McLellan v. Commissioner, Social Security Administration

          OPINION AND ORDER

          MARCIA S. KRIEGER, SENIOR UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court pursuant to the Defendant's (“SSA”) Motion to Dismiss (# 16), Ms. McLellan's response (# 23), and the SSA's reply (# 24).^[1] Ms. McLellan has also filed a Motion for Leave to Supplement (# 28) her Complaint, to which the SSA has filed no response. Also pending are numerous motions (# 26, 27, 29, 31, 32) by Ms. McLellan, variously seeking appointment of counsel, an update on the status of the case, or an expedited ruling.

         According to Ms. McLellan's pro se^[2] Complaint (# 1), she applied for Social Security Disability benefits in March 2007. After extended administrative proceedings, in October 2017, the SSA found Ms. McLellan eligible for benefits retroactively to July 2012. Ms. McLellan contends that she has begun receiving her monthly benefit payments, but has yet to receive any “backpay” - that is, the retroactive payments.^[3]

         Supplemental submissions from Ms. McLellan and filings by the SSA flesh out Ms. McLellan's claims somewhat, and the Court recites those additional facts simply for purposes of clarity and context, without actually relying on them as part of the Court's analysis. On October 13, 2017, an ALJ determined that Ms. McLellan was entitled to benefits retroactive to August 2012, totaling $30, 402.90. For various reasons (including avoiding conflict with certain means-testing that applies to a claimant's entitlement to ongoing benefits), when retroactive benefit payments owed to a claimant exceed a certain amount, the SSA will not pay them out in a lump sum. Instead, the SSA makes such payments “in not more than 3 installments [ ] made at 6-month intervals, ” with the first two installment payments determined by a formula. 20 C.F.R. § 416.545(b). Pursuant to this rule, in March 2018, the SSA made a first installment payment to Ms. McLellan in the amount of $2, 250.

         There are certain exceptions to the installment payment rule, allowing the first two installment payments to be increased above the formula-driven amount if the claimant has outstanding debts for necessities like clothing or shelter. 20 C.F.R. § 416.545(d)(1)(i). It appears that, at some point in time, Ms. McLellan requested that her installment payment be increased due to outstanding debts she owed for rent payments. She states that she “received correspondence” in late March 2018 “dismissing my request for reconsideration of my award.”

         It appears that SSA made the second installment payment six months later, in or about September 2018. However, rather than paying any sums to Ms. McLellan, SSA made a payment of $11, 571 to the State of Colorado. This payment appears to be pursuant to 42 U.S.C. § 1383(g). That statute provides that, upon the written authorization of a claimant, the SSA may “withhold [retroactive] benefits due with respect to that individual and may pay to a State . . . an amount sufficient to reimburse the State [ ] for interim assistance furnished on behalf of the individual by the State.” See generally Johns v. Stewart, 57 F.3d 1544 (10^th Cir. 1995) (finding that such practice does not contravene the Social Security Act). According to a September 5, 2018 letter from the State of Colorado to Ms. McLellan, Ms. McLellan had previously “signed an authorization giving Social Security the authority to reimburse the State . . . for assistance given to you under the State Aid to the Needy Disabled State Only program.” The State of Colorado provided Ms. McLellan a calculation of the aid payments she had received under that program between 2012 and 2017, with the total coming to $11, 571.

         It would appear that the third installment payment, in the final amount of $16, 581.19, ^[4]would have been due in or about March 2019. The record before the Court does not indicate whether that payment was made, and if it was, to whom and in what amount(s).

         A. Motion to dismiss

         The SSA moves (# 16) to dismiss Ms. McLellan's claim, arguing that the Court's subject-matter jurisdiction extends only to “final” decisions of the agency. 42 U.S.C. § 405(g), (h). The SSA argues that determinations about when and how to pay retroactive benefits are not “final” benefits subject to judicial review.^[5]

         42 U.S.C. § 405(g) provides that “any individual, after any final decision of the Commissioner [ ] made after a hearing . . ., may obtain review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision.” 42 U.S.C. § 405(h) provides that “no findings of fact or decision of the Commissioner [ ] shall be reviewed . . . except as herein provided.” Thus, the Court's jurisdiction to hear Ms. McLellan's claim exists only to the extent that she is challenging a “final decision . . . made after a hearing.”

         In Smith v. Berryhill, 139 S.Ct. 1765, 1774 (2019), the Supreme Court sought to define what constitutes a “final decision” under the Social Security Act. It must be “final, ” in the sense of “terminal” - that is, “the final stage of review” under the SSA's own regulations. Id. It must also be “made after a hearing, ” in the sense that it is “tethered to” a hearing that is “a matter of legislative right rather than agency grace.” Id. at 1775. In so holding, the Smith Court distinguished its case - in which the claimant sought an initial award of benefits and had a hearing before an ALJ, only to have his appeal of the ALJ's ruling denied on timeliness grounds - from Califano v. Sanders, 430 U.S. 99, 108 (1977), in which the Court held that a claimant's petition to reopen a prior final decision - a petition that was denied by the SSA without a hearing - was not subject to judicial review because “the opportunity to reopen final decisions and any hearing convened to determine the propriety of such action are afforded by the Secretary's regulations and not by the Social Security Act.”

         It is not completely clear what rule Smith purports to lay down. In Keller v. Commissioner, 748 Fed.Appx. 192, 194 (10^th Cir. 2018), the 10^th Circuit seems to have read Smith extremely narrowly, construing it to establish that “the district court's jurisdiction is limited to reviewing the agency's final decision on an initial claim for benefits” (not, as in both Califano and Keller, a request by a claimant to reopen a prior denial of such a claim). If that is the correct reading of Smith, Ms. McLellan's claim challenging the SSA's decision to pay her retroactive benefits in installments is not a “final decision” because, clearly, it is not an “initial claim for benefits.”

         Alternatively, one might read Smith to teach that matters arising under statute can, if pursued to conclusion, result in a “final decision, ” whereas procedures that are created solely by regulation cannot. If that is the correct reading, Ms. McLellan's claim challenging the payment of her retroactive benefits via installment still fails. The Social Security Act itself has relatively little to say on how and when such payments are made. 42 U.S.C. § 404(a)(1) provides that “whenever the Commissioner [ ] finds that more or less than the correct amount of payment has been made to any person, . . . proper adjustment or recovery shall be made under regulations prescribed by the Commissioner.” (Emphasis added.) In other words, although Congress requires that an underpayment be rectified, it leaves discretion to the Commissioner to determine how and when additional payments are made. As explained above, the Commissioner has done so in the form of the installment payment scheme described in 20 C.F.R. § 416.545(b). That scheme does not describe any hearing procedure that claimants are entitled to if they disagree with the timing or amount of installment payments. (Indeed, it does not even appear that the regulation confers any discretion upon the Commissioner to decide whether to make installment payments. If the unpaid benefit amount exceeds an objectively-calculable threshold, interim payments in specifically-defined amounts are mandatory.) Thus, the installment payment scheme is a “matter of agency grace, ” not a “legislative right” that entails a right to a hearing and, thereafter, judicial review under 42 U.S.C. § 405(g). As such, the Court lacks the power to hear Ms. McLellan's challenge to the SSA's invocation of the installment payment plan for her retroactive benefits.^[6]

         Yet another way of reading Smith is that the notion of a “final decision” is tied to the exhaustion of the SSA's four-step appeal procedure. 139 S.Ct. at 1772 (“modern-day claimants must generally proceed through a four-step process before they can obtain review from a federal court”). 20 C.F.R. § 416.1400 “describe[s] the process of administrative review and explain[s claimants'] right to judicial review after you have taken all the necessary administrative steps.” (Emphasis added.) The administrative process requires a claimant to: (i) obtain an initial determination, (ii) request reconsideration of an unfavorable determination, (iii) request a hearing before an ALJ, and (iv) request review of the ALJ's decision by the Appeals Council. It is only “[w]hen you have completed the steps of the administrative review process” that a claimant “may request judicial review by filing an action in federal court.” 20 C.F.R. § 416.1400(a)(1)-(5). To the extent that Smith requires complete exhaustion of the administrative review process before an determination becomes a “final decision, ” Ms. McLellan's Complaint does ...