APPENDIX B
869 F.2d 675
25 Soc.Sec.Rep.Ser. 97, Unempl.Ins.Rep. CCH 14544A
Simon NASH, Plaintiff-Appellant,
v.
Otis R. BOWEN, John A. Svahn, Donald J. Devine, Louis B.
Hays, Philip T. Brown, and L. Charles Leonard,
Defendants-Appellees.
Simon NASH, Plaintiff-Appellant,
v.
Otis R. BOWEN, John A. Svahn, Donald J. Devine, Louis B.
Hays, Philip T. Brown, and L. Charles Leonard,
Defendants-Appellees.
No. 586, Docket 88-6066.
United States Court of Appeals, Second Circuit.
Argued Dec.
20, 1988.
Decided
March 7, 1989.
Simon Nash, Buffalo, N.Y., plaintiff-appellant pro se.
Stephen J. Markman, Ass't. Atty. Gen., Washington, D.C.
(Wilfred R. Caron, Sr. Counsel, William G. Laffer III, Office of Legal Policy,
U.S. Dep't of Justice, Washington, D.C., of counsel), for defendants-appellees.
Irving Kator, Joseph B. Scott, Jennifer R. Levin, Kator,
Scott & Heller, Washington, D.C., for Federal Administrative Law Judges
Conference and Ass'n of Administrative Law Judges, amici curiae, on behalf of
plaintiff-appellant.
Anthony Szczygiel, Ass't Professor, Legal Assistance
Program, State University of New York at Buffalo Law School, Buffalo, N.Y.,
amicus curiae, on behalf of plaintiff-appellant.
Before FEINBERG, NEWMAN and ALTIMARI, Circuit Judges.
ALTIMARI,
Circuit Judge:
The principal issue raised by the instant appeal following
a nonjury trial in the United States District Court for the Western District of
New York (Elfvin, J.) is whether efforts by the Secretary of Health and Human
Services (the "Secretary") to improve the quality and efficiency of
the work of Administrative Law Judges ("ALJs") impaired their
asserted right to "decisional independence" under the Administrative
Procedure Act, 5 U.S.C. Sec. 551 et seq. (the "APA"). In addition, we
are asked to decide whether plaintiff-appellant, an ALJ with the Social
Security Administration, has standing to challenge the Secretary's policy of
non-acquiescence in decisions of federal courts other than the Supreme Court.
Because the district court's factual findings underlying the conclusion that
the Secretary's policies did not exceed the bounds of legitimate agency
supervision are fairly supported by the record and therefore are not clearly
erroneous, we agree with the district court that the Secretary's practices did
not infringe on the decisional independence of ALJs. We also find that the
district court correctly granted summary judgment in favor of
defendants-appellees on plaintiff-appellant's non-acquiescence claim for lack
of standing and therefore affirm the district court's judgment in all respects.
BACKGROUND
Plaintiff-appellant, pro se, Simon Nash is an
Administrative Law Judge ("ALJ") with some thirty years experience in
the Social Security Administration. In 1967, he became an ALJ in charge
("ALJIC") of the Buffalo, New York field office of hearings and
appeals. By 1975, the Social Security Administration (the "agency")
was faced with an administrative crisis due to a backlog of over 100,000 cases.
In order to eliminate the backlog and the concomitant delays in
processing appeals, former director of the Bureau (now "Office") of
Hearings and Appeals Robert L. Trachtenberg instituted a series of reforms
which appellant contends interfered with the "decisional
independence" of ALJs under the APA, the Social Security Act and the due
process clause of the fifth amendment. Nash initially protested the new
policies within the agency only to be summarily demoted from his position as
ALJIC to ALJ. In his original complaint filed May 30, 1978 in the district
court, plaintiff alleged, in addition to a claim concerning his demotion which
was later dropped, that the Secretary's newly-instituted "Peer Review
Program," monthly production goals, and "Quality Assurance
System" infringed upon the "quasi-judicial" status of ALJs. Nash
v. Califano, 613 F.2d 10, 13 (2d Cir.1980) ("Nash I "); see Ramspeck
v. Federal Trial Examiners Conference, 345 U.S. 128, 130, 73 S.Ct. 570, 572, 97
L.Ed. 872 (1953).
On June 4, 1979, plaintiff's claims were dismissed by the
district court for lack of standing. This court reversed on January 7, 1980 in
an opinion by then Chief Judge Kaufman, Nash I, 613 F.2d 10, and remanded the
case to the district court for further consideration. We held that the
"alleged inroads on ALJs' decisional independence [was] arguably within
the zone of interests protected by the [APA] and Social Security Act." Id.
at 14; see Association of Data Processing Serv. Organizations, Inc. v. Camp,
397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970). This court also
noted in dicta that the APA confers a "special status" on ALJs,
protecting them from agency interference and giving them a "qualified
right" of decisional independence. 613 F.2d at 15-16; see Ramspeck, 345
U.S. at 132-33, 73 S.Ct. at 573.
Following remand to the district court, plaintiff filed an
amended complaint, dated September 29, 1982, which realleged the above claims
seeking declaratory relief and added a new claim which attacked the legality of
the agency's non-acquiescence policy. On May 29, 1985, the district court
dismissed plaintiff's non-acquiescence claim for lack of standing and set the
remaining claims for trial. At that time, the district court also considered
defendants' contention that this court's decision in Nash I--while resolving
the question of plaintiff's standing to maintain his remaining claims under the
APA--did not preclude dismissal of those claims inasmuch as neither the APA nor
any other federal statute expressly or impliedly creates a private right of
action in plaintiff's favor. The district court rejected this argument and
instead interpreted Nash I as construing the APA to provide plaintiff a right
of action to advance his decisional independence claims. But see Goodman v.
Svahn, 614 F.Supp. 726, 729 n. 3 (D.D.C.1985); cf. Association of ALJs, Inc. v.
Heckler, 594 F.Supp. 1132, 1140-41 (D.D.C.1984). The case thus proceeded to
trial before Judge Elfvin in 1985-86, and following trial the matter was
submitted for decision. On January 6, 1988, the district court filed its
memorandum decision and order finding in favor of defendants, and judgment
thereafter was entered dismissing all of plaintiff's claims.
DISCUSSION
I.
We address plaintiff's non-acquiescence claim first. As the
district court correctly recognized, plaintiff was unable to demonstrate the
requisite " 'distinct and palpable' " injury, Gladstone, Realtors v.
Village of Bellwood, 441 U.S. 91, 100, 99 S.Ct. 1601, 1608, 60 L.Ed.2d 66
(1979) (quoting Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 2206, 45
L.Ed.2d 343 (1975)), arising from the challenged practice such that he
"personally would benefit in a tangible way from the court's
intervention." Warth, 422 U.S. at 508, 95 S.Ct. at 2210; see Allen v.
Wright, 468 U.S. 737, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984); Valley Forge
Christian College v. Americans United for Separation of Church and State, Inc.,
454 U.S. 464, 102 S.Ct. 752, 70 L.Ed.2d 700 (1982). The only adverse
consequence for Nash resulting from nonacquiescence is that his decisions are
subject to reversal by the Secretary. This court previously has considered the
Secretary's de facto policy of non-acquiescence in the law of the circuit
concerning the "treating physician" rule, but only in the context of
adjudicating the rights of claimants to Social Security benefits. See, e.g.,
Stieberger v. Bowen, 801 F.2d 29 (2d Cir.1986); Schisler v. Heckler, 787 F.2d
76 (2d Cir.1986). At least one other circuit court has rejected ALJ standing to
challenge the merits of a policy instruction to ALJs when a claimant-initiated
proceeding seeking review of the administrative denial of social security
benefits is available. See D'Amico v. Schweiker, 698 F.2d 903, 906 (7th
Cir.1983). Indeed, "[t]hat route is preferable to a suit by administrative
law judges, who are the umpires between claimants to social security benefits
and the Social Security Administration." Id. We thus agree with the
district court that Nash lacks standing to pursue a non-acquiescence claim
against the Secretary.
II.
Turning, then, to plaintiff's "decisional
independence" claims, the challenged practices are threefold. As explained
in Nash I, familiarity with which is assumed, the first allegedly unlawful
practice is the "Peer Review Program" (a/k/a the "Appellate
Appraisal System,") which directed the Office of Hearings and Appeals to
review decisions of ALJs outside of the usual appeals procedure conducted by
the Appeals Council. 42 U.S.C. Secs. 405, 421; 20 C.F.R. Sec. 404.900 et seq.;
cf. 5 U.S.C. Secs. 556(b)(3), 3105 (vesting ALJs with power to conduct
administrative hearings). The second practice concerns the imposition of
allegedly arbitrary monthly production quotas requiring ALJs to render a
specified number of decisions per month. Cf. 5 U.S.C. Sec. 4301(2)(D)
(exempting ALJs from performance appraisals); 5 C.F.R. Sec. 930.211 (same). The
third alleged threat to ALJs' decisional independence is the "Quality
Assurance System," which attempted to control the number of ALJ decisions
reversing previous state-level determinations declining to award benefits. See
generally Nash I, 613 F.2d at 13.
A.
Preliminarily, we address two procedural arguments raised
by defendants on this appeal. According to defendants, plaintiff's generalized
attacks on the agency are "fundamental[ly] flaw[ed]" in that they do
not state a cause of action under the APA or any other federal statute.
Defendants point to the D.C. Circuit's in banc decision in Council of and for
the Blind of Delaware County Valley, Inc. v. Regan, 709 F.2d 1521, 1524-25
(D.C.Cir.1983) as support for the proposition that although we previously have
decided in favor of plaintiff on the question of standing, Nash I, 613 F.2d at
16-17, this court is not thereby precluded now from holding that plaintiff has
no private right of action to maintain his suit. Cf. Goodman v. Svahn, 614
F.Supp. 726, 729 n. 3 (D.D.C.1985). Relying on dicta from Nash I that the APA
"confer[s] a qualified right of decisional independence upon ALJs,"
613 F.2d at 15, the district court declined to examine the sufficiency of
Nash's claims and proceeded directly to the merits. Defendants in effect argue
that the district court was not bound by dicta in Nash I and should have
dismissed plaintiff's causes of action for failure to state claims upon which
relief could be granted. See Fed.R.Civ.P. 12(b)(6).
While we agree Nash I stands only for the narrow premise
that plaintiff has standing to pursue his claims, we see no need to decide in
this case whether the APA confers, expressly or by implication, protection for
the decisional independence of ALJs since the district court rejected Nash's claims
on their merits. We should add, however, that it is not clear whether the APA
provides such protection aside from the tenure, compensation, and performance
appraisal exemption provisions under the APA that give life to the
"quasi-judicial" status of ALJs. See Goodman, 614 F.Supp. at 728; cf.
5 U.S.C. Sec. 7521(a) (protecting ALJs from agency disciplinary action except
for "good cause established and determined by the Merit Systems Protection
Board ... after opportunity for hearing before the Board"); id. Sec.
1205(a)(1) (empowering Merit Systems Protection Board to hear and adjudicate
disputes under APA, including whether an ALJ has been subjected to
"prohibited personnel practice" under 5 U.S.C. Sec. 1206(a)(1));
Brennan v. HHS, 787 F.2d 1559 (Fed.Cir.), cert. denied, 479 U.S. 985, 107 S.Ct.
573, 93 L.Ed.2d 577 (1986) (adjudicating ALJ decisional independence claim in
context of appeal from decision of Merit Systems Protection Board disciplining
ALJ under 5 U.S.C. Sec. 7521). In any event, given the present posture of this
case, we decline to assess the legal sufficiency of Nash's claims.
Defendants' other procedural objection concerns the
preclusive effect of a prior judgment in favor of the Secretary in Association
of ALJs v. Heckler, 594 F.Supp. 1132 (D.D.C.1984). The Department of Justice
contends that the Association case is res judicata on the merits of at least
two of Nash's decisional independence claims. The complaint in the Association
case constituted a broad challenge to various practices of the Secretary
substantially identical to those advanced by plaintiff in this case. The
Association specifically alleged that the Secretary had infringed upon the
decisional independence of ALJs through policies and practices designed to
monitor the decisions of ALJs and "pressure [them] into disposing of ...
larger numbers of cases each year" and "into deciding fewer cases in
favor of claimants." Complaint p 18; see 594 F.Supp. at 1135-36. The
record in this case indicates that Nash is a member of the Association, that he
consulted with the Association's counsel about the D.C. district court
litigation, and that he shared certain documents with the Association for use
in its case. App. at 437-39.
We are inclined, therefore, to agree with defendants that
the decision of the district court, at least with regard to the "Peer
Review Program" and the "Quality Assurance System," may be
affirmed as res judicata on the judgment in Association of ALJs v. Heckler.
Although the district court did not rule on this point, it would seem that we
are not precluded from doing so. See American Furniture Co. v. International
Accommodations Supply, 721 F.2d 478, 482 (5th Cir. Unit A 1981); Robertson v.
Interstate Securities Co., 435 F.2d 784, 787 n. 4 (8th Cir.1971); see also Dandridge
v. Williams, 397 U.S. 471, 475 n. 6, 90 S.Ct. 1153, 1156-57 n. 6, 25 L.Ed.2d
491 (1970); but cf. Savings & Profit Sharing Fund of Sears Employees v.
Gago, 717 F.2d 1038, 1039 n. 3 (7th Cir.1983) (unless pleaded or otherwise
properly raised at trial, res judicata defense is waived); Nevada Power Co. v.
Watt, 711 F.2d 913, 932-33 (10th Cir.1983) (same).
On the question of res judicata, plaintiff argues only that
his claims are separate and distinct from those decided in Association of ALJs.
He attempts to couch the decisional independence claims raised by the
Association case in terms of the now-discontinued "Bellmon Review
Program," which was instituted under the authority of section 304(g) (the
"Bellmon Amendment") of the Social Security Disability Amendments Act
of 1980, Pub.L. No. 96-265, 94 Stat. 441, 456 (1980). See Association of ALJs,
594 F.Supp. at 1133; see also W.C. v. Bowen, 807 F.2d 1502, 1503-05 (9th
Cir.1987) (explaining reasons for demise of "Bellmon Review
Program"), modified, 819 F.2d 237 (9th Cir.1987). However, the fact that
the "Bellmon Review Program" is no longer in existence does not make
the legal issue moot. See Association of ALJs, 594 F.Supp. at 1141. Indeed, the
challenged practices in this case also appear to have ceased; but because they
are "capable of repetition, yet evading review," Southern Pacific
Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911),
there remains a live controversy between the parties to be resolved. See Murphy
v. Hunt, 455 U.S. 478, 481, 102 S.Ct. 1181, 1183, 71 L.Ed.2d 353 (1982). The
point is that the "Bellmon Review Program" is for all intents and
purposes the same as the "Quality Assurance System" considered
herein, i.e., the targeting and pressuring of ALJs with high allowance of
benefit rates (a/k/a "reversal" rates) to fall into line or be
subjected to disciplinary action. Plaintiff's other claims were either raised
in the Association case ("Peer Review Program" claim), or could have
been raised (monthly production goals claim) in that action. See Allen v.
McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414-15, 66 L.Ed.2d 308 (1980). In sum,
Nash appears to have had a full and fair opportunity to be heard in that case.
Notwithstanding the very substantial, if not dispositive,
arguments in favor of application of the rule of res judicata in the instant
case, we nonetheless feel obliged to reach the merits of Nash's claims in view
of our strong intimation in Nash I that plaintiff was entitled to a plenary
trial. 613 F.2d at 17. Accordingly, we proceed to a consideration of the
dismissal by the district court of plaintiff's decisional independence claims
on their merits.
B.
The district court explicitly determined that
"[a]lthough the defendants may have engaged in some questionable practices
which clearly caused great unrest among ALJs, ... they did not infringe on the
decisional independence of ALJs." The factual components of this
conclusion, as with all findings of fact, cannot be set aside on appeal unless
they are clearly erroneous. Fed.R.Civ.P. 52(a).
The district court held that the "Peer Review
Program" was intended to respond to the "wide disparity in legal and
factual determinations among ALJs." Judge Elfvin concluded that various
peer review actions constituted "legitimate administrative steps
undertaken to enhance the quality and efficiency of the hearing system."
Cf. Heckler v. Campbell, 461 U.S. 458, 466-67, 103 S.Ct. 1952, 1956-57, 76
L.Ed.2d 66 (1983). Policies designed to insure a reasonable degree of
uniformity among ALJ decisions are not only within the bounds of legitimate
agency supervision but are to be encouraged. See Santise v. Schweiker, 676 F.2d
925, 930-31 (3d Cir.1982), cert. denied, 461 U.S. 911, 103 S.Ct. 1889, 77
L.Ed.2d 280 (1983); see generally Scalia, The ALJ Fiasco--A Reprise, 47
U.Chi.L.Rev. 57 (1979). In this case, "extra-appellate" review of
"dead" cases aimed at improving the quality of ALJ decisionmaking is
entirely consistent with the prerogative of the agency which retains "all
the powers which it would have in making the initial decision." 5 U.S.C.
Sec. 557(b). It is, after all, the Secretary who ultimately is authorized to
make final decisions in benefit cases. Baker v. Heckler, 730 F.2d 1147, 1150
(8th Cir.1984); cf. 42 U.S.C. Sec. 405(1) (authorizing Secretary to delegate
his statutory powers to "any member, officer, or employee" of the
agency). An ALJ is a creature of statute and, as such, is subordinate to the
Secretary in matters of policy and interpretation of law. Mullen v. Bowen, 800
F.2d 535, 540-41 n. 5 (6th Cir.1986); Association of ALJs, 594 F.Supp. at 1141.
Thus, the Secretary's efforts through peer review to ensure that ALJ decisions
conformed with his interpretation of relevant law and policy were permissible
so long as such efforts did not directly interfere with "live"
decisions (unless in accordance with the usual administrative review performed
by the Appeals Council). See 5 U.S.C. Sec. 556(b) (administrative hearings
"shall be conducted in an impartial manner"); id. Sec. 554(d)(2) (ALJ
shall not be "subject to ... supervision or direction" concerning
pending matters). The efforts complained of in this case for promoting quality
and efficiency do not infringe upon ALJs' decisional independence. Since Judge
Elfvin concluded that the "Peer Review Program" was intended to be,
and operated as, a quality control measure, we see no reason to disturb his
determination.
Regarding the Secretary's policy of setting a minimum
number of dispositions an ALJ must decide in a month, we agree with the
district court that reasonable efforts to increase the production levels of
ALJs are not an infringement of decisional independence. In a memorandum dated
July 1, 1975, then Director Trachtenberg indicated that while he was opposed to
the fixing of quotas, he was recommending a goal of 26 dispositions per
four-week period. When Louis B. Hays became Associate Commissioner of the
Office of Hearings and Appeals in 1981, he specifically concerned himself with
ALJs whose productivity fell below twenty case dispositions per month. The
record also reflects continuing pressure from the agency on ALJs to increase
monthly dispositions.
The setting of reasonable production goals, as opposed to
fixed quotas, is not in itself a violation of the APA. The district court
explicitly found that the numbers at issue constituted reasonable goals as
opposed to unreasonable quotas. Judge Elfvin explained that
[a] minimum number of dispositions an ALJ must decide in a
given period, provided this number is reasonable and not "etched in
stone", is not a prescription of how, or how quickly, an ALJ should decide
a particular case. It does not dictate the content of the decision.
Moreover, in view of the significant backlog of cases, it
was not unreasonable to expect ALJs to perform at minimally acceptable levels
of efficiency. Simple fairness to claimants awaiting benefits required no less.
Accordingly, we agree with the district court that the decisional independence
of ALJs was not in any way usurped by the Secretary's setting of monthly
production goals.
The Secretary's "reversal" rate policy embodied
in the "Quality Assurance System," however, is cause for concern. To
coerce ALJs into lowering reversal rates--that is, into deciding more cases
against claimants--would, if shown, constitute in the district court's words
"a clear infringement of decisional independence." See also Schweiker
v. McClure, 456 U.S. 188, 195, 102 S.Ct. 1665, 1669-70, 72 L.Ed.2d 1 (1982). In
his brief on appeal and at oral argument, Nash characterized the alleged
pressure from the agency concerning reversal rates as the heart of the
controversy. Plaintiff also maintained that the reversal rate policy, in effect
from approximately 1975 to 1985, was implemented under the guise of improving
the quality and uniformity of ALJ decisions but was in fact a clear attempt by
the Secretary to influence ALJs into deciding more cases in favor of the
agency.
The Secretary concedes that he was very concerned about
reversal rates, but only to the extent that they might indicate errors in the
decisionmaking of ALJs. Testimony in the record revealed that reversal rates
were used as a benchmark in deciding whether there might be problems in the
adjudicatory methods of particularly high (or low) reversal rate ALJs.
Statistical record evidence supported the agency's proffered correlation
between actual errors of law or policy in ALJs decisions and extremes in their
reversal rates. The agency maintained then, and maintains now, that reducing
reversal rates was not the intent of the policy. Indeed, a handwritten notation
by Associate Commissioner Hays on a 1982 internal agency memorandum placed the
policy in perspective:
[T]here is no goal to reduce reversal rates--there is a
goal to improve decisional quality [and] consistency, which is assumed to have
as one effect a reduction of the reversal rate.
App. at 2071.
In view of the foregoing record evidence, therefore, we
cannot say that the district court's determination was clearly erroneous.
Whatever legitimate concerns there may be about the soundness of the
Secretary's practices regarding "reversal" rates, those concerns are
more appropriately addressed by Congress or by courts through the usual
channels of judicial review in Social Security cases. See generally Redish &
Marshall, Adjudicatory Independence and the Values of Procedural Due Process,
95 Yale L.J. 455, 499-500 (1986). The bottom line in this case is that it was
entirely within the Secretary's discretion to adopt reasonable administrative
measures in order to improve the decisionmaking process. See Heckler v.
Campbell, 461 U.S. 458, 466, 103 S.Ct. 1952, 1956-57, 76 L.Ed.2d 66 (1983)
(" 'exceptionally broad' " authority is vested by Congress in
Secretary to implement and administer Social Security Act) (quoting Schweiker
v. Gray Panthers, 453 U.S. 34, 43, 101 S.Ct. 2633, 2640, 69 L.Ed.2d 460
(1981)); see also 42 U.S.C. Sec. 405(a), (b). Since the district court found no
direct pressure on ALJs to maintain a fixed percentage of reversals, we
conclude that the Secretary's policy in this regard did not infringe upon the
"decisional independence" of ALJs.
CONCLUSION
For all of the foregoing reasons, the judgment of the
district court is
AFFIRMED.
ANOTHER BACKGROUND CASE.
Grant v. Shalala, 989 F.2d 1332 (3d Cir. 1993)
Before: HUTCHINSON, ALITO, and HIGGINBOTHAM, Circuit
Judges.
ALITO, Circuit Judge:
This is an interlocutory appeal in a class action brought
pursuant to Section 205(g) of the Social Security Act, 42 U.S.C. § 405(g). The
question presented is whether the district court may hold a trial and make its
own findings of fact regarding the alleged general bias of a Department of
Health and Human Services (HHS) administrative law judge (ALJ) or whether the
court must instead review the Secretary's findings on this question. Based on
the express language of Section 205(g), binding circuit precedent, and the
effect that such litigation would have on the independence of administrative
law judges, we hold that the district court may not make its own findings but
may only review the Secretary's findings and, if necessary, remand to the
agency for further proceedings.
I.
In September 1985, Lois Grant filed an application for
Social Security Insurance disability benefits. She asserted that she could not
perform any substantial gainful employment because of an injury to her knee, as
well as pain, depression, and other conditions stemming from that injury. The
state agency handling the application denied her claim. Grant then requested a
hearing before an HHS Administrative Law Judge, and her case was assigned to
ALJ Russell Rowell. After a hearing, ALJ Rowell concluded that Grant was not
entitled to benefits. He found that the medical evidence did not show that
Grant could not perform sedentary work, such as that in which she had previously
engaged. App. 36, 39. Furthermore, he found that Grant's complaints of pain
were not credible. App. 37. In reaching this conclusion, he relied on what he
termed "a large element of secondary gain" and noted that following
her injury Grant's after-tax benefits from workers' compensation exceeded her
before-tax income prior to the injury. App. 37-38. Grant then sought review of
the ALJ's decision before the HHS Appeals Council, but the Appeals Council
denied her application for review.
In 1988, Grant filed a complaint in the United States
District Court for the Middle District of Pennsylvania pursuant to Section
205(g) of the Social Security Act, 42 U.S.C. § 405(g), [n1] against the
Secretary of Health and Human Services, asserting that the decision denying her
benefits was contrary to the Social Security Act and the Due Process Clause of
the Fifth Amendment. Her complaint specifically alleged (App. 44):
ALJ Rowell is inclined in every disability case to deny
benefits; he uses his discretion to determine credibility to effect this bias
against claimants.
Several months later, Grant filed an amended complaint,
which added two additional named plaintiffs, Jamie P. Donnelly and Harold
Wallace. [n2] In addition, the amended complaint was brought on behalf of a class
consisting of certain disability claimants whose cases had been or would in the
future be assigned to ALJ Rowell. Among other things, the complaint sought a
declaratory judgment that ALJ Rowell was biased against disability claimants
and that this bias had deprived or would deprive the plaintiffs of a fair
hearing. The complaint also sought an injunction requiring that all of the
plaintiffs' claims that ALJ Rowell had rejected be reheard before other ALJs,
as well as prohibiting the Secretary "from assigning ALJ Rowell in the
future to any tasks which involve the discretion to determine Social Security
and/or SSI disability claims." [n3] App. 62.
The Secretary opposed class certification and moved for a
protective order preventing the plaintiffs from conducting further discovery. [n4]
The district court denied the Secretary's motions. [n5] Grant v. Sullivan,
720 F. Supp. 462 (M.D. Pa. 1989). In February 1990, the district court
certified a class consisting of "all claimants for Social Security
disability benefits or Supplemental Security Income disability benefits, or
both, who have received, or will receive, an adverse decision from
Administrative Law Judge Russell Rowell on or after January 1, 1985, and all
disability claimants whose claims have been or will be assigned to ALJ Rowell
for a decision." Grant v. Sullivan, 131 F.R.D. 436, 450 (M.D. Pa.
1990). [n6]
In the meantime, the Chair of the Social Security
Administration Appeals Council, Eileen Bradley, had determined that the agency
should conduct its own investigation into the allegations that ALJ Rowell was
generally biased against disability claimants. Ms. Bradley appointed a
three-member panel and instructed it to examine the records in a random sample
of the disability cases decided by ALJ Rowell. She stated that the sample was
"anticipated to consist of at least 200 cases." App. 105. She also
stated that the panel would seek to determine whether the records in these
cases "manifest instances of a pattern of bias of any sort on the part of
ALJ Rowell, based, inter alia, on the conduct of the hearings, the language of
the decisions, credibility determinations, evidentiary inferences and the
accuracy of characterization of medical exhibits." Id. In addition,
she stated that the plaintiffs and ALJ Rowell would have the opportunity to
appear, testify, introduce evidence, and call and examine witnesses. Id.
After the decision to conduct this administrative
investigation was announced, the Secretary filed a motion in the district court
asking the court to dismiss or, in the alternative, to stay the case in favor
of the administrative investigation. The magistrate judge recommended that the
stay be granted provided that the Secretary agreed to postpone the
administrative proceeding until the plaintiffs could complete their discovery.
The district court, however, rejected this recommendation, stating (App. 133)
that it had already decided that the plaintiffs were entitled to a trial in
district court on their claims of bias and that exhaustion of administrative
remedies should not be required. [n7]
Despite the district court's denial of the motion, the
special panel proceeded with the investigation of ALJ Rowell and set out to
examine the records in a statistically significant sampling of his cases. The
panel did not attempt to analyze other evidence, such as depositions and
statements of co-workers, regarding ALJ Rowell's personality or views.
The panel determined that ALJ Rowell had decided 948
disability cases during a five-year period. From these, the panel selected a
random sample and was eventually able to examine the files in 212 cases. All
pertinent documents in the files were reviewed, and tape recordings of the
hearings were studied. In October 1990, the panel issued its report. The panel
reported that it had "detected no patterns of irregularity during the
hearing process, and no indication in the hearing tapes or transcripts it
reviewed that Judge Rowell entertains any bias against any of the claimants,
and certainly not against all of them." App. 168. The report continued (id.
at 169):
Indeed, as a general rule, the Panel has concluded that at
the hearings Judge Rowell consistently comported himself in a professional,
courtly, polite and gentle fashion, displaying neither hostility nor rancor
towards any attorney or claimant. . . . In addition, our review of the
"appeals files" (hearing office records) available to us shows that
Judge Rowell is scrupulously conscientious in his preparation for, and conduct
of, administrative hearings in Social Security claims.
In addition, the report found no statistical evidence that
ALJ Rowell was biased against all disability claimants or that he was biased
based on race, ethnicity, gender, or age. Id. at 172-73, 181-82.
The report, however, did criticize ALJ Rowell for employing
what the panel termed "irregular language" in about 70 cases. Id.
at 174. As examples, the report mentioned cases in which ALJ Rowell had
described a claimant whose testimony he did not believe as
"manipulative" or a "malingerer," as having put on a
"performance" or "charade," or as having attempted to
obtain "secondary gain" (i.e., obtain more in benefits than the
claimant had previously earned by working). Id. at 174-75. While
recognizing that ALJ Rowell was required to make credibility determinations,
the panel found that his language in these cases exceeded "the bounds of
taste and the needs of a legally sufficient, defensible disability
determination." App. 178. The panel also found that ALJ Rowell had placed
too much emphasis on the concept of "secondary gain."
The acting Chair of the Appeals Council, Andrew J. Young,
generally accepted the panel's conclusions, including all of those noted above.
In addition, Mr. Young wrote that although he did not "accept the
proposition that an abstract psychological inquiry" regarding ALJ Rowell
was appropriate, he had decided, for purposes of completeness, to consider
deposition testimony from former co-workers of ALJ Rowell that had been
obtained in civil discovery. App. 144. He stated:
I find no persuasive evidence in isolated statements from
the deponents as to what they allegedly heard ALJ Rowell utter, or in their
personal opinions of ALJ Rowell to support a finding that he has a mindset that
is biased against claimants generally or certain claimants based on their race,
ethnicity, or socio-economic status, to the exclusion of determining the merits
of each case based upon the record evidence.
Id. at 144-45.
After the Appeals Council had made its findings, the
Secretary moved the district court to vacate the orders setting the case on the
trial calendar and holding that the plaintiffs need not exhaust their
administrative remedies. The Secretary asked that the district court instead
review the plaintiffs' claims on the administrative record. In the alternative,
the Secretary asked that the district court stay or postpone the trial of the
case pending the disposition of his motions and interlocutory appellate review
of that disposition. The district court denied the Secretary's motion to vacate
the orders, but certified an interlocutory appeal under 28 U.S.C. § 1292(b) to
determine "whether [the district court] may conduct a trial on Plaintiffs'
claims of general bias." App. 292.
On appeal, the Secretary argues that the district court may
not properly conduct a trial and make findings of fact regarding ALJ Rowell's
alleged general bias. Relying on Section 205(b)(1), (g), and (h) of the Social
Security Act, 42 U.S.C. § 405(b)(1), (g), and (h), the Secretary argues that
the fact-finding role in Social Security cases is exclusively his and that the
district courts have no fact-finding role. The Secretary maintains that his
argument is supported by our decision in Hummel v. Heckler, 736 F.2d 91
(3d Cir. 1984), that the status of the present case as a class action does not
provide a valid basis for distinguishing it from Hummel, and that a
trial in district court examining the mindset, thought processes, and
predispositions of ALJ Rowell would be destructive to the integrity of the
administrative process.
The plaintiffs contend that neither the language of the
Social Security Act nor our decision in Hummel precludes the district
court from conducting a trial and making findings on the issue of bias because
the present case is a class action. The plaintiffs rely primarily on the
Supreme Court's decision in two cases, Califano v. Yamasaki, 442 U.S.
682, 61 L. Ed. 2d 176, 99 S. Ct. 2545 (1979), and Bowen v. City of New York,
476 U.S. 467, 90 L. Ed. 2d 462, 106 S. Ct. 2022 (1986). The plaintiffs also
argue that an inquiry into ALJ Rowell's state of mind is justified in this case
because there is substantial evidence of his bias. The plaintiffs highlight the
following evidence: their deposition of a "decision-writer" who
worked for ALJ Rowell for five years; planned trial testimony by a former
attorney-advisor and decision-writer regarding his conversations with ALJ
Rowell at lunch, during visits at each other's homes, and on other occasions; a
statistical analysis of a sample of ALJ Rowell's decisions by their expert; and
evidence that ALJ Rowell allegedly destroyed his notes concerning certain cases
after they were sought by plaintiffs in discovery. Appellees' Br. at 10-18.
II.
We begin by examining the pertinent provisions of the
Social Security Act and governing circuit precedent concerning those
provisions. Under Section 202(b)(1) of the Act, 42 U.S.C. 402(b)(1), [n8] the
Secretary is directed to "make findings of fact, and decisions as to the
rights of any individual applying for a payment." The Secretary's decisions
are subject to judicial review under Section 205(g) of the Act, 42 U.S.C. §
405(g), but the scope of that review is circumscribed. Section 205(g) states
without qualification or exception:
The findings of the Secretary as to any fact, if supported
by substantial evidence shall be conclusive . . . .
If a district court rejects a finding pursuant to this
standard, Section 205(g) authorizes the court to remand the case for rehearing
before the agency. Furthermore, Section 205(g) provides that, if new material
evidence becomes available after the conclusion of the administrative
proceeding, a district court may order "additional evidence to be taken
before the Secretary." And if any "additional or modified findings of
fact" are made on remand, those findings are reviewable only to the same
limited extent as the original findings. In short, Section 205(g) creates a
scheme in which a district court may conduct a restricted review of the
Secretary's findings and may remand a case for new findings, but this scheme
makes no provision for a district court to make any findings of its own.
Addressing this scheme in Hummel v. Heckler, 736
F.2d at 93, we stated flatly that "the district courts have no
fact-finding role in Social Security cases." See also Johnson v. Heckler,
741 F.2d 948, 952 (7th Cir. 1984); Parker v. Harris, 626 F.2d 225 (2d
Cir. 1980). Hummel, a case in which an individual claimant disputed the
denial of benefits, is particularly relevant for present purposes since the
claimant contended that the ALJ who decided her case was biased. She argued
that the ALJ's bias stemmed from a "Bellmon Review" of his
determinations. (The "Bellmon Review" program included a review by
the Appeals Council of the allowance decisions of ALJs with high allowance
rates. [n9] ) We held that the plaintiff was entitled to discovery to determine
whether the ALJ had undergone a "Bellmon Review" and, if so, to
obtain information about it. Id. at 94. We stated that this discovery
was needed so that the plaintiff could "attempt to convince the district
court that a remand to the Secretary for the taking of new evidence
[was] appropriate." Id. at 95 (emphasis added). Furthermore, we
stated that "in the event that a finding of bias [was] made on remand,"
the plaintiff would be entitled to a new administrative hearing on the merits
of her disability claim. Id. at 95 (emphasis added). Thus, we made
perfectly clear in Hummel that the district court could not make
findings regarding the ALJ's alleged bias but could at most remand the case to
the Secretary so that the Secretary could make such findings. Hummel is
of course binding on this panel.
The language of Section 205(g) and our decision in Hummel
provide strong support for the Secretary's argument in this case that the
district court may not conduct a trial and make its own findings regarding the
ALJ's alleged bias. As we have noted, the Secretary has already conducted an
extensive inquiry and has already made findings on this very matter. Thus, the
portion of Section 205(g) stating categorically that "the findings of the
Secretary as to any fact, if supported by substantial evidence" must be
accepted as "conclusive" seems quite clearly to mean that the
district court in this case must review the Secretary's findings on the
question of bias rather than making independent findings of its own. Moreover,
the entire scheme of judicial review set out in Section 205(b) appears to mean,
as we put it in Hummel, 741 F.2d at 93c, that "district courts have
no fact-finding role in Social Security cases." Hummel was, to be
sure, an individual review case, not a class action, but neither Section 205(g)
nor Hummel draws any distinction between individual review cases and
class actions.
III.
In response to the language of the Social Security Act and
our decision in Hummel, the plaintiffs, the district court, and the
dissent all appear to acknowledge that a district court may not generally
engage in fact-finding in a case brought under Section 205(g). They maintain,
however, that this restriction does not apply in class actions.
In support of their position, the plaintiffs do not point
to anything in the language of Section 205(g) or any other provision of the
Social Security Act or its legislative history. Instead, they rely primarily on
two Supreme Court decisions -- Califano v. Yamasaki, supra, and Bowen
v. City of New York, supra. In addition, they cite a number of lower
court decisions. The dissent, taking a somewhat different approach, attempts to
find support in the language of Section 205(g), but this argument appears to us
to be foreclosed by Yamasaki. The dissent also relies on City of New
York, as well as McNary v. Haitian Refugee Center, Inc., 498 U.S.
479, 111 S.Ct. 888, 112 L. Ed. 2d 1005 (1991), which concerned a provision of
the Immigration Reform and Control Act of 1986, 8 U.S.C. § 1160. We find all of
these arguments unavailing. We will first discuss the three relevant Supreme
Court decisions -- Yamasaki, City of New York, and McNary
-- and then turn to the lower court cases.
A. In Yamasaki,
a class action was filed by Social Security recipients who contended that the
Social Security Administration was required to provide the opportunity for a
hearing before beginning to recoup overpayments. In the Supreme Court, the
Secretary of Health, Education, and Welfare argued, among other things, that
class relief may not be awarded in a case brought under Section 205(g). The
Secretary relied on "the language of § 205(g) which authorizes suit by
'any individual,' speaks of judicial review of 'any final decision of the
Secretary made after a hearing to which [the plaintiff] was a party,' and
empowers district courts 'to enter . . . a judgment affirming, modifying, or
reversing the decision of the Secretary.'" 442 U.S. at 698. "This
language," the Secretary contended, indicated that "Congress
contemplated a case-by-case adjudication of claims under § 205(g)" rather
than class actions. 442 U.S. at 698-99.
The Supreme Court disagreed. The Court first noted that
Section 205(g) "contains no express limitation of class relief." 442
U.S. at 699. The Court next observed that the Federal Rules of Civil Procedure
apply to all federal civil actions and that Rule 23 authorizes class actions if
specified conditions are met. 442 U.S. at 700. The Court therefore reasoned
that class relief is available in all federal civil actions "in the
absence of a direct expression" of a contrary congressional intent. Id.
And the Court found no such "clear expression of congressional
intent" in Section 205(g). Id. The Court attached little
significance to the use of the term "any individual," since other
jurisdictional provisions under which class actions may be brought employ
similar language. [n10] Id. Moreover, the Court concluded that
"class relief is consistent with the need for case-by-case adjudication .
. . so long as the membership of the class is limited to those who meet the
requirements of § 205(g)." 442 U.S. at 701. Finally, the Court observed
that class relief was peculiarly appropriate in the case at hand because the
claims turned on "questions of law applicable in the same manner" to
all class members. Id.
Relying on this portion of the Yamasaki opinion, the
plaintiffs advance two arguments, both of which seem to us quite strained. The
plaintiffs first appear to argue that the Supreme Court's decision stands for
the broad proposition that in class actions any restrictive language in Section
205(g) should not be interpreted literally. We strongly disagree with this
interpretation. If is of course true, as recounted above, that the Yamasaki
Court rejected a particular argument based on the language of Section 205(g).
It hardly follows, however, as the plaintiffs seem to imply, that every
argument based on the literal language of Section 205(g) must also be rejected.
Instead, we believe that each such argument must be evaluated separately on its
own merits. Furthermore, we believe that the Supreme Court's reason for
rejecting the Secretary's argument in Yamasaki is inapplicable here. In Yamasaki,
as noted, the Court found no clear expression of a congressional intent to bar
all class actions under Section 205(g). Here, by contrast, Section 205(g)
states explicitly and categorically that the Secretary's findings if supported
by substantial evidence must be accepted as "conclusive," and Section
205(g) clearly sets out a scheme of judicial review for Social Security cases
in which "the district courts have no fact-finding role." Hummel,
736 F.2d at 93.
The plaintiffs' second argument based on Yamasaki is
essentially as follows. Yamasaki held that a class action may be brought
under the Section 205(g); fact-finding is necessary to adjudicate some class
claims; therefore Yamasaki means that fact-finding by a district court
in class actions is allowed. We believe that this argument reads far too much
into Yamasaki. As we have noted, Yamasaki held that class relief
is not barred in Section 205(g) cases, but Yamasaki did not exempt
Section 205(g) class actions from the restrictions that this provision
expressly imposes. Consequently, Yamasaki does not mean, as the
plaintiffs suggest, that Section 205(g) restrictions of district court
fact-finding may simply be disregarded whenever class relief is sought. Such an
interpretation of Yamasaki would be especially far-fetched since the
Court's opinion in that case made no mention of district court fact-finding.
Indeed, as already noted, the Court observed that "class relief" was
"peculiarly appropriate" in that case because the claims "turned
on questions of law applicable in the same manner to each member of the
class." 442 U.S. at 701 (emphasis added).
While the plaintiffs attempt to draw support for their
position from Yamasaki, the dissent propounds an argument that Yamasaki
precludes. In an attempt to find support in the language of Section 205(g) for
its distinction between individual review cases and class actions, the dissent
focuses on terms in Section 205(g) that the dissent suggests are more
applicable to individual review cases than to class actions. See dissenting
typescript at 4-5. The dissent includes the following quotation from Section
205(g) with the terms it finds helpful highlighted:
Any individual, after any final decision of
the Secretary made after a hearing to which he was a party,
irrespective of the amount in controversy, may obtain a review of such a
decision by a civil action commenced within sixty days after the mailing to
him of such decision or within such further time as the Secretary may allow . .
. . The findings of the Secretary as to any fact, if supported by substantial
evidence, shall be conclusive, and where a claim has been denied by the
Secretary or a decision rendered under subsection (b) of this section
which is adverse to an individual who was a party to the hearing before
the Secretary, because of failure of the claimant or such individual to submit
proof in conformity with any regulation prescribed under subsection (a) of this
section, the court shall review regulations and the validity of such
regulations. (emphasis added).
Dissenting typescript at 4 (emphasis added in the
dissenting opinion.
Based on these highlighted terms, the dissent draws the
conclusion that "section 205(g) deals solely with individual review
cases." Id. at 7. The dissent subsequently reiterates:
Section 205(g) sets out the district court's jurisdiction
and applicable standard of review in individual review cases.
Id. at 11.
This argument is almost precisely the same as the argument
that was advanced by the Secretary and rejected by the Supreme Court in Yamasaki.
There, as previously noted, the Secretary argued that many of the same terms
highlighted by the dissent indicated that "Congress contemplated a
case-by-case adjudication of claims under § 205(g) that is incompatible with
class relief." 442 U.S. at 699. The Court, however, disagreed and held
that Section 205(g) applies to class actions as well as individual review
cases. Thus, the dissent's argument that "section 205(g) deals solely with
individual review cases" (dissenting typescript at 7) is directly contrary
to the Yamasaki's reasoning and holding.
B. The other Supreme
Court case on which the plaintiffs rely -- Bowen v. City of New York, supra
-- is likewise inapposite. There, a plaintiff class alleged that their
disability claims had been denied based on a secret and illegal policy adopted
by the Social Security Administration. The district court conducted a seven-day
trial and found that the Social Security Administration had indeed followed a
secret and illegal policy. In the court of appeals and the Supreme Court, the
Secretary and the Commissioner of the Social Security Administration did not
challenge either the district court's authority to make findings, the
particular findings that it made, or its ruling that the policy followed by the
Social Security Administration was improper. Instead, they raised other
arguments not directly relevant here.
In relying on City of New York, the plaintiffs
appear to reason as follows. City of New York was a Social Security
class action; factual findings were made; the Supreme Court did not criticize
the district court for making those findings; therefore, factual findings in a
Social Security class action must be proper. We do not agree.
First and most important, since the district court's
authority to make findings was not challenged or addressed in the district
court, the court of appeals, or the Supreme Court, the mere fact that findings
were made is inconsequential for precedential purposes. "Questions which
merely lurk in the record, neither brought to the attention of the court nor
ruled upon, are not to be considered as having been so decided as to constitute
precedents." Webster v. Fall, 266 U.S. 507, 511, 69 L. Ed. 411, 45
S. Ct. 148 (1925). Accord Illinois State Board of Elections v. Socialist
Workers Party, 440 U.S. 173, 183, 59 L. Ed. 2d 230, 99 S. Ct. 983 (1979); United
States v. L.A. Tucker Truck Lines, 344 U.S. 33, 38, 97 L. Ed. 54, 73 S. Ct.
67 (1952); Losada v. Golden Gate Disposal Co., 950 F.2d 1395, 1399 (9th
Cir. 1991); National Cable Television Ass'n, Inc. v. American Cinema
Editors, Inc., 937 F.2d 1572, 1581 (Fed. Cir. 1991); R.R. Donnelley
& Sons Co. v. FTC, 931 F.2d 430, 433 (7th Cir. 1991); Cousins v.
Secretary of the U.S. Dep't of Transportation, 880 F.2d 603, 608 (1st Cir.
1989); Soyka v. Alldredge, 481 F.2d 303, 306 (3d Cir. 1973). See also
Hagans v. Lavine, 415 U.S. 528, 535, 39 L. Ed. 2d 577, 94 S. Ct. 1372 n.5
(1974) (sub silentio rulings on jurisdictional issues are not binding).
Second, even if we assumed that it was proper for the
district court to engage in fact-finding in City of New York, mandamus
jurisdiction, 28 U.S.C. § 1361, rather than Section 205(g), might have provided
the basis for doing so. In City of New York, the district court and the
court of appeals held that the district court had mandamus jurisdiction, as
well as jurisdiction under Section 205(g). City of New York v. Heckler,
578 F.Supp. 1109, 1117-19 (E.D.N.Y.) aff'd, 742 F.2d 729, 734-39 (2d
Cir. 1984). [n11] Mandamus is available only if, among other things, the
plaintiff has no other adequate avenue of relief (Heckler v. Ringer, 466
U.S. 602, 616-17, 80 L. Ed. 2d 622, 104 S. Ct. 2013 (1984)), and in City of
New York the court of appeals held that this requirement had been
satisfied. 742 F.2d at 739. In the present case, on the other hand, the
plaintiffs have not asserted mandamus jurisdiction, and in any event they have
an adequate alternative remedy, since they can seek review of the Secretary's
findings on the issue of ALJ Rowell's alleged bias.
Moreover, we perceive a significant distinction between the
factual questions at issue in cases like the City of New York and the
factual question in the present case, a distinction that may have a bearing on
the appropriateness of mandamus. In cases like City of New York in which
plaintiffs claim that an agency has been following a secret and unlawful
policy, it could be argued that normal administrative procedures are inadequate
because the agency could not function as an impartial fact-finder. In that
situation, the ancient maxim that no one may be a judge in his own case could
be invoked. [n12] By contrast, when the factual question is simply whether a
single ALJ is biased, any argument that the agency could not act as an
impartial fact-finder would have far less force. For all of these reasons, therefore,
City of New York does not support the plaintiffs' argument in this case.
C. We similarly do not
believe that McNary v. Haitian Refugee Center, Inc., 498 U.S. 479, 111
S.Ct. 888, 112 L. Ed. 2d 1005 (1991), on which the dissent relies (dissenting
typescript at 9-12), sheds light on the question before us. In McNary,
the Supreme Court held that a district court had general federal question
jurisdiction to entertain a class action brought by aliens who claimed that the
INS was administering the Special Agricultural Workers (SAW) amnesty program in
a way that violated due process and the Immigration Reform and Control Act of
1986. The Court held that 8 U.S.C. § 1160(e) -- a provision of the Act that
provides the exclusive avenue for judicial review of "an application for
adjustment of status" pursuant to the SAW program -- did not preclude the
district court from exercising its general federal question jurisdiction. The
Court relied on the particular language of 8 U.S.C. § 1160(e) (111 S.Ct. at 896-97)
and observed that, if the plaintiffs' district court suit were barred, they
"would not as a practical matter be able to obtain meaningful judicial
review" of their claims (id. at 898).
McNary does not
support the dissent's argument for the simple reason that McNary
concerned a different question under a different statute -- namely, whether 8
U.S.C. § 1160(e) precluded a district court from exercising general federal
question jurisdiction. Here, neither 8 U.S.C. § 1160(e) nor any other
immigration statute is implicated, [n13] and general federal question
jurisdiction has never been invoked. [n14] Moreover, while the Court in McNary
observed that the plaintiffs could not have obtained meaningful judicial review
if their district court action was barred, in this case the plaintiffs can
obtain judicial review of the Secretary's decision regarding ALJ Rowell's
alleged bias, but that review must be based on the administrative record and
the Secretary's findings of fact.
D. In addition to
relying on the Supreme Court decisions already discussed, the plaintiffs' brief
cited -- but did not discuss -- several of our previous decisions. Appellee's
Br. at 29 n.8. Perhaps the only thing that needs to be said about these cases
is that the fact-finding authority of the district court was not challenged or
discussed in any of them. For this reason alone, they provide no precedential
support for the plaintiffs' position. In any event, we find all of these cases
readily distinguishable from the case before us.
In Bailey v. Sullivan, 885 F.2d 52 (3d Cir. 1989), a
class action was filed contending that the Secretary was following another
"alleged secret policy" (id. at 58), this one related to his
"severity regulations." The district court denied class certification
on grounds that we found erroneous, and we reversed and instructed the district
court to reconsider its decision. Id. at 58-59. We also stated that, if
the district court found that the case should proceed as a class action, it
should entertain evidence of "systematic misapplication." Id.
at 59. Thus, Bailey, like City of New York, was a case in which
the propriety of district court fact-finding was not challenged or addressed,
and the disputed factual question -- the existence of a secret, illegal policy
-- was one on which the Secretary's ability to make impartial findings could
have been challenged.
In Wilkerson v. Bowen, 828 F.2d 117 (3d Cir. 1987),
we remanded a case to the district court and instructed the court to determine
whether the plaintiffs were entitled to injunctive relief on their claim that
the Secretary was not following our decisions regarding the evaluation of
disability claims based on alcoholism. Any fact-finding that might be necessary
in that case would again appear to fall into the same category as that in City
of New York and Bailey, i.e., fact-finding to determine whether the
Secretary was in practice departing from binding legal rules.
In Holman v. Califano, 835 F.2d 1056 (3d Cir. 1987),
we remanded a case for the district court to determine whether the Secretary
had violated a duty to make disability payments to claimants within a
reasonable time after they were found eligible. The opinion makes no reference
to fact-finding. Nor does it suggest that the underlying facts (i.e.,
statistics on the length of time between a determination of eligibility and the
commencement of payments) were either unknown or disputed. Thus, it may well be
that the determination to be made by the district court on remand was purely
legal, viz., whether any delay shown by the statistics was reasonable. [n15]
Finally, in several of our cases, while we remanded the
case to the district court, our opinion provides no indication that we
envisioned that the district would engage in any fact-finding on remand. Mattern
v. Mathews, 582 F.2d 248 (3d Cir. 1978), cert. denied sub nom. Califano
v. Mattern, 443 U.S. 912, 61 L. Ed. 2d 876, 99 S. Ct. 3101 (1979); Liberty
Alliance of the Blind v. Califano, 568 F.2d 333 (3d Cir. 1977).
In sum, we find nothing in any decisions of the Supreme
Court or this court that supports the authority of the district court, in the
face of section 205(g)'s express prohibition, to make its own findings
regarding ALJ Rowell's alleged bias. We are therefore convinced that the
district court lacked such authority.
IV.
Section 205(g)'s restriction of district court fact-finding
is not an empty technical requirement but instead serves a vital role in
safeguarding the integrity of the administrative process. In the present
context, Section 205(g) protects against discovery and court proceedings that
could seriously undermine the independence of Social Security ALJs.
As the Supreme Court observed in Butz v. Economou,
438 U.S. 478, 513, 57 L. Ed. 2d 895, 98 S. Ct. 2894 (1978), there was
considerable concern prior to the passage of the Administrative Procedure Act
that "persons hearing administrative cases at the trial level could not
exercise independent judgment." Therefore, "the process of agency
adjudication is currently structured so as to assure that the [ALJ] exercises
his independent judgment on the evidence before him, free from pressures by the
parties or other officials within the agency." Id. Relying in part
on this structure, the Supreme Court concluded that the role of the modern
federal ALJ is "'functionally comparable' to that of a judge." [n16] Id.
Availability of the type of discovery and trial that the
plaintiffs sought in this case would undermine this vital independence.
Although Hummel permits some discovery on the issue of bias, that
discovery must be limited to the development of those facts and issues that are
appropriate, on remand, to the Secretary's consideration of the existence of
bias in connection with those benefit claims that are the subject of the
section 205(g) action or actions before the district court. On that premise, we
would be reluctant to sanction the type of discovery the district court
contemplated in this case because we are convinced that such fact-finding would
have a deleterious effect on the independence of ALJs and thus on the
administrative process.
It has long been recognized that attempts to probe the
thought and decision making processes of judges and administrators are
generally improper. In United States v. Morgan, 313 U.S. 409, 422, 85 L.
Ed. 1429, 61 S. Ct. 999 (1941), the Supreme Court observed that questioning a
judge or administrator about the process by which a decision had been reached
would undermine the judicial or administrative process. The Court wrote (id.):
"Just as a judge cannot be subjected to such a scrutiny . . ., so the
integrity of the administrative process must be equally respected." See
also Citizens To Preserve Overton Park v. Volpe, 401 U.S. 402, 420, 28 L.
Ed. 2d 136, 91 S. Ct. 814 (1971); Franklin Savings Ass'n v. Ryan, 922
F.2d 209, 211 (4th Cir. 1991); NLRB v. Botany Worsted Mills, 106 F.2d
263 (3d Cir. 1939) (striking interrogatories probing the decision making
process of NLRB members), cert. denied, 319 U.S. 751, 87 L. Ed. 1705, 63
S. Ct. 1164 (1943); 3 K Davis, Administrative Law Treatise, § 17.7
(1980).
In this case, the plaintiffs, through discovery, [n17] have
already delved deeply into ALJ Rowell's decision making processes, work habits,
and private communications. For example, they deposed an opinion-writer who
assisted ALJ Rowell in writing opinions for five years, and they plainly
intended to rely heavily on her evidence. During her deposition, under
questioning by plaintiffs' counsel, she gave evidence concerning, among other
things, ALJ Rowell's instructions concerning opinions that she was assigned to
draft, his use of "stock" language in opinions, differences between
his work procedures and views and those of other ALJs, the length of his
opinions and the number of revisions he made, her evaluation of aspects of his
work, his consultation of law books, his familiarity with and views about
particular rules of law, whether she thought his opinions were principled or
result-oriented, how often she disagreed with his decisions, whether she
believed that his decisions discriminated against certain groups, how he viewed
his role as a Social Security ALJ, whether he ever uttered racial or ethnic
epithets, complaints about him from typists and secretaries, how he evaluated
certain types of evidence, the number of hours he worked, his views regarding
particular physicians in the area, his views regarding alcoholism and obesity,
and many other matters.
The plaintiffs also apparently intended to rely heavily on
anticipated testimony by another co-worker who "wrote decisions for ALJ
Rowell, [] discussed cases [with him] in the office, went to lunch with him
nearly every day," became a "close personal" friend, [n18] and
visited ALJ Rowell's home. This testimony, according to the plaintiffs'
proposed findings of fact, would relate numerous statements allegedly made by
ALJ Rowell regarding his "views of claimants generally and the Social
Security disability system and attorneys and doctors of claimants in the
system." Appellees' Br. at 14. In addition, the plaintiffs sought in
discovery ALJ Rowell's notes concerning cases that he decided, and the
plaintiffs allege that ALJ Rowell destroyed some of these documents in order to
avoid producing them. In short, it appears that the plaintiffs made very
extensive efforts to probe the thinking and decision making processes of an
officer occupying a position described by the Supreme Court as
"functionally comparable" to that of a judge.
Such efforts to probe the mind of an ALJ, if allowed, would
pose a substantial threat to the administrative process. Every ALJ would work
under the threat of being subjected to such treatment if his or her pattern of
decisions displeased any administrative litigant or group with the resources to
put together a suit charging bias. [n19] Every ALJ would know that his or her
staff members could be deposed and questioned in detail about the ALJ's
decision making and thought processes, that co-workers could be subpoenaed and
questioned about social conversations, that the ALJ's notes and papers could be
ordered produced in discovery, and that any evidence gathered by these means
could be used, in essence, to put the ALJ on trial in district court to
determine if he or she should be barred from performing the core functions of
his or her office. This would seriously interfere with the ability of many ALJs
to decide the cases that come before them based solely on the evidence and the
law.
V.
We fully recognize that bias on the part of ALJs may
undermine the fairness of the administrative process. "Trial before 'an
unbiased judge' is essential to due process." Johnson v. Mississippi,
403 U.S. 212, 216, 29 L. Ed. 2d 423, 91 S. Ct. 1778 (1971). "Any tribunal
permitted by law to try cases and controversies not only must be unbiased but
also must avoid even the appearance of bias." Commonwealth Coatings
Corp. v. Continental Casualty Co., 393 U.S. 145, 150, 21 L. Ed. 2d 301, 89
S. Ct. 337 (1968). See also Haines v. Liggett Group Inc., 975 F.2d 81,
98 (3d Cir. 1992); Hummel, 735 F.2d at 93.
The type of district court trial and fact-finding that the
plaintiffs sought in this case, however, are not necessary in order to
safeguard the impartiality of Social Security disability adjudications. Other
procedures that pose far less threat to the integrity of the administrative
process are readily available.
As previously noted, the Social Security Administration has
promulgated regulations prohibiting an administrative law judge from conducting
a disability hearing "if he or she is prejudiced or partial with respect
to any party or has any interest in the matter pending for decision." 20
C.F.R. §§ 404.940, 416.1440. The regulations allow a claimant to seek the
disqualification of an ALJ. Id. If the ALJ refuses to step aside, the
claimant can pursue an administrative appeal (id.) and subsequently
obtain judicial review. This procedure is analogous to the procedure for
seeking disqualification of a federal district court judge. See 28
U.S.C. §§ 144, 455. [n20]
Furthermore, in the present case the Social Security
Administration responded to the allegations against ALJ Rowell by convening a
special panel and conducting an extensive analysis of a statistically
significant, random sample of his disability decisions. The special panel wrote
a lengthy report setting out its findings, and while it did not find any evidence
of bias, the panel criticized certain practices that it detected. The acting
Chair of the Appeals Council then reviewed this report and accepted its
essential conclusions. The Secretary acknowledges that the plaintiffs may seek
judicial review of these findings and that the district court, if it finds them
insufficient, may remand the matter to the Secretary for further proceedings.
We, of course, express no view regarding the correctness of the administrative
findings or the adequacy of the special panel's inquiry, but we are convinced
that the plaintiffs' right to an impartial administrative determination can be
fully protected through the process of judicial review of the Secretary's
determination.
VI.
In conclusion, we hold that the district court in the
present case lacks the authority to conduct a trial and make independent
findings of fact concerning the alleged bias of ALJ Rowell. We hold, instead,
that the district court may only review the findings of the Secretary on this
question pursuant to the standard set out in Section 205(g).
Any individual, after any final decision of the Secretary
made after a hearing to which he was a party, irrespective of the amount in
controversy, may obtain a review of such decision by a civil action commenced
within sixty days after the mailing to him of notice of such decision or within
such further time as the Secretary may allow. Such action shall be brought in
the district court of the United States for the judicial district in which the
plaintiff resides, or has his principal place of business, or, if he does not
reside or have his principal place of business within any such judicial
district, in the United States District Court for the District of Columbia. As
part of his answer the Secretary shall file a certified copy of the transcript
of the record including the evidence upon which the findings and decision
complained of are based. The court shall have power to enter, upon the
pleadings and transcript of the record, a judgment affirming, modifying, or
reversing the decision of the Secretary, with or without remanding the cause
for a rehearing. The findings of the Secretary as to any fact, if supported by
substantial evidence, shall be conclusive, and where a claim has been denied by
the Secretary or a decision is rendered under subsection (b) of this section
which is adverse to an individual who was a party to the hearing before the
Secretary, because of failure of the claimant or such individual to submit
proof in conformity with any regulation prescribed under subsection (a) of this
section, the court shall review only the question of conformity with such
regulations and the validity of such regulations. The court may, on motion of
the Secretary made for good cause before he files his answer, remand the case
to the Secretary for further action by the Secretary, and it may at any time
order additional evidence to be taken before the Secretary, but only upon a
showing that there is new evidence which is material and that there is good
cause for the failure to incorporate such evidence into the record in a prior
proceeding; and the Secretary shall, after the case is remanded, and after
hearing such additional evidence if so ordered, modify or affirm his findings
of fact or his decision, or both, and shall file with the court any such
additional and modified findings of fact and decision, and a transcript of the
additional record and testimony upon which his action in modifying or affirming
was based. Such additional or modified findings of fact and decision shall be
reviewable only to the extent provided for review of the original findings of
fact and decision. The judgment of the court shall be final except that it
shall be subject to review in the same manner as a judgment in other civil
actions. Any action instituted in accordance with this subsection shall survive
notwithstanding any change in the person occupying the office of Secretary or
any vacancy in such office.
42 U.S.C. § 405(g).
2. The amended
complaint alleged that ALJ Rowell had denied the disability claims of both of
these men and in doing so had found that they were not credible. App. 55-58.
3. In addition, the
complaint sought that notice be sent to all class members informing them that
ALJ Rowell was biased and that they were entitled to a new hearing. Finally,
the complaint sought findings that the named plaintiffs were entitled to
benefits.
4. The Secretary
contended that the plaintiffs had waived their claims of bias by failing to
raise them during the administrative proceedings, that the claim of ALJ
Rowell's alleged "general" bias toward disability claimants was not
justiciable, and that the district court lacked jurisdiction with respect to
those members of the plaintiff class who had not exhausted administrative remedies
or filed suit within 60 days of the final administrative order.
5. Among other things,
the court held that the plaintiffs' bias claims were not barred due to failure
to exhaust or failure to file suit within the 60-day period because the
plaintiffs and their attorneys could not have reasonably detected ALJ Rowell's
bias until later. Grant v. Sullivan, 720 F. Supp. 462 at 471-74 . In
doing so, the court reserved decision on "whether [it] should try the bias
claims . . . or whether [it] should remand these claims to the Secretary for
fact-finding" until the court decided the question of class certification.
Id. at 474.
6. Donnelly withdrew
as a class representative, and Wallace was dismissed by the court as a class
representative. 131 F.R.D. at 448.
The Secretary's motion seeks a stay of proceedings in order
to give the Secretary time to try a new ad hoc administrative procedure for
determining whether Administrative Law Judge Russell Rowell is biased. In an
order dated July 27, 1989, the Court decided the same question which the
Secretary has now placed before the Court in the motion to dismiss or for a
stay of proceedings -- whether we may try the bias claims of the Plaintiffs and
the class members or whether we are obliged to remand this action to the
Secretary. Grant vs. Sullivan, 720 F. Supp. 462, 474 (M.D. Pa. 1989). In that
decision we stated that whether we should try the bias claims or whether we
should remand the claims to the Secretary for fact-finding depended in large
part upon whether we certified a class of Plaintiffs in this action and what
size of class we certified. Id.
The Court held a hearing on the Plaintiffs' motion for
class certification on January 22-24, 1990. By order dated February 21, 1990,
the Court certified a class of approximately 700 persons in this case and
determined that the members of the class were not obliged to exhaust
administrative remedies before proceeding in this Court on their class claims.
The Court determined that proposed class members would suffer irreparable harm
by first having to exhaust administrative remedies.
(b) Administrative determination of entitlement to
benefits; findings of fact; hearings; investigations; evidentiary hearings in
reconsideration of disability benefit terminations; subsequent applications
(1) The Secretary is directed to make findings of fact, and
decisions as to the rights of any individual applying for a payment under this
subchapter. Any such decision by the Secretary which involves a determination
of disability and which is in whole or in part unfavorable to such individual
shall contain a statement of the case, in understandable language, setting
forth a discussion of the evidence, and stating the Secretary's determination
and the reason or reasons upon which it is based. Upon request by any such
individual or upon request by a wife, divorced wife, widow, surviving divorced
wife, surviving divorced mother, surviving divorced father, husband, divorced
husband, widower, surviving divorced husband, child, or parent who makes a
showing in writing that his or her rights may be prejudiced by any decision the
Secretary has rendered, he shall give such applicant and such other individual
reasonable notice and opportunity for a hearing with respect to such decision,
and, if a hearing is held, shall, on the basis of evidence adduced at a
hearing, affirm, modify, or reverse his findings of fact and such decision. Any
such request with respect to such a decision must be filed within sixty days
after notice of such decision is received by the individual making such
request. The Secretary is further authorized, on his own motion, to hold such
hearings and to conduct such investigations and other proceedings as he may
deem necessary or proper for the administration of this subchapter. In the
course of any hearing, investigation, or other proceeding, he may administer
oaths and affirmations, examine witnesses, and receive evidence. Evidence may
be received at any hearing before the Secretary even though inadmissible under
rules of evidence applicable to court procedure.
9. For a description
of this program, see Stieberger v. Heckler, 615 F. Supp. 1315, 1377-79
(S.D.N.Y. 1985), vacated on other grounds, 801 F.2d 29 (2d Cir. 1986); Association
of Administrative Law Judges, Inc. v. Heckler, 594 F. Supp. 1132, 1133-36
(D.D.C. 1984). Our opinion in the present case should not be interpreted as
expressing any view regarding the propriety of this or other similar programs.
Courts and commentators have disagreed sharply on this question. Compare
Nash v. Bowen, 869 F.2d 675, 678-81 (2d Cir. 1989) (upholding program) and
Pierce, Political Control Versus Impermissible Bias in Agency
Decisionmaking: Lessons from Chevron and Mistretta, 57 U. Chi. L. Rev. 481,
501-19 (1990) (arguing that program was generally valid) with Barry v. Bowen,
825 F.2d 1324, 1330-31 (9th Cir. 1987) (program invalid); Salling v. Bowen,
641 F. Supp. 1046, 1055-56, 1073 (W.D. Va. 1968) (same); Association of Administrative
Law Judges, 594 F. Supp. at 1141-43 (same).
10. The Court cited 28
U.S.C. § 1343 (civil rights), 28 U.S.C. § 1361 (mandamus), and 29 U.S.C. §
1132(a) (ERISA).
11. The Supreme Court
did not reach this issue. The Court has never decided whether mandamus
jurisdiction is available in Social Security cases. See Heckler v. Ringer,
466 U.S. 602, 616-17, 80 L. Ed. 2d 622, 104 S. Ct. 2013 (1984). Compare
Colonial Penn Ins. Co. v. Heckler, 721 F.2d 431, 437 n.2 (3d Cir. 1983).
12. The propriety of
district court fact-finding in a case such as City of New York is not
before us, and we express no view on this question. We merely note that,
assuming for the sake of argument that the fact-finding in City of New York
was proper, it would not follow that the district court could engage in
independent fact-finding here.
14. See Heckler v.
Ringer, 466 U.S. at 613-16; (addressing general federal question
jurisdiction to entertain claims relating to Social Security); Weinberger v.
Salfi, 422 U.S. 749, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975) (same).
15. We will not
describe in detail the decisions of other courts of appeals and district courts
on which the plaintiffs rely. The decisions that are most favorable to the
plaintiffs -- Small v. Sullivan, No. 89-3700 (S.D. Ill. Sept. 21, 1992),
and Kendrick v. Sullivan, 784 F. Supp 94 (S.D.N.Y. 1992) -- reject many
objections raised by the Secretary to class actions similar to the one before
us, but the opinions do not directly address the argument that the district
court was barred by Section 205(g) from making its own findings of fact
regarding the ALJs' bias. Virtually all of the other cases involve district
court determinations regarding a practice or policy of the Social Security
Administration or component of the Social Security system. Luna v. Bowen,
834 F.2d 161 (10th Cir. 1987) (policy and practice regarding evaluation of
pain); Hyatt v. Heckler, 711 F. Supp. 837 (W.D.N.C. 1989), aff'd in
part sub nom. Hyatt v. Sullivan, 899 F.2d 329 (4th Cir. 1990) (same); Samuels
v. Heckler, 668 F. Supp. 656 (W.D. Tenn. 1986) (practice regarding
instructions to consulting physicians); New York v. Bowen, 655 F. Supp.
136 (S.D.N.Y. 1987), aff'd. sub nom. New York v. Sullivan, 906
F.2d 910 (2d Cir. 1990). Thus, if these cases involved any fact-finding (as
opposed to the interpretation of regulations and Social Security directives),
the fact-finding would appear to be analogous to that in Bowen and Bailey
and is not, for the reasons already discussed, germane for present purposes. In
the final cited case, Barnett v. Bowen, 665 F. Supp. 1096 (D. Vt. 1987),
in which the district court awarded declaratory and injunctive relief related
to delays in scheduling hearings, we see no indication that the court engaged
in fact-finding.
16. See also NLRB
v. Permanent Label Corp., 657 F.2d 512, 527-28 (3d Cir. 1981) (Aldisert,
J., concurring) (discussing independence of ALJs), cert. denied, 455
U.S. 990 (1982).
17. Our decision in Hummel
did not approve discovery of the type permitted here. In Hummel, we held
that a claimant was entitled to discovery as to whether the ALJ had undergone a
"Ballmon Review" and, if so, the nature of the review. 736 F.2d at
95. We did not sanction depositions of the ALJ's co-workers and staff.
19. The parties have
called to our attention the fact that similar class actions have recently been
filed against several other HHS ALJs.
20. In addition, an
agency may seek recusal of an ALJ in a proceeding before the Merit Systems
Protection Board. 5 U.S.C. § 7521.
A. LEON HIGGINBOTHAM, JR., Circuit Judge,
dissenting.
Suppose a class of plaintiffs alleged that the Secretary of
Health and Human Services had adopted a secret policy under which claimants
living in hispanic, black or poor white communities were presumed to be
generally "less deserving" of social security disability benefits.
Would a federal district have the authority to conduct a de novo fact-finding
trial in ruling on plaintiffs' claim, or would the district court only have the
authority to review the Secretary's findings of facts under a limited standard
of review?
According to Bowen v. City of New York, 476 U.S.
467, 106 S.Ct. 2022, 90 L.Ed.2d 462 (1986) and McNary v. Haitian Refugee
Center, Inc., 498 U.S. 479, 111 S.Ct. 888, 112 L. Ed. 2d 1005 (1991), the
district court would have the power to conduct a de novo fact-finding trial.
Why? Because, collateral classwide constitutional or statutory challenges to an
agency's practices or policies are reviewed de novo by the courts. Haitian
Refugee Center, 111 S.Ct. at 897; Bowen v. City of New York, 476
U.S. at 483.
Now substitute the entirely fictional hypothetical scenario
described above for the actual complaint brought by the present class of
plaintiffs. According to the complaint, ALJ Rowell has allegedly adopted a
biased policy under which he believes that claimants living in hispanic, black
or poor white communities are only "attempting to milk the system",
that they are "perfectly capable of going out and earning a living",
that they "prefered living on public monies," "that he had no
intention of paying them" and that "he did not care what the evidence
showed." Should a federal district court have the authority to conduct a
de novo fact-finding trial in reviewing plaintiffs' claim, or should the
district court only have the power to review the agency's findings under a
limited standard of review?
The majority today answers that the district court does not
have the authority to conduct a de novo trial, but instead only has the
authority to review the agency's findings under a limited standard of review. I
respectfully dissent. Why? Because, plaintiffs' claim of general bias is a
collateral challenge to an unconstitutional practice, no less so because
adopted by an ALJ than had it been adopted by the Secretary. As such the
district court has the authority to conduct a de novo trial in reviewing
plaintiffs' claim.
This dissent proceeds in two parts. In the first part I
will refute each ground advanced by the majority for its holding. In the second
part, I will submit an alternative reasoning to that of the majority.
I.
The majority relies on four grounds for holding that the
district court lacks the authority to make independent findings of fact in a
classwide suit alleging unconstitutional and statutorily unlawful bias on the
part of an ALJ.
First, the majority finds that the express language of
section 205(g) of the Social Security Act, 42 U.S.C. § 405(g), "creates a
scheme in which a district court may conduct a restricted review of the
Secretary's findings and may remand a case for new findings, but this scheme
makes no provision for a district court to make any findings of its own."
Majority Typescript Op at 15. Second, the majority reasons that our decision in
Hummel "stated flatly that 'the district courts have no
fact-finding role in Social Security cases'." Majority Typescript Op at
15. Third, the majority finds that no decision from the Supreme Court or this
court, including Bowen v. City of New York, has ever expressly held that
the district court has the authority to make findings of fact regarding the
alleged bias of an ALJ. Instead, according to the majority, in the only
instances in which the district court engaged in fact-finding, the fact in
question concerned the existence of a hidden unlawful agency or practice -- a
question on which the Secretary could not function as an impartial fact-finder.
Majority Typescript Op at 25. Fourth, the majority argues that this court
should be reluctant to allow the district court to make independent findings of
fact regarding the bias of an ALJ because "such fact-finding would have a
deleterious effect on the independence of ALJs and thus on the administrative
process." Majority Typescript Op at 31. None of these grounds are valid.
A.
As the district court correctly recognized, social security
cases brought in federal district court generally fall into two categories. Bowen
v. City of New York, 476 U.S. at 484. The first category is the individual
review case. This involves an appeal to the district court from a final
decision of the Secretary denying Social Security or SSI benefits. In this sort
of appeal, the district court is asked to examine whether on the facts of the
case the claimant is entitled to benefits. Id. The second category of
social security cases is a collateral class action. This involves an action in
the district court challenging the agency's policies or practices as
unconstitutional or statutorily unlawful. In this sort of action, the district
court is not asked to determine whether any of the class plaintiffs are
actually entitled to benefits. Id.
Section 205(g) sets out the district court's jurisdiction
and applicable standard of review in individual review cases. It provides in
relevant part:
Any individual, after any final decision of the
Secretary made after a hearing to which he was a party,
irrespective of the amount in controversy, may obtain a review of such a
decision by a civil action commenced within sixty days after the mailing to
him of such decision or within such further time as the Secretary may allow....
The findings of the Secretary as to any fact, if supported by substantial
evidence, shall be conclusive, and where a claim has been denied by the
Secretary or a decision rendered under subsection (b) of this section
which is adverse to an individual who was a party to the hearing before
the Secretary, because of failure of the claimant or such individual to submit
proof in conformity with any regulation prescribed under subsection (a) of this
section, the court shall review only the question of conformity with such
regulations and the validity of such regulations. (emphasis added).
All that section 205(g) plainly says is that a claimant who
has been denied benefits after a "hearing" to which the claimant was
a "party" may petition the district court for review of the
Secretary's decision, irrespective of the "amount in controversy,"
and that, in ruling on the denial of benefits, the court shall consider
"conclusive" findings of the Secretary as to any fact, if supported
by "substantial evidence." Stated another way, section 205(g)
provides that in individual review cases district courts have jurisdiction to
review denial of benefits by the Secretary, and in such cases the district
court's fact-finding role is limited to affirming the findings of the Secretary
if supported by substantial evidence.
Section 205(g), however, leaves unanswered two questions:
first, does the federal district court have jurisdiction over collateral class
actions where plaintiffs challenge a practice or policy of the agency as
unconstitutional or statutorily unlawful, without challenging the underlying
merits of the denial of their claims for benefits? Second, if the federal
district court has jurisdiction over collateral class actions, what is the
proper standard of review to be exercised by the court in such actions?
In Califano v. Yamasaki, 442 U.S. 682, 99 S.Ct.
2545, 61 L.Ed.2d 176 (1979), the Supreme Court answered the first question in
the affirmative. The court found that section 205(g) does not preclude federal
district courts from assuming jurisdiction over social security class actions. Yamasaki,
442 U.S. at 700-701. Instead, the court held that the plain language of section
205(g) is consistent with the exercise by district courts of their usual
authority under the Federal Rules of Civil Procedure to conduct cases,
including Social Security cases, as class actions:
Section 205(g) contains no express limitation of class
relief. It prescribes that judicial review shall be by the usual type of 'civil
action' brought routinely in district court in connection with the array of
civil litigation.... In the absence of a direct expression by Congress of its
intent to depart from the usual course of trying 'all suits of a civil nature'
under the Rules established for that purpose, class relief is appropriate in
civil actions brought in federal court, including those seeking to overturn
determinations of the departments of the Executive Branch of the Government in
cases where judicial review of such determinations is authorized. (citations
omitted).
Id.
Just as section 205(g) does not expressly address the
question of whether federal district courts have jurisdiction over collateral
class actions, it leaves untouched the question of the standard of review
applicable in such actions. The majority claims, however, that, even in
collateral class actions, the plain language of the statute "creates a
scheme in which a district court may conduct a restricted review of the
Secretary's findings and may remand a case for new findings, but this scheme
makes no provision for a district court to make any findings of its own."
Majority Typescript op at 15. In so concluding, the majority homes in on a
single phrase in section 205(g): "The findings of the Secretary as to any
fact, if supported by substantial evidence, shall be conclusive...".
According to the majority, that phase "seems quite clearly to mean that
the district court must review the Secretary;'s findings [even in collateral
class actions] rather than setting out to make independent findings of its
own." Majority Typescript Op at 16.
Respectfully, the majority is wrong. The phrase does not
"quite clearly" mean that the district court is bound by the
Secretary's findings in collateral class actions for the quite simple reason
that section 205(g) deals solely with individual review cases. While the
majority does a good job of focussing on the phrase that the Secretary's
findings are conclusive if supported by substantial evidence, it inexplicably
ignores the other provisions of section 205(g) which surrounds that phrase and
give it context and meaning.
For example, section 205(g) states that "any
individual, after any final decision of the Secretary made after a hearing to
which he was a party, irrespective of the amount in controversy, may obtain a
review of such decision...." The use of the terms "hearing to which
he was a party" clearly contemplates an individual determination of
eligibility for benefits at an actual proceeding where an individual claimant
was present and was given the opportunity to present evidence." Moreover
the use of the term "amount in controversy" also contemplate a
determination of eligibility for benefits where the claimant and the Secretary
seek to ascertain a dollar amount in benefits to which the claimant is
entitled. These characteristics of the terms "hearing at which he was a
party" and "amount in controversy" are only present in individual
review cases where the claimant challenges the merits of the denial of benefits
by the Secretary. By contrast, in most collateral review cases, plaintiffs may
challenge a particular aspect of the Secretary's practice or policy without any
reference to a hearing where plaintiffs were present. Moreover, since in a
collateral action case, plaintiffs do not challenge the merits of the denial of
their benefits, by definition there is no "amount in controversy."
The majority maintains that this reasoning is "foreclosed
by Yamasaki." Majority Typescript op at 18. According to the majority, the
Supreme Court in Yamasaki, held that "Section 205(g) applies to
class actions as well as to individual review cases," and that the above
reasoning "is directly contrary to the Yamasaki reasoning and
holding." Majority Typescript at 22. However, a careful reading of Yamasaki
reveals that it is not contrary to the above reasoning. In Yamasaki, the
Supreme Court stated that "Section 205(g) contains no express limitation
on class relief." Yamasaki, 442 U.S. at 699. The court explained
that Section 205(g) is simply silent on the question of whether federal courts
may exercise jurisdiction over social security class actions. Id. at
700. According to the court, in the absence of clear expression by Congress of
its intent to exempt social security class actions from the usual course of
trying all suits of a civil nature, class actions were not precluded by Section
205(g). Id. All that the Supreme Court held in Yamasaki is that
Section 205(g) did not limit federal court jurisdiction over social security
class actions, just as here Section 205(g) does not limit the standard of
review exercised by federal courts over those actions.
Recently, the Supreme Court engaged in the exact same analysis
of a similar statute. In McNary v. Haitian Refugee Center, Inc., 498
U.S. 479, 111 S.Ct 888, 112 L. Ed. 2d 1005 (1991), a class of plaintiffs made
up of unlawful alien farmworkers sued the Immigration and Naturalization
Service (INS) under the Immigration Reform Control Act of 1986 (the Act).
Plaintiffs claimed that the INS had denied their application for lawful status
in violation of the due process guarantees of the Fifth Amendment to the
Constitution. The Act itself prescribed the jurisdiction and standard of review
by the courts in reviewing the denial by the INS of applications for lawful
status. It provided in relevant part:
There shall be no administrative or judicial review of a
determination respecting an application for adjustment of status under this
section except in accordance with this subsection.
8 U.S.C. § 1160(e)(1).
There shall be judicial review of such a denial only in the
judicial review of an order of exclusion or deportation under section 1105a of
this title.
8 U.S.C. § 1160(e)(3).
Such judicial review shall be based solely upon the
administrative record established by the appellate authority and the findings
of fact and determinations contained in such record shall be conclusive unless
the applicant can establish abuse of discretion or that the findings are
directly contrary to clear and convincing facts contained in the record
considered as a whole.
8 U.S.C. § 1160(e)(3)(B).
Much as the majority maintains in the present case, the INS
argued before the Supreme Court that the "plain language" of the Act
restricted judicial review of, not only individual appeals of denial of status
adjustment by the INS, but also collateral classwide constitutional and
statutory challenges to INS policies and practices. The Court rejected the argument.
The Court reasoned:
the critical words [§ 1160(e)(1)] describe the provision as
referring only to review "of a determination respecting an application"
for SAW status. Significantly, the reference to "a determination"
describes a single act rather than a group of decisions or a practice or
procedure employed in making decisions. Moreover, when [§ 1160(e)(3) further
clarifies that the only judicial review permitted is in the context of
deportation proceeding, it refers to "judicial review of such a denial"
-- again referring to a single act, and again making clear that the earlier
reference to "a determination respecting an application" describes
the denial of an individual application. We therefore agree with the District
Court's and Court of Appeals' reading of this language as describing the
process of direct review of individual denials of SAW status, rather than as
referring to general collateral challenges to unconstitutional practices and
policies used by the agency in processing applications. (emphasis in original).
McNary v. Haitian Refugee Center, Inc., 111 S.Ct. at 896.
Similarly, the critical words of Section 205(g) describe
the provision as referring to judicial review of "any final decision"
made after "a hearing" at which an individual was "a
party", irrespective of "the amount in controversy." These words
describe a "single act rather than a group of decisions or a practice or
procedure employed in making decisions." Moreover, Section 205(g),
prescribes that the findings of the Secretary shall be conclusive where "a
claim has been denied" or when the Secretary renders "a
decision" which is adverse to "an individual who was a party to the
hearing before the Secretary." Again, these words refer to "a single
act", namely the "denial of an individual application."
Therefore, as the Supreme Court concluded in McNary v. Haitian Refugee
Center, the language of Section 205(g) describes "the process of
direct review of individual denials of social security benefits, rather than
refer to general collateral challenges to unconstitutional practices and
policies used by the agency, or the ALJ, in processing applications for
benefits.
The majority summarily dismisses the analogy between McNary
and the present case by stating that "McNary concerned a different
question under a different statute." Majority Typescript op at 26. Of
course, the majority is superficially correct. McNary did involve a
different statute. But that statute is remarkably similar to Section 205(g).
Like Section 205(g), that statute provides for limited judicial review of an
agency's denial of an individual application. The Supreme Court, however, held
that the statute described "the process of direct review of individual
denials [], rather than refered to general collateral challenges to
unconstitutional practices used by the agency in processing applications."
McNary, 111 S.Ct. at 888. Moreover, contrary to the majority's
assertion, the Supreme Court in McNary faced precisely the same before
this court today; namely the standard of review to be exercised by federal
courts in "collateral challenges to unconstitutional practices and
policies used by an agency in processing applications." Id. [21]
The majority can point to no language in section 205(g) which expressly states
that, even in collateral class actions, federal district courts are limited to
the Secretary' findings of fact and have no power to engage in independent
fact-finding. Instead, the majority grasps unto an isolated phrase in the whole
of section 205(g) and uses that disconnected phrase to expand the meaning of
section 205(g) without any evidence that Congress intended the statute to have
such broad application.
B.
The second ground upon which the majority relies is our
decision in Hummel v. Heckler, 736 F.2d 91 (3d Cir. 1984). According to
the majority, in Hummel "we stated flatly that 'the district court
have no fact-finding role in Social Security cases'." Majority Typescript
Op at 15. But, as with its selective reading of the language of section 205(g),
the majority again quotes out of context this court's statement in Hummel.
Only one paragraph prior to the statement that "district courts have no
fact finding role in Social Security cases", the court explicitly wrote
that "district courts have no fact-finding role in social security review
cases." In other words, the statement that district courts have no
fact-finding role in social security cases must be read to refer obviously to
social security individual review cases.
Indeed Hummel itself was an individual review case.
To fully understand the nature of the case, a careful examination of the facts
and the holding is necessary. The Hummel panel described the case as
follows:
Jeannette E. Hummel appeals from a summary judgment in
favor of the Secretary of Health and Human Services in her action, pursuant to
42 U.S.C. § 405(g) (Sup. V 1981), for review of the denial of disability
benefits under Title XVI of the Social Security Act, 42 U.S.C. §§ 1381-1385
(1976 Supp V 1981). Hummel contends that the district court erred in concluding
that the Secretary's decision is supported by substantial evidence.
Alternatively, she contends that the district court erred in ruling on the
Secretary's motion for summary judgment while her motions to compel discovery
were outstanding. Those discovery requests sought information concerning
possible bias of the administrative law judge who presided at her hearing.
Hummel, 736 F.2d at
92.
In other words, in Hummel plaintiff had made two
separate arguments before the district court. First, plaintiff claimed that the
Secretary's denial of her benefits was not supported by substantial evidence.
Second, plaintiff requested further discovery so as to be able to show that the
ALJ who ruled on her claims for benefits was biased against her. Plaintiff argued
that proof of bias on the part of the ALJ would demonstrate that the denial of
her benefits was not supported by substantial evidence. The district court
rejected both of plaintiff's arguments and granted summary judgment in favor of
the Secretary. The court concluded that the Secretary's findings were supported
by substantial evidence. The court also concluded that proof of bias on the
part of the ALJ would be irrelevant because the objective medical evidence
contained in the administrative record more than amply supported the
Secretary's conclusion that the plaintiff was not entitled to benefits.
On appeal to this court, plaintiff reiterated the same two
arguments made before the district court. As to the first argument, we agreed
with the district court and held that "in the absence of a finding of
bias, the Secretary's decision denying benefits [was] supported by substantial
evidence." Id. at 95. However, as to plaintiff's second argument,
we reversed the district court and held that "where information relating
to a contention bearing on the fundamental fairness of the agency hearing is in
possession of the government, discovery is available to the section 405(g)
plaintiff so that she can attempt to convince the district court that a remand
to the Secretary for the taking of new evidence is appropriate." Id.
In other words, instead of finding that allegations of bias were irrelevant
because of the "objective" nature of the medical evidence, we
reasoned that such allegations, if proven true, would be highly relevant
inasmuch as bias on the part of the ALJ may affect the sort of
"objective" evidence which ends up or does not end up in the record.
Thus, we concluded as follows:
We hold, therefore, that in the absence of a finding of
bias, the Secretary's decision denying benefits is supported by substantial
evidence. In the event that a finding of bias is made on remand, a new hearing
must be held before an administrative law judge to determine the merits of
Hummel's claim." Id.
In short, even though the claimant in Hummel had made a
claim that she was denied benefits because the ALJ judge may have been biased
against her, it was clear that she was seeking to challenge the merits of the
denial of her benefits. Claimant in Hummel claimed that the Secretary's
denial of benefits was not supported by substantial evidence and sought to so
prove by showing that the ALJ who ruled on her case may have been biased
against her. Claimant did not request the court to assume jurisdiction over her
case or to make independent findings regarding the bias of the ALJ. Claimant's
argument that the ALJ may have been biased was simply a method of proving that
the district court should have reversed the denial of her benefits because,
pursuant to section 205(g), the findings of the Secretary, as reflected in the
ALJ's ruling, was not supported by substantial evidence. As such, Hummel
was an individual review and not a collateral class action case.
The majority here writes:
we made perfectly clear in Hummel that the district
court could not make findings regarding the ALJ's alleged bias but could at
most remand the case to the Secretary so that the Secretary could make such
findings.
Majority Typescript Op at 16.
That is a significant expansion of our careful holding in Hummel.
As stated in detail above, we held in Hummel that the district court had
no independent fact-finding role in an individual review case and, as such,
could not make findings of its own regarding the alleged bias of the ALJ. We
remanded the case because remands to the Secretary in social security cases are
common. Indeed, since at the time of Hummel's appeal the administrative record
contained no findings regarding the alleged bias of the ALJ, once we reasoned
that proof of the ALJ bias was relevant in determining whether the Secretary's
denial of benefits to Hummel was supported by substantial evidence, we had no
choice but to remand the case to the Secretary for fact-finding. Thus, contrary
to what the majority suggests, we certainly did not hold that the district
court may never, even in collateral class action cases, make independent
findings regarding the alleged bias of an ALJ. The majority has taken a
relatively straightforward individual review case which we remanded to the
Secretary for further fact-finding and transformed it into a sweeping
declaration on the role of federal district courts in classwide constitutional
and statutory challenges to the policy and practice of an administrative
agency. [22]
C.
The third ground upon which the majority relies is its
conclusion that no decision from the Supreme Court or this court has ever
expressly held that the district court has the authority to make findings
regarding the alleged bias of an ALJ. Instead, according to the majority, in
the only instances in which the district courts engaged in fact-finding, the
fact in question concerned the existence of a hidden unlawful agency or
practice -- a question on which the Secretary could not function as an
impartial fact-finder. Majority Typescript Op at 25. None of the cases cited by
the majority, indeed none of the cases cited by plaintiffs or by the Secretary,
have ever held that the fact-finding role of the district court in social
security cases is predicated on whether the Secretary can be expected to be an
impartial fact-finder. The only support the majority cites for this broad
distinction is "the ancient maxim that no one may be judge in his own
cause." Majority Typescript Op at 24. Publilius Syrus, who first uttered
that maxim in the first century B.C., was no doubt right. But the wisdom of the
maxim notwithstanding, it cannot serve as a substitute for judicial precedent.
In any event, the maxim itself is not applicable to the
present case. The reasoning of the majority seems to be that when the Secretary
adopts a policy or engages into a practice, the Secretary cannot be an
impartial fact-finder in determining whether that policy or practice is
unconstitutional or unlawful. The majority does not explain why this is so, but
one supposes that the majority must mean that since the policy or practice is
the Secretary's own, it will lose all objectivity in reviewing its legality.
That reasoning is based on a somewhat unrealistic view of administrative
agencies. It is as if the majority suggest that the Secretary, as an
individual, adopts the policy and the Secretary, as an individual, ends up
reviewing its legality. In other words, in the majority's view, the Secretary
runs every aspect of the agency, not only in name but also in fact. There is
absolutely no evidence that this is the case. Indeed it may very well be that
the branch of the agency which adopts the policy is not the same branch which
ultimately reviews its legality.
Moreover, even if one begins to imagine that the majority
is correct in assuming that the Secretary develops a strange attachment to its
own policies and practices, thereby rendering it incapable of being an
impartial fact-finder in ruling on their legality, the fact remains that the
same reasoning can be applied to an allegation of bias by an ALJ. The same
Secretary that adopts a policy or practice is the same Secretary that
supervises ALJs. If, as the majority maintains, the Secretary is incapable of
being an impartial fact-finder in reviewing the legality of its policies, there
is no reason to think that the Secretary will be any more capable of being an
impartial fact-finder in reviewing allegations of unlawful bias on the part of
its ALJ. The majority's argument seems to be that the Secretary is unable to be
an impartial fact-finder with regard to the agency's unlawful policies and
practices because the Secretary is not separate from the agency. If that is so,
then the same can be said about the relationship between the Secretary and the
ALJ. The Secretary, the ALJ and various other branches of the agency all
constitute part of the same bureaucracy. To separate the Secretary, the agency,
and the ALJ is to insist on pure fiction. And as Justice Holmes would say,
"fiction always is a poor ground for changing substantial rights." Haddock
v. Haddock, 201 U.S. 562, 630, 26 S. Ct. 525, 50 L. Ed. 867 (1906) (Holmes,
J., dissenting).
D.
The fourth and final ground upon which the majority relies
to explain its holding is that this court should be reluctant to allow the
district court to make independent findings of bias on the part of an AlJ
because "such fact-finding would have a deleterious effect on the
independence of ALJs and thus on the administrative process." Majority
Typescript Op at 31 (emphasis in original). According to the majority, "it
has long been recognized that attempts to probe the thought and decision making
processes of judges and administrators are generally improper." Majority
Typescript Op at 31. This is because "efforts to probe the mind of an ALJ
through such evidence pose a substantial threat to the administrative
process." Majority Typescript Op at 33. Moreover, the majority continues,
if the sort of trial and discovery sought by the plaintiffs in this case is
allowed, "this would seriously interfere with the ability of many ALJs to
decide the cases that come before them based solely on the evidence and the
law." Majority Typescript Op. at 34.
The picture the majority paints is one where social
security ALJs reach the decision to award or deny benefits to claimants through
an almost "mysterious" process which is not susceptible to judicial
review. The majority lists a parade of horribles which will inevitably and
inexorably unfold if district courts are permitted to make independent findings
of whether social security ALJs deny claimants benefits on the basis of
unlawful biases. The majority reasoning is based on its determination that
courts may not be permitted "to probe the thinking and decision making
processes of an officer occupying a position described by the Supreme Court as
'functionally comparable' to a judge." Majority Typescript Op at 31. The
Supreme Court may have described ALJs as functionally comparable to judges, but
the court never held that ALJs are federal judges. The independence
guaranteed to Article III judges is rooted in the separation of powers doctrine
embodied in the Constitution of the United States. By contrast, the
independence afforded to ALJs, whatever its contours may be, is not rooted in
the constitution, but rather is a function of the need for administrative
efficiency, the recognition of administrative expertise, and the need to build
an adequate administrative record for judicial review. Weinberger v. Salfi,
422 U.S. 749, 765, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975). [23]
Accordingly, the independence enjoyed by ALJs is not
without bounds. For one thing, the need for administrative efficiency is not
necessarily controlling in actions where plaintiffs challenge the very legality
of the agency's policy or practice. Bowen v. City of New York, 476 U.S.
at 485. For another thing, the recognition of administrative expertise, and the
need to build an adequate administrative record for judicial review are not
applicable when, as in the present case, plaintiffs' does not seek to have the
court review the very area in which the agency is deemed to be expert. Id.
This is of course amply demonstrated by the facts of the
present case. The Social Security Administration simply does not have any
expertise in reviewing claims of general bias. Granted the agency has in place
regulations to determine claims of individual bias. 20 C.F.R. §§ 404.940,
416.1440. But those regulations are obviously not designed to handle claims of
general bias. The Secretary in fact acknowledged that the exiting regulations
were not adequate in reviewing claims of general bias. If they were, the
Secretary would have relied on them rather than instituting an "ad
hoc" method in reviewing plaintiffs' claim in this case. Moreover, the ad
hoc procedure set up by the Secretary is unlikely to produce an adequate record
for judicial review. For example in the case of the Secretary's examination of
allegations of bias on the part of ALJ Rowell, the ad hoc procedure was not
established by regulation or statute; it lacked any procedural rules; it lacked
discovery mechanisms; and they were no parties and no assignment of burden of
proof. In short, the agency does not have the expertise in dealing with claims
of general bias, and there is no reason to believe that the ad hoc procedure it
has devised will produce an adequate record for judicial review.
Of course, I am convinced that the majority of ALJs perform
the duties of their office consistent with the statute they are charged to
execute and in compliance with the constitution. But I cannot accept the majority's
position that the exercise of independent review by the district courts on the
question of general bias by ALJs will have a deleterious effect on the
administrative process. If anything, such an independent review can only
strengthen public confidence in the administrative process. And, an
administrative process which enjoys public confidence will in the end function
more efficiently.
Having stated the reasons why I believe the majority's
reasoning is flawed, I now turn to the discussion of how I submit this case
should have been decided.
II
The Supreme Court established in Bowen c. City of New York
that district courts hear two types of Social Security cases on appeal:
individual review of denials of benefits and collateral class claims. Id.
476 U.S. at 484. As the court stated, individual review cases are
"materially distinguishable" from collateral class claims. Id.
An individual review case involves an appeal to the district court from a final
decision of the Secretary denying Social Security or SSI disability benefits.
The issue before the district court in an individual review case is whether the
claimant is entitled to benefits. The district court, pursuant to section
205(g), may affirm the denial of benefits, reverse the denial of benefits, or
remand the case to the Secretary for further fact-finding. Moreover, the
district, in an individual review case, must accept as conclusive all findings
of fact by the Secretary if supported by substantial evidence.
By contrast, a collateral claim is an action in the
district court challenging a policy or practice of the agency as
unconstitutional or statutorily unlawful, without challenging the underlying
merits of their denial for benefits. The issue before the district court in a
collateral claim is whether the challenged practice or policy is indeed
unlawful. The court never considers the question of whether plaintiffs are
actually entitled to benefits because a collateral claim means that the action
is separate from the merit disability determination conducted by the agency.
While Bowen v. City of New York clearly established
the distinction between individual review cases and collateral claims, it did
not explicitly address the issue of the standard of review to be applied by
district courts in collateral claims. However, a careful reading of Bowen v.
City of New York, demonstrates that it provides strong and convincing
support for the conclusion that district courts have the authority to conduct
independent fact-finding trials in collateral claims.
A.
Bowen v. City of New York involved two distinct programs of the Social Security Act. The first
program, the Social Security Disability Insurance Program, provides benefits to
persons who have paid into the program and have become mentally or physically
disabled. The second program, the Supplemental Security Income Program,
provides benefits to indigent disabled persons. To be eligible for benefits
under either program, a claimant must be found to under a disability of such
severity that claimant is unable to engage in substantial work of any kind.
Pursuant to statutory authority, the Secretary adopts regulations for both
programs to evaluate and process applicants for disability benefits.
In Bowen v. City of New York, a class of plaintiffs,
composed of claimants who were denied or were about to be denied disability
benefits, brought an action in the district court against the Secretary,
alleging that the Secretary had adopted an unpublished policy under which
deserving claimants were denied benefits. Plaintiffs claimed that the policy
was implemented through the use of secret internal memoranda and was never
published in the Federal Register. Plaintiffs argued that failure to make the
policy known denied class members due process of law. Following a 7-day trail
the district court found, not only that the Secretary had followed a covert
policy, but also that the policy actually violated the Social Security Act. The
Court of Appeals for the Second Circuit affirmed the district court and the
Secretary appealed to the Supreme Court.
Before the Supreme Court, the Secretary challenged the
judgement of the Court of Appeals on jurisdictional grounds. The Secretary's
jurisdictional argument was twofold: first the Secretary argued that certain
members of the class, whose claim for benefits had been finally denied, had
failed to bring their action in the district court within 60 days of the final
decision; second, the Secretary argued that other members of the class had
failed to exhaust administrative remedies before suing in the district court.
The Supreme Court rejected both of the Secretary's arguments. The court held
that equitable tolling of the 60-day period was proper as to those plaintiffs
who had failed to seek judicial period within the statutory period. The court
also held that it was proper to waive the requirement of exhaustion of
administrative remedies as to those plaintiffs who had not exhausted their
administrative appeals. For purposes of my analysis, the relevant portion of
the court's opinion is its discussion regarding waiver of the requirement of
exhaustion of administrative remedies.
The court reasoned as follows: Normally only a final
judgment from the Secretary is appealable to the district court. Id. at
482. The final decision requirement consists of two elements. Id. The
first element is that "the claims for benefits must have been presented to
the Secretary." Id. at 483, quoting Mathews v. Eldridge, 424
U.S. 319, 328, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976). The second element is
that "the administrative remedies prescribed by the Secretary must be
exhausted." Id. at 482-83.
Normally, the Secretary has discretion to waive the
exhaustion requirement. But, "cases may arise where a claimant's interest
in having a particular issue resolved promptly is so great that deference to
the agency's judgment is inappropriate." Id. at 483. Two factors
are significant in determining whether a case is such that deference to the
agency's judgment as to the exhaustion requirement is inappropriate. The first
factor is that "the constitutional challenge brought [must be] 'entirely
collateral to [a] substantive claim of entitlement'." Id. The
second factor is that "full relief cannot be obtained at a postdeprivation
hearing." Id.
B.
The same two factors which determine whether district
courts should waive the requirement of exhaustion of administrative remedies in
collateral claims may also be used to determine whether district courts should
exercise restricted or de-novo review of an agency's findings of facts in
collateral claims.
The reason is this: the doctrine exhaustion of
administrative remedies and the doctrine of restricted review of an agency's
findings of fact are driven by the same considerations. Specifically, claimants
are required to exhaust administrative remedies because, by claimants
exhausting their administrative appeals, the administrative machinery
"functions efficiently," the agency has the opportunity to
"afford the parties the benefits of its experience and expertise,"
and the agency is able to "compile a record which is adequate for judicial
review." Salfi, 422 U.S. at 765. Similarly, courts exercise restricted
review of an agency's finding because to exercise de-novo review of the
agency's findings of fact would disturb the efficient functioning of the
agency, would unduly disregard the expertise and experience of the agency, and
would merely duplicate an already complete record.
Therefore, one can reasonably conclude that, if application
of the doctrine of exhaustion of administrative remedies and the doctrine of
restricted review of an agency's findings of fact are driven by the same
factors, then the non-application of these two doctrines should also reasonably
be driven by the same factors. In Bowen v. City of New York, the Supreme
Court stated that district courts may waive the requirement of exhaustion of
remedies when the constitutional challenge brought is collateral to a
substantive claim of entitlement, and when full relief cannot be obtained at
the level of an administrative hearing. Bowen v. City of New York, 476
U.S. at 483. Similarly, district courts need not apply restricted review to an
agency's findings of fact but may instead exercise de novo fact-finding review
when the constitutional challenge brought is collateral to the substantive claim
of entitlement, and when full relief cannot be obtained at the level of an
administrative hearing.
C.
The present case satisfies those two factors. As to the
first factor, plaintiffs claim that an ALJ denies benefits to deserving
claimants on the basis of an unconstitutional and statutorily unlawful general
bias. Plaintiffs do not seek to have the district court review the substantive
merits of the denial of their benefits. Therefore plaintiffs constitutional
challenge is "entirely collateral to a substantive claim of
entitlement."
As to the second factor, plaintiffs are unlikely to obtain
full relief at the level of an administrative hearing. I have already described
above that the Secretary does not have any regulation or process in place for
handling claims of general bias as opposed to claims of individual bias. I have
also described above how the ad hoc procedure the Secretary has devised is
inadequate to afford plaintiffs a full and fair hearing on the issue of general
bias on the part of ALJ Rowell. The district court was correct when it
thoughtfully observed that "the agency cannot properly police itself in a
case that has been certified as a class action involving a claim of generalized
bias on the part of an Administrative Law Judge especially where the class
consists of approximately 700 plaintiffs." District court opinion at 12.
D.
In the final analysis, when all else has been said, it must
be remembered clearly what plaintiffs are claiming here. Plaintiffs claim
that, pursuant to the due process clause of the Fifth Amendment to the United
States Constitution, they have the right to have their petition for social
security benefits heard by an impartial administrative law judge.
Plaintiffs claim that their due process rights have been violated because their
applications for benefits were denied by an ALJ who possessed a general bias
against a class of plaintiffs because of their race and their economic status.
But more importantly, plaintiffs claim that their rights have been violated
because the agency is simply not equipped to police claims of general bias. The
determination of whether or not plaintiffs' constitutional right has been
violated is the province of the courts and not that of an agency. McNary v.
Haitian Refugee Center, Inc., 111 S.Ct. at 897. Indeed, the decision of the
Supreme Court in McNary v. Haitian Refugee Center, Inc. is highly
relevant to the present case, for it also deals with the question of whether
district courts ought to exercise de novo -- as opposed to limited -- review of
classwide collateral constitutional challenges to an agency's practice or
policy. That case involved a challenge to the manner in which the Immigration
and Naturalization Service (INS) was administering the Special Agricultural
Workers (SAW) provisions of the Immigration Reform Control Act of 1986. The SAW
provisions of the Act required the Attorney General to adjust the status of
certain alien farmworkers from unlawful aliens to "Special Agricultural
Workers" (SAW) lawfully admitted temporary and eventually permanent
residents. 8 U.S.C. § 1160(a)(1), (a)(2).
Pursuant to statutory authority, the INS promulgated
regulations to determine the eligibility of alien farmworkers for SAW status.
Essentially the INS determined eligibility for SAW status based on a personal
interview with each applicant. Applicants were required to bring to the
interview supporting documents, such as affidavits from employers. If an
applicant was found ineligible for SAW status, the Immigration and Nationality
Act (INA) barred judicial review of the denial except in the context of
judicial review of a deportation order; a review conducted by the court of
appeals, not the district court. 8 U.S.C. § 1105(a). Moreover, the INA provided
that, in reviewing a denial of SAW status, the court of appeals is restricted
to the administrative record and that "the findings of fact contained in
such a record [are] conclusive unless the applicant can establish abuse of
discretion or that the findings are contrary to clear and convincing facts
contained in the record as a whole." 8 U.S.C. § 1160(e)(3)(B).
In 1988, a group of unsuccessful SAW applicants brought a
class action in the district court for the Southern District of Florida against
the INS. Plaintiffs alleged that the interview process was conducted in an
arbitrary fashion that deprived applicants of the due process guarantees of the
Fifth Amendment to the Constitution. Among the procedures challenged by
plaintiffs was a practice by the INS whereby interviewers would "routinely
discredit supporting affidavits from a secret list of employers." McNary
v. Haitian Refugee Center, Inc., 111 S.Ct. at 894 n.9. The district court
found that it had jurisdiction over the class action and, after a de novo
trial, ruled on the merits that the practices of the INS were unconstitutional.
The Court of Appeals for the Eleventh Circuit affirmed and the INS filed a
petition for certiorari to the Supreme Court solely on the question of whether
the district court had jurisdiction over the action.
Before the Supreme Court, the INS made two jurisdictional
arguments. First, the INS argued that, pursuant to 8 U.S.C. § 1105(a), the
district court did not have jurisdiction over plaintiffs' claim. Second, the
INS argued that, even if the district court had jurisdiction over the claim,
pursuant to 8 U.S.C. § 1160(e)(3)(B), the court did not have the authority to
conduct de novo review of the agency's findings, but was limited to the
administrative record, and that the findings of fact in the record were
conclusive unless applicants could establish abuse of discretion.
The Supreme Court rejected both arguments and affirmed the
court of appeals. Id. at 899. As to the argument that the district
court's review was limited to an abuse of discretion standard, the court held
as follows:
The abuse of discretion standard of judicial review under §
210 (e)(3)(B) would make no sense if we were to read the Reform Act as
requiring constitutional and statutory challenges to INS procedures to be
subject to its specialized review provision. Although the abuse-of-discretion
standard is appropriate for judicial review of administrative adjudication of
the facts of an individual application, such a standard does not apply to
constitutional or statutory claims, which are reviewed de novo by the courts.
Id. at 897.
The same factual and legal matrix exists in the present
case. Haitian Refugee Center, involved a statutory scheme which provided
for limited judicial review of "an administrative adjudication of the
facts of an individual application for SAW status." Id. Similarly,
here this case involves a statutory scheme which provides for limited judicial
review of an "administrative adjudication of the facts of an individual
application" for social security benefits. In Haitian Refugee Center,
plaintiffs brought a classwide collateral challenge to the procedures devised
by INS to determine eligibility for SAW status as violative of their due
process rights under the Fifth Amendment to the Constitution. Similarly, here
plaintiffs have brought a classwide collateral challenge to the practice of the
Secretary -- as reflected by the general bias of an ALJ and as reflected in the
lack of adequate procedure by the Secretary to deal with general bias -- to
determine eligibility for benefits as violative of their due process rights
under the Fifth Amendment to the Constitution. In Haitian Refugee Center,
plaintiffs challenged the practices of the INS without challenging the
underlying merit of their SAW applications. Similarly, here plaintiffs
challenge the bias of an ALJ and the Secretary's lack of procedures for dealing
with general bias without challenging the underlying merits of their denial of
benefits. In Haitian Refugee Center plaintiffs alleged that interviewers
from the INS kept a secret list of employers whose affidavits were routinely
rejected. Similarly, here plaintiffs claimed that an ALJ routinely denied their
claims if they belong to a particular economic group. In Haitian Refugee
Center, the Supreme Court held that although limited judicial review is
appropriate for review of "an administrative adjudication of the facts of
an individual application" such limited review "does not apply to
constitutional or statutory claims, which are reviewed de novo by the
courts." Id. Similarly, here the district court was correct in
finding that, although limited review is appropriate for review of an
administrative adjudication of an individual application or benefits, such
limited review does not apply to collateral constitutional and statutory
claims, which are reviewed de novo by the courts.
III.
By now, to say that administrative agencies exercise broad
discretionary power over a wide range of private interests with only
intermittent control by the three branches of government is to state a rather
obvious proposition. See Sunstein, Interest Groups In American Public
Law, 38 Stan.L.Rev. 29, 60 (1985); Stewart, The Reformation of American
Administrative Law, 88 Harv.L.Rev. 1669, 1716 (1975); See also R.
Litan & W. Nordhaus, Reforming Federal Regulation (1983). In recent
years, courts have moved to make the administrative process more accountable
and responsive to the public. This movement began with the judicial creation of
the "hard-look doctrine." See, Greater Boston Television
Corp. v. FCC, 143 U.S. App. D.C. 383, 444 F.2d 841, 851 (D.C. Cir. 1970.
Currently, the hard-look doctrine has four principal elements: 1) the
enlargement of the class of interests entitled under the due process clause to
an administrative hearing before agency infringement of those interests; 2) the
establishment of a presumption in favor of judicial review of agency action or
inaction; 3) more scrutinizing judicial review based upon a detailed agency
justification for its decision; and 4) the enlargement of the class of
interests entitled to judicial review of agency action. See, Stewart, The
Reformation of American Administrative Law, 88 Harv.L.Rev. at 1716. Today
the majority opinion has abandoned the hard-look doctrine. Instead, it has
begun to fashion what can only be called the "quick-glance doctrine."
Justice Cardozo once wrote:
The great ideals of liberty and equality are preserved
against the assaults of opportunism, the expediency of the passing hour, the
erosion of small encroachments, the scorn and derision of those who have no
patience for general principles, by enshrining them in constitutions, and
consecrating to the task of their protection a body of defenders. [24]
In this country courts in general -- and federal courts in
particular -- have been "consecrated" the defenders of constitutional
rights against the assaults, encroachments and biases of individuals, be they
holders of elected office or recipients of bureaucratic positions. What the
majority proposes to do in its holding is effectively to have courts take a
back seat to bureaucratic agencies in protecting constitutional liberties. This
-- even if the majority couches it in terms of administrative efficiency and
expertise -- is a radical and unwise redefinition of the relationship between
federal courts and federal agencies, likely to have an effect far beyond the
question of the standard of review exercised by federal courts in collateral
actions alleging unlawful bias on the part of a social security administrative
law judge.
For the foregoing reasons I respectfully dissent.
21. The majority also
mentions in a footnote that "McNary distinguished Heckler v.
Ringer, [466 U.S. 602, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984)], which
involved Section 205(g)." The majority does not explain why the fact that Heckler
v. Ringer was distinguished in McNary should be relevant here. The
truth is, it is not at all relevant. In Heckler v. Ringer, four
plaintiffs sued to establish a right to reimbursement under the Medicare Act
for a particular form of surgery. Plaintiffs sought judicial review of the
Secretary's denial of reimbursement for the surgery without exhausting their
administrative remedies as required by Section 205(g). The district court
dismissed for lack of jurisdiction under Section 205(g) and plaintiffs
appealed. Plaintiffs argued that they were not required to exhaust
administrative remedies because their claim was not an individual review case.
The Supreme Court disagreed and found that at bottom plaintiffs' claim was not
a collateral challenge but an individual review claim. Id. 466 U.S. at
614. In McNary, the Secretary argued that Heckler v. Ringer
supported its position that the court should exercise limited review of
plaintiffs' claim. The court distinguished Heckler v. Ringer by noting
that plaintiffs' claim in that case was not collateral to their claims for
benefits. McNary, 111 S.Ct. at 897. Here, plaintiffs' claim is
collateral to their claims for benefits.
22. The majority tries
to gloss over the distinction between individual review cases and collateral
class actions by concluding: "Hummel was, to be sure, an individual
review case, not a class action, but neither Section 205(g) nor Hummel
draws any distinction between individual review cases and class actions."
Majority Typescript Op at 17. This is an indefensible statement given the
Supreme Court's unequivocal statement that social security collateral class
actions are "materially distinguishable" from individual review
cases. Bowen v. City of New York, 476 U.S. at 484.
23. The Supreme Court
has described the contours of the independence afforded to ALJ in terms of a
rationale for the administrative exhaustion doctrine:
Exhaustion is generally required as a matter of preventing
premature interference with agency processes, so that the agency may function
efficiently and so that it may have an opportunity to correct it errors, to
afford the parties and the courts the benefit of its expertise, and to compile
a record which is adequate for judicial review. Salfi, 422 U.S. at 765.
807 F.2d 1502
55 USLW 2394, 16 Soc.Sec.Rep.Ser. 73,
Unempl.Ins.Rep. CCH 17,126
Unempl.Ins.Rep. CCH 17,126
W.C., Plaintiff-Appellee,
v.
Otis R. BOWEN, Secretary, Health and Human Services,
Defendant-Appellant.
v.
Otis R. BOWEN, Secretary, Health and Human Services,
Defendant-Appellant.
No. 86-3770.
United
States Court of Appeals, Ninth Circuit.
Argued and Submitted Dec. 2, 1986.
Decided Jan. 13, 1987.
As Amended on Denial of Rehearing and Rehearing En Banc June
5, 1987.*
William
Rutzick, Schroeter, Goldmark & Bender, Seattle, Wash., for plaintiff-appellee.
Howard
S. Scher, Dept. of Justice, Washington, D.C., for defendant-appellant.
Appeal
from the United States District Court for the Western District of Washington.
Before
BROWNING, WRIGHT and BEEZER, Circuit Judges.
EUGENE A. WRIGHT, Circuit Judge.
W.C. is a class plaintiff. He represents a class of social security
claimants who were denied disability benefits. These denials occurred after
favorable ALJ decisions when, pursuant to the Bellmon Review Program, the
Appeals Council reviewed and reversed the ALJ decisions. The district court
found that the Bellmon Review Program was a substantive rule which required
notice and comment rulemaking. Because the rulemaking procedure was not
followed, the Appeals Council's decisions were voided and the court ordered
that benefits be restored to the class members.
BACKGROUND
The facts are well stated in the district court's opinion. W.C. v.
Heckler, 629 F.Supp. 791 (W.D.Wash.1985). Briefly, the Social Security
Administration terminated W.C.'s disability and SSI benefits on February 17,
1982. Plaintiff requested and received a hearing before an Administrative Law
Judge. The ALJ reversed the termination of plaintiff's benefits. The SSA
Appeals Council, a body which issues final decisions on behalf of the Secretary
of Health and Human Services, reversed the ALJ and terminated plaintiff's
benefits.
The ALJ decision was reviewed under the
Bellmon Review Program.1 This was enacted by the Secretary in response to the
Bellmon Amendment to the Social Security Act.2 The Amendment was a response to
the increasing number of appeals to ALJs, the high number of allowance
decisions by them, and the policy that only ALJ decisions denying claims were
subject to review. H.R.Rep. No. 944, 96th Cong., 2d Sess. 57, reprinted in 1980
U.S.Code Cong. & Admin.News 1392, 1405; S.Rep. No. 408, 96th Cong., 2d
Sess. 53, reprinted in 1980 U.S.Code Cong. & Admin.News 1277, 1331.
The Bellmon Review Program provides for own-motion review of ALJ
decisions allowing disability benefits. The district court found that:
ALJs with individual allowance rates3 of 70 percent or
higher and ALJs in hearing offices with aggregate allowance rates of 74 percent
or higher were targeted for review. Half of the allowance decisions issued by
targeted ALJs were evaluated by the Office of Hearings and Appeals for possible
review, and 7 1/2 percent of the allowance decisions issued by these ALJs were
formally reviewed by the Appeals Council. On April 1, 1982, the targeted ALJs
were divided into four groups based on own-motion rates.4 Each and every
allowance decision by ALJs in the group with the highest own-motion rates was
evaluated for possible review. In the group with the second-highest rates, 75
percent of the ALJs allowance decisions were thus evaluated; in the group with
the third-highest rates, 50 percent; and in the group with the lowest rates, 25
percent. In addition, the program was expanded so that 15 percent of all
allowance decisions by targeted ALJs were formally reviewed by the Appeals
Council. Finally, the program was expanded to provide review of a national
random sample of ALJ allowance decisions, ALJ decisions referred from the SSA
Office of Disability Operations, and decisions of all new ALJs.
W.C., 629 F.Supp. 791, 793-94 (W.D.Wash.1985) (footnotes renumbered).
The plaintiff's action in federal district
court alleged that the Program5 was adopted improperly because
of noncompliance with APA notice and comment procedures. The court entered
summary judgment in favor of the class6 on this claim. The Secretary appeals.
ANALYSIS
A. Merits
It is undisputed that the Bellmon Review Program was adopted without
notice and comment rulemaking. It is also undisputed that the program is a rule
under the Administrative Procedures Act and presumptively requires notice and
comment rulemaking. 5 U.S.C. Secs. 551(4), 553(b) & (c) (1982). Unless it
is exempt from such rulemaking, the program is invalid. See Buschmann v.
Schweiker, 676 F.2d 352, 355-56 (9th Cir.1982).
The Secretary contends that the program merely interprets his
long-standing authority to review ALJ decisions on his own motion. The
Secretary has the authority, under 20 C.F.R. Secs. 404.969 and 404.970 (1986),
to review ALJ decisions. Razey v. Heckler, 785 F.2d 1426, 1428, amended by 794
F.2d 1348 (9th Cir.1986); Taylor v. Heckler, 765 F.2d 872, 874-75 (9th
Cir.1985). The Secretary argues that the program enforces this existing
authority without altering the class of persons subject to own-motion review.
As such, according to the Secretary, the program was an interpretive rule not
requiring notice and comment rulemaking.
In determining whether a rule is interpretive or substantive, two
factors must be considered. The first factor is whether the rule modifies
existing rights, law, or policy. If the rule "effect[s] a change in
existing law or policy," Powderly v. Schweiker, 704 F.2d 1092, 1098 (9th
Cir.1983), or " 'affect[s] individual rights and obligations,' "
Chrysler Corp. v. Brown, 441 U.S. 281, 302, 99 S.Ct. 1705, 1718, 60 L.Ed.2d 208
(1979), the rule is substantive. Cubanski v. Heckler, 781 F.2d 1421, 1426 (9th
Cir.1986). If the rule is only indicative of the agency's interpretation of
existing law or policy, it is interpretive. Alcaraz v. Block, 746 F.2d 593, 611
(9th Cir.1984); Louisiana-Pacific Corp. v. Block, 694 F.2d 1205, 1210 (9th
Cir.1982).
Second, the source of the rule must be considered. If it is promulgated
pursuant to statutory direction or under statutory authority, it is a
substantive rule. Cubanski, 781 F.2d at 1426. If the agency does not exercise
delegated legislative power to promulgate the rule, it is interpretive.
Under these principles, the Bellmon Review Program was a substantive
rule. It changed existing policy. The Secretary's existing own-motion review is
codified in 20 C.F.R. Secs. 404.969 and 404.970. Under those regulations,
decisions from one ALJ were no more likely to be reviewed than those of
another. Nor was any class of claimants more likely to be reviewed. Before the
review program was implemented, virtually no decisions granting disability
benefits were reviewed on the Secretary's own motion. During 1981, no favorable
ALJ decision was subject to own-motion review. W.C., 629 F.Supp. at 809.
The Bellmon Amendment was specifically designed to change this policy.
Congress concluded that the Secretary's own-motion review authority was
insufficiently exercised and directed him to change this policy. As a result,
in 1982, 12,000 favorable decisions were considered for own-motion review under
the review program. Of these decisions, 2,200 were actually reviewed. Id.
The review program affects existing rights in two ways. First, the
district court found that it was designed to alter ALJ decisions. It caused
those judges to deny benefits in close cases where benefits might previously
have been granted. Id. at 799-800. Other courts have reached similar
conclusions. See, e.g., Barry v. Heckler, 620 F.Supp. 779, 782 (N.D.Cal.1985) (Bellmon
Review Program affects impartiality of administrative law judges and the
Appeals Council); Association of Administrative Law Judges, Inc. v. Heckler,
594 F.Supp. 1132, 1143 (D.D.C.1984). This conclusion is not clearly erroneous.
Second, the program limits the Secretary's discretion not to review an
ALJ decision. Prior to the Bellmon Amendment, the Secretary could review any
such determination. Under the program, all decisions from certain
"targeted" ALJs must be screened for own-motion review. The Secretary
no longer has discretion not to consider those for own-motion review. Rules
which substantially limit an agency's discretion are generally substantive
rules. See Guardian Federal Savings & Loan Association v. Federal Savings
and Loan Insurance Corp., 589 F.2d 658, 666-67 (D.C.Cir.1978).
Turning to the source of the rule, we find that it was issued pursuant
to statutory direction. The Bellmon Amendment clearly directs the Secretary to
formulate a new policy. It provides "The Secretary of Health and Human
Services shall implement a program of reviewing, on his own motion, decisions
rendered by administrative law judges...." Social Security Disability
Amendments of 1980, Pub.L. No. 96-265, Sec. 304(g), 94 Stat. 441, 456. The
Secretary, not Congress, formulated the program to select individual cases for
own-motion review. Congress specifically omitted any basis for such review in
the final amendment. H.R.Rep. No. 944, 96th Cong., 2d Sess. 57, reprinted in
1980 U.S.Code Cong. & Admin.News 1392, 1405. It clearly intended that the
Secretary use his discretion to enact a review program. In exercising that
discretion, the Secretary enacted a substantive rule. Cf. Stoddard Lumber Co.,
Inc. v. Marshall, 627 F.2d 984, 986-88 (9th Cir.1980) (inspection procedure not
an exercise of delegated legislative power).
The review program is a substantive rule
and, as such, required notice and comment rulemaking. The Secretary's failure
to use that procedure, renders the program invalid under the APA.7
B. Remedy
The district court concluded that the Appeals Council decisions were
void since they were made under an invalid review program. W.C., 629 F.Supp. at
801. The only valid decisions issued were the favorable ones of the ALJs. The
Secretary was ordered to reinstate these favorable decisions and pay
retroactive disability benefits to the class members. Id. at 801-02.
An agency rule which violates the APA is
void. See Buschmann, 676 F.2d at 355-56. Agency action taken under a void rule
has no legal effect. Id. But for the review program, it is highly unlikely that
the Appeals Council would have reviewed the plaintiffs' favorable decisions. An
ALJ decision is binding on the parties unless one of the specified avenues of
review is properly exercised. 20 C.F.R. Sec. 416.1455. Since no valid review of
the ALJ decisions was taken, they became binding. Furthermore, the effect of
the program on the Appeals Council's impartiality militates against reinstating
their decisions. See Barry v. Heckler, 620 F.Supp. 779, 782 (N.D.Cal.1985). We
agree with the district court that the ALJ's decisions must be reinstated and
the claimants provided disability benefits.8
This remedy does not encroach on the Secretary's fact-finding role. It
does not determine, as a matter of fact, whether a claimant is entitled to
disability benefits but merely vacates an invalid agency action. Compare Bowen
v. City of New York, --- U.S. ----, 106 S.Ct. 2022, 2031, 90 L.Ed.2d 462
(1986).
Appellee has indicated that it intends to seek attorneys fees presumably
for both the appeal and the action in district court. The request should be
made to the district court.
AFFIRMED.
The Order amending this opinion is published at --- F.2d ----
1
The Program was announced in Social Security Ruling 82-13. It was
described in a memorandum from Louis B. Hayes, Associate Commissioner of the
SSA Office of Hearings and Appeals dated September 24, 1982. See W.C. v.
Heckler, 629 F.Supp. 791, 793 (W.D.Wash.1985)
2
The Bellmon Amendment states:
The Secretary of Health and Human Services shall implement a program of
reviewing, on his own motion, decisions rendered by administrative law judges
as a result of hearings under section 221(d) of the Social Security Act, and
shall report to the Congress by January 1, 1982, on his progress.
Social Security Disability Amendment of 1980, Pub.L. No. 96-265, Sec.
304(g), 94 Stat. 441, 456.
3
"An ALJ's allowance rate during a given period is the number of
claims for benefits he upholds divided by the total number of decisions he
issues." W.C., 629 F.Supp. at 793 n. 4
4
"An ALJ's own-motion rate during a given period is the number of
his decisions corrected by the Appeals Council on own-motion review divided by
the total number of his decisions evaluated for possible own-motion
review." W.C., 629 F.Supp. at 793 n. 5
5
It appears that the Secretary ceased targeting ALJs for review based on
individual allowance rates in early 1983. The district court limited the
meaning of "Bellmon Review Program" to the prior version of the
program which did target ALJs in this manner
6
The class was defined as:
All claimants within the state of Washington for Title II Social
Security disability benefits or Title XVI, Supplemental security income
benefits who have received (or who received during the pendency of his litigation)
decisions from ALJs reversing initial denials of terminations or disability and
whose cases are then reviewed by the Appeals Council on its own motion pursuant
to the Bellmon Amendment.
W.C., 629 F.Supp. at 794-95.
7
The Bellmon Review Program, as a substantive rule, also required
publication in the Federal Register. 5 U.S.C. Sec. 552(a)(1) (1982). The
Secretary did not follow this requirement. The program is also void on this
ground
8
Reinstating the ALJ decisions does not conclusively place ineligible
recipients forever on the social security rolls. In 1984, Congress established
procedures that the Secretary must follow to terminate benefits. 42 U.S.C. Sec.
1382c(a)(5) (1983), (Supp.1986). This act permits terminating benefits if
substantial evidence demonstrates that a prior determination awarding benefits
was in error. 42 U.S.C. Secs. 1382c(a)(5)(D) (1983) (Supp.1986). The act
overrules the presumption of continuing disability under Patti v. Schweiker,
669 F.2d 582, 586-87 (9th Cir.1982). Warren v. Bowen, 804 F.2d 1120 (9th
Cir.1986). Thus, under his existing authority, the Secretary may have authority
to review plaintiffs' continuing eligibility for benefits
Beyond noting this possibility, we intimate no view whether any class
member is or is not entitled to benefits.
Association of Administrative Law Judges, Inc. v. Heckler,
594 F. Supp. 1132 (D.D.C. 1984)
GREEN, J.
MEMORANDUM OPINION AND ORDER
Plaintiff, the Association of Administrative Law Judges, is
a not-for-profit corporation whose members are administrative law judges (ALJs)
employed by the Department of Health and Human Services (HHS) and assigned to
the Office of Hearings and Appeals (OHA) of the Social Security Administration
(SSA). Plaintiff's members adjudicate claims for disability benefits under
Title II and XVI of the Social Security Act, 42 U.S.C. §§ 401 et seq. (1982)
and 42 U.S.C. §§ 1381 et seq. (1982). Plaintiff brought this lawsuit to
challenge the "Bellmon Review Program", which defendants instituted
to implement Section 304(g) of the Social Security Disability Amendments of
1980, the "Bellmon Amendment". [n1] Plaintiff alleges that this
program violates the rights of its members to decisional independence under the
Administrative Procedure Act (APA), 5 U.S.C. § 551 et seq. (1982).
State agencies administer the Social Security Disability
Insurance Program pursuant to agreements with the SSA. Based upon medical
information received from various sources and applying SSA guidelines, the
state disability determination service issues the decision of SSA. A claimant
who is denied benefits may file for reconsideration at the state level and if
dissatisfied may then seek relief on the federal level. The ALJ hearing is a de
novo proceeding. The ALJ is the first agency personnel in the review process to
interview the claimant in person. The claimant may submit additional evidence,
produce expert witnesses, and be represented by counsel. If his or her claim is
denied by the ALJ, the claimant may appeal to the Appeals Council, which is the
last step in the administrative process.
The Appeals Council has the authority to review all
decisions of ALJs, at its own discretion ("own motion"), or at the
request of a claimant. In either case, the Appeals Council is authorized to
exercise jurisdiction only when: (1) there appears to be an abuse of discretion
by the ALJ; (2) there is an error of law; (3) the action, findings or
conclusions of the ALJ are not supported by substantial evidence; or (4) there
is a broad policy or procedural issue that may effect the general public
interest. 20 C.F.R. § 404.970(a), 416.1470(a) (1984). Based upon its review,
the Appeals Council may modify, affirm, reverse or remand an ALJ's decision.
When the Appeals Council reverses or remands an ALJ's decision, it issues an
opinion stating the grounds for reversal or remand and identifying dispositive
abuses of discretion, errors of law, problems with conclusions of law and
findings of fact, insufficiencies of evidence, and policy or procedural issues
of concern to SSA. If a case is remanded, the ALJ must take any action ordered
by the Appeals Council, but may also take any additional action that is not
inconsistent with the remand order.
The Bellmon Admendment directed the Secretary of HHS to
resume review of decisions of ALJs on her own motion. Congress expressed
concern at that time about the high rate at which ALJs were reversing
determinations made at the state level at the variance in these rates among
ALJs. See H.R. Rep. No. 944, 96th Cong., 2d Sess. 57 (1980), reprinted in
[1980] U.S. Code Cong. & Ad. News 1392, 1405; S. Rep. No. 408, 96th Cong.,
2d Sess. 53 (1980), reprinted in [1980] U.S. Code Cong. & Ad. News 1277,
1331.
A study performed pursuant to the Bellmon Amendment and
described in a report to Congress in January 1982 (PX-1), indicated that the
Appeals Council more often would have changed decisions by ALJs allowing
benefits made by ALJs with above average allowance rates than allowance
decisions made by ALJs with average or below-average allowance rates. [n2] The
Bellmon Review Program, a series of measures designed to improve decisional
quality and accuracy, began in October, 1981. Associate Commissioner of SSA,
Louis B. Hays, announced that four categories of cases would be selected for
possible "own motion" review:
Initially, individual ALJs with allowance rates of 70% or
higher were to have 100% of their allowance decisions reviewed for accuracy and
hearing offices with allowance rates of 74% or higher would also be reviewed.
106 ALJs, or approximately 13% of all ALJs in SSA, were placed on Bellmon
Review because of their high allowance rates. The selection of entire hearing
offices for review was soon discontinued. The other three categories of review
not yet operative.
An overview of the program was communicated to the ALJ
corps in a Memorandum dated September 24, 1982 from Mr. Hays. (PX-111)
("Hays Memorandum"). That Memorandum explained that Bellmon Review
was being instituted because of Congressional concern about high allowance
rates and because only ALJ decisions denying benefits were generally subject to
further review. Allowance rates were used as the basis for selecting the
initial review group, in part, because studies had shown that decisions in this
group would be the most likely to contain errors which would otherwise go
uncorrected.
Based upon own-motion rates (the frequency with which the
Appeals Council takes action to correct an ALJs decision, as calculated by the
Office of Appraisal) the individual ALJs were divided into four groups: 100%
review; 75% review; 50% review and 25% review. In determining whether an ALJ
should be removed from review, the Appeals Council considered only decisional
accuracy, defined as a 5% own motion rate for three consecutive months. An ALJ
with a 5% own motion rate could be said to be 95% accurate. Shortly after
implementation, the criteria for removing targeted ALJs from review were
amended. [n3] The 5% own motion rate was abandoned in favor of an own motion
rate approximating that of the national random sample. [n4]
A companion system for providing individualized feedback
and counseling on the results of the review was also described in the Hays
Memorandum. Never implemented, this feedback system was intended to complement
the case-by-case feedback which occurs through the process of reversals and
remands by advising ALJs of "decisional weaknesses and provid[ing] a
mechanism for achieving long term improvement." Plaintiff's members
believed tht the feedback memoranda developed for peer counseling sessions that
were scheduled to be held in January 1983 would direct high allowance ALJs how
to develop, hear and decide cases. No counseling sessions under this program
were ever conducted. Defendants decided not to initiate the feedback proposal
except with respect to ALJs who choose to participate. [n5]
Finally, the Hays Memorandum advised that if, after further
review an ALJ's performance had not improved, "other steps" would be
considered. Understandably, plaintiff's members viewed that as a warning that
OHA would recommend that charges be brought before the Merit Systems Protection
Board (MSPB) seeking adverse personnel action, which could include dismissal.
See testimony of Francis Mayhue, Robert B. Murdock.
The Bellmon Review Program has evolved substantially since
the Hays Memorandum was issued. Significantly, in April 1982, before this
lawsuit was filed, defendants stopped using allowance rates to target ALJs for
Bellmon Review once own motion data became available. [n6] The ALJs whose
allowance decisions were reviewed were selected for individual review solely on
the basis of their own motion rates under the national random sample.
In mid-1983, OHA began to include in Bellmon Review
unappealed decisions denying benefits by ALJs with high
"grant-review" rates -- the rates at which the Appeals Council grants
claimants requests for review of denial decisions. [n7] This part of the
program was not communiated to the ALJ corps at large,[n8] nor were written
rules or procedures for this part of the program developed.
Most recently, OHA, under a new Associate Commissioner, has
eliminated entirely the individual ALJ portion of Bellmon Review. Notice of
Filing June 22, 1984, Memorandum to all ALJs, June 21, 1984. This Memorandum
indicates that the number of cases reviewed under the national random sample
will be increased. Apparently, the results of Bellmon Review demonstrated that
the difference between the own motion rates of the selected ALJ and national
random sample portions of the review had progressively narrowed, which
suggested that overall, decisional quality and consistency had improved. The
review of unappealed denial decisions by high grant-review ALJs has also been
discontinued to be replaced by review of a national random sample of such
decisions. These changes have been instituted on an interim basis only.
Plaintiff charged that the targeting of individual ALJs
under Bellmon Review, based upon allowance rates and then own motion rates, was
in essence an attempt to influence ALJs to reduce their allowance rates and
thereby compromise their decisional independence.
The president of plaintiff Association, Charles Bono,
sent a Mailgram to Associate Commissioner Hays (PX-110) in response to the Hays
Memorandum requesting that the Bellmon Review Program be abandoned. Mr. Bono
stated that the Bellmon Review Program would result in illegal performance
ratings of ALJs and would have the effect of chilling ALJ decisional
independence. [n9] Mr. Hays did not respond to this Mailgram.
Mr. Hays sought advice from the Office of the General
Counsel for SSA, concerning the legality of targeting high allowance ALJs for
Bellmon Review. (PX-387). The Office of General Counsel recognized that the
Senate version of the Bellmon Amendment required such targeting but that the
Conference Report did not. The Office of General Counsel inferred from the
legislative history that targeting may have been perceived as having a possible
chilling effect on the decisional independence of targeted ALJs. In conluded
that while the law did not directly preclude targeting, there could be some
legal risk, and suggested the desirability of reviewing some denial decisions.
Although Mr. Hays had solicited the advice of the General Counsel, he did not
acceptk it, viewing the matter differently. He testified at trial that he
interpreted the Bellmon Amendment and its legislative history to require the
focus on allowance decisions only. His decision to focus initially on allowance
decisions only was based upon several additional factors: the findings of the
Bellmon study later reported to Congress; that own motion data was not yet
completely available; that a high proportion of denial decisions were already
being reviewed on requests of claimants; that the grant-review rate for denial
decisions was fairly low; that data from review of the Fort Smith (Arkansas)
Hearing Office demonstrated that denial decisions were generally correct; and
the efficient allocation of limited resources.
Plaintiff presented evidence that there were significant
problems with unappealed denial decisions which Mr. Hays did not take into
account in his initial implementation of Bellmon Review. (PX-163). Moreover,
the Bellmon "work group" had concluded in August 1980, that at least
some denial decisions should be included in the Bellmon Review process to avoid
biased adjudication and any denial of due process. (PX-407).
It was plaintiff's view that Mr. Hays had a financial
incentive to pressure ALJs to reduce their allowance rates. As a member of the
Senior Executive Service, he had a performance plan which stated as one of its
goals or objectives, the reduction of allowance rates. (PX-368C, 368B). Mr.
Hays' performance was rated higher in FY 1981, a year in which such a reduction
took place, than in FY 1982, when it did not. Mr. Hays stressed that his
performance plan goal, to improve the quality of adjudication in OHA, was
derived in response to Congressional criticism. Studies had shown a correlation
between high allowance rates and high error rates. Thus, Mr. Hays expected that
improved quality of adjudication would lead to some reduction in allowance
rates, particularly since allowance decisions had not been subject to review by
the Appeals Council for several years. Mr. Hays denied that the reduction of
allowance rates was an independent goal in the performance plan. See also
PX-301, 309.
Plaintiff also charged that OHA had at least considered
allowance rate goals for the ALJ corps. One option for removal of targeted ALJs
from review which was not implemented, was to remove ALJs from review when
their allowance rates equaled or surpassed OHA's fiscal year goals. (PX-29).
Mr. Hays disapproved this option and noted specifically, at that time, that no
goal existed to reduce allowance rates, only one to improve decisional quality
and consistency, which could have, as one effect, a reduction in allowance
rates. Mr. Ogden testified that when he used the term "goal", he
meant rather a budgetary assumption. Both Mr. Ogden and Mr. Hays explained that
SSA must project allowance rates for budgetary purposes. Both denied that OHA
made any attempt to keep allowance rates within the projections for any given
year. OHA provided information to SSA, but did not determine the final
estimates. See PX-288. Nonetheless, OHA continued to use the term "goals"
to describe SSA projections of allowance rates. The insensitive choice of that
term could reasonably have indicated that SSA considered a certain number of
allowances too many.
Evidence apart from the budgetary projections cumulatively,
and strongly, suggested that OHA had an ulterior goal to reduce ALJ allowance
rates. When My. Hays first became Associate Commissioner, he issued a
memorandum to the ALJs, in which he noted a perception that ALJ allowance rates
were "untenable". (PX-157). Sometime later, he sent a memorandum to
SSA, in which he described as "good news" a decline in allowance
rates. (PX-360). Mr. Hays received a memorandum from SSA's Office of Management
Coordination, which requested a decrease in the variance among allowance rates
and a decrease in allowance rates overall. (PX-324). See also PX-187, PX-189,
PX-193, PX-197, PX-198, PX-199, PX-200, PX-201 (Reports on Bellmon Review
tracking allowance rates of ALJs on Bellmon Review without mention of quality
and consistency).
Much of the testimony in this case involved the Fort Smith,
Arkansas Hearing Office. On December 10, 1980, prior to the institution of the
Bellmon Review Program, Deputy Chief ALJ J. Robert Brown visited the Fort Smith
Hearing Office to discuss with ALJs Jerry Thomasson, Francis Mayhue and David
Hubbard the possible reasons why the allowance rate of the Fort Smith Hearing
Office was significantly higher than the allowance rates of the Little Rock,
Arkansas Hearing Office, which received cases from the same state agency. The
allowance rate at Fort Smith was approximately 90%. See testimony of Andrew J.
Young. ALJs Thomasson and Mayhue suggested that the Appeals Council review 100%
of their decisions.These ALJs voluntarily submitted some of their decisions to
Judge Brown, who reviewed and discussed them with other OHA personnel. In many
cases, these decisions did not clearly convey what factors were considered in
reaching the decision. Judge Brown provided the Fort Smith ALJs with an
instructional memorandum that included samples of decisions from Fort Smith,
both as they were written and as OHA had revised them.The results of the
decisions were not changed.
The Fort Smith ALJs were subsequently advised by Chief ALJ
Phillip Brown, that effective August 17, 1981, the Appeals Council would begin
reviewing all of their decisions. The Fort Smith Review was a separate program
entirely from Bellmon Review. During the course of its review OHA discovered
significant deficiencies in the quality and accuracy of the Fort Smith Hearing Office
decisions. See, e.g., DX-J6. See testimony of Burton Berkley regarding
decisions of Judge Thomasson; DX-Y2; DX-P6. OHA decided to provide training to
ALJs Thomasson and Mayhue on the application of the Social Security disability
regulations and the sequential evaluation process of adjudicating cases. Judge
Hubbard was not included in the training because he appeared generally to
understand the regulatory scheme.
The training took place in January 1982 at OHA Headquarters
in Arlington, Virginia. The individuals conducting the training, William
LaVere, Deputy Director of the Office of Appeals Operations, and Burton
Berkley, Deputy Chairman of the Appeals Council, testified that the sole
purpose of the training was to help the Fort Smith ALJs issue correct decisions
and not to pressure them to reduce allowance rates. Indeed, Mr. Berkley
testified that he did not even know the allowance rates of the Fort Smith ALJs.
Judge Thomasson believed that the training was prompted by
the high allowance rates and labor-management problems in the Fort Smith
office, and designed to pressure him to allow fewer claims for benefits. He
testified, as did Judge Mayhue, that Mr. LaVere had told them both that the
only way to be free of OHA scrutiny was to lower their allowance rates to the
national average of 45-55%. However, Mr. LaVere testified that he merely
informed them of the national average in response to Judge Mayhue's inquiry.
Mr. LaVere also testified that Judge Thomasson stated in the training session
that he did not read the regulations of the Secretary. Mr. LaVere recommended
that Judge Thomasson be place on 100% Bellmon Review based upon his own motion
rate. (DX-H3). Mr. Berkley testified that Judge Thomasson's writing did not
improve at all while he was on Fort Smith Review.
In December 1981, Don Przybylinski, Special Counsel of OHA,
visited the Fort Smith Hearing Office to conduct a preliminary investigation of
complaints concerning labor-management problems, alleged time-and-attendance
violations, and unfair labor practice charges that had been filed against OHA
by employees of the Fort Smith office. This visit was independent of OHA's
concern about the Fort Smith ALJ's allowance rates.Mr. Przybylinski testified
that Judge Thomasson introduced the subject of allowance rates during that
visit but that he did not discuss that subject. He denied telling Judge
Thomasson that the allowance rates in the Fort Smith office must be lowered, as
Judge Thomasson had testified, and as Betty Davis stated in her deposition. From
all of this evidence it appears that OHA was genuinely concerned about the
quality of Judge Thomasson's decisions and not his allowance rate.
Judge Mayhue had been relying on Court cases which did not
conform to the Secretary's regulations and cases which pre-dated certain of the
Secretary's regulations. Yet, it was never suggested to Judge Mayhue that he
could be disciplined for those decisions. In fact, Mr. Berkley testified that
the quality of Judge Mayhue's decisions increased markedly. Nonetheless, Judge
Mayhue was put on Bellmon Review when Fort Smith Review ended. (PX-328). Judge
Hubbard was also placed on Bellmon Review. As part of this training Judges
Thomasson and Mayhue were sent to Southfield, Michigan to hold hearings on
remand in cases which they had decided. As administrative decision was made
that the education of these ALJs outweighed andy expense and delay involved. No
punishment of any sort was intended.
At trial, plaintiff identified other practices of
defendants, which allegedly interfere with ALJ decisional independence. First,
plaintiff objected to the Secretary's policy of nonacquiescence in certain
federal court decisons. See Testimony of Jerry Thomasson, Francis Mayhue, David
Hubbard. The position description for ALJs (PX-103) requires ALJs to take those
decisions into account in the decisionmaking process. Thus, plaintiff asserted
that some ALJ allowance decisions are considered erroneous by the Appeals
Council when, in fact, they would be upheld on appeal to the United States District
Court. Own motion rates, therefore, are inflated because they do not reflect
the ultimate judicial disposition of the ALJs own motion cases.
The Secretary's policy of nonacquiescence, as explained by
Mr. Berkley, has been in existence since SSA was established. The Secretary
follows only the decisions of the Supreme Court of the United States, or those
decisions which she decides to adopt by changing the regulations and those
decisions in which the Commission decides to acquiesce. This system is intended
to insure that claimants in all parts of the country are governed by the same
laws, rules and regulations.
Second, plaintiff asserted that OHA personnel which
represent SSA in disability hearings before ALJs under the experimental
Government Representative Program, act as porsecutors in cases where the
claimant is represented by counsel. Mr. Hays testified that the government
representative develops a case for both sides based upon the prehearing record
to determine whether or not the representation should be undertaken. The
development work would be made available to the ALJ, at which time the
government representative might recommend that the ALJ issue a fully favorable
decision on the record.Alternatively, the government representative may refer
the case to the Appeals Council for possible review on its own motion.
As the program is now structured, the government
representatives are ultimately responsible to the head of OHA, the same
individual who supervises ALJs and has the authority to recommend disciplinary
action. To remedy this problem, plaintiff requested that the Government
Representative Program be administered outside of OHA. My. Hays testified that
the program could function elsewhere in SSA.
Third, plaintiff objected to the Appeals Council's ex parte
use of the opinions of medical support staff.However, Mr. Berkley
satisfactorily explained that when the Appeals Council relies on an opinion of
a member of its medical support staff as the underlying basis for reversal of
an ALJ decision, whether favorable or unfavorable, the medical support staff
opinion is entered into the administrative record after the claimant has been
given the opportunity to review and comment on it. Were this otherwise, an
imcomplete administrative record would be presented to the federal court
ultimately reviewing the agency decision. Opinions of medical support staff are
used primarily where new evidence is presented to the Appeals Council and where
the ALJ clearly did not appear to understand the medical evidence, in which
case the medical support staff would prepare a summary of the evidence in the
record. [n10]
With reason, plaintiff and its members viewed defendants'
combined actions as a message to ALJs to tip the balance against claimants in
close cases to avoid reversal or remand by the Appeals Council, which would
increase their own motion rate, which would result in being placed on Bellmon
Review, with the added potential for peer counseling and MSPB proceedings.
Judge Ainsworth H. Brown testified that he felt compelled to practice defensive
adjudication in order to protect himself and the record. In sum, Bellmon
Review, according to plaintiff, had the purpose and effect of chilling ALJ
decisional independence so as to lower the ALJ allowance rate. See testimony of
Charles Bono, Jerry Thomasson, Francis Mayhue.
Defendants' position throughout this litigation, expressed
by Mr. Hays emphatically at trial, has been that there is no agency policy to
reduce allowance rates. The agency's policy is to reduce inconsistency in the
application of law regulations both within the ALJ corps and in the different
levels of the adjudicatory process, and to reduce the number of decisions that
do not correctly apply substantive agency policy. In keeping with this policy,
OHA recognized that high allowance rates may indicate undue inconsistency of
adjudicatory standards within SSA and that a reduction of that inconsistency
may result in or be reflected by some reduction in allowance rates, among other
things. [n11] Defendants maintained that ALJs were not ranked by allowance
rates.
Defendants insist that no adverse action is planned against
any ALJ based on the ALJ's failure to maintain an acceptable level of
decisional correctness, but have not ruled out the possibility that such action
may be necessary in the future in an extreme case. Indeed, participants at a
meeting about feedback under Bellmon Review considered that in phase three of
the feedback program, "assuming no changed behavoir on the part of the
individual ALJ, OA [Office of Appraisal] would initiate a memorandum to the ALJ
recommending that the ALJ file be turned over to the Office Special Counsel for
Administrative processing through OPM [Office of Personnel Management] for
appropriate action." (PX-17). See testimony of Levi J. Ogden.
Yet, Mr. Hays denied any intention to pursue disciplinary
action when he referred to "other steps" in the Hays Memorandum. He
never even imagined that the Bellmon Review Program could have a chilling
effect on ALJs, particularly since their denial decisions had always been
subject to review.He believed that ALJs would successfully resist any possible
pressure.
The APA contains number of provisions designed to safeguard
the decisional independence of ALJs. See generally, Butz v. Economou, 438 U.S.
478, 513-14, 57 L. Ed. 2d 895, 98 S. Ct. 2894 (1978); Ramspeck v. Federal Trial
Examiners Conference, 345 U.S. 128, 132, 97 L. Ed. 872, 73 S. Ct. 570 (1953);
Nash v. Califano, 613 F.2d 10, 15-16 (2d Cir. 1980). Although employees of the
selecting agency, ALJs are entitled to pay prescribed by the Office of
Personnel Management independently of agency recommendations or ratings. 5
U.S.C. § 5372 (1982), 5 U.S.C. § 554 (1982). They are exempted from the
performance appraisals to which other Civil Service employees are subject. 5
U.S.C. § 4301(2)(D)(1982). See also 5 C.F.R. § 930.211 (1984). ALJs do not
receive monetary awards or periodic step increases based upon performance.
Cases must be assigned whenever possible, kin rotation, an ALJ may not be assigned
duties inconsistent with his or her responsibilites as an ALJ, and an ALJ may
not communicate ex parte with anyone inside or outside the agency about the
facts of a particular case. 5 U.S.C. §§ 3105, 557(d)(1) (1982).
In order to institute an adverse action against an ALJ, the
employing agency must establish good cause after an opportunity for a hearing
before the MSPB. 5 U.S.C. § 7521(a) (1982). This section permits the
institution of performance-related adverse actions despite the proscription of 5
U.S.C. § 4301. See Drew v. U.S. Dep't of the Navy, 217 U.S. App. D.C. 344, 672
F.2d 197, 201 (D.C. Cir.) cert. denied, 459 U.S. 1072, 74 L. Ed. 2d 634, 103 S.
Ct. 493 (1982). By implication, then, an agency may gather data and form an
opinion of an ALJ's performance. See J. Mashaw, et al., Social Security
Hearings and Appeals 123 (1978). Accordingly, the mere calculation and
maintenance of own motion and grant-review data does not violate 5 U.S.C. §
4301.
While the position of an ALJ is not "constitutionally
protected," Ramspeck v. Federal Trial Examiners Conference, 345 U.S. at
133, in many respects, it is "functionally comparable" to that of a
federal judge. Butz v. Economou, 438 U.S. at 513. The ALJ serves as the
factfinder and decisionmaker. ALJs in SSA must provide claimants "full
hearings under the Secretary's regulations and in accordance with the
beneficient purposes" of the Social Security Act. Gold v. Secretary of
HEW, 463 F.2d 38, 43 (2d Cir. 1972); see also Echevarria v. Secretary of HHS,
685 F.2d 751, 755 (2d Cir. 1982). To provide a full hearing, the ALJ must
"scrupulously and conscientiously probe into, inquire of, and explore for
all the relevant facts." Gold v. Secretary of HEW, 463 F.2d at 43; Diabo
v. Secretary of HEW, 200 U.S. App. D.C. 225, 627 F.2d 278, 281-82 (D.C. Cir.
1980). The ALJ must develop all of the evidence, including that contrary to the
claimants's position. Richardson v. Perales, 402 U.S. 389, 408-410, 28 L. Ed.
2d 842, 91 S. Ct. 1420 (1971); Bowman v. Heckler, 706 F.2d 564, 567-68 (5th
Cir. 1983). The conduct of the hearing rests generally in the ALJ's discretion,
Richardson v. Perales, 402 U.S. at 400; the ALJ conducts the hearing according
to his own understanding and conscience. Cf. United States ex rel. Accardi v.
Shaughnessy, 347 U.S. 260, 266-67, 98 L. Ed. 681, 74 S. Ct. 499 (1954).
Finally, the ALJ must issue a decision based upon the complete hearing record
which may include numerous subjective elements. The complete position
description for ALJs in SSA (PX-103) is set out in the Appendix made part of
this Memorandum Opinion.
On matters of law and policy, however, ALJs are entirely
subject to the agency. E.g., D'Amico v. Schweiker, 698 F.2d 903, 907 (7th Cir.
1983); See Scalia, The ALJ Fiasco -- A Reprise, 47 U. Chi. L. Rev. 57, 62
(1980). Although an ALJ may dispute the validity of agency policy, the agency
may impose its policy through the administrative appeals process. In reviewing
an ALJ's decision the agency retains "all the powers which it would have
in making the initial decision." 5 U.S.C. § 557(b) (1982). If the agency
accepts the ALJ's decision, or if that decision is not appealed, it becomes the
final decision of the agency. "The statute authorizes the Secretary, not
the ALJ, to make reviewable final decisions in disability cases." Baker v.
Heckler, 730 F.2d 1147, 1150 (8th Cir. 1984). The Secretary has delegated that
authority to the Appeals Council. It is the Appeals Council's decision, not the
ALJ's, that a court reviews to determine whether the agency's decision is based
upon substantial evidence. Id. In sum, the ALJ's right to decisional
independence is qualified.
The sole issue in this case is whether that qualified right
has been violated by the now discontinued individual ALJ portion of the Bellmon
Review Program, which targeted individual ALJs initially on the basis of their
allowance rates and then on the basis of their own motion rates. Although the
evidence at trial did not suggest that defendants intend to resume the practice
of targeting high allowance ALJs for Bellmon Review, and although targeted
review based upon own motion rates and grant-review rates of individual ALJs is
no longer in effect, defendants have advised the ALJ corps of the possibility
that Bellmon Review could be resumed. Notice of Filing June 22, 1984,
Memorandum to all ALJs June 21, 1984. For this reason, there remains a live
controversy between the parties. See e.g., Murphy v. Hunt, 455 U.S. 478, 480,
71 L. Ed. 2d 353, 102 S. Ct. 1181 (1982).
At the same time, perhaps in response to this litigation,
defendants have modified the Bellmon Review Program significantly for the
better. The worthiness of defendants' stated goal of improving the quality and
accuracy of decisions notwithstanding, targeting high allowance ALJs for review,
counseling and possible disciplinary action was of dubious legality for at
least two reasons. First, that practice was not consistent with the language of
the Bellmon Amendment nor its sparse legislative history. Neither directed SSA
to focus on allowance decisions or target for review only ALJs with high
allowance rates. In his introductory remarks, Senator Bellmon did state that
SSA was to review the allowance decisions of those ALJs with high allowance
rates but those remarks were not incorporated into the law. See Staff of Senate
Comm. on Governmental Affairs, 98th Cong., 1st Sess., The Role of the
Administrative Law Judge in the Title II Social Security Disability Insurance
Program 9 (Comm. Print 1983) ("Senate Comm. Print"). Second, high
allowance ALJs were initially targeted for review without regard to their
actual own motion rates in an overbroad sweep.
The practice of targeting ALJs on the basis of own motion
rates, once that data became available, did reflect defendants' stated goal of
improving the quality and accuracy of ALJ decisions. However, the evidence as a
whole, persuasively demonstrated that defendants retained an unjustifiable
preoccupation with allowance rates, to the extent that ALJs could reasonably
feel pressure to issue fewer allownace decisions in the name of accuracy. While
there was no evidence that an ALJ consciously succumbed to such pressure, in
close cases, and, in particular, where the determination of disability may have
been based largely on subjective factors, as a matter of common sense, the
pressure may have intruded upon the factfinding process and may have influenced
some outcomes. [n12] In denying this contention, even as a possibility, Mr.
Hays may have paid the ALJs an undue compliment. Selecting allowance decisions
and unappealed denial decisions for review for accuracy from the national
random sample is undeniably a more equitable and more conciliatory means of
accomplishing the same purpose and does not compromise ALJ independence by
focusing excessively on allowance rates.
The evidence, on balance, did not suggest that in the
controversial proposed feedback system, if it had been implemented, ALJs would
have been directed to deny deserving claims for benefits. If a case discussed
in a feedback session or memorandum was to be remanded, a different ALJ would
be assigned to hear that case. [n13] Nor did the evidence suggest that ALJs
would be disciplined simply for allowing a large number of deserving claims.
Should disciplinary action ever be instituted against an ALJ who failed to
maintain an acceptable level of decisions correctness, the MSPB would have to
determine whether that constituted "good cause" under the statute. 5
U.S.C. § 7521(a) (1982).
The ALJ is not insulated from review by the Appeals Council
for decisional correctness. See Chocallo v. Bureau of Hearings and Appeals, 548
F. Supp. 1349, 1361-62 (E.D. Pa. 1982), aff'd without opinion, 716 F.2d 889 (3d
Cir.), cert. denied, 464 U.S. 983, 104 S. Ct. 426, 78 L. Ed. 2d 360 (1983).It
appears that ALJs often differ with the Appeals Council as to the definition of
correctness in particular cases. This is a matter to be resolved on a
case-by-case basis should a claimant appeal the final decision of the agency to
a federal district court. See Baker v. Heckler, 730 F.2d at 1150. While the ALJ
may have difficulty discerning the correct result in a given case because of
the Secretary's policy of nonacquiescence in certain federal court decisions, [n14]
there was no evidence that because of that policy any ALJ denied benefits which
should have been paid, the questionable legality of that policy
notwithstanding. [n15]
Nor did the evidence demonstrate that the Government
Representative Program has interfered with the decisional independence of any
ALJ. While any potential for conflict built into the structure of the program
is sharply reduced now that ALJs are no longer subject to Bellmon Review based
upon allowance rates or own motion rates, the agency would do well to consider
whether any potential of the appearance of conflict might be avoided by some
organizational modification.
In sum, the Court concludes, that defendants' unremitting
focus on allowance rates in the individual ALJ portion of the Bellmon Review
Program created an untenable atmosphere of tension and unfairness which
violated the spirit of the APA, if no specific provision thereof. Defendants'
insensitivity to that degree of decisional independence the APA affords to
administrative law judges and the injudicious use of phrases such as
"targeting", "goals" and "behavior modification"
could have tended to corrupt the ability of administrative law judges to
exercise that independence in the vital cases that they decide. However,
defendants appear to have shifted their focus, obviating the need for any injunctive
relief or restructuring of the agency at this time. While it is incumbent upon
the agency to reexamine the role and function of the Appeals Council and its
relationship to the ALJs in light of this litigation, it would be unsuitable
for the Court to order any affirmative relief under the present circumstances.
Plaintiff has achieved considerable success in its valid attempt to reveal and
change agency practices.
It is, therefore, by the Court, this 10th day of September,
1984
ORDERED that judgment be entered in favor of defendants and
that this cause stands dismissed.
APPENDIX
Position Description, Administrative Law Judge, Social
Security Administration
[SEE ILLUSTRATION IN ORIGINAL]
BUREAU OF HEARINGS AND APPEALS
SOCIAL SECURITY ADMINISTRATION
POSITION DESCRIPTION
ADMINISTRATIVE LAW JUDGE (LICENSING AND BENEFITS)
I. INTRODUCTION
Administrative law judges within the Department of Health,
Education, and Welfare, Social Security Administration, Bureau of Hearings and
Appeals, are located throughout nine geographically dispersed DHEW regions,
encompassing the entire United States and Puerto Rico. Administrative law judge
offices are established in 60 major cities throughout the nation.
Under the direct delegation from the Secretary of Health,
Education and Welfare, and in the manner prescribed by the Administrative
Procedure Act, the administrative law judge holds hearings and makes and issues
decisions on appeals from determinations made in the course of administration
of Titles II and XVIII of the Social Security Act. The basic types of cases
are: (a) appeals by individuals from determinations dealing with entitlement to
disability benefits under Title II; (b) appeals under Title II involving
entitlement of individuals to old age and survivors' benefits; (c) appeals by
hospitals and various health and care institutions and agencies dissatisfied
with the determination that they do not meet the licensing and regulatory
provisions covering "Providers of Services" under Title XVIII; and
(d) appeals by individuals from determinations involving entitlement and/or
amount of hospital services or medical and health services. Since cases are
assigned on a rotation basis, each administrative law judge handles all types
of cases regardless of the degree of difficulty or complexity of the issues.
Administrative law judges' decisions are final decisions of
the Secretary unless subsequently reviewed as provided in the regulations. They
either affirm, modify, or reverse any previous determinations and are issued
and forwarded directly to the parties in the administrative law judge's own
name.
II. DUTIES AND RESPONSIBILITIES
Under the provisions of Titles II and XVIII of the Social
Security Act and applicable Federal, State, and foreign laws, and in conformity
with the Administrative Procedure Act, and with full and complete individual
independence of action and decision, and without review, the administrative law
judge has full responsibility and authority to (1) dismiss or allow requests
for hearings and rule on requests for extensions; (2) identify problems and
issues to be resolved; (3) analyze all previously developed evidence and
appraise previous licensing, regulatory, and adjudicative processes by the
administrative agency; (4) determine whether there are other parties with
adverse interest to be joined in the case; (5) issue subpoenas and rule on
petitions to revoke subpoenas; (6) correlate and resolve conflicting evidence;
(7) hear testimony and rule on all motions, petitions, or exceptions involving
questions of law, procedure, and the admissibility of evidence; (8) hold
prehearing conferences with the appellant and/or his counsel and the government
representative; (9) make all evidence of record available to the parties and
inform them of any evidence or expert testimony required in connection with a
material point or issue; (10) administer oaths and affirmations; (11) govern
the conduct of the parties at the hearing, and in general regulate the entire
course of the proceedings; (12) control the examination and cross-examination
of witnesses; (13) introduce into the record documentary and other evidence
deemed necessary for the completion or full development of the record; (14)
hear oral argument, and receive and consider briefs that are submitted; (15)
appraise the credibility of witnesses, and resolve conflicts in lay and expert
evidence; (16) consider and dispose of proposed findings of fact and
conclusions of law submitted by the claimant's or government representatives;
(17) make findings of fact on each issue, giving the reasons therefore and
render conclusions of law as sole trier of fact and law; (18) fully consider
all the evidence of record and issue decisions within the requirements of the
Administrative Procedure Act, which decisions are completely independent and
final, signed only by him, and published to parties in interest without prior
review; and (19) entertain petitions for attorney's fees and issue orders
designating the amount of fee permitted.
The administrative law judge may also take other action not
inconsistent with the Administrative Procedure Act such as perfecting a record
or presiding at hearings and issuing decisions in matters remanded by the
Federal courts. Administrative law judges also hear and decide cases arising under
Title VI of the Civil Rights Act of 1964 involving providers of service, and
may act as administrative law judge for other administrative agencies (on
assignment by the Civil Service Commission) to hear and decide Title VI cases.
III. SUPERVISION AND GUIDANCE
The Social Security and Administrative Procedure Acts
prohibit substantive review and supervision of the administrative law judge in
the performance of his quasi-judicial functions. His decisions may not be
reviewed before publication, and after publication only by the Appeals Council
in certain prescribed circumstances. He is subject only to such administrative
supervision as may be required in the course of general office management. His
decisions take into account all applicable Federal, State, and foreign laws,
statutes, regulations, rulings, and decisions of the Federal courts.
In cases involving the licensing of "Providers of
Services" under Title XVIII, the administrative law Judge's decision can
only be reviewed at the request of a party (the institution involved or the
government). In other cases, a decision can be reviewed at the request of a
claimant, or by the Council on its own motion. In any event, the Council takes
jurisdiction only on a certiorari basis. Final decisions of the administrative
law judge may be appeals to the Federal courts, and the Social Security Act
(Sec. 205(g)) requires that courts uphold the administrative law judge's
findings of fact when supported by substantial evidence.
IV. SPECIAL KNOWLEDGE AND ABILITIES REQUIRED
The administrative law judge must have expert knowledge of
judicial practice; exceptional professional attainment; a capacity for analysis
and articulation; the ability to balance important and conflicting
considerations; a proven ability to assure a fair hearings; and be able to
discharge effectively the responsibilities placed upon him for bringing all
matters coming before him to a prompt and just final decision. Inherent demands
of the job include such characteristics as tact, poise, firmness, impartiality,
diplomacy, originality, imagination, initiative, professional bearing, the
ability to control the emotionalism of opposing counsel, claimants, witnesses,
or other individuals whose conduct may threaten the orderly conduct of the
proceedings; and he must possess the ability to meet novel and taxing legal
problems. The administrative law judge is required to appraise the issues
promptly and thoroughly before any testimony is adduced. If the pleadings are
insufficient the administrative law judge must have the necessary legal ability
to take any and all action required to clarify the issues. With the issues
defined, he will exercise initiative in obtaining stipulations of fact. Since,
unlike a judge, an administrative law judge has no contempt powers, poise and
diplomacy in meeting delicate situations are essential.
The administrative law judge must obtain a clear and
concise record, containing all relevant facts, while excluding all immaterial
matters. He must use judgment and initiative in the calling of expert or other
witnesses and in requesting either the government representative or the
appellants' counsel for evidence on any material point at issue. A broad
knowledge of all technical, legal, medical, and economic factors involved is
necessary in order that the administrative law judge may develop a complete
record of the hearing.
The administrative law judge must be aware of current
practices in the fields of medical treatment, hospital administration, costs of
medical services, safety standards, and like matters in order to render well
informed and proper decisions in regulatory and licensing proceedings under
Title XVIII. His decisions have a substantial impact upon the Administration's
policies and procedures in this health insurance program in which there is a
great deal of public interest.
In the disability program under Title II, the
administrative law judge must decide cases involving a wide variety of physical
and mental impairments, and the effect such impairments have on the ability of an
individual to work. To reach informed judgments in these cases, the
administrative law judge must possess a knowledge of the medical,
psychological, and vocational factors involved in each case. The administrative
law judge called upon to perform in this program must develop a background in
the medicolegal field not normally inherent in other legal positions in the
Government service.
In old age and survivors' benefit cases, the administrative
law judge is required to have extensive knowledge of State, Federal and foreign
laws dealing with difficult and complex questions in such fields as conflicts
of law, domestic relations, descent and distribution, employer-employee
relations, contracts, trusts, partnerships, corporations, accounting, and
related subjects. For example, in the Social Security Act there are a number of
express references to the Internal Revenue Code, the Immigration and
Naturalization Act, the Agricultural Marketing Act, and other laws. In the
Internal Revenue field alone, the administrative law judge is required to have
the necessary expertise to make findings on such matters as adjusted gross and
net income; evasion and avoidance of taxes; whether there exists a bona fide
corporation or partnership; and the reasonableness of salaries paid to
corporate officers.The administrative law judge is not bound in such cases by
findings of the Treasury Department or other Government agencies.
The increasing interest by the courts in the interrelated
medical and vocational factors has made it necessary to utilize oral testimony
of vocational and medical experts, most of whom are eminent authorities in
their respective fields. He is the sole person charged with evaluating the
credibility of witnesses in making a judgment on the evidence developed at the
hearing. The administrative law judge is required to have the skillful and
comprehensive interrogation of expert witnesses. He must be able to analyze and
summarize in decisional format complex facts and laws clearly and concisely,
and to create a dignified and objective atmosphere at the hearing.
JUDGMENT
In accordance with the Memorandum Opinion and Order issued
this date, judgment shall be, and it hereby is, entered in favor of defendant,
Margaret M. Heckler, et al., and against plaintiff, Association of
Administrative Law Judges, Inc.
1. Pub. L. No. 96-265
(1980) (discussed at 42 U.S.C. § 421 (1982)).
2. Plaintiff faulted
this study because its results were reached during the time the "short
form fully favorable" was in use. That form was phased out after Bellmon
Review began. Many of the ALJs who were placed on Bellmon Review as a result of
this study did not have experience with the sequential evaluation process of
writing decisions.
3. The removal
criteria were originally set forth in a Memorandum from Levi J. Ogden, Director
of OHA's Office of Appraisal, to Mr. Hays. (PX-29). Three options were
presented. Option 1 provided that ALJs in the 25% review category would be
removed from review when the 95% level of accuracy had been approached and
maintained for one month. (This option was ultimately approved with a
modification by Mr. Hays, who changed one month to three months). Mr. Ogden
recognized at the time that the 95% level could be difficult to achieve but
that its employment could result in lowered allowance rates. (PX-29). In fact,
Mr. Ogden testified, no ALJs were ever removed from review on the basis of
having achieved a 5% own motion rate. Mr. Hays testified that at the time he
approved Option 1, as modified, he questioned whether the 5% own motion rate
was a realistic standard.He had been advised by the Office of Policy and
Procedures that the 5% own motion rate was "unrealistic, essentially
arbitrary . . . and possibly inequitable." (PX-29A).
4. However, this
change was not communicated to the ALJ corps at large. The national random
sample did not include a certain portion of decisions of ALJs under Bellmon
Review.
5. The proposed
feedback system under Bellmon Review resembles the defunct Appellate Appraisal
System. See PX-266. However, unlike that System, under Bellmon review, the
Appeals Council would not have been involved with the feedback process apart
from issuing opinions reversing or remanding ALJ decisions.
6. The Appeals Council
had not routinely exercised its own authority for several years prior to the
Bellmon Amendment.
7. Grant-review was
instituted despite a study of unappealed denial decisions by low allowance ALJs
conducted by the Office of Appraisal, which indicated no need for such review
except in extreme cases. (PX-352). See testimony of Levi J. Ogden. But see
PX-163.
8. At trial, Mr. Hays
explained that since this was a matter likely to be raised in litigation, he
felt that it was advisable to withhold this information. In addition, the
relatively small size of the grant-review portion of the Bellmon Review
rendered it a less appropriate subject for a general Memorandum. Those ALJs who
were placed on grant-review were informed about its operation.
Had Mr. Hays informed the ALJ corps about this portion of
the review, the negative reaction to the initial focus on allowance decisions
only may have been tempered somewhat. However, although plaintiff stressed the
unfairness of the initial focus on allowance decisions only, counsel argued
that even a grant-review program or a low allowance review program initially
adopted under Bellmon Review would have violated decisional independence.
9. Some of plaintiff's
members felt that maintaining statistics based upon allowance rates constituted
illegal performance ratings. See Testimony of Robert M. Murdock; PX-378 (based
upon own-motion rates released pursuant to the Freedom of Information Act).
10. Plaintiff
challenged numerous practices of defendants, as well as those described above.
Among them, plaintiff charged, without sufficient evidentiary substantiation,
that the Office of Appeals Operations, a compenent of OHA, acts as a
prosecutorial body, actively seseking out ALJ allowance decisions to be
reversed by the Appeals Council.
Plaintiff also questioned whether the Appeals Council
applies the same standard of review in own motion cases as it does when it
reviews cases pursuant to claimant requests. Mr. Berkley testified that,
although at one time the possibility of different standards was considered, the
standard employed is the same in all cases: The Appeals Council reviews the
ALJ's decision to determine whether it was supported by substantial evidence.
(PX-382, PX-420). If substantial evidence is lacking to support a particular
finding, the decision will nonetheless be upheld, within an opinion, if the
result is supported by substantial evidence.If the Appeals Council reviews a
decision of an ALJ on its own motion and reverses or remands the decision
because it was not based upon substantial evidence, presumably the ALJ's onw
motion rate would be affected.
11. "Targeted
Ongoing Review", or Bellmon Review, according to defendants, "is a
multifaceted program to correct ALJ [allowances] and, in the process, promote
behavioral change. By behavioral change we mean to correct those aspects of
decisional performance which do not reflect the content of the law, regulations
or SSA policy." (PX-379).
12. This conclusion
was reached wholly independently of the results of the survey of ALJs by Dr.
Donna Price Cofer.
13. The remand policy
at OHA has been changed in general. Now, remand cases are put into the regular
rotational process in any given hearing office so that a remand case may or may
not be assigned to the ALJ who made the initial decision. However, the ALJ who
made the initial decision still receives a copy of the remand order for
feedback purposes.
14. The position
description for ALJs in SSA (PX-103) directs ALJs to "take into account
all applicable Federal, State and foreign laws, statutes, regulations, rulings,
and decisions of the Federal Courts." To the extent the Secretary has not
acquiesced in a federal court decision the ALJ is put in the difficult position
of "trying to serve two masters; the courts and the Secretary of Health
and Human Services." Hillhouse v. Harris, 547 F. Supp. 88, 93 (N.D. Ark.
1982), aff'd 715 F.2d 428 (8th Cir. 1983) (per curiam).
15. See Senate Comm.
Print at 28-29.
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