PRINCIPAL CASES

RICHARDSON V. PERALES
Quimbee Overview:
 Rule
o Under administrative law, a federal agency may deny a claimant’s request
for benefits based on evidence that would be inadmissible under the
formal rules of evidence.
 Facts
o Pedro Perales (plaintiff) filed a claim for disability benefits under the
Social Security Act (Act), 42 U.S.C. § 301 et seq., which was
administered by the secretary of health, education, and welfare (Secretary)
(defendant). After Perales’s claim was denied, he requested a hearing
before the Secretary. The administrative record developed at the hearing
included testimony by Perales and his doctor, both of whom maintained
that Perales was wholly and permanently disabled by a back injury.
However, contradictory medical reports indicated that Perales’s treating
neurosurgeon and other medical specialists had concluded that his
condition was not disabling. Perales made various objections to the rules
of evidence applied at the hearing, arguing that the evidence introduced
into the record was inadmissible and therefore violated procedural due
process. The hearing examiner overruled the objections and concluded that
Perales was not disabled under the Act. The appeals council affirmed, and
Perales sought review in federal district court. The district court remanded
the case to the hearing examiner. The court of appeals affirmed the
remand. The United States Supreme Court granted certiorari to review.
 Issue
o Under administrative law, may a federal agency deny a claimant’s request
for benefits based on evidence that would be inadmissible under the
formal rules of evidence?
 Holding
o Yes. An agency may deny a claimant’s request for benefits based on
evidence that would be inadmissible under the formal rules of evidence.
Under the Act, Congress has authorized the Secretary to establish
appropriate procedures and evidentiary standards for adjudicating requests
for disability benefits. Section 405 of the Act provides that otherwise
inadmissible evidence may become part of the administrative record.
Section 405 also provides that the Secretary may issue subpoenas
compelling witnesses to testify, and that the Secretary’s fact finding is
conclusive as long as it is supported by substantial evidence. The language
of the Act clearly indicates that (1) Congress intended to authorize the
Secretary to establish appropriate hearing procedures, (2) evidentiary
standards for these hearings should not be applied so rigidly that they bar
the consideration of relevant evidence, and (3) hearing officers should
have considerable discretion. Congress intended to provide for the use of
relatively informal procedures to make hearings under the Act accessible
 to a layperson. Thus, within the scope of the authority granted by
Congress, the Secretary may consider contradictory and strictly
inadmissible evidence to be substantial evidence supporting the denial of
disability benefits. Here, the Secretary’s informal hearing procedures
ensured that the evidence admitted at Perales’s hearing was reliable and
had probative value. The administrative record does not indicate that the
physicians or the Secretary were biased, and a wide range of medical
specialists agreed that Perales’s impairment was mild. Moreover, given
that there is an established hearsay exception for medical records based on
reliability, there was no reason to reject the contradictory medical reports.
Finally, as a practical matter, because the Secretary handles a large volume
of cases, requiring oral testimony instead of medical records in every case
like Perales’s would be unduly costly and burdensome. Therefore, the
Secretary did not violate procedural due process by allowing otherwise
inadmissible evidence to be introduced into the administrative record at
Perales’s hearing. The judgment of the court of appeals is reversed, and
the case is remanded to the district court to determine whether the
Secretary’s findings are supported by substantial evidence.
My Notes:
 Background Info
o The claimant filed for Social Security disability benefits on the basis of a back
injury that was not relieved by treatment and surgery.
o the state agency and the SSA concluded that the claimant had not established an
impairment severe enough to constitute disability status.
o The state agency and the SSA's argument relied heavily on reports of
examinations by consulting physicians ordered by the state agency.
o At the hearing, the claimant and his treating physician testified in support of
disability.
o The hearing examiner concluded that the claimant was not disabled by relying on
the written reports of the consulting physicians and the oral testimony of another
consulting physician who reviewed the claimant's medical records but did not
examine him.
o The claimant then sought internal review before the SSA Appeals Council, which
concluded that the hearing examiner was correct.
o the claimants sought judicial review under a provision in the Social Security Act
incorporating the substantial evidence standard.
 he argued that:
(a) the agency's reliance on documentary, hearsay evidence violated
both the APA's procedural requirements and due process;
(b) The role of the hearing examiner improperly combined prosecutorial
and adjudicatory functions; and
(c) that the written reports could not constitute substantial evidence in
light of the contrary live testimony from his treating physician
o The district court and court of appeals concluded that Perales was entitled to a
new hearing
 Supreme Court Analysis of Perales
o Issue
 “The question, then, is as to what procedural due process requires with the
respect to examining physicians’ reports on a social security disability
claim.”
o Holding
 “We Conclude that a written report by a licensed physician who has
examined the claimant and who sets forth in his report his medical
findings in his area of competence may be received as evidence in a
disability hearing and, despite its hearsay character and an absence of
cross-examination, and despite the presence of opposing direct medical
testimony and testimony by the claimant himself, may constitute
substantial evidence supportive of a finding by the hearing examiner
adverse to the claimant, when the claimant has not exercised his right to
subpoena the reporting physician and thereby provide himself with the
opportunity for cross-examination of the physician.”
o Reasoning
 The Court explained that, although the consulting examiners were under
contract with the state agency, there was no reason to believe they were
biased.
 It reasoned that there was an “impressive range of examination” in the
case and yet “no inconsistency whatsoever in the reports of the five
specialists”

o Arguments
 Perales Relies heavily on the court holding and statements in Goldberg v.
Kelly [397 U.S. 254 (1970)]
9 stating that due process requires notice “and an effective
opportunity to defend by confronting any adverse witnesses”
 The Court determined that the two cases were less than comparable
 Kelly had to do with termination of benefits without prior notice
and also concerned a situation, the Court said, “where credibility
and veracity are at issue, as they must be in many termination
proceedings.
o In the Perales case, the Court noted that:
 Notice was given;
 The physician's reports were on file and available
for inspection by the claimant and his counsel;
 The authors of those reports were known and were
subject to subpoena and to the very cross-
examination that the claimant asserts he has not
enjoyed;
 The specter of questionable credibility and veracity
is not present, only professional disagreement with
the medical conclusions.
  Perales also argues that the medical reports in question are “mere
uncorroborated hearsay”  relates this statement to Mr. Chief Justice
Hughes’ sentence in Consolidated Edison Co. v. NLRB [305 U.S. at 230]
in which he states that “mere uncorroborated hearsay or rumor does not
constitute substantial evidence.”
 The Court reasoned that:
o “Although the reports are hearsay in the technical sense,
because their content is not produced live before the
hearing examiner, we feel that the claimant and the Court
of Appeals read too much into the single sentence from
Consolidated Edison”  The contrast the Chief Justice
was drawing was not with material that would be deemed
formally inadmissible in judicial proceedings but with
material “without a basis in evidence having rational
probative force”
 Finally, Perales suggests that the Administrative Procedure Act, rather
than the Social Security Act, governs the processing of claims and
specifically provides for cross-examination  And in any event the
hearing procedure is invalid on due process grounds and an “independent
hearing examiner” should be provided.
 The Court noted that:
o The Social Security administrative procedure does not vary
from that prescribed by the APA.
o Holding
 The Supreme Court reversed and remanded the decision.

ROBINETTE V. COMMISSIONER OF THE IRS

Quimbee Overview
 Rule
o The United States Tax Court may not consider new evidence in deciding whether an
Internal Revenue Service appeals officer abused his discretion during a collection due-
process hearing.
 Facts
o James Robinette (plaintiff) did not file income-tax returns for several years and, as a
result, owed over $1 million in back taxes, penalties, and interest. Eventually, the
Internal Revenue Service (IRS) (defendant) placed Robinette into default and notified
Robinette of its intention to impose a levy on his property. Section 6330 of the Internal
Revenue Code required the IRS to give a taxpayer a collection due-process hearing
before imposing a levy on the taxpayer’s property. In accordance with § 6330, the IRS
conducted a collection due-process hearing for Robinette. The IRS appeals officer in
charge of the hearing examined Robinette’s file, gathered relevant documents, and
wrote an explanatory memorandum recommending that the levy be imposed on
Robinette’s property. The IRS Office of Appeals approved the levy. Robinette
appealed to the United States Tax Court under § 6330(d)(1), arguing that the appeals
officer abused his discretion in deciding to impose the levy. The tax court conducted a
 de novo hearing at which it entered new evidence and decided in favor of Robinette.
The IRS appealed.
 Issue
o May the United States Tax Court consider new evidence in deciding whether an
Internal Revenue Service appeals officer abused his discretion during a collection due-
process hearing?
 Holding and Reasoning
o No. The United States Tax Court may not consider new evidence in deciding whether
an Internal Revenue Service appeals officer abused his discretion during a collection
due-process hearing. Administrative law generally requires reviews of agency
decisions to be limited to the evidence that the agency was presented with. The
Administrative Procedure Act also specifies that judicial review of agency decisions
should be limited to the agency’s record. Further, the abuse-of-discretion standard of
review that § 6330 requires implies the review of a closed record. A court cannot
accurately determine whether an appeals officer abused his discretion if the court
considers additional information that the officer was unaware of. Nothing in the
legislative history of § 6330 supports deviating from the norms of administrative law.
Therefore, it follows that the United States Tax Court must limit its review of
collection due-process hearing decisions to the evidence that the IRS appeals officer
had available. In this case, the tax court erred by conducting a de novo hearing and
allowing new evidence. Rather, the tax court should have determined whether the
appeals officer abused his discretion using only the evidence in front of the officer.
This court will review Robinette’s case using only the evidence that was available to
the IRS.

My Notes:
 Background Info:
o Robinette failed to file tax returns for several years and owed over $1,000,000 in
back taxes, penalties, and interest.
o after the IRS sent a deficiency notice he submitted (pursuant to statutory
procedures) an “offer-in-compromise” to settle the debt  he would promptly
pay part of the taxes owed and meets several other conditions, including the
timely filing of future returns.
o The IRS accepted the offer
o Robinette initially filed timely returns but failed to do so in 1998
o the IRS notified Robinette that he was in default on the offer  and later sent a
notice of their intent to impose a levy on his assets and of his right to a “collection
due process” hearing before the imposition of the levy
o Robinette requested a hearing
o Robinette’s lawyer claimed that he mailed Robinette’s 1998 return on the due date
in 1999  the appeals office are determined to the contrary and recommended
that the levy be imposed, IRS approved the notice of intent to levy.
o Robinette appealed to the Tax Court  which found that he had not filed his 1998
return in a timely manner, but that his failure to do so was not material to his
offer-in-compromise.
 Consistent with the legislative history of the Act, the parties agree that the Tax Court
reviews the decision of an IRS hearing officer under an “abuse of discretion” standard of
review.
 There is a substantial dispute in this case, however, concerning the scope of the record on
which this deferential judicial view could take place
o Robinette argued, and a majority of the Tax Court held, that the Tax Court may
receive new evidence in the course of reviewing whether and appeals officer
abused his discretion in denying relief during a collection due process hearing.
 A significant portion of the tax courts analysis that the appeals officer
abused his discretion in the case was based on evidence not presented
during the administrative appeal.
o The Commissioner contends that this was an error, and that consistent with
general principles of administrative law and the APA  judicial review of the
agency decision should be limited to the administrative record developed at the
hearing before the appeals officer.
 it is a basic principle the administrative law that the review of
administrative decisions is “ordinarily limited to consideration of the
decision of the agency… and of the evidence on which it was based”
 “abuse of discretion” standard specified in the APA, 5 U.S.C. § 706(2)(A)
 “the focal point for judicial review should be the administrative record
already in existence, not some new record made initially in the reviewing
court.”