Michener v. Berryhill ( 2019 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
FRANCES MICHENER, :
:
Plaintiff, : Civil Action No.: 18-1657 (RC)
:
v. : Re Document No.: 12
:
ANDREW SAUL1 and :
SOCIAL SECURITY ADMINISTRATION, :
:
Defendants. :
MEMORANDUM OPINION
GRANTING IN PART DEFENDANTS’ MOTION TO DISMISS
The Social Security Administration applies a provision of federal law to reduce the Social
Security benefits of individuals who also receive pension benefits from a foreign government.
For years, Steven Rosell and Frances Michener were among those affected by this reduction.
Believing it to be unlawful, they brought this putative class action against the agency and its
Commissioner on behalf of individuals whose benefits have been similarly lowered. But as the
Court will explain below, venue is improper in this district under the Social Security Act. The
Court therefore grants Defendants’ motion to dismiss in part and transfers the case to the
appropriate forum, the Northern District of California.
By brief way of background, Title II of the Social Security Act, 42 U.S.C. §§ 401–34,
“provides old-age, survivor, and disability benefits to insured individuals irrespective of financial
need.” Bowen v. Galbreath, 485 U.S. 74, 75 (1988). To support payment of those benefits,
many workers in the United States are taxed. “The expectation is that, having contributed to the
1
Andrew Saul is automatically substituted as Defendant pursuant to Federal Rule of Civil
Procedure 25(d).
national economy while actively employed, those workers will later become eligible
beneficiaries” of the Social Security system, rather than supporters of it. Eshel v. Comm’r of
IRS, 831 F.3d 512, 514 (D.C. Cir. 2016). Certain jobs are exempt from Social Security taxes,
however. “This non-covered employment is often federal employment that, prior to 1984, was
exempt from Social Security taxes because federal employees contributed to the federal civil
service pension which was ‘designed to take the place both of social security and a private
pension plan for workers who remain[ed] in [federal] employment throughout their careers.”
Petersen v. Astrue, 633 F.3d 633, 634 (8th Cir. 2011) (second alteration in original) (quoting
H.R. Rep. No. 98-25, at 22 (1983)).
Given the existence of non-covered employment, the Social Security Act contains a
“windfall elimination provision” (“WEP”), see 42 U.S.C. § 415(a)(7), which “seeks to preserve
the progressive nature of the Social Security system by ensuring that the formula [the Social
Security Administration] uses to calculate benefits does not advantage high-income workers who
split their careers between covered and non-covered employment over those who paid Social
Security taxes for their entire careers,” Hawrelak v. Colvin, 667 F. App’x 161, 162 (7th Cir.
2016). To accomplish that goal, the WEP “reduces the benefits received by certain individuals
who also receive pensions for work that did not require them to pay social security taxes.” Id.Thus, with respect to the above-mentioned pre-1984 federal employees, the WEP requires that
benefits be calculated under a modified formula that accounts for their civil service pension
benefits. See Petersen, 633 F.3d at 635.
The WEP is potentially relevant to other individuals too, though. The claims in this case
result from its application to individuals who, in addition to Social Security benefits, also receive
pension benefits from a foreign government based on work performed in that foreign county.
2
Plaintiff Frances Michener originally brought the case with her husband, Steven Rosell, but after
Rosell passed away, she was substituted as the sole Plaintiff, proceeding both in her individual
capacity and as executor of her late husband’s estate. See Order Granting Mot. to Substitute,
ECF No. 20. Rosell worked in Canada from 1976 to 1990 and in the United States from 1990 to
2012, so from 2013 until his death, he received benefits from both the Canada Pension Plan and
the U.S. Social Security system. See Compl. ¶¶ 1, 25–26, ECF No. 1. Michener, meanwhile,
received a spousal benefit based on her husband’s Social Security entitlement. Id. ¶ 2.
The Social Security Administration, however, consistently reduced Rosell’s and
Michener’s benefit awards under the WEP to account for Rosell’s Canadian pension. Id. ¶¶ 1–2.
Michener’s complaint raises three challenges to those reductions. Count One alleges that the
reductions violate the terms of the WEP itself; Count Two claims that the reductions violate the
Social Security Administration’s implementing regulations; and Count Three claims that the
reductions violate a bilateral agreement between the United States and Canada that governs the
payment of pension benefits. See id. ¶¶ 53–67. Michener also asks that the Court certify a class
of all individuals whose Social Security benefits or spousal benefits have been similarly reduced
under the WEP based on receipt of pension benefits from another country with which the United
States has entered into a bilateral agreement like the one with Canada. See Mem. Supp. Mot. to
Certify Class at 8, ECF No. 9.
The Social Security Administration’s response is that Michener’s complaint should be
dismissed for improper venue. This objection is grounded in two provisions of the Social
Security Act. The first, 42 U.S.C. § 405(h), states that “[n]o action against the United States, the
Commissioner of Social Security, or any officer or employee thereof shall be brought under [28
U.S.C. §§ 1331 or 1346] to recover on any claim arising under this subchapter.” This provision
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thus “precludes federal-question jurisdiction in an action challenging [the] denial of claimed
[Social Security] benefits.” Mathews v. Eldridge, 424 U.S. 319, 327 (1976). And it means that
the “sole avenue for judicial review” in such a case is the Social Security Act’s specific judicial
review provision, 42 U.S.C. § 405(g). Heckler v. Ringer, 466 U.S. 602, 615 (1984).
That judicial review provision is the second provision relevant here. It contains two
requirements that any plaintiff must satisfy to bring suit. One is an administrative exhaustion
requirement—part of which is waivable, but part of which is jurisdictional and nonwaivable. See
Eldridge, 424 U.S. at 328; 42 U.S.C. § 405(g) (“Any individual, after any final decision of the
Commissioner of Social Security made after a hearing to which he was a party . . . may obtain a
review of such decision by a civil action.”). The other is a special venue requirement, which
states that the “action shall be brought in the district court of the United States for the judicial
district in which the plaintiff resides, or has his principal place of business, or, if he does not
reside or have his principal place of business within any such judicial district, in the United
States District Court for the District of Columbia.” 42 U.S.C. § 405(g).
For present purposes, there is no dispute that Rosell and Michener complied with the
exhaustion requirement. The venue requirement, however, poses a potential problem. “[T]he
law is clear that in determining whether venue for a putative class action is proper, courts are to
look only at the allegations pertaining to the named representatives.” Murdoch v. Rosenberg &
Assocs., LLC, 875 F. Supp. 2d 6, 11 (D.D.C. 2012) (quoting Cook v. UBS Fin. Servs., Inc., No.
05 Civ. 8842(SHS), 2006 WL 760284, at *6 n.2 (S.D.N.Y. Mar. 21, 2006)). And here, Michener
resides in San Rafael, California, see Compl. ¶ 2, located in the Northern District of California.
For venue to be proper in this Court, then, Michener must identify some reason that § 405(g) and
§ 405(h) do not apply to her claims.
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Michener is unable to do that. The Supreme Court has construed § 405(h) “quite broadly
to include any claims in which ‘both the standing and the substantive basis for the presentation’
of the claims is the Social Security Act.” Ringer, 466 U.S. at 615 (quoting Weinberger v. Salfi,
422 U.S. 749, 761 (1975)). Michener’s claims easily fall within that category. As already noted,
Count One is grounded entirely in the WEP, which is contained within the Social Security Act.
Count Two claims a violation of agency regulations, which were promulgated under authority
granted by the Act. See 20 C.F.R., ch. III, pt. 404, subpt. A (providing that authority for
regulations is various provisions of the Social Security Act). And even Count Three, the one
based on the bilateral agreement with Canada, falls within § 405(h)’s scope because such
international agreements are themselves products of the Act. See 42 U.S.C. § 433(a) (“The
President is authorized . . . to enter into agreements establishing totalization arrangements
between the social security system established by this subchapter and the social security system
of any foreign country.”).
Nonetheless, Michener contends that she is not bound by § 405(g)’s venue requirement
because she says that these claims are collateral to any individual benefits determination. Citing
Vencor Nursing Centers, L.P. v. Shalala, 63 F. Supp. 2d 1, 6 (D.D.C. 1999), she argues that such
collateral claims are governed by the general venue statute, 28 U.S.C. § 1391. But the Court
respectfully disagrees with Vencor Nursing. Critical to that case’s venue holding was its
conclusion that § 405(g) did not apply to collateral claims at all and that jurisdiction over such
claims was instead authorized by the federal-question statute, 28 U.S.C. § 1331. This reasoning
is irreconcilable with the Supreme Court’s decision in Mathews v. Eldridge, though, which
makes clear that the collateral nature of a claim has relevance only for determining whether the
non-jurisdictional component of § 405(g)’s exhaustion requirement should be waived.
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The claim at issue in Eldridge was a challenge to the Social Security benefits termination
procedure: the plaintiff claimed that the due process clause afforded him the right to an
evidentiary hearing before his benefits were terminated. See 424 U.S. at 325–26. This
constitutional challenge, the Supreme Court held, was “entirely collateral” to the plaintiff’s
“substantive claim of entitlement” under the Social Security Act. Id. at 330. The plaintiff
therefore did not need to exhaust “the full set of internal-review procedures” provided by the
agency. Id. But in waiving that part of the exhaustion requirement, the Court maintained that
jurisdiction still existed under § 405(g)—not § 1331. See id. at 332 (“We conclude that the
denial of Eldridge’s request for benefits constitutes a final decision for purposes of § 405(g)
jurisdiction over his constitutional claim.”); id. at 332 n.12 (“[J]urisdiction in the District Court
was proper under [§] 405(g).”).
This jurisdictional conclusion makes complete sense in light of the fact that § 405(h),
again, precludes federal-question jurisdiction over “any claim arising under” the Social Security
Act—a class of claims that is “quite broad[]” and would seem to include collateral ones. Ringer,
466 U.S. at 615. Thus, in the words of the Supreme Court, “an exception to exhaustion” applies
to collateral claims—but just an exception and nothing more. Id. at 618. Indeed, other than
Vencor Nursing and perhaps one additional outlier, see Libbie Rehabilitation Ctr., Inc. v.
Shalala, 26 F. Supp. 2d 128, 130–31 (D.D.C. 1998), 2 courts appear to have consistently
recognized that whether a claim is collateral has relevance only for exhaustion purposes, see,
2
Libbie Rehabilitation, on which Vencor Nursing relied, did not say expressly that
§ 1331 provides jurisdiction over collateral claims, but it did say that collateral claims “fall[]
outside the jurisdiction restrictions of §§ 405(g) and 405(h).” 26 F. Supp. 2d at 131. As the
Court noted above, that cannot be squared with Mathews v. Eldridge.
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e.g., Bowen v. City of New York, 476 U.S. 467, 483 (1986); Ryan v. Bentsen, 12 F.3d 245, 247–
48 (D.C. Cir. 1993); Suarez v. Colvin, 140 F. Supp. 3d 94, 98–100 (D.D.C. 2015).
Assuming for the sake of argument, then, that Michener’s claims here are properly
considered collateral, that fact is irrelevant to the issue of jurisdiction or venue. As the Court
already explained, the claims still “aris[e] under” the Social Security Act within the meaning of
§ 405(h), which means that jurisdiction is proper under § 405(g), not § 1331. And when
§ 405(g) provides jurisdiction, there is no basis for ignoring that provision’s specific venue
requirement. It states, without qualification, that “[s]uch action shall be brought in the district
court of the United States for the judicial district in which the plaintiff resides, or has his
principal place of business.” 42 U.S.C. § 405(g). Here, Michener resides in the Northern
District of California, and there is no allegation that she has a principal place of business
elsewhere. See Compl. ¶ 2. Venue is therefore improper in the District of Columbia.
The Court does not, however, believe that dismissal is warranted under these
circumstances. Nothing in § 405(g) mandates dismissal when a case is initiated in the incorrect
forum, and 28 U.S.C. § 1406(a) authorizes district courts to transfer cases to the correct forum
“in the interest of justice.” Indeed, transfer is generally preferred to dismissal, unless the “claims
have ‘obvious substantive problems.’” Lemon v. Kramer, 270 F. Supp. 3d 125, 140 (D.D.C.
2017) (quoting Laukus v. United States, 691 F. Supp. 2d 119, 127 (D.D.C. 2010)). In this case,
the Social Security Administration has not identified any such problem, and no problem is
immediately apparent to the Court. The Court will accordingly transfer the case to the Northern
District of California. An order consistent with this Memorandum Opinion is separately and
contemporaneously issued.
Dated: July 18, 2019 RUDOLPH CONTRERAS
United States District Judge
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