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Bonita M. Lerro, Individually and As Class Representative v. New Jersey Department of Human Services

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


March 17, 2011

BONITA M. LERRO, INDIVIDUALLY AND AS CLASS REPRESENTATIVE ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
NEW JERSEY DEPARTMENT OF HUMAN SERVICES, DIVISION OF FAMILY DEVELOPMENT, OFFICE OF CHILD SUPPORT SERVICES (OCSS), DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-106-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 14, 2011

Before Judges R. B. Coleman and Lihotz.

Plaintiff Bonita M. Lerro appeals from the dismissal of her complaint, with prejudice for failure to state a claim upon which relief can be granted against the New Jersey Department of Human Services (DHS), Division of Family Development, Office of Child Support Services (the Department or OCSS). We affirm.

Plaintiff filed a class action complaint against defendant, OCSS, on behalf of all individuals who have been participants in the child support system serviced by defendant since October 1, 2000, and who did not have interest calculated on their child support arrears. In her complaint, plaintiff asserted defendant violated her civil rights, pursuant to the New Jersey Civil Rights Act, N.J.S.A. 10:6-1, and 42 U.S.C.A. § 1983, because it failed to calculate post-judgment interest charges on outstanding child support arrears, in the records it maintained, as required by federal statutes. As relief, plaintiff sought, among other things, to compel OCSS to calculate interest on child support arrears on a contemporaneous basis and to refund her application and monitoring fees for the years the records were not properly maintained.

Defendant moved to dismiss plaintiff's complaint with prejudice for failure to state a claim upon which relief can be granted, pursuant to Rule 4:6-2(e). Plaintiff opposed the motion and cross-moved to file an amended complaint. In her proposed amended complaint, plaintiff joined the Commissioner of the New Jersey Department of Human Services, the Director of the Division of Family Development, and the Director of OCSS. Plaintiff also proposed two additional causes of action, alleging (1) breach of contract and (2) an action in lieu of prerogative writs. On September 25, 2009, the court granted defendant's motion to dismiss the complaint with prejudice and denied plaintiff's cross-motion to amend the complaint.

It is undisputed that plaintiff is a custodial parent of two children whose support payments are tracked by the State case registry. Plaintiff paid a twenty-five dollar application fee and a twenty-five dollar yearly monitoring fee "to offset the costs of keeping adequate records" of support payments. Payments under the two orders for child support are in arrears; the outstanding obligations are $36,710 and $17,671.

The State case registry was created to comply with the requirements of Title IV-D of the Social Security Act, 42 U.S.C.A. §§ 651 to -669b (the Act). 42 U.S.C.A. § 654a(e). Title IV-D delegates operation of the Child Support Program to designated State agencies. 42 U.S.C.A. § 654a(a); N.J.A.C. 10:110-1.2. In New Jersey, the designated Title IV-D agency is the OCSS. N.J.A.C. 10:110-1.2.

The Act requires that states efficiently collect child support as a condition of receiving federal funding. Pryce v. Scharff, 384 N.J. Super. 197, 202 (App. Div. 2006). To qualify the State must do more than "collect overdue support payments; it must also establish a comprehensive system to establish paternity, locate absent parents, and help families obtain support orders." Blessing v. Freestone, 520 U.S. 329, 334-35, 117 S. Ct. 1353, 1356, 137 L. Ed. 2d 569, 578 (1997) (explaining 42 U.S.C.A. §§ 651, 654). The State Title IV-D agency's composition and its services must comply with federal guidelines. "For example, States must create separate units to administer the plan, [42 U.S.C.A.] § 654(3), and to disburse collected funds, [42 U.S.C.A.] § 654(27)." Blessing, supra, 520 U.S. at 334, 117 S. Ct. at 1356, 137 L. Ed. 2d at 578.

Additionally, each State's Title IV agency is obligated [t]o maintain detailed records of all pending cases, as well as to generate the various reports required by federal authorities, States must set up computer systems that meet numerous federal specifications. Finally, in addition to setting up this administrative framework, each participating State must enact laws designed to streamline paternity and child support actions. . . . If a State does not "substantially comply" with the requirements of Title IV-D, the Secretary is authorized to penalize the State by reducing its AFDC grant by up to five percent. § 609(a)(8). [Blessing, supra, 520 U.S. at 334-35, 117 S. Ct. at 1356-57, 137 L. Ed. 2d at 578-79.]

The State case registry is required to "include a record of . . . the amount of monthly (or other periodic) support owed under the order, and other amounts (including arrearages, interest or late payment penalties, and fees) due or overdue under the order." 42 U.S.C.A. § 654a(e)(4). Further, federal regulations require that the computer records include (1) the amount of support owed under the order and (2) other amounts due or overdue under the order including arrearages, interest or late payment penalties and fees. 45 C.F.R. 307.11(e)(4).

To comply with Title IV-D requirements, New Jersey established its State case registry under N.J.S.A. 2A:17-56.58. Consistent with federal regulations, the statute requires the registry to include information on "the amount and frequency of support owed and other amounts due or overdue under the support order, including arrearages, interest or late payment penalties and fees." N.J.S.A. 2A:17-56.58(a)(1).

A cooperative agreement between DHS and the Administrative Office of the Courts established the Probation Division as the unit responsible for collecting child support. Pryce, supra, 384 N.J. Super. at 203. In Pryce, we reversed the Chancery Division's denial of a motion to assess interest on a father's overdue child support. We held DHS must calculate post-judgment interest at the time of execution or satisfaction of child support judgments. Pryce, supra, 384 N.J. Super. at 215. In response to Pryce, the Administrative Office of the Courts issued Directive No. 16-06 (the Directive). The Directive provided:

When the obligor pays the full arrears, such payment shall be accepted and posted immediately. After receipt of the obligor's full arrears payment and request for a warrant of satisfaction, the warrant of satisfaction shall be provided to the judgment creditor(s) . . . and the judgment creditor shall be informed of the right to post judgment interest. The parties may agree upon an interest calculation or may agree to waive or compromise such interest in a warrant of satisfaction.

It remains the OCSS's practice to only calculate interest at the time of execution or satisfaction of child support judgments. Moreover, Rule 5:7-5(g) provides in pertinent part as follows:

In accordance with N.J.S.A. 2A:17-56.23a, past-due child support payments are a judgment by operation of law on or after the date due and are subject to post-judgment interest at the rates prescribed in Rule 4:42-11 at the time of satisfaction or execution. Past-due child support payable through the Probation Division shall be automatically docketed as civil judgments with the Clerk of the Superior Court on the first day of the month following the date the payment was due. The Probation Division may, with the authorization of a child support judgment creditor, assist that party in calculating post-judgment interest in accordance with Rule 4:42-11 at the time an offer of satisfaction is tendered or an execution of assets is initiated.

The trial court dismissed plaintiff's complaint for failure to state a claim for which relief can be granted. In our review of a dismissal pursuant to Rule 4:6-2(e), "'the plaintiff is entitled to a liberal interpretation of its contents and to the benefits of all its allegations and the most favorable inferences which may be reasonably drawn from them.'" Burg v. State, 147 N.J. Super. 316, 319-20 (App. Div.), cert. denied, 75 N.J. 11 (1977) (quoting Rappaport v. Nichols, 31 N.J. 188, 193 (1959)). The inquiry is limited to examining the legal sufficiency of the facts alleged on the face of the complaint. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). We are required to search the complaint "in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." Ibid. We inquire whether, on the facts alleged, accepting them as true, a cause of action arose against the defendants. Burg, supra, 147 N.J. Super. at 320. Our review is not concerned with the weight, worth, nature or extent of the evidence. Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969). If the allegations are "palpably insufficient to support a claim upon which relief can be granted[,]" we must affirm the dismissal of the complaint. Rieder v. State Dep't. of Transp., 221 N.J. Super. 547, 552 (App. Div. 1987).

Plaintiff argues that the Directive acknowledges that child support judgments accrue post-judgment interest consistent with other civil judgments. Recognition of the accrual of interest is, however, distinct from requiring the ongoing calculation or collection of that interest. The Directive clearly specifies that accrued interest is to be calculated after satisfaction of the judgment, as it reads: "The Court [in Pryce] concluded that child support judgments in fact do accrue post-judgment interest, consistent with other civil judgments, with the post-judgment interest in these matters to be calculated when satisfying judgments on behalf of obligees whose child support is paid through Probation."

Plaintiff also argues that the Directive applies only to the Probation Division, however, the motion court correctly concluded that the Directive applies to both the Probation Division and OCSS. Federal law requires the Title IV-D agency, in this case OCSS, to collect child support including overdue support and a cooperative agreement between DHS and the Administrative Office of the Courts established the Probation Division as the unit responsible for collecting child support. Pryce, supra, 384 N.J. Super. at 203, 205.

Plaintiff points out that the Directive is only an interim solution and complains defendant has not taken any action to fiX the registry system since issuing the Directive. We agree the Directive indicates its recommended procedure is temporary, pending "more extended development, review, and formal approval of a permanent post-judgment interest protocol." As we recognized in Pryce, the Probation Division has needed new computer software to calculate post-judgment interest since 1994. Pryce, supra, 384 N.J. Super. at 213 (The 1994-1996 Family Division Practice Committee Report recommended that the AOC provide the Probation Division with "computer software that calculates post-judgment interest in accordance with the payment and distribution scheme used by Probation."). Although it is regrettable that the Probation Division still appears incapable of calculating post-judgment interest prior to execution or satisfaction, this is not a violation of state and federal law for which a right to sue is conferred upon plaintiff or any of the other individuals in her putative class.

Plaintiff's argument, that the obligation to calculate interest is ongoing, is unavailing. This issue was thoroughly addressed in Pryce, which explains that Title IV-D of the Social Security Act is primarily concerned with the promotion of systemic cost efficiency in the collection of child support payments:

The Federal Act provides that the State will receive incentive payments, pegged to the amount of child support collected and the efficiency with which the collections are made. See 42 U.S.C.A. § 658a. Efficiency is calculated by comparing the amount collected with the administrative cost of collection. 42 U.S.C.A. § 658a(b)(6)(E)(i). Therefore, the State has an interest in the cost-effectiveness of its child support collection system and may lose federal incentive funds if its system is not cost effective. We infer that the State may reasonably take into account cost efficiency in its determination as to whether and when to impose post-judgment interest on overdue child support.

As further discussed below, this concern for cost efficiency explains why our Court Rules treat interest on child support judgments somewhat differently than interest on other judgments, by providing that past-due child support payments "are subject to post-judgment interest . . . at the time of satisfaction or execution." R. 5:7-5(g). Thus, the IV-D agency is required to incur the cost of calculating interest at the point where it has located assets (e.g., inheritances, bank accounts, tax refunds) from which the interest can be collected, or where the obligor is seeking a satisfaction of judgment and presumably is motivated to pay the interest so that the lien of the judgment may be removed from encumbered assets such as a house that is about to be sold. [Pryce, supra, 384 N.J. Super. at 205-06.]

We ultimately held "the Court Rules, as we construe them, do not require [the] Probation [Division] to undertake an ongoing calculation." Id. at 214. Our view on that issue has not changed.

Plaintiff argues she has standing and that her claim is analogous to the plaintiff in Pryce. We disagree.

In Pryce, we distinguished Blessing, which held that Title IV-D does not give individuals a federal right to force a state agency to substantially comply with Title IV-D. Pryce, supra, 384 N.J. Super. at 202 n.1; Blessing, supra, 520 U.S. at 333, 117 S. Ct. at 1356, 137 L. Ed. 2d at 577. In Pryce, we rejected the State's argument that the plaintiff lacked standing because the plaintiff was "not seeking to enforce a general right to effective enforcement of Title IV-D. Rather, Pryce [was] seeking to enforce her right, under the aegis of this State's statutes and Court Rules, to have post-judgment interest added to the Probation arrears account." Pryce, supra, 384 N.J. Super. at 202 n.1 (emphasis added). We "perceive[d] no rational reason why, if plaintiff has calculated the interest herself, it should not be added to the Probation account." Id. at 215-16.

Here, plaintiff instituted a class action suit seeking to compel the State to comply with federal and state law which requires the registry to keep track of interest on a periodic basis. As we clearly indicated in Pryce, and as the Rules Governing the Courts confirm, the calculation of child support obligations and interest are matters of funding incentive and administrative cost efficiency.

Plaintiff argues, however, that she satisfies the three-part test stated in Blessing, supra, 520 U.S. at 341, 117 S. Ct. at 1359, 137 L. Ed. 2d at 582, to determine whether a statute confers a federal right upon an individual. In Blessing, the United States Supreme Court addressed whether individuals may sue state officials under 42 U.S.C.A. § 1983 for asserted violations of Title IV-D. Id. at 339-40, 117 S. Ct. at 1359, 17 L. Ed. 2d at 581. "Section 1983 imposes liability on anyone who, under color of state law, deprives a person 'of any rights, privileges, or immunities secured by the Constitution and laws.'" Id. at 340, 17 S. Ct. at 1359, 17 L. Ed. 2d at 581-82. The Court outlined three factors necessary to determine that a statutory provision gives rise to a federal right which may be enforced by a private individual.

First, Congress must have intended that the provision in question benefit the plaintiff. Second, the plaintiff must demonstrate that the right assertedly protected by the statute is not so vague and amorphous that its enforcement would strain judicial competence. Third, the statute must unambiguously impose a binding obligation on the States. In other words, the provision giving rise to the asserted right must be couched in mandatory rather than precatory terms. [Ibid. (citations and quotations omitted).]

In Blessing the § 1983 claims were brought by five Arizona mothers against state officials on grounds that state child- welfare agencies consistently failed to meet the requirements of Title IV-D of the Social Security Act requiring states receiving federal child-welfare funds to "substantially comply" with the regulations designed to ensure timely payment of child support. Id. at 333-35, 117 S. Ct. at 1356-57, 17 L. Ed. 2d at 577-79.

The United States Supreme Court found defendant's action did not assert a violation of a federal right explaining:

[T]he requirement that a State operate its child support program in "substantial compliance" with Title IV-D was not intended to benefit individual children and custodial parents, and therefore it does not constitute a federal right. Far from creating an individual entitlement to services, the standard is simply a yardstick for the Secretary to measure the systemwide performance of a State's Title IV-D program.

Thus, the Secretary must look to the aggregate services provided by the State, not to whether the needs of any particular person have been satisfied. [Blessing, supra, 520 U.S. at 343, 117 S. Ct. at 1361, 17 L. Ed. 2d at 584.]

Because the provision of the federal statute cited by the claimants in Blessing focused on "the aggregate services provided by the State," rather than "the needs of any particular person," the Supreme Court held it conferred no individual rights and thus could not be enforced through § 1983. The Supreme Court emphasized: "To seek redress through § 1983 . . . a plaintiff must assert the violation of a federal right, not merely a violation of federal law." Id. at 340, 117 S. Ct. at 1359, 17 L. Ed. 2d at 582. Blessing elaborated further, explaining that the purpose of the detailed statutory requirements imposed upon the states was to improve the overall efficiency of the states' child support enforcement scheme. The Court stated:

Title IV-D lays out detailed requirements for the State's data processing system.

Among other things, this system must sort information into standardized data elements specified by the Secretary; transmit information electronically to the State's AFDC system to monitor family eligibility for financial assistance; maintain the data necessary to meet federal reporting requirements; and provide for the electronic transfer of funds for purposes of income withholding and interstate collections. Obviously, these complex standards do not give rise to individualized rights to computer services. They are simply intended to improve the overall efficiency of the States' child support enforcement scheme. [Id. at 344, 117 S. Ct. at 1361, 137 L. Ed. 2d at 584 (citations omitted).]

In Blessing, the claimants' specific allegation was not that the agency violated a specific right, but that it did not substantially comply with Title IV-D. Id. at 332, 117 S. Ct. at 1362, 137 L. Ed. 2d at 584. While the Court did "not foreclose the possibility that some provisions of Title IV-D give rise to individual rights," it emphasized that plaintiffs must be able to "identify with particularity the rights they claimed." Id. at 345, 117 S. Ct. at 1362, 137 L. Ed. 2d at 585.

Here, plaintiff claims her particularized right is that the child support registry must include the calculation of interest on child support arrears on a regular or periodic basis. Plaintiff argues she is the beneficiary of the statutory scheme because the purpose of the registry is to ensure child support collections. The Law Division found plaintiff was not the intended beneficiary of Title IV-D and therefore lacked standing. The Law Division held the statute requires substantial compliance with Title IV-D and is not intended to benefit the individual children and custodial parents. This holding mirrors the United States Supreme Court's interpretation in Blessing, which stated "the requirement that a State operate its child support program in 'substantial compliance' with Title IV-D was not intended to benefit individual children and custodial parents, and therefore it does not constitute a federal right." Blessing, supra, 520 U.S. at 343, 117 S. Ct. at 1361, 17 L. Ed. 2d at 584. Moreover, as stated previously, "these complex [computer registry] standards do not give rise to individualized rights to computer services. They are simply intended to improve the overall efficiency of the States' child support enforcement scheme." Id. at 345, 117 S. Ct. at 1362, 137 L. Ed. 2d at 584.

Subsequent Supreme Court decisions have reaffirmed the narrow scope of the "intended beneficiary" factor in Blessing. For example, in Alexander v. Sandoval, 532 U.S. 275, 289, 121 S. Ct. 1511, 1521, 149 L. Ed. 2d 517 (2001) (quoting California v. Sierra Club, 451 U.S. 287, 294, 101 S. Ct. 1775, 1779, 68 L. Ed. 2d 101 (1981)), the Court stated "[s]tatutes that focus on the [entity or] person regulated rather than the individuals protected create 'no implication of an intention to confer rights on a particular class of persons.'" In Gonzaga University v. Doe, 536 U.S. 273, 283, 122 S. Ct. 2268, 2275, 153 L. Ed. 2d 309, 321 (2002), the Court held § 1983 imposes liability only for the deprivation of "rights, privileges, or immunities secured by the Constitution and laws of the United States." Only rights, not the lesser standard of "benefits" or "interests," may be enforced under the authority of that section. Ibid. Federal statutes create individual rights enforceable under § 1983 only when imbued with "explicit rights-creating" language phrased in terms of persons benefited. Id. at 284, 122 S. Ct. at 2276, 153 L. Ed. 2d 321; Joseph S. v. Hogan, 561 F. Supp. 2d 280, 295 (E.D.N.Y. 2008).

Plaintiff maintains, even if her claim is not actionable under 42 U.S.C.A. § 1983, the claim is viable under the New Jersey Civil Rights Act, N.J.S.A. 10:6-1 to -2, which provides:

Any person who has been deprived of any substantive due process or equal protection rights, privileges or immunities secured by the Constitution or laws of the United States, or any substantive rights, privileges or immunities secured by the Constitution or laws of this State, or whose exercise or enjoyment of those substantive rights, privileges or immunities has been interfered with or attempted to be interfered with, by threats, intimidation or coercion by a person acting under color of law, may bring a civil action for damages and for injunctive or other appropriate relief. [N.J.S.A. 10:6-2(c).]

This provides for causes of action in two circumstances: (1) when a person is deprived of a right, or (2) when the person's rights are interfered with by threats, intimidation, coercion or force. Felicioni v. Admin. Office of Courts, 404 N.J. Super. 382, 400 (App. Div. 2008). Neither circumstance applies to this case.

The relevant statutes do not confer enforceable rights to individuals. The New Jersey Child Support Program Improvement Act (CSPIA), N.J.S.A. 2A:17-56.7a to -56.25, was enacted in response to the changes to the Social Security Act by the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, Pub. L. No. 104-193, §§ 300-95, 110 Stat. 2105 (codified as amended in scattered sections of 42 U.S.C.A.), including changes to Title IV-D such as the child support registry. N.J.S.A. 2A:17-56.7b(a). Through the CSPIA, the legislature intended to maximize federal funding and incorporate and expand on the fundamental concepts of PRWORA. Ibid. In other words, CSPIA was enacted to ensure substantial compliance with the changes to Title IV-D so that the state would receive the maximum amount of federal funding under the program.

It follows that since an individualized right was not created under Social Security Act Title IV-D, an identical individualized right cannot be created under state law enacted to comply with the federal statute. Moreover, plaintiff does not offer any statutory or other authority to support her argument. Based on our review, we reject plaintiff's argument.

Plaintiff next argues dismissal was improper because many key facts have not been discovered. However, plaintiff ignores the fact that her case was dismissed, as a matter of law, because the motion court found Title IV-D did not give rise to individual rights. "Discovery is intended to lead to facts supporting or opposing an asserted legal theory; it is not designed to lead to formulation of a legal theory." Camden Cnty. Energy Recovery Assocs., L.P. v. N.J. Dept. of Envtl.

Prot., 320 N.J. Super. 59, 64 (App. Div. 1999), aff'd o.b. 170 N.J. 246 (2001).

Plaintiff seeks to amend her pleading should it be found deficient. Rule 4:9-1 provides "a party may amend a pleading only by written consent of the adverse party or by leave of court which shall be freely given in the interest of justice." "[T]he granting of a motion to file an amended complaint always rests in the court's sound discretion." Notte v. Merchs. Mut. Ins. Co., 185 N.J. 490, 501 (2006) (quoting Kernan v. One Washington Park Urban Renewal Assocs., 154 N.J. 437, 456-57 (1998)). "[C]courts are free to refuse leave to amend when the newly asserted claim is not sustainable as a matter of law. In other words, there is no point to permitting the filing of an amended pleading when a subsequent motion to dismiss must be granted." Id. at 501 (citations and quotation marks omitted). We agree with the Law Division's ruling that because it is clear plaintiff does not have an individualized right to computer services through the federal and state statutes governing the State case registry, any claim by plaintiff to the contrary is unsustainable as a matter of law. R. 2:11-3(e)(1)(E).

Affirmed.

20110317

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