Cleary v. Blum, 79 Civ. 1217 (KTD).

• Decision Date: 21 January 1981
• Docket Number: No. 79 Civ. 1217 (KTD).,79 Civ. 1217 (KTD).
• Citation: 507 F. Supp. 514
• Parties: Ethel CLEARY, on behalf of herself and all other persons similarly situated, Plaintiff, v. Barbara B. BLUM, Individually and as Commissioner of the New York State Department of Social Services, Defendant.
• Court: U.S. District Court — Southern District of New York

507 F. Supp. 514

Ethel CLEARY, on behalf of herself and all other persons similarly situated, Plaintiff, v. Barbara B. BLUM, Individually and as Commissioner of the New York State Department of Social Services, Defendant.

No. 79 Civ. 1217 (KTD).

United States District Court, S. D. New York.

January 21, 1981.

Westchester Legal Services, Inc., White Plains, N. Y., for plaintiff; Martin A. Schwartz, White Plains, N. Y., of counsel.

Robert Abrams, Atty. Gen. of the State of New York, New York City, for defendant; Kathleen Gill Miller, Asst. Atty. Gen., New York City, of counsel.

OPINION & ORDER

KEVIN THOMAS DUFFY, District Judge:

Ethel Cleary is a 73 year old widow who suffers from arteriosclerosis and exemia, a circulatory ailment. Mrs. Cleary is also an amputee. Although Mrs. Cleary's resources are insufficient to meet the costs of necessary medical care and services, she does not qualify for public assistance because her resources exceed certain allowable limits. Instead, Mrs. Cleary is eligible for Medicaid¹ benefits because she is deemed to be a "SSI-related medically needy"² person.

Eligibility for and the amount of Medicaid assistance to which a SSI-related medically needy person is entitled depends on the amount the applicant is able to contribute towards his own expenses. An applicant's "liability" is determined by subtracting from his annual net income an amount which the applicant may retain to meet his personal needs. If the net income exceeds the amount allowed for personal needs, the excess is considered available to meet the individual's medical expenses. 42 U.S.C. § 1396a(a)(17); 42 C.F.R. § 435.800 et seq.

When Mrs. Cleary applied for Medicaid benefits, however, the defendant failed to correctly compute her liability. Specifically, the defendant failed to subtract $240 from Mrs. Cleary's total annual income as required by law,³ before determining the amount of Mrs. Cleary's income which exceeds her personal needs allowance. As a result, plaintiff is required to contribute $20 more a month for her medical expenses than a person who receives public assistance under the Aid To Families with Dependent Children Program hereinafter "AFDC". This outcome directly contravenes the holding in Aitchison v. Berger, 404 F.Supp. 1137 (S.D.N.Y.1975), aff'd, 538 F.2d 307 (2d Cir. 1976), cert. denied, 429 U.S. 890, 97 S.Ct. 246, 50 L.Ed.2d 172 (1976) (exempt income may not be less than AFDC standard of need).

After exhausting her administrative remedies, Mrs. Cleary instituted this § 1983 class action on March 9, 1979. Plaintiff alleged that the New York Department of Social Services' hereinafter the "defendant" determination of eligibility for and the amount of medical assistance to which SSI-related medically needy persons are entitled is contrary to federal statutory and constitutional law. After discovery and negotiations, the parties entered into a consent decree which was approved by the court on March 11, 1980.

The plaintiff now seeks an award of costs and attorneys' fees pursuant to the Civil Rights Attorneys' Fees Awards Act of 1976 hereinafter "Fees Act", 42 U.S.C. § 1988. The defendant opposes such an award arguing that the court is without subject matter jurisdiction and that an award of attorneys' fees is inappropriate because the case was terminated by settlement. Defendants also allege that an award in this case will discourage settlements in similar cases.

The court rejects each of these arguments and holds that plaintiff's attorneys are entitled to a fee award of $3,951.92.

I

Defendant first objects to the award of attorneys' fees on jurisdictional grounds. Defendant argues that the district court lacked jurisdiction over this matter because plaintiff's claims failed to state a constitutional claim of sufficient substance to support federal jurisdiction under 28 U.S.C. § 1343(3) or to meet the $10,000 threshold of 28 U.S.C. § 1331.

I accepted jurisdiction of this matter on the theory that plaintiff presented a constitutional claim sufficient to confer jurisdiction under 28 U.S.C. § 1343(3). See Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974). The constitutional question asserted by the plaintiff is clearly substantial, to wit: whether New York's disparate treatment of two classes of potential Medicaid recipients in determining their eligibility for Medicaid, and the amount of Medicaid to which they were entitled, violated the equal protection clause of the fourteenth amendment. This issue is neither frivolous nor devoid of merit. As a matter of law, there is federal jurisdiction over this issue, including pendent statutory claims. Id.

In any event, the court has jurisdiction over plaintiff's Social Security Act claim due to a recent amendment of 28 U.S.C. § 1331. Federal Question Jurisdictional Amendments Act of 1980, Pub.L.No.93-259 (amending 28 U.S.C. § 1331 (1958)). As amended, § 1331 no longer imposes an amount in controversy requirement on cases arising under the Constitution, laws or treaties of the United States. Id. The Act applies to all actions pending on the date of the enactment of the Act. Id.

I hold that the instant action is still pending even though the only remaining issue is that of attorneys' fees. See Rainey v. Jackson State College, 551 F.2d 672 (5th Cir. 1977); see also Bradley v. School Board of City of Richmond, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974). As a result, the court has jurisdiction of this action.

The defendant's second contention is that the plaintiff is not a "prevailing party" who is entitled to attorneys' fees under the Fees Act, 42 U.S.C. § 1988, since the case ended in a settlement rather than through an order of the court.

This argument was rejected by the Second Circuit in Gagne v. Maher, 594 F.2d 336 (2d Cir. 1979), aff'd, 448 U.S. 122, 100 S.Ct. 2570, 65 L.Ed.2d 653 (1980) (fees awarded where dispute settled by consent decree). In Maher, both the Second Circuit and Supreme Court relied upon the Senate Report for Section 1988 which stated that "for purposes of the award of counsel fees, parties may be considered to have prevailed when they vindicate rights through a consent judgment or without formally obtaining relief." S.Rep.No.1011, 94th Cong., reprinted in 1976 U.S.Code Cong. & Ad. News 5908, 5912; accord, Kopet v. Esquire Realty Co., 523 F.2d 1005, 1008 (2d Cir. 1975). The Supreme Court in Maher concluded that "the fact that respondent prevailed through a settlement rather than through litigation does not weaken her claim to fees. Nothing in the language of Section 1988 conditions the District Court's power to award fees on full litigation of the issues or on a judicial determination that plaintiff's rights have been violated." Gagne v. Maher, 448 U.S. at 129, 100 S.Ct. at 2575. Rather, the purpose of the Fees Act is "to remove financial impediments that might preclude or hinder `private citizens', collectively or individually, from being `able to assert their civil rights.' Senate Report at p. 2, U.S.Code Cong. & Admin. News 1976, p. 5910." Zarcone v. Perry, 581 F.2d 1039, 1042 (2d Cir. 1978), cert. denied, 439 U.S. 1072, 99 S.Ct. 843, 59 L.Ed.2d 38 (1979).

Applying these standards here, I find that the prerequisites for an award of attorneys' fees have been met. The initiation of this lawsuit encouraged the defendant to conform its eligibility and award policies to the requirements of the equal protection clause and the Social Security Act. See Chatterton v. Blum, No. 78-305 (N.D.N.Y., filed Sept. 3, 1980). The settlement agreement⁴ gives the plaintiff, as well as the class she represented, virtually all the relief sought in the complaint. Under the settlement, the defendant agreed to (i) correctly compute the plaintiff's eligibility for Medicaid benefits and the amount of benefits to which she is entitled,⁵ and (ii) issue a directive to each of the local Social Service districts within New York State specifying the formula for determining Medicaid eligibility and requiring that each district take immediate steps to insure that this formula is applied in all appropriate cases. By these terms, the plaintiff and other Medicare applicants are assured that proper and equitable Medicare computations will be employed by the New York Department of Social Services. In light of these achievements, Mrs. Cleary is clearly a "prevailing party" within the meaning of the Fees Act. See Gagne v. Maher, 594 F.2d at 340; S.Rep.No.1011, 94th Cong., reprinted in 1976 U.S.Code Cong. & Ad. News 5910, 5912.

Defendant's contention that plaintiff's suit was unnecessary is also without merit. Plaintiff instituted this action only after exhausting available administrative remedies. Defendant's continued failure to modify plaintiff's Medicaid evaluation entitled plaintiff to seek relief in the federal courts. Moreover, the plaintiff ultimately cooperated in reaching a settlement with the defendant. See Chatterton v. Blum, No. 78-305 (N.D.N.Y., filed Sept. 3, 1980). Finally, the absence of bad faith on the part of the defendant is not a reason to deny attorneys' fees when an entitlement to such fees is grounded in Section 1988. Hutto v. Finney, 437 U.S. 678, 693, 98 S.Ct. 2565, 2574-75, 57 L.Ed.2d 522 (1978).

The last argument asserted by the defendant is that awarding attorneys' fees in this case will encourage defendants to litigate rather than settle similar matters in order to avoid paying attorneys' fees. This argument, however, cuts both ways. If attorneys' fees are disallowed for settled cases, plaintiffs too will be reluctant to settle.

It is true that attorneys' fees generally are not recoverable by the winning party in federal litigation. See Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Congress, however, can authorize exceptions to the usual rule, id., and has done so here by electing to recompense those who successfully defend basic civil rights. To deny ...