Carsley v. Commissioner of Social Security

Filing 21

ORDER GRANTING DEFENDANTS OBJECTIONS TO REPORT AND RECOMMENDATION, ADOPTING REPORT AND RECOMMENDATION ONLY TO THE EXTENT IT RECOMMENDS REVERSAL OF THE COMMISSIONERS DETERMINATION, AND REVERSING AND REMANDING TO THE COMMISSIONER FOR FURTHER CONSIDERATION. Signed by Judge J. Daniel Breen on 6/16/17. (Breen, J.)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
EASTERN DIVISION
WILLIAM T. CARSLEY,
Plaintiff,
v.

No. 12-1102

COMMISSIONER OF SOCIAL SECURITY,
Defendant.
______________________________________________________________________________
ORDER GRANTING DEFENDANT’S OBJECTIONS TO REPORT AND
RECOMMENDATION, ADOPTING REPORT AND RECOMMENDATION ONLY TO THE
EXTENT IT RECOMMENDS REVERSAL OF THE COMMISSIONER’S
DETERMINATION, AND REVERSING AND REMANDING TO THE COMMISSIONER
FOR FURTHER CONSIDERATION
______________________________________________________________________________
I. INTRODUCTION
The complaint in this action was filed on May 1, 2012, by the pro se Plaintiff, William T.
Carsley. On February 3, 2017, the matter was referred to United States Magistrate Judge
Charmiane G. Claxton for a report and recommendation. (Docket Entry (“D.E.”) 18.) On March
3, 2017, Judge Claxton recommended that the final decision of the Commissioner be reversed,
the Plaintiff’s waiver of overpayment of benefits be granted, benefits withheld from the claimant
as a result of recoupment of overpayments be reimbursed, and judgment be entered pursuant to
Sentence Three of 42 U.S.C. § 405(g) modifying the Commissioner’s decision. (D.E. 19.) On
March 16, 2017, the Commissioner filed timely objections to the magistrate judge’s report and
recommendation. (D.E. 20.) As no response to the Commissioner’s objections has been filed
and the time therefor has expired, this matter is ripe for decision.

II. COURT’S REVIEW OF MAGISTRATE JUDGE’S DETERMINATION
When objections have been filed with respect to a report and recommendation of the
magistrate judge, the district judge “shall make a de novo determination of those portions of the
report or specified proposed findings or recommendations to which objection is made.” 28
U.S.C. § 636(b)(1); see also Fed. R. Civ. P. 72(b)(3). He “may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. §
636(b)(1); see also Fed. R. Civ. P. 72(b)(3). The district judge may not “simply concur” in the
magistrate judge’s findings, but must “conduct [his] own review in order to adopt the
recommendations.” Fharmacy Records v. Nassar, 465 F. App’x 448, 456 (6th Cir. 2012) (per
curiam) (internal quotation marks omitted). “[T]he filing of an objection does not oblige the
district court to ignore the report and recommendation; it requires the court to give fresh
consideration to the finding objected to insofar as the objection impugns the integrity of the
finding.” Id.
III. BACKGROUND
The Plaintiff began receiving disability insurance benefits (“DIB”) on March 1, 1991.1
On December 21, 2009, the Social Security Administration (“SSA”) issued a notice informing
him that he was overpaid in the amount of $27,135 for the period from March 2008 to November
2009. (Administrative Record (“AR”) 74-77.) The claimant sought a waiver of the overpayment
and, after a hearing before the Administrative Law Judge (“ALJ”) on July 14, 2011, at which
Carsley represented himself, the waiver was granted. (AR 22-26.) The ALJ concluded that,
while the claimant was overpaid, he was not at fault in causing the overpayment and recovery of
the payment defeated the purpose of Title II of the Social Security Act, 42 U.S.C. § 401, et seq.

1

The nature of Carsley’s disability is unclear from the record.
2

On November 17, 2011, the Appeals Council decided, sua sponte, to review the determination of
the ALJ and agreed that Carsley had been overpaid, but found he was not without fault in the
overpayment and denied the waiver. The instant appeal of the Appeals Council’s determination
followed.
IV. ANALYSIS
Where, as here, the Appeals Council grants review of a claim, its determination becomes
the Commissioner’s final decision. See Sims v. Apfel, 530 U.S. 103, 106-07 (2000); Snell v.
Apfel, 177 F.3d 128, 132 (2d Cir. 1999); Walker v. Sec. of Health & Human Servs., 884 F.2d
241, 244 (6th Cir. 1989). The determination of the Commissioner must be affirmed if the correct
legal standards were used and the decision is supported by substantial evidence. Bowman v.
Comm’r of Soc. Sec., ___ F. App’x ___, 2017 WL 1065553, at *3 (6th Cir. Mar. 21, 2017).
“Substantial evidence exists if a reasonable mind might accept the relevant evidence as adequate
to support” the decision. Mueller v. Comm’r of Soc. Sec., ___ F. App’x ___, 2017 WL 1065550,
at *1 (6th Cir. Mar 21, 2017) (per curiam). “The substantial-evidence standard presupposes that
there is a zone of choice within which the decisionmakers can go either way, without
interference by the courts.” Blakley v. Comm’r of Soc. Sec., 581 F.3d 399, 406 (6th Cir. 2009)
(quoting Mullen v. Bowen, 800 F.2d 535, 545 (6th Cir. 1986)). “Therefore, if substantial
evidence supports the [Commissioner’s] decision, th[e] [c]ourt defers to that finding even if there
is substantial evidence in the record that would have supported an opposite conclusion.” Id.
(internal quotation marks omitted). When considering whether substantial evidence supports the
Commissioner’s decision, the district courts “do not try the case de novo, resolve conflicts in
evidence, or decide questions of credibility.” Bass v. McMahon, 499 F.3d 506, 509 (6th Cir.
2007).

3

Section 404 of the Social Security Act permits the Commissioner to recover from persons
to whom Social Security benefits have been overpaid those monies in excess of the correct
amount. 42 U.S.C. § 404(a)(1). The statute further provides, however, that recovery may not be
had from “any person who is without fault if such . . . recovery would defeat the purpose of [the
statute] or would be against equity and good conscience.” 42 U.S.C. § 404(b)(1); see also 20
C.F.R. § 404.506(a).
The threshold inquiry in determining whether an overpayment of benefits should be
waived is the “fault” of the beneficiary. Watson v. Sullivan, 940 F.2d 168, 171 (6th Cir. 1991)
(per curiam); Chavez v. Comm’r of Soc. Sec., No. 1:14-cv-532, 2015 WL 1730371, at *2 (S.D.
Ohio Apr. 14, 2015), report & recommendation adopted 2015 WL 4540138 (S.D. Ohio July 27,
2015). “Although the [SSA] may have been at fault in making the overpayment, that fact does
not relieve the overpaid individual . . . from whom the [SSA] seeks to recover the overpayment
from liability for repayment if such individual is not without fault.” 20 C.F.R. § 404.507. As
explained in the regulation, fault depends “upon whether the facts show that the incorrect
payment to the individual . . . resulted from . . . [a]n incorrect statement made by the individual
which he knew or should have known to be incorrect”; “[f]ailure to furnish information which he
knew or should have known to be material”; or “acceptance of a payment which he either knew
or could have been expected to know was incorrect.” Id. Section 404(b) provides that “[i]n
making for purposes of [analyzing fault] any determination of whether any individual is without
fault, the Commissioner of Social Security shall specifically take into account any physical,
mental, educational, or linguistic limitation such individual may have[.]” 42 U.S.C. § 404(b)(2);
see also 20 C.F.R. § 404.507 (the Commissioner “will consider all pertinent circumstances,

4

including the individual’s age and intelligence, and any physical, mental, educational, or
linguistic limitations . . . the individual has”).
A conclusion that the claimant was not without fault does not require a finding of bad
faith; instead, an overpayment may arise from an honest mistake. Morgan v. Finch, 423 F.2d
551, 553 (6th Cir. 1970); Quaynor v. Comm’r of Soc. Sec., Civil Action No. 14-12258, 2015 WL
9487846, at *4 (E.D. Mich. Dec. 9, 2015), report & recommendation adopted 2015 WL 9478026
(E.D. Mich. Dec. 29, 2015). It is the burden of the claimant to demonstrate that he is without
fault before a benefits overpayment can be considered waived. Watson, 940 F.2d at 171. “The
question of fault is one of fact and as such is subject to the substantial evidence standard of
review.” Doan v. Sec. of Health & Human Servs., No. 86-5956, 1987 WL 36143, at *1 (6th Cir.
July 7, 1987) (per curiam); Hassett v. Comm’r of Soc. Sec., No. 1:12cv419, 2013 WL 3834372,
at *4 (W.D. Mich. July 24, 2013).
“The decision which must be reached in a fault determination is highly subjective, highly
dependent on the interaction between the intentions and state of mind of the claimant and the
peculiar circumstances of his situation.”

Piskorek v. Colvin, No. 13 CV 3831, 2014 WL

5152565, at *7 (N.D. Ill. Oct. 7, 2014). The determination of fault requires the ALJ, or the
Appeals Council in this case, to evaluate whether a reasonable person in the claimant’s own
circumstances, and with whatever limitations he may have, could believe he was entitled to
continued benefits. Harrison v. Heckler, 746 F.2d 480, 482 (9th Cir. 1984); Ducharme v. Astrue,
Civil Action No. PWG-08-2698, 2012 WL 907777, at *3 (D. Md. Mar. 15, 2012).
Further, “[w]here an individual . . . accepts such overpayment because of reliance on
erroneous information from an official source within the Social Security Administration . . . with
respect to the interpretation of a pertinent provision of the Social Security Act or regulations

5

pertaining thereto, . . . such individual, in accepting such overpayment, will be deemed to be
without fault.” 20 C.F.R. § 404.510a. “[W]here an individual demonstrates satisfaction of 20
C.F.R. § 404.510a, the individual has also satisfied the ‘without fault’ requirement of 42 U.S.C.
§ 404(b).” Valley v. Comm’r of Soc. Sec., 427 F.3d 388, 393 n.2 (6th Cir. 2005). Adjustment or
recovery is waived in the situation described in § 404.510a “since it will be deemed such
adjustment or recovery is against equity and good conscience.”

20 C.F.R. § 404.512(a).

Nonetheless, the claimant may be determined to be at fault for accepting overpayment after
receiving misinformation “if the evidence shows he should have recognized that his changed
circumstances warranted notice to Social Security, or at least an inquiry about any effect of that
change on his eligibility.” Gladden v. Callahan, 139 F.3d 1219, 1223 (8th Cir. 1998).
In the hearing before the ALJ, the claimant offered testimony, which the ALJ found
credible, that, prior to beginning a part-time job at a parts store, he went to a Social Security
office where an employee told him he could make a certain amount per year without endangering
his benefits and, as a result of that advice, he tried to stay under that amount.2 However, he was
misinformed, as the permissible amounts were based on monthly earnings, rather than annual
income. According to the claimant, “I was told that I could make so much per year, so that’s
what I was going by. But, actually, it’s so much per month. . . . And I didn’t know that.” (AR
246.)
The ALJ found as follows:
I find that the claimant was undoubtedly told that he could engage in work during
his Trial Work Period and his Extended Period of Eligibility with certain earnings
limitations. However, given the complexity and month-by-month calculations
involved in determining which months constitute a trial work period and when an
extended period of eligibility starts and ends, I also find that it was reasonable for
2

It is not entirely clear from the record when this conversation occurred; however, it
apparently took place at some time prior to Plaintiff’s attempts at work in 2004.
6

the claimant to rely on the information he was given by the Social Security agent
while he continued to work for some five years without being advised that his
disability status was in danger because of his earnings.
There is no evidence that the Social Security Administration gave the claimant
any updated information to clarify the amount of earnings he could earn without
losing his disability status, or that the extent of his ongoing earnings placed his
disability status in jeopardy. The claimant was justified in relying on the
information he had been given.
(Id. at 25.)
As noted above, the Appeals Council disagreed with the no-fault determination, finding
that
the record shows that the claimant was notified by the [Social Security]
Administration in April and May of 2007 that he had completed a trial work
period in August 2004 and the amount he could earn and still receive disability
benefits during the extended period of eligibility. At the time of the notices, the
claimant was working for Three Little Pigs Bar-B-Q. In the Notice of Important
Information dated May 15, 2007, the claimant was advised that earnings over
$900 a month was considered to be substantial gainful work activity [(“SGA”)].
The record shows that the claimant earned $1,140.39 in March 2008 and
$1,013.76 in April 2008, which is well over the $900 considered to be SGA in the
2007 n[ot]ice.
Prior to February 2008, the month the claimant’s entitlement to benefits
terminated, he knew or should have known the monthly amount he could earn and
still receive benefits, and therefore accepted payments which [he] knew or should
have known were incorrect.
(Id. at 12 (internal citations to the record omitted).)
The Commissioner argues in its objections to the report and recommendation that the
Appeals Council’s conclusion that Carsley was not without fault with respect to the overpayment
was supported by substantial evidence, namely the two 2007 written communications
(collectively, the “2007 Letters”) referred to in the Appeals Council’s opinion.3 The first letter is
undated but appears from the record to have been sent in April 2007. Therein, the SSA advised

3

Copies of these letters are contained in the administrative record at pages 37 and 42.
7

the Plaintiff that his work and earnings indicated that his disability ended because of substantial
work in September 2004, based on employment at Three Little Pigs Bar-B-Q and Kelly Services
in 2003 and 2004. The letter also explained as follows:
Your disability ends if your work activity shows your ability to do substantial
work.
*
*
*
Generally, substantial work is physical or mental work a person is paid to do.
Work can be substantial even if it is part-time. To decide if a person’s work is
substantial, we consider the nature of the job duties, the skill and experience
needed to do the job, and how much the person actually earns.
A person’s work may be different than before his or her health problems began. It
may not be as hard to do and the pay may be less. However, we may still find that
the work is substantial under our rules.
Usually, we find that work is substantial if gross monthly earnings average more
than the following amounts:
In 2007
*
in 2005
in 2004
in 2003

$900
*
*
$830
$810
$800 . . .

(Id. 38-39 (emphasis added).) The letter indicated that the “usual” or “general” rules may not
apply if there was evidence to suggest the claimant did not fully earn the salary paid or if he had
impairment-related work expenses, noting that no such evidence had been submitted by Carsley.
(Id. 37.) The agency requested any additional information the claimant wished to provide prior
to making its final decision on whether to discontinue benefits.
The second correspondence, dated May 15, 2007, informed Plaintiff of the SSA’s final
determination that his disability status ended as of September 2004 and contained the same
explanation set forth above with respect to the first communication. Both missives provided
contact information in the event Plaintiff had questions. It does not appear from the record that

8

he ever contacted the agency for clarification or with questions with regard to whether
substantial work was based on monthly or annual earnings.
It was the conclusion of the magistrate judge that the Appeals Council committed
reversible error in finding Carsley not without fault based on the 2007 Letters.4 Specifically, the
magistrate judge criticized the agency’s use of the terms “generally,” “usually,” and “may” as
“clearly suggest[ing] that there is a discretionary component requiring consideration of the other
enumerated factors, including assessing the nature of the job duties and the skill and expertise
needed but leav[ing] Plaintiff woefully lacking in meaningful guidance as to how such discretion
would ultimately be exercised.” (D.E. 19-1 at PageID 124-25.) However, the nature of the job
duties and skill and experience necessary in determining what is and what is not substantial work
are not at issue. Rather, the question as the Court sees it is whether the Appeals Council erred in
determining that Carsley should have recognized from the references exclusively to monthly
earnings in the 2007 Letters that clarification may be in order.
As noted above, the Court must affirm the Commissioner’s decision if there is substantial
evidence to support it. Here, the Appeals Council found the claimant not without fault in light of
the 2007 Letters’ references to the amounts he could earn on a monthly basis and continue to
receive benefits.5 There is no evidence in the record that Carsley made any effort to question
how the calculation was made or the inconsistency between the agency’s monthly calculation as
evidenced in the 2007 Letters and what he had been told previously. Thus, the Court cannot find
that the Appeals Council’s determination on this question, while rendering a harsh result, was not

4

The Commissioner does not appear to take issue with the Plaintiff’s assertion that he was
misinformed by an SSA employee or agent.
5

The claimant has not contended that he did not receive the letters.
9

supported by substantial evidence. The report and recommendation is rejected to the extent it
found otherwise.6
However, the Court does agree with the magistrate judge’s ultimate conclusion and
recommendation that the Commissioner’s decision should be reversed, albeit for a different
reason. The Appeals Council, and the ALJ for that matter, failed to take into consideration
Carsley’s “age and intelligence, and any physical, mental, educational, or linguistic limitations,”
as is required under § 404.507 and, thus, the correct legal standards for determining whether
waiver of the overpayment was appropriate were not employed.
For purposes of this discussion, the Court is mindful of the fact that, as noted above,
Carsley was not represented at the hearing before the ALJ. Nor did he have counsel who could
have provided any evidence to the Appeals Council.7

“Social Security proceedings are

inquisitorial rather than adversarial. It is the ALJ’s duty to investigate the facts and develop the
arguments both for and against granting benefits.” Sims, 530 U.S. at 110-11. Where a claimant
is unrepresented before the ALJ, “an administrative law judge’s basic obligation to develop a full
and fair record rises to a special duty . . . [to] scrupulously and conscientiously probe into,
inquire of, and explore for all the relevant facts.” Lashley v. Sec. of Health & Human Servs., 708
F.2d 1048, 1051-52 (6th Cir. 1983) (internal citations omitted). “This heightened duty arises
from the remedial nature of the Social Security Act, as well as from the recognition that the
ultimate responsibility for ensuring that every claimant receives a full and fair hearing lies with
the administrative law judge.” Brewer v. Comm’r of Soc. Sec., Case No. 5:16-cv-137, 2016 WL
6

In light of this decision, the Court need not consider the findings of the magistrate judge
with respect to whether recovery of the overpayment would defeat the purposes of the Social
Security Act or be against equity and good conscience in connection with the misinformation
claim. See Quaynor, 2015 WL 9487846, at *6 n.7.
7

According to the record, Attorney Kathleen Caldwell represented Carsley in 2009 and
2010 but apparently withdrew sometime prior to the hearing before the ALJ.
10

7634431, at *10 (N.D. Ohio Dec. 12, 2016), report & recommendation adopted 2017 WL 27260
(N.D. Ohio June 3, 2017). However, the “mere fact that a claimant was unrepresented is not
grounds for reversal. Rather, [the district court is to] examine each case on its own merits to
determine whether the ALJ failed to fully develop the record and therefore denied the claimant a
full and fair hearing.” Duncan v. Sec. of Health & Human Servs., 801 F.2d 847, 856 (6th Cir.
1986) (internal citation omitted); see also Long v. Soc. Sec. Admin., No. 3:15-cv-00751, 2016
WL 6583649, at *8 (M.D. Tenn. Nov. 4, 2016).
While, in the “Applicable Law” section of her opinion, which was incorporated into the
decision of the Appeals Council, the ALJ stated that, in determining whether Carsley was at
fault, she would consider the § 404.507 circumstances, there is no indication or mention
whatever that any such consideration actually occurred, either on the part of the ALJ or the
Appeals Council. Moreover, the ALJ asked no questions of the claimant during the hearing
concerning any age-related, intellectual, physical, mental, or educational limitations he may have
had. These circumstances, along with the lack of information in the record concerning the
underlying disability for which Carsley was initially awarded DIB; information in the transcript
indicating that the jobs he performed during his period of disability, at Kelly Services, a
temporary staffing service, and as a helper at Three Little Pigs Bar-B-Q, did not require any
heightened mental acuity, intelligence, or advanced education; and the absence of counsel to
bring any such limitations to the attention of the ALJ or the Appeals Council, compel the Court
to conclude that the final decision of the Commissioner can simply not be meaningfully assessed
on judicial review. See Masotti v. Comm’r of Soc. Sec., 14-CV-5081 (SLT), 2016 WL 5404632,
at *5-6 (E.D.N.Y. Sept. 27, 2016) (absent findings relative to the existence of any of the
limitations enumerated in § 404.507, especially where the claimant was unrepresented by

11

counsel, the record was not sufficiently developed to permit meaningful review); Martinez v.
Astrue, Civil Action No. 11-cv-00654-WYD, 2012 WL 1045230, at *8 (D. Colo. Mar. 28, 2012)
(ALJ’s failure to inquire into or consider claimant’s education or intelligence in fault
determination or to develop the record on the issue, as she was unrepresented, required remand
for further factfinding); Hughes v. Barnhart, No. Civ.A.03-174-A-1, 2004 WL 3247622, at *3-4
(M.D. La. May 27, 2004) (ALJ cited the applicable regulation and stated that he considered the §
404.507 factors, but mentioned no evidence upon which he based his conclusion that the
claimant was not without fault; thus, the decision failed to provide an adequate basis upon which
the court could determine whether the correct legal principles were followed or whether
substantial evidence supported the decision, rendering remand justified).
CONCLUSION
Based on the foregoing, the objections of the Commissioner to the report and
recommendation relative to the Plaintiff’s misinformation claim are GRANTED. The report and
recommendation is adopted only to the extent it recommended that the Commissioner’s
determination be reversed. The determination of the Appeals Council is REVERSED and this
matter is REMANDED to the Commissioner for reevaluation of the claimant’s request for
waiver of overpayment recovery and further development of the record as indicated herein.
IT IS SO ORDERED this 16th day of June 2017.
s/ J. DANIEL BREEN
UNITED STATES DISTRICT JUDGE

12