Gerald Fitschen v. Kilolo Kijakazi

In the
United States Court of Appeals
for the Seventh Circuit
____________________
No. 20-3508
GERALD FITSCHEN,
Plaintiff-Appellant,
v.
KILOLO KIJAKAZI, Acting
Commissioner of Social Security,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Central District of Illinois.
No. 2:19-cv-02259 — Colin S. Bruce, Judge.
____________________
ARGUED FEBRUARY 23, 2022 — DECIDED NOVEMBER 14, 2023
____________________
Before SYKES, Chief Judge, and FLAUM and KANNE, Circuit
Judges. ∗
SYKES, Chief Judge. In February 2000 the Social Security
Administration (“SSA”) found Gerald Fitschen eligible for
∗ Circuit Judge Kanne died on June 16, 2022, and did not participate in
the decision of this case, which is being resolved under 28 U.S.C. § 46(d)
by a quorum of the panel.
2 No. 20-3508
disability benefits and began sending him monthly benefits
checks. Fitschen returned to work in January 2001 but
continued to receive benefits for a nine-month “trial work
period.” See 42 U.S.C. § 422(c)(4). When the trial period
expired, he could continue to work and receive benefits for
an additional 36-month period but only if his wages did not
exceed the level at which a person is deemed to be capable of
engaging in substantial work activity. Id. § 423(a).
The SSA conducted a continuing disability review in
March 2003 and determined that Fitschen had engaged in
substantial work and should not have received benefits for
much of 2002 and 2003. The SSA notified him of his over-
payment liability but also told him that his benefits would
continue because he had ceased substantial work in October
2003. Fitschen again returned to work in January 2004 but
did not report the change in his work activity or earnings
until the agency initiated another review in 2007 and placed
his benefits in suspension.
The SSA has a statutory duty to recover overpayments
but may waive recovery if the recipient was without fault
and other criteria are met. See id. § 404(a)(1), (b)(1). Fitschen
asked the agency to waive recovery. After protracted pro-
ceedings before three different administrative law judges
and two administrative appeals, in 2019 the Commissioner
of Social Security issued a final order finding Fitschen liable
for an overpayment of $50,289.70 and declining to waive
recovery because he was not without fault. The district court
upheld that decision.
On appeal Fitschen raises two arguments. First, he con-
tends that the agency is procedurally barred from recovering
the overpayment because it failed to comply with the re-
No. 20-3508 3
quirements of its “reopening” regulation. This argument
wrongly assumes that the reopening rules apply in this
situation. They do not. The SSA’s overpayment assessment
did not “reopen” Fitschen’s initial eligibility determination
or any later determination concerning the continuation or
recomputation of his benefits. Second, Fitschen claims that
he was entitled to a waiver of his repayment obligation. This
argument is also meritless; the Commissioner’s finding that
Fitschen was at fault is supported by substantial evidence.
We therefore affirm the judgment.
I. Background
More than 24 years ago, Gerald Fitschen, an electrician,
applied for Social Security disability benefits after he was
diagnosed with advanced cancer and stopped working. The
SSA approved his application, and he began receiving
benefits in February 2000. Fitschen returned to work in
January 2001. A few months later, he notified his local SSA
office of his return to work, and the agency told him that his
benefits would continue for a nine-month “trial work peri-
od.” The Social Security Act defines “disability” as the
“inability to engage in any substantial gainful activity”
because of a qualifying physical or mental impairment.
42 U.S.C. § 423(d)(1)(A). A trial work period, authorized
under § 422(c), is “a period during which [a claimant] may
test [his] ability to work and still be considered disabled.”
20 C.F.R. § 404.1592(a).
When a trial work period ends, a recipient may continue
to work for an additional 36 months without losing benefits
but only if his monthly earnings do not exceed the level of
“substantial gainful activity” as defined in the Act and
regulations. 42 U.S.C. § 423(a)(1); 20 C.F.R. §§ 404.1572–74,
4 No. 20-3508
.1492a(a). Fitschen continued to work after his trial work
period ended in October 2001. His disability payments
continued too—subject to this earnings limitation—and he
was required to tell the agency if his work activity changed
in any way that might affect his benefits.
In March 2003 the agency initiated a continuing disability
review. The SSA periodically conducts these reviews to
determine if a beneficiary is still disabled and entitled to
receive benefits. 20 C.F.R. § 404.1589. A beneficiary must
continue to satisfy both medical and employment-related
criteria for receipt of benefits, so the 2003 review covered the
status of Fitschen’s medical and employment circumstances;
the agency requested information from him on both. Based
on this review, the SSA concluded that Fitschen still met the
medical criteria for continuation of benefits. However, based
on his work history for four employers between January
2001 and September 2003, the agency determined that his
disability had ended in October 2001 when his trial work
period expired.
That determination was administratively affirmed in
October 2003, and on October 20 the SSA sent Fitschen a
Notice of Disability Cessation. The notice alerted him that
because he had received benefits while engaged in substan-
tial gainful activity for approximately two years after the
expiration of his trial work period, he owed the SSA
$27,746.30—the total (to that date) of the overpaid benefits.
In the same notice, the agency told Fitschen that he had
become re-entitled to benefits beginning that same month
because he was no longer engaged in substantial work. The
notice advised him that his benefits would continue through
September 2004, but it also included several important
No. 20-3508 5
reminders: (1) “Your disability ends if your work activity
shows your ability to do substantial work”; (2) “[y]ou must
tell us right away about any changes that may affect your
benefits”; and (3) “[i]f you do not [tell us about work chang-
es], you may have to repay any benefits you are not due.”
Two weeks after Fitschen received this notice, he re-
turned 11 uncashed benefits checks. On December 1 the SSA
sent Fitschen another notice reminding him of his duty to
“tell us right away” if he returned to work or if his work
activity or pay changed. The notice explained the rules for
working while receiving benefits and reminded Fitschen that
benefits would stop if he earned more than the monthly
level that determines a person’s ability to engage in substan-
tial gainful activity.
On December 9 the agency notified Fitschen that the re-
turned checks had reduced his overpayment liability from
$27,746.30 to $11,647.50 and that the SSA would recover the
remainder by withholding his benefits checks starting in
2004. The SSA then withheld Fitschen’s benefits from
February through September of 2004 before returning him to
full pay status in October. But there was a problem. Unbe-
knownst to the SSA, Fitschen had resumed substantial work
in January 2004, so he was not entitled to the withheld
benefit checks in the first place. There is no indication in the
record that Fitschen reported his substantial work activity as
required.
Fitschen thereafter continued to receive benefits while he
engaged in substantial work. From 2002 through 2006, the
SSA sent Fitschen annual letters notifying him that based on
his prior year’s earnings—that is, the earnings known to the
agency—his monthly benefit would increase. Included with
6 No. 20-3508
these annual letters were lump-sum payments reflecting the
retroactive application of the increase. These letters, formally
called Notices of Change in Benefits, are computer-
generated form letters sent periodically after an individual
becomes entitled to benefits. 20 C.F.R. §§ 404.280, .285. The
agency generates these notices when the annual recomputa-
tion of benefits results in an increase in the beneficiary’s
primary benefit; the recomputations are performed automat-
ically based on available earnings data. Id. §§ 404.280,
.281(e), .285.
The SSA did not review Fitschen’s file again until
May 27, 2007, after an earnings alert triggered a second
continuing disability review. The agency asked Fitschen to
complete Form SSA-821 detailing his work history from 2002
to 2007. On June 13 Fitschen submitted the signed form with
the required information. That same day he provided a
sworn statement to his local SSA field office:
I returned to work in 2001 as an electrician for
Local 134. I reported my earnings timely and
knew that I was not entitled to the disability bene-
fits I was receiving. In fact, I returned check[s] to
SSA every month from December 2002 [to]
October 2003. I continued to receive mail stat-
ing they were finally going to cut me off. But
this never happened. I then started to receive a
[SSA-1099 form] in which I perceived that to
mean that I had to pay taxes on these disability
payments, so I then began to cash these checks,
as I did not think it was fair to get taxed on
money I was not to use. (Emphasis added.)
No. 20-3508 7
The SSA had indeed sent Fitschen annual SSA-1099 forms
for tax purposes showing the total amount of benefits he had
received each year.
The following month—June 2007—the SSA suspended
Fitschen’s benefits pending an investigation. He did not
object to the suspension. In the lengthy review that followed,
the SSA learned that between January 2004 and June 2007,
Fitschen’s average monthly earnings were between $4,261
and $6,341, well above the amount set for determining
substantial gainful activity. In July 2009, the agency sent
Fitschen a final decision explaining that because he had
engaged in substantial work activity, he had not been enti-
tled to benefits from January 2004 onward. The next month
the SSA assessed a total overpayment liability of $70,369.60.
Fitschen responded to the overpayment notice by return-
ing an additional seven uncashed benefits checks and asking
the agency to waive recovery of the balance of the overpay-
ment. The SSA denied the waiver request. Fitschen sought
reconsideration; the agency denied that request too.
Fitschen then requested a hearing before an administra-
tive law judge (“ALJ”). In his hearing request, he stated that
because the “SSA and myself are responsible for the over-
payment, there should be a meeting somewhere to resolve
the situation.” He argued that the agency should waive
recovery of the overpayment, in part because he was not at
fault for it.
On August 4, 2011, the ALJ confirmed the overpayment
liability and found that Fitschen was not eligible for a waiver
of repayment:
8 No. 20-3508
Because the claimant knew that he was not en-
titled to the benefits, but kept and cashed the
checks anyway, he is at fault in causing the
overpayment. Although I have sympathy with
the claimant’s conundrum when faced with the
1099 form from the [SSA] and his resultant ap-
parent tax liability, this does not justify the
claimant’s taking money that he knew … was
not his. Instead, it would further illustrate the
claimant’s need to immediately clear up the
situation with the [agency] before additional
problems develop. For these reasons, I con-
clude that the claimant was at fault in causing
and accepting the overpayment, and, thus,
waiver is not possible.
Fitschen sought administrative review of the ALJ’s deci-
sion, and in May 2013 the SSA Appeals Council remanded
the case for a new calculation of the overpayment amount.
Another ALJ held a supplemental hearing and in November
2014 issued a decision assessing an overpayment liability of
$50,289.70. Fitschen accepted the new calculation but sought
further administrative review concerning his request for a
waiver of repayment. The Appeals Council vacated the
second ALJ’s decision and ordered a new hearing because
the agency lost the hearing tape. In 2016 while the matter
remained before a third ALJ, Fitschen paid the debt in full
but continued to pursue his claim for a waiver. (That is, he
was now asking to be repaid.)
In July 2018 a third ALJ confirmed Fitschen’s overpay-
ment liability of $50,289.70 and again found that he was at
fault and thus was not eligible for a waiver of his repayment
No. 20-3508 9
obligation. Fitschen again sought review by the Appeals
Council, reiterating his request for a waiver and raising a
new procedural argument: He claimed that the agency was
procedurally barred from recovering the overpayment
because it violated its reopening regulation by reopening his
initial eligibility determinations without good cause. In
response the agency argued that the reopening regulation
did not apply and that Fitschen was ineligible for a waiver
based on his own admissions that he knew he was not
entitled to continued benefits based on his earnings.
On July 23, 2019, the Appeals Council issued a final order
affirming Fitschen’s overpayment liability of $50,289.70 and
denying his request for a waiver because he was not without
fault for the overpayment. The Appeals Council also rejected
Fitschen’s procedural argument, explaining that the reopen-
ing requirements did not apply because the overpayment
assessment did not “reopen” any prior eligibility determina-
tion or benefits recomputation.
The Appeals Council’s order constituted the final deci-
sion of the Commissioner of Social Security, so Fitschen’s
remaining recourse was to seek judicial review under
42 U.S.C. § 405(g). He did so. Ruling on cross-motions for
summary judgment, the district judge rejected Fitschen’s
argument about the reopening requirements, finding it
unsupported by the statutory and regulatory framework.
The judge also concluded that the agency’s denial of
Fitschen’s waiver request was supported by substantial
evidence—namely, his own statements admitting that he
knew he was not entitled to the benefits he was receiving but
kept the money anyway. The judge accordingly entered
judgment for the Commissioner, and Fitschen appealed.
10 No. 20-3508
II. Discussion
We review the summary-judgment order de novo, using
“the same deferential standard of review as the district
court.” Dixon v. Massanari, 270 F.3d 1171, 1176 (7th Cir. 2001).
The Social Security Act limits judicial review to final deci-
sions of the Commissioner, § 405(g), and here the Appeals
Council’s July 2019 decision is the Commissioner’s final
decision, see Schoenfeld v. Apfel, 237 F.3d 788, 792 n.2 (7th Cir.
2001). The scope of review is quite limited: we must uphold
the Commissioner’s decision if it is supported by substantial
evidence and no error of law occurred. Cannon v. Apfel,
213 F.3d 970, 974 (7th Cir. 2000); see also § 405(g) (“The find-
ings of the Commissioner of Social Security as to any fact, if
supported by substantial evidence, shall be conclusive … .”).
The substantial-evidence standard is not demanding: the
term “substantial evidence” as used here means “such
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Walker v. Berryhill,
900 F.3d 479, 482 (7th Cir. 2018) (quotation marks omitted).
We review the record as a whole but do not substitute our
own judgment for that of the Commissioner; we do not
reconsider facts, reweigh the evidence, resolve conflicts in
the evidence, or decide questions of credibility. Schoenfeld,
237 F.3d at 792.
Fitschen raises the same two issues on appeal that he
raised below. He contends that the SSA did not comply with
the requirements of its reopening regulation and thus is
barred from recovering the $50,289.70 overpayment. He also
argues that he was not at fault for the overpayment and is
therefore entitled to a waiver of repayment.
No. 20-3508 11
A. Reopening
There is no doubt that Fitschen was overpaid. 1 His first
challenge to his repayment obligation is a procedural one: he
contends that the overpayment assessment is invalid be-
cause the agency failed to comply with the requirements of
its reopening regulation.
This argument proceeds in two steps. Fitschen first ar-
gues that his initial 2000 eligibility determination, his
October 2003 eligibility determination (at the end of the first
continuing disability review), and the annual recomputation
notices were all “initial determinations” under the relevant
regulations and thus were subject to the agency’s rule on
administrative finality. There’s no dispute about this point,
so we don’t need to dwell on it. Fitschen next argues that the
agency’s overpayment assessment effectively “reopened”
one or more of those initial determinations, triggering the
agency’s reopening regulation, which it did not follow. This
argument misunderstands the regulatory scheme, as we
explain below.
The relevant regulations “establish a scheme for ensuring
finality in the [Commissioner’s] determinations.” Dugan v.
Sullivan, 957 F.2d 1384, 1387 (7th Cir. 1992). First, an “initial
1 An overpayment occurs whenever a claimant receives money from the
SSA to which he is not entitled. 20 C.F.R. § 404.501(a). The Supreme
Court has recognized that each beneficiary bears an ongoing burden of
proving that he remains entitled to benefits even after the agency has
initially awarded benefits. Mathews v. Eldridge, 424 U.S. 319, 336 (1976). A
beneficiary’s ongoing burden of proof is the primary reason why the SSA
requires all beneficiaries to report changes in their work and earnings.
20 C.F.R. § 404.1588(a). It’s undisputed that Fitschen was overpaid in the
amount of $50,289.70.
12 No. 20-3508
determination” is an agency decision that is subject to
administrative or judicial review. 20 C.F.R. § 404.902. Exam-
ples include, among other things, determinations regarding
a claimant’s “entitlement or [his] continuing entitlement to
benefits,” “the amount of [his] benefit,” and any “recompu-
tation of [his] benefit.” Id. Everyone agrees that the agency’s
2000 and 2003 eligibility determinations and the 2002–2006
annual recomputation notices are considered separate and
distinct initial determinations.
The SSA may reopen such determinations within specific
time limits and under certain conditions: (1) within one year
for any reason; (2) within four years for good cause; and
(3) at any time if the initial determination was obtained by
fraud or similar fault. Id. § 404.988. Fitschen maintains that
the SSA’s overpayment assessment effectively “reopened” a
prior eligibility determination or benefits recomputation
after the one-year grace period without a showing of good
cause or fraud. The SSA responds that the reopening regula-
tion did not apply. We agree with the agency.
When the SSA determines that a disability claimant is el-
igible for benefits and starts sending monthly payments, the
agency must periodically conduct a continuing disability
review to determine if the benefits recipient remains eligible.
§ 404.1589. An overpayment assessment following a continu-
ing disability review is itself a separate initial determination,
§ 404.902(a), (k), and is subject to judicial review (as this case
attests). In conducting a continuing disability review, the
agency may assess the beneficiary’s current medical status
(to determine whether he still meets the relevant criteria for
disability); the beneficiary’s current work status (to deter-
mine whether his earnings are still low enough to qualify for
No. 20-3508 13
benefits); or both. The agency performs a work review when
it learns that a beneficiary has returned to work or when
substantial earnings have been posted to his wage record.
20 C.F.R. § 404.1590(b). The SSA may also perform a work
review at any time to determine if a recipient’s earnings data
shows that he is able to perform substantial gainful activity
no matter how long he has been receiving benefits. Id.§ 404.1590(i)(4).
Fitschen contends that the continuing disability reviews
and the subsequent overpayment assessment had the effect
of “reopening” his initial 2000 eligibility determination (or
perhaps the 2003 eligibility determination, or one or more of
the annual benefits recomputations). Not so. An overpay-
ment occurs whenever a beneficiary receives more money
than he is entitled to, id. § 404.501(a), and the SSA is statuto-
rily required to recover overpayments, 42 U.S.C. § 404(a)(1).
An overpayment inquiry does not revisit and revise a prior
eligibility determination based on information showing that
it was incorrect when made. Rather, an overpayment inquiry
is prompted by changes in a recipient’s medical or work
status occurring after an eligibility determination has been
made. Putting the point somewhat differently, an overpay-
ment inquiry assumes the correctness of the underlying
eligibility determination; the inquiry instead examines
whether changes in the recipient’s medical or work status
since that determination—here, Fitschen’s substantial gainful
activity after he returned to work—have resulted in a subse-
quent overpayment.
Fitschen relies on a number of cases applying the SSA’s
reopening regulation, but all involve initial eligibility deter-
minations that were reopened because they were incorrect at
14 No. 20-3508
the time they were made. See Dugan, 957 F.2d at 1386 (hold-
ing that a reopening was required where the SSA considered
anew earnings information that it possessed at the time of its
initial determination); Heins v. Shalala, 22 F.3d 157, 161–62
(7th Cir. 1994) (holding that the SSA had to reopen an eligi-
bility determination that was made on the basis of a fraudu-
lent application); see also Fugate v. Comm’r of Soc. Sec.,
776 F.3d 389, 392 (6th Cir. 2015) (finding that a reopening
was required because the initial decision was based on a
mathematical error); Kassin v. Sec’y of Health & Human Servs.,
945 F.2d 114, 114 (6th Cir. 1990) (holding that the SSA could
reopen an initial assessment that did not account for all of
the facts at the time); Fowler v. Bowen, 876 F.2d 1451, 1455
(10th Cir. 1989) (finding reopening valid where the claimant
fraudulently misrepresented his earnings in his initial
application for benefits); Barone v. Bowen, 869 F.2d 49, 49
(2d Cir. 1989) (holding that the SSA was required to reopen a
determination that it sought to revise on the basis of facts
that were originally available); Sotiriades v. Mathews, 546 F.2d
1018, 1020 (D.C. Cir. 1976) (noting that a determination of
eligibility had to be reopened because the claimant withheld
information “at the time she applied for benefits”). 2
In contrast, here Fitschen’s eligibility determinations
were correct when made. The overpayment assessment
accounted for later changes in his work status—i.e., his
2 Fitschen also cites Schwingel v. Harris, 631 F.2d 192 (2d Cir. 1980), but
that case does not help him. Schwingel did not concern the applicability
of the reopening regulation. The case concerned the “without fault”
requirement for a waiver of an overpayment; more specifically, the issue
was whether the beneficiary had been denied a fair hearing on the issue
of fault. Id. at 196.
No. 20-3508 15
substantially gainful employment after he returned to work.
The SSA’s reopening regulation did not apply. 3
B. Fault and Waiver
As we’ve noted, the SSA has a statutory obligation to re-
coup overpayments, either by adjusting a recipient’s future
benefits payments or recovering the overpayment from the
recipient. 42 U.S.C. § 404(a). But the statute also contains a
waiver provision: the agency may not recover an overpay-
ment—either directly or by offsetting future payments—if
the recipient “is without fault” and recovery of the over-
payment “would defeat the purpose of [the Social Security
Act] or would be against equity and good conscience.”
§ 404(b)(1). The recipient bears the burden of establishing
that both requirements have been met. Banuelos v. Apfel,
165 F.3d 1166, 1170 (7th Cir. 1999), overruled on other grounds
by Johnson v. Apfel, 189 F.3d 561 (7th Cir. 1999).
A finding of fault in connection with an overpayment can
be based on the recipient’s “[f]ailure to furnish information
which he knew or should have known to be material” or his
“acceptance of a payment which he either knew or could
have been expected to know was incorrect,” among other
things. 20 C.F.R. § 404.507. If the recipient is not without
fault, then he is ineligible for a waiver—even if the agency
also “may have been at fault in making the overpayment.”
Id.; see also id. § 416.552 (“The overpaid individual … is not
relieved of liability … because the [SSA] may have been at
3 Fitschen also cites the SSA’s Program Operations Manual System (its
internal operating manual), but the manual simply elaborates on the
relevant statutory and regulatory framework. And as we’ve explained,
Fitschen’s argument misreads the statutory and regulatory framework.
16 No. 20-3508
fault in making the overpayment.”). That’s because a benefi-
ciary’s responsibility to repay overpaid benefits “is not
punitive in nature” but is instead a recognition that a “mis-
take occurred” and the recipient “has to make the public fisc
whole.” Watson v. Sullivan, 940 F.2d 168, 172 (6th Cir. 1991).
The Commissioner found that Fitschen was at fault for
the overpayment and on that basis denied his request for a
waiver. To repeat our deferential standard of review: we
must uphold the Commissioner’s decision if substantial
evidence supports it and no error of law occurred.
Fitschen identifies no legal error. And the Commission-
er’s finding of fault is amply supported by the evidence.
First, and most obviously, Fitschen twice explicitly acknowl-
edged his own fault. In his 2007 sworn statement to his local
SSA office, he admitted that he knew that he was not entitled
to the disability benefits he was receiving. And in his 2010
request for a hearing before an ALJ, he wrote that because
the “SSA and myself are responsible for the overpayment,
there should be a meeting somewhere to resolve the situa-
tion.” 4
If more were needed, the record reflects that the SSA re-
peatedly reminded Fitschen of the rules for working while
receiving benefits as well as his obligation to immediately
report changes in his work activity. His retention of benefits
payments and failure to report work changes after these
repeated reminders is further evidence of fault.
4 Fitschen objects that the Appeals Council did not make an express
finding about his credibility. We’re not sure why. His case did not require
a credibility determination. His admissions of fault were in writing and
obviously adverse to his own interests.
No. 20-3508 17
Fitschen insists that he did report his work activity, but
that’s only partially correct. He reported his work activity
only twice: first during his trial work period when his
earnings had no bearing on the continuation of benefits and
again in June 2007 after the SSA specifically asked him for an
account of his work activity during the second continuing
disability review.
Fitschen also argues that his receipt of the annual recom-
putation notices made it reasonable for him to assume that
he could keep his benefits checks despite his substantial
gainful activity. On the contrary, the recomputation notices
would have prompted a reasonable person to inquire further
to determine why he was still receiving benefits checks while
engaged in substantial gainful activity. Anyway, this argu-
ment essentially asks us to reweigh the evidence and substi-
tute our judgment for the Commissioner’s. That’s not our
role. 5
Because substantial evidence supports the Commission-
er’s determination that Fitschen was at fault, there’s no basis
to vacate the agency’s denial of his request for a waiver.
AFFIRMED
5 Fitschen also cites Casey v. Berryhill, 853 F.3d 322 (7th Cir. 2017), but his
reliance on that case is entirely misplaced. Casey suggested in dicta that
the benefits recipient there might have a “plausible” waiver claim based
on the facts of that case. Id. at 330. But Casey did not involve the merits of
the recipient’s waiver request; the case concerned only whether the
recipient had good cause for his failure to file a timely administrative
appeal. Id. at 323–24.