Opinion
Case No. 14-57189 Adversary Proceeding Case No. 15-04115
04-15-2016
In re: James Earl Williams, Debtor. State of Michigan, Department of Licensing & Regulatory Affairs, Unemployment Insurance Agency, Plaintiff, v. James Earl Williams, Defendant.
Chapter 7
OPINION AND ORDER DENYING CROSS MOTIONS FOR SUMMARY JUDGMENT
I. INTRODUCTION
James Earl Williams applied for and received state unemployment benefits based on his certification that he was ready, able, and willing to work. Around the same time, Williams also applied for Social Security disability ("SSD") benefits. The State of Michigan ("the Agency") contends that Williams' SSD application is wholly inconsistent with a finding of work readiness, and his unemployment benefits were fraudulently obtained. It administratively determined that Williams owes restitution of the benefit payments, plus a statutory penalty and interest. Williams says given his age and medical condition, his actions were consistent and proper.
The Agency filed an adversary proceeding and seeks a determination that Williams' debt is nondischargable under 11 U.S.C. §§523(a)(2)(A) and 523(a)(7). Cross motions for summary judgment are pending. Because there is a narrow set of circumstances in which it is not facially inconsistent to receive unemployment benefits while applying for SSD benefits, and there are genuine issues of material facts as to whether Williams' situation fits within those circumstances, the Court DENIES both motions.
II. BACKGROUND
Williams applied for unemployment benefits and certified-through a questionnaire-that he was able and willing to work full-time every day. Of the sixteen certification questions, none asked whether he had applied for SSD benefits.
On August 20, 2013, the Agency questioned Williams' eligibility for unemployment benefits. Williams provided the Agency medical records suggesting that he had some medical issues that might effect his ability to work. Still, based at least in part on his certifications, the Agency continued to provide Williams unemployment benefits for the weeks ending August 24, 2013 through January 4, 2014.
Meanwhile, on November 21, 2013, Williams filed an application for SSD benefits, alleging his disability began on April 13, 2013. Williams did not tell the Agency about his SSD application. On June 18, 2015, an administrative law judge ("ALJ") concluded that Williams "has not been under a disability within the meaning of the Social Security Act" for the following reasons:
Williams filed a second application for SSD benefits on December 9, 2013, alleging his disability began April 13, 2013.
1. [Williams] does not have an impairment or combination of impairments that significantly limits his ability to perform basic work activities;Williams appealed on the grounds that: (1) the ALJ erred in not finding his lumbar degenerative disk disease and adjustment disorders severe impairments; and (2) the ALJ failed to consider the side effects of his medications. Williams' appeal also states:
2. [T]here are no impairments, which more than minimally affect [William's] ability to perform basic work activities; and
3. [Williams'] physical and mental impairments, considered singly and in combination, do not significantly limit [Williams'] ability to perform basic work activities.
This list is not exhaustive since the decision contains numerous errors. For all the foregoing reasons and for any other reason not stated herein that would be the basis for reversal, we respectfully request that the Appeals Council reverse the ALJ's decision outright and award benefits or, in the alternative, remand this case for another hearing and for further evaluation as set forth herein, in accordance with the administration rules and regulations.(Emphasis added).
In an administrative determination dated October 23, 2014, the Agency found that due to Williams' "illness, injury or work restrictions," he was unable to perform full-time work; therefore, he was ineligible for unemployment benefits beginning August 18, 2013. The Agency also found that Williams "intentionally misled and/or concealed information to obtain benefits [he was not] entitled to receive." Williams was ordered to pay $4,560.00 in restitution and $18,240.00 in penalties for a total of $22,800.00. He did not appeal these findings.
III. STANDARD OF REVIEW
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, summary judgment must be granted "if the movant shows that there are no genuine issues as to any material fact in dispute and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); CareToLive v. Food & Drug Admin., 631 F.3d 336, 340 (6th Cir. 2011). The standard for determining whether summary judgment is appropriate is whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Pittman v. Cuyahoga County Dep't of Children Services, 640 F.3d 716, 723 (6th Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)).
The Court must draw all reasonable inferences in favor of the party opposing the motion. Pluck v. BP Oil Pipeline Co., 640 F.3d 671, 676 (6th Cir. 2011). However, the nonmoving party may not rely on mere allegations or denials, but must "cit[e] to particular parts of materials in the record" as establishing that one or more material facts are "genuinely disputed." Fed. R. Civ. P. 56(c)(1). A mere scintilla of evidence is insufficient; there must be evidence on which a jury could reasonably find for the non-movant. Hirsch v. CSX Transp., Inc., 656 F.3d 359, 362 (6th Cir. 2011).
IV. ANALYSIS
A. The Agency's Collateral Estoppel Argument Fails
As an initial matter, the Agency argues that Williams is estopped from contesting the findings it made on October 23, 2014: that Williams intentionally mislead the Agency and concealed information to obtain benefits. The Court disagrees.
When seeking to preclude the relitigation of an issue in an administrative decision, the following elements must be satisfied: (1) the administrative decision must have been adjudicatory in nature; (2) it must provide a right to appeal; and (3) the legislature must have intended to make the decision final absent an appeal. Pack v. Mt. Morris Consol. Sch., 487 F. App'x 267, 270 (6th Cir. 2012) (citing Nummer v. Treasury Dep't, 448 Mich. 534 (1995)). "An administrative board acts in a judicial capacity when it hears evidence, gives the parties an opportunity to brief and argue their versions of the facts, and the parties are given an opportunity to seek court review of any adverse findings." Nelson v. Jefferson County, Ky., 863 F.2d 18, 19 (6th Cir. 1988); see also Nummer v. Treasury Dep't, 448 Mich 534, 542-43 (1995) (finding the proceeding was adjudicatory in nature because plaintiff was represented by counsel, called witnesses, and had a full hearing on the merits of his claim).
The Agency's decision was not adjudicatory in nature: its findings were made without affording Williams a hearing. Therefore, Williams is not collaterally estopped from arguing he did not fraudulently obtain unemployment benefits.
B. There is a Question of Fact as to Whether Williams Fraudulently Obtained Unemployment Benefits under 11 U .S.C. § 523(a)(2)(A)
Section 523(a)(2)(A) provides that a debtor is not discharged from any debt "for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by[] false pretenses, a false representation, or actual fraud[.]" To except a debt from discharge under section 523(a)(2)(A), the Agency must prove by a preponderance of the evidence:
(1) the debtor obtained money through a material misrepresentation that, at the time, the debtor knew was false or made with gross recklessness as to its truth; (2) the debtor intended to deceive the creditor; (3) the creditor justifiably relied on the false representation; and (4) its reliance was the proximate cause of loss.Rembert v. AT&T Universal Card Services (In re Rembert), 141 F.3d 277, 280-81 (6th Cir. 1998).
There is a narrow set of circumstances in which it may not be inconsistent for an applicant for unemployment benefits to certify that he is able to work while, at the same time-because of his age and the nature of his impairments-believe he is disabled for purposes of obtaining SSD benefits. The Code of Federal Regulations provides that an individual approaching advanced age with a severe impairment may be disabled for purposes of the Social Security Administration ("SSA")-though technically able to work in some capacity: "If you are closely approaching advanced age (age 50-54), we will consider that your age along with a severe impairment(s) and limited work experience may seriously affect your ability to adjust to other work." 20 C.F.R. § 404.1563(d). Thus, an individual who meets this criteria may be able to truthfully certify to the Agency that he is ready, willing, and able to work, but nevertheless be deemed disabled under the SSA.
The ALJ indicated in her determination that Williams "acknowledges finding a job, but not wanting it because it did not pay enough-not because he was unable." --------
When Williams applied for SSD benefits, he was a 52-year-old man with adjustment disorder, liver disease, and hypertension. Therefore, he may have satisfied section 404.1563(d) and been "disabled" under the SSA, while still able to work full-time for unemployment purposes. Nonetheless, the Agency argues that Williams made two material misrepresentations: (1) that he could work; and (2) that he failed to disclose that he applied for SSD benefits. See Heide v. Juve (In re Juve), 761 F.3d 847, 851 (8th Cir. 2014) ("A debtor's silence as to a material fact can constitute a false representation under 523(a)(2)(A).").
The Court cannot rule as a matter of law that Williams made material misrepresentations because there are genuine issues of material facts as to:
1. the reason Williams appealed the ALJ's decision (i.e., was it because he believed he had a substantive disability and was unable to work; or was it because he believed he could work, and was only disabled based on section 404.1563(d)); andSee Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 807 (1999) (summary judgment is inappropriate when an individual provides a reasonable explanation for the inconsistency in the applications); see also Chief Administrative Judge Frank A. Cristaudo's Memorandum dated August 9, 2010 ("[r]eciept of unemployment benefits does not preclude the receipt of Social Security disability benefits. . . . [I]ndividuals need not choose between applying for unemployment insurance and Social Security disability benefits"); Luther v. Comm'r of Soc. Sec., No. 11-13911, 2012 WL 3717769, at *8 (E.D. Mich. June 28, 2012) ("the fact that Plaintiff collected unemployment benefits does not preclude the receipt of Social Security Disability benefits") (internal quotations omitted); Ross v. Acrisure P1, L.L.C., No. 315347, 2014 WL 3973380, at *4 (Mich. Ct. App. Aug. 14, 2014) (the Agency recognized that applying for and receiving SSD benefits did not necessarily mean a claimant is unable to work).
2. whether Williams had an obligation to report information that was not included on the Agency's questionnaire.
V. CONCLUSION
Because there is a narrow set of circumstances in which it is not facially inconsistent to receive unemployment benefits while applying for SSD benefits, and there are genuine issues of material facts as to whether Williams' situation fits within those circumstances, the Court DENIES both motions. A scheduling conference will be held on April 25 , 2016 at 2:00 p.m.
IT IS ORDERED. Signed On April 15, 2016
/s/Mark A. Randon
Mark A. Randon
United States Bankruptcy Judge