Arrowood v. NC DHHS, No. COA99-940.

• Decision Date: 19 September 2000
• Docket Number: No. COA99-940.
• Citation: 140 NC App. 31,535 S.E.2d 585
• Parties: David ARROWOOD, Petitioner-appellant, v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent-appellee.
• Court: North Carolina Court of Appeals

535 S.E.2d 585

140 NC App. 31

David ARROWOOD, Petitioner-appellant, v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Respondent-appellee.

No. COA99-940.

Court of Appeals of North Carolina.

September 19, 2000.

Pisgah Legal Services, by Curtis B. Venable, Asheville, for petitioner-appellant.

North Carolina Justice and Community Development Center, the North Carolina Chapter of the National Organization of Women, the North Carolina Hunger Network, Southerners for Economic Justice and North Carolina Fair Share, by Carlene McNulty; and Hunton & Williams, by Charles D. Case; and Elizabeth McLaughlin, Raleigh, amicus curiae, for petitioner-appellant.

Attorney General Michael F. Easley, by Assistant Attorney General Belinda A. Smith, for the N.C. Department of Health and Human Services, respondent-appellee.

MARTIN, Judge.

Petitioner-appellant David Arrowood ("petitioner") appeals from an order of the superior court upholding a decision by respondent-appellee North Carolina Department of Health and Human Services ("respondent") to terminate his public assistance benefits.

Petitioner and his family began receiving public assistance from respondent in January 1996 under the federal Aid to Families with Dependent Children program ("AFDC"), 42 U.S.C. § 601, et seq. Under the AFDC program, the federal government partially reimbursed states for welfare programs that were either in compliance with the federal program, or if modified from federal prescriptions, for programs where the state applied for and received a waiver from the United States Department of Health and Human Services ("HHS") under § 1115 of the Social Security Act. 42 U.S.C. § 1315(a).

In 1995, respondent requested such a waiver in order to implement a "demonstration" of its "Work First Program" which contained welfare reform concepts that differed from those under the AFDC program, including a 24-month limitation on the receipt of public assistance. In February 1996, HHS granted respondent's waiver request to implement the proposed provisions of respondent's Work First Program, and respondent subsequently took measures to implement the provisions, including the 24-month limitation. Respondent compiled a Work First Program Manual outlining the procedures for instituting the new policies, and developed a contract for beneficiaries of the program (the "Work First Personal Responsibility Contract-Part II"). According to respondent's manual, beneficiaries were required to sign the contract in order to continue receiving benefits, and a signed contract signified commencement of the 24-month time limitation. Petitioner signed such a contract on 3 May 1996. Respondent did not, however, take any formal action to promulgate rules regarding the Work First policies, and at the time respondent instituted the 24-month time limitation, neither federal law nor state law or regulation contained any such time limit.

In August 1996, the United States Congress repealed the AFDC program and replaced it with a federal block grant entitled Temporary Assistance to Needy Families ("TANF"), 42 U.S.C. § 601, et seq., in which Congress granted states greater flexibility to design and operate their own welfare programs. Thereafter, on 28 August 1997, the North Carolina General Assembly formally enacted the Work First Program, which met the minimum requirements of TANF and included the 24-month limitation on receipt of benefits. N.C. Gen.Stat. § 108A-25(b1). Prior to this enactment, North Carolina statutes simply required compliance with the AFDC program, and contained no time limitation on the receipt of benefits. Following the enactment, on 6 October 1997, respondent requested that petitioner sign a second contract wherein he acknowledged that he had received 15 months of public assistance and was entitled to only 9 more months of participation in the program.

Effective 31 July 1998, the Rutherford County Department of Social Services terminated petitioner's benefits in accordance with the Work First Program Manual, following a determination that petitioner and his family had been receiving benefits for over 24 months. On 19 November 1998, respondent conducted an evidentiary hearing on the termination of petitioner's benefits in which it determined that in April 1996 HHS granted North Carolina's request for waiver authority to institute the Work First Program; that the waiver gave North Carolina the ability to deny AFDC benefits to adults who had received such benefits for 24 months; that the waiver had the force and effect of federal law; that North Carolina lawfully implemented the Work First Program, including the 24-month limitation, in August 1996; and that petitioner's household had received public assistance prior to August 1996 through July 1998. Accordingly, respondent upheld the termination of petitioner's benefits, which termination was reviewed and affirmed by respondent's Chief Hearing Officer.

On 12 March 1999 petitioner filed a Petition for Judicial Review of respondent's decision with the Superior Court of Rutherford County, and on 27 May 1999 the superior court entered an order affirming respondent's decision "as being made upon lawful procedure and not affected by error of law." Petitioner appeals.

Petitioner brings forth two assignments of error on appeal: (1) that the superior court erred in failing to find that respondent acted contrary to law in enforcing the 24-month time limitation on public assistance prior to the limit's proper promulgation pursuant to the Administrative Procedure Act, N.C. Gen. Stat. § 150B, et seq.; and (2) that the superior court erred in failing to find that respondent acted contrary to law in enforcing an unpromulgated provision of general applicability to limit petitioner's public assistance prior to authority from the North Carolina General Assembly or federal government.

The Administrative Procedure Act ("APA") governs both trial and appellate review of decisions rendered by an administrative agency such as respondent. N.C. Gen. Stat. § 150B, et seq.; Living Centers-Southeast, Inc. v. N. C. Dept. of Health and Human Services, Div. of Facility Services, Certificate of Need Section, ___ N.C.App. ___, 532 S.E.2d 192 (2000). Pursuant to the APA, an agency decision is first reviewed in superior court, which court may affirm or remand the decision, or may modify or reverse the decision if "the substantial rights of the petitioner may have been prejudiced because the agency's findings, inferences, conclusions or decisions" are any of the following:

(1) In violation of constitutional provisions;

(2) In excess of the statutory authority or jurisdiction of the agency;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or

(6) Arbitrary or capricious.

N.C. Gen.Stat. § 150B-51(b).

"In reviewing a superior court order regarding an agency decision, our scope of review consists of the two-fold task of `(1) determining whether the trial court exercised the appropriate scope of review and, if appropriate, (2) deciding whether the court did so properly.'" Avant v. Sandhills Center for Mental Health, Developmental Disabilities & Substance Abuse Services, 132 N.C.App. 542, 545, 513 S.E.2d 79, 82 (1999) (quoting ACT-UP Triangle v. Com'n for Health Serv., 345 N.C. 699, 706, 483 S.E.2d 388, 392 (1997)). The applicable standard of review depends upon the errors alleged, Dorsey v. University of North Carolina-Wilmington, 122 N.C.App. 58, 468 S.E.2d 557, cert. denied, 344 N.C. 629, 477 S.E.2d 37 (1996), and "[t]he appropriate standard of review for an assertion that a Department of Health and Human Services decision is based on an error of law is de novo review." Bio-Medical Applications of North Carolina, Inc. v. North Carolina Dept. of Human Resources, Div. of Facility Services, Certificate of Need Section, 136 N.C.App. 103, 108-09, 523 S.E.2d 677, 681 (1999).

In the present case, petitioner alleges that the superior court erred in failing to find that respondent's decision was based on errors of law; petitioner does not allege that the superior court applied an inappropriate standard of review. Thus, our sole task is a de novo review of the propriety of respondent's decision, and accordingly, the superior court's affirmation of that decision.

A.

Petitioner first argues that the August 1996 implementation of the 24-month limitation on receipt of public assistance was affected by error of law in that no rules regarding the limit's implementation were officially promulgated pursuant to the APA. It is undisputed that in August 1996, following the grant of the waiver request, respondent began implementing the Work First Program, including the 24-month time limitation found in the Work First Manual, without prior approval from the state legislature or through rule-making procedures under the APA.

Respondent does not dispute, however, that the APA ordinarily requires that rules be promulgated in accordance with the Act; rather, respondent contends that, under G.S. § 150B-19(4), the 24-month limitation was exempt from the rule-making requirement of the APA, and could be effective upon receipt of the HHS waiver approval. G.S. § 150B-19(4) provides that an agency is prohibited from promulgating a rule that "[r]epeats the content of a law, a rule, or a federal regulation." N.C. Gen.Stat. § 150B-19(4). Respondent argues that the grant of the waiver to implement the time limitation was, in essence, federal law that operates as an "amendment to the state plan" upon its grant. Respondent maintains that "the waiver authority was granted on February 5, 1996. Therefore, beginning February 5, 1996, petitioner, as an ongoing participant in the program, was subject to the new law." Thus, respondent contends that it could not, under G.S. § 150B-19(4), have promulgated any rules regarding the...