Cervantez v. Sullivan

• Decision Date: 08 August 1989
• Docket Number: No. CIV. S-89-529 LKK/EM.,CIV. S-89-529 LKK/EM.
• Citation: 719 F. Supp. 899
• Parties: Jesse CERVANTEZ, on behalf of himself and all others similarly situated, Plaintiffs, v. Louis SULLIVAN, Secretary of the Department of Health and Human Services, Defendants.
• Court: U.S. District Court — Eastern District of California

719 F. Supp. 899

Jesse CERVANTEZ, on behalf of himself and all others similarly situated, Plaintiffs, v. Louis SULLIVAN, Secretary of the Department of Health and Human Services, Defendants.

No. CIV. S-89-529 LKK/EM.

United States District Court, E.D. California.

August 8, 1989.

COPYRIGHT MATERIAL OMITTED

Gary F. Smith, Carole F. Grossman, Legal Services of N. Cal., Woodland, Cal., Jeanette L. Smith, Legal Center for the Elderly & Disabled, Sacramento, Cal., Gil Deford, Peter Komlos-Hrobsky, National Sr. Citizens Law Center, Los Angeles, Cal., for plaintiffs.

Stuart E. Schiffer, Acting Asst. Atty. Gen., Sheila Lieber, Margot de Ferranti, U.S. Dept. of Justice, Federal Programs Branch, Civ. Div., Washington, D.C., for defendants.

ORDER

KARLTON, Chief Judge.

This action for declaratory and injunctive relief challenges the validity of 20 C.F.R. § 416.1123(b)(2). Under that regulation, the Department of Health and Human Services counts as income, money that has been garnished from Supplemental Security Income ("SSI") applicants or recipients, when calculating entitlement to SSI benefits under Title XVI of the Social Security Act, 42 U.S.C.A. §§ 1381-1383c.

The matter is before the court on the defendant's motion to dismiss for lack of subject matter jurisdiction, and the plaintiff's motions for class certification and for summary judgment.¹ For the reasons I explain below, the defendant's motion to dismiss is DENIED, and the plaintiff's motions for class certification and for summary judgment are hereby GRANTED.

I CASE BACKGROUND

Plaintiff, Jesse Cervantez, is 50 years old and disabled. He has been receiving benefits under the Social Security Disability Insurance ("SSDI") program pursuant to Title II of the Social Security Act since 1985. Declaration of Jesse Cervantez, Plaintiff's Memorandum of Points and Authorities in Support of Motion for Preliminary Injunction, Exhibit A at 1 (hereinafter "Cervantez Declaration"). SSDI is paid to disabled persons who suffer from a mental or physical disability. Although it is administered by the Social Security Administration, the SSDI program is funded by the FICA contributions of employees and employers. Bowen v. City of New York, 476 U.S. 467, 469, 106 S.Ct. 2022, 2024, 90 L.Ed.2d 462 (1986).

Plaintiff is also eligible to receive SSI benefits under Title XVI of the Social Security Act. The SSI program is a nationwide needs-based assistance program which is intended to provide subsistence income, as defined by federal standards, to indigent disabled persons who satisfy one of the categorical requirements of age, blindness or disability. SSI is funded out of general revenues collected through federal taxes, and is also administered by the Social Security Administration ("SSA"). Lyon v. Bowen, 802 F.2d 794, 796 (5th Cir.1986). Eligibility for SSI benefits is restricted to persons whose monthly resources and income fall below a statutorily defined minimum income level.

The Secretary of the Department of Health and Human Services (hereinafter "the Secretary") determines both eligibility and the amount of an individual's SSI benefits by comparing "countable income" (i.e., income derived from sources other than SSI) with the statutory federal benefit level plus any applicable state supplement. The statute defines "income" for purposes of this determination to include money that is earned by the recipient by virtue of his or her employment, 42 U.S.C.A. § 1382a(a)(1) (West Supp.1989), as well as items of value, whether cash or in-kind, obtained from other sources called "unearned income." 42 U.S.C.A. § 1382a(a)(2) (West Supp.1989). The SSI benefit is the difference between the value of an SSI income as defined above, and the statutory benefit level.

The Secretary has adopted a series of complex regulations governing eligibility for both the SSDI and the SSI programs. 20 C.F.R. pt. 404, subpt. P (1985) (SSDI); 20 C.F.R. pt. 404, 416, subpt. I (1985) (SSI). Prior to 1982, the regulations defined "countable income" as including only cash or other sources of value which were actually available to the applicant to provide for his or her basic needs including food, clothing and shelter.²

This policy was reversed in 1982, when 20 C.F.R. § 416.1123(b)(2) was amended. It now provides:

(b) Amount considered as income: We may include more or less of your unearned income that you actually receive....

....

(2) We also include more than you actually receive if amounts are withheld because of a garnishment.

Contrary to the former policy, the regulation now explicitly provides that certain income that is not actually available to satisfy the SSI applicant's or recipient's basic needs will be included in the determination of both eligibility for, and the amount of, SSI benefits.

Plaintiff is entitled to receive monthly benefits of $576 under the SSDI program. Plaintiff's Memorandum of Points and Authorities, Exhibit B. In November 1988, the Secretary began to withhold a substantial portion of Mr. Cervantez' Title II benefits to satisfy a state court garnishment order pursuant to 42 U.S.C. § 659.³ Presently approximately $359 of plaintiff's benefits are being withheld pursuant to the garnishment so that in fact he receives only $198 of his Title II benefits. Under 20 C.F.R. § 416.1123(b)(2), however, the Secretary has calculated the amount of plaintiff's SSI benefits as if he were in fact receiving the full Title II benefits. As a result, he receives approximately $80 from SSI, so that his total income is less than $300 per month, while the federal benefit level for similarly situated persons under the relevant provisions of the statute is $687.⁴ The effects of this method of calculation have been devastating for Mr. Cervantez. See section II-B 2, infra.

On November 3, 1988, plaintiff filed a Request for Reconsideration of the Secretary's determination of benefits in which he challenged, inter alia, the SSA's policy of counting garnished Title II benefits as income for SSI purposes. Complaint, para. 21, Exhibit F. In a Notice of Reconsideration dated February 2, 1989, the Secretary denied plaintiff's request in this regard. Complaint, para. 22, Exhibit G. On March 9, 1989, Mr. Cervantez appealed the adverse decision of the SSA by filing a Request For Hearing by an Administrative Law Judge on the issue of the validity of the SSA's regulation. Complaint, para. 23, Exhibit H. On April 13, 1989, plaintiff filed the current complaint. At the time the complaint was filed, no date for hearing before an administrative law judge had been set.

In this action, plaintiff charges that 20 C.F.R. § 416.1123(b)(2) violates section 1612(a)(2)(B) of Title XVI of the Social Security Act, which defines "unearned income" as follows:

Any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old-age, survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits....

42 U.S.C.A. § 1382a(a)(2)(B) (West Supp. 1989) (emphasis added).

II THE SECRETARY'S MOTION TO DISMISS

In his complaint, plaintiff asserts that jurisdiction in this court is proper under both the Social Security Act, 42 U.S.C.A. §§ 405(g) and 1383(c)(3), and the Mandamus Act, 28 U.S.C.A. § 1361. The Secretary has moved to dismiss under Federal Rule of Civil Procedure 12(b)(1). He contends that plaintiff has failed to exhaust his administrative remedies under section 205(g) of the Social Security Act, 42 U.S. C.A. § 405(g), which he argues are exclusive under section 205(h) of the Act, 42 U.S.C.A. § 405(h).

A. Standards for Dismissal Under Fed.R.Civ.P. 12(b)(1)

A party seeking to invoke the jurisdiction of a federal court has the burden of establishing that jurisdiction exists. KVOS, Inc. v. Associated Press, 299 U.S. 269, 278, 57 S.Ct. 197, 201, 81 L.Ed. 183 (1936); Scott v. Breeland, 792 F.2d 925, 927 (9th Cir.1986). On a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), the standards that must be applied vary according to the nature of the jurisdictional challenge.

If the challenge to jurisdiction is a facial attack, i.e., the defendant contends that the allegations of jurisdiction contained in the complaint are insufficient on their face to demonstrate the existence of jurisdiction, the plaintiff is entitled to safeguards similar to those applicable when a Rule 12(b)(6) motion is made. The factual allegations of the complaint are presumed to be true, and the motion is granted only if the plaintiff fails to allege an element necessary for subject matter jurisdiction. See 2A J. Moore, J. Lucas & G. Grotheer, Moore's Federal Practice, para. 12.07, at 12.46-47 (2d ed.1987). See also Eaton v. Dorchester Development, Inc., 692 F.2d 727, 731 (11th Cir.1982); Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981); Mortensen v. First Federal Sav. and Loan, Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).

A complaint alleging federal question jurisdiction will be dismissed for lack of subject matter jurisdiction for any one of three reasons: if the cause does not "arise under" any federal law or the United States Constitution, if there is no case or controversy within the meaning of that constitutional term, or if the cause is not one described by any jurisdictional statute. Baker v. Carr, 369 U.S. 186, 198, 82 S.Ct. 691, 700, 7 L.Ed.2d 663 (1962). The Secretary claims that by virtue of plaintiff's failure to exhaust his administrative remedies, the matter at bar falls within the third category. I do not agree.

B. Jurisdiction Under Section 205(g)

The Social Security Act provides in relevant part that:

Any individual, after any final decision of the Secretary made after a hearing to which he was a party ... may obtain a review of such decision by a civil action commenced within sixty days after

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