Chin v. Carolyn W. Colvin, Acting Commissioner of the Social Security Administration

Filing 50

ORDER AFFIRMING DECISION OF ADMINISTRATIVE LAW JUDGE. Signed by JUDGE J. MICHAEL SEABRIGHT on 4/2/2015. (afc)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

CALVIN C. CHIN,

) CIV. NO. 12-00508 JMS-KSC
)
Plaintiff,
) ORDER AFFIRMING DECISION OF
) ADMINISTRATIVE LAW JUDGE
vs.
)
)
CAROLYN W. COLVIN, ACTING )
COMMISSIONER OF SOCIAL
)
SECURITY,
)
)
Defendant.
)
_____________________________ )
ORDER AFFIRMING DECISION OF ADMINISTRATIVE LAW JUDGE
I. INTRODUCTION
This is an action brought under 42 U.S.C. § 405(g) to review a final
decision of the Acting Commissioner of Social Security, Carolyn C. Colvin (the
“Commissioner,” or “Defendant”). Calvin C. Chin (“Chin” or “Plaintiff”) was
awarded Social Security disability benefits, effective from March 2005, based on a
work injury. The Commissioner claims that Plaintiff’s disability benefits must
now be offset by a payment that Plaintiff received from an April 2006 settlement
agreement with his former employer. Plaintiff disagrees.
Social Security disability benefits are generally reduced by workers’
compensation benefits but not by private or union disability insurance payments.

Applying that principle, the substantive issue before this court is relatively simple
-- did the payment Plaintiff received under the April 2006 settlement constitute a
workers’ compensation payment or a disability insurance payment?
After carefully reviewing the record, the court concludes that the
April 2006 settlement constitutes a lump sum of workers’ compensation payments.
Accordingly, the court AFFIRMS the September 22, 2010 Final Decision of the
Administrative Law Judge (“ALJ”), and upholds the Commissioner’s claim that
Chin received an overpayment.
II. BACKGROUND
Although the substantive issue is relatively straightforward, the
posture of the case also presents several procedural issues. The court thus sets
forth the important substantive facts, as well as relevant aspects of the procedural
history in considerable detail.
Plaintiff, formerly a painter with M. Shiroma Painting Company, was
injured in an industrial accident on June 18, 2003. Administrative Record (“AR”)
at 21, 28. After that, he worked sporadically, on a part-time basis, until about
September 30, 2004. Id. at 22. Although the record is not entirely clear, Plaintiff
apparently received workers’ compensation and/or temporary disability benefits
from June 2003 until December 2004 or January 2005. Id. at 11, 21, 28-29. He
2

then applied for Social Security disability benefits in December 2005. The
subsequent history of Plaintiff’s Social Security claim is lengthy, and the relevant
portions are best understood in a timeline, as detailed below:
December 16, 2005

Plaintiff applies for Social Security disability
insurance benefits. Id. at 11.

April 7, 20061

Plaintiff executes a “Compromise and Settlement
Agreement” with King & Neel (a “workers’
compensation Insurance Adjuster”) on behalf of
“M. Shiroma Painting Company, d.b.a. M.
Shiroma Construction Company,” and “Workers’
Compensation Self Insurance Group, PSIG”
(collectively “Employer/Adjuster”). Id. at 28.
According to the April 2006 settlement, it is based
on “a claim for workers’ compensation benefits
against Employer/Adjuster . . . alleging that on or
about June 18, 2003, and while in the course and
scope of his employment . . . [Plaintiff] alleged an
injury to his right leg, right shoulder, and right
eye[.]” Id. A dispute apparently arose as to
whether Plaintiff’s “back condition was . . . related
to the industrial accident of June 18, 2003.” Id. at
29. Under the terms of the April 2006 settlement,
“Employer/Adjuster” agreed to pay Plaintiff a total
of $68,331.12. The amount is itemized into
categories for disability payments, attorneys’ fees,
a living allowance, medical-related
reimbursements, and other costs. Id. at 30.

1

The “Compromise and Settlement Agreement” was filed with the Hawaii Department
of Labor and Industrial Relations Appeals Board (“DLIR”) on April 24, 2006. AR at 27. The
court refers to this Settlement Agreement as “the April 2006 settlement.”
3

March 10, 2008

The Commissioner awards Plaintiff monthly
Social Security disability benefits effective from
March 2005, finding that Plaintiff became disabled
on September 29, 2004. Id. at 40. The award
states “[h]owever, we cannot pay you for March
2005 through November 2005.” Id. The
Commissioner awards Plaintiff (1) a lump sum of
$39,417 for past due benefits, and (2) monthly
benefits of $1,718.20 (before deductions),
beginning in March 2008. Id. at 40-41.
Among other information, the award states: “We
have to take into account your workers’
compensation payment of $2,513.30 when we
figure your Social Security benefits. Because you
receive this payment, we are withholding the
benefits you are due.” Id. at 41. It then explains
“[w]e do not reduce benefits once workers’
compensation payments have stopped. Therefore
we are paying benefits at the full rate beginning
December 2005. Please let us know right away if
you receive workers’ compensation and/or other
public disability payments again.” Id.

July 27, 2009

The Commissioner asks Plaintiff under 42 U.S.C.
§ 404(a) to reimburse benefits she already paid to
Plaintiff. She sends Plaintiff a letter stating “[w]e
have determined that you received $39,050 more
in Social Security benefits that you were due.”
AR at 64.2 In part, the Commissioner states “[y]ou

2

Although the exact date is unclear from the record, Plaintiff had previous notice of this
overpayment. The record contains a March 3, 2009 letter giving Plaintiff “the new repayment
withholding schedule we will use to collect the overpayment,” AR at 50, and a corresponding
March 10, 2009 “request for reconsideration” from Plaintiff. Id. at 52. A March 17, 2009 letter
from the Commissioner (referencing a $39,050 balance) indicates that Plaintiff would continue to
receive benefits until the Commissioner responded to that request. Id. at 53. And, on June 12,
(continued...)
4

have received a lump-sum award of $68,331.12 to
settle your workers’ compensation claim. A lumpsum award affects Social Security benefits in the
same way that periodic payments do.” Id. The
letter continues: “When we figured how much to
reduce you and your family’s benefits, we
excluded $5,143.32 of the legal, medical and other
expenses. We treated the rest of the lump-sum,
$63,187.80, as if you had been paid $580.00 per
week.” Id.
The letter then provides: “You should refund this
overpayment within 30 days. . . . If we do not
receive your refund within 30 days, we plan to
recover the overpayment by withholding your full
benefit beginning . . . about October 21, 2009. We
will continue withholding your benefit until the
overpayment has been fully recovered.” Id. at 65.
It also explains Plaintiff’s appeal rights, indicating
that he (1) could apply for a waiver of
overpayment if “[i]t was not your fault that you
got too much Social Security money,” and
“[p]aying us back would mean you cannot pay
your bills for . . . necessary expenses, or it would
be unfair for some other reason;” and/or (2) could
file an appeal within sixty days, and that if he
appealed within thirty days, “you will not have to
pay us back until we decide your case.” Id.
August 13, 2009

The Commissioner issues a detailed Notice of
Reconsideration to Plaintiff, “affirm[ing] the
accuracy of the calculation of your overpayment of

2

(...continued)
2009, attorney Dennis Chang, wrote to the Commissioner indicating he represented Plaintiff
regarding Plaintiff’s “overpayment issue.” Id. at 179.
5

$39,050.00.” Id. at 73.
August 14, 2009

Plaintiff requests a hearing before an ALJ. Id. at
76.

April 22, 2010

The ALJ sets a hearing for June 15, 2010. Id. at
108.

April 23, 2010

Counsel Dennis Chang enters an appearance for
Plaintiff for the June 2010 hearing. Id. at 107. In
Chang’s written filing, Plaintiff both (1) requests a
waiver, arguing that Plaintiff “is clearly without
fault and, if he is ordered to pay reimbursement,
there will be undue financial hardship,” and
(2) argues, providing a detailed itemization, that
“the calculation of overpayment is wrong.” Id. at
110. He does not argue that the April 2006
settlement agreement was actually “disability
insurance” and not “workers’ compensation.”

June 15, 2010

An administrative hearing is held before ALJ
Dean K. Franks. Id. at 269-289. The ALJ
determines that the request for waiver “hasn’t [yet]
been heard before by the district office.” Id. at
273. The ALJ thus indicates that “an issue of
waiver [is] not in front of me.” Id. at 288. The
ALJ tells Plaintiff that “you still have the
subsequent issue which would be of requesting a
waiver . . . once this is settled then there will be a
new notice sent to you[.]” Id. at 286.
The hearing focuses on the calculation of the
amount of overpayment. Plaintiff argues, through
counsel, that additional amounts should have been
excluded from the $68,331.12 settlement in
computing the relevant portion of “workers’
compensation” such that the overpayment should
6

be lower. Id. at 281-82. The ALJ summarized
(and counsel agreed): “And so Mr. Chang it
appears then that the issue you’re [bringing] today
is not that the original award was wrong. . . . Your
issue is that the amount of the overpayment
charged against him is incorrect . . . because there
were some payments that were paid out of this
lump sum benefit of $68,331 which under the
regulations should have been excluded and not
counted as income to the claimant.” Id. at 281.
That is, Plaintiff does not argue that the April
2006 settlement agreement was actually payment
for “disability insurance” and not “workers’
compensation.”
The ALJ tentatively rules “that the $68,000 is not
the correct amount to be considered as the lump
sum.” Id. at 284. He indicates that “if I agree with
you . . . we direct the program center to recalculate
the overpayment.” Id. He anticipates that “it will
be a partially favorable decision where the lump
sum that was used will be reduced [but] [t]here
still will be an overpayment, because it still has to
be applied[.]” Id. at 284-85. The parties agree,
however, that Plaintiff would provide additional
documentation after the hearing. Id. at 288.
July 21, 2010

Plaintiff’s counsel provides additional
documentation and argument, contending that
“[t]he correct overpayment calculations should
first be reduced by $18,938,” based on the proper
deductions. Id. at 114. He argues that, given this
figure, Plaintiff “received a lump sum of
$49,392.80 rather than the $68,331.12, which
represents the total settlement inclusive of the
deductible amounts.” Id.

7

He also makes additional arguments for waiver,
indicating that Plaintiff “is not responsible for the
alleged overpayment” and “is not at fault as well
since all relevant information was provided to his
local SSA office[.]” Id. at 115.
September 22, 2010

Consistent with his June 15, 2010 inclinations, the
ALJ issues a “Notice of Decision -- Partially
Favorable.” Id. at 191. The ALJ concludes that
“the lump-sum award of $68,331.12 should have
been reduced by $18,998.32 [and] [t]he claim is
therefore remanded to the Western Program
Service Center for recalculation of the
overpayment.” Id. at 196.3 The ALJ vacates the
overpayment amount of $39,050, and remands to
the Western Program Service Center with
instructions to “recalculate the overpayment using
the excluded amount of $18,998.32.” Id. at 197.
(He makes no ruling regarding a waiver by the
Commissioner of the overpayment.)

October 9, 2010

The Commissioner (through the Western Program
Service Center) issues a letter recalculating the
amount of overpayment, as instructed by the ALJ.
The new amount of overpayment is $28,840. Id. at
198.

October 15, 2010

Plaintiff files a Request for Review of Hearing
Decision. Id. at 153, 210. Among several other
arguments, his counsel argues to the Social
Security Appeals Council for the first time that
“[t]he so-called workers’ compensation lump sum

3

The ALJ’s calculation of $18,998.32 differs from the $18,938 asserted by Plaintiff in
his July 21, 2010 supplemental filing, apparently because of a typographical error in bills from
medical providers -- Plaintiff alleged $933.32, AR at 114, when the actual figure was $993.32.
See id. at 30, 116.
8

payment may be exempt since it is a part and
parcel of a company and union group disability
insurance, according to Mr. Chin in a document he
had sent with copies to [the ALJ] and myself.” Id.
at 154 (referring to a copy of a Social Security
guideline, POMS § DI 52105.015, discussed
below).
Plaintiff also completes a Request for Waiver of
Overpayment form (dated October 15, 2010),
selecting as the reason that “The overpayment was
not my fault and I cannot afford to pay the money
back and/or it is unfair for some other reasons.”
Id. at 202. (There is no indication in the record
that any action was taken on this Request for
Waiver.)
July 11, 2012

The Appeals Council denies Plaintiff’s request for
review. Id. at 218. This denial renders the ALJ’s
September 2010 Decision final and appealable to a
district court. See 42 U.S.C. § 405(g); Brewes v.
Comm’r of Soc. Sec. Admin., 682 F.3d 1157, 116162 (9th Cir. 2012) (“When the Appeals Council
declines review, the ALJ’s decision becomes the
final decision of the Commissioner, and the
district court reviews that decision for substantial
evidence[.]”) (citation and internal quotation
marks omitted).

September 10, 2012

Plaintiff, proceeding pro se, files this action in this
court, petitioning for judicial review of the
September 2010 ALJ Decision. Doc. No. 1.

February 8, 2013

The court remands the case to the Commissioner
to prepare a complete certified record because
“missing files [were] needed to complete the
administrative record.” Doc. No. 20. The case is
9

administratively closed.
July 26, 2013

The Appeals Council vacates the September 2010
Decision and remands to an ALJ for a de novo
hearing “because the claim file . . . and the
recording of the hearing” cannot be located. AR at
226.

October 24, 2013

After the missing documents are located, the
Appeals Council vacates its July 26, 2013 remand
order, and allows Plaintiff to submit “additional
evidence and/or arguments” to the Appeals
Council regarding the September 2010 Decision.
Id. at 7.

July 25, 2014

The Appeals Council again denies review of the
September 2010 Decision, considering “the
reasons you disagree with the [September 2010
Decision], new evidence, and all of the issues in
the case.” Id. at 4A.
The Appeals Council rejects Plaintiff’s argument
that the “workers’ compensation payments were
part of a company and union group disability
insurance program.” Id. It reasons that “there is
no evidence in the record showing that you
received disability insurance payments through
your employer or union.” Id. Rather, “[t]he
compromise agreement dated April 7, 2006
identified both the periodic payments and the
lump-sum settlement you received as workers’
compensation payments.” Id.

October 7, 2014

Case is re-opened in the district court. Doc. Nos.
37, 38.

January 12, 2015

Plaintiff files his Opening Brief and Exhibits.
10

Doc. No. 45.
March 9, 2015

The Commissioner files her Answering Brief.
Doc. No. 48. (Plaintiff did not file a Reply Brief.)4
III. STANDARD OF REVIEW

Under 42 U.S.C. § 405(g), “[t]he district court reviews the
Commissioner’s final decision for substantial evidence, and the Commissioner’s
decision will be disturbed only if it is not supported by substantial evidence or is
based on legal error.” Hill v. Astrue, 698 F.3d 1153, 1158-59 (9th Cir. 2012); see
also Treichler v. Comm’r of Soc. Sec. Admin., 775 F.3d 1090, 1098 (9th Cir. 2014)
(“[Courts] leave it to the ALJ to determine credibility, resolve conflicts in the
testimony, and resolve ambiguities in the record.”) (citations omitted). Substantial
evidence is “more than a mere scintilla but less than a preponderance; it is such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Hill, 698 F.3d at 1159 (citation omitted).
“Even though findings might be supported by substantial evidence,
the correct legal standard must be applied in making a determination of disability.”
Frost v. Barnhart, 314 F.3d 359, 367 (9th Cir. 2002) (citation omitted). In other
words, “the decision should be set aside if the proper legal standards were not

4

The court decides this petition under Local Rule 7.2(d), based on written submissions
without an oral hearing.
11

applied in weighing the evidence and making the decision.” Benitez v. Califano,
573 F.2d 653, 655 (9th Cir. 1978) (quoting Flake v. Gardner, 399 F.2d 532, 540
(9th Cir. 1968)).
“When the Appeals Council declines review, ‘the ALJ’s decision
becomes the final decision of the Commissioner,’” and the district court reviews
that decision for substantial evidence, based on the record as a whole.’” Brewes,
682 F.3d at 1161-62 (quoting Taylor v. Comm’r of Soc. Sec. Admin., 659 F.3d
1228, 1231 (9th Cir. 2011)) (other citation omitted). That is, the court reviews the
ALJ’s decision, not the Appeals Council’s decision. See id. at 1161 (“[W]e do not
have jurisdiction to review a decision of the Appeals Council denying a request for
review of an ALJ’s decision, because the Appeals Council decision is a non-final
agency action.”) (citing Taylor, 659 F.3d at 1231).
IV. DISCUSSION
A.

Plaintiff’s Argument
Social Security disability benefits are generally reduced by taking

workers’ compensation benefits into account. See 42 U.S.C. § 424a(a)(2)(A)
(providing a formula for a reduction of disability benefits if a claimant is entitled
to “periodic benefits on account of [a claimant’s] total or partial disability
(whether or not permanent) under a [workers’] compensation law or plan of the
12

United States or a State[.]”). Moreover, it does not matter if payments of workers’
compensation benefits are awarded in a “lump sum” -- a similar reduction for a
lump-sum payment “shall be made at such time or times and in such amounts as
the Commissioner of Social Security finds will approximate as nearly as
practicable the reduction[.]” 42 U.S.C. § 424a(b). See, e.g., Hodge v. Shalala, 27
F.3d 430, 432 (9th Cir. 1994) (“[T]he scope of the federal offset provisions is
extremely broad. Even lump-sum awards are ‘periodic benefits’ as long as they
are ‘a commutation of, or a substitute for, periodic payments.’”) (quoting
§ 424a(b)). And the result is the same if the lump sum is a settlement of a
workers’ compensation claim. See Black v. Schweiker, 670 F.2d 108, 110 (9th Cir.
1982) (affirming an offset of Social Security disability benefits, given a settlement
of a workers’ compensation claim, reasoning that “[w]here the right to and liability
for periodic workers’ compensation payments are thus extinguished by a voluntary
settlement, the settlement can only be regarded as a ‘substitute’ for the
payments.”).
Plaintiff’s pro se Opening Brief, construed liberally, argues that his
disability benefits were improperly reduced because the April 2006 settlement
constituted “company or union group disability insurance,” and not “workers’
compensation” benefits. See Doc. No. 45, Pl.’s Brief at 1. Specifically, Plaintiff
13

argues that:
[a]n appeal was filed, on company or [union group
disability payments].[5] Appeals counsel [sic] stood by
the ruling King and Neel as the insurance payer which is
not true. . . . It Is [sic] a lot clear [sic] to see and read that
Payments from union group is exempt from off-set
calculation (POMS) Program Operations Manual System
DI 52105.015 (dated 11/26/2008-Present).
. . . . My WC records show corresponding letters from
King and Neel that [they] are third party Adjuster for
PSIG (Painting and Decorating Contractors of Hawaii
Self Insured Group). Payments paid came from the self
insured group.
. . . . M. Shiroma Painting is a Union Contrator
Company. And a member of (PSIG) Painting and
Decorating Contractors Association of Hawaii Self
Insurance Group.
Id. at 1-2.
His argument is derived from the Commissioner’s “Program
Operations Manual System” (“POMS”), which, “formerly called the ‘Claims
Manual,’ is ‘the Social Security Administration’s authorized means for issuing
written program instructions for adjudicating claims and performing its mission.’”
Jones v. Shalala, 5 F.3d 447, 449 n.4 (9th Cir. 1993) (quoting Briggs v. Sullivan,

5

The square brackets around “union group disability payments” are in the original.
14

886 F.2d 1132, 1135 (9th Cir. 1989)).6 And POMS § DI 52105.015, entitled
“Payments Not Considered Workers’ Compensation (WC),” provides:
The following payments are not WC. The field office
(FO) or processing center (PC) will input a special
message to the master beneficiary record (MBR) to alert
technicians that the payments are not WC.
....
5.
Company or union group disability insurance -short or long term.
6.

Private disability insurance payments regardless of
the purchaser.

Doc. No. 45-6, Pl.’s Ex. 6 (copy of POMS § DI 52105.015) (also available at
http://policy.ssa.gov/poms.nsf/lnx/0452105015 (last accessed March 23, 2015)).
B.

The Argument Has Not Been Waived
Initially, the Commissioner contends that Plaintiff’s argument

regarding the nature of the April 2006 settlement (i.e., that it represented
“company or union group disability insurance,” and not workers’ compensation
6

The POMS “contains the Social Security Administration’s internal rules of
procedure . . . [and] is a set of guidelines through which the Social Security Administration
construes the statutes governing its operations.” C. Kuitschek & J. Dubin, Social Security
Disability Law and Procedure in Federal Court § 1:19 at 36 (2015). Accordingly, Kennedy v.
Colvin, 738 F.3d 1172, 1177-78 (9th Cir. 2013), reiterates that the POMS is an agency
interpretation that “may be ‘entitled to respect’ under Skidmore v. Swift & Co., 323 U.S. 134
(1944), to the extent it provides a persuasive interpretation of an ambiguous regulation, but it
‘does not impose judicially enforceable duties on either this court or the ALJ.’” (quoting CarilloYeras v. Astrue, 671 F.3d 731, 735 (9th Cir. 2011)). That is, the POMS “are entitled to respect,
but only to the extent that those interpretations have the ‘power to persuade.’” Lockwood v.
Comm’r of Soc. Sec. Admin., 616 F.3d 1068, 1073 (9th Cir. 2010) (citing Christensen v. Harris
Cnty., 529 U.S. 576, 587 (2000)) (some internal quotation marks omitted).
15

benefits) was waived because Plaintiff only challenged the amount of the
overpayment (not the nature of the settlement) before the ALJ. See Doc. No. 48 at
12, Def.’s Mem. at 11 (“Plaintiff has not preserved his contention against the
Commissioner’s finding about the fact of an overpayment because Plaintiff’s
representative did not raise this contention in his June 2010 letter to the ALJ or at
the hearing.”). The Commissioner relies on Meanel v. Apfel, 172 F.3d 1111, 1115
(9th Cir. 1999), which held that “at least when claimants are represented by
counsel, they must raise all issues and evidence at their administrative hearings in
order to preserve them on appeal.” Meanel further stated that “[w]e will only
excuse a failure to comply with this rule when necessary to avoid a manifest
injustice[.]” Id.
But here -- although Plaintiff did indeed fail to argue to the ALJ that
the April 2006 settlement was “company or union group disability insurance” -Plaintiff did raise the issue with the Appeals Council. AR at 154. The Appeals
Council invited new arguments and considered additional evidence, and rejected
the very same argument that Plaintiff makes to this court. Id. at 4A. Meanel is
thus distinguishable. Unlike here, “Meanel concerned an argument based on
entirely new evidence brought to the court’s attention for the first time in the
district court appeal.” Skelton v. Comm’r of Soc. Sec., 2014 WL 4162536, at *12
16

(D. Or. Aug. 18, 2014) (finding Meanel distinguishable, and alternatively,
exercising discretion to reach the merits of the claimant’s argument). And other
courts have likewise interpreted Meanel as part of “the Ninth Circuit’s longstanding position that claimants are required to raise all issues either before the
ALJ or before the Appeals Council.” Harhaw v. Colvin, 2014 WL 972269, at *5
(E.D. Cal. Mar. 10, 2014) (emphasis added) (citing Meanel) (other citation
omitted). In short, because the issue was raised at the administrative level, the
issue was not waived.7
C.

The ALJ’s September 2010 Decision Correctly Applied Legal
Standards and Is Supported by Substantial Evidence
On the merits, the Commissioner agrees that if a claimant receives

“company or union group disability insurance” as set forth in POMS § DI
52101.015(5), then such payments are not “workers’ compensation” (and would
not offset Social Security disability benefits). As explained above, the substantive
7

Although this court is reviewing the final decision of the ALJ (not the action of the
Appeals Council), Brewes, 682 F.3d at 1161, the court must still consider new evidence
submitted to the Appeals Council that was not before the ALJ. See id. at 1162 (“[T]he
administrative record includes evidence submitted to and considered by the Appeals Council.
The Commissioner’s regulations permit claimants to submit new and material evidence to the
Appeals Council and require the Council to consider that evidence in determining whether to
review the ALJ’s decision, so long as the evidence relates to the period on or before the ALJ’s
decision.”). Harhaw thus reasoned that “because the record on appeal included issues and
evidence submitted to and considered by the Commissioner, issues not raised before the ALJ but
raised before the Appeals Council are preserved on appeal to the district court.” 2014 WL
972269, at *4. See Brewes, 682 F.3d at 1162 (“[A]s a practical matter, the final decision of the
Commissioner includes the Appeals Council’s denial of review[.]”).
17

issue before the court is simple -- was the April 2006 settlement payment under a
group disability plan or workers’ compensation? The court concludes that the
April 2006 settlement in fact constitutes a lump sum of workers’ compensation
payments.
The April 2006 settlement specifically explains the nature of the
dispute and of the payment made to Plaintiff by “Employer/Adjuster” (defined as
(1) “workers’ compensation insurance Adjuster, KING & NEEL;” (2) “Employer,
M. SHIROMA PAINTING COMPANY, INC.”; and (3) “Workers’ Compensation
Self Insurance Group, PSIG.” AR at 28). In pertinent part, the April 2006
settlement provides:
WHEREAS, Claimant has alleged a claim for workers’
compensation benefits against Employer/Adjuster
pursuant to the provisions of Chapter 386, Hawaii
Revised Statutes (“HRS”), as amended alleging that on
or about June 18, 2003, and while in the course and
scope of his employment with Employer, Claimant
alleged an injury to his right leg, right shoulder, and right
eye; and
....
WHEREAS, by report dated August 16, 2004 . . . Dr.
Clifford Lau opined that Claimant’s conditions related to
the industrial accident of June 18, 2003 were stable and
rated Claimant at 12% impairment of the right lower
extremity and 2% of the right upper extremity; and
WHEREAS, by report dated January 13, 2005 . . . Dr.
Lau opined that Claimant’s alleged back condition was
18

not related to the industrial accident of June 18, 2003;
and
WHEREAS, a Decision was issued by the Director [of]
the Department of Labor and Industrial Relations
(“Director” or “DLIR”) on December 30, 2004, whereby
the Director determined that Claimant was entitled to
vocation rehabilitation (“VR”) services and [to]
continued TTD [(Temporary Total Disability)] benefits;
and
WHEREAS, an appeal from the above-referenced
Director’s Decision was timely filed on January 10, 2005
by Employer/Adjuster and on January 12, 2005 by
Claimant[.]
Id. at 28-29.
Given that dispute, the parties agreed that Plaintiff would be paid
$68,331.12, and that both parties would “voluntarily withdraw their respective
appeals” then pending before the State DLIR. Id. at 30. Among other matters, the
parties agreed that “Claimant’s alleged low back condition did not arise out of or
in the course of his industrial accident of June 18, 2003 or his employment with
Employer,” and “Claimant agrees to waive any and all claims to which he alleged
he has or may have that the termination of TTD benefits . . . was improper[.]” Id.
at 31.
Based on its plain terms, the April 2006 settlement clearly and
undisputably paid Plaintiff a lump sum to settle a “workers’ compensation”
19

dispute. The dispute concerned whether Plaintiff’s back injury was related to his
industrial accident -- it concerned a claim for workers’ compensation benefits
pursuant to Hawaii law. The source of the payment was Plaintiff’s former
employer (M. Shiroma Painting Company); the “Workers’ Compensation Self
Insurance Group, PSIG” (“PSIG”); and King & Neel (defined in the April 2006
Settlement Agreement as a “workers’ compensation insurance adjuster”). AR at
28. And according to the POMS, these three entities are proper sources for
“workers’ compensation” payments. See POMS § DI 52101.001(B)(2) (defining
“workers’ compensation” as “a temporary or permanent payment made under a
Federal or State law to [a] worker because of a work related injury, illness or
disease”) & POMS § DI 52101.001(B)(2)(a) (defining “sources of [workers’
compensation] payments” as including “Insurance Carrier” and a “Self-insured
employer”).8 Elsewhere, the POMS likewise explains that proper “payers of
[workers’ compensation] in the States” include an “insurance carrier (licensed by
the State to transact [workers’ compensation],” a “self-insured employer,” and a
“third-party administrator (service organizations hired by self-insured employer).”

8

See Doc. No. 48-1, Def.’s Ex. 1 (copy of POMS § DI 52101.001) (also available at
http://policy.ssa.gov/poms.nsf/ lnx/0452101001 (last accessed March 24, 2015)).
20

POMS § DI 52120.001(B).9
The Commissioner also points out that the POMS specifically
instructs that amounts received under a settlement agreement for periodic workers’
compensation payments are subject to offset. See POMS § DI 52120.001(I)(56).10
Further, the POMS defines a “lump sum payment” as including “a commutation or
a settlement.” POMS § DI 52120.001(I)(21).11 The court accepts these POMS
sections as valid agency interpretations that are “‘entitled to respect’ under
Skidmore v. Swift & Co., 323 U.S. 134 (1944).” Kennedy, 738 F.3d at 1177.

9

See Doc. No. 48-2, Def.’s Ex. 2 (copy of POMS § DI 52120.001) (also available at
http://policy.ssa.gov/poms.nsf/lnx/0452120001 (last accessed March 24, 2015). A fourth source
of workers’ compensation under POMS § 52120.001(B) is a “State agency,” id., which is not at
issue here.
10

Section DI 52120.001(I)(56) defines “Voluntary Settlement Agreements,” in pertinent
part, as follows:
Sometimes referred to as ‘sidebar agreements,’ are negotiated
directly between the employee (or his/her attorney) and the
employer (or the employer’s insurance carrier). The employee’s
right to and liability for periodic WC payments is terminated by the
agreement in return for a payment from the employer/insurer.
Amounts received under these agreements are subject to offset in
the same manner as an approved WC settlement regardless of
whether or not the agreement requires approval of the State WC
board, or whether or not State law construes the settlement amount
to be payment of weekly WC.
Doc. No. 48-2, Def.’s Ex. 2 at 13 (copy of POMS § DI 52120.001) (also available at
http://policy.ssa.gov/poms.nsf/lnx/0452120001 (last accessed March 24, 2015).
11

See Doc. No. 48-2, Def.’s Ex. 2 (copy of POMS § DI 52120.001) (also available at
http://policy.ssa.gov/poms.nsf/lnx/0452120001 (last accessed March 24, 2015).
21

Indeed, such interpretations are consistent with Ninth Circuit precedent directly on
point. See Black, 670 F.2d at 110 (affirming an offset of Social Security disability
benefits where claimant had obtained a settlement of a workers’ compensation
claim).
Plaintiff might be confused by the roles of PSIG and King & Neel.
He argues that “[the] Appeals [Council] stood by the ruling King and Neel as the
insurance payer which is not true.” Doc. No. 45, Pl.’s Mem. at 1. Apparently
referring to PSIG, he states that “[it’s clear] to see and read that Payments from
union group is exempt from off-set calculation[.]” Id. But the record plainly
establishes (and Plaintiff has no evidence to the contrary) that King & Neel is the
“administrator for PSIG” (and “a workers’ compensation insurance adjuster”), and
PSIG is “a workers’ compensation self insurance group” of which M. Shiroma
Painting Company was a member. Doc. No. 45-4, Pl.’s Ex. 4. Under the POMS,
they are all valid sources of workers’ compensation payments.
In other words, Plaintiff has no evidence that any of the payment from
the April 2006 Settlement Agreement constitutes “company or union group
disability insurance” such that it could be excluded from an offset of Plaintiff’s
Social Security benefits. Accordingly, the ALJ’s September 2010 Decision
correctly applied applicable legal standards and was supported by substantial
22

evidence. See Hill, 698 F.3d at 1158-59. The court thus upholds the
Commissioner’s ultimate determination that Plaintiff owes the Commissioner
$28,840 as an overpayment.12
D.

The Court Cannot Consider Plaintiff’s Request for a Waiver of
Overpayment
The Social Security Act allows a recipient of benefits who has been

overpaid to request a waiver from repayment (1) if they are “without fault” and
(2) if repayment “would defeat the purpose of [Title II of the Social Security Act]
or would be against equity and good conscience.” 42 U.S.C. § 404(b). In turn, the
applicable regulation defines “defeat the purpose of title II” as meaning “to
deprive a person of income required for ordinary and necessary living expenses.”
20 C.F.R. § 404.508(a).
The Commissioner argues that -- to the extent Plaintiff is still seeking
a review of a request for a waiver of overpayment -- this court should not consider
the issue for lack of administrative exhaustion. (Plaintiff’s Complaint alleges that

12

Plaintiff’s Opening Brief does not challenge the ALJ’s computation of the
overpayment -- which favorably (for the Plaintiff) reduced the amount due from $39,050 to
$28,840 -- and any challenge to the amount (although mentioned in the Complaint) is waived.
See, e.g., Avenetti v. Barnhart, 456 F.3d 1122, 1125 (9th Cir. 2006) (reiterating, in a Social
Security context, that arguments not raised by a party in its opening brief are waived) (citing
Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999)).
23

“the Defendant did not consider Section 404.510A,[13] concerning fault on the part
of the Defendant,” Doc. No. 1, Compl. at 1, although Plaintiff did not raise or
argue this issue in his Opening Brief.) The court agrees.
Plaintiff requested a waiver prior to the June 2010 hearing before the
ALJ, AR at 115, but the ALJ did not review the request because it had not been
processed before the hearing. Id. at 273. The ALJ told the parties that “an issue of
waiver [is] not in front of me,” id. at 288, and told Plaintiff he could file a request
after receiving a new notice of overpayment after those proceedings were
concluded. Id. at 286. Likewise, although Plaintiff raised § 404(b) to the Appeals
Council, id. at 155, the Appeals Council did not address the request for waiver.
Thus, because there is no “final decision” of the Commissioner regarding that
request for waiver as required by 42 U.S.C. § 405(g), the court cannot consider
any challenges regarding the request. See, e.g., Califano v. Sanders, 430 U.S. 99,
108-09 (1977) (observing that § 405(g) “clearly limits judicial review to a
particular type of agency action, a ‘final decision of the Secretary made after a
hearing’”); Subia v. Comm’r of Soc. Sec., 264 F.3d 899, 902 (9th Cir. 2001)
(concluding that the court “cannot seek judicial review” under § 405(g) if she did

13

20 C.F.R. § 404.510a concerns when an individual is “without fault” in receiving an
overpayment for purposes of 42 U.S.C. § 404(b).
24

not exhaust administrative remedies, where there was no basis to waive the
failure).
To be clear, as to a request for waiver under 42 U.S.C. § 404(b), the
court has only determined that there is no such request properly before the court -there is no “final determination” by the Commissioner in the record regarding a
waiver. The court offers no opinion (and has made no determination) as to
whether Plaintiff might otherwise qualify for a waiver, or whether he could still
apply for a waiver upon conclusion of the present proceeding (if there is no
request for waiver currently pending before the Commissioner).
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V. CONCLUSION
For the foregoing reasons, the court AFFIRMS the September 22,
2010 Decision of the Administrative Law Judge, and thus upholds the
Commissioner’s $28,840 claim for overpayment from Plaintiff. The Clerk of
Court shall close the case file.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, April 2, 2015.

/s/ J. Michael Seabright
J. Michael Seabright
United States District Judge

Chin v. Colvin, Civ. No. 12-00508 JMS-KSC, Order Affirming Decision of Administrative Law
Judge

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