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Allen v. Berryhill

United States District Court, N.D. Alabama, Western Division

August 10, 2018

SHAULA LANEAR ALLEN, Plaintiff,
v.
NANCY A. BERRYHILL, Deputy Commissioner for Operations of the Social Security Administration, Defendant.

          MEMORANDUM OPINION

          T. MICHAEL PUTNAM UNITED STATES MAGISTRATE JUDGE.

         The plaintiff, Shaula Lanear Allen, individually and as representative payee and on behalf of J.L., [1] appeals from the decision of the Commissioner of the Social Security Administration (“Commissioner”) finding that she and J.L. received an overpayment based upon J.L.'s available resources and denying her and J.L.'s requests for a waiver of the overpayment of Supplemental Security Income (“SSI”) benefits. Ms. Allen timely pursued and exhausted her and J.L.'s administrative remedies, and the decision of the Commissioner is ripe for review pursuant to 42 U.S.C. §§ 405(g), 1383(c)(3).[2] The parties have consented to the exercise of dispositive jurisdiction by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Doc. 18).

         I. Factual Background

         When J.L. was an infant, a pharmacy filled a prescription for him, but labeled the prescribed medication with an incorrect dosage instruction. (Tr. at 209-10). Consequently, J.L. ingested four times the necessary dosage, suffered an injury, and required emergency medical care. (Tr. at 210). In 2000, Allen brought a lawsuit on behalf of J.L. in the Chancery Court of Lowndes County, Mississippi (“the chancery court”), and she settled his claim for $20, 000 in 2002. (Tr. at 209-211) (engagement letter dated 2000). Pursuant to the court order approving the settlement, after deduction attorney's fees and costs, Allen paid $13, 062.73 into “an F.D.I.C. insured account.” Allen apparently opened a certificate of deposit with Cadence Bank (“the account”) and deposited the settlement proceeds. (See Tr. at 78-85, 212-13).

         Initially, the court order directed Allen to retain the settlement proceeds in the account “for the maintenance and education of the minor child” and prohibited Allen from withdrawing any of the proceeds “without the further order of th[e] Court.” (Tr. at 210A; see also tr. at 320 (letter from 2002 indicating that proceeds were to be placed in “a frozen account”)). According to Allen, the chancery court made clear to her that she “was not to use” the proceeds deposited into the account and that the “money was not to be used for [J.L.] to take care of himself.” (Tr. at 333; see also tr. at 426-27). On one occasion in 2006, she petitioned the court for authority to withdraw $2, 000 from the account because of her and J.L.'s “recent relocation [from Mississippi to Alabama] and [J.L.'s] dire need for medications and counseling not covered by insurance.” (Tr. at 285). Because of the move, Allen needed to schedule many doctor's appointments for her son; in essence, she needed to find a new doctor to replace each of his former doctors located in Mississippi. (See tr. at 333). Therefore, she needed access to the proceeds to be able to pay for the visits and medications. (See tr. at 333). The petition was granted by the Mississippi court.

         Allen petitioned the court once again to withdraw proceeds from the account in 2010. (Tr. at 282, 334, 426-27, 435). The chancery court denied her request to purchase a computer for J.L.'s educational needs. (Tr. at 282, 334, 426-27, 435). The chancery court explained to Allen's attorney that it was Allen's responsibility “to take care of [J.L.]” with her own resources, not with the settlement proceeds. (Tr. at 426-27). The court intended the funds in the account to be preserved for payment to J.L. upon his becoming an adult.

         From July 2007 to September 2008, Allen was deployed to Iraq, during which time she relinquished her role as J.L.'s representative payee to her mother (J.L.'s grandmother). She was not in control of the account during that time.

         II. Administrative History

         Allen, on behalf of J.L., initially applied for SSI benefits on November 10, 2004. (Tr. at 126). Subsequently, on February 28, 2007, an ALJ awarded SSI benefits to J.L. (Tr. at 379). Allen served as J.L.'s representative payee, except for the period of time between July 3, 2007 and September 15, 2008, when Allen was deployed to Iraq. (Tr. at 304, 415). J.L.'s grandmother served as representative payee during the period that Allen served overseas. (Tr. at 304, 415). Once she returned from Iraq and resumed her role as representative payee, the Commissioner began a redetermination of J.L.'s eligibility for SSI benefits. (Tr. at 29). During this time, Allen first reported to the Commissioner the existence of the account. (Tr. at 34).

         On December 9, 2009, the Commissioner informed Allen that J.L.'s payments would stop in January 2010. (Tr. at 40). The Commissioner determined that J.L. should have received no SSI benefits from May 1, 2009 forward because he had resources greater than $2, 000 in November 2009 and because Allen's income was greater than the amount of SSI benefits available to J.L. during the period from May 2009 through October 2009 and from December 2009 forward. (Tr. at 40-41, 51-60). The Commissioner determined that J.L. received an overpayment of $5, 722.81 for the period from December 2008 to December 2009. (Tr. at 61).

         On February 23, 2010, the Commissioner further determined that J.L. impermissibly received SSI benefits for a greater period of time, specifically from December 2007 to December 2009. (Tr. at 71). According to the Commissioner, J.L.'s SSI benefits from December 2007 to April 2009 should have equaled $0.00 because J.L.'s resources exceeded $2, 000 based on the settlement proceeds deposited into the account. (Tr. at 78-85). On April 2, 2010, the Commissioner informed Allen that J.L. was not entitled to SSI benefits because his resources exceeded $2, 000. (Tr. at 96-97). The Commissioner sent billing statements to Allen in the amount of $7, 030 on March 19, 2010 (tr. at 87) and $8, 075 on June 14, 2010 (tr. at 107). The Commissioner placed Allen on notice of the total amount of the $15, 105 overpayment on April 9, 2010. (Tr. at 98).

         At some point, Allen requested the Commissioner to waive the overpayment, and when the Commissioner denied the waiver request, Allen requested the Commissioner to reconsider the waiver request.[3] (See tr. at 98). Additionally, on April 7, 2010, Allen requested the Commissioner to reconsider the fact of the overpayment by excluding the account. (Tr. at 101). The Commissioner denied reconsideration for the waiver issue on April 9, 2010 (tr. at 98), and the overpayment issue on April 14, 2010 (tr. at 101). Allen's Mississippi attorney submitted a letter to the Commissioner on April 15, 2010, explaining that, based on Mississippi law, Allen did not have a right to access the account to provide for J.L.'s general support and maintenance. (Tr. at 283). On April 28, 2010, Allen requested a hearing before an administrative law judge (“ALJ”), disagreeing with the Commissioner's initial determinations because the “account was a restrictive account.” (Tr. at 106).

         Allen twice appeared before an ALJ, once on April 25, 2011 (tr. at 327), and again on September 19, 2011 (tr. at 340). Subsequently, on October 13, 2011, the ALJ notified Allen of his unfavorable decision (tr. at 160), concluding that: (1) J.L. received an overpayment in the amount of $15, 105; (2) Allen was at fault; and (3) Allen was not entitled to a waiver (tr. at 165-66). In effect, both Allen and J.L. were liable for repayment. On November 29, 2011, the Commissioner mailed Allen a new billing statement which reflected $15, 105 as the total amount due. (Tr. at 290). Allen requested the Appeals Council to review the Hearing Decision on November 30, 2011, asserting that the unfavorable decision “does not agree with the CD transcript of the hearing in which the judge ruled differently.” (Tr. at 167). Allen was referring to the hearing held on April 25, 2011, during which the ALJ stated on the record that the account was not a countable resource. (Tr. at 333) (stating “because it's frozen, apparently, it doesn't count as a resource . . . . Somebody counted it as a resource, and . . . I don't really know [why] because the decree is pretty clear on that.”).

         On August 28, 2018, the Appeals Council vacated the October 13, 2011, hearing decision and remanded the case back to the ALJ “for further proceedings.” (Tr. at 186, 188).[4] Allen appeared for a hearing before the ALJ on February 4, 2014 (tr. at 355), and requested the ALJ's recusal on March 3, 2014 (tr. at 264), which was granted (see tr. at 406). On July 14, 2014, Allen appeared before a new ALJ. (Tr. at 403). Subsequently, on February 26, 2015, Allen again received an unfavorable decision. (Tr. at 16-18). The new ALJ held that: (1) J.L. received an overpayment totaling $15, 105 because the account was a resource that excluded J.L. from receiving SSI benefits for the period from December 2007 through December 2009; (2) J.L. was liable for the overpayment even though he was not at fault; and (3) Allen was both at fault and liable for the overpayment. (Tr. at 21-26). Allen requested review of the ALJ's decision, but the Appeals Council denied review on March 17, 2017. (Tr. at 5).

         I. Standard of Review

         This Court's role in reviewing claims brought under the Social Security Act is a narrow one. The scope of its review is limited to determining (1) whether there is substantial evidence in the record as a whole to support the findings of the Commissioner, and (2) whether the correct legal standards were applied. See Richardson v. Perales, 402 U.S. 389, 390, 401 (1971); Wilson v. Barnhart, 284 F.3d 1219, 1221 (11th Cir. 2002).

         The Court approaches the factual findings of the Commissioner with deference, but applies close scrutiny to the legal conclusions. See Miles v. Chater, 84 F.3d 1397, 1400 (11th Cir. 1996). “Substantial evidence is more than a scintilla and is such relevant evidence as a reasonable person would accept as adequate to support a conclusion.” Mitchell v. Commissioner, Soc. Sec. Admin., 771 F.3d 780, 782 (11th Cir. 2014). The Court may not decide facts, weigh evidence, or substitute its judgment for that of the Commissioner. Id. “The substantial evidence standard permits administrative decision makers to act with considerable latitude, and ‘the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence.'” Parker v. Bowen, 793 F.2d 1177, 1181 (11th Cir. 1986) (Gibson, J., dissenting) (quoting Consolo v. Federal Mar. Comm'n, 383 U.S. 607, 620 (1966)). Indeed, even if this Court finds that the evidence preponderates against the Commissioner's decision, the Court must affirm if the decision is supported by substantial evidence. Miles, 84 F.3d at 1400. “Speculation is, of course, no substitute for evidence, and a decision based on speculation is not supported by substantial evidence.” White ex rel. Smith v. Apfel, 167 F.3d 369, 375 (7th Cir. 1999); see also Lynch v. Astrue, 358 Fed.Appx. 83, 87 (11th Cir. 2009) (“Testimony that contains an undue degree of speculation is not substantial evidence.”); Bates v. Colvin, No. 6:14-cv-906-TMP, 2015 WL 3407539, at *6 n.3 (N.D. Ala. May 27, 2015). No. decision is automatic, however, for “despite this deferential standard [for review of claims] it is imperative that the Court scrutinize the record in its entirety to determine the reasonableness of the decision reached.” Bridges v. Bowen, 815 F.2d 622, 624 (11th Cir. 1987). Moreover, failure to apply the correct legal standards is grounds for reversal. See Bowen v. Heckler, 748 F.2d 629, 635 (11th Cir. 1984).

         III. Discussion

         Allen argues that substantial evidence does not support the ALJ's determination that J.L.'s settlement-proceeds account was an available resource and, therefore, that an overpayment occurred because J.L.'s resources exceeded the $2, 000 limit. The Commissioner contends that Allen failed to exhaust administrative remedies by not obtaining a final decision as to the fact and amount of the overpayment. Even if Allen exhausted her administrative remedies as to the overpayment issue, the Commissioner asserts that substantial evidence supports the ALJ's determination that an overpayment occurred due to the existence of the account. Furthermore, the Commissioner maintains that substantial evidence supports the ALJ's determination that (1) J.L. was without fault; (2) the denial of a waiver does not defeat the purposes or impede the efficient or effective administration of Title XVI of the Social Security Act; (3) the denial of a waiver for J.L. is not against equity and good conscience; and (4) Allen was with fault. The court finds that substantial evidence does not support the ALJ's determination that an overpayment occurred, and because of this fact, the court does not reach the merits of whether substantial evidence supports the ALJ's denials of a waiver for both Allen and J.L.

         A. Exhaustion

         Despite the Commissioner's argument to the contrary, Allen has exhausted the administrative procedures related to the overpayment issue. This court may review only the final decisions of the Commissioner. See 42 U.S.C. § 405(g). To obtain a final decision, the claimant must undertake a four-step administrative review process. See 20 C.F.R. § 416.1400(a). First, the Commissioner must make an initial determination affecting the rights of the claimant. 20 C.F.R. §§ 416.1400(a)(1); 416.1402 (listing actions that are initial determinations). If the claimant is dissatisfied with the Commissioner's initial determination, the claimant may request the Commissioner to reconsider the initial determination. 20 C.F.R. §§ 416.1400(a)(2); 416.1407. If the request for reconsideration is denied and the claimant is still dissatisfied, the claimant may request a hearing before an ALJ. 20 C.F.R. §§ 416.1400(a)(3); 416.1429. If the claimant is dissatisfied with the ALJ's hearing decision, the claimant may request the Appeals Council to review the hearing decision. 20 C.F.R. §§ 416.1400(a)(4); 416.1467. At this point, the decision of the Appeals Council becomes a final decision when the Appeals Council either denies review or enters a decision. 20 C.F.R. §§ 416.1400(a)(5); 416.1481.

         The Commissioner concedes that Allen has obtained a final decision as to the waiver issue, but the Commissioner asserts that Allen has not obtained a final decision as to the fact and amount of alleged overpayment. The Commissioner appears to exalt form over substance. As explained more fully in Section II, the Commissioner terminated J.L.'s SSI benefits starting January 1, 2010, which constitutes an initial decision. (Tr. at 40; see also 20 C.F.R. § 416.1402(b)). Allen requested the Commissioner to reconsider the fact and amount of the overpayment on April 7, 2010. (Tr. at 101). After the Commissioner denied reconsideration (tr. at 101), Allen requested a hearing before an ALJ, asserting that the “account was a restrictive account.” (Tr. at 106).

         Admittedly at this point, tracking the overpayment issue becomes difficult because of the subsequent administrative proceedings, but the Court believes that Allen did not fail to exhaust the overpayment issue. The ALJ made an unfavorable decision on October 13, 2011, finding an overpayment in the amount of $15, 105. (Tr. at 165). Allen requested the Appeals Council to review the ALJ's decision, arguing that decision did “not agree with the CD transcript of the hearing in which the judge ruled differently.” (Tr. at 167). During a previous hearing, the ALJ stated that the account should not have counted as a resource. (Tr. at 333). The Appeals Council reviewed the ALJ's decision and vacated the decision in its entirety. (Tr. at 186). On remand, a new ALJ issued a hearing decision on February 26, 2015, finding that the account was a countable resource and that an overpayment occurred. (Tr. at 21-23). Then the ALJ determined that Allen and J.L. were not entitled to waivers of the overpayment. (Tr. at 23-26). Allen requested review of February 26, 2015, hearing decision, and the Appeals Council denied review on March 17, 2017, resulting in a final decision. (Tr. at 5).

         The Commissioner makes much of the ALJ's framing of the issue on remand. However, it seems clear that when the Appeals Council vacated the earlier ALJ's decision, the entire matter, not just the waiver, was put before the second ALJ. On remand, the ALJ discussed extensively whether the account counted as a resource. The Court finds that the ALJ made a finding as to the fact and amount of overpayment in response to Allen's original request for reconsideration. Furthermore, even though the Appeals Council's instructions to the ALJ on remand were limited to the waiver issue, Allen adequately raised the overpayment issue when she requested the Appeals Council to review the October 13, 2011, hearing decision. Therefore, Allen received a final decision either when the Appeals Council failed to additionally instruct the ALJ to consider the overpayment issue on remand (indicating that the Appeals Council denied review of the overpayment issue) or when the Appeals Council denied review of the February 26, 2015, hearing decision which extensively discussed the existence of the account. In either circumstance, Allen obtained a final decision as to the overpayment issue.

         B. Merits

         1. Regulatory and POMS Framework

         The Commissioner and the ALJ determined that J.L.'s bank account was a resource. An individual may not receive SSI benefits if the individual's resources exceed $2, 000. 42 U.S.C. § 1382(a)(3)(B). Resources include “cash or other liquid assets or any real or personal property that individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance.” 20 C.F.R. § 416.1201(a); see also § 416.1208(a). As defined by regulation, “[l]iquid resources are cash or other property which can be converted to cash within 20 days . . . [such as] stocks, bonds, mutual fund shares, promissory notes, mortgages, life insurance policies, [and] financial institution accounts (including savings, checking, and time deposits, also known as certificates of deposit) . . . .” 20 C.F.R. § 416.1201(b). “An account qualifies as one used for ‘support and maintenance' if money from the account may be used for food or shelter.” Shields v. Comm'r of Soc. Sec., No. 2:14-cv-226, 2015 WL 9238990, at *2 (W.D. Mich. Dec. 17, 2015) (citing 20 C.F.R. § 416.1157(b)(3)).

         Under the Social Security Administration's Program Operations Manual System (“POMS”), a conservatorship account may count as a resource in determining eligibility for SSI benefits. A “‘conservatorship account' refers to a financial account in which a person or institution has been appointed by a court to manage and preserve the ...


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