (b) and 59 (a)(2) of

the Federal Rules of Civil Procedure, Moved the District

Court tc amend its Findings and Judginent and for a New

Hearing. The Court, on July 15, 1970, denied claimant’s

said Motion and denied his request for Oral Argument.

(43-48)

Claimant then appealed to the Court of Appeals. That

Court, on April 12, 1971, in a Per Curiam Order, affirmed

the District Court’s judgment. (33-35)

The Secretary had contended that the lump sum exemp-

tion provision of Section 224 (b) was limited to medical

expenses and to legal fees. The Court of Appeals held

that a Michigan ‘‘redemption” settlement always consti-

tutes in part a commutation of periodic compensation pay-

ments. The Court held that claimant’s Social Security bene-

fits may be reduced by his entire lump sum Workmen’s

Compensation settlement, except for the unpaid medical

expenses and attorneys fees, which the Secretary had de-

ducted. The Court did not attribute any of ciaimant’s set-

tlement to future medical expenses, saying that claimant

had not proven the amount of said future expenses.

The lower Courts rejected claimant’s constitutional ar-

guments, basing their decisions on Lofiy v. Richardson, pe-

tition for certiorari pending before this Court in Case No.

1738. (440 F.2d 1144, 1971, and 325 F. Supp. 285, 1970)

The Court of Appeals ignored the Secretary’s failure to

recompute claimant’s earnings, because of his second job,

as required by Scction 159 of Public Law 90-248.

REASONS FOR GRANTING WRIT OF CERTIORARI

Important Federal Questions are Presented By The

Lower Court’s Construction of Section 224 of the Social

Security Act, Important Constitutional Questions aze

Presented by Said Section 224 Itself, and This Court

is Considering Cases Involving The Constitutional

Questions

A. This Court Should Settle the Meaning of Section

224 of the Social Security Act.

These Statutory construction issues were present but

were not litigated in Lofty, supra.‘'The only question pre-

sented to this Court in Lofty is similar tu Petitioner’s

question No. 3, supra.

1. A Michigan “Redemption” Settlement is Not a

Commutation of or a substitute for Periodic Pay-

ments,

The Michigan Workmen’s Compensation Act allows a

commutation of or a substitute for periodic payments by

means of a “lump sum advance;” Part II, Section 22 of the

Act provides in part:

“. . . [S]Jaid compensation commission may at

any time direct in any case, if special circumstance

be found which in its judgment require the same,

that the deferred payments due under this Act be

commuted on the present worth thereof at 5 per

cent per annum to 1 or more lump sum payments.”

(Mich. ‘Comp. Laws, Sec. 412.22; Mich. Stats. Ann.

Sec. 17.172)

Had claimant received a “lump sum advance’’ pursuant

to the above statutory provision the Secretary would have

acted correctly in applying the reduction because the

‘‘luamp sum advance” would have been a commutation of,

or a substitute for, periodic payments.

However, under Michigan law the payment recewed by

claimant was not a commutation of, or a substitute for,

perwdtc payments; claimant received a lump sum by way

of a ‘‘redemption” settlement which is an entirely different

concept under Michigan law.

With respect to a ‘‘redemption” the Michigan Work-

men’s Compensation Act provides in Part II, Section 22

as follows:

“(Any liability resulting from an injury] may be

redeemed by the payment of a lump sum by agree-

ment of the parties, subject to the approval of the

commission, . . .” (M.§. A. 17.172).

The difference between the ‘‘redemption” under Michigan

law and the “lump sum advance” include the following:

(1) The “redemption” constitutes a settlement in full

of all rights of claimants of actual and possible liability of

employers in regard to not only weekly benefits, but medi-

cal and hospital expenses, cost of nursing care and reha-

bilttation through vocational training, as well, for his en-

tire life. Wehmeter v. W. E. Wood Co., 377 Mich. 176, 139

N. W. 2d 733 (1966). In contrast, the ‘‘lump sum advance”

covers weekly benefits only and is a commutation of substi-

tute for such periodic benefits.

(2) The “redemption” is like an out of court settle-

mest of a contested claim; the amount agreed upon is a

negotiated compromise and considers many factors, in-

cluding the question of liability. In contrast, the ‘‘lump

sum advance” is directly and solely a commutation of de-

ferred weekly benefits based on their present worth at 5%

per year;

(3)' The ‘‘redemption”, when approved, allows attor-

ney fees of up to 15% of the amount of the settlement under

Michigan Workmen’s Compensation rules; in contrast, the

attorney fee in connection with the lump sum advance is

entirely discretionary with the Hearing Referee who con-

siders it; in practice either no fee is allowed or a mere

nominal fee is permitted.

The Michigan Supreme Court, in Wehneicr v. W. E.

Wood Co., supra held that a ‘‘redemption’’ settlement,

under Michigan law, was not the same as a “‘lump sum ad-

vance” of weekly Workmen’s Compensation payments. The

Court of Appeals, while purporting to rely upon Weh-

meter, supra, holds that a Michigan redemption settle-

men is always at least in part a “commutation of, or sub-

stitute for, periodic payments” for purposes of Sections

224(a) and (b) of the Social Security Act. (34) Thus,

the Court of Appeals’ construction of Michigan law con-

flicts with the holding of the highest Court of Michigan.

The decisions of the Secretary and the Court of Ap-

peals are contrary to and, in effect, nullify the specific

language of Subsection 224(b). If this lump sum redemp-

tion settlement is a ‘‘commutation of” or a “substitute

for” periodic payments, then any lump sum would be.

This, in effect, nullifies the ‘lump sum proviso.”

2. The Secretary and the Lower Court Limit

“Lump Sum” in Section 224 to Claimant’s At-

torneys Fees and Past Medical Expenses

The Court of Appeals, in this case accepted the Secre-

tary’s argument that the ‘‘lump sum” exception be limited

to claimant’s attorneys fees and medical payments. This

argument is faulty. If Congress had so intended to limit

‘lump sum,” then it could easily have said so. Other sta-

tutes, such as the Michigan Workmen’s Compensation Act,

specifically deal with medical payments. Furthermore,

‘*Iump sum” is broader than the meaning suggested by the

Secretary in other parts of the Social Security Act. (See,

e.g., Sec. 202(n)(1)(c} in regard to ‘‘lump sum death pay-

ment.”’)

The mischief inherent in the Court’s Order is apparent

from its conclusion that a Michigan redemption settle

ment “aiways constitutes m part a commutation of perio-

dic payments.” (34) That means that the lump sum ex-

ception is written out of the Act for all Michigan workers.

Petitioner submits that the Court errs by holding that

part of cvery Michigan redemption settlement is a substi-

tute for periodic payments. But assuming arguendo that

the Court is correct, this cannot justify the Court’s con-

clusion that claimant’s entire redemption settlement (less

attorneys fees and past medical expenses) should be

treated as a commutation of or substitute for periodic

payments. The lower Court holds claimant responsible

for not having proven what part of his redemption settle-

ment was made up of future medical expenses, thereby

also winning exclusion of them from the reduction com-

putation. This would have required claimant over a year

after the settlement was consummated and when claimant

appeared before the Hearing Examiner or two years later’

when the matter came before the District Court, to show

what part of the settlement was apportioned to future

medical expenses. Such an undertaking would have been

sheer deception and pure speculation because the nature

of this redemption settlement precludes an apportion-

ment by the weekly payments and medical expenses.

Other Courts place this burden on the Secretary. The

identical issue was involved in Slone v. Finch,. ... .F. Supp.

...-, CCH Un. Ins. Rep. Para. 16,093 (S. D. Ohio; Novem-

ber 27, 1970). Claimant Slone received a Jump sum settle-

ment of $8,000 under the Ohio Workmen’s Compensation

Act. Two thousand dollars had been paid by claimant as

attorney’s fees. The Secretary concluded that the entire

$6,000 remaining was a commutation of periodic payments

and, thus, substantially reduced claimants Social Secu-

rity disability benefits. Judge Hogan grapsed this issue

and, in a well reasoned opinion, stated in part:

“It is quite clear to this Court that if the Com-

mission makes a given award to a given person for

a given number of weeks and thereafter, on ap-

plication, the ‘(Commission commutes that to a lump.

sum payment, then the lump sum payment is merely

a commutation of or substitute for periodic pay-

ments as that term is used in Section 424 and would

clearly furnish the basis for an appropriate deduc-

tion.

The other secticn and the one specifically in-

volved in this case is Revised Code Section 4123.65.

This section is entitled, ‘Application for final settle-

ment.’ ...

As we pointed out initially, this is an unusual

situation. Gambill v. Finch, 309 F. Supp. 1 (E.D.

Tenn., 1970) is a pure and simple commutation case.

The same is true of Ladner v. H.E.W., 304 F. Supp.

474 (Miss., 1969). In other words, in the Ladner

case the Act itself as applied to the facts settled

the periodic payments and, after the periodic pay

ments had been settled, the commutation took place.

In thts record there never occurred any event

based on which either the period involved in a pe-

riodic payment or the amount involved in a periodic

payment was determined, The only thing that was

determined in this case by the action of the Com-

mission was that $8,000.00 was a fair amount to

pay, not in any communtation, but in exchange for a

release of whatever claim it was this plaintiff made.

We point out that the claimant, is zart of this set-

tlement, not only released any basic claim he had

for periodic payment but also released any claim

which he might ever have in the future for any

medical or hospital expenses... .

The Secretary has made no finding in respect of

how much of the settlement amount represented a

‘substitute for’ periodic payments and how much

represented & ‘substitute for’ future ‘lump sum’

payments for medical expense.” (at pp. 2167, 2168;

emphasis added)

The Court remanded the case to the Secretary. The U. S.

Attorney served notice of appeal in January, but with-

drew it in February, 1971. The Judge’s distinction be-

tween the two Sections in the Ohio Statute is similar to

the distinction made by the Michigan Supreme Court in

Wehmeicr, supra. The Court of Appeals here overlooked

such distinction.

Ironically, District Judge Keith, who had decided the

instant case, issued a later decision which reaches the

same result as in Slone, supra. In Miley v. Finch,.... F.

Supp....., CCH Un. Ins. Reps. Para. 15,848 (E.D. Mich.

June 12, 1970), the Court rejected claimant’s constitu-

tional arguments, relving upon his decision in the instant

case and upon Lofty, supra. But the Court remanded the

case to the Secretary, holding in part:

“Finally, plaintiff argues that the secretary

failed, prior to applying the offset provisions of

the act, to reduce the amount of the redemption by

any payment for future medical expenses included

in the settlement agreement. . .

It is unquestionably the law in Michigan that a

redemption amount encompasses payment of weekly

benefits and all past and future medical expenses.

See Wehmeier v. W.E. Wood Company (1966) 377

Mich 176.

If such is the case in Michigan, then, prior to any

application of the offset provisions of the Social Se-

curity Act, a determination must be made on each

redemption amount as to what portion represents

a commutation of our substitute for periodic pay-

ments and what portion represents settlement for

past and future medical expenses.

The record in this matter contains no such deter-

mination; at best the transcript contains a ‘Report

of Contact, Workmen Compensation Payment Re-

port’ from the Lansing, Michigan District Office,

stating the conclusion that the amount of $5,929.15

excludes ‘medical and/or attorney’s fees.’

As the record is void of evidence to support this

conclusion, which apparently was adopted by the Sec-

retary, there is no basis in fact on which this Court

may affirm this decision. Therefore, as to this third

issue, the matter must be reversed and remanded

so that the Secretary may, with the assistance of

evidence submitted by the plaintiff or the Work-

men’s (Compensation Board, make a determination

as to what portion of the redemption amount con-

stituted a commutation or substitute for periodic

payments and what portions represents payments

for past and future medical expenses.

It seems to this Court that, in view of the decision

of Wehmeier, supra, such a determination would

be required in every case where a redemption

amount effectuates an offset.” (Emphasis added;

at 2499)

In the instant case, the Secretary deducted some law-

yer’s fees and an amount for past medical expenses from

the offset. The Secretary neglected claimant’s future and

present medical expenses. District Judge Keith, in ruling

‘for the Secretary in the instant case, treated plaintiff Miley

better than petitioner herein.

3. The Lower Court’s Construction of Section 224

Conflicts with this Court’s Rules of Statutory

Construction and with the Purposes of the Stat-

ute...

The errors inherent in the Secretary’s and the Court

of Appeals decisions go beyond doing violence to the lan-

guage of the Act. Said decisions are also contrary to the

purposes of the Social Security Act and to this Court’s

rules of Statutory construction.

This Court discussed the history of the Act and its bene-

ficiai purposes, paritcularly in regard to its unemployment

and old age portions, in Charles C. Steward Mach. Co. v.

Davis, 301 U.S. 548, 586-588 (1937), Helvering v. Davis,

301 U.S. 619, 641-645 (1987), both opinions by Mr. Justice

Cardozo, and in United States v. Sk, 331 U.S. 704, 710

(1947), by Mr. Justice Reed.

The purpose of the disability benefits portions was dis-

cussed in Sayers v. Gurdner, 380 F. 2d 920 (6th Cir. 1967),

in part as follows:

“Because of the repeated necessity of reversing

the Secretary in these cases, we should go back to

A NS ee a ISS PEDERI

the origins of the Statute and consider first things

first. The Act was adopted pursuant to a public

policy unknown to the common law, designed for the

protection of society, and enacted to alleviate the

burdens which rest on large number of the popu-

lation because of the insecurities of modern life,

particularly those accompanying old age, unemploy-

ment and disability, through the establishment in

advance of a provident fund for the needy worker,

out of which he wili be paid disability denefits,

annuities, and compensation; and there is no ques-

tion that the Social Securities Act is constitu-

tional.”

ae ca * * *

“The Social Security Act brought with it, among

other provisions, the right to disability benefits for

workers who have become disabled from doing the

work—usually the hard manual work-—that they

have done during their lives.

“In McGaha v. Ribicoff, 262 F. Supp. 161, 167,

the court, in a case involving disability benefits

under the Social Security Act reversed the Hearing

Examiners and states... .

“Pinched by poverty, beset by adversity, driven

by necessity, one may work to keep the wolf away

from the door though not physically able to work; -

and, under the law in this case, the fact that the

woman worked to earn her living did not prevent a

jury from finding, from the evidence before it that

she was totally and permanently disabled even

while working.’” (at 942 of 380 F. 2d; emphasis

supplied)

The Court in Sayers, reversed the District Court’s affir-

mance of a denial of disability payments and directed that

benefits be paid.®

8’ The Court discussed the large percentage of times in which the

Secretary has been reversed in disability cases as bearing upon the

standards of judicial review (at 942 and 948).

aan iit, mea nee i" ¥ “ pe that Sd

This Court and most other Courts hold that the purpose

of legislation governs its interpretation. See, for example,

United States v. American Trucking Assn., 310 U.S. 534,

543, 544 (1940); and see The Legal Process, by Professors

Henry Hart and Albert Sacks, at pp. 1082 and 1339 of

1957 Cambridge Tentative Edition).

The view of the Secretary, as upheld by the Court of Ap-

peals, is contrary to the beneficial purposes of the Social

Security. Act and its Section 223 providing for disability

benefits. It also nullifies the Section 224(b) “lump sum”

exception. (See discussion, swpra, at p. 9)

The Secretary’s decision does not even square with the

presumed purpose of Section 224(a)-——that is to avoid du-

plication or pyramiding of benefits so that an individual

cannot receive more money in a combination of benefits

than he would have received if he continued to work. The

application of the Section in this claimant’s case does not

accomplish the legislative purpose; he had two jobs and

the addition of Social Security benefits to his lump sum

compensation settlement would not come close te his lost

income. (See Statement of the Case, supra, at pp. 4, 5):

In the case at bar, the court broadly construed an ex-

ception to receipt of benefits (i.e., the Workmen’s Compen-

sation offset); the Court narrowly construed the Subsec-

tion 224(b) lump sum exclusion from this offset. And, final-

ly the Court broadly construed ‘commutation” or ‘‘substi-

tute” in Subsection 224(b). The Court’s aforedescribed

standards of construction are all contrary to the general

rule of construing a beneficial statute liberally or broadly

to allow benefits and narrowly construing its disqualify-

ing provisions, or those which might reduce benefits. 82

Corpus Juris Secundum, ‘‘Statutes,’’ Section 382 (at 891-

894). In this respect, the lower Court’s decision is contrary

to the decisions of this Court, to the decisions of other Cir-

cuit Courts and even to its own earlier decisions. See, for

example, United States v. Silk, 331 U.S. 704, 712 (1937);

Schwing v. United States, 165 F. 2d 518, 520, 521 (3d Cir.

1948; and Ewing v. Black, 172 F. 2d 331 (6th Cir. 1949) ;

compare A. H. Phillips, Inc. v. Walling, 324 U.S. 490, 493

(1965).

Delno v. Celebrezze, 347 F. 2d 159 (9th Cir. 1965), was

an appeal from a judgment sustaining the decision of the

Appeals Council which had denied plaintiff’s application

for old-age insurance benefits under Section 202(a) of

the Act. (At 161) The Court of Appeals vacated said judg-

ment. In regard to construction of the Act, the Court said,

in part:

“The record indicates that the Appeals Council

applied the ‘services to occupant’ exception nar-

rowly, and included borderline items in the rental

exclusion. The general statutory preference for

coverage would seem to require the opposite ap-

proach.” (At 165; emphasis ours)

See also, Davidson v. Gardner, 370 F. 2d 803, 807, 808 (6th

Cir. 1967).

Claimant here has had Social Security taxes taken out

of his pay. To deny coverage or to reduce it by something

which le would have received anyway is to reach an ab-

surd and unfair result. Statutes, where at all possible, must

be construed to avoid such a result. See, for example, U.S.

v. American Trucking Assn., Inc., 310 U.S. 534 and St.

Luke’s Hospital Association of Cleveland, Ohio v. United

States, 333 F. 2d 157, 163, 164 (6th Cir. 1964). Compare

Reynolds v. Gardner, 271 F. Supp. 676 (W.D. Va 1966), af-

firmed 381 F. 2d 380 (4th Cir. 1967).

Neither defendant Secretary nor the lower Courts gave

any sensible meaning to the term ‘‘lump sum” in Section

224. Based upon the Statutory construction issues alone,

this Court should hear this case.

B. Section 224 of the Social Security Act is Contrary

to the Fifth Amendment of the United States Con-

stitution, This Court has Other Cases involving

these issues before it.

Section 204, as construed by the Secretary, deprives Pe-

titioner of property without due process of law in at least

two respects:

1. It unreasonably discriminates against claimant pe-

titioner as compared with other disabled workers who paid

Social Security taxes and who received their full disability

benefits under the Social Security Act; and 2. It effec-

tively nullifies claimant’s private settlement agreement by

taking Social Security disability benefits away from claim-

ant, in an amount equal to what he receives under said

settlement agreement. These issues present important

Federal questions.

The first constitutional issue is the same as is before

this Court in Belcher v. Richardson, Case No. 1091, re-

viewing 317 F. Supp. 1294 (S. D. W. Va. 1970), Bartley v.

Richardson, Case No. 108, seeking review o. 311 F. Supp.

876 (E. D. Ky. 1970) and Lofty v. Richardson, Case No.

1758, petition for certiorari pending.

In Belcher, the United States District Court for the

Southern District of West Virginia held:

“In sum, therefore, it is held that in the circum-

stances of plaintiff’s case, the application of Sec-

tion 224 cannot be constitutionally applied, since

to do so would deprive him of due process and

equal pretection of the law under the Fifith and

Fourteenth Amendments.”

In Lofty and Bartley, the lower Courts, as in the instant

ease, upheld the Section’s constitutionality. Thus, this Pe-

tition should be granted to help resolve the conflict in the

decisions of our Federal Courts on this question.

In order that petitioner’s rights be fully protected, peti-

tioner requests that this Petition be considered with the

Petition in Lofty, supra, and that this Court hear this

case so that this case can be decided along with said other

eases pending before this Court.

C‘aimant has been required by law to make certain So-

cial Security tax contributions over a period of years

while engaged in covered employment. These contributions

in part have been placed in the Federal Disability In-

surance Trust Fund created by Congress. [Title 42

U.S.C.A. See. 401(b) ]

Claimant suffered a work-connected injury for which he

received a monetary settlement. Congress directs that his

Social Security Disability Benefits from the trust fund

shall be reduced because of the receipt of workmen’s com-

pensation benefits. Another person, who has made the

same Social Security tax contributions to the trust fund,

may suffer a disability which is not work-connected in ori-

gin and for which he receives a private settlement; the Act

permits him to receive full Social Security Disability Bene-

fits out of the trust fund.

Such a difference in treatment between persons re-

quired to make the same Social Security tax contributions

‘to the trust fund is unreasonably discriminatory resulting

in an arbitrary reduction in disability benefits. As such,

Section 224 of the Social Security Act is unconstitutional

as an infringement of claimant’s rights not to be deprived

of property without due process of law guaranteed to him

by the Fifth Amendment to the United States Constitu-

tion. (U.S.C.A. Constitution, Amendments 1 to 5, p. 482.)

If the intent of Congress in enacting Section 224 was to

avoid duplication and pyramiding of benefits so that an

individual cannot receive more money in combination of

benefits than he would have received if he continued to

work (Hearings before the Committee on Finance—

United States Senate on H. R. 6675, pp. 146-151 [Part I)),

it was arbitrary to reduce Social Security benefits by

Workmen’s Compensation, because such compensation is

a public-borne cost of industry. As such, it is owed the in-

dividual by his employer or by his employer’s private in-

surer under the public policy to compensate him for injury

suffered in the service of our modern indystrial society.

See the quote from Belcher v. Richardson, infra at page 26.

At the same time, the worker is individually taxed to

build a separate trust fund under Social Security out of

which disability benefits may be paid to him. His Social

Security tax contributions are self-borne, not as a volun-

tary but as a mandatory supplemental insurance program

required by law. Under these circumstances, should not

claimant be entitled to both benefits, in full, even at the

risk of receiving more in benefits than he did in prior

earnings? The savings otherwise accumulated or the bene-

fits of a private disability insurance policy but for the tax

would have been available to him. Moreover, it is sub-

mitted that the feared “‘pyramiding” is more a theory than

a practical reality. In most cases, full Social Security Dis-

ability Benefits would simply close the gap to insure dur-

ing disability continuing income about the size of previous

earnings and in a few cases would it exceed by any sub-

stantial sum the full average weekly earnings of the man

before injury.

Claimant has been permanently injured. He will suffer

pain and physical impairment the rest of his life. Surely

some portion of his redemption settlement and of his So-

cial Security benefits is ‘‘compensation” for this injury.

Finally, in this claimant’s case the combined workmen’s

compensation benefits and Social Security benefits would

be $336.10 less than his total earnings from both jobs be-

fore injury. (65) The Secretary’s failure to recompute

claamant’s earnings to reflect ints second job, makes the

application of Section 224(a) to this claimant especially

harsh and arbitrary.

In analyzing the alleged reasonableness of a classifica-

tion made in a statute, a court must look to the purpose

of the statute involved. As Justice Brandeis said, while

dissenting in Quaker City Cab Co. v. an 277

U.S. 389 (1928) :

“|. . the classification must insist wpon a differ-

ence which is real, as distinguished from one which

is seeming, specious, or fanciful, so that all actually

situated similarly will be treated alike; that the

obect of the classification must be the accomplish-

ment of a purpose or the promotion of a policy,

which is within the permissible functions of the

State; and that the difference must bear a relation

to the object of the legislation which is substantial,

as distinguished from one which is speculative, re-

mote or negligible. . . .” (At 406, emphasis sup-

plied). .

The majority held that the classifications in the Statute

were not “based on a real and substantial difference hav-

ing reasonable relation to the subject of the legislation.”

(At 402).

Compare Porter v. Shibe, 158 F. 2d 68, 73 (10th Cir.

1946), where the Court relied upon Nebbia v. People of

State of New York, 291 U.S. 502, 525, (1933), and Fox v.

Michigan Employment Sec. Commis., 379 Mich. 579 (1967).

The determination of whether a Federal law is uncon-

stitutionally unreasonable within the Fifth Amendment is

similar to the question of the validity of state action within

the Fourteenth Amendment’s equal protection clause. See,

for example, Bolling, et al v. Sharpe, et al, 347 U.S. 497,

499 (1954).

In Cahfornia Dept. of Human Resources Development,

et al v. Java, et al,....US....., 39 Law Week 4491 (Case

No. 507; April 26, 1971), this Court unanimously voided

Sections of the California Unemployment Insurance Code

which were contrary to the purposes of the Federal unem-

ployment insurance program as expressed in Section 303

(a)(1) of the Social Security Act. [Title 42, U.S.C.A. See.

503 (a)(1)]

We.have seen, supra, that Section 224, as construed by

the Secretary is contrary to the purposes of the Social Se-

curity Act, and its Sections 223 and 224. For this reason,

Section 224(a) cannot stand as against the standards for

constitutionality which Federal and state laws must meet.

2. Impairment of Contractual Obligations

The second part of constitutional issue has not yet been

discussed in the cases before this Court.

The due process clause of the Fifth Amendment projects

persons, such as claimant from Federal action which im-

pairs contractual obligations.* In this regard, it is stated

in 16A Corpus Juris Secundum, ‘‘Constitutional Law,”

Section 610:

“In general valid contracts are property and can-

not be interfered with without due process of law,

and this rule applies whether the obligee is a pri-

vate individual, a municipality, a state, or the

United States.” (At p. 740; emphasis supplied)

Claimant entered a valid settlement agreement with his

employer’s insurance company as a result of injuries suf-

fered by claimant. The Secretary, by his erroneous con-

struction of Section 224 of the Act, takes away disability

benefits otherwise due claimant because of said private

settlement agreement. This action attaches a new disad-

vantage or liability to claimant’s settlement agreement.

This azreement is, in effect, nullified just as if Congress

had passed a law requiring any person who receives health

or accident insurance benefits to pay an equivalent amount

to the United States Treasury Department.

Compare Article I, Section 10, and the Fourteenth Amendment

due process clause as to state action which unreasonably affects con-

tracts.

3. The Rights-Privilege Distinction of Flemming v.

Nestor, Upon which the Lower Court Opinions

in Lofty and in the Instant Case are Based,

Has Been Abandoned by this Court.

The lower Courts, in dismissing claimant’s Constitu-

tional arguments, merely cited the opinions in Lofty v.

Finch, 325 F. Supp. 285, (E.D. Mich. 1970), affirmed 440

F. 2d 1144 (6th Cir. 1971). The Lofty case is now before

this Court in Case No. 1758. First, Lofty’ does not involve

a person who, as claimant in the instant case, had two jobs

when disabled. Thus, in this case, the arbitrariness of the

Secretary’s construction of the Act is even more apparent.

Secondly, Lofty is wrong.

The Courts in Lofty, primarily relied upon Flemming v.

Nestor, 363 U.S. 603 (1960), in rejecting plaintiff Lofty’s

Constitutional arguments.

In Nestor, supra, the District Court (169 F. Supp. 922)

held Section 202 (n) [42 U.S.C. Sec. 402(n)] unconstitu-

tional. That Section terminates Social Security Old Age

benefits payable to a deported alien. The Supreme Court,

with present Justices Black, Brennan and Douglas dissent-

ing, reversed the District Court. The majority opinion was

mainly based upon its view that citizens do not have an

‘accrued property right” to Social Security benefits. How-

ever, the Court majority did stress:

“This is not to say, however, that Congress may

exercise its power . . . free of all constitutional

restraint. The interest of a covered employee

under the Act is of sufficient substance to fall

within the protection from arbitrary governmental

action afforded by the Due Process Clause.” (At

611)

Compare Sherbert v. Verner, 374 U.S. 398, 405 (1963),

opinion by Justice Brennan (who dissented in Nestor) ; the

Court (though citing the above quote from Nestor) under-

cut Nestor’s view of the difference between rights and

privileges.

Nestor is not the instant case. And we submit that the

result in Nestor is ludicrous and unjust. Fortunately, this

Court drifted away from its views in Nestor and, finally,

completely rejected the philosophy upon which Nestor was

based.

In Kennedy v. Mendoza-Martinez, 372 U.S. 144 (1963),

a statute allowing deportation for evading the draft wag

held unconstitutional as imposing punishments without

due process of law. This was contrary to Nestor where he

had been deported and deprived of Social Security because

of his past communist activities. The dissenting justices

said the majority opinion was contrary to Nestor (at 209).

Nestor has also been cited by dissenting justices in at

least the following cases: Rusk v. Cort, 369 U.S. 367 (1962) ;

United States v. Brown, 381 U.S. 487, 462, 467 (1965),

where this Court, in affirming the Court of Appeals, held

unconstitutional Section 504 of the Labor-Management Re-

porting and Disclosure Act of 1959; Wells v. Rockefeller,

394 U.S. 542, 550 (1969); and Swann v. Adams, 385 U.S.

440 (1967), where this Court held unconstitutional New

York Congressional Redistricting and Florida Legisla-

tive Reapportionment, and Shapiro v. Thompson, 394 U.S.

618 (1969), where a Connecticut law denying welfare bene-

fits to citizens who have not resided there one year was

held unconstitutional. Compare Heikkila v. Celebrezze, 222

F. Supp. 629 (N.D. Calif. 1963), where the Court limited

Nestor to its peculiar facts (at 631 and 632).

The rights-privilege distinction, upon which Nestor was

based, may have been finally put to rest in Goldberg u,

Kelley, 397 U.S. 254, 261 (1970). See also Wheeler v. Mont-

gomery, 397 U.S. 280 (1970); and Daniel v. Goliday, 398

U.S. 73 (1970)

In Belcher v. Richardson, supra, the Court discussed

Nestor in relation to Goldberg v. Kelley, as follows:

“Thus, we must conclude that the concept es-

poused by the majority in Nestor, that one who has

contributed to the social security fund and later

becomes eligible to receive the benefits provided by

the Social Security Act has no indefeasible prop-

erty right to such benefits, is no longer to be con-

sidered a viable and controlling precedent for that

principle, in view of the more recent holding in

Goldberg that a welfare recipient who has made no

direct contribution to the fund from which he draws

benefits does have recognizable property right to

such benefits and one which is protected by all the

safeguards of due process.” (Emphasis ours; at

2014)

It is claimant’s view that Congress never intended Sec-

tion 224 to apply to lump sum setlements, such as received

by him; in fact, Congress, in Subsection 224(b), expressly

exempted such settlements from any Wurkmen’s Compen-

sation offset. (See discussion, swpra, at pp. 7-8). How-

ever, the Secretary’s refusal to properly construe and

apply Section 224, unconstitutionally interferes with and

impairs claimant’s contract and property rights.

We ask this Honorable Court to carefully examine Sec-

tion 224, as herein construed, in light of its own purpose

and with regard to the expressed purposes of the Social

Security Act and its Section 223 with which Section 224,

.as construed below, conflicts. This Court should then hold

that Section 224 is contrary to the Fifth Amendment of

the United States Constitution.

C. The Secretary’s Failure to Apply Section 159 Of

Public Law 90-248 in Computing Claimant’s Earn-

ings Presents Another Important Federal Question.

Prior to 1968, the computation of earnings for disability

benefits and other Social Security benefits were limited

to those earnings from which Social Security taxes were

taken. For example, in 1967 the maximum earnings sub-

ject to Social Security taxes were $6,600.00.

Many persons, of course, earned more than said maxi-

mum amount. Claimant having had two jobs at the time of

his injury, was one of such persons. (65)

The Congress of the United States did not think it fair

or right for the disability benefits due such persons to be

based only upon earnings subject to Social Security taxes.

In December, 1967, Congress enacted, and the President

signed, Section 159 of Public Law 90-248 to correct this

situation. This amended Section 224 (a); compare Sub-

sections 215(a),(c)(2) and(f)(2); and see 2 U.S. Congres-

sional and Administrative News, 1967 at pp. 2834, 2835,

2847, 2873, 2874, 2853, 2884, 3046, 3047, 3060, and 3104)

which state in part:

“Disability Benefits Affected by the Receipt of

Workmen’s Compensation. The dill would modify

one of the provisions in present law for determining

the amount of combined social security and work-

men’s compensation benefits that can be paid when

a disabled worker is eligible under both programs.

In these cases, the computation of average earn-.

ings could inciude earnings in excess of the annual

amount taxable under social security.” (at 2847;

emphasis supplied)

Section 224 of the Act as amended by section 159 of Pub-

tic Law 90-248 provides in pertinent part:

“For purposes of clause (5), an individual’s aver-

age current earnings means the larger of (A) the

average monthly wage used for purposes of com-

puting his benefits under section 223, or (b) one-

sixtieth of the total of his wages and. self-employ-

ment income (computed without regard to the limi-

tations specified in sections 209(a) and 211(b)(1)

for the five consecutive calendar years after 1950

for which such wages and self-employment income

were highest.” (Emphasized words added by sec-

tion 159, supra, effective for benefits for months

after January, 1968; (86, 87)

The Secretary used $273.00 as the ‘‘average monthly

wage”, upon which the disability benefits were based. The

Secretary justifies this by stating that it is higher than

$245.00, the figure calculated by the Secretary to be claim-

ant’s highest monthly wage for the past five years.

The Secretary erroneously failed to take claimant’s

$709.00 combined earnings as the average monthly wage for

disability income purposes. Secondly, the five-year aver-

age must also now reflect both jobs of claimant.

This Amendment was made effective in regard to any

Social Security benefits to be paid after February, 1968.

(Ibid, at 3104) The earnings of persons, such as claimant

were to be recomputed after February 29, 1968 and higher

benefits were to accordingly be paid. (See Historical Note

after 42 U.S. C. A. Sec. 424a)

Increased benefits were to be paid to claimant whether

or not his lump sum settlement is used to offset his So-

cial Security disability benefits. (See 2 U.S. Cong. &

Admin. News, 1967, at pp. 2873, 2874, 2883 and 2884)

The Secretary failed to apply said Amendment to claim-

ant’s earnings and to his benefits based upon such earn-

ings. This is impermissible. The evidence of claimant’s two

jobs and income was submitted to the Examiner. (65)

Before the Appeals Council, as the Secretary has ad-

mitted, claimant clearly and expressly requested recompu-

tation. The Secretary, however, disregarded the Amend-

ment and refused to make the required recomputation.

Claimant then brought suit and again expressly raised

said issue. For example, the third Argument in claimant’s

Brief to the District Court and the third question pre-

sented the Court of Appeals was the same as this argu-

ment to this Court. Claimant’s counsel, at the hearing be-

fore the District Judge, stressed this argument. The Sec-

retary never answered this argument in his Brief nor

orally. The Secretary ignored the issue as he had ignored

the Amendment. Neither the Secretary nor the District

Judge objected to claimant’s raising this issue.

The District Judge, incredibly, in his Memorandum Opin-

ion and Order of May 28, 1970, refused to consider this

issue and stated that it never had been raised at the ad-

ministrative level. (41, 42)

Claimant filed a Motion to Amend Findings and Judg-

ment and for a New Hearing based upon the Court’s deci-

sion on this argument. The Secretary in his Answer to

Plaintiff's Motion to Amend Findings, challenged for the

first time claimant’s right to the recomputation, arguing

that claimant had not produced evidence at the administra-

tive level to support this conclusion.

Claimant did produce such evidence by his own state-

ments and by furnishing supporting financial records. Fur-

thermore, the Hearing Examiner found as a fact that

claimant had been working two jobs. (65) There was

sufficient evidence in the record to require such recompu-

tation. Had the Secretary ‘really wanted more evidence,

then he could have obtained it.

The District Judge, in denying claimant’s Motion to

Amend Findings, held that claimant’s evidence of two jobs

and the money earned at said jobs did not “fairly apprises

the Secretary of claimant’s claim that Section 159 of Pub-

lic Law 90.248 was possibly applicable.”* (47) But claimant

expressly cited said Section 159 to the Appeals Council and

asked that his earnings be recomputed.

Claimant respectfully submits that the District Judge

(based upon his May 28 Opinion) overlooked claimant’s

evidence.

The Secretary must administer the Act in accordance

with its beneficial purposes and ensure that a disabled

worker receives his full benefits under the Statute. It is

wrong for the Secretary to act as if disabled workers are

somehow getting away with something when they receive

their full benefits.

The Court of Appeals ignored this question. Thus, the

lower Court has sanctioned the Disirict Court’s allowing

the Secretary to avoid applying Section 159 of Public Law

90-248. While this practice may not present as far reaching

a Federal question as the other issues, it is important that

this Court exercise its supervisory powers and require the

Secretary to consider and to apply Section 159 of Public

Law 90-248 to claimant’s claim for benefits.

5 Claimant did not ask the District Judge to usurp the administra-

tive function. In claimant’s Brief to the District Judge, we urged that

the Court remand this case to the Secretary with instructions to recom-

pute claimant’s earnings and benefits as required by said Public Law

90-248.

CONCLUSION

The Constitutional issues are before this Court in at

least three other cases. The lower court opinion conflicts

with that of a three judge District Court in Belcher v.

Richardson, Supreme Court No. 1091. The issues coucern-

ing the proper meaning and application of Section 224 of

the Social Security Act are significant and substantial.

For the aforementioned reasons, Petitioner prays that

his Petition for Writ of Certiorari to the Court of Appeals

for the Sixth Circuit be granted.

Respectfully submitted,

/s/ Jordan Rossen

8000 East Jefferson Avenue

Detroit, Michigan 48214

(313) 926-5216

and

Eames, Petrillo, Wilcox,

and Kerwin

/s/ Leonard A. Wilcox, Jr.

900 Guardian Building

Detroit, Michigan 48226

(313) 963-3750

Attorneys for Petitioner

Dated: July 16, 1971.

NTC ne a

APPENDIX A

OPINIONS OF COURTS AND AGENCIES

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT COURT

Johnney Benjamin, Plaintiff-Appellant

Elliott L. Richardson, Secretary of Health,

Education and Welfare

Defendant-Appellee

No. 20,714

PER CURIAM ORDER

Decided and Filed April 29, 1971

Before: Weick, Peck and Kent, Circuit Judges.

This is an appeal from a judgment of the District Court

affirming a decision of the Secretary of Health, Education

and Welfare. After finding the claimant, the plaintiff-

appellant herein, to be disabled within the meaning of the

Social Security Act, the Secretary determined that the

disability benefits to which the claimant would be entitled

were required to be reduced pursuant to Section 224 of

the Act (42 U.S.C. § 424) by the amount of a lump sum

settlement received by the claimant under the Michigan

Workmen’s Compensation Act (Mich. Stat. Ann. 17.172).

Claimant attacks both the factual correctness and the con-

stitutionality of the Secretary’s determination.

Section 224(a) of the Social Security Act (42 U.S.C.

§ 424 (a)) provides that when a claimant entitled to re-

ceive Social Security disability benefits also receives perio-

dic disability benefits under a state workmen’s campensa-

tion or like plan, a reduction in the Social Security bene-

fits must be made by the amount in which the claimant’s

combined Social Security disability benefits and his work-

men’s compensation benefits exceed 80% of his previous

average monthly earnings. Section 224(b) (42 U.S.C.

§ 424(b)) excludes from the reduction computation, how-

ever, any lump sum received by the claimant under a work-

men’s compensation plan unless the tump sum payment

constitutes a “commutation of, or substitute for, periodic

payments” under such plan. Therefore, the principal is-

sue before the Secretary cnd the District Court was whe-

ther the lump sum received by the claimant here under

the Michigan Workmen’s Compensation Act constituted, in

whole or in part, a ‘‘commutation of, or substitute for,

periodic payments” under the Michigan plan. We agree

with the District Court’s conclusion that under Michigan

law a “redemption’”’ settlement of the type entered into

herein always constitutes, in part, a commutation of perio-

dic compensation payments. Wehmeier v. W. FE. Wood Co.,

377 Mich. 176, 139 N.W. 2d 733 (1966). Thus it was incum-

bent on the claimant, as part of his burden of proof, to

show any unpaid medical expenses, future medical ex-

penses or any other amounts which should have been ex-

cluded from the lump sum. Other than certain unpaid medi-

cal expenses and attorney fees shown by the claimant,

which the Secretary did exclude from the lump sum in

making his reduction computation under Section 224,

claimant failed to show any amounts which should have

been excluded.

Claimant’s alternative argument attacking the constitu-

tionality. of Section 224 of the Act raises issues previously

considered and negatively resolved by this Court. Lofty v.

Rachardson,....F. 2d ....(No. 20,484, decided and filed

March 4, 1971). Accordingly, )

It is ordered that the judgment of the District Court be

and it is hereby affirmed.

Entered by Order of the Court

Carl W. Reuss,

Clerk

MEMORANDA OPINION AND ORDER OF MAY 28, 1970

By Hon. Daxz<n J. Keith

UNITED STATES DISTRICT COURT

©LASTERN DISTRICT OF MICHIGAN

SUUTHERN DIVISION

Civil Action No. 32816

Johnney Benjamin, Plaintiff

Vv.

Robert H. Finch, Secretary of Health, Education,

and Welfare, Defendant

Plaintiff brings this action pursuant to § 205(g) of the

Social Security Act, 42 USC § 205 (g), for review of ta

final decision of the Secretary of Health, Education, and

Welfare, that under the provisions of § 224 of that Act,

42 USC § 424, the disability ‘insurance benefits to which

plaintiff is entitled under $ 223 of that Act, 42 USC

§ 423 must be reduced beginning April, 1967 by reason of

plaintiff’s receipt, pursuant to Michigan’s Workmen’s

Compensation Law, of lump sum amount which the Secre-

tary held to be ‘‘a commutation of, or a substitute for,

periodic payments” which would have been otherwise pay-

able under the Workmen’s Compensation Law.

The Secretary of Health, Education, and Welfare moved

the Court for summary judgment affirming his final deci-

sion; briefs and oral arguments were presented to the

Court on the matter.

FACTS: On September 7, 1967, a Hearing Referee with

the State of Michigan, Department of Labor, Workmen’s

Compensation Department signed a “Redemption Order”

in a matter pending before it involving plaintiff and his

employer which stated:

“The agreement to redeem the employer’s entire

liability for an injury sustained by the plaintiff on

Aprii 20, 1966 by a single payment in lieu of weekly

payments having been considered by a Hearing Refe-

ree of the Workmen’s Compensation Department and

it appearing that said agreement should be: (ap

preved) (denied). [sic].

Therefore, it is ordered that said agreement to re-

deem the employer’s entire liability for weekly pay-

ments and medical benefits herein by the payment of

$10,000.00 is approved.”

The Appeals Council of the Federal Department of

Health, Education, and Welfare, Social Security Adminis-

tration reviewed that order entered by the Hearing Refe-

ree of the Workmen’s Compensation Department of the

State of Michigan and considered the effect it had on pay-

ment of disability benefits to plaintiff under the Federal

Social Security Act. The Appeals Council held that:

‘¢ , . . The lump sum payment which the claimant

received constituted a substitute for periodic pay-

ments within the meaning of § 224 (b) of the Act....

Therefore, it is clear that the weekly payments were

redeemed in accordance with the agreement of the

parties whereby the lump sum discharged in full any

liability for paying further periodic benefits. Thus, the

lump sum was, within the meaning of § 224 of the Act,

a substitute for periodic payments and, therefore, re-

quires offset.’’ (See Appeals Council Decision, Tran-

script p. 6.)

Accordingly, the disability benefits to which plaintiff was

found entitled under the Social Security Act were reduced

pursuant to the application of setoff provisions found in

§ 224 of the Act. (42 USC § 424 [a]), because of plaintiff’s

receipt of Workmen’s Compensation Benefits.

ISSUES: Plaintiff presents three issues to this Court.

(I) Was the Workmen’s Compensation received by

plaintiff herein a lump sum payment exempt under § 224

(b) of the Social Security Act (42 USC §$ 424 [b] from

the reduction provisions of § 224 (a) of the Social Security

Act (42 USC §$ 424 [a]).

(II) Is § 224 of the Social Security Act (42 USC § 424)

as construed by the Secretary unconstitutional?

(III) Did the Secretary fail to apply § 159 of Public

Law 90-248 in computing claimant’s earnings?

I. The Social Security Act provides in part that receipt

of Workmen’s Compensation benefits on a monthly basis

by an individual under age 62 will result in a setoff against

the payment of monthly Social Security benefits. (§ 224

Social Security Act; 42 USC § 424). The Act further

states:

“(b) If any periodic benefit under a Workmen’s

Compensation Law or plan is payable on other than

a monthly basis (excluding a benefit payable as a lump

sum, except to the extent that it is a commutation of,

or a substitute for, periodic payments), the reduction

under this section shali be made at such time or times

and in such amounts as the Secretary finds will ap-

proximate as nearly as practicable the reduction pre-

scribed by subsection (a).” § 224 Social Security Act;

42 USC § 424 (b).

It is the position of plaintiff in this matter that the lan-

guage of the section set out above clearly excludes from

the control of the Social Security setoff provisions §224(a)

of that Act (42 USC § 424 (a)) an amount paid under

Michigan’s Workmen’s Compensation law which results

from settlement or redemption of liability between an em-

ployee and his employer. Plaintiff contends that such re-

demptions or settlements do not constitute a commutation

of, or substitute fer, periodic payments, and therefore, un-

der § 224(b) of the Act (42 USC § 424 (b)) any amount

received by an employee from such redemption or settle-

ment cannot effectuate a setoff in the payment of his So-

cial Security benefit under § 224(a) of the Act (42 USC.

§ 424[a]). It is plaintiff’s position that any application by

the Secretary of the setoff provisions enunciated in the

Social Security Act against an amount received by way of

redemption or settlement constitutes an unconstitutional

application cf those provisions, and results in deprivation

of plaintiff's property without due process of law.

In order to determine the applicability of that provision

of the Social Security Act which allows for a setoff of bene-

fits upon receipt of an amount which constitutes a commu-

tation of, or substitute for, periodic payments of Work.

men’s Compensation benefits under a state law, it is neces-

sary to analyze the provisions of the Michigan law allow-

ing for payment of an amount by way of redemption or

settlement; whether or not such amount constitutes a com-

mutation of weekly benefits depends on the characteriza-

tion provided the payment by the state itself. Toward this

end, the Court will confine itself to the statutes and case

law of the State of Michigan, though both parties have

cited abundant law from outside the state.

The Michigan Statute allowing for the payment of one

lump sum amount to an employee potentially covered un-

der the State’s Workmen’s Compensation law reads as

follows:

‘‘ After 6 months time has elapsed from the date of

injury, any liability resulting therefrom may be re-

deemed by the payment of a lump sum by agreement

cf the parties, subject to the approval of the compen-

sation commission, and said compensation commission

may at any time direct in any case, if special circum-

stances be found which in its judgment require the

same, that the deferred payments due under this act

be commuted on the present worth thereof at 5% per

annum to 1 or more lump sum payments, and that such

payments shall be made by the employer or the insu-

rance company carrying such risk, or commissioner of

insurance. When an application is made to redeem lia-

bility, the application may, within the discretion of the

department be treated also as being an application for

an advance lump sum payment.

The filing of a petition for redemption or advance

lump sum payment shall not be considered an admis-

sion of liability and in any case where the department

treats any application for redemption as an applica-

tion for advance lump sum payment under this sectiun

the employer shall be entitled to a hearing on the

question of liability.” CL 1948, 4§ 412.22 (MSA

§17.172).*

* Repealed by Mich. P.A. 1969, No. 317; See CL 1948, § 418.835

(MSA § 17.287 [825]).

The Michigan Supreme Court recently addressed it-

self to an interpretation of that section of the statute set

out above, in the case of Wehmeier v. W. E. Wood Co.

(1966) 377 Mich. 176, wherein the state court briefly

summarized the history of that section and the case law

interpretating it. In the opinion of this Court, the charac-

terization of redemption payments as enunciated by the

State Court in Wehmever resolves the issues presently

before it.

-A close reading of Wehmeier, Supra reveals that neither

the majority nor the dissenting minority of the Michigan

Supreme Court Justices questioned the fact that a re-

demption or settlement constituted, at least in part, a com-

mutation of weekly benefits; the dispute among the mem-

bers of that Court centered on the question of exactly

what, in addition to the commutation of weekly benefits,

was redeemed by the payment.

Indeed, in the dissenting opinion, Justice Souris explains

‘that, ‘‘the legislature provided for redemption of weekly

- compensation paymenis. ...” Wehmeier, Supra, p. 200-

201. That sentence summarizes what is obviously the opin-

ion of the entire Michigan Supreme Court Justices namely,

that a redemption agree.nent always encompasses, in part,

_a@ commutation of weekly compensation payments. This

Court cannot superimpose an opinion differing from the

interpretation of the Michigan Workmen’s Compensation

Statute regarding redemption of agreeemnts as provided

by the Michigan Supreme Court.

In view of the interpretation regarding redemption

agrements pursuant to tle Micrigan Statute (CL 1948

§ 412.22 [MSA § 17.172]) as well as the order entered on

September 7, 1967 by the Workmen’s Compensation Hear-

‘ ing Referee of the State of Michigan allowing for redemp-

tion of ‘‘the employer’s entire liability by a single payment

in lieu of weekly payments... ”. (See Exhibit 15, tran-

script p. 185), this Court holds that that which plaintiff

received was, as a matter of law, a commutation of weekly

benefits. Therefore, the setoff provisions found in § 224(a)

of the Social Security Act (42 USC § 424 [a]) apply; the

exclusion for certain lump .um amounts enunciated in

§ 224 (b) (424 USC 424 [b]) of that Act cannot apply

where the lump sum is a commutation of a substitute for

periodic payment.

It. The setoff provisions of the Social Security Act have

been recently upheld as constitutional in tne case of Bar-

bara Lofty v. Wilbur J. Cohen, Secretury of Health, Edu-

cation, and Welfare (Civil Action No. 30916, opinion ren-

dered March 20, 1970, Judge Thomas P. Thornton, Dis-

trict Judge, Eastern District of Michigan). This Court

ugrees with the opinion expressed by Judge Thornton

in that case and, inasmuch as plaintiff has failed to con-

vince in this case that the setoff provisions, although con-

stitutional, were unconstitutionally implemented, holds that

there has been no showing that plaintiff was deprived of a

property right without due process of law

Iu. The final argument of plaintiff is that the Secretary

has failed to apply § 159 of Public Law 90-248 in comput-

ing plaintiff’s earnings in arriving at the benefit amount

to be paid by the Social Security Administration. This

Court has carefully reviewed the transcript of proceedings

at the administrative level in the matter, and finds that

nowhere was the Secretary presented with the claim that

the benefit amount payable or the setoff applied under the

Social Security Act was improperly computed. As the

matter regarding the proper computation of the benefit

amount has never been presented to the Social Security

Administration, the Secretary has had no opportunity to

consider and review that claim, and therefore this Court

is without jurisdiction at this juncture to address itself

to that question. If there is some problem in the computa-

tions of the benefit amount to be received or the amount

of the setoff to be applied under the Social Security Act,

such questions must first be presented at the administrative

level so that remedy may be made. Only if relief is denied,

may this Court review the matter so as to ascertain the

appropriateness of the Secretary’s decision.

In view of the fact that this third issue has never been

presented at the administrative level, this Court is with-

out jurisdiction to hear any complaint regarding the Sec-

retary’s failure properly to compute the benefit amount or

the setofi provision.

CONCLUSION:

This Court, therefore, having carefully considered the

matters presented to it, holds that the setoff provisions 0:

the Social Security Act are constitutional and were consti-

tutionally implemented in this matter. In addition, this

Court holds that it is without jurisdiction to hear com-

plaints regarding the proper computation of the benefit

amount applied under the Social Security Act, as such

complaints were never presented at the administrative level.

ORDER:

Therefore, it is ordered that the Motion for Summary

Judgment brought by the defendant in this matter re-

questing that the decision of the Secretary of Health,

Education, and Welfare be affirmed, be and the same is

hereby granted.

It is further ordered that the relief requested by the

plaintiff be and the same is hereby denied.

Damon J. Keith,

U. S. District Judge.

ORDER DENYING MOTION FOR REHEARING OF

PLAINTIFF’S MOTION FOR SUMMARY

JUDGMENT

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

Johnney Benjamin, Plaintiff,

vs.

Robert Finch, Secretary of Health, Education

and Welfare, Defendant

Civil Action No. 32816

At a session of said Court held in the Courthouse in the

Federal Building, Detroit, Wayne County, Michigan, on

the 13th day of July, A.D., 1970;

Present: Honorable Damon J. Keith, U. S. District

| Judge.

Plaintiff moves the Court for a rehearing on the third

issue presented in his Motion for Summary Judgment.

That issue stated:

“The Secretary has failed to apply Section 159 of

Public Law 90.248 in computing plaintiff’s earnings.’’

That section of the statute to which plaintiff refers states

in essence that if an individual is entitled to Social Secu-

rity Disability Benefits and Workmen’s Compensation

Benefits, his disability benefit will be reduced by the amount

that the total of both benefits exceed 80% of his ‘‘average

current earnings”. (See Title 42 USC § 424[a]).

The statute goes on to state that:

‘* ... average current earnings means the larger

of (A) the average monthly wage used for purposes

of computing his benefits under section 423 of this title,

or (B) one-sixtieth of the total of his wages and self

employment income (computed without regard to the

limitations specified in sections 409(a) and 411(b)

(1) of this title) for the five consecutive calendar years

after 1950 for which such wages and self-employment

income were highest.” Title 42 USC § 424(a).

Interpreted, that definition means that for purposes only

of computing the reduction in benefits the “average cur-

rent earnings” may include income which was in excess

of the yearly amounts of earnings taxed for Social Secu-

rity benefits.* This interpretation is more clearly ex-

pressed in 1967 U. S. Code Congressional and Administra-

tive, p. 2834 where it is stated that:

‘‘The bill [Section 159 of Public Law 90.248] would

modify one of the provisions in present law for determin-

ing the amount of combined social security and workmen’s

compensation benefits that can be paid when a disabled

worker is eligible under both programs. In these cases, the

computation of average earnings could include earnings

in excess of the annual taxable under social security.”

A careful review of the statute (Title 42 USC § 424(a))

convinces that ‘‘average éurrent earnings” is the term

used for that figure utilized only in the formula for com-

puting the reduction due to receipt of both a Disability

* Those taxable amounts as required to be reported by an employer

or self-employed individual were:

1950—$3000; 1957-1954—$3600; 1954-1958—$4200; 1958-1965—

$4800; 1965-1967—$6600; 1968—on, $7800.

Benefit and Workmen Compensation Benefit. It is not a

term employed for or having any effect on computation

of Social Security Disability amount. The new statutory

definition of the term (as provided by Section 159 of Public

Law 90.248) allows for inclusion of wages or self-employ-

ment in excess of yearly Social Security taxable amounts

solely for purposes of computing the reduction and not for

purposes of computing the benefit amount.

Prior to the enactment of Public Law 90.248 (effective

February, 1968) there was no provision in the definition of

‘‘average amount earnings” for inclusion of yearly earn-

ings in excess of those taxable amounts.

With this background in mind, the question before this

Court is not whether the Secretary either failed to apply

Public Law 90.248 but rather whether plaintiff adequately

notified the Secretary that somehow the provisions of the

amendment would apply favorably to him. |

Plaintiff refers to parts of-the record containing infor-

mation that he had “two jobs” and that he had “actual

earnings of $709.00’’. From this he argues that the Secreary

was made aware that the provisions of § 159 of Public Law

90.248 were applicable. Nowhere does the record reflect that

plaintiff alleged earnings in any year which exceeded the

taxable amounts. Nowhere does the record reflect that

plaintiff either challenged the amount of ‘‘average cur-

rent earnings” used by the Secretary in computing the

redc2tion, or asserted that the “average current earnings”

should be higher.

It is apparent, understandably so, that plaintiff was

throughout these proceedings more concerned that there

‘was any reduction than he was interested in the manner

of computing that reduction. However, the record shows

that he was adequately alerted to that method of comput-

ing the reduction and never challenged the manner in which

it was made nor asserted that his earnings in any given

vear exceeded the taxable amount so as to allow for higher

‘‘average current earnings.”

On July 16, 1968 a letter was sent to plaintiff through his

attorney wherein it was stated that:

.. The law provides that total benefits payable on

the social security account of a disabled beneficiary

shall be reduced by the amount the combined so-

cial security benefits and workmen’s compensation

exceed 80 percent of the disabled beneficiary’s aver-

age monthly wage as computed under the Social Secu-

rity Act.

The average current earnings are the higher of (1)

the average monthly wage on which the disability

amount is based, or (2) the average monthly wage

based on the wage earner’s five consecutive years of

highest earnings after 1950.

The average monthly wage on which Mr. Benjamin’s

disability is based is $273.00. His ‘‘high five” average

monthly wage is $245.00. Eighty percent of $273.00

(the higher average monthly wage) is $218.40. Thus,

Mr. Benjamin may receive no more than $218.40 from

social security benefits and workmen’s compensation

payments combined for any month.

. Since the $251.90 workmen’s compensation pay-

meer exceeds 80 per cent of Mr. Benjamin’s average

current earnings by $33.50 ($251.96 minus $218.40),

his month social security benefits of $107.00 were ad-

justed to none effective April 1967.” See transcript,

p. 177, Exhibit 9, p. 1-3.

If Mr. Benjamin believes that his ‘‘average current earn-

ings” in computing an amount for reduction purposes are

higher than the amount utilized by the Secretary, he has

never raised that point below. This Court does not believe

that a claim of “two jobs” or ‘‘monthly earnings of

$709.00” in 1968 (which would amount to $7808.00 in a tax-

able year of $7800.00) fairly apprises the Secretary of

plaintiff’s claim that Section 159 of Public Law 90.248

was possibly applicable. If plaintiff truly believes his “ac-

tual current earnings’’ are higher, the computation can

still be reviewed and amended by the Secretary.

In view of the above, this Court holds that plaintiff has

failed to demonstrate a palpable defect by which the Court

and the parties have been mislead and that a different

disposition of the case must result from a correction

thereof. (See Local Court Rule IX—A. 4, Motions for Re-

hearing).

Therefore, it is ordered thet plaintiff’s Motion for a Re-

hearing on the issue that the Secretary failed to apply Sec-

tion 159 of Public Law 90-248 in computing plaintiff’s

earnings be and the same is hereby denied.

Damon J. Keith,

U. S. District Judge.

DECISION OF APPEALS COUNCIL

Department of

HEALTH, EDUCATION, AND WELFARE

Social Security Administration

Bureau of Hearings and Appeals

In the case of Johnney Benjamin, Claimant

Claim for Disability Insurance Benefits

Johnney Benjamin, Wage Earner

Social Security Account Number 247-48-2649

This case is before the Appeals Council on its own mo-

tion to review the hearing examiner’s decision of December

3, 1968. The claimant and his representative, Leonard A.

Wilcox, Jr., Attorney at Law, were advised of this action

by the Appeals Council and of the claimant’s rights in

connection therewith.

In his decision, the hearing examiner found that the lump

sum payment of $10,000 which the claimant received under

the Michigan Workmen’s Compensation Law, does not

constitute a commutation of, or a substitute for, periodic

payments and, therefore, the hearing examiner concluded

that the receipt of this payment does not subject the claim-

ant’s disability insurance benefits to reduction as provided

in section 224 of the Social Security Act.

The issue before the Appeals Council is whether the

claimant’s disability insurance benefits are subject to the

‘‘offset” provisions of section 224 of the Act by reason

of the redemption payment received by the claimant.

The record reveals that on March 16, 1967, the claimant,

who was born on September 17, 1931, filed an application

for disability benefits and alleged that he became unable to

work because of a ‘‘disability” beginning April 20, 1966. It

appeared that the claimant worked that evening at the Log

Cabin Bar and following an earlier altercation a customer

returned to the bar at closing time and shot the claimant.

The claimant was found, after a hearing on October 25,

1968, to be under a ‘‘disability” within the meaning of the

Act. -

The claimant was awarded monthly benefits of $107 ef-

fective November 1966. However, under section 224 of the

Act the disability benefit was reduced because of “offset”

beginning April 1967 on the basis of notice received in

that month that the claimant was entitled to workmen’s

compensation payments. The workmen’s compensation pay-

ments of $58.13 per week began May 4; 1966 and were based

on his combined weekly earnings of $87.20.

A further notice dated September 27, 1967 indicated

that weekly payments of $58.13 were made for 5i weeks

(April 21, 1966 to April 12, 1967) for a total of $2,964.63

and a Redemption Order dated September 7, 1967 was in

the amount of $10,000.00.

The redemption order provided, in pertinent part:

“The agreement to redeem the employer’s entire

liability for an injury sustained by the plaintiff on

April 20, 1966 by a single payment in lieu of weekly

payments having been considered by a Hearing Refe-

vee of the Workmen’s Compensation Department and

it appearing that said agreement should be: (AP-

PROVED).

Therefore, it is ordered that said agreement to re-

deem the employer’s entire liability for weekly pay-

ments and medical benefits herein by the payment of

$10,000.00 is approved.

It is further ordered that said sum be paid as fol-

lows:

$1,500.00 directly to Leonard A. Wilcox, Jr., at-

torney(s) for plaintiff for all legal services ren-

dered, including all expenses in connection there-

with, ; _ ,

Ti akhancea aes Se Os cake cde kad aniesions

(specify type or none)

_ for medical expenses

$8500.00 directly to the plaintiff, being the balance.”

Section 224 of the Social Security Act, provides, as

pertinent here:

‘*(a) If for any month prior to the month in which

an individual attains the age of 62—

(1) such individual is entitled to benefits under

section 223, and

(2 such individual is entitled for such month,

under a workmen’s compensation law or plan of the

United States or a State, to periodic benefits for a

total or partial disability (whether or not permanent),

and the Secretary has in a prior month, received no-

tice oi such entitlement for such month, the total of

his benefits under section 223 for such month and of

any benefits under section 202 for such month based

on his wages and self-employment income will be re-

duced (but not below zero) by the amount by which

the sum of—

(3) such total of benefits under sections 223 and

202 for such month, and

(4) such periodic benefits payable (and actually

paid) in such month to such individual under the

51.

workmen’s compensation law or plan, exceeds the

_ higher -of—-

(5) 80 per cenium of his average current earn-

ings, or

(6) the total of such individual’s disability in-

surance benefits under section 223 for such month and

of any monthly insurance benefits under section 202

for such month based on his wages and self-employ-

ment income, prior to reduction under this section.

(b) If any periodic benefit under a workmen’s com-

pensation law or plan is payable on other than a

monthly basis (excluding a benefit payable as a lump

sum except to the extent that it is for commutation

of, or a substitute for, periodic payments), the reduc-

tion under this section shall be made at such time or

times and in such amounts as the Secretary finds will

approximate as nearly as practicable the reduction

prescribed by subsection (a).”

After careful consideration of the evidence, the Appeals

Council believes and finds that the lump sum payment

which the claimant received constituted a substitute for

periodic payments within the meaning of section 224(b)

of the Act. The weekly payments were redeemed in accord-

ance with an agreement of the parties that was approved

by the Workmen’s Compensation Department of Michigan.

The redemption order approved the agreement to redeem

the employer’s entire liability for weekly payments and

medical benefits by a single payment of $10,000 (includ-

ing $1500.00 for attorney’s fec). Therefore, it is clear

that the weekly payments were redeemed in accordance

with the agreement of the parties whereby the lump sum

discharged in full any liability for paying further periodic

ova SL5: aia te near oe a

benefits. Thus, the lump sum was, within the meaning of

section 224 of the Act, a substitute for periodic payments,

and, therefore, requires offset.

The amount to be oifset would be $10,000 less $1500 at-

torney’s fee and $350 medical expenses, a net amount of

$8,150.

It is, therefore, the decision of the Appeals Council that

the claimant’s disability insurance benefits are subject to

offset in accordance with the foregoing. The decision of the

hearing examiner is accordingly reversed.

APPEALS COUNCIL

Irving Trager, Member

Jackson C. Smith, Deputy Chairman

Date: March 17, 1969

HEARING EXAMINER’S DECISION

Department of

HEALTH, EDUCATION, AND WELFARE

Social Security Administration

Bureau of Hearings and Appeals

In the Case of

Johnney Benjamin (‘Claimant)

Claim for—

Exemption from the Reduction provisions of Section

224 of the Social Security Act

Johnney Benjamin (Wage Earner)

247-48-2649 (Social Security Account Number)

Jchnney Benjamin was shot in the back while in the

employ of the Log Cabin Bar on April 20, 1956.

A Hearing Examiner of the Bureau of Hearings and Ap-

peals issued a decision dated April 12, 1968 holding that

claimant was ‘disabled’ under the provisions of Sections

216 and 223 of the Social Security Act. Claimant there-

upon became entitled to benefits on his application for a

period of disability and for disability insurance benefits.

‘Claimant also filed a claim against his employer for

workmen’s compensation. He received weekly periodic pay-

menis for about one year from April 20, 1966 to April 7,

1967 in the amount of $58.13 per week. On September 7,

1967 the Michigan Workmen’s Compensation Department

approved a Redemption Agreement executed by the parties

providing that claimant will get a lump sum payment in

the amount of $10,000—less an attorney’s fee of $1500.

The Social Security Administration, in their Certificate

cf Social Insurance Award, applied the Reduction Provi-

sions of Section 224 of the Social Security Act to claim-

ant’s social security benefits.

In essence, Section 224 of the Social Security Act was

approved by the Congress of the United States to avoid

duplication and pyramiding of benefits so that an individual

cannot receive more money in a combination of benefits

than he would have received if he continued to work.’

It is noted at this point that claimant’s attorney was

awarded an attorney’s fee by the Hearing Examiner in

the disability hearing. The effect of the reduction provi-

sions of Section 224 was to reduce claimant’s award to

the point where the attorney’s lien on the back award was

insufficient to cover his fee. Consequently, the attorney

had to look to his client for payment of the balance of his

fee.

The Issues

The general issue before the Hearing Examiner is

whether a reduction of the claimant’s disability benefits

because of a workmen’s compensation payment is appli-

cable under Section 224 of the Social Security Act, as

amended.

The specific issue to be decided is whether or not the

Redemption Agreement executed by the parties and ap-

proved by the Workmen’s Compensation Department of

Michigan is a lump sum payment subject to exemption

from the Reduction Provisions of Section 224 of the Social

Security Act.

1 Hearings before the Committee on finance—United States Senate

on H.R. 6675 pps. 146-151 (Part I)

A constitutional issue has been raised by claimant’s coun-

sel inasmuch as he argues that his claimant has paid into

the trust fund the same amount of money as other claim-

ants but that his award would be smaller due to the re--

duction provisions of Section 224. Consequently, he argues

that his claimant is being discriminated against in viola-

tion of the United States Constitution.

The Law

Reduction of Benefits Based on Disat ility on Account of

Receipt of Workmen’s Compensation

“(b) If any periodic benefit under a workmen’s

compensation law or plan is payable on other than a

monthly basis (excluding a benefit payable as a lump

sum except to the extent that it is a commutation of,

or a substitute for, periodic payments), the reduction

under this section shall be made at such time or times

and in such amounts as the Secretary finds will ap-

proximate as nearly as practicable the reduction pre-

scribed by subsection (a).

(42 USC 424(b); Section 224(b) Social Security Act)

The applicable Michigan statutes provide:

“Whenever any weekly payment has been continued

for not less than 6 months, the liability therefor may

be redeemed by the payment of a lump sum by agree-

ment of the parties subject to the approval of the com-

pensation commission, and said compensation com-

mission may at any time direct in any case, if special

circumstances be found which in its judgment require

the same, that the deferred payments due under this

Act be commuted on the present worth thereof at 5

pores yee mE oom Or more immp-sum paer-

Menta tt tae suet periment enal w made ur the

SnruTse UT tie uBR CONpeDY carrying euch rick.

summa: vf meuteuse. Waoer an epplcetion

@ Mate Meee eli. tee applection mer. with-

ote tine ote epee ie treetes alec

aa weag mi spyiemulL for an atveus lmmp sum

yarnear Tw fiiny of & petriuon for redemption or

7tes suit bun periment seal not we comeiderec

22 wit vw’ inulitty euc i any sepe Where the

(cae ee EET tpplcuer for reqemption ae

aa tole 4" eovews inp sum periment under

ia wen. ese eever Buel tw enutiet we neer-

ag wm me vet vf Levy.”

~~ --—-

Menge Saute cuuvmen sectuer 17.172;

“Baet> <6 soutruvme of Lavilty under this art

Sra ae $2 ui tue recuverr of compensation Lene-

fea. 2a tered peorumet. sual ve tue exelueive remecr

ganas ae ete?

Weng sae Anuomien setucn (Tis

Tae faeca 23 re a spore. Tuer suow periments on t

erste aaa fe evo ue seer. Tuer efter ec cepee of

Term, Mantas ie setempuen agreement wee retiied

oy me Borguett Congeusuer Belfer.

The sunianer tae uever coumeuec Lavity i tus cope.

The mers fac “ie petits pewmeule ere meds i tt

smesaman wf iammlicy per oe Tue pevinents were made on

2 sortase west OM eeu wee euc OF GerueiOn meds

Mm me wietion of levi:

Hawerer_ ae Misugmi Dietuer proviae tunel tue exert

U7 somety ages wl etpler eripee Were tue CuDdL-

soma of ja~lic> emer uae tue Wormer’: Compenseuon

eae area

Law. In other words, the common law liability rales as to

negligence are inapplicable.

In the facts of this case, the liability of the employer

was not clear and persuasive. Claimants’ attorney recom-

mended the settlement to his client because of two issues

which would have to be decided in a plenary hearing.

These issues were whether or not the gunshot wound arose

out of and in the course of claimant’s employment. The

other issue was a medical one and had to do with whether

or not a functional overlay was disabling within the Work-

men’s Compensation Act.”

In accordance with procedures set up by the Workmen’s

Compensation Department, a hearing was heid so that the

Redemption Award could be considered by the Referee.

The follewing exchange took place between the Referee

and the claimant:

“The Referee: Mr. Benjamin, as your attorney has

explained to you, if you tried your case and you could

show that as a consequence of your injury that you

could not work you could collect compensation for

every week that you were off work for the rest of your

life because of the injury. You could also get medical

treatment for your injury for the rest of your life.

So you have got life-long coverage in terms of com-

pensation for every week you are off work because of

the injury, anda even if you are working, if you need

medical attention you could get that medical attention

and have it paid for by the employer if it was proven

that you received an injury at work and then, as a con-

sequence, you needed medical attention. Now, you are

2 Exhibit 16, page 3—Transcript of proceedings before a Referee

of the Workmen’s Compensation Department.

giving all that up in exchange for this settlement. And

when you settle your case, if you settle your case and

I approve it, you are giving up all your rights that

you have against the Defendant here, the Log Cabin

Bar, and closing the case against them.

A. Yes, sir.

The Referee: Do you understand that?

A. Yes, sir.

The Referee: And do you want to do that?

A. Yes.

The Referee: And do you realize that if you had

some medical costs in the future that come about as

a result of this injury that you will have to pay for

those yourself and that the Company will not do it?

A. Yes. I talked that over with my wife.

The Referee: Okay. Do you want me to approve

this settlement?

A. Yes, I do.”

(Exhibit 16, pages 11, 12 and 13.)

It is clear from the statements of the Referee and of

counsel that this lump sum award had all he earmarks of

a settlement of a lawsuit rather than a substitute for

periodic payments.

Now the Redemption Order signed by the Workmen’s

‘Compensation Referee had a printed paragraph which

states that the agreement to redeem by a single payment

was in lieu of weekly payments.°

However, this statement taken by itself does not show

that this payment was a substitute for periodic payments.

The Workmen’s Compensation Department of Michigan

has a procedure for an advance payment of benefits based

3 Exhibit 15.

on actuarial formula.* There is no doubt but that an ad-

vance payment based on the formula would be a substi-

tute for periodic payments.

‘Counsel for claimant has pointed out that the Michigan

Statutes were recently revised to permit a Redemption

Award without the prerequisite of a six month payment

period. This would tend to show that Michigan Law no

longer requires ay periodic payments prior to the ap-

proval of a lump sum redemption award.

The facts of this case show that the defendant employer

in the workmen’s compensation case set forth various de-

fenses as to liability in his answer to claimant’s com-

plaint.*

The lump sum settlement or Redemption Award was

hammered out by the parties after some agonizing delib-

eraticn. Claimant’s attorney recommended to the claim-

ant that he accept this award since it would eliminate some

of the risks of a non-suit in the event of a trial or plenary

hearing.

Section 224(b) of the Social Security Act excludes from

the reduction provisions a lump sum benefit payment. The

payment oi the $10,000 was a lump sum benefit payment.

Was this lump sum payment a substitute for or a com-

mutation of periodic payments? The undersigned Hear-

ing Examiner does not think so.

Therefore, the undersigned Hearing Examiner finds

that the Redemption Award to Johnney Benjamin was a

lump sum payment and not a substitute for a commuta-

tion of periodic payments.

4 Exhibit 22.

5 Exhibit 12,

‘Claimant’s counsel has attacked the constitutionality of

Section 224 of the Social Security Act. The undersigned

Hearing Examiner is called upon to administer the Social

Security Act as a quasi-judicial officer. It is well estab-

lished that an administrative officer has no authority to

pass upon the constitutionality of an act which he is called

upon to administer.°

_ ‘The finding in this case is limited to the facts in the

instant case. This decision does not stand for the general

proposition that all Redemption Awards are lump sum

payments and are subject to the Exemption Provisions of

Section 224(b) of the Social Security Act.

Decision

_ The Reduction Provisions of Section 224 of the Social

Security Act are not applicable to claimant’s disability

benefits.

/s/ Sidney J. Fenster

Hearing Examiner

2700 Broderick Tower Bldg.

Detroit, Michigan 48226

Date: December 3, 1968

6 Public Utilities Commission v. U.S., 355 U.S. 584; 78 S. Ct. 446.

HEARING EXAMINER’S DECISION

Department. of

HEALTH, EDUCATION, AND WELFARE

Social Security Administration

Bureau of Hearings and Appeals

In the case of ,

Johnney Benjamin (Claimant)

Claim for

Period of Disability and Disability Insurance Benefits

Johnney Benjamin (Wage Earner)

247-48-2649 (Social Security Account Number)

This case is before the Hearing Examiner pursuant to

Section 205(b) of the Social Security Act, as amended,

(42 USC 405(b)), hereinafter referred to as the Act, on a

request for hearing filed on December 226, 1967 by Johnney

Benjamin, the claimant herein, who is dissatisfied with de-

terminations made by the Social Security Administration

which initially and on reconsideration disallowed his ap-

plication for a period of disability and disability insurance

benefits under the provisions of Sections 216(i) and 223

of the Act (42 USC 416(i) and 423). The claimant’s said

application was filed on March 16, 1967 and it alleged that,

because of an impairment described as “bullet lodged in

back,” he became unable to work on April 20; 1966.

A hearing, at which the clairoant personally appeared

and testified, was held on February 28, 1968 before the

undersigned Hearing Examiner at Detroit, Michigan. The

claimant was represented by his attorney, Leonard A.

‘ Wilcox, Jr., Esquire.

Issues Involved

The general issues in this case are whether the claimant

is entitled to a period of disability and to disability in-

surance benefits under Sections 216(i) and 223, respec-

tively, of the Act.

The specific issue to be decided is whether the claimant,

during the time he met the earnings requirement of the

Act, became unable to engage in any substantial gainful

activity by reason of a 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 12 months.

Applicable Statutes and Regulations

Sections 216(i) and 223 of the Act, insofar as pertinent

to this case, define “disability” as “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

12 months.”

Subsection (d) of Section 223 of the Act provides, in

part, as follows:

‘*(2)(A) An individual . . . shall be determined to

be under a disability only if his physical or mental

impairments are of such severity that he is not only

unable to do his previous work but cannot, consider-

ing his age, education, and work experience, engage

in any other kind of substantial gainful work which

exists in the national economy, regardless of whether

such work exists in the immediate area in which he

lives, or whether a specific job vacancy exists for him,

or whether he would be hired if he applied for work.

For purposes of the preceding sentence . . . ‘work

which exists in the national economy’ means work

which exists in significant numbers either in the region

where such individual lives or in several regions of

the country... . 3

(3) For purposes of this subsection, a ‘physical

or mental impairment’ is an impairment that results

from anatomical, physiological, or psychological ab-

normalities which are demonstrable by medicaily ac-

ceptable clinical and laboratory disgnostic techniques

(5) An individual shall not be considered to be

under a disability unless he furnishes such medical

and other evidence of the existence thereof as the Sec-

retary may require.”

Sections 216(i) and 223 of the Act further provide that

- an individual shall not be considered to be under a dis-

ability unless he was “a fully insured individual” and has

social security credits for not less than 20 calendar quar-

ters of work during a period of 40 calendar quarters end-

ing in or after the calendar quarter in which he became

disabled.

Sections 404.1502, 404.1015-404.1519 and 404.1523-404.-

1524, inclusive, of Subpart P, Title 20 of the Code of Fed-

eral Regulations, indicate what proof is required to estub-

lish entitlement to disability insurance benefits under the

Act and what standards will be applied for evaluating such

evidence.

In substance, these sections of the Regulations provide

that although primary consideration is given to the sever-

ity of the individual’s medically determinable physical or

mental impairment, consideration also is given to other

factors such as the individual’s age, education, training

and work experience in determining his ability to engage

in «ay substantial gainful activity. In evaluating the rela-

tive severity of an individual’s medically determinable im-

»airment, consideration is given, among other things, to

how much the impairment affects his abilities to move

about, handle objects, see, hear, speak, understand and

reason.

Summary of Claimant’s Testimony

The claimant testified substantially as follows:

He was born on September 17, 1931 in Hartsville, South

Carolina. He completed 7 grades of schoo] but when he

was “around 17 years old” he dropped out of school and

worked for a year for the Plain Glass Construction Com-

pany in Hartsville. That company was engaged in building

5 and 10¢ stures and the claimant worked as a general

construction laborer for $2.25 per hour. In 1949 he moved

to the Detroit, Michigan area and from 1949 to 1950 he

worked as a laborer for $1.80 per hour for the New Haven

Foundry, Mt. Clemens, Michigan. From 1950 to 1952 he

worked at a salary of $60.00 a week for Ernie Grissom

Ford, Warren, Michigan in the reconditioning of cars. That

work involved putting old cars into “new” condition and

the claimant’s work was to clean the interior of the cars

doing the necessary spraying, painting and waxing.

From 1952 to 1956 he worked as a machine operator at

$2.79 an hour for the Chrysler Corporation, Warren, Mich-

igan. He was laid off because of a strike and he obtained

work in the reconditioning of cars for the Edmond Olds-

mobile, Detroit, Michigan and for Krajenke Buick, Ham-

tramck, Michigan. He held down both jcbs during the

same period, 1956 to 1959, one job paying him $100.00 a

week and the second job paying him $15.00 per car. From

August 1959 to August 1962 he worked at reconditioning

cars for Hi Dawson Ford, Detroit, Michigan at a salary

of $110.00 per week. Daring part of that time, namely

from 1960 to 1962, ne also held down a second job recon-

ditioning cars for Tommy C. Rector, Detroit, Michigan and

was paid $15.00 per car. From August 1962 to August

1963 he worked for Bill Snetheamp in Detroit at $140.00

per week doing “painting and parts delivery.” From

August 1963 to April 20, 1966 he worked for Stark Hickey

in Detroit at $80.00 a week, driving a “wrecker,” lubri-

cating vehicles, delivering parts and performing other gen-

eral chores. From January 15, 1966 to April 20, 1966 he

also worked as bar manager of the Log Cabin Inn, South-

field, Michigan at a salary of $100.00 a week. During those

months he worked for Stark Hickey from 7 a.m. to 3:30

p.m. and then at the Log ‘Cabin Bar until 2:30 or 3 a.m.

Shortly after midnight of April 20, 1966 a customer at

the Log Cabin Inn threatened the claimant with violence

and the claimant put in a call for the police. Before the

police arrived the claimant was shot in the back. He was

taken by the police to the Henry Ford Hospital where he.

remained until May 3, 1966. He was told by the doctors in

the hospital that a bullet was lodged in his spine at about

the location of his 8th thoracic vertebra and that the sur-

gical removal of the bullet might result in a permanent

paralysis. It therefore was decided not to remove the

bullet and it continues to be lodged against his spine.

When he was discharged from the hospital on May 3,

1966 he was told that he cculd go back to work.

Although the owner of the Log Cabin Inn refused to —

give him any employment he obtained work as a laborer

Ne rte oe

for the Braver Lumber Company in Detroit and he re-

ported for work there on September 9, 1966. However,

after he had worked only two hours he “passed out” on the

job. He was taken to Dr. John B. Greene where he had

an X-ray taken. Dr. Greene told him that the X-ray

showed a bullet lodged “near his spine.” The doctor told

him that he was not “quite healed” inside. After several

months, when he felt he might be strong enough to return

40 work, he applied for a job at several places, one of them

being the Ford Motor ‘Company Rouge Plant, Gate 6. He

was given a physical examination but was refused employ-

ment because of the bullet in his back. He also went to the

Dodge Plant where he was given a physicai examination

and again refused employment because of the bullet in his

back. Other companies where he applied for work also

turned him down. He frequently was told that he was not

a good insurance risk for employment. He finally did ob-

tain employment at the Ditzler Auto Painting Company in

Detroit on April 1, 1967 at a salary of $90.00 a week, his

job being to mix paints. He found that he could not tol-

erate the paint fumes, however, and he was assigned to

driving a truck. As that work also involved loading and

unloading containers of paint he quickly discovered. that

he was not able to do any lifting so had to give up his em-

ployment with the Ditzler Auto Painting Company on

April 15, 1967. Subsequently the Braver Company prom-

ised to give him “light’’ work, so he started work there

in August 1967. However, certain “heavy” tasks later were

assigned to him, such as picking up kegs of nails, which he

found he could not do. Whenever he tried to lift a keg

of nails he ‘‘could feel the bullet in his back, and sharp

pains would radiate from his back up and down his spine

and into his right shoulder.” The bullet “feels like a ball

bearing and hurts all the time,” particularly when he

i ape:

“Jeans over.” He had to quit work at the Braver Lumber

Company after being there only one month. He next found

employment with the Michigan Automotive Replacement

Company as a truck driver and “handling stock’’ at a sal-

ary of $80.00 a week. As this work also involved the load-

ing and unloading of the truck he drove, such loads in-

cluding batteries, crankshafts, spark plugs, etc., he found

the work too exhausting and he had to quit that job on

December 15, 1967.

His next employment was for Floyd Rice, a Ford Dealer

in Detroit, at a salary of $85.00 a week, “driving cars.”

In this work he is not required to do anything except work

as a “carhop” which merely involves driving a car out of

the dealer’s yard and taking the customers to their homes.

On this job he works from 3:30 p.m. to midnight, five days

a week. He started work for Floyd Rice on January 2,

1968 and has continued to work there ever since. He ob-

tained this job through his friend, Paul Garagan, the serv-

ice manager for Floyd Rice. Mr. Garagan had been accus-

tomed to stop at the Log Cabin Inn to “have a few beers”

after he got off work at midnight at Floyd Rice’s. He and

the claimant became acquainted and developed a friend-

ship. After the claimant was injured and became unable

to return to work at the Inn or to do any heavy physical

work Mr. Garagan told the claimant that he could have a

job with Floyd Rice as long as Mr. Garagan was the serv-

ice manager there, and that his job there would only in-

volve driving carg and would not include any heavy lift-

ing or other physical labor. However, Mr. Garagan

warned the cleimant that Mr. Garagan’s boss might not

approve of the claimant’s employment if it became known

that the claimnt only had to drive cars whereas the other

‘‘carhops” who worked for Floyd Rice had additional duties

which involved some hard physical labor. Consequently,

ina)

He taimadt ine wv cuY Ow wo ue mer mH eit

eomtimie 6 word fur Fovve De

The daimasnc *ue ter wetfed tun: ue bet Deen married

ames (DS. wie ess ut eaten «Fe aiweve likes % work

Tory Aart mt et we oer at postivic. He bane

stg tat wn ne st eee te. et ot BOOT ee he

sympiest ia wut Of wore Ur OMe you Me womld go tw

mia wenn pass 0" eure auc work auvtuer fol

wre Sue na myut ur ZAprl 2. WE. nowever. be Lee

Ist wen tue “i in wr oo tue verwout type of work Le

aast tome gre-ane > Oo ony ue umeDe G0 any ft

ag UIT 16 a2 see one aullty & wend etreen or

care” Faas w oe uu" Ue iC Wore peut fume.

Pirmernare ss" sues ue urygucr um tue Log Cab Inn,

ne 24a Ten wer eu” oie “a eee ary wore

Wiers Hers 27 mye: wo”) auc ue uv “frigntened of

tara 2 wuld we oc cee 1 gt Beer Ww Work = «& ter.”

Bevery =me 16 tet Br eUNeUEE emg EUOD Mt Dring:

teem ae nema ous exper Tre are wuere the

gniles 9 uviest ‘mse ol tu time” The paw “throw

Sage 2 snags :

Ela tality mete meee Cuerss pile.” “water pile”

Cnmmas: iar tie emer. siniet tug: ue Led served ae the

Hacmant? sce on ot preperatuer. flume auc prosecc-

sen 1? 24 em wm te Ley Wa0u ios for Woremen's

Comtensaion utes ue Mecuger Stee Wormer’ Con-

pense aaa ee te ee sac teen paid.

triemed 1 “amyecexiuer ivy wore tear er monte. and

hefsrs ae ve tet tee cunmmpeirir Limeied vefore the

seamed ¢ Cunmeuecion Suerc tue cman and the Bt

Pau lasses Vongqer. wie: wee toe surans carrier

for the Log Cabin Inn, entered into a redemption agree-

ment which was subsequently approved after hearing by

the Workmen’s Compensation Board; and that the claim

-was redeemed for a cash payment of $10,000. Counsel for

the claimant further stated that there was never a find-

ing by the Workmen’s Compensation Board that the claim-

ant was “totally disabled.”

Decision

Accordingly, it is the decision of the Hearing Examiner

that the claimant Johnney Benjamin, based on his applica-

tion filed on March 16, 1967, is entitled to a period of dis-

ability beginning on April 20, 1966 and to disability in-

surance benefits under the provisions of Sections 216(i)

and 223, respectively, of the Social Security Act, as

amended.

/s/ Milton C. Ferguson,

Hearing Examiner

Date: April 12, 1968

DECISION IN LOFTY v. RICHARDSON _

No. 20484

UNITED STATES COURT OF APPEALS

For the Sixth Circuit

Barber Lofty, Plaintiff-Appellant

Elliott L. Richardson, Secretary of Health, Education

and Welfare, Defendant-Appellee.

Appeal from the United States District Court for the

Eastern District of Michigan, Southern Division.

Decided and Filed March 4, 1971.

Before: Edwards and Miller, Circuit Judges, and

O’Sullivan, Senior Circuit Judge.

Edwards, Circuit Judge. In this case appellant attacks

the constitutionality of an amendment to the Social Secu-

rity Act adopted in 1965 (42 U.S.C. § 424(a), as amended,

(Supp. _V, 1969)) which had the effect of reducing a claim-

ant’s Social Security disability benefits by the amount of

Workmen’s Compensation benefits received by him where

the total received under the two programs exceeded 80%

of his previovs average monthly wages. Appellant claims

this provision violates the due process clause of the United

States Constitution because when Congress made Work-

men’s Compensation the only subject for such deductions,

it thereby created a paiently arbitrary classification.

We begin our consideration of this case, as indeed we

must, with the Supreme Court’s last ruling upon an in-

vidious classification argument in a Social Security case.

“This is not to say, however, that Congress may

exercise its power to modify the statutory scheme free

of all constitutional restraint. The interest of a cov-

ered employee under the Act is of sufficient substance

to fall within the protection from arbitrary govern-

ment: . action afforded by the Due Process Clause.

In judging the permissibility of the cut-off provisions

of § 202 (n) from this standpoint, it is not within our

authority to determine whether the Congressional

judgment expressed in that section is sound or equita-

ble, or whether it comports well or ill with the pur-

poses of the Act. ‘Whether wisdom or unwisdom re-

sides in the scheme of benefits set forth in Title II,

it is not for us to say. The answer to such inquiries

must come from Congress, not the courts. Our con-

cern here, as often, is with power, not with wisdom.’

Helvering v. Davis, supra, at 644. Particularly when

we deal with a withholding of a noncontractual bene-

fit under a social welfare program such as this, we

must recognize that the Due Process Clause can be

thought to mterpose a bar only if the statute mani-

fests a patently arbitrary classification, utterly lacking

in rational justification.” Flemming v. Nestor, 363 U.S.

603, 611 (1960). (Emphasis added.)

Since we cannot say that the classification herein at-

tacked was ‘‘utterly lacking in rational justification,” we

cannot hold as appellant csks that Congress was without

power to pass the 1965 amendment.

Claimant in this case was granted total and permanent

disability benefits under the Social Security Act starting

in 1966. In June of 1966 he accepted a lump sum “‘redemp-

tion settlement’’ in full payment of his Workmen’s Com-

pensation claim arising out of the same injuries which

produced his total and permanent disabiilty for Social Se-

curity benefits.

Taking into account the Workmen’s Compensation

settlement, the Secretary reduced claimant’s Social Secu-

rity benefits from $269.80 a month to $25.80 per month for

44 months, or until the Compensation settlement had been

exhausted at the raie of $57 per week. This action was taken

under 42 U.S.C. § 424(a), as amended, (Supp. V., 1969),

which placed a limit of 80% of claimant’s previous average

monthly earnings upon the total of Social Security and

Workmen’s Compensation benefits which he was to receive.

Section 424(a) required that only the difference, after

deduction of Workmen’s Compensation benefits, should

be paid by Social Security.

This reduction formula was adopted by Congress in

1965, effective January 1, 1966. Much of the testimony which

preceded its adoption argued that double disability bene-

fits close to or exceeding prior earnings defeated the pur-

pose of motivating injured beneficiaries back toward pro-

ductive work and tempted the states to reduce or eliminate

Workmen’s Compensation benefits and throw full respon-

sibility on the national Social Security scheme.

The amendment enacted by Congress is now attacked,

not because the purposes claimed for it might not be argu-

ably rational grounds for congressional action, but because

Congress in establishing the reduction provision referred to

above did not also include such benefits as private insu-

rance proceeds and benefits resulting from damage suits

in civil courts. It is claimed that existence of these bene-

fits without deductions makes the selection of Workmen’s

Compensation as the only deduction against Social Secu-

rity benefits an arbitrary and capricious classification

which cannot stand when tested against the due process

clause.

The District Judge who heard this case below dismissed

it with a brief opinion which cited the reasons for the

amendinent referred to above and held that “it is there-

fore reasonable to preclude a claimant from receiving

amounts as a result of retirement or disability far in excess

of his earnings received while working.” The District

Judge held that the classification involved herein was not

patently arbitrary within the meaning of Flemming v. Nes-

tor, 363 U.S. 693 (1960).

We have already set forth above the essential holding

of the Flemming case upon which the District Judge based

decision. But there is a good deal of case law which serves

to illustrate the breadth of legislative power accorded the

Congress (or the states) by the Supreme Court’s interpre-

tation of the constitutional limitations contained in the

due process and equal protection clauses.

In the following two cases, former Chief Justice War-

ren wrote for the Court:

‘The constitutional safeguard is offended only if the

classification rests on grounds wholly irrelevant to the

achievement of the State’s objective. State legisla-

tures are presumed to have acted within their consti-

tutional power despite the fact that, in practice, their

laws result in some inequality. A statutory discrimi-

nation will not be set aside if any state of facts rea-

sonably may be conceived to justify it. See Kotch v.

Board of River Port Pilot Comm’rs, 330 U.S. 552;

Metropolitan Casualty Ins. Co. v. Brownell, 294 U.S.

580; Lindsley v. Natural Carbonic Gas Co., 220 U.S.

61; Atchison, T. € 8S. F. R. Co. v. Matthews, 174 U. S.

96.” McGowan v. Maryland, 366 U.S. 420, 425-26

(1961). (Footnotes omitted.)

‘‘[SJome basic guidelines have been firmly fixed. The

distinctions drawn by a challenged statute must bear

some rational relationship to a legitimate state end

and will be set aside as violative of the Equal Protec-

tion Clause only if based on reasons totally unrelated

to the pursuit of that goal. Legislatures are presumed

to have acted constitutionally even if source inaterials

normally resorted to for ascertaining their grounds

for action are ctherwise silent, and their statutory

classifications will be set aside only if no grounds can

be conceived to justify them. See McGowan v. Mary-

land, 366 U.S. 420 (1961); Kotch wv. Board of River

Port Pilot Commissioners, 330 U.S. 552 (1947) ; Lind-

sley v. Natural Carbonic Gas Co., 220 U.S. 61 (1911).

With this much discretion, a legislature traditionally

has been allowed to take reform ‘‘one step at a time,

addressing itself to the phase of the problem which

seems most acute to the legislative mind,’’ Williamson

v. Lee Optical of Oklahoma, Inc., 348 U.S. 483, 489

(1955); and a legislature need not run the risk of los-

ing an entire remedial scheme simply because it failed,

through inadvertence or otherwise, to cover every evil

that might conceivably have been attacked. See Ozan

Lumber Co. v. Union County National Bank, 207 U.S.

251 (1907).” McDonald v. Board of Election Commis-

stoners of Chicago, 394 U.S. 802, 809 (1969).

Even more recently Justice Stewart dealt with a some-

what similar classification argument:

“Tn the area of economics and social welfare, a State

does not violate the Equal Protection Clause merely

because the classifications made by its laws are im-

perfect. If the classification has some ‘reasonable ba-

sis’, it does not offend the Constitution simply because

the classification ‘is not made with mathematical nicety

or because in practice it results in some inequality.’

Lindsey v. National Carbonic Gas Co., 220 U.S. 61, 78.

‘The problems of government are practical ones and

may justify, if they do not require, rough accomo-

dations—illogical, it may be, and unscientific.’ Metro-

polis Theatre Co. v. City of Chicago, 228 U.S. 69-70.

‘A statutory discrimination will not be set aside if any

state of facts reasonably may be conceived to justify

it.” McGowan v. Maryland, 366 U.S. 420, 426”. Dan-

dridge v. Williams, 397 U.S. 471, 485 (1970).

With these rules pertaining to legislative power before

us,’ we turn directly to the background and purpose of the

disputed amendment.

The legislative record plainly shows that Congress had

the Workmen’s Compensation-Social Security overlap be-

fore it as a problem for a decade. When the Social Secu-

rity Act was first passed in 1935, it provided no disability

benefits. Act of Aug. 14, 1935, ch. 531, 49 Stat. 620 et seq.,

(42 U.S.C. § 301 (ff)). When benefits for total and per-

manent disability were first added in 1956, Congress did

require the offset of Workmen’s Compensation Act of Aug.

1, 1956, Pub. L. No. 880, 70 Stat. 816-17.

Two years later, however, acting on the assumption that

the impact of the duplication was relatively slight, the

offset provision was repealed. Act of Aug. 28, 1950 Pub.

L. No. 85-840, Sec. 206, 72 Stat. 1025.

1The McGowan, McDonald and Dandridge cases are, of course, at-

tacks upon state statutes, wherein appellant’s reliance was upon the

equal protection clause of the Fourteenth Amendment. As to an asser-

tion of an arbitrary classification argument, there is a wide area of

overlap between the effect of the Fifth Amendment’s due Process clause

and the Fourteenth Amendment’s equal protection clause. Bolling v.

Sharpe, 347 U.S. 497, 499 (1954).

If there be a difference between the effect of these two clauses,

it would appear that since the equal protection clause is the more “ex-

plicit” of the two clauses, the cases quoted above weuld apply a fortiori

to this attack upon a federal statutory classification where reliance is

had on due process,

In the years which followed it is clear that Congress

received a great number of complaints about the repeal

of the offset. These complaints—the overwhelming majo-

rity of them originating with large employers or large

employer organizations—lead to reenactment of the Work-

men’s Compensation offset (in somewhat different form)

in the Soc. Sec. Amendments of 1965, eff. Jan. 1, 1956,

Pub. L. No. 89-97, Tit. ITI, § 335, 79 Stat. 406, 42 U.S.C.

§ 424(a), as amendec’, (Supp. V, 1969).

Hearings were held before adoption of Section 424(a)

only in the Senate—but the record there amply serves to

indicate the rationale of its advocates. Thus Ll. J. Dikovies,

representing the Council of State Chambers of Commerce,

told the Senate subcommittee:

Thousands of disabled workers today are receiving

more tax-free income from social security disability

benefits combined with State workmen’s compensation

benefits than they were earning before they became ill

or were injured. Section 303 would add many more

thousands to this number. When tax-free social insu-

rance benefits exceed earning power there is little in-

centive for a disabled person to accept the risk, pain,

and struggle involved in attempting to become self-

supporting again.

A matter of equal concern is the impact of Federal

disability payments on State workmen’s compensation

programs. Legislative proposals have been offered in

several States (Colorado, Florida, Maryland, and Min-

nesota) to reduce workmen’s compensation benefits by

the amount of OASI disability benefits payable to a

disabled worker. If other States follow this direction

and section 303 of this bill is enacted, we believe it will

be only a matter of time until State workmen’s com-

pensation programs are destroyed.

If that happens, a major impetus for this country’s

remarkable achievements in occupational safety will

be destroyed also. Workmen’s compensation insurance

costs are based on the actual loss experience of in-

dustry groups and of individual employers. This gives

the employer a direct financial incentive to improve

safety on the job. If workmen’s compensation costs

are absorbed into the social security program, em-

ployers without safety programs and those whose

employment is hazardous would pay no more than those

employers who have adopted safety programs or who

have less hazardous employment. We strenuously ob-

ject to any action which could have an adverse effect

on safety programs and on the remarkable down-

swing in disabling accidents that has taken place over

the last three decades. Hearings on H.R. 6675 Before

the Senate Com. on Finance, 89th Cong., Ist Sess.,

p. 259 (1965).

And J. Dewey Dorsett, representing the American In-

surance Association, presented a table purporting to show

that continued duplication of benefits under terms of the

then pending bill would mean at least some payments in

excess of prior average “take home pay” in every state,

and up to a maximum of 247% in the instance of Arizona.

Chart I—Duplication of workmen’s compensation disability benefits

by social security benefiis in H.R. 6675

Combined Workmen’s Combined

workmen’s compensa- benfits

compensa- average tion percentage

tion and weekly maximum of

social take-home weekly take-home

State security pay 2 benefit? pay

benefits 2

MIE nnn 40 bas cearenss $ 96.62 $ 67.96 $ 38.00 142

ME. dekadesedascceunes 172.00 130.10 100.00 132

BE, oe kkcddecscsnsassa 222.10 90.06 152.50 247

Arkansas ..cccccccccccces 92.05 65.16 35.00 141

CE ota decncwaseace 142.00 101.21 70.00 140

GEE bho wccvasncsccens 111.60 86.55 43.75 129

Connecticut ............-. 127.77 88.35 59.00 14€

BD nc xdcccarecsccss 113.97 79.30 50.00 144

District of Columbia....... 137.48 86.30 70.00 159

DEED. eadakacavradaeaccaen 101.26 69.05 42.00 147

CNR an sincakensasdsaass 94.97 66.74 37.00 142

EE cGadbncasnsedceuas 142.85 87.11 75.00 164

DE cas kkadnnedn disadvan 110.26 81.56 45.00 135

DED nedesandsdscatecea 122.85 86.73 55.00 142

BREED skacduddeccacesrce 108.97 78.94 45.00 138

DE: <ceccandeddacaseoneas 105.60 78.08 42.00 135

SEE. cx dawestandsnaense 107.26 81.38 42.00 132

MemtMey oc cccccccccceses 102.38 73.59 41.00 139

PRP PCeTe Teer TT TT 98.14 77.12 35.00 127

SE: aakteteaheeceaneson 100.62 67.32 42.00 149

pn PPPrrrrerrerrry 119.43 79.58 55.00 150

Massachusetts ..........+. 137.18 83.50 71.00 164

Biieigem oc ccc cccccceas 149.77 89.01 81.00 168

PEED, a cccciccacccaces 111.18 83.14 45.00 134

Mississippi ............++- 89.46 62.08 35.00 142

DE okccanccscsecares 111.93 79.60 47.50 141

PI “Scccscedesncassee 114.31 88.08 46.00 130

DE. Karencdnavecsace 103.60 77.76 40.00 133

pS Prrrrrrr rr rrr rr ry 125.96 498.76 57.20 i127

New Hampshire ......... - 104.72 70.40 45.00 149

New Jersey ........-+ee+5 111.55 84.68 45.00 132

New Mexico ...........-.- 108.77 88.61 40.00 123

New York ..ccccccccccces 127.48 85.89 60.00 148

North Carolina ........... 93.81 65.14 37.50 144

State security pay? benefit® pay

benefite 1

GREROMER oc cnccccccocsccss 100.18 — 76.41 87.50 131

GON ci ncscccccccccsics 121.29 485.81 57.69 141

Pennsylvania ............ 113.68 83.88 47.50 135

Rhode Island ............ 109.43 19.54 45.00 138

South Carolina ........... 90.38 63.93 35.00 141

South Dakota ............ 101.60 78.40 38.00 130

Tennessee ........eeeeeee 96.80 68.07 38.00 142

TEE cnadedacadapesecses 98.14 77.06 35.00 127

MPTP Teer re 122.40 90.41 52.80 135

Vermont .cccccccccccccces 103.26 6.00 44.00 150

_, ss a rrerrrrrerr rr rs 98.26 69.52 39.00 141

Washington ..........+.-+ 122.57 489.40 57.69 137

West Virginia ............ 100.31 482.88 38.00 121

Wisconsin ...cccccccccccce 130.18 83.50 64.00 156

WyOmting ..ccccccccccccce 118.51 484.37 55.38 140

Longshoremen’s Act ...... 114.67 70.00 8 wseeeee

1 Compensation benefits for temporary total disability payable to a

worker with a wife and 2 chikdren. Social Security benefits provided

in ELR. 6675 medicare bill, pp. 164-165.

2 Average weekly wages less Federal income and gocial security

taxes (4 deductions). Based upon wages of employees to whom com-

pensation paid, July 1964—National Council on Compensation Insur-

ance.

2As of May 1965. Includes, maximum allowance for temporary

total disability for worker with a wife and 2 children. (Michigan and

New York reflect benefit incheases contained in bills that have passed

their legislature.)

* Figures not available to National Council on Compensation In-

surance for monopolistic State fund. Source: Production workers in

manufacturing—196C Statistical Supplement, Monthly Labor Review,

pp. 33-35 (US. Department of Labor).

5 Figures not available—varies in each State.

Hearings on H.R. 6675 Before the Senate Comm. on

Finance, 89th Cong., 1st Sess., p. 898 (1965).

is ig tear Yar ener waveme of uv off eet amenc-

Ment witwsgie toer vyyouer’ uo nunivert of tporesmen

and sf scmiimte wadtesee Su at epee pout uf view

Waa seesenion a0 ae Nweoroare: oo! Dewitn. Lauter anc

Waitary nit 6 VW ne Wy Beret ww sUUgE tO de

lay snugetiment of mi Sims: ULL & mre tuOrongr etudY

nat een tists

teeta Sure ene. 5 tour yesterdey

I sxeyemnet ams tue novseurs Couns. on buem. Seen-

cor when mete 2 teyor. teu. seeed tuxt < stucr

ee nete nit tw Zivue Viarvs aut Mean omunittic

Ber yr tet Geter out eee cg etude Of

“ae eemear wut efecu 0! tue overiap vetween social

Sars Mil weenie? cupeuseuer ane Ww report

or Deemer RK tum 5 smi veevrdey that

perima + neu 0 te cusavliity seueeeric: w-

ter Wein ecu nie Teeeve WOTKIUED & COM peDse-

son. wit Geet fueete were tear famiem tuet net we te

swiswiet=t on sutmecise: wit tus oucction. Tht ineue

aaa Se ie un opin

I mat ose ein et VE -tueeuf opuuer or i. put ist

me wl cn wae ene 0 te UE prometit wOLUC Le.

Fire of wl. fw tue tame of diseulity toe wean bes

2 owjsc ug yu wut tee wed neve c wary

lyin ae evi ere ee WOU Pomeive.

Then £24 mat « wal: Gieansec ce of & erie

DET en neue 2c conan of workinen’t

SISO. Zi eS peouritY Cusauility ceuelie Le

Nes seve met Tuel tuk wWaeeet were. i trunk we neve

B B02 wme sopereecsisvor uw tue tact tuet nes be not

ern. age oe ee: WOU weve eer sauetanusliy

2 Bom settings «eee es ct age et eo

higher, say, 10 or 15 years later, and to find a way of

taking account of that fact.

Another element is that the Congress of the United

States in 1958 repealed the offset provision that had

been in effect because it presented a great many tech-

nical and administrative problems. In certain cases,

the offset provision resulted in delays in paying dis-

ability benefits because of the slow process, in some in-

stances, of determination under workmen’s compen-

sation and because we couldn’t move until we knew

what the amount of compensation was when the award

had been made.

So there are many problems that have to be staffed

out and thoroughly considered.

I think the House Ways and Means Committee in its

wisdom arived at the right conclusion—that there is a

need for the Social Security Administration to make a

thorough study of this question and to report back to

Congress by December of 1966. Hearings on H.R. 6675

Before the Senate Comm. on Finance, 89th Cong., 1st

Sess., p. 146 (1965).

However persuasive this statement might appear to us,

it is clear that the Senate committee did not desire to wait.

Its report on which subsequently the Senate and then the

House acted favorably provided:

(6) Reduction of disability benefits on account of

receypt of workmen’s compensation benefits

The committee has taken note of the concern that

has been expressed by many witnesses in the hearings

about the payment of disabiilty benefits concurrently

with benefits payable under State workmen’s compen-

setion programs. While data of the kind requested

by the House Committee on Ways and Means in its

report on this bill are not now available, the commit-

tee believes that amendatory legislation should not

await completion of the requested study. Although

there is some dispute as to the number of workers who

receive benefits under these two programs and whe-

ther these payments are excessive, the committee be-

lieves that it is desirable as « matter of sound princi-

ple to prevent the payment of excessive combined bene-

fits.

The committee believes that the provision it is rec-

ommending avoids the problems and inequities of the

earlier offset provision .in the social security law for

reducing monthly disability benefits by the amount of

any other benefit to which a worker was entitled under

State workmen’s compensation laws, which was in ef-

fect from July 1957 to July 1958, but was repealed

then. The new offset provision re ommended by the

committee provides for a reduction in the social secu-

rity disability benefit (except where the State work-

men’s compensation law provides for an offset against

social security disability benefits) in the event the

total benefits paid under the two programs exceed 80

percent of the worker’s average monthly earnings

prior to the onset of the disability. Under this provi-

sion, the worker’s average monthly earnings would be

defined as the higher of (a) his average monthly wage

used for purposes of computing his social security

disability benefit or (b) his average monthly earn-

ings, in employment covered by social security dur-

ing his highest 5 consecutive years after 1950. (In no

event, however, would the total benefits payable with

respect to a worker be reduced below the amount of

the unreduced monthly sociai security benefits). This

reduction formula would generally avoid the inequity

encountered under the previous offset provision, where

athe

the reductions that were required frequently resulted

in benefits that replaced no more than 30 percent or so

of the worker’s earnings at disablement. S. Rep. No.

404, 89th Cong., Ist Sess., p. 100 (1965).

This then brings us to consideration of appellant’s argu-

ment that the disputed amendment represents ‘‘a patently

arbitrary classification, utterly lacking in rational justifi-

cation.’”’ Flemming v. Nestor, 303 U.S. 603, 611 (1960),

and hence must be declared void. It seems to us that the

result contended for by appellant would represent a very

narrow construction of the congressional power to enact,

amend and modify social legislation as required by the

circumstances reported to Congress concerning its opera-

tion. If (as appellant concedes) the rationale for prevent-

ing double coverage is a reasonable one (whether we

might individually agree with it or not) then we believe

that Congress also had the right to make it applicable to

Workmen’s Compensation claimants and uot to do so as

to recipients of damage action judgments and private in-

surance proceeds.

The legislative history of this amendment. shows a great

many complaints were registered before Congress about

Workmen’s Compensation-Sccial Security double cover-

age. The record is devoid of any complaints at all about

double coverage resulting from private insurance or neg-

ligence actions in courts. It is neither novel nor necessa-

rily irrational for Congress to fail to act upon a problem

about which they have received no complaints and have

ben supplied no information, even when Congress, as here,

does act upon a somewhat parallel problem as to which it

had both.

Still another reason which might reasonably be conceived

to justify the congressional classification is that adminis-

tratively it would be relatively simple to enforce the Work-

men’s Compensation deductions, whereas separating out the

wage benefits from civil damage judgments, or determin-

ing who had received private insurance benefits, might offer

administrative problems of a serious nature.

Finally, it is entirely conceivable to us that Congress

may have considered Social Security bencfits and Work-

men’s Compensation benefits to be more arguably duplica-

tive of one another than could appropriately be claimed

concerning Social Security benefits and the other two types

of payments. Both Social Security and Workmen’s Com-

pensation programs are social weifare legislation. Private

accident or disability insurance is a private contract, fre-

quently paid for entirely by the recipient. And, of course,

court awards for injuries are private rights derived from

the common law involving the principle of compensation

for negligence or fault.

Most of the argument for the Workmen’s Compensation

offset came from employers who generally pay all of the

costs for Workmen’s Compensation and half of the costs

of the Social Security benefits. Their argument before Con-

gress was that they were paying twice for the same injury.

This argument would have, of course, no merit at all in

relation to a damage action award or to the proceeds of

privately purchased accident or disability insurance.

As we have aleardy indicated, our conclusion is that

Section 424(a) does not violate the due process clause of

the United States Constitution.

As to the other two issues presented in appellant’s brief,

we affirm the judgment of the District Court for the rea-

sons set forth in the opinion of the District Judge.

The judgment of the District Court is affirmed.

APPENDIX B

Section 224 of the Social Security Act

(42 U.S.C.A. 424a, Pub. L. 89-97, Title III, 335, 79 Stat.

406, Amended Jan 2, 1968, Pub. L. 90-428, Title I, 159

(a) 81 Stat. 869)

(a) If for any month prior to the month in which an

individual attains the age of 62—

(1) such individual is entitled to benefits under sec-

tion 423 of this title, and

(2) such individual is entitled for such month, under

a workmen’s compensation law or plan of the United

States or a State, to periodic benefits for a total or par-

tial disability (whether or not permanent) and the Sec-

retary has, in a prior month, received notice of such en-

titlement for such month,

the total of his benefits under section 425 of this title for

such month and of any benefits under section 402 of this

title for such month based on his wages and self-employ-

ment incon ¢ shall be reduced (but not below zero) by the

amount by which the sum of—

(3) such total of benefits under sections 423 and 402

of this title for such month, and

(4) such periodic benefits payable (and actually

paid) for such month to such individual under the work-

men’s compensation law or plan,

exceeds the higher of—

(5) 80 percentum of his ‘‘average current earnings”,

’

(6) the total of such individual’s disability insurance

benefits under section 423 of this title for such month

and of any monthly insurance benefits under section 402

of this title for such month based on his wages and self-

employment income, prior to reduction under this sec-

tion.

In no case shall the reduction in the total of such benefits

under sections 423 and 402 of this title for a month (in a

continuous period of months) reduce such total below the

sum of—

(7) the total of the benefits under sections 423 and

402 of this title, after reduction under this section, with

respect to all persons entiled to benefits on the hasis of

such individual’s wages and self-employment income for

such month which were determined for such individual

and such persons for the first month for which reduction

under this section was made (or which would have been

so determined if all of them had been so entitled in such

first month), and

(8) any increase in such benefits with respect to such

individual and such persons, before reduction under this

section, which is made effective for months after the

first month for which reduction under this section is

made.

For purposes of clause (5), an individual’s average cur-

rent earnings means the larger of (A) the average monthly

wage used for purposes of computing his benefits under sec-

tion 423 of this title, or (B) one-sixtieth of the total of his

wages and self-employment income (computed without re-

gard to the limitations specified in sections 409(a) and

411(b) (1) of this title) for the five consecutive calendar

years after 1950 for which such wages and self employment

income were highest. In any case where an individual’s

wages and self-employment income reported to the Secre-

tary for a calendar year reach the limitations specified in

sections 409(a) and 411(b) (1) of this title, the Secretary

under regulations shall estimate the total of such wages

and self-employment income for purposes of clause (B)

of the preceding sentence on the basis of such information

as may be available to him indicating the extent (if any)

by which such wages and self-employment income exceed

such limitations.

(b) If any periodic benefit under a workmen’s compen-

sation law or plan is payable on other than a monthly basis

(excluding a benefit payable as a lump sum except to the

extent that it is a commutation of, or a substitute for,

periodic payments), the reduction under this section shall be

made at such time or times and in such amounts as the Sec-

retary finds will approximate as nearly as practicable the

reduction prescribed by subsection (a) of this section.

made after any reduction under subsection (a) of section

403 of this title, but before deductions under such section

and under section 422 (b) of this title.

(d) The reduction of benefits required by this section

shall zot be made if the workmen’s compensation law or

plan under which a periodic benefit is payable provides for

the reduction thereof when anyone is entitled to benefits

under this subchapter on the basis of the wages and self-

employment income of an individual entitled to benefits un-

der section 423 of this title.

(e) Ifit appears to the Secretary that an individual may

be eligible for periodic benefits under a workmen’s com-

pensation law or plan which would give rise to reduction

under this section, he may require, as a condition of certi-

ns. ee

fication for payment of any benefits under section 423 of

this title to any individual for any month and of any benc-

fits ‘under section 402 of this title for such month based

on such individual’s wages and self-employment income,

that such individual certify (i) whether he has filed or in-

tends to file any claim for such periodic benefits, and (ii)

if he has so filed, whether there has been a. decision on

such claim. The Secretary may, in the absence of evidence

to the contrary, rely upon such a certification by such indi-

vidual that he has not filed and does not intend to file

such a claim, or that he has so filed and no final decision

thereon has been made, in certifying benefits for payment

pursuant to section 405(i) of this title.

(f) (1) In the second calendar year after the year in

which reduction under this section in the total of an indi-

vidual’s benefits under section 428 of this title and any

benefits under section 402 of this title based on his wages

and self-employment income was first required (in a con-

tinuous period of months), and in each third year there-

after, the Secretary shall redetermine the amount of such

benefits which are still subject to reduction under this sec-

tion; but such redetermination shall not result in any de-

crease in the total amount of benefits payable under this

subchapter :on the basis of such individual’s wages and

self-employment income. Such redetermned benefit shall

be determined as of, and shall become effective with, the

January following the year in which such redetermination

‘was made.

(2) In making the redetermination required by para-

graph (1) of this subsection, the individua!’s average cur-

rent earnings (as defined in subsection (a) of this section)

shall be deemed to be the product of his average current

earnings as initially determined under subsection (a) of

this section and the ratio of (i) the average of the taxable

wages of all persons for whom taxable wages were re-

ported to the Secretary for the first calendar quarter of

the calendar year in which such redetermination is made,

to (ii) the average of the taxable wages of such persons

reported to the Secretary for the first calendar quarter of

the taxable year in which the reduction was first computed

(but not counting any reduction made in benefits for a pre-

vious period of disability). Any amount determined under

the preceding sentence which is not a multiple of $1 shall

be reduced to the next lower multiple of $1.

(g) Whenever a reduction in the total of benefits for

any month based on an individual’s wages and self-em-

ployment income is made under this section, each benefit,

except the disability insurance benefits, shall first be pro-

portionately decreased, and any excess of such reduction

over the sum of ali such benefits other than the disability

insurance benefit shall then be applied to such disability

insurance benefit.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.