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Smith v. Commissioner of Social Security

United States District Court, M.D. Florida, Orlando Division

November 13, 2017

ANDREA SMITH, Plaintiff,

          ORDER [1]

          THOMAS B. SMITH United States Magistrate Judge

         This is an action brought under 42 U.S.C. §405(g) to obtain judicial review of the decision of Defendant the Commissioner of Social Security, to discontinue disability benefits awarded to Plaintiff Andrea Smith under the Social Security Act. Pending before the Court is the Acting Commissioner of Social Security's Motion for Partial Summary Judgment (Doc. 11). The Commissioner seeks summary judgment on Counts One and Two of Plaintiff's complaint “and any and all contentions arising out of an alleged violation of Plaintiff's due process rights.” (Id.). Plaintiff has filed an opposition brief with an appendix (Doc. 19). The transcript of administrative proceedings has also been filed (Doc. 10). For the reasons explained herein, Defendant's motion is GRANTED.


         Although Defendant's motion presents with a complicated history, all pertinent facts are undisputed. According to the allegations of the complaint and as set forth in the administrative transcript, [2] in April of 2009, Plaintiff applied for a period of disability and disability insurance benefits under the Social Security Act (Tr. 327). She was found disabled by administrative law judge (“ALJ”) David Daugherty, on May 3, 2010 (Tr. 165-172). At the time, Plaintiff was represented by Eric C. Conn, a once prominent Social Security lawyer in Eastern Kentucky (Doc. 1, ¶2; Tr. 181-82). ALJ Daugherty issued a fully favorable decision without a hearing by relying on evidence submitted by Mr. Conn from Dr. Frederic Huffnagle (Doc. 14 at 4; Tr. 171).

         In October of 2013, the Senate Committee on Homeland Security and Governmental Affairs issued a report accusing Mr. Conn and ALJ Daugherty of committing fraud (Doc. 14-1).[3] As set forth in the papers and not disputed by Plaintiff, Mr. Conn orchestrated one of the largest fraud schemes in the history of the Social Security Administration (“SSA”) by conspiring with ALJ Daugherty and four doctors, one of whom was Plaintiff's medical source, Dr. Huffnagle. Mr. Conn, a Dr. Adkins, and ALJ Daugherty were charged in an 18-count indictment returned on April 1, 2016 in the U.S. District Court for the Eastern District of Kentucky. See Indictment, U.S. v. Conn, et al., 5:16 cr 22 (E.D. Ky. Apr. 1, 2016). In a related case, on March 24, 2017, Mr. Conn pleaded guilty in federal court for his role in a scheme to fraudulently obtain $550 million in federal disability payments. As part of his plea, Mr. Conn admitted that he submitted falsified medical documents, and ALJ Daugherty authored decisions granting disability benefits, in over 1, 700 claimants' cases. In his plea, Mr. Conn admitted that he routinely prepared and medical professionals signed evaluation reports stating that claimants had limitations considered disabling by Defendant, irrespective of the claimants' actual physical or mental conditions. See Plea Agreement, U.S. v. Conn, et al., 5:17-cr-43 (E.D. Ky. March 24, 2017) (Doc. 14-3). ALJ Daugherty, who was bribed by Mr. Conn, would assign Mr. Conn's cases to himself and-without holding a hearing-issue favorable decisions to Mr. Conn's clients relying on the fraudulent evidence submitted by Mr. Conn. On May 12, 2017, ALJ Daugherty pleaded guilty in federal court to his role in the scheme. See U.S. v. Daugherty, 5:17-cr-66 (E.D. Ky. May 12, 2017). Dr. Huffnagle is deceased. See Carter v. Colvin, 220 F.Supp.3d 789, 792 (E.D. Ky. 2016).

         On May 12, 2015, the Acting Counsel to the Inspector General of the Social Security Administration sent a Referral Pursuant to Section 1129(1) of the Social Security Act (the “Act”) to the agency's general counsel (Tr. 400, herein “the referral”). The referral stated in part:

Pursuant to section 1129(1) of the Social Security Act, 42 U.S.C. § 1320a-8(1), the Social Security Administration (SSA) Office of the Inspector General (OIG) previously provided you with information regarding 1, 787 individuals. These individuals were formerly represented by attorney Eric C. Conn, or his firm, and OIG had reason to believe that fraud was involved in their applications for Social Security benefits. Specifically, in these cases, OIG had, and still has, reason to believe that Mr. Conn or his firm submitted pre-completed "template" Residual Functional Capacity forms purportedly from Bradley Adkins, Ph.D., Srinivas Ammisetty, M.D., Frederic Huffnagle, M.D., or David P. Herr, D.O., dated between January 2007 and May 2011, in support of the individuals' applications for benefits.
SSA OIG understood that SSA would use this information to carry out its responsibilities to redetermine cases involving fraud or similar fault under sections 205(u) and 1631(e)(7)(A)(i) of the Act, 42 U.S.C. §§ 405(u) and 1383(e)(7)(A)(i). The previous referral was with the understanding that SSA was not to take any adverse action against any individual on the list until further notice.

This Memorandum is to advise you that we are not aware of any objections to SSA moving forward with its administrative processing of the redeterminations of the 1, 787 individuals whose names were previously provided by OIG to SSA on July 2, 2014. As such, this notice is to inform SSA that it may proceed with its redetermination of the cases of the individuals on the previously transmitted list.

(Tr. 400, emphasis added).

         On May 18, 2015, six days after the date of the referral, the Appeals Council of the SSA sent notice to Plaintiff that the Office of Inspector General had informed SSA that "there was reason to believe fraud was involved" in certain cases involving evidence tendered by Mr. Conn from four doctors, including Dr. Huffnagle (Tr. 219). The notice stated in part:

Under sections 205(u) and 1631(e)(7) of the Social Security Act (Act), SSA must redetermine an individual's disability case when there is reason to believe fraud or similar fault was involved in that individual's application for benefits. In conducting a redetermination, SSA must disregard any evidence from one of the medical providers above when the information was submitted by representative Eric C. Conn or other representatives associated with Mr. Conn's law office.

(Tr. 210). Defendant told Plaintiff it had looked at her case to determine if ALJ Daugherty's decision was supported by substantial evidence after disregarding the evidence from Dr. Huffnagle, and: “[a]fter reviewing all of the relevant information, we plan to send your case back to an Administrative Law Judge for more action and a new decision.” Id. Defendant set aside ALJ Daugherty's favorable decision and Plaintiff was invited to send more evidence to the agency for consideration (Tr. 211-212).

         On September 21, 2015, Plaintiff had a prehearing teleconference with an attorney with the Social Security Office of Disability Adjudication and Review (Tr. 126-38). The attorney noted that the ALJ “will be considering whether you were disabled between December 31st of 2008 and May 3rd of 2010.” (Tr. 133). After setting forth a list of medical evidence of record, the attorney asked Plaintiff if she was “aware of any other medical sources who examined you or for whom you received treatment between the dates I've mentioned” (Tr. 133-134). Plaintiff replied: “I can't think right now.” (Tr. 134). Plaintiff was told to notify the agency should she later recall any other medical providers or have any other evidence relating to whether she was disabled between those dates. Id.

         Following a postponement requested by Plaintiff (Tr. 255), a new ALJ conducted a hearing on September 8, 2016 (Tr. 139-61). Plaintiff was represented by new counsel. After considering the hearing testimony and relevant evidence, the new ALJ concluded that there was insufficient evidence in the administrative record to support Plaintiff's original entitlement to benefits and, on October 12, 2016, issued an unfavorable decision finding that Plaintiff was not disabled at any point between her original application and the May 3, 2010 date of ALJ Daugherty's decision (Tr. 10-32). Accordingly, Plaintiff's disability benefits were terminated. The Appeals Council denied Plaintiff's request for review on April 11, 2017, which made the ALJ's October 12, 2016 decision the Commissioner's final decision on Plaintiff's claim for benefits (Tr. 1-6).

         Plaintiff filed a three count complaint in this Court (Doc. 1). In Counts One and Two, she alleges that the SSA “violated her Fifth Amendment right to due process by unduly delaying the redetermination hearing and by excluding certain evidence submitted by Mr. Conn.” (Doc. 1, ¶6). In Count Three, she contends that the Commissioner's finding that she was not disabled is not supported by substantial evidence. (Id., ¶7). The Commissioner has moved for summary judgment on Counts One and Two (the alleged due process violations).[4]


         Standard of Review

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). An issue of fact is “genuine” only if “a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is “material” if the fact could affect the outcome of the lawsuit under the governing law. Id. In determining whether a genuine dispute of material fact exists, the Court must read the record and the evidence presented in the light most favorable to the non-moving party. See Porter v. Ray, 461 F.3d 1315, 1320 (11th Cir. 2006).

         The party moving for summary judgment “bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets this burden then the burden shifts to the non-moving party to “go beyond the pleadings, ” meaning the non-movant must either (i) present specific evidence showing that there is a genuine issue of material fact; or (ii) show by other means that the moving party is not entitled to judgment as a matter of law. Id. at 324-26. In reviewing the record “the Court may not undertake the jury's function of weighing the evidence properly offered by the parties.” Gordilis v. Ocean Drive Limousines, Inc., No. 12-cv-24358-JLK, 2014 WL 2214274, *1 (S.D. Fla. May 28, 2014), citing Latimer v. Roaring Toyz, Inc., 601 F.3d 1224, 1237 (11th Cir.2010) (“Neither we nor the district court are to undertake credibility determinations or weigh the evidence.”).


         The issues presented have not been addressed by the Eleventh Circuit, and there is presently no controlling opinion on point. However, because the fallout from the Conn/Daugherty fraud occurred primarily in Kentucky, several courts there and one in West Virginia have addressed these issues directly, and my analysis of those decisions informs my findings here.

         The Redetermination Process

         Under the Social Security Act, Defendant is required to redetermine an individual's entitlement to benefits at any time that there is “reason to believe that fraud or similar fault was involved in the application of the individual for such benefits.” 42 U.S.C. §§ 405(u)(1)(A) and 1383(e)(7)(A)(i). The Act describes the redetermination process Defendant must undertake when the case is referred to it by the OIG or when Defendant uncovers fraud itself. By statutory mandate, as soon as the OIG “has reason to believe that fraud was involved in the application of an individual for monthly insurance benefits”, the OIG must refer the information, including the individual claimant at issue, to Defendant. See 42 U.S.C. § 1320a-8(1); Robertson v. Berryhill, No. CV 3:16-3846, 2017 WL 1170873, at *1 (S.D. W.Va. Mar. 28, 2017). After this referral, or when Defendant through its own investigation has reason to believe fraud or similar fault is involved, Defendant “shall immediately redetermine” those cases involving fraud or similar fault. 42 U.S.C. § 405(u)(1)(A). Defendant is required as part of this redetermination process to “disregard any evidence if there is reason to believe that fraud or similar fault was involved in the providing of such evidence.” 42 U.S.C. §§ 405(u)(1)(B) and 1383(e)(7)(A)(ii). As explained in Robertson:

A redetermination hearing decides whether the disability claimant qualified for benefits at the time of the original application. See Hearings, Appeals, & Litigation Law Manual (HALLEX) I-1-3-25(C)(3) (“[A]n adjudicator will be directed to consider the claim(s) only through the date of the final and binding determination or decision on the beneficiary's or recipient's application for benefits.”). The adjudicator's decision must rely only on new evidence and evidence remaining in the file after excluding the tainted evidence as mandated by § 405(u). HALLEX I-1-3-25(C)(4)(c). Interpreting the language in § 405(u), HALLEX provides that “adjudicators do not have discretion to reconsider the issue of whether the identified evidence should be disregarded when based on an OIG referral....” HALLEX I-1-3-25(C)(4)(a). A claimant can appeal the adjudicator's decision to discontinue ...

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