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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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