Cervantez v. Sullivan

• Decision Date: 10 June 1992
• Docket Number: No. 90-15056,90-15056
• Parties: Jesse CERVANTEZ, on Behalf of himself and others similarly situated, Plaintiff-Appellee, v. Louis W. SULLIVAN, M.D., Secretary of the Department of Health and Human Services, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 229

963 F.2d 229

37 Soc.Sec.Rep.Ser. 261

Jesse CERVANTEZ, on Behalf of himself and others similarly situated, Plaintiff-Appellee, v. Louis W. SULLIVAN, M.D., Secretary of the Department of Health and Human Services, Defendant-Appellant.

No. 90-15056.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 3, 1990.

Submission Vacated Oct. 11, 1990.

Resubmitted May 16, 1991.

Decided April 7, 1992.

As Amended on Denial of Rehearing

and Rehearing En Banc June 10, 1992.

Deborah Ruth Kant, Deputy Atty. Gen., U.S. Dept. of Justice, Washington, D.C., for defendant-appellant.

Gary F. Smith and Carole F. Grossman, Legal Services of Northern California, Inc., Woodland, Cal. and Gill Deford, Nat. Sr. Citizens Law Center, Los Angeles, Cal., for plaintiff-appellee.

Before: BROWNING, GOODWIN and RYMER, Circuit Judges.

JAMES R. BROWNING, Circuit Judge:

The Secretary of Health and Human Services calculates the income of Supplemental Security Income (SSI) claimants to determine their eligibility for benefits and the amount of these benefits. The SSI claimants in this class action are subject to state court garnishment orders, pursuant to which funds they would otherwise receive are withheld to pay their legal obligations. It is the Secretary's policy, embodied in a published regulation, 20 C.F.R. § 416.1123(b)(2), to count the garnished amounts as income to the claimants. The district court struck down this regulation as in conflict with the Social Security Act. ¹ The Secretary appeals and we reverse. ^*

I

The SSI program was enacted by Congress in 1972 to provide "a subsistence allowance, under federal standards, to the Nation's needy aged, blind, and disabled." Schweiker v. Wilson, 450 U.S. 221, 223, 101 S.Ct. 1074, 1077, 67 L.Ed.2d 186 (1981); see 42 U.S.C. §§ 1381-1383c (Title XVI of the Social Security Act). To be eligible for SSI benefits, a claimant must be aged, blind or disabled, as defined by 42 U.S.C. § 1382c, and must have "income" and "resources" below certain levels. See 42 U.S.C. § 1382(a). Persons eligible for SSI benefits receive a monthly check reduced on a dollar-for-dollar basis by any "income" they receive. 42 U.S.C. § 1382(b). "Income" for SSI purposes is defined in 42 U.S.C. § 1382a and detailed regulations promulgated by the Secretary. See 20 C.F.R. §§ 416.1100-416.1182.

Jesse Cervantez has been eligible for SSI since 1985 because of serious physical and mental disabilities. He fell behind in child support payments, and a state court entered a garnishment order. Pursuant to this order, the Secretary withheld approximately $359 of Cervantez' monthly total of $558 in Title II (SSD) disability benefits. ² Pursuant to 20 C.F.R. § 416.1123(b)(2), the Secretary counted the garnished $359 as part of Cervantez' "income" in computing his SSI benefit eligibility level, resulting in a reduction in total benefits received from more than $650 to less than $300 per month. Cervantez filed suit on behalf of himself and other SSI claimants whose benefits were denied or reduced because the Secretary treated garnished amounts as "income."

The issue presented is whether the district court properly held 20 C.F.R. § 416.1123(b)(2) to be inconsistent with the Act. ³

II

A

The Social Security Act defines the "income" of an SSI claimant as including both "earned income" and "unearned income." 42 U.S.C. § 1382a(a). Section 1382a(a)(1) lists the items constituting "earned income," and section 1382a(a)(2), in defining "unearned income," provides:

unearned income means all other income, including--

. . . . .

(B) 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....

As we have noted, the regulation central to this appeal provided that the funds listed in § 1382a(a)(2) as "unearned income" will be considered "income" of an SSI claimant even if the funds are garnished by state court order:

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

....

(2) We also include more than you actually receive if amounts are withheld from unearned income because of a garnishment or to make certain payments such as payment of your Medicare premiums.

20 C.F.R. § 416.1123(b)(2) (1990). ⁴

B

Plaintiffs contended, and the district court agreed, that because 42 U.S.C. § 1382a(a)(2)(B) defines "unearned income" to an SSI claimant as including "any payments received" from "an annuity, pension, retirement or disability benefit," and because garnished amounts are not "received" by the claimant, it violates the plain language of the statute to count these amounts as "income." After the district court's decision, however, we followed four other circuits in holding the word "received" is used in subsection (a)(2)(B) as a "mere grammatical link," and does not require that funds be physically received by claimants to be counted as "income." Martin v. Sullivan, 932 F.2d 1273, 1275, 1278 (9th Cir.1990) (citation omitted). ⁵

Martin upheld a regulation providing that funds withheld from a government benefits check to recoup a prior overpayment must be counted as "unearned income" even though these funds were not physically received by the claimant. The converse is also true: amounts physically received by a claimant are not always countable as income. We held in Whaley v. Schweiker, 663 F.2d 871, 875 (9th Cir.1981), that the Secretary could not count as "income" to an SSI claimant a portion of the claimant's Veteran's Administration pension specifically earmarked for the claimant's children, even though these funds were physically received by the claimant.

C

Plaintiffs argue that garnished amounts may not be counted as "income" because they are not actually available to meet the subsistence needs of SSI claimants. No such requirement is found in the statutory definition of "income," ⁶ and Martin rejected the argument that this Circuit's prior cases had interpreted the statute as creating "a broad 'actual availability' principle that is to be applied to every case determining what constitutes 'income' for purposes of SSI benefits." 932 F.2d at 1277. The funds counted as "income" in Martin were withheld to repay a debt to a government agency and were no more available to meet subsistence needs than the funds in this case.

The three prior Ninth Circuit cases plaintiffs rely upon as establishing an "actual availability" requirement (Whaley, 663 F.2d 871, Summy v. Schweiker, 688 F.2d 1233 (9th Cir.1982), and Department of Health Services v. Secretary of HHS, 823 F.2d 323 (9th Cir.1987)) were distinguished in Martin. See id. 932 F.2d at 1276-77.

In Whaley, we held the Secretary could not count as "income" to an SSI claimant a portion of the claimant's Veteran's Administration pension specifically earmarked for the claimant's children. ⁷ The amounts at issue in Whaley were intended by Congress to be used for the support of the claimant's children, not the claimant. 663 F.2d at 874-75. The claimant would not have received the funds if he had not had custody of the children and responsibility for supporting them. Id. Although the funds were sent to the claimant, he received them, in essence, as a trustee for his children. See Martin, 932 F.2d at 1276 (plaintiff in Whaley "acted solely as a trustee for his children"). In contrast, the garnished amounts counted as "income" in this case were not intended for anyone but the claimants; the funds were payable to the claimants and were garnished to pay obligations owed by the claimants.

In Summy, we held amounts received from the Veteran's Administration as reimbursement for extraordinary medical expenses did not constitute income for SSI purposes. 688 F.2d at 1235. Summy relied on an SSI regulation expressly providing " 'income' does not include 'the value of any third party payment for medical care or medical services furnished to a beneficiary.' " 688 F.2d at 1234 (quoting 20 C.F.R. § 419.1109(a) (1980)). The Court limited its holding in Summy to payments expressly excluded from "income" by the terms of the regulation. ⁸ See Martin 932 F.2d at 1276-77. The regulation applicable to this case expressly includes rather than excludes garnished amounts as "income."

The decision in DHS is more troublesome because the opinion contains a statement that amounts used to pay court-ordered child support obligations may not be counted as "income." The question at issue in DHS, however, was whether the Secretary could require the State of California to count amounts claimants were compelled to pay for court-ordered child support or alimony as "income" for the purpose of the Medicaid program. The Secretary argued California was required to adopt the definition of "income" established by the Social Security Act and the Secretary's SSI regulations. 823 F.2d at 327. The court rejected this contention, holding California was not required to adopt the SSI definition of "income," and that California's "proposal to treat court-ordered spousal and child support payments as 'unavailable' to the Medicaid recipient for purposes of determining his or her eligibility," id. at 326, was therefore valid. Id. at 327-28 (states not required to follow SSI eligibility requirements in formulating Medicaid eligibility standards).

The DHS Court went on to comment that the holding in Whaley, an SSI case, should be read to prohibit inclusion in "income" of money used to pay court-ordered child support or alimony. DHS at 327-28. Martin held this broad characterization of the Whaley holding was "merely dicta" because the DHS Court had already held that California's own rule excluding spousal and child support payments from "income" in Medicaid cases was valid and controlling. See Martin, 932 F.2d at 1277. ⁹ Accepting ...