[00:00:00] Speaker 03:
May it please the court?

[00:00:01] Speaker 03:
My name is Mark Stern.

[00:00:03] Speaker 03:
I am the attorney for Darren Cooper.

[00:00:06] Speaker 03:
Mr. Cooper is a disabled man who, when he applied for Social Security, did it pro se, messed it up.

[00:00:20] Speaker 03:
It eventually went to an appeal.

[00:00:22] Speaker 03:
He hired counsel.

[00:00:29] Speaker 03:
The ALJ reversed and awarded compensation.

[00:00:34] Speaker 03:
At that point, Mr. Cooper's counsel filed a corrected application, which corrected some of the deficiencies in Mr. Cooper's original one.

[00:00:48] Speaker 03:
The Social Security admits they received it, admits that they cataloged it, and admits that they screwed up and didn't catalog it correctly.

[00:00:56] Speaker 03:
Several months later, they cut Mr. Cooper a check for vastly in excess of what he was entitled to, but he didn't know the difference.

[00:01:12] Speaker 03:
Years went by, and Social Security then, well, Mr. Cooper had some financial problems, filed bankruptcy.

[00:01:23] Speaker 03:
Social Security, after the bankruptcy,

[00:01:28] Speaker 03:
We calculated and found out the mistake that it had made and assessed him some 50-some thousand dollars in which they then proceeded to collect by stopping his ongoing Social Security disability payments.

[00:01:47] Speaker 03:
One of the problems that Mr. Cooper had with that is that when Social Security stopped his ongoing payments, it also, I'm not sure the correct word, but vacated his Medicare entitlement.

[00:02:01] Speaker 03:
So here he is not getting the money, but all of a sudden he's not getting the medical care that he needs.

[00:02:06] Speaker 03:
He's still disabled.

[00:02:08] Speaker 03:
Mr. Cooper then had filed a bankruptcy.

[00:02:12] Speaker 03:
The IRS was not listed because Mr. Cooper didn't know that he owed them anything.

[00:02:18] Speaker 03:
He was just getting Social Security disability.

[00:02:20] Speaker 01:
It's clear, counsel, that at the time of discharge, he didn't realize or didn't know that there was an overpayment.

[00:02:27] Speaker 03:
That's correct.

[00:02:29] Speaker 03:
He had no idea.

[00:02:30] Speaker 03:
He had no concept.

[00:02:30] Speaker 03:
He got something after the bankruptcy when they stopped his payments.

[00:02:37] Speaker 05:
And indeed, Mr. Stern, the bankruptcy court was not aware of it either in terms of structuring his ultimate discharge in bankruptcy, correct?

[00:02:46] Speaker 03:
It was a no-asset case, Your Honor.

[00:02:48] Speaker 03:
Yes, that's the point.

[00:02:48] Speaker 05:
There was no asset, so there was not any consideration of it by the bankruptcy court.

[00:02:51] Speaker 03:
No, there was no consideration of it one way or the other.

[00:02:55] Speaker 01:
Right.

[00:02:56] Speaker 01:
And once he was notified of overpayment, he had the right to appeal the decision to try to recoup the overpayment, and he chose not to do that.

[00:03:07] Speaker 03:
I can tell you that it was not successful and I'm and it may be still be ongoing, but What do you mean by that?

[00:03:17] Speaker 01:
Well, I thought that he didn't avail himself of that option and chose to go back to bankruptcy court Well, he did go back to bankruptcy court and and he's now after the 60 minutes so he didn't choose the administrative appeal route and

[00:03:33] Speaker 03:
He did not.

[00:03:35] Speaker 01:
And if he had, would there be consideration of the equities in that process?

[00:03:41] Speaker 01:
Do you know?

[00:03:42] Speaker 03:
I do not know.

[00:03:43] Speaker 03:
But I would also know that I can also tell the court that the law, it's United States al-Qaeda export versus US, determined that exhaustion of administrative remedies is not necessary when the

[00:04:03] Speaker 01:
Oh, I'm not assuming that he had to have exhausted any administrative remedies in order to pursue this appeal or in order to go back to bankruptcy court.

[00:04:14] Speaker 01:
I'm just trying to understand if he had alternative routes.

[00:04:17] Speaker 03:
He's in the process of doing it.

[00:04:20] Speaker 03:
He's been told it's going to be denied.

[00:04:22] Speaker 03:
He hasn't got the denial.

[00:04:24] Speaker 03:
It's somewhere in the grist of the administration.

[00:04:31] Speaker 05:
In point of fact, he went back in February of 2023, he reopened his bankruptcy case, correct?

[00:04:37] Speaker 03:
Yes.

[00:04:38] Speaker 05:
And then essentially sought sanctions against Social Security, because Social Security had immediately—reducted his payments immediately.

[00:04:46] Speaker 05:
They started deducting monthly benefits.

[00:04:48] Speaker 05:
Isn't that correct?

[00:04:49] Speaker 05:
Before he went back into bankruptcy, when he... It took effect immediately, and as I understand it, almost $2,500 less a month was being distributed.

[00:04:59] Speaker 03:
Something like that, plus his medical benefits.

[00:05:01] Speaker 05:
Immediately.

[00:05:02] Speaker 05:
It was a fait accompli.

[00:05:03] Speaker 05:
It was done automatically.

[00:05:05] Speaker 05:
And then he went back into bankruptcy court seeking sanctions in terms of being in conflict with the bankruptcy court rulings.

[00:05:11] Speaker 03:
Correct, Your Honor.

[00:05:17] Speaker 03:
There was a hearing the judge, Judge Borreca, decided that the doctrine of recoupment could be used to offset the current benefits with the amount that had been awarded or with the incorrectly paid amount.

[00:05:37] Speaker 03:
I would point out that recoupment is not provided for in the bankruptcy code.

[00:05:41] Speaker 03:
It's an equitable remedy.

[00:05:46] Speaker 03:
an equitable remedy should not be used to punish an innocent person because everyone admits that it was the Social Security's error.

[00:05:55] Speaker 03:
The appellee has admitted that it may be a mutual mistake of fact.

[00:06:02] Speaker 03:
We don't think it's a mutual mistake of fact.

[00:06:04] Speaker 03:
We think that when Social Security miss

[00:06:08] Speaker 03:
misrecorded what he was getting, that it was their error and not Mr. Cooper's, because Mr. Cooper, he couldn't tell what he was supposed to get and what he wasn't.

[00:06:25] Speaker 03:
He's not a college graduate.

[00:06:26] Speaker 03:
He was working as a project matter or a laborer.

[00:06:31] Speaker 03:
It's hard to believe that he would be able to do the calculation and know what he should or shouldn't get.

[00:06:38] Speaker 05:
Well, the thrust of the argument below, wasn't it?

[00:06:40] Speaker 05:
It was the degree to which the logical relationship test should be applied in terms of under Ninth Circuit jurisprudence, correct?

[00:06:49] Speaker 05:
Wasn't that really the thrust of the legal argument below?

[00:06:52] Speaker 03:
I think, Your Honor, that the bankruptcy appellate panel

[00:06:59] Speaker 03:
Attempted to apply what it perceived Ninth Circuit law to be which I think is referred to the logical relationship test if I'm not which is Newbury versus Nestor and I would say that The Bankruptcy Court got it wrong You have to go you have to start by looking at at Newbury to determine a

[00:07:24] Speaker 05:
Whether it's the same transaction or not, essentially.

[00:07:26] Speaker 03:
Whether it's the same transaction or not.

[00:07:27] Speaker 05:
And that was the thrust of the ruling that was deemed to be the same transaction, and ergo equitable recoupment could apply.

[00:07:34] Speaker 03:
Yes.

[00:07:35] Speaker 03:
In Newbury, there was one contract.

[00:07:37] Speaker 03:
And both sides of the contract, it was a commercial dispute.

[00:07:43] Speaker 03:
In fact, every Ninth Circuit case that has looked at the doctrine of recoupment has done so in the term of a contract.

[00:07:54] Speaker 05:
Not in terms of bankruptcy.

[00:07:57] Speaker 03:
Even in terms of bankruptcy, they've looked at it in terms of a contract.

[00:08:01] Speaker 03:
And this is not a contract.

[00:08:03] Speaker 03:
And it's not a contract for two reasons, or maybe even three.

[00:08:09] Speaker 03:
First, social security is not based in contract.

[00:08:14] Speaker 03:
Our Supreme Court decided that 60 years ago,

[00:08:21] Speaker 03:
Fleming versus Nestor.

[00:08:23] Speaker 03:
I don't know if that's cited or not.

[00:08:27] Speaker 03:
It's a social equity program, and it's not a contract.

[00:08:34] Speaker 03:
Council, did you want to reserve?

[00:08:39] Speaker 03:
Your Honor, I can't hear you.

[00:08:45] Speaker 04:
Bring the mic closer.

[00:08:48] Speaker 04:
Did you want to reserve time for rebuttal argument?

[00:08:51] Speaker 03:
We had agreed 10-10 and whatever is left for rebuttal.

[00:08:58] Speaker 03:
So we were told we had 30 minutes as opposed to the 15 we started with.

[00:09:05] Speaker 04:
That's fine.

[00:09:07] Speaker 03:
Thank you, Your Honor.

[00:09:12] Speaker 05:
I mean, the point of it not being a contract was is that it's an entitlement for Mr. Cooper out of contract.

[00:09:18] Speaker 05:
And so essentially, at least below, the entitlement only arose because he became disabled.

[00:09:25] Speaker 03:
No, that's not the case, Your Honor.

[00:09:26] Speaker 03:
That's what the court thought.

[00:09:29] Speaker 03:
But that's not the case.

[00:09:30] Speaker 03:
But I'm saying that was the ruling below.

[00:09:31] Speaker 05:
That was the ruling below from the court.

[00:09:32] Speaker 03:
That was the ruling below.

[00:09:34] Speaker 03:
But that's not the case.

[00:09:35] Speaker 03:
I don't know how well it was argued, but the Social Security entitlement

[00:09:40] Speaker 03:
is a monthly entitlement.

[00:09:43] Speaker 03:
You have to live to the end of the month to be able to collect it.

[00:09:48] Speaker 03:
You have to be currently disabled.

[00:09:52] Speaker 03:
And Amicus will address that with much more detail than I can.

[00:09:57] Speaker 03:
But it's not a contract.

[00:10:00] Speaker 03:
It's not a right that flows out of the original award.

[00:10:06] Speaker 03:
It's a right that flows out of being disabled.

[00:10:10] Speaker 03:
And Mr. Cooper remains disabled.

[00:10:15] Speaker 03:
Right.

[00:10:15] Speaker 01:
I mean, that system is set up so that it can constantly be reevaluated, right?

[00:10:21] Speaker 01:
It's not like you get the benefits and then it's secured forever.

[00:10:24] Speaker 03:
Correct, Your Honor.

[00:10:25] Speaker 03:
And I believe Social Security is required to reassess on a regular basis.

[00:10:31] Speaker 03:
And I think it was, but I don't know, it was one of those reassessments where they decided they made a mistake.

[00:10:36] Speaker 03:
Because if it was just

[00:10:39] Speaker 03:
said it and forget it, he would still be receiving the benefits and they wouldn't decide they had to make a mistake.

[00:10:45] Speaker 03:
So someone had to cause them to go look at it and I would submit that that's because the Social Security Act requires the Social Security Administration to inquire as to the current status and that

[00:11:08] Speaker 03:
didn't happen here or that did happen here and they screwed it up.

[00:11:13] Speaker 03:
They said we're going to recoup it.

[00:11:15] Speaker 03:
The bankruptcy court said we were going to recoup it and

[00:11:25] Speaker 03:
Excuse me, my clock is now saying time remaining, and it's going up.

[00:11:30] Speaker 03:
Did I use my 10 minutes?

[00:11:31] Speaker 03:
It's going up, yeah.

[00:11:33] Speaker 04:
You did.

[00:11:33] Speaker 04:
Well, don't worry.

[00:11:34] Speaker 04:
We'll give you an extra minute or two.

[00:11:38] Speaker 03:
Thank you.

[00:11:43] Speaker 03:
And that's essentially the problem is that the BAP applied Ninth Circuit law and did it incorrectly.

[00:11:51] Speaker 03:
And that's why it needs to be reversed and sent back.

[00:11:55] Speaker 03:
And there needs to be a decision in this circuit that sets forth what the other circuits that have ruled on this have said and what the Bankruptcy Court in Oregon said and in Ray French.

[00:12:11] Speaker 03:
Thank you.

[00:12:12] Speaker 02:
Thank you counsel, okay now I guess we'll hear from the appellee Your honor if I may I believe on me Kai go next Okay, sorry May it please the court Thomas Moore's mayor of Kramer Levin or Amokai National Consumer Bankruptcy Rights Center

[00:12:43] Speaker 02:
and National Association of Consumer Bankruptcy Attorneys.

[00:12:48] Speaker 02:
As the panel has already observed, Social Security disability benefits, they provide income security, and the Bankruptcy Code provides relief from pre-bankruptcy claims.

[00:13:03] Speaker 02:
And we submit the Third Circuit got it right in Levi Schweiker.

[00:13:08] Speaker 02:
when it held that SSA violates the goals of both statutes, when it reduces post-bankruptcy benefits and denies income security to recover a pre-bankruptcy claim in violation of the stay, in this instance, in violation of the discharge.

[00:13:30] Speaker 02:
And this court has never differed with Levi Schweiker on this point.

[00:13:37] Speaker 02:
This court has never held that post-bankruptcy social security disability benefits can be reduced to cover free bankruptcy claims.

[00:13:52] Speaker 02:
The courts below, as principal counsel has noted, and the SSA, they all rely on precedents that don't apply.

[00:14:01] Speaker 02:
They all involve

[00:14:05] Speaker 02:
reimbursement for services rendered by hospitals or payments to pensioners for money that they earned as a pension and they got paid too much.

[00:14:16] Speaker 02:
But none of those payments involved the basic function of income security.

[00:14:24] Speaker 02:
They don't depend on the beneficiary's poverty.

[00:14:29] Speaker 02:
They don't address specifically

[00:14:33] Speaker 02:
the beneficiaries' poverty.

[00:14:37] Speaker 02:
They depend on what was paid and not paid.

[00:14:41] Speaker 02:
And this statute is different.

[00:14:45] Speaker 02:
Section 204 of the Social Security Act, it does not, as the government argues, it does not adjust disability payments up and down, and it doesn't require

[00:14:59] Speaker 02:
SSA to reduce benefits.

[00:15:01] Speaker 02:
It provides the SSA with a collection of remedies.

[00:15:08] Speaker 02:
And if SSA discovers an overpayment, the statute gives it various remedies to collect that overpayment.

[00:15:16] Speaker 02:
And the bankruptcy codes discharge is designed to protect debtors from collection remedies.

[00:15:26] Speaker 01:
So, Council, if you can clarify, what is the rule that you're advocating for, that it can never apply to disability benefits or that it's determined on a case-by-case basis?

[00:15:39] Speaker 02:
A former, Your Honor, the Third Circuit said that these are not benefits that are subject to recoupment and I believe that is a correct, I submit that is a correct statement of law and I don't think it is case-by-case.

[00:15:56] Speaker 02:
There's a statement, I guess it might be in the BAP, it's in the government's brief, suggesting that this is a matter for the bankruptcy court's discretion.

[00:16:09] Speaker 02:
I think this is binary.

[00:16:11] Speaker 02:
Either these benefits are protected from recoupment or they're subject to recoupment.

[00:16:18] Speaker 02:
It's not a matter for a bankruptcy court to say, in this case, I think it should be, in this case, I think it shouldn't be.

[00:16:25] Speaker 02:
The discharge is granted based on facts in existence at a discharge hearing.

[00:16:31] Speaker 05:
Is that affected at all by the bankruptcy court dealing with what is called the logical relationship test?

[00:16:37] Speaker 05:
They seem to get lost in terms of either factual relationship or a legal relationship, and there was something in the briefs about that.

[00:16:44] Speaker 05:
Is that analysis at all affected, or was it correctly applied, or should it have been considered at all?

[00:16:51] Speaker 02:
I submit

[00:16:53] Speaker 02:
that the logical relationship test does not apply to income security benefits because income security depends on the status of the beneficiary at any moment in time, not

[00:17:13] Speaker 02:
a payment history or an earnings history.

[00:17:17] Speaker 02:
It has to do with the beneficiary status at a particular moment in time, which is not logically related to whether he or she was paid or overpaid at a previous point in time.

[00:17:30] Speaker 05:
But does it, does it arise out of the same transaction or occurrence, I guess, in terms of, at least that appears to have been the argument of the government, that it arises out of the same occurrence, i.e.

[00:17:40] Speaker 05:
the disability?

[00:17:43] Speaker 02:
No, I understand that it was Mr. Cooper's disability that triggered the right to his payment pre-bankruptcy, but his continuing right to payment depends on facts and circumstances that exist after the bankruptcy is over.

[00:18:03] Speaker 02:
If he dies, he doesn't get the payment.

[00:18:06] Speaker 02:
If he comes into money, he doesn't get the payment.

[00:18:09] Speaker 02:
If he has other benefits post-bankruptcy, they may reduce the payment.

[00:18:15] Speaker 02:
This isn't simply a calculation of what was he paid before and what should he have been paid.

[00:18:21] Speaker 02:
It's inconsistent with the purpose of both SSA and the bankruptcy code to say that Mr. Cooper suddenly gets thrust back into poverty because SSA uses its statute to affect

[00:18:40] Speaker 02:
a recoupment that isn't provided for on the bankruptcy code.

[00:18:44] Speaker 02:
That's the whole point of a bankruptcy discharge.

[00:18:47] Speaker 02:
I get to live.

[00:18:55] Speaker 02:
And this court has also said, again, adopting language from the Third Circuit as its own, this is in Gardens Regional Hospital.

[00:19:09] Speaker 02:
We have stated our express agreement with the Third Circuit, I'm slightly paraphrasing, that the recruitment doctrine in bankruptcy cases should be applied only when it would be inequitable for the debtor to enjoy the benefits of that transaction without meeting its obligation.

[00:19:29] Speaker 02:
Well, okay, it is inequitable to let a hospital keep an overpayment without recruitment.

[00:19:38] Speaker 02:
it is equitable and indeed it is necessary to give an individual debtor post-bankruptcy benefits designed to keep him from poverty even though he got a payment pre-bankruptcy that would be subject to the discharge.

[00:20:05] Speaker 02:
I think this is a binary question.

[00:20:08] Speaker 02:
I think the third circuit ruled very clearly 40 years ago.

[00:20:11] Speaker 02:
I don't think there's another circuit that has addressed this issue and said, no, recruitment is available for social security disability payments.

[00:20:24] Speaker 02:
There are a couple of lower court cases that come close.

[00:20:28] Speaker 02:
They deal with other benefits that aren't income security benefits.

[00:20:34] Speaker 02:
What we would urge

[00:20:35] Speaker 02:
this court not to adopt a rule of law that would subject thousands if not tens of thousands of social security disability beneficiaries in the Ninth Circuit to a hazard that is not present elsewhere.

[00:20:53] Speaker 02:
These are poor people.

[00:20:54] Speaker 02:
They depend on government benefits.

[00:20:57] Speaker 05:
Mr. Mayor, I believe that you've cited Lee v. Swiker, the Third Circuit opinion in 1984 several times, but there are other, according to the briefing here, the Second, Six, and Seventh Circuits have also essentially followed that principle.

[00:21:11] Speaker 05:
Is that not correct?

[00:21:14] Speaker 02:
Yes, it is correct.

[00:21:15] Speaker 02:
The Malinowski case we think is very useful and on point.

[00:21:19] Speaker 05:
That's the Second Circuit case.

[00:21:20] Speaker 02:
that's a second circuit case it deals it doesn't quite deal with exactly the same benefits but yes I think that that is a supporting decision and the sixth circuit dealt with a a cousin of this issue in connection with Social Security's attempt to say only we at Social Security have jurisdiction to determine who gets benefits and who doesn't the bankruptcy court has to stay out of it

[00:21:48] Speaker 02:
And the Sixth Circuit said, we are not going down that road.

[00:21:51] Speaker 02:
And in some ways, some of the positions taken by the government in this case, it's almost an attempt to resurrect that process by suggesting that once benefit determination is given to Social Security, the bankruptcy discharges are relevant.

[00:22:12] Speaker 02:
That should not be the law.

[00:22:18] Speaker 02:
I'm happy to answer further questions, but I would otherwise not encumber the court's time.

[00:22:25] Speaker 04:
I don't have questions.

[00:22:27] Speaker 02:
I have no further questions.

[00:22:28] Speaker 04:
Judge Wynne.

[00:22:29] Speaker 01:
I don't have any questions.

[00:22:30] Speaker 01:
Thank you.

[00:22:31] Speaker 04:
Thank you.

[00:22:31] Speaker 04:
We thank you for your argument.

[00:22:34] Speaker 02:
Thank you for the opportunity.

[00:22:37] Speaker 04:
So now we'll hear from Mia Pelli.

[00:22:54] Speaker 04:
He could Billy could wait Wait a few seconds till that screens not know great Take so council for a belly we've Made the time 30 minutes per side so

[00:23:18] Speaker 00:
Thank you, Your Honor.

[00:23:20] Speaker 00:
Good morning, Your Honor.

[00:23:21] Speaker 00:
Good morning.

[00:23:21] Speaker 00:
And may it please the Court.

[00:23:23] Speaker 00:
This Court should affirm the bankruptcy appellate panel's decision for two independently sufficient reasons.

[00:23:31] Speaker 00:
First, on a purely statutory ground, because the Social Security Act mandates that the Social Security Administration, which I'll refer to as the agency, adjust Mr. Cooper's ongoing benefit calculation

[00:23:47] Speaker 00:
to account for the $73,000 overpayment that he received in 2019.

[00:23:54] Speaker 00:
That's a clear statutory directive that the agency must follow, and there's no conflict between the Social Security Act, Section 404A1 of Title 42, and anything in the Bankruptcy Code, specifically not the Bankruptcy Code's discharge injunction.

[00:24:11] Speaker 00:
which does not mention recoupment and does not prohibit the recoupment that is required.

[00:24:16] Speaker 01:
Under that argument, where does the equitable recoupment doctrine fall?

[00:24:21] Speaker 01:
It's just a nullity?

[00:24:24] Speaker 00:
No, Your Honor.

[00:24:25] Speaker 00:
The equitable recoupment doctrine is the second basis on which this Court should affirm.

[00:24:31] Speaker 00:
on the purely statutory grounds, the court does not need to reach the equitable doctrine of recoupment.

[00:24:39] Speaker 00:
And it needs to follow the statute that applies and governs the agency's conduct here.

[00:24:45] Speaker 05:
What about the section 404A you've cited?

[00:24:48] Speaker 05:
Section 407A specifically provides that the right of any person to any future payment under this subchapter, now this is under the Social Security Act, shall not

[00:25:01] Speaker 05:
be transferable and none of the monies paid or payable or right existing under this sub-chapter shall be subject to attachment, garnishment or other legal process.

[00:25:13] Speaker 05:
That certainly seems to conflict with the notion that there can be this ex post facto action by the Social Security Administration after through no fault of Mr. Cooper it took three years for the Social Security Administration to correct its error.

[00:25:26] Speaker 05:
How does 404A jive with 407A?

[00:25:30] Speaker 00:
407A is what's known as the anti-alienation clause of the Social Security Act.

[00:25:36] Speaker 00:
And it protects a Social Security beneficiary from a creditor taking legal action, engaging legal process to try to attach those benefits, to garnish benefits that are paid to the beneficiary.

[00:25:52] Speaker 00:
That provision does not apply to the agency itself.

[00:25:57] Speaker 00:
in calculating the amount of benefits that the beneficiary is due.

[00:26:02] Speaker 05:
Is there any case law that supports that exact theory?

[00:26:07] Speaker 05:
I understand that's your argument.

[00:26:09] Speaker 05:
I'm asking if there are cases.

[00:26:12] Speaker 05:
For example, the Third Circuit is totally on point and totally rejects the position of the government, as counsel has noted.

[00:26:18] Speaker 05:
And your argument is 407A does not conflict with 404A.

[00:26:22] Speaker 05:
Do you have any cases under 407A that would permit this kind of recoupment of benefits that are paid excessively as to someone who's come out of bankruptcy?

[00:26:32] Speaker 00:
Well, Your Honor, the cases that apply 407A talk about creditors.

[00:26:36] Speaker 05:
No, no, no.

[00:26:37] Speaker 05:
I don't mean to cut you off, Mr. Forslough, so I'm asking a question.

[00:26:41] Speaker 05:
And the point is, is that I understand what your argument is, and I'm asking if you have any cases

[00:26:46] Speaker 05:
that support your interpretation of that in that fashion, that would support the argument that the Social Security Administration is allowed to come in and just reduce payments despite the bankruptcy court order.

[00:26:58] Speaker 05:
And I have not found any.

[00:26:59] Speaker 05:
I guess if I've missed it, tell me.

[00:27:01] Speaker 00:
No, Your Honor, I don't think you have missed it, and I don't think that 407A has ever been... I'm not aware of any case law discussing the application of 407A to the agency itself, because it is understood as a protection for beneficiaries against creditors, not the agency, when the agency is trying to recoup an overpayment.

[00:27:24] Speaker 00:
So it's not an issue that the courts have addressed.

[00:27:27] Speaker 00:
So it's not a matter that's been decided against Social Security.

[00:27:31] Speaker 05:
My question to you again, Mr. Forsythe, would be is the position of the government in this case within the spirit

[00:27:37] Speaker 05:
of 407A that seeks to protect the beneficiary in that fashion against garnishment, attachment.

[00:27:45] Speaker 05:
Here, this is very similar to a garnishment or attachment, is it not, to suddenly come forward three years later and seek recoupment of $73,000 and then summarily just start collecting it, like the next month, just start deducting benefits.

[00:27:59] Speaker 05:
That is in the area, is it not, of attachment or garnishment.

[00:28:05] Speaker 00:
Well, Your Honor, the law makes a distinction between recoupment and other types of collection remedies.

[00:28:11] Speaker 00:
Other types of collection remedies are those that would allow a creditor to reach into Mr. Cooper's pocket and take money away from him, affirmatively demand a payment from him.

[00:28:21] Speaker 00:
That's the type of relief that he gets because of his bankruptcy discharge.

[00:28:25] Speaker 00:
He's protected from those types of actions.

[00:28:28] Speaker 00:
Social Security in 404A1A has three different remedies that it can use to try to collect an overpayment from a beneficiary.

[00:28:38] Speaker 00:
But only one of those is available here, because Mr. Cooper gets the benefit of the bankruptcy discharge.

[00:28:45] Speaker 00:
He gets the benefit that protects him from Social Security trying to offset his federal tax refund, for example.

[00:28:51] Speaker 00:
They can't do that, because it's prohibited by the discharge injunction, which specifically mentions offset.

[00:28:58] Speaker 00:
Also, another remedy in 404A1 is

[00:29:01] Speaker 00:
to demand payment and collect payment directly from the debtor and Social Security agrees that it cannot do that either.

[00:29:10] Speaker 00:
The only remedy that's available here, the only way for Social Security to comply with its statutory mandate, and the Supreme Court has called this a mandate,

[00:29:19] Speaker 00:
in Sullivan v. Everhart 1990 Supreme Court decision that the 404A1 instruction is a mandate that Social Security adjust future benefits to account for a prior overpayment.

[00:29:32] Speaker 00:
And there's no way around that.

[00:29:34] Speaker 00:
Mr. Cooper's right, his entitlement, there was a lot of discussion in the first half of the argument about an entitlement to Social Security benefits.

[00:29:43] Speaker 00:
His only source of entitlement to these benefits is the Social Security Act itself.

[00:29:49] Speaker 01:
Council, I guess I really struggle with that argument because you want us to say, well, the statute mandates that Social Security collect back the overpayment and the analysis ends there.

[00:30:05] Speaker 01:
But I go back to my original question of what happens to equitable recoupment?

[00:30:09] Speaker 01:
We can't end the analysis with the statutes giving the government the right to recoup the monies because now he's gone through bankruptcy.

[00:30:18] Speaker 01:
The debt's been discharged.

[00:30:21] Speaker 01:
It's not his fault that Social Security figured out too late that it had overpaid.

[00:30:25] Speaker 01:
So now we're in a position where we have to tackle directly the doctrine of equitable recruitment, right?

[00:30:33] Speaker 01:
We can't just stop the analysis of, well, the statute says that the government gets to recoup, and so therefore we don't need to reach the doctrine of equitable recoupment.

[00:30:42] Speaker 01:
You're reading that completely out of the analysis.

[00:30:45] Speaker 00:
Your Honor, I will address equitable recoupment is certainly a basis on which the Court

[00:30:50] Speaker 00:
should affirm, and the Social Security Administration can meet those.

[00:30:54] Speaker 00:
But if I may, I want to direct the Court's attention to the DC Circuit's Consumer Health Services case.

[00:31:00] Speaker 00:
And in that case, the DC Circuit decided in favor of Medicare being able to recover a pre-petition overpayment and to recoup it from post-petition payments that it owed to the health care provider.

[00:31:16] Speaker 00:
And the court decided that on two grounds.

[00:31:18] Speaker 00:
First, on a purely statutory ground of 42 USC 1395G, which is very similar to 404A1 in this case.

[00:31:29] Speaker 00:
It was a statutory mandate that the federal agency recover over payments.

[00:31:34] Speaker 00:
And the court, all three judges on the panel, agreed with that part of the decision.

[00:31:40] Speaker 00:
The court then went on to also decide on equitable recruitment grounds and said that also under equitable recruitment, Medicare could recover

[00:31:48] Speaker 00:
these overpayments.

[00:31:49] Speaker 00:
Judge Sintel filed a concurring opinion in that case and said, I won't join that.

[00:31:55] Speaker 01:
Let me have you move on to equitable recoupment.

[00:32:00] Speaker 01:
Do you agree that the Ninth Circuit has no case that is dispositive, no case that's on all fours with the facts of this case?

[00:32:08] Speaker 00:
This is an issue of first impression in this circuit to apply equitable recoupment in the social security context.

[00:32:16] Speaker 00:
So we are arguing on the basis- The case arising out of bankruptcy.

[00:32:19] Speaker 05:
Pardon me?

[00:32:20] Speaker 05:
In the context of the bankruptcy action.

[00:32:23] Speaker 00:
Yes.

[00:32:23] Speaker 00:
Equitable recoupment is a doctrine that arises within bankruptcy.

[00:32:28] Speaker 00:
And the cases that we rely on are closely analogous.

[00:32:32] Speaker 00:
They deal with the Medicare program.

[00:32:34] Speaker 00:
Medicare payments, the Sims case, also known as the TLC hospitals case.

[00:32:39] Speaker 01:
Right.

[00:32:39] Speaker 01:
No, I agree with you that there's nothing on point, but what I'm disturbed by is that the bankruptcy, the BAP seems to think that its hands are tied.

[00:32:50] Speaker 01:
In its decision twice, the BAP says, well, I'm looking now at page 104.

[00:32:56] Speaker 01:
Although Cooper's equity argument resonates, we are bound by contrary Ninth Circuit law and by Cooper's failure to utilize the remedies afforded by the Social Security Act.

[00:33:07] Speaker 01:
Next page.

[00:33:08] Speaker 01:
Accordingly, the bankruptcy court and this panel are obligated to follow Ninth Circuit precedent.

[00:33:13] Speaker 01:
I'm looking and like the parties have argued, there's really no binding precedent.

[00:33:18] Speaker 01:
So at least to that extent, I think the BAP went awry.

[00:33:22] Speaker 01:
Would you agree with that?

[00:33:23] Speaker 01:
By assuming that there's Ninth Circuit precedent that binds the outcome of this case.

[00:33:29] Speaker 00:
I wouldn't agree.

[00:33:31] Speaker 00:
I think that the Ninth Circuit precedent clearly directs the outcome that the BAP reached.

[00:33:37] Speaker 00:
It was applying the logical relationship test.

[00:33:41] Speaker 00:
I don't think the BAP said there was a Social Security decision from the Ninth Circuit, and therefore we must rule in this fashion.

[00:33:47] Speaker 00:
But it was looking at the logical relationship test and applying it to the facts of this case, and on that basis held that equitable recoupment

[00:33:58] Speaker 00:
applies as this court.

[00:34:00] Speaker 01:
Well, I think the problem is that it read the case, the Ninth Circuit case so narrowly that it didn't take into account any of the equities involved in this case.

[00:34:10] Speaker 01:
It didn't analyze any of the equities involved.

[00:34:14] Speaker 00:
The Ninth Circuit's decisions have

[00:34:16] Speaker 00:
confined the equitable analysis to the logical relationship test, looking at whether there is a close legal and factual relationship between the countervailing obligations.

[00:34:27] Speaker 05:
Which essentially, and following up Judge Winn's question, essentially relates to the trust fund, correct?

[00:34:33] Speaker 05:
in terms of the SSDI trust fund.

[00:34:36] Speaker 05:
That's to what you're making reference.

[00:34:38] Speaker 00:
The trust fund is the source of the overpayment.

[00:34:41] Speaker 00:
It's also the source of the money that will be paid to Mr. Cooper as ongoing benefits.

[00:34:47] Speaker 05:
But that is not directly analogous in this situation, because the beneficiaries must pay into that fund, correct?

[00:34:56] Speaker 00:
beneficiaries receiving disability insurance benefits like Mr. Cooper.

[00:35:04] Speaker 00:
He has paid into the fund.

[00:35:05] Speaker 00:
These are earned benefits that he received based upon his prior work history and meeting the requirements of certain quarters of coverage.

[00:35:14] Speaker 00:
We detail that in the brief, what the formula is.

[00:35:17] Speaker 00:
And so, yes, these are earned benefits, just like retirement benefits are earned benefits.

[00:35:22] Speaker 05:
Where is the legal relationship analysis in terms of the test?

[00:35:26] Speaker 05:
And the legal relationship test also considers workmen's compensation payments.

[00:35:31] Speaker 05:
That was the whole basis of it, correct?

[00:35:34] Speaker 05:
Of which the Social Security had knowledge in 2019.

[00:35:38] Speaker 00:
The formula reduces the payment of Social Security.

[00:35:42] Speaker 05:
That was the basis, because under the statutory scheme, under 424A to B, they have to consider workmen's compensation benefits.

[00:35:51] Speaker 05:
And they were so advised in 2019.

[00:35:54] Speaker 00:
Mr. Cooper, for the first time on May 1st of 2019, advised the Social Security Administration that he had received workers' compensation benefits.

[00:36:04] Speaker 00:
That came two years after his false statement on his initial application in May of 2017 that he was not receiving workers' compensation.

[00:36:15] Speaker 00:
He was represented by counsel by 2019.

[00:36:17] Speaker 00:
He was.

[00:36:18] Speaker 05:
Was he represented by counsel in 2017?

[00:36:20] Speaker 05:
No, he was not.

[00:36:21] Speaker 05:
So, pro se,

[00:36:23] Speaker 05:
Your view is that he made a false statement.

[00:36:25] Speaker 05:
Some might say he made a mistake.

[00:36:27] Speaker 05:
And I understand the argument of the government is that he made a false statement.

[00:36:31] Speaker 05:
But clearly, once he was represented by counsel in 2019, he provided the correct information, correct?

[00:36:37] Speaker 00:
He did.

[00:36:37] Speaker 00:
He did.

[00:36:38] Speaker 00:
It was only two days after he provided that information that Social Security processed the request and determined that he was entitled to disability insurance benefits.

[00:36:49] Speaker 00:
Then it spent a few months determining whether he had also received supplemental security income,

[00:36:55] Speaker 00:
It determined that he did not.

[00:36:56] Speaker 00:
And then in August of 2019, it made this $73,000 overpayment.

[00:37:01] Speaker 00:
The case doesn't come down to whether Mr. Cooper was at fault or whether the agency was at fault in causing the overpayment.

[00:37:11] Speaker 00:
But clearly, the two-year-long delay in providing the correct information about his workers' compensation benefits contributed to the error that occurred here.

[00:37:25] Speaker 05:
It's probably not a path you want to go down, counsel, I wouldn't think, in that the two-year delay that resulted from not being represented by a lawyer is more than offset by the three-year delay that the Social Security Administration has before it acted.

[00:37:39] Speaker 05:
Wouldn't that, in terms of the matter of the equities here?

[00:37:43] Speaker 00:
Well, the three-year delay was just an additional period of time that Mr. Cooper enjoyed the benefit of the windfall before Social Security requested that he repay that money.

[00:37:55] Speaker 00:
There was a three-year delay because the Social Security Administration screwed up.

[00:37:58] Speaker 00:
But the point being, Mr. Cooper didn't suffer any harm because of that three-year delay.

[00:38:05] Speaker 00:
He hasn't suffered any financial harm because of that three-year delay.

[00:38:08] Speaker 00:
I'd like to get back to the logical relationship test and how Social Security meets that test here.

[00:38:16] Speaker 00:
The logical relationship test requires a close factual and legal connection between the countervailing obligations.

[00:38:22] Speaker 00:
And those countervailing obligations here are the overpayment in 2019 and Mr. Cooper's claim

[00:38:28] Speaker 00:
to ongoing, unreduced disability insurance benefits.

[00:38:32] Speaker 05:
Well, the logical relationship test only comes into effect because recruitment is only permissible, only permissible, where it satisfies the logical relationship test that such countervailing obligations arise out of the same transaction or occurrence, correct?

[00:38:49] Speaker 05:
That's the importance of it.

[00:38:51] Speaker 05:
That's correct.

[00:38:51] Speaker 05:
That's the only basis.

[00:38:54] Speaker 05:
that allow Social Security to recoup and seek to recoup in this fashion.

[00:38:57] Speaker 05:
So the burden is on the Social Security Administration with respect to the application of the logical relationship test, correct?

[00:39:05] Speaker 00:
Social Security needs to show that there is a close factual and legal connection.

[00:39:09] Speaker 05:
Right, so before we even get to the matter of the equities, even on that ground, it has to show that it arises out of the same transaction or occurrence, correct?

[00:39:18] Speaker 00:
That's correct.

[00:39:19] Speaker 05:
All right.

[00:39:19] Speaker 05:
And the matter of whether there's a contractual relationship of such, for example, that's the argument Mr. Mayor was making earlier.

[00:39:28] Speaker 05:
So that really is the burden you bear here, even before you get to the matter of the equities, which I can understand you might want to not get to too quickly in terms of the equities.

[00:39:36] Speaker 05:
But in terms of that,

[00:39:37] Speaker 05:
It has to be the same transaction or occurrence.

[00:39:40] Speaker 05:
Basically, the argument of the government is the same transaction or occurrence is the disability which Mr. Cooper suffers.

[00:39:46] Speaker 05:
That's essentially your argument, is it not?

[00:39:48] Speaker 00:
No, it's not, your honor.

[00:39:49] Speaker 05:
Okay, what is the same transaction or occurrence?

[00:39:52] Speaker 05:
Same transaction, sorry.

[00:39:53] Speaker 05:
I didn't interrupt you, I apologize.

[00:39:55] Speaker 05:
What is the same transaction or occurrence here on which you must base your argument that the logical relationship test applies and that recruitment is permissible?

[00:40:04] Speaker 00:
I think first I want to state what the Ninth Circuit has said about the logical relationship test is that it doesn't require a close proximity in time.

[00:40:12] Speaker 00:
It doesn't depend on temporal proximity, but rather on that close factual and legal connection.

[00:40:17] Speaker 00:
And the close factual connection is that the overpayment in 2019 is the but for cause of Social Security's efforts to reduce the ongoing entitlement to disability insurance benefits.

[00:40:29] Speaker 00:
But for that $73,000 overpayment,

[00:40:32] Speaker 00:
Social Security would not be under its obligation under 404A1 to reduce Mr. Cooper's ongoing benefit payments.

[00:40:41] Speaker 00:
There's a very close factual connection there.

[00:40:43] Speaker 00:
The close legal connection is also supplied by the Social Security Act, which mandates this result.

[00:40:49] Speaker 00:
It mandates that the agency reduce Mr. Cooper's future benefits to account for the prior overpayment.

[00:40:57] Speaker 00:
And that fits very closely with this court's decision in SIMS, which dealt with the Medicare statute and the similar provision of 1395-G, which required Medicare to recover by recoupment a pre-petition, pre-bankruptcy overpayment against payments that it owed to the health care provider post-petition.

[00:41:23] Speaker 01:
Whether he's entitled to ongoing or future disability benefits have to be constantly reevaluated by the agency.

[00:41:31] Speaker 01:
Does that affect the analysis of whether this is one singular logical transaction?

[00:41:38] Speaker 00:
No, it doesn't.

[00:41:41] Speaker 00:
And I don't know the exact schedule of periodic reviews, but to the extent there have been periodic reviews that simply affirm the status quo, that Mr. Cooper continues to have a disability that qualifies him to receive these benefits, all that does is confirm that nothing has changed.

[00:41:59] Speaker 00:
The status quo remains the same.

[00:42:01] Speaker 00:
He has the same pre-petition earnings history that qualifies him for these benefits.

[00:42:06] Speaker 00:
He continues to have the disability that qualifies him for these benefits.

[00:42:11] Speaker 01:
So if nothing has changed, and those are the facts in the record, then... So hypothetically, if you have a particular debtor for whom the analysis has changed, does that mean that it's no longer logically related?

[00:42:27] Speaker 01:
How would that work?

[00:42:29] Speaker 00:
Are you suggesting that you'd have a debtor who qualifies for disability insurance based on a particular disability and then later on the disability resolved so that the person- Well, whatever factors you consider, if there's a change,

[00:42:45] Speaker 01:
he may either no longer be entitled the same benefits or reduce benefit amounts, right?

[00:42:51] Speaker 01:
That's the point of ongoing evaluation is to see whether the situation has changed.

[00:42:56] Speaker 00:
It wouldn't reduce the amount that the debtor is due, but it could

[00:43:01] Speaker 00:
If the disability had resolved such that the person was able to return to work, then the person would no longer be eligible for disability insurance benefits, and there would be nothing from which the agency could recoup, because recoupment relies upon the ongoing obligation of the agency to make monthly benefit payments to Mr. Cooper.

[00:43:22] Speaker 00:
If he were able to return to work,

[00:43:24] Speaker 00:
and Social Security no longer owed him these benefits, then recoupment would not be available.

[00:43:30] Speaker 00:
Because recoupment is merely a defense.

[00:43:33] Speaker 00:
It's a defense against Mr. Cooper's claim against the agency.

[00:43:36] Speaker 01:
Well, if he had income, let's say, from another source, then wouldn't the payments be adjusted?

[00:43:41] Speaker 00:
Well, thank you for that question, because that helps me respond to something that the amicus council mentioned.

[00:43:47] Speaker 00:
And the answer is no.

[00:43:49] Speaker 00:
These benefits do not depend upon Mr. Cooper's assets or income from any other source.

[00:43:55] Speaker 00:
The formula for these benefits in section 415 of Title 42, as adjusted by section 404A1, is based upon his prior work history and earnings,

[00:44:07] Speaker 00:
and his qualifying disability.

[00:44:10] Speaker 00:
It is not a means-tested program.

[00:44:12] Speaker 00:
It is not limited to people who are in poverty or close to poverty.

[00:44:17] Speaker 00:
So those are incorrect statements that Amicus Council made this morning.

[00:44:22] Speaker 00:
This program, Mr. Cooper's

[00:44:25] Speaker 00:
Right to benefits are established based on his work history and earnings.

[00:44:31] Speaker 00:
He could receive a million dollars inheritance tomorrow.

[00:44:35] Speaker 00:
And his entitlement to these benefits would not change.

[00:44:38] Speaker 00:
And further, Social Security would not be able to touch that million dollars because he's discharged the debt in bankruptcy.

[00:44:44] Speaker 00:
And he gets the full benefit of that bankruptcy discharge.

[00:44:47] Speaker 00:
He is protected.

[00:44:48] Speaker 00:
The bankruptcy is meaningful.

[00:44:50] Speaker 05:
I want to speak to because I follow up on that two points one in terms of the bankruptcy is meaningful.

[00:44:58] Speaker 05:
Clearly the bankruptcy court considers this person's financial status and clearly would have considered whether or not he had had a win had had some obligation of seventy three thousand dollars were not.

[00:45:10] Speaker 05:
I mean, if this was a no asset Chapter 7 bankruptcy, but if to the extent that there is a $73,000 debt that exists, that's certainly a factor the bankruptcy court would consider in terms of the ultimate discharge, would it not?

[00:45:24] Speaker 05:
I mean, how would it not, I guess is my point.

[00:45:26] Speaker 05:
In terms of bankruptcy law, just in terms of equities, bankruptcy law is meant to protect people, obviously.

[00:45:33] Speaker 05:
It's meant to protect the debtor, allow someone to get a fresh start, correct?

[00:45:36] Speaker 05:
We would agree with that.

[00:45:37] Speaker 00:
Yes.

[00:45:37] Speaker 05:
All right, so how does the bankruptcy court not in some way consider, in terms of the overall facts presented before it, whether or not there's also, oh, by the way, a $73,000 obligation that this person owes?

[00:45:49] Speaker 00:
Your honor, Mr. Cooper received the $73,000 in August of 2019, and he received his bankruptcy discharge in the summer of 2020.

[00:45:59] Speaker 00:
In that interim, he had lost the $73,000.

[00:46:05] Speaker 00:
I don't know exactly the reasons, but he no longer had that money, and that's reflected on his bankruptcy schedules.

[00:46:12] Speaker 00:
So it doesn't affect his eligibility for discharge.

[00:46:15] Speaker 00:
He could have had

[00:46:18] Speaker 00:
million dollars of debts and he could still get a bankruptcy discharge provided that his non-exempt assets were made available to pay his creditors.

[00:46:28] Speaker 05:
Let me ask you one other question because I won't allow you to get to your point.

[00:46:31] Speaker 05:
I didn't mean to interrupt you.

[00:46:32] Speaker 05:
You made reference to the Medicare statute, and I believe it's 42 United States Code section 1395G, is that correct?

[00:46:40] Speaker 00:
Yes.

[00:46:40] Speaker 05:
And that statute specifically provides, with respect to Medicare, the matter of provider of services,

[00:46:50] Speaker 05:
Following up on Judge Winn's question, may make necessary adjustments on account of previously made overpayments or underpayments, correct, in the context of Medicare?

[00:46:59] Speaker 05:
Yes.

[00:47:00] Speaker 05:
Okay.

[00:47:00] Speaker 05:
And you're saying there's an analogous situation under the Social Security Act as well?

[00:47:04] Speaker 05:
That's right.

[00:47:06] Speaker 01:
The opening brief references the manual program, operations, manual system, and says that the pursuit of recoupment in this case violates the administration's manual.

[00:47:20] Speaker 01:
Is that correct?

[00:47:23] Speaker 00:
That's what the brief says, but the brief is not correct.

[00:47:26] Speaker 00:
The program operation manual system is internal guidance for Social Security, and it talks about bankruptcy discharges.

[00:47:33] Speaker 00:
And as a general matter, it says that

[00:47:38] Speaker 00:
Recovery of an overpayment needs to be consistent with a bankruptcy discharge.

[00:47:44] Speaker 00:
That provision of the POMS does not talk about recoupment.

[00:47:49] Speaker 00:
That's a specialized situation.

[00:47:52] Speaker 00:
It provides a general rule, but it doesn't discuss the type of situation where recoupment would apply.

[00:47:58] Speaker 00:
So there's no inconsistency between the agency following the statute, which clearly needs to override any kind of non-binding internal guidance.

[00:48:08] Speaker 00:
Yes, Judge Gould.

[00:48:09] Speaker 04:
I was going to say, if you're done answering Judge Wynn's question, I have one question, which is pretty simple.

[00:48:19] Speaker 04:
If we adopt the Social Security Administration's position and rule for you, are we creating a circuit split with four other circuits?

[00:48:34] Speaker 00:
Thank you, Your Honor.

[00:48:36] Speaker 00:
The answer is no, because you're not creating a split between the Ninth Circuit and the Third Circuit, because as this Court has recognized in Sims and Gardens Regional and other cases, there is already a well-entrenched split between the two circuits as to this proper standards under equitable recoupment and the logical relationship test.

[00:48:56] Speaker 00:
The Third Circuit in 1992 in the University Medical Center case expressly rejected this court's logical relationship test and said that a logical relationship between countervailing obligations is not sufficient.

[00:49:08] Speaker 00:
So there's already a decades long split.

[00:49:12] Speaker 00:
As to the other circuits, the Seventh Circuit case of Navarre, the Sixth Circuit case of Rowan, in both of those cases,

[00:49:22] Speaker 00:
Mr. Cooper's counsel this morning also mentioned Enrey French was a District of Oregon bankruptcy case.

[00:49:28] Speaker 00:
Those decisions all addressed an entirely different question.

[00:49:31] Speaker 00:
They didn't mention or analyze recoupment.

[00:49:35] Speaker 00:
They were asked whether Section 407 of Title 42 gave Social Security a blanket exemption from having overpayments discharged in bankruptcy.

[00:49:45] Speaker 00:
And those courts all rejected that and said, no, Social Security doesn't get an exemption from having its

[00:49:52] Speaker 00:
its overpayments, discharge, and bankruptcy.

[00:49:55] Speaker 00:
But those cases are in apposite here.

[00:49:57] Speaker 00:
They don't address recoupment.

[00:49:58] Speaker 00:
And any suggestion by Mr. Cooper or the Amici that they do is incorrect.

[00:50:05] Speaker 00:
The Second Circuit's Malinowski decision doesn't discuss Social Security or any other federal program.

[00:50:12] Speaker 00:
In fact, it discusses a state law program

[00:50:15] Speaker 00:
an unemployment insurance program.

[00:50:18] Speaker 00:
And it found there that, and it made an important point, which was that the state of New York could not give itself a right to recoup in its own statutes that overrode the bankruptcy code.

[00:50:34] Speaker 00:
But it pointed out and it cited the DC Circuit's consumer health services case saying that Congress, however, it has a free hand to allow a federal program to recoup funds and that

[00:50:52] Speaker 00:
that federal statute allowing recoupment would be given effect in a way that a state law would not.

[00:50:59] Speaker 00:
So there will be no additional split of authority.

[00:51:05] Speaker 00:
The recoupment law is already split between this court and the Third Circuit.

[00:51:14] Speaker 00:
I want to emphasize also the protections for beneficiaries such as Mr. Cooper when Social Security seeks to recoup an overpayment under 404.502C of 20 CFR.

[00:51:32] Speaker 00:
Mr. Cooper can request that the withholding amount is reduced and is reduced so that it does not deprive him of the income that he needs to meet his basic living needs.

[00:51:45] Speaker 00:
And the agency will consider that and will make appropriate reductions.

[00:51:49] Speaker 00:
He has not requested that remedy thus far, but that is available to him and there's no

[00:51:55] Speaker 00:
time limit that bars him from seeking that at this point.

[00:51:59] Speaker 00:
Also, he can seek waiver of recovery.

[00:52:02] Speaker 00:
Judge Nguyen asked at the beginning of the argument if he had asked for, if he had challenged the overpayment.

[00:52:09] Speaker 00:
He did not challenge the overpayment itself, and he can't do that any longer.

[00:52:14] Speaker 00:
The time has run to do that, but he can ask for a waiver, meaning that the agency would agree not to recover this.

[00:52:21] Speaker 00:
And after we filed the briefs in this case, he did request a waiver.

[00:52:25] Speaker 00:
That is an administrative process that is ongoing.

[00:52:29] Speaker 00:
It has not yet concluded.

[00:52:31] Speaker 00:
The agency has made an initial determination that he is not entitled to waiver.

[00:52:36] Speaker 00:
But he has appeal rights within the administrative process.

[00:52:41] Speaker 00:
And if he's ultimately dissatisfied with that, he can appeal to the district court and ultimately to this court under 42 USC section 405 G.

[00:52:55] Speaker 00:
That regulation, 20 CFR 404.502C, also allows the Social Security Administration to reduce a monthly withholding amount to as little as $10.

[00:53:07] Speaker 00:
And also, I want to add, as I close here, that the agency's internal policies, and it's reflected in the palms, we cite it in a footnote in our brief, that

[00:53:21] Speaker 00:
The agency's default withholding amount is 10% of a beneficiary's benefits.

[00:53:28] Speaker 00:
So if Social Security were to begin recouping, it would recoup 10%.

[00:53:33] Speaker 00:
And Mr. Cooper would continue to get 90% of his Social Security disability benefits in addition to all of his workers' compensation benefits, which the record shows exceed $4,000 a month.

[00:53:47] Speaker 00:
if the court has further questions.

[00:53:49] Speaker 05:
You mentioned 20 CFR 404.502.508 closely following that notes that social security regulations caution the agency that it should not distribute benefits in a manner that defeats

[00:54:07] Speaker 05:
defeats the purpose of, quote, Title II by depriving a person of the income required for ordinary and necessary living expenses.

[00:54:16] Speaker 05:
That's also a factor to be considered by the agency, is it not?

[00:54:19] Speaker 00:
Yes, and the agency will consider that factor.

[00:54:22] Speaker ?:
OK.

[00:54:22] Speaker 05:
Well, thank you very much.

[00:54:23] Speaker 05:
Thank you.

[00:54:24] Speaker 05:
Thank you.

[00:54:24] Speaker 01:
Thank you.

[00:54:25] Speaker 04:
Thank you, Council.

[00:54:29] Speaker 04:
Do we see?

[00:54:36] Speaker 04:
We have time for rebuttal left.

[00:54:46] Speaker 03:
I'll just have to stand up taller.

[00:54:51] Speaker 01:
You can adjust the podium at the lectern if that's more comfortable for you.

[00:54:58] Speaker 03:
I found the button.

[00:55:08] Speaker 03:
As Your Honor Judge Winn pointed out, the program manual, which is cited in the opening brief, provides specifically that if a discharge accepts a Social Security debt and the bankruptcy proceedings are dismissed, normal collection can be resumed.

[00:55:25] Speaker 03:
Otherwise, the bankruptcy judgment will be binding on the SSA with

[00:55:29] Speaker 03:
repayment, if any, limited to the terms of the discharge order unless the Office of General Counsel is successful in objecting to the discharge.

[00:55:39] Speaker 03:
That's from the Social Security POMS manual.

[00:55:43] Speaker 03:
I understand counsel's statement that it applies except when the Social Security Administration decides that it doesn't apply and they're going to seek recoupment.

[00:55:57] Speaker 03:
That's what the Social Security Administration has opined.

[00:56:07] Speaker 03:
There were questions about whether Mr.

[00:56:12] Speaker 03:
Cooper misrepresented himself when he was pro se.

[00:56:18] Speaker 03:
I asked him about that, and he said, well, I looked it up, and they said, are you getting time loss?

[00:56:22] Speaker 03:
And I wasn't, so I was getting a pension.

[00:56:24] Speaker 03:
So I just decided that's what it meant.

[00:56:26] Speaker 03:
He was wrong, but that's what he thought.

[00:56:28] Speaker 03:
But even if he intentionally misrepresented, there is a provision in the bankruptcy code called 11 USC, Section 523A2 and 6.

[00:56:39] Speaker 03:
And if you are a creditor and you don't get notice of a bankruptcy and you believe that there's fraud or defalcation, we don't have that here, or a malicious and willful injury, you can reopen the case, file a complaint to determine the dischargability, have an adversary proceeding, and there you are.

[00:57:00] Speaker 03:
That's not what happened here.

[00:57:01] Speaker 03:
The Social Security just took it upon itself to

[00:57:07] Speaker 03:
stop his payments and stop his benefits.

[00:57:10] Speaker 03:
And that's what prompted the motion for contempt.

[00:57:18] Speaker 03:
That was one way to get it before the court.

[00:57:23] Speaker 03:
And as Mr. Frazier

[00:57:27] Speaker 03:
indicated if the disability goes away, he's no longer disabled, whether he goes back to work or not, the benefits go away.

[00:57:36] Speaker 03:
They are determined on a monthly basis, arguably.

[00:57:40] Speaker 03:
I don't know how often there's an evaluation, but it's not based upon, it's not directly tied to the original determination.

[00:57:52] Speaker 03:
As long as you're still disabled, you still get the benefits.

[00:57:58] Speaker 03:
a windfall.

[00:57:59] Speaker 03:
I don't know that it's a windfall.

[00:58:02] Speaker 03:
Mr. Cooper is very disabled, can't work, is in pain.

[00:58:10] Speaker 03:
I don't know that it's a windfall if the Social Security made a mistake.

[00:58:14] Speaker 03:
I guess you can argue that it is, but I personally have a number of medical problems and

[00:58:20] Speaker 03:
I don't get paid for them, but I give the medical problems up, even for money, if I could get rid of them, even for the money that I might be getting.

[00:58:33] Speaker 03:
And lastly, there's an argument that there's a well-established split in the circuits.

[00:58:40] Speaker 03:
I don't believe that's the case.

[00:58:43] Speaker 03:
The Ninth Circuit cases,

[00:58:47] Speaker 03:
that have dealt with this have all dealt with contracts.

[00:58:50] Speaker 03:
If you're talking about Medicare reimbursement, the contract provides, because the payments go back and forth.

[00:58:58] Speaker 03:
And at the end of the year, you have to have an accounting, and somebody owes someone money.

[00:59:04] Speaker 03:
That's recruitment.

[00:59:07] Speaker 03:
That's part of the same contract.

[00:59:08] Speaker 03:
It's part of the same relationship.

[00:59:10] Speaker 03:
Social Security disability benefits aren't part of the same relationship, even though Social Security disability benefits are based upon a determination of disability, that disability is ongoing and you're required to still be disabled in order to get the benefits.

[00:59:35] Speaker 03:
And I don't have anything further that, unless the court has any questions.

[00:59:42] Speaker 04:
No questions.

[00:59:45] Speaker 03:
Is it OK to cede whatever I have left to Mr. Mirror, or are we done?

[00:59:52] Speaker 01:
Absolutely.

[00:59:53] Speaker 01:
Just because you have the time, it doesn't mean you have to use it.

[00:59:56] Speaker 05:
OK, I would say the question is, is Mr. Mayor allowed to use the term if he'd like to use it?

[01:00:00] Speaker 05:
Yes, yes.

[01:00:03] Speaker 03:
He was accused of misstating some things.

[01:00:06] Speaker 03:
I think he ought to have the ability to respond to that.

[01:00:09] Speaker 04:
OK, let's let him finish up.

[01:00:14] Speaker 02:
Thank you, Your Honor.

[01:00:15] Speaker 02:
I think this case has been argued, and I think it's appropriate to end it here.

[01:00:22] Speaker 02:
I don't see a further benefit.

[01:00:25] Speaker 04:
OK, thank you.

[01:00:26] Speaker 04:
We appreciate your comment.

[01:00:29] Speaker 04:
I want to say this is one of the most challenging cases anyone could imagine.

[01:00:37] Speaker 04:
And I want to thank counsel for appellant for amicus.

[01:00:43] Speaker 04:
and for the Appellee Social Security Administration for your excellent arguments.

[01:00:50] Speaker 04:
And you've given us plenty to think about.

[01:00:54] Speaker 04:
The case will now be submitted, and the parties will hear from us in due course.

[01:01:02] Speaker 04:
Thank you again.

[01:01:03] Speaker 05:
Thank you.