Filed: Jun. 13, 1995
Latest Update: Mar. 02, 2020
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 6-13-1995 Serrant v VI Employ Sec Agency Precedential or Non-Precedential: Docket 94-7639 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Serrant v VI Employ Sec Agency" (1995). 1995 Decisions. Paper 166. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/166 This decision is brought to you for free and open access by the Opinions of the
Summary: Opinions of the United 1995 Decisions States Court of Appeals for the Third Circuit 6-13-1995 Serrant v VI Employ Sec Agency Precedential or Non-Precedential: Docket 94-7639 Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995 Recommended Citation "Serrant v VI Employ Sec Agency" (1995). 1995 Decisions. Paper 166. http://digitalcommons.law.villanova.edu/thirdcircuit_1995/166 This decision is brought to you for free and open access by the Opinions of the U..
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Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
6-13-1995
Serrant v VI Employ Sec Agency
Precedential or Non-Precedential:
Docket 94-7639
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
Recommended Citation
"Serrant v VI Employ Sec Agency" (1995). 1995 Decisions. Paper 166.
http://digitalcommons.law.villanova.edu/thirdcircuit_1995/166
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1995 Decisions by an authorized administrator of Villanova
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 94-7639
___________
CHERYL SERRANT,
Appellant
v.
VIRGIN ISLANDS EMPLOYMENT SECURITY AGENCY,
Unemployment Insurance Service,
Appellee
_____________________________________________
Appeal from the District Court
of the Virgin Islands
Division of St. Thomas and St. John
D.C. Civil Action No. 91-cv-00068
_____________________________________________
Argued: April 20, 1995
Before: BECKER, NYGAARD and ROTH, Circuit Judges.
(Filed June 13, 1995)
RICHARD AUSTIN, ESQUIRE (ARGUED)
Legal Services of the Virgin Islands, Inc.
3017 Orange Grove
Christiansted, St. Croix
U.S. Virgin Islands 00820-4375
Attorney for Appellant
ALVA A. SWAN, ACTING ATTORNEY GENERAL
PAUL L. GIMENEZ, SOLICITOR GENERAL
ELLIOTT M. DAVIS (ARGUED)
ASSISTANT ATTORNEY GENERAL
Virgin Islands Department of Justice
48B-50 Kronprindsens Gade
St. Thomas, Virgin Islands 00802
Attorneys for Appellee
___________________________
OPINION OF THE COURT
___________________________
BECKER, Circuit Judge.
This is an appeal from a final order of a United States
Magistrate, 28 U.S.C. § 636(c)(1). That order affirmed a
decision of a hearing examiner for the appellee Virgin Islands
Employment Security Agency, Unemployment Insurance Service
(within the Virgin Islands Department of Labor) (“Agency”), which
in turn had reversed an initial determination awarding
unemployment benefits to appellant Cheryl Serrant. The hearing
examiner also authorized the Agency to recoup previously paid
benefits from Serrant. It is the latter decision, also affirmed
by the Magistrate Judge, that is challenged on this appeal. For
the reasons that follow, we reverse.
I
On April 24, 1990, Serrant was employed at Point
Pleasant Beach Resort as a reservations clerk. According to the
hotel management, Serrant was discharged because she refused to
prepare an “advance occupancy report.” According to the hearing
examiner, acting on the appeal of the hotel from the initial
award of benefits, Serrant’s actions leading to her dismissal
constituted misconduct within the meaning of 21 V.I.C. §
304(b)(3), thereby resulting in her disqualification for
unemployment insurance benefits under that section.1 While
Serrant maintains that her actions did not constitute wilful
misconduct within the meaning of the statute, a position that may
have merit, the facet of the hearing examiner’s decision dealing
with denial of benefits is not challenged on this appeal.
Rather, we consider only the portion of the hearing examiner’s
decision dealing with recoupment.
The recoupment holding was predicated on 24 V.I.C. §
305(j)(2), which provides:
If the Commissioner of Labor finds, within the
two-year period following payment to any individual of
any amount as benefits under this chapter, that such
individual is not entitled, by reason other than that
specified in subsection (h)(2) or subsection (j)(1)
above, to such amount, he shall repay such amount to
the Commissioner of Labor for the Unemployment Fund or
in the absence of such repayment such amount shall be
deducted from any future benefits payable to him under
this chapter, within the two-year period following the
date of notice of the final determination or decision;
Provided, That no repayment or deduction from benefits
shall be required under this paragraph if the amount
overpaid was received by the individual without fault
on his part, and such recoupment would be against
equity and good conscience.
(emphasis added).
1
. 24 V.I.C. § 304(b)(3) provides in pertinent part:
(b) An insured worker shall not be disqualified for
writing week credits or benefits for any week of his
unemployment unless with respect to such week the
Director finds that:
(3) he was discharged for misconduct connected with his
most recent work . . . .
The hearing examiner’s rationale for authorizing
recoupment is contained in the following paragraph of his
opinion:
It is clear that recoupment or denial of future
benefits is warranted in the instant case. This
Claimant was awarded benefits where she was at fault.
She was terminated because of her own misconduct.
Section 305(j)(2) allows the Agency to elect to recover
the benefits paid to a claimant or to deny future
benefits. This case provides an instance where that
election must be made. The Commissioner must determine
which is appropriate. The Act offers no guidance on
this point. It allows the Commissioner to do either as
a matter of discretion.
The case then came on Writ of Review, 5 V.I.C. § 1421
and 5 V.I.C. app. V Rule 11(a), before the Magistrate Judge. His
resolution of the issue was equally terse. After quoting §
305(j)(2) he stated:
The hearing examiner’s rationale was that it was
because of Petitioner’s misconduct, which is an
intentional act, that she was dismissed and that,
therefore, since it was ultimately determined that the
benefits were received through Petitioner’s fault, she
must repay the Agency.
In reviewing, this determination by the hearing
examiner, this court finds that the decision is
supported by a rational basis, and, therefore, cannot
be disturbed.
The Magistrate Judge therefore affirmed the hearing examiner’s
decision. Because our own holding turns on questions of the
interpretation and application of law, our review of the
Magistrate Judge’s conclusion is plenary.
II
The key terms in § 305(j)(2) (for purposes of this
appeal) are “without fault,” and “equity and good conscience.”
Unfortunately, neither the hearing examiner nor the Magistrate
Judge devoted much attention to the meaning of these terms, or to
the record as it might bear on them. That may well be due to the
fact that the parties directed the attention of these
administrative and judicial officers primarily to the misconduct
issue, and there was little, if anything, placed in the record
relative to fault and “equity and good conscience.”
A
Turning first to the meaning of the phrase “without
fault,” the threshold question is the extent to which it is
informed by the terms of § 305(j)(1). That section provides:
(j)(1) Any person who makes, or causes to be made
by another, a false statement or representation of a
material fact, knowing it to be false or knowingly
fails, or causes another to fail, to disclose a
material fact, and as a result thereof has received any
amount as benefits under this chapter to which he was
not entitled shall, in the discretion of the
Commissioner of Labor, be liable to repay such amount
to the Commissioner of Labor for the Unemployment Fund
or to have such amount deducted from any future
benefits payable to him under this chapter within the
two-year period following the date of notice of the
final determination, redetermination or decision.
Serrant argues that the fault necessary to subject one to
recoupment is that specified in § 305(j)(1), that is, making
misrepresentations to receive benefits. This approach makes
eminent sense. It is also consistent with the most similar
provision we have found, a Wyoming regulation set forth in the
margin,2 which also defines fault principally in terms of
considerations that bear on fault in making the application for
benefits.
If § 305(j)(1) were controlling, Serrant’s position
would be strong because there is no administrative or judicial
finding that she made any kind of misrepresentation to obtain
benefits. However, § 305(j)(2) by its terms appears not to apply
where the person received benefits to which he or she was not
entitled by reasons specified in (j)(1). Section 305(j)(2)
therefore seems to contemplate a situation where a claimant
receives benefits through his or her own fault but not by means
2
. Fault Criteria. In determining whether a claimant is without
fault for purposes of deciding whether to waive recovery of
overpaid benefits under [Wyo. Stat.] § 27-3-409, the Division
shall consider the following criteria:
(a) Whether the claimant made an incorrect
statement of facts of a material nature in order to
collect benefits; or
(b) Whether the claimant knew or should have
known that the statement he gave the Division was
incorrect; or
(c) Whether the claimant failed to disclose or
caused another person to fail to disclose a material
fact in connection with a claim for benefits; or
(d) Whether the claimant knew or should have
known the fact not disclosed was material; or
(e) Whether the claimant knew or should have
known he was not entitled to benefits; or
(f) Whether the overpayment resulted directly or
indirectly, in whole or part, from some other erroneous
act or omission of the claimant, which he knew or
should have known was wrong; or
(g) Any other relevant factor.
Div. of Unemployment Ins., Dep’t of Employment, Rules and
Regulations, ch. XXXII, § 1 (1990).
of what are essentially misrepresentations as described in
(j)(1).
But this conclusion is quite problematic, for it is
difficult to identify such a scenario. Indeed, if the (lamented)
construction is correct, hearing examiners would, as Serrant
contends, and as the hearing examiner and Magistrate Judge did
here, be likely to conflate the facts to be considered in
connection with the unemployment benefit application process
under § 305(j) (i.e., the putative misconduct) with the work-
related conduct relevant to the determination of disqualification
for benefits under 24 V.I.C. § 304(b)(3). This seems dubious
inasmuch as these are discrete statutory provisions and appear to
serve different purposes. For example, if there is no
misconduct, there is no overpayment. However, if there is
misconduct, and that automatically was deemed fault in receipt of
benefits, a recipient who was denied benefits for misconduct
would, in view of the conjunctive wording of the recoupment
provision,3 always be subject to recoupment regardless of the
background circumstances and the dictates of equity and good
conscience. We doubt that the legislature intended such an
untoward result.
3
. The language reads (with emphasis supplied):
. . . provided, that no repayment or deduction from
benefits shall be required under this paragraph if the
amount overpaid was received by the individual without
fault on his part, and such recoupment would be against
equity and good conscience.
But then what does § 305(j)(2) mean? What additional
or different conduct (other than misrepresentation to obtain
benefits) transforms being disqualified for benefits due to work-
related misconduct into receiving overpayment through fault of
one’s own? That is far from clear. Moreover, § 305(j)(2)
exempts from recoupment not individuals who applied for benefits
through no fault of their own, but those who received them
without fault. This distinction seems opaque, and leads us to
doubt that these provisions really fit together.4 Taking the
statute at its most literal meaning, however, Serrant was not at
fault in receiving the benefits. She received them as the result
of an order of the (appellee) Agency, and there is no finding
that, at the time she received them, she had done anything
blameworthy in connection with their receipt. Even the work-
related misconduct finding came months later, at the time of the
hearing examiner’s decision. In short, Serrant’s failing to
complete the occupancy report for the hotel does not render her
later receipt of benefits due to Agency order to be through fault
of her own.
B
The meaning of “equity and good conscience” probably
favors Serrant's position even more strongly. The terms are not
defined in any Virgin Islands Regulation, but similar provisions
in other jurisdictions make clear that equity and good conscience
4
. We leave clarification to the Virgin Islands legislature,
which might be well advised to look at the problems we have
identified.
relate to the ability of the recipient to repay the debt without
experiencing hardship. See 20 C.F.R. § 10-323:
(a) Recovery of an overpayment is considered to be
“against equity and good conscience” when an individual
presently or formerly entitled to benefits would
experience severe financial hardship in attempting to
repay the debt . . . .
See also International Union, UAW v. Dole, 919 F.2d 753, (D.C.
Cir. 1990) (financial hardship is key factor in interpretation
and consideration of “equity and good conscience” as used in 20
C.F.R. § 617.55(a)(2)(ii)(A), concerning recoupment of Trade
Adjustment Assistance benefits); Giles v. Director of Labor,
621
S.W.2d 10, 11 (Ark. App. 1981) (Corbin, J., concurring) (“[O]ne
factor in determining equity and good conscience is the financial
condition of the claimant.”); Gilles v. Department of Human
Resources Development,
521 P.2d 110, 117 (Cal. 1974) (considering
“whether recovery of the overpayment, by imposing extraordinary
hardship on the claimant, would tend to defeat the objectives of
the Unemployment Insurance Code.”); Section 2 of the Wyoming
Regulations cited above.5 We believe that the Virgin Islands
5
. Section 2. Equity and Good Conscience and Defeats the
Purpose of the Act Criteria. In determining whether recovery of
an overpayment defeats the purpose of the Employment Security Law
or is against equity and good conscience for the purpose of
deciding whether the overpayment of benefits shall be waived, the
Division shall consider the following criteria:
(a) The extent to which recovery of the overpayment
would create an extreme financial hardship on the claimant.
Extreme financial hardship as used herein means the claimant
would be unable to provide himself or his immediate family with
minimal necessities of food, clothing, medicine, and shelter as a
result of the Division recovering the overpayment. Extreme and
lasting financial hardship may be expected to endure for more
than 120 days.
statute carries with it a similar meaning. There is no
indication in the record, that Serrant, who has been granted
leave to proceed in this case in forma pauperis, has an ability
to repay the sums she has received. There is not only no fact
finding contra but nothing in the record from which any such
finding could be inferred. And while we acknowledge that there
may be “other relevant factors,” see supra note 4, none have been
suggested as being applicable here.
III
In view of the foregoing, it appears from the record
that, had the hearing examiner and Magistrate Judge focused on
the pertinent issue, they would have determined that any
overpayment received by Serrant was received without fault on her
part, and further, that any recoupment would have to be deemed
against equity and good conscience. Repayment of benefits is
therefore not required. The fact that Serrant was found to have
been guilty of wilful misconduct in terms of the benefit
entitlement ruling does not affect this result.6
(..continued)
(b) The extent to which an agent of the Division made
an error which contributed to causing the overpayment of
benefits. However, such an error shall not include making a
decision to pay benefits which was reversed through the appeals
process.
(c) Any other relevant factor, provided the claimant
is without fault.
6
. In light of our disposition, we do not address Serrant’s
contention that the doctrine of equitable estoppel would prohibit
the Agency from recouping the overpayment of benefits due to the
Agency’s seven-month delay in issuing a final decision reversing
her award of benefits.
The order of the district court, therefore, will be
reversed, and the case remanded with the directions to vacate the
order for recoupment.
