Carter v. Colvin
220 F. Supp. 3d 789
E.D. Ky.2016Background
- Multiple plaintiffs (Title II and Title XVI beneficiaries) received fully‑favorable Social Security awards based largely on opinions from physicians and decisions by ALJ David Daugherty; later those physicians, attorney Eric Conn, and ALJ Daugherty were implicated in an alleged fraud scheme.
- The OIG identified numerous applications (≈1,787) with reason to believe fraud was involved and referred them to the SSA; the SSA initiated statutorily mandated "redeterminations" under 42 U.S.C. §§ 405(u), 1383(e)(7), which exclude evidence tied to the alleged fraud.
- Plaintiffs were notified, given opportunities to submit new or substitute evidence, had redetermination hearings before new ALJs, and received adverse decisions; Appeals Council denials produced final agency action and plaintiffs brought § 405(g) suits.
- Plaintiffs claimed violations of the Fifth Amendment Due Process Clause, the Equal Protection Clause, the Social Security Act (reopening vs. redetermination and statutory immediacy), and the Administrative Procedure Act (notice‑and‑comment and on‑the‑record adjudication).
- The SSA argued redeterminations are distinct from reopenings, are authorized by statute and administrative guidance (SSR/HALLEX), and that procedural protections (opportunity to submit new evidence and agency assistance) satisfied due process without permitting challenge to OIG fraud referrals.
- The court held there were no material factual disputes and granted the Acting Commissioner summary judgment in part, finding the redetermination procedures constitutional and lawful as applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether due process requires disclosure of OIG fraud evidence and a pre‑redetermination hearing on the fraud allegation | Plaintiffs: denial of benefits rests on undisclosed "secret" fraud allegations; they must be allowed to see and challenge that evidence | SSA: fraud finding merely triggers a redetermination and exclusion of tainted evidence; plaintiffs get meaningful opportunity to submit substitute evidence | Held: No. Under Mathews/Eldridge balancing, plaintiffs received adequate process; exclusion of OIG evidence and opportunity to develop new evidence satisfy due process |
| Whether redetermination procedure must operate as a reopening (with full procedures) or permit hearings on OIG referrals | Plaintiffs: statutory history and purpose require reopening‑type procedures and hearings on fraud | SSA: Congress intended a streamlined redetermination distinct from reopenings; SSR/HALLEX and agency rules reflect that | Held: SSA’s interpretation is reasonable and entitled to deference; redeterminations are distinct and need not permit challenges to OIG referrals |
| Whether delay between alleged fraud discovery and redeterminations violated statutory "immediately" requirement | Plaintiffs: long delay prejudiced ability to obtain substitute evidence; statutory immediacy was violated | SSA: OIG investigatory prerogatives and risk to criminal prosecutions justify delay; statute permits withholding when referral would interfere | Held: Delay justified by investigatory concerns; plaintiffs failed to show a statutory violation entitling them to relief |
| Whether APA required notice‑and‑comment rulemaking or formal on‑the‑record adjudication for redeterminations | Plaintiffs: HALLEX/agency procedures bind beneficiaries and should have been promulgated formally; on‑the‑record adjudication required | SSA: HALLEX/SSR are interpretative/internal guidance not subject to notice‑and‑comment; statute does not require on‑the‑record adjudication | Held: No APA violation — procedures are interpretative/internal and the statute does not mandate on‑the‑record hearings |
Key Cases Cited
- Goldberg v. Kelly, 397 U.S. 254 (1970) (welfare recipients entitled to hearing before benefit termination)
- Mathews v. Eldridge, 424 U.S. 319 (1976) (three‑factor due process balancing test)
- Morrissey v. Brewer, 408 U.S. 471 (1972) (due process is flexible and situation‑dependent)
- Hamdi v. Rumsfeld, 542 U.S. 507 (2004) (notice of factual basis and opportunity to rebut required in some contexts)
- Califano v. Yamasaki, 442 U.S. 682 (1979) (procedural protections for waiver of recovery in benefits overpayment context)
- Skidmore v. Swift & Co., 323 U.S. 134 (1944) (weight to be given agency interpretations depends on their persuasiveness)
- Garcia v. Sec’y of Health & Human Servs., 46 F.3d 552 (6th Cir. 1995) (deference to Social Security rulings in statutory interpretation)
- First Nat. Bank of Lexington v. Sanders, 946 F.2d 1185 (6th Cir. 1991) (distinguishing substantive rules from interpretative guidance under the APA)