Sanfilippo v. Comm Social Security ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
4-10-2003
Sanfilippo v. Comm Social Security
Precedential or Non-Precedential: Precedential
Docket 02-2170
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2003
Recommended Citation
"Sanfilippo v. Comm Social Security" (2003). 2003 Decisions. Paper 595.
http://digitalcommons.law.villanova.edu/thirdcircuit_2003/595
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2003 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL
Filed April 10, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2170
THOMAS F. SANFILIPPO,
Appellant
v.
JO ANNE B. BARNHART,
COMMISSIONER OF SOCIAL SECURITY
On Appeal from the United States District Court
for the Western District of Pennsylvania
District Court Judge: The Honorable Gustave Diamond
(D.C. Civil No. 01-cv-00283)
Submitted Under Third Circuit L.A.R. 34.1(a)
January 17, 2003
Before: ROTH, FUENTES, and ALDISERT, Circuit Judges
(Opinion Filed: April 10, 2003)
John F. Hooper, III
4712 Clairton Boulevard
Pittsburgh, PA 15236
Counsel for Appellant
Eric P. Kressman
Social Security Administration
OGC/Region III
P.O. Box 41777
Philadelphia, PA 19101
Counsel for Appellee
2
OPINION OF THE COURT
FUENTES, Circuit Judge:
Pursuant to 42 U.S.C. § 405(g), Thomas Sanfilippo
(“Sanfilippo”) sought judicial review in the United States
District Court for the Western District of Pennsylvania of
the decision of the Commissioner of Social Security
(“Commissioner”) reducing his federal disability insurance
benefits under Title II of the Social Security Act (“Act”) by
the net amount of a lump-sum workers’ compensation
settlement, prorated over a period of 4.3 years. Sanfilippo
claims that his benefits should not be offset by his pre-
settlement compensation rate. Rather, he claims that the
lump-sum settlement should be prorated over his life
expectancy. Because we agree that the Commissioner’s use
of the pre-settlement rate in prorating the settlement over
a period of 4.3 years is based on a reasonable
interpretation of the Act and is not otherwise arbitrary or
capricious, we affirm the Order of the District Court
granting summary judgment to the Commissioner.
I. Facts and Procedural History
On February 18, 1987, Sanfilippo, an arborist, suffered
neck and back injuries while working. On April 2, 1993, he
filed an application for disability insurance benefits. On
May 28, 1996, an Administrative Law Judge (“ALJ”) issued
a decision awarding Sanfilippo benefits under the Act. In
accordance with 42 U.S.C. § 424a(a), the Social Security
Administration (“SSA”) offset Sanfilippo’s disability
insurance benefits by $243.94 per week ($195.15 per week
after the deduction of attorneys’ fees), the amount paid by
his employer pursuant to the Pennsylvania Workers’
Compensation Act.
On July 7, 1998, the Pennsylvania Bureau of Workers’
Compensation approved a compromise and release
settlement between Sanfilippo and his employer. Under the
terms of the settlement, Sanfilippo received a lump-sum
payment of $55,000 and, in return, agreed to waive and
3
release his entitlement to all future indemnity, medical and
other benefits that might be available to him under the
Pennsylvania Workers’ Compensation Act.
In October 1998, SSA informed Sanfilippo that his
disability insurance benefits would continue to be reduced
by $195.15 per week - the amount of the lump-sum
payment prorated over a period of 4.3 years. Sanfilippo
requested reconsideration of this offset determination, and,
on May 3, 1999, SSA informed Sanfilippo that the
reduction of his disability insurance benefits had been
properly calculated.
At Sanfilippo’s request, an ALJ held a hearing on
December 20, 1999. The ALJ granted Sanfilippo’s request
for leave to obtain additional information. On June 22,
2000, Sanfilippo submitted an amended order from the
Pennsylvania Bureau of Workers’ Compensation stating
that the lump-sum payment of $55,000 represented
payment in lieu of compensation equal to $29.59 per week
for a period of 1,487 weeks, which was Sanfilippo’s life
expectancy. On July 17, 2000, the ALJ issued a decision
reversing the reconsideration determination and holding
that Sanfilippo’s lump-sum payment should be prorated
over his life expectancy rather than a 4.3 year period.
On September 8, 2000, the Appeals Council notified
Sanfilippo that it was reviewing the ALJ’s decision under
the error of law provision of 20 C.F.R. § 404.969. On
December 7, 2000, the Appeals Council issued a decision
reversing the determination of the ALJ. The Appeals
Council reinstated SSA’s prior determination that
Sanfilippo’s lump-sum workers’ compensation settlement
should be prorated at the periodic rate received prior to the
settlement. Pursuant to 20 C.F.R. § 404.981, the decision of
the Appeals Council became the final decision of the
Commissioner.
On February 9, 2001, Sanfilippo filed a complaint in the
United States District Court for the Western District of
Pennsylvania, in which he challenged the decision of the
Appeals Council. On cross motions for summary judgment,
the District Court granted the Commissioner’s motion for
summary judgment. Sanfilippo now seeks appellate review
of the District Court’s decision.
4
II. Jurisdiction and Standard of Review
This Court has jurisdiction over Sanfilippo’s appeal
pursuant to 42 U.S.C. § 405(g). Our review of legal issues is
plenary. Schaudeck v. Commissioner of Social Security, 181
F.3d 429, 431 (3d Cir. 1999). Our role is not to impose
upon the SSA our own interpretation of the Social Security
legislation. Rather, because Congress has delegated to the
Commissioner the responsibility for administering the
complex programs, we must defer to her construction as
long as it is reasonable and not arbitrary and capricious.
Wheeler v. Heckler, 787 F.2d 101, 104 (3d Cir. 1986).
III. Discussion
The issue before the Court on appeal is whether the
Commissioner properly prorated Sanfilippo’s lump-sum
settlement over a period of 4.3 years, or, as Sanfilippo
contends, the lump sum award should have been prorated
over his life expectancy. Sanfilippo argues that SSA’s
Program Operations Manual System (“POMS”), § DI-
52001.555(C)(4), is irrational, arbitrary and fails to
approximate as nearly as practicable the reduction of
disability insurance benefits prescribed by 42 U.S.C.
§ 424a(a).
Pursuant to 42 U.S.C. § 424a(a), the Commissioner is
required to reduce, or offset, the level of a recipient’s social
security disability payments when the total of that
recipient’s disability payments and workers’ compensation
benefits exceeds eighty percent of his pre-disability
earnings. When an individual’s workers’ compensation
benefits are paid in a lump-sum, the Act requires the
Commissioner to prorate the lump-sum payment and
“approximate as nearly as practicable” the rate at which the
award would have been paid on a monthly basis. 42 U.S.C.
§ 424a(b). The Commissioner has developed internal
guidelines for calculating the rate by which lump-sum
awards may be prorated. These guidelines list three steps,
in priority order:
1. The rate specified in the lump-sum award.
2. The periodic rate prior to the lump-sum if no rate
is specified in the lump-sum award.
5
3. If workers’ compensation, the State’s workers’
compensation maximum in effect in the year of
injury. This figure can be used if no rate is
specified in the award or there was no preceding
periodic benefit.
POMS § DI-52001.555(C)(4).
In this case, the Commissioner ultimately concluded that
the periodic rate paid prior to the lump-sum settlement was
the appropriate rate for offsetting the lump-sum amount
because the original compromise and release settlement did
not specify an offset rate. The Commissioner also found
that “effect need not be given” to the amended order of the
Pennsylvania Bureau of Workers’ Compensation “because it
was amended solely to circumvent the offset provisions.” (R.
at 10). The District Court concluded that the
Commissioner’s determination was a reasonable
interpretation of the Act and we agree.
We owe great deference to the Commissioner’s method for
determining Sanfilippo’s workers’ compensation offset as
the United States Supreme Court has “long recognized that
considerable weight should be accorded to an executive
department’s construction of a statutory scheme it is
entrusted to administer . . . .” United States v. Mead Corp.,
533 U.S. 218, 227-28 (2001) (quoting Chevron U.S.A., Inc.
v. Natural Resources Defense Council, Inc., 467 U.S. 837,
844 (1984)). We find nothing unreasonable about the
Commissioner’s actions in this case. Because there was no
rate specified in the original agreement, the Commissioner
relied on step two of the lump-sum proration provisions
and considered Sanfilippo’s prior periodic benefit rate.
Sanfilippo’s weekly payment before the lump-sum
settlement produced a reasonable estimate of what
Sanfilippo’s future weekly rate would have been had he not
agreed to a lump-sum payment. We decline to conclude
that the Commissioner’s method, or its application to
Sanfilippo, is arbitrary and capricious.
A. Step 2
Sanfilippo argues that the offset method contained in
step 2 is irrational based on this Court’s decision in
Sciarotta v. Bowen, 837 F.2d 135 (3d Cir. 1988). In
6
Sciarotta, this Court remanded the case to the district court
to determine whether the Commissioner’s assumption that
Sciarotta’s lump-sum settlement represented his workers’
compensation carrier’s determination that he would have
received the maximum weekly benefit allowable under New
Jersey law was irrational. Id. at 140. On remand, the
district court concluded that the Commissioner’s method of
calculating the offset rate was irrational because the
Commissioner failed to provide a sufficient explanation
regarding the use of the maximum workers’ compensation
rate. See Sciarotta v. Bowen, 735 F. Supp. 148, 151-54
(D.N.J. 1989).
Sciarotta provides no support for Sanfilippo’s position
because, as the District Court in this case correctly
emphasized, Sciarotta dealt with the rationality of the use of
the state workers’ compensation maximum as the
calculation rate under the third step of the POMS
interpretive guidelines, not the second step. See also Rodlin
v. Secretary of Health and Human Services, 750 F. Supp.
146, 152 (D.N.J. 1990) (finding Sciarotta clearly
distinguishable because “Step 2 . . . concerns the use of a
previous periodic rate to prorate the lump sum award,
while Step 3 concerns the use of the maximum periodic
rate in effect in the year of injury.”) In Sciarotta, this Court
expressed concern about the method the SSA used in
converting Sciarotta’s lump sum payment into a stream of
theoretical periodic payments, noting at the start of the
opinion that the “record is not entirely clear as to how the
SSA performed these calculations.” Sciarotta, 837 F.2d at137 n.2. The SSA had concluded that the settlement
reflected the carrier’s determination that Sciarotta would
have received the maximum weekly benefit allowable under
New Jersey law, a conclusion permissible under step 3 of
the guidelines; however, the SSA failed to explain how it
reached this determination. Id. at 140. We remanded the
case to the district court to further develop the record and
to allow the SSA to explain how it concluded that
Sciarotta’s settlement represented the maximum allowable
payment under New Jersey law. Id. at 141. This Court
never mentioned step 1 or 2 of the guidelines in Sciarotta.
In this case, Sanfilippo received prior periodic payments,
a circumstance specifically addressed by step 2 of the
7
POMS guidelines. Case law dealing with step 3 has no
relevance to the issue before us as the Commissioner never
reaches step 3 unless the settlement fails to specify a rate
(step 1) and the applicant received no prior periodic benefit
(step 2). As we explained above, by applying Sanfilippo’s
weekly payment before the lump-sum settlement, according
to step 2 of the guidelines, the Commissioner was able to
“approximate as nearly as practicable” the rate at which the
award would have been paid on a periodic basis. Federal
courts in other circuits have also recognized as reasonable
the use of step 2 to determine an offset to federal disability
benefits. See Berger v. Apfel, 200 F.3d 1157, 1161-62 (8th
Cir. 2000) (remanding to Commissioner to recalculate offset
based on more accurate assessment of periodic payment
appellant was receiving prior to settlement); Mann v.
Heckler, CIV. No. 85-0163P, 1986 WL 36270, at *2 (D. Me.
March 17, 1986), aff ’d without opinion, 802 F.2d 440 (1st
Cir. 1986). In sum, we find nothing irrational about
applying a periodic rate received prior to a lump-sum
settlement to determine the offset rate that will
“approximate as nearly as practicable” the hypothetical
future periodic rate of the lump-sum settlement.
B. Amended Order
Sanfilippo also argues that the Commissioner was bound
by the amended order of the Pennsylvania Workers’
Compensation Bureau dated May 23, 2000, which stated
that the lump-sum payment “represents a payment in lieu
of compensation equal to $29.59 per week, for a period of
1487 weeks.” (R. at 408). Because the amended order
specifies a rate based on life expectancy, Sanfilippo asserts
that SSA should have prorated his lump-sum settlement
pursuant to step 1 of the POMS interpretive guidelines. The
District Court affirmed the decision of the Commissioner to
discount the amended order based on Social Security
Ruling 97-3, which states:
Based on section 224 of the Act, case law, and SSA
policy, SSA is not necessarily bound by the terms of a
second, or amended, stipulation in determining
whether and by what rate a disabled worker’s Social
Security disability insurance benefits should be offset
on account of a WC [workers’ compensation] lump sum
8
payment. SSA will evaluate both the original and
amended stipulations and disregard any language
which has the effect of altering the terms in the original
lump-sum settlement where the terms in the amended
document are illusory or in conflict with the terms of
the first stipulation concerning the actual intent of the
parties, and where, as here, the terms of the amended
document have the effect of circumventing the WC
offset provisions of section 224 of the Act.
Social Security Ruling 97-3 (published 10/3/97).
We agree with the decision of the District Court. The
amended order was issued almost two years after
Sanfilippo’s original compromise and release agreement and
the terms, rights, and obligations of the settlement
remained the same. The only change to the original
settlement was that the lump-sum amount was said to
represent compensation of $29.59 per week over the course
of Sanfilippo’s life expectancy. The terms in this amended
document “would have the effect of circumventing the WC
offset provisions of section 224 of the Act,” the exact
scenario that Social Security Ruling 97-3 was designed to
address and avoid. We find no legal error in the
Commissioner’s decision to not give effect to the amended
order.
IV. Conclusion
Accordingly, for the reasons stated above, we affirm the
judgment of the District Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit