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HOSKINS v. ASTRUE (N.D.Ill. 11-1-2010)
ROBERT HOSKINS, JR., Plaintiff, v. MICHAEL ASTRUE, Commissioner of Social
Security, Defendant.
Case No. 09 C 6098.
United States District Court, N.D. Illinois, Eastern Division.
November 1, 2010
MEMORANDUM OPINION AND ORDER[fn1]
[fn1] On December 4, 2009, by consent of the parties and pursuant to
28 U.S.C. § 636(c) and Local Rule 73.1, this case was assigned to
this Court for all proceedings, including entry of final judgment
(doc. # 13).
SIDNEY SCHENKIER, Magistrate Judge
In this social security disability insurance benefit appeal,
the guardian of the estate of plaintiff Robert Hoskins, Jr.
("plaintiff" or "Robert"), [fn2] moves for reversal and/or remand of a
final decision by the Commissioner of the Social Security
Administration ("SSA"), denying Robert's application for Social
Security Income ("SSI") (doc. # 25). In the alternative,
plaintiff argues that the Appeals Council erred in denying his
motion to reopen and reconsider its denial of SSI (Id.). The
Commissioner has filed a cross-motion for summary judgment to
affirm the decision rejecting Robert's claim for SSI (doc. # 37).
For the reasons set forth below, we grant in part and deny in
part the Commissioner's and the plaintiff's motions, and we
remand this case for further proceedings.
I.
We begin with a summary of the procedural history of this case.
The claimant in this case, Robert Hoskins, Jr., suffers from
cerebral palsy and possible mental retardation (R. 23, 172). The
guardian of Robert's person — his mother, Sharon Hoskins ("Ms.
Hoskins") — applied for SSI on his behalf on June 15, 2005 (R.
86). The previous month, a "supplemental needs trust" in the
amount of approximately $500,000.00 was created for Robert (R.
23, 73, 114). The Northern Trust Company ("Northern Trust") is
the trustee and has been the guardian of Robert's estate since
July 1997 (R. 106).
On September 27, 2005, SSA determined that the trust was a
countable resource to Robert for SSI purposes, and on October 4,
2005, SSA ruled that he was ineligible to receive SSI despite his
undisputed disability because — counting the assets in the trust
— he had excess resources (R. 83, 86). On October 31, 2005, Ms.
Hoskins filed a request for reconsideration (R. 94). On December
20, 2005, SSA completed its reconsideration and again found that
Robert was not eligible to receive SSI (R. 95). On January 17,
2006, Ms. Hoskins requested a hearing before an ALJ, which was
granted and scheduled for October 3, 2007 (R. 98, 100, 124).
On October 2, 2007, the Illinois probate court authorized a
first amendment to the trust ("First Amended Trust") (R. 107,
136). At the October 3, 2007 hearing, only Robert's
representatives appeared. In a written opinion dated November 30,
2007, the ALJ adopted the trustee's argument that the First
Amended Trust was not a countable resource, and thus, that Robert
was entitled to SSI (R. 19, 25-26).
On January 11, 2008, the regional commissioner of SSA submitted
written argument in support of a request that the Appeals Council
review and reverse the ALJ's decision (R. 143-46). On January 28,
2008, the Appeals Council sent out a notice indicating its intent
to review the ALJ's November 30, 2007, decision on the grounds
that the ALJ committed an error of law and his decision
was not supported by substantial evidence (R. 147). The notice
indicated that the Appeals Council planned to find Robert
ineligible for SSI due to excess resources (R. 148).
On February 26, 2008, the probate court approved a second
amendment to the supplemental needs trust ("Second Amended
Trust") (R. 157). That same day, Robert's attorney wrote a letter
contesting the Appeals Council's intended decision to find the
First Amended Trust a countable resource, and arguing that in any
event the newly filed Second Amended Trust was not a countable
resource (R. 153). On July 2, 2009, the Appeals Council issued a
ruling reversing the ALJ's decision finding Robert eligible for
SSI. The Appeals Council held that the trust — in its original
and amended forms — is a countable resource, and thus precludes
Robert's eligibility for SSI due to excess resources (R. 16-18).
On August 4, 2009, the trust was amended for a third time (R.
7, 9). On that same day, Robert's attorney sent the Appeals
Council a letter entitled a "Motion to Reconsider," asking the
Appeals Council to reconsider its unfavorable decision and find
Robert eligible for SSI, and attaching the Third Amended Trust
(R. 5-6). On September 22, 2009, the Appeals Council denied the
motion to reconsider (R. 3). On September 30, 2009, Robert's
attorney sought review in this Court of the Appeals Council's
denial of SSI and refusal to reopen the decision denying SSI
(doc. #1: Complaint).
II.
The administrative record in this case consists of the
supplemental care trusts, legal arguments as to whether Robert is
entitled to SSI, and Social Security rulings and opinions on this
issue. The parties agree that Robert was born with and continues
to suffer from cerebral palsy. Willie Hoskins, Robert's cousin and one of his caregivers, testified that Robert also suffers from severe mental retardation
(R. 172).
On May 4, 2005, a supplemental care trust was entered into on
Robert's behalf with approximately $500,000.00 in assets. The
trust was funded with proceeds Robert received in 1989 or 1990
from a settlement in a personal injury lawsuit that was filed on
his behalf due to injuries he received at birth and his resulting
disabilities (R. 111, 173-74). Article Three of the trust stated
that it "shall terminate upon Robert's election following his
restoration of rights or upon [his] death," and that upon
Robert's death,
in accordance with 42 U.S.C. 1396p(d)(4)(A) and
89 Ill. Admin. Code, Ch. 1, Sect. 120.347(d)(1), the Trust
assets remaining upon termination as provided or at the
death of Robert shall be paid to the appropriate State
agencies, as reimbursement to the State of Illinois for
benefits provided to Robert during Robert's lifetime,
except that the Trustee may with court approval and
consistent with existing law first pay any outstanding,
reasonable expenses for maintaining the existence of
the Trust, and final bills, debts, expenses, taxes,
fees, and funeral-related items. In the event that any
assets of the Trust are remaining after payment of the
reasonable expenses and reimbursement to the State of
Illinois as set forth above, then the balance shall be
distributed to whomever Robert designates by will, or
if none, to Robert's estate.
(R. 77). The supplemental care trust further stated that: "[t]he
Trust is created for the purpose of providing for the extra and
supplemental needs, comforts and luxuries of Robert during his
lifetime," that are not covered by state or federal medical
assistance programs, and that the trust "will not cause
disqualification from[] the benefits that Robert otherwise
receives as a result of his disability . . ." (R. 73-74).
A.
On June 15, 2005, Ms. Hoskins filed an application for SSI on
Robert's behalf (R. 86). In support of the application, on
September 7, 2005, Kelly Hancock, an attorney and a Vice
President at Northern Trust who represented Northern Trust in its capacity
as guardian of Robert's estate, submitted the supplemental care
trust and attached a brief letter stating that the trust "was
created for the purpose of providing for the extra and
supplemental needs, comforts and luxuries of Mr. Hoskins during
his lifetime" (R. 72).
In a memorandum dated September 27, 2005, SSA indicated its
intent to find Robert ineligible for SSI because he had excess
resources in his trust (R. 83-84). SSA stated that the trust did
not meet one of the requirements of the "special needs trust
exception," all of whose requirements must be met to stop the
trust assets from being counted as a resource for SSI purposes
(Id.). Specifically, SSA explained that the trust failed to
provide that upon Robert's death, the state will be reimbursed as
the first payee for the total medical assistance it provided for
Robert except for certain taxes due and fees for the
administration of Robert's estate (R. 84). In addition, SSA
argued that Robert's trust was a countable resource under SSA's
"regular resource rules," because Robert could revoke the trust
as the grantor and sole beneficiary of the trust, and the trust
allows Robert to terminate the trust following his restoration of
rights (R. 84-85).
One week later, on October 4, 2005, SSA issued a notice denying
Robert's application for SSI because he had resources worth more
than $2,000.00 for the calendar years for which he sought
benefits (R. 86).[fn3] SSA determined that Robert's resources
amounted to over $470,000.00 in June, July, August, and September
2005 due to the supplemental care trust (R. 89-92).[fn4] Ms. Hoskins
timely filed a request for reconsideration on October 31, 2005
(R. 94), which was denied on December 20, 2005 (R. 95). Ms. Hoskins then timely filed a request for a hearing before an ALJ (R. 98), which was granted,
with a hearing date set for October 3, 2007 (R. 100, 124).
B.
Ms. Hancock, Ms. Hoskins, and Willie Hoskins appeared at a
pre-hearing meeting before the ALJ on August 22, 2007 (R. 166,
190). During that meeting, Ms. Hancock argued that Robert should
be entitled to SSI because the supplemental care trust was an
"over trust" created to provide for Robert's supplemental needs
that were not covered by Medicaid and Social Security, and the
public benefits would be paid back from the trust assets when
Robert dies (R. 167-68, 179-80). Further, Ms. Hancock noted that
the beneficiaries of the nine other supplemental trust
arrangements that she oversees all receive SSI (R. 169-70). The
ALJ questioned Willie Hoskins as to the nature of Robert's
illness, which Willie Hoskins described as severe mental
retardation, some paralysis on his left side, and cerebral palsy
(R. 171-72). The ALJ then asked whether Robert had previously
received SSI, and Ms. Hancock replied that he received benefits
in the 1980s, but they were discontinued after he received
$500,000.00 from the personal injury lawsuit filed on his behalf
in 1989 or 1990 (R. 172-73). The ALJ then took the matter under
advisement (R. 180).
On October 2, 2007, the probate court authorized Northern Trust
to execute a first amendment to the supplemental care trust,
specifically "to make any and all amendments necessary" so that
the trust will "be in compliance with Social Security
Administration regulations" (R. 136). The First Amended Trust,
filed the same day, amended Article Three so that it stated that
upon termination of the trust or Robert's death, the remaining
trust assets will be used to reimburse the State of Illinois,
except that "the Trustee may with court approval first pay taxes
as allowed by current law. Any other final expenses must be in
compliance with current law and with the expressed written consent of the State with notice to all interested parties and prior court approval" (R. 139).
Ms. Hancock and Robert's attorney, Paul Franciszkowicz,
appeared at the ALJ hearing on October 3, 2007 (R. 186). Ms.
Hancock testified that Robert was adjudicated disabled by the
probate court approximately ten years prior based on cerebral
palsy and mental retardation, and that he is unable to manage his
personal and financial affairs (R. 193). She again testified that
the supplemental care trust is a special needs trust that
Northern Trust created "to allow [Mr. Hoskins] to . . . qualify
for government benefits to meet his medical needs so that his
trust assets could be preserved for his supplemental needs,"
because "there's no likelihood that he'll ever be able to work
and support himself," and Northern Trust sought to ensure that
"his estate assets would be able to last throughout his lifetime"
(R. 194).
Ms. Hancock further testified that Article Three of the First
Amended Trust was amended to address SSA's concern that the State
be reimbursed first, except for certain exceptions permitted by
law (R. 198). Further, she testified that Robert does not have
the mental capacity to revoke a legal document and is not
expected to, nor does he have the right to receive income from
the trust because disbursements on his behalf can only be made
with court approval (R. 199-200). Ms. Hancock also clarified that
there is no other intended beneficiary of the trust besides
Robert (R. 201). The ALJ considered Ms. Hancock an expert based
on her years of experience with special needs trusts (R. 204).
On November 30, 2007, the ALJ issued a fully favorable decision
finding Robert eligible for SSI (R. 19). Although representatives
of SSA did not appear at the hearing, in making his decision, the
ALJ considered the arguments in SSA's September 27, 2005
memorandum (R. 23-24). In his opinion, the ALJ made the following rulings. First, the ALJ determined that the trust need not be established for the sole
benefit of the individual beneficiary (R. 25). Second, the ALJ
held that Northern Trust, not Robert, was the grantor of the
trust, and thus the trust is not revocable (Id.). Third, the ALJ
found that the early termination provision did not create a
contingent interest in any foreseeable third party (Id.). Fourth,
the ALJ found that the First Amended Trust satisfied SSA's
concern about Article Three of the trust, by providing that upon
Robert's death, the State had priority as first payee over
payment of other debts and expenses (Id.). Therefore, the ALJ
found that the First Amended Trust was not a countable resource
for purposes of determining Robert's eligibility for SSI (R.
25-26).
C.
On January 11, 2008, the regional commissioner of SSA requested
that the Appeals Council reopen the ALJ's decision, and provided
written argument that the ALJ erred in finding that the
supplemental needs trust was not a countable asset (R. 145-46).
The regional commissioner argued: that the trust must be for the
sole benefit of the individual; that Robert is both the grantor
and sole beneficiary of the trust and thus the trust is
revocable; that the early termination provision creates a
contingent interest in third parties; that the probate court did
not approve the First Amended Trust; and that the trust fails to
provide that all states that provided medical assistance to
Robert must be reimbursed before other expenses are paid (R.
145-46).
On January 28, 2008, the Appeals Council sent out a notice
indicating its intent to review the ALJ's decision, and to find
Robert ineligible for SSI due to excess resources on the grounds
that the ALJ committed an error of law and his decision was not
supported by substantial evidence (R. 147-48). First, the Appeals
Council stated that the ALJ "provided no rationale" for his
conclusions and "appears to have simply accepted the arguments submitted by the
attorney for the claimant's representative" (R. 148). Second, the
Appeals Council stated that the ALJ evaluated only whether the
trust met the criteria for the special needs trust exception, and
not whether the trust meet the regular resource requirements
(Id.). Third, the Appeals Council agreed with SSA's contention
that the First Amended Trust was not approved by the Circuit
Court (R. 149). Fourth, the Appeals Council stated that Robert
was the grantor of the trust because it was established with his
assets, despite the fact that Northern Trust acted in a fiduciary
capacity to establish the trust (Id.). Fifth, the Appeals Council
stated that Robert was the sole beneficiary of the trust, and
because the trust does not have contingent beneficiaries, the
trust is revocable (Id.).
On February 26, 2008, the probate court approved a second
amendment to the supplemental needs trust ("Second Amended
Trust") (R. 159, 162-63). The Second Amended Trust amended
Articles One and Three to first provide reimbursement to Illinois
or any other state that provided benefits to Robert (R. 162-63).
In addition, Article Three was amended to add a contingent
beneficiary upon Robert's death:
In the event that any assets of the Trust are remaining
after payment of the reasonable expenses and the
reimbursement to the State of Illinois and any other
State in which Robert resided and received
benefits . . ., then . . . (a) One Percent (1%) [of the
balance] shall be distributed to Sharon Hoskins,
Guardian of the Person of Robert Hoskins; [and] (b)
Ninety-nine (99%) shall be distributed pursuant to the
Will drafted by Robert, or if none, according to the
laws of intestacy . . .
(R. 163). The probate court also issued a declaratory order
stating that Robert's supplemental care trusts "were and continue
to be irrevocable" (R. 159).
Also on February 26, 2008, Robert's attorney wrote a letter
contesting the Appeals Council's intended decision to find the
original and First Amended Trust to be a countable resource, and
arguing that the newly filed Second Amended Trust should be
considered and found to not be a countable resource (R. 153).
Robert's attorney argued that: (1) because SSA chose not to
appear at the ALJ hearing, its arguments for review of the ALJ
opinion unfairly raised issues that were not raised at the
hearing in violation of Robert's due process rights; (2) he had
provided proof of a court order approving the First Amended
Trust; (3) the Second Amended Trust is not revocable because
Robert is the sole beneficiary during his lifetime, but there is
a residuary beneficiary upon his death; (4) because Robert is and
will continue to be under an incapacity, the trust is irrevocable
because "the only possible way to revoke the trust is through
court order, and there is no evidence to suggest that the Probate
Court ever would have allowed such a revocation;"(5) SSA must
accept the probate court's declaratory judgment finding the trust
irrevocable; and (6) the Second Amended Trust addresses SSA's
concern that the First Amended Trust did not call for repayment
to other states besides Illinois (R. 154-57). Robert's attorney
requested that the Appeals Council uphold the ALJ's decision and
allow him to appear before them to address the legal and policy
issues in the case (R. 157-58).
The Appeals Council did not hold a hearing, but on July 2,
2009, it issued an unfavorable decision reversing the ALJ's
decision finding Robert eligible for SSI (R. 10). In its written
decision, the Appeals Council adopted the ALJ's statements
regarding the relevant provisions of the Act, SSA's regulations
and rulings, the issues in the case, and the evidentiary facts
(R. 14). The Appeals Council then adopted the statements in its
January 28, 2008 notice of its intent to review the ALJ's
decision as its basis for concluding that the assets under the
First Amended Trust were a countable resource (R. 15).
Next, the Appeals Council addressed the newly filed Second
Amended Trust (R. 16). The Appeals Council first looked to SSA's
operating instructions on trusts as set forth in the Programs
Operations Manual, or POMS. The Appeals Council concluded that
the Second Amended Trust is not a countable resource under the
regular resource rules set forth in POMS SI 01120.200 (Id.).
Under those rules, a trust will be counted as a resource if the
claimant can: (1) revoke or terminate the trust and use the
assets to meet his needs for food or shelter; (2) direct the use
of the trust principal for his support and maintenance; or (3)
sell his beneficial interest in the trust (Id.). The Appeals
Council found that the Second Amended Trust met each of these
requirements: (1) the trust as irrevocable because it had
residual beneficiaries; (2) the claimant could not direct the use
of the trust principal because the trustee had sole discretion to
make distributions; and (3) the claimant would not be able to
sell his beneficial interest in the trust (Id.).
Nevertheless, the Appeals Council concluded that the trust —
in all its versions — failed to meet two of the three
requirements of the special needs trust exception, all three of
which must be met to avoid the general rule that a trust created
with the assets of an individual is a resource for SSI purposes
(R. 16-17). To constitute an exception, the trust (1) must
contain the assets of an individual under age 65 who is disabled;
(2) must be established for the benefit of such individual
through the actions of a parent, legal guardian, or court; and
(3) must provide that the state will receive all amounts
remaining in the trust upon the death of the individual up to an
amount equal to the total medical assistance paid on behalf of
the individual under a state Medicaid plan (Id.). The Appeals
Council found that the trust did not meet the second and third
requirements (Id.).
As to the second requirement, the Appeals Council first
explained that POMS SI 01120.203(B)(1)(e) interprets the language
to mean that the trust must be established for the sole
benefit of the individual (R. 17). Under POMS SI
011120.201(F)(2), "sole benefit" means that the trust must
benefit no one but that individual, whether at the time the trust
is established or at any time for the remainder of the
individual's life (Id.). Because Article Three allows residual
beneficiaries to receive trust assets upon early termination due
to restoration of Robert's rights — rather than only upon
Robert's death — the Appeals Council found the "sole benefit"
requirement not met (Id.).
As to the third requirement, the Appeals Council found that the
trust did not comply with the types of expenses that SSA allowed
prior to reimbursement of the states (R. 17). POMS SI
01120.203(B)(3)(a) specifies that the only administrative
expenses that may be paid from the trust prior to reimbursement
to the states are: (1) taxes due from the trust to the states or
federal government because of the death of the beneficiary; and
(2) reasonable fees for administration of the trust estate
associated with termination of the trust (Id.). In the Second
Amended Trust, however, Article Three allows the trustee, with
court approval, to pay taxes and other final expenses as allowed
by "current law" prior to reimbursement to the states (Id.). The
Appeals Council found that this was broader than permitted under
POMS, and that the term "current law" was overly vague (Id.).
Thus, the Appeals Council reversed the decision of the ALJ and
found that the trust — in all its forms — is a countable
resource that precluded Robert's eligibility for SSI due to
excess resources at all times since the date of his June 15,
2005, application (R. 18).
D.
On August 4, 2009, the trust was amended a third time, with
probate court approval (R. 7-9). Pursuant to this amendment, the
trust was revised to state that it "shall terminate upon the
death of Robert (R. 7)," thus eliminating the possibility of
termination upon Robert's election following any
restoration of rights. The Third Amended Trust also changed the
language indicating that reimbursement would comply with "current
law" to specifically track the language from POMS as cited by the
Appeals Council that:
the Trust assets remaining at the death of Robert shall
be paid as follows prior to reimbursement of the
state(s): Taxes due from the trust to the state or
federal government because of the death of the
Beneficiary and reasonable fees for administration of
the trust estate such as an accounting of the trust to
the court, completion and filing of documents, or other
required actions associated with termination and
wrapping up of the trust. Then, the Trust shall make
repayment to the appropriate state agencies, as
reimbursement to the State of Illinois, or any other
state that has provided benefits to Robert during his
lifetime, an amount equal to the total medical
assistance payments, or other state payments, paid on
behalf of Robert, under any public benefit programs to
the extent such assistance has not already been
reimbursed from any other source.
(R. 7).
On August 4, 2009, Robert's attorney asked the Appeals Council
to reconsider its unfavorable decision, and to find him eligible
for SSI based on the revisions made in the Third Amended Trust
(R. 5-6). The attorney attached the Third Amended Trust and asked
the Appeals Council to consider it in support of the motion
(Id.).[fn5] In addition, the Third Amended Trust used the exact POMS
language to describe distribution of trust proceeds upon Robert's
death (Id.). Based on these amendments to the trust and as a
matter of public policy, Robert's attorney requested that the
Appeals Council reconsider its unfavorable decision and find
Robert eligible for SSI (R. 6).
On September 22, 2009, the Appeals Council denied the motion to
reconsider (R. 3). First, the Appeals Council stated that none of
the following reasons to reopen or change its decision were
present: new and material evidence; a clerical error; or
evidence already considered that clearly showed that there was an
error (Id.). Second, the Appeals Council stated that the time
limit for reopening a decision on a claim for SSI had expired
since the motion to reconsider was filed more than two years
after SSA's initial notice that the trust was a countable
resource on September 27, 2005 (Id.). The Appeals Council further
stated that "[u]nder our rules, you do not have the right to
court review of our denial of your request for reopening" (R. 3).
In addition, it noted that "[i]f, based on the changes made to
the trust you believe that the claimant now qualifies for [SSI],
you should contact the local Social Security office to re-apply
for those benefits. The August 4, 2009 request for reopening may
serve as a protective filing for those benefits, if you file a
new application within 60 days of the date of this notice" (Id.).
There is nothing in the record to indicate that plaintiff
re-applied for benefits based on the changes made to the trust.
Rather, on September 30, 2009, Robert's attorney sought review in
this Court of the Appeals Council's denial of SSI and refusal to
reopen the decision denying SSI. In the memorandum in support of
his motion for summary judgment, plaintiff argues that we should
reverse and remand the Appeals Council's July 2, 2009, decision
reversing the ALJ's decision and denying him SSI based on the
Second Amended Trust (doc. # 30: Pl.'s Mem. at 6). In the
alternative, he argues for reversal and remand because the
Appeals Council erroneously denied his motion to reconsider based
on the Third Amended Trust.
III.
We reverse the Commissioner's final decision only if it is not
supported by substantial evidence, is based on a legal error, or
is too poorly articulated to permit meaningful review. Hopgood ex
rel. L.G. v. Astrue, 578 F.3d 696, 698 (7th Cir. 2009). While
judicial review of the Commissioner's decisions "is deferential, it is not abject."
Parker v. Astrue, 597 F.3d 920, 921 (7th Cir. 2010). We uphold
the decision if it is supported by substantial evidence; that is,
"such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion." Terry v. Astrue, 580 F.3d 471,
475 (7th Cir. 2009) (internal citations and quotations omitted).
IV.
It is premature, however, to apply these standards of review to
the Appeals Council's July 2, 2009 determination that Robert is
ineligible for SSI based on the Second Amended Trust, because
this may not be the "final decision" of the Commissioner if this
case is remanded to the Appeals Council to consider the Third
Amended Trust. Accordingly, we address plaintiff's second
argument first: whether the Appeals Council erred in its
September 22, 2009 decision denying plaintiff's motion to reopen
and refusing to reconsider its denial of SSI based on the Third
Amended Trust. The Appeals Council set forth two reasons for its
denial: (1) the time limit for reopening their decision had
expired; and (2) good cause for reopening was not shown.
Plaintiff argues that the Appeals Council erred because: (1) the
Third Amended Trust constituted new and material evidence
entitling Robert to a reopening of the prior decision, and
ultimately entitling him to SSI, and (2) the limitations period
cited in the denial of the motion to reconsider was erroneous
(Pl.'s Mem. at 12-13). We address these two arguments in turn.
A.
First, we address the Appeals Council's determination that
there was no good cause shown for reopening the case. Agency
regulations make clear that good cause may be shown where: (1)
new and material evidence was furnished; (2) a clerical error was
made; or (3) the evidence that was considered in making the
determination or decision clearly showed on its face that an
error was made. See 20 C.F.R. § 416.1489 (listing these three examples as
evidence of good cause to reopen a decision). Plaintiff argues
that the Third Amendment to the Trust constitutes new and
material evidence which the Appeals Council should have
considered (Pl.'s Mem. at 12).
At the threshold, defendant contends that the Appeals Council's
decision not to reopen its earlier decision is not reviewable. In
general, federal courts lack jurisdiction to review an
administrative decision not to reopen a decision on a previous
claim for benefits, unless the denial of the petition to reopen
implicates the party's constitutional rights. Califano v.
Sanders, 430 U.S. 99, 107-09 (1977). Review of a decision not to
reopen the Commissioner's final decision is limited because the
decision is discretionary. Eads v. Sec'y of the Dep't of Health
& Human Servs., 983 F.2d 815, 817 (7th Cir. 1993).
We can, however, review an erroneous refusal by the Appeals
Council to take account of new evidence submitted to it, because
that is a legal error. Keys v. Barnhart, 347 F.3d 990, 993 (7th
Cir. 2003). The Seventh Circuit has held that the Appeals
Council's determination that additional evidence submitted by a
claimant is not material is a legal determination that is subject
to de novo review. Nelson v. Bowen, 855 F.2d 503, 506 (7th Cir.
1988). The Social Security Act, 42 U.S.C. § 405(g), authorizes
the court to remand the case to SSA for consideration of newly
discovered evidence. Eads, 983 F.2d at 817.[fn6]
In this case, plaintiff has persuaded us that the Third Amended
Trust is new and material evidence. See Eads, 983 F.2d at 818.
"New evidence is evidence not in existence or available to the
claimant at the time of the administrative proceeding." Jens v.
Barnhart, 347 F.2d 209, 214 (7th Cir. 2003) (internal quotations
omitted). That clearly applies to the Third Amended Trust, which
was amended to conform with the Appeals Council's July 2, 2009
decision. "Evidence is material if there is a reasonable
probability that the Commissioner would have reached a different
conclusion had the evidence been considered." Id. As explained
above, on its face the Third Amended Trust amends the specific
provisions of the Second Amended Trust that the Appeals Council
found to render the assets of the trust to be a countable
resource; and, counting those assets as a resource is what made
Robert ineligible for SSI. Thus, there is a reasonable
probability that the Commissioner would have reached a different
conclusion as to whether the Third Amended Trust was a resource
to Robert than was found as to the Second Amended Trust. We
conclude that the Appeals Council committed a legal error in
failing to recognize the Third Amended Trust to be new and
material evidence.
B.
The Appeals Council, however, also stated that plaintiff was
time-barred from seeking reconsideration and reopening of the
Appeals Council's earlier decision. Agency regulations provide
that "[a] determination, revised determination, decision, or
revised decision may be reopened . . . (b) Within two years of
the date of the notice of the initial determination if good cause
is shown to reopen the case." 20 C.F.R. § 416.1488(b). In this
case, the Appeals Council ruled that the relevant date for
triggering this two-year time period was September 27, 2005, the
date of the initial determination denying SSI based on the
original supplemental care trust (R. 3). Consequently, the
Appeals Council found that the motion to reconsider was filed
too late because it was filed more than two years after that date
(Id.). Plaintiff argues that the Appeals Council's selection of
the September 2005 date was arbitrary and capricious because the
decision for which he sought reconsideration was not issued until
July 2, 2009, more than two years after the Commissioner's
initial determination.
We agree with plaintiff. We note that while the initial
decision by SSA in September 2005 was unfavorable to Robert, on
November 30, 2007, the ALJ issued a decision finding Robert
eligible for SSI. As of that date, there was nothing for Robert
to appeal. Instead, it was the Commissioner who requested that
the Appeals Council review the ALJ's decision. It was not until
July 2, 2009, that the Appeals Council issued its decision
reversing the ALJ's decision. Robert then sought reconsideration
on August 4, 2009, just over one month later.
The regulations allow for reopening within two years of "[a]
determination, revised determination, decision, or revised
decision." 20 C.F.R. § 416.1488(b). The Appeals Council's
decision on July 2, 2009, constitutes a revised decision or
determination, as it reversed the ALJ's opinion, and issued the
new, final decision in this case. We find nothing in the Appeals
Council's decision to explain why it started the clock running
with the September 27, 2005 decision, and ignored the intervening
ALJ decision of November 30, 2007, and the Appeals Council
decision of July 2, 2009. Thus, plaintiff's motion to reopen was
timely under the clear language of the Agency's own regulations.
CONCLUSION
For the foregoing reasons, the Court directs the Clerk of the
Court to enter judgment granting in part and denying in
part plaintiff's motion for summary judgment (doc. # 25) and
Defendant's motion for summary judgment (doc. # 37). Because we
grant plaintiff's motion to remand for consideration of whether, under the Third Amended Trust, Robert is entitled to SSI, we deem it premature to address the Appeals Council's decision that Robert was ineligible for SSI based on
the Second Amended Trust. Only once the Appeals Council on remand
considers the impact of the Third Amended Trust will we know
whether anything remains to address with respect to the Second
Amended Trust. We thus remand pursuant to sentence six of
42 U.S.C. § 405(g), which allows a remand to the agency "upon a
showing that there is new evidence which is material and that
there is good cause for the failure to incorporate such evidence
into the record in a prior proceeding," for proceedings
consistent with this Memorandum Opinion and Order.[fn7] Terminating
case.
Dated: November 1, 2010
[fn2] We refer to Robert Hoskins by his first name to avoid confusion
with his guardian, Sharon Hoskins, and because that is how he is
referred to in the trust documents at issue in this case.
[fn3] The Social Security Act provides that an individual will not be
eligible for SSI if he or she has resources that exceed $2,000.00
for the calendar year for which he or she is seeking benefits.
42 U.S.C. § 1382(a)(1)(B)(ii), (a)(3)(B).
[fn4] SSA erroneously left off a zero in its September 2005
calculation, listing Robert's resources as $47,600.00 rather than
$470,600.00 (R. 92).
[fn5] In the motion, Robert's attorney explained that he had to
receive special permission from the probate court to remove the
possibility of termination upon restoration of Robert's rights,
because the probate court "has always required the provision
regarding restoration of rights to be included in supplemental
care trusts, in order to protect the rights of an individual if
his disability is ever lifted" (R. 5).
[fn6] This is in contrast to a case where the Appeals Council
considers the newly submitted evidence as a part of the
claimant's petition to reopen his case. Diaz v. Chater,
55 F.3d 300, n. 1 (7th Cir. 1995). In that situation, the decision not to
reopen a case and the additional evidence accompanying it may not
be reviewable. Id. Nevertheless, even then, "there is authority
for the proposition that, when a decision has been reopened and
reconsidered on the merits to any extent, the new decision on the
merits is subject to judicial review." Johnson v. Sullivan,
936 F.2d 974, 976 (7th Cir. 1991). Here, however, there is no
evidence that the Appeals Council considered the Third Amended
Trust, and neither the Appeals Council's letter denying the
motion to reconsider nor defendant's brief suggests that the
Appeals Council considered the Third Amended Trust.
[fn7] Plaintiff also asks for an award of one-fourth of any back
benefits payable on plaintiff's Social Security accounts (Pl.'s
Mem. at 14). Plaintiff, however, provides no support for this
request, and we deny this request without prejudice.
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