661 F.2d 655 (7th Cir. 1981), 80-2544, Simer v. Rios
|Citation:||661 F.2d 655|
|Party Name:||Elsie SIMER, et al., Plaintiffs-Appellants, v. Richard J. RIOS, Acting Director of Community Services Administration; Community Services Administration, Defendants-Appellees.|
|Case Date:||October 07, 1981|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued Feb. 12, 1981.
[Copyrighted Material Omitted]
Jack L. Block, Chicago, Ill., for plaintiffs-appellants.
Lawrence Wimbush, Washington, D.C., for amicus curiae.
Neil H. Koslowe, Counsel Civ. Div., Dept. of Justice, Washington, D.C., for defendants-appellees.
Before SWYGERT, Senior Circuit Judge, and PELL and WOOD, Circuit Judges.
HARLINGTON WOOD, Jr., Circuit Judge.
This case raises many issues concerning the legality and eventual vacating of a settlement agreement entered into by the plaintiffs and the Community Services Administration (CSA).
Suit was initiated on September 24, 1979 by eight individuals and Gray Panthers of Chicago, an unincorporated non-profit organization, as a class action. The complaint alleged several claims against CSA for its administration of the Crisis Intervention Program (CIP).
CIP was a program funded under the Emergency Energy Conservation Services Program (EECSP), 42 U.S.C. § 2809(a)(5), and was designed "to enable low income individuals and families, including the elderly ... to participate in the energy conservation programs designed to lessen the impact of the high cost of energy ... and to reduce ... energy consumption." Id. 1
One aspect of this program provided cash assistance for fuel and utility bills to qualified individuals. 2 The pertinent regulations
adopted by CSA conditioned the grant of assistance payments upon the production of a shut-off notice from a utility company. 3 Plaintiffs' complaint alleged that this regulation violated EECSP which provided that "(e)ligibility for any of the programs authorized under this section shall not be based solely on delinquency in payment of fuel bills." 42 U.S.C. § 2809(a)(5).
Within 10 days of the filing of the complaint, plaintiffs moved in the district court for a temporary restraining order and a preliminary injunction which would enjoin CSA from returning unspent funds from the 1979 program to the United States Treasury. 4 The district court entered a temporary restraining order which directed CSA not to return the unspent money to the Treasury until further court order.
Thereafter, both parties moved for summary judgment, plaintiffs contending that the regulation violated the plain letter of the statute. In response, CSA argued that assistance was to be offered only in cases of crisis or emergency and that the regulation was a reasonable means to ensure that a "crisis" did exist. 5
At a hearing held on the motions for summary judgment, the district court indicated that it would rule for plaintiffs. In regard to defendant's contention that the shut-off notice requirement was consistent with the "crisis" emphasis of the statute the court stated:
I do not find the language about crisis in this statute. In Section 2809 of Title 42 in Paragraph 5, it talks about the Energy Conservation Service. It talks about the elderly and the near poor. It talks about lessening the impact of high cost of energy on such individuals and families. In other words, it does not speak in terms of crisis. It speaks in terms of helping poor and near poor people.
Hearing of Jan. 4, 1980, App. at 193. 6
After the district court indicated that it would be inclined to rule for plaintiffs on the issue of the validity of the regulation, counsel for CSA indicated that settlement discussions might be appropriate. The district court agreed and continued to hold the motions for summary judgment under advisement.
The parties next appeared in court on April 25, 1980 with a settlement to present to the district court. At the prior hearing the parties and the district court discussed the problem of relief for the statutory violation. Several alternatives were discussed with varying opposition to each alternative stated by CSA. One possibility was that the 1979 program would be reopened and that the remaining funds would be administered and disbursed through this program. CSA objected to this because a new more extensive program for 1980 was presently functioning and was substantially different from the 1979 program. Therefore, reopening the 1979 program would be, in the words of CSA, an "administrative nightmare." Hearing of Jan. 4, 1980, App. at 186-87.
A second alternative considered at the hearing was to reprogram the funds from the 1979 program into the 1980 program. The major flaw with this proposal, according to the parties, was that it would not provide the greatest relief for those who were to benefit from the program.
The settlement eventually agreed to by the parties presented a third alternative funding of programs which would accelerate long range solutions to the energy problems for the elderly. 7 The programs funded by the settlement included: 1) a four million dollar hypothermia program; 2) four million dollars for emergency energy conservation kits; 3) a two million dollar solarization program; 4) six and one-half million dollars to local groups to fund advocacy programs to represent the interests of energy consumers; 5) one million dollars for an "Emergency Preparedness/Impact Assessment" program; 6) $300,000 to fund a Small Farm Energy Project; 7) $350,000 to hire personnel to administer and monitor all of the above programs. In addition to the funding of these programs, each of the eight named individual plaintiffs received a cash payment of $250.00.
The parties presented the settlement to the district court and recommended that the court approve the agreement. The parties informed the district court that the settlement was consistent with congressional intent and was a proper accommodation of the various conflicting interests at stake. The district court agreed with this characterization of the settlement and signed and entered the consent decree. At no time at this hearing was the issue of class certification or notice to the putative class members discussed or alluded to. Nor was settlement conditioned upon class certification or the putative class being bound by the judgment.
On August 20, 1980 an article entitled "A Sweetheart of a Lawsuit" appeared in the Wall Street Journal. The article was highly critical of the settlement in this case and indicated that it was the result of collusion between CSA and plaintiffs' counsel. According to the article, CSA entered into the settlement because funding for many CSA projects probably would be terminated. The settlement's distribution of the funds allowed CSA to continue to fund these "pet projects."
Approximately one month after the publication of the article in the Wall Street Journal, Senator Paul Laxalt sent a letter to defendant Richard J. Rios, acting director of the CSA. Senator Laxalt stated that he was "disturbed by reports that our adversary system of justice may have been compromised by the settlement in the case." Senator Laxalt requested an accounting of monies spent and unspent pursuant to the settlement and that "(u)ntil such time as the ... accounting has been delivered to me, and I have a chance to review it, I request that no additional funds be disbursed by the Community Services Administration." App. at 278. A copy of the letter also was sent to Judge Grady, the district court judge who signed the settlement decree.
On September 26, 1980 the district court issued an order, sua sponte, calling for a status conference in the case. The order, apparently referring to contacts by Senator Laxalt and discussions in the media, stated:
It has come to our attention that questions have been raised as to whether the "Stipulation and Agreed Order" in this case ... may provide for the funding of programs which Congress did not intend to be funded in this manner.
App. at 93.
The order set the status conference for October 6, 1980. On October 5, 1980 a "motion to intervene and motion for relief from the order" was filed by: Fred P. Meagher, a member of the putative class, Senators Paul Laxalt, Orrin Hatch, and Edward Zorinsky, and the Capital Legal Foundation (Capital). 8 The motion sought to vacate the order approving the settlement and to restrain any further spending pursuant to the settlement.
The above motion stated several grounds for intervention and for vacating the settlement. Most significantly, the intervenors contended that the settlement violated proper class action procedure under Rule 23(e) by failing to give putative class members notice and an opportunity to be heard. The intervenors also argued that the settlement was not in the best interests of class members or CSA.
At the status conference of October 6, 1980, the district court pursued several lines of inquiry regarding the settlement approved on April 25, 1980. First, the district court queried whether the disbursement of the funds pursuant to the settlement order was consistent with congressional intent. Second, the district court discussed the class action issue and intimated that it previously had concluded that class certification was properly denied. 9 The district court denied the motion to intervene and requested that memoranda be filed on whether or not the settlement order should be vacated.
On October 29, 1980 the district court issued a "Memorandum Opinion" which vacated the order of April 25, 1980 approving the settlement. Furthermore, in the opinion, the court denied the motion for class certification and held the claims of the organizational plaintiffs, Gray Panthers, nonjusticiable....
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