Weyerhaeuser Co. v. United States Railroad Retirement Board , 503 F.3d 596 ( 2007 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 06-3455 & 06-3763
WEYERHAEUSER COMPANY,
Petitioner and Intervening Respondent,
v.
UNITED STATES RAILROAD RETIREMENT BOARD,
Respondent,
and
B.B., K.N., G.S., et al.,
Intervening Respondents and Petitioners.
____________
Petitions for Review of an Order
of the United States Railroad Retirement Board.
No. 06-26 (June 22, 2006)
____________
ARGUED JUNE 1, 2007—DECIDED SEPTEMBER 24, 2007
____________
Before FLAUM, MANION, and ROVNER, Circuit Judges.
MANION, Circuit Judge. Under the Railroad Retirement
Act (“RRA”), an employee who works for a railroad
employer is entitled to benefits based, in part, on the
employee’s years of service with that employer. The
intervening respondents received their paychecks from
2 Nos. 06-3455 & 06-3763
Weyerhaeuser Company (“Weyerhaeuser), but they
worked for DeQueen and Eastern Railroad (“DeQueen”),
which is a subsidiary of Weyerhaeuser. Railroad carriers
such as DeQueen are covered employers under the RRA.
Weyerhaueser did not credit these employees for that
railroad service. The Railroad Retirement Board (“Board”)
found in favor of four of the employees and credited them
for their prior service. Weyerhaeuser does not dispute that
four of the intervening respondents should be credited
retroactively for four years’ service. The Board, however,
determined that the four employees were entitled to
retroactive RRA service credit beyond the four years
automatically allowed by statute. The Board also con-
cluded that the other two intervening respondents were not
entitled to retroactive RRA service credit. Weyerhaeuser
appeals from the Board’s order granting the four employ-
ees retroactive service credit beyond four years. The four
employees granted retroactive service credit intervened
and appeal, claiming they were entitled to additional years
of service credit, even beyond the years awarded. The two
employees denied retroactive service credit also inter-
vened, claiming they were also entitled to retroactive
service credit. We affirm in part, reverse in part, and
remand in part.
I.
This case involves the Railroad Retirement Act of 1974,
45 U.S.C. § 231 et. seq. (“RRA”). The RRA provides “a
system of annuity, pension, and death benefits for employ-
ees of designated classes of employers,” Railroad Concrete
Crosstie Corp. v. Railroad Retirement Bd., 709 F.2d 1404, 1409
(11th Cir. 1983) (internal citation omitted), similar to the
Social Security Act. See Peppers v. Railroad Retirement Bd.,
Nos. 06-3455 & 06-3763 3
728 F.2d 404 (7th Cir. 1983) (noting that because of the
similarities between the RRA and the SSA, the same
analysis applies on appeal). The RRA applies only to
employers that provide railroad services. See 45 U.S.C.
§ 231(a) (2000) (defining the term “employer” under the
RRA).
The Board determined that the petitioner in this appeal,
Weyerhaeuser Company (“Weyerhaeuser”), is not an
employer under the RRA. See Weyerhaeuser Car Shop,
B.C.D., 03-40 (U.S. R.R. Ret. Bd. May 8, 2003) (Employer
Status Deter.).1 However, a Weyerhaeuser subsidiary,
DeQueen and Eastern Railroad (“DeQueen”), is a covered
employer under the RRA.
The intervening respondents and petitioners, Ben
Bramlett, Karen Neumeier, Gil Sharp, Deborah Ruth, Carol
Honea and Larry Potts,2 were all treated as Weyerhaeuser
1
Available at http://www.rrb.gov/blaw/bcd/bcd03-40.htm
(last visited Aug. 1, 2007).
2
In their briefs on appeal, the six employees were all identified
solely by their initials. At oral argument, we inquired as to
why, and were informed that it is the Board’s practice so as to
maintain the privacy of the parties. The parties proffered no
other justification. However, “[j]udicial proceedings are sup-
posed to be open, . . . in order to enable the proceedings to be
monitored by the public. The concealment of a party’s name
impedes public access to the facts of the case, which include the
parties’ identity.” Doe v. City of Chicago, 360 F.3d 667, 669 (7th
Cir. 2004). Although “the concealment of a party’s name is [not]
always improper[,] [t]he presumption [is] that parties’ identities
are public information . . . .” Id. That presumption can be
overcome “by showing that the harm to the plaintiff (normally
(continued...)
4 Nos. 06-3455 & 06-3763
employees for payroll purposes, although they all per-
formed services for DeQueen. They each received checks
from Weyerhaeuser and, in turn, Weyerhaeuser charged
DeQueen for their salaries. Weyerhaeuser did not file RRA
returns reporting compensation for Sharp, Ruth, Honea, or
Potts, and only started filing RRA returns for Bramlett and
Neumeier in the mid-1980’s.
In 2002, the Board initiated an audit of Weyerhaeuser.
Following the audit, the Board concluded that certain
employees who were paid by Weyerhaeuser, but who
performed work for DeQueen, should be considered
employees of DeQueen for purposes of RRA coverage.3
Specifically, in May 2003, the Board concluded the because
2
(...continued)
the plaintiff is the party whose identity is concealed) . . . exceeds
the likely harm from concealment.” Id. In this case, the parties
provided no justification for the use of pseudonyms, other than
that it is the Board’s practice to do so to protect the privacy of
the employees. (It is clearly not a question of protecting the
employees from retaliation, as Weyerhaeuser knows the
identity of the claimants.) A mere desire for privacy, how-
ever, does not overcome the presumption that a party’s identity
is public information. Accordingly, we identify the parties
by their names.
3
An employee is a covered employee under the RRA, if, among
other things, he is “in the service of” an RRA employer. 45
U.S.C. § 231(d)(1). An employee is “in the service of” an RRA
employer if “(A) he is subject to the continuing authority of the
employer to supervise and direct the manner of rendition of his
service, or (B) he is rendering professional or technical services
and is integrated into the staff of the employer, or (C) he is
rendering, on the property used in the employer’s operations,
personal services the rendition of which is integrated into the
employer’s operations . . . .” Id.Nos. 06-3455 & 06-3763 5
Weyerhaeuser employee Potts had provided a portion of
his services to DeQueen and was “integrated” into
DeQueen’s staff and railroad operations, he was covered
by the RRA. Potts, B.C.D. 03-40.2 (U.S. R.R. Ret. Bd. May
12, 2003) (Employee Serv. Deter.).4 The Board concluded
that Potts’ service should have been credited under the
RRA and granted him retroactive service credit for four
years, “as permitted by section 211.16.” Section 211.16 and
its statutory counterpart, 45 U.S.C. § 231h, both provide
for time limits for correcting records of compensation.
Section 211.16 provides:
The Board’s record of the compensation reported as
paid to an employee for a given period shall be conclu-
sive as to amount, or if no compensation was reported
for such period, then as to the employee’s having
received no compensation for such period, unless the
error in the amount of compensation or the failure to
make return of the compensation is called to the
attention of the Board within four years after the date
on which the compensation was required to be re-
ported to the Board as provided for in § 209.6 of this
chapter.
20 C.F.R. § 211.16.5 In other words, any compensation
4
Available at http://www.rrb.gov/blaw/bcd/bcd03-40.2.htm
(last visited Aug. 1, 2007).
5
Similarly, 45 U.S.C. § 231h provides: “The Board’s record of
the compensation so returned shall be conclusive as to the
amount of compensation paid to an employee during each
period covered by the return, and the fact that the Board’s
records show that no return was made of the compensation
claimed to have been paid to an employee during a particular
period shall be taken as conclusive that no compensation was
(continued...)
6 Nos. 06-3455 & 06-3763
possibly due but not paid or not credited more than four
years before the Board receives notice of a deficiency is not
recoverable, i.e., the non-payment is final. Because the
filing deadline for service records for each calendar year is
the last day of February of the following year, when the
Board issued its May 2003 decision as to Potts, the service
records for the years 1998 and earlier were deemed conclu-
sive. Accordingly, as a result of the Board’s May 2003
decision, Potts received retroactive service credit for the
years 1999 through 2002. Potts sought reconsideration of
the Board’s decision, requesting additional retroactive
service credit beyond the four-year limit based on 20 C.F.R.
§ 211.16(b). Section 211.16(b) provides: “The Board may
correct a report of compensation after the time limit set
forth in paragraph (a) of this section where the compensa-
tion was posted or not posted as the result of fraud on the
part of the employer.” Potts argued that a 1995 efficiency
study prepared for Weyerhaeuser by Anacostia & Pacific
Company, Inc. (“Anacostia”) showed that Weyerhaeuser
fraudulently failed to file RRA service records on his
behalf. In the efficiency study, Anacostia stated that
DeQueen’s “practice of contracting with [Weyerhaeuser]
for the entire mechanical work force as well as certain
accounting personnel is subject to challenge by the Rail-
road Retirement Board (’RRB’). In essence, the RRB posi-
tion is that railroads cannot escape payment of Railroad
Retirement and Unemployment Insurance Taxes by
5
(...continued)
paid to such employee during that period, unless the error in
the amount of compensation returned in the one case, or the
failure to make return of the compensation in the other case,
is called to the attention of the Board within four years after
the day on which return of the compensation was required to
be made.”
Nos. 06-3455 & 06-3763 7
contracting an integral railroad function to an affiliate
under common ownership.” The Board denied Potts’
request for reconsideration, finding that Potts’ allegations
of fraud were “not meritorious.” See Potts, B.C.D. 05-21
(U.S. R.R. Ret. Bd. May 17, 2005) (Employee Serv. Deter.
Recon.).6 The Board added:
[T]he Board regards the contention that fraud was
committed as a very serious accusation and does not
find that the failure of Weyerhaeuser to report [Potts’]
service and compensation constituted fraud even
though a management study stated that certain
Weyerhaeuser Company employees worked exclu-
sively for [DeQueen] (and another affiliated railroad).
The Board notes that the same report also stated that
the employees had “apparently performed consider-
able mechanical or maintenance work for
[Weyerhaeuser Company] and third parties.”
Id.Then, in May 2005, the Board found that Sharp, Ruth,
and Honea, who were all supervised by DeQueen employ-
ees and were subject to the continuing authority of
DeQueen, were covered employees. Accordingly, the Board
found their service creditable under the RRA. See
Weyerhaeuser Car Shop, B.C.D. 05-17 at 8 (U.S. R.R. Ret.
Bd. May 4, 2005) (Employer Status/Employee Serv.
Deter.).7 The Board further granted them retroactive service
credit “to the extent permitted by section 9 of the Railroad
Retirement Act and section 211.16 of the Board’s regula-
6
Available at http://www.rrb.gov/blaw/bcd/bcd05-21.htm
(last visited Aug. 1, 2007).
7
Available at http://www.rrb.gov/blaw/bcd/bcd05-17.htm
(last visited Aug. 1, 2007).
8 Nos. 06-3455 & 06-3763
tions.” Id. at 8-9. That amounted to retroactive service
credit for Sharp, Ruth, and Honea for the years 2001
through 2004. Sharp, Ruth, and Honea requested additional
service credit beyond four years, also relying on 20 C.F.R.
§ 211.16(b)’s fraud exception. The Board denied their
request for additional service credit, concluding that “as a
general rule the Board’s record of compensation and
service may not be corrected after four years in the absence
of fraud. A majority of the Board finds no evidence of fraud
in the record . . . .” See B.C.D. 05-39 (U.S. R.R. Ret. Bd. Aug.
5, 2005) (Retro. Employee Serv. Credit, Employer Status
Deter.).8
After the Board issued its decision denying Sharp, Ruth,
and Honea’s request for additional service credit, their
attorney, who also represented Potts, requested reconsider-
ation of the Board’s decisions denying all four claimants
retroactive service credit beyond four years.9 The four
again argued that Weyerhaeuser had committed fraud and
that they were entitled to RRA service credit beyond the
four years already authorized. On June 22, 2006, the Board
reversed its earlier holding as to all four employees and
granted them retroactive service credit back to
1995—beyond the four-year limit set forth in section 211.16.
See Weyerhaeuser Car Shop, B.C.D. 06-26 (U.S. R.R. Ret. Bd.
June 22, 2006) (Employer Status/Employee Serv. Deter. on
8
Available at http://www.rrb.gov/blaw/bcd/bcd05-39.htm
(last visited Aug. 1, 2007).
9
Potts had already requested reconsideration and the Board
had denied his request for reconsideration.” See Potts, B.C.D. 05-
21. Thus, this was his second request for reconsideration.
Nos. 06-3455 & 06-3763 9
Recon.).10 After noting its prior decisions, in which it found
no evidence that Weyerhaeuser committed fraud, the
Board cited the 1995 Anacostia report and concluded that
that report “did or should have put Weyerhaeuser on
notice of the nature of the issue regarding the reporting of
service performed by its employees for the affiliated
carriers and created reasonable expectations that such
service should be creditable under the Acts.” Id. at 3. The
Board added that “neither section 9 of the RRA nor section
211.16 of the [Board’s] regulations should be applied to
bar” the employees from receiving additional retroactive
service credit. Id. at 3-4. Accordingly, the Board ordered
that Sharp, Ruth, Honea, and Potts receive retroactive
service credit back to 1995, id. at 3, which in effect added
six years of service credit for Sharp, Ruth, and Honea and
four years for Potts. Weyerhaeuser filed a petition for
review of the June 22, 2006, decision in this court. Sharp,
Ruth, Honea, and Potts intervened in this appeal, arguing
that the Board erred in limiting the retroactive service
credit to 1995, maintaining they are entitled to retroactive
service credit for every year they worked at Weyerhaeuser.
Two other employees of Weyerhaeuser, Ben Bramlett and
Karen Neumeier, also intervened in this appeal. Bramlett
and Neumeier both were treated as employees subject to
the RRA provisions since 1984, but they claim that they
were entitled to retroactive service credit for the years from
1973 through 1984 and 1975 through 1984, respectively. In
August 2005, the Board concluded that Bramlett and
Neumeier were not entitled to retroactive service credit
because more than four years had passed and there was no
10
Available at http://www.rrb.gov/blaw/bcd/bcd06-26.asp
(last visited Aug. 1, 2007).
10 Nos. 06-3455 & 06-3763
evidence in the record of employer fraud in connection
with Bramlett and Neumeier. See B.C.D. 05-39.
Bramlett and Neumeier sought reconsideration of that
decision. The Board affirmed its initial determination,
concluding again that there was no evidence of fraud for
the period of 1973 through 1984. B.C.D. 06-26 at 4. In so
ruling, the Board added that Bramlett and Neumeier are
precluded from obtaining retroactive service credit “more
than twenty years after the alleged conduct” by
Weyerhaeuser. B.C.D. 06-26 at 4. Bramlett and Neumeier
seek to overturn the Board’s decision on appeal.
II.
This court has jurisdiction to review the final decisions of
the Board pursuant to 45 U.S.C. § 355. We review the
Board’s decision to determine if it is supported by substan-
tial evidence, which is “such relevant evidence as a reason-
able mind might accept as adequate to support a conclu-
sion.” Richardson v. Perales, 402 U.S. 389, 401 (1971) (internal
citation omitted). Moreover, a Board decision must have a
reasonable basis in the law. Holman v. U.S. R.R. Ret. Bd., 253
F.3d 975, 978 (7th Cir. 2001).
On appeal, Weyerhaeuser first claims that the Board’s
decision to grant retroactive service credit beyond four
years to Sharp, Ruth, Honea, and Potts lacks a reasonable
basis in the law because the regulations allow for such
retroactive service credit only in the event of fraud, and the
Board concluded that there was no evidence of fraud. We
agree. As quoted above, 20 C.F.R. § 211.16 provides that the
Board’s records are conclusive unless (1) “RRA employ-
ment taxes previously had been paid and either error
correction or principles of equity require that the employee
Nos. 06-3455 & 06-3763 11
received additional retroactive service credit”; or (2) “the
employee’s erroneous service record is due to employer
fraud.” 20 C.F.R. § 211.16. The parties agree that the first
exception does not apply, thus leaving the fraud exception
as the only possible way for the intervening parties to
obtain retroactive service credit beyond four years.
In this case, though, the Board found there was no
evidence of fraud. See Potts, B.C.D. 05-21 at 3. (“[T]he
Board regards the contention that fraud was committed as
a very serious accusation and does not find that the failure
of Weyerhaeuser to report [Potts’] service and compensa-
tion constituted fraud even though a management study
stated that certain Weyerhaeuser Company employees
worked exclusively for [DeQueen] (and another affiliated
railroad).”); B.C.D. 05-39 at 1-2 (denying Sharp, Ruth, and
Honea’s request for additional years of retroactive service
credit, concluding that “as a general rule the Board’s record
of compensation and service may not be corrected after
four years in the absence of fraud. A majority of the Board
finds no evidence of fraud in the record . . . .”). Signifi-
cantly, on reconsideration the Board did not find that
Weyerhaeuser had committed fraud. Rather, the Board
concluded that the 1995 Anacostia report “did or should
have put Weyerhaeuser on notice of the nature of the issue
regarding the reporting of service performed by its em-
ployees for the affiliated carriers and created reasonable
expectations that such service should be creditable under
the Acts.” See B.C.D. 06-26 at 3. The Board then added
that “neither section 9 of the RRA nor section 211.16 of the
[Board’s] regulations should be applied to bar” the em-
ployees from receiving additional retroactive service
credit. Id. at 3-4.
That, however, is exactly what section 211.16 of the
Board’s regulations does—bars employees from receiving
12 Nos. 06-3455 & 06-3763
additional retroactive service credit absent limited circum-
stances, such as employer fraud. Specifically, 20 C.F.R.
§ 211.16(c) provides that “[e]xcept as provided in para-
graph (b)(1) of this section, no employee may be cred-
ited . . . beyond the four year period . . . unless the em-
ployee established to the satisfaction of the Board that all
employment taxes . . . have been paid with respect to the
compensation and service.” Because employment taxes
have not been paid on behalf of the six claimants, service
credit is only creditable beyond four years, as provided
in paragraph (b)(1), and that section states that “[t]he
Board may correct a report of compensation after [four
years] where the compensation was posted or not posted
as the result of fraud on the part of the employer.” 20
C.F.R. § 211.16(b)(1).
On appeal, the Board readily admits that it “did not find
that Weyerhaeuser Company committed fraud, as that
term is commonly used, in connection with Weyerhaeuser
Company’s failure to report compensation for the individu-
als for whom it now concedes are or were employees of the
DeQueen and Eastern Railroad.” Board’s Respondent,
Cross-Respondent Brief at 12-13. The Board attempts to
sidestep this concession in two main ways. First, it notes
that § 211.16(b)(1) does not define “fraud,” and then the
Board points out that it had previously found that the
“knowing failure to report compensation and service as
required under the Railroad Retirement Act, met the
standard set forth in section 211.16(b) and would support
the requirement of retroactive crediting of service and
compensation.” Board’s Respondent, Cross-Respondent
Brief at 11. Similarly, the intervening respondents point to
other Board decisions granting retroactive service credit
beyond four years, which were based on an employer’s
knowing failure to report compensation. Intervening
Respondents and Petitioners’ Brief at 15-16. From this, we
Nos. 06-3455 & 06-3763 13
understand the Board and intervening respondents to be
arguing that, since the regulations do not define “fraud,”
the Board has discretion to interpret that term to mean the
“knowing failure to report compensation.” The problem
with this argument is that the Board, in this case, did not
find that Weyerhaeuser had “knowingly failed to report
compensation.” Rather, the Board found that the Anacostia
report “did or should have put Weyerhaeuser on notice of
the nature of the issue regarding the reporting of service
performed by its employees for the affiliated carriers and
created reasonable expectations that such service should be
creditable under the Acts.” See B.C.D. 06-26 at 3. Thus,
rather than apply the “knowing” standard the Board
seemingly puts forth for fraud on appeal, the Board
applied a “did or should have had notice” standard. (And
even then, the Board did not conclude that Weyerhaeuser
knew or should have had notice that it was required to
report compensation under the RRA—it merely concluded
that the report “did or should have put Weyerhaeuser on
notice of the nature of the issue, . . . and created reasonable
expectations that such service should be creditable under
the Acts.”) Thus, the Board’s decision cannot stand even
applying its favored definition of “fraud.”11
11
Because the Board did not find that Weyerhaeuser had
knowingly failed to report compensation for the intervening
respondents and concedes that the Board did not find
Weyerhaeuser had committed fraud as that term is commonly
used, we need not decide whether a knowing failure to re-
port compensation would qualify as “fraud” under 20 C.F.R.
§ 211.16(b)(1). Other portions of the regulations provide that
“[u]nlike fraud, fault does not require a deliberate intent to
deceive,” indicating that fraud requires a deliberate intent to
deceive. 20 C.F.R. § 255.11(b). Additionally, the consultant’s
(continued...)
14 Nos. 06-3455 & 06-3763
The Board also puts forth an equitable argument for
sustaining its decision: It argues that because
“Weyerhaeuser Company knew or should have known that
the individuals should be receiving credit for service
performed for DeQueen and Eastern while they were on
the Weyerhaeuser Company payroll,” Board’s Respondent,
Cross-Respondent Brief at 13, “it is equitable that these
individuals receive credit under these circumstances.” Id.Initially, we note that in its decision on reconsideration, the
Board never found that Weyerhaeuser “knew or should
have known that the individuals should be receiving
credit . . . .” Rather, as noted above, the Board found that
Weyerhaeuser knew or should have known “of the issue.”
Knowing that something is an issue is quite different than
knowing that you are legally required to report service
credit. Regardless, the regulations that the Board itself
promulgated do not provide an equitable exception to the
four-year bar. Rather, the only exception relevant to this
appeal is the fraud exception. Yet on reconsideration the
Board did not address the question of fraud, instead stat-
ing that it “need not make a finding as to whether
Weyerhaeuser willfully failed to report certain of its
employees under the [RRA].” B.C.D. 06-26 at 3. The Board
cannot ignore its own regulations merely because it finds
them inequitable under the circumstances of this case. See
Rhodes v. Johnson, 153 F.3d 785, 789 (7th Cir. 1998) (noting
that while an agency has discretion to reasonably interpret
its regulations, this “must not be confused with the power
11
(...continued)
report may not prove intent or knowledge, since the report
came from an independent consultant and not the Board and
merely raised the issue with Weyerhaeuser; the report did
not conclude that the employees were definitively subject to
taxes, but rather that the practice may be “subject to challenge.”
Nos. 06-3455 & 06-3763 15
to rewrite” unambiguous regulations); Pearce v. Director,
Office of Workers’ Comp. Programs, 647 F.2d 716, 726 (7th Cir.
1981) (stating that “it is well settled that reasonable regula-
tions promulgated pursuant to statutory authority have the
force and effect of law. . . . [and] an agency is bound by its
own regulations”). See also Panhandle E. Pipe Line Co. v. Fed.
Energy Regulatory Comm’n, 613 F.2d 1120, 1136 (D.C. Cir.
1979) (noting that “[t]he fact that a regulation as written
does not provide [the agency] a quick way to reach a
desired result does not authorize it to ignore the regulation
or label it ‘inappropriate’ ”). Therefore, there is no basis in
law for the Board’s decision on reconsideration that
Sharp, Ruth, Honea, and Potts are entitled to retroactive
service credit beyond four years.
Weyerhaeuser argues that upon overturning the Board’s
decision on reconsideration, there is no need for remand
because the Board had already concluded that there was no
evidence of fraud. The Board in its earlier decisions had
found that there was no evidence of fraud. See B.C.D. 05-
21; B.C.D. 05-39. But those decisions are not before this
court. Rather, the only decision before this court is the
Board’s decision on reconsideration. Although the Board’s
decision on reconsideration cannot stand because it failed
to apply the fraud standard established in its own regula-
tions, the intervening respondents had sought reconsidera-
tion of the Board’s initial decision that there was no
evidence of fraud. The Board never addressed that ques-
tion on reconsideration. See B.C.D. 06-26 at 3 (stating that
the Board “need not make a finding as to whether
Weyerhaeuser willfully failed to report certain of its
employees under the [RRA]”). Accordingly, we must
remand this case to the Board to rule on the motion for
reconsideration applying the proper standard, at least as to
intervening respondents Sharp, Ruth, and Honea. There is
16 Nos. 06-3455 & 06-3763
no need to remand for intervening respondent Potts
because, as discussed below, the Board violated its own
regulations in reopening Potts’ case.
As set forth above, the Board originally concluded in
May 2003 that Potts was entitled to retroactive service
credit for the years 1999 through 2002. Potts sought recon-
sideration of that decision, arguing that he was entitled to
credit for additional years that he had worked for
Weyerhaeuser. The Board denied Potts’ request for recon-
sideration in May 2005, and Potts did not appeal that
decision. However, when the Board granted Sharp, Ruth,
and Honea’s request for reconsideration, the Board also
“reopen[ed] the decision regarding [Potts’] request for
reconsideration,” and then concluded that Potts should
receive credit back to 1995. See B.C.D. 06-26 at 4. The
regulations, though, limit the Board’s authority to reopen
decisions relating to employee status determination. The
Board’s regulations provide for the “Finality of deter-
minations issued under this part,” stating:
Any determination rendered by the Board at the initial
or reconsideration stages shall be considered a final
determination and shall be binding with respect to all
parties unless reversed on reconsideration or upon
judicial review. A final determination may be reopened
at the request of a party who was, or could have been,
a party to the final determination when the party
alleges that the law or the facts upon which the final
determination was based . . . changed sufficiently to
warrant a contrary determination.[12]
12
A “final determination” is defined as “[a]ny determination
rendered by the Board at the initial or reconsideration
stages.” 20 C.F.R. § 259.6.
Nos. 06-3455 & 06-3763 17
20 C.F.R. § 259.6. Thus, the Board only had the power to
reopen Potts’ case if “the law or the facts upon which the
final determination was based . . . changed sufficiently to
warrant a contrary determination.” Id.On appeal, the Board does not claim that the law
changed. Rather, the Board asserts that its decision grant-
ing Sharp, Ruth, and Honea reconsideration is a “change of
facts” which justifies the Board’s reopening of its decision
as to Potts. Board’s Respondent, Cross-Respondent Brief
at 15. Section 259.6 of the regulations, however, only allows
for the reopening of a decision if there was a change in
facts “upon which the final determination was based. . . .”
Id. But in denying Potts’ request for reconsideration, the
Board did not base its decision on the fact that Sharp, Ruth,
and Honea were also denied retroactive service credit
beyond four years; rather, the Board based its decision on
the lack of evidence of fraud. Thus, none of the underlying
facts upon which the Board’s final determination as to
Potts’ request for reconsideration changed. Therefore,
section 259.6 of the regulations does not authorize the
Board to reopen Potts’ case. While the Board argues that it
would be inequitable to treat Potts differently than Sharp,
Ruth, and Honea,13 “[w]hen an administrative agency
13
In making the equitable argument on appeal, the Board relies
on the fact that on reconsideration, it granted Sharp, Ruth,
and Honea retroactive service credit to 1995. That decision,
however, has no basis in law, see supra at 15, and the only
way that Sharp, Ruth, or Honea will receive additional ser-
vice credit is if on remand the Board reverses its previous
factual finding that there was no fraud on the part of
Weyerhaeuser. Conversely, if the Board stands by its original
(continued...)
18 Nos. 06-3455 & 06-3763
promulgates rules to govern its proceedings, these rules
must be scrupulously observed . . . for once an agency
exercises its discretion and creates the procedural rules
under which it desires to have its actions judged, it denies
itself the right to violate these rules.” Black v. Interstate
Commerce Comm’n, 737 F.2d 643, 652 n.3 (7th Cir. 1984). We
further noted in Black, “[i]f an agency in its proceedings
violates its rules and prejudice results, any action taken as
a result of the proceedings cannot stand.” Id.The Board also attempts to justify its decision to reopen
Potts’ case by noting that the three-member Board re-
opened Potts’ case on its own initiative and that “the Board
has the discretion to reopen any case where the Board
deems it proper to do so.” Board’s Respondent, Cross-
Respondent Brief at 15. In support of its position, the Board
cites 20 C.F.R. § 261.11, entitled: “Discretion of the three-
member board to reopen or not to reopen a final decision.”
Potts likewise relies on section 261.11 as a basis for reopen-
ing his case. That section provides:
In any case in which the three-member Board may
deem proper, the Board may direct that any decision,
which is otherwise subject to reopening under this
part, shall not be reopened or direct that any decision,
which is otherwise not subject to reopening under this
part, shall be reopened.
20 C.F.R. § 261.11While section 261.11 provides the Board with discretion
to reopen cases that are not otherwise subject to reopening,
13
(...continued)
factual finding of no fraud, then there will be no disparate
treatment.
Nos. 06-3455 & 06-3763 19
that language is modified by “under this part.” “This part”
is part 261. Further, 20 C.F.R. § 261.1(b) provides that “[a]
final decision as that term is used in this part means any
decision of the type listed in § 260.1 of this chapter . . . .”
Section 260.1 provides for decisions by the Board on claims
for benefits under the RRA.14 Potts, however, was not
seeking benefits under the RRA and the Board was not
reopening a final decision of the type listed in § 260.1.
Rather, the Board’s decision concerned Potts’ status as an
employee under the RRA and that decision involved part
259. See 20 C.F.R. § 259. Thus, by its own terms, 20 C.F.R.
§ 261.11 does not apply to this case.
The Board does not cite any other statutory or regulatory
provisions that would authorize it to reopen Potts’ case,
and thus has forfeited any other basis for reopening the
14
Specifically, Section 260.1(a) provides: “Claims for benefits
shall be adjudicated and initial decisions made by the Board
concerning: (1) Applications for benefits under the Railroad
Retirement Act; (2) The withdrawal of an application; (3) A
change in an annuity beginning date; (4) The termination of an
annuity; (5) The modification of the amount of an annuity or
lump-sum benefit; (6) The reinstatement of an annuity which
had been terminated or modified; (7) The existence of an
erroneous payment; (8) The recovery of the amount of an
erroneous payment; (9) The eligibility of an individual for a
supplemental annuity or the amount of such supplemental
annuity; (10) Whether representative payment shall serve the
best interests of an annuitant as a result of that individual’s
incapacity to manage his annuity payments; and (11) Who
shall be designated or continued as representative payee on
behalf of an annuitant.” 20 C.F.R. § 206.1(a).
20 Nos. 06-3455 & 06-3763
case.15 Since the only regulation applicable limits the
Board’s authority to reopen cases to circumstances not
present here, the Board acted contrary to the law in reopen-
ing Potts’ case, and that decision must be reversed. The
Board may not like its regulations, but as noted above,
“[w]hen an administrative agency promulgates rules to
govern its proceedings, these rules must be scrupulously
observed . . . for once an agency exercises its discretion
and creates the procedural rules under which it desires to
have its actions judged, it denies itself the right to violate
these rules.” Black, 737 F.2d 643 n.3.
That brings us to Sharp, Ruth, Honea, and Potts’ claim
that the Board erred in limiting retroactive credit to 1995.
While we must remand this case for the Board to apply the
required fraud standard to determine whether Sharp, Ruth
and Honea were entitled to retroactive credit to 1995,
remand is not necessary to resolve Sharp, Ruth, Honea and
Potts’ petition challenging the Board’s refusal to grant them
credit for the earlier years. We review the Board’s decision
for substantial evidence. Wassenberg v. U.S. R.Ret. Bd., 75
F.3d 294, 296 (7th Cir. 1996). Given this deferential stan-
dard, we conclude that the Board did not err in concluding
that Sharp, Ruth, Honea, and Potts were not entitled to
15
In his brief, Potts also points to 20 C.F.R. § 261.2(a) and
§ 261.2(b) as possible authority for the Board’s decision reopen-
ing his case. Section 261.2 provides for conditions for reopening
“[a] final decision,” but as noted above, “final decision” for
purposes of part 260 “means any decision of the type listed in
§ 260.1.” Because Potts’ case did not involve a type listed in
§ 260.1, it was not a final decision for purposes of § 261.2 and
thus the grounds for reopening in § 261.2(a) and (b) do not
apply.
Nos. 06-3455 & 06-3763 21
additional years of service credit. The Anacostia Report
was not issued until 1995, and it was this report that the
Board concluded put Weyerhaeuser on notice of the issue
that it might need to treat some of its employees as employ-
ees under the RRA. While we leave for remand the ques-
tion of whether this report established fraud, we conclude
that the Board’s decision that prior to that date there was
no evidence of fraud is supported by substantial evidence.
Accordingly, under these circumstances, we affirm the
Board’s decision to deny these four claimants service credit
pre-dating the report.
Finally, Bramlett and Neumeier claim that the Board
erred in denying them any retroactive credit. Both Bramlett
and Neumeier were treated as employees subject to the
RRA since 1984, but they claim they were entitled to
retroactive service credit for all of the years they worked at
Weyerhaeuser, which would date back to the early 1970’s.
The Board rejected their claim, concluding that it was the
1995 report that put Weyerhaeuser on notice of the RRA
reporting issue and that since those claimants had received
service credit since the 1980’s, they were not entitled to any
additional retroactive service credit.
Again, our review is for substantial evidence. See
Wassenberg, 75 F.3d at 296. Given this deferential standard,
we conclude that the Board did not err in concluding that
Bramlett and Neumeier were not entitled to additional
years of service credit. The Anacostia Report was not
issued until 1995, and it was this report that the Board
concluded put Weyerhaeuser on notice of the issue that it
might need to treat some of its employees as employees
under the RRA. By 1995, however, Weyerhaeuser had
already been treating Bramlett and Neumeier as employees
under the RRA. While Bramlett and Neumeier point to
22 Nos. 06-3455 & 06-3763
other evidence that they believe shows that Weyerhaeuser
should have treated them as RRA employees since 1973,
the Board did not find that evidence indicative of fraud,
and it is not our place to second-guess the Board’s factual
determination. Accordingly, under these circumstances, the
Board’s decision to affirm its original decision denying
Bramlett and Neumeier additional retroactive credit is
affirmed.16
16
Bramlett and Neumeier, along with intervening respondents
Sharp, Ruth, Honea, and Potts, note that “[i]n the event that
this Court finds evidence of intent to mislead insufficient to
substantiate a finding of employer fraud on the current re-
cord, then on remand for a hearing, the RRB could subpoena
all individuals who have provided information in this case.”
Brief of Intervening Respondents and Petitioners at 25. They
further note that they “specifically requested evidentiary
hearing [s] on at least ten (10) occasions in the record [but] [t]hey
never were given a hearing, . . . .” Id. at 27. It is unclear from
these passing comments whether the six claimants were at-
tempting to argue on appeal that the Board erred in denying
their request for an evidentiary hearing. Their brief did not
identify that as an issue on appeal. More significantly, the
claimants did not cite any case law addressing whether this
court has jurisdiction to review the Board’s decision not to
hold an evidentiary hearing, and, if so, the appropriate stand-
ard of review. By not presenting or developing this argument
on appeal, the claimants have waived any challenge to the
Board’s decision not to hold an evidentiary hearing. See
Weinstein v. Schwartz, 422 F.3d 476, 477 n.1 (7th Cir. 2005) (not-
ing that failure to develop arguments on appeal constitutes
waiver).
Nos. 06-3455 & 06-3763 23
III.
The Board’s regulations limit retroactive service credit
to four years, absent an exception to the general four-year
bar. The Board initially concluded as to Sharp, Ruth,
Honea, and Potts’ claims for additional service credit that
the only exception possibly applicable in this case—
employer fraud—did not apply because there was no
evidence that Weyerhaeuser had committed fraud. On
reconsideration, the Board granted retroactive service
credit beyond the four years, to 1995, without finding
that Weyerhaeuser had committed fraud. This contravened
the governing regulations and was thus contrary to law.
Accordingly, we reverse the Board’s decision on reconsid-
eration as to Sharp, Ruth, Honea, and Potts. We further
remand this case to the Board for it to rule on Sharp, Ruth,
and Honea’s motion for reconsideration applying the
fraud standard mandated by the Board’s regulations.
Because the Board had already denied Potts’ motion for
reconsideration and violated its own regulations in reopen-
ing that decision, there is no basis for a remand for Potts.
As to Bramlett and Neumeier: the Board’s decision denying
them retroactive service credit is supported by substantial
evidence and, accordingly, we affirm that decision. We also
affirm the Board’s decision denying Sharp, Ruth, Honea
and Potts retroactive credit for years pre-dating the
1995 report, as that decision was also supported by sub-
stantial evidence.
24 Nos. 06-3455 & 06-3763
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—9-24-07