UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 00-30080
HOWARD MAKOFSKY
Plaintiff-Appellant,
v.
KENNETH S. APFEL Commissioner, Social Security Administration
Defendant-Appellee,
Appeal from the United States District Court for the Eastern District of Louisiana (99-CV-1720-LLM)
January 23, 2001
Before GOODWIN1, GARWOOD and JONES, Circuit Judges.
EDITH H. JONES, Circuit Judge:2
Appellant Howard Makofsky received an overpayment of
Social Security benefits and seeks to waive reimbursement to the
Social Security Administration (SSA). An administrative law judge
(ALJ) held that Makofsky failed to show that he was “without fault”
under 42 U.S.C. § 404(b), and refused to waive the overpayment.
1 Circuit Judge of the Ninth Circuit, sitting by designation. 2 Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. Makofsky appeals. Concluding that there is not sufficient evidence
to sustain the ALJ’s conclusion, we reverse and remand.
Makofsky began receiving retirement benefits from the SSA
in 1989. At that time, he signed a preprinted application that
stated, “[m]y reporting responsibilities have been explained to me
and I have also received a printed explanation of those
responsibilities.” Makofsky testified that the SSA office was very
busy on the day he applied for benefits, and that SSA personnel
spoke to him only briefly. He did not recall receiving any oral or
written instructions to notify the SSA if he went to prison. He
understood from SSA Form 1099 tax documents that he could earn only
limited income while receiving benefits and that he was obliged to
notify SSA of changes in address.
Makofsky was in prison between February 1995 and April
1996 for writing bad checks, a felony. Under 42 U.S.C. § 402(x),
he was not entitled to receive social security benefits during this
period. Makofsky testified that he never knew this, and he
therefore did not notify the SSA of his confinement. He continued
to receive benefits in a post office box, his sole mailing address
since at least 1982. Makofsky’s former spouse had power of
attorney over his affairs, and she received and cashed his benefits
for him. She paid his bills and rent during his confinement, and
sent cash to him.
2 In May 1996, the SSA notified Makofsky that he had
received an overpayment and asked him to repay $ 14,136. Makofsky
asked the SSA to waive the overpayment. The SSA refused to do so,
but it reduced the debt to $13,196.
The ALJ held a hearing at which only Makofsky testified.
In his decision, the ALJ briefly described Makofsky’s testimony and
ruled:
Although [Makofsky] asserts that he did not know that he had the duty to inform the Administration if he were incarcerated, he did know that he had to report a change of address, other sources of income, and other circumstances. . . .
I conclude claimant knew or should have known that he had to inform the Administration when he became incarcerated due to conviction of a felony in February 1995. He was aware of other reporting procedures which are explained concurrently with the one requiring that he report any incarcerations due to felony convictions.
Record at 10 (citations omitted). The ALJ concluded that Makofsky
was at fault, and refused to waive the overpayment.
This decision cited no SSA instructions that would have
notified Makofsky to report incarceration. It made no explicit
findings about Makofsky’s credibility. It also did not explicitly
consider Makofsky’s physical, mental, educational, or linguistic
limitations.
The district court affirmed, finding that substantial
evidence supported the ALJ’s decision. Makofsky appeals.
3 STANDARD OF REVIEW
We may review only two issues: 1) whether substantial
evidence supports the decision, and 2) whether the ALJ correctly
applied the law. See Paul v. Shalala, 29 F.3d 208, 210 (5th
Cir.1994). Substantial evidence is “more than a mere scintilla and
less than a preponderance. It is such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.”
Id. (citing Muse v. Sullivan, 925 F.2d 785, 589 (5th Cir.1991).
DISCUSSION
Makofsky contends that substantial evidence does not
support the determination that he was at fault. He argues that the
SSA never told him to report incarceration, and that he never knew
he had to. He also argues that the ALJ did not impugn his
credibility, and thus the ALJ should have credited his testimony.
Section 404(b), “No recovery from persons without fault,”
states
In any case in which more than the correct amount of payment has been made, there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience.
42 U.S.C. § 404(b). Thus, Makofsky cannot benefit from this
section unless he was without fault. Makofsky has the burden of
proof on this issue. See Bray v. Bowen, 854 F.2d 685, 687 (5th
Cir.1988) (holding that the evidence supported a finding of fault).
4 SSA regulation § 404.507, “Fault,” states:
What constitutes fault on the part of the overpaid individual . . . depends upon whether the facts show that the incorrect payment to the individual . . . resulted from: . . .
(b) Failure to furnish information which he knew or should have known to be material.
20 C.F.R. § 404.507. Our inquiry therefore is whether there is
substantial evidence that Makofsky knew or should have known that
his imprisonment was material to his eligibility.
If the SSA told Makofsky to report imprisonment, he
certainly would be at fault. In Bray, the SSA informed the
claimant of her obligation to report marriage at the time she filed
and through periodic check “stuffers.” This court, refusing to
waive an overpayment, concluded that she was at fault for not
reporting her change in marital status. See Bray, 854 F.2d at 687.
Where the SSA does not expressly warn claimants, however,
federal appeals courts have not assumed that claimants know what is
material to their eligibility. In Peeler v. Heckler, a prisoner
was already receiving SSA benefits when § 402(x) took effect in
1980. See Peeler v. Heckler, 781 F.2d 649 (8th Cir.1986). The SSA
knew that the claimant was in prison, but it did not suspend his
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UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 00-30080
HOWARD MAKOFSKY
Plaintiff-Appellant,
v.
KENNETH S. APFEL Commissioner, Social Security Administration
Defendant-Appellee,
Appeal from the United States District Court for the Eastern District of Louisiana (99-CV-1720-LLM)
January 23, 2001
Before GOODWIN1, GARWOOD and JONES, Circuit Judges.
EDITH H. JONES, Circuit Judge:2
Appellant Howard Makofsky received an overpayment of
Social Security benefits and seeks to waive reimbursement to the
Social Security Administration (SSA). An administrative law judge
(ALJ) held that Makofsky failed to show that he was “without fault”
under 42 U.S.C. § 404(b), and refused to waive the overpayment.
1 Circuit Judge of the Ninth Circuit, sitting by designation. 2 Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. Makofsky appeals. Concluding that there is not sufficient evidence
to sustain the ALJ’s conclusion, we reverse and remand.
Makofsky began receiving retirement benefits from the SSA
in 1989. At that time, he signed a preprinted application that
stated, “[m]y reporting responsibilities have been explained to me
and I have also received a printed explanation of those
responsibilities.” Makofsky testified that the SSA office was very
busy on the day he applied for benefits, and that SSA personnel
spoke to him only briefly. He did not recall receiving any oral or
written instructions to notify the SSA if he went to prison. He
understood from SSA Form 1099 tax documents that he could earn only
limited income while receiving benefits and that he was obliged to
notify SSA of changes in address.
Makofsky was in prison between February 1995 and April
1996 for writing bad checks, a felony. Under 42 U.S.C. § 402(x),
he was not entitled to receive social security benefits during this
period. Makofsky testified that he never knew this, and he
therefore did not notify the SSA of his confinement. He continued
to receive benefits in a post office box, his sole mailing address
since at least 1982. Makofsky’s former spouse had power of
attorney over his affairs, and she received and cashed his benefits
for him. She paid his bills and rent during his confinement, and
sent cash to him.
2 In May 1996, the SSA notified Makofsky that he had
received an overpayment and asked him to repay $ 14,136. Makofsky
asked the SSA to waive the overpayment. The SSA refused to do so,
but it reduced the debt to $13,196.
The ALJ held a hearing at which only Makofsky testified.
In his decision, the ALJ briefly described Makofsky’s testimony and
ruled:
Although [Makofsky] asserts that he did not know that he had the duty to inform the Administration if he were incarcerated, he did know that he had to report a change of address, other sources of income, and other circumstances. . . .
I conclude claimant knew or should have known that he had to inform the Administration when he became incarcerated due to conviction of a felony in February 1995. He was aware of other reporting procedures which are explained concurrently with the one requiring that he report any incarcerations due to felony convictions.
Record at 10 (citations omitted). The ALJ concluded that Makofsky
was at fault, and refused to waive the overpayment.
This decision cited no SSA instructions that would have
notified Makofsky to report incarceration. It made no explicit
findings about Makofsky’s credibility. It also did not explicitly
consider Makofsky’s physical, mental, educational, or linguistic
limitations.
The district court affirmed, finding that substantial
evidence supported the ALJ’s decision. Makofsky appeals.
3 STANDARD OF REVIEW
We may review only two issues: 1) whether substantial
evidence supports the decision, and 2) whether the ALJ correctly
applied the law. See Paul v. Shalala, 29 F.3d 208, 210 (5th
Cir.1994). Substantial evidence is “more than a mere scintilla and
less than a preponderance. It is such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.”
Id. (citing Muse v. Sullivan, 925 F.2d 785, 589 (5th Cir.1991).
DISCUSSION
Makofsky contends that substantial evidence does not
support the determination that he was at fault. He argues that the
SSA never told him to report incarceration, and that he never knew
he had to. He also argues that the ALJ did not impugn his
credibility, and thus the ALJ should have credited his testimony.
Section 404(b), “No recovery from persons without fault,”
states
In any case in which more than the correct amount of payment has been made, there shall be no adjustment of payments to, or recovery by the United States from, any person who is without fault if such adjustment or recovery would defeat the purpose of this subchapter or would be against equity and good conscience.
42 U.S.C. § 404(b). Thus, Makofsky cannot benefit from this
section unless he was without fault. Makofsky has the burden of
proof on this issue. See Bray v. Bowen, 854 F.2d 685, 687 (5th
Cir.1988) (holding that the evidence supported a finding of fault).
4 SSA regulation § 404.507, “Fault,” states:
What constitutes fault on the part of the overpaid individual . . . depends upon whether the facts show that the incorrect payment to the individual . . . resulted from: . . .
(b) Failure to furnish information which he knew or should have known to be material.
20 C.F.R. § 404.507. Our inquiry therefore is whether there is
substantial evidence that Makofsky knew or should have known that
his imprisonment was material to his eligibility.
If the SSA told Makofsky to report imprisonment, he
certainly would be at fault. In Bray, the SSA informed the
claimant of her obligation to report marriage at the time she filed
and through periodic check “stuffers.” This court, refusing to
waive an overpayment, concluded that she was at fault for not
reporting her change in marital status. See Bray, 854 F.2d at 687.
Where the SSA does not expressly warn claimants, however,
federal appeals courts have not assumed that claimants know what is
material to their eligibility. In Peeler v. Heckler, a prisoner
was already receiving SSA benefits when § 402(x) took effect in
1980. See Peeler v. Heckler, 781 F.2d 649 (8th Cir.1986). The SSA
knew that the claimant was in prison, but it did not suspend his
benefits until a year after the new law took effect. The Eighth
Circuit stated that “[b]eneficiaries are not presumed to know of
each new arcanum of social-security law. They are not presumed to
5 have acted with fault when, in the absence of changed personal
circumstances, they accept a benefit payment in the amount which
they have been accustomed to receiving each month.” Id. at 653-54
(citations omitted). The court found that substantial evidence did
not support the ALJ’s determination of fault under § 404(b).
In another circuit decision, claimants argued that they
did not know they had to report a savings account to the SSA. See
Romero v. Harris, 675 F.2d 1100, 1101-02 (10th Cir.1982). Funds in
the savings account were initially below the SSA’s resource limit
but later exceeded it. The claimants testified that the SSA never
told them to report savings accounts. See id. at 1102. Although
the ALJ found them at fault and refused to waive the overpayments
under § 404(b), the Tenth Circuit reversed for lack of evidence in
the record to support a finding of fault. See id. at 1104. While
Peeler and Romero are not exactly like this case, they show that
Makofsky is not at fault unless he had some reason to know that he
was ineligible for benefits.
Here, termination of benefits under § 402(x) is not so
obvious that Makofsky should have been aware of it on his own.
Some might find it intuitive that prisoners cannot receive
benefits, but the rule has not always been this straightforward.
The rule did not even exist before 1980, and prisoners who
committed misdemeanors could receive benefits until 1994. See
6 Historical and Statutory Notes, 42 U.S.C. § 402 (West 2000). We
believe § 402(x) is beyond the scope of an ordinary applicant’s
knowledge.
Makofsky signed a form stating that he received
instructions on his reporting duties. There is no evidence in the
record, however, of the substance of these instructions or even of
standard SSA instructions to applicants. Granted, Makofsky bears
the burden of proof. Makofsky testified, however, that the SSA
never told him to report imprisonment. Nothing in the record
contradicts this.
The ALJ’s decision was based in part on Makofsky’s
consciousness of income limits and his duty to report address
changes. This is not substantial evidence that Makofsky knew or
should have known to report his imprisonment. Awareness of
fundamental reporting responsibilities does not automatically
translate into awareness of fairly obscure statutory provisions.
Makofsky did not change his address, so his failure to report his
imprisonment does not create an inference that he was concealing
anything.
Perhaps the ALJ simply disbelieved Makofsky, but if so
the ALJ should have stated this. “Where, as here, credibility is
a critical factor in determining whether the claimant was without
fault, the ALJ must have stated explicitly whether he believed the
7 witness’s testimony.” Valente v. Secretary of Health & Human
Servs., 733 F.2d 1037, 1045 (2nd Cir.1984) (reversing a finding of
fault in part on the ALJ’s failure to make a finding on
credibility); see also Albalos v. Sullivan, 907 F.2d 871, 873-74
(9th Cir.1990) (requiring more than merely an implicit finding that
claimant was not credible in a § 404(b) fault case). The Eleventh
Circuit has reversed a finding of fault because the ALJ did not
clearly explain whether its ruling was based on the scope of
claimant’s evidence or his credibility. See Viehman v. Schweiker,
679 F.2d 223, 229 (11th Cir.1982). It also demanded that “the fact
finder articulate any reasons for questioning [the claimant’s]
credibility.” We agree with these circuits and hold that where a
witness’s testimony is central to a § 404(b) fault inquiry, the ALJ
should include a credibility finding in his decision.
In sum, substantial evidence does not support the ALJ’s
findings. There is no record evidence that in 1989, the SSA
regularly informed applicants that they must report incarceration.
Moreover, since Makofsky’s testimony excused his fault, there is no
substantial evidence for a contrary finding without some proof, or
explicit, explained finding, that Makofsky lacked credibility.
We recognize that an unpublished decision from the Eighth
Circuit refused to find a claimant without fault on somewhat
analogous facts. In Kiefer v. Apfel, 2000 U.S. App. LEXIS 23332
8 (8th Cir.2000), the claimant indicated on his application that he
had received reporting instructions, and later received benefits
while in prison. He sought to waive the overpayment, arguing that
he was without fault because he relied on an allegedly ambiguous
letter from the SSA. The court rejected his claim and found that
substantial evidence supported the ALJ’s decision.
Kiefer is factually distinguishable for a couple of
reasons. First, the claimant was not arguing that he had never
received instructions to report confinement. On the contrary, he
wanted to contest the denial of benefits pending confinement.
Second, the court found unpersuasive his reliance on an ambiguous
and self-contradictory letter from SSA. This case, by contrast, is
only about what the SSA told Makofsky (nothing explicit about the
consequence of incarceration) and what he knew or should have
known.
Notwithstanding our conclusion that Makofsky was without
fault, he is not necessarily entitled to a waiver of repayment.
Under § 404(b), he must still show that recovery would defeat the
purpose of Title II benefits or would be against equity and good
conscience. Remand is required to consider this question, which
under the statute includes assessment of the claimant’s physical,
mental, educational or linguistic limitations. Id.
9 For the reasons stated above, we REVERSE because Makofsky
was without fault and REMAND for further proceedings.