On Appeal From the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 85-0627.
BEFORE: SLOVITER and STAPLETON, Circuit Judges and FARNAN, District Judge*fn*
STAPLETON, Circuit Judge :
Christine Russell appeals the district court's denial of her motion for an award of attorney's fees and costs under the Equal Access to Justice Act (EAJA), 28 U.S.C. § 2412(d) (Supp. III 1985). Russell seeks compensation for attorney's fees and costs incurred during judicial review of the decision by Secretary Heckler of the Department of Health and Human Services not to waive recoupment of social security benefit overpayments made to Russell. Russell also seeks compensation for attorney's fees and costs incurred in litigating this fee petition. The liability of the United States turns on whether the Secretary's positions on recoupment and this fee petition were "substantially justified" as that phrase is used in the EAJA.*fn1 28 U.S.C. § 2412(d)(1)(A) (Supp. III 1985).
The Social Security Act states that overpayments are not to be recouped if the recipient is "without fault" and certain other requirements are met. 42 U.S.C. § 404(b) (1982). In the first instance, the administrative law judge (ALJ) found that Russell was "not without fault" and thus that recoupment of the overpayment could not be waived. App. at 14. The Appeals Council summarily affirmed the ALJ's decision, finding substantial evidence that Russell was at fault. The district court concluded that the Social Security Administration (SSA) could not recoup the overpayment because the ALJ's findings were not supported by substantial evidence that Russell was at fault. On the petition for attorney's fees, however, the district court determined that the position taken by the SSA, although rejected by the court, was "substantially justified," and therefore concluded that the United States was not liable for Russell's attorney's fees under the EAJA. 28 U.S.C. § 2412(d)(1)(A)(Supp. III 1985). We reverse, finding that Russell is entitled to an award of attorney's fees and costs with respect to both the recoupment proceedings and this fee petition.
The Secretary's position in the recoupment proceeding was that Russell "should have known" her institutionalized son Michael was not "in her care," and therefore Russell was "not without fault" in failing to report her ineligibility to the SSA and in accepting the overpayments. In order to determine whether this position is substantially justified, and thereby evaluate Russell's claim for attorney's fees and costs, it is necessary to consider the law and facts relevant to the underlying recoupment proceedings.
Section 204(b) of the Social Security Act provides:
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.
42 U.S.C. § 404(b) (1982). In order to show that the recipient was at fault under the SSA regulations, the facts must show that the overpayment resulted from:
(a) An incorrect statement made by the individual which he knew or should have known to be incorrect; or
(b) Failure to furnish information which he knew or should have known to be material; or
(c) With respect to the overpaid individual only, acceptance of a payment which he either knew or could have been expected to know was incorrect.
20 C.F.R. § 404.507 (1986).*fn2
Appellant Christine Russell's husband, James Russell, died in July of 1974. The Russells were the parents of two surviving sons: James Gary, then 15, who lived with his mother; and Michael Russell, then 9, who was mentally retarded and lived in a nursing home under the custody of the State of Pennsylvania. Although Christine Russell did not pay for Michael's care, she was consulted about his welfare and activities.
After her husband's death, Christine Russell applied to the SSA for mother's insurance benefits, surviving child's insurance benefits and benefits on behalf of another -- her institutionalized son Michael. To qualify for mother's insurance benefits, an applicant must have at least one child in her care. To be named as payee for a child's benefits, the child must be in the care of the applicant.
The SSA benefit application forms refer to the requirement that there be a child "in your care." For example, the application form for receipt of benefits on behalf of another states: "Do you agree to notify the Social Security Administration promptly when you no longer have responsibility for the welfare and care of any person for whom you receive payments?" App. at 76. The application for mother's insurance benefits states:
You may receive a mother's benefit for any month in which you have in your care a child or dependent grandchild of the deceased entitled to a child's insurance benefit because he (she) is:
-disabled or handicapped (age 18 or over and disability began before age 22)
App. at 66. It also explained that:
YOU MUST NOTIFY THE SOCIAL SECURITY ...