United States District Court, Northern District of California
April 22, 2003
KEVIN S. FUSON, PLAINTIFF,
JO ANNE B. BARNHARDT, COMMISSIONER OF SOCIAL SECURITY, DEFENDANT.
The opinion of the court was delivered by: Maxine M. Chesney, United States District Judge
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT; REMANDING ACTION FOR FURTHER PROCEEDINGS
Plaintiff Kevin S. Fuson brings this action pursuant to 42 U.S.C. § 405 (g) to obtain judicial review of a final decision of the Commissioner of the Social Security Administration. The matter is before the Court on plaintiffs motion for summary judgment and defendant's cross-motion for summary judgment. Pursuant to Civil Local Rule 16-5, the motions have been submitted on the papers without oral argument. Having considered the papers in support of and in opposition to the motions, the Court rules as follows.
Plaintiff became eligible for supplemental security income ("SSI") benefits in January 1984. (Certified Transcript of Record ("Tr.") at 128.) On September 14, 1995, the Social Security Administration ("SSA") approved plaintiff's Plan for Achieving Self-Support ("PASS").*fn1 (Tr. at 91.) Plaintiffs plan was "to start a store-front collectible business." (See Tr. at 67.) Under the PASS, which was effective as of March 1995, plaintiff was able to set aside $422 of his monthly social security benefits, up to a maximum of $8,524 over the term of the PASS. (Tr. at 91.) In approving the plan, the SSA stated: "Our approval is good until 8/31/96 when we will review your activities under the plan and consider extending it." (Id.)
In April 1997, plaintiff filed a request for an extension of his PASS. (Tr. at 58-65, 94-96.) On August 6, 1997, the SSA advised plaintiff that before it would review plaintiffs request for an extension of his PASS, plaintiff would need to submit certain additional information. (Tr. at 97-98.) The SSA also advised plaintiff that his SSI benefits "may stop" if he did not respond to the request for further information before September 6, 1997. (Tr. at 97.) On August 12, 1997, plaintiff filed a Request for Reconsideration, contending that his benefits should not be stopped before a determination on his plan had been made. (Tr. at 99.) On January 24, 1998, the SSA denied plaintiffs Request for Reconsideration, stating: "[W]e cannot continue to pay the extra money each month that we have been paying until a decision on the PASS is made." (Tr. at 103.) On March 20, 1998, plaintiff provided additional information concerning his PASS to the SSA. (Tr. at 106-08.) That same day, plaintiff also filed a Request for Hearing by an Administrative Law Judge ("ALJ"), challenging the SSA's determination to reduce plaintiffs SSI benefits while plaintiffs request to extend his PASS remained pending. (Tr. at 110.)
On April 29, 1998, the SSA sent plaintiff a letter denying his request for an extension of his PASS, stating:
When the goal of a PASS involves self employment, the
plan must include a detailed business plan that
explains how, when and why the business will be
successful. Neither the original PASS nor the business
plan you submitted with it provides this information.
In order to make a decision on your request for an
extension of your PASS you were asked to provide this
information, but you said this already has been done
and did not submit what was requested. Although you
have received additional income as a result of the
PASS for thirty-three months you did not yet have a
place to operate your business and have not made any
profit from your business. You have not supplied any
information to establish that the proposed business
has a reasonable chance of being successful and that
it will lead to you becoming self supporting.
Therefore your request for an extension of your PASS
is denied and it is suspended effective February
1997. Please note, however, that if you can provide an
in-depth business plan that gives a specific date and
place that you will actually begin selling merchandise
we will consider approving an extension to cover
storage fees and possibly other expenses.
(Tr. at 113.) On May 13, 1998, plaintiff sent the SSA what he described as a "business plan written for the period April, 1997 thru September, 1998."*fn2
(See Tr. at 119). Thereafter, on June 23, 1998, plaintiff filed a Request for Reconsideration of the SSA's April 29, 1998 decision to suspend his PASS. (See Tr. at 121.) On November 27, 1998, the SSA denied reconsideration, stating:
We have thoroughly reviewed your PASS, the business
plan you submitted in 1995, and the evidence you
submitted for your progress review and find that the
decision to suspend your PASS was correct.
The business plan you submitted was incomplete and
provided no evidence of how your business will be
successful or how it will lead to you becoming
self-supporting. In addition, there is no evidence
that you have taken the steps necessary to start your
business. Therefore, the original redetermination is
On March 5, 1999, ALJ Gilbert Pavlovsky issued a decision on the issue of whether plaintiff remained eligible for an income exclusion under his PASS for the period during which the SSA was considering whether to grant plaintiffs request for an extension.*fn3 (Tr. at 127-31.) ALJ Pavlovsky ruled that plaintiff remained eligible for an income exclusion "through at least the date a substantive determination is made on his formal request for extension." (Tr. at 130-31.) At the time that decision was announced, however, the substantive determination, as noted above, had already been made by the SSA, a fact of which neither plaintiff nor the SSA advised ALJ Pavlovsky. (Tr. at 151.)
In response to ALJ Pavlovsky's decision of March 5, 1999, the SSA issued retroactive payments to plaintiff in May 1999 and August 1999, for the periods February 1998 through May 1999 and March 1995 through August 1999, respectively. (Tr. at 29, 145-46, 151-52.) On October 3, 1999, the SSA advised plaintiff that it was implementing its April 29, 1998 decision to deny an extension. (Tr. at 151-52.) Thereafter, on October 14, 1999, the SSA notified plaintiff that it would reduce plaintiffs benefits beginning September 1, 1999. (Tr. at 158-163.) On October 25, 1999, plaintiff filed a Request for Reconsideration of the October 14, 1999 notice. On November 23, 1999, the SSA denied plaintiffs Request for Reconsideration, stating:
The decision to reduce your SSI payments is correct.
We must now count your Social Security disability as
income. In the past we had excluded your Social
Security as income because of a Plan to Achieve Self
Support. However it was decided that you were not in
compliance with your PASS and accordingly, we must
count the Social Security benefits as income against
(Tr. at 169.)
On December 30, 1999, plaintiff filed a Request for Hearing by an ALJ, stating:
Since 98 Jan. my PASS plan was stopped without a
reason (I have a decision on March 99 on this issue
from Judge Pavlovsky at Hearings & Appeals S.F.) I
also got a redetermination Ms. McSweeney on Nov. 99
which I also disagree with. And they are still
refusing to pay me my [sic] from the March 99
(Tr. at 174.) On May 23, 2000, in response to plaintiffs December 30, 1999 Request for Hearing, ALJ F. Neil Aschemeyer conducted a hearing. (Tr. at 39.) During the hearing, plaintiff argued that the SSA erred by not renewing his PASS because he was in compliance with the terms of his PASS, and that he had not received all of the money due to him under ALJ Pavlovsky's decision of March 5, 1999. (See Tr. at 40, 48.)
In a decision dated May 26, 2000, ALJ Aschemeyer stated that "the only issue to be considered at this hearing is whether the claimant's request for extension of the income exclusion should be continued beyond September 1999." (Tr. at 30) (emphasis in original). The ALJ found that plaintiff was not eligible for an extension of his original PASS, because plaintiffs "plan for achieving his occupational objective is not viable and he has not made sufficient progress under the approved terms of his original PASS." (Tr. at 31.)
On July 16, 2001, the Appeals Council denied plaintiff's request for review of the ALJ's decision. Thereafter, plaintiff commenced this action for judicial review.
The Commissioner's determination to deny benefits will not be disturbed if they are supported by substantial evidence and based on the application of correct legal standards. See Reddick v. Charter, 157 F.3d 715, 720 (9th Cir. 1998). "Substantial evidence means 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." Andrews v. Shalala, 53 F.3d 1035, 1039 (9th Cir. 1995). The reviewing court must consider the administrative record as a whole, and weigh both the evidence supporting and detracting from the ALJ's decision. See id. If the evidence is susceptible to more than one rational interpretation, the reviewing court will uphold the decision of the ALJ. See id.
Plaintiff seeks review of ALJ Aschemeyer's decision of May 26, 2000. Plaintiff argues the ALJ erred in his resolution of both issues presented in his December 30, 1999 Request for Hearing: (1) whether the SSA erred by not extending plaintiffs PASS; and (2) whether plaintiff had received all benefits due under ALJ Pavlovsky's decision of March 5, 1999.
A. Extension of PASS
Plaintiff contends that his request for an extension of his PASS was improperly denied.
ALJ Aschemeyer found that plaintiff was not eligible for an extension of his PASS for two independent reasons: (1) plaintiff had "not made sufficient progress under the approved terms of his original PASS"; and (2) plaintiffs "plan for achieving his occupational objective [was] not viable." (Tr. at 31.)
As a threshold matter, plaintiff argues that ALJ Pavlovsky's decision of March 5, 1999 resolved the issue of whether plaintiff was in compliance with the terms of his PASS and thus entitled to an extension. In his March 1999 decision, ALJ Pavlovsky found plaintiff was in compliance with his PASS as of April 1997 (see Tr. at 130), noting there was nothing in the record before him indicating that plaintiff was not in compliance or that the SSA had made a determination to that effect. (See Tr. at 128-29.)*fn4 In particular, ALJ Pavlovsky observed:
The claimant formally requested the time extension on
April 25, 1997 (Exhibit 6). As already noted, there is
no indication that the Administration has yet made a
determination on whether an extension should be
granted. . . .
In this case, there is no indication that the claimant
failed to follow the conditions of his original plan,
or that he ever abandoned his original plan; the
claimant still appears committed to his original
plan. Likewise, it is apparent that the claimant has
not yet achieved his occupational goal.
(Tr. at 128-29.) As discussed above, ALJ Pavlovsky thereupon concluded that the SSA could not reduce plaintiffs benefits pending the SSA's "substantive determination" of whether plaintiff was entitled to an extension. (See Tr. At 131.)
In his May 2000 decision, ALJ Aschemeyer interpreted ALJ Pavlovsky's decision as follows:
In the previous Hearing Decision (dated March 5,
1999), the Administrative Law Judge was not aware that
a substantive reconsideration determination had been
made in November 1998, since the case material was
pending with other components of the Social Security
Administration. As a result, the Administrative Law
Judge found that the claimant appeared to be in
compliance with the terms of his original PASS at the
time he filed his extension in April 1997 (since there
was no documentary evidence to the contrary), and that
the income exclusion should therefore be continued
until a substantive determination was made on the
formal request for extension.
At the hearing, the claimant testified that he
believes the prior Hearing Decision was fully
favorable to him on the issue of whether he was still
eligible for the income exclusion he was given under
his original PASS, and he believes that the Hearing
Decision was never fully implemented by the Social
Security Administration. However, the prior Hearing
Decision provided for very limited relief in that it
directed a continued income exclusion only until a
substantive determination was made on the claimant's
request for extension (without knowing that such a
determination had already been made).
(Tr. at 30) (emphasis in original).
ALJ Aschemeyer correctly interpreted ALJ Pavlovsky's decision as not resolving the issue of whether plaintiff was in compliance with his PASS at the time the SSA held to the contrary. The issue of compliance was not before ALJ Pavlovsky for determination as plaintiffs Request for Hearing was limited to the issue of whether the SSA should have reduced plaintiff's benefits pending the SSA's decision on plaintiffs request for an extension. ALJ Pavlovsky's decision does not discuss the SSA's determination, announced in April 1998 and November 1998, that plaintiff was not in compliance with the terms of his PASS, as that decision was not brought to the attention of ALJ Pavlovsky.*fn5 Consequently, ALJ Aschemeyer did not err by rejecting plaintiffs argument that ALJ Pavlovsky had resolved the issue of compliance. Accordingly, the Court turns to ALJ Aschemeyer's determination of that issue.
As noted, ALJ Aschemeyer determined that plaintiff had "not made sufficient progress under the approved terms of his original PASS." (See Tr. at 31.) The Code of Federal Regulations provides that the SSA will discontinue payments of benefits allowed under a PASS where the claimant "fail[s] to follow the conditions of [the] plan." See 20 C.F.R. § 416.1182. Under agency guidelines, "compliance is performing according to the approved plan (or as amended). An individual is in compliance provided he/she is adhering: to the savings and spending schedule; and timely to any other steps/activities prescribed under the plan." See POMS SI 00870.002(B)(3) (Pl.'s Ex. 62 at 2) (emphasis added). *fn6 Steps include milestones and interval steps. See POMS SI 00870.006(D)(3) (Pl.'s Ex. 62 at 11.) "Milestones or Interval Steps are significant and discernable events that depict an individual's progress towards the attainment of his/her occupational goal." See POMS SI 00780.002(B)(8) (Pl.'s Ex. 62 at 3).
ALJ Aschemeyer determined that plaintiff had not timely adhered to the steps prescribed under plaintiff's PASS, stating:
[T]he claimant's original PASS called for him to use
the additional SSI benefits he would be receiving to
transfer his inventory of merchandise to the local
area, purchase computer equipment, network with
potential business contacts, and research information
he would need to open the business (Exhibit 3). Such
actions were to be completed by August 1996, with
actual rental of shop space and purchase of additional
supplies to take place during an anticipated 18-month
extension (which would have ended in January 1998, if
all actions had taken place timely).
However, in the claimant's request for extension
(filed in April 1997, almost a year after the first
period should have ended), he was still including the
purchase of computer equipment and moving his
inventory as some of his PASS-related expenses for
which he needed the continued income exclusion
(Exhibit 6). Those expenses should have been taken
care of during the first period covered by the
original PASS, especially since that period was
essentially extended by the Administration's failure
to review the claimant's compliance in August 1996, as
(Tr. at 30.)
Among the "steps necessary to achieve objective" that plaintiff set forth in his original PASS proposal were: "[t]o transfer beginning inventory from my mother's garage in San Antonio, Texas to a peninsula location (June 1995)" and "[t]o purchase a computer to organize and price inventory and organize and manage the business itself (August 1995 Thru June, 1996)." (See Tr. at 67.) These steps were adopted by the SSA when it approved his PASS*fn7 and, under the terms of the SSA's approval, were to be completed by plaintiff prior to August 31, 1996. (See Tr. at 91.)
Plaintiff, however, conceded in his request for an extension that as of April 25, 1997 he had not transferred the inventory from his mother's garage in San Antonio, Texas, and he had not purchased a computer. (See Tr. at 94.) In the request for an extension, plaintiff explained that during the initial 18 months of his PASS:
I have maintained a vehicle in good working order. I
purchased inventory for my business that is currently
being held in a storage unit. I spent time networking
with other antique and non-profit businesses. I
discussed the possibility with small business owners
and non-profit groups of setting up a store-front
partnership or a space within an existing business. I
am currently having my business cards printed. I
purchased a pager. I set up a business phone line with
voice mail. I purchased multiple display cases that
are currently in a storage unit. I researched
information to obtain licensing as a non-profit
(Tr. at 94-95.) Absent from plaintiffs discussion of his activities during the initial 18 months are references to the above-noted steps prescribed in the initial PASS approval. Indeed, in his request for an extension, plaintiff conceded: "Over the next eighteen months I plan to purchase a computer . . . I plan to retrieve excess inventory from my mother's home in Texas." (Id.)
Plaintiff did not argue to ALJ Aschemeyer, nor does he argue on appeal, that the above-noted initial steps were immaterial or that they do not constitute "significant and discernable events that depict [his] progress towards the attainment of [his] occupational goal." See POMS SI 00870.002(B)(3) (Pl.'s Ex. 62 at 2). Rather, plaintiff argues that he was in "complete compliance" with the terms of the PASS. (See Pl.'s Mot. at 5.) Plaintiff, however, cites to no evidence in support of this assertion, nor does he otherwise demonstrate ALJ Aschemeyer erred in finding plaintiff was not in compliance by reason of plaintiffs failure to timely adhere to the milestones/interval steps prescribed in his original PASS.
Accordingly, substantial evidence supports ALJ Aschemeyer's finding that plaintiff did not comply with the initial conditions of his PASS. As that finding, standing alone, is a sufficient ground to warrant the SSA's discontinuing payments of benefits allowed under a PASS, see 20 C.F.R. § 416.1182, the ALJ's decision not to extend plaintiffs PASS will be affirmed.*fn8
B. Benefits Due Under March 1999 Decision
In light of ALJ Pavlovsky's decision of March 5, 1999, the SSA paid plaintiff retroactive benefits. (Tr. at 145-46, 151-52.) After receiving those retroactive benefits, plaintiff challenged the SSA's calculations of the benefits due under ALJ Pavlovsky's decision. (Tr. at 154.) Specifically, plaintiff asserted he was due the sum of $6752, rather than the "estimated" $5800 he received. (See id.) The administrative record does not reflect that the SSA expressly addressed plaintiffs challenge as to the amount due, although the SSA advised plaintiff that "[t]he decision to reduce your SSI payments is correct." (Tr. at 169.)
In plaintiffs Request for Hearing Before an ALJ, plaintiff stated he had not received all benefits assertedly due under ALJ Pavlovsky's decision. (See Tr. at 174.) At the hearing before ALJ Aschemeyer, plaintiff attempted to offer testimony to support his claim that the SSA did not correctly calculate the amount of retroactive benefits. (See Tr. at 47-49.) The ALJ disallowed such testimony, stating: "[I]t's not related to the issue before me." (Tr. at 50.) According to the ALJ, "the only issue to be considered at this hearing is whether the claimant's request for extension of the income exclusion should be continued beyond September 1999." (Tr. at 30) (emphasis in original). In that regard, ALJ Aschemeyer noted in his decision that the SSA "fully complied" with the terms of ALJ Pavlovsky's decision by delaying implementation of its decision not to extend plaintiffs PASS and by paying additional retroactive benefits. (Tr. at 30.) ALJ Aschemeyer's decision, however, did not address plaintiffs claim that the SSA's calculation of retroactive benefits was incorrect. Consequently, ALJ Aschemeyer did not make a determination on one of the issues raised in plaintiffs Request for Hearing.
Accordingly, the case will be remanded for consideration of plaintiffs claim that the SSA incorrectly calculated the amount of his retroactive benefits.
For the reasons stated above:
1. The ALJ's decision that plaintiff was not eligible for an extension of his PASS is hereby AFFIRMED.
2. With respect to the calculation of the amount of retroactive benefits due, the matter is hereby REMANDED for further proceedings consistent with this order.
The clerk shall close the file.
IT IS SO ORDERED.