Olson v. Astrue, No. 2:2012cv00563 - Document 27 (E.D. Wash. 2014)

Court Description: DECISION and ORDER: Granting (ECF No 15 ) Plaintiff's Brief (construed as Motion for Summary Judgment) and Denying (ECF No 22 ) Defendant's Motion for Summary Judgment Signed by Magistrate Judge Victor E. Bianchini. (LS, Courtroom Deputy)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 EASTERN DISTRICT OF WASHINGTON 6 7 8 Case No. 12-CV-00563-VEB MARILYN OLSON, on behalf of Steven W. Olson, deceased, 9 Plaintiff, 10 vs. 11 DECISION AND ORDER CAROLYN W. COLVIN, Acting Commissioner of Social Security, 12 13 14 Defendant. I. INTRODUCTION 15 Plaintiff Marilyn Olson commenced this action on behalf of Steven W. Olson, 16 her late husband, pursuant to 42 U.S.C. §§ 405 (g) and 1383 (c)(3) seeking judicial 17 review of the Commissioner of Social Security s application of the Social Security 18 Act s offset provisions. The parties consented to the jurisdiction of a United States 19 Magistrate Judge. (Docket No. 5). 20 1 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 On February 3, 2014, the Honorable Rosanna Malouf Peterson, Chief United 2 States District Judge, referred this case to the undersigned pursuant to 28 U.S.C. § 3 636(b)(1)(A) and (B). (Docket No. 26). II. BACKGROUND 4 5 The procedural history may be summarized as follows: 6 In May of 2005, the Social Security Administration ( SSA ) awarded benefits 7 to Steven W. Olson, Plaintiff s husband, finding him disabled as of March 2, 2002, 8 due to chronic lymphatic leukemia, fatigue, nausea, and carpal tunnel syndrome. (T 9 at 11, 131). 1 Shortly thereafter, Mr. Olson, through counsel, advised the SSA that he 10 had received a permanent partial disability ( PPD ) award under Washington State s 11 workers compensation program, in the amount of $16,207.68, based on bilateral 12 hearing loss. (T at 31-34). Mr. Olson indicated that he did not believe the SSA was 13 entitled to offset the PPD award against his benefits. (T at 31-34). 14 The SSA disagreed and reduced Mr. Olson s benefits. (T at 16). The actual 15 amount of the offset was the subject of several redetermination calculations 16 conducted by the SSA between 2005 and 2009. (T at 11-12, 40-43, 54-57, 62-65, 66- 17 73, 74-77, 80-83). Mr. Olson passed away on April 27, 2006, and Plaintiff was 18 substituted in his place. (T at 11). 19 1 20 Citations to ( T ) refer to the administrative record at Docket No. 10. 2 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 In March of 2009, Plaintiff requested a hearing before an Administrative Law 2 Judge ( ALJ ) to determine whether the PPD award was subject to the offset 3 provisions of the Social Security Act. (T at 89-90, 91-92). On May 26, 2010, ALJ 4 James Sherry ruled in Plaintiff s favor, concluding that, under Washington state law, 5 the PPD award was not a substitute for periodic benefits and was therefore not 6 subject to offset under federal law. (T at 120-28). On July 23, 2010, the Social 7 Security Administration Appeals Council sua sponte vacated ALJ Sherry s decision 8 and remanded the matter for reconsideration. (T at 130-42). The parties, through 9 counsel, submitted additional legal briefing. (T at 12). The ALJ issued a new 10 decision on January 12, 2011, finding that the PPD award did trigger the offset 11 provisions of the Social Security Act. (T at 8-14). The ALJ s second decision 12 became the Commissioner s final decision on August 20, 2012, when the Appeals 13 Council denied Plaintiff s request for review. (T at 3-6). 14 On October 9, 2012, Plaintiff, acting by and through her counsel and on behalf 15 of her late husband, timely commenced this action by filing a Complaint in the 16 United States District Court for the Eastern District of Washington. (Docket No. 1). 17 The Commissioner interposed an Answer on December 20, 2012. (Docket No. 9). 18 Plaintiff filed a supporting Brief on September 3, 2013. (Docket No. 15). 19 Although Plaintiff did not file a summary judgment motion, her Brief requests that 20 3 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 relief (Docket No. 15, at p. 10) and this Court will deem the Brief to be a motion for 2 summary judgment. 3 November 8, 2013. (Docket No. 22). As noted above, the parties consented to the 4 jurisdiction of a Magistrate Judge. (Docket No. 5). 5 6 The Commissioner moved for summary judgment on For the reasons set forth below, the Commissioner s motion is denied, Plaintiff s motion is granted, and this case is remanded for further proceedings. 7 III. DISCUSSION 8 9 A. Social Security s Offset Provision 10 The Social Security Act provides, in pertinent part, that a recipient of 11 disability benefits, who is also entitled to periodic benefits on account of his or her 12 total or partial disability . . . under a workmen's compensation law or plan of the 13 United States or a State shall have his or her Social Security disability benefits 14 reduced by the amount by which the state workers compensation 2 benefits exceed 15 the higher of: (a) 80 percent of the recipient s average current earnings; or (b) the 16 total of the recipient s Social Security disability benefits. 42 U.S.C. § 424a(a)(2-6). 17 18 Although the Act references workmen s compensation, many modern jurisdictions use the phrase workers compensation. 2 19 20 4 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 The SSA is obliged to follow this offset provision when it applies. See 42 U.S.C. § 2 424a (a)(2). 3 A non-periodic ( lump sum ) payment received under state workers 4 compensation law may be considered a periodic benefit subject to offset if the 5 payment was, in reality, a commutation of, or a substitute for, periodic payments. 6 42 U.S.C. § 424a(b); see also Black v. Schweiker, 670 F.2d 108, 109-10 (9th Cir. 7 1982). This case presents the issue of whether a lump sum ( PPD ) award under 8 Washington State s workers compensation program is a substitute for periodic 9 payments subject to the Social Security offset provision. 10 B. Ninth Circuit Precedent 11 The Court of Appeals for the Ninth Circuit considered the offset provision in 12 Hodge v. Shalala, 27 F.3d 430 (9th Cir. 1994). The court noted that the purpose of 13 the offset provision was to prevent double recovery and found that its scope was 14 extremely broad. Id. at 432; see also Richardson v. Belcher, 404 U.S. 78, 82-83, 15 30 L.Ed.2d 231, 92 S. Ct. 254 (1971)(discussing offset provision s legislative history 16 and noting Congress s concern that duplicate recovery of workers compensation 17 benefits and Social Security disability benefits would decrease a worker s incentive 18 to rehabilitate and seek further employment). 19 20 5 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 Hodge involved a workers compensation award under Oregon law. Id. The 2 claimant received a lump-sum award based on a right forearm injury. Id. The 3 amount of the award (which is called a scheduled award under Oregon law) was 4 determined based upon the value of the injured body part without reference to the 5 claimant s earnings. Id. at 433 (citing Or. Rev. Stat. §§ 656.214 (2) (4)). 6 The claimant in Hodge argued that his scheduled award was not a periodic 7 benefit subject to the Social Security offset provision. Id. The claimant contrasted 8 his scheduled award with another type of award available under Oregon s workers 9 compensation law, an unscheduled award, which is calculated by reference to the 10 claimant s loss of earning capacity. The claimant conceded that unscheduled awards 11 are periodic benefits subject to offset, but argued that scheduled awards were not 12 substitutes for periodic benefits because they are determined without reference to 13 wages. Id. at 432-33. 14 The Ninth Circuit rejected the claimant s argument, finding that under Oregon 15 law, both types of awards scheduled and unscheduled are intended to cover a 16 claimant s lost earning capacity. Id. at 433 (emphasis original)(citing Cutright v. 17 Weyerhaeuser Co., 702 P.2d 403, 407 (Or. 1985)). 18 scheduled award granted under Oregon s workers compensation law is a substitute Thus, Hodge held that a 19 20 6 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 for periodic benefits and is therefore subject to the Social Security offset provision. 2 Id. 3 This Court is aware of only one published decision applying Hodge to a 4 workers compensation award under Washington State law. In Kreutner v. Astrue, 5 No. C09-5676, 2010 U.S. Dist. LEXIS 68188 (W.D.Wa. June 8, 2010, the claimant 6 received a permanent partial disability ( PPD ) award based on a mental health 7 impairment. Id. at *2. The award involved a lump sum payment (known under 8 Washington law as a PPD award ) determined without reference to the claimant s 9 loss of earning power. Id. at *6. The court found that the Washington State PPD 10 award was subject to the Social Security offset provision. Id. at *7-*8. 11 The Kreutner court s ruling was based in its conclusion that the entire 12 scheme of Worker s Compensation law is to compensate workers, who are active in 13 the labor market, for wages lost because of inability (or reduced capacity) to work as 14 a result of a compensable injury . . . . Id. at *7 (quoting Hodge, 27 F.3d at 433). 15 The court concluded that any distinction between the workers compensation laws of 16 Oregon and Washington was a distinction without a difference and, as such, the 17 Hodge precedent dictated a finding that the PPD award was subject to offset. Id. at 18 *6-*7. 19 20 7 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 In the present case, the ALJ cited Kreutner in support of his decision on 2 reconsideration finding that the offset provision applied to Mr. Olson s PPD award. 3 (T at 14). 4 C. Analysis 5 Although the interpretation of the Social Security offset provision is a 6 question of federal law, the application of the provision requires a review of state 7 workers compensation law. See Hodge, 27 F.3d at 432-33. This Court, upon 8 consideration of Washington State law, finds that the interpretations of the 9 Commissioner of Social Security and this Court s sister court in Kreutner are 10 incorrect. In particular, this Court finds the reasoning in Hodge binding, but its 11 result distinguishable based upon the uniqueness of Washington state law as 12 distinguished from Oregon state law, and concludes that Plaintiff s PPD award was 13 not subject to offset. 14 The Ninth Circuit s ruling in Hodge was based on its conclusion that even 15 though the Oregon legislature had assigned specific dollar amounts to particular 16 body parts, scheduled payments [were] still designed to compensate for the 17 economic loss of earning capacity. Hodge, 27 F.3d at 433 (quoting In re 18 Woodman, 614 P. 2d 1162, 1164 (Or. 1980)). In other words, the Ninth Circuit s 19 application of the Social Security offset provision was premised upon its reading of 20 8 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 Oregon state law, and, in particular, an examination of the precedents discussing the 2 purpose of the state s workers compensation law. 3 In this regard, the Ninth Circuit relied principally on In re Woodman. In that 4 case, the Supreme Court of Oregon recognized that the scheduled award was 5 determined without reference to the claimant s earnings capacity, but found that this 6 formula was a matter of convenience somewhat like liquidated damages that 7 serve[d] to simplify and expedite settlement of such claims by excluding disputed 8 predictions of the claimant's future earning capacity. Woodman, 614 P.2d at 1164. 9 In Cutright v. Weyerhaeuser Co., 702 P.2d 403, 407 (Ore. 1985), another 10 decision cited by the Ninth Circuit in Hodge, the Supreme Court of Oregon held that 11 its state legislature intended workers' compensation benefits to provide wage 12 replacement . . . . In other words, Hodge was based on the fact that, under Oregon 13 law, scheduled and unscheduled awards serve the same purpose (wage replacement) 14 and, as such, are both subject to the Social Security offset provision. 15 In Washington, however, the workers compensation law serves a dual 16 purpose and is not designed solely to compensate for the economic loss of earning 17 capacity. Under Washington law, a worker injured so severely that he or she is 18 unable to work, may be classified as permanently totally disabled. Rev. Code 19 Wash. § 51.08.160. A worker is compensated for a permanent total disability via 20 9 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 periodic payments or a lump sum based on a percentage of the worker s wages. Rev. 2 Code Wash. § 51.32.060. In addition, Washington s workers compensation law 3 contains a schedule of permanent partial disabilities, which are defined as loss of 4 either one foot, one leg, one hand, one arm, one eye, one or more fingers, one or 5 more toes, . . . or any other injury known in surgery to be permanent partial 6 disability. Rev. Code Wash. § 51.08.150. Hearing loss is a scheduled partial 7 disability. Rev. Code Wash. § 51.32.080 (1). Mr. Olson received this type of award 8 (a PPD award ). 9 Washington state law allows for recoveries that would be considered 10 duplicative if the sole purpose of its workers compensation system was designed 11 to compensate for lost earnings capacity. For example, a worker who receives a 12 PPD award and is subsequently found to be permanently and totally disabled based 13 on an unrelated occupational injury or disease may receive his or her full benefits, 14 notwithstanding the payment of a lump sum for his . . . prior injury. Rev. Code 15 Wash. § 51.32.060(4); see Clauson v. Dep't of Labor & Indus., 130 Wn.2d 580, 586, 16 925 P.2d 624 (1996). Likewise, a worker who is determined to be permanently and 17 totally disabled and awarded pension benefits is not precluded from subsequently 18 seeking a PPD award based on a pre-existing unrelated occupational injury or 19 20 10 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 disease (provided the application for the PPD award is timely filed). See McIndoe v. 2 Dep t of Labor & Indus., 26 P.3d 903, 910 (Wash. 2001), 3 This is not considered this a double recovery because the Washington 4 workers compensation law is intended to serve two purposes. As the Supreme 5 Court of Washington explained in McIndoe v. Dep t of Labor & Indus., [t]he fact 6 that the Legislature took a presumed possible loss of earning power into 7 consideration in order to arrive at dollar amounts to be paid for certain specified 8 disabilities . . . does not lead to the conclusion that the only purpose of the statutes is 9 to compensate for lost wages. McIndoe, 26 P.3d at 908. To the contrary, the 10 establishment by the Legislature of a specific cash award for specific amputations 11 and losses of faculties . . . was necessary if the legislative plan of compensation in 12 accordance with loss of bodily function (as distinguished from partial loss of earning 13 power) was to be accomplished. Id. (quoting Page v. Dep't of Labor & Indus., 328 14 P.2d 663 (Wash. 1958) and citing Wash. Admin. Code § 296-20-01002)); see also 15 Stone v. Dep t of Labor & Indus., 172 Wn. App. 256, 262 (Wash. Ct. App. 16 2012)( These two types of benefits are separate concepts ). 17 In McIndoe, each of the plaintiff workers was injured on the job and awarded 18 permanent total disability benefits. Thereafter, they filed claims for hearing loss 19 sustained in unrelated injuries that occurred before the injuries that led to their 20 11 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 permanent disability awards. The Washington Department of Labor & Industries 2 denied the claims on the grounds that making a PPD award would result in a double 3 recovery. Id. at 905. 4 The court rejected the Washington Department of Labor and Industries 5 argument that both types of workers compensation awards (a PPD award and 6 permanent total disability) are compensation for wage loss, finding that argument 7 inconsistent with Washington s workers compensation statute. McIndoe, 26 P.3d at 8 909. In particular, the court cited Rev. Code Wash. § 51.32.060 (4), which expressly 9 permits a claimant to receive both types of benefits, provided they arise from 10 different injuries. 11 The Washington Supreme Court also reviewed its precedents on this subject, 12 including Davis v. Bendix Corp., 917 P.2d 586 (Wash. Sup. Ct. 1996). In Davis, the 13 court stated that permanent partial disability compensates the claimant for future 14 lost earning capacity measured by a percentage of loss of bodily function. Davis, 15 917 P.2d at 590. In McIndoe, the court held that [t]o the extent . . . the statements 16 in Davis could be read as meaning that permanent partial disability payments in 17 addition to permanent total disability payments would constitute double recovery 18 because both compensate for lost earning capacity, it is disapproved. McIndoe, 26 19 P.3d at 909. 20 12 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 In further support of its reasoning, the McIndoe court noted that, under 2 Washington law, [a]n injury may have no effect at all on the worker s wage earning 3 capacity, yet the injury is fully compensable via a PPD award. McIndoe, 26 P.3d at 4 908 (citing Kostida v. Dep t of Labor & Indus., 247 P. 1014, 1016 (Wash. Sup. Ct. 5 1926)(finding that while loss of one testicle had no effect on claimant s wage 6 earning capacity, a PPD award was permitted because [o]ne has a right to remain in 7 possession of all those useful members of his body which are provided by nature )). 8 The Washington Supreme Court s reasoning in McIndoe is unlike the Oregon 9 Supreme Court s analysis in Woodman, which (as discussed above) concluded that 10 Oregon s legislature created scheduled and unscheduled awards to serve the 11 same purpose (wage replacement) via different calculation formulas. See Woodman, 12 614 P.2d at 1164. This is far from a distinction without a difference. In fact, the 13 difference is dispositive. 14 With regard to the applicability of the federal Social Security offset provision, 15 this Court reads the Ninth Circuit s decision in Hodge as an instruction to look to the 16 underlying state law to determine whether a particular workers compensation award 17 is intended to compensate a claimant for lost earning capacity. See Hodge, 27 F.3d at 18 433 (citing and discussing Woodman and other Oregon state precedent in support of 19 holding that Social Security offset provision applied). 20 13 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 As discussed in detail above, the Washington Supreme Court has held that a 2 PPD award may be given for reasons unrelated to lost earning capacity and, indeed, 3 may be awarded without double recovery concerns where the claimant has already 4 been compensated for his or her lost earning capacity based on an unrelated injury. 5 McIndoe, 26 P.3d at 908-10. As such, where (as here) the PPD award was made for 6 a separate injury, 3 there is no double recovery implication under Washington law. 7 The Social Security offset provision s concern with double recovery, see Hodge, 27 8 F.3d at 432, is thus not implicated here. 9 This Court recognizes that two Circuits have adopted the view that PPD 10 awards are subject to offset by definition as matter of federal law, irrespective of 11 whether a particular state characterizes its PPD (or scheduled ) awards as 12 something other than wage-loss disability benefits. See Olson for Estate of Olson v. 13 Apfel, 170 F.3d 820, 822-25 (8th Cir. 1999); Grant v. Weinberger, 482 F.2d 1290, 14 1292 (6th Cir. 1973). 15 articulate this rationale in Hodge. Instead, as discussed above, the Ninth Circuit 16 engaged in an extensive analysis of Oregon Supreme Court precedents (including, in 17 particular, Woodman) interpreting the purposes of the state workers compensation 18 19 Mr. Olson was found to be disabled under the Social Security Act due to chronic lymphatic leukemia, fatigue, nausea, and carpal tunnel syndrome. (T at 11, 131). He received the PPD award under Washington s workers compensation law because of bilateral hearing loss. (T at 31-34). 20 14 However, the Ninth Circuit did not cite these cases or 3 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB 1 law. Hodge, 27 F.3d at 432-33. 2 distinguishable from the Oregon precedent relied upon in Hodge. As such, applying 3 the methodology employed by the Ninth Circuit in Hodge and interpreting 4 Washington State precedent, this Court finds that Mr. Olson s PPD award was not 5 subject to the Social Security offset provision. Washington State s precedents are materially 6 IV. ORDERS 7 8 IT IS THEREFORE ORDERED that: 9 Plaintiff s Brief, Docket No. 15, is deemed a motion for summary judgment 10 11 12 13 14 15 and that motion is GRANTED, The Commissioner s motion for summary judgment, Docket No. 22, is DENIED, and This case is REMANDED for a recalculation and refund of any offset against Mr. Olson s Social Security benefits. DATED this 9th day of April, 2014. 16 17 18 /s/Victor E. Bianchini VICTOR E. BIANCHINI UNITED STATES MAGISTRATE JUDGE 19 20 15 DECISION AND ORDER OLSON v COLVIN 12-CV-00563-VEB

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