Banas v. Dempsey

Decision Date18 October 1984
Docket NumberNo. 82-1546,82-1546
Citation742 F.2d 277
PartiesCarol BANAS, et al., Plaintiffs-Appellants, v. John T. DEMPSEY, Defendant-Appellee. MICHIGAN WELFARE RIGHTS ORGANIZATION, et al., Plaintiffs-Appellants, v. John T. DEMPSEY, Defendant-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Edward J. Hoort, Michigan Legal Services, William Burnham, Wayne State University

Law School (argued), Detroit, Mich., Paul D. Reingold, Legal Services of Southeast Michigan, Ann Arbor, Mich., for plaintiffs-appellants.

Frank J. Kelley, Atty. Gen. of Michigan, Louis J. Caruso, Asst. Atty. Gen., Robert N. Rosenberg, Asst. Atty. Gen. (argued), Lansing, Mich., for defendant-appellee.

Before LIVELY, Chief Judge, JONES, Circuit Judge, and HOLSCHUH, District Judge. *

HOLSCHUH, District Judge.

In Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979), the Supreme Court held, in a case in which the District Court had enjoined state officials from future violations of federal law under the doctrine of Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), that the Eleventh Amendment did not bar the additional relief of an order compelling the state officials to send notices to members of the plaintiff class of welfare recipients informing them of the availability of state administrative procedures to determine their eligibility for lost benefits. This appeal, a consolidation of two actions brought in the Eastern District of Michigan, presents questions involving the doctrine of mootness and, of more significance, the problem of under what circumstances a federal court can order a state official to give a Quern -type notice without violating the restrictions placed on Article III jurisdiction by the Eleventh Amendment. 1

I.

Although both cases have given rise to the same important issues, the factual history of each case warrants separate discussion.

A.

Plaintiffs, Michigan Welfare Rights Organization (MWRO) and Gail Blessing, filed a class action complaint on April 11, 1980, seeking relief primarily under 42 U.S.C. Sec. 1983, and challenging certain policies of defendant, the Director of the Michigan Department of Social Services (MDSS), relating to the provision of day care benefits for employed Aid to Families with Dependent Children (AFDC) recipients.

Plaintiffs alleged in count I of their complaint that by wrongfully refusing to deduct from plaintiffs' incomes child care costs necessitated by working parents' needs to be at their places of employment, defendant was depriving them of benefits to which they were entitled under Title IV-A of the Social Security Act in violation of the Supremacy Clause. In count II, plaintiffs asserted that in failing to inform them properly of their rights to claim work expenses above the standard amount and of their right to request an administrative hearing to challenge defendant's denial of benefits, defendant was violating not only federal regulations but also the due process clause of the Fourteenth Amendment. Plaintiffs' third claim for relief alleged a denial of equal protection as a result of the acts alleged in count I.

Plaintiffs sought class certification, a declaratory judgment that defendant's policies and practices violated federal statutory and constitutional provisions, injunctive relief to prevent defendant from continuing to enforce the challenged practices, notification to all class members of their rights to an administrative review under state procedures for lost benefits, and attorney's fees.

Prior to October 1, 1981, federal law required a state participating in AFDC to disregard from earned income any expenses reasonably attributable to the earning of such income. This included child care expenses incurred by working parents. Plaintiffs asserted that defendant refused to permit child care costs to be considered as an allowable expense of employment in calculating budgetable earned income. Defendant contended that the state could do so because it already provided day care services to recipients without cost.

Effective October 1, 1981, Congress amended the relevant portion of the Social Security Act, 42 U.S.C. Sec. 602(a), to provide that the state agency shall disregard from earned income expenditures, not exceeding specified amounts, required to be incurred for care of a dependent child, 2 and defendant implemented policies, also effective October 1, 1981, consistent with these amended provisions. On January 29, 1982, plaintiffs moved for summary judgment on the merits of their claim that defendant's prior policies violated pre-October 1, 1981, federal law. They also sought an order against defendant state official requiring the issuance of a notice similar in content to that approved by the Supreme Court in Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). Defendant, on February 1, 1982, moved to dismiss the action, arguing that the federal law change had rendered the pre-October 1, 1981, claims moot and that the Eleventh Amendment barred any other relief, including an order requiring issuance of a Quern -type notice to persons who had lost benefits as a result of defendant's actions.

At the March 9, 1982, hearing on plaintiffs' motions for summary judgment and class certification and defendant's motion to dismiss, plaintiffs made no claim that state law violated the Social Security Act's child care expense provisions after October 1, 1981. Plaintiff's counsel admitted, on the record, that plaintiff's claims for declaratory and notice relief, if valid at all, related only to benefits allegedly lost prior to October 1, 1981.

The District Court on June 22, 1982, denied plaintiffs' motions for summary judgment and class certification and granted defendant's motion to dismiss the action. It is from these rulings that plaintiffs in MWRO appealed.

B.

On May 11, 1981, Carol Banas and eight other named plaintiffs filed a class action complaint, seeking relief primarily under 42 U.S.C. Sec. 1983, and challenging in count I of their complaint the constitutionality of a section of the Michigan Poor Law, which, along with policies of the defendant Director of the MDSS, required that income of stepparents be considered in determining AFDC eligibility or grant levels for stepchildren under the age of 18 who lived in the same household as the stepparent. Plaintiffs claimed the statute and policies violated the applicable provision of Title IV-A of the Social Security Act and regulations pursuant thereto.

Plaintiffs asserted in count II an equal protection violation as a result of a section of the Michigan Poor Law that allegedly required stepparents to take on a greater responsibility for support of stepchildren eligible for AFDC benefits than was required of stepparents of stepchildren who were not eligible for AFDC benefits. In count III plaintiffs alleged that the Michigan Poor Law impermissibly burdened plaintiff's rights of family privacy and free association by encouraging stepparents to move out of the home or get a divorce if they were already married and by encouraging prospective stepparents not to marry.

Plaintiffs contended in count IV that defendant's policies permitted dependent children and their caretaker relatives, except for stepparents, to deduct from gross earned income all actual expenses of producing that income. State regulations were alleged to require eighty percent of the gross earnings of a stepparent to be automatically counted as available income without allowing for any work expense deductions. Plaintiffs asserted that this distinction between the incomes of stepparents and other caretaker relatives violated the Social Security Act and federal equal protection guarantees.

Plaintiffs sought class certification, a declaratory judgment that the state statute and defendant's policies and practices violated federal statutory and constitutional provisions, injunctive relief to prevent defendant from continuing to enforce the challenged law and practices, notification to all class members of their rights to an administrative review under state procedures for lost benefits, and attorney's fees.

On May 28, 1981, plaintiffs filed a motion for a preliminary injunction, seeking to enjoin defendant from enforcing the challenged policies and practices regarding stepparents' incomes. The District Court granted plaintiffs' motion for a preliminary injunction, which ruling was then appealed to this Court.

Effective October 1, 1981, and before the appeal from the District Court's preliminary injunction could be heard, Congress amended the relevant portion of the Social Security Act, 42 U.S.C. Sec. 602(a), to provide that income of stepparents living in the same household as the child shall be counted for the purposes of determining eligibility and amount of benefits for AFDC. 3 As a result of this change in the law, the parties stipulated to amend the preliminary injunction order, making its prospective effect valid only up to October 1, 1981. The District Court amended the preliminary injunction order to comport with the parties' stipulation, and on October 27, 1981, defendant voluntarily dismissed his appeal of the preliminary injunction order.

Defendant, on March 19, 1982, filed a motion to dismiss the action, arguing that plaintiffs' action was mooted by the amendment to the Social Security Act and that the Eleventh Amendment was a bar to the issuance of any orders sought by plaintiffs. Plaintiffs, on April 9, 1982, filed their motion for summary judgment, seeking a declaration that the defendant's pre-October 1, 1981, policies violated the Social Security Act's requirements before that date and an order compelling the issuance of a notice similar in content to that approved by the Supreme Court in Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979).

At the hearing conducted on April 13, 1982, plaintiffs...

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