Ortiz v. Eichler

• Decision Date: 05 July 1985
• Docket Number: Civ. A. No. 84-16 MMS.
• Parties: Nilsa ORTIZ, John Peek, Annie Mae Revelle, Marcinda Jackson, and Denise Trader, individually and on behalf of all other persons similarly situated, Plaintiffs, v. Thomas P. EICHLER, in his official capacity as Secretary of the Delaware Department of Health and Social Services, and Phyllis T. Hazel, in her official capacity as Director of the Department's Division of Economic Services, Defendants.
• Court: U.S. District Court — District of Delaware

616 F. Supp. 1046

Nilsa ORTIZ, John Peek, Annie Mae Revelle, Marcinda Jackson, and Denise Trader, individually and on behalf of all other persons similarly situated, Plaintiffs, v. Thomas P. EICHLER, in his official capacity as Secretary of the Delaware Department of Health and Social Services, and Phyllis T. Hazel, in her official capacity as Director of the Department's Division of Economic Services, Defendants.

Civ. A. No. 84-16 MMS.

United States District Court, D. Delaware.

July 5, 1985.

COPYRIGHT MATERIAL OMITTED

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Anne M. Perillo, Community Legal Aid Soc., Inc., Wilmington, Del., for plaintiffs.

Margaret S. Proctor, Deputy Atty. Gen., Dept. of Justice, Wilmington, Del., for defendants.

OPINION

MURRAY M. SCHWARTZ, Chief Judge.

The six named plaintiffs in this proposed class action challenge the procedures used by the Division of Economic Services of the Delaware Department of Health and Social Services ("DES") relating to three forms of federal public assistance: Aid to Families with Dependent Children ("AFDC"), Food Stamps, and Medicaid. Specifically, they complain that defendants have acted unlawfully in two areas: 1) notification of public assistance claimants of adverse action and 2) conduct of administrative hearings regarding the eligibility of persons for public assistance. Named as defendants are Thomas Eichler, in his official capacity as Secretary of the Delaware Department of Health and Social Services, and Phyllis T. Hazel, in her official capacity as Acting Director of DES.¹

Plaintiffs allege the practices employed by DES in providing notice and a hearing before reducing or terminating public assistance benefits violate plaintiffs' procedural rights under the pertinent federal regulations and the United States and Delaware Constitutions. In particular, plaintiffs complain that DES employees have considered hearsay evidence and evidence not in the record, failed to provide plaintiffs with timely and adequate notice, initiated and considered ex parte communications, failed to issue decisions that explain the reasons for the determination and the evidence relied upon, and failed to provide an impartial decisionmaker.

Upon completion of discovery, plaintiffs filed motions for class certification and for summary judgment. For the reasons stated below, the motion for class certification will be granted, and the motion for summary judgment will be granted in part and denied in part.

I. Facts

A. Fair Hearings Procedures

The relevant facts are either undisputed or, where disputed, are set forth in the light most favorable to the defendants, the party opposing the motion. The three federal programs at issue — AFDC, Medicaid, and Food Stamps — were established by federal law to provide financial, medical, and nutritional assistance to low-income persons. As part of their duties to administer these programs, the Secretaries of the Department of Health and Human Services and the Department of Agriculture have promulgated detailed regulations that specify eligibility criteria for these programs and set forth various requirements for how claims are to be processed. See 7 C.F.R. §§ 271-85 (1985); 42 C.F.R. §§ 430-56 (1984); 45 C.F.R. §§ 201-82 (1984).

The administrative burden of determining which persons are eligible for these programs falls on the states. Each state must formulate a plan for administering each program and submit it to the appropriate federal agency for approval. As part of its plan, the state must "provide for granting an opportunity for a fair hearing before the State agency to any individual whose claim for benefits is denied or is not acted upon with reasonable promptness." 42 U.S.C. § 602(a)(4); see also 42 U.S.C. § 1396a(a)(3); 7 U.S.C. § 2020(e)(10); cf. 7 U.S.C. § 2015(b)(2). The Secretary responsible for each program has promulgated regulations specifying the minimum fair hearing rights that each state, through its plan, must afford individuals. See 7 C.F.R. § 273.15-.16; 42 C.F.R. § 431.200-.246; 45 C.F.R. § 205.10. Although the language of the regulations for each act differs in many respects, the basic procedural rights afforded to claimants are virtually identical, except that persons charged with intentional violations of the Food Stamp program are afforded some additional rights, presumably because intentional program violators are subject to punitive measures. Compare 7 C.F.R. § 273.15 with 7 C.F.R. § 273.16.

In Delaware, a DES caseworker makes the initial decision to deny an application for public assistance benefits or to reduce or terminate existing benefits. Any person² whose application for benefits is denied or whose existing benefits are reduced or terminated is entitled to written notice of the agency action and an opportunity for a fair hearing. See DES Economic Services Policy Manual, D.I. 57, §§ 5000-5201 (hereinafter "DES Manual"). The method chosen by Delaware and DES to provide fair hearings involves two stages. First, the claimant appears at an evidentiary hearing before a State Hearing Officer who administers oaths and controls the conduct of the hearing. The agency caseworker puts forward the reasons why he or she made the initial decision to deny, reduce, or terminate benefits, along with any evidence that supports the decision. The claimant, along with his or her representative, has an opportunity to present his or her case, including supporting evidence. Also present at the hearing is the State Hearing Representative, whose role is the subject of some dispute between the parties and who will be discussed at length below. It is undisputed, however, that the Hearing Representative prepares a recommended hearing decision and submits it, a draft decision letter, and the hearing record to the Director of DES, but not to the claimant.³ At the second level of the decision making process, the Director reviews these materials and either accepts or rejects the recommended decision. In the latter case, the decision letter is returned to the Hearing Representative for redrafting. When the decision letter is satisfactory to the Director, he or she signs it and sends it to the claimant. This letter represents the final decision of the state agency with no further right of appeal at the administrative level. Claimants can appeal decisions "resulting in financial harm to the appellant" within thirty days to the state Superior Court, which will sustain the agency's decision if it is supported by substantial evidence on the record. 31 Del.C. § 520 (1984 Supp.) (effective September 29, 1984).

B. The Named Plaintiffs' Cases

The named plaintiffs all were adversely affected by DES decisions, applied for and were granted hearings, and received adverse decisions from the agency. Plaintiff Nilsa Ortiz received $75 per month in Food Stamps until September 30, 1983. When she applied for recertification, as is periodically required, her Food Stamps allotment was reduced to $24 per month commencing in October, 1983. The issue at her hearing was whether Ms. Ortiz customarily purchased and prepared food in common with her boyfriend, who earned some income. After the hearing, the Hearing Representative recommended reversing the claims worker's decision to reduce her benefits because he found that Ms. Ortiz did not customarily purchase and prepare food with her boyfriend. Upon receiving this recommendation, the Director asked Ms. Ortiz's case supervisor for more information and looked at her case file, which contained some documents that were not part of the hearing record. Appendix ("A"), D.I. 47A, at 11-12. The Director also had conversations about Ms. Ortiz's case with the Hearing Representative, Hearing Officer, and DES Program Administrator. Ms. Ortiz was never informed that the Director looked at her case file and had these conversations, nor was she sent a copy of the recommended decision. On December 12, 1983, the Director informed Ms. Ortiz by letter that the caseworker's decision setting her Food Stamps benefits at $24 per month was affirmed.

Plaintiff John Peek received notice in October, 1983, that an administrative disqualification hearing had been scheduled concerning his $75 monthly Food Stamps allotment because he had allegedly filed a false application. At the hearing, Mr. Peek testified and explained that his failure to include certain information was unintentional. Several applications filed by Mr. Peek were admitted into evidence, although the interviewers for the applications were not present. In the course of making his decision, the Hearing Representative examined a Quality Control Report prepared by a person who was not present at the hearing,⁴ but did not rely on this report. A-102-103. The Hearing Representative recommended that Mr. Peek be disqualified for six months. The Director accepted this recommendation and sent Mr. Peek a final decision letter stating in pertinent part: "You are disqualified from participation in the Food Stamp Program for six (6) months beginning January 1984. At a hearing on December 2, 1983, which you attended, a determination was made that you intentionally violated program rules by providing false, misleading information concerning income from employment." A-140.

The third plaintiff, Annie Mae Revelle, had a hearing to determine "whether she owed DES for an overpayment of AFDC and Medicaid benefits that were made to her grandson Rasheen between August 1982 and June 1983." Complaint, ¶ 21a; see Answer, ¶ 21a. Ms. Revelle's counsel presented several legal arguments at the hearing concerning the alleged overpayment. The text of the final decision of the Director states, in its entirety:

The decision of the Division of Economic Services to file a claim for repayment of benefits paid under the Aid to Families with Dependent Children (AFDC) Program on behalf of your grandchild, Rasheen Revelle, is affirmed.

Based on the information presented at your Fair Hearing, I find that the agency is

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