Guardianship Estate of Keffeler v. STATE, DSHS, 67680-1.

• Decision Date: 29 April 2004
• Docket Number: No. 67680-1.,67680-1.
• Court: Washington Supreme Court
• Parties: GUARDIANSHIP ESTATE OF Danny KEFFELER, by Wanda PIERCE, Guardian, and other persons similarly situated, Respondents, v. STATE of Washington, Department of Social and Health Services; Lyle Quasim, Director of the Department of Social and Health Services; and Michael R. Hobbs, Program Manager for the Department of Social and Health Services, Appellants.

88 P.3d 949

151 Wash.2d 331

GUARDIANSHIP ESTATE OF Danny KEFFELER, by Wanda PIERCE, Guardian, and other persons similarly situated, Respondents, v. STATE of Washington, Department of Social and Health Services; Lyle Quasim, Director of the Department of Social and Health Services; and Michael R. Hobbs, Program Manager for the Department of Social and Health Services, Appellants.

No. 67680-1.

Supreme Court of Washington, En Banc.

Argued October 30, 2003.

Decided April 29, 2004.

Christine O. Gregoire, Attorney General, Debra Casparian, Asst., Olympia, WA, Lawrence Lockwood, Asst., Lacey, WA, William Collins, Asst., Olympia, WA, for Appellants.

Rodney Reinbold, Okanogan, WA, Richard B. Price, Omak, WA, for Respondents.

Eugene A. Studer, Assistant United States Attorney, Tacoma, WA, Deborah Kant, William Kanter, Colette Matzzie, and Peter D. Ke Bler, of the Department of Justice, Washington, DC, for Amicus Curiae (Commissioner of the U.S. Social Security Administration).

OWENS, J.

The representative class plaintiff, Keffeler, argues that the State violated the equal protection clause of the fourteenth amendment to the United States Constitution by misusing funds and refusing to exercise discretion in social security fund disbursement, causing foster children with the State as a representative payee to be treated differently from children with a private representative payee. Keffeler further argues that the State of Washington violated the due process clause of the Fourteenth Amendment by refusing to provide appropriate notice to children and their guardians before the State was chosen as a representative payee. We find that children with a state representative payee are not treated differently from children with a private representative payee and that prior federal notice sent to guardians fulfills procedural due process. Therefore, we reverse the trial court on the constitutional issues and hold that the State has not violated the equal protection or procedural due process requirements of the Fourteenth Amendment. Further, if Keffeler has concerns about the misuse of funds, he should direct his claims to the Social Security Administration (Administration).

FACTS

Keffeler brought a class action suit in Okanogan County Superior Court challenging the State's use of foster children's social security benefits. Keffeler based his claims on constitutional and statutory violations. The court granted Keffeler summary judgment based on the State's violation of 42 U.S.C. § 407. The court also noted that the State violated procedural due process by not sufficiently notifying children and their guardians prior to appointment of the State as representative payee. Mem. Op., Clerk's Papers (CP) at 628.¹ This court affirmed the trial court on the statutory basis and therefore did not address Keffeler's constitutional claims. Guardianship Estate of Keffeler v. Dep't of Soc. & Health Servs., 145 Wash.2d 1, 4, 32 P.3d 267 (2001) (Keffeler I), overruled by Wash. State Dep't of Soc. & Health Servs. v. Guardianship Estate of Keffeler, 537 U.S. 371, 381, 123 S.Ct. 1017, 154 L.Ed.2d 972 (2003) (Keffeler II)

. The United States Supreme Court reversed our decision and held that the State's use of benefits to reimburse itself for foster care was not a violation of 42 U.S.C. § 407. Keffeler II, 537 U.S. at 375, 392,

123 S.Ct. 1017. Because the United States Supreme Court decided the case on a statutory basis, it did not address the constitutional claims. A motion to resume jurisdiction over the constitutional issues in the case was granted on May 29, 2003. We now review these issues de novo. See Shoop v. Kittitas County, 149 Wash.2d 29, 33, 65 P.3d 1194 (2003) (stating that constitutional challenges are reviewed de novo); Fusato v. Wash. Interscholastic Activities Ass'n, 93 Wash.App. 762, 767, 970 P.2d 774 (1999) (same).

ISSUES

1. Did the State violate the Fourteenth Amendment's equal protection clause by misusing funds and refusing to exercise discretion in social security fund disbursement?

2. If the State is required to provide notice prior to appointment of a representative payee, is the Administration's notice adequate to satisfy procedural due process?

ANALYSIS

(1) LEGAL CONTEXT

The Department of Social and Health Services (DSHS) has the authority to accept custody of children from parents and juvenile courts in order to provide for the child's physical care and maintenance costs if needed. RCW 74.13.031(6). The secretary of DSHS is the custodian of any money the child may receive while in DSHS placement. By statute, the secretary has the authority to disburse these funds "for such personal needs of such person as the secretary may deem proper and necessary," and funds may be applied "against the amount of public assistance otherwise payable to such person." RCW 74.13.060(1), (2). Therefore, under RCW 74.13.060(2), a child's funds obtained from any source may be used to reimburse any benefits paid to the child or on behalf of the child during the time the child is in DSHS placement. See WAC XXX-XX-XXXX (explaining that unexempted resources and unearned income of a child in foster care must be used by DSHS for the child's cost of care).²

One source of funds a child may receive while in DSHS custody is social security benefits. 42 U.S.C. § 401 (2000) (Title II benefits/OASDI) allows children to receive social security benefits if they are unmarried and are dependent on a wage earner entitled to these benefits who has subsequently died. Keffeler II, 537 U.S. at 375,123 S.Ct. 1017. 42 U.S.C. § 1381 (2000) (Title XVI benefits/SSI) allows children that are blind or disabled to receive benefits if their income and assets are below $2,000. Id.; see 42 U.S.C. § 1382 (2000). Although the two types of benefits are separate and distinct programs, we agree with the State that for the purpose of this litigation and the issues raised, they are comparable. CP at 529.

Supplemental Security Income (SSI) and Old-Age, Survivors, and Disability Insurance (OASDI) benefits are usually distributed to the entitled individual, but the Social Security Commissioner (Commissioner) may decide to distribute the benefits to a representative payee instead. Keffeler II, 537 U.S. at 375-77, 123 S.Ct. 1017; 42 U.S.C. §§ 405(j)(1)(A), 1383(a)(2)(A)(ii)(I) (2000); 20 C.F.R. §§ 404.2010(b), 416.610(b) (2003). The Commissioner will choose a representative payee if it is "in the interest of such individual (as determined by the Commissioner of Social Security in regulations)." 42 U.S.C. § 405(j)(2)(A)(ii) (2000) (emphasis added); see also 42 U.S.C. § 1383(a)(2)(B)(i)(II) (2000); Keffeler II, 537 U.S. at 376-77, 123 S.Ct. 1017. The Commissioner does an investigation and considers several factors to determine who should be the representative payee. 42 U.S.C. §§ 405(j)(2)(A)-(D), 1383(a)(2)(B) (2000); 20 C.F.R. §§ 404.2020, 416.620 (2003). Further, public institutions will not be appointed if there is another qualified person to act as a representative payee. Keffeler II, 537 U.S. at 376, 389-91, 123 S.Ct. 1017; 20 C.F.R. §§ 404.2021(b), 416.621(b) (2003). Therefore, in most cases where the State is appointed representative payee, there is no one else to apply for or receive the benefits on behalf of the child. Keffeler II, 537 U.S. at 389-91, 123 S.Ct. 1017; see also Aff. of Tamara Erickson, Suppl. Clerk's Papers (SCP) at 81-84 (explaining the duties of DSHS as a representative payee). As of September 1999, there were 10,578 children in DSHS custody, about 1,500 children received OASDI and/or SSI benefits, and DSHS acted as a representative payee for 1,411 children. Keffeler II, 537 U.S. at 379 & n. 3, 123 S.Ct. 1017.

Both a private representative payee and a state representative payee must use funds in accordance with federal and state laws and regulations. The funds may be used only for the use and benefit of the beneficiary and must be used in the best interest of the beneficiary as determined by the representative payee. Keffeler II, 537 U.S. at 376-77, 123 S.Ct. 1017; 20 C.F.R. §§ 404.2035, 416.635 (2003). The Commissioner has determined that benefits are used in the best interest of the beneficiary if the benefits are used for current maintenance and care: food, shelter, clothing, medical care, and personal comfort items. 20 C.F.R. §§ 404.2040, 416.640 (2003); see also Keffeler II, 537 U.S. at 376-77, 382-83, 123 S.Ct. 1017 (stating proper use of benefits and that deference should be given to the Social Security Act and regulations). If any funds are left "[a]fter the representative payee has used benefit payments consistent with the guidelines... any remaining amount shall be conserved or invested on behalf of the beneficiary." 20 C.F.R. § 404.2045 (2003) (emphasis added); see also 20 C.F.R. § 416.645 (2003) ("If payments are not needed for the beneficiary's current maintenance or reasonably foreseeable needs, they shall be conserved or invested") (emphasis added). However, if more than $2,000 is conserved on behalf of SSI children, the children will be ineligible for further benefits. Keffeler II, 537 U.S. at 390, 123 S.Ct. 1017; 42 U.S.C. § 1382(a)(1)(B), (3)(B) (2000).

Complimentary to federal regulations, WAC XXX-XX-XXXX orders DSHS to use a foster child's unexempted income to cover the cost of the child's care. The regulation also orders any private representative payee to send any payments received on the foster child's behalf to the DSHS child support division.³ When DSHS receives a child's social security benefits, the benefits are credited to a Foster Care Trust Fund Account, kept by the state treasurer. Keffeler II, 537 U.S. at 378,123 S.Ct. 1017.⁴ This fund includes subsidiary accounts for each child. Id. Usually, a foster care provider will purchase current maintenance needs for a child and DSHS reimburses the foster care provider according to a fixed compensation schedule. Id. DSHS then compares payments to a provider with the...