Argument analysis: Justices grapple with meaning of final decision made after a hearing

In Monday’s oral argument in Smith v. Berryhill, the justices confronted a split among the courts of appeals as to whether an SSI disability claimant can obtain judicial review of the Social Security Appeals Council’s dismissal of his appeal as untimely under 42 U.S.C. sec. 405(g). Section 405(g) provides that “[a]ny individual, after any final decision of the Commissioner of Social Security made after a hearing to which he was a party, … may obtain review of such decision by a civil action.”

Michael Kimberly, representing the petitioner, Ricky Lee Smith, argued that the Appeals Council’s dismissal was a final appealable decision under section 405(g). Although a Social Security regulation has long provided that “[t]he dismissal of a request for Appeals Council review is binding and is not subject to further review,” the Social Security Administration, represented by Assistant to the Solicitor General Michael Huston, agreed with Kimberly that the dismissal was a final decision subject to review but disagreed on one point. The government argued that it was “very, very important for the Court to hold” that the only remedy in the event a court rules against the agency on the question of timeliness is remand to the agency. Kimberly, in contrast, contended that a court can, in the exercise of its discretion, reach the merits of the underlying decision after it rules in favor of the claimant on the timeliness question.

Because the government joined Kimberly in arguing for reversal of the lower court’s decision, the court appointed Deepak Gupta to support the decision below. Emphasizing the long-standing nature of the precedent, Gupta argued that judicial review under Section 405(g) is limited to certain kinds of final agency action and does not encompass dismissals on the ground of untimeliness.

Justice Ruth Bader Ginsburg began by asking Kimberly about the meaning of Section 405(g)’s “after a hearing” requirement, particularly considering that the Appeals Council never holds hearings. Kimberly explained that those words embody an exhaustion requirement and should have the same meaning as under Section 405(b)(1): a hearing before an administrative law judge, which occurred in this case.

Chief Justice John Roberts questioned Kimberly’s assertion that there should be a strong presumption in favor of judicial review.  Roberts agreed that “there’s normally a presumption, but surely here the presumption is at least out of the picture, if not overturned, because you have a situation where Congress in general said no review under 405(h).” Kimberly responded that in Section 405(h), Congress was attempting to make clear that the sole avenue for review of final Social Security decisions is filing a complaint under 405(g), but that the presumption in favor of judicial review remains under Section 405(g), especially in light of the language “any final decision.”

Justice Sonia Sotomayor asked Kimberly to clarify his position on the scope of a court’s review. Kimberly replied that he thought that a court could, in the exercise of its discretion, review the merits of the underlying decision if the court were to hold in favor of the claimant on the question of timeliness.  Ginsburg was skeptical: “You are urging that we skip over the Appeals Council and go back to consider the merits of the ALJ’s decision.”

Sotomayor then asked Kimberly whether the agency can dictate to the court whether there is judicial review. Kimberly responded that the agency has the authority to establish its own procedural requirements and determine when it has completed its review, but it cannot dictate whether there is judicial review after it has concluded its procedure.

Sotomayor’s first question to Huston, representing the government, was whether the case is moot because the government is instructing its attorneys to waive exhaustion of remedies in all timeliness appeals. Huston said no: The government would like the court to resolve the split among the courts of appeals as to whether the agency’s regulation is a reasonable interpretation of the statute.

Justice Elena Kagan asked what would happen if, before the ALJ held a hearing, there was a filing that was not timely. Huston responded that clearly the claimant would be required to continue to pursue the administrative process to appeal the question of timeliness. The harder question, Huston continued, and one the court need not resolve, is whether the claimant would be entitled to judicial review if he went through the appeals process and was never granted a hearing because a hearing is not required on the question of timeliness. Based on the logic of the court’s decision in Weinberger v. Salfi, Huston explained, the claimant would be entitled to judicial review: “[W]here the agency has reasonably determined that it doesn’t need a hearing in order to make a final decision on a particular issue, then the after a hearing requirement is not a barrier to judicial review.”

Kagan pointed out that Salfi is a constitutional avoidance case and that Huston’s interpretation seems “to read out the ‘made after a hearing’ from the statute.” Huston responded that the “after a hearing” requirement is included in Section 405(g) because it is also included in Sections 405(h) and 405(b)(1), and “405(b)(1) is the basic instruction to hold a hearing to make a decision.” According to Huston, “it holds together in the ordinary course.”

When asked by Ginsburg, Huston confirmed that he agreed with Kimberly that “after a hearing” refers to a hearing before an ALJ, and he explained that “the problem with [Gupta]’s argument is that it would mean that Appeals Council decisions, of which there are approximately 22,000 every year, are never reviewable,” because the council typically decides cases on paper rather than holding a hearing.

Justice Brett Kavanaugh asked Huston to explain why the government is now arguing that a plain reading of the language of the statute supports its current interpretation when for many years it took the opposite position. Huston responded that the government takes the text of the statute very seriously and it recently had two opportunities to reconsider the question:  once when the U.S. Court of Appeals for the 7th Circuit held that judicial review applies to dismissals on timeliness grounds and again when the cert petition was filed in this case. It is now convinced that “the statutory text is plain” and the reasons offered by the courts of appeal against judicial review “just don’t simply hold up.”

Justice Stephen Breyer asked Huston to consider an alternative reading of the statute – that “the final decisions that are reviewable are final decisions that had something to do with the hearing, some kind of relationship,” and that decisions based solely on procedural grounds do not fall within the statute. Huston responded that such an interpretation would be inconsistent with Salfi and with several other Supreme Court decisions that read Section 405(g) as setting forth a waivable exhaustion-of-remedies requirement.

Gupta, the amicus defending the decision below, began by declaring, “The way that Section 405(g) has successfully cabined judicial review for more than eight decades for the more than a dozen massive claims processes to which it now applies is to limit judicial review not just to any final agency action but to a particular kind of action.” He argued that the words in the statute “final decision” “made after a hearing” need to be read together because “each word qualifies and modifies the kind of action in question.”

In response to a question by Ginsburg about whether a dismissal on untimeliness grounds is a “final decision,” Gupta asserted that “the statute delegates to the Social Security Administration the ability to determine when it produces a final decision of the Commission.” Sotomayor asserted that his position “comes perilously close to reading the words ‘final judgment’ out of the Act and saying the agency can tell us what that means,” a proposition with which she strongly disagreed.

Turning to the “after a hearing” requirement, Gupta proposed that the court adopt Judge Henry Friendly’s reasoning that that “the matter on which a claimant seeks review does not come within 405(g) if it’s one that may be denied without a hearing or where the hearing would be afforded only under the agency’s regulations and not by the Social Security Act itself.” Justice Neil Gorsuch thanked Gupta for his “heroic efforts,” but noted that Friendly admitted that his reading was “the tyranny of literalism.” Gorsuch asked why he shouldn’t follow the plain language of the statute that simply requires “a hearing.”

Breyer pointed out that there was a hearing in this case and there was a final decision. He suggested that the purpose of the “after a hearing” requirement is to “weed out a lot of worthless applications” and people who didn’t go through the right procedure to begin with. Because those purposes were served in this case, why not permit judicial review? In response, Gupta emphasized that he was defending the status quo.

Asked by Roberts about the presumption of reviewability, Gupta responded it was just that, a presumption, and no substitute for the words in the statute. Kagan questioned whether merits decisions by the Appeals Council would be reviewable. Gupta said they would, because the Appeals Council would still be reviewing the matter on which a hearing is required. Ginsburg described Gupta’s interpretation as “so out of sync with the normal understanding of dismissal on procedural grounds,” which Gupta did not deny. He responded that final means different things in different contexts.

Kavanaugh and Ginsburg questioned Gupta’s concerns about a floodgate of litigation, pointing to the “practical experience” in the U.S. Court of Appeals for the 11^th Circuit, which has long permitted judicial review of dismissals on timeliness grounds. Kagan asked whether it felt strange to be making this claim when the solicitor general is not concerned. If the solicitor general doesn’t care, why should anyone else? Gupta conceded that it did feel a bit strange, but he maintained that the judiciary should have “an institutional interest.” Sotomayor responded that as an institution, shouldn’t the judiciary be worried about being “kicked out of review”? Gupta reiterated that the current regime is a long-standing practice that Congress has adopted over and over and that “has stood the test of time.”

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Past case linked to in this post:

Weinberger v. Salfi, 422 U.S. 749 (1975)