Frederick v. Shalala

• Decision Date: 01 September 1994
• Docket Number: No. 94-CV-6364L.,94-CV-6364L.
• Citation: 862 F. Supp. 38
• Parties: Elaine FREDERICK, Individually and on behalf of herself and all others similarly situated, Plaintiff, v. Donna SHALALA, in her capacity as Secretary of Health and Human Services, Michael Dowling, in his capacity as Commissioner of the New York State Department of Social Services, and James V. Murray, in his capacity as Commissioner of the Steuben County Department of Social Services, Defendants.
• Court: U.S. District Court — Western District of New York

862 F. Supp. 38

Elaine FREDERICK, Individually and on behalf of herself and all others similarly situated, Plaintiff, v. Donna SHALALA, in her capacity as Secretary of Health and Human Services, Michael Dowling, in his capacity as Commissioner of the New York State Department of Social Services, and James V. Murray, in his capacity as Commissioner of the Steuben County Department of Social Services, Defendants.

No. 94-CV-6364L.

United States District Court, W.D. New York.

September 1, 1994.

David B. Pels, Southern Tier Legal Services, Bath, NY, Susan Antos, Greater Upstate Law Project, Albany, NY, for plaintiff.

Anne VanGraafeiland, Asst. U.S. Atty., Rochester, NY, for Donna E. Shalala.

Charles D. Steinman, Asst. Atty. Gen., Rochester, NY, for Michael Dowling.

John F. Leyden, Asst. Steuben County Atty., Bath, NY, for James V. Murray.

DECISION AND ORDER

LARIMER, District Judge.

Plaintiff, Elaine Frederick, has applied for and been denied benefits under the Aid to Families with Dependent Children ("AFDC") program. The reason for the denial was that she has equity in a car appraised at $4000 and both federal and state regulations provide that AFDC recipients may have no more than $1500 equity in a vehicle. Plaintiff commenced this action seeking a declaration that those regulations, 45 C.F.R. § 233.20(a)(3)(i)(B)(2) and 18 N.Y.C.R.R. § 352.23(b)(2), are unlawful, and enjoining defendants from relying on those regulations when determining eligibility for AFDC benefits in New York State. Pending before the court is plaintiff's motion for a preliminary injunction directing defendants to provide her with a two-person AFDC grant for her and her son pending the resolution of this case.

FACTUAL BACKGROUND

The facts are virtually undisputed. Plaintiff lives in Bath, New York with her son Braxton. Braxton, who was born on September 11, 1993, suffers from certain medical problems that require occasional visits to physicians and other health care professionals. Some of these appointments are in Rochester, which is approximately a 150-mile round trip from plaintiff's home.

On May 24, 1994, plaintiff applied for AFDC benefits for herself and Braxton at the Steuben County Department of Social Services ("SCDSS"). By a notice dated June 13, 1994, SCDSS informed plaintiff that her application was denied because plaintiff owns a vehicle which SCDSS appraised at $4000, which exceeds the $1500 limit that is at issue in this litigation.

Plaintiff alleges that she is unemployed and that her only income since May 1994 is $200 that her estranged husband sent her. She states that she needs her car to take Braxton to his medical appointments and to seek employment. She alleges that if she does not receive AFDC benefits soon she may face eviction from her apartment and will be unable to purchase necessities.

STATUTORY AND REGULATORY SCHEME

AFDC is a joint federal-state program which is designed "to furnish financial assistance ... to needy dependent children and the parents or relatives with whom they are living." 42 U.S.C. § 601. New York State is a participant in the program.

Regulations promulgated by the Secretary of Health and Human Services ("HHS") have long set certain limits on the dollar amount of resources that AFDC recipients may have. Prior to 1981, the regulations allowed a recipient to possess up to $2000 in resources, and excluded the value of one automobile in making that calculation, without regard to the value of the automobile.

In 1981, however, Congress enacted the Omnibus Budget Reconciliation Act ("OBRA"), which, inter alia, for the first time set a statutory resource limit for AFDC recipients. The resource limit was reduced from the $2000 limit previously set by regulation to $1000 per family. 42 U.S.C. § 602(a)(7)(B). In addition, the statute excluded "so much of the family member's ownership interest in one automobile as does not exceed such amount as the Secretary shall provide." 42 U.S.C. § 602(a)(7)(B)(i).

Pursuant to this directive, the Secretary promulgated a regulation setting the automobile-equity limit at $1500. This figure was based on a 1979 survey which the Secretary stated showed that ninety-six percent of food-stamp recipients who owned cars had equity value in the cars of $1500 or less. The Secretary concluded that the $1500 limit was appropriate in that it would "be set within the range of the vast majority of current recipients ..." 47 Fed.Reg. at 5657 (1982). The analogous New York State regulation adopted the same limit because 42 U.S.C. § 602(a) in effect provides that a state AFDC plan must employ the limit chosen by the Secretary.

The automobile limit has remained at $1500 ever since, although it has received further attention by both Congress and the Secretary. In 1988, the House of Representatives adopted as part of the Family Support Act, Pub.L. No. 100-485, 102 Stat. 2343, 2356, a bill which would have allowed some states to experiment with a $4500 limit. The Senate version of the Act contained no such provision, and a conference committee "followed the Senate amendment (i.e., no provision)," but "directed the Secretary to review regulations establishing limits on the value of a vehicle and to revise them if he determines revision would be appropriate." House Conf.Rep. No. 100-998, 100th Cong., 2d Sess. 189 (1988), reprinted in 1988 U.S.C.C.A.N. 2776, 2879, 2977.

While the Secretary was undertaking this review, he received several inquiries from members of Congress concerning complaints from their constituents that the $1500 limit was too low, particularly in light of the effects of inflation over the years. The congressmen asked the Secretary to take those concerns into account in deciding whether to raise the limit. See Secretary's Memorandum of Law Ex. 2.

Upon completion of his review, however, the Secretary decided not to revise the limit. As the Secretary explained in a letter to Senator Dennis DeConcini dated March 23, 1992, the Secretary concluded that raising the limit to $3000 would cost an extra $200 million annually, which would have to be offset by reductions in other programs for needy children and families. Id. The Secretary decided that this was not desirable and that the limit should remain where it was.

DISCUSSION

Under the well-established standard in the Second Circuit for granting a preliminary injunction, "the movant must demonstrate `(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.'" Wallace Int'l Silversmith v. Godinger Silver Art Co., 916 F.2d 76, 78 (2d Cir.1990), (quoting Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam)), cert. denied, 499 U.S. 976, 111 S.Ct. 1622, 113 L.Ed.2d 720 (1991). In the case at bar, plaintiff contends that she has met the standard by demonstrating irreparable harm if the motion is denied, and a likelihood of success on the merits.¹

After considering the arguments presented by both sides, I find that plaintiff has failed to establish that she is likely to succeed on the merits. The motion for a preliminary injunction must therefore be denied.

Under the Administrative Procedure Act, 5 U.S.C. § 704 et seq., a reviewing court may set aside an agency's action only if that action is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). While the court should engage in "a thorough, probing, in-depth review" of the action, the court must not substitute its own judgment for that of the agency. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415-16, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). Rather, the court should defer to the agency if the agency's findings have a rational basis. Bowman Transp., Inc. v. Arkansas-Best Freight Sys., 419 U.S. 281, 290, 95 S.Ct. 438, 444, 42 L.Ed.2d 447 (1974).

Plaintiff maintains that she can demonstrate a likelihood of success on the merits because the challenged regulation limiting equity in an automobile to $1500 lacks a rational basis and is contrary to the intent of Congress in establishing the AFDC program.

Plaintiff devotes much of her argument to her contention that the Secretary's adoption of $1500 as the vehicle-equity limit was irrational to begin with. Plaintiff maintains that the Secretary's analysis and use of the 1979 food-stamp data was flawed for a number of reasons.

This is not the first jurisdiction in which this precise issue has been litigated, although it appears to be the first reported proceeding in the Second Circuit. There is a marked split of authority among the few courts that have addressed the validity of the $1500 limit.² Although none of these other decisions are binding on this Court, I have considered them all in determining the merits of the case before me.

Although I am certainly sympathetic to plaintiff in her plight, I do not believe that the proper remedy is a judicial one. In sum, I am not persuaded that plaintiff has shown a likelihood that she will prevail on the merits on this issue. Even assuming the validity of some of plaintiff's arguments, it still appears that the Secretary had a rational basis for setting the limit at $1500.

Plaintiff argues that the population of AFDC recipients and that of food-stamp recipients were not identical because the two programs have different eligibility requirements. The Secretary was not insensitive to these differences, however, but he nevertheless found that there was a substantial correlation between the two groups. Falin v. Sullivan, 776 F.Supp. 1097, 1101 (E.D.Va. 1991), aff'd, 6 F.3d 207 (4th Cir.1993) (per curiam), cert. denied, ___ U.S. ___, 114 S.Ct. 1551, 128 L.Ed.2d 200 (1994). He also found that food-stamp recipients were, on average, more affluent than AFDC...