Gamboa v. Rubin

Decision Date09 April 1996
Docket NumberNos. 94-15302,94-15303,s. 94-15302
Citation80 F.3d 1338
Parties, 50 Soc.Sec.Rep.Ser. 520A, Medicare & Medicaid Guide P 44,122, 96 Cal. Daily Op. Serv. 2392, 96 Daily Journal D.A.R. 4041 Paul M. GAMBOA, Plaintiff-Appellant-Cross Appellee, v. Winona E. RUBIN, Director, Dept. of Human Services, State of Hawaii, Defendant-third-party-plaintiff-- Appellee--Cross Appellant, v. Donna E. SHALALA, Secretary of Health & Human Services, Defendant-third-party-defendant--Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Barbara A. Fabrey, Legal Aid Society of Hawaii, Honolulu, Hawaii, for plaintiff-appellant-cross-appellee, Paul M. Gamboa.

Steven S. Michaels, Deputy Attorney General, Honolulu, Hawaii, for defendant-third party plaintiff-appellee-cross-appellant, Winona E. Rubin, Director, Department of Human Services.

Christine N. Kohl, United States Department of Justice, Washington, D.C., for defendant-third party defendant-appellee, Donna E. Shalala, Secretary of Health and Human Services.

Appeal from the United States District Court for the District of Hawaii; Harold M Before: PREGERSON, KOZINSKI, and HAWKINS, Circuit Judges.

Fong, Chief District Judge, Presiding. No. CV-92-00397-HMF.

Opinion

PREGERSON, Circuit Judge:

Paul M. Gamboa, on behalf of a certified class of low income people, appeals the district court's grant of summary judgment in favor of defendants Donna Shalala, Secretary of Health and Human Services ("the Secretary"), and, in part, in favor of Winona Rubin, director of the Hawaii Department of Human Services ("DHS"). The district court upheld a $1500 automobile equity limit for recipients of Aid for Families with Dependent Children ("AFDC"), but found that Hawaii was incorrectly applying that limit to determine Medicaid eligibility for certain individuals. We have jurisdiction under 28 U.S.C. § 1291. We affirm in part, reverse in part, and remand.

BACKGROUND

Paul Gamboa and members of the plaintiff class assert that the automobile equity limit set by the Secretary in 1982 is invalid. Plaintiffs contend that the $1500 limit was arbitrary and capricious when the Secretary issued it, and remains so because the Secretary has not adjusted the figure for inflation. The plaintiffs also argue that the Hawaii Department of Human Services improperly calculated the automobile equity allowed for certain recipients of Medicaid.

A. Facts and Prior Proceedings.

In November 1991, plaintiff Paul Gamboa had an operation to remove a brain tumor. Since then, he has been subject to disabling seizures. Gamboa owes approximately $40,000 in medical bills. He uses his car, a Buick, to take his two minor children to school, to go to the doctor's office, and to run errands.

On November 25, 1991, Gamboa applied for AFDC and Medicaid for himself and his two children. On December 31, 1991, DHS denied Paul Gamboa's application because the equity in his car exceeded the regulatory limit of $1500 set by the United States Department of Health and Human Services ("HHS") for AFDC recipients. 1

Gamboa appealed the decision to a Hawaii state court, naming Winona E. Rubin, DHS Director, as the defendant. Because an HHS regulation was at issue, Rubin filed a third-party complaint against the Secretary of HHS. The Secretary then removed the action to the United States District Court for the District of Hawaii. In district court, Gamboa filed an amended complaint, adding the Secretary as a defendant and seeking certification of the case as a class action. The class, which includes all individuals who are ineligible for benefits because the equity in their automobiles exceeds $1500, was certified on October 6, 1992.

All parties filed cross motions for summary judgment. On November 4, 1993, the district court upheld the $1500 equity limit, granting HHS's motion for summary judgment and denying the plaintiffs' motion for summary judgment. The court also granted in part and denied in part DHS's motion for summary judgment. The court granted DHS's motion with respect to the $1500 equity limit, but denied it with respect to Hawaii's Medicaid regulations. On November 29, 1993, the district court granted the plaintiffs' motion for summary judgment on the Medicaid issue. Gamboa, plaintiffs, and Rubin now appeal.

B. Statutory Framework.
1. AFDC.

In 1935, Congress established the Aid to Families with Dependent Children ("AFDC") program. AFDC is a cooperative federal-state program which provides monetary assistance to needy, dependent children. The federal government prescribes eligibility criteria for AFDC recipients and provides states with matching funds for distribution. The states administer the program according In 1955, the Secretary of the Department of Health, Education and Welfare ("DHEW"), HHS's predecessor, began imposing income and resource limitations on the states. See Hazard v. Shalala, 44 F.3d 399, 402 (6th Cir.1995). Under the regulations effective before 1975, families could qualify for AFDC benefits if they had less than $2000 in property. See Brown v. Secretary of Health and Human Servs, 46 F.3d 102, 104 (1st Cir.1995). These early regulations exempted the value of one automobile, regardless of its value, from the calculation of family resources. Id.

                to plans approved by HHS.   See 45 C.F.R. §§ 201.2 & 233.10(b)(1);  42 U.S.C. § 601
                

In 1975, the Secretary of DHEW issued a regulation that for the first time placed a cap on the automobile exemption. The regulation provided, that to the extent that a car's market value exceeded $1200, the difference would count toward a family's overall resource limit of $2000. Id. The District of Columbia Circuit struck down the regulation in National Welfare Rights Org. v. Mathews, 533 F.2d 637, 647-48 (D.C.Cir.1976), because the regulation failed to consider encumbrances on automobiles and because the administrative record gave no empirical basis for the limits the Secretary had chosen. As a result of the decision in National Welfare Rights, the automobile exemption reverted to the previous regulation which allowed the exemption of one car, regardless of its value. See Brown, 46 F.3d at 104.

In the Omnibus Budget Reconciliation Act of 1981 ("OBRA"), Congress for the first time imposed a statutory limitation on the amount of resources that an AFDC family may have. Pub.L. No. 97-35 § 2302, 95 Stat. 357, 844-5 (codified at 42 U.S.C. § 602(a)(7)(B)). OBRA amended the AFDC provisions, reducing the overall resource limit from $2000 to $1000 per family. The statute also provides that any state may exempt "so much of the family member's ownership interest in one automobile as does not exceed such amount as the Secretary may prescribe." 42 U.S.C. § 602(a)(7)(B)(i) (emphasis added).

In 1982, HHS adopted a regulation that set the automobile equity limit at $1500. 45 C.F.R. § 233.20(a)(3)(i)(B)(2). Under the regulation, an AFDC family can have only up to $1500 in equity in a car, and any amount over this equity limit is counted towards the $1000 statutory resource limit. The $1500 automobile equity limit was based on data from a 1979 survey of food-stamp recipients contained in a report submitted to Congress in 1981. The Secretary of HHS has not adjusted the $1500 equity limit for inflation since its adoption in 1982.

2. Medicaid.

Medicaid is a federal program that provides funds for medical assistance to indigent persons. See 42 U.S.C. § 1396 et seq. As with the AFDC program, states, like Hawaii, that participate in the Medicaid program must comply with federal regulations. Medicaid is a need-based program. As a result, Hawaii demands that Medicaid recipients satisfy certain resource limits.

ANALYSIS
A. Standing.

We review questions of standing de novo. See Wedges/Ledges of Cal., Inc. v. Phoenix, 24 F.3d 56, 61 (9th Cir.1994). Article III of the United States Constitution limits the jurisdiction of our court to actions that present "cases" or "controversies," a requirement that is analyzed through the doctrine of standing. The Supreme Court articulated the requirements for Article III standing in Lujan v. Defenders of Wildlife, 504 U.S. 555, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992):

First, the plaintiff must have suffered an "injury in fact"-an invasion of a legally-protected interest which is (a) concrete and particularized and (b) "actual or imminent, not 'conjectural' or 'hypothetical.' " Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be "fairly ... trace[able] to the challenged action of the defendant, and not ... the result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," Id. at 560-61, 112 S.Ct. at 2136 (citations omitted).

that the injury will be "redressed by a favorable decision."

Plaintiffs maintain they have standing to challenge the $1500 automobile equity limit because they allege that, but for this limit, they would have been eligible for AFDC benefits. Defendant Rubin asserts that plaintiffs' alleged injury will not "likely" be redressed with a favorable ruling. Defendant Rubin relies on Coakley v. Sunn, 895 F.2d 604 (9th Cir.1990). That case, however, is inapposite.

In Coakley, this court held that plaintiffs, who had received personal injury awards, did not have standing to challenge Hawaii's interpretation of the federal "lump sum" rule, 42 U.S.C. § 602(a)(17), which provides that AFDC recipients are ineligible for AFDC benefits when they receive a lump sum of income. 895 F.2d at 607. We reasoned that striking down Hawaii's regulation would not redress plaintiffs' injuries because the statute did not require states to provide any exception to the "lump sum" rule. Id. The statute at issue in Coakley provides that any "[s]tate may at its option recalculate the period of ineligibility ... [if] the income received has become unavailable to the members of the...

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