United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 10-3278
___________
Deanna K. Sipp, *
*
Plaintiff - Appellant, *
*
v. * Appeal from the United
* States District Court for
Michael J. Astrue, Social Security * the District of Nebraska.
Commissioner, *
*
Defendant - Appellee. *
___________
Submitted: May 11, 2011
Filed: June 13, 2011
___________
Before MURPHY, BEAM, and COLLOTON, Circuit Judges.
___________
MURPHY, Circuit Judge.
Deanna K. Sipp received disability insurance benefits under the Social Security
Act between September 1994 and March 2004. She was intermittently employed
during that time. After an investigation, the Social Security Administration (SSA)
notified Sipp in March 2004 that she was ineligible for disability benefits because her
employment income had exceeded SSA limits. SSA also determined that Sipp was
required to repay more than $60,000 in overpaid benefits. Sipp sought a waiver of
overpayment recovery.
An administrative law judge (ALJ) denied her request, and the appeals council
declined to hear the case. Sipp then sought judicial review. After the district court1
remanded the case to the agency for consideration of evidence that the ALJ’s first
decision had neglected to address, the ALJ again denied the waiver. The ALJ also
concluded that she lacked authority to consider Sipp’s new argument contesting the
amount of the overpayment itself, which she had raised for the first time in her district
court complaint. After the appeals council again denied review, the district court
entered judgment for SSA, affirming the ALJ on both issues. Sipp appeals. We
affirm.
I.
Sipp suffers from profound hearing loss. She received social security disability
benefits from 1978 to 1982 and 1994 to 2004. For each round of benefits she
completed an SSA benefit application form in which she agreed to notify the agency
of changes in her employment status. She acknowledged in each application that
employment changes could affect her eligibility for benefits.
After she began receiving benefits in 1994, Sipp started working part time at
public schools in Lincoln, Nebraska. She worked there between August 1995 and
June 1996, but she made no written report to SSA about that employment. In
February 2002, SSA asked Sipp to report her work history for 2000 and 2001. Sipp
reported that she had worked at a summer camp for children with hearing loss in July
and August of both 2000 and 2001. Sipp completed a second work activity report in
August 2003, which explained that she had worked at the summer camp every year
from 1996 to 2001. The second report also informed SSA that Sipp worked as an
1
The Honorable Laurie Smith Camp, United States District Judge for the
District of Nebraska.
-2-
office clerk starting in April 2003, but it did not mention her work at the Lincoln
public schools.
Following Sipp’s second report, SSA sought pay records from all of her
employers to determine if her work activity had made her ineligible for benefits.
Disability beneficiaries are entitled to a trial work period in which they can work for
nine months within a sixty month span without losing benefits. See 20 C.F.R. §
404.1592. At the conclusion of the trial work period, beneficiaries receive a thirty six
month extension of eligibility. See id. § 404.1592a. During the extension of
eligibility, SSA pays benefits for any month in which the beneficiary did not receive
employment income above a certain threshold. See id. SSA’s investigation revealed
that Sipp had exhausted her trial work period by May 1996. Her extension of
eligibility began immediately thereafter, and she exceeded the income threshold for
the first time in July 1997 because of her summer camp work. For SSA’s purposes
her disability ceased that month. See id. Her extension of eligibility continued
through May 1999. As soon as she began receiving employment income above the
threshold again, in July 1999, her entitlement to benefits ended. See id.
SSA informed Sipp in March 2004 that she was no longer eligible for benefits
and that she had already received some payments to which she was not entitled. SSA
sent her a letter in July 2005 advising her that she must repay $63,406.90 in overpaid
benefits. In the same letter, SSA told her that she could contest the debt by filing
within sixty days a request for reconsideration disputing the amount of the
overpayment or a request asking SSA to waive her obligation to repay.
Sipp filed a request for waiver, but not for reconsideration. She checked a box
on the waiver form indicating that the reason for her request was that the
overpayment was not her fault and that she could not afford to repay the money. On
the form she stated that she could not recall whether she had reported her July 1997
-3-
work activity to SSA. She wrote that the overpayment was not her fault because she
had worked for only five weeks during the summer of 1997.
Sipp attended a personal conference with an SSA employee to discuss her
waiver request. After that meeting, SSA concluded that Sipp could not prove she had
timely reported her work and thus could not establish that she was not at fault for its
overpayment. SSA also determined that Sipp could repay at least some money
without undergoing financial hardship. Sipp then sought review from an ALJ. Her
attorney’s prehearing memorandum listed waiver as the only issue to be decided. For
substantially the same reasons given by SSA after her personal conference, the ALJ
held that Sipp was not entitled to a waiver. The appeals council denied Sipp’s request
for review, which had again listed waiver as the only issue to be decided.
Sipp retained new counsel and invoked her right to judicial review in federal
district court. Her complaint there challenged for the first time whether SSA had
properly calculated the amount of the overpayment itself, as well as its decision to
deny her a waiver of overpayment recovery. Before the district court took any action
on the merits, SSA moved that the case be remanded because the ALJ had
inadvertently overlooked Sipp’s February 2002 work activity report when evaluating
whether she had adequately reported her employment to the agency. The district
court retained jurisdiction while granting the request for remand, directing the ALJ
to consider the 2002 report in her next decision.
The ALJ held a supplemental hearing in July 2009. Sipp argued that the
hearing should address not only her request for waiver, but also her new challenge to
the overpayment itself. The ALJ found that her authority was limited to considering
the waiver request, which she again denied after reviewing the 2002 report. The
appeals council rejected Sipp’s request for review, and the case returned to the district
court.
-4-
The district court affirmed the ALJ’s determination that Sipp was barred from
arguing issues other than her waiver request. It declined to address issues that were
beyond the scope of the remand and were not exhausted administratively within the
limitations period. The court rejected Sipp’s argument that principles of equitable
tolling should excuse her failure to pursue timely administrative remedies. The court
addressed the merits of Sipp’s request for a waiver of overpayment recovery, holding
that substantial evidence supported the ALJ’s decision to reject her request.
Following the district court’s decision in favor of SSA, Sipp moved to alter or amend
the judgment. The district court denied that motion.
Sipp now appeals on two separate issues. First, she challenges the district
court’s refusal to consider the merits of her attack on the overpayment itself. Second,
she argues that she should have been granted a waiver of overpayment recovery.
II.
Whether the district court should have considered the merits of Sipp’s
overpayment challenge is a question of “[s]ubject matter jurisdiction based upon
exhaustion of administrative remedies,” which we review de novo. In Home Health,
Inc. v. Shalala, 272 F.3d 554, 559 (8th Cir. 2001).
Federal courts have jurisdiction over social security claims under 42 U.S.C. §
405(g), which permits judicial review of a final decision of the social security
commissioner. The commissioner’s decision is not final unless the claimant has
presented a claim for benefits to the commissioner and has exhausted the prescribed
administrative remedies before seeking judicial review. Schoolcraft v. Sullivan, 971
F.2d 81, 84-85 (8th Cir. 1992). The presentation requirement must be met in every
case, and a plaintiff’s failure to present a claim to the commissioner divests federal
courts of jurisdiction entirely. Mathews v. Eldridge, 424 U.S. 319, 328 (1976). The
administrative exhaustion requirement can however be excused, either by consent of
-5-
the commissioner or in exceptional circumstances by the court. Schoolcraft, 971 F.2d
at 85 & n.7.
Sipp did not exhaust her administrative remedies with respect to her challenge
to the overpayment. A request for waiver of overpayment is distinct from a request
for reconsideration. See 20 C.F.R. § 404.902(j)-(k). A request for reconsideration
is the proper vehicle for a challenge to an overpayment determination. See id. §
404.502a(f), 404.907. Sipp received notice of the overpayment and failed to request
reconsideration within sixty days. At the end of that period, SSA’s initial
overpayment determination became binding and not subject to judicial review. See
id. § 404.905.
Sipp argues that she did exhaust her administrative remedies, pointing out that
she had written on the waiver request form that the overpayment was not her fault
because she had worked for only five weeks in the summer of 1997. She claims that
her written comment effectively questioned SSA’s determination of when her
disability had ended, which would affect its calculation of the overpayment. In her
view, this provided notice to SSA that she was challenging the overpayment.
Even if Sipp’s comment on the waiver form were to be construed as a request
for reconsideration, however, she failed to pursue that request at any administrative
level prior to remand. Had she done so, the administrative exhaustion requirement
would have served its purposes of “afford[ing] the parties and the courts the benefit
of [the agency’s] experience and expertise” and “compil[ing] a record which is
adequate for judicial review.” Weinberger v. Salfi, 422 U.S. 749, 765 (1975). Sipp
did not exhaust her administrative remedies. Thus, the agency’s expertise has not
been brought to bear on her challenge to the overpayment and there is no record for
us to review.
-6-
Sipp next argues that SSA may not assert the administrative exhaustion defense
because it failed to do so the first time the case came before the district court. She
bases her argument on the general rule that “failure to plead an affirmative defense
results in a waiver of that defense.” First Union Nat’l Bank v. Pictet Overseas Trust
Corp., 477 F.3d 616, 622 (8th Cir. 2007). SSA points out that Sipp did not present
that argument to the district court while the case was before it. She only attempted
to raise it in a motion to alter the district court’s final judgment under Federal Rule
of Civil Procedure 59(e). That motion was denied. Prior to that time, and without the
benefit of argument from the parties, the district court appeared to treat the
administrative exhaustion requirement not as a forfeitable affirmative defense, but as
a condition of subject matter jurisdiction which cannot be waived by a party’s failure
to raise it. See, e.g., Beaulieu v. Minnesota, 583 F.3d 570, 574 (8th Cir. 2009). We
need not decide that question because an issue first raised on a Rule 59(e) motion is
not preserved for our de novo review. Winthrop Res. Corp. v. Eaton Hydraulics, Inc.,
361 F.3d 465, 469 (8th Cir. 2004).
As the district court explained, Rule 59(e)’s limited purpose is to allow the trial
court to correct manifest errors of law or fact. Johnson v. Chater, 108 F.3d 942, 945
n.3 (8th Cir. 1997). The district court’s denial of such a motion is reviewed for a
clear abuse of discretion. Hagerman v. Yukon Energy Corp., 839 F.2d 407, 413-14
(8th Cir. 1988). Sipp has not shown that the district court abused its discretion in
denying her motion to alter the judgment. Nor has she argued that this court should
give fresh consideration to her argument because manifest injustice would otherwise
result. Cf. Gragg v. Astrue, 615 F.3d 932, 938 (8th Cir. 2010).
Finally, Sipp urges the court to use its equitable powers to excuse her failure
to pursue her challenge to the overpayment through administrative channels within
the appropriate time period. The district court correctly concluded that equitable
tolling is not available in this case. Equitable tolling can sometimes allow a claim
otherwise barred by a limitations period to proceed, Medellin v. Shalala, 23 F.3d 199,
-7-
202 (8th Cir. 1994), but circumstances that might justify the application of this
“extraordinary remedy,” such as “misconduct on the part of the agency or gross, but
good-faith, error on the part of the claimant,” id. at 204, are not present in this case.
We conclude that the commissioner made no judicially reviewable “final
decision” on Sipp’s challenge to the overpayment. Because Sipp did not timely
challenge the overpayment, she failed to meet the administrative exhaustion
requirement. That failure can be overcome only if SSA or the court consents, and
neither entity has done so. Since no final decision was made, the district court lacked
jurisdiction under § 405(g) to consider Sipp’s challenge to the overpayment, and its
ruling should be affirmed.
III.
Sipp also appeals the district court’s holding that she was not entitled to a
waiver of overpayment recovery. On this issue SSA does not dispute that Sipp has
exhausted her administrative remedies and obtained a final decision. Having
jurisdiction over this claim, we review de novo the district court’s judgment
upholding the ALJ’s decision to deny the waiver. Gonzales v. Barnhart, 465 F.3d
890, 894 (8th Cir. 2006). We conduct our review by deciding whether substantial
evidence on the record as a whole supports the ALJ’s decision. Neal ex rel. Walker
v. Barnhart, 405 F.3d 685, 688 (8th Cir. 2005). When an individual seeks a waiver
of overpayment recovery, she has the burden of proof. See Coulston v. Apfel, 224
F.3d 897, 900 (8th Cir. 2000) (per curiam).
Sipp was entitled to waiver only if she was “without fault” in causing the
overpayment. 42 U.S.C. § 404(b). Fault includes the “[f]ailure to furnish information
which [the overpaid individual] knew or should have known to be material.” 20
C.F.R. § 404.507(b).
-8-
Substantial evidence supports the ALJ’s decision denying waiver in this case.
Sipp did not provide documentation of any of her work to SSA until February 2002
despite intermittent employment from 1995 on. The ALJ properly found that Sipp
knew or should have known that her work information was material because of her
agreement to report such work in her 1978 and 1994 benefit applications. There was
no evidence that she did not understand her obligation to report. Sipp is not entitled
to a waiver of overpayment recovery because substantial evidence shows that she was
not without fault in causing the overpayment.
For these reasons, we affirm the judgment of the district court.
______________________________
-9-