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Casey v. Berryhill

United States Court of Appeals, Seventh Circuit

January 30, 2017

John R. Casey, Plaintiff-Appellant,
Nancy A. Berryhill, Acting Commissioner of Social Security, [*] Defendant-Appellee.

          Argued September 27, 2016

         Appeal from the United States District Court for the Northern District of Indiana, Hammond Division. No. 2:13-cv-00328-RL-JEM - Rudy Lozano, Judge.

          Before Bauer, Rovner, and Hamilton, Circuit Judges.

          Hamilton, Circuit Judge.

         In 2009, the Social Security Administration notified Plaintiff John Casey that he needed to repay about $334, 000 in disability benefits he should not have received. Casey sought a waiver, but an administrative law judge denied his request. Six months later, Casey submitted an untimely request to the Appeals Council seeking review of the ALJ's decision. Casey argued that he had good cause for his delay. The Appeals Council seemed to agree. On April 12, 2012, the Council extended Casey's deadline to submit evidence or a statement in support of his waiver claim. But on July 17, 2013, the Appeals Council reversed course, informing Casey that it had dismissed his request for review because there was "no good cause to extend the time for filing." Casey then sued the Acting Commissioner of Social Security in district court. The Commissioner moved to dismiss, and a magistrate judge recommended granting the Commissioner's motion. The district judge adopted the magistrate's recommendation and dismissed the case.

         The district court erred. The action by the Appeals Council in first granting and then retroactively denying Casey's good cause request was arbitrary, having the effect of an unfair bureaucratic bait-and-switch. To be sure, the Council had discretion to determine initially whether Casey offered good cause for his late administrative appeal. See 20 C.F.R. §§ 404.968(b), 404.911. But having granted Casey's request, the Council could not simply change its mind and dismiss Casey's appeal on the theory that he had not adequately justified his delay, after leading him on for over a year without suggesting he needed to provide more information, an affidavit, or anything else by way of support. We reverse the judgment of the district court and remand with instructions to remand this matter to the agency for administrative proceedings consistent with this opinion.

         I. Procedural History

         We recount the salient facts, which are drawn from the administrative record and from Casey's complaint. We take Casey's allegations as true in reviewing the district court's judgment of dismissal. In 1979, Casey began receiving Social Security disability insurance benefits. Two years later, he entered the federal Witness Protection Program. According to Casey, the United States Marshals Service initially informed him that he could not simultaneously receive both his witness protection stipend and his disability benefits. Later, however, an agent of the Marshals Service allegedly told Casey that he could receive both income streams and that, as remuneration for cooperating with the government, he would continue to receive disability benefits throughout his natural life. He apparently received both streams of income for some time; he later received disability benefits while simultaneously earning income.

         In 2009, the Social Security Administration notified Casey that, in light of his earnings history, he had been overpaid $333, 893.90 in disability benefits. Casey did not seek timely reconsideration of that determination, which became final sixty days after he received the notice. See 20 C.F.R. §§ 404.909(a), 404.905. Instead, in either February or August 2010 (the record is unclear), Casey requested a waiver of the overpayment pursuant to 42 U.S.C. § 404(b)(1), which provides: "In any case in which more than the correct amount of payment has been made, there shall be no ... recovery ... from[] any person who is without fault if such ... recovery would defeat the purpose of [the Social Security Act] or would be against equity and good conscience." See also 20 C.F.R. § 404.506 (describing process for submitting waiver request).

         The Social Security Administration denied Casey's waiver request in November 2010. After an evidentiary hearing, an administrative law judge upheld that denial in an August 25, 2011 decision. Though Casey had argued that he was entitled to rely on the Marshals Service's assurance that he would receive disability benefits for life, the ALJ disagreed, finding that there was "no proof" to substantiate the alleged promise and that, in any event, Casey had "many opportunities and incentive [sic] to contact the Social Security Administration to inquiry [sic] into his receipt of [disability] benefits." The ALJ also cited Casey's "ability to repay the overpayment" as a "significant issue." (The ALJ had calculated Casey's gross monthly income at over $15, 000 and had noted that Casey and his wife owned real property with a net value of almost $600, 000.)

         After receiving notice of the ALJ's August 25, 2011 adverse decision, Casey had sixty days to seek further review by the Appeals Council. See 20 C.F.R. § 404.968(a). He did not submit a timely request for review. However, in a March 2, 2012 letter, Casey's attorney at the time, Arman Sarkisian, invoked the good cause exception for untimely requests. See §§ 404.968(b), 404.911, 404.900(b). Sarkisian advised the Appeals Council that neither he nor his firm had received a copy of the ALJ's decision and that he had learned of the decision only after contacting the ALJ's chambers "several months" after the decision issued. Sarkisian asked the Council to (1) find that Casey had good cause for a late filing, (2) grant Casey additional time to secure information, and (3) evaluate the appeal as if it had been timely.

         In an April 12, 2012 letter, the Appeals Council informed Sarkisian that it had "granted your request for more time" before acting on Casey's case, and it invited him to submit evidence or legal argument within twenty-five days, with the caveat that "[a]ny more evidence must be new and material to the issues considered in the hearing decision dated August 25, 2011." Sarkisian requested additional extensions on April 24, 2012 and May 22, 2012, both of which were granted. Sarkisian requested a further extension on June 25, 2012: this time, the agency denied his request, informing him that it would proceed with its action based on the existing record.

         On July 17, 2013, the Appeals Council dismissed Casey's request for review. The Appeals Council did not, however, address the merits of Casey's request for reconsideration. Instead, in its order, the Council characterized Casey's prior correspondence as requesting additional time to "complete a 'good cause' statement and to provide the Administration with additional evidence regarding his late filing." "To date, " the Council wrote, "it does not appear that [Casey] has provided the 'good cause' statement he indicated would be forthcoming." The Council concluded there was "no good cause to extend the time for filing."

         Casey then brought suit under 42 U.S.C. § 405(g), a statute authorizing judicial review of any "final decision" by the Commissioner of Social Security. The Commissioner moved to dismiss on the theory that Casey had failed to exhaust his administrative remedies. According to the Commissioner, although the Appeals Council afforded Casey "an opportunity to show good cause for his untimely request for review, " he failed to do so. The Commissioner contended that because Ca- sey "did not comply with the agency's deadlines and procedural rules, and thus failed to properly exhaust his administrative remedies/' the district court had "no authority under section 405(g) to review the Commissioner's decision." In opposition, Casey pointed out that (1) the Appeals Council had granted his good cause request in its April 12, 2012 letter and (2) the Council's dismissal order actually advised him of his right to seek judicial review. Nevertheless, the magistrate judge recommended that the district court dismiss Casey's complaint. Citing our decision in Boley v. Colvin,761 F.3d 803 (7th Cir. 2014), the magistrate judge recognized that the district court had jurisdiction to review ...

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