JAMES S. GWIN, District Judge.
Plaintiff Stephanie Steigerwald brings this class action complaint against Defendant Nancy Berryhill, Acting Commissioner of the Social Security Agency ("Commissioner").
Defendant Commissioner moves to dismiss Plaintiff's complaint, saying this Court lacks subject matter jurisdiction.
For the following reasons, the Court
Defendant Commissioner has previously found Plaintiff Steigerwald entitled to both retroactive disability benefits under Title II of the Social Security Act and retroactive supplemental security income ("SSI") under Title XVI of that Act.
Eligibility for SSI benefits and the amount of those benefits are both affected by an individual's income, including income from Title II disability benefits.
When a claimant hires an attorney or other representative to aid them in obtaining Title II disability benefits, the claimant can pay the representative from her awarded Title II benefits.
Because a representative's fee may not be finalized until after a claimant is awarded retroactive benefits, SSA may need to calculate the windfall offset twice: once when a claimant is initially paid retroactive benefits, and again after the claimant's representative's fee is finalized.
After the representative's fee is finalized, a second windfall offset calculation can result in SSA paying the claimant additional benefits.
Plaintiff Steigerwald alleges that in a large number of cases, including her own, SSA has failed to perform a second windfall offset calculation after the final representative's fee is determined.
Because the process leading to the necessity of a windfall offset recalculation can be confusing when spoken of in the abstract, Plaintiff Steigerwald's account gives a useful example.
Plaintiff Steigerwald hired her attorneys in September 2009, and agreed to pay her attorneys 25 percent of the benefits they recovered for her.
At that time, SSA correctly calculated the amount of past-due SSI and Title II benefits owed to Steigerwald. SSA then paid all past-due SSI benefits to Plaintiff Steigerwald, and withheld all past-due Title II benefits in order to make the first windfall offset calculation and to account for approximately $17,000 in potential attorneys' fees that Steigerwald might have to pay.
Under her attorneys' agreement with Steigerwald, their successful representation entitled them to approximately $17,000, which is the amount they sought in a January 2015 petition.
In September 2016, SSA contacted Steigerwald's attorneys to ask whether Steigerwald's attorneys would petition the district court for the remainder of the fee that SSA had not awarded them. SSA also notified the attorneys that the agency was withholding approximately $3,500 (the difference between Steigerwald's attorneys' full fee and the amount SSA awarded them) from Steigerwald's benefits.
At this point, SSA had to complete two actions in order to finish paying Steigerwald's pastdue benefits. First, SSA needed to release the $3,500 it withheld for attorneys' fees. SSA did this in February 2017.
Second, SSA needed to perform another windfall offset calculation after reducing Steigerwald's qualifying income to account for the $13,500 attorneys' fees that she had paid.
A motion to dismiss pursuant to Rule 12(b)(1) may either make a facial jurisdictional attack or it can attack the factual basis of jurisdiction.
Defendant Commissioner argues that this Court lacks jurisdiction to hear Plaintiff Steigerwald's claims because (1) Steigerwald did not first present her claims to the SSA; (2) even if Steigerwald had first presented her claims, she did not exhaust those claims; and (3) Steigerwald's claims are now moot. Defendant Commissioner also argues that this Court lacks mandamus jurisdiction because Steigerwald has an alternate adequate remedy through § 405(g).
Defendant Commissioner argues that this Court lacks subject matter jurisdiction over Plaintiff Steigerwald's claims because she did not sufficiently bring those claims to SSA before filing her complaint, in violation of 42 U.S.C. § 405(g)'s non-waivable presentment requirement.
Section 405(g)'s presentment prong requires that all claimants bring their claims to the attention of SSA before filing suit in federal court.
Plaintiff Steigerwald argues that she or her attorneys satisfied § 405(g)'s presentment requirement three times: first, by originally filing her application for benefits; second, by her attorneys' petitioning for attorneys' fees; and third, by responding with a letter that told SSA that Steigerwald's attorneys' fees were final and arguing for SSA to "release the withheld benefits to the claimant."
The Court need not decide whether Steigerwald presented her current claims simply by filing for benefits or when her attorneys made their request for fees. Steigerwald's attorneys' subsequent letter to SSA regarding benefits withheld because of attorneys' fees satisfies the presentment requirement.
That letter, sent on September 15, 2016, responded to SSA's September 12, 2016 notice that SSA was still withholding funds from Plaintiff Steigerwald's benefits because of her attorneys' pending request for fees.
This letter informed Defendant Commissioner that the attorneys' fees in Plaintiff Steigerwald's case were final and told SSA to release whatever benefits SSA had withheld because of these outstanding fees. SSA's own operations manual states that once an attorney's fee is authorized by SSA or the district court in a case where both Title II and SSI claims are involved, SSA should send a copy of the notice authorizing the fee to the relevant SSA field office. That field office should then perform the necessary windfall offset benefits recalculation.
Therefore, SSA knew Plaintiff Steigerwald had demanded SSA perform a second, updated windfall offset calculation, and SSA had all of the information it needed to perform this calculation. Presentment does not require more than this.
The Court finds that by making SSA aware that the attorneys' fees issue was final and that SSA should release her withheld benefits, Plaintiff Steigerwald presented her claim.
In addition to its non-waivable presentment requirement, § 405(g) also contains a waivable requirement that a claimant exhaust her administrative remedies prior to filing an action in federal court. Defendant Commissioner can voluntarily waive this administrative exhaustion requirement, or in certain circumstances, the Court may require Defendant Commissioner to waive this requirement.
Plaintiff Steigerwald does not contend that she has exhausted her available administrative remedies. Instead, she argues that this requirement should be waived because exhaustion in this instance would be futile. She argues that neither she nor any class member received a notice of entitlement to retroactive payment of underpaid benefits. Without the knowledge that SSA had failed to perform a second windfall offset calculation and did not intend to do so, Plaintiff Steigerwald says there was no decision to appeal and no remedy to exhaust. Plaintiff Steigerwald also argues that exhaustion should be waived because her claim is collateral to her claim for benefits and she will suffer irreparable harm without waiver.
The Court finds each of these arguments persuasive. In Bowen v. City of New York, the Supreme Court identified three relevant factors for deciding whether a court should waive an exhaustion requirement: "(1) are the claims at issue collateral to the underlying decisions as to eligibility for entitlements; (2) would claimants be irreparably harmed were the exhaustion requirement enforced against them; and (3) would exhaustion of administrative remedies be futile."
All three of these factors weigh in favor of requiring waiver here. First, SSA has already determined that Plaintiff Steigerwald and the proposed class are entitled to both Title II and SSI benefits. Indeed, Defendant Commissioner now admits that it owed Steigerwald additional benefits after a windfall offset recalculation.
Second, Plaintiff Steigerwald makes a clear case for potential irreparable harm. Title II and SSI benefits are designed to ensure that recipients who live with both poverty and disability receive enough income to purchase basic life necessities. Prolonged denial of these benefits results in an inability to purchase these necessities,
Where, as here, a plaintiff has presented evidence that these vital benefits may languish in administrative purgatory for years, clear danger of irreparable harm exists.
Finally, Plaintiff Steigerwald has presented evidence that requiring administrative exhaustion would be futile. Defendant Commissioner accurately notes that when an attorneys' fee authorization occurs, SSA sends the claimant a notice that explains the windfall offset recalculation and states, "[i]f a claimant thinks more SSI benefits are due, and has not received more money or a letter within 90 days of this authorization notice, he or she should contact SSA."
Ordinarily, this would suggest that there is an adequate administrative remedy for pursuing a windfall offset recalculation-based underpayment. However, Plaintiff Steigerwald's attorneys contacted SSA within 90 days of when their fee was finalized and requested that SSA release the benefits withheld from Steigerwald.
Defendant Commissioner makes much of the fact that SSA provided a February 2017 notice of additional benefits, which referenced Attorney Roose's September 2016 communication.
Nothing about this notice, however, suggests to Steigerwald or her attorneys that SSA would not also perform a windfall offset recalculation, as its own operating procedures required it to do.
Indeed, this problem flows throughout all of the notices given to Steigerwald about the calculation of her benefits. Throughout the numerous notices it provided to Steigerwald, SSA never informed Steigerwald that it had finalized all of her benefits calculations; each notice simply referred to the calculation of a discrete portion of her benefits.
Without some type of final notice or a notice with explicit information about the windfall offset recalculation (or lack thereof), neither Steigerwald nor her attorneys received reason to believe that the windfall offset recalculation payment was not forthcoming. They were given no reason to challenge the absence of that recalculation. By attempting to "exhaust" this claim, Steigerwald would not be challenging one of Defendant Commissioner's decisions through an administrative review process, she would simply be requesting that SSA hurry up.
Ultimately, exhaustion in this instance is futile because there is no SSA action to challenge through the administrative review process. Instead, SSA has simply delayed performing, or failed to perform, part of its required review of a claimant's benefits and provided no notice to claimants that further review had ended.
For these reasons, the Court will require Defendant Commissioner to excuse § 405(g)'s exhaustion requirement.
Defendant Commissioner next argues that once SSA became aware of Plaintiff Steigerwald's complaint, it performed the second windfall offset calculation to correctly subtract her attorneys' fees.
"The Supreme Court has made clear that Article III requires that an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed. . . . A case may therefore become moot `when the issues presented are no longer "live" or the parties lack a legally cognizable interest in the outcome.'"
Regardless of whether SSA has fully compensated her however, because this is a putative class action, the "picking off" exception to the mootness doctrine applies.
In cases such as this, the Sixth Circuit looks to "the timing and method of relief" to determine whether the picking off exception applies.
Here, both the timing and method of relief are suspect. The Court finds that the picking off exception applies. Defendant Commissioner had the opportunity and ability to pay Plaintiff Steigerwald and the other potential class members the benefits allegedly owed to them any time after their attorneys' fees were finalized. Defendant Commissioner only paid Steigerwald, however, shortly before filing this motion to dismiss.
Although Defendant Commissioner argues that the picking off exception applies only after a plaintiff files a class certification motion, the Court sees no reason to draw this distinction. If a defendant could simply "pick off" a named plaintiff any time prior to class certification briefing, that would allow "defendants to essentially opt-out of [Federal Rule of Civil Procedure] 23."
The courts are generally not in the business of subverting the Federal Rules of Civil Procedure, promoting irrationality, and creating perverse incentive structures that unnecessarily lower the quality of attorneys' work product. Therefore, the Court will not adopt Defendant Commissioner's suggested interpretation of the "picking off" exception.
The Sixth Circuit cases that Defendant Commissioner cites do not compel a different result. As Defendant Commissioner correctly identifies, in its recent "picking off" cases, the Sixth Circuit has "held that a class action was not moot even though the named plaintiffs had been tendered a Rule 68 offer of judgment because a motion for class certification was then pending."
Nothing about this rationale limits the picking off exception to the time before a plaintiff files a motion for class certification. Instead, the question the Court must answer is whether a plaintiff has pursued her class claims with reasonable diligence and whether "the defendant is on notice that the named plaintiff wishes to proceed as a class, and the concern that the defendant therefore might strategically seek to avoid that possibility exists."
Finally, Defendant Commissioner makes no attempt to argue that SSA's review of Steigerwald's case and subsequent payment to her was part of any standard and established procedure. This is not the case where SSA was simply working through a backlog of claims and Steigerwald just happened to be "next in line" for SSA to process. Indeed, Defendant Commissioner admits that the only reason SSA paid Plaintiff Steigerwald when it did was because Steigerwald filed this complaint.
The Court finds that the "picking off" exception applies and so Plaintiff Steigerwald's claim is not moot.
For these reasons, the Court
IT IS SO ORDERED.
SSA's alleged failure to calculate and pay "Windfall Offset Calculation Two" is the cause of this suit. Amounts marked "(estimated)" were not provided by the parties and are used solely for illustrative purposes.