20 CFR 404.408
Lofty v. Cohen, 325 F.Supp. 285 (E.D. Mich. 1970); Affirmed, U.S. Ct. of Appeals (6th Cir., 3/4/71) (CCH U.I.R., Vol. 1A, Fed. Par. 16,186)
THORNTON, District Judge:
Plaintiff brings this suit to review a final decision of the Secretary of Health, Education, and Welfare under the provisions of 42 U.S.C.A. § 405(g). Briefly stated, it is plaintiff's position that the decision is erroneous in four respects. First, plaintiff contends that his disability dates from a period prior to June 1965 (the effective date of certain reduction provisions of the Social Security Act, as amended). Second, plaintiff contends that the lump sum settlement entered into in lieu of periodic payments to which he became entitled under the provisions of the Michigan Workmen's Compensation Act was not such a "commutation of, or substitute for periodic payments" (42 U.S.C.A. § 424(b)) as to be subject to the reduction provisions of the amended Act. Third, plaintiff contends that the reduction or crediting provisions of the Act for workmen's compensation benefits are unconstitutional. Fourth, plaintiff contends that if such reductions are to be made the formula applicable should be different from the one here employed.
The factual background of this case is succinctly set forth in the Hearing Examiner's Decision. We quote verbatim the paragraph from that decision setting forth such background:
The application for disability was filed March 29, 1966, alleging inability to engage in "substantial gainful activity" from January 19, 1966. This was allowed. In computing the benefits to which plaintiff thereby became entitled, the reduction provisions of the 1965 Amendments to the Social Security Act were applied because of benefits plaintiff had received from workmen's compensation. Plaintiff then sought and received a hearing before the Hearing Examiner contesting the application of the 1965 Amendments to his Social Security benefits. At that hearing plaintiff amended his application to allege that the onset date of his disability was December 1963, rather than January 19, 1966. This brings us to a consideration of plaintiff's First contention.
In order for plaintiff to successfully establish the onset of disability date as December 1963, it must be established that from that date on he was unable to engage in "substantial gainful activity." 42 U.S.C.A. § 416(i)(1)(A). The fine lines that have been drawn by those courts which have been confronted with the determination of ability to engage in "substantial gainful activity" in the plethora of reported disability cases are hardly relevant to the circumstances present here. Plaintiff here denies the existence of that which is. No amount of rationalization that we may employ can render negative that which is positive. Plaintiff testified that from January 1964 to January 1966 he had worked forty to fifty hours a week. The fact that he worked on small parts since he could not lift heavier ones does not affect the "substantiality" of his activity in light of a forty- to fifty-hour work week. His earnings record from 1962 through 1965 reflects not only gainful activity but upwardly gainful activity. For the four years 1962 through 1965 his earnings, respectively, were: $4,280.93, $5,965.77, $6,926.71 and $8,117.27. His contention that he was unable to engage in "substantial gainful activity" in 1964 and 1965 is so patently ridiculous as to be meritless on its face. Thus, even though an enumeration of the medical findings might initially lead to the conclusion that impairments have been established of such proportions that engagement in work activity is highly unlikely, if in fact a claimant has engaged in employment which can reasonably be classified as "substantial gainful activity," he is thereby precluded by the definition of "disability" from obtaining benefits under the Act. Marshall v. Gardner, 298 F.Supp. 542, 545 (S.D. W.Va. 1968), affirmed 408 F.2d 883 (C.A. 4, 1969). Plaintiff is, therefore, not a pre-1965 amended Social Security Act claimant. The decision of the Secretary in this respect is supported by substantial evidence.
Plaintiff's Second contention is that the settlement of his workmen's compensation rights was a "redemption settlement" not a commutation or a substitute for periodic payments within the meaning of 42 U.S.C.A. § 424(b). A copy of the State of Michigan Workmen's Compensation settlement order of May 19, 1966 is included in the Certification of defendant, attached to the Answer herein -- Exhibit No. 11, page 118 of the Certification. It is denominated Redemption Order, and it is to the effect that the employer's entire liability is redeemed by the agreement "by a single payment in lieu of weekly payments and all medical benefits." The net sum payable to the plaintiff was $10,722.00. The Michigan statute pursuant to which the lump-sum award was made clearly contemplates that such a lump-sum payment is a substitute for plaintiff's claim for future periodic payments. See Walters v. Flemming, 185 F.Supp. 288 (D. Mass. 1960); see also Wohmeier v. W. E. Wood Co., 377 Mich. 176 (1966). The defendant's determination in this respect is supported both by law and reason and is not erroneous.
We now reach plaintiff's Third contention which he states, in his February 2, 1970 brief, as follows: "We maintain that Section 224 which imposes a formula for reducing social security disability benefits when the claimant is receiving workmen's compensation is demonstrably repugnant to the due process clause of the Fifth Amendment." The statute reads as follows:
Both plaintiff and defendant cite Flemming v. Nestor, 363 U.S. 603 (1960) as supportive of their respective contentions. Plaintiff quotes from Nestor the test of permissible classification -- "[W]e must recognize that the Due Process Clause can be thought to interpose a bar only if the statute manifests a patently arbitrary classification, utterly lacking in rational justification." Nestor, supra, at page 611. As to the facts in Nestor and the holding therein, a summary was made by Circuit Judge Gerald McLaughlin in Price v. Flemming, 280 F.2d 956, 958 (C.A. 3, 1960), which we here set forth.
The court also held that:
It is the fact that Nestor, as stressed by both appellant and the amicus curiae, was not eligible for benefits under the Act until after the statute covering deportation because of past Communist membership became effective. Nestor, states appellant, therefore had no accrued property right. But the Supreme Court did not decide Nestor on that narrow ground. It expressly rejects the concept of accrued property rights as being a part of the Social Security System. It describes in terms certain the identical benefit with which we are dealing as "a noncontractual benefit under a social welfare program."
It is plaintiff's contention that the benefit reduction provision of Section 224 is so patently arbitrary and so utterly lacking in rational justification as to constitute discrimination that is unconstitutional. Defendant refers to the Senate Finance Committee report prior to the enactment of Section 224 stating that a purpose of the legislation is to prevent the payment of excessive combined benefits. Another objective of the legislation is to avoid duplication of public benefits. Plaintiff argues that there is, however, no provision for reduction of social security benefits for a claimant who receives private disability benefits or who receives a tort damage award. Plaintiff is saying that Section 224, in effect, has singled out claimants receiving workmen's compensation benefits as a target for reduced social security benefits, but not claimants who may be receiving benefits of entirely different types. Defendant argues that the social security program is to "provide a substitute, at least in part, of an individual's loss of earnings when he either retires or becomes disabled." Helvering v. Davis, 301 U.S. 619 (1937); Nierotko v. Social Security Board, 327 U.S. 358 (1946). It is, therefore, reasonable to preclude a claimant from receiving amounts, as a result of retirement or disability, far in excess of his earnings received while working. Viewed in this light section 224 is analogous to section 203(b) of the Act providing for the imposition of deductions upon an individual's receipt of social security benefits due to excess earnings." * * * Defendant cites and quotes from Judge McLaughlin's opinion, quoted above herein in part, for the proposition that Congress has the power to impose deductions against retirement benefits in light of earnings in excess of amounts permitted by statute. It seems to us that the classification described in Section 224 includes all individuals receiving benefits under any federal or state workmen's compensation law, and to that extent it is not patently arbitrary in light of the purpose of social security benefits. The justification for such treatment is to prevent unequal benefits for those persons who would otherwise receive duplicate benefits. In this respect it seems to us to be rational. The limitation was enacted to prevent the situation which had existed where a social security beneficiary received full social security benefits plus state or federal workmen's compensation benefits, compared to one who was not receiving state or federal workmen's compensation benefits. The reduction provision attempts to equalize that which was unequal. Plaintiff contends that it does just the opposite.
The Court of Appeals for the Second Circuit, in an opinion written by Circuit Judge Robert P. Anderson, dealt with the theory advanced by a social security beneficiary that a certain discrimination in the Social Security Act was violative of due process and equal protection. In Gruenwald v. Gardner, 390 F.2d 591 (C.A. 2, 1968) plaintiff Gruenwald took issue with the "different and discriminatory criteria" established by Congress for the "computation of benefits for men and women at age 62 as a result of the application of 42 U.S.C. § 415(b)(3)." The Court said that plaintiff disputes "the unequal treatment of two individuals solely because of sex," and said that plaintiff argued that a "classification must rest upon a difference which is real." Judge Anderson did not fail to point out that the difference is real. He also said, at page 592:
We hold that the benefit reduction provision of Section 224 is not arbitrary classification, that it has rational justification and that it is not violative of due process.
With respect to plaintiff's Fourth contention, we set it forth verbatim as expressed in his first brief. It is as follows:
With respect to (a) above, the Hearing Examiner's Decision contains the answer which is dispositive of he point. In his CONCLUSIONS, paragraph (2), the Hearing Examiner sets forth Section 224(a), subsections (1) through (5). We have previously herein set forth subsections (1) through (4).
The Hearing Examiner concludes as follows:
We can say it no better.
Again, with respect to (4)(b) of plaintiff's Fourth contention, the Hearing Examiner's determination is entirely supportable and is confirmed by us. He states that:
The procedure employed was in accordance with Section 224(b) which reads:
Lastly is plaintiff's contention that defendant should somehow allocate 41.5 per cent of the workmen's compensation settlement to medical expense and prorate the 58.5 per cent against the Social Security payment. There is just no basis, legal or practical, for such a procedure. It would be contrary to Section 224(b). In addition, there was no breakdown in the Redemption Order indicating that any particular percentage thereof was for medical expenses. The lump sum was a substitute for periodic payments and subject to the applicable statutory provisions.
For the reasons hereinabove set forth, defendant's motion for summary judgment will be granted. An appropriate order may be presented.
 42 U.S.C.A. § 424(a), as amended in 1965.
 "(5) 80 percentum of his 'average current earnings'," or * * *
For purposes of clause (5), an individual's average current earnings means the larger of (A) the average monthly wage used for purposes of computing his benefits under section 423 of this title, or (B) one-sixtieth of the total of his wages and self-employment income * * * for the five consecutive calendar years after 1950 for which such wages and self-employment income were highest. * * *"
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