L.N.P., оn his own behalf and on behalf of his dependent children P.D.P. and L.D.P., and on behalf of all others similarly situated v. KILOLO KIJAKAZI, in her official capacity as Acting Commissioner of the Social Security Administration; SOCIAL SECURITY ADMINISTRATION
No. 22-1187
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
April 7, 2023
Before NIEMEYER, AGEE, and QUATTLEBAUM, Circuit Judges.
PUBLISHED. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Michael Stefan Nachmanoff, District Judge. (1:21-cv-00820-MSN-TCB). Argued: December 8, 2022.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Agee and Judge Quattlebaum joined.
ARGUED: Cameron Reynolds Argetsinger, II, KELLEY DRYE & WARREN LLP, Washington, D.C., for Appellant. Hugham Chan, OFFICE OF THE UNITED STATES ATTORNEY, Alexandria, Virginia, for Appellees. ON BRIEF: Ira T. Kasdan, KELLEY DRYE & WARREN LLP, Washington, D.C., for Appellant. Jessica D. Aber, United States Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Richmond, Virginiа, for Appellees.
This appeal addresses the question of whether an applicant for retirement benefits under the Social Security Act has satisfied the conditions necessary for excusing his failure to exhaust the administrative process required by
In October 2019, just before his 62nd birthday, L.N.P. applied to the Social Security Administration (“SSA“) for early retirement benefits, as well as “auxiliary” benefits for his two dependent children. SSA approved his application, advising him that by January 2020, after he turned 62, he would recеive retirement benefits of $2,154 per month, and his children would each receive auxiliary benefits of $1,107 per month, the amount of which was derived from the amount of L.N.P.‘s benefits.
Believing that SSA had used an incorrect formula to calculate his children‘s benefits and was underpaying them as a result, L.N.P. filed a request with SSA for reconsideration, and an SSA employee informed him by telephone that his request was being denied. When L.N.P. asked for a written confirmation of SSA‘s decision, the employee indicated that she would request one but that it could take up to a year to be issued. In July 2021, after not receiving a written decision for more than a year, L.N.P. commenced this action against SSA pursuant to
SSA filed a motion to dismiss L.N.P.‘s complaint pursuant to
The district court granted SSA‘s motion and dismissed L.N.P.‘s complaint without prejudice, concluding that L.N.P.‘s failure to exhaust was “a jurisdictional problem requiring dismissal under [Rule] 12(b)(1)” and that L.N.P. had failed to satisfy the conditions necessary for excusing exhaustion. After L.N.P. filed a motion to alter or amend the judgment under
While we agree with L.N.P. that
I
Under the Social Security Act, individuals who reach “retirement age” are entitled tо “old age insurance benefits” based on their earnings record. At the time of L.N.P.‘s application for benefits, the applicable full retirement age was 66 1/2 years old. In addition, retirees’ “auxiliaries” — such as spouses and dependent children under the age of 18 — are each entitled to receive benefits derivative from the retiree‘s benefits in an amount that may not exceed one-half of the retiree‘s benefits. But all such benefits — the retiree‘s and auxiliaries’ — are subject to a statutory family maximum amount that can have the effect of limiting the auxiliaries’ benefits. If a rеtiree reaches the age of 62, he may elect to apply for a reduced “early retirement” benefit at any time thereafter up to the full retirement age.
In this case, L.N.P. elected to receive early retirement benefits at age 62, and his reduced benefit was calculated to be $2,154 per month, rather than the full retirement benefit, which would have been $2,954 per month had he waited until age 66 1/2. His two dependent children each received an auxiliary benefit of $1,107 per month. After receiving notice of these benefits, L.N.P. believed that SSA had miscalculated his childrеn‘s benefits and thus was underpaying them, and he so notified SSA. He maintained that under the Social Security Act, when he elected to receive a reduced benefit based on early retirement, that reduced amount should effectively increase the remaining portion of the family maximum amount that would then be available to his dependent children, increasing the benefit for each child by $375 per month. He argued that his calculation
SSA, however, took the position that the children‘s benefits must be based on the family maximum benefit minus the full retirement benefit, even if the retiree receives a reduced benefit amount, and thаt therefore L.N.P.‘s dependent children were not entitled to any additional payment. SSA explained that its method of calculation reflected a policy that when the retiree receives a reduced benefit, the auxiliary benefits based on that retiree‘s work record must also be reduced — not proportionally increased, as L.N.P. would have it — and it thus viewed L.N.P.‘s proposed method as “lead[ing] to the absurd result of redistributing to auxiliary beneficiaries the benefits that the early retiree chose to forego.”
L.N.P. commenced this action seeking a declaration that his method of calculation is correct, an injunction requiring SSA to follow it, and reimbursement of the underpayment amount of $375 per child per month. In his detailed 31-page complaint, L.N.P. alleged that SSA “improperly deduct[ed] a much larger amount from the ‘family maximum’ than [it] should,” resulting “in lesser amounts of child‘s insurance benefits being paid than is required by law.” He alleged that SSA‘s improper calculations were “traceable to [its] failure to properly apply the holding of the First Circuit‘s decision in [Parisi], which [properly] construed [
In his complaint, L.N.P. acknowledged that he did not exhaust his administrative remedies, as required by
On SSA‘s motion, the district court dismissed L.N.P.‘s complaint, concluding that L.N.P. could not be excused from exhausting administrative remedies and that his complaint was therefore subject to dismissal under
From the district court‘s judgment dated November 24, 2021, and its order denying L.N.P.‘s
II
On the subjects of jurisdiction and exhaustion of administrative remedies, the Social Security Act provides:
The findings and decisions of the Commissioner of Social Security after a hearing shall be binding upon all individuals who were parties to such hearing. No findings of fact or decision of the Commissioner of Social Security shall be reviewed by any person, tribunal, оr governmental agency except as herein provided. No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter.
Any individual, after any final decision of the Commissioner of Social Security made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the Commissioner of Social Security may allow. Such action shall be brought in the district court of the United States for the judicial district in which the plaintiff resides, or has his principal place of business . . . .
Modern-day claimants must genеrally proceed through a four-step process before they can obtain review from a federal court. First, the claimant must seek an initial determination as to his eligibility. Second, the claimant must seek reconsideration of the initial determination. Third, the claimant must request a hearing, which is conducted by an ALJ. Fourth, the claimant must seek review of the ALJ‘s decision by the Appeals
Council. See 20 CFR § 416.1400 . If a claimant has proceeded through all four steps on the merits, all agree,§ 405(g) entitles him to judicial review in federal district court.
Smith, 139 S. Ct. at 1772. The exhaustion requirement was designed to let SSA process claims in accordance with its complex рrocedures and apply its expertise before authorizing judicial review. As the Court in Weinberger v. Salfi explained:
Exhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.
422 U.S. 749, 765 (1975) (emphasis added).
Because the Commissioner of Social Security has “ultimate responsibility for the integrity of the administrative program,” she has the discretion to waive the exhaustion requirement if she “satisfies [her]self, at any stage of the administrative process, that no further review is warranted either because the internal needs of the agency are fulfilled or because the relief that is sought is beyond [her] power to confer.” Mathews v. Eldridge, 424 U.S. 319, 330 (1976); see also Bowen v. City of New York, 476 U.S. 467, 483 (1986). And in “exceptional circumstances,” a court may excuse the exhaustion requirement. Hyatt v. Heckler, 807 F.2d 376, 378 (4th Cir. 1986) (citing Bowen, 476 U.S. at 483); see also Smith, 139 S. Ct. at 1774 (observing that exhaustion “may not only be waived by the agency, but also excused by the courts” (citations omitted)).
The Supreme Court has identified three conditions that permit a court to excuse compliance with
In short, Congress has channeled all claims for social security benefits first to SSA for its consideration and resolution in accordance with its administrative procedures and, only after the Commissioner of Social Security has issued her final decision, to a district court. That statutory sequence is mandatory. Yet, in exceptional circumstances, when the purposes of the administrative process have been fulfilled or when the Commissioner determines she has no power to grant the relief requested, the Commissioner may, in her discretion, waive the exhaustion requirement and allow the claim to proceed to court. Moreover, focusing on those same considerations, a court may excuse the exhaustion requirement. And there may also be an equitable justification for excusing exhaustion in the circumstance when engaging in the administrative proсess would result in irreparable injury to the claimant. See Bowen, 476 U.S. at 483–84.
With these principles in hand, we address L.N.P.‘s contention that the district court erred in not excusing exhaustion of administrative remedies in this case.
III
At the outset, L.N.P. contends that the district court erred by “treating exhaustion
In the initial order dismissing the complaint, the district court did indeed treat exhaustion as a jurisdictional question and accordingly relied on
L.N.P.‘s argument is well taken. While
[The requirement of a final decision by the Commissioner made after a hearing] consists of two elements, only one of which is purely “jurisdictional” in the sense that it cannot be “waived” by the [Commissioner] in a particular case. The waivable element is the requirement that the administrative remedies prescribed by the [Commissioner] be exhausted. The nonwaivable element is the requirement that a claim for benefits shall have been presented to the [Commissioner].
Absent such a claim there can be no “decision” of any type. And some decision by the [Commissioner] is clearly required by the statute.
424 U.S. at 328*; see also Smith, 139 S. Ct. at 1773–74; Bowen, 476 U.S. at 482–83. Thus,
Accordingly, a motion under
Id. (cleaned up). And even to succeed in these rare circumstances, the defendant must show “that the plaintiff‘s potential [response] to the affirmative defense was foreclosed by the allegations in the complaint.” Id. at 466.
We conclude that the Goodman exception applies in this case. L.N.P., recognizing that satisfying exhaustion under
On this threshold question raised by L.N.P., we therefore conclude that, while the district court erroneously relied on
IV
On the merits, the district court held that L.N.P. satisfied none of the three Bowen conditions, and accordingly, it dismissed L.N.P.‘s complaint for failing to exhaust administrative remedies as required by
Before addressing the Bowen conditions, we note that L.N.P.‘s contention that satisfaction of any one condition is sufficient to bypass the exhaustion requiremеnt appears to be foreclosed by our precedent. In Bowen, the Supreme Court identified and applied all three factors, stating:
[1] The claims in this lawsuit are collateral to the claims for benefits . . . . [2] Moreover . . . the claimants . . . would be irreparably injured were the exhaustion requirement now enforced against them. . . [3] Finally, . . . guided by the policies underlying the exhaustion requirement, . . . exhaustion would have been futile.
476 U.S. at 483–85 (cleaned up). And in Hyatt, we likewise articulated the three Bowen conditions and applied them conjunctively, suggesting that all three must be satisfied. See 807 F.2d at 378. We stated in conclusion that “the district court‘s judicial waiver of the exhaustion
Nonetheless, we address whether L.N.P. has satisfied each of the three Bowen conditions.
A
L.N.P. argues first that his claims are “collateral” to his claim for benefits, as he is seeking relief requiring SSA to “make ministerial calculations consistent with [the] law,” which reaches beyond the specific relief requested for himself and his children. He alleged in his complaint that SSA‘s calculations of auxiliary benefits have been violating
But L.N.P. also alleged in his complaint that he made a claim for benefits on his own behalf and on behalf of his children and that SSA awarded him and his children benefits based on calculations that, he claimed, violated
L.N.P.‘s complaint, which claimed systemic procedural violations that arose from his own claim for benefits, presents exactly the scenario that the Supreme Court has found does not justify bypassing the exhaustion requirement of
As in Ringer, we conclude that L.N.P.‘s own claims for benefits are inextricably intertwined with his systemic claims because both are bаsed on the very same allegedly erroneous method of calculating benefits. The claims are therefore not collateral in the sense first articulated in Mathews, where, as the Court noted, the constitutional challenge alleging a violation of the claimant‘s due process rights was ”entirely collateral to [the claimant‘s] substantive claim of entitlement.” 424 U.S. at 330 (emphasis added). Accordingly, L.N.P.‘s systematic claims do not warrant excusing the exhaustion of the
B
L.N.P. also argues that requiring him to exhaust administrative remedies will cause his dependent children “irreparable hardship.” He alleged that the irreparable hardship would arise from “economic hardships” caused by waiting for back benefits; by his mortality risk as a man in his 60s, given that his children‘s benefits are derivative of his own; and by the loss of interest on any economic reparation. In short, the irreparable hardship that L.N.P. claims is entirely economic. Moreover, the heightened mortality risk he alleged exists regardless of whether his children receive increased benefits; his death would not be a relevant factor for determining benefits payable before his death.
Economic hardship of the type L.N.P. claims is not the kind of equitable condition for which courts have excused exhaustion of the administrative process. For instance, in Mathews, the Court recognized a risk of irreparable injury based on the claimant‘s physical condition and corresponding dependency on disability benefits, such that “termination [of benefits] would damage him in a way not recompensable through retroactive payments.” 424 U.S. at 331. And in Bowen, the Court accepted the district court‘s finding that the “ordeal of having to go through the administrative appeal process may trigger a severe medical setback” for the claimant and therefore result in irreparable injury. 476 U.S. at 483.
In his complaint, L.N.P. alleged no physical injury, much less irreparable injury, that would be suffered as a consequence of delayed payment. Moreover, even as to the alleged economic hardship, he alleged that each of his children was receiving $1,107 per month and that, if he were to be successful, those payments would increase by only $375 per month. He made no allegation that this underpayment was depriving his children of basic life necessities or other matters of similar gravity. See Hyatt, 807 F.2d at 380 (applying the exception where the claimants would be “irreparably injured if the exhaustion requirement were enforced against them“); see also Smith v. Schweiker, 709 F.2d 777, 781 (2d Cir. 1983) (noting that the claimant‘s harms were not irreparable when they were “currently . . . receiving benefits and [were] eligible to make claims for past losses“).
C
Finally, L.N.P. argues that pursuing the administrative process would be futile because SSA personnel would follow its internal “Program Operations Manual System,” which, he claims, provides the method for calculating auxiliary benefits that is inconsistent with
L.N.P.‘s speculation as to what SSA would do might well be correct. But it also might not be correct. See Bowen, 476 U.S. at 487 (stressing that not “every internal policy [alleged] to be inconsistent with legal requirements . . . will justify . . . excusing exhaustion“). Indeed, this type of issue is of the kind that falls squarely within the policy underlying the exhaustion requirement that Congress recognized in enacting
preventing premature interference with agency processes, so that the agency
may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.
Id. at 484 (emphasis added) (quoting Salfi, 422 U.S. at 765); see also Smith, 139 S. Ct. at 1779 (noting that “a federal court generally goes astray if it decides a question that has been delegated to an agency if that agency has not first had a chance to address the question“).
Neither the district court nor this court has had the benefit of reviewing SSA‘s decision in light of a reasoned explanation for why it believes that the best interpretation of
* * *
In sum, L.N.P. made a claim to SSA for retirement benefits for himself and auxiliary benefits for his children. SSA awarded both him and his children benefits, calculating their amount in accordance with its operative internal manual. L.N.P. disagreed with SSA‘s calculation of his dependents’ auxiliary benefits and commenced this action without exhausting the administrative process. Despite his efforts to emphasize the fact that a favorable decision in his case would benefit many similarly situated persons, this case is, at bottom, about L.N.P.‘s disagreement with the manner in which SSA disposed of his claim for benefits.
Congress has stated clearly that all such claims must be channeled through
AFFIRMED