Decision Date29 May 1985
Docket NumberCiv. S-83-776 LKK.,No. Civ. S-83-406 LKK,Civ. S-83-406 LKK
Citation613 F. Supp. 558
PartiesPUBLIC AGENCIES OPPOSED TO SOCIAL SECURITY ENTRAPMENT, et al., Plaintiffs, v. Margaret HECKLER, Secretary, Department of Health and Human Services, et al., Defendants. STATE OF CALIFORNIA, Plaintiff, v. UNITED STATES of America, et al., Defendants.
CourtU.S. District Court — Eastern District of California



Betsy Grey, Atty., Dept. of Justice, Civ. Div., Washington, D.C., for defendants.

Paul Dobson, Deputy Atty. Gen., Sacramento, Cal., for State of California.

Ernest Schulzke, Sacramento, Cal., for plaintiffs in No. Civ. S-83-406 LKK.


KARLTON, Chief Judge.

The above captioned cases are currently before the court on cross motions for summary judgment, preliminary injunctions, and dismissal. The motions are disposed of in this Memorandum and Order.


For several years, many political subdivisions of the State of California ("the public agencies") have voluntarily participated in the Old Age, Survivors, and Disability Insurance Benefits program of the federal Social Security Act. The federal and state statutes governing the public agencies' participation permitted them to withdraw from the program so long as they satisfied certain termination requirements. On April 20, 1983, the Congress amended that portion of the federal statute which permitted the public agencies to withdraw. The public agencies and the State then sued the United States and the administrators of the Social Security program, challenging the constitutionality of the amendment. They argued that the amendment constituted an illegal tax upon the State, and that various constitutional rights of the State, the public agencies and their employees were violated by passage of the 1983 amendment. Those challenges to the amendment are currently before the court.

Among the constitutional arguments proffered, the public agencies allege that the April, 1983 amendment effected a taking of their contract rights without just compensation. In resolving this issue, I am mindful of my duty to construe statutes as constitutional. I am also mindful of the fact that the statute I consider was enacted by Congress as part of a comprehensive package of legislation dealing with the intractable problem of ensuring the financial viability of one of the most important social programs adopted by the federal government. Nonetheless, and no matter with what circumspection a judge approaches the task, under our system it is "emphatically the province and duty of the judicial department to say what the law is." Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60 (1803).

With all the deference to which an act of Congress is entitled, I nonetheless conclude in this opinion that, as against the United States, the public agencies were vested with the contractual right to withdraw from Title II, that this right constitutes "private property" within the meaning of the Just Compensation Clause of the Fifth Amendment, and that this property was taken from them by the United States without the "just compensation" mandated by that clause. I further determine, however, that to award just compensation in this case would frustrate the very purpose Congress had in passing the statute. Accordingly, I find that to comply with the provisions of the Constitution and to honor the evident intent of Congress I must declare the statute unconstitutional and of no effect to the degree that it prevents the State and its public agencies from withdrawing from the program.

Lest this Opinion be read too broadly, I briefly pause to clarify what this case is not about. This case does not involve mandatory participation in the Social Security system by the State of California or its public agencies. It may be assumed without deciding, that Congress could force the State and public agencies to provide Title II benefits to their employees, since the welfare of all United States citizens is of concern to the entire nation. See Garcia v. San Antonio Metropolitan Transit Authority, ___ U.S. ___, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985). It may be assumed (without deciding) that such an imposition might pass constitutional muster even though the Agreement permits the State to withdraw from the contract. In such a case, the State's contractual right to withdraw would appear to be unaffected (thus a Just Compensation claim might be avoided), but the termination right would do the State no good since it would then be under a statutory obligation to participate in the Program. This is not, however, the situation presented here. In the case before this court, the Congress has specifically divested the State and its public agencies of their contractual right to terminate their participation in the Program; it has further instructed the Secretary to effectuate that divestment by directing her to refuse to accept any otherwise properly tendered notifications of withdrawal. It is to this statutory scheme that the lawsuits are tendered and it is only this question which is addressed.


Effective January 1, 1951, the State of California ("the State") and the United States executed an agreement ("the Agreement") pursuant to 42 U.S.C. § 418(a)(1) under which the Old Age, Survivors, and Disability Insurance Benefits program of the Social Security Act ("the Program" or "Title II") would be extended to public employees if and when the State and its eligible public agencies chose to include them. (POSSE Complaint Exhibit "A"; CALIFORNIA Complaint Exhibit "A"). As required by the federal statute in effect at the time the Agreement was executed, the Agreement permitted the State to withdraw any coverage group1 of its public employees upon two years' advance notice to the Secretary.

Pursuant to the statute, the Agreement required the State to make certain payments to the United States Treasury to finance its participation, and the participation of its public agencies. The Agreement provided that the State would pay into the United States Treasury, "amounts equivalent to the sum of the taxes which would be imposed under the Federal Insurance Contributions Act." (Agreement, as amended April 13, 1955, CALIFORNIA Complaint Exhibit "A").

In order to carry out its end of the bargain, the State enacted enabling legislation. See Cal.Gov't Code §§ 22000-22603 (West 1980 & Supp.1985). Pursuant to the Agreement and that legislation, the State entered into individual agreements with those of its public agencies wishing to participate in the Program. The public agencies became enrolled in the program when the State and the United States modified the State/federal agreement to include them. See 42 U.S.C. § 418(c)(4). The public agencies were required by the state's enabling legislation to make certain "contributions" to the State as payment for their participation. See Cal.Gov't Code §§ 22551-53 (West 1980 & Supp.1985). As permitted by that legislation, the public agencies could withdraw from coverage (and concomitant liability to the state), upon two years' advance notice to the State. See Cal.Gov't Code § 22310 (West Supp.1985).

In sum, the United States agreed to enroll any public agency whose participation the State requested, so long as the State paid for the participation. In turn, the State agreed to enroll any public agency which requested it, so long as the public agency reimbursed the State for the costs of its participation. In an apparent attempt to avoid getting caught paying for public agencies which had already withdrawn from the Program, the State prohibited the public agencies from withdrawing except on the same terms and conditions (essentially) upon which the State itself could terminate their enrollment. Thus, in effect, the public agencies were permitted to withdraw only if the State could terminate their enrollment, thus ending the State's own liability for the public agencies' participation.

In April of 1983, Congress enacted section 103(a) and (b) of Public Law 98-21 (see 42 U.S.C.A. § 418(g) (West Supp.1985)). This amendment deleted that part of the former statute which permitted the State to terminate the agreement, and to terminate coverage for any set of its public employees. The amendment provided that any state participating at the time of enactment could not withdraw under any circumstances. It also purported to invalidate any notices of withdrawal which had already been filed, but which had yet to go into effect.2 The State had already submitted notices of voluntary withdrawal from the Social Security system on behalf of several of its public agencies.

These two related suits were filed to challenge that part of the enactment which prohibited the State from exercising the "escape clause" of the contract and thereby withdrawing from Title II.


The plaintiffs in P.O.S.S.E. v. Secretary of H.H.S. (Civ. S-83-406 LKK) ("POSSE") are several public agencies of the State of California, their employees and local taxpayers, and a group called Public Agencies Opposed to Social Security Entrapment ("POSSE"), who seek declaratory and injunctive relief against the defendant United States, the Secretary of Health and Human Services, and others.

For purposes of these cases, a "public agency" is "any city, county, city and county, district, municipal or public corporation, or any instrumentality thereof." Cal.Gov't Code § 22009 (West Supp.1985). The original public agency plaintiffs are three Special Districts organized under the laws of California. They are Yorba Linda Library District,3 North Bakersfield Recreation and Park District,4 and Delano Mosquito Abatement District.5 By order of November 17, 1983, the plaintiffs were granted leave to join additional plaintiffs. The plaintiffs joined were five general law cities,6 one charter city,7 and eleven additional Special Districts.8

The POSSE plaintiffs name as defendants, the United...

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