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Ellis v. Blum

decided: February 18, 1981.


Appeal from an order of the District Court for the Southern District of New York, Constance Baker Motley, Judge, dismissing plaintiff's amended complaint for want of jurisdiction. Reversed and remanded.

Before Friendly, Mansfield and Meskill, Circuit Judges.

Author: Friendly

As argued to us, this appeal from an order of the District Court for the Southern District of New York dismissing plaintiff's amended complaint for want of jurisdiction presented a veritable nightmare of jurisdictional and mootness problems. While the case was under advisement, Congress passed and the President signed the Federal Question Jurisdictional Amendments Act of 1980, 94 Stat. 2369, abolishing the amount-in-controversy requirement in federal question cases, 28 U.S.C. § 1331(a), with respect to all defendants.*fn1 Section 4 of the Act provides that it "shall apply to any civil action pending on the date of enactment of this Act." Although, as will be seen, this amendment does not provide a quick answer to all the problems presented, it somewhat simplifies them and, in our view, mandates a reversal and remand to the district court for further proceedings.


The administrative scheme forming the background of this case can be outlined briefly as follows: § 421 of Title II of the Social Security Act, 42 U.S.C. § 401 et seq., empowers the Secretary of Health and Human Services (Secretary) to enter into agreements with state agencies delegating authority to them to make initial determinations as to eligibility for disability benefits. Such an agreement exists between the Secretary and the State of New York, and delegates that authority to the Bureau of Disability Determinations (BDD) of the New York State Department of Social Services (NYSDSS), with the oversight of the Social Security Administration (SSA).

In a majority of cases a state agency, such as BDD, is directed periodically to assess a beneficiary's continued eligibility for benefits. If the agency's tentative assessment after investigation is that the beneficiary has ceased to be disabled, the beneficiary must be so informed by a pretermination notice, which also advises the beneficiary that he or she has at least ten days to submit additional evidence supporting a claim of continuing disability. At the expiration of this period, the state agency makes a formal determination which is then reviewed by the SSA. If the SSA agrees with the state agency, it notifies the beneficiary in writing of the termination and of the opportunity for de novo reconsideration by the state agency. Various other avenues also exist for administrative and judicial review of an adverse decision, but benefits are discontinued effective two months after the month in which the disability is found to have ceased. Thus, the pretermination notice and the ensuing ten-day period for submission of additional evidence constitute the only opportunities a beneficiary has to learn of the case against him or her and to contest it prior to the cut-off of disability payments.

The pretermination notices at the center of this litigation are of two kinds: written and telephonic. The procedures for written notices, as announced in the SSA's Disability Insurance State Manual (Manual), a guide for state agencies to the policies of the Secretary and her interpretations of the Act and regulations, provide that a written pretermination notice should contain a summary of the evidence and the rationale for the proposed termination of benefits. The procedures for telephonic notices have been revised during the period at issue in this case. Prior to May, 1979, a telephonic pretermination notice, as prescribed by the Manual, consisted solely of a telephone call to the beneficiary conveying the same information as a written notice, including a brief summary of the evidence and a statement of the reasons for termination. As of that date the SSA changed its policy, supplementing the telephone contact with a follow-up letter to be sent within a day of the call. This letter recapitulates the content of the phone conversation with the important exception that it does not set out a summary of the evidence or a statement explaining the agency's decision to terminate.

The Complaint and Proceedings Below

This action was brought on September 7, 1979, and the plaintiff's motion to amend the complaint was granted on June 13, 1980. A summary of the amended complaint is as follows:

The action is a class action seeking injunctive and declaratory relief as well as compensatory damages for injuries suffered by the named plaintiff. The alleged class consists of New York residents who were or are recipients of disability benefits whose benefits have been terminated or threatened with termination without prior adequate written notice containing a summary of the evidence leading to the proposed termination and an explanation of the determination that the recipient is no longer under a disability. Plaintiff Catherine Ellis is such a recipient; her sole source of income has been such monthly benefits of $385.50. The complaint named four defendants: Barbara Blum, individually and as Commissioner of the NYSDSS; Sidney Houben, individually and as Director of BDD; H. Williams, individually and as Disability/Analyst Specialist of BDD; and Patricia Harris, as Secretary of the United States Department of Health, Education and Welfare (now Health and Human Services). We will sometimes refer to the first three as the state defendants, without thereby implying that they were engaged in state action.

After typical class action allegations, the amended complaint went on as follows: In November, 1978, prior to the institution of the revised procedure for telephonic pretermination notices, plaintiff Ellis received the first of three pretermination notices a telephone call from an individual who represented herself to be an employee of the SSA. The caller informed Ellis that her disability benefits would terminate as it was the opinion of the SSA that she was no longer disabled. Due to the anxiety caused by the call, Ellis suffered an epileptic seizure. Plaintiff did not submit any evidence to contest the proposed termination because she was unable to remember what evidence the SSA told her it was relying upon. She did contact her local Social Security office and was told by an employee not to worry about the telephone call, and that she was not "cut off". However, in January, 1979, she received a written formal Social Security Termination Notice from the SSA informing her that the medical evidence in her case indicated that she had become able to do substantial gainful work in October, 1978 and that the last disability payment to which she was entitled was the one she had received for the month of December, 1978.

Plaintiff thereupon retained Westchester Legal Services, Inc. Counsel protested termination, complaining of the impropriety of the telephone notice as a means by which to advise plaintiff of the opportunity to submit medical evidence of continued disability. By letter dated April 5, 1979, the HEW's Regional Counsel advised that plaintiff's benefits would be reinstated retroactive to January, 1979,*fn2 and that her case would be returned to BDD for reconsideration but that HEW counsel had no basis for believing that the result would be different. On or about April 24, 1979, plaintiff received a second pretermination notice, this time from BDD in a form letter which stated that she had "regained ability to engage in substantial gainful activity in October 1978", the date having been typed in the blank space that followed the form notice. The notice also informed her that she had ten days to submit evidence before a final determination would be made. After a telephone conversation with plaintiff's counsel, BDD on May 8, 1979 retracted the April 24 notice, saying it was "premature on our part" and that BDD was "continuing to further develop this case."

On August 20, 1979, Ellis received still another pretermination notice from BDD dated August 15, 1979. This informed her that she had "regained ability to engage in substantial gainful activity in June, 1979." The following sentence was typed in a space which had been left blank for the agency to fill in with a summary of the evidence and an explanation of the proposed termination: "Medical evidence in file indicates you retain the capacity to perform your customary work activity." The form also stated that unless plaintiff submitted further evidence within ten days, BDD would forward the record to the SSA where a "formal determination" would be made and benefits terminated as of August 31, 1979. As in all prior instances no further information was given and this rendered plaintiff "unable to submit any evidence or statements to support her claim of continuing disability." The written notices of April 24 and August 20 also caused her "emotional distress, anxiety, pain and suffering in that they placed her under an apprehension that her social security benefits would be terminated without setting forth the reasons therefore (sic )." (Emphasis deleted).

The thrust of the complaint was that defendants' use of a written pretermination notice that does not contain reasons and a summary of the evidence violates the due process clauses of the Fifth and Fourteenth Amendments, the Social Security Act, and the SSA's Manual, and that the provisions of the Manual authorizing telephonic pretermination notice likewise violate the Constitution.

The prayer for relief sought an order determining the action to be a proper class action under F.R.Civ.P. 23(a) and (b)(2); an injunction against terminating plaintiffs' Title II social security benefits without first providing adequate written notice of the reasons, including a summary of the evidence upon which the determination was made and an explanation why it has been determined that the recipient is no longer under a disability; an injunction against enforcing § 353.6 of the SSA's Manual to the extent that it authorizes telephonic pretermination notices; a mandatory injunction restoring all plaintiffs who have been terminated without adequate written notice to the level of benefits which they were receiving prior to termination; a mandatory injunction requiring Secretary Harris to take all necessary steps to insure that the state defendants provide adequate, written pretermination notices; entry of a declaratory judgment of the invalidity of termination of disability benefits by notices not containing the material noted above; entry of a final judgment awarding plaintiffs all benefits wrongfully withheld; entry of a final order requiring defendants to provide plaintiffs notice of their right to apply for retroactive disability benefits; entry of a judgment in favor of plaintiff Ellis awarding compensatory damages in the amount of $1,500, apparently for her emotional distress; and the grant to plaintiffs of their costs, disbursements and attorneys' fees and such further and other relief as may be just and equitable.

On March 17, 1980, the United States, representing all the defendants, moved to dismiss the action under F.R.Civ.P. 12(b) and (c). This was supported by an affidavit of Jean Hall Hinckley, Director of SSA's Division of Post-Adjudicative and Technical Policy. The affidavit recited various steps BDD had taken to reevaluate Ellis in September, 1978. Additional facts were that on July 3, 1979, Ellis was asked to see a consulting psychologist on July 9 but did not attend. Also BDD on October 12, 1979, sent a letter to plaintiff's attorney asking her to disregard the pretermination notice of August 20, 1979, and requesting a psychological examination of the plaintiff. The examination resulted in a determination by BDD that she had a " "mental deficiency with organic features' that is not expected to improve over time", and on November 30, 1979, Ellis was informed that her benefits would continue. Plaintiff's counsel countered with affidavits suggesting that the numerous retractions of termination and pretermination notices were due to defendants' knowledge of the activities of plaintiff's counsel and particularly the knowledge in the spring of 1979 that a complaint was being prepared, the inference being that defendants were endeavoring to keep the constitutional issues raised by plaintiff from being decided by the courts. Plaintiff had not moved for class certification until March 5, 1980.

The amended complaint asserted four jurisdictional bases, 42 U.S.C. § 405(g) and 28 U.S.C. §§ 1331, 1361, and 1343(3). In a scholarly opinion the district judge dismissed the complaint for lack of jurisdiction. She concluded that 42 U.S.C. § 405(g) was unavailable due to the lack of a final decision by the Secretary adverse to the claimant; that resort to 28 U.S.C. § 1331 was precluded by the final sentence of 42 U.S.C. § 405(h); that the standards for mandamus jurisdiction under 28 U.S.C. § 1361, laid down by this court in Lovallo v. Froehlke, 468 F.2d 340, 343 (1972), cert. denied, 411 U.S. 918, 93 S. Ct. 1555, 36 L. Ed. 2d 310 (1973), had not been met; and that 28 U.S.C. § 1343(3) was inapplicable to the state defendants since they were not acting "under color of any State law, statute, ordinance, regulation, custom or usage" but as agents of the United States. Having concluded that it lacked jurisdiction, the district court found it unnecessary to rule on the plaintiff's motion for class certification, or on the Government's contention that the decision to continue Ellis' benefits had mooted the entire controversy.

Sections § 405(g) and 405(h)

The jurisdictional difficulties in this case stem primarily from the broad reading given the last sentence of § 405(h) in Weinberger v. Salfi, 422 U.S. 749, 95 S. Ct. 2457, 45 L. Ed. 2d 522 (1975). Mere perusal of the statutory language,*fn3 which comes down from the Social Security Act Amendments of 1939, especially in context with § 405(g), would not immediately suggest to the ordinary reader an intention to render § 1331 unavailable in an action challenging the constitutionality of substantive provisions of the Social Security Act, or the procedures adopted in its administration, even though a ruling favorable to plaintiffs might require additional social security payments to be made by the Government. One would have supposed that the purpose was rather to make clear that the procedures of § 405(g) for judicial review of final action by the Secretary were exclusive and could not be circumvented by resort to the general jurisdiction of the district courts. Congress' attention appears to have been devoted to the run-of-mine case where an applicant for benefits challenged the Secretary's determination of the facts, interpretation of the law, or application of the law to the facts. Certainly the language of § 405(g), providing that "any individual, after any final decision of the Secretary made after a hearing to which he was a party, irrespective of the amount in controversy, may obtain a review of such decision by a civil action ... brought in the district court of the United States ...." and that the "court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Secretary", does not suggest that Congress in 1939 thought it was establishing procedures to be used in class actions challenging the constitutionality of the provisions of the Act or of procedures adopted by the Secretary, and seeking broad injunctive and declaratory relief.*fn4

However, in Weinberger v. Salfi, supra, the Supreme Court, with three Justices dissenting, held that the plain language of 42 U.S.C. § 405(h) barred resort to 28 U.S.C. § 1331 in a class action challenging the constitutionality of a substantive provision of the Social Security Act. Just as the decision was surprising in restricting access to 28 U.S.C. § 1331, it surprised in the other direction, perhaps as a necessary consequence, by sustaining jurisdiction under 42 U.S.C. § 405(g) in a situation where previously this would hardly have been thought to exist. Such jurisdiction was found with respect to the named plaintiffs who had submitted applications to the SSA although their proceedings had not gone beyond a filing with a district Social Security Office and, upon denial, to the Regional Office for reconsideration. Conceding that this fell "short of meeting the literal requirement of § 405(g) that there shall have been a "final decision of the Secretary made after a hearing' ", 422 U.S. at 764, 95 S. Ct. at 2466, as well as further ...

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