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Mercer v. Birchman

decided: February 9, 1983.

LUCY E. MERCER AND RUTH HAVENS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
BRUCE LEE BIRCHMAN AND RICHARD S. SCHWEIKER, SECRETARY OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANTS-APPELLEES



Appeals by plaintiff, Lucy E. Mercer, a recipient of Medicare benefits, individually and as representative of a class of all individuals who have been denied a reasonable opportunity for a hearing to appeal the denial of Medicare benefits, and by Ruth Havens, intervening plaintiff, also a recipient of Medicare benefits, from an order of the District Court for Connecticut, T. Emmet Clarie, Chief Judge, 533 F. Supp. 1234, dismissing the complaint for want of jurisdiction. Affirmed.

Friendly, Kearse and Pratt, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

These appeals are from orders of Chief Judge Clarie in the District Court for Connecticut, 533 F. Supp. 1234, which dismissed a claim asserted by Lucy Mercer, a recipient of benefits under title XVIII of the Social Security Act, 42 U.S.C. § 1395 et seq. (Medicare), individually and on behalf of a class of all individuals who have been denied a reasonable opportunity for a hearing to appeal the denial of Medicare benefits, and a claim asserted by Ruth Havens, also a recipient of Medicare benefits, as intervening plaintiff.

The cases have a long history, summarized in Judge Clarie's first opinion, 510 F. Supp. 99 (D. Conn. 1981), and brought up to date in his second, 533 F. Supp. 1234 (D. Conn. 1982). We will assume familiarity with these and will state only the essentials. During late 1976 and early 1977 plaintiff Mercer was confined to a convalescent center in Willimantic, Conn. Her claim for medicare benefits covering her stay there was denied by the Social Security Administration (SSA) and she took an administrative appeal. The appeal was assigned to Administrative Law Judge (ALJ) Birchman who set the hearing for Providence, R.I., some 45 miles away from Mercer's home in Windham, Conn. Mercer claims that the ALJ denied her written request for copies of proposed exhibits to be provided to her representative in advance of the hearing, denied a telephone request for postponement of the hearing to a more convenient time and place,*fn1 and allowed only one of her representatives to be present at the hearing. When these and other requests were denied, Mercer's representatives, a non-profit legal services corporation, refused to participate further in the hearing. Before the ALJ had ruled on the merits of her claim, Mercer brought this action in the District Court for Connecticut on February 9, 1978, on her own behalf and that of the class above described seeking injunctive and declaratory relief that ALJs be required to provide claimants with copies of proposed exhibits at least two weeks prior to hearings, to permit use of these copies at hearings, to schedule hearings at a time and place convenient to claimants, and to place no unreasonable restrictions on the number of representatives at claimants' hearings. Jurisdiction was sought to be predicated on 28 U.S.C. § 1331 and § 1361 and 42 U.S.C. § 405(g).*fn2

Mrs. Havens' Medicare claim, which arose from a stay in a nursing home in Rockville, Conn., likewise was denied by the SSA. Havens appealed, and a hearing was set before ALJ McCarthy. Allegedly the ALJ refused to allow her attorneys, the same legal services corporation, to make an oral argument.

On April 7, 1978, ALJ Birchman denied Mercer's claim and ALJ McCarthy denied Havens' claim. The district court certified a class consisting of Mercer "and those similarly situated, namely, all individuals who have been denied a reasonable opportunity for a hearing to appeal the denial of their Medicare benefits" on April 25, and granted leave for Havens to intervene on June 29, 1978.

Both Mercer and Havens appealed the actions of the ALJs to the SSA's Appeals Council. On September 29, 1978, it remanded Mercer's case for a de novo hearing before ALJ Dietrich,*fn3 who communicated with Mercer's representatives on the availability of copies of the exhibits and on the timing of the hearing to suit Mercer's convenience. On December 14, 1978, the Appeals Council remanded Havens' case, on the ground that refusal to allow oral argument constituted a deprivation of due process, and instructed the ALJ to "schedule a supplemental hearing at a time and place convenient to all parties and give the claimant and/or her representative the opportunity to submit additional evidence and to present oral argument. " The respective ALJs allowed Havens' claim on January 25, 1979, and Mercer's on April 30, 1979.

Although the administrative process had thus resulted in their clients' obtaining the entire monetary relief they had claimed, despite whatever errors the ALJs had made on the first round, the non-profit legal services corporation representing Mercer and Havens continued to press the action in the district court. On December 15, 1978, the judge denied the Secretary's motion to dismiss and allowed discovery. However, when plaintiffs moved for summary judgment, the judge reexamined the jurisdictional problem and found that "the Court does not have jurisdiction over this case, because the plaintiffs did not exhaust the administrative remedies available to them prior to the inception of the action." 510 F. Supp. at 100. He therefore denied plaintiffs' motion for summary judgment and dismissed the action, 510 F. Supp. 99. On appeal to this court, a panel vacated and remanded without opinion, 685 F.2d 425 (2 Cir. 1981), to enable Judge Clarie to determine whether the jurisdictional issue was controlled in plaintiffs' favor by our decision in Ellis v. Blum, 643 F.2d 68 (2d Cir. 1981), where, on quite different facts, we had sustained jurisdiction under the mandamus statute, 28 U.S.C. § 1361. Judge Clarie found that the case was not controlled by Ellis v. Blum and adhered to his initial ruling, 533 F. Supp. 1234. On a second appeal we hold that he was right.

The starting point for modern analysis of problems such as those here presented is Weinberger v. Salfi, 422 U.S. 749, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975). The Court there held that a district court did not have general federal question jurisdiction under 28 U.S.C. § 1331 with respect to named plaintiffs making a claim of unconstitutionality of provisions in the Social Security Act, 42 U.S.C. § 416(c) (5) and (e) (2), which defined "widow" and "child" so as to exclude surviving wives and stepchildren whose respective relationships to a deceased wage earner had subsisted for less than nine months prior to his death. This was because 42 U.S.C. § 405(h) expressly excluded resort to 28 U.S.C. § 1331 to recover under any claim arising under Title II of the Social Security Act. The Court did, however, find jurisdiction over the claims of the named plaintiffs under § 405(g), which authorizes the district courts to review any adverse "final decision" of the Secretary, despite plaintiffs' failure to resort to appellate procedures within the Department since, in light of the Secretary's lack of power to declare the challenged provisions unconstitutional, any such resort would have been futile. As to class members other than the named plaintiffs, the Court found that "the complaint is deficient in that it contains no allegations that they have even filed an application with the Secretary, much less that he has rendered any decision, final or otherwise, review of which is sought." 422 U.S. at 764.

Salfi was shortly followed by Mathews v. Eldridge, 424 U.S. 319, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976). Eldridge had been receiving disability benefits under 42 U.S.C. § 423 but these had been terminated, without an evidentiary hearing, on the basis of improvement in his medical condition. Without seeking reconsideration to which he was entitled, Eldridge brought suit, invoking jurisdiction under § 405(g), on the sole ground, 424 U.S. at 325, that despite applicable regulations he was entitled under Goldberg v. Kelly, 397 U.S. 254, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970), to an evidentiary hearing prior to termination. The Court upheld § 405(g) jurisdiction. It found implicit in Salfi that the central requirement of a final decision by the Secretary consisted of two elements, only one of which was "purely 'jurisdictional'" in the sense that it cannot be 'waived ' by the Secretary in a particular case." 424 U.S. at 328. This was the requirement that a claim for benefits shall have been presented to the Secretary, a condition that Eldridge had fulfilled. The other, waivable, element was the "requirement that the administrative remedies prescribed by the Secretary be exhausted." Id. In this respect, while Eldridge's case differed from Salfi in that the Secretary had power to remedy the unconstitutionality of which Eldridge complained since he could provide for a pretermination hearing, the Court did not "regard this difference as significant" since "it is unrealistic to expect that the Secretary would consider substantial changes in the current administrative review system at the behest of a single aid recipient raising a constitutional challenge in an adjudicatory context." 424 U.S. at 330. Hence, although there was no evidence of express waiver of the exhaustion requirement by the Secretary such as had been found in Salfi, the Court found the case to be appropriate for dispensing with the normal exhaustion requirement. Given its conclusion that jurisdiction in the district court was proper under § 405(g), the Court found "it unnecessary to consider Eldridge's contention that notwithstanding § 405(h) there was jurisdiction under the mandamus statute, 28 U.S.C. § 1361, or the Administrative Procedure Act, 5 U.S.C. § 701 et seq.", 424 U.S. at 332, n.12. It answered the latter question in the negative in Califano v. Sanders, 430 U.S. 99, 51 L. Ed. 2d 192, 97 S. Ct. 980 (1977).

In Ellis v. Blum, supra, 643 F.2d 68, we were required to deal with the former question. The case involved two sets of defendants. One set consisted of state officials who were enforcing the SSA's benefit termination plan in a manner alleged to be inconsistent with the SSA Manual, the Social Security Act, and due process. The other was the Secretary who was accused of failing to enforce the manual against the state defendants. We held that the state defendants were not within the ambit of § 405(h) which prohibits actions other than under § 405(g) only against "the United States, the Secretary, or any officer or employee thereof", and that jurisdiction with respect to them could be maintained under 28 U.S.C. § 1331 in light of the amendment, made during the pendency of the appeal, which eliminated the jurisdictional amount requirement in all federal question cases, 94 Stat. 2369 (1980). We found the question of jurisdiction over the Secretary to be more difficult but concluded we need not decide issues raised with respect to § 405(g) or § 1331 jurisdiction since there was jurisdiction in mandamus under 28 U.S.C. § 1361, a remedy which is not barred in terms by § 405(h), and which, absent any negative holding by the Supreme Court, see Norton v. Mathews, 427 U.S. 524, 529-30, 49 L. Ed. 2d 672, 96 S. Ct. 2771 (1976); Mathews v. Eldridge, supra, 424 U.S. at 322 n.12 (1976); Califano v. Yamasaki, 442 U.S. 682, 698, 61 L. Ed. 2d 176, 99 S. Ct. 2545 (1979), we had sanctioned in White v. Mathews, 559 F.2d 852, 856 (2 Cir. 1977), cert. denied, 435 U.S. 908, 98 S. Ct. 1458, 55 L. Ed. 2d 500 (1978); Barnett v. Califano, 580 F.2d 28, 31 (2 Cir. 1978); and Sharpe v. Harris, 621 F.2d 530, 532 (2 Cir. 1980) -- all three cases relating to the dilatoriness of the Secretary in handling claims for various forms of payment. Recognizing that "traditionally a writ of mandamus will not issue unless the plaintiff had exhausted administrative remedies and unless the defendant owes the plaintiff a clear duty to act", supra, 643 F.2d at 81, we thought Ellis was an appropriate case for dispensing with exhaustion, on a ground similar to that stated by Justice Powell in Eldridge for dispensing with exhaustion in an action under § 405(g) on the facts there before the Court, namely, that "it would be foolish to expect the Secretary in an adjudicatory administrative proceeding to remedy what plaintiff alleged to be a full-blown policy of the state defendants of issuing deficient pretermination notices." 643 F.2d at 78.*fn4

Mercer's and Havens' claims for Medicare benefits were the paradigm of those where resort to the internal procedures of the SSA should be required. After an initial adverse determination of their claims and during the pendency of their district court action, Mercer and Havens followed the established course of administrative review. Their pursuit of administrative remedies could hardly be called futile or "foolish". Whereas Eldridge would have been asking the Secretary to change his regulations, Mercer and Havens were asking him to enforce them. As a result, not only did they receive the benefits they claimed but the procedural defaults of which they complained were acknowledged to be deviations from established agency regulations and were corrected. No question of statutory validity as in Salfi, no attack on the Secretary's prescribed regulations as in Eldridge, no conflict between the established procedures of cooperating agencies as in Ellis v. Blum rendered illusory the prospect of an administrative remedy for the wrongs these plaintiffs allege so as to justify resort to the courts before exhaustion.

In the year Mercer's and Havens' claims were considered, the SSA handled some 34,900,000 Medicare bills and some 6,900,000 other claims, of which approximately 20% were initially rejected, Social Security Administration, The Year in Review: The Administration of Social Security Programs, 1978 (1980). In an enterprise of such magnitude, it is essential that the agency provide machinery for self-correction and it has done precisely that.*fn5 The first step, specified in 20 C.F.R. § 404.909 (1977) is a request for reconsideration. Save for cases governed by the expedited appeals process, 20 C.F.R. §§ 404.916a-916f,*fn6 an unsuccessful request for reconsideration is followed by a hearing before an ALJ, 20 C.F.R. § 404.917 et seq. and, if the result of that is adverse, a request for review by the Appeals Council, 20 C.F.R. § 404.955 et seq. An important purpose of review by the Appeals Council is to ferret out procedural errors by the hundreds of ALJs employed by the SSA who conduct some 215,000 hearings every year, Social Security Administration: The Year in Review, supra. Precisely that purpose was served here. In Havens' case the Appeals Council explicitly directed that a new hearing should be held and oral argument allowed. While the remand ...


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