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Kirk v. Berryhill

United States District Court, D. South Carolina

July 9, 2019

Gary Kirk, Plaintiff,
Nancy A. Berryhill, Acting Commissioner of Social Security Administration, Defendant.


          Donald C. Coggins, Jr. United States District Judge.

         Following the First World War, "a primarily agrarian American society had become a primarily urban, industrialized one." Commissioner Martha A. McSteen, Fifty Years of Social Security, Social Security Bulletin 36 (1985).[1] This led to a greatly increased reliance on cash wages, which became problematic as the Great Depression ravaged the nation during the early 1930s. Catastrophic economic losses occurred throughout the country, and, "[b]y the mid-1930's, the lifetime savings of millions of people had been wiped out." Id. at 37. Faced with an aging population on the brink of "living their remaining years in destitution," Congress acted by passing the Social Security Act of 1935 ("the Act"). Id. President Franklin D. Roosevelt, in signing the Act into law on August 14, 1935, stated: "This law, too, represents a cornerstone in a structure which is being built but is by no means complete." Id. at 38.

         Much of the industrial revolution was quite literally fueled by coal mined from Kentucky and West Virginia's mountains. With dangerous work comes increased physical injury. Much of Appalachia has spent the greater part of the twentieth century enduring hard, physically exhausting, and dangerous labor to provide energy for the United States. American growth and prosperity was borne on the backs of these blue collar workers. As disability rates increased across the country, in 1956, Congress expanded the Social Security system to include payments to disabled workers. Now, every year, millions of Americans receive Supplemental Security Income ("SSI") and Disability Insurance Benefits ("DIB"). These benefits are often the only means by which disabled individuals can provide food and shelter for their families. Given the importance of these benefits, Congress and the Social Security Administration ("SSA") have established a complex administrative system to determine (and redetermine) whether individuals are properly receiving benefits. See, e.g., 42 U.S.C. § 405. This administrative system is overseen by the SSA, but it is moored by the procedural due process requirements of the United States Constitution.

         While this case comes to the Court by way of a request for judicial review, it is not the typical administrative appeal that this Court sees on a daily basis; instead, this case presents important questions of due process and administrative procedure related to the SSA's redetermination process. Specifically, this case involves a massive fraud scheme perpetrated by attorney Eric Conn, two corrupt ALJs, and several doctors. After the SSA uncovered and pursued this scheme, it discontinued the benefits of thousands of attorney Conn's clients and required them to have their benefits redetermined. Plaintiff was one of those clients, and the SSA discontinued his benefits, finding that his benefits were based on a fraudulent medical report. Yet, despite the critical importance of whether this report was accurate or inaccurate, the SSA prohibited Plaintiff from challenging its determination that the report was fraudulent. Plaintiff contends that due process requires more, and this Court agrees. Prior to addressing Plaintiff's claims, the Court turns to the lengthy history underlying this case.


         I. Attorney Eric Conn's Scheme to Defraud the SSA

         Throughout Kentucky, attorney Eric Conn was known as "Mr. Social Security." Senate Committee on Homeland Security and Governmental Affairs, How Some Legal, Medical, and Judicial Professionals Abused Social Security Disability Programs for the Country's Most Vulnerable: A Case Study of the Conn Law Firm 1 (Oct. 7, 2013) (hereinafter, "Senate Report").[2] "At the height of his success in 2010, Mr. Conn employed nearly 40 people and obtained more than $3.9 million in legal fees from [the] SSA, making him the agency's third highest paid disability lawyer that year." Id. Today, Mr. Conn is disbarred and resides in the Federal Correctional Institution - Hazelton, serving a 27-year prison sentence as a result of a complex scheme to defraud the SSA.

         "The scheme, according to the SSA, worked like this: Conn created a limited number of template Residual Capacity ("RFC") forms, which he or attorneys in his office filled out ahead of time." Hicks v. Comm'r of Soc. Sec., 909 F.3d 786, 793 (6th Cir. 2018) (citation omitted). "These forms, which are normally meant to convey a claimant's ability to do work-related activities on a day-to-day basis in a regular work setting, were purportedly manipulated to ensure that they satisfied the SSA's criteria for establishing a disability." Id. (internal citations and quotations omitted). Four doctors-Bradley Adkins, Ph.D.; Srinivas Ammisetty, M.D.; Frederic Huffnagle, M.D.; or David P. Herr, D.O-"then signed these forms without making any adjustments, and Conn submitted the forms to the SSA on behalf of his clients." Id. (citation omitted). Former ALJ David Daugherty, "who was allegedly receiving bribes from Conn, then assigned Conn's cases to himself and issued favorable rulings to Conn's clients." Id. (citation omitted). Former ALJ Daugherty "scheduled as many as 20 hearings form Mr. Conn's clients in a single day, moving them through in 15 minute increments." Senate Report at 2. "Eventually, Judge Daugherty stopped holding hearings for Mr. Conn's cases altogether, instead deciding them 'on the record' in large numbers-and always favorably." Id.

         Given the gravity of the alleged scheme, one would expect that the SSA would act as soon as it learned about the fraud. To the contrary, it took the SSA nearly a decade to begin to close the book on the Conn scheme. "The SSA first learned about possible wrongdoing involving Daugherty and Conn as far back as 2006, when a senior case technician[3] and a master docket clerk[4] in the SSA's Office of Disability Adjudication and Review (which houses the ALJs) raised concerns that Daugherty was reassigning Conn's cases to himself and rapidly deciding them in the claimants' favor." Hicks, 909 F.3d at 793 (citation omitted). In response to these complaints, supervisors retaliated against the employees, ultimately leading to the resignation of Jennifer Griffith in October 2007. ECF No. 7-1 at 12. "At the time of her resignation, [Griffith] cited the reason for her leaving as the 'misconduct of ALJ David Daugherty' by which she was referring to 'his misappropriation of the cases and deciding those favorably based on the attorneys assigned them.'" Id. (quoting Tr. of Evidentiary Hearing 28, Griffith v. Conn, No. 11-cv- 157 (E.D. Ky. Sept. 8, 2014)). In July 2009, Ms. Griffith called SSA's Office of Inspector General ("OIG") to report the misconduct. Id.

         Eventually, the Wall Street Journal published an article in May 2011, "highlight[ing] Daugherty's practice of taking Conn's cases and awarding benefits and not[ing] that '[a] possible connection between Messrs. Daugherty and Conn is a subject of the inspector general's investigation.'" Hicks, 909 F.3d at 793 (quoting Damian Paletta, Disability-Claim Judge Has Trouble Saying "No," Wall St. J. (May 19, 2011)). "Also in 2011, the U.S. Senate Committee on Homeland Security and Governmental Affairs launched an investigation into Daugherty's unusually quick adjudication of disability claims and unusually high rate of granting benefits." Id. "The Committee issued a report in October 2013 finding that 'Judge Daugherty worked with Mr. Conn in inappropriate ways to approve a high volume of cases submitted by the Conn Law Firm.'" Id. (quoting Senate Report at 5).

         "After publication of the Wall Street Journal article in May 2011, [the] SSA instituted a number of reforms to correct the situation in Huntington, including reinstituting the assignment of cases to all ALJ's (sic) on a strict rotational basis." Senate Report at 2. "Mr. Conn, Judge Daugherty, and Chief Judge Andrus[5] also took steps in reaction to the article." Id. "According to the testimony of former employees, and corroborated by documentary evidence, Mr. Conn's office purchased several disposable prepaid cellular phones for the purpose of allowing Mr. Conn and Judge Daugherty to talk." Id. at 2-3. Mr. Conn then "systematically destroyed several dozen of the Conn Law Office's computers, and hired a local shredding company to clear out a large warehouse full of documents." Id. at 3. Conn's misconduct did not stop there, however, as he devised a plan with Chief Judge Andrus to discredit senior case technician Sarah Carver, one of the initial whistleblowers from 2006. Id. "According to former Conn and SSA employees as well as a recorded SSA [OIG] interview in which Judge Andrus admitted his part, he and Mr. Conn worked together to have video surveillance conducted of Ms. Carver on days when she worked from home in an attempt to catch her violating the office's telework policies." Id.

         Despite the overwhelming evidence of corruption in the Huntington SSA office, the SSA did not place former ALJ Daugherty on administrative leave until 2011 and allowed former Chief ALJ Andrus to remain in the office until September 2013, when the SSA finally placed former Chief ALJ Andrus on administrative leave pending a removal action. Id. At the time the Senate Report was issued in October 2013, Mr. Conn was still representing claimants seeking disability benefits and had "even opened a new office in California." Id.

         By July 2014, the SSA's OIG "had identified 1, 787 individuals-all of whom had been represented by Conn-whose applications, the OIG 'had reason to believe,' were tainted by fraud." Hicks, 909 F.3d at 794. "This tag has statutory significance." Id. Under the Act, "the SSA is required to 'immediately redetermine' a beneficiary's entitlement to disability benefits if, at any point after granting benefits, the SSA has 'reason to believe that fraud or similar fault was involved in the application' for benefits." Id. (quoting 42 U.S.C. § 405(u)(1)(A)). Under the Act, "[t]he SSA may, however, delay redetermination proceedings if 'a [state or federal prosecutor] with jurisdiction over potential or actual related criminal cases, certifies, in writing, that there is a substantial risk that such action by the Commissioner of Social Security with regard to beneficiaries in a particular investigation would jeopardize the criminal prosecution of a person involved in a suspected fraud.'" Id. "Notwithstanding the SSA's clear statutory mandate to 'immediately redetermine' benefits upon suspicion of fraud, the OIG provided the 1, 787 names to the SSA with the understanding that SSA was not to take any adverse action against any individual on the list until further notice." Id. (internal citations and quotations omitted) (emphasis added).

         It was not until May 12, 2015, that OIG finally informed the SSA that it could proceed with redetermination hearings. Id. Upon receiving the green light to proceed, the SSA notified more than 1, 500 individuals (including Plaintiff) that it was instituting redetermination proceedings. Id. Critically, however, the SSA informed the individuals that it would be disregarding any evidence from the four medical providers listed above if that evidence was presented by Mr. Conn in a prior hearing before former ALJ Daugherty. Not only were the RFC determinations excluded, all evidence, including quantitative testing and behavioral observations, was excluded in the redetermination proceedings. Id. Thus, nine years after the SSA first learned about the fraud, and in apparent disregard of the Act's immediacy requirement, the SSA began redetermining whether Mr. Conn's clients were entitled to disability benefits.

         The repercussions of these delayed redetermination proceedings were immediate and severe. Approximately 800 former Conn clients lost their benefits. UPDATE 800 Former Conn Clients "Likely to Get Benefits Back, " WSAZ (April 30, 2019), -FBI-374559171.html. These individuals have struggled to feed their families and obtain adequate medical treatment. Id. Tragically, at least four former Conn clients have committed suicide. Id. Remarkably, however, almost 200 lawyers and law students volunteered their services to help Conn's former clients challenge their denials in federal court. Id. The Court commends these attorneys for their pro bono service and outstanding advocacy. Indeed, in this case alone counsel travelled from Kentucky twice at their own expense to represent Plaintiff in hearings before this Court. It is this type of advocacy and commitment to public service that brings great credit to the bar.

         Initially, the cases filed by these pro bono attorneys were largely unsuccessful, as district court judges rejected due process challenges to the redetermination process. However, a series of cases was assigned to (then) United States District Judge Amul Thapar of the Eastern District of Kentucky.[6] Judge Thapar found that the SSA denied Amy Jo Hicks, a former Conn client, the right to a meaningful hearing in violation of the Due Process Clause. See Hicks v. Colvin, 214 F.Supp.3d 627 (E.D. Ky. 2016), aff'd by 909 F.3d 786 (6th Cir. 2018). Specifically, Judge Thapar found that the SSA's prohibition on claimants' challenging the exclusion of evidence submitted by Conn from the four doctors named above was a violation of the claimants' procedural due process rights. Id. After issuing his decision in Hicks, Judge Thapar issued a similar decision in each of the other six cases assigned to him. Hicks, 909 F.3d at 796. At the same time, several other district judges rejected the very same challenges by other claimants. Inevitably, the case went to the United States Court of Appeals for the Sixth Circuit, which ultimately affirmed Judge Thapar's opinion in a split decision, finding that the SSA's refusal to allow claimants the fair opportunity to rebut assertions that medical reports were fraudulent violated the minimal protections of procedural due process and the formal-adjudication requirements of the Administrative Procedure Act ("APA"). See Id. at 813 ("The Due Process Clause of the Constitution and the Administrative Procedure Act required the SSA to allow plaintiffs an opportunity to show why the medical reports uniformly and entirely disregarded in their redetermination proceedings were not, in fact, tainted by fraud."). The SSA filed a Petition for Rehearing En Banc, which was denied by the full Sixth Circuit. ECF No. 73-1. Senior Judge John M. Rogers, who dissented from the panel majority, was the only judge indicating that he would grant rehearing en banc. Id. On June 19, 2019, Justice Sonia Sotomayor granted Defendant's application to extend the time to file a petition for a writ of certiorari. See Saul v. Hicks, No. 18A1319 (June 19, 2019).

         It is undeniable that Mr. Conn's illegal behavior has devastated the lives of thousands of people and led to extensive civil and criminal litigation. Indeed, Mr. Conn and former ALJ Daugherty have both been sentenced to federal prison. Mr. Conn pled guilty and was initially sentenced to 12 years' incarceration, but that sentence was extended to 27 years' incarceration after Mr. Conn fled the country pending sentencing and was located in Honduras after six months on the run. Former ALJ Daugherty was sentenced to 4 years' incarceration. Alfred Bradley Adkins, Ph.D., was convicted of conspiracy, mail fraud, wire fraud, and making false statements, and was sentenced to 25 years' incarceration. Chief Judge Andrus pled guilty and was sentenced to 6 months' incarceration.

         With this lengthy factual and procedural history in mind, the Court turns to the facts of this case.

         II. Plaintiff's Initial Award of Benefits and Redetermination Hearing

         The parties set forth, in detail, Plaintiff's medical history in their briefing. By way of summary, Plaintiff has experienced serious health issues for over twenty years. Plaintiff has been treated multiple times for fibromyalgia, joint pain, muscle weakness, Bell's Palsy, anxiety, depression, suicidal ideations (and at least one suicide attempt), Arnold Chiari malformation, and hypertension.

         Plaintiff filed applications for DIB and SSI benefits on November 18, 2008, claiming a disability onset date of December 1, 2006. After an initial denial, Plaintiff, represented by Mr. Conn, requested a hearing on his claims before an ALJ.[7] Former ALJ Daugherty issued a fully favorable decision dated November 2, 2009. ECF No. 43-4 at 11-15. Former ALJ Daugherty found that Plaintiff suffered from the following severe impairments: Arnold-Chiari Syndrome, Bell's Palsy, Sciatica, and Low Back Pain, and had the "residual functional capacity to lift 8-10 pounds occasionally and 5 pounds frequently, stand/walk 2-3 hours per work day, sit 3 hours per work day, only occasionally crawl and never climb." Id. at 13. Former ALJ Daugherty found "that the information provided by Dr. Huffnagle most accurately reflects [Plaintiff's] impairments and limitations, "[8] gave little weight to the State agency medical consultants' physical assessments, and limited Plaintiff to "sedentary work at best." Id. at 13-14. ...

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