Where a man filed a lawsuit challenging the formula used by the Social Security Administration, or SSA, to calculate his children’s benefits, but he failed to exhaust the administrative process prior to filing suit, the suit was dismissed.
In October 2019, L.N.P. applied to the SSA for early retirement benefits, as well as “auxiliary” benefits for his two dependent children. SSA approved his application, advising him that after he turned 62, he would receive retirement benefits of $2,154 per month, and his children would each receive auxiliary benefits of $1,107 per month.
Believing that SSA had used an incorrect formula to calculate his children’s benefits and was underpaying them as a result, L.N.P. filed a request with SSA for reconsideration. An SSA employee informed him by telephone that his request was being denied. When
L.N.P. asked for a written confirmation of SSA’s decision, the employee indicated that she would request one but that it could take up to a year to be issued.
In July 2021, after not receiving a written decision for more than a year, L.N.P. commenced this action against SSA on behalf of himself, his two dependent children, and a putative class of similarly situated individuals. Shortly thereafter, SSA issued its written decision, affirming its denial of L.N.P.’s request and standing by its method of calculation.
The district court dismissed L.N.P.’s complaint without prejudice, concluding that L.N.P.’s failure to exhaust was “a jurisdictional problem requiring dismissal under [Rule] 12(b)(1)” and that L.N.P. had failed to satisfy the conditions necessary for excusing exhaustion. After L.N.P. filed a motion to alter or amend on the ground that the failure to exhaust was not jurisdictional, the district court stated that “whether … analyzing this [case] under 12(b)(1) or 12(b)(6),” it would “come to the same conclusion.”
By requiring a final decision of the commissioner as a condition for judicial review, 42 U.S.C. § 405(g) effectively mandates exhaustion of administrative remedies as a prerequisite for filing suit. The exhaustion requirement was designed to let SSA process claims in accordance with its complex procedures and apply its expertise before authorizing judicial review.
Yet, in exceptional circumstances, when the purposes of the administrative process have been fulfilled or when the commissioner determines she has no power to grant the relief requested, the commissioner may, in her discretion, waive the exhaustion requirement and allow the claim to proceed to court. Moreover, a court may excuse the exhaustion requirement. And there may also be an equitable justification for excusing exhaustion in the circumstance when engaging in the administrative process would result in irreparable injury to the claimant.
L.N.P. contends that the district court erred by “treating exhaustion as a jurisdictional question” and dismissing his complaint under Rule 12(b)(1), rather than addressing it under Rule 12(b)(6). L.N.P.’s argument is well taken. While the district court erroneously relied on Rule 12(b)(1) in the first instance to dismiss L.N.P.’s complaint, this court can, in the circumstances of this case, review the merits of the exhaustion requirement under Rule 12(b)(6). This is so because the merits of that defense can be fully adjudicated by looking to the face of the complaint to determine whether L.N.P. would be able to justify excusing compliance with § 405(g)’s exhaustion requirement.
The Supreme Court has identified three conditions that permit a court to excuse compliance with § 405(g), namely, when (1) “[t]he claims … are collateral to the claims for benefits”; (2) “the claimants … would be irreparably injured were the exhaustion requirement … enforced against them” and (3) “[t]he purposes of exhaustion would not be served by requiring” it, as exhaustion would be “futile.”
Regarding the first provision, L.N.P.’s complaint, which claimed systemic procedural violations that arose from his own claim for benefits, presents exactly the scenario that the Supreme Court has found does not justify bypassing the exhaustion requirement of § 405(g). Second, while L.N.P. argues that irreparable hardship would arise from “economic hardships” caused by waiting for back benefits, economic hardship of this type is not the kind of equitable condition for which courts have excused exhaustion of the administrative process.
Finally, L.N.P. argues that pursuing the administrative process would be futile because the SSA would not likely overturn its current illegal policy” that “has been ‘entrenched’ for decades.” L.N.P.’s speculation as to what SSA would do might well be correct. But it also might not be correct.
L.N.P. v. Kijakazi, Case No. 22-1187, April 7, 2023. 4th Cir. (Niemeyer), from EDVA at Alexandria (Nachmanoff). Cameron Reynolds Argetsinger II for Appellant. Hugham Chan for Appellees. VLW 023-2-099. 20 pp.