Bliek v. Palmer

• Decision Date: 02 January 1997
• Docket Number: 96-1991,Nos. 96-1466,s. 96-1466
• Citation: 102 F.3d 1472
• Parties: Evelyn BLIEK, Individually and on behalf of all other persons similarly situated; Tish Eberline, Individually and on behalf of all other persons similarly situated, Plaintiffs-Appellees, v. Charles M. PALMER, In his official capacity as the Director of the Iowa Department of Human Services; Kim D. Schmett, In his capacity as Acting Director of the Iowa Department of Inspections and Appeals, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1472

102 F.3d 1472

Evelyn BLIEK, Individually and on behalf of all other

persons similarly situated; Tish Eberline,

Individually and on behalf of all other

persons similarly situated, Plaintiffs-Appellees, v. Charles M. PALMER, In his official capacity as the Director

of the Iowa Department of Human Services; Kim D. Schmett,

In his capacity as Acting Director of the Iowa Department of

Inspections and Appeals, Defendants-Appellants.

Nos. 96-1466, 96-1991.

United States Court of Appeals,

Eighth Circuit.

Submitted June 12, 1996.

Decided Jan. 2, 1997.

Joseph G. Basque, Council Bluffs, IA, argued (Martin Ozga and Linda Cooper, on the brief), for appellees.

Barbara E.B. Galloway, Des Moines, IA, for appellant.

Before BEAM, HEANEY, and HANSEN, Circuit Judges.

HANSEN, Circuit Judge.

Evelyn Bliek and Tish Eberline filed this class action suit pursuant to 42 U.S.C. § 1983, seeking injunctive and declaratory relief. The plaintiffs contended, among other things, that the defendants violated the plaintiffs' due process rights by failing to notify them of the state's discretionary authority to settle, adjust, compromise, or deny claims arising out of overissuances of food stamps due solely to agency error. The district court ¹ granted the plaintiffs' motion for summary judgment and permanently enjoined the defendants from initiating or continuing efforts to collect food stamp overpayments issued as a result of agency error until the defendants provided notice to the plaintiffs of the state's settlement authority. The court gave the parties fourteen days in which to file a report in which they agreed to the terms of the notice to be provided to the class members.

Defendants filed a notice of appeal and a motion to stay the permanent injunction pending the appeal. We granted the defendants' motion in part, staying all of the injunction except the portion requiring the parties to submit for the district court's approval a report agreeing to the terms of the notice. The parties subsequently submitted an agreed-upon form of notice to the district court, and the court approved it and entered a final judgment in the case. We affirm the judgment of the court and lift the stay we previously imposed.

I.

The named plaintiffs in this case, Evelyn Bliek and Tish Eberline, both receive food stamps pursuant to the Food Stamp Act of 1977 (the Act), 7 U.S.C. §§ 2011-2032 (1994). Solely as a result of mistakes made by the State of Iowa, and unbeknownst to them, Bliek and Eberline were issued more food stamps than they were entitled to receive under the Act. Upon discovering this "agency error," the defendants initiated collection of the food stamp overpayments by sending each of the plaintiffs a "demand letter," as prescribed by federal regulations promulgated under the Act. See 7 C.F.R. § 273.18(d)(3) (1995). The demand letters informed the plaintiffs of the alleged overissuances and gave the plaintiffs notice of their administrative appeal rights as to the amount of overissuances. The letters did not specifically inform the plaintiffs that the state has discretionary settlement authority to settle, adjust, compromise or deny recovery of all or part of the overpayments, even though a section of the notice headed "Actions That May Be Taken On Overpayments" listed every adverse action that could be taken, including criminal prosecution and the filing of a civil suit. (See Appellants' App. at 119.)

The plaintiffs filed this cause of action pursuant to 42 U.S.C. § 1983, individually and on behalf of others similarly situated, challenging the state's policies regarding the collection of overissuances. The district court certified the class action, describing the class as "all individuals residing in the State of Iowa who have participated in the food stamp program in the State of Iowa, who have been determined to have received an overpayment of food stamp benefits as a result of agency error, and who have been subjected to collection efforts based on such overpayments since September 28, 1991." Bliek v. Palmer, 916 F.Supp. 1475, 1478 n. 1 (N.D.Iowa 1996). The plaintiffs and the defendants both filed motions for summary judgment. Finding no genuine issues of material fact, the district court rendered an opinion deciding the issues of law, and as relevant here, granted plaintiffs' motion for summary judgment on their procedural due process argument regarding the state's failure to notify the plaintiffs of its settlement authority. Id. at 1485-93. The defendants appeal.

II.

The Food Stamp Act establishes a federally funded, state-administered program that provides nutritional assistance to eligible households. 7 U.S.C. § 2013(a) (1994). The purpose of the Act is "to safeguard the health and well-being of the Nation's population by raising levels of nutrition among low-income households." Id. § 2011. Under the food stamp program, eligible households receive food stamp coupons that can be redeemed for food items at retail stores participating in the program. Id. § 2013(a); see also id. §§ 2014-2015 (setting standards for determining eligibility of households).

The Secretary of Agriculture (the Secretary) is authorized to formulate and administer the food stamp program, id. § 2013(a), and to that end has promulgated various regulations, which are set forth at 7 C.F.R. §§ 271.1--285.10 (1995). ² The Secretary has delegated to state agencies the responsibility for administering the program, and thus the state agencies make the individual eligibility determinations and actually distribute the food stamps to the eligible households. 7 C.F.R. § 271.4(a). The State of Iowa participates in the food stamp program and has designated the Iowa Department of Human Services (DHS) as the state agency that implements the program. Iowa Code Ann. § 234.12 (1994).

If a household is issued more food stamps than it is entitled to receive, the adult household members are liable for the value of the overissuances. 7 C.F.R. § 273.18. In such a case, the Secretary has the authority to establish a claim against those individuals. 7 U.S.C. § 2022(a)(1). The Secretary also has plenary settlement authority regarding overissuance claims--that is, "the power to determine the amount of and settle and adjust any claim and to compromise or deny all or part of any such claim or claims arising under [the Act]." Id.

The Secretary has delegated much of his power regarding claims, including the settlement authority, to state agencies. 7 C.F.R. § 271.4(b). Accordingly, state agencies "shall establish a claim against any household that has received more food stamp benefits than it is entitled to receive...." Id. § 273.18(a).

When a state agency (in Iowa, the DHS) determines that a household has received too many food stamps as a result of agency error, the agency initiates a collection action by sending the household a demand letter. Id. § 273.18(d)(3)(i). The letter that DHS sends out informs the recipient of the amount of the alleged overissuances and provides a space for the recipient to indicate the recipient's preferred method of repayment. Although the letter informs the recipient of his or her right to appeal the agency's determination and the possibility of a fair hearing on the appeal, see id. § 273.15 (fair hearings), it does not inform the recipient of the state agency's settlement authority. In fact, the present form of notice states in large block letters "FEDERAL RULES REQUIRE THAT THE IOWA DEPARTMENT OF HUMAN SERVICES COLLECT ALL OVERPAYMENTS," without explaining that those same federal rules give the DHS authority to settle and compromise an overpayment claim. (Appellants' App. at 119.)

III.

The district court granted plaintiffs' motion for summary judgment, finding they have been denied procedural due process because the state has failed to inform them of its settlement authority. We review a grant of summary judgment de novo, using the same standards as did the district court. Dakota Gasification Co. v. Pascoe Bldg. Sys., 91 F.3d 1094, 1097 (8th Cir.1996). Thus, we will affirm the grant of summary judgment if the record shows there is no genuine issue of material fact and the prevailing party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); Dakota Gasification Co., 91 F.3d at 1097.

The Due Process Clause of the Fourteenth Amendment guarantees that no state will "deprive any person of life, liberty, or property, without due process of law." U.S. Const. amend. XIV, § 1. We engage in a two-part analysis when addressing a procedural due process argument, asking, first, whether the plaintiffs have a protected interest at stake, and if so, what process is due. Schneider v. United States, 27 F.3d 1327, 1333 (8th Cir.1994), cert. denied, 513 U.S. 1077, 115 S.Ct. 723, 130 L.Ed.2d 628 (1995). The state concedes the first point of the analysis, stating:

Iowa agrees that Food Stamp recipients have a property interest protected by the Fourteenth Amendment in the Food Stamp coupons and in the cash equivalent that Iowa would attempt to collect as repayment of an overissuance of Food Stamps due to agency error. Iowa disagrees with the District Court's conclusion that the Due Process Clause requires more process.

(Appellants' Br. at 19.)

For the most part, the Supreme Court provided the answer to our second inquiry in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). There, the Court held that welfare benefits "are a matter of statutory entitlement for persons qualified to receive them" and thus are a constitutionally protected property interest. Id. at 262, 90 S.Ct. at 1017-18. Further, because the welfare recipients in Goldberg relied on the benefits for subsistence, the Court held that the recipients were entitled under the Due Process Clause to a fair hearing before the termination of the benefits. Id. at 264, 90 S.Ct. at 1018-19. In Atkins v. Parker, the Court eliminated any doubt one might have about the...