The ALJ found that, pursuant to 20 C.F.R. § 404.1575(a)(3),
plaintiff engaged in substantial gainful work activity at the
close of his trial work period.
As discussed above, under 20 C.F.R. § 404.1575(a)(3), an
individual will be considered to engage in substantial gainful
activity if he renders services ". . . that are significant to
the operation of the business . . ." and receives ". . . a
substantial income from the business." Services by a self
employed individual employing others, as is the case with
plaintiff, are "significant" if either the individual
contributes ". . . more than half the total time required for
the management of the business . . ." or the individual renders
". . . management services for more than 45 hours a month
regardless of the total management time required by the
business." 20 C.F.R. § 404.1575(b)(1).
The ALJ found that the plaintiff ". . . is not merely a
nominal insurance agent lending his name and license to a
business run by his wife . . ." but that plaintiff has ". . .
sole managerial control over the business and performs
`significant' managerial services. . . ." In so finding, the
ALJ considered plaintiff's testimony that his wife did most of
the work in the business since 1978. The ALJ cited, however,
plaintiff's testimony that his insurance business could not
legally operate without a licensed owner-agent manager, such as
plaintiff, and that his wife was not licensed. (R., p. 30). The
ALJ also cited the lack of persuasive evidence that plaintiff's
wife provided ". . . any of the experience and expertise in the
insurance field necessary to manage the business." (R., p. 30).
In fact, the ALJ emphasized the fact that the plaintiff ". . .
indicated that it was necessary for him to talk with clients in
order to assess their insurance needs, [to] determine the
appropriate types of coverage and the appropriate carriers . .
." etc. (R., p. 30).
This Court agrees with the ALJ that, based on the evidence
available in the factual record, plaintiff's ". . . expertise
in the insurance field . . ." generated the business revenues.
(R., pp. 30, 31).
Plaintiff further argues that ALJ placed a ". . . grossly
disproportionate . . ." value on the value of the services
plaintiff performed. (p. memo., p. 9). In this regard,
plaintiff argues that substantial evidence in the factual
record indicates that some or most of the earnings from
plaintiff's insurance business were attributable to work
performed on client accounts predating the plaintiff's
disability and amounted to a return on capital. (p. memo., p.
9). Plaintiff contends that he is entitled to findings ". . .
or, at least, consideration . . ." with respect to the portion
of earnings which were ". . . basically a return of capital. .
. ." (p. memo., p. 10). Plaintiff argues that had the ALJ
subtracted amounts attributable to a mere "return on capital"
from plaintiff's average monthly net earnings for the relevant
years, plaintiff's resultant average monthly net income would
have fallen below the sums specified in 20 C.F.R. §
404.1574(b)(2). (p. memo., p. 10).
However, the ALJ found that factual evidence in the record
contradicted plaintiff's contention that plaintiff's income
from the business was a mere return on invested capital.
The ALJ found, and this Court agrees, that the factual record
". . . clearly shows that [plaintiff's] agency underwrites
insurance and has been active and continuously growing since he
became entitled to benefits." (R., p. 30). The ALJ emphasized
plaintiff's testimony that since plaintiff applied for
disability benefits, the number of accounts with plaintiff's
agency ". . . had grown from just a few . . . to over 200. . .
." (R., p. 30).
The ALJ cited additional documentary evidence to support the
conclusion that plaintiff's income was not merely just a return
on investment: plaintiff's income tax records established that
". . . the business' annual gross revenue increased by a factor
of 15, from approximately $4,000.00 in 1978 to almost
$60,000.00 in 1985." (R., pp. 30, 92-112). Although plaintiff
testified that the business did not advertise for clients,
plaintiff's income tax records reflected deductions for
advertising expenses from 1980 to 1984. (R., pp. 30, 100, 103,
105-107, 109). The ALJ further cited evidence that ". . .
despite the allegedly passive, home-bound nature of
[plaintiff's] business, his income tax records also show
deductions for automobile expenses, attendance at
business-related seminars, and entertainment and travel
expenses each year from 1977 through 1985, the last year for
which tax records were offered in evidence." (R., pp. 30,
Therefore, this Court finds the ALJ's determination that
plaintiff's income for the relevant years was not just a mere
return on an investment to be supported by substantial evidence
in the factual record.
20 C.F.R. § 404.1575(c)(1) provides that the Secretary will
consider net income from a business "substantial" under 20
C.F.R. § 404.1575(a)(3) if it averages more than the amounts
contained in 20 C.F.R. § 404.1574(b)(2) (more than $260.00 per
month in 1978, more than $280.00 per month in 1979 and more
than $300.00 per month in 1980 and beyond). In this case, the
ALJ found that plaintiff's average monthly net earnings from
the years 1980 through 1984 were generally ". . . substantially
above . . ." the amounts contained in 20 C.F.R. §
404.1574(b)(2) for those years. The ALJ found that in 1980,
plaintiff's average monthly net earnings were approximately
$395.00, in 1981 they were approximately $566.00, in 1982 they
were approximately $418.00, in 1983 they were approximately
$895.00. (R., p. 31). The ALJ further noted that although in
1984 plaintiff's average monthly net earnings dipped to
approximately $286.00, in 1985 ". . . they rebounded to
$1,700.00 per month. . . ." (R., p. 31).
Therefore, the ALJ concluded that
[b]ased on the sustained earnings exceeding the
specified amount for four full years beginning
January 1980, the Administration's determination
that the claimant was engaging in substantial
gainful activity during such period is entirely
warranted under 20 C.F.R. § 404.1575(a)(3).
(R., p. 31).
The documentary evidence forming part of the factual record,
supports the ALJ's conclusion that the plaintiff's income was
"substantial" under 20 C.F.R. § 404.1575(c)(1) and therefore
also under 20 C.F.R. § 404.1575(a)(3).
Therefore, this Court agrees with the ALJ that plaintiff
engaged in substantial gainful activity under 20 C.F.R. §
404.1575(a)(3) after his trial work period had ended. As noted
above, the ALJ also found that plaintiff engaged in substantial
gainful activity under the alternative test contained in 20
C.F.R. § 404.1575(a)(2). Under that section, even if
plaintiff's work activity was not ". . . fully comparable to
that of an unimpaired individual . . .," plaintiff would still
be found to have engaged in substantial gainful activity
because his work ". . . is clearly worth the amount shown in §
404.1574(b)(2) when considered in terms of its value to the
business, or when compared to the salary that an owner would
pay to an employee to do the work [plaintiff is] doing."
In this case, the ALJ found that plaintiff's work was ". . .
clearly worth the amounts specified in 20 CFR § 404.1574(b)(2)
when considered in terms of its value to his business and,
therefore, constitutes substantial gainful activity." (R., p.
31). Viewing the factual record which indicates that
plaintiff's business depends on his singular role as the
business decision maker, this Court agrees with the ALJ that
plaintiff engaged in substantial gainful activity under 20
C.F.R. § 404.1575(a)(2).
Lastly, pursuant to 42 U.S.C. § 416(i)(2)(D)(ii), plaintiff's
disability benefits terminated at the close of the second month
following the month in which the disability ceased. Since
plaintiff's disability ceased as of January 1980, plaintiff's
disability benefits should terminate effective March 31, 1980.
For the reasons set forth above, this Court finds that
substantial evidence in the factual record supports the
Secretary's final determination that the plaintiff engaged in
substantial gainful activity and
therefore, effective March 31, 1980, was no longer entitled to
receive disability insurance benefits.
IT IS HEREBY ORDERED, that this Court grants the Secretary's
motion for judgment on the pleadings.
FURTHER, that this Court directs the Clerk of the United
States District Court for the Western District of New York to
dismiss the above-captioned case, in accordance with this