OTIS R. BOWEN, SECRETARY OF HEALTH AND HUMAN SERVICES, PETITIONER V. EDNA JOHNSON, ET AL. No. 85-1442 In the Supreme Court of the United States October Term, 1985 Petition for a Writ of Certiorari to the United States Court of Appeals for the Seventh Circuit Petition for a Writ of Certiorari to the United States Court of Appeals for the Seventh Circuit PARTIES TO THE PROCEEDING The petitioner is the Secretary of Health and Human Services. The named respondents, Edna Johnson and James Montgomery, represent the following class certified by the district court (App., infra, 41a): All persons in Illinois who are filing or have filed applications for disability benefits under Title II and/or Title XVI of the Social Security Act, and whose benefits are being or have been denied pursuant to the policies set forth in 20 C.F.R. Sections 404.1520(c) and .1522, 416.920(c) and .922 (1982); and the Social Security Rulings cum. ed. 82-55 (1982); and all recipients of such benefits who are making or have made claims for continued benefits (through participation in a Continuing Disability Interview), and whose benefits are being or have been terminated pursuant to the same policies. TABLE OF CONTENTS Parties to the Proceeding Opinions below Jurisdiction Statutory and regulatory provisions involved Questions Presented Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F Appendix G Appendix H Appendix I Appendix J The Solicitor General, on behalf of the Secretary of Health and Human Services, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Seventh Circuit in this case. OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-27a) is reported at 769 F.2d 1202. The order denying the Secretary's petition for rehearing with suggestion for rehearing en banc and the opinion dissenting from that order (App., infra, 28a-36a) are reported at 776 F.2d 166. The December 7, 1983 order of the district court certifying the plaintiff class (App., infra, 39a-49a) is reported at 100 F.R.D. 70, and the September 19, 1984 order of the district court granting the plaintiffs' motion for summary judgment (App., infra, 50a-64a) is reported at 593 F. Supp. 375. The December 17, 1984 order of the district court denying the Secretary's motion to alter or amend the judgment (App., infra, 65a-76a); the March 15, 1985 order of the district court prescribing procedures and time limits for reopening claims, denying the Secretary's motion for a stay pending appeal, and denying plaintiffs' motion for contempt (App., infra, 78a-95a); and the March 1985 supplemental order of the district court (App., infra, 96a-98a) are unreported. JURISDICTION The judgment of the court of appeals was entered on July 30, 1985 (App., infra, 37a-38a), and the petition for rehearing was denied on October 30, 1985 (App., infra, 28a-36a). By order dated January 22, 1986, Justice Stevens extended the time within which to file a petition for a writ of certiorari to and including February 27, 1986. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). STATUTORY AND REGULATORY PROVISIONS INVOLVED Sections 223(d)(1)(A) and (2)(A), 1614(a)(3)(A) and (B) of the Social Security Act, 42 U.S.C. 423(d)(1)(A) and (2)(A), 1382c(a)(3)(A) and (B); Sections 223(d)(2)(C) and 1614(a)(3)(G) of the Social Security Act, as added by Section 4 of the Social Security Disability Benefits Reform Act of 1984, Pub. L. No. 98-460, 98 Stat. 1800-1801 (to be codified at 42 U.S.C. 423(d)(2)(C), 1382c(a)(3)(G)); and 20 C.F.R. 404.1520, 404.1521, 416.920 and 416.921 are reproduced at App., infra, 99a-106a. QUESTIONS PRESENTED 1. Whether, in this class action brought under 42 U.S.C. 405(g) to challenge regulations promulgated by the Secretary of Health and Human Services under the Social Security disability programs, the district court properly exercised jurisdiction over the claims of class members who did not exhaust their administrative remedies or obtain a final decision of the Secretary within 60 days of the filing of the complaint. 2. Whether the court of appeals correctly invalidated regulations issued by the Secretary, 20 C.F.R. 404.1520(c) and 416.920(c), which provide that a person seeking Social Security disability benefits will be found not to be disabled if he does not have a medically "severe" impairment that significantly limits his ability to do basic work activities. STATEMENT This is a class action brought on behalf of Illinois residents to challenge two regulations that are integral parts of the five-step sequential evaluation process established by the Secretary of Health and Human Services to determine whether a person seeking disability benefits under the Social Security Act is disabled. The regulations, 20 C.F.R. 404.1520(c) and 416.920(c), provide that if the claimant does not have a medically "severe" impairment -- defined to mean an impairment that significantly limits a person's ability to do basic work activities that are necessary for most jobs -- the claimant will be found not to be disabled. 1. Title II of the Social Security Act provides, inter alia, for the payment of insurance benefits to a person who is "under a disability." 42 U.S.C. 423(a)(1)(D). Disability benefits also are provided under the Supplemental Security Income program established by Title XVI of the Act. 42 U.S.C. 1382(a). The term "disability" is defined under both programs to mean the "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months" (42 U.S.C. 423(d)(1)(A), 1382c(a)(3)(A)). The Act further provides that an individual "shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy" (42 U.S.C. 423(d)(2)(A), 1382c(a)(3)(B)). To implement these statutory definitions, the Secretary has established a five-step "sequential evaluation" process to be followed in determining whether a claimant is disabled. 20 C.F.R. 404.1520, 416.920. At step 1, the decision-maker (the state agency, administrative law judge (ALJ), or Appeals Council) determines whether the individual is engaged in work that constitutes substantial gainful activity. If so, he is found not to be disabled. 20 C.F.R. 404.1520(b), 416.920(b). If the claimant is not engaged in substantial gainful activity, the decision-maker must determine at step 2 whether he has a medically "severe" impairment. 20 C.F.R. 404.1520(c), 416.920(c). An impairment is not "severe" if it does not "significantly limit" the claimant's physical or mental ability to do "basic work activities" (20 C.F.R. 404.1521(a), 416.921(a)), which include walking, standing, lifting, etc.; capacities for seeing, hearing and speaking; understanding and carrying out simple instructions; using judgment; responding appropriately to supervision and co-workers; and dealing with changes in a routine work setting. 20 C.F.R. 404.1521(b), 416.921(b). If the claimant's impairment does not significantly limit his ability to do these basic work activities, he is found not to be disabled without specific consideration of his age, education, and work experience. 20 C.F.R. 404.1520(c), 416.920(c). If the claimant does have a "severe" impairment, the decision-maker then must determine at step 3 whether the impairment is equal in severity to one of the listed impairments that are deemed to be disabling on medical grounds alone. 20 C.F.R. 404.1520(d), 416.920(d). If the impairment is not so severe as to meet the listings, the claimant will be found not to be disabled at step 4 if he is still able to do his past work. 20 C.F.R. 404.1520(e), 416.920(e). But if the claimant cannot do his past work, the decision-maker must determine at step 5 whether, in light of the claimant's age, education, and work experience, he can perform other work that exists in the national economy. 20 C.F.R. 404.1520(f), 416.920(f). 2.a. This class action was brought in the United States District Court for the Northern District of Illinois to challenge the severity step of the sequential evaluation process (App., infra, 39a-41a). One of the two named plaintiffs, Edna Johnson, applied for SSI disability benefits on March 24, 1982. After the state agency determined that she was not disabled, she requested an ALJ hearing. The ALJ denied her claim on the ground that each of her impairments was not severe, and the Appeals Council affirmed. The other named plaintiff, James Montgomery, had been awarded disability benefits in 1976 on the basis of diabetes and heart disease. On January 8, 1982, Montgomery was notified that he was no longer considered disabled and that his benefits would be terminated effective October 1981. Montgomery appealed, and the ALJ concluded that he still was disabled. However, the Appeals Council granted review on its own motion and concluded that neither his heart disease nor his diabetes was a severe impairment. The Appeals Council therefore held that Montgomery was not disabled. App., infra, 5a-6a, 54a-55a. After their claims were denied by the Appeals Council, Johnson and Montgomery sought judicial review pursuant to 42 U.S.C. 405(g). An amended class complaint was filed on August 11, 1983. The plaintiffs challenged the regulations requiring a claimant to demonstrate a "severe" impairment (20 C.F.R. 404.1520(c), 416.920(c)), as well as companion regulations that then provided that the combined effect of unrelated impairments would not be considered unless each impairment, considered separately, was severe (20 C.F.R. 404.1522, 416.922). On December 7, 1983, the district court certified a class consisting of (i) all persons in Illinois "who are filing or have filed applications" for Title II or SSI disability benefits and whose claims are being or have been denied pursuant to the challenged severity policies, and (ii) all receipients of Title II or SSI disability benefits in Illinois "who are making or have made claims for continued benefits * * * and whose benefits are being or have been terminated pursuant to the same policies" (App., infra, 41a). Although the named plaintiffs had obtained a decision from the Appeals Council before seeking judicial review pursuant to 42 U.S.C. 405(g), the district court held that the class could include unnamed class members who had not exhausted their administrative remedies (App., infra, 42a-47a). b. In an opinion dated September 19, 1984, the district court held that the severity step of the sequential evaluation process is invalid to the extent that it permits the denial of a claim where the claimant is unable to perform his own past work. The court relied on judicial decisions stating that a claimant establishes a prima facie case of disability if he shows that he cannot perform his past work, and that the burden then shifts to the Secretary to establish that there are other jobs in the national economy that the claimant can do. In the court's view, the severity regulations impermissibly increase the showing the claimant must make to establish a prima facie case of disability because they substitute an inability to perform "basic work activities" for an inability to perform past work. App., infra, 58a-61a. The district court also held that the Secretary must consider the combined effect of unrelated impairments, even if those impairments, considered separately, are not severe. Id. at 61a-62a. As relief, the district court enjoined the Secretary from enforcing the relevant regulations insofar as they do not recognize a prima facie case of disability where the claimant is unable to do his past work and do not consider the combined effect of nonsevere impairments. The court also ordered the Secretary to "hold new disability hearings for class members"; to reinstate benefits pending the hearing determinations to those class members whose benefits were terminated; and to grant retroactive benefits to any class members who are found after a new hearing to be disabled. Finally, the court remanded the claims of Johnson and Montgomery to the Secretary for redetermination without application of the challenged policies. App., infra, 63a-64a. c. In a December 17, 1984 order denying the Secretary's motion to alter or amend the judgment (App., infra, 65a-76a), the district court rejected the Secretary's contention that it had improperly awarded relief to persons who had not sought judicial review within 60 days of the final decision on their claims, as required by 42 U.S.C. 405(g). The court held that compliance with the 60-day filing requirement is not a jurisdictional prerequisite and that the Secretary had waived the 60-day issue under Fed. R. Civ. P. 8(c) and 12(h)(1) because it was not "sufficiently raise(d)" in the answer to the amended complaint or the memorandum on class certification. App., infra, 69a. The district court also rejected the Secretary's contention that the validity of the severity step of the sequential evaluation process was confirmed by the intervening enactment of the Social Security Disability Benefits Reform Act of 1984, Pub. L. No. 98-460, 98 Stat. 1794 et seq. section 4 of that Act (98 Stat. 1800) requires the Secretary, effective December 1, 1984, to consider the combined effect of impairments in determining whether the claimant's impairments are severe. /1/ The district court acknowledged that Congress approved the sequential evaluation process and the severity step when it passed the 1984 Act. But in the court's view, Congress's action did not undermine its September 19 holding that the severity regulations' focus on the claimant's ability to do "basic work activities," rather than his ability to do his prior work, was inconsistent with the Social Security Act. App., infra, 73a-74a. d. On March 25, 1985, the district court ordered the Secretary to provide for the reopening and redetermination of the claims of all Illinois residents whose claims for disability benefits were filed or pending at any time on or after February 26, 1979 -- more than four years before this suit was filed. The March 25 order prescribed detailed procedures and time limits for implementing that relief. Id. at 90a-95a. /2/ 3.a. The court of appeals affirmed (App., infra, 1a-27a). The court of appeals first rejected the Secretary's argument that the district court granted relief to class members over whom it had no jurisdiction under 42 U.S.C. 405(g). In the court's view, respondent s' challenge to the severity regulations was "sufficiently collateral" to the class members' claims for benefits to justify a judicial "waiver" of the exhaustion requirement under 42 U.S.C. 405(g), because more than "'ministerial details'" would remain to be adjudicated on the claims of the individual class members if the severity regulations were invalidated. App., infra, 11a, quoting Heckler v. Ringer, No. 82-1774 (May 14, 1984), slip op. 11. The court further believed that the class members' failure to exhaust their administrative remedies could be excused on the basis of "futility," because the challenged severity policies were embodied in published regulations that were not likely to be altered in the course of administrative appeals on the claims of individual class members. App., infra, 11a. The court of appeals similarly agreed with the district court that the 60-day filing requirement in 42 U.S.C. 405(g) is not jurisdictional and that the Secretary did not sufficiently raise the class members' failure to comply with that requirement to preserve it as a defense. App., infra, 11a-13a. On the merits, the court of appeals held that the Title II and SSI severity regulations are invalid to the extent they permit the Secretary to deny benefits to a claimant who has established that he is unable to perform his own past work. App., infra, 13a-18a, 22a, 27a. Like the district court, the court of appeals believed that the disability determination must be a two-step process, "with the first step placing the burden on the claimant to demonstrate inability to perform past work," and the burden then shifting to the Secretary to show that there are other jobs in the national economy that the claimant is able to to (id. at 15a-16a). The court of appeals also rejected the Secretary's contention that Congress endorsed the severity step of the sequential evaluation process when it enacted Section 4 of the Social Security Disability Benefits Reform Act of 1984, which requires the Secretary to consider the combined effect of nonsevere impairments when deciding whether the claimant's impairments are severe. See page 8 & note 1, supra. The court relied on statements in the House Report expressing concern that the criteria for determining whether an impairment is nonsevere were too stringent and observing that the Secretary intended to reevaluate those criteria. App., infra, 18a-20a, quoting H.R. Rep. 98-618, 98th Cong., 2d Sess. 7-8 (1984). /3/ b. The Secretary's petition for rehearing with suggestion for rehearing en banc was denied by an equally divided court (App. infra, 28a-36a). In a dissenting opinion joined by three other judges, Judge Easterbrook disagreed with the panel's decision on the jurisdictional issues as well as the merits (id. at 29a-36a). He stressed that under Califano v. Yamasaki, 442 U.S. 682, 701, 704 (1979), every member of a class in an action brought under 42 U.S.C. 405(g) must independently satisfy the "final decision" and 60-day filing requirements. With respect to the former, Judge Easterbrook observed that a court of appeals cannot "waive" the "final decision" requirement under 28 U.S.C. 1291 simply in order "to hear an interesting and important legal issue in mid-case" (App., infra, 30a), and he concluded that a court likewise cannot waive the "final decision" requirement under 42 U.S.C. 405(g). Judge Easterbrook explained that this Court's finding of jurisdiction in Mathews v. Eldridge, 424 U.S. 319, 330-332 (1976), was consistent with the practice of finality under 28 U.S.C. 1291, because the asserted right to a pretermination hearing was "irremediable on appeal" and "has nothing to do with the merits" of the claim. By contrast, the question in this case regarding the validity of the severity regulations "has everything to do with the merits of a claim for benefits, and if the Secretary is wrong the validity of the Step Two rule is reviewable on appeal" (App., infra, 30a-31a). With respect to the 60-day filing requirement in 42 U.S.C. 405(g), Judge Easterbrook observed that "(t)ime limits in suits against the United States are not ordinary statutes of limitations," but instead "are substantive conditions on the consent to suit, and they apply unless they are expressly surrendered" (App., infra, 32a). In this case, he believed that "(b)elatedly raising the point in district court is not an active surrender. It is closer to an act of negligence by the government's lawyer, an act that ought not eliminate a statutory limit on litigation against the United States" (id. at 33a). On the merits, Judge Easterbrook concluded that the severity regulations serve a useful screening function and are a reasonable exercise of the Secretary's broad discretion to establish rules for the administration of the Social Security Act. App., infra, 36a. He also was of the view that the 1984 Act suggests that "Congress knew of and approved the sequential process in which 'severity' is one step" (id. at 36a). /4/ REASONS FOR GRANTING THE PETITION This case presents important questions concerning (i) the jurisdiction of a district court in a class action brought under 42 U.S.C. 405(g), and (ii) the validity of the severity step of the sequential evaulation process established by the Secretary for the adjudication of claims for disability benefits under the Social Security Act. Because these issues are before the Court in other cases, we do not believe that this case warrants plenary review. Rather, we suggest that the petition be disposed of as appropriate in light of the Court's rulings in the other cases. The question whether the courts below properly excused the failure by the unnamed class members to comply with the "final decision" and 60-day filing requirements in 42 U.S.C. 405(g) is closely related to the jurisdictional issues presented in Bowen v. City of New York, No. 84-1923 (argued Feb. 26, 1986), and Bowen v. Owens, No. 84-1905 (argued Feb. 26, 1986). Similarly, the question of the validity of the severity regulations is presented in Bowen v. Yuckert, petition for cert. pending, No. 85-1409 (filed Feb. 21, 1986). In Yuckert, the Ninth Circuit held that the severity regulations are invalid because (i) they do not provide for the claimant to establish a prima facie case of disability simply by showing that he cannot perform his own past work, and (ii) they do not provide for a specific consideration of the claimant's age, education, and work experience in every case. Yuckert v. Heckler, 774 F.2d 1365, 1369-1370 (1985), petition for cert. pending, No. 85-1409 (filed Feb. 21, 1986). By contrast, the court of appeals in the instant case invalidated 20 C.F.R. 404.1520(c) and 416.920(c) only to the extent that they do not provide for the claimant to establish a prima facie case by showing an inability to perform his prior work. App., infra, 22a. Application of the severity regulations has been sustained by the Seventh Circuit where the claimant does not show that he is unable to perform his past work. Bunch v. Heckler, 778 F.2d 396, 398 n.4 (1985). /5/ Because the Ninth Circuit's holding in Yuckert invalidates step 2 of the sequential evaluation process on broader grounds, it is a more appropriate vehicle in which to resolve the dispute concerning the legality of the severity regulations. CONCLUSION The petition for a writ of certiorari should be held and disposed of as appropriate in light of the Court's decisions on the jurisdictional issues in Bowen v. City of New York, No. 84-1923, and Bowen v. Owens, No. 84-1905, and in light of the Court's disposition of the petition for a writ of certiorari raising the question of the validity of the severity regulations in Bowen v. Yuckert, petition for cert. pending, No. 85-1409. Respectfully submitted. CHARLES FRIED Solicitor General FEBRUARY 1986 /1/ Subsections (a) and (b) of Section 4 of the 1984 Act (98 Stat. 1800) add a new paragraph (C) to Section 223(d)(2) of the Social Security Act (to be codified at 42 U.S.C. 423(d)(2)(C)) and a new paragraph (G) to Section 1614(a)(3) of that Act (to be codified at 42 U.S.C. 1382c(a)(3)(G)). Each paragraph requires the Secretary, when considering whether a claimant's impairment or impairments "are of a sufficient medical severity that (they) could be the basis of eligibility," to "consider the combined effect of all of the individual's impairments without regard to whether any such impairment, if considered separately, would be of such severity." Subsection (c) (98 Stat. 1801) of Section 4 provides that these amendments "shall apply with respect to determinations made on or after the first day of the first month beginning after 30 days after the date of the enactment of this Act." /2/ The district court also denied the Secretary's motion for a stay pending appeal (App., infra, 78a-89a), but the court of appeals thereafter granted a stay (id. at 7a). /3/ Although Congress had established an effective date of December 1, 1984 for the new statutory requirement that the Secretary consider the combined effect of several unrelated impairements (see note 1, supra), the court of appeals also held that the class members whose claims had been denied prior to that date were entitled to have their claims reopened to permit a reconsideration of multiple impairments. App., infra, 22a-27a. /4/ The court of appeals has stayed its mandate pending certiorari insofar as it affirmed those portions of the district court's judgment that required the reopening of closed claims. /5/ The district court expressly rejected the contention that the Secretary is required to consider the claimant's age, education, and work experience at step 2 of the sequential evaluation process (App., infra, 58a). APPENDIX