Willie Ousley v. Comm'r of Soc. Sec.
909 F.3d 786
| 6th Cir. | 2018Background
- Eleven SSDI/SSI beneficiaries were awarded benefits after representation by attorney Eric Conn; ALJ David Daugherty issued favorable decisions based largely on reports from four doctors (Adkins, Ammisetty, Huffnagle, Herr).
- SSA OIG uncovered a widespread scheme: Conn submitted pre-filled RFC forms and allegedly bribed ALJ Daugherty; OIG identified ~1,787 potentially tainted claims and referred them to SSA for redetermination.
- In 2015 SSA notified the eleven plaintiffs it would "redetermine" entitlement, statutorily disregarding evidence submitted by the four doctors when provided through Conn; plaintiffs were not given an opportunity to rebut the OIG's fraud-assertion before new ALJs.
- New ALJs held hearings, excluded all doctor reports tied to Conn, concluded plaintiffs were not entitled to benefits as of the original application dates, and terminated benefits (with potential overpayment liability).
- Plaintiffs challenged SSA procedures in district court under the Fifth Amendment (due process), the APA, and the Social Security Act; this consolidated appeal addressed differing district-court outcomes and the proper procedural protections for redetermination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether due process required an opportunity to rebut OIG's assertion of fraud before SSA redetermination hearings | Plaintiffs: Constitutionally entitled to notice of factual basis and a fair chance to rebut fraud assertions before a neutral decisionmaker; exclusion of doctors' reports without chance to rebut denied core process | SSA: Mathews balancing applies; existing redetermination process (ability to submit new evidence, hearings) suffices; burden of additional procedures and law-enforcement concerns justify exclusion | Held for plaintiffs: SSA violated due process by denying opportunity to rebut OIG fraud assertions; Mathews and older precedents require at least notice and chance to rebut when deprivation depends on contested factual findings |
| Whether SSA redetermination hearings complied with APA formal-adjudication requirements (official notice and opportunity to show contrary) | Plaintiffs: SSA used off-record OIG referrals to exclude evidence and failed to provide opportunity to contest material facts, violating APA formal-adjudication safeguards (5 U.S.C. §556(e)) | SSA: Redeterminations comport with §405(b)(1) and thus with APA; OIG fraud determinations are separate and need not be subject to APA formal-adjudication protections | Held for plaintiffs: SSA violated APA requirements by excluding evidence on off-record fraud findings without providing the opportunity to show contrary; remanded for further proceedings |
| Whether SSA's differential procedures (OIG-based vs. SSA-based fraud findings) are arbitrary and capricious under APA | Plaintiffs: Treating claimants differently based on whether OIG or SSA initiated fraud finding is arbitrary; similarly situated claimants receive unequal process | SSA: Distinct roles and burdens of OIG (law enforcement) justify different procedures; concerns about burden, interference with prosecutions, and investigatory expertise | Held for plaintiffs: SSA's disparate treatment is arbitrary and capricious; agency lacked adequate, non-post-hoc explanation in HALLEX; remand required |
| Whether SSA violated the Social Security Act by (a) redetermining without proof of fraud and (b) failing to "immediately" redetermine under §405(u) | Plaintiffs: Reopening/res judicata principles and POMS require proof (preponderance) before reopening; SSA delayed redeterminations for years despite earlier warning signs | SSA: §405(u) uses a lower "reason to believe" standard that authorizes redeterminations without proof; SSA acted appropriately in timing after OIG referral and statutory text does not prescribe a specific remedy for delay | Held for SSA: (a) SSA may redetermine on "reason to believe" basis (statutory text controls); (b) timing claim rejected—statute does not mandate an automatic remedy for delay; district courts' grants to SSA on these statutory claims affirmed |
Key Cases Cited
- Mathews v. Eldridge, 424 U.S. 319 (1976) (three-factor balancing test for procedural due process)
- Hamdi v. Rumsfeld, 542 U.S. 507 (2004) (notice of factual basis and fair opportunity to rebut before neutral decisionmaker)
- Greene v. McElroy, 360 U.S. 474 (1959) (where governmental action depends on fact findings, evidence must be disclosed so individual can show it is untrue)
- United States v. Scheffer, 523 U.S. 303 (1998) (limitations on right to present evidence; evidentiary rules may be upheld when reasonable)
- Motor Vehicle Mfrs. Ass'n v. State Farm, 463 U.S. 29 (1983) (agency actions must be upheld on the grounds articulated by the agency; arbitrary-and-capricious review)
- Auer v. Robbins, 519 U.S. 452 (1997) (deference to agency interpretation of its own regulations)
- Montalvo-Murillo v. United States, 495 U.S. 711 (1990) (courts ordinarily will not impose a coercive sanction for failure to meet statutory timing provisions)
- Gilbert v. Homar, 520 U.S. 924 (1997) (independent third-party findings can justify administrative deprivations without pre-deprivation hearing)