OTIS R. BOWEN, SECRETARY OF HEALTH AND HUMAN SERVICES, PETITIONER V. DAVID DIXON, ET AL. No. 86-22 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 Second 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 Second Circuit in this case. PARTIES TO THE PROCEEDING The petitioner is the Secretary of Health and Human Services. The named respondents are David Dixon, Ricardo Ramirez, Ophelia Casey, Dominga Carrasquillo, Joanne Lockett, Eulalia Terez, Carmen Feliciano and Tomasina Gonzalez. In addition, the district court certified the following class of plaintiffs (App., infra, 69a-70a): All persons in the State of New York who have filed or will file applications for disability benefits under Title II and/or Title XVI of the Social Security Act, and whose benefits have been or will be denied pursuant to the policies set forth in 20 C.F.R. Sections 404.1520(c) and .1521, 416.920(c) and .921 (1982), and Social Security Ruling 82-55 (1982); and all recipients of such benefits who have made or will make claims for continued benefits, and whose benefits have been or will be terminated pursuant to the same policies. The plaintiff class does not include, at this time, any such persons who received decisions of the Secretary on or before July 19, 1983 and 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 the receipt of such decision. 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 OPINIONS BELOW The opinion of the court of appeals (App., infra, 1a-15a) is reported at 785 F.2d 1102. The June 22, 1984 opinion of the district court on respondents' motions for class certification and a preliminary injunction (App., infra, 18a-58a) is reported at 589 F. Supp. 1494, and the June 22, 1984 opinion of the district court on the motions by certain individual respondents to intervene (App., infra, 59a-67a) is reported at 589 F. Supp. 1512. The July 26, 1984, order of the district court granting the motions for class certification and a preliminary injunction (App., infra, 68a-88a) and the July 22, 1985, order of the district court denying the Secretary's motion to vacate the preliminary injunction (App., infra, 89a-91a) are unreported. JURISDICTION The judgment of the court of appeals was entered on March 7, 1986 (App., infra, 16a-17a). By order dated May 27, 1986, Justice Marshall extended the time within which to file a petition for a writ of certiorari to and including July 3, 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, 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, 92a-99a. QUESTION Presented Whether the court of appeals correctly affirmed the district court's preliminary injunction barring the Secretary 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 York-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 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. (& 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 physical activities such as walking, standing, lifting, etc.; 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 basic work activities, he is found not to be disabled on this ground alone, without a 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 then must determine at step 3 whether the impairment is so severe as to be the equivalent of 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. This class action -- which consists of four consolidated suits -- was filed on September 23, 1983, in the United States District Court for the Southern District of New York to challenge the "severity" step of the sequential evaluation process. In an opinion dated June 22, 1984, the district court granted respondents' motions for class certification and a preliminary injunction (App., infra, 18a-58a). a. The district court certified a class of all persons in New York who: (i) have filed or will file applications for disability benefits under Title II or Title XVI of the Act and whose applications have been or will be denied on the basis of the severity regulations, or (ii) have received disability benefits that have been or will be terminated pursuant to the same policies (App., infra, 55a). But the district court provided that the class "at this time" does not include any persons who received decisions of the Secretary on or before July 19, 1983, and failed to file a complaint in federal district court or to appeal to the next level of administrative review within 60 days (App., infra, 70a). The cut-off date of July 19, 1983, which is approximately 60 days before the complaint was filed in this case, was intended to comply with the requirement in 42 U.S.C. 405(g) that a claimant seek judicial review within 60 days of the Secretary's final decision (App., infra, 28a & n. 18). However, the court dispensed with the other prerequisite to suit that ordinarily is applicable 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 claims for benefits. The court appeared to acknowledge that respondents' challenge to the "severity" regulations was not collateral to their substantive claims for benefits and that exhaustion of administrative remedies was not futile because benefits might be awarded or denied on some other basis (App., infra, 29a-30a & n.19). Nevertheless, the court concluded that exhaustion should not be required because class members would experience financial hardship if they did not receive disability benefits and because the ALJs and the Appeals Council are not free to disregard applicable regulations when adjudicating claims for benefits (id. at 30a-31a). b. The district court determined that a preliminary injunction should be entered because, in its view, the class members would suffer irreparable injury without that relief and were likely to succeed on the merits of their contention that the severity regulations are inconsistent with the Social Security Act. The court read 42 U.S.C. 423(d)(2)(A) and 1382c(a)(3)(B) to require the decision-maker to consider the vocational factors of age, education, and work experience in connection with every claim for benefits, and it therefore held that benefits cannot be denied solely on the basis of the medical severity of the impairment (App., infra, 33a-35a). The district court rejected the Secretary's contention that the regulations are a valid means of screening out those claimants who have slight or de minimis impairments. Although it recognized that the Secretary had explained the regulations on that basis when they were promulgated in 1978 (see 43 Fed. Reg. 9284, 9296), it objected to the fact that "the regulation itself does not use the Secretary's language" (App., infra, 36a). The court further recognized that the severity step in the sequential evaluation process was supported by the legislative history of the 1967 amendments to the Social Security Act and that the predecessor regulations had been promulgated in 1968 to implement those amendments. But the court nevertheless believed that the language of 42 U.S.C. 423(d)(2)(A) and 1382c(a)(3)(A) rendered the regulations invalid (App., infra, 22a-23a, 39a-42a). /2/ c. On July 25, 1984 the district court entered a broad order that enjoins the Secretary from denying or terminating benefits on the basis of the policies in the challenged regulations and directs retroactive relief for all class members whose benefits already have been denied or terminated on the basis of those policies (App., infra, 68a-88a). In particular, the court ordered the Secretary to identify all class members within either 30 days or 75 days; to reopen the administrative decisions denying or terminating benefits to class members and to readjudicate those claims; and to reinstate benefits, as of June 22, 1984, to all class members whose benefits were terminated (id. at 71a-74a). 3. In a brief order dated July 22, 1985, the district court denied the Secretary's motion to vacate the preliminary injunction, rejecting the contention that the severity step of the sequential evaluation process was ratified by the Social Security Disability Benefits Reform Act of 1984, Pub. L. No. 98-460, 98 Stat. 1794 et seq. (App., infra, 89a-91a). Section 4 of the 1984 Act requires the Secretary, effective December 1, 1984, to consider the combined effect of impairments in determining whether the claimant's impairments are severe (98 Stat. 1800-1801). /3/ The district court acknowledged that Congress approved the sequential evaluation process when it passed the 1984 Act, but it concluded that Congress did not actually validate the severity step itself (App., infra, 91a). 4. The court of appeals affirmed the preliminary injunction and the district court's refusal to vacate that injunction (App., infra, 1a-15a). The court of appeals acknowledged the Secretary's arguments that the challenged regulations "are fully consistent with the Act" and that the district court "should have deferred to the Secretary's longstanding view that medical evidence alone may justify a finding that the claimant is not disabled within the meaning of the Act" (id. at 10a). But "(w)hether or not these substantive contentions may prevail on the ultimate decision of the merits of (respondents') claims," the court stated, the preliminary injunction should not be disturbed because, in its view, the district court did not abuse its discretion in entering the injunction (id. at 10a-11a). In a brief discussion that did not mention the origins of the relevant statutory and regulatory provisions, the court of appeals simply stated that the district court had not applied "erroneous legal principles" regarding preliminary injunctions generally (id. at 11a-12a). The court also was "not persuaded" (id. at 12a) that the legislative history of the 1984 Act rendered the preliminary injunction improper, observing that "in the absence of greater clarity," the district court was not required to conclude that the legislative history constituted a "definitive ratification" of the principle embodied in the severity regulations that benefits may be denied without a specific consideration of the claimant's age, education, and work experience (id. at 12a, 14a). REASONS FOR GRANTING THE PETITION 1. The Court has granted certiorari in Bowen v. Yuckert, No. 85-1409 (May 19, 1976), to consider the validity of the regulations under which Social Security benefits may be denied if the claimant does not have a medically "severe" impairment. There is no occasion for plenary review of that issue here as well. The Court therefore should hold the petition in this case and dispose of it as appropriate in light of its decision in Yuckert. 2. a. Aside from the erroneous ruling below regarding the validity of the severity regulations, the injunction affirmed by the court of appeals was improper in two other respects: First, the district court erroneously included in the class and granted relief to numerous claimants who did not exhaust their administrative remedies. As the district court appears to have recognized (App., infra, 29a-30a & n.19), respondents' challenge to the validity of the severity regulations is not at all collateral to their claims for benefits; that challenge goes to the very basis of the administrative decisions denying their claims. Moreover, respondents challenge not a "secret" policy, as the Court found in Bowen v. City of New York, No. 84-1923 (June 2, 1986), slip op. 12-13, 17, but a policy embodied in public regulations and elaborated upon in formal Social Security Rulings. Similarly, although the Court sustained the district court's findings in City of New York that the class members would suffer a medical setback if they were required to exhaust their administrative remedies, such that the pursuit of administrative remedies would itself affirmatively cause harm (compare FTC v. Standard Oil Co., 449 U.S. 232, 242, 244 (1980)), in this case the injuries respondents allege are the financial consequences that result from the denial of their claims for benefits on the merits at a preliminary stage of the administrative review process. If those consequences, which Congress must have anticipated, were sufficient to constitute "irreparable injury" that permitted a court to excuse the failure by claimants to pursue their administrative remedies, the exhaustion requirement under 42 U.S.C. 405(g) would be largely vitiated under the disability and SSI programs. /4/ Second, although the 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. 1328, 1333 (1983) (Rehnquist, Circuit Justice). The district court, affirmed by the court of appeals, has barred the Secretary from utilizing the severity regulations in adjudicating all disability claims in New York, even though neither court has finally ruled on the validity of the regulations. Indeed the court of appeals relied on the supposedly "preliminary" nature of the relief to avoid addressing the merits of the Secretary's arguments. As a practical matter, that relief is not "preliminary" for the individual claimants affected, because their claims must be adjudicated, and either granted or denied, without reference to the challenged regulations. Cf. Heckler v. Redbud Hospital District, No. A-32 (July 24, 1985), slip op. 5-6 (Rehnquist, Circuit Justice), motion to vacate denied (August 28, 1985). Moreover, the regulations the Secretary is prohibited from applying rest on a principle -- that benefits may be denied on the basis of medical evidence alone, without a specific consideration of the claimant's age, education, and work experience -- that has been an integral part of the disability program virtually since its inception and has been embodied in formal regulations for more than 25 years. See Yuckert Pet. 11-16. In addition to this broad prospective relief, the courts below also erred in requiring, incident to a supposedly "preliminary" injunction, the readjudication of the claims of all class members whose benefits were denied in reliance on the severity regulations and the reinstatement of benefits to class members whose benefits were terminated. b. Although we believe that the court of appeals clearly erred in these additional respects when it affirmed the district court's preliminary injunction, we do not seek review at this time on the issues of exhaustion of administrative remedies and the proper basis and scope of a preliminary injunction in this setting. The retroactive relief ordered by the district court for class members whose benefits were denied or terminated was not stayed, and that relief is now being accomplished. /5/ All that then will remain is the prospective effect of the injunction. If the Court sustains the validity of the severity regulations in Yuckert, the preliminary injunction in the instant case must be reversed on the merits, irrespective of the other errors committed by the court below. 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 ruling in New York, 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 JULY 1986 /1/ As we have explained in our certiorari petition in Yuckert (at 5 n.1), 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. However, that difference in sequence does not affect the question whether the absence of a "severe" impaRment is by itself sufficient to support a determination that a claimant is not disabled. /2/ The district court also invalidated Social Security Ruling (SSR) 82-55, which gave additional guidance to adjudicators regarding the severity step of the sequential evaluation process (App., infra, 46a-50a). SSR 82-55 provided, inter alia, that the combined effect of several impairments would not be considered unless each such impairment, considered separately, was severe. See also 20 C.F.R. 404.1522, 416.922 (1984). SSR 82-55 was superseded by statutory amendments, effective December 1, 1984, that require the consideration of the combined effect of several impairments (see page 8 & note 3, infra), and SSR 82-55 therefore has been formally rescinded (SSR 85-III-II, at 47 (Apr. 1985)). As a result, this aspect of the district court's decision is not in issue here. /3/ Subsections (a) and (b) of Section 4 of the 1984 Act (98 Stat. 1800) add a new paragraph (C) to Section 223(d) of the Social Security Act (42 U.S.C. (Supp. II) 423(d)(2)) and a new paragraph (G) to Section 1614(a)(3) of that Act (42 U.S.C. (& Supp. II) 1382c(a)(3)). 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) 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." /4/ Congress did not contemplate any such exception from exhaustion requirements for disability or SSI claimants, because it specifically directed that judicial review would be available under both programs in the same manner as was then generally provided in 42 U.S.C. 405(g), which requires a "final decision" as a prerequisite to judicial review. See 42 U.S.C. (& Supp. II) 423(d), 1383(c)(3). /5/ Independently of the preliminary injunction affirmed by the court of appeals, all class members in this case whose benefits were terminated are entitled under Section 2(d) of the 1984 Act (98 Stat. 1797) to have their claims reopened and readjudicated because they also were members of the certified class in Schisler v. Heckler, 107 F.R.D. 609 (W.D.N.Y. 1984), aff'd, 787 F.2d 76 (2d Cir. 1986) (petition for rehearing pending), which was an action raising the question whether medical improvement must be shown in order for a claimant's benefits to be terminated. In addition, class members in this case who sought benefits on the basis of a mental impairment have also been affected by the new standards under Section 5 of the 1984 Act (98 Stat. 1801) for evaluating such claims. See Bowen v. City of New York, slip op. 18 n.14. We have been informed by the Department of Health and Human Services that the claims of class members affected by Sections 2 and 5 of the 1984 Act are now being readjudicated. APPENDIX