Kenneth F. Sass v. United States Railroad Retirement Board

* After examining the briefs and the record, we have concluded that oral argument is
unnecessary. Thus, the appeal is submitted on the briefs and the record. See FED. R. A PP. P.
34(a)(2).
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Submitted December 11, 2008 *
Decided December 12, 2008
Before
JOHN L. COFFEY, Circuit Judge
JOEL M. FLAUM, Circuit Judge
MICHAEL S. KANNE, Circuit Judge
No. 08‐1806
KENNETH F. SASS,
Petitioner,
v.
UNITED STATES RAILROAD
RETIREMENT BOARD,
Respondent.
On Petition for Review of a Decision of
the Railroad Retirement Board.
No. 07‐AP‐0038
O R D E R
Kenneth Sass challenges the decision of the Railroad Retirement Board ordering him
to repay $34,946 in excess benefits and a $51,005 penalty. Because the Board’s decision is
supported by substantial evidence and has a reasonable basis in law, we uphold the
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1

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decision.
Sass was 51 when he began receiving a disability annuity in 1991. Until recently, a
disability annuitant like Sass could not earn more than $400 per month in wages or self‐
employment income without a reduction in benefits (the amount is now $700), and
annuitants who exceed this cap must notify the agency. 45 U.S.C. § 231a(e)(4) (2000 & Supp.
II 2002). A failure to do so has serious consequences. In addition to reimbursing the agency
for unauthorized benefits, the annuitant will also be penalized with a loss of future benefits.
A first failure to report earnings will result in a penalty equal to one month’s benefits. Id.;
Reese v. R.R. Ret. Bd., 906 F.2d 355, 357 (8th Cir. 1990). A subsequent failure to report
earnings will result in a penalty equal to the benefits for each month there were excess
earnings. 45 U.S.C. § 231a(e)(4); Reese, 906 F.2d at 357.
At some point Sass took a job with Avis Rent A Car, and for several months in 1997
he earned more than $400 but did not disclose his earnings to the agency. When the
omission was discovered, the agency recouped an overpayment of $3,311 and penalized
Sass in the amount of $1,042. That incident is not at issue here, but in 2006 the agency
learned that Sass’s undisclosed earnings had also exceeded the earnings cap from 2001
through 2004. The agency notified Sass that his benefits had been overpaid by more than
$34,000, and on the mistaken belief that this was his first failure to report the agency also
assessed a penalty of $1,119. Sass, though, requested reconsideration, which prompted the
agency to realize its mistake and increase the penalty to $51,005 because this was the second
time that Sass had failed to report excess earnings. The overpayment amount and penalty
were upheld by the agency’s Bureau of Hearings and Appeals, and then by a divided Board.
In his petition for review, Sass does not contest his obligation to repay the
unauthorized benefits; his only contention is that the Board should have waived recovery of
the penalty. Our jurisdiction to review Board decisions arises under 45 U.S.C. § 231g. We
will sustain a Board decision that is based on substantial evidence and has a reasonable
basis in the law. Weyerhaeuser Co. v. U.S. R.R. Ret. Bd., 503 F.3d 596, 601 (7th Cir. 2007);
Holman v. U.S. R.R. Ret. Bd., 253 F.3d 975, 978 (7th Cir. 2001).
The facts underlying the Board’s decision are not challenged by Sass. For several
years he exceeded the income cap without telling the agency, and he does not dispute the
calculated amount of either the overpayment or the penalty. At best he contends that the
penalty will cause him financial hardship.
The relevant statute provides that there “shall be no recovery” when benefits have
been overpaid if, “in the judgment of the Board,” the recipient is “without fault” and
recovery would be contrary to the purposes of the Railroad Retirement Act or would be

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No. 08‐1806 Page 3
inequitable. 45 U.S.C. § 231i(C); see 20 C.F.R. § 255.10. An annuitant can be found at fault
through either action or inaction, including failure to report information that the annuitant
should have known was material. 20 C.F.R. § 255.11(b), (d)(1)(I). Sass admitted receiving
notice at the time of his application and every year thereafter that he was required to report
excess earnings. And having already been caught not reporting excess earnings once before,
Sass undoubtedly knew his duty to report. The Board found, and Sass does not dispute,
that he was at fault for the overpayment.
In its decision the Board asserts with no citation to authority that the nondisclosure
penalty “is not subject to waiver,” but in its brief here, counsel for the Board does not repeat
this contention. Instead, counsel now relies on 45 U.S.C. § 231a(e)(4) for the proposition that
the nondisclosure penalty is “mandatory,” as if that settles the question.
We generally defer to the Board’s interpretation of the statutes Congress has
entrusted it to administer. Crown v. U.S. R.R. Ret. Bd., 811 F.2d 1017, 1019 (7th Cir. 1987).
But the Board’s interpretation must have a reasonable basis in law. Holman, 253 F.3d at 982.
If the Board’s reasoning is “so lacking in thoroughness that we are unable to discern the
Board’s basic path of analysis,” then we will be unable to find that the interpretation has a
reasonable basis in law. Ry. Labor Executives’ Ass’n v. U.S. R.R. Ret. Bd., 749 F.2d 856, 862
(D.C. Cir. 1984).
Given the Board’s silence, it would be difficult for us to conclude that its
interpretation of its waiver power has a reasonable basis in law, especially when our own
research has not uncovered even one legal precedent discussing the question. But we need
not decide the point because Sass does not qualify for a waiver in any case. As noted, the
Board is authorized to waive recovery only if the beneficiary was not at fault for the
overpayment, and if recovery would be contrary to the purpose of the Act or against equity
or good conscience. 45 U.S.C. § 231i(C); Peterson v. U.S. R.R. Ret. Bd., 780 F.2d 1361, 1363
(8th Cir. 1985). The Board determined that Sass was at fault for the overpayment because he
failed to report his excess earnings and he knew this was required. Sass received
information concerning the reporting requirements at the time of his application for
benefits, he signed a certification to that effect, he annually received notice of the
requirement, and he had been penalized once before for failing to report excess earnings.
Because Sass concedes he was at fault, he has no chance for waiver.
The dissenting Board member feared that upholding the significant penalty would
ultimately result in Sass filing for bankruptcy and the Board recovering nothing. The point
is irrelevant. The prospect that overpayment or the penalty might be dischargeable has no
bearing on the Board’s legal authority to waive the penalty. The dissenting Board member

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has conflated two unrelated questions, and we see no purpose in speculating further about
whether the Board will succeed in collecting from Sass.
The petition for review is DENIED.

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