Wallace Financial, ALJ Ruling 2023-2 (HHS CRD November 1, 2022)

ORDER DISMISSING CASE

Respondent, Wallace Financial, is a Michigan insurance agency whose stated mission is to help its clients meet their financial goals through insurance products.  See P. Motion at 3.  The Social Security Administration Office of the Inspector General (OIG) has imposed a civil money penalty (CMP) on Respondent Wallace, citing section 1140 of the Social Security Act.  The OIG charges the company with disseminating solicitations that conveyed the false impression that they were authorized by the Social Security Administration (SSA).

Respondent appeals, and the OIG moves to dismiss the appeal as untimely.

I grant the OIG’s motion and dismiss this appeal pursuant to 20 CFR § 498.202(f)(1).  I find that Respondent did not timely file its appeal and did not show good cause for the untimely filing.

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Background

In a notice, dated February 14, 2022, the OIG advised Respondent and its Chief Executive Officer (CEO) that the OIG was proposing to impose a $15,006 civil money penalty (CMP) against the company.  The letter explained that section 1140 of the Social Security Act authorizes the penalty.  That section and its implementing regulations, 20 C.F.R. §§ 498.100-224, prohibit the misuse of SSA-related words, letters, and symbols in advertisements, solicitations, or other communications “in a manner conveying the false impression that such item is approved, endorsed, or authorized by the [Social Security Administration].”  P. Ex. 1 at 1.  The letter charged that, in violation of section 1140, Wallace Financial had disseminated, via the United States Postal Service, 5,002 misleading solicitations, conveying the false impression that they were official SSA communications or were otherwise approved, endorsed, or authorized by SSA.  Id.

The letter advised Respondent – in bold – that it had the right to appeal the penalty and set forth the procedures for appealing: 

Within 60 (sixty) days of receipt of this notice, Wallace Financial has the right to request a hearing before an Administrative Law Judge (ALJ) of the United States Department of Health and Human Services Departmental Appeals Board.  The written request should include specific issues in this Notice of Proposed Civil Monetary Penalty with which the company disagrees and the basis for its contention.  The procedures for requesting a hearing can be found at 20 C.F.R. part 498.

P. Ex. 1 at 3.  The letter also invited Wallace Financial to provide any information relating to the proposed CMP that it wanted the OIG to consider.  However, it emphasized that “[c]ontacting the SSA-OIG does not extend the 60-day appeal period.  The SSA-OIG does not have the authority to extend the 60-day appeal period.”  P. Ex. 1 at 3 (emphasis in original).

Respondent received the notice letter on March 1, 2022.  P. Ex. 2.  It did not request a hearing within 60 days.

In an email and in a letter, both dated August 8, 2022, Respondent’s CEO asked the OIG for a “delayed appeal.”  P. Exs. 5, 6.  The OIG Counsel subsequently provided Respondent with a copy of the regulations governing section 1140 appeals, sent Respondent a link to the Departmental Appeals Board website, and forwarded its requests

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for a delayed appeal to this office.  P. Exs. 7, 8.

In an amended order, dated September 13, 2022, I noted that Respondent’s hearing request appeared to be untimely and advised the parties that the OIG may file a motion to dismiss, if it maintains that Respondent filed an untimely hearing request.  I gave Respondent ten days to respond to the motion, citing 20 C.F.R. § 498.213.  Amended Acknowledgment and Pre-hearing Order at 4 (¶ 5) (Sept. 13, 2022) (P. Ex. 9).

On September 23, 2022, SSA filed a motion to dismiss, arguing that the appeal was untimely and that Respondent had not shown good cause for the late filing.  With its motion, the OIG submitted nine exhibits (P. Exs. 1-9).  Wallace Financial’s response was due October 3, 2022.  On October 4, 2022, its CEO submitted a short letter explaining that she had miscalculated the deadline for responding to the SSA’s motion and, for that reason, filed a day late.  However, the filing did not address any of the issues raised in the OIG’s motion to dismiss nor otherwise explain why this case should not be dismissed.  Respondent has not supplemented that submission in the time that has passed since then.

Discussion

A respondent may request a hearing to challenge a proposed CMP but must do so within the time permitted.  20 C.F.R. § 498.109(b) and (c).  I am required to dismiss an untimely hearing request, unless the respondent shows good cause for the untimely filing.  20 C.F.R. § 498.202(f)(1).

Notwithstanding the notice letter’s explicit instructions to file the appeal with the Departmental Appeals Board and its advising that the SSA-OIG did not have the authority to extend the 60-day appeal period, Respondent sent its requests for a delayed appeal to the SSA-OIG.  Nevertheless, I will assume that Respondent acted in good faith when it misdirected its appeal and will consider August 8, 2022, the filing date.  See 20 C.F.R. § 404.911(b)(8).  The request was nevertheless significantly late, filed 160 days after Respondent received SSA’s notice.

The question is whether Respondent has established good cause for the late filing.

The regulations that govern these proceedings do not define “good cause” but leave that determination to my discretion.  See, e.g., Taos Living Ctr., DAB No. 2293 at 12 (2009) (holding that the ALJ “has discretion to extend the period . . . to file . . . if . . . the ALJ finds ‘good cause’ for the late filing”).

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ALJs who have addressed the issue have repeatedly adopted the reasoning in Hillcrest Healthcare, L.L.C., DAB CR976 (2002), aff’d, DAB No. 1879 (2003).  There, the ALJ looked to the definition of good cause found in 20 C.F.R. Parts 404 and 416 and found that those sections establish the principle that two types of situations warrant a finding of good cause:  1) the events that prevented timely filing were beyond the affected party’s ability to control; and 2) actions taken by the agency misled the party into not filing the request timely.  Hillcrest, DAB CR976; see, e.g., NBM Healthcare, Inc., DAB CR2500 (2012), aff’d, DAB No. 2477 (2012); Michael Reiner, M.D., DAB CR2547 (2012); Oak Park Healthcare Ctr., DAB CR1917(2009); SSA v. Parham, DAB CR1600 (2007); Knox Cty. Nursing Home, DAB CR1588 (2007); Casa del Sol Senior Care Ctr., DAB CR1418 (2006); The Heritage Ctr., DAB CR1219 (2004); Roy Hollins/Western Reference Lab., DAB CR1055(2003); Hammonds Lane Ctr., DAB CR913 (2002), aff’d, DAB No. 1853 (2002).

For its part, the Departmental Appeals Board “has never attempted to provide an authoritative or complete definition of the term.”  Hillcrest, DAB No. 1879 at 5.  Nevertheless, it has not rejected the widely-held ALJ view and has not reversed any ALJ dismissal that applied that reasoning, although it has generally cited other reasons for affirming the dismissal.  See Casa del Sol, DAB CR1418 (2006) (noting that the Board has not “disabused us of this approach to considering ‘good cause’” despite its having ample opportunity to do so).  For example, the Board has ruled that, where a party consciously chooses, for reasons of its own, not to request a hearing, it must accept the consequences of its inaction – loss of its right to a hearing.  Hammonds , DAB No. 1853.  See Hillcrest, DAB No. 1879 at 5 (holding that when the affected party received a “clear notice of its right to request a hearing and the deadline for making such a request,” neither its efforts to resolve its dispute through the Independent Dispute Resolution process nor its efforts to correct its deficiencies instead of filing an appeal constituted good cause “under any reasonable definition.”).

Because no one in this case – or elsewhere – has proposed an alternative, I see no reason to depart from the widely and consistently applied standard for determining good cause:  that the events that prevented timely filing were beyond the affected party’s ability to control.  Respondent here has made no such showing.

Neither has Respondent established good cause “under any reasonable definition.”  It has offered two, not wholly consistent, reasons for the late filing.  In the August 8, 2022 email, the company’s CEO suggested two reasons for the late filing:  1) she was trying to “reach someone” at the direct mail company that Wallace Financial employed “to learn how and from whom they got compliance;” and 2) she was undergoing “a serious Thyroid medication adjustment during that period as well.”  P. Ex. 5.  In the August 8,

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2022 letter, the CEO alluded to, without explaining, “significant medical reasons,” and without mentioning any efforts to contact the direct mail company.  P. Ex. 6.

Consistent with the Board’s conclusion in Hillcrest, the CEO’s reaching out to a company that could help with its defense and potentially resolve the matter without an appeal, does not justify Respondent’s failing to file its hearing request on time.  Nothing would have prevented the company from filing the appeal within 60 days and contacting the direct mail company.

Nor does Respondent’s allusion to a “medication adjustment” create good cause.  First, Respondent provides no corroborating evidence of the CEO’s medical issues and has not explained why they prevented her from filing the appeal, an easy process, as shown by the simple email and short note that ultimately generated this action.  Respondent does not claim that the CEO was hospitalized, bedridden, or unable to communicate nor that she was the only person who could have filed the appeal.  It has not explained why her purported incapacity – even if established (which it was not) – would have precluded another company employee from filing the appeal or prevented the company from hiring counsel.

Moreover, Respondent admits that, during the time in which it could have filed its appeal, the CEO was trying to “reach someone” at the direct marketing company that Wallace Financial employed.  This cuts against the suggestion that she was so incapacitated that she could not have filed the appeal.

Conclusion

The OIG sent Respondent Wallace Financial a straight-forward notice advising the company that it could request a hearing by filing its request within 60 days of receiving the notice.  Respondent did not file its appeal until 160 days after it received the notice and has not shown good cause for the untimely filing.  I therefore grant the OIG’s motion to dismiss and dismiss this matter.  20 C.F.R. § 498.202(f)(1).