Littlefield v. State, Dept. of Human Services

• Decision Date: 02 July 1984
• Parties: Elizabeth LITTLEFIELD v. STATE of Maine, DEPARTMENT OF HUMAN SERVICES.
• Court: Maine Supreme Court

Page 731

480 A.2d 731

Elizabeth LITTLEFIELD v. STATE of Maine, DEPARTMENT OF HUMAN SERVICES.

Supreme Judicial Court of Maine.

Argued Jan. 19, 1984.

Decided July 2, 1984.

Eaton, Glass, Marsano & Woodward, Francis C. Marsano (orally), Belfast, for plaintiff.

Katherine Greason, Asst. Atty. Gen., Department of Human Services (orally), Augusta, for defendant.

Before McKUSICK, C.J., ROBERTS, VIOLETTE, WATHEN, GLASSMAN, and SCOLNIK, JJ., and DUFRESNE, A.R.J.

DUFRESNE, Active Retired Justice.

Elizabeth Littlefield, an AFDC recipient, pursuant to Rule 80C(m), M.R.Civ.P., seeks in this appeal a review of the judgment of the Superior Court (Waldo County) affirming rulings of the Department of Human Services terminating for the period of 37 months her monthly benefits of three hundred thirty-two ($332.00) dollars for herself and a minor daughter under the Aid to Families with Dependent Children program. Because the Department of Human Services (DHS) in its application of the lump sum rule so-called in a manner inconsistent with its own regulations erroneously calculated the appellant's term of ineligibility to receive benefits under the program, we vacate the judgment below and remand the case for proper evaluation.

In November, 1982, while under an AFDC grant of $332.00 per month for herself and her minor daughter, Ms. Littlefield accepted $21,000.00 in full settlement of a personal injury and property damage tort claim arising out of a previous automobile accident in which she received a compression fracture to her back, her car was demolished and other personal property damaged. Her AFDC benefits at the time were her only source of financial subsistence. As is usually the case in such settlements, the insurance company had made the $21,000 draft in both Ms. Littlefield's and her attorney's names so as to guarantee payment of legal, medical and hospital fees and expenses connected with the litigation. It is not disputed that Ms. Littlefield's attorney had undertaken to guarantee the payment of hospital and doctor bills to be incurred pending disposition of her claim out of the settlement proceeds. Thus, the appellant's attorney did retain the sum of $8,648.35 out of the draft payment, turning over the balance of $12,351.65 to Ms. Littlefield as her net share of the settlement. ¹ On receipt of this money, the appellant promptly proceeded to dispose of it by paying alleged personal debts to her mother ($3,500.00), and her sister ($1,000.00). She had borrowed $1,569.75 from her father to replace her automobile completely destroyed in the accident and cancelled that indebtedness out of the insurance proceeds. She bought a clothes dryer, dishwasher and sewing machine for $1,076.00. She further depleted the settlement funds by paying off past due utility bills, and a bank loan, and department store debts. She also purchased other furniture, clothing, food and wedding rings with the balance of the stated moneys.

When Ms. Littlefield notified the Department of Human Services of the insurance settlement and her receipt of the net amount of $12,351.65, the agency sent her a notice dated January 17, 1983 indicating that her AFDC payments would be terminated for 37 months. ² The following day, the appellant requested an administrative hearing on her welfare termination. On February 2, 1983 the Department of Human Services held a hearing to review the 37-month termination of Ms. Littlefield's AFDC benefits. By decision dated February 14, 1983, the hearing officer approved the assistance termination. Ms. Littlefield, pursuant to 5 M.R.S.A. § 11001, et seq. (M.R.Civ.P. 80C), filed a complaint in the Superior Court which, by decision dated June 27, 1983, denied her request for a temporary injunction and affirmed the decision of the hearing officer.

The Department justifies its decision on the basis of its welfare regulations then in effect. Printed in the Maine Public Assistance Payments Manual (MPAPM), the regulations purport to have the force of law and serve as the official guiding chart in the administrative assessment of welfare eligibility of applicants. Among other things, they establish levels of financial need, below which individuals are eligible for assistance. They set in detail the dollar amounts to which eligible needy applicants are entitled. They further specify the maximum amounts of resources which welfare recipients may have or keep in reserves before losing their eligibility to receive benefits under the AFDC program. They indicate that the income of participants will be considered in the assessment of benefits which will be tailored to reflect that factor.

More specifically, the Department justifies its termination of Ms. Littlefield's welfare benefits for the period of 37 months on its "Non-Recurring Lump Sum Income" regulation as it existed at the time of the receipt of the insurance settlement and of the ruling made thereon. This regulation at the time read in part as follows:

G. Special Instructions for Treatment of Certain Types of Income and Deductions

1. Non-Recurring Lump Sum Income (For example: retroactive benefits such as Social Security, Workman's Compensation, Unemployment, etc.)

If the assistance unit's total amount of countable earned and unearned income (excluding the AFDC grant and including the lump sum income) exceeds the standard of need in the month of receipt of the income, the unit will be ineligible for assistance for the number of full months derived by dividing the total income by the needs standard applicable to that family. Any income remaining after this calculation is treated as if it is income received in the first month following the period of ineligibility and is considered available for use at that time. The first month of the period of ineligibility is the month of receipt of the lump sum income....

Sums of money earmarked for specific purposes such as settlement for back medical bills resulting from accidents or injury, compensation for loss of resources, legal fees, etc. are to be excluded as lump sum income, so long as the money is used for the specific purpose intended under the terms of the settlement.

Sums of money received from IRS Tax Refunds are to be considered as an asset.

M.P.A.P.M. ch. II, § C, p. 9 § G(1). ³

In our approach to the issue, whether the Department was correct in its decision respecting the impact of the lump sum rule upon Ms. Littlefield's eligibility to continued AFDC payments, we must have in mind that the AFDC program under the Social Security Act is a joint federal-state undertaking purposely designed to provide financial assistance to needy dependent children and the parents or relatives who live with and care for them. Its comprehensive stated purpose is "to help ... parents or relatives to attain or retain capability for the maximum self-support and personal independence consistent with the maintenance of continuing parental care and protection ... ." 42 U.S.C. § 601. It is financed in large measure by the federal government on a matching fund basis, and participating states must submit for approval AFDC plans which are in conformity with the federal act and the regulations promulgated thereunder by the Department of Health, Education, and Welfare, the administrative federal agency involved. The program, however, is then administered by the states, which are given broad discretion in determining both the standard of need and the level of benefits. Shea v. Vialpando, 416 U.S. 251, 253, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974).

Also, in the administration of the AFDC program which is based on a scheme of cooperative federalism, the federal legislation (42 U.S.C. § 602(a)(1984)), as well as the State of Maine law (22 M.R.S.A. § 3741 (1980)), requires state compliance with the several requirements of the Social Security Law as amended and the federal regulations promulgated thereunder. These federal regulations are binding on participating states and regulations promulgated under state authority which contravene, or are inconsistent with, either the act itself or the federal regulations are invalid under the Supremacy Clause of the United States Constitution. U.S.C.A. Const. art. 6, cl. 2. See King v. Smith, 392 U.S. 309, 317, 88 S.Ct. 2128, 2133, 20 L.Ed.2d 1118 (1968); Randall v. Goldmark, 366 F.Supp. 947, 952 (D.Mass.1973); Ottman v. Fisher, 319 A.2d 56, 60-61 (Me.1974). State programs restricting eligibility or calculating need in a manner inconsistent with federal regulations are not valid. Miller v. Youakim, 440 U.S. 125, 99 S.Ct. 957, 59 L.Ed.2d 194 (1979). Furthermore, mere approval of a State AFDC plan by the Department of Health, Education & Welfare, the federal agency, will not insulate the terms of the plan from judicial review and assure its validity. See Woodman v. Dept. of Health & Social Services, 101 Wis.2d 315, 304 N.W.2d 723, 727 (1981). And, as we said in Ottman v. Fisher, 319 A.2d, at 64, it is clear that Maine has adopted the same goals for its AFDC program as those adopted by Congress.

We will now proceed to consider the appellant's points on appeal in the light of these stated preliminaries. It was argued below and the argument was presented to us on appeal that the lump sum rule used by the appellee to terminate Ms. Littlefield's AFDC welfare payments was inapplicable to her case, since she did not, at the time, have earned income and, under the Social Security Act and federal regulations, the nonrecurring lump sum rule applies, so it is claimed, only to those AFDC families with earned income in the month of receipt of the lump sum payment. This very argument was made in Sweeney v. Murray, 732 F.2d 1022 (1st Cir.,1984) and was rejected. The interpretation of federal statutes, including the Social Security Act, and the construction of federal regulations or policies are matters of federal rather than state law and the proper subject for determination by federal rather than state courts. See Finch v....