976 F.2d 1462 (4th Cir. 1992), 85-2043, Maryland Dept. of Human Resources v. United States Dept. of Agriculture

Docket Nº:85-2043, 91-2370.
Citation:976 F.2d 1462
Party Name:MARYLAND DEPARTMENT OF HUMAN RESOURCES; Ruth W. Massinga, Secretary; Linda Walter, Individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. UNITED STATES DEPARTMENT OF AGRICULTURE; John R. Block, Secretary, Defendants-Appellants. MARYLAND DEPARTMENT OF HUMAN RESOURCES; Ruth W. Massinga, Secretary; Melinda Y. Harps, Indi
Case Date:September 15, 1992
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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976 F.2d 1462 (4th Cir. 1992)

MARYLAND DEPARTMENT OF HUMAN RESOURCES; Ruth W. Massinga,

Secretary; Linda Walter, Individually and on

behalf of all others similarly situated,

Plaintiffs-Appellees,

v.

UNITED STATES DEPARTMENT OF AGRICULTURE; John R. Block,

Secretary, Defendants-Appellants.

MARYLAND DEPARTMENT OF HUMAN RESOURCES; Ruth W. Massinga,

Secretary; Melinda Y. Harps, Individually and on

behalf of all others similarly situated,

Plaintiffs-Appellees,

v.

UNITED STATES DEPARTMENT OF AGRICULTURE; John R. Block,

Secretary, Defendants-Appellants.

Nos. 85-2043, 91-2370.

United States Court of Appeals, Fourth Circuit

September 15, 1992

Argued May 7, 1992.

As Amended Oct. 27, 1992.

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[Copyrighted Material Omitted]

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Irene Marietta Solet, Civil Div., U.S. Dept. of Justice, Washington, D.C., argued (Stuart M. Gerson, Asst. Atty. Gen., Michael Jay Singer, Civil Div., U.S. Dept. of Justice, Washington, D.C., Richard D. Bennett,

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U.S. Atty., Baltimore, Md., on brief), for defendants-appellants.

Nancy Backer Shuger, Asst. Atty. Gen., Baltimore, Md., argued (J. Joseph Curran, Jr., Atty. Gen. of Maryland, Stuart R. Cohen, Legal Aid Bureau, Inc., Baltimore, Md., on brief), for plaintiffs-appellees.

Before HALL and LUTTIG, Circuit Judges, and MICHAEL, United States District Judge for the Western District of Virginia, sitting bye designation.

OPINION

LUTTIG, Circuit Judge:

The United States Department of Agriculture (USDA) refused to approve two requests by the state of Maryland to exclude certain "energy assistance" grants from its residents' income when calculating eligibility and benefits under the federal food stamp program. The Maryland Department of Human Resources, Maryland's Secretary of Human Resources, and a class of Maryland food stamp recipients sued to require USDA to approve the exclusion requests. The United States District Court for the District of Maryland awarded the plaintiffs summary judgment and granted injunctive and declaratory relief in their favor. USDA appeals the district court's order. We reverse the district court's judgment on the merits and vacate its preliminary injunction.

I.

Most of the relevant facts are detailed in two published opinions by the district court. Maryland Dep't of Human Resources v. USDA, 772 F.Supp. 1562 (D.Md.1991); Maryland Dep't of Human Resources v. USDA, 617 F.Supp. 408 (D.Md.1985). We summarize the facts below only to the extent necessary for the disposition of this appeal.

A.

Plaintiff-appellee Maryland Department of Human Resources administers in Maryland the federal food stamp program established by the Food Stamp Act of 1977, 7 U.S.C. §§ 2011-2032. Pursuant to this program, food stamps are distributed to the plaintiffs-appellees food stamp recipients, among others. Defendant-appellant USDA administers the food stamp program nationwide. 1 Under the food stamp program, each state distributes federally issued stamps to eligible households, see id. §§ 2013-16, which in turn redeem the stamps for food items, see id. §§ 2013(a), 2017, 2018. The federal government pays all benefits for program recipients, see id. § 2013(a), and reimburses fifty percent of each state's administrative costs, see id. § 2025(a).

Eligibility for, and benefits under, the federal food stamp program are based on household income--the lower the income, the greater the benefits. See id. §§ 2014, 2017; 7 C.F.R. § 273.10; Shaffer v. Block, 705 F.2d 805, 809 (6th Cir.1983). Income is broadly defined as "all income from whatever source," subject to certain exclusions. 7 U.S.C. § 2014(d); 7 C.F.R. § 273.9(b); see also H.R.Rep. No. 464, 95th Cong., 1st Sess. 25, reprinted in 1977 U.S.Code Cong. & Admin.News 1704, 1971, 2001. One such exclusion is for

any payments or allowances made for the purpose of providing energy assistance ... under any State or local laws designated by the State or local legislative body authorizing such payments or allowances as energy assistance, and determined by the Secretary [of USDA] to be calculated as if provided ... on a seasonal basis for an aggregate period not to exceed six months in any year....

7 U.S.C. § 2014(d)(11). 2 It is USDA's interpretation of this statutory exclusion from

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income for state-funded "energy assistance" and, in particular, USDA's refusal to allow Maryland to exclude certain grants from income under this provision that plaintiffs-appellees challenge in this action.

Pursuant to its rulemaking authority under the Food Stamp Act, id. § 2013(c), and its mandate to determine whether payments under state or local laws are "for the purpose of providing energy assistance," id. § 2014(d)(11), USDA has promulgated a regulation that outlines "[s]ome indicators," or factors, the presence of which reflects, in USDA's judgment, that the purpose of state or local payments is to provide energy assistance. The enumerated "indicators of purpose" are as follows:

(A) The energy assistance is not limited to households which receive [public assistance (PA) ] or [general assistance (GA) ]; 3

(B) The energy assistance is provided only to households which actually incur home energy costs;

(C) If the energy assistance payments are made separately or combined with other assistance payments, such as PA or GA, the energy assistance results in an increase in total assistance to the household ... when compared to the assistance level as of the first day of the State or local legislative session during which the energy assistance is authorized or increased;

(D) The energy assistance is based on studies, surveys, or reports evaluating home energy costs. The energy assistance levels should be directly tied to the findings of such studies, surveys, or reports; and

(E) The energy assistance payments are designated as such by the legislative body enacting them....

7 C.F.R. § 273.9(c)(11)(i) (footnote added). Although this list is not intended to be "all-inclusive" of the factors that will guide USDA's "case-by-case" review of state requests for energy assistance exclusions, state-funded energy assistance that "meets most of the factors ... will probably be approved for exclusion." Preamble to Final Rule, 48 Fed.Reg. 16,828, 16,828 (Apr. 19, 1983) [hereinafter Final Rule Preamble]. Energy assistance that does not meet most of the factors "probably will not be approved." Id.; see also note 11 infra.

B.

In its 1985 session, Maryland's General Assembly enacted for fiscal year 1986 a $17 million increase in grants to persons receiving Aid to Families with Dependent Children (AFDC) and state-funded General Public Assistance. The legislature denominated this increase as "energy assistance." See 617 F.Supp. at 413-14. On April 17, 1985, Maryland sought USDA's approval to exclude this increase from food stamp income under 7 U.S.C. § 2014(d)(11). See 617 F.Supp. at 411. USDA denied the request, stating that Maryland was required to include the new grant amounts when calculating recipients' income for food stamp purposes. See id.

On June 25, 1985, Maryland and a class of food stamp recipients filed an action for declaratory and injunctive relief in the United States District Court for the District of Maryland challenging USDA's interpretation and application of its regulations to require inclusion of the grant amounts in income. See J.A. at 7-23. Despite USDA's denial of Maryland's exclusion request, Maryland began excluding the state-authorized welfare benefit increases from food stamp recipients' income on July 1, 1985, the first day of fiscal year 1986. See 617 F.Supp. at 411. And despite USDA's assurances that it would not impose sanctions pending resolution of the litigation, see id., Maryland sought and obtained on August 2, 1985, a preliminary injunction barring USDA from recouping food stamp overissuances or imposing penalties during the pendency of the litigation, see id. at 416. This injunction appeared to

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prevent USDA from recouping food stamp overissuances in Maryland or enforcing statutory sanctions against the state even if USDA were to prevail on the merits:

1. Defendants may not, now or in the future, impose any fiscal sanctions or other penalties upon the State plaintiffs, or otherwise reduce any funds for administrative costs which normally would be paid to the State plaintiffs in the usual course of defendants' financial participation in Maryland's Food Stamp Program ... from the period beginning August 1, 1985[,] until this matter is determined on the merits.

2. Defendants may not, now or in the future, require the State plaintiffs to establish and recover as overissuances the dollar value of any food stamps issued as a result of the State plaintiffs' policy to exclude from income when determining [food stamp] eligibility and benefit level ... the energy assistance grant [for fiscal year 1986] from the period beginning August 1, 1985, until this matter is determined on the merits[.]

Id. (emphases added). And in its subsequent order of October 23, 1985, the district court clarified that its injunction in fact would prohibit USDA from ever recouping overissuances made during the pendency of this action or enforcing sanctions in response to the overissuances:

[T]he parties dispute whether defendants are entitled to retroactive relief if they prevail on the merits of this action. The court hereby makes clear that its August 2, 1985, order issued in the context of a preliminary injunction bars the defendants from seeking retroactive relief now or in the future regardless of whether it [sic] prevails on the merits....

J.A. at 219.

Contemporaneous with its decision to bar USDA from recouping overissuances...

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