Tyler Jaxson v. Andrew Saul
970 F.3d 775
| 7th Cir. | 2020Background
- An ALJ (David Daugherty) and attorney Eric Conn ran a fraud scheme: Conn steered clients to physicians (including Frederic Huffnagle) and paid bribes to Daugherty; fabricated medical reports produced hundreds of millions in improper benefits.
- The SSA Inspector General notified the agency in 2015 of "reason to believe" fraud affected 1,787 named claimants; two statutes (42 U.S.C. §405(u) and §1383(e)(7)) require immediate redeterminations and direct the Commissioner to "disregard any evidence" when there is reason to believe fraud was involved in providing it.
- Tyler Jaxson applied in 2009; he missed agency exams, Conn submitted a Huffnagle-signed report, and ALJ Daugherty awarded benefits in 2010 without a hearing.
- After the IG report, SSA told Jaxson it would redetermine his claim and that it "must disregard" evidence from listed providers; an ALJ held a 2016 hearing, denied benefits, and the Appeals Council denied review; Jaxson sued under 42 U.S.C. §§405(g) and 1383(c)(3).
- The district court remanded, holding the summary exclusion violated due process; the Seventh Circuit affirmed the remand but on administrative-law grounds, holding the claimant is entitled to an adversarial opportunity to contest whether there is a "reason to believe" evidence is fraudulent, and concluding HALLEX/SSR 16-1p are not binding law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SSA may summarily exclude provider reports identified by the IG without giving the claimant an adversarial opportunity | Jaxson: Summary exclusion deprived him of due process; ALJ should have considered Huffnagle's report | SSA: Internal guidance and redetermination process allow exclusion; formal evidentiary hearings are unnecessary | ALJ must give both sides an opportunity to be heard on whether there is "reason to believe" the evidence was fraudulent; summary exclusion without that adversarial opportunity is improper (remand affirmed on administrative-law grounds) |
| Whether HALLEX and SSR 16-1p have the force of law | Jaxson: Agency policy compelled exclusion and affected rights | SSA: HALLEX/SSR are internal guidance and not legally binding | Court: HALLEX/SSR lack the force of law; they do not themselves change claimants' legal rights |
| Who decides whether there is "reason to believe" evidence is fraudulent and what process is required | Jaxson: Only a full evidentiary hearing (trial-like) adequately protects rights | SSA: Agency may resolve admissibility summarily (analogous to judge ruling on admissibility) | Court: ALJ may resolve the question without a full trial-style evidentiary hearing but must allow both sides to submit arguments and evidence before ruling (summary resolution acceptable when appropriate) |
| Whether a redetermination must be a formal, on-the-record APA §554 hearing | Jaxson: Remand proceedings must be on the record under the APA | SSA: Informal adversarial procedure suffices | Court: Argument forfeited below; in any event APA formal on-the-record procedures are not required—ordinary adversarial opportunity to rebut official notice suffices |
Key Cases Cited
- New York City Transit Authority v. Beazer, 440 U.S. 568 (1979) (constitutional adjudication is a last resort when nonconstitutional grounds suffice)
- Richardson v. Perales, 402 U.S. 389 (1971) (SSA hearings may rely on written medical reports; administrative hearings are less formal than trials)
- Biestek v. Berryhill, 139 S. Ct. 1148 (2019) (Supreme Court recognized permissible procedural shortcuts in SSA disability hearings)
- United States v. Martinez de Ortiz, 907 F.2d 629 (7th Cir. 1990) (trial judge rules on admissibility under a Fed. R. Evid. 104(a)-like framework without taking independent evidence)
- Hicks v. Commissioner, 909 F.3d 786 (6th Cir. 2018) (contrasting Sixth Circuit view that summary exclusion of IG-flagged evidence may raise due process problems)