Larry v. Yamauchi

• Decision Date: 21 December 1990
• Docket Number: No. LR-C-89-831.,LR-C-89-831.
• Citation: 753 F. Supp. 784
• Parties: Margaret LARRY and Cleta Page on behalf of themselves and all those similarly situated, Plaintiffs, v. Dr. Terry YAMAUCHI, Director of the Arkansas Department of Human Services, Defendant, Clayton Yeutter, individually and in his official capacity as Secretary of the United States Department of Agriculture, Defendant/Intervenor.
• Court: U.S. District Court — Eastern District of Arkansas

753 F. Supp. 784

Margaret LARRY and Cleta Page on behalf of themselves and all those similarly situated, Plaintiffs, v. Dr. Terry YAMAUCHI, Director of the Arkansas Department of Human Services, Defendant Clayton Yeutter, individually and in his official capacity as Secretary of the United States Department of Agriculture, Defendant/Intervenor.

No. LR-C-89-831.

United States District Court, E.D. Arkansas, W.D.

December 21, 1990.

Marilyn F. Rauch, Central Arkansas Legal Services, David J. Manley, Legal Services of Arkansas, Little Rock, Ark., and Brian Wolfman, Public Citizen Litigation Group, Washington, D.C., for plaintiff.

Carolyn Parham Young, Dept. of Human Services, Office of General Counsel, James B. Barnhill, Dept. of Human Services Office of General Counsel, Little Rock, Ark., for defendant.

Brent Bumpers, U.S. Attys. Office, Little Rock, Ark., Marcia K. Sowles and Stephen Hart, Dept. of Justice, Washington, D.C., for defendant/intervenor.

MEMORANDUM OPINION

SUSAN WEBBER WRIGHT, District Judge.

Certain food stamp recipients challenge the Secretary of Agriculture's policy of counting monetary assistance in the form of utility reimbursements received under the Housing Act, 42 U.S.C. § 1437 et seq., as income for the purposes of calculating food stamp benefits. This case is properly decided on cross-motions for summary judgment.¹ As required by Rule 56 of the Federal Rules of Civil Procedure, there is no genuine issue as to any material fact.

The plaintiffs represent a class consisting of food stamp recipients subject to having their food stamp allotments reduced or denied on account of the defendants' policy of counting as income monies paid as utility reimbursements by public housing or other authorized agencies. Defendant Yamauchi is the Director of the Arkansas Department of Human Services ("DHS"), the state agency responsible for administering the food stamp program in compliance with federal laws and regulations. Defendant and Intervenor Yeutter, as Secretary of Agriculture, is responsible for establishing national standards for the administration of the food stamp program, including the policy that Section 8 utility reimbursements should be counted as income under the Food Stamp Act, 7 U.S.C. §§ 2011 et seq. ("the Act").

Plaintiffs, as recipients of federal housing subsidies, pay "rent" in the amount of thirty percent of their adjusted gross income. Included in the housing subsidy is a predetermined amount for reasonable utilities consumption known as a "utility allowance." Unlike some public housing tenants, the plaintiffs pay some or all of their costs for utilities directly to the utility suppliers. As more fully described below, the utility allowance is credited against the plaintiffs' rental obligation. In cases such as the plaintiffs', where the utility allowance exceeds the amount of their rent payment, the balance of the utility allowance is paid directly to the tenant. This monetary payment is known as a "utility reimbursement."

Households whose utilities are directly provided by the public housing authority do not receive a utility reimbursement. Neither do households for which the utility allowance is less than the rental payment. For these households, the Secretary excludes the utility allowance benefit from household income in calculating food stamp allotments. However, for the plaintiffs and the class they represent, the Secretary counts as household income the utility allowance benefit to the extent it exceeds the plaintiffs' rental obligation and is remitted to the plaintiffs in the form of a utility reimbursement.

The calculation of food stamp benefits is based on the plaintiffs' relative levels of household income; the lower the income level, the more food stamps the household is entitled to receive and vice versa. The plaintiffs' food stamp allotment would be greater each month if, all other things being equal, their utility reimbursements were not included as income by the defendants in calculating their food stamp awards.

The plaintiffs first allege that the counting of utility reimbursements as income for food stamp purposes violates their rights under the Food Stamp Act by failing to properly exclude such payments under 7 U.S.C. § 2014(d)(11)(A), which provides for the exclusion of "any payments or allowances made for the purpose of providing energy assistance ... under any Federal law."

The plaintiffs further claim that the defendants have violated their rights under the equal protection clause of the fourteenth amendment and the due process clause of the fifth amendment by creating an arbitrary and irrational distinction (1) between households whose utility allowance does not exceed the total rent obligation (in which case no part of the utility allowance is counted as food stamp income) and households whose utility allowance does exceed the total rent obligation (in which case the utility reimbursement is counted as food stamp income), and (2) between households that do not receive utility reimbursements because the public housing agency directly provides the energy, leaving the tenant family with no obligation to the utility company (in which case no part of the utility allowance is counted as food stamp income), and households that receive utility reimbursements (in which case the reimbursement is counted as food stamp income).

Finally, the plaintiffs allege that Defendant Yeutter failed to follow the rule-making procedures set forth in the Administrative Procedure Act, 5 U.S.C. § 553, prior to directing Defendant Yamauchi to count the plaintiffs' utility reimbursement as food stamp income, that such failure was arbitrary, capricious, and an abuse of discretion under 5 U.S.C. § 706(2)(A), and that the directives given to Defendant Yamauchi are thus null and void.

The plaintiffs seek declaratory and injunctive prospective relief as well as retrospective relief in the amount of reimbursements for all past food stamp benefits withheld as a result of the challenged policy. For the reasons that follow, the Court grants the defendants' motion for summary judgment and denies the plaintiffs' motion for summary judgment.

I. STATUTORY AND REGULATORY BACKGROUND

A. The United States Housing Act

Under the United States Housing Act of 1937, 42 U.S.C. § 1437 et seq., as amended, the Department of Housing and Urban Development ("HUD") operates and funds various housing programs for low income families to remedy "the unsafe and unsanitary housing conditions and the acute shortage of decent, safe, and sanitary dwellings for families of low income." 42 U.S.C. § 1437. These programs include low-rent public housing owned and operated by public housing agencies ("PHAs"), see 42 U.S.C. § 1437c, and the Section 8 Housing Assistance Payment Program, authorized by the Housing and Community Development Act of 1974, Pub.L. 93-383, 88 Stat. 633, 656 (codified at 42 U.S.C. § 1437f), which provides assistance payments for low-income families renting units from private landlords and other entities. HUD pays Section 8 subsidies through the local PHA to the owners, landlords, or mortgagees rather than directly to the beneficiaries. See 42 U.S.C. § 1437f(b) and (c).² The amount of HUD's contribution under the Section 8 program is equal to the difference between the contract rent and the amount the household is required to pay. 42 U.S.C. § 1437f(c)(3).

Under both programs, the Brooke Amendment to the Housing Act generally limits the rent that may be charged for a dwelling unit assisted under the Housing Act to thirty percent of a household's monthly adjusted income. 42 U.S.C. § 1437a(a)(1). The tenant's rental obligation for occupancy of a public housing or Section 8 unit is called the "Total Tenant Payment." 24 C.F.R. §§ 813.107 (Section 8 and related programs), 913.107 (public housing and related programs). Rent covers all housing costs, including occupancy and utilities. 24 C.F.R. §§ 882.105(a) (Section 8), 965.472 (public housing). See 42 U.S.C. § 1437f(c)(1) (rent under Section 8 includes "utilities and all maintenance and management charges"). HUD defines "utilities" as "electricity, gas, heating fuel, water and sewerage services, and trash and garbage collection," but not telephone service. 24 C.F.R. § 965.472.

Prior to 1981, the utilities in multi-resident apartment buildings used for public housing were metered on an aggregate basis, with one meter measuring the utility use of the entire building. The PHA included utility costs in the rent charged each tenant, which under the Brooke Amendment could not exceed thirty percent of the tenant's adjusted gross income. In 1981 HUD began requiring local PHAs to install individual utility meters for each unit of public housing to encourage reduced energy consumption. 24 C.F.R. §§ 965.401-410.

Presently, there are three methods for paying utilities in public and Section 8 housing. First, in some public housing units, the PHA may still purchase the utilities directly and add the monthly utility costs to the rental payment. However, the tenant pays no more than thirty percent of his adjusted gross income under the Brooke Amendment, subject to additional flat fee charges for certain appliances. 24 C.F.R. §§ 965.471(b), 965.477(b). Second, in public housing units where "checkmeters" have been installed to measure the consumption of PHA-supplied utilities, the PHA may assess a surcharge if the tenant exceeds a predetermined average utility consumption figure. The surcharge is a payment owed in addition to the Brooke Amendment rent charge. 24 C.F.R. § 965.470-72. Third, an individual meter is installed at the dwelling unit and the resident purchases utility services directly from the utility supplier.

Where the PHA or Section 8 owner does not supply utilities to the tenant and the tenant must pay utility costs directly, HUD "historically has considered that `rent' should take into account some amount paid by the tenant family for...