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Unice v. Berryhill

United States District Court, M.D. Tennessee, Nashville Division

July 12, 2017

SUSAN K. UNICE, Plaintiff,
NANCY A. BERRYHILL, Acting Commissioner of Social Security, Defendant.

          Trauger, Judge



         To The Honorable Aleta A. Trauger, United States District Judge

         Pursuant to 42 U.S.C. § 405(g), Plaintiff seeks judicial review of the Social Security Commissioner's decision that (1) Plaintiff and her daughter were overpaid disability benefits under Title II of the Social Security Act and (2) recovery of the overpayment would not be waived. For the following reasons, the Magistrate Judge RECOMMENDS that Plaintiff's Motion for Judgment Based Upon the Administrative Record (Doc. 18) be GRANTED IN PART and DENIED IN PART and the Commissioner's decision be AFFIRMED IN PART, REVERSED IN PART, and REMANDED for further consideration and explanation as to whether Plaintiff and her daughter were overpaid.


         After receiving a fully favorable disability decision from an administrative law judge (“ALJ”) in 2010, Plaintiff and her daughter were awarded Title II disability benefits beginning March 2008. (AR, pp. 44-62).[1] Payment continued through July 2012. (Id. at 116-117).

         The Commissioner notified Plaintiff in July 2011 and again in August 2012 that her disability ended in October 2009 because she was engaged in substantial gainful activity (“SGA”). (Id. at 67-69, 74-76, 81-86). In the August 2012 correspondence, the Commissioner explained that Plaintiff's SGA made her and her daughter ineligible for benefits as of January 2010. (Id. at 74-76, 81-86). Shortly thereafter, the Commissioner sent Plaintiff invoices requesting repayment of $56, 097.20, the amount paid to Plaintiff and her daughter from January 2010 to July 2012. (Id. at 91-98).

         Plaintiff requested a waiver of the overpayment in January 2013. (Id. at 28-35). The Commissioner denied Plaintiff's request on initial review and after a personal conference. (Id. at 100-101, 109-115). After a hearing before an ALJ, Plaintiff's request for waiver of the overpayment was again denied. (Id. at 20-27, 405A-444). Specifically, the ALJ found Plaintiff was overpaid $56, 097.20 in benefits between January 1, 2010 and July 1, 2012; Plaintiff was not at fault for causing the overpayment; recovery of the overpayment would not defeat the purpose of Title II of the Social Security Act and would not be against equity and good conscience; and recovery of the overpayment would not be waived. (Id. at 25-27). The Appeals Council declined to review the ALJ's decision. (Id. at 3-7).

         Plaintiff appealed the Commissioner's decision to this Court. (Doc. 1). The matter was referred to the Magistrate Judge. (Doc. 9). Presently pending is the fully briefed Plaintiff's Motion for Judgment Based Upon the Administrative Record. (Docs. 18, 18-1, 22, 23, 26, 27).


         A. Self-Employment Activities

         Plaintiff has an associate degree in business administration and a paralegal certification. (AR, p. 440). In 2008, Plaintiff and her husband formed a South Carolina limited liability company that provides private security services, Advanced Protection Services, LLC (the “company”). (Id. at 379-381, 421). The company now has a license to operate in Arizona as well as South Carolina. (Id. at 421). Plaintiff owns 51% of the company, and her husband owns the remaining 49%. (Id. at 409). Plaintiff is the company's agent for service of process, and she holds the titles of President and Chief Financial Officer (“CFO”). (Id. at 379, 420). She states these positions are nothing more than titles. (Id. at 434-435).

         In correspondence with the Commissioner in June 2011, Plaintiff said the company is overseen by her husband in South Carolina and she spends between six and ten hours a week paying bills and processing licenses on behalf of the company. (Id. at 396). Plaintiff later told the Commissioner in May 2012 that she spends approximately 25 hours each month performing managerial duties for the company. (Id. at 390). As of May 2012, Plaintiff lived in Arizona where she oversaw the company's financial, licensing, insurance, and human resources matters. (Id.).

         During the administrative hearing, Plaintiff testified as to her involvement in the company. From 2008 to 2012, Plaintiff oversaw the expenses and startup of the business and otherwise oversaw “[e]verything that's done.” (Id. at 420-421). Asked if she materially participated in the day-to-day operations of the company, Plaintiff said she did to the extent of overseeing the financial and sometimes the legal end of things. (Id. at 436-437). Between 2008 and 2011, Plaintiff stated she spent between 8 to 12 hours a week doing business-related activities, later clarifying she spent more time when the company was founded. (Id. at 424-425, 434).

         Plaintiff lived in South Carolina from 2008 to 2011. (Id. at 421). Part of her home was used for the company. (Id. at 424). She sat in on some of the employment interviews, and the ultimate hiring decision was made by her husband and other officers. (Id. at 421-422). She and her husband advertised available job openings online. (Id. at 422-423). When a new client would come onboard, Plaintiff was responsible for preparing and signing the contracts with them. (Id. at 423). She made bank deposits for the company, and before the company started using an online bill paying service, Plaintiff was responsible for paying business expenses with checks. (Id. at 423-424, 441). Payroll, monthly expenses, taxes, and employee hour schedules were performed by another individual. (Id. at 421, 423-424).

         In 2011, Plaintiff moved to Arizona and assisted the Arizona office. (Id. at 421, 425). The Arizona business had two employees and had contracts with national companies that called Plaintiff from time to time. (Id. at 426). Plaintiff's husband performed the interviews in the Arizona office, though she participated in one interview. (Id.). As with the South Carolina office, Plaintiff made bank deposits for the Arizona office. (Id. at 441).

         Plaintiff agreed with counsel's statement that her activity in the business was primarily to protect her interest in the company. (Id. at 434, 437). She testified she was not aware she had income because she did not receive W-2s or checks. (Id. at 436). However, she received annual payments from the company: $12, 720.05 in 2009 and $12, 841 in 2010. (Id. at 121).

         B. Financial Status

         Plaintiff reported that after the award of Title II benefits, she lost her home and both she and her husband declared Chapter 7 bankruptcy. (Id. at 34).

         In 2009, Plaintiff's company had a total income of $249, 836. (Id. at 182). Plaintiff received $12, 720.05 from the company 2009 and $12, 841 in 2010. (Id. at 121). Though these payments were originally reported as self-employment income, after the administrative hearing Plaintiff amended her tax returns to recharacterize her earnings as passive income. (Id. at 215, 256, 366-378).

         On January 15, 2013, Plaintiff reported her family had $330, 000 in readily available funds. (Id. at 31). Of this amount, $31, 663 was in her daughter's savings account, $300, 000 was in Plaintiff's inherited individual retirement account (“IRA”), and $400 was in a joint checking account shared by Plaintiff and her husband. (Id.). Plaintiff reported monthly household expenses as $4, 232, which included payment of a business loan. (Id. at 33-34).


         A. Venue and Choice of Law

         An application for judicial review of the Commissioner's final decision must be brought in the judicial district where the claimant resides. 42 U.S.C. § 405(g). As Plaintiff presently resides in Williamson County, Tennessee (Doc. 1-1), her appeal to the Middle District of Tennessee is appropriate. The merits of the ALJ's decision, however, shall be reviewed under Ninth Circuit precedent because the ALJ's decision was rendered in the District of Arizona. See Shaw v. Colvin, No. 1:14-CV-00081-FDW, 2014 WL 6680412, at *1 (W.D. N.C. Nov. 25, 2014) (applying the law where the administrative proceedings occurred); Pierce v. Colvin, No. 7:12-CV-129-D, 2013 WL 3326716, at *3 (E.D. N.C. July 1, 2013) (same); Mannella v. Astrue, No. CIV06-469-TUC-CKJ BP, 2008 WL 2428869, at *1 (D. Ariz. June 12, 2008) (same).

         B. ...

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