Henjum v. Astrue

Filing 23

MEMORANDUM AND ORDER: 1. Henjum's motion for summary judgment (Doc. No. 11) is DENIED. 2. The Commissioner's motion for summary judgment (Doc. No. 20) is GRANTED. 3. This matter is dismissed with prejudice. 4. The following memorandum is incorporated by reference. (Written Opinion). Signed by Magistrate Judge Jeanne J. Graham on 9/13/11. (LPH)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Paul J. Henjum,

Civil No. 10-3988 (JJG)

Plaintiff,
v.

MEMORANDUM AND ORDER

Michael J. Astrue,
Commissioner of Social Security,
Defendant.

JEANNE J. GRAHAM, United States Magistrate Judge
Plaintiff Paul Henjum (Henjum) brings this action contesting the Commissioner’s
decision that Henjum received workers’ compensation payments prior to January 2007, which
were subject to the offset provision contained in section 224(a) of the Social Security Act.
Jurisdiction is proper under 42 U.S.C. ' 405(g). Henjum is represented by Michael J. Cuzzo.
Defendant is represented by Lonnie F. Bryan, Assistant U.S. Attorney. The parties consented to
a final judgment from this Court in accordance with 28 U.S.C. ' 636(c), Fed.R.Civ.P. 73 and
Local Rule 72.1(c). The matter is before the Court on the parties’ cross-motions for summary
judgment. (Doc. Nos. 11, 20.) Being duly advised of all the files, records, and proceedings
herein, IT IS HEREBY ORDERED THAT:
1.

Henjum’s motion for summary judgment (Doc. No. 11) is DENIED.

2.

The Commissioner’s motion for summary judgment (Doc. No. 20) is
GRANTED.

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3.

This matter is dismissed with prejudice.

4.

The following memorandum is incorporated by reference.

LET JUDGMENT BE ENTERED ACCORDINGLY
Dated this 13th day of September, 2011.
s/ Jeanne J. Graham
JEANNE J. GRAHAM
United States Magistrate Judge

MEMORANDUM
I.

BACKGROUND
The question presented here is whether Henjum’s worker’s compensation benefits should

be offset against his social security disability benefits. The Social Security Administration
granted Henjum’s application for disability insurance benefits (“DIB”), finding Henjum to be
disabled beginning June 28, 2001, and eligible for benefits as of January 2002. (Tr. 15-19.)
Henjum also received workers’ compensation benefits (“WC”), beginning in June 2001. (Tr. 21,
37.)

In July 2002, Henjum’s weekly worker’s compensation benefit of $509.82 was

discontinued, and Henjum brought another claim before a worker’s compensation judge for
continued benefits. (Tr. 70, 82.) The claim was tried before a workers’ compensation judge.
(Id.) Although the actual workers’ compensation award is not in the record, it is undisputed that
on December 14, 2006,1 the workers’ compensation judge awarded Henjum a total of $59,634.50
payable in the following manner:

1

The original order was dated December 11, 2006, and the worker’s compensation judge
issued an amended order on December 14, 2006, for the purpose of adding an award for
permanent partial disability. (Tr. 70.)
2

$

$11,419.97 temporary total disability for the period from 6/28/01 to 12/2/01;

$

$13,051.39 temporary total disability for the period from 1/30/02 to 7/28/02;

$

$25,083.14 permanent total disability for the period from 11/4/03 to 10/12/04; and

$

$10,080.00 permanent partial disability on 12/22/06.

(Tr. 21, 31, 36, 37, 80-81.)
On December 22, 2006, the Minnesota Workers’ Compensation Division sent Henjum a
“Notice of Benefit Payment,” which indicated a final payment was issued. (Tr. 20.) Although
Henjum’s employer had already made payments, the employer appealed the worker’s
compensation award primarily because the employer disagreed with the finding that Henjum met
the permanent partial disability threshold for permanent total disability claims. (Tr. 29-30, 70.)
The parts of the award which specifically related to the permanent partial disability threshold for
permanent total disability claims were the award of $25,083.14 for the period of November 4,
2003 to October 12, 2004 (paid in weekly amounts of $509.82) and $10,080.00 on December 22,
2006. (Tr. 21, 36.)
Henjum and his employer entered into a “Stipulation for Settlement” (“Stipulation”)
dated January 23, 2007.2 (Tr. 26-34.) In the Stipulation, Henjum’s employer stated that it had
mistakenly paid Henjum $36,457.93 (withholding attorney’s fees of $7,232.63) because it timely
appealed the award to the Worker’s Compensation Court of Appeals. (Tr. 30.) The terms of the
Stipulation required Henjum to return $800.00 of the benefits he had been paid, and Henjum’s

2

Henjum notes there are several typos in the Stipulation regarding the date of his injury,
which should read May 16, 2001, not May 16, 2005. (Pl.’s Mem. of Law in Supp. of Mot. for
Summ. J. at 4. (“Pl.’s Mem.”))
3

attorney to return $200.00. (Tr. 31.) The Stipulation provided that the remaining money [net
$29,425.30 to Henjum after deduction of statutory attorney’s fees] was meant to “maximize the
Employee’s social security . . . benefits[,]” by treating the lump sum Henjum retained as if the
payments had been prorated over Henjum’s life expectancy beginning on November 4, 2003, in
the amount of $120.10 per month. (Tr. 31-32.) In other words, the Stipulation did not require
Henjum to actually be paid $120.10 per month beginning November 4, 2003, over his life
expectancy. Instead, he would retain all but $800.00 of the benefits already paid to him. A copy
of the Stipulation was provided to the Social Security Administration on May 1, 2007. (Tr. 35.)
In June 2007, and again in September, the SSA notified Henjum that he had received
overpayments of DIB due to his receipt of workers’ compensation benefits between January
2002 and January 2004. (Tr. 40-42, 53-56.) Henjum filed a request for a hearing by an
Administrative Law Judge, wherein he contended the Stipulation, not the initial workers’
compensation award, controlled whether an overpayment should be assessed between January
2002 and January 2004, and the Stipulation provided that the payments were to be prorated over
his life expectancy, deemed to be in the amount of $120.10 per month. (Tr. 57.)
A hearing was held before an Administrative Law Judge on April 29, 2008. (Tr. 77-83.)
At the hearing, Henjum’s counsel argued the offset of benefits should be governed by the
Stipulation, because it was the only legally binding document governing the workers’
compensation payments after the award by the workers’ compensation judge had been appealed.
(Tr. 80.) Henjum’s attorney asserted that the payment the employer made to Henjum was paid

4

back during the pendency of the appeal. (Tr. 81.) Therefore, he argued, it was the Amended
Notice of Benefit Payment3 that reflected the only payments Henjum received. (Id.)
On July 1, 2008, the ALJ issued a decision unfavorable to Henjum. (Tr. 8-14.) The ALJ
made the following findings:
1. Based on an injury, the claimant received the following
workers’ compensation payments: a payment of $11,419.97 for
temporary total disability from June 28, 2001 to December 2,
2001; $13,051.39 in permanent total disability from January 30,
2002 through July 28, 2002; and $25,083.14 from November 4,
2003 through October 12, 2004. In addition, the claimant received
a payment of $10,080.00 in “PP” (or permanent partial disability)
which was paid on December 22, 2006.
2. The claimant and his employer entered into a Settlement
Agreement in January 2007 and agreed that the employer would
pay $36,475.93 minus $7,032.63 in attorney’s fees and $800
previously paid to the employee or claimant by mistake for a net
payment to the claimant/employee of $29,425.30 to be prorated
from November 4, 2003 through the expected life of the claimant
or 245 months.
3. As part of the Settlement Agreement, the claimant agreed to
reimburse his employer and insurer $800.00 and his attorney
agreed to reimburse the sum of $200.00.
4. There is no other evidence that workers’ compensation
previously received was ever returned or paid back.
5. The claimant received workers’ compensation benefits prior
[to] January 2007, which were subject to the offset provision
contained in section 224(a) of the Social Security Act. 42 U.S.C.
424a, see also 20 CFR 404.408 and SSR 97-3.

(Tr. 13-14.) Henjum appealed the ALJ’s decision, but the Appeals Council denied review on
August 27, 2010. (Tr. 2-5.) When the Appeals Council denied review, the ALJ’s decision
became the final decision of the Commissioner for purposes of judicial review. 42 U.S.C.

3

There is no document entitled Amended Notice of Benefit Payment in the Administrative
Record.
5

' 405(g); Clay v. Barnhart, 417 F.3d 922, 928 (8th Cir. 2005); Browning v. Sullivan, 958 F.2d
817, 822 (8th Cir. 1992). Henjum filed a complaint in this Court on September 21, 2010,
seeking review of the agency decision.4 [Doc. No. 1.] The only issue Henjum raised is whether
the Commissioner has the right to offset his DIB subsequent to November 4, 2003. (Pl.’s Mem.
at 3-4.)
II.

ANALYSIS
Review by this Court of the Commissioner’s final decision is limited to a determination

of whether the decision of the Commissioner is supported by substantial evidence on the record
as a whole and whether the Commissioner applied the correct legal standards. Berger v. Apfel,
200 F.3d 1157, 1161 (8th Cir. 2000) (citing 42 U.S.C. ' 405(g) and Richardson v. Perales,
402 U.S. 389, 401 (1971)). The amount of DIB an individual may receive while simultaneously
receiving workers’ compensation benefits is governed by 42 U.S.C. ' 424a and 20 C.F.R.
' 404.408(a). Sunde v. Barnhart, 417 F.3d 986, 987 (8th Cir. 2005). “When an individual’s
combined DIB and WC benefits exceed eighty percent of the individual’s pre-disability earnings,
the Act requires a reduction in DIB-called a DIB ‘offset.’” Id. (citing 42 U.S.C. ' 424a(a) and
Berger, 200 F.3d at 1159.) Attorney’s fees incurred in connection with the public disability
award are excluded from the offset calculation. Id.
Henjum asserts that the payments made by his employer subsequent to November 4,
2003, as described in the December 22, 2006 Notice of Benefit Payment, were invalidated by the
employer’s subsequent appeal of the award, and that the terms of the Stipulation should govern

4

The Commissioner contends that the Appeals Council’s decision, and hence its reasoning
for not reviewing the ALJ’s decision, is not subject to judicial review. See Browning v. Sullivan,
958 F.2d at 822-23. The Court agrees with this argument and therefore, the Court will not
address Henjum’s arguments regarding the Appeals Council’s reasons for denying review.
6

the offset instead. Henjum contends the SSA’s own guidelines for establishing the rate for
determining an offset indicate that the first rate that should be used is the rate specified in the
Award, which Henjum contends is the Stipulation in this case, because the award was appealed.5
Henjum asserts that, “[o]nce appealed, [the worker’s compensation judge’s] Decision should be
treated as null and void, as it was not a final Decision.” (Pl.’s Mem. at 8.)
42 U.S.C. ' 423a(b) “mandate[s] that an offset of a lump sum award ‘approximate as
nearly as possible’ the offset that would apply for a periodic6 workers’ compensation benefit.”
Berger v. Apfel, 200 F.3d at 1161. Likewise, the agency regulation, 20 C.F.R. ' 404.408(g),
provides:
(g) Public disability benefit payable on other than a monthly basis.
Where public disability benefits are paid periodically but not
monthly, or in a lump sum as a commutation of or a substitute for
periodic benefits, such as a compromise and release settlement, the
reduction under this section is made at the time or times and in the
amounts that the Administration determines will approximate as
nearly as practicable the reduction required under paragraph (a) of
this section.

5

The “SSA applies a three-step test to determine the rate at which to prorate [a worker’s
compensation lump sum settlement award].” Berger, 200 F.3d at 1160.
[F]irst, SSA looks to the rate specified in an award; second, to the
periodic rate paid prior to the settlement; and third, to the
maximum benefit to which the claimant would have been entitled
under the state’s workers’ compensation law.
Id. (citing Social Security Administration POMS DI 52001.555(C)(4)). However, POMS
guidelines do not have legal force and are not binding on the Commissioner. Id. (citing
Schweiker v. Hansen, 450 U.S. 785, 789 (1981). This Court notes the ALJ did not refer to this
POMS guideline in his decision.
6

Offsets of periodic, as opposed to lump sum, worker’s compensation benefits are
governed by 42 U.S.C. ' 424a and 20 C.F.R. ' 404.408(a). It appears that the agency, prior to
the ALJ hearing, followed 20 C.F.R. ' 404.408(a) in calculating the DIB offset based on the
payments made to Henjum, as described in the Notice of Benefit Payment dated December 22,
2006. (Tr. 11-13, 36-42, 51-56.)
7

The Commissioner contends the ALJ did not have to approximate the rate at which the
lump sum award in the settlement agreement would be paid, because actual payments had
already been made. Also, there was no evidence that Henjum had returned more than $800 or
that Henjum would actually receive future payments of $120.10 per month under the settlement
agreement. The Commissioner asserts that Social Security Ruling (“SSR”) 97-3 provides that
the Commissioner need not blindly follow the terms of a settlement.
The Court notes that the issue the SSA addressed in SSR 97-3 was whether it should give
effect to an amended stipulation on a prior lump sum workers’ compensation settlement which
originally resulted in offset of the disabled worker’s claim. 1997 WL 605332 at *1 (SSA Oct. 3,
1997) (emphasis added). The SSA determined that it should not give effect to the amended
stipulation if it was amended solely to circumvent the offset provisions of the Act. Id. The SSA
expressly noted that the Ruling did not address “the related issue of the validity of stipulated
lump sum settlements where the original settlement contains a term purporting to prorate a lump
sum over the life expectancy of the worker.” Id. at n.5. Therefore, SSR 97-3 is not directly
applicable to the present case.
The Commissioner quoted Sunde v. Barnhart, 417 F.3d 986 (8th Cir. 2005) for the
proposition that “Social Security Ruling 97-3 addressed a second (or amended) stipulation, but
the policy of refusing to be bound by the terms of a stipulation that provides an end-run around
the federal offset seems equally applicable to an original stipulation.” (Def.’s Mem. in Supp. of
Mot. for Summ. J. at 9). The Commissioner asserts that this case is like Sunde because the
stipulation in both cases created illusory payments to create an end-run around the federal offset.

8

The Court notes that in Sunde, the Eighth Circuit addressed the issue of whether an
attorney’s fee award in a workers’ compensation case could be allocated to a time period
different from that during which the fees were actually paid to avoid the federal offset in DIB
required under 42 U.S.C. ' 423a, and held that it could not. 417 F.3d at 987, 990. Like in the
present case, the stipulation provided that it was intended to maximize the employee’s
entitlement to Social Security disability benefits. Id. at 988. The Sunde Court held that the
Commissioner’s decision was consistent with the purposes underlying section 42 U.S.C. ' 424a
because:
the Commissioner essentially construed [20 C.F.R.] ' 404.408(d)
to prohibit a WC settlement stipulation from allocating paid legal
expenses to a time period different from that in which the expenses
were actually paid, where evidence indicated the stipulation was
designed solely for the purpose of circumventing the federal offset
provision.

Id. at 989. The Sunde Court noted that although SSR 97-3 addressed a second or amended
stipulation, “the policy of refusing to be bound by the terms of a stipulation that provides an endrun around the federal offset seems equally applicable to an original stipulation.” Id. at 990. The
court further stated, “[w]e see no basis for binding the SSA to the terms of an original stipulation
that essentially increases an individual’s maximum allowable DIB by creating an illusory
payment period for attorney’s fees.” Id. The court cited Berger, 200 F.3d at 1161, where it
“held that a ‘bare intent to evade the offset’ was an insufficient basis upon which to bind the SSA
to the terms of the settlement.” Id.
This Court finds that the reasoning of the Eighth Circuit in Sunde and Berger also applies
here, where the actual workers’ compensation payments Henjum received [$509.82 weekly or

9

approximately $2,209.22 monthly]7 were much greater than the illusory lifetime expectancy
payments described in the Stipulation [$120.10 monthly].

In the Stipulation, the lifetime

expectancy payment provision was created for the express purpose of maximizing Henjum’s
entitlement to Social Security disability benefits.
When there is a settlement for a lump sum workers’ compensation benefit, the ALJ need
only approximate how the benefits would have been paid on a monthly basis. See 20 C.F.R.
' 404.408(g). The ALJ’s decision to use the monthly benefit actually paid to Henjum before he
entered into the Stipulation, even though the ALJ did not deduct the $800.00 Henjum paid back,
was a close estimate to the monthly benefit Henjum actually received between November 4,
2003 and October 12, 2004.
Henjum did not in fact receive lifetime payments under the Stipulation; and there is
nothing in the Stipulation that indicates the provision for lifetime payments was anything other
than an end-run around the federal offset provision. See Berger, 200 F.3d at 1161 (“[w]e are
inclined to agree that SSA was not compelled to prorate the settlement award over Berger’s
remaining life expectancy.”) The illusory payments of $120.10 a month over Plaintiff’s life
expectancy were far less than what Henjum actually received during the relevant time period and
retained after the Stipulation. The Court must defer to reasonable regulatory interpretations.
Shalala v. Guernsey Memorial Hosp., 514 U.S. 87, 94-95 (1995).

Therefore, if an ALJ

reasonably determined a reduction that would approximate, as nearly as practicable, the periodic
monthly benefit reduction under the statute and regulation, the Court must affirm the ALJ. See
e.g., Bubnis v. Apfel, 150 F.3d 177, 181-85 (2nd Cir. 1998). The Court finds the ALJ’s decision

7

The Court calculated the approximate monthly payment by multiplying 509.82 by 52 and
dividing by twelve. See also Tr. 39 “Start 12/03 Stop 09/04” “WC only 2209.20”
10

was based on a reasonable interpretation of 20 C.F.R. ' 404.408(b), because it closely
approximated the workers’ compensation benefits Henjum was actually paid on a monthly basis.
JJG

11