OTIS R. BOWEN, SECRETARY OF HEALTH AND HUMAN SERVICES, PETITIONER V. JOHN WILSON, ET AL. No. 86-897 In the Supreme Court of the United States October Term, 1986 Petition for a Writ of Certiorari to the United States Court of Appeals for the Third Circuit 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 Third Circuit in this case. PARTIES TO THE PROCEEDINGS The petitioner is the Secretary of Health and Human Services. The named respondents are John Wilson and Mary Christopher. In addition, the district court certified the following class of plaintiffs (App., infra, 19a-20a, 52a): All persons in the State of New Jersey who have filed or will file applications for disability benefits under Title II and/or Title XVI of the Social Security Act, as amended, and whose benefits have been or will be denied or terminated based upon a finding of no severe impairment pursuant to the policies set forth in 20 C.F.R. Sections 404.1520(c) and .1521, 416.920(c) and .921 (1983), and Social Security Ruling 82-55 (1982). The plaintiff class does not include, at this time, any such persons who received decisions of the Secretary on or before July 25, 1984 and who failed to file a Complaint in Federal District Court or to appeal to the next level of administrative review, within 60 days after the date of receipt of such decision. TABLE OF CONTENTS Parties to the proceedings Opinions below Jurisdiction Statutory and regulatory provisions involved Question 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 OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-14a) is reported at 796 F.2d 36. The October 28, 1985 opinion of the district court on respondents' motions for class certification and a preliminary injunction (App., infra, 21a-43a); the November 14, 1985 supplemental opinion of the district court (App., infra, 44a-50a); and the November 14, 1985 order of the district court certifying the class and granting a preliminary injunction (App., infra, 51a-65a), are reported at 622 F. Supp. 649. JURISDICTION The judgment of the court of appeals was entered on July 14, 1986, and the petition for rehearing was denied on September 3, 1986 (App., infra, 17a-18a). 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, as codified at 42 U.S.C. (& Supp. II) 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 (codified at 42 U.S.C. (Supp. II) 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, 66a-73a. QUESTION PRESENTED Whether the court of appeals correctly affirmed the district court's preliminary injunction barring the Secretary of Health and Human Services from applying regulations under which 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 New Jersey-wide class action involves the validity of regulations under which a claimant for Social Security disability benefits will be found not to be disabled if he does not have a medically "severe" impairment. The question of the validity of these regulations is already before the Court in Bowen v. Yuckert, cert. granted, No. 85-1409 (May 19, 1986). 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. (Supp. II) 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. (& Supp. II) 1382(a)). The term "disability" is defined under both programs to mean the inability "to engage in any substantial gainful activity" by reason of a "medically determinable physical or mental impairment" (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. (& Supp. II) 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 (at issue here) whether the claimant 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 and lifting; 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). /1/ If the claimant does have a "severe" impairment, the decision-maker must determine at step 3 whether the impairment is equivalent in its severity to one of the listed impairments that are automatically deemed to be disabling. 20 C.F.R. 404.1520(d), 416.920(d). If the impairment is not that severe, the decision-maker then must determine at step 4 whether the claimant is able to do his own past work; if so, he is not disabled. 20 C.F.R. 404.1520(e), 416.920(e). Finally, 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. On October 11, 1983, respondent Wilson brought this action under 42 U.S.C. 405(g) in the United States District Court for the District of New Jersey seeking judicial review of the Secretary's final decision denying his claim for disability benefits on the ground that he did not have a "severe" impairment within the meaning of the regulations discussed above. On October 1, 1984, Wilson, joined by respondent Christopher, filed an amended complaint, seeking class certification and a preliminary injunction. App., infra, 22a-23a, 37a-38a. /2/ a. By order dated October 9, 1985, the district court certified a class consisting of all persons in New Jersey who have filed or will file applications for disability benefits under Title II or Title XVI of the Act and whose benefits have been or will be denied or terminated based on the absence of a severe impairment under the regulations (App., infra, 19a-20a). The court specified that, "at this time," the class does not include any such persons who received decisions of the Secretary on or before July 25, 1984 and who failed to appeal to the next level of administrative review or to file a complaint in district court within 60 days (id. at 20a). The cut-off date of July 25, 1984, was selected to comply with the requirement in 42 U.S.C. 405(g) that a claimant must seek judicial review (in this case, by means of the class representatives' motion for class certification) within 60 days of the Secretary's final decision on his claim for benefits (App., infra, 40a & n.15). However, the district court dispensed with the other prerequisite to suit under 42 U.S.C. 405(g) by including in the class persons who had not exhausted their administrative remedies and obtained a decision from the Appeals Council on their individual claims for benefits (App., infra, 39a-43a). The court acknowledged the Secretary's argument that the class members' challenge to the severity regulations was not "substantially collateral but (was) in fact identical to plaintiffs' claims for benefits" (id. at 42a). But the court nevertheless believed that exhaustion could be dispensed with because, in its view, the Secretary had assumed a "fixed" position with respect to the validity of the severity regulations, thereby rendering exhaustion "futile" (id. at 41a), and the plaintiffs would suffer "irreparable harm" as a result of the loss of benefits while they pursued adminstrative remedies (id. at 33a-34a, 42a). b. The district court next held that a "preliminary injunction" should issue to bar application of the severity regulations to bar application of the severity regulations to all members of this certified class (App., infra, 31a-35a). The court concluded that, by virtue of the Third Circuit's then-recent decision in Baeder v. Heckler, 768 F.2d 547 (1985), the plaintiffs were likely to succeed on the merits of their challenge to the regulations (App., infra, 27a-31a). In Baeder, the court held that 42 U.S.C. (& Supp. II) 423(d)(2)(A) requires consideration of the claimant's age, education, and work experience in every case and that benefits therefore cannot be denied on the basis of medical factors alone, as the severity regulations permit. 768 F.2d at 551. The court did state in Baeder that it might find the regulations to be consistent with the Act if they screened out only those persons with de minimis impairments; but the court found that the regulations were not so applied (ibid.) and therefore held them invalid (id. at 553). After Baeder was decided, the Secretary issued Social Security Ruling (SSR) 85-28 (1985), which makes clear that the severity regulations are intended to screen out only those claimants whose impairments could be expected to have no more than a minimal effect on their ability to work even if their age, education, and work experience were specifically considered. /3/ The district court in the instant case nevertheless held that Baeder does not permit the Secretary to apply even a de minimis standard, as under SSR 85-28 (App., infra, 30a). The district court further concluded that the loss of benefits to those class members whose claims were denied because their impairments were not severe was likely to cause them irreparable injury, which outweighed the administrative burden that would be imposed on the Secretary by a preliminary injunction (App., infra, 32a-35a). c. On the foregoing basis, the district court, on November 14, 1985, entered a sweeping "preliminary injunction" that enjoined the Secretary from denying or terminating benefits on the basis of the severity regulations (App., infra, 53a). The "preliminary injunction" also awarded retroactive relief, requiring the Secretary: (i) to send each class member whose application was denied or whose benefits were terminated at any state of the administrative review process since July 26, 1984 a prescribed notice informing him of his right to have his claim redetermined, and (ii) to reopen and readjudicate the claims of all such class members who request that relief (id. at 53a-54a, 56a-57a, 61a). The court imposed time limits for the identification and notification of class members (id. at 53a), directed the Secretary to use his best efforts to acquire new evidence and redetermine claims within specified time periods (id. at 53a-55a), and ordered the Secretary to make detailed, periodic reports to respondents' counsel (id. at 57a-59a). 3. The court of appeals affirmed the preliminary injunction (App., infra, 1a-4a). As an initial matter, the court of appeals declined to consider the Secretary's challenge to the district court's certification of a class that included numerous persons who did not exhaust their administrative remedies (id. at 4a-7a). In the court of appeals' view, a class certification issue may be decided on the appeal of a preliminary injunction under 28 U.S.C. 1292(a)(1) "only when that issue 'directly controls (the) disposition of the (preliminary injunction issue), or (when) the issues are, in some other way, inextricably bound'" (App., infra, 5a, quoting Kershner v. Mazurkiewicz, 670 F.2d 440 (3d Cir. 1982) (en banc) (brackets added by court)). The court concluded that the exhaustion and preliminary injunction issues are not "sufficiently interrelated" to permit consideration of the former in this case, because the preliminary injunction issue concerns only "whether the Secretary has authority to continue to apply the severity regulations in light of Baeder and SSR 85-28," while the exhaustion issue "would be resolved by reference to principles of administrative finality" (App., infra, 6a). On the merits, the court of appeals read its prior decision in Baeder to require consideration of vocational as well as medical factors in every disability determination and therefore to prohibit the Secretary from applying the severity regulations even if they are limited to de minimis impairments. The court therefore held that SSR 85-28 does not render the severity regulations valid. App., infra, 7a-12a. REASONS FOR GRANTING THE PETITION 1. The Court has granted the petition for a writ of certiorari in Bowen v. Yuckert, No. 85-1409, to consider the validity of the regulations under which Social Security disability benefits may be denied if the claimant does not have a severe impairment. There is no occasion for the Court to grant plenary review in this case to consider the same issue. The Court therefore should hold the petition in this case and dispose of it as appropriate in light of its decision in Yuckert. /4/ 2. The merits to one side, however, the courts below erred in several respects as regards the preliminary injunction. a. The district court erroneously included in the class and granted relief to numerous claimants who did not exhaust their administrative remedies through the Appeals Council stage and therefore did not obtain the "final decision" of the Secretary that is a jurisdictional prerequisite to suit under 42 U.S.C. 405(g). And the district court did so even though it did not dispute the Secretary's contention that each class member's challenge to the severity regulations was not "substantially collateral" to his claim for benefits, but rather was "identical" to his challenge to the interlocutory decision denying his claim in reliance on those regulations. See App., infra, 42a. The district court relied on two factors in dispensing with the exhaustion requirement. First, it believed that exhaustion would be futile (App., infra, 41a, 42a). However, this Court held in Weinberger v. Salfi, 422 U.S. 749, 766 (1975), that exhaustion could not be dispensed with on the basis of the court's perception of futility even where the claimant challenged the constitutionality of a provision of the Social Security Act that barred the payment of benefits, an issue beyond the power of the Secretary to resolve. At least in the absence of the most compelling and "unique circumstances" (Bowen v. City of New York, No. 84-1923 (June 2, 1986), slip op. 17), it would seem to follow a fortiori that a court has no authority to dispense with the exhaustion requirement on futility grounds where the claimant challenges the validity of a regulation, which is within the power of the Secretary to determine. There are no special circumstances here that would suggest an exception to this rule. In further administrative proceedings, the Secretary would be given the opportunity to interpret and apply the regulations, and the ALJ or Appeals Council might find that the claimant's impairment is "severe" within the meaning of the challenged regulations, thereby obviating any occasion for the claimant to challenge those regulations in court. /5/ The district court also concluded that exhaustion should be dispensed with because the members of the plaintiff class would suffer "irreparable harm" if they could not obtain immediate relief. This reasoning was equally erroneous. When the Court excused exhaustion in City of New York, it expressly relied upon the district court's finding that the claimants would suffer a medical setback if they were required to exhaust their administrative remedies (slip op. 15-16), such that the pursuit of administrative remedies would itself affirmatively cause them harm. Compare FTC v. Standard Oil Co., 449 U.S. 232, 242, 244 (1980). In this case, by contrast, the only injuries relied upon by the district court were the financial consequences that result from the denial of claims for benefits on the merits at preliminary stages of the administrative review process. If those consequences -- which any disability claimant might allege -- were sufficient to dispense with exhaustion, the explicit "final decision" requirement in 42 U.S.C. 405(g) would be largely vitiated under the disability and SSI programs. Congress clearly did not intend that result when it incorporated 42 U.S.C. 405(g) and its well-established exhaustion requirement into the disability and SSI programs in 1956 and 1972. See 42 U.S.C. (& Supp. II) 421(d), 1383(c)(3). b. The district court's error in exercising jurisdiction over the claims of, and awarding relief to, numerous class members who did not exhaust their administrative remedies was compounded by the court of appeals' refusal even to consider the correctness of the district court's actions in this regard. The court of appeals viewed the exhaustion issue as an incidental question of class certification that was distinct from the propriety of the preliminary injunction and therefore not within the scope of its jurisdiction under 28 U.S.C. 1292(a)(1) over the appeal from the order granting a preliminary injunction (App., infra, 5a-7a). This novel holding was clearly wrong. The Secretary of course argued in district court that no preliminary injunction should issue in this case for reasons (relating to the merits and equitable considerations) that had nothing to do with the jurisdictional requirements of 42 U.S.C. 405(g) (App., infra, 31a-35a). But in addition, the Secretary argued that those New Jersey residents who failed to exhaust their administrative remedies could not properly be included in the class in this suit under 42 U.S.C. 405(g) and therefore could not properly be the beneficiaries of any relief ordered by the district court (App., infra, 39a-43a). The district court's order at issue here nevertheless grants injunctive relief to those claimants. On the Secretary's appeal of that order under 28 U.S.C. 1292(a)(1), the court of appeals plainly had jurisdiction to decide whether the injunction was improperly entered as to those plaintiffs, even if it was valid as to others -- especially since the Secretary's challenge to the preliminary injunction in this regard is that the district court had no jurisdiction under 42 U.S.C. 405(g) over the claims of these class members. See Salfi, 422 U.S. at 766 (a "final decision" is a "statutorily specified jurisdictional prerequisite" under 42 U.S.C. 405(g)). In fact, in Heckler v. Lopez, 463 U.S. 1328 (1983), the Secretary argued on appeal from a preliminary injunction that the district court had erroneously granted relief to class members who had not exhausted their administrative remedies and whose claims therefore were not within the jurisdiction of the district court (463 U.S. at 1334-1335 (Rehnquist, Circuit Justice)). In granting a partial stay of that injunction, which the Court subsequently declined to vacate (464 U.S. 879 (1983)), Justice Rehnquist made clear that this jurisdictional issue was subject to review on appeal of the preliminary injunction (463 U.S. at 1331). The dissenting opinions of Justice Brennan and Justice Stevens likewise expressed no doubt on this issue. 464 U.S. at 879-884. Any other result would defeat the purpose of 28 U.S.C. 1292(a)(1) of permitting an immediate appeal of injunctive orders. /6/ c. Finally, although the district court labeled its order a "preliminary injunction," the relief granted went far beyond "the usual 'prohibitory' injunction which merely freezes the positions of the parties until the court can hear the case on the merits." Heckler v. Lopez, 463 U.S. at 1333 (Rehnquist, Circuit Justice). The courts below affirmatively barred the Secretary from utilizing the severity regulations in adjudicating all disability claims in New Jersey. That relief is not "preliminary" as regards any individual class member, because his claim must be either granted or denied without reference to the regulations that the district court enjoined. Cf. Heckler v. Redbud Hospital District, No. A-32 (July 24, 1985), slip op. 5-6 (Rehnquist, Circuit Justice). Moreover, those regulations rest on a principle -- that benefits may be denied on the basis of medical evidence alone, without special consideration of the claimant's age, education, and work experience -- that has been an integral feature of the disability program virtually since its inception in 1956 and has been embodied in formal regulations for more than 25 years. See Gov't Br. at 30-50 in Yuckert. A regulation so deeply embedded in a program under which millions of claims are adjudicated annually should not be set aside until the court has rendered a final judgment in the case. The courts below also erred in requiring, as an incident to the supposedly "preliminary" injunction, the readjudication of the claims of all class members whose claims were denied on the basis of the severity regulations and who thereafter faile to seek further review within the 60 days allowed. The equities do not favor the granting of relief pendente lite to persons who committed such procedural defaults in the administrative review process. d. Although we believe that the district court's preliminary injunction and the court of appeals' affirmance of that injunction were erroneous for the additional reasons just discussed, we do not seek review on those issues at this time. There was no stay of the retroactive relief ordered by the district court, and that process has now been largely completed. All that will then remain is the prospective prohibition against the use of the regulations. If the Court sustains the severity regulations in Yuckert, the preliminary injunction in this case must be reversed on the merits, irrespective of the other errors committed by the courts below in granting and affirming that injunction. On the other hand, if the Court were to hold in Yuckert that the severity regulations are invalid, the Secretary of course would follow that decision in New Jersey, as elsewhere, thereby mooting the other questions regarding the propriety of the preliminary injunction in this case. CONCLUSION The petition for a writ of certiorari should be held and disposed of as appropriate in light of the Court's decision in Bowen v. Yuckert, cert. granted, No. 85-1409 (May 19, 1986). Respectfully submitted. CHARLES FRIED Solicitor General DECEMBER 1986 /1/ As we have explained in our brief (at 4 n.1) in Yuckert, the sequence in which the severity of an impairment is considered now differs somewhat under the new regulations governing the evaluation of persons who already are receiving disability benefits. 20 C.F.R. 404.1594(f), 416.994(b)(5). However, that differing sequence does not affect the question whether the absence of a medically "severe" impairment is sufficient to support a determination that a claimant is not disabled. /2/ At the time, respondent Christopher's claim for benefits had been denied by the ALJ on the ground that her impairment was not severe, but the Appeals Council had not yet ruled on her request for review. The Appeals Council thereafter reversed the ALJ's decision and awarded her benefits, but the district court nevertheless permitted her to be a class representative (App., infra, 23a n.1). /3/ SSR 85-28 is reproduced as Appendix I to the petition for a writ of certiorari (at 37a-44a) and is discussed in our brief on the merits (at 10-11, 22, 26-27, 29 n.15, 48 n.29) in Yuckert. /4/ We have likewise suggested that the Court hold the certiorari petitions in Bowen v. Johnson, No. 85-1442, and Bowen v. Dixon, No. 86-2, which also involve the validity of these regulations, pending the decision in Yuckert. /5/ Respondents do not challenge a "secret" policy, such as that found by the Court in City of New York, slip op. 12-13, 17; the threshold requirement of a severe impairment is embodied in published regulations. There accordingly can be no suggestion in this case that those class members who abandoned their claims when they failed to seek further administrative review within 60 days -- the very claims that the district court required to be readjudicated -- were prevented by any action of the Secretary from seeking further review in the manner required b y 42 U.S.C. (& Supp. II) 405 and implementing regulations. /6/ The court of appeals believed that its refusal to consider the exhaustion issue was supported by the Third Circuit's prior decision in Kershner v. Mazurkiewicz, supra (App., infra, 5a-6a). However, the district court in that case had denied both the plaintiffs' motion for class certification and their motion for a preliminary injunction. Because injunctive relief was denied on grounds independent of those that led to the denial of class certification, the latter question did not affect the resolution of the preliminary injunction question. The Third Circuit therefore concluded that it did not have "pendent" jurisdiction over the class certification issue. See 670 F.2d at 459-460. In this case, by contrast, the district court granted the motions for class certification and for a preliminary injunction. The validity of the injunction insofar as it awards relief to class members who did not exhaust their administrative remedies therefore depends, inter alia, on whether the district court properly exercised jurisdiction over those class members' claims. For this reason, the court of appeals had jurisdiction to consider the latter question. Indeed, this case satisfies the test articulated by the court of appeals, because the question of the district court's jurisdiction "'directly controls'" and is "'inextricably bound'" up with the question of the award of injunctive relief (App., infra, 5a (quoting Kershner, 670 F.2d at 449)). See also Kershner, 670 F.2d at 447 (district court's jurisdiction may be considered on appeal of preliminary injunction). APPENDIX