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Tyler J. v. Saul

United States District Court, N.D. Illinois, Western Division

August 7, 2019

Tyler J. Plaintiff,
Andrew Marshall Saul, Commissioner of Social Security, Defendant.



         Plaintiff Tyler J. (formerly known as Dennis K.) applied for Disability Insurance Benefits (“DIB”) and Supplemental Security Income (“SSI”) in 2009, and he was awarded those benefits by an Administrative Law Judge (“ALJ') in June of 2010. His disability benefits were reviewed in November of 2014 and were continued. Then, in May of 2015, Plaintiff was notified that the Social Security Administration (“SSA”) needed to redetermine Plaintiffs eligibility for benefits because there was reason to believe that fraud was involved in certain cases involving evidence the SSA received from four doctors. Because one of those four doctors, Dr. Frederic Huffnagle, provided evidence to the SSA in Plaintiffs case, his case was redetermined. In conducting such redetermination, the SSA disregarded any evidence from Dr. Huffnagle. In July of 2016, the ALJ concluded, after conducting a new hearing and disregarding all evidence by Dr. Huffnagle, that Plaintiff was ineligible for DIB and SSI as of the date of his original application, and his benefits were terminated. After exhausting all administrative remedies, Plaintiff sued in this Court. The parties have consented to the jurisdiction of a United States Magistrate Judge for all proceedings pursuant to 28 U.S.C. § 636(c).

         For the reasons set forth below, the Commissioner's decision denying Plaintiffs claims on redetermination is reversed, and this case is remanded.

         I. Background

         In 2009, Plaintiff applied for DIB and SSI. Plaintiff alleged a disability beginning on January 14, 2009, due to degenerative disc disease, lower back problems, bipolar disorder, depression, and anxiety. R. 282, 286. During the initial proceedings on his application, Plaintiff was represented by a social security lawyer, Eric C. Conn. Mr. Conn submitted records prepared by Dr. Huffnagle in support of Plaintiff s claims.

         On June 1, 2010, without conducting a hearing, ALJ David Daugherty found Plaintiff disabled as of January 14, 2009. R. 118-22. ALJ Daugherty determined that Plaintiffs sciatica and low back strain/sprain were severe impairments. R. 120. Relying solely on evidence submitted by Mr. Conn from Dr. Huffnagle, ALJ Daugherty found that Plaintiff was limited to less than sedentary work and issued a fully favorable decision. R. 120-21.

         In October of 2013, the U.S. Senate Committee on Homeland Security and Governmental Affairs issued a report accusing Mr. Conn and ALJ Daugherty of committing fraud. United States Senate Committee on Homeland Security and Governmental Affairs, How Some Legal, Medical, and Judicial Professionals Abused Social Security Disability Programs for the Country 's Most Vulnerable: A Case Study of the Conn Law Firm (Oct. 7, 2019) (“Report”), available at As set forth in the Report, Mr. Conn conspired with ALJ Daugherty and four doctors, one of whom was Plaintiffs medical source, Dr. Huffnagle. Id. at 2, 58-75. The Report stated that the SSA had learned about this wrongdoing as early as 2006. Id. at 2. After hearing testimony and investigating, the U.S. Senate Committee concluded that “inept agency oversight . . . enabled the misconduct to continue for years.” Id. at 1.

         By July of 2014, the SSA's Office of Inspector General (“OIG”) had identified 1, 787 current or former clients of Mr. Conn whose applications the OIG “had reason to believe, were tainted by fraud.” Hicks v. Comm'r of Soc. Sec., 909 F.3d 786, 794 (6th Cir. 2018) (internal quotation marks omitted). Pursuant to the Social Security Act, the SSA is required to “immediately redetermine” a beneficiary's entitlement to disability benefits if, at any point after granting benefits, the SSA has “reason to believe that fraud or similar fault was involved in the application” for benefits. 42 U.S.C. § 405(u)(1)(A). Nonetheless, the OIG provided the 1, 787 names to the SSA “with the understanding that SSA was not to take any adverse action against any individual on the list until further notice.” Hicks, 909 F.3d at 794 (citation omitted).

         On May 12, 2015, the OIG sent a referral letter to the SSA pursuant to Section 1129(a)(1) of the Social Security Act. Defendant's Motion to Dismiss, Attachment 2. The referral stated in part:

…the Social Administration (SSA) Office of The Inspector General (OIG) previously provided you with information regarding 1, 787 individuals. These individuals were formerly represented by attorney Eric C. Conn, or his firm, and OIG has reason to believe that fraud was involved in their applications for Social Security benefits. Specifically, in these cases, OIG had, and still has, reason to believe that Mr. Conn or his firm submitted pre-completed “template” Residual Functional Capacity forms purportedly from Bradley Adkins, PH.D., Srinivas Ammisetty, M.D., Frederic Huffnagle, M.D., or David P. Herr, D.O. dated between January 2007 and May 2011, in support of the individuals' application for benefits.

Id. The letter went on to state that the OIG was not aware of any objections to the SSA moving forward with administrative processing of the redeterminations of the 1, 787 individuals previously identified and told the SSA “that it may proceed with its redetermination of the cases of the individuals on the previously transmitted list.” Id.

         Six days later, on May 18, 2015, the SSA sent a letter to Plaintiff. The letter stated, “This is about the Administrative Law Judge's decision dated June 1, 2010.” R. 160. It went on to explain that the SSA must redetermine Plaintiffs eligibility for benefits because: 1) there was reason to believe fraud was involved in certain cases involving Dr. Huffnagle (and three other doctors); 2) Dr. Huffnagle provided evidence in Plaintiffs case; and 3) the ALJ previously used that evidence to find Plaintiff disabled. The letter informed Plaintiff that during the redetermination process the SSA “must disregard any evidence from one of the medical providers above when the information was submitted by representative Eric C. Conn or other representatives associated with Mr. Conn's law office.” R. 160. Finally, the letter stated that SSA had looked at Plaintiffs case again to see if the decision was supported after disregarding the evidence signed by Dr. Huffnagle and had concluded that the remaining evidence in Plaintiffs file did not support a favorable benefits determination. R. 161. As such, the SSA planned to send the case back to an ALJ for more action and a new decision. Plaintiff was informed that he could submit more evidence to the ALJ so long as it was “new and material” and concerned Plaintiffs “disability” starting on or before June 1, 2010. R. 162.

         The SSA held a new hearing on Plaintiffs case, and ALJ John Dowling issued his decision on July 7, 2016. ALJ Dowling disregarded the April 27, 2010 medical report submitted by Dr. Huffnagle. R. 31. This included Dr. Huffnagle's report of Plaintiff s medical examination as well as his functional capacity findings. ALJ Dowling concluded that “there was insufficient evidence to support a finding of disability as of June 1, 2010. Therefore, the beneficiary's benefits are terminated, and SSA may treat any benefits previously received as overpayment.” R. 41.

         After exhausting his administrative remedies, Plaintiff filed an eight-count complaint in this Court. Plaintiff's Complaint alleges that the SSA's procedures and actions violated the Due Process Clause of the Fifth Amendment (Count I), the Social Security Act (Counts III, V and VI) the Administrative Procedures Act (Count II, IV and VII) and that the SSA's decision is not supported by substantial evidence (Count VIII).

         The Commissioner filed a motion to dismiss Counts I through VII of Plaintiff's Complaint for failure to state a claim. Plaintiff filed a motion for summary judgment on the due process, Administrative Procedures Act (“APA”), and Social Security Act claims. Specifically, Plaintiff asked that the Commissioner's redetermination decision terminating benefits be outright reversed, and that this Court reinstate his benefits without the need for a remand. Plaintiff's Motion at 1, 20. Thereafter, the Commissioner filed the administrative record. Plaintiff supplemented his briefing by pointing to portions of the administrative record to further support his motion for summary judgment on the due process claim and also moved for summary judgment on his claim that ALJ Dowling's decision was not supported by substantial evidence.

         After the issues were fully briefed, but before the motions were ruled upon, the Sixth Circuit issued an opinion in Hicks v. Commission of Social Security, 909 F.3d 786 (6th Cir. 2018). In Hicks, the Sixth Circuit was faced with essentially the same issues as are presented before this Court. The Hicks court ruled that the SSA's refusal to grant the plaintiffs an opportunity to rebut the OIG's assertion of fraud as to the Conn-related medical reports violated the plaintiffs' rights to procedural due process and violated the APA. Hicks, 909 F.3d at 804. Because of the ensuing decision rendered in Hicks, both parties in the present case were ordered to file a supplemental brief addressing that decision.

         Hicks is the first of several cases around the country dealing with the Conn-related fraud to reach a court of appeals.[1] The Seventh Circuit has directed district courts to “give most respectful consideration to the decisions of the other courts of appeals and follow them whenever [they] can.” Colby v. J.C Penney Co., 811 F.2d 1119, 1123 (7th Cir. 1987). A district court may not defer mechanically to other circuits, however, or abdicate its duty to independently decide a legal question. Id. A posture somewhere in between some deference and complete deference is proper when cases in different circuits challenge the same practice of the same defendant, particularly if different outcomes would place the defendant under inconsistent obligations. Id. at 1124; Wilkins v. Just Energy Grp, Inc., No. 13-CV-5806, 2019 U.S. Dist. LEXIS 47486, at *11 (N.D. Ill. Mar. 22, 2019). With these concepts in mind the Court turns to the parties' arguments.

         II. Analysis

         A. Due Process

         Plaintiff argues that his right to procedural due process was violated when he was prevented from challenging the OIG's allegation of fraud related to Dr. Huffnagle's medical reports. That allegation of fraud automatically resulted in the exclusion of all records from Dr. Huffnagle. Without those records, the ALJ determined that Plaintiff was not disabled. Plaintiff argues he should have had the opportunity to prove that Dr. Huffnagle's records were not fraudulent as they related to him. By preventing him from challenging the OIG's factual assertion of fraud, Plaintiff asserts he was deprived of the absolute right to a meaningful hearing, which necessarily must include a fair opportunity to rebut the governments factual assertions before a neutral decisionmaker. Plaintiff's Motion at 10.

         This exact issue was addressed by the Sixth Circuit in Hicks. The Hicks plaintiffs were eleven former Conn clients, who had been subjected to redetermination hearings based on a “reason to believe that fraud or similar fault was involved” in their original hearing. Hicks, 909 F.3d at 793-94 (internal quotation marks omitted) (quoting 42 U.S.C. § 405(u)(1)(A)). They lost their benefits after a rehearing in which they were prevented from contesting that fraud had occurred. They each sued in federal court. The individual cases were consolidated on appeal to the Sixth Circuit.

         The Hicks plaintiffs, like Plaintiff here, argued that procedural due process requires, at a minimum, “a fair opportunity to rebut the Government's factual assertions before a neutral decisionmaker.” Id. at 797. The Sixth Circuit agreed. They noted that the Supreme Court has recognized the immutable principle that “where governmental action seriously injures an individual and reasonableness of the action depends on fact findings, the evidence used to prove the Government's case must be disclosed to the individual so that he has an opportunity to show that it is untrue.” Id. (quoting Greene v. McElroy, 360 U.S. 474, 496 (1959)). Relying on Green, the Hicks court held that because the SSA's action “‘depends on fact findings' that the plaintiffs have not been provided the opportunity to rebut, the government's process is constitutionally inadequate.” Hicks, 909 F.3d at 798.

         The Commissioner in the present case urges this Court to disregard the Sixth Circuit's decision in Hicks because the opinion demoted the three-part balancing test set forth by the Supreme Court in Mathews v. Eldridge, 424 U.S. 319 (1976) to “back-up status, ” which the Commissioner argues is contrary to Supreme Court and Seventh Circuit law. Defendant's Supplemental Brief at 3.

         The court in Hicks considered whether the case should be decided using the Mathews three-part balancing test. Hicks, 909 F.3d at 797. It was persuaded however by the plaintiffs' argument that minimum due process rights cannot be balanced away. Id.

         This Court agrees with the interpretation of the Sixth Circuit that the Mathews test does not apply to cases deciding whether minimum due process rights were violated. The Mathews case itself was one that sought to determine whether a pre-deprivation hearing was required before social security benefits could be taken away. Mathews v. Eldridge, 424 U.S. 319 (1976). There already existed post-deprivation procedures for challenging the government's actions. Thus, the Court used the balancing test to determine whether additional protections were necessary. Id. at 335.

         In United States v. James Daniel Good Real Prop., 510 U.S. 43, 53 (1993), the Court explained that the Mathews test is reserved for situations when the court is determining whether a pre-deprivation versus a post-deprivation hearing is required. The Court noted that the right to “prior notice and a hearing is central to the Constitution's command of due process.” Id. The Court further stated:

We tolerate some exceptions to the general rule requiring predeprivation notice and hearing, but only in extraordinary situations where some valid governmental interest is at stake that justifies postponing the hearing until after the event. Whether the seizure of real property for purposes of civil forfeiture justifies such an exception requires an examination of the competing interests at stake, along with the promptness and adequacy of later proceedings. The three-part inquiry set forth in Mathews v. Eldridge, 424 U.S. 319, 47 L.Ed.2d 18, 96 S.Ct. 893 (1976), provides guidance in that regard.

Id. (internal quotation marks and citations omitted).

         The Seventh Circuit's application of the Mathews test is consistent with the Supreme Court's direction in James Daniel, 510 U.S. 43. See Parrett v. Connersville 737 F.2d 690, 696 (7th Cir. 1984) (“Mathews v. Eldridge [ ] merely requires a comparison of the costs and benefits of giving the plaintiff a more elaborate procedure than he actually received.”); Sutton v. Milwaukee, 672 F.2d 644, 645 (7th Cir. 1982) (describing the Mathews test as a “simple cost-benefit test of general applicability for deciding whether due process requires notice and hearing before government may deprive a person of property”). In Sutton, the court applied Mathews to determine whether, even though post towing procedural protections existed, due process required notice and hearing before a car was towed. Id.

         The case that the Commissioner cites, Van Harken v. City of Chicago, 103 F.3d 1346 (7th Cir. 1997), further supports the Hicks court's interpretation of the Mathews test. See Defendant's Supplemental Brief at 4. In Van Harken, the court was asked to determine whether a process for adjudicating parking tickets comported with due process. Van Harken, 103 F.3d at 1348. The process allowed the adjudicator to decide the violation based on the ticket itself without requiring the issuing police officer to appear and testify. Id. at 1350. The court applied the Mathews test. Id. at 1351. However, like the facts in Mathews, Sutton, and Parrott, the procedure at issue provided the plaintiffs with post-deprivation procedures to contest the ticket. Id. at 1350.

         In the present case, this Court is not being asked to determine if Plaintiff deserved a more elaborate opportunity to contest the Government's allegations of fraud. Plaintiff had no opportunity to contest the government's factual allegations of fraud, either before the redetermination hearing, during the hearing, or at any time after the hearing. He simply was forced to accept, without any opportunity to rebut, that Dr. Huffnagle's medical reports about him were fraudulent and thus could not be used to support his claim for disability. The right to rebut the Government's factual assertions (whether pre or post-deprivation) is a basic requirement of procedural due process. Hamdi v. Rumsfeld, 542 U.S. 507, 533 (2004) (holding that due process required notice of the government's factual basis and a fair opportunity to rebut the government's factual assertions before a neutral ...

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