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STIEBERGER v. SULLIVAN

May 29, 1990

THERESA STIEBERGER, ET AL., INDIVIDUALLY AND ON BEHALF OF ALL PERSONS SIMILARLY SITUATED; AND THE CITY OF NEW YORK, PLAINTIFFS,
v.
LOUIS W. SULLIVAN, AS SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Sand, District Judge.

        TABLE OF CONTENTS
I. BACKGROUND ................................................... 722
    A. Procedural History of the Case ........................... 722
    B. The Administrative Review Process ........................ 723
II. DISCUSSION .................................................. 724
    A. Statute of Limitations ................................... 724
    B. Non-acquiescence ......................................... 728
      1. What Constitutes Non-acquiescence ...................... 728
      2. The Legality of Non-acquiescence ....................... 730
      3. Non-acquiescence in Second Circuit Precedent ........... 730
          a. Standing to Challenge Six Alleged Areas
                of Non-acquiescence ............................. 731
          b. The Weight Accorded Treating Physician Opinions .... 732
          c. The Right to Cross-Examine the Authors of
                Post-Hearing Reports ............................ 738
          d. ALJ's Personal Observations ........................ 740
          e. The Standards for Evaluating Credibility ........... 742
          f. The Duty to Accord Weight to the Determinations
                of Other Agencies ............................... 744
          g. The Duty to Assist Pro Se Claimants ................ 745
      4. SSA's Formal Acquiescence Policy ....................... 747
          a. The Original Acquiescence Policy (Prior to
                June 1985) ...................................... 747
          b. The Adoption of Interim Circular 185 (June
                1985-December 1985) ............................. 748
          c. Transmittal X-7 (December 1985-) ................... 750
          d. The Implementation of Interim Circular 185
                and Transmittal X-7 ............................. 751
          e. Measures Taken Since Transmittal X-7 ............... 755
          f. Recent Amendments (January 1990-) .................. 757

III. CONCLUSION AND COMMENTS ON REMEDY .......................... 758

Plaintiffs, a class of Social Security claimants and the City of New York, bring this action challenging two policies of the Social Security Administration: "non-acquiescence" and "Bellmon Review." Plaintiffs move for summary judgment with respect to their non-acquiescence claim, and defendants, citing the applicable statute of limitations, move for judgment on the pleadings, or in the alternative for summary judgment, with respect to the City of New York and a substantial portion of the plaintiff class. Some familiarity with this Court's earlier decision in this case is presumed. See Stieberger v. Heckler, 615 F. Supp. 1315 (S.D.N.Y. 1985), vacated, 801 F.2d 29 (2d Cir. 1986).

I. Background

A. Procedural History of the Case

This Court's prior decision provides a detailed description of the early procedural history of this case which will only be briefly summarized here. See Stieberger, 615 F. Supp. at 1321-23. Plaintiffs Theresa Stieberger and the City of New York commenced this action to challenge two policies implemented by the United States Department of Health and Human Services ("HHS") and the Social Security Administration ("SSA"): "non-acquiescence" and "Bellmon Review." "Non-acquiescence" is the agency's alleged policy of adjudicating claims without implementing the holdings in decisions of United States Courts of Appeal. Bellmon review is the agency's policy pursuant to which the decisions of Administrative Law Judges ("ALJs"), who had rendered a high percentage of pro-claimant determinations in disability benefit cases, were subjected to agency-initiated review. Plaintiffs are moving for full summary judgment but are addressing only the non-acquiescence issue on the theory that they would be entitled to the same relief if they prevailed on one or both issues. Transcript of Oral Argument dated January 11, 1990 ("Tr.") at 12.

In this Court's decision of August 19, 1985, we denied defendants' motion to remand plaintiff Stieberger's case to SSA, granted plaintiff Patricia Happy's motion to intervene, denied a motion by Angel Vega to intervene, granted the motions of plaintiffs Milagros Sullivan and Harold Johnson to consolidate their actions with this action, and certified a class consisting of:

  All New York State residents whose claims for
  benefits or continuation of benefits have been or
  will be denied or terminated pursuant to hearings
  before administrative law judges since October 1,
  1981, based on a determination that they do not
  have a disability that prevents them from engaging
  in substantial gainful activity; and whose
  benefits have not been granted or restored through
  subsequent appeals.

615 F. Supp. at 1400. On the basis of a finding that plaintiffs were likely to prevail on the merits of their non-acquiescence claim, the Court granted a detailed preliminary injunction. The Court also found that plaintiffs had standing to challenge the Bellmon Review policy, but denied plaintiffs' motion for preliminary relief because SSA had discontinued the challenged aspects of the practice.*fn1 On September 6, 1986, the Second Circuit vacated this Court's preliminary injunction on the ground that the relief granted in Schisler v. Heckler, 787 F.2d 76 (2d Cir. 1986) ("Schisler I"), had removed the necessity for this Court's injunction. Stieberger v. Bowen, 801 F.2d 29 (2d Cir. 1986). In Schisler I, the Second Circuit directed the District Court on remand to "state in relevant publications to be determined by the district court that adjudicators at all levels, state and federal, are to apply the treating physician rule of this circuit." 787 F.2d at 84. The final Schisler instructions were eventually set out in Schisler v. Bowen, 851 F.2d 43, 46-47 (2d Cir. 1988) ("Schisler II").

On January 26, 1987, this Court granted plaintiffs motion to compel production of documents relating to the work of the Litigation Management Project and the Acquiescence Task Force. With plaintiffs' agreement, a protective order was issued prohibiting the disclosure of the contents of the documents to others. On January 11, 1990, this Court lifted the protective order, Tr. at 47, and on February 8, 1990, the Court of Appeals denied defendants' petition for a stay of the order lifting the protective order.

In 1986, defendants moved for summary judgment on statute of limitations grounds with respect to the City of New York and a portion of the plaintiff class. This Court determined that a decision on defendants' motion should be deferred until a dispositive motion on the merits was also before the Court. Defendants have now renewed their motion, and it is presently before the Court.

B. The Administrative Review Process

The Social Security Administration is responsible for administering the disability programs of the Social Security Act. SSA has set up a multi-step process for claimants seeking a determination that they are sufficiently disabled to be entitled to benefits. State disability determination services ("DDSs") make the initial determination relying upon a review physician or psychologist and a disability examiner neither of whom actually examine claimants. This determination is based upon a written record. In New York, the New York State Office of Disability Determinations ("ODD") performs this function pursuant to a contract with SSA. Under 42 U.S.C.A. § 421(a)(2) (1983 & Supp. 1989) and 20 C.F.R. §§ 404.1615(a), 404.1633(a) & (b), 416.1015(a), 416.1033(a) & (b) (1989), ODD is bound to apply SSA's standards and procedures for determining disability. Within 60 days of the receipt of a denial notice, a claimant may seek reconsideration by ODD. Except when a claimant is seeking reconsideration of a determination that he is no longer disabled, reconsideration determinations are also made without a hearing or an appearance by the claimant.

SSA uses a set of instructions known as the Program Operations Manual System ("POMS") to instruct ODD adjudicators how to apply policies relating to the disability program. A procedure called "quality assurance" is used by SSA to monitor and evaluate ODD's compliance with SSA policy. Specifically, SSA officials review a percentage of ODD's disability determinations. When quality assurance staff members determine that ODD has deviated from SSA policy in a particular case, SSA may return the case to ODD for correction or further development of evidence. A percentage of "performance accuracy" is recorded by SSA, and if the percentage falls below a fixed level for two or more quarters, SSA is authorized to intervene to undertake certain corrective measures. If SSA declares ODD to be in a state of "substantial failure," which can occur only after a number of alternatives have been exhausted, it can assume direct control of disability determinations. SSA also monitors and evaluates DDS's compliance with SSA policies and procedures during pre-effectuation review, a process through which SSA is required to review 65 percent of the favorable Title II disability determinations on a pre-effectuation basis.

Within 60 days of the receipt of a notice of denial at the reconsideration stage, a claimant may request a de novo hearing before an ALJ which is conducted by SSA's Office of Hearings and Appeals ("OHA"). At such a hearing, a claimant may appear and be represented, present witnesses, and present evidence of disability not presented to ODD. The ALJ may solicit the testimony of a physician, who reviews the documentary medical evidence and explains terms and concepts which appear in the records, and a vocational expert, who offers an opinion concerning whether a hypothetical claimant with certain mental and physical limitations would be capable of performing jobs in the national economy. The ALJ then issues a written decision.

The ALJ's decision may be appealed within 60 days to SSA's Appeals Council. The Appeals Council can also review on its own motion an ALJ decision for which the claimant has not sought review. The Appeals Council may deny or dismiss a request for review, or grant the request and issue a decision or remand the case for further proceedings. The Appeals Council will "consider all the evidence in the [ALJ] hearing record as well as any new and material evidence submitted to it which relates to the period on or before the date of the administrative law judge hearing decision." 20 C.F.R. §§ 404.976(b)(1), 416.1476(b)(1) (1989).

Social Security Rulings ("SSRs"), which are issued by SSA, explain policies set out in the Social Security Act, regulations, and case law. SSRs present the agency's interpretation of the law, often incorporating decisions of federal courts, but do not have the force and effect of law. Unlike SSA regulations, SSRs were not published in full in the Federal Register and did not appear in the Code of Federal Regulations, though regulations which became effective January 11, 1990 indicate that all SSRs will now be published in the Federal Register. 55 Fed.Reg. 1012, 1016 (1990) (to be codified at 20 C.F.R. 404, 410, 416, 422). When SSA issues a ruling acquiescing in a decision of a United States Court of Appeals, it is called an acquiescence ruling ("AR").

In addition to SSRs, decision-makers at the OHA level are provided with decisions of the United States Supreme Court and the OHA Handbook, a manual which guides OHA personnel on operating procedures.*fn2 Some decisions of the United States Courts of Appeal have been distributed to federal adjudicators by the Chief ALJ and Regional Chief ALJs, and federal adjudicators apparently have some access to other decisions through commercial reporters. Anderson Declaration ¶ 1. Since 1988, they have also been given the Circuit Court Case Reporter, an on-line data base which is part of the Hearings and Appeals Law (LEX) ("HALLEX").*fn3 Finally, SSA reports that "program circulars" which remind adjudicators of agency policy are distributed.

Upon denial of review by the Appeals Council or upon affirmance of the ALJ's decision by the Appeals Council, the claimant may file a complaint in federal district court challenging the agency's decision.

II. Discussion

Fed.R.Civ.P. 56(c) stipulates that a motion for summary judgment shall be granted if there is "no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Since the record before the Court consists almost entirely of undisputed facts, such as statements of SSA policy, internal agency memoranda the authenticity of which is unchallenged, and uncontradicted deposition testimony, we find that summary judgment is an appropriate mechanism for resolving the issues before the court. The few contested facts clearly do not relate to material issues.

A. Statute of Limitations

Defendants move for judgment on the pleadings or in the alternative for summary judgment with respect to the City of New York, all unnamed class members in whose case a final decision was rendered before May 30, 1984, and all unnamed class members in whose case a non-final agency decision from which no appeal was taken was rendered before May 30, 1984. Defendants contend that because plaintiffs failed to comply with the requirement in 42 U.S.C.A. § 405(g) (1983) that judicial review of a final decision of the Secretary be sought within sixty days after the mailing of notice of the decision, their actions are barred.*fn4 Plaintiffs' amended complaint, which for the first time included claims relating to non-acquiescence and Bellmon Review, was filed on August 3, 1984.

Plaintiffs argue that this Court has already considered this issue in Stieberger and that this earlier decision should stand as the law of the case. Plaintiffs also reassert their argument that SSA has waived the statute of limitations and that equitable tolling of the statute is in order.

In Stieberger this Court granted plaintiffs' motion for certification of a class that included members of the class against whom defendants now seek summary judgment. In reaching our decision, we held that the sixty day period in Section 405(g) should be tolled because plaintiffs "had little basis to know, or reason to suspect, that the Secretary was refusing to apply the relevant precedents of judicial authorities in resolving their claims." 615 F. Supp. at 1331. This Court discounted the importance of defendants' observation that SSA's policy was published in the Office of Hearings and Appeals ("OHA") Handbook, finding such publication more analogous to an internal memorandum. We concluded that:

  [t]he only manner in which the policy could have
  been detected is by a careful comparison of the
  Secretary's rules and the relevant case law; but
  surely the claimants `were entitled to believe
  that their Government's determination of
  ineligibility was the considered judgment of an
  agency faithfully executing the laws of the United
  States' . . . rather than the judgment of an
  agency which refused to adhere to Second Circuit
  precedent construing the Social Security Act.

Id. at 1331-32 (citations omitted).

Under the law of the case doctrine, a prior ruling on an issue of law in the same case will stand, absent "compelling" or "cogent" reasons for reconsideration. Baden v. Koch, 799 F.2d 825, 828 (2d Cir. 1986); Doe v. New York City Dep't of Social Servs., 709 F.2d 782, 789 (2d Cir.), cert. denied, 464 U.S. 864, 104 S.Ct. 195, 78 L.Ed.2d 171 (1983). Though the issue is presented to the Court in a different posture, we are asked to decide once again whether the actions of these plaintiffs should be barred by the 60-day limitation period in Section 405(g). However, since the Court's earlier ruling was based at least in part upon factual determinations, and since these determinations were made at a preliminary stage in this litigation before full discovery had taken place, the Court will revisit this issue in light of the expanded record now before it.

Defendants argue once again that their conduct with respect to non-acquiescence was not secretive.*fn5 However, the Court finds no reason to deviate from its ruling that the plaintiffs in this case had "little basis to know, or reason to suspect, that the Secretary was refusing to apply the relevant precedents of judicial authorities in resolving their claims." 615 F. Supp. at 1331. Clearly, no attempt was ever made to apprise plaintiffs of SSA's actual policy toward decisions of the courts of appeal. We also find there to be sufficient evidence that SSA has persistently dismissed as insignificant and even attempted to obfuscate the discrepancies between the law of the Second Circuit and SSA policy. For example, the evidence suggests that SSA had offered its adjudicators through SSRs, POMS instructions for state adjudicators and training materials a number of methods to discount the opinions of treating physicians and had never instructed them how much weight such opinions should be given, despite a clear rule in the Second Circuit that such opinions are binding unless contradicted by substantial evidence. See infra pp. 732-38. SSA, for its part, has never acknowledged that it is bound by Second Circuit law generally or issued a ruling acquiescing in the treating physician rule specifically until ordered to do so by the Court of Appeals. Instead, it continues to argue that its own rules are not inconsistent with Second Circuit law. Under circumstances such as these, plaintiffs could not be expected to know of SSA's violations.

The Court also finds that defendants have offered no additional evidence which would lead the Court to deviate from its ruling in Stieberger that defendants' conduct with respect to the implementation of Bellmon Review warranted tolling of the sixty day limitations period. Defendants point out that a memorandum written in 1982 by defendant Louis B. Hays which described the individual ALJ portion of Bellmon review was not restricted in its circulation to the agency as this Court believed at the time of Stieberger, but was in fact published by the National Association of Social Security Claimants' Representatives and was therefore accessible to plaintiffs' counsel. For reasons which will be discussed below, the Court does not believe that knowledge that can be ascribed to certain counsel is sufficient to bar the actions of the entire plaintiff class in this case. Defendants also draw the Court's attention to proceedings before Congress and various articles and stories which appeared in the media. We concluded in Stieberger, however, that in light of SSA's failure to disclose its implementation of Bellmon Review in accordance with APA rulemaking procedures or in some other manner reasonably ascertainable by plaintiffs, this evidence was insufficient to avert the tolling of the entire statute of limitations. Defendants have not offered any additional evidence suggesting that class members could reasonably have been expected to have familiarized themselves with Bellmon Review.

The thrust of defendants' argument is that plaintiffs' counsel either knew or should have known of the facts which gave rise to plaintiffs' cause of action. Defendants point out that the various congressional hearings, media reports and legal actions raising these issues well before the filing of plaintiffs' complaint should have at least apprised counsel of the relevant facts. More significantly, defendants offer a letter from one of plaintiffs' attorneys which indicates that some time in the late fall of 1982 an attorney was assigned to determine whether hearings held by the Senate Subcommittee on Governmental Operations on May 10, 1982 "raised issues that were amenable to litigation." See Letter from Burt Neuborne to Brian Kennedy (May 19, 1986); Defendants' Exhibit ("DX") A. The letter also indicates that counsel prepared a draft complaint that became the basis for the complaint in this action as early as March 1983, sixteen months before this action was commenced. Id. This evidence would strongly suggest that some of plaintiffs' attorneys knew of the relevant facts well before May 30, 1984 and that many other attorneys could have known of them.

What follows from this conclusion, however, is not clear. Defendants cite Link v. Wabash R.R. Co., 370 U.S. 626, 634, 82 S.Ct. 1386, 1390, 8 L.Ed.2d 734 (1962) (quoting Smith v. Ayer, 101 U.S. 320, 326, 25 L.Ed. 955 (1880)), for the proposition that plaintiffs are charged with "`notice of all facts, notice of which can be charged upon the attorney.'" See also Hay v. Wells Cargo, Inc., 596 F. Supp. 635, 640 (D.Nev. 1984), aff'd, 796 F.2d 478 (9th Cir. 1985) (counsel's knowledge, imputed to plaintiff, can foreclose equitable tolling of statute of limitations); International Paper Co. v. Federal Power Comm'n, 438 F.2d 1349, 1357 (2d Cir.), cert. denied, 404 U.S. 827, 92 S.Ct. 61, 30 L.Ed.2d 56 (1971). Plaintiffs point out that each of the cases cited by defendants involved individual representation where plaintiffs had at least some discernible relationship with counsel and retained the option of commencing legal malpractice actions against their attorneys and did not involve a class action with thousands of dispersed parties. Plaintiffs also observe that class counsel in this case did not represent the class members prior to the commencement of this litigation.

It should be noted that other courts have considered tolling the statute of limitations of Section 405(g) in class actions challenging non-acquiescence, though none of these courts appears to have considered the impact of knowledge on the part of counsel of the facts giving rise to the cause of action more than 60 days before the action was commenced. See Hyatt v. Heckler, 807 F.2d 376, 380-81 (4th Cir. 1986), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 41 (1987); Lopez v. Heckler, 725 F.2d 1489, 1504-07 (9th Cir.), vacated on other grounds, 469 U.S. 1082, 105 S.Ct. 583, 83 L.Ed.2d 694 (1984); Adamson v. Bowen, 855 F.2d 668, 677 (10th Cir. 1988); Schisler v. Heckler, 107 F.R.D. 609, 614 (W.D.N.Y. 1984).*fn6 One court has also tolled the 60-day period in an action challenging Bellmon review. See W.C. v. Heckler, 629 F. Supp. 791, 796 (W.D.Wash. 1986), aff'd, 807 F.2d 1502 (9th Cir. 1987). At the same time, though not in a case involving non-acquiescence or Bellmon review, at least one court has declined to toll the limitation period under Section 405(g) where the plaintiffs or counsel for the plaintiff class should have been aware of the facts which formed the basis for plaintiffs' cause of action more than 60 days before the filing of the complaint. See Gay v. Bowen, No. 87-0441, 1987 WL 15516 (N.D.Ill. Oct. 19, 1987) (WESTLAW, DCT file).

The Court's decision would have unfortunate consequences whether or not we find the statute of limitations to have been tolled. If we imputed counsel's knowledge to the entire plaintiff class, thousands of members of the class, many of whom are disabled, indigent, and unsophisticated pro se litigants, would be denied relief to which they would otherwise be entitled and may desperately need. Furthermore, the vast majority of the class members have had no contact with counsel and may well be unaware that any action in which they have an interest is proceeding. At the same time, if counsel for a class is permitted to ignore limitations provisions like Section 405(g), there is a danger that the salutary purposes of a statute of limitations may be significantly undermined in class actions.

Tolling is an equitable concept and the Court must therefore strike a balance between the concerns underlying the statute of limitations and the equitable interest in not extinguishing otherwise valid complaints of unrepresented and unsophisticated persons. We hold that where a member of the plaintiff class was represented by counsel at the final stage of the administrative review process, and where counsel had knowledge of the facts which formed the basis for this action or it can be demonstrated that counsel had access to such knowledge, that member's claim will be barred by Section 405(g). For example, the claim of a member of the class, if any, represented by counsel Burt Neuborne at the final stage of the administrative review process would be barred. As part of any future remedy in this action, the Court will direct that the form providing notice to class members and soliciting dates as to eligibility for relief inquire whether that member was represented by counsel and the identity of such counsel.

Defendants, anticipating that the Court might reach this type of result, argue that "to the extent individual knowledge of the unnamed class members themselves [and presumably their counsel] were deemed material . . . it would be doubtful in the extreme that class certification would remain appropriate." Defendants' Memorandum in Support of Motion for Judgment on the Pleadings at 20, n. 23.*fn7 However, the presence of unresolved individual issues of compliance with the statute of limitations does not prevent class actions from proceeding. See, e.g., Milberg v. Lawrence Cedarhurst Fed. Sav. & Loan Ass'n., 68 F.R.D. 49, 52 (E.D.N.Y. 1975); Williams v. Sinclair, 529 F.2d 1383, 1388 (9th Cir. 1975), cert. denied, 426 U.S. 936, 96 S.Ct. 2651, 49 L.Ed.2d 388 (1976). If it is determined that individual members of the plaintiff class are barred by the statute of limitations as a result of knowledge attributed to their attorneys, the Court can enter the appropriate order stating that those persons are ineligible for relief. See Cohen v. District of Columbia Nat'l Bank, 59 F.R.D. 84 (D.D.C. 1972). Since the plaintiff class by and large pursued its disability claims pro se, it is reasonable to assume that the class members who will thus be barred would constitute a small percentage of the tens of thousands of disability claimants.

Since the City of New York seeks no independent relief and no monetary damages, the Court need not address whether the City of New York is barred by the statute of limitations.

B. Non-acquiescence

1. What Constitutes Non-acquiescence

Our focus now turns to plaintiffs' motion for summary judgment with respect to their claim of SSA non-acquiescence. Non-acquiescence can be understood generally as an administrative agency's deliberate refusal to implement holdings in binding court decisions in cases adjudicated before it. See Heckler v. Lopez, 464 U.S. 879, 887, 104 S.Ct. 221, 226, 78 L.Ed.2d 217 (1983) (Brennan, J., dissenting). The type of non-acquiescence at issue in this case is SSA's unwillingness to follow a court of appeals holding in subsequent cases within the same circuit.*fn8 See Stieberger, 615 F. Supp. at 1342-43.

As at least one SSA official has recognized, the agency has practiced different types of non-acquiescence. At times it has formally announced that it will not apply holdings of courts of appeal, and at other times, it has simply ignored the decisions and "continue[ed] to follow the Secretary's interpretation as reflected in regulations or other agency instructions." PX 23 at 1; Wilson Deposition ("Dep.") II at 316-18. Plaintiffs suggest that the agency is now primarily practicing this form of "silent non-acquiescence."*fn9 Defendants deny that they have engaged in any form of non-acquiescence in disability cases, at least since 1985.

In order to establish agency non-acquiescence, the evidence must demonstrate that SSA has deliberately failed to "follow the law of the circuit whose courts have jurisdiction over the cause of action." Hyatt v. Heckler, 807 F.2d 376, 379 (4th Cir. 1986), cert. denied, 484 U.S. 820, 108 S.Ct. 79, 98 L.Ed.2d 41 (1987). In the absence of an instruction to apply court of appeals holdings to the cases before them, SSA adjudicators are obliged to apply agency policy and agency interpretations of the law. Nash v. Bowen, 869 F.2d 675, 680 (2d Cir.), cert. denied, ___ U.S. ___, 110 S.Ct. 59, 107 L.Ed.2d 27 (1989). Since SSA has not instructed its adjudicators that they are bound by the decisions of the courts of appeal but has instead explicitly directed them to apply agency policy, a careful comparison between these decisions and agency policy must be undertaken.

Where the agency does not formally announce that it will non-acquiesce in a particular decision, the agency's conduct cannot be considered non-acquiescence unless there are substantial differences between agency policy and court of appeals holdings and unless these differences have influenced the agency's adjudication of individual cases. See Floyd v. Sullivan, 833 F.2d 529, 532 (5th Cir. 1987) (differences in language do not constitute non-acquiescence; plaintiffs must offer evidence of a system-wide pattern of mistaken adjudication). If a particular difference between SSA policy and a court holding has not affected the agency's adjudication of individual cases, the agency cannot be said to have failed to apply the holding in practice, and the agency's conduct cannot be said to have affected the determinations of eligibility. Impact upon the adjudicatory process can be established with evidence of "a system-wide pattern of mistaken adjudication," id., such as a series of cases where courts have reversed for failure to apply a particular holding or internal SSA memoranda describing a practice of not applying a particular holding.*fn10

A small number of cases over a significant period of time where courts reversed for failure to apply a court of appeals holding would suggest either that the effects of the difference between agency policy and the holding cannot be detected in court opinions, that the differences have no effect, or that SSA actually applies the holding in the cases it adjudicates. Whatever the explanation, however, without other evidence of an impact upon the adjudicatory process the agency's practice could not be called non-acquiescence. On the other hand, if a rather large number of courts have found that SSA adjudicators failed to apply a particular holding, the difference between agency policy and the particular holding can be said to have influenced agency adjudication.

Unless the impact of the differences between SSA policy and court of appeals holdings upon the agency's adjudication of cases has come to the attention of SSA officials, the differences could still conceivably be explained as inadvertent or unintentional. However, if a number of courts have reversed or remanded cases because of an agency adjudicator's failure to apply a particular holding or if some group within SSA has called these differences to the attention of agency officials, the continued failure to reconcile agency policy with the holding can be considered deliberate.

SSA argues that it is acquiescing as long as it's policy is not explicitly inconsistent with the holdings in Second Circuit decisions. Stated differently, SSA maintains that it is failing to acquiesce only when a provision of SSA policy expressly contradicts a Second Circuit holding. If one accepts the legal premise that SSA is bound by the holdings of the courts of appeal, as this Court does, whether SSA's policy explicitly contradicts the holdings is not the issue. The issue is whether SSA is affirmatively applying the Court's holding and whether the consequence thereof is to deny claimants benefits to which they would otherwise be entitled.

Defendants also argue that because precedents can be read either broadly or narrowly, any duty they have to acquiesce does not extend beyond acquiescence in "cases of square conflict" between SSA policy and court decision. Defendants' Memorandum at 41-44. Defendants draw this conclusion from the principle that an agency is required to acquiesce only in "square holdings of courts."

Clearly, SSA is not obliged to incorporate dicta from court of appeals decisions as policy. See Sirbo Holdings, Inc. v. Commissioner of IRS, 476 F.2d 981, 989 (2d Cir. 1973) (tax court fulfills its duties when it "respects decisions of a court of appeals . . . and should be free to voice its disagreement with statements not essential thereto . . ." (emphasis in original)); Schisler II, 851 F.2d at 46-47. Nor would SSA be expected to apply a holding from a Second Circuit decision beyond the scope indicated by the language of the decision itself. See Dixon v. United States, 381 U.S. 68, 76-79, 85 S.Ct. 1301, 1306-08, 14 L.Ed.2d 223 (1965). For example, if the wording of a Second Circuit holding could be read in good faith to suggest that the holding should apply only to the facts of that specific case, SSA would of course not be obligated to apply the holding beyond those facts.

Moreover, if the agency could find a principled distinction between a particular set of factual circumstances and the case in which the Second Circuit articulated its holding which would indicate that the decision would not be controlling under those circumstances, and if SSA believed in good faith that the decision should not be applied in those circumstances, it would be entitled to set out as policy both the circumstances where the decision would be controlling and the circumstances where SSA had decided that it should not be applied. Under this scenario, the Second Circuit would presumably have the opportunity, when reviewing a decision arising under these "different circumstances," to pass upon the distinction drawn by SSA. In addition, SSA's position with regard to the Second's Circuit's holding would be clearly articulated as policy.

Defendants argue that Court holdings concerning the "weight" given to evidence or requiring that an adjudicator "consider" certain factors are difficult to put into practice. Defendants' Memorandum at 76. If the Second Circuit's holdings suffer from any ambiguity or are difficult to implement, SSA is free to state the holdings as policy and then offer a good faith explanation in the same policy statement of how the rule will be put into practice. Should the Second Circuit regard SSA's explanation as inconsistent with how it intended the rule to operate, the Court will have the opportunity to indicate this upon review of individual cases. In the meantime, SSA could not be said to have failed to acquiesce.

2. The Legality of Non-acquiescence

In Stieberger, this court held that SSA's refusal to follow a court of appeals ruling in subsequent cases within the same circuit ran afoul of the doctrine of separation of powers in the United States Constitution. 615 F. Supp. at 1357. We find the same deficiencies where the agency is applying a substantially different rule which influences its adjudication of cases controlled by the court of appeals holdings.

After noting in Stieberger that plaintiffs were entitled to have the validity of SSA's policy and practice under the Constitution's Equal Protection Clause analyzed under the rational basis standard, we also found that:

  [t]he consequence of the SSA's non-acquiescence
  policy is simply this: one set of rules applies to
  those claimants fortunate enough to procure legal
  representation, persistent enough to appeal an
  adverse determination of the various
  non-acquiescing levels of the agency to a federal
  court bound to follow the Court of Appeals ruling,
  and healthy enough to endure this belabored
  process; a different and adverse rule will govern
  the rights of those claimants who are
  unrepresented, insufficiently persistent in their
  efforts to invoke the benefits of favorable
  judicial rulings, or incapable of doing so. The
  arbitrariness of such as system is evident simply
  from its description.

Id at 1362-63. Based upon these observations, we concluded that the arbitrary distinctions drawn by SSA's policy were difficult to reconcile with constitutional due process and equal protection standards. Id.*fn11 Where SSA's rule is substantially different in a case controlled by a court of appeals decision and the agency's adjudication of cases is thereby affected, these same constitutional infirmities are present.

3. Non-acquiescence in Second Circuit Precedent

Plaintiffs are alleging that SSA's policies and practices amounted to non-acquiescence in five discrete areas: the weight accorded treating physician opinions, the right to cross-examine the authors of post-hearing reports, the standards for evaluating credibility, the duty to accord weight to the determinations of other agencies, and the duty to assist pro se claimants. For the sake of specificity, the Court has created a sixth category: an ALJ's consideration of his or her own personal observations. The Court will consider each area in turn to determine whether there are substantial differences between agency policy and Second Circuit holdings and whether these differences have affected SSA's adjudication of cases. Because plaintiffs contend that SSA's general acquiescence policy has in fact perpetuated systematic non-acquiescence and can be expected to continue to do so, the Court will also analyze that policy to determine whether it can be expected to guard sufficiently against non-acquiescence in the future.

To be entitled to the injunctive relief they seek, plaintiffs must demonstrate a "threat of continuing injury." H.L. Hayden Co. of N.Y., Inc. v. Siemens Medical Sys., Inc., 879 F.2d 1005, 1022 (2d Cir. 1989); United States v. W.T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 898, 97 L.Ed. 1303 (1953). Because plaintiffs seek readjudication of all administrative determinations rendered after October 1, 1981 denying the claims of class members for disability payments, see Plaintiffs' Suggested Remedial Order and Judgment ¶ 12 & 13, they must also demonstrate specific instances of agency non-acquiescence. Defendants maintain, as they did in opposition to plaintiffs' motion for a preliminary injunction, that the Court need not evaluate the legality of its general acquiescence policy because SSA's standards and policies are in conformity with Second Circuit holdings. We will therefore consider first whether plaintiffs have established the specific instances of past non-acquiescence they allege.

          a. Standing to Challenge Six Alleged Areas of
                        Non-acquiescence

Defendants contest the class representatives' standing to challenge alleged non-acquiescence by SSA in holdings other than the treating physician rule and the duty owed to pro se plaintiffs, pointing out that the named plaintiffs have not alleged that non-acquiescence in those other particular holdings injured them. While the issues raised by the named plaintiff in a class action are limited to those as to which he is aggrieved, see Oatis v. Crown Zellerbach Corp., 398 F.2d 496, 499 (5th Cir. 1968), defendants' definition of the "issues" as to which plaintiffs are aggrieved is too narrow. It is apparent that plaintiffs' challenge is to SSA's general "policy and practice" of non-acquiescence in holdings of the Second Circuit. See Second Amended Complaint ¶¶ 1, 23-31. Plaintiffs clearly allege that they were injured as a result of this policy and practice. Id. at ¶ 36.

Defendants' argument can be recast as challenge to the typicality of the named plaintiffs' claims or the commonality of the class issues under Fed.R.Civ.P. 23(a). Under Rule 23(a), the claims of the class must be limited to "those fairly encompassed by the named plaintiffs' claims," General Tel. Co. of the Northwest, Inc. v. EEOC, 446 U.S. 318, 330, 100 S.Ct. 1698, 1706, 64 L.Ed.2d 319 (1980), and a class representative "must be part of the class and `possess the same interest and suffer the same injury' as the class members." East Texas Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977) (quoting Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 216, 94 S.Ct. 2925, 2930, 41 L.Ed.2d 706 (1974)). Generally, a named plaintiff's claim is typical if "it arises from the same event or course of conduct that gives rise to the claims of other class members and is based on the same legal theory." Paskel v. Heckler, 99 F.R.D. 80 (E.D.Pa. 1983) (quoting 1 H. Newberg, Class Actions § 1115b (1977)).

In Rossini v. Ogilvy & Mather, Inc., 798 F.2d 590, 598-99 (2d Cir. 1986), the Second Circuit held that a named plaintiff who alleged a claim of discriminatory placement and discriminatory denial of transfer could serve as a representative of a class alleging discrimination in training or promotion, in part because the existence and functioning of a discriminatory system within a company was a common issue. Plaintiffs in this case also allege a systemic violation caused by the policy and practice of a single organization, and their respective injuries and legal theories are considerably more similar than those of the class in Rossini.

In order to adjudicate fully the claims of the class and issues defined in Stieberger, the Court must address whether SSA has acquiesced in these additional Second Circuit holdings. In Stieberger we found the commonality requirement of Fed.R.Civ.P. 23(b)(3) was satisfied by the class allegation that their disability claims were decided by adjudicators instructed by SSA to disregard circuit court precedent. 615 F. Supp. at 1327-28. We also certified a class consisting of New York residents whose benefit claims have been or will be denied or terminated pursuant to hearing before administrative law judges since October 1, 1981, based on a determination that they do not have a disability that prevents them from engaging in substantial gainful activity. Id. at 1400. Without evidence of the extent of SSA's non-acquiescence in Second Circuit holdings, plaintiffs would not be able to demonstrate the actual nature and extent of the injury inflicted upon the class by the challenged conduct. Similarly, without such evidence, the Court would be unable to tailor the class relief to the scope of defendants' violation. See Califano v. Yamasaki, 442 U.S. 682, 702, 99 S.Ct. 2545, 2558, 61 L.Ed.2d 176 (1979). Plaintiffs have indicated a willingness and ability to join other class members falling in these other categories. The Court believes such an exercise would delay this already protracted litigation unnecessarily.

b. The Weight Accorded Treating Physician Opinions

Plaintiffs argue that class members whose cases were adjudicated prior to the entry of the preliminary injunction in this case were denied the benefit of the Second Circuit's treating physician rule, unless they appealed to a federal court which perceived SSA's failure to apply the rule. Plaintiffs also contend that SSA would continue to adjudicate cases without following the Second Circuit rule if it were not for this case and the Schisler decision. In Stieberger we concluded:

    The evidence of agency non-acquiescence in the
  Second Circuit's treating physician rule is
  overwhelming. One or two decisions reversing an
  ALJ's improper consideration of treating physician
  opinion testimony might be nothing more than the
  ordinary aberrations of the administrative agency
  adjudicative process. The striking pattern of
  consistent disregard for clear, repeatedly
  articulated standards is evidence of a wholly
  different character. Moreover, while the present
  record is not complete with full administrative
  records of plaintiffs' individual disability
  determinations, defendants have made no attempt to
  even begin to refute the assertions of
  non-acquiescence contained in the affidavits of
  the individual plaintiffs . . . concerning the
  agency's blatant disregard of the Second Circuit's
  treating physician's rule.
    Defendants may well be correct in observing that
  cases involving the opinion of a treating
  physician involve a panoply of different factual
  circumstances including, inter alia, the nature of
  the physician's opinion (i.e., medical, vocational,
  or a "legal" opinion on the ultimate issue of
  disability); the length of the doctor/patient
  relationship; the physician's expertise in the
  subject matter of his or her opinion, or the
  consistency of a treating physician's opinion with
  that of another treating physician. We fail to see,
  however, how these variables in any way refute or
  explain the overwhelming evidence of the
  Secretary's persistent failure to apply the Second
  circuit's legal standards governing the evaluation
  of

  the opinion of a claimant's treating physician.
  While the Secretary's non-acquiescence could
  arguably be even more explicit, such as in those
  situations in which the Secretary issues a formal
  statement of non-acquiescence, we believe that the
  preliminary showing here is virtually as strong a
  showing of de facto non-acquiescence as can be
  made.

615 F. Supp. at 1349.

In Schisler I, 787 F.2d 76 (2d Cir. 1986), the Second Circuit directed Judge Elfvin to enter an order requiring SSA to instruct its adjudicators to adhere to the treating physician rule. In its decision, after noting both that the treating physician rule had never been the subject of a formal statement of non-acquiescence by SSA and that reversals based on this rule were so numerous as to justify plaintiffs' concerns, the Second Circuit accepted "at face value" the assertion by counsel for SSA that "the policy position of the Secretary . . . is the same as the second circuit rule." Id. at 83-84. At the same time, the Court rejected SSA's argument that an injunction was inappropriate because of the difficulties in distinguishing an "innocent misapplication" from a "deliberate failure to apply the rule." Id. at 84. The Court found that "the great benefits to be gained by avoiding unnecessary delay to claimants and unnecessary review by the courts" outweighed the cost of properly instructing SSA adjudicators. Id.

SSA's proposed instruction submitted in November 1986 pursuant to the Second Circuit's decision in Schisler I set forth "factors" to be considered in determining "the consideration given to a particular medical report," including: the relationship between the individual and the source, the completeness of the medical report, the medical specialty of the source, the recentness of the evidence and the extent to which the opinion is supported by medical findings. Plaintiffs' Exhibit ("PX") 114 at 9-11. The proposed instruction also indicated that treating physician opinions would be "conclusive" as to the issues of the nature and severity of an impairment only when they were "fully supported by medically acceptable clinical and/or laboratory diagnostic techniques." Id. Judge Elfvin found that "there lurk[ed] in [the proposed instruction's] lengthy and discursive text bases for not applying the treating physician rule." Schisler, No. 80-572E, 1987 WL 15330 (W.D.N.Y. August 5, 1987) (WESTLAW, DCT file) at n. 3. The instruction eventually ordered by the District Court was distributed on October 29, 1987. The Second Circuit appended a final version of the instruction to its decision in Schisler II, 851 F.2d at 46-47. SSA circulated copies of the instruction to OHA adjudicators in New York State on March 9, 1989 and to state adjudicators in New York on April 5, 1989. PX 119.

The preliminary injunction issued by this Court ordered SSA to distribute to adjudicators a writing stating the treating physician rule. After the Court of Appeals vacated the injunction, SSA issued two tele-types, the first announcing the Court of Appeals decision, PX 115, and the second stating "all existing memorandums, teletypes, instructions, and POMs issued in Stieberger v. Bowen will remain in effect until superseded by the issue of further instructions on treating source evidence." PX 116.*fn12 Since SSA was required to conform SSA policy to the treating physician rule pursuant to the Stieberger injunction and since SSA left the Stieberger instructions in place after the injunction was vacated, the Court confines its inquiry to whether non-acquiescence occurred before the date of compliance with Stieberger.

By comparing the treating physician rule as set out by decisions of the Second Circuit and the policy of SSA prior to the date of compliance with Stieberger as expounded in SSRs, POMS instructions and training materials, the Court must determine whether the representation by counsel in Schisler I that the policy position of SSA was the same as the Second Circuit rule was in fact accurate. Stated differently, the Court must decide whether its preliminary conclusion in Stieberger that SSA persistently failed to acquiesce in the Second Circuit's holdings governing the evaluation of the opinion of a claimant's treating physician is substantiated or cast in doubt by the additional evidence and arguments of counsel.

At least since 1981, the law of the Second Circuit has provided that:

    [A] treating physician's opinion on the subject
  of medical disability, i.e., diagnosis and nature
  and degree of impairment, is: (i) binding on the
  fact-finder unless contradicted by substantial
  evidence; and (ii) entitled to some extra weight
  because the treating physician is usually more
  familiar with a claimant's medical condition than
  are other physicians, although resolution of
  genuine conflicts between the opinion of the
  treating physician, with its extra weight, and any
  substantial evidence to the contrary remains the
  responsibility of the fact-finder.

Schisler I, 787 F.2d at 81. Since 1987, opinions of non-examining medical personnel cannot, in themselves, constitute substantial evidence to override the opinion of the treating source. Hidalgo v. Bowen, 822 F.2d 294, 297 (2d Cir. 1987); Schisler II, 851 F.2d at 47; see ...


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