Lamberton v. Shalala

• Decision Date: 07 July 1994
• Docket Number: No. CV 91-609 TUC JMR.,CV 91-609 TUC JMR.
• Citation: 857 F. Supp. 1349
• Parties: Karen LAMBERTON, Individually, on Behalf of her minor children and on behalf of all other similarly situated, Plaintiffs, v. Donna E. SHALALA, Secretary of Health and Human Services, in her official capacity, and Charles E. Cowan, Director, Department of Economic Security, Defendants.
• Court: U.S. District Court — District of Arizona

857 F. Supp. 1349

Karen LAMBERTON, Individually, on Behalf of her minor children and on behalf of all other similarly situated, Plaintiffs, v. Donna E. SHALALA, Secretary of Health and Human Services, in her official capacity, and Charles E. Cowan, Director, Department of Economic Security, Defendants.

No. CV 91-609 TUC JMR.

United States District Court, D. Arizona.

July 7, 1994.

William E. Morris, Southern Ariz. Legal Aid, Inc., Tucson, AZ, for plaintiffs.

Don B. Overall, Asst. U.S. Atty., Tucson, AZ, and Charles P. Gillet, Office of the Regional Counsel, Dept. of HHS, Region IX, San Francisco, CA, and Bonnie E. Elber, Asst. Atty. Gen., Phoenix, AZ, for defendants.

AMENDED ORDER

ROLL, District Judge.

INTRODUCTION

Plaintiffs are members of a class who have been or are being denied Aid to Families with Dependent Children ("AFDC") benefits because their ownership interest in a single motor vehicle exceeds the maximum allowable limit. This action challenges the validity of 45 C.F.R. § 233.20(a)(3)(i)(B)(2) which restricts to $1500 the equity value a household may have in an automobile. Named as defendants are Donna Shalala, Secretary of Health and Human Services ("HHS"), and Charles E. Cowan, Director, Department of Economic Security ("DES").¹ Class plaintiffs contend that the regulation is arbitrary, capricious and otherwise contrary to law, and is violative of the equal protection guarantee implicit in the fifth amendment to the United States Constitution.

The case is now before the Court on the parties' cross-motions for summary judgment.² Summary judgment is appropriate only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The initial burden rests on the moving party to point out the absence of any genuine issue of material fact. Once satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). On a summary judgment motion, all reasonable doubt as to the existence of a genuine issue of fact should be resolved against the moving party. Hector v. Wiens, 533 F.2d 429, 432 (9th Cir.1976). The non-moving party's evidence is to be taken as true, and all inferences are to be viewed in the light most favorable to the non-moving party. Eisenberg v. Insurance Co. of N. Am., 815 F.2d 1285, 1289 (9th Cir.1987). When both sides have filed cross-motions, "each movant has the burden of presenting evidence to support its motion that would allow the district court, if appropriate, to direct a verdict in its favor." High Tech Gays v. Defense Industry Sec. Clearance Office, 895 F.2d 563, 574 (9th Cir.1990) (citation and quotations omitted).

For the reasons that follow, the Court concludes that there are no material issues of fact in dispute and that summary judgment in favor of the class is appropriate. Fed. R.Civ.P. 56(c).

FACTUAL BACKGROUND

The undisputed facts are as follows. Plaintiff Karen Lamberton ("Lamberton") is the natural mother of her three children and sole adult in her household. Lamberton and her children became indigent when Lamberton's husband was sentenced to a term of imprisonment. The family liquidated their personal property and forfeited their home in a foreclosure proceeding. At the time the case was filed, Lamberton was attending community college and her three daughters were enrolled in elementary school.

The Lambertons previously received AFDC support, but their benefits were terminated upon reapplication in March of 1991. DES notified Lamberton that her adverse eligibility determination was due to excessive automobile ownership interest. DES valued Lamberton's vehicle, and her corresponding equity interest, at $4375.³ Lamberton unsuccessfully appealed the decision to an administrative law judge. This lawsuit followed.

STANDARD OF REVIEW

The Administrative Procedure Act ("APA") requires a reviewing court to set aside agency findings of fact which are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). The scope of review is quite narrow. Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). Agency action having no rational basis in the record or manifesting a clear error of judgment may be rejected, but the court is not to substitute its judgment for that of the agency. Marsh v. Oregon Natural Resources Council, 490 U.S. 360, 378, 109 S.Ct. 1851, 1861-62, 104 L.Ed.2d 377 (1989); United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376 (9th Cir.1992). However, the court must ensure that "the decision is based on a consideration of the relevant factors...." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). An agency rule is considered arbitrary and capricious if the agency has relied on factors which Congress did not intend it to consider, entirely failed to consider an important aspect of the problem, or offered an explanation that runs counter to the evidence. Motor Vehicles Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2866-67, 77 L.Ed.2d 443 (1983).

In reviewing an agency's construction of a statute, the court must reject those interpretations that are either contrary to clear congressional intent or frustrate the policy that Congress sought to implement. Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837, 843 n. 9, 104 S.Ct. 2778, 2781-82 n. 9, 81 L.Ed.2d 694 (1984). "Under the APA, an agency's discretion is not boundless, and the court must be satisfied ... that the agency examined the relevant data and articulated a satisfactory explanation for its action based upon the record." People of the State of California v. F.C.C., 905 F.2d 1217, 1230 (9th Cir.1990).

DISCUSSION

AFDC is authorized under Title IV of the 1933 Social Security Act. 42 U.S.C. § 601 et seq. It is a cooperative federal-state program that furnishes subsistence payments to eligible households with dependent children deprived of parental support. Although states have some authority over eligibility criteria, Congress and the Secretary of Health and Human Services determine limitations of the income and resources allowed qualifying households. Figueroa v. Sunn, 884 F.2d 1290, 1291 (9th Cir.1989).

In 1981, Title IV-A of the Social Security Act was amended under the auspices of the Omnibus Budget Reconciliation Act ("OBRA") to authorize the Secretary of HHS to adopt regulations excluding as a resource countable for purposes of AFDC eligibility, "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). Within the year, the Secretary issued a notice of rulemaking which established $1500 as the maximum equity that could be disregarded.⁴ The regulation as formally promulgated provides that a maximum of $1500 equity in an automobile may be disregarded for purposes of determining whether AFDC applicants own assets exceeding the maximum allowed eligible households.⁵ 45 C.F.R. § 233.20(a)(3)(i)(B)(2). This regulation authorizes states to adopt federally approved assistance plans providing for an automobile equity of less than $1500, but not greater than that sum. In Arizona, AFDC eligibility determinations are made by the Department of Economic Security ("DES") pursuant to state plan provisions.⁶

The $1500 Limit is Arbitrary and Capricious

In choosing the $1500 motor vehicle equity limit for AFDC recipients, the Secretary relied upon a survey conducted in 1979 by the Food and Nutrition Service ("FNS"). See Food and Nutrition Service, Assets of Low Income Households: New Findings on Food Stamp Participants and Nonparticipants (January 1981) (unpublished manuscript) hereinafter "FNS Study". The Secretary interpreted the FNS study as establishing that 96% of food stamp recipients with automobiles had an equity interest no greater than $1500. Based on this information alone, the Secretary determined that the $1500 equity limit was "within the range of the vast majority of current food stamp recipients and given that the food stamp population tends to be, on the average, more affluent than AFDC recipients, this limit appears reasonable and supportable for AFDC recipients." 47 Fed.Reg. 5648, 5656-5657 (Feb. 5, 1982).

The Court finds that the FNS study did not provide a rational basis for the $1500 equity limit. In reaching this conclusion, the Court recognizes the work of Peter Fisher, Ph.D., who was commissioned to analyze the basis and consequences of the AFDC automobile equity rule. Dr. Fisher discovered that the FNS study concentrated on vehicle ownership interests among households in receipt of food stamps, which placed those families at income levels at or below the national average. Peter S. Fisher, An Economic Investigation into the Basis for and Consequences of the H.H.S. Rule Eliminating from Eligibility for A.F.D.C. Benefits Families Who Have Over $1500 Equity in a Vehicle 14-15 (May 1990) (unpublished manuscript) hereinafter "Fisher Study". Dr. Fisher posits that the FNS study is overbroad and does not accurately reflect the unique characteristics of AFDC households, relying instead upon a presumed overlap between membership in the AFDC population and food stamp eligible homes. Dr. Fisher points out that numerous AFDC households are comprised of recently divorced women and their minor children who experienced better economic circumstances during marriage and acquired more costly vehicles at that time.⁷ Fisher Study at 5. Moreover, many of the children for whom AFDC payments are intended are...