Knisley v. Bowman

• Decision Date: 13 April 1987
• Docket Number: No. K82-4.,K82-4.
• Citation: Knisley v. Bowman, 656 F.Supp. 1540 (W.D. Mich. 1987)
• Parties: William and Linda KNISLEY, Horace and Julia Johnson, Clara Daniels and Sandra Thrasher, on Behalf of themselves and all others similarly situated, Plaintiffs, v. Robert BOWMAN, Director of the Michigan Department of Treasury, Defendant.
• Court: U.S. District Court — Western District of Michigan

656 F. Supp. 1540

William and Linda KNISLEY, Horace and Julia Johnson, Clara Daniels and Sandra Thrasher, on Behalf of themselves and all others similarly situated, Plaintiffs, v.Robert BOWMAN, Director of the Michigan Department of Treasury, Defendant.

No. K82-4.

United States District Court, W.D. Michigan, S.D.

April 13, 1987.

Michigan Legal Services by Edward J. Hoort, Flint, Mich., Legal Services of Southwestern Michigan by William L. Coash, Battle Creek, Mich., for plaintiffs.

Frank J. Kelley, Atty. Gen. by John W. Jackson, Jr., Richard R. Roesch, Asst. Attys.Gen., Lansing, Mich., for defendant.

OPINION

ENSLEN, District Judge.

This action was originally brought to enjoin defendant from "absconding with income tax refunds of individuals without providing rudimentary due process."Essentially, plaintiffs challenge the State of Michigan's state tax refund intercept program, whereby the Michigan Department of Treasury(MDT) acts as a collection agent for all state agencies with monetary claims against individuals who file state income tax returns.Some time ago the court denied defendant's motion to dismiss plaintiffs' complaint pursuant to Fed.R. Civ.P. 12(b)(6).Knisley v. Monroe,539 F.Supp. 849(W.D.Mich.1982).Currently pending before the Court are plaintiffs' motion for class certification and cross motions for summary judgment.

I.FACTUAL BACKGROUND

The six named plaintiffs, two married couples and two individuals, were all adversely affected by the defendant's implementation of the tax intercept program in 1981.

While plaintiffs have only brought suit against the MDT and its Director, the state tax intercept program is essentially a cooperative effort in which MDT acts on behalf of other state agencies.Any state agency with an outstanding liquidated debt against a state taxpayer may, by following the appropriate procedures, have the MDT offset, by the amount of the debt, any state tax refund claimed by the debtor.There are, of course, numerous state agencies that refer debts to the MDT for participation in the tax intercept program.The nature of the debts owing to these different agencies for which claims are made to the MDT are even more varied.In the cases of the Michigan Employment Security Commission and the Michigan Vehicle Accident Claims Fund, the debts referred to the tax intercept program arise from administrative decisions or judicial judgments.The Department of Education, Central Michigan and Northern Michigan Universities often use the program to collect on promissory notes (student loans) on which the obligor has defaulted.Referrals to the MDT from the Department of Social Services(DSS) originate from at least seven different agency programs: (1) General Assistance, (2) Emergency Needs Program, (3) Aid to Families with Dependent Children, (4) Medical Assistance, (5) Food Stamp Program, (6)Court-Ordered Foster Care, and (7)Court-Ordered Child Support.The claims of all the named plaintiffs related to alleged obligations to one state agency — the DSS.

PlaintiffWilliam Knisley was twice adjudged in contempt of the Calhoun County Circuit Court's order for child support: on June 11, 1975 for the amount of $1,180.00 and on March 21, 1977 for the amount of $3,752.50.On February 2, 1979, Mr. Knisley acknowledged the increasing arrearage and agreed to an increasing adjudgment in his child support payments.On June 19, 1980, Mr. Knisley agreed to an increased wage assignment.

In the State of Michigan, the Office of the Friend of the Court(FOC) acts as an intermediary between the individual ordered to pay child support and the recipient of the support.All payments of child support are received initially by the FOC.M.C.L.A. § 552.509(replacing former M.C. L.A. § 552.252).¹Where, as in the Knisley case, the children receive public assistance under the Aid to Families with Dependent Children (AFDC) program, the State is assigned the rights to all back child support accrued at the time of application for assistance.42 U.S.C. § 602(a)(26)(A).²In that case, child support payments received by the FOC are transferred directly to the DSS.M.C.L.A. § 552.23(2).³

At some point in 1981, Mr. Knisley was certified by the FOC for a state tax refund offset.Mr. Knisley and his second wife, Linda, filed a joint state income tax return for the tax year 1980.Linda Knisley had no legal responsibility for her husband's child support obligations.Nevertheless, $349.46 of the Knisleys' joint tax refund for 1980 was intercepted by the MDT and transferred to the DSS on April 1, 1981.

PlaintiffHorace Johnson is or was subject to three separate orders of child support from the Calhoun County Circuit Court.He has been found in contempt of court for arrearages on these obligations numerous times between 1978 and 1981.Horace and Julia Johnson filed a joint state income tax return and for the tax year 1980.Once again, due to child support arrearages and AFDC reimbursement obligations, $172.62 of Johnson's state tax refund for 1980 was intercepted by MDT and transferred to DSS.Subsequent to the interception and transfer of funds, it was determined by DSS that Julia Johnson was a non-indebted spouse having earned 23% of the family's joint income reported on the 1980 tax return.Therefore, Julia Johnson received an administrative refund of 23% of the intercepted amount, or $39.70.

PlaintiffClara Daniels twice executed agreements to repay the Calhoun County DSS amounts received from that office.On April 28, 1975, Ms. Daniels agreed to repay $144.70 received for payment of "delinquent taxes."On May 18, 1978, Ms. Daniels signed an agreement that emergency relief in the amount of $74.00 received from the office would be repaid out of her "property tax rebate check."On August 25, 1977, the local DSS office sent a letter to Ms. Daniels demanding repayment of the delinquent balance of $92.00 on the original 1975 amount.On June 30, 1980, the local DSS sent another letter demanding repayment of the $74.00 debt acknowledged in 1978.This letter, however, evidences that the 1978 agreement to repay was not a separate debt in addition to the amount owed on the 1975 aid.Rather, the $74.00 balance referred to in the 1978 agreement was merely the remaining balance on the 1975 debt.Nevertheless, DSS referred the matter to MDT, which intercepted and transferred to DSS $205.00 of Ms. Daniels' homestead property tax credit for 1980.On July 13, 1981, DSS issued a $39.00 administrative refund to Ms. Daniels, stating that by the department's calculations, that much of the debt had been paid.It appears to this Court that the DSS erroneously added the $92.00 balance from the 1975 aid and the $74.00 balance on the "1978 aid" to arrive at a "total balance" of $166.00.Of course, the Department's own letter of June 30, 1980, reveals that this computation is plainly in error.The Court is unaware whether Ms. Daniels has ever been made whole for this erroneous deprivation.

On February 3, 1978, PlaintiffSandra Thrasher(a/k/a Sandra Wilcox) signed an agreement to repay the Calhoun County DSS an amount of $523.60 received for emergency relief.According to the agreement, this amount was to be repaid by March 31, 1978.Although Ms. Thrasher was sent letters demanding repayment in July and October of 1980, it appears that no effort to repay the amount was ever made.The MDT intercepted her 1980 income tax refund and homestead property tax credit and transferred the full amount, $521.00, to DSS.

II.PLAINTIFFS' MOTION FOR CLASS CERTIFICATION

Plaintiffs have moved pursuant to Fed.R.Civ.P. 23(a) and (b)(2) to have the following class certified: "all those persons who have had income tax refunds withheld by the Defendants MDT and its Director without notice and the opportunity for a hearing and all those persons who may have income tax refunds so withheld by Defendants in the future."Rule 23 provides, in pertinent part:

(a) Prerequisites to a Class Action.One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable.An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied and, in addition:

....

(2)the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole emphasis added.

The parties dispute the plaintiffs' ability to meet the four prerequisites of (a) with respect to their proposed class.For the reasons set forth in the following discussion, the Court believes that plaintiffs can only make the required showings of (a) and (b)(2) with respect to a class more discrete than that proposed.A more appropriate class is defined as all those persons who have in the past been aggrieved by defendants' interception of state income tax refunds pursuant to a referral from the DSS, and those persons who will be so aggrieved in the future.

With respect to either the plaintiffs' proposed class or the more discrete class suggested by the Court, the numerosity requirement of Rule 23(a)(1) would be satisfied.While the Court has no exact figures before it, it appears from the information obtained in discovery that the number of people aggrieved by DSS-related tax refund interceptions since the program began is most certainly in the hundreds and possible thousands.The Court will take judicial notice of the fact that the number of plaintiffs in the smaller class is substantial enough to make joinder "impracticab...