669 F.2d 877 (3rd Cir. 1982), 81-2915, Philadelphia Citizens in Action v. Schweiker

Docket Nº:Helen O'Bannon, Appellant in No. 81-2915, Richard Schweiker,
Citation:669 F.2d 877
Party Name:PHILADELPHIA CITIZENS IN ACTION by Roxanne Jones, Executive Director and Trustee Ad Litem, and Philadelphia Welfare Rights Organization by Louise Brookins, Executive Director and Trustee Ad Litem, v. Richard SCHWEIKER, Secretary, United States Department of Health and Human Services, and Helen O'Bannon, Secretary, Department of Public Welfare, Comm
Case Date:January 15, 1982
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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669 F.2d 877 (3rd Cir. 1982)

PHILADELPHIA CITIZENS IN ACTION by Roxanne Jones, Executive

Director and Trustee Ad Litem, and Philadelphia

Welfare Rights Organization by Louise

Brookins, Executive Director

and Trustee Ad Litem,

v.

Richard SCHWEIKER, Secretary, United States Department of

Health and Human Services, and Helen O'Bannon, Secretary,

Department of Public Welfare, Commonwealth of Pennsylvania,

Helen O'Bannon, Appellant in No. 81-2915, Richard Schweiker,

Appellant in No. 81-2916, Philadelphia Citizens in Action

and Philadelphia Welfare Rights Organization, Appellants in

No. 81-2942.

Nos. 81-2915, 81-2916 and 81-2942.

United States Court of Appeals, Third Circuit

January 15, 1982

Argued Dec. 2, 1981.

Rehearing and Rehearing In Banc Denied Feb. 10, 1982.

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John O. J. Shellenberger, (argued), Deputy Atty. Gen., Allen C. Warshaw, Deputy Atty. Gen., LeRoy S. Zimmerman, Atty. Gen., Stanley I. Slipakoff, Chief of Litigation, Dept. of Public Welfare, Philadelphia, Pa., for Helen O'Bannon.

Douglas G. Dye (argued), Jonathan M. Stein, Richard Weishaupt, Community Legal Services, Inc., Philadelphia, Pa., for Philadelphia Citizens in Action and Philadelphia Welfare Rights Organization.

J. Paul McGrath, Asst. Atty. Gen., Peter F. Vaira, Jr., U. S. Atty., Leonard Schaitman, Michael Kimmel (argued), Susan Sleater, Attys., Dept. of Justice, Washington, D. C., for Richard Schweiker.

Before ADAMS, WEIS and HIGGINBOTHAM, Circuit Judges.

OPINION

ADAMS, Circuit Judge.

President Reagan signed into law the Omnibus Budget Reconciliation Act (OBRA), Pub.L.No.97-35, 95 Stat. 357, on August 13, 1981. OBRA was the product of a major, highly publicized, and vigorously debated effort by Congress and the President to reverse the growth of federal spending by systematically reducing the level of expenditures in a wide range of federal programs. In one of its many provisions, OBRA mandated major revisions in the Aid to Families with Dependent Children (AFDC) program, reducing or eliminating

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federal funding for state-administered AFDC benefits to many persons who until then were eligible to receive those benefits. Congress set October 1, 1981, as the date on which the changes were to take effect.

The Department of Health and Human Services (HHS), which is charged with administering the AFDC program at the federal level, issued rules on September 21, 1981, to implement the revisions in AFDC policy. 46 Fed.Reg. 46750-73. The Secretary of HHS declared these rules to be "interim rules" for a 60-day period, during which time the Department would entertain comments on them. The Department proposed to issue final rules at the end of that period, on November 20, 1981. The Pennsylvania Department of Public Welfare (DPW) promulgated state regulations implementing the provisions of OBRA on November 7, 1981, to be effective November 9, 1981. 11 Pa.Bull. 3954-82 (Nov. 7, 1981).

Philadelphia Citizens in Action (PCIA) and the Philadelphia Welfare Rights Organization (PWRO), two associations comprising recipients of various types of welfare benefits, filed suit in the Eastern District of Pennsylvania on October 30, 1981, alleging that the federal rules had not been promulgated in conformity with the Administrative Procedure Act (APA), 5 U.S.C. § 553. The organizations sought injunctive and declaratory relief against HHS and DPW to prevent them from taking any action based on the federal AFDC rules or any conforming state regulations. After a hearing, the district court issued an order on November 20, 1981, invalidating the rules adopted by HHS and enjoining the Commonwealth of Pennsylvania from "reducing and/or terminating AFDC benefits in reliance on either the invalidated federal regulations or the Pennsylvania regulations published November 7, 1981...." The effect of this order was to forestall implementation of the statutorily-mandated changes in AFDC policy and to subject Pennsylvania to the risk that its payment of benefits at the existing higher level would not be reimbursed by the federal government. The state and federal agencies applied to this Court for a stay of the district court's order. We declined to grant that request at that time, and instead ordered an expedited hearing schedule. On December 2, 1981, we heard oral argument on the merits of the appeal and at the conclusion of the argument issued a stay of the district court's order. We now decide that the district court erred in declaring the federal rules invalid and in enjoining the Pennsylvania rules. Accordingly, we reverse the order of the district court.

I.

Congress created the AFDC program in 1935, and established it in Title IV, Part A of the Social Security Act, 49 Stat. 627, codified at 42 U.S.C. §§ 601-676. The program is intended to promote the care of needy dependent children in their own homes or in those of relatives and to assist the parents or relatives with whom they live to attain self-sufficiency. See 42 U.S.C. § 601. Under the statutory program, benefits are paid and administered by those states that wish to participate in the program. A state that desires to participate must first obtain from HHS approval for its state plan, which must conform with the statutory requirements of Title IV and the HHS implementing rules. States that receive approval can obtain reimbursement from the federal government for more than half of the benefits paid and administrative expenses incurred under their plan. See 42 U.S.C. § 603.

The primary purpose of the OBRA amendments to the AFDC program is to reduce or eliminate welfare benefits for those considered by Congress to be less needy than those completely without resources-persons or households that have available other sources of income or resources with which to support themselves. The amendments are intended to accomplish this by a number of means: limits on the amount of a potential recipient's earned income to be disregarded in determining eligibility and grant size, Pub.L.No.97-35, § 2301; redefinition of a potential recipient's income and resources, § 2302; lower income limits on eligibility, § 2303; new

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treatment of lump-sum payments and earned income advances, §§ 2304, 2305; and several other approaches, §§ 2306-2320.

Under the Social Security Act, HHS is required to promulgate rules and regulations to effectuate the AFDC programs and provide guidance to states so that they may comply with federal requirements. 42 U.S.C. § 639. Following enactment of OBRA, HHS was obliged to issue new rules to meet the new requirements of the OBRA amendments. Aware before the Act was set in final form that OBRA would contain amendments to the AFDC program, HHS began taking steps towards the eventual promulgation of new rules as early as May 1981, when a study group was created to formulate plans for drafting new rules. In order to give the public and interested groups as much opportunity to provide input, on July 2, 1981, and again on July 21, HHS sent out requests for comments and ideas as to possible regulations to individuals and organizations including PWRO, one of the appellees in this case. Representatives of HHS met with representatives of the American Public Welfare Association (APWA) on July 13 and August 3, 1981, and worked out a rough preliminary draft of proposed rules that was sent to the states through the APWA on August 13, 1981.

On the same date, OBRA was enacted into law. HHS at that point had 49 days until October 1, 1981, the date by which the Act was to go into effect, to implement rules interpreting and applying the OBRA amendments, unless of course HHS was to postpone the effective date of the legislature beyond the date that Congress had mandated. Proposed rules were approved by the Secretary on September 3, 1981, twenty-one days after passage of the Act. Conferences were held by HHS for state administrators to discuss the statutory amendments and accompanying proposed rules on September 13 and 15, 1981. On September 21, 1981, the federal rules were published, 46 Fed.Reg. 46570, as interim rules for a 60-day notice and comment period. The rules took effect on October 1, 1981, the effective date of the statute. To a considerable extent the rules merely reiterated the statutory requirements and resolved relatively minor matters committed to the Department's discretion. During the 60-day period few comments on the rules were received by HHS. Indeed, no comment was received from the appellee organizations until November 19, 1981.

II.

A.

Appellees contend, and the district court held, that the Secretary's promulgation of its rules did not comply with the requirements of the APA, 5 U.S.C. § 553. 1 Section

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553 sets out the procedures that an agency must follow in promulgating rules, requiring that notice of proposed rules be published in the Federal Register and that a period of time be provided in which the public can comment on the proposed rules and suggest changes to the promulgating agencies before the proposed rules become effective. 2 The asserted violation of this procedural requirement of the APA in the promulgation of the new federal AFDC regulations served as the basis for the district court's issuance of injunctive relief invalidating the federal rules as well as barring Pennsylvania from implementing its own regulations effecting the benefit cuts. The federal and state agencies do not contend that the procedures set out in section 553 for notice and comment were followed. Instead, they assert that because of a specific provision in the APA, HHS was not required in the circumstances present here to adhere to notice and comment procedures in this instance.

The APA provisions reflect a judgment by Congress that the public interest is...

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