Splude v. Social Security

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 98-1630



                 DANIEL SPLUDE & RONALD CARGILL,



                     Plaintiffs, Appellants,



                                v.



  KENNETH S. APFEL, SOCIAL SECURITY ADMINISTRATION COMMISSIONER,



                       Defendant, Appellee.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                    FOR THE DISTRICT OF MAINE



             [Hon. Gene Carter, U.S. District Judge]


Before



                     Boudin, Circuit Judge,

                                

           Coffin and Bownes, Senior Circuit Judges.


Michael A. Bell with whom Jon Holder was on brief for

appellants.

     Christine N. Kohl, Appellate Staff, Civil Division, with whom

Frank W. Hunger, Assistant Attorney General, Jay P. McCloskey,

United States Attorney, and Barbara C. Biddle, Appellate Staff,

Civil Division, were on brief for appellee.


January 15, 1999


BOUDIN, Circuit Judge.  It is no accident that Title 42,

containing the social security laws among other statutes, occupies

four successive volumes of the United States Code (the Internal

Revenue Code requires only two volumes).  This case turns on the

interplay of statutes establishing two different social security

programs and several ancillary provisions.  A brief primer will be

helpful.

  The most familiar social security program is federal old

age, survivors and disability insurance, the core provisions of

which were adopted as part of the New Deal in 1935.  42 U.S.C. 

401-433.  It is based on contributions made by employees and their

employers to the social security trust fund, and it primarily

provides retirement income.  But if an insured worker becomes

disabled before retirement, scheduled benefits are payable to the

employee during disability. Id.  401(b), 423.  The latter

payments are called "social security disability" or "SSD."

  In 1972, Congress added a new social security program to

provide "supplemental security income" (called "SSI") for "aged,

blind and disabled" persons of limited means regardless of their

insured status.  42 U.S.C.  1381a, 1382.  This is a social

welfare program funded out of general taxpayer revenues.  SSI is

available even to those who qualify for SSD, but SSD income is

considered in determining whether a disabled person qualifies for

SSI under the latter's means test.  Id.  1382a(a)(2)(B),

(b)(4)(B).  A disabled person who qualifies for payments under both

programs is called a "concurrent claimant."

  This case concerns two concurrent claimants, Daniel

Splude and Ronald Cargill.  Splude's circumstances are

illustrative.  He applied in 1992 for both SSD and SSI benefits

dating back to 1988.  While awaiting a determination of disability

by the Social Security Administration (which administers both

programs), Splude received relief payments from the Maine

Department of Human Services.  He signed an agreement with the

Social Security Administration authorizing it to deduct from

Splude's initial SSI payment that portion of the interim relief

provided by Maine that was not itself funded by the federal

government.

  There is a broad "anti-assignment" law governing SSD

payments and applicable to SSI payments by cross-reference, 42

U.S.C.  407(a), 1383(d)(1), reprinted in the appendix to this

opinion.  However, Splude's 1992 agreement with the Social Security

Administration, committing his SSI funds to repay interim state

aid, is specifically permitted by a proviso to the cross-referenced

statute limiting assignment of SSI payments.  Id.  1383(g)(1). 

This statutory exception does not apply to SSD payments; if Splude

had attempted to assign his rights to future SSD payments to the

Maine agency, the Social Security Administration would not have

been allowed to make such a deduction.

  In addition to this relationship of federal and state

payments, there is a potential interaction between SSD and SSI

payments.  As already noted, SSD payments due for any month are

treated under the SSI means test as income that may reduce or

eliminate SSI payments for the same month.  One might expect that

the Social Security Administration would always make both

calculations at the same time, determining SSD payments due to the

applicant and then reducing SSI payments to the extent required. 

But different information is needed for the two calculations (e.g.,

because SSI is means tested), and SSD is normally computed at field

offices and SSI at a central Maryland office.

  During the events in this case, the Social Security

Administration generally paid out whichever claim was computed

first, whether SSI or SSD.  Further, an applicant might not apply

for disability payments as soon as entitled to do so.  Thus,

eventually the applicant might receive a large SSI check for back

payments; and later, when SSD was calculated, the SSI payment might

prove to have been overstated because the SSD payment--made later

for the same period--reduced the amount of (means-tested) SSI

properly due for the same period.

  This overpayment problem was met by the so-called

"windfall offset" provisions first added in 1980 and later amended

in 1984, 42 U.S.C.  1320a-6(a), reprinted in the appendix.  Under

this provision, an excess initial payment for SSI caused by the

delay just described can be recaptured by the Social Security

Administration by deducting the excess when the SSD payment is

later calculated and ready to be paid.  In September 1995, the

Social Security Administration abandoned its "pay whichever claim

is calculated first" policy and now, we are told, calculates SSI

and SSD benefits at the same time so as to avoid any windfall.  But

the old policy was in effect in April 1993 when the Social Security

Administration first found that Splude was disabled and had been

for a prior period.

  In May 1993, the Social Security Administration advised

Splude that he was entitled to $10,659.30 as an initial SSI payment

for the period May 1991 through May 1993.  After some

miscalculations were corrected by cross payment,  Maine (in

accordance with Splude's agreement) received $7,582 from the Social

Security Administration for the interim assistance that Maine had

provided to Splude while he was waiting for SSI to be paid, and

Splude received the balance of $1,776.

  In June 1993, the Social Security Administration

calculated Splude's past-due SSD benefits through April 1993. 

Before any required reductions, this initial payment was computed

as $18,706.60.  Other deductions aside (e.g., counsel fees), Splude

was told that $9,349.57 would be withheld from him because the SSD

payment just calculated reduced the initial SSI payment properly

due to Splude; in other words, when his initial SSI payment was

recalculated to take account of the SSD payment now due for

overlapping months, Splude had received $9349.57 too much in SSI--

which was now being recaptured for the U.S. Treasury out of his SSD

payments under the windfall offset provision.

  Splude immediately sought reconsideration. He argued,

inter alia, that the deduction from his benefits to reimburse Maine

and the deduction under the windfall offset statute were both

effectively violations of the anti-assignment provision governing

SSD.  He included also constitutional claims shortly to be

described.  The Social Security Administration rejected Splude's

request for reconsideration.  It followed the same course in

Cargill's case in which the facts, so far as pertinent, parallel

those of Splude's case (including a repayment to Maine for interim

aid), and in which the legal claims are also similar.  

  Splude and Cargill then proceeded before an

Administrative Law Judge, and their cases were consolidated.  In

January 1996, the ALJ issued a decision favoring the claimants as

regards the Maine deductions, holding that they should not have

been made.  The Appeals Council reversed, reinstating the original

computations, without deciding the constitutional issues (it said

it had no authority to do so).  The claimants then sought review in

the district court where the cases were assigned to a magistrate

judge for a recommended decision.

  The magistrate judge, in a decision later adopted by the

district court, ruled that the anti-assignment provision governing

SSD had not been violated.  He said that the "pay whichever claim

is ready first" policy did violate equal protection principles but

that no remedial action was warranted, in part because the policy

had now changed.   Accordingly, judgment was entered in favor of

the Social Security Administration.  The claimants now appeal from

the district court's resolution, making us the fifth body to review

the original administrative determination.

  On appeal, we begin with the claimants' statutory

arguments, reserving the constitutional issues for later attention. 

On both levels, the issues are essentially legal, involving

interpretations of statutory and constitutional provisions or legal

characterizations of events; the raw facts are undisputed.  Thus,

our review is de novo, save as the Social Security Administration's

view of the statutes may be entitled to some deference.

  The claimants in this case suffered two different

deductions pertinent here: one, nominally from their initial SSI

payments, was to reimburse Maine; the other, from their later SSD

payments, was to reimburse the U.S. Treasury for SSI overpayments

found to have occurred after SSD was calculated.  The claimants'

primary attack is upon the first of these deductions--the payments

to Maine--which they say conflict with the provision barring

assignment of or levy on social security payments including SSD.

  On the surface, the claimants have no argument.  The

Social Security Administration made a conventional computation of

SSI payments due, subject always to recomputation under the

windfall offset statute if latter SSD computations showed that too

much SSI had been paid.  The federal agency then withheld a portion

of each claimant's initial SSI payment to reimburse Maine,

precisely as provided by the proviso to the anti-assignment statute

that approves such withholding from SSI--but not SSD--where a state

has advanced relief out of its own funds while the claimant is

awaiting federal payments.

  One is thus puzzled when, at the outset, the claimants'

brief in this court stresses the importance placed by Congress on

the anti-assignment provisions, borne out by Congress' amendment in

1983 to reinforce that prohibition, and on precedent including

Supreme Court cases protecting social security payments under the

anti-assignment provisions from assignments, liens, and other

efforts to seize the payments for a variety of otherwise just

obligations.  After all, whatever the strength of the anti-

assignment provisions, a proviso explicitly permits deductions from

SSI to repay interim state assistance.

     The claimants' argument is stronger than it at first

appears.   Once unraveled, the contention is not merely that the

initial payments to them would have been immune from Maine's reach

if SSD had been paid first--a correct statement but one that could

be answered by saying, "so what."  The argument--put in its

strongest form--is that the original SSI payments were SSD payments

or (since the payments were calculated under the SSI statute and

were so intended to be SSI) should be recharacterized as SSD

payments.  This latter is an argument that the government does not

directly answer, quite possibly because it did not fully appreciate

that it was being made.  The argument rests on two pillars.

     First, one could view SSD as the unqualified "earned"

benefit, resting (at least in theory) on past contributions by or

for the claimants, and view SSI as a contingent "welfare" payment

whose amount is reduced to the extent that SSD due for the same

period pushes the claimant up against the SSI means test.  This

view has some basis in the statutory framework:  SSD is due

unconditionally upon disability; SSI, only to the extent that SSD

and other income fall short under the SSI means test.

     Second, one could point to Congress' strong policy to

protect the principal benefit--here, SSD--by an anti-assignment

clause not qualified (as is SSI) by an exception that allows the

state to recapture advances of relief made by the state.  This

policy, it might then be argued, would be served by insisting that

the first payment made be treated as the SSD payment (up to the

full amount that would be due if SSD were calculated alone),

however the payment might be labeled by the Social Security

Administration.   

     A mathematical expression of the point is suggestive. 

Here, the government's own calculations show that if the two

initial payments due Splude for SSD and SSI had been computed at

the same time, most of what was owed would be SSD in the amount of

$18,706.60; this would be immune from withholding for Maine's

benefit (although other deductions might apply).  The balance in

SSI payments due Splude, after SSD payments were imputed to his

income, would be only $1,883.30.  This balance would be subject to

a deduction in Maine's favor but this would give Maine far less

than the $7,582 it originally advanced to Splude, and Splude's net

gain would be substantial.

     We decline to recharacterize the transaction.  While

Congress  does have a policy to protect SSD, which might be served

in some measure by the recharacterization, it also has two other

policies:  to compensate states that make advances on SSI and to

recapture from SSD excessive SSI benefits previously awarded.  The

recharacterization sought by Splude would result in an immediate

loss to the Treasury, contrary to the windfall offset statute, and

could in the future discourage interim state aid extended in

reliance on repayment from SSI, undercutting the aim of the proviso

to the SSI anti-assignment statute.

     We have no idea which of its several policies Congress

would regard as trumping the other if it faced and resolved the

tension, which grows out of the interplay--unanticipated by

Congress, one may suppose--of piecemeal amendments and changing

administrative practice as to the timing of payments.  The sound

course for us must thus be not to engage in recharacterizations but

to treat the initial payments to claimants here as SSI, in

accordance with the intent with which they were made and the

statute under which they were actually calculated.

     A recharacterization is not required to avoid injustice. 

Splude got interim state aid, knowing that he would have to pay it

back from his SSI, which is just what happened.  If SSD had been

paid first, he would largely have escaped repayment, but many would

regard this as something of a lucky accident or even a windfall. 

Similarly, Congress explicitly warned that SSD is to be reduced

where SSI is overpaid.  The result here is not an injustice but

merely an anomaly.  In a scheme as complex as this one, anomalies

cannot always be avoided and are not grounds for a court to rewrite

Congress' language.

     Each of the other circuits to address the issue before us

has also supported the government.  See White v. Bowen, 835 F.2d

974, 978-79 (2d Cir. 1987); McKenzie v. Bowen, 787 F.2d 1216, 1220-

22 (8th Cir. 1986).  Further, the Social Security Administration is

normally accorded the deference due to an agency plausibly

interpreting its own governing statutes.  Cf. Chevron U.S.A. Inc.v. Natural Resources Defense Council, Inc. 467 U.S. 837, 842-45

(1984).  Our own reading of the statute is thus reinforced,

although we would follow it even if other circuits and the agency

were silent.

     It is not clear whether the claimants are also attacking

the second deduction as a statutory violation.  The claimants'

brief could be taken to argue elliptically that the withholding of 

a portion of the initial SSD payment due each claimant,  to

reimburse the Treasury for overpaying SSI, was itself prohibited by

the anti-assignment statute protecting SSD payments from

assignment, levy and the like.  The claimants refer to the 1983

amendment already mentioned that warns that "n[o] other provision

of law . . . may be construed to limit, supersede or otherwise

modify [the anti-assignment ban] except to the extent that it does

so by express reference to this section."  42 U.S.C.  407(b).

     The first deduction (from the SSI payments to repay state

advances) is unaffected by the amendment; the deduction is

permitted by a proviso within the SSI anti-assignment provision

itself.  However, the second deduction (from the SSD payments to

recapture SSI overpayments) is premised on another law, the

windfall offset provision, which itself makes no reference to the

anti-assignment provision.  Should we then regard the second

deduction as one constituting an assignment, levy, or the like of

SSD funds which is authorized but inadequately so because not by a

statute that makes "express reference to" the anti-assignment

statute?   

     The most straightforward reading of the windfall offset

provision is that what it effects is not any kind of assignment or

levy but an internal computation of how much SSD or SSI is due--a

computation by which a prior overpayment in either category for the

same period is used to reduce what is to be paid in the other

category.  Further, the windfall offset provision is a specific

directive to withhold from SSD an amount needed to recapture excess

SSI previously paid; it is hard to think that Congress, in adopting

the broad "express reference" amendment to the anti-assignment

statute, meant sub silentio to repeal its own prior specific

directive.  Accordingly, we conclude that the second deduction,

from SSD itself, violates no statute.

     This brings us to claimants' constitutional claims. The

first argument, explicitly summarized in the heading of their

brief, is that the "backdoor" assignment of their SSD benefits

"without notice and an opportunity to be heard" violated the

claimants' rights to due process of law under the Fifth Amendment. 

Claimants rely heavily, in this connection, on Dionne v. Bouley,

757 F.2d 1344 (1st Cir. 1985).  

     Cast as a claim that procedural rights were wrongly

denied, the argument makes no sense.  Both deductions--from SSI for

Maine and from SSD for the Treasury--were computations made in the

course of determining what the Social Security Administration

should remit to the claimants.  The government was hardly obliged

to pay out moneys before initially determining what was due. 

Thereafter, plaintiffs point to nothing procedurally inadequate

about the process afforded to them to show that they were entitled

to more than the government paid them.

     The objections claimants raise to the deductions are

substantive (i.e., they do not like the result), but that is not a

problem of notice or opportunity to object.  Dionne is wholly

distinguishable.  In that case, a judgment creditor secured an

attachment on the debtor's bank account, primarily containing

social security payments exempt from attachment.  This court agreed

with the debtor that Rhode Island procedure was deficient in

failing to provide the debtor, post-attachment, with notice and a

prompt opportunity to remove the attachment based upon the federal

anti-attachment provision governing Social Security payments.

     So far as the claimants are making an argument based on

substantive due process or takings law, as some of their other

citations suggest, the answer is a different one.  Social security

benefits like SSD have been regarded in some contexts as "property"

for constitutional purposes.  See, e.g., Mathews v. Eldridge, 424

U.S. 319 (1976) (continued receipt of social security disability

checks).  But this case requires no exploration of the

circumstances in which such a property interest can be limited or

qualified.

     Here, the deduction from SSI for the benefit of Maine,

agreed to by the claimants, was part of a transaction that

effectively advanced a portion of their SSI welfare benefits; the

claimants got the full amount due, some of it paid earlier for

their own benefit.  Conversely, the reduction of SSD to account for

an overpayment of SSI, effected under the windfall offset  statute,

recaptures for the government SSI payments to which the claimant

was never entitled.  In neither case did the deduction comprise a

taking or other wrongful interference with a property interest.

     The final argument made by the claimants is that the

then-practice of the Social Security Administration of paying first

whichever benefit was first calculated violates equal protection

principles.  As noted above, one who gets paid SSD first may end up

effectively avoiding repayment of some or all of a state advance;

one who gets paid SSI first may end up repaying all of the

advances. The claimants say that the (now-superseded) payment

policy was irrational discrimination because it created two classes

of similarly situated persons who receive different benefits based

on the accident of which payment occurred first.

     The federal government is not directly governed by the

equal protection clause, which appears only in the Fourteenth

Amendment, but the Supreme Court has held that equal protection

principles are implicit in the Fifth Amendment's due process

clause.  See Bolling v. Sharpe, 347 U.S. 497 (1954).  The

magistrate judge agreed with the claimants that the former payment

policy did violate equal protection principles.  He then withheld

relief on grounds that we need not describe, because we find no

such violation.

     In reaching this conclusion, we reject at the outset the

government's contention that claimants' equal protection claim

fails merely because there is no charge of "purposeful

discrimination" by the Social Security Administration, that is to

say, a subjective intent to favor one group or disfavor another on

impermissible grounds.  In certain kinds of cases--e.g., those

involving ad hoc actions or those involving merely an adverse

impact on an individual group--lack of such an invidious purpose

may be fatal to the claim.  See, e.g., Washington v. Davis, 426

U.S. 229 (1976).

     However, any "classification" by the government, even if

made without any wrongful or suspect purpose,  is required under

equal protection principles to meet a minimum requirement of

rationality.  See Schweiker v. Wilson, 450 U.S. 221, 230 (1981);

Baker v. City of Concord, 916 F.2d 744, 747 (1st Cir. 1990).  The

former practice of the Social Security Administration to pay

whichever claim was computed first might be regarded as creating a

classification since it was a deliberate, ongoing policy that did

predictably, although innocently, create two groups of claimants

enjoying different net benefits.  The difficulty for Splude and

Cargill is that the test of rationality is extremely generous to

the government in social and economic matters, see  Baker, 916 F.2d

at 747, and a policy that seeks to get payments out as soon as they

are ready is not irrational.  Delaying payments until both SSI and

SSD are computed doubtless threatens hardships of its own.  That a

particular classification scheme, otherwise rational, will produce

occasional aberrant outcomes is something that the Constitution is

taken to tolerate.

     Affirmed.                        STATUTORY APPENDIX

42 U.S.C.  407.  Assignment; amendment of section

     (a) The right of any person to any future

     payment under this subchapter shall not be

     transferable or assignable, at law or in

     equity, and none of the moneys paid or payable

     or rights existing under this subchapter shall

     be subject to execution, levy, attachment,

     garnishment, or other legal process, or to the

     operation of any bankruptcy or insolvency law.



     (b) No other provision of law, enacted before,

     on, or after April 20, 1983, may be construed

     to limit, supersede, or otherwise modify the

     provisions of this section except to the

     extent that it does so by express reference to

     this section.



42 U.S.C.  1320a-6.  Adjustments in SSI benefits on account of

retroactive benefits under subchapter II



(a) Reduction in benefits



Notwithstanding any other provision of this chapter, in any case

where an individual--



     (1) is entitled to benefits under subchapter

     II of this chapter that were not paid in the

     months in which they were regularly due; and



     (2) is an individual or eligible spouse

     eligible for supplemental security income

     benefits for one or more months in which the

     benefits referred to in clause (1) were

     regularly due,



     then any benefits under subchapter II of this

     chapter that were regularly due in such month

     or months, or supplemental security income

     benefits for such month or months, which are

     due but have not been paid to such individual

     or eligible spouse shall be reduced by an

     amount equal to so much of the supplemental

     security income benefits, whether or not paid

     retroactively, as would not have been paid or

     would not be paid with respect to such

     individual or spouse if he had received such

     benefits under subchapter II of this chapter

     in the month or months in which they were

     regularly due.  A benefit under subchapter II

     of this chapter shall not be reduced pursuant

     to the preceding sentence to the extent that

     any amount of such benefit would not otherwise

     be available for payment in full of the

     maximum fee which may be recovered from such

     benefit by an attorney pursuant to section

     subsection (a)(4) or (b) of section 406 of

     this title.



(b) "Supplemental security income benefits" defined



     For purposes of this section, the term

     "supplemental security income benefits" means

     benefits paid or payable by the Commissioner

     of Social Security under subchapter XVI of

     this chapter, including State supplementary

     payments under an agreement pursuant to

     section 1382e(a) of this title or an

     administration agreement under section 212(b)

     of Public Law 93-66.



(c) Reimbursement of the State



     From the amount of the reduction made under

     subsection (a) of this section, the

     Commissioner of Social Security shall

     reimburse the State on behalf of which

     supplementary payments were made for the

     amount (if any) by which such State's

     expenditures on account of such supplementary

     payments for the month or months involved

     exceeded the expenditures which the State

     would have made (for such month or months) if

     the individual had received the benefits under

     subchapter II of this chapter at the times

     they were regularly due.  An amount equal to

     the portion of such reduction remaining after

     reimbursement of the State under the preceding

     sentence shall be covered into the general

     fund of the Treasury.



42 U.S.C.  1383(d).  Procedures applicable; prohibition on

assignment of payments; representation of claimants



     (1) The provisions of section 407 of this

     title and subsections (a), (d), and (e) of

     section 405 of this title shall apply with

     respect to this part to the same extent as

     they apply in the case of subchapter II of

     this chapter.



42 U.S.C.  1383(g).  Reimbursement to States for interim

assistance payments



     (1) Notwithstanding subsection (d)(1) of this

     section and subsection (b) of this section as

     it relates to the payment of less than the

     correct amount of benefits, the Commissioner

     of Social Security may, upon written

     authorization by an individual, withhold

     benefits due with respect to that individual

     and may pay to a State (or a political

     subdivision thereof if agreed to by the

     Commissioner of Social Security and the State)

     from the benefits withheld an amount

     sufficient to reimburse the State (or

     political subdivision) for interim assistance

     furnished on behalf of the individual by the

     State (or political subdivision).