Lowry v. Obledo

• Court: California Court of Appeals
• Writing for the Court: REGAN
• Citation: Lowry v. Obledo, 111 Cal.App.3d 14, 169 Cal.Rptr. 732 (Cal. App. 1980)
• Decision Date: 03 June 1980
• Parties: Stephanie LOWRY et al., Plaintiffs, Appellants and Cross-Respondents, v. Mario OBLEDO et al., Defendants, Respondents, and Cross-Appellants. Civ. 18525.

Page 732

169 Cal.Rptr. 732

111 Cal.App.3d 14

Stephanie LOWRY et al., Plaintiffs, Appellants and Cross-Respondents, v. Mario OBLEDO et al., Defendants, Respondents, and Cross-Appellants.

Civ. 18525.

Court of Appeal, Third District, California.

June 3, 1980.

Diane Morrison, Legal Aid Society of Sacramento County, Sacramento, for Stephanie Lowry et al.

George Deukmejian, Atty. Gen., by Thomas E. Warner and Elisabeth Brandt, Deputy Attys. Gen., Sacramento, for Mario Obledo et al.

REGAN, Acting Presiding Justice.

This case is a class action against the Secretary of the State Health and Welfare Agency and the Director of the Department of Benefit Payments seeking to have a state regulation concerning the Aid to Families with Dependent Children (AFDC) program declared invalid and to have class members' AFDC benefits recalculated. Plaintiffs challenge as contrary to federal law a state regulation disallowing as reasonable work-related expenses those child care expenses paid to nonworking members of the AFDC applicant's household. The court below declared the regulation to be contrary to both state and federal law. The court granted two named plaintiffs peremptory writs of mandate ordering defendants to recalculate their grants. However, the court refused to grant a writ of mandate for the class as a whole.

Three issues are raised on appeal, one by plaintiffs (as appellants) and two by defendants (as cross-appellants). Defendants contend that the court below erred in its interpretation of federal law and therefore should not have granted judgment for plaintiffs on the merits. Defendants contend that they were denied due process by the lower court's failure to certify the class and order notice to its members prior to consideration of the merits of the case. Finally, plaintiffs urge that the trial court abused its discretion in limiting the class to present AFDC recipients and refusing to order a peremptory writ of mandate for the class compelling defendants to recalculate class members' past awards.

The class action was brought by three named plaintiffs: Stephanie Lowry, Marilyn Hoover and Rita Trejo.

Stephanie Lowry became employed in February 1977. From February through May she paid her mother $1 an hour to provide child care for her son. In May she moved into her mother's house. In July the County of Sacramento completed an evaluation of this child care arrangement certifying it as adequate but disallowing the expenses as contrary to the state regulation in question inasmuch as Lowry's mother had become a nonworking member of Lowry's household. Had Lowry not moved into her mother's home, the expenses paid her mother for child care would have continued to be treated as reasonable work expenses, and deductible from income. At the fair hearing Lowry's mother testified that she had given up her nonpaying missionary work to care for her grandson and that she could not care for the child without payment for her services. Lowry testified that she first asked her mother to care for the child because the child had been physically abused by the previous sitter.

Marilyn Hoover became employed June 1, 1977, at which time she lived with her two aunts. One aunt worked. Hoover paid the other aunt for child care services provided to Hoover's child for June and July. The county evaluated this child care plan and disallowed the expenses because Hoover's aunt was a nonworking member of her household. The administrative record shows that the aunt also provided child care services for her stepbrother's children but does not reflect whether she was compensated for this service. Hoover testified at her fair hearing that she worked from 3:45 p. m. to 12:15 a. m. and was unable to make alternative child care arrangements. She also testified that her aunt charged her $4 per day and that this was the least expensive rate she could find.

In June 1977, Rita Trejo began working in a temporary job scheduled to end August 31, 1977. During this period she lived with her mother and seven siblings. She paid her 16-year-old nonworking sister $270 to care for her two children for July. In August the county evaluated the child care arrangement and refused to allow the expenses for that month because the child-care provider was a nonworking member of the recipient's household. The county also concluded that the $270 paid impermissibly exceeded the community rate for two children of $180. Trejo did not appear at her fair hearing and therefore was not granted relief at trial.

Plaintiffs originally challenged both state Welfare and Institutions Code section 11451.6 and Manual of Policy and Procedures (MPP) section 44-113.241(b) as contrary to federal law. Plaintiffs contended that the federal law requires that the only limitation placed on allowable work expenses be that of reasonableness. The trial court found instead that the regulation was contrary to both state and federal law inasmuch as the regulation did not allow for individualized determinations of the reasonableness of the child care expenses. The federal statute, 42 U.S.C. section 602(a)(7), requires that states participating in the AFDC program deduct from an applicant's income those expenses "reasonably attributable to the earning of ... income" for purposes of measuring the applicant's income in order to determine both eligibility for the program and the size of the applicant's grant. Welfare and Institutions Code section 11451.6 enacts this requirement as state law, providing for "exemptions of earned income for work-related expenses, (including) reasonable and necessary costs for child care. For purposes of this section, reasonable and necessary costs of child care are defined as actual costs, not to exceed the costs of securing child care available in the community which meets the minimum standards...." (Emphasis added.)

MPP section 44-113.241(b) reads in pertinent part, "The reasonable and necessary cost of obtaining such care shall be allowed when the county determines that adequate care for the recipient's children cannot be provided during his/her working hours by nonworking persons in his/her household. However, the amount allowed shall not exceed the cost of securing such child care through a child care facility meeting the standards outlined in Chapter 30-350 ... when the county determines that such a facility is available to the recipient." It is not disputed on appeal that the AFDC program will allow as reasonable work-related expenses child care expenses paid to nonhousehold members when a nonworking member of the recipient's household refuses to provide such care.

Plaintiffs also sought peremptory writs of mandate for themselves and their class pursuant to Welfare and Institutions Code section 10962 and Code of Civil Procedure section 1094.5. Section 10962 provides that any individual dissatisfied with the outcome of administrative hearings procedures may file a petition with the superior court pursuant to Code of Civil Procedure section 1094.5. The latter section provides for the administrative writ of mandamus.

Plaintiffs sought to define the class for purposes of both declaratory relief and the peremptory writs of mandate as those AFDC recipients "who have been refused a work expense deduction for child care costs paid to non-working household members since February 1, 1977 or who have been refused approval of a child care plan to employ a non-working household member as a babysitter since February 1, 1977."

Plaintiffs simultaneously moved for summary judgment on the declaratory relief and for certification that the class was proper. Defendants then moved for partial summary judgment with respect to the peremptory writs of mandate. Defendants also objected to consideration of the merits of the case prior to certification of the class and notice to its members. Notwithstanding defendant's objection, the trial court simultaneously certified the class and ruled on the merits.

The court certified the class for purposes of declaratory relief only, defining it as 200 persons "who are currently recipients of Aid to Families with Dependent Children (AFDC), are currently employed, and are not allowed, as a deduction from earnings countable in computation of their AFDC benefits, costs which they actually incurred by paying non-working members of their respective households for child care during working hours, where such disallowance is based solely upon the provisions of MPP section 44-113.241(b)." MPP section 44-113.241(b) was declared invalid insofar as it failed to provide for individualized determinations of whether the incurred cost of child care was reasonable. The court granted peremptory writs of mandate ordering defendant to set aside the fair hearing determinations of plaintiffs Lowry and Hoover. The court did not certify the class for purposes of the cause of action seeking a peremptory writ of mandate for the class members and no such writ was ordered.

I

Defendants contend that the trial court erred in holding that MPP section 44-113.241(b) is violative of Welfare and Institutions Code section 11451.6 and 42 U.S.C. § 602(a)(7). We do not agree.

The effect of MPP section 44-113.241(b) is to place an absolute bar against allowing as work-related expenditures deductible from an applicant's income those child care expenses paid to a member of the applicant's household. However, the United States Supreme Court has interpreted 42 U.S.C. § 602(a)(7) as "a congressional directive that no limitation, apart from that of reasonableness, may be placed upon the recognition of expenses attributable to the earning of income." (Shea v. Vialpando (1974) 416 U.S. 251, 260, 94 S.Ct. 1746, 1753, 40 L.Ed.2d 120, 129. Emphasis added.) The court concluded that the requirement of recognizing all reasonable expenditures was based upon congressional concern that a contrary policy would discourage applicants from seeking and retaining employment. Defendants' refusal to...