Donnal S. Mixon v. Office of Personnel Management ( 2016 )

UNITED STATES OF AMERICA
MERIT SYSTEMS PROTECTION BOARD
DONNAL S. MIXON, DOCKET NUMBER
Appellant, SF-0845-15-0822-I-2
v.
OFFICE OF PERSONNEL DATE: December 29, 2016
MANAGEMENT,
Agency.
THIS FINAL ORDER IS NONPRECEDENTIAL 1
Donnal S. Mixon, Palm Springs, California, pro se.
Roxann Johnson, Washington, D.C., for the agency.
BEFORE
Susan Tsui Grundmann, Chairman
Mark A. Robbins, Member
FINAL ORDER
¶1 The appellant has filed a petition for review of the initial decision, which
affirmed the reconsideration decision of the Office of Personnel Management
(OPM) denying his request for a waiver of the overpayment of his disability
retirement annuity. Generally, we grant petitions such as this one only when: the
1
A nonprecedential order is one that the Board has determined does not add
significantly to the body of MSPB case law. Parties may cite nonprecedential orders,
but such orders have no precedential value; the Board and administrative judges are not
required to follow or distinguish them in any future decisions. In contrast, a
precedential decision issued as an Opinion and Order has been identified by the Board
as significantly contributing to the Board’s case law. See 5 C.F.R. § 1201.117(c).
2
initial decision contains erroneous findings of material fact; the initial decision is
based on an erroneous interpretation of statute or regulation or the erroneous
application of the law to the facts of the case; the administrative ju dge’s rulings
during either the course of the appeal or the initial decision were not consistent
with required procedures or involved an abuse of discretion, and the resulting
error affected the outcome of the case; or new and material evidence or legal
argument is available that, despite the petitioner’s due diligence, was not
available when the record closed. Title 5 of the Code of Federal Regulations,
section 1201.115 (5 C.F.R. § 1201.115). After fully considering the filings in this
appeal, we conclude that the petitioner has not established any basis under
section 1201.115 for granting the petition for review. Therefore, we DENY the
petition for review and AFFIRM the initial decision, which is now the Board’s
final decision. 5 C.F.R. § 1201.113(b).
BACKGROUND
¶2 The appellant appealed an OPM reconsideration decision finding that he
was overpaid $125,524.00 in Federal Employees’ Retirement System (FERS)
retirement annuity benefits from August 1, 2007, to August 30, 2014, and denying
his request for a waiver. Mixon v. Office of Personnel Management, MSPB
Docket No. SF-0845-15-0822-I-1, Initial Appeal File (IAF), Tab 1. OPM
approved the appellant’s disability retirement application on August 15, 2007.
IAF, Tab 5 at 69-71. In the approval letter, OPM advised him that he must apply
for Social Security disability benefits and, if awarded such benefits,
“immediately notify us of the amount and the effective date of the monthly
benefit.” Id. at 69 (emphasis in original). OPM explained that because his FERS
disability benefits would be reduced by 100 percent of any Social Security
benefits payable for the first 12 months, the appellant should not negotiate any
Social Security checks until his FERS benefits had been reduced to account for
his receiving Social Security benefits. Id. at 70. At the same time that he applied
for a disability retirement annuity, the appellant also applied and was approved
3
for disability benefits under his Federal Employee Group Long Term Disability
(FEGLTD) policy. Refiled Appeal File (RAF), Tab 8 at 14.
¶3 On April 21, 2008, OPM sent the appellant a letter instructing him to notify
it of the current status of his application for Social Security benefits . IAF, Tab 5
at 56-57. The letter advised the appellant that if he was receiving Social Security
disability benefits and thus receiving an overpayment in FERS benefits, he was
legally required to repay that money to OPM, and further, if the Social Security
Administration sent him a retroactive payment, he should hold such payment until
he received notice from OPM of the amount of his overpayment. Id. at 56. On
May 5, 2008, the appellant notified OPM that he had been denied Social Security
benefits and had requested reconsideration of his application. Id. at 55. The
appellant’s June 1, 2008 FERS annuity payment, which he received on
July 1, 2008, was adjusted pursuant to 5 U.S.C. § 8452(a)(1)(A), reducing his
monthly payment from $6,661.00 to $4,441.00. IAF, Tab 5 at 47; RAF, Tab 8
at 16, Tab 16 at 6.
¶4 On July 13, 2008, the Social Security Administration approved t he appellant
for disability retirement benefits effective August 2007. IAF, Tab 5 at 23-26.
Shortly thereafter, the appellant called OPM and informed an employee there that
his Social Security benefits had been approved. RAF, Tab 8 at 15. The OPM
employee allegedly told the appellant that his retirement file had been prepared
for transfer to storage, but that she would put a note in the file about the grant of
Social Security benefits, and the agency would act on that information when the
file was transferred. Id. at 15-16. OPM has no record of the appellant’s
telephone call and did not adjust his annuity payment. IAF, Tab 9 at 7; RAF,
Tab 6 at 8-9.
¶5 In December 2013, while he was researching an unrelated matter, the
appellant found a potential discrepancy between the amount of the FERS annuity
payment he was receiving and the amount of the nontaxable benefits he believed
he should have been receiving under his FEGLTD policy. RAF, Tab 8 at 17. The
4
appellant contacted OPM and learned that his FERS benefits were not being
offset by his Social Security benefits. IAF, Tab 5 at 48-50; RAF, Tab 8 at 17-18.
He thus asked OPM to correct the error. IAF, Tab 5 at 48-50. He recontacted
OPM on a number of other occasions during 2014 to reiterate his request and
engaged the assistance of United States Senator Ron Wyden’s office to try to
resolve the issue. RAF, Tab 8 at 18-19.
¶6 On April 2, 2015, OPM notified the appellant that he had been overpaid in
the amount of $125,524.00. IAF, Tab 5 at 35-44. The appellant timely requested
reconsideration of the decision. Id. at 9-31. OPM issued a reconsideration
decision on August 4, 2015, affirming the initial decision and denying his request
for a waiver. Id. at 5-8. He subsequently filed this Board appeal. IAF, Tab 1.
¶7 Shortly thereafter, the appellant sought reimbursement from his FEGLTD
insurance carrier for the amount of the overpayment, and he requested specific
information from OPM to enable him to do so. IAF, Tabs 3, 7-9. The
administrative judge dismissed the appeal without prejudice to allow the appellant
sufficient time to obtain a decision from his insurance carrier. IAF, Tab 10,
Initial Decision. On December 3, 2015, the appellant’s insurance carrier
determined that it had underpaid him by $118,384.31, and thus reimbursed him
that amount. RAF, Tab 4 at 7-10.
¶8 The administrative judge then refiled the appeal sua sponte. RAF, Tab 1.
After the appellant waived his right to a hearing and the record closed , RAF,
Tab 13, the administrative judge found that the agency had proven the amount
and existence of an overpayment, RAF, Tab 17, Initial Decision (ID) at 5-6. The
administrative judge found that the appellant was without fault in creating the
overpayment, but that he was not entitled to a waiver or adjustment of the
repayment schedule. ID at 7-10. The administrative judge further found that the
appellant had not demonstrated that he was entitled to a partial waiver based on
detrimental reliance or unconscionability. ID at 10-14. The appellant filed a
petition for review. Petition for Review (PFR) File, Tab 1.
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DISCUSSION OF ARGUMENTS ON REVIEW
Burdens and Elements of Proof
¶9 OPM bears the burden of showing the existence and the amount of an
annuity overpayment by a preponderance of the evidence. 2 5 C.F.R. § 845.307(a).
An appellant seeking waiver of an established overpayment bears the burden of
establishing his entitlement to such a waiver by substantial evidence. 3 5 C.F.R.
§ 845.307(b). To be entitled to a waiver, the appellant must show that: (1) he is
without fault in creating the overpayment; and (2) recovery of the overpayment
would be against equity and good conscience. 5 U.S.C. § 8470(b); Parker v.
Office of Personnel Management, 75 M.S.P.R. 688, 692 (1997).
¶10 Recovery of an overpayment is against equity and good conscience if it
would cause financial hardship, the appellant can show he relinquished a valuable
right or changed positions for the worse due to the overpayment, or it would be
inequitable otherwise under the circumstances, i.e., unconscionable. Vojas v.
Office of Personnel Management, 115 M.S.P.R. 502, ¶ 22 (2011); 5 C.F.R.
§ 845.303. The standard for unconscionability is a high one and is granted only
under exceptional circumstances. Taylor v. Office of Personnel Management,
87 M.S.P.R. 214, ¶ 18 (2000). In assessing unconscionability, the Board
considers all relevant factors under a totality of the circumstances
approach. Aguon v. Office of Personnel Management, 42 M.S.P.R. 540, 550
(1989). Such circumstances may include, but are not limited to, cases wherein:
(1) the agency delayed an exceptionally long time to adjust an annuity; (2) the
agency failed to respond within a reasonable length of time to an annuitant’s
inquiries regarding an overpayment; (3) the agency failed to act expeditiously to
2
A preponderance of the evidence is that degree of relevant evidence that a reasonable
person, considering the record as a whole, would accept as sufficient to find that a
contested fact is more likely to be true than untrue. 5 C.F.R. § 1201.4(q).
3
Substantial evidence is the degree of relevant evidence that a reasonable person,
considering the record as a whole, might accept as adequate to support a conclusion,
even though other reasonable persons might disagree. 5 C.F.R. § 1201.4(p).
6
adjust an annuity in the face of the specific notice; and/or (4) the agency is
otherwise grossly negligent in handling the case. Id. at 550-51; see, e.g.,
Newcomb v. Office of Personnel Management, 42 M.S.P.R. 552, 558-59 (1989),
(determining that a delay of 3 years and 10 months between a request for waiver
and a final decision from the agency is not unconscionable); Policy Guidelines on
the Disposition of Overpayments under the Civil Service Retirement System and
Federal Employees’ Retirement System § I.F.1 (May 1995) (hereinafter Policy
Guidelines) (stating that for a waiver based on egregious errors or delays to
satisfy the standard for unconscionability, there must be “a determination that the
agency’s handling of a case was so offensive—so monstrously harsh and shocking
to the conscience—that one's sense of equity forbids recovery”).
¶11 However, an individual who knows or suspects that he is receiving an
overpayment is required by principles of equity and good conscience to set aside
the overpayment for OPM to recover. Dorrello v. Office of Personnel
Management, 91 M.S.P.R. 535, ¶ 7 (2002). In such cases, recovery by OPM is
not against equity and good conscience. Zucker v. Office of Personnel
Management, 114 M.S.P.R. 288, ¶ 7 (2010); Policy Guidelines § I.C.4 (stating
that a without-fault appellant who accepts a payment he suspects or knows to be
erroneous is obligated to set aside the overpaid money pending recovery, and
recovery in such cases is not against equity and good conscience). Waivers of
repayment are granted only in exceptional circumstances, which do not include
financial hardship. Zucker, 114 M.S.P.R. 288, ¶ 7. The Board applies the
set-aside rule and determines whether a waiver is appropriate according to the
specific facts of each case. Harrison v. Office of Personnel Management,
57 M.S.P.R. 89, 93 (1993).
Fault Determination
¶12 Because the administrative judge found him to be without fault in causing
the overpayment, the appellant asserts, the administrative judge could not have
reasonably concluded that he accepted an overpayment that he knew or should
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have known to be erroneous. PFR File, Tab 1 at 6-7; ID at 7. The appellant
misconstrues the administrative judge’s determination that he was without fault.
Fault determination is the first step in the decisionmaking process regarding
waiver. Policy Guidelines § I.B.1; see 5 U.S.C. § 8470(b); Parker, 75 M.S.P.R.
at 692. An overpayment debtor will be found to be without fault if he performed
no act of commission or omission resulting in the overpayment. Policy
Guidelines § I.B.1. Here, the appellant promptly offered a status update
regarding his Social Security disability benefits application when OPM requested
one. IAF, Tab 5 at 55. He submitted a sworn statement regarding his telephonic
contact with OPM after he was approved for Social Security disability benefits.
RAF, Tab 8 at 15-16; see Policy Guidelines § I.B.6 (stating that an individual
who accepts an overpayment will automatically be found without fault, regardless
of whether he knew or should have known that the payment was erroneous, if he
promptly contacts OPM and questions the correctness of the payment). The
administrative judge thus reasonably concluded that the appellant was without
fault in causing the overpayment. ID at 7. Whether recovery is against equity
and good conscience, however, is a separate consideration. 5 U.S.C. § 8470(b);
Parker, 75 M.S.P.R. at 692; Policy Guidelines § I.C.1 (“The against-equity test is
the second hurdle in the waiver decision making process. ”). It requires a showing
of financial hardship, detrimental reliance, or unconscionability. Policy
Guidelines § I.C.1. The appellant did not allege financial hardship, and as we
explain below, he did not establish detrimental reliance or unconscionability.
Detrimental Reliance
¶13 The appellant asserts that the administrative judge erroneously relied upon
Slater v. Office of Personnel Management, 42 M.S.P.R. 510 (1989), for the
proposition that, even if his tax burden had increased because of the overpayment,
he nevertheless failed to meet the criteria for detrimental reliance and was thus
not entitled to a partial waiver. PFR File, Tab 1 at 16-17; ID at 11-13. The
appellant argues that the circumstances in Slater may be distinguished from his
8
own because his tax liability did not result from receiving added income via the
overpayment, but instead, resulted from receiving taxable income from OPM in
lieu of the nontaxable income he should have received from his FEGLTD
insurance carrier. PFR File, Tab 1 at 16. He argues that his FEGLTD benefits
did not compensate him for the income taxes he already had paid in prior years on
the overpaid FERS benefits. Id. at 16-19. As in Slater, however, the appellant’s
tax liability resulted from his receipt of an overpayment from OPM. Slater,
42 M.S.P.R. at 520. That he was later able to recoup most of the overpayment
from an insurance policy is not controlling.
¶14 The appellant also argues that the circumstances in his case more closely
resemble those in Day v. Office of Personnel Management, 873 F.2d 291
(Fed. Cir. 1989). PFR File, Tab 1 at 17-19. In Day, an annuitant who was
retroactively reinstated to the date of his retirement asked OPM to waive his
annuity repayment after the deductions taken from his back pay award left him
with too little money to pay the income taxes he owed on that sum. Day v. Office
of Personnel Management, 833 F.2d 1580, 1581 (Fed. Cir. 1987). The U.S. Court
of Appeals for the Federal Circuit vacated the Board’s decision denying a waiver
and remanded the case with instructions for the Board to apply the analysis
required by 5 U.S.C. § 8346(b). Id. at 1581-82. Section 8346(b) sets forth the
standard for determining whether OPM can waive recovery of an overpayment,
i.e., that “the individual is without fault and recovery would be against equity and
good conscience.” In contrast, the administrative judge here has conducted such
analysis, ID at 7-14, and in any event, the Day court ultimately found that the
appellant was not entitled to a waiver, Day, 873 F.2d at 292-94. The appellant
has not made a compelling argument that his entitlement to a waiver is stronger
than that of the appellant in Day. In Day as here, an agency’s improper action led
to the appellant’s unexpected tax liability, Day, 873 F.2d at 292-93, and in any
event, he was in a position to prevent his own losses by more closely monitoring
changes to his income stream.
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¶15 As for the appellant’s assertion that he would be unable to amend past-year
tax returns to eliminate the overpayment income, his tax advisor’s declaration
does not address whether he might avail himself of any other options that would
allow him to recoup or otherwise rectify the tax burden while he repays the
overpayment in future years. RAF, Tab 9 at 47-48. Because he bore the burden
of proof, it was his obligation to address these matters. Parker, 75 M.S.P.R.
at 692. It was likewise his obligation to monitor the sources of his income as he
received it, especially as he had been warned that an overpayment was possible
under the circumstances. IAF, Tab 5 at 56, 69.
Unconscionability
¶16 The appellant additionally argues that he should receive a partial waiver of
the overpayment for the period from January through September 2014 based on
unconscionability. PFR File, Tab 1 at 9-11. That period covers the time between
his initial notice to OPM that he believed he might be receiving an overpayment
and OPM’s recalculating his annuity payment. Id. at 9; IAF, Tab 5 at 48-50;
RAF, Tab 8 at 17-18. The appellant asserts that the agency’s “[w]illful failure
after repeated notice over a period of nine months which cost [him] more than
$4000 in tax payments he would not otherwise have owed or had to pay
constitutes unclean hands[.]” PFR File, Tab 1 at 11; RAF, Tab 7 at 20-21. The
administrative judge found that the appellant did not suffer actual harm as a result
of this delay and that “any tax consequences for this time period may be resolved
through future offset of taxable income.” ID at 14.
¶17 The Board will grant a waiver based on unconscionability only under
exceptional circumstances. Taylor, 87 M.S.P.R. at 221. For a waiver based on
egregious errors or delays to satisfy the standard for unconscionability “requires a
determination that the agency’s handling of a case was so offensive—so
monstrously harsh and shocking to the conscience—that one’s sense of equity
forbids recovery.” Policy Guidelines § I.F.1. The delay between the appellant’s
reporting the overpayment and OPM’s readjusting his annuity is unfortunate, but
10
not egregiously long. See, e.g., Newcomb, 42 M.S.P.R. at 558‑59 (finding a
delay of 3 years and 10 months between a request for waiver and a final decision
was not unconscionable). As we have explained, moreover, the appellant did not
establish that any of the tax consequences he experienced for receiving taxable
income during that period were irrevocable.
Applicability of the Set-Aside Rule
¶18 The appellant asserts that the administrative judge erroneously concluded
that he should have known he was receiving an overpayment, thus triggering
application of the set-aside rule for payments he received between July 2008 and
January 2014. PFR File, Tab 1 at 6-7; ID at 8-10. He explains that, because of
the statutorily mandated reduction in his benefits, see 5 U.S.C. § 8452(a)(1)(a),
his annuity payment was reduced by nearly the same amount as it would have
otherwise been reduced had his Social Security benefits been deducted during the
same time period, PFR File, Tab 1 at 6. He further explains that he was suffering
from debilitating pain and taking high doses of pain medication during that time,
which may have affected his ability to conclude that OPM was not yet deducting
the Social Security benefits from his annuity. Id. at 8. He asserts that the
administrative judge did not consider his medical condition and how it might have
affected his cognitive abilities, and instead gave weight to the fact that OPM
twice reminded him during 2008 to set aside any payments he received from the
Social Security Administration. Id. at 8-9.
¶19 The appellant further asserts that the Policy Guidelines § I.C.4, require
OPM to show that he had actual knowledge or, at least, “actual suspicion” that he
was receiving an overpayment. Id. at 9 (emphasis omitted). Only actual
knowledge, or actual suspicion, he argues, would give rise to the prohibition
against unjust enrichment upon which the set-aside rule is based. Id. He asserts
that the administrative judge erred in holding him liable for what he might have
reasonably been expected to know, rather than what he actuall y knew. Id.
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¶20 The appellant’s annuity was reduced from $6,661 to $4,441 on July 1, 2008,
and that reduction is similar in amount to the $2,170 per month in Social Security
disability benefits for which he later qualified. RAF, Tab 8 at 16. He also
credibly alleged that his personal circumstances at the time were challenging . Id.
The appellant’s argument is nevertheless unavailing. He knew that his annuity
would be reduced after 1 year, aside from any consideration of Social Security
disability benefits. IAF, Tab 5 at 70. The reduction of his annuity took place a
month before he received notice that he had been approved for Social Security
disability benefits. IAF, Tab 5 at 5, 23-26, 47; RAF, Tab 8 at 15-16, Tab 9
at 12-15. The appellant also knew that the set-aside rule was in force. IAF,
Tab 5 at 56, 70. When he was initially approved for Social Security disability
benefits, he received a retroactive payment from the Social Security
Administration, id. at 14, but he did not remit that sum to OPM even though he
knew he would need to do so, id. at 56. Additionally, as the administrative judge
explained, nothing in the appellant’s circumstances relieved him of the obligation
to monitor the sources of his income at the time. ID at 20. Contrary to his
assertion, section I.C.4 of the Policy Guidelines does not require actual
knowledge. Section I.C.4 states that an individual who has accepted a known or
suspected overpayment and has been found to be without fault because he
promptly notified OPM of the overpayment is nevertheless obliged to set aside
the overpayment for recovery by OPM. Policy Guidelines § I.C.4; see Policy
Guidelines § I.B.6. The appellant clearly suspected he may have been receiving
an overpayment, as shown by the fact he notified OPM that he had started
receiving Social Security disability payments as he had been instructed to do.
RAF, Tab 8 at 15-16.
Abuse of Discretion
¶21 Finally, the appellant argues that the administrative judge abused her
discretion by “injecting into the initial decision factual and legal arguments, not
presented by the agency, as to which [he] had no notice and no opportunity to
12
present evidence or respond in legal argument.” PFR File, Tab 1 at 12. He
asserts that, because OPM did not frame any argument about his tax liability, he
had no notice that the administrative judge would make findings regarding that
issue. Id. at 12-13. The administrative judge’s findings, however, should not
have been a surprise because the appellant himself submitted a declaration from
his tax advisor. RAF, Tab 9 at 46-48. Although the appellant asserts that he can
supply another declaration from his tax advisor demonstrating why the initial
decision was “demonstrably wrong” concerning his taxes, PFR File, Tab 1 at 16,
he has not done so. 4 Accordingly, we affirm the initial decision finding that the
appellant was not entitled to waiver.
NOTICE TO THE APPELLANT REGARDING
YOUR FURTHER REVIEW RIGHTS
You have the right to request review of this final decision by the
U.S. Court of Appeals for the Federal Circuit. You must submit your request to
the court at the following address:
United States Court of Appeals
for the Federal Circuit
717 Madison Place, N.W.
Washington, DC 20439
The court must receive your request for review no later than 60 calendar days
after the date of this order. See 5 U.S.C. § 7703(b)(1)(A) (as rev. eff.
Dec. 27, 2012). If you choose to file, be very careful to file on time. The court
has held that normally it does not have the authority to waive this statutory
deadline and that filings that do not comply with the deadline must be dismissed.
See Pinat v. Office of Personnel Management, 931 F.2d 1544 (Fed. Cir. 1991).
4
The appellant also argues that the Board should remand the appeal for a determination
of the correct amount of the waiver because his tax advisor inadvertently failed to
exclude the increase in tax liability he accrued when he received a lump sum payment
from the Social Security Administration in July 2008. PFR File, Tab 1 at 4. He
submitted no supporting evidence, and in any event, he has not established that he
qualifies for a waiver.
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If you need further information about your right to appeal this decision to
court, you should refer to the Federal law that gives you this right. It is found in
title 5 of the United States Code, section 7703 (5 U.S.C. § 7703) (as rev. eff.
Dec. 27, 2012). You may read this law as well as other sections of th e
United States Code, at our website, http://www.mspb.gov/appeals/uscode.htm.
Additional information is available at the court’s website,
www.cafc.uscourts.gov. Of particular relevance is the court’s “Guide for Pro Se
Petitioners and Appellants,” which is contained within the court’s Rules of
Practice, and Forms 5, 6, and 11.
If you are interested in securing pro bono representation for an appeal to
the U.S. Court of Appeals for the Federal Circuit, you may visit our website at
http://www.mspb.gov/probono for information regarding pro bono representation
for Merit Systems Protection Board appellants before the Feder al Circuit. The
Merit Systems Protection Board neither endorses the services provided by any
attorney nor warrants that any attorney will accept representation in a given case.
FOR THE BOARD: ______________________________
Jennifer Everling
Acting Clerk of the Board
Washington, D.C.