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MATTERN v. WEINBERGER

April 30, 1974

ARLENE M. MATTERN
v.
CASPER WEINBERGER, UNITED STATES SECRETARY OF HEALTH, EDUCATION AND WELFARE


Troutman, District Judge.


The opinion of the court was delivered by: TROUTMAN

This action challenges the procedure utilized by the Secretary of Health, Education and Welfare [the Secretary], pursuant to Section 204 of the Social Security Act [the Act], to adjust or reduce social security benefits in order to recoup an alleged over-payment. Specifically, plaintiff, on behalf of herself and others similarly situated, seeks injunctive and declaratory relief, requiring the Secretary to conduct an evidentiary hearing prior to adjusting or reducing social security benefits to which plaintiff is entitled under Title II of the Act. 42 U.S.C. § 401 et seq. Plaintiff challenges the failure to provide an oral hearing prior to the recoupment of an alleged over-payment on the grounds that it is contrary to the purpose of the Act and violative of the Fourteenth Amendment to the Constitution. Presently before the Court are (1) defendant's motion to dismiss the complaint for lack of jurisdiction, (2) plaintiff's motion for a class action determination, (3) plaintiff's motion to convene a three-judge court and (4) cross-motions for summary judgment.

 The relevant facts are not in dispute and are as follows: Plaintiff, at the time this action was filed, was fifty-three years old and is presently disabled. In 1971, she filed an application for disabled widow's benefits pursuant to 42 U.S.C. § 402(e) (1) (B) (ii) on the social security earnings record of her deceased husband. Her application was initially denied, but, upon reconsideration, she was found entitled to benefits effective December 1971. *fn1" Thereafter, plaintiff informed the social security office that she was in financial distress. Upon investigation, the office forwarded a request for a critical case payment to the Philadelphia payment center on the basis of plaintiff's alleged condition of hardship. The payment center failed to consider the statutory waiting period and erroneously certified payment of monthly benefits retroactive to May 1971 rather than December 1971. A check in the amount of $1063.80 was issued to plaintiff. Prior to the receipt of this check, plaintiff received another check in the amount of $119.30, representing her monthly entitlement. According to defendant, plaintiff was notified that the special check for $1063.80 was in error and should be returned.

 Upon plaintiff's failure to return the check, she was notified of the alleged over-payment and the Secretary's intent to adjust or reduce the amount of her monthly check in order to recoup the over-payment. Plaintiff, thereafter requested wavier of the recovery action and completed a "without fault" questionnaire. In her response, plaintiff admitted receiving the check for $1063.80, which she cashed to pay her bills, but denied the receipt of any notice that the check was not correct until she received the letter, indicating the Secretary's intent to recoup the over-payment. By letter dated October 20, 1972, plaintiff was advised that recovery of the over-payment could not be waived because she was not without fault and she was further advised of her right to request reconsideration of this determination. On November 20, 1972, plaintiff filed a request for reconsideration, and as a result of this request, the adjustment action was not implemented pursuant to Section 5503.5 of the Claims Manual. On December 29, 1972, plaintiff commenced this civil action. Subsequently, the reconsideration decision upheld the initial determination on the ground that plaintiff was not without fault and, therefore, liable for recovery of the overpayment. In order to alleviate undue hardship, recovery by partial adjustment of $30 per month was recommended, commencing with her January 1973 benefit. As a result of this notice, the parties entered into a stipulation continuing plaintiff's full benefits until the disposition of this action.

 Section 204 of the Act, 42 U.S.C. § 404, authorizes the Secretary, under regulations prescribed by him, to recover incorrect overpayments or to adjust benefits to provide for such recovery. Section 204 provides in pertinent part:

 
"(1) With respect to payment to a person of more than the correct amount, the Secretary shall decrease any payment under this subchapter to which such overpaid persons is entitled, or shall require such overpaid person or his estate to refund the amount in excess of the correct amount, or shall decrease any payment under this subchapter payable to his estate or to any other person on the basis of the wages and self-employment income which were the basis of the payments to such overpaid person, or shall apply any combination of the foregoing. . . .
 
"(b) In any case in which more than the correct amount of payment has been made, there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience."

 Under subsection (b) of Section 204, no adjustment or recovery shall be made where such person is without fault *fn2" and such adjustment or recovery would defeat the purpose of Title II of the Act *fn3" or would be against equity and good conscience. *fn4"

 See also 20 CFR § 404.506.

 20 CFR § 404.901 et seq. of the Social Security Administration regulation sets forth a four-step administrative process by which a claimant may obtain review of a decision to adjust benefits in order to recoup an overpayment. Following an initial determination that an over-payment has been made and that there is no basis for waiver of recovery, the claimant may obtain reconsideration pursuant to 20 CFR 404.914. Subsequent to a reconsidered determination, an individual may request a hearing de novo before an administrative law judge, 20 CFR 404.917, and review by the Appeals Council of the Social Security Administration. 20 CFR 404.945. Thereafter, a claimant may seek judicial review in the district courts pursuant to § 205(g) of the Act. 42 U.S.C. § 405(g). During the period that a claimant is pursuing his administrative remedies, there is no provision in the Act or in the regulations, requiring that a hearing must be conducted prior to implementation of any adjustment or recovery. Section 5503.5 of the Claims Manual provides that where reconsideration of an initial determination is requested, "withholding to recoup the overpayment will be further deferred and payment will be continued" until a decision upon reconsideration is made. Thus, under the regulations and provisions of the Claims Manual, adjustment of benefits in order to recoup an overpayment may be implemented following a decision upon reconsideration and there is no provision for a hearing de novo before an administrative law judge prior to the implementation of the adjustment.

 I. Jurisdiction

 First, exhaustion is inapplicable because plaintiff claims that the statute and regulations promulgated thereunder are constitutionally insufficient in that they fail to provide a hearing prior to recoupment of an over-payment. Where a plaintiff attacks the constitutionality of the statute under which an administrative agency acts, the attack does not turn upon a factual determination requiring administrative expertise, and the doctrine of exhaustion of administrative remedies, therefore, does not apply. See Gainville v. Richardson, 319 F. Supp. 16, 18 (D. Mass. 1970), and cases cited therein.

 Secondly, the prohibition of Section 205(h), barring any action against the Secretary under Section 1331 of Title 28, is inapplicable in that plaintiff is not seeking to "recover on any claim" arising under Title II of the Act. The merits of plaintiff's claim are not before the Court and we are not asked to review any decision of the Secretary. Plaintiff's sole claim is that she is entitled to a hearing prior to a determination to reduce or adjust here benefits, and plaintiff seeks declaratory and injunctive relief to remedy the constitutional deficiencies in the Secretary's procedure. Thus, plaintiff's action is ...


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