United States District Court, E.D. New York
March 24, 2004.
KATHLEEN CALEF, o/b/o HEATHER CALEF, Plaintiff, -against- JO ANNE B. BARNHART, as Commissioner of Social Security, Defendant
The opinion of the court was delivered by: ARTHUR SPATT, District Judge
MEMORANDUM OF DECISION AND ORDER
Kathleen Calef (the "plaintiff") commenced this action on behalf of
her daughter Heather Calef ("Heather"), pursuant to the Social Security
Act, 42 U.S.C. § 405(g) (the "Act"), seeking review of a final
administrative determination of the Commissioner of the Social Security
Administration (the "Commissioner") which determined that the
disbursements to the plaintiff from a Supplemental Needs Trust
("SNT") constituted unearned income reducing Heather's supplemental
security income ("SSI") benefits.
Presently before the Court are (1) the Commissioner's motion for
judgment affirming its decision and its motion to dismiss the plaintiff's
complaint for failure to state a claim pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure; and (2) the plaintiff's cross-motion
for a remand.
Since June 1992, the plaintiff has received SSI benefits on behalf of
her daughter Heather who had been rendered disabled. On October 15, 1998,
the plaintiff filed a petition to the Supreme Court of the State of New
York, County of Suffolk to transfer a putative tort settlement into a SNT
fund. The petition requested, among other things, that the SNT be amended
to provide the plaintiff with monthly stipends in the sum of $1,000
because she could not work steadily because of her daughter's medical
On December 17, 1998, the Court of Claims of the State of New York
issued an Infant's Compromise Order which settled the state court action.
The Infant's Compromise Order provided, in part, for an initial payment
of $437,377.45 to the plaintiff as trustee of a SNT on behalf of Heather.
On March 1, 1999, the Supreme Court of Suffolk County entered an order
and judgment appointing the plaintiff co-guardian for property management
and guardian of the personal needs of Heather. The court ordered that the
plaintiff be paid
an amount of $1,000 per month from the SNT as a stipend. On March
19, 1999, the plaintiff and the other co-guardian executed the amended
SNT, which was then submitted, together with the court order, to the
Social Security Administration ("SSA").
On September 30, 1999, SSA determined that the plaintiff's monthly
stipend of $1,000, which she began receiving in March 1999, was unearned
income and should have been "deemed" or attributed to Heather. As a
result, SSA concluded that these payments reduced Heather's SSI payments
to a sum of $63 per month from her regularly monthly payment of $523 and
that she received an overpayment in the sum of $2,300 from May 1999
through September 1999 because of the monthly unearned income of $1,000
received by the plaintiff.
The plaintiff requested reconsideration, arguing that her monthly
stipend was earned income and that Heather's SSI benefits were therefore
correct. On October 15, 1999, the Commissioner issued a reconsideration
decision which stated, in relevant part:
You have requested that we reconsider our
determination that the monthly stipend of $1000.00
you receive from Heather Calef's Supplemental
Needs Trust is unearned income. Your
Reconsideration Request states that it is earned
income. To qualify as "earned" income, income must
be from wages or employment. The stipend is not a
wage, as you are Heather's custodial parent, not
her employee. She does not have the authority to
direct your work. You are not self-employed as
your minor child's care-giver. As you are
receiving neither a wage, nor income from
self-employment, the stipend you receive from the
trust fund is "unearned." Our prior decision
regarding this matter is affirmed.
On October 25, 1999, the plaintiff requested a hearing before an
administrative law judge ("ALJ"). In her application, the plaintiff
argued that her monthly stipend was earned
income because she was employed by Heather and was paid by
Heather's SNT. On January 28, 2000, ALJ Sy Rayner conducted a hearing at
which the plaintiff was represented by counsel. At the hearing, the
plaintiff testified that in 1999 her daughter's SSI benefits were in the
amount of $523 per month until SSA reduced the benefit amount to $63 a
month because of the monthly stipend she was receiving from Heather's
SNT. The plaintiff argued that the stipend is a salary paid to her for
services rendered to her daughter. As such, she stated that the monthly
stipend should be characterized as earned income and not unearned income.
In a decision dated February 8, 2000, the ALJ reversed the
reconsideration decision and determined that the plaintiff's monthly
stipend of $1,000 was earned income because the plaintiff received the
stipend from the SNT for services that she performed on Heather's behalf
that a hired caretaker would be paid to perform.
On March 30, 2000, the Appeals Council advised the plaintiff of its
intent to review, on its own motion, the ALJ's decision under the error
of law provision pursuant to 20 C.F.R. § 416.1469 and 416.1470. In a
letter dated June 6, 2000, the Appeals Council notified the plaintiff of
its intention to find the monthly stipend constituted as unearned income
for deeming purposes, and it offered the plaintiff an opportunity to
respond. On August 10, 2000, the Appeals Council issued the
Commissioner's final decision, finding that the plaintiff's monthly
stipend from the SNT was not earned income because it was neither wages
nor self-employment income.
The plaintiff then commenced this action on October 3, 2000. In the
complaint, the plaintiff alleged that, (1) the Commissioner breached the
Due Process Clause of the Constitution by denying the plaintiff SSI
benefits without providing notice with citations to the applicable
regulations and the standards used in computing benefits as required by
Ford V. Shalala, 87 F. Supp.2d 163 (E.D.N.Y. 1999); (2) the
Commissioner has a policy and practice of not acquiescing to state court
orders, thereby violating Executive Order 12612; (3) the Commissioner has
breached her "duty of care that the laws be faithfully executed" by
implementing a "nonacquiescence policy whereby he does not follow the
holding in Christensen v. Harris, 529 U.S. 576,
120 S.Ct. 1655, 146 L.Ed.2d 621 (2000) that a letter-opinion by Executive
Branch counsel does not have the force of law"; (4) the Commissioner has
violated the "the Equal Protection clause of the Constitution by denying
the severely disabled plaintiff SSI benefits because her Guardian-mother
has been paid compensation to be her caretaker and provide for all of the
plaintiff's activities of daily living, rather than a third party being
paid compensation to be her caretaker and provide care of all of the
plaintiff's activities of daily living"; (5) the Commissioner
"implemented an arbitrary and capricious policy and practice not to apply
his own earned income regulations by not including Court ordered
compensation for providing all of the activities of daily living for a
severely disabled minor child as being considered `earned' income"; and
(6) the Commissioner "violated the federal statutory rights of the
plaintiff and thereby committed a
`Bivens' tort." The plaintiff seeks, among other things, an award
of full benefits retroactive to the initial date of her application and
an order directing the Commissioner to comply with the Ford
order, Executive Order 12612, and the Christensen holding.
The Commissioner now moves for judgment on the pleadings affirming the
final decision by the SSA and to dismiss the plaintiff's complaint for
failure to state a claim. The plaintiff moves for a remand.
A. Standard of Review
To review the Commissioner's decision, the Court must determine whether
(1) the Commissioner applied the correct legal standard, see
Tejada v. Apfel, 167 F.3d 770, 773 (2d Cir. 1999); and (2) the
decision is supported by substantial evidence, see
42 U.S.C. § 405(g); Brown v. Apfel, 174 F.3d 59, 61-62 (2d Cir.
1999). Substantial evidence is "more than a mere scintilla."
Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420,
28 L.Ed.2d 842 (1971) (quoting Consolidated Edison Co. v. NLRB,
305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938)). Rather, substantial
evidence requires enough evidence that a reasonable person "might accept
as adequate to support a conclusion." Brown, 174 F.3d at 62-63.
In determining whether the Commissioner's findings are supported by
substantial evidence, "the reviewing court is required to examine the
entire record, including
contradictory evidence and evidence from which conflicting
interferences can be drawn." Id. at 62 (quoting Mongeur v.
Heckler, 722 F.2d 1033, 1038 (2d Cir. 1983) (per curiam)). In
addition, new evidence submitted to the Appeals Council may be considered
as part of the record for the purpose of judicial review. Brown v.
Apfel, 174 F.3d 59, 62 (2d Cir. 1999).
Furthermore, the Court is mindful that "it is up to the agency, and not
this court, to weigh the conflicting evidence in the record." Clark
v. Commissioner of Soc. Sec., 143 F.3d 115, 118 (2d Cir. 1998).
Indeed, in evaluating the evidence, "`the court may not substitute its
own judgment for that of the Secretary, even if it might justifiably have
reached a different result upon de novo review.'" Jones v.
Sullivan, 949 F.2d 57, 59 (2d Cir. 1991) (quoting Valente v.
Secretary of Health & Human Servs., 733 F.2d 1037, 1041 (2d Cir.
B. The Commissioner's Motion for Judgment On the
With regard to the motions before the Court, the sole issue to be
decided is whether the plaintiff's monthly stipend of $1000 from
Heather's SNT fund was properly characterized as unearned income for
purposes of Heather's eligibility for SSI benefits. The Commissioner
argues that, because the plaintiff failed to show that her monthly
stipend of was earned income as defined in the regulations, such stipend
was properly treated as unearned income for purposes of SSI eligibility.
The SSI program provides monthly benefits to aged, blind or disabled
individuals whose income and resources do not exceed certain limits.
42 U.S.C. § 1382(a)(1). An eligible claimant is paid a flat monthly
benefit rate reduced by the amount of non-excludable income received by
such individual or deemed to such individual. 42 U.S.C. § 1382(b)(1)
and 1382a(b); see also 20 C.F.R. Part 416, subpart K. Such
income is anything that the SSI recipient receives in cash or in kind
that can be used to meet her needs for food, clothing and shelter.
20 C.F.R. § 416.1102. Income therefore is a "major factor" in
calculating SSI benefits or in determining whether a claimant is entitled
to such benefits. 20 C.F.R. § 416.1100.
To calculate a child's SSI benefits, the Act provides:
For purposes of determining eligibility for and
the amount of benefits for any individual who is a
child under age 18, such individual's income and
resources shall be deemed to include any income
and resources of a parent of such individual (or
the spouse of such a parent) who is living in the
same household as such individual, whether or not
available to such individual, except to the extent
determined by the Commissioner to be inequitable
under the circumstances.
42 U.S.C. § 1382c(f)(2)(A); see also
20 C.F.R. § 416.1160(a)(2), 416.1160(b)-(d), and 416.1165. Thus, the
income of a parent living in the same household is deemed to be the
income of the child. "Deemed income" is someone else's income that has
been considered received whether or not that income is actually made
available to the SSI claimant.
The regulations separate income into two categories: earned income and
income. 20 C.F.R. § 416.1104. The deemed income may be earned
or unearned income. See 20 C.F.R. § 416.1165(a). Earned
income includes wages and net earnings from self-employment.
20 C.F.R. § 416.110(a), (b). In determining the effects of earned income on an
SSI claimant's eligibility, SSA counts the total amount paid as wages,
subject to the exclusion of earned income enumerated in
20 C.F.R. § 416.1112 and the Appendix to 20 C.F.R. § 416, subpart K;
see 42 U.S.C. § 1382a(b). If earned income is deemed
applicable to a child, SSA deducts a sum of $65 from the amount of earned
income and then subtracts one-half of that amount. See
20 C.F.R. § 416.1165(d)(2).
In contrast, unearned income is defined as "all income that is not
earned income" such as "support and maintenance furnished in cash or in
kind." 42 U.S.C. § 1382a(a)(2)(A). The regulations define in kind support
and maintenance as "any food, clothing, or shelter that is given to you
or that you receive because someone else pays for it."
20 C.F.R. § 416.1130(b). With respect to a child, SSA totals the amount of the
parent's unearned income (less the $20 general exclusion) and the
remaining earned income, and then deducts the SSI benefit rate.
20 C.F.R. § 416.1165(d)(3). The remaining amount of the parent's income is
deemed to be income to the child. 20 C.F.R. § 416.1165(e)(1).
Significantly, the exclusions for earned income are much greater than for
In this case, the plaintiff does not dispute the Commissioner's
decision that income must be deemed to Heather. Instead, the plaintiff
merely asserts that her monthly stipend
should be characterized as earned income, not unearned income, in
computing the amount of her income being deemed to her daughter.
It is undisputed that pursuant to a state court order, Heather's mother
receives a monthly stipend of $1,000 from Heather's SNT. To establish
that her monthly stipend of $1,000 is earned income, the plaintiff was
required to show that the stipend is either net earnings from
self-employment or wages. 20 C.F.R. § 416.1110. The plaintiff argues
she is self-employed in caring for her daughter. The regulations define
net earnings from self-employment as "gross income from any trade or
business that you operate, less allowable deductions for that trade or
business. . . . These are the same net earnings that we would count
under the social security retirements insurance program and that you
would report on your Federal income tax return."
20 C.F.R. § 416.1110(b). The record reveals that the plaintiff failed
to establish that she was engaged in a trade or business or that she
reported the stipend as self-employment income on her federal tax returns.
Nor did the plaintiff demonstrate that her stipend is wages. The
regulations define wages as payments made to an individual for working as
someone else's employee. 20 C.F.R. § 416.1110(a). An "employee" is
regarded as anyone who has the status of employee under the "usual common
law rules." 42 U.S.C. § 410(j)(2). Under the regulations, "you are a
common law employee if the person you work for may tell you what to do
and how, when, and where to do it." 20 C.F.R. § 404.1007(a). Among
that may show employee status are the following:
(1) The person you work for may fire you.
(2) The person you work for furnishes you with
tools or equipment and a place to work.
(3) You receive training from the person you work
for or are required to follow that person's
(4) You must do the work yourself.
(5) You do not hire, supervise, or pay assistants
(unless you are employed as a foreman, manager, or
(6) The person you work for sets your hours of
work, requires you to work full-time, or restricts
you from doing work for others.
(7) The person you work for pays your business or
(8) You are paid by the hours, week, or month.
20 C.F.R. § 404.1007(b).
The Appeals Council properly concluded that the plaintiff was not
employed by her daughter under the common law rules because she did not
demonstrate that her daughter or her daughter's SNT instructed her in the
how, when, or where of her tasks or directed her actions as to which
chores or activities to perform. Indeed, the plaintiff failed to
demonstrate any of the employer-employee characteristics set forth in
20 C.F.R. § 404.1007(b). Thus, the plaintiff's monthly stipend was
neither net earnings from self-employment nor wages from employment, As
such, the Commissioner's conclusion that the monthly stipend constitutes
unearned income for deeming purposes is supported by substantial
C. The Plaintiff's Motion for a Remand
1. The Due Process Claim
The plaintiff claims that the Commissioner violated the due process
clause of the Fifth Amendment of the United States Constitution because
Heather was denied SSI benefits without written notice of the standards
used in computing benefits, as required by Ford v. Shalala,
87 F. Supp.2d 163 (E.D.N.Y. 1999). In requesting that the case be remanded,
the plaintiff asserts that the Commissioner has "affirmatively decided to
participate in the Ford nonacquiescence policy whereby the SSA
Commissioner has the ongoing authority to change the legal standards
relied upon when denying benefits at any time during the appeal process
in direct defiance of Judge Sifton's unappealed Ford decision."
In Ford, the court held that SSI applicants were denied due
process of law because the Commissioner's notices sent to them failed to
identify the provision of federal law, federal regulation, or POMS
citation that were applied in determining whether to grant or deny,
change, or terminate benefits. Id. at 180. The Court finds that
the plaintiff's reliance on Ford is misplaced.
The final judgment in Ford specifies that the remedy of the
class members is the modification of future notices regarding initial
eligibility decisions. The Ford decision does not concern a
remand of pending court cases where final agency decisions have already
been rendered. Id. at 185; see Hecht v. Barnhart,
217 F. Supp.2d 356, 360 (E.D.N.Y. 2002) ("The final judgment in the Ford
case specifies that the class members' remedy is the modification of
future notices. Therefore, the decision in Ford does not compel this
remand this case so that the SSA can provide Plaintiff with a
statement containing the citations upon which the SSA relied in reducing
his benefits"). Furthermore, as the Commissioner points out, the
plaintiff appealed the notices and pursued her administrative remedies
with regard to the standards applied in computing her benefits. The final
decision contained the legal citations applicable to the SSA's
calculation of Heather's benefits. The plaintiff was afforded due process
in all respects. Accordingly, the plaintiff's request for a remand based
on a due process claim for the purpose of obtaining a new notice with
citations is denied.
2. The Executive Order
The plaintiff also contends that the Commissioner has failed to comply
with Executive Order 12612 because she has a policy and practice of not
acquiescing to state court decisions. The plaintiff seeks a remand
pursuant to the sixth sentence of 42 U.S.C. § 405(g) to provide the
SSA with an opportunity to comply with this Executive Order. It is
well-established that no private right of action exists to enforce
obligations imposed on executive branch officials by executive orders.
Zhang v. Slattery, 55 F.3d 732, 747 (2d Cir. 1995). Rather, an
executive order is privately enforceable only if it is issued pursuant to
a statutory mandate or delegation of congressional authority. Chen
Zhou Chai v. Carroll, 48 F.3d 1331, 1336 (4th Cir. 1995). In fact,
Executive Order 12612 states:
This Order is intended only to improve the
internal management of
the Executive branch, and is not intended to
create any right or benefit, substantive or
procedural, enforceable at law by a party against
the United States, its agencies, its officers, or
Exec. Order No. 12612, 52 FR 41685 (Oct. 26, 1987). Accordingly,
because Executive Order 13217 provides no right of judicial review, the
plaintiff's request for a remand on this basis is denied.
3. The Christensen Holding
In the complaint, the plaintiff further claims that the Commissioner
breached its duty to "take care that the laws be faithfully executed" by
implementing "a policy based on the letter-opinion of Executive Branch
counsel," thereby "not acquiescing to the Supreme Court's [holding in
Christensen v. Harris, 529 U.S. 576, 587, 120 S.Ct. 1655,
146 L.Ed.2d 621 (2000)]. . . ." In Christensen, the Supreme
Court held that agency interpretations contained in "policy statements,
agency manuals, and enforcement guidelines, all of which lack the force
of law[,] do not warrant Chevron-style deference."
The plaintiff does not address this claim in her brief and, thus, it is
waived because the Court can only guess as to its meaning. Moreover, on
the merits, the record reveals that the Commissioner's determination
neither referred to nor relied upon, "a letter-opinion by an Executive
Branch counsel." Accordingly, this claim is dismissed.
4. The Equal Protection Claim
In addition, the plaintiff alleges that the Commissioner violated "the
clause of the Constitution by denying the severely disabled
plaintiff SSI benefits because her Guardian-mother has been paid
compensation to be her caretaker and provide for all the plaintiff's
activities of daily living, rather than a third party being paid
compensation to be her caretaker and provide care of all of the
plaintiff's activities of daily living."
The SSA's classifications used in determining the level of benefits to
which SSI recipients are entitled are subject to rational basis review.
Ellis v. Apfel, 147 F.3d 139, 144 (2d Cir. 1998) (citing
Mathews v. De Castro, 429 U.S. 181, 185, 97 S.Ct. 431,
50 L.Ed.2d 389 (1976)). The statute and regulations upon which the
classifications are based must be upheld if they "have a rational basis
and do not engage in invidious discrimination, regardless whether flaws
may be found in their logic." Id. (internal quotations and
In this case, the plaintiff objects to SSA's classification
distinguishing between income paid to the parent, which is subject to
deeming, and income paid to a non-parent, which is not subject to
deeming. However, the plaintiff fails to explain why this classification
is unsupported by a rational basis. In addition, as stated by one court:
"In announcement of the final deeming regulations, the Secretary traced
the deeming concept to `the long social and legislative history'
reflecting the parents' responsibility to support their children. This
traditional responsibility accords a rational basis to Congress' decision
to deem the income of a parent but not, for example, of an aunt or
uncle." Kollet v. Harris, 619 F.2d 134, 139-140 (1st Cir. 1980)
(citing to 43 Fed. Reg. 39565 (Sept. 6, 1978)). Accordingly, the
Court finds that a rational basis exists in distinguishing between income
paid to the parent and income paid to a non-parent. Thus, the plaintiff's
equal protection claim is dismissed.
5. The Arbitrary and Capricious Claim
The plaintiff contends that the Commissioner "has implemented an
arbitrary and capricious policy and practice not to apply [her] own
earned income regulations by not including Court ordered compensation for
providing all of the activities of daily living for a severely disabled
minor child as being considered `earned' income." Notably, the
plaintiff's brief does not set forth the basis of this claim.
Furthermore, as previously discussed, the record shows that the
Commissioner followed the regulations and that the conclusions are
supported by substantial evidence in the record and are based on correct
standards. Accordingly, the plaintiff's arbitrary and capricious claim is
6. The Bivens Claim
The complaint alleges that the Commissioner has "violated the federal
statutory rights of the plaintiff and thereby committed a `Bivens' tort."
Again, the plaintiff does not elaborate on this claim in her brief,
leaving the Court only to surmise as to its meaning. In any case, the
Commissioner is correct in asserting that Bivens does not afford a remedy
against federal agencies. Schweitzer v. Dept. of Veterans
Affairs, No. 01 CV 6067, 2001 U.S. App. LEXIS 25383, at *5 (2d Cir.
Nov. 26, 2001) (citing FDIC v. Meyer, 510 U.S. 471, 484,
114 S.Ct. 996, 127 L.Ed.2d 308 (1994)). Thus, the Bivens claim
7. Another Request for Remand
The plaintiff further requests a remand to have an opportunity to
administratively challenge the application of the legal standards applied
by the Commissioner. In support of her request, the plaintiff cites to
the Rooker-Feldman doctrine, which provides that "a party losing in state
court is barred from seeking what in substance would be appellate review
of the state judgment in a United States district court, based on the
losing party's claim that the state judgment itself violates the loser's
rights." Johnson v. De Grandy, 512 U.S. 997, 1005-06,
129 L.Ed.2d 775, 114 S.Ct. 2647 (1994). The Court finds that this doctrine
has no applicability to the present case, as SSA did not lose in the
The plaintiff also relies heavily on New York State o/b/o Holland
v. Sullivan, 927 F.2d 57 (2d Cir. 1991), in which the Secretary of
Health and Human Services denied medicare coverage for a plaintiff's
hospital stay. In Holland, the Secretary had promulgated
specific criteria to determine eligibility for this coverage. 927 F.2d at
58. The Second Circuit determined that based on the record it was unclear
as to whether the ALJ or the Appeals Council relied on this criteria in
determining the plaintiff's eligibility. Id. at 59. Thus, the
court held that when a rule sets forth specific criteria, the
"Secretary's determination must contain an application of the criteria to
the particular facts of the case." Id.
Here, as discussed above, the record reveals that the Commissioner
relied on the
correct legal standards and criteria in computing the plaintiff's
eligibility for SSI benefits. Accordingly, the plaintiff's request for a
remand is denied.
Based on the foregoing, it is hereby
ORDERED, that the Commissioner's motion for judgment
affirming its decision and dismissing the plaintiff's complaint is
GRANTED; and that it is further
ORDERED, that the plaintiff's motion for a remand is
DENIED; and it is further
ORDERED, that the Clerk of the Court is directed to close
© 1992-2004 VersusLaw Inc.