Appeal from a judgment of the District Court for the Eastern District of New York, Anthony J. Travia, Judge, 375 F. Supp. 1312 (1974), declaring unconstitutional the procedures of the Social Security Administration whereby benefits being paid to survivors' children might be reduced because of claims of illegitimate children which would cause the total benefits to exceed the statutory maxima without a pre-reduction oral evidentiary hearing. Reversed, with instructions to dismiss the complaint.
Waterman, Friendly and Gurfein, Circuit Judges.
This appeal displays a new facet in the developing law of due process with respect to administrative action by the welfare state. Whereas such controversies have typically involved disputes between the Government on the one hand and a citizen or class of citizens on the other, here the ultimate conflict is between two categories of citizens and the Government's interest is to pay the right one. Before reaching the problem of what due process requires in this context, we must traverse a procedural thicket.
I. The Statutory Background and the Regulations in Controversy.
Pursuant to 42 U.S.C. §§ 402(d)(1), (d)(2), and (g)(1), the dependent children and the spouse, see Weinberger v. Wiesenfeld, 420 U.S. 636, 95 S. Ct. 1225, 43 L. Ed. 2d 514 (1975) of an individual who died as fully insured under the Social Security Act, 42 U.S.C. § 414(a), are each entitled to a monthly payment for a specified period equivalent generally to three-quarters of the primary insurance amount of the decedent. In no case, however, may the total benefits to a family exceed a specified maximum, 42 U.S.C. § 403(a), set out in the table accompanying 42 U.S.C. § 415(a).
Prior to 1965 the only children eligible for benefits pursuant to 42 U.S.C. §§ 402(d)(1) and (d)(2) were children who could inherit from the decedent pursuant to applicable state law or whose parents had participated in a ceremony which would have resulted in a valid marriage except for one of two specified legal impediments. 42 U.S.C. §§ 416(h)(2)(A) & (B), 402(d)(3). In 1965 Congress amended the Act to include other illegitimate children, Social Security Amendments of 1965, Pub. L. No. 89-97, § 339(a), 79 Stat. 409, where, inter alia, the decedent wage earner, before his death, acknowledged paternity in writing, was decreed by a court to have been the father, or was ordered by a court to contribute support to the child because of paternity. This was codified as 42 U.S.C. § 416(h)(3)(C)(i).*fn1
Congress again amended the Act in 1968, Social Security Amendments of 1967, Pub. L. No. 90-248, § 163(a)(1), 81 Stat. 872,*fn2 to deal with the situation, apparently not contemplated by the 1965 legislation, where the inclusion of illegitimate children would raise the total above the statutory maximum.*fn3 The 1968 amendment provided that when the total benefits would exceed the maximum, any reduction should first occur in the benefits payable to children made eligible by the 1965 amendments; the effect of this was to exclude these illegitimate children altogether when the benefits payable to the widow and other children reached the maximum.*fn4 This provision was held unconstitutional in Griffin v. Richardson, 346 F. Supp. 1226 (D. Md.) (three-judge court), summarily affirmed per curiam, 409 U.S. 1069, 93 S. Ct. 689, 34 L. Ed. 2d 660 (1972),*fn5 on the ground that the discriminatory classification in it served no legitimate state interest and was thus violative of the due process rights of the class of illegitimate children who were plaintiffs in that suit.
This decision made it necessary for the Social Security Administration (SSA) to revise its procedures, under authority of 42 U.S.C. § 405(a), for handling cases where the addition of children claiming to be entitled to benefits under the 1965 amendments would result in exceeding the statutory maximum, the validity of which has not been questioned. Cf. Dandridge v. Williams, 397 U.S. 471, 483-87, 25 L. Ed. 2d 491, 90 S. Ct. 1153 (1970). The revised procedures, incorporated into the SSA Claims Manual, were designed to permit the reworking of all claims "as though the  provision had never been enacted," Claims Manual T305, and to provide all beneficiaries whose benefits were going to be reduced with "a detailed explanation of the reason for the reduction." Id. T308(b). Beneficiaries whose benefits were to be reduced must be notified prior to the reduction, id. T315, by an SSA Reviewing Office, which would process the award for the newly entitled illegitimate child but would "diary" the case for 45 days and not effectuate a benefit check reduction until the operating month after the processing of any protest filed within that period. Id. T310(c). The notice explained that a "recent court decision" required equality of treatment for all children of a wage earner who died fully insured and that, as a result, the monthly benefits of the beneficiaries named in the notice had to be reduced to an amount specified in order to pay benefits to other named children who qualified under 42 U.S.C. § 416(h)(3). The notice was to specify under which subsection of 42 U.S.C. § 416(h)(3) these children qualified and show the "exact basis" for that determination. The notice further invited the beneficiary or his representative to submit any evidence within 30 days to prove that the illegitimate children do not qualify or that, for some other reason, the benefits of the beneficiary should not be reduced. Claims Manual T315.
If, based upon this notice, the beneficiary visited an SSA District Office, he was given a complete explanation for the action and had the right to inspect the original evidence upon which the SSA determined that a child was entitled to participate in the benefits under 42 U.S.C. § 416(h)(3). If that evidence was not immediately available, the District Office was to send for it. If the beneficiary nevertheless elected to protest and to offer evidence to dispute the validity of the determination of new entitlement, the District Office was to prepare a report describing the contact between the beneficiary and District Office personnel and to forward that along with the evidence submitted to the Reviewing Office, which would determine "whether [the] evidence casts doubt on the original determination." Id. T308(b).
If a protest was received by the Reviewing Office prior to actual downward adjustment in the benefit checks of the current beneficiaries, that is, within 45 days of notice and such additional time as effectuating that adjustment within SSA would take, id. T310(c)(3)(A), a branch of the Reviewing Office was required to review the file for the case, requesting any necessary additional information and clarification. "If the evidence or argument submitted does not cast doubt on the original determination that the child is entitled under [42 U.S.C. § 416(h)(3)] (a protest without substantive proof does not cast doubt upon the original determination)," the benefits were adjusted and the beneficiary was informed of the basis of that reduction and its effective date in a notice which advised him of his right to petition for reconsideration of the adjustment. If a protest was received after the adjustment was made, it was treated as a request for reconsideration. Claims Manual T310(c).
If the beneficiary requested reconsideration, a reviewing officer in the independent Reconsideration Branch reexamined the claim and produced a written Reconsideration Determination, summarizing the evidence and law and delivering a reconsidered determination. If this was also adverse to the beneficiary, he could request a full evidentiary hearing before an Administrative Law Judge of the Bureau of Hearings and Appeals, with attendant rights of administrative appeal to the Appeals Council and of judicial review, 42 U.S.C. § 405(g).
II. The Facts and the Proceedings in the District Court.
Plaintiffs, the widow and two legitimate children of a fully insured, deceased wage-earner, Charles Frost, Jr., had been receiving mother's and surviving children's insurance during 1973 of $159.30 for Mrs. Frost and a like amount for each child. The widow, Claudia Frost, had filed for these benefits on August 26, 1968, five days after the death of her husband, from whom she had been separated for some time. On February 15, 1973, the SSA notified these beneficiaries that their benefits would be reduced to $95.70 for each claimant as a result of the SSA's determination that Charles Frost, Jr., was the father of two illegitimate children, Charles E. III and Tina L. Frost, whose mother, Lola Coolidge, had applied for benefits on behalf of the former on August 26, 1968, the same day Claudia Frost filed her application, and on behalf of both on April 8, 1969, a short time after Tina was born. No benefits were awarded at the time because of the operation of the 1968 amendment disfavoring illegitimate children, but the application was granted effective March, 1973, thereby reducing the amounts available to Claudia Frost and her two children fathered by Charles Frost, Jr. Seemingly the protest step in the SSA procedure was omitted, see 375 F. Supp. at 1315 n.5, but Mrs. Frost did request ...