Kramer Levin Secures Pro Bono Victory in the Ninth Circuit

The U.S. Court of Appeals for the Ninth Circuit today held that the Bankruptcy Code bars the Social Security Administration (SSA) from reducing post-bankruptcy disability payments to Darrin Lenald Cooper in order to recoup $73,000 in pre-bankruptcy overpayments — in a case of first impression in the Ninth Circuit — a decision likely to benefit thousands of debtors living on disability benefits, and a victory for both Cooper and for Kramer Levin’s clients, the National Consumer Bankruptcy Rights Center (NCBRC) and National Association of Consumer Bankruptcy Attorneys (NACBA).

Cooper suffered a disabling injury working for Boeing. He applied for SSA disability benefits. In 2019, SSA commenced paying Cooper monthly disability benefits plus a lump sum of more than $73,000 for accrued 2016 – 2019 benefits. The lump sum was an overpayment because SSA failed to take account of Cooper’s receipt of state of Washington workers’ compensation payments.

Cooper did not know the $73,000 was an overpayment or that he owed SSA anything when he filed for Chapter 7 bankruptcy and obtained a discharge in 2020. Cooper continued to receive disability payments until 2022, when SSA discovered its overpayment and informed Cooper that it would withhold his disability payments until it recouped the 2019 overpayment. Cooper sought an order compelling SSA to resume payments but lost both in the bankruptcy court and on intermediate appeal to the Bankruptcy Appellate Panel for the Ninth Circuit. NCBRC and NACBA retained Kramer Levin to file an amicus brief in the U.S. Court of Appeals for the Ninth Circuit, where Cooper’s attorney, Marc S. Stern, and Thomas Moers Mayer of Kramer Levin jointly argued against SSA.

The Court of Appeals accepted Cooper’s and NCBRC/NACBA’s arguments that SSA’s recoupment was inequitable and inconsistent with the Bankruptcy Code’s “first fundamental purpose of providing a fresh start to honest debtors” and the Social Security Act’s “foundational purpose of providing income security to vulnerable individuals, especially disabled individuals.” 
SSA makes disability benefit overpayments to thousands of individuals every year. Most disability beneficiaries have not completed high school, more than 80% do not have a college degree, and more than 35% live in poverty or near-poverty. The Ninth Circuit is the most populous in the nation, covering California, Oregon, Washington, Arizona, Nevada, Idaho, Montana, Alaska and Hawaii. Today’s decision will benefit all individual debtors in these areas who have received disability overpayments from SSA.

NACBA is a nonprofit organization of more than 1,500 consumer bankruptcy attorneys nationwide. Its corporate purposes include education of the bankruptcy bar and the community at large on the uses and misuses of the consumer bankruptcy process. Additionally, NACBA advocates nationally on issues that cannot adequately be addressed by individual member attorneys. It is the only national association of attorneys organized for the specific purpose of protecting the rights of consumer bankruptcy debtors.

NCBRC is a nonprofit organization dedicated to protecting the integrity of the bankruptcy system and preserving the rights of consumer bankruptcy debtors. To those ends, it provides assistance to consumer debtors and their counsel in cases likely to have a material impact on consumer bankruptcy law. Among other things, it submits amicus curiae briefs when in its view resolution of a particular case may affect consumer debtors throughout the country, so that the larger legal effects of courts’ decisions will not depend solely on the parties directly involved in the case.