Burke v. Children's Services Division

• Decision Date: 20 February 1980
• Citation: 288 Or. 533,607 P.2d 141
• Parties: Sandra BURKE, Individually and on behalf of all others similarly situated, Petitioner, v. CHILDREN'S SERVICES DIVISION, J. N. Peet, Administrator, and Department of Human Resources, Richard A. Davis, Director, Respondents. TC 414-115; CA 10501; SC 26253.
• Court: Oregon Supreme Court

Page 141

607 P.2d 141

288 Or. 533

Sandra BURKE, Individually and on behalf of all others

similarly situated, Petitioner, v. CHILDREN'S SERVICES DIVISION, J. N. Peet, Administrator, and Department of Human Resources, Richard A. Davis, Director, Respondents.

TC 414-115; CA 10501; SC 26253.

Supreme Court of Oregon.

Argued and Submitted Nov. 8, 1979.

Decided Feb. 20, 1980.

[288 Or. 534-A] Gary Roberts, Legal Aid Service, Portland, argued the cause for petitioner. With him on the briefs were Michael H. Marcus and Robert B. Johnstone, Legal Aid Service, Portland.

Melinda L. Bruce, Asst. Atty. Gen., Salem, argued the cause for respondents. With her on the briefs were James A. Redden, Atty. Gen., and Walter L. Barrie, Sol. Gen., Salem.

Before DENECKE, C. J., and HOLMAN, TONGUE, LENT and PETERSON, JJ. ^*

TONGUE, Justice.

This is a class suit in equity on behalf of families with dependent children asking for a declaratory judgment that defendants had improperly terminated a program for federally funded payments to them and for an order requiring the resumption of such payments. On a motion by the plaintiffs for partial summary judgment the trial court: (1) ordered the defendants to resume making child care payments on behalf of the plaintiffs in accordance with policies in effect prior to February 15, 1975; (2) held that the plaintiffs were entitled to judgment against defendants in the amounts by which their net available incomes were reduced by the Children's Services Division's discontinuance of its payment program on that date; and (3) ordered the defendants to identify the class members, determine the amounts due them, remit those amounts to the class members, and account to the court for all class members who could not be located. The Court of Appeals reversed holding that under the circumstances of this case the trial court did not have authority to grant the relief embodied in its order. Burke v. Children's Services Division, 39 Or.App. 819, 593 P.2d 1262 (1979). We allowed plaintiffs' petition for review because this case raises significant issues of administrative law and of the relief available for improper action by administrative agencies.

This case arises from a decision by the Division (CSD) to terminate, because of a projected shortage of funds, a program of direct payments to providers of child care for certain recipients of Aid to Families with Dependent Children (AFDC). Plaintiff Burke, whose child care payments had been made by CSD under the program, received notice of its termination on February 15, 1975, the date the change in policy went into effect. On February 16, 1975, the Public Welfare Division of the Department of Human Resources adopted rules providing that child care expenses paid by recipients would be taken into account in computing the amount of AFDC grants. The combined effect of these two changes in policy was to reduce plaintiff Burke's net available income because the amount of the increase in her AFDC grant was less than the cost of her child care which had been paid by CSD.

On March 20, 1975, plaintiff Burke filed this lawsuit on behalf of herself and others similarly situated. On March 25 CSD adopted a temporary rule terminating its day care payment program, but has never, so far as the record shows, adopted a permanent rule to that effect.

Upon a prior appeal the Court of Appeals held that the termination of the benefit program could not be accomplished by internal management directive, ORS 183.310(7)(a), but must be done by the promulgation of a rule according to the procedures prescribed in ORS 183.335, including notice of the intended action and opportunity for interested persons to present their views. Burke v. Children's Services Division, 26 Or.App. 145, 552 P.2d 592 (1976). The defendants did not seek review of that decision.

CSD's temporary rule of March 25, 1975, was adopted without the notice and comment procedures described above. Subsection (2) of ORS 183.335 provided at that time that a temporary rule could be adopted without prior notice and opportunity for comment if

" * * * an agency finds that its failure to act promptly will result in serious prejudice to the public interest or the interest of the parties concerned, and sets forth the specific reasons for its finding * * *." ¹

Effective May 16, 1975, CSD repealed its first temporary rule and adopted in its place a second temporary rule to the same effect insofar as it affected persons of plaintiffs' class. ² Both rules, as filed with the Secretary of State, were accompanied by statements intended to meet the requirements of ORS 183.335(2), quoted above. Temporary rules expire by force of statute 120 days after their adoption. ORS 183.335.

Plaintiffs contend that because CSD has never taken any steps to effect a permanent repeal of its day care payment program after providing the required notice and opportunity to be heard, the trial court properly ordered the defendants to pay restitution in the amounts by which their net incomes have been reduced to date by the termination of the program and also to resume making such payments.

The Court of Appeals found it unnecessary to decide whether, as a general proposition, the trial court had the power to do either of these things. Instead it held that it was not authorized to do so under the facts of this case for two reasons. First, the original benefit program had not been embodied in a validly promulgated prior rule. Second, CSD's program was replaced, the day after its termination, by a substitute program administered by another agency. (39 Or.App. at 823, 593 P.2d 1262). In our opinion, neither reason will support the Court of Appeals' conclusion.

An agency's failure to employ proper procedures when adopting a rule does not eliminate the need to employ proper procedures when repealing it.

Prior to 1977, ³ ORS 183.310(7) defined a "rule" as:

" * * * any agency directive, regulation or statement of general applicability that implements, interprets or prescribes law or policy, or describes the procedures or practice requirements of any agency. The term includes the amendment or repeal of a prior rule * * *."

The statute goes on to list certain exceptions to the broad language of this definition, but none of them are applicable here. We need not in this case explore the outer reaches of the statutory definition. Certainly the original "directive" or "statement" adopting CSD's day care payment program, whatever its precise form and whatever informality attended its promulgation, constituted an implementation of agency policy within the meaning of the definition and was therefore a rule.

It is true that a rule may be declared by a court to be invalid if it was adopted without the proper procedures. See ORS 183.400. In the absence of such a declaration, however, it remains an effective statement of existing practice or policy, binding on the agency, until repealed according to procedures required by the Administrative Procedures Act. An agency may not rely on its own procedural failures to avoid the necessity of compliance with its rules.

The rules adopted by another agency did not constitute a proper repeal of CSD's program.

Defendants contend that the adoption of a substitute benefit program by the Public Welfare Division (now the Adult and Family Services Division, 1977 Or. Laws ch. 267 § 5) effectively terminated the CSD program without the necessity of CSD adopting a permanent rule to that effect. The substitute program was embodied in two temporary rules which were later promulgated as permanent rules effective May 25, 1975. Or.Adm. Rules 461-04-515-516. ⁴

The agency ultimately responsible for the provision of day care assistance to AFDC recipients is the Department of Human Resources. That department is directed by ORS 184.750 to provide services relating to "public assistance, children and families" through its various divisions including CSD and the former Public Welfare Division. It has been designated by the legislature as the recipient of all federal funds provided for such services. ORS 184.750(4).

Under the applicable federal regulation, federal funds may be used for child care for AFDC recipients in the form of either direct payments to providers or increased assistance grants. 45 CFR 220.61(e)(11). The defendants argue that through the change in the rules of the Public Welfare Division and the termination, at the same time, of the CSD payment program the Department of Human Resources, the responsible agency, was simply exercising its authority to change from one permissible method of providing child care services to another permissible method.

Plaintiffs do not dispute the authority of the Department of Human Resources to make such a choice. ⁵ They challenge only the procedure by which its accomplishment was attempted. We need not consider whether such a change could have been accomplished by a rule adopted by the Department of Human Resources itself, or whether an attempt by the Public Welfare Division, by a valid rule, to terminate a program previously administered by CSD could ever be effective. ⁶

Neither method of change was attempted in this case. The rules of the Public Welfare Division upon which defendants rely do not purport to terminate the CSD program. They provide only that child care expenses will be taken into account in determining the amount of assistance grants to AFDC recipients except in situations where child care programs are provided by CSD. They do not specify what those situations are or will be in the future. By their terms they simply do not accomplish what the Court of Appeals, in the first appeal of this case, held can be accomplished only by the proper adoption of a rule.

Because we conclude that neither CSD's failure to initiate the child care payment program with proper rule-making procedures nor the adoption by the Public Welfare Division of the rules discussed above obviated the need...