749 F.2d 1009 (3rd Cir. 1984), 84-1043, Barnes v. Cohen

Docket Nº:84-1043, 84-5063 and 84-5064.
Citation:749 F.2d 1009
Party Name:Roseann BARNES, on behalf of herself and all others similarly situated, Nancy Betson, Annabelle Woodard, and Cynthia Williams v. Walter COHEN, individually and in his capacity as Secretary of the Pennsylvania Department of Public Welfare; Don Jose Stovall, individually and in his capacity as Executive Director of the Philadelphia County Board of As
Case Date:November 23, 1984
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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749 F.2d 1009 (3rd Cir. 1984)

Roseann BARNES, on behalf of herself and all others

similarly situated, Nancy Betson, Annabelle

Woodard, and Cynthia Williams

v.

Walter COHEN, individually and in his capacity as Secretary

of the Pennsylvania Department of Public Welfare; Don Jose

Stovall, individually and in his capacity as Executive

Director of the Philadelphia County Board of Assistance;

and Margaret M. Heckler, individually and in her capacity as

Secretary of the United States Department of Health and

Human Services.

Appeal of Nancy BETSON, Annabelle Woodard, and Cynthia Williams.

Essie Mae HARRIS, and T.E., individually and on behalf of

all others similarly situated,

v.

Audrey HARRIS, individually and in her capacity as Acting

Director of the Division of Public Welfare, New Jersey

Department of Human Services; George J. Albanese,

individually and in his capacity as Commissioner of New

Jersey Department of Human Services; and Margaret M.

Heckler, as Secretary of the United States Department of

Health and Human Services, Appellants

Nos. 84-1043, 84-5063 and 84-5064.

United States Court of Appeals, Third Circuit

November 23, 1984

Argued Sept. 10, 1984.

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Deborah Harris (Argued), David A. Super, Community Legal Services, Inc., Philadelphia, Pa., for appellants in No. 84-1043.

Stephen M. Latimer (Argued), Legal Services of New Jersey, New Brunswick, N.J., Aldred Donnarumma, Union County Legal Services, Elizabeth, N.J., Richard Semel, Bergen County Legal Services, Hackensack, N.J., for appellees in Nos. 84-5063 and 84-5064.

Richard K. Willard, Acting Asst. Atty. Gen., Washington, D.C., Edward Dennis, Jr., U.S. Atty. for the Eastern Dist. of Pa., Philadelphia, Pa., W. Hunt Dumont, U.S. Atty. for the Dist. of N.J., Newark, N.J., Robert S. Greenspan, Atty., Marleigh D. Dover, Atty., Deborah Kant, Atty. (Argued), Dept. of Justice, Civil Div., Washington, D.C., for Margaret Heckler.

Leroy S. Zimmerman, Atty. Gen., John O.J. Shellenberger (Argued), Allen C. Warshaw, Deputy Atty. Gen., Philadelphia, Pa., for appellees in No. 84-1043.

Irwin I. Kimmelman, Atty. Gen. of N.J., Trenton, N.J., for appellants in Nos. 84-5063 and 84-5064.

James J. Ciancia, Asst. Atty. Gen., Trenton, N.J., of counsel.

Dorothy A. Donnelly, Deputy Atty. Gen., Trenton, N.J., on brief.

Before SEITZ, BECKER, and ROSENN, Circuit Judges.

OPINION

ROSENN, Circuit Judge.

In 1981, Congress, as part of the Omnibus Budget Reconciliation Act (OBRA), Pub.L. No. 97-35, 95 Stat. 357 (1981), revised the Aid to Families with Dependent Children (AFDC) program by providing that "specified" AFDC beneficiaries who receive lump-sum income in excess of their monthly standard of need are ineligible for program assistance for a specific period of time regardless of whether the lump sum is still actually available. The issue common to the two cases consolidated for the appeal now before us is whether the "lump-sum" provision applicable to the AFDC program, 42 U.S.C. Sec. 602(a)(17), applies to all of its beneficiaries or only those with earned income.

The United States district courts in the two cases at bar came to conflicting conclusions. In Betson v. Cohen, 578 F.Supp. 154 (E.D.Pa.1983), the United States District Court for the Eastern District of Pennsylvania denied injunctive relief after holding that the provision applied to all AFDC families. On the other hand, the United States District Court for the District of New Jersey in Harris v. Heckler, 576 F.Supp. 915 (D.N.J.1983), granted summary judgment for the plaintiffs upon holding that the provision applied only to beneficiaries with earned income. The Pennsylvania case presented the additional question of whether personal injury damage awards or settlements are included in the definition of "lump-sum income" under the applicable state and federal law. The district court answered this question in the affirmative.

The Pennsylvania plaintiffs and the New Jersey defendants have appealed. We reverse in the New Jersey case. In the Pennsylvania case, we affirm on the application

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of the lump-sum provision, but reverse on the question of whether personal injury awards constitute income.

I. Background

The AFDC program, established by Congress under Title IV-A of the Social Security Act, is a federal-state matching-fund activity that provides financial assistance to needy dependent children and their parents who live with and care for them. The program is operated at the federal level by the Department of Health and Human Services (HHS). In Pennsylvania, it is administered by the Pennsylvania Department of Public Welfare (PDPW) and in New Jersey through the Division of Public Welfare (NJDPW) of the Department of Human Services (DHS). Defendant Walter Cohen is Secretary of the PDPW; defendant Audrey Harris is Director of the NJDPW. Federal defendant Margaret Heckler is Secretary of HHS.

Eligibility for AFDC benefits depends on the financial circumstances of the applicant or recipient. That is, they must have income and resources below applicable limits in order to be eligible for AFDC benefits. In making this determination, the focus is on income and resources that are actually available. See, e.g., Shea v. Vialpando, 416 U.S. 251, 261-62, 94 S.Ct. 1746, 1754, 40 L.Ed.2d 120 (1974); 45 C.F.R. Sec. 233.20(a)(3)(ii)(D). When Congress changed the law in 1981, it altered this scheme somewhat by providing that "specified" AFDC beneficiaries who receive lump-sum income in excess of their monthly standard of need are ineligible for a specific period of time regardless of whether the lump sum is still actually available. The period of disqualification is determined by dividing the state standard of need for assistance to such a family into the amount of the lump sum; the quotient is the number of months of disqualification. See 42 U.S.C. Sec. 602(a)(17).

The plaintiffs are contesting the federal and state regulations passed to implement this section. They contend that, under 42 U.S.C. Sec. 602(a)(17), the "specified" AFDC beneficiaries to whom the lump-sum rule applies are those with earned income. HHS, PDPW, and NJDPW, however, insist that the lump-sum rule applies to all beneficiaries regardless of whether they have earned income. See 45 C.F.R. Sec. 233.20(a)(3)(ii)(D); 55 Pa.Code Sec. 183.44(b)(1)(iii), (iv); N.J.A.C. 10:82-4.15(a).

The instant cases arose after the plaintiffs, AFDC beneficiaries without earned income, received lump sums of money from various sources. In the New Jersey case, plaintiff Essie Mae Harris received $11,568.36 in life insurance proceeds and plaintiff Theresa Eisen received a bequest of $5,329. As for the Pennsylvania plaintiffs, Nancy Betson and Annabelle Woodard received lump sums in settlement of personal injury claims and Cynthia Williams received retirement benefits. 1 In all five cases, the plaintiffs believed that the lump-sum provision did not apply to them, and the sums were dissipated in a relatively short time. 2 The state agencies, however, applied the lump-sum provision to the plaintiffs and terminated their benefits for periods extending long past the date the funds were exhausted. This therefore left them destitute. The New Jersey district court subsequently granted relief to the plaintiffs there upon finding that the lump-sum disqualification applied only to those with earned income. The Pennsylvania district court denied similar relief.

The Pennsylvania plaintiffs, in addition to arguing that 42 U.S.C. Sec. 602(a)(17) should apply only to those families with earned income, also contend that compensation for personal injuries is not "income" as that term is used in the federal statute and state regulations. This conflicts with the

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PDPW's determination that personal injury awards are properly included as a type of lump-sum "income." The Pennsylvania court held that neither the Social Security Act nor the state's own regulations were violated by the PDPW's application of the rule to personal injury awards. Betson, 578 F.Supp. at 159-60.

II. Applicability of Sec. 602(a)(17) to Families Without Earned Income

The standard of review of the district courts' decisions is whether they applied the correct legal precepts in reaching their legal conclusions. This court may exercise an independent review of the question of law presented. See Shands v. Tull, 602 F.2d 1156 (3d Cir.1979).

In interpreting a statute, the starting point is of course the language of the statute itself. See American Tobacco Co. v. Patterson, 456 U.S. 63, 68, 102 S.Ct. 1534, 1537, 71 L.Ed.2d 748 (1982); Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). It is to be presumed that "the legislative purpose is expressed by the ordinary meaning of the words used," Richards v. United States, 369 U.S. 1, 9, 82 S.Ct. 585, 591, 7 L.Ed.2d 492 (1962), and if the statutory language is clear, it is not necessary to examine the legislative history, see TVA v. Hill, 437 U.S. 153, 184 n. 29, 98 S.Ct. 2279, 2296 n. 29, 57 L.Ed.2d 117 (1978).

When 42 U.S.C. Sec. 602(a)(17) is read objectively, and with no knowledge of the legislative history, it seems to be unambiguous. By its terms, the lump-sum disqualification applies only to "a person specified in paragraph 8(A)(i) or (ii)." These sections, in turn, specifically refer only to individuals who have earned income. Furthermore, the very use of the term "specified" suggests limitation. See Harris v. Heckler, 576 F.Supp. at 918 ("[i]n common parlance, the word 'specify' contains some connotation of restriction") (quoting Clark v. Harder, 577 F.Supp. 1085, 1087 (D.Kan.1983)). Because the statute, by its very existence, has already restricted the statutory focus to AFDC applicants...

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