Paul Dolbashian v. Secretary of Health and Human Services, 688 F.2d 4, 1st Cir. (1982)

688 F.
2d 4
Paul DOLBASHIAN, Plaintiff, Appellant,

v.
SECRETARY OF HEALTH AND HUMAN SERVICES,
Defendant, Appellee.
No. 82-1054.
United States Court of Appeals,

First Circuit.
Argued June 9, 1982.
Decided Sept. 8, 1982.
Carol E. Najarian, Providence, R. I., with whom Abedon, Michaelson,

Stanzler, Biener, Skolnik & Lipsey, Providence, R. I., was on brief, for
plaintiff, appellant.
Everett C. Sammartino, Asst. U. S. Atty., Providence, R. I., with whom
Lincoln C. Almond, U. S. Atty., Providence, R. I., was on brief, for
defendant, appellee.
Before COFFIN, Chief Judge, ROSENN, Senior Circuit Judge,*
BOWNES, Circuit Judge.
COFFIN, Chief Judge.
Appellant, Paul Dolbashian, challenges the administrative law judge's (ALJ's)

finding that he is no longer entitled to disability benefits under 42 U.S.C. 423
and that he is liable for repayment of the benefits he has received since April,
1974. The ALJ's decision, upheld by the district court, is subject to our
independent review and will be sustained if its factual findings are supported by
substantial evidence and are in accordance with the law. See id. 405(g);
Miranda v. Secretary of Health, Education and Welfare, 514 F.2d 996, 998 (1st
Cir. 1975).
Under the Social Security Act, an individual who has disability insurance is
entitled to insurance benefits if he is unable
3 engage in any substantial gainful activity by reason of any medically

"to
determinable physical or mental impairment which ... has lasted not less than 12
months." 42 U.S.C. 423(d).
4
Appellee has never contested the severity of appellant's physical condition; the
primary issue has been whether appellant's continued participation in his
business demonstrated that he was capable of "substantial gainful activity" and
therefore not eligible for benefits.
Appellant began receiving benefits in 1969 after sustaining extensive neck and
back injuries.1 The injuries prevented him from carrying on his activities as a
self-employed general contractor who remodelled homes and as a retailer and
installer of major household appliances. In May, 1973, he returned to his
business, working three hours a day for four to five days a week, but at the end
of a nine-month trial work period, he reported to the Social Security
Administration that he had stopped working. He was told that his inability to
work entitled him to continue to receive benefits but that he should report any
return to work.
In 1976 appellant reported on his work activity since January, 1974:
7 run a retail appliance & building supply company. The business is closed to
"I
customers. There is a note on the door to call my home phone 781-5530 for
appointment. I make an appointment & either my wife or son-in-law goes down to
store & discusses the merchandise through a catalog. I also refer many of the people
to Clarence Cavanaugh at Greenwood TV & Appliance.... I do the ordering & bookwork about one hour per day depending on my physical condition. I do this work at
home. I cannot hold my head down for too long. We are virtually closed & are
planning to sell the bldg. & the business. Our net profit decreases every year. My
son-in-law Jean Claude Boisnier lives next door & my wife do most of the work
activity. Clarence Cavanaugh does most of the demonstration for me for free as we
are long time friends. He will show the items at the Greenwood Co. & will either
order it through me or if he has the appliance-he bills me. Clarence's son will often
pick up merchandise for me.... (T)he business is based solely on my knowledge of
the business as I am not physically capable of performing activity in the business."
8
Based upon a review of this report and a visit to the building in which
appellant's business was housed, the Social Security Administration determined
that appellant had not been entitled to receive benefits since the end of the trial
work period and that he was liable for overpayments to himself, his son, and
his wife totalling $13,012. The ALJ, after a hearing, confirmed the finding that
appellant was not eligible for benefits, concluding that "the amount of time
admittedly spent, the degree of skill and knowledge employed, as well as

claimant's own characterization of his status" demonstrated that appellant did
engage in substantial gainful activity. He found liability for the full amount of
the overpayments. Appellant appeals both findings.
Finding of substantial gainful activity
9
At the time the ALJ made his determination about appellant's eligibility for
payments, regulations provided that any work performed during that period
when payments were received may demonstrate an ability to perform
substantial gainful activity. 20 C.F.R. 404.1532(a). Substantial gainful activity
was defined as that which involves the performance of significant physical or
mental duties for profit even if no profit is realized. Performance on a part-time
basis did not preclude a finding that the work was substantial. Id. 404.1432(b).
With respect to people who are self-employed, the regulations specifically
noted that:"Supervisory, managerial, advisory or other significant personal
services rendered by self-employed individuals demonstrate an ability to engage
in substantial gainful activity." Id. 404.1532(f).
10
The degree of appellant's physical participation in the business is extremely

limited. The substantiality of his contribution consequently must be founded, if
at all, on his mental activity, which can be measured for its importance to the
continuing operation of the business. Although the record contains
contradictions about the extent to which appellant has actually placed orders
himself,2 appellant's own descriptions of his tasks support a conclusion that his
mental activities have been pivotal to the business. In the work activity report
that spurred the Administration's investigation of his disability status, appellant
wrote:
11
"(T)he
business is based solely on my knowledge of the business as I am not
physically capable of performing activity in the business. People are referred to me
through word of mouth-they call me, ask my advice, etc. and I order the material
they require right from my home. Occasionally, I may go to their home & look at the
layout of a kitchen & advise them."
12
Subsequently he stated that "My mental ability and knowledge of the business
is valuable to the business-however my physical condition prevents active
participation."
13
We think these statements are sufficient to provide the substantial evidence

necessary to support a finding of substantial activity. Appellant's activities may
have been restricted in large part to the telephone and very limited in time, but
his knowledge of appliances and his ability to advise have contributed in an

important way to the operation of the business. The regulations specifically
recognized that the services performed by a self-employed individual may be
more intangible in nature, and it is those intangible contributions that we find
persuasive.
14
We cannot say that there was insufficient support for the finding that
appellant's activity was gainful. Income tax returns show that appellant reported
a profit from his business for 1971, 1973, 1974 and 1975 and reported a small
loss for 1976. 3 Although his profit was not significant and may be attributable
in part to the gratuitous assistance he received from others, this does not prevent
a finding that the activity was gainful and that profit resulted in part from his
efforts.
15
In holding that the ALJ's conclusion on the disability issue is supported by

substantial evidence, we add a caveat. We have been able to conclude that
appellant was performing substantial gainful activity only because of the
peculiar circumstances under which he performed: He was fortunate to have a
pre-existing business and to be in the unusual position, due to the presence of
other people who could help, of being able to keep the business going with a
minimum of physical effort. Were he not in business for himself and able to
accommodate his business to his physical condition, he might be deemed
incapable of performing substantial gainful activity. Consequently, if
appellant's circumstances should change so he is no longer operating his
business, eligibility for disability payments might be restored.
Liability for overpayment

16
The regulations that the ALJ applied to appellant state that an individual is not
liable for overpayments if he is without fault and adjustment or recovery would
either defeat the purpose of the act or be against equity and good conscience. 20
C.F.R. 404.506. The ALJ concluded that a finding of fault followed
automatically from the conclusion that appellant was performing substantial
gainful activity and made unsupported findings that reimbursement would not
be against equity and good conscience and would not defeat the purpose of the
act.
17
We cannot agree that a finding of fault can be made without further

examination of the circumstances. The conclusion that someone is performing
substantial gainful activity does not necessarily mean that the individual was at
fault for receiving the payments for which he was not eligible. The regulations
specify that whether someone is at fault depends upon the particular
circumstances-circumstances the ALJ did not examine. For example, liability

may depend on whether the individual failed to provide information that he
knew or should have known to be material. See id. 404.507. The ALJ should
have determined whether appellant's return to work for one to two hours per
day after the end of the trial work period constituted a return to work that he
knew or should have known to be material information. If appellant was
performing substantially the same activities that he performed during the trial
period, he perhaps should have known, depending on "pertinent
circumstances", that a description of those activities was material to the
continued receipt of benefits. And a statement that he had ceased such activities
when in fact he had not, might constitute "(a)n incorrect statement ... which he
knew or should have known to be incorrect." Id. 404.507(a). On the other hand,
if the activities engaged in after the trial period were substantially fewer and of
less importance than the earlier activities, it might be properly found that he
should not have known this to be material information. The ALJ should have
also assessed whether, by supplying income tax returns that noted his income
from the business, appellant provided the necessary material information.
18
Because determinations such as these involve questions of fact that this court
cannot and should not assess in the first instance, we remand for further
consideration of the issue of fault. See Small v. Califano, 565 F.2d 797, 801
(1st Cir. 1977); Torres v. Secretary of Health, Education and Welfare, 475 F.2d
466, 469 (1st Cir. 1973). Although the ALJ concluded previously that
reimbursement would not defeat the purpose of the act or be against equity and
good conscience, he should reconsider these issues on remand if he finds that
appellant was not at fault.
19
The judgment of the district court is affirmed in part and vacated in part and is
remanded to the district court for entry of an order remanding to the Secretary
for further proceedings in accordance with this opinion.
Of the Third Circuit, sitting by designation
Appellant sustained these injuries when the airplane in which he was flying hit
an unexpected airpocket, causing him to be thrown out of his seat and up
against the ceiling of the airplane. His neck was broken, left arm paralyzed,
discs fractured, and hip sprained. Continued pain in his neck, shoulders, back,
and limbs has severely limited his mobility, made it difficult for him to hold his
head in a working position, and has caused him to be under continual medical
attention
At the hearing before the ALJ appellant testified that Cavanaugh ordered most
of the goods, and in the record is his statement that he did none of the ordering
himself. To the contrary, however, is his first work activity report in which he
wrote that he did spend time ordering. We cannot fault the ALJ for accepting
appellant's statement in the work activity report
Appellant's income tax returns also reflect the purchase in 1971 of the building
that housed his business

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688 F.

Paul DOLBASHIAN, Plaintiff, Appellant,

United States Court of Appeals,

Carol E. Najarian, Providence, R. I., with whom Abedon, Michaelson,

Appellant, Paul Dolbashian, challenges the administrative law judge's (ALJ's)

3 engage in any substantial gainful activity by reason of any medically

In 1976 appellant reported on his work activity since January, 1974:

admittedly spent, the degree of skill and knowledge employed, as well as

The degree of appellant's physical participation in the business is extremely

We think these statements are sufficient to provide the substantial evidence

his knowledge of appliances and his ability to advise have contributed in an

In holding that the ALJ's conclusion on the disability issue is supported by

Liability for overpayment

We cannot agree that a finding of fault can be made without further

circumstances-circumstances the ALJ did not examine. For example, liability

Of the Third Circuit, sitting by designation

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