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Everett v. Schramm

September 6, 1985

KAREN EVERETT AND MARION MICKENS, INDIVIDUALLY AND ON BEHALF OF THEIR CHILDREN, AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED,
v.
PATRICIA SCHRAMM, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE DELAWARE DEPARTMENT OF HEALTH AND SOCIAL SERVICES; AND CHARLES HAYWARD IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE DEPARTMENT'S DIVISION OF ECONOMIC SERVICES, APPELLANTS IN NO. 84-5490; MARION MICKENS AND KAREN EVERETT ON BEHALF OF THEMSELVES AND ALL OTHER PERSONS SIMILARLY SITUATED, APPELLANTS IN NO. 84-5449



On Appeal from the United States District Court for the District of Delaware, (D.C. Civ. No. 83-209)

Author: Higginbotham

Before GIBBONS and HIGGINBOTHAM, Circuit Judges and NEWCOMER, District Judge*fn*

Opinion OF THE COURT

A. LEON HIGGINBOTHAM, JR., Circuit Judge.

Karen Everett and Marion Mickens ("plaintiffs") brought this class action alleging illegalities in the administration of the State of Delaware's Aid to Families With Dependent Children ("AFDC") program. Defendants Patricia Schramm and Charles Hayward were sued in their official capacities as, respectively, Secretary of the Delaware Department of Health and Social Services ("the Department") and Director of the Department's Division of Economic Services. The district court found for the plaintiffs and granted declaratory and injunctive relief with respect to certain AFDC calculations made between October 1, 1981 and December 31, 1983. With respect to calculations since January 1, 1984, the district court found for defendants. Plaintiffs appealed and defendants cross-appealed. For the reasons that follow, we will affirm.

I.

AFDC was one of four categorical assistance programs created by the Social Security Act of 1935, § 401 et seq., 49 Stat. 620, 627 (1936). Though AFDC has frequently been amended over the years, the program's basic structure -- an early example of cooperative federalism -- has remained constant. Under the program, financially needy households that include dependent children receive monetary payments from the state. The payments are funded jointly by the state and federal governments. To be eligible for federal matching funds, a state must adopt a plan for aid and services to needy families in conformity with 42 U.S.C. § 602.

States must set two standards for the program: the standard of need and the payment level. The standard of need is a set of amounts each state considers adequate to provide for the subsistence needs of households of various sizes. It is "a dollar figure set by each State reflecting the amount deemed necessary to provide for essential needs, such as food, clothing, and shelter." See Quern v. Mandley, 436 U.S. 725, 737, 56 L. Ed. 2d 658, 98 S. Ct. 2068 (1978). While a 1968 amendment to the federal law required that the standard of need be adjusted by July 1, 1969 to reflect increases in the cost of living, 42 U.S.C. § 602(a)(23). Alvarado v. Schmidt, 317 F. Supp. 1027, 1038-39 (W.D. Wis. 1970), it does not mandate any adjustment to account for inflation that has occurred thereafter, New Jersey Welfare Rights Organization v. Cahill, 483 F.2d 723, 726 (3d Cir. 1973), nor does it specify which household expenses must be included in the calculation. Metcalf v. Trainor, 472 F. Supp. 576, 586 (N.D. Ill. 1979). The payment levels, in contrast, are the amounts the state actually pays to eligible households. The amounts paid vary with the number of household members and the amount of the household's other income. "Congress has always left to the States a great deal of discretion" as to both the standard of need and the level of benefits to be paid. Rosado v. Wyman 397 U.S. 397, 408, 25 L. Ed. 2d 442, 90 S. Ct. 1207 (1970). And, until quite recently, AFDC mandated no particular relationship between the two figures; states were free to pay any level of benefits without regard to the standard of need. Johnson v. Likins, 568 F.2d 79, 82 (8th Cir. 1977).

The standard of need took on greater significance with the enactment of the Omnibus Budget Reconciliation Act of 1981 ("OBRA"), Pub. L. No. 97-35, §§ 2302, 2306, 95 Stat. 357, 845-46 (1982), which became effective October 1, 1981. First, OBRA declared any household whose gross income exceeded 150 percent of the state's standard of need ineligible for AFDC benefits. 42 U.S.C. § 602(a)(18). Second, OBRA required the states to assume that stepparents contribute a certain part of their income to the household for the purpose of calculating the amount of household income to be subtracted from the payment level. 42 U.S.C. § 602(a)(31). The amount assumed to be contributed by the stepparent is calculated by subtracting from the stepparent's income a sum that includes an amount equal to the state's standard of need for a household consisting of the stepparent and his or her actual dependents.

The effects of the statutory changes wrought by OBRA are well-illustrated in the cases of the named plaintiffs. In January 1983, Karen Everett was receiving AFDC payments of $197 per month for herself and her infant child. At that time she took a part-time job with an expected average gross monthly income of $400. Shortly thereafter, she was notified that her AFDC payments would be terminated because her income exceeded 150 percent of what Delaware contends was its standard of need for a family of two.*fn1 In February 1983, when Marion Mickens married Charles Mickens, she was receiving and AFDC grant of $266 per month for herself and her two children. Mr. Mickens had a gross income at that time of approximately $400 per month. Calculations required by § 602(a)(31) were done to determine how much of this stepparent's income would be assumed to be available to Mrs. Mickens and her children. The amount of Mr. Mickens' income disregarded was equal to what Delaware contended was its standard of need for a family of two -- $197.*fn2 Enough was left and assumed to be available to Mrs. Mickens and her children that her benefits were terminated.

On April 15, 1983, Everett and Mickens filed this lawsuit seeking declaratory and injunctive relief on behalf of a class consisting of all Delaware AFDC recipients and applicants who were or would be denied benefits due to the state's application of OBRA's "150 percent" and "stepparent income" rules. They argued that Delaware had violated federal and state law by using its then-current AFDC payment level, rather than its actual (and allegedly much higher) standard of need, in making the calculations required under OBRA. There was no dispute that Delaware complied with the terms of 42 U.S.C. § 602(a)(23) by conducting a cost of living study in 1968 and establishing standard of need in accordance with the results.*fn3 Plaintiffs' principal contention was that under Del. Code Ann. tit. 31, § 509 (1974), as enacted in 1971,*fn4 Delaware's 1968 standard of need had subsequently been subject to annual adjustments for increases in the Consumer Price Index.*fn5 Defendants, however, contended that the only statutory provisions defining its standard of need were Del. Code Ann. tit. 31, § 502(8)*fn6 and § 503(d)*fn7, that authority for establishing the standard of need in accordance with the statutory definition was vested in the Department, and that the actual standard of need so established -- which had been increased several time since 1968, but had not kept pace with inflation -- appeared under the heading "Standard Allowance Schedule: Basic Personal Needs" in Delaware's AFDC plans submitted to the federal government.*fn8 These figures, Delaware contended, had properly been used in making the OBRA "150 percent" and "stepparent income" calculations during the period October 1, 1981 - December 31, 1983.

The district court granted summary judgment to plaintiffs on this issue. On June 8, 1984, the district court ordered that:

Any claims against members of the plaintiff class by the Department of Health and Social Services (DHSS), which were asserted before the date of this Order, for AFDC overpayments involving the application of 42 U.S.C. §§ 602(a)(18) and 602(a)(31) between October 1, 1981 and December 31, 1983, shall be recalculated utilizing the standards of need in this Order.*fn9 In addition, all new overpayment claims initiated after the date of this Order shall be calculated using the standards of need in this Order.*fn10

While this case was pending in district court, the Delaware assembly approved a bill ("S.B. 209") that repealed the cost of living adjustment provision in § 509 and ...


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