SUBJECT:

Social Security Administraation, Office
of the Inspector General,

Petitioner,

Peoples Benefit Services, Inc.,

Respondent.

DECISION AND ORDER DISMISSING CASE

"Men must turn square corners when they deal with the government." Rock Island, A. & L. R. Co. v United States, 254 U.S. 141, 143 (1920) (Holmes, J.). So, too, must litigants when they enter this forum. When a litigant in this forum has placed itself in a position of procedural vulnerability and seeks to avoid the consequences by an appeal to the Administrative Law Judge's (ALJ's) discretion, a trail of "cut corners" marked by evasions and failures of candor does not serve it well.

In this case, Respondent's hearing request is untimely. It must be dismissed unless, in an exercise of my discretion, I am able to find good cause for its untimeliness. 20 C.F.R. � 498.202(f)(1). The record before me offers no reason to find that good cause exists for Respondent's untimeliness, and offers no reason whatsoever that I should understand the cause of that untimeliness as other than Respondent's deliberate tactical choice. Respondent's efforts to explain or justify that tactical choice and to shift its consequences have been at best coy. At their worst, those efforts fall short of the candor expected of litigants in this forum. On such a record I decline to relieve Respondent of the consequences of filing its hearing request late. I have sought, but cannot find, good cause for Respondent's untimeliness. Accordingly, Respondent's hearing request filed May 17, 2006 must be dismissed.

I shall set out the details of the history of this case presently, and will note my findings and conclusions regarding that history at suitable points in this discussion. But it may be helpful to review now a few of the basic principles I have considered in foreclosing Respondent from any further review of the Social Security Administration's imposition against it of a $4,349,972 civil money penalty (CMP).

The first principle is the most obvious: no person or entity should be casually deprived of a legally-created right to seek review of an adverse agency action. In this forum that principle has been distilled by the Departmental Appeals Board (Board) in a series of cases into this admonition: an ALJ "should not lightly conclude that a (litigant) has failed in its effort to take advantage of its opportunity for a hearing." The Carlton at the Lake, DAB No. 1829, at 8 (2002). Implicit in that admonition and in the language which enunciates it is the admonition's solicitude for "good faith efforts of (litigants) to perfect appeals . . . ." Id. at 7 - 8. And nothing could be plainer than the Board's sharp disapproval of "gamesmanship" in the perfecting of appeals to this forum. Alden Nursing Center - Morrow, DAB No. 1825, at 12 (2002).

The second principle is that an ALJ must exercise discretion in assessing the reason or reasons for some flaw in a hearing request. The regulation governing this appeal requires dismissal of untimely hearing requests when "the respondent fails to demonstrate good cause . . ." for not meeting the 60-day deadline. 20 C.F.R. � 498.202(f)(1). And although the concept of "good cause" has not been much debated in the context of 20 C.F.R. Part 498, the concept of "good cause" has never been defined in this forum or before the Board as anything other than circumstances beyond the ability of the party-litigant to control. Hillcrest Healthcare, L.L.C., DAB 1879 (2003); Glen Rose Medical Center Nursing Home, DAB No. 1852 (2002); Hospicio San Martin, DAB No. 1554 (1996); The Heritage Center, DAB CR1219 (2004); Hillcrest Healthcare, LLC, DAB CR976 (2002).

The third principle is corollary to the second. This third principle holds that the tactical steps chosen by a potential party-litigant when faced with an agency action creating a right to appeal to this forum are by definition not beyond the ability of that party-litigant to control, and thus cannot constitute good cause for filing its hearing request late. Concourse Nursing Home, DAB No. 1856 (2002); Nursing Inn of Menlo Park, DAB No. 1812 (2002); Cary Health and Rehabilitation Center, DAB No. 1771 (2001); The Heritage Center, DAB CR1219 (2004); Carrington South Health Care Center, Inc., DAB CR1071 (2003); EagleCare, Inc., d/b/a Beech Grove Meadows, DAB CR923 (2002).

Those three principles have guided my evaluation of the record before me, and have informed my analysis in reaching the following findings and conclusions. Each finding or conclusion is set out below, numbered and presented in boldface text.

1. Respondent received Petitioner's demand letter on March 15, 2006.

For present purposes, this case began when the Social Security Administration (SSA), Petitioner in these proceedings, announced a proposed administrative action against Respondent, Peoples Benefit Services, Inc. (PBS). SSA's proposed action took the form of a CMP of $4,349,972, and was announced in SSA's demand letter dated March 14, 2006. The demand letter was transmitted to PBS's counsel by priority overnight express service.

SSA's demand letter was received by PBS's counsel at 8:58 AM EST on Wednesday, March 15, 2006. Receipt of SSA's demand letter was acknowledged for the law firm by "B. Irace." The name of PBS's counsel appeared plainly in the address of SSA's demand letter and on the shipping documents themselves.

The regulation governing appeals pursuant to 20 C.F.R. Part 498 explicitly provides that hearing requests are presumed to be received "five days after the date of such notice, unless there is a reasonable showing to the contrary." 20 C.F.R. � 498.202(e). The acknowledgment of receipt of SSA's demand letter by "B. Irace" constitutes more than a "reasonable showing" of the actual date on which PBS received SSA's demand letter. It conclusively proves that Respondent PBS received SSA's demand letter on March 15, 2006.

2. Respondent's hearing request was filed on May 17, 2006.

PBS transmitted its hearing request to the Civil Remedies Division by priority overnight express service on Wednesday, May 17, 2006. The hearing request is dated May 17, 2006, and was received by the Civil Remedies Division on Thursday, May 18, 2006. The hearing request was signed by PBS's counsel whose name appeared plainly on SSA's March 14, 2006 demand letter.

The regulation governing appeals pursuant to 20 C.F.R. Part 498 explicitly provides that documents such as hearing requests "are considered filed when they are mailed." 20 C.F.R. � 498.211(a)(4). I interpret that regulatory language as applicable to instances in which documents are transmitted by express service. Respondent PBS's hearing request was filed on May 17, 2006.

3. Respondent's hearing request was filed more than 60 days after its receipt of SSA's demand letter, and was therefore not timely.

A party whom SSA proposes to sanction under any of the provisions of 20 C.F.R. � 498.100 through 498.132 may appeal SSA's proposed action, but it must do so by filing a hearing request in compliance with 20 C.F.R. � 498.202(c) and (d). The terms of 20 C.F.R. � 498.202(c)(2) require that a hearing request must be filed "within 60 days after the notice . . . is received by the respondent or upon a showing of good cause, the time permitted by an ALJ."

The rules governing the computation of time in these proceedings are set out at 20 C.F.R. � 498.212. Those rules, when applied to PBS's receipt of SSA's demand letter on Monday, March 15, 2006, establish the last date on which PBS's hearing request would have been timely as May 15, 2006. 20 C.F.R. � 498.212(b). PBS's hearing request was filed on May 17, 2006. Respondent PBS's hearing request was filed more than 60 days after its receipt of SSA's demand letter, and was therefore not timely.

4. No good cause has been shown, and I find no good cause, for Respondent's failure to file its hearing request timely.

SSA lost no time in challenging the timeliness of PBS's hearing request. On May 24, 2006 SSA filed Petitioner's Motion to Dismiss supported by argument, authorities, and four attached exhibits. The exhibits included SSA's March 14, 2006 demand letter, printouts of tracking records related to both the letter and the hearing request, and printouts of email correspondence between counsel for the parties. SSA's position in its Motion was and remains straightforward, if characterized by a certain punctilio: PBS's hearing request was filed two days late and must be dismissed as required by 20 C.F.R. � 498.202(f)(1). SSA's position in its Motion is that PBS was plainly warned of the importance of timeliness in seeking a hearing, and that the demand letter made clear that unless a hearing were requested within 60 days the proposed action would become final and PBS would no longer have the right to an appeal. 20 C.F.R. �� 498.109(a)(5)(ii) and 498.109(c).

PBS responded by filing Respondent's Opposition to Petitioner's Motion to Dismiss on June 2, 2006. ⁽¹⁾ PBS asserted that it was entitled to the presumption that it had received SSA's demand letter five days after its date, that is, on May 18, 2006. That assertion, made without the citation of authority apposite to any of the various jurisdictional grants to this forum, depends on the notion that the "reasonable showing to the contrary" language of 20 C.F.R. � 498.202(e) can operate only to extend, and never to shorten, the presumed five-day period between the date of a demand letter and the date on which a party receives such a letter. I reject that assertion and that underlying notion. I conclude that proof of the earlier receipt of a demand letter is a "reasonable showing to the contrary" of the presumed five-day delivery time, and that the 60-day period for appeal prescribed by 20 C.F.R. � 498.202(c)(2) begins to run from the proven date of PBS's actual receipt of SSA's letter.

But PBS's Opposition raised a second theory, and that second theory became the undoing of its effort to show good cause for its untimeliness. On the first page of its Opposition PBS wrote:

Then, the OIG makes the self-serving determination that PBS's request for a hearing was untimely, by relying upon package tracking information that the notice letter was signed for by someone--neither Respondent nor its counsel--on March 15, 2006.

That language is evasive and disingenuous, but vague. Later in PBS's Opposition, on page 8, appears language just as disingenuous and evasive, but considerably more specific:

The OIG relies upon a signature acknowledging receipt of a Federal Express package as proof that Mr. Tellock (counsel-of-record for PBS) received the notice letter on March 15, 2006. See Petitioner's Br. at 3 and Ex. 2. Petitioner's evidence, however, is deficient for a number of reasons. First, the tracking information does not indicate, as argued by the OIG, that the package was signed for by Mr. Tellock. Instead, Petitioner's Exhibit 2 indicates that the Federal Express package was "[s]igned for by "B. Irace." There are no attorneys at Arent Fox with the surname Irace. Thus the OIG's alleged proof only demonstrates that the package arrived at 1675 Broadway in New York City, a 35-story office building with multiple tenants, not that it was received by Mr. Tellock or any Arent Fox attorney on March 15, 2006.

That remarkable assertion was one of the topics discussed during a pre-hearing conference held by telephone on June 7, 2006, the results of which were summarized in my Order of June 8, 2006. That Order established a schedule for the submission of additional memoranda in connection with the pending motions, but it also sought a candid expression from PBS's counsel of the details behind his disavowal of any professional connection with "B. Irace." Paragraph 4 of that Order reads in toto thus:

4. Respondent will file, not later than June 16, an affidavit from the person identified as "B. Irace" in Respondent's Opposition to Petitioner's Motion to Dismiss, at pages 9-10. That affidavit must set out particulars of the employment and duties of "B. Irace" at the law firm of Arent Fox, 1675 Broadway, New York, New York, on Wednesday, March 15, 2006. If "B. Irace" was not employed at the law firm of Arent Fox on that date, counsel for Petitioner need only so state in an informal letter.

PBS duly filed the affidavit of Brian Irace on June 16, 2006, but simultaneously objected to its admission into the record of this case because, so PBS complained, the requirement that it explain precisely who "B. Irace" might be "unfairly shifted the evidentiary burden and forced PBS to assist the OIG's motion papers" and because "the affidavit is more prejudicial than probative and, if admitted, would substantially prejudice PBS's position."

It may be well to pause here to review PBS's position. It had denied that the receipt signed by "B. Irace" on March 15, 2006 constituted proof that SSA's March 14, 2006 letter had been received by its counsel on that date. Its denial archly disclaimed knowledge of any connections whatsoever among "B. Irace," the law firm Arent Fox, and counsel for PBS. When compelled to be more candid in its factual representations on the point, PBS protested on June 16, 2006 that requiring it to tell the truth unfairly shifted an evidentiary burden, and that the truth revealed by that compelled candor would "substantially prejudice" its position. These observations raise two obvious but troubling questions: first, since PBS had adamantly denied that service on "B. Irace" amounted to service on counsel for PBS, what possible shifting of any burden could be implied by requiring PBS to tell whether "B. Irace" was employed in the mailroom at Arent Fox; and second, how could a truthful answer to that question be prejudicial to PBS's position, unless that position were based on a paucity of candor so pronounced as to border on bad faith?

I overrule PBS's objection to the admission of Brian Irace's affidavit, for it bears obvious relevance to the question of service on PBS and to the question of good cause for PBS's late filing of its hearing request. Its probative value is substantial, and no conceivable prejudice can accrue to PBS by its admission. The affidavit of Brian Irace is here set forth in ipsissima verba:

AFFIDAVIT OF BRIAN IRACE

BRIAN IRACE, pursuant to 28 U.S.C. � 1746, declares as follows:

1. I am employed by the law firm of Arent Fox PLLC ("Arent Fox"), located at 1675 Broadway, New York, New York 10019.

2. My job title is Office Services Assistant.

3. My duties include receipt of mail and packages, copying, sending and receiving faxes. Once I receive mail or a package, I place it in the Arent Fox inter-office mail system for distribution to the intended recipient.

4. My job title and duties described above are the same today as they were on March 15, 2006.

5. There are five other people at Arent Fox who share my duties described above. Four of the five people share my title. The fifth individual has the title of Office Services Manager.

I declare under penalty of perjury that the foregoing is true and correct.

Executed this 16th day of June, 2006 at New York, New York.

(Signature of Brian Irace)
Brian Irace

When PBS filed its Memorandum on June 30, 2006, it did not discuss the Brian Irace affidavit or concede, even tacitly, that PBS received the SSA's demand letter on Wednesday, March 15, 2006.

PBS's Memorandum did admit that counsel for PBS wrote to SSA on Friday, March 17, 2006, expressing awareness of SSA's demand letter and some familiarity with its contents and import ("[T]his letter is not a response to the formal notice of proposed penalty, as required to request a hearing before an administrative law judge . . .") and asserting, "My client is reviewing its legal options and will be contacting your office at the appropriate time." Regardless of the scope of PBS's admission, however, I have found that PBS received SSA's letter on March 15, 2006. Implicit in that finding is my rejection of PBS's argument that receipt of SSA's demand letter by PBS's counsel and Arent Fox did not constitute valid service of it on PBS. That argument itself betrays another failure-of-candor by PBS.

The untimely hearing request PBS eventually did file on May 17, 2006 was signed by the addressee of the demand letter, who was also the author of the letter to SSA written on PBS's behalf on March 17, 2006. The hearing request extended to over 13 pages in length, and raised in detail a panoply of defenses to the proposed agency action. Some of those defenses raised legal questions or were based on mixed questions of fact and law. Some were based on PBS's assertions of constitutional defenses. But nowhere in PBS's hearing request can be found any stated or implied challenge to the effective service of SSA's demand letter on PBS. The omission of any such challenge from the hearing request, given that document's length and detail, cannot have been other than intentional. PBS's present claim that its lawyer was not the proper party to be served is transparently a lately-made change of tactics, a second guess untimely voiced. I conclude that service of the demand letter on PBS's lawyer on March 15, 2006 was effective as service on PBS as of that date, and I further conclude that any defect in that service was waived by PBS's tactical choice, "after reviewing its legal options," to omit such a claim from its hearing request.

At this point the three principles set out earlier in this discussion point to the only conclusion this record will support. First, PBS and its counsel will not lightly be assumed to have forfeited the right to contest SSA's proposed action, but the calendar cannot be stretched or bent: PBS's hearing request was two days late. I must not lightly conclude that PBS is without good cause for filing its hearing request out-of-time, but I can exercise my discretion to find good cause only on facts that show how events beyond PBS's control prevented its timely filing, and I have been shown no such facts. I must be solicitous of litigants' good faith efforts to perfect appeals, but I can find nothing to warrant extending that solicitude to PBS's efforts here. And, finally, as I review the facts that have been shown to me, I am able to discern only a series of tactical choices and lapses of candor by PBS and its counsel, the consequences of which I am unwilling to remit through an exercise of my discretion.

For the reasons set forth above, I grant Petitioner's Motion to Dismiss. The hearing request filed by Respondent People's Benefit Services, Inc., on May 17, 2006, must be, and is, DISMISSED.

Richard J. Smith

Administrative Law Judge

1. At the same time PBS filed its Opposition to Petitioner's Motion to Dismiss, PBS also filed Respondent's Counter-Motion to Dismiss. This Counter-Motion asserted first that the alleged imperfection in the service of SSA's demand letter somehow deprives this forum of jurisdiction over the hearing request PBS itself filed, and went on to assert that SSA's demand letter "fails to state a claim upon which relief may be granted." The result announced in this Decision makes consideration of Respondent's Counter-Motion to Dismiss unnecessary.