Johnson v. White, 147

• Decision Date: 28 November 1975
• Docket Number: No. 147,D,147
• Citation: 528 F.2d 1228
• Parties: Ruth JOHNSON et al., Plaintiffs-Appellants, v. Henry C. WHITE, Commissioner of Welfare, State of Connecticut, Defendant-Appellee. ocket 75--7153.
• Court: U.S. Court of Appeals — Second Circuit

Page 1228

528 F.2d 1228

Ruth JOHNSON et al., Plaintiffs-Appellants, v. Henry C. WHITE, Commissioner of Welfare, State of

Connecticut, Defendant-Appellee.

No. 147, Docket 75--7153.

United States Court of Appeals, Second Circuit.

Argued Oct. 10, 1975.

Decided Nov. 28, 1975.

David M. Lesser, New Haven, Conn. (William H. Clendenen, Jr., New Haven, Conn., Douglas Crockett and Dennis O'Brien, Willimantic, Conn., of counsel), for appellants.

Francis J. MacGregor, Asst. Atty. Gen. (Carl R. Ajello, Atty. Gen. of Conn., of counsel), for appellee.

Before KAUFMAN, Chief Judge, and FRIENDLY and SMITH, Circuit Judges.

FRIENDLY, Circuit Judge:

This class action by Connecticut beneficiaries of the Aid to Families with Dependent Children (AFDC) program, jointly funded by the Federal Government and the State, has been pending since September, 1971. It has required enormous effort by counsel for the plaintiffs and for the State, by HEW, and by Judge Blumenfeld, all of whom have labored conscientiously and cooperatively to achieve a just result. Although the history of this case is fully related in Judge Blumenfeld's opinion, 353 F.Supp. 69 (D.Conn.1972), some of the factual material must be repeated in order to put into perspective the points we are asked to decide.

In the Social Security Amendments of 1967, effective January 2, 1968, 81 Stat. 821,898, 42 U.S.C. § 602(a)(23), Congress added § 402(a)(23) to the Social Security Act. This stipulated that, in order to receive federal participatory funding, ¹ a state's plan for AFDC must

provide that by July 1, 1969, the amounts used by the State to determine the needs of individuals will have been adjusted to reflect fully changes in living costs since such amounts were established, and any maximums that the State imposes on the amount of aid paid to families will have been proportionately adjusted.

At that time, the State of Connecticut computed its 'standard of need' by determining a separate budget for each AFDC-assisted unit; while this budget included certain standardized sums for the basic needs of food, clothing, personal incidentals, and household supplies, the sums for shelter, utilities, and various 'special needs' were included either at the actual cost to the recipient unit or at that cost limited by a stated maximum. Payments were made on the basis of this standard of need as reduced by various sums representing income or resources otherwise available to the recipient unit. Following the Congressional mandate, the State Commissioner of Welfare proceeded to adjust a large part of the standard of need to account for inflation. In the absence of any action reducing the percentage of need to be met, this correspondingly increased the level of payment as well. Consultation with officials at HEW led to further adjustments in various components of the standard.

In 1971 the State decided to change from a system in which the needs of AFDC recipients were computed and paid on an individualized basis to a system in which, except for certain relatively unusual items, recipients would be paid on the basis of a 'flat grant,' varying only by the number of persons in the assisted unit. This new system was to be known as the Connecticut Family Assistance Plan (CFAP). In order to determine the standard of need upon which the grant could be computed, the State, in the summer of 1971, conducted an elaborate statistical analysis, which will be discussed in detail at various points in this opinion. For the moment, it will suffice to say that, in broad terms, the State computed the standard of need for each size of assistance unit by averaging together a random sample of the sums budgeted for those units (before income disregards) under the prior assistance program. The budgets used had been constructed in the period from June 1, 1970 to May 31, 1971.

The State planned, as of November 1, 1971, to implement a system in which the standard of need was constructed as just described, and the level of benefits would be equal to 85% of need. On October 28, 1971, following a hearing, the district judge issued a preliminary injunction preventing that implementation. ² At a further hearing held a few days later, the parties and the court agreed that HEW should be invited to review the plaintiffs' claims and to submit a brief as amicus curiae. HEW then conducted an extensive review of the State's program; the State incorporated into its plan various changes suggested during this review, which resulted in yet further updating of some of the component parts of the new averaged standard of need.

On April 3, 1972, HEW filed its brief endorsing the State's program. Defendant then moved to dissolve the preliminary injunction, including in its moving papers a representation of the State's willingness to raise the level of benefits to equal the standard of need, 'barring unforeseen circumstances.' Following another hearing, the district court, in an opinion dated June 12, 1972, terminated the preliminary injunction and, with two exceptions not here relevant, ordered judgment entered for the defendant.

Plaintiffs thereafter submitted two motions. One was entitled 'Motion to Reopen, Set Aside, Alter and Amend Judgment, For Relief From Judgment, To Allow Further Evidence and Allow Reargument, For Rehearing and For Stay of the Execution of Judgment Pending Disposition of Motion.' The other was entitled 'Motion to Amend and Supplement Findings of Fact and Conclusions of Law.' The motions were accompanied by various affidavits and proposed exhibits, indicating material which plaintiffs would introduce at the reopened hearing. At the parties' request decision on these motions was deferred pending lengthy efforts at settlement. When these ultimately proved unproductive, the judge denied the motions and this appeal followed.

I.

Plaintiffs' initial contention is that, by directing dismissal of the complaint, the judge transgressed his authority, and that we should reverse and remand on that ground alone. They do not contest that, just as a court may order a consolidation of the trial on the merits with 'an application for a preliminary injunction,' F.R.Civ.P. 65(a)(2), so it may order consolidation with a motion to end one. Their point, rather, is that the judge did not give notice of his intention until after the hearing had been concluded.

We agree that the judge should have done this either during the hearing or, in any event, before rendering his decision. Capital City Gas Co. v. Phillips Petroleum Co., 373 F.2d 128, 131 (2 Cir. 1967). However, in order to obtain a reversal for such an error, a party must show, not only surprise but 'prejudice' in the sense of having other material evidence to introduce. Nationwide Amusements, Inc. v. Nattin, 452 F.2d 651, 652 (5 Cir. 1971); Eli Lilly & Co. v. Generix Drug Sales, Inc., 460 F.2d 1096, 1106-07 (5 Cir. 1972); 11 Wright & Miller, Federal Practice and Procedure § 2950 at 487--88 (1973). Apart from plaintiffs' failure to make specific objection to the judge's failure to give notice in either of their two post-judgment motions, our disposition of the case is such that plaintiffs will have no ground to complain of the error. So much of their proffered evidence as we deem relevant can be offered on the remand we are directing on other grounds.

II.

Turning to the merits, all of plaintiffs' contentions center on the application of § 402(a)(23), which was given extensive consideration in Rosado v. Wyman, 397 U.S. 397, 90 S.Ct. 1207, 25 L.Ed.2d 442 (1970). However, since the parties are in sharp disagreement concerning the interpretation of that opinion, we find it convenient to deal at the outset with those attacks which do not require an in-depth analysis of it. Those attacks turn on Connecticut's alleged failure to adjust the component elements of its standard of need 'to reflect fully changes in living costs since such amounts were established.'

The most basic challenge concerns the use, as a basis for updating, of the Consumer Price Index, United States Urban Average, which allegedly does not reflect inflation said to be more rapid in Connecticut than in the country generally. ³ In a letter to the states dated October 17, 1969, HEW implemented the updating requirement of § 402(a)(23) by establishing seven 'Acceptable cost study methods.' These differed in the degree of the burden placed on the state administering agency. For example, while Method C allowed the state to 'conduct a statewide cost study of the items of living,' Method B--the method applied by Connecticut in part and now questioned--allowed the states to rely on federally-generated statistics. It provided for the use of 'the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index, for the appropriate region (to) determine the current index price for the applicable items of living.' In its amicus brief HEW interpreted this regulation as follows: '(I)t is the position of HEW that where a State such as Connecticut does not contain one of the 23 Standard Metropolitan Statistical areas for which there are individual city indexes then the use of the U.S. City Average Index will satisfy the requirement of using the C.P.I. for the 'appropriate region."

Plaintiffs have not presented--indeed in the absence of expensive cost studies could not present--definitive proof that the nationwide CPI--Urban Average Index failed to reflect changes in statewide Connecticut living costs. Their case at trial was that Connecticut should have used the cost of living indices for Boston and/or New York City, the two of the 23 Metropolitan Statistical areas nearest to Connecticut. We see no logic compelling that conclusion, particularly in view of HEW's contrary position; see Rosado, 397 U.S. at 415, 90 S.Ct. 1207. Geographical proximity does not guarantee identity of economic circumstances.

On appeal plaintiffs take a different tack, suggesting use of a Northeast regional index. While there is...