Reed v. Lukhard

• Decision Date: 26 July 1984
• Docket Number: Civ. A. No. 83-0493.
• Parties: Ona Mae REED, et al., Plaintiffs, v. William L. LUKHARD, et al., Defendants.
• Court: U.S. District Court — Western District of Virginia

591 F. Supp. 1247

Ona Mae REED, et al., Plaintiffs, v. William L. LUKHARD, et al., Defendants.

Civ. A. No. 83-0493.

United States District Court, W.D. Virginia, Roanoke Division.

July 26, 1984.

Claude Lauck, Legal Aid Society of Roanoke Valley, Roanoke, Va., Gilman Roberts, Va. Legal Aid Society, Inc., Danville, Va., Jill Hanken, Virginia Poverty Law Ctr., Inc., Richmond, Va., Claire E. Curry, Client Centered Legal Services of S.W. Va., Inc., Castlewood, Va., for plaintiffs.

John P. Alderman, U.S. Atty., E. Montgomery Tucker, Asst. U.S. Atty., Roanoke, Va., Diane C. Moskal, Regional Atty., Charlotte Hardnett, Asst. Regional Atty., Region III, HHS, Philadelphia, Pa., John A. Rupp, Sr. Asst. Atty. Gen., Richmond, Va., for defendants.

MEMORANDUM OPINION

TURK, Chief Judge.

PROCEDURAL POSTURE

This case is before the court on cross-motions for summary judgment. Plaintiffs Ona Mae Reed, Sallie Long, and Ruth Wilcher instituted this action on June 6, 1983 on their own behalf and on behalf of a proposed class of persons similarly situated. They seek injunctive and declaratory relief pursuant to 5 U.S.C. § 701-706 and 42 U.S.C. § 1983 in connection with the termination of benefits under § 602(a)(17) of the Aid to Families with Dependent Children Program (AFDC).¹ Jurisdiction is predicated on 28 U.S.C. §§ 1331 and 1343.

After a hearing on plaintiffs' motion for a preliminary injunction this court entered an order on June 28, 1983 enjoining the defendants from applying the "lump sum" income rule of 45 C.F.R. § 233.20(a)(3)(ii)(D) and ADC Manual § 305.4(c) to all three named plaintiffs.² Plaintiffs' request for a preliminary injunction as to the proposed class was, however, denied. Reed v. Lukhard, 578 F.Supp. 40, 45 (W.D. Va.1983). On August 1, 1983, the court ordered joinder of the Secretary of HHS as a necessary defendant. Thereafter, the court granted the motions of Opal Mae Cook and Stella King for intervention as individual plaintiffs. The matter is now ripe for summary judgment and for disposition of plaintiffs' motion for class certification.

STATEMENT OF FACTS

In 1981, Congress enacted the Omnibus Budget Reconciliation Act, Pub.L. 97-35 which amended the ADFC Program, 42 U.S.C. § 601 et seq. Section 602(a)(17) was added, which changed the treatment of lump sum payments received by AFDC applicants or recipients. Prior to enactment of this section, if an AFDC assistance unit received nonrecurring lump sum funds they were considered "income" in the month of receipt and the recipient was rendered ineligible for AFDC benefits. Once the funds were reduced to the state's standard of need and the recipient was otherwise eligible for AFDC, the assistance unit would be reinstated on the AFDC rolls. This new section requires state AFDC plans to provide for a period of ineligibility for AFDC recipients as follows:

A State plan for aid and services to needy families with children must ... (17) provide that if a person specified in § 602 8(a)(i) or (ii) receives in any month an amount of income which, together with all other income for that month not excluded under paragraph (8), exceeds the State's standard of need applicable to the family of which he is a member —

(A) such amount of income shall be considered income to such individual in the month received, and the family of which such person is a member shall be ineligible for aid under the plan for the whole number of months that equals (i) the sum of such amount and all other income received in such month, not excluded under paragraph (8), divided by (ii) the standard of need applicable to such a family, and (B) any income remaining (which amount is less than the applicable monthly standard) shall be treated as income received in the first month following the period of ineligibility specified in subparagraph (A).

§ 602(a)(8), which is incorporated by reference into § 602(a)(17) specifies:

that, with respect to any month, in making the determination of need under § 602(a)(7), the State agency —

(i) shall disregard all of the earned income of each dependent child receiving aid to families with dependent children who is (as determined by the State in accordance with standards prescribed by the Secretary) a full-time student or a part-time student who is not a full-time employee attending a school, college or university, or a course of vocational or technical training designed to fit him for gainful employment;

(ii) shall disregard from the earned income of any child or relative applying for or receiving aid to families with dependent children, or of any other individual (living in the same house as such relative and child) whose needs are taken into account in making such determination, the first $75 of the total of such earned income for such month (or such lesser amount as the Secretary may prescribe in the case of an individual not engaged in full-time employment or not employed throughout the month).

Pursuant to 45 C.F.R. § 233.20(a)(3)(ii)(D)³, the federal defendant's regulation implementing § 602(a)(17), all recipients of nonrecurring lump sum income from any source are subject to the lump sum rule. The state defendant has adopted this interpretation in § 305.4c, Virginia ADC Manual⁴.

Plaintiffs challenge the defendants' treatment of nonrecurring lump sum compensation for personal injuries on two grounds. First, they contend that the statutory language of § 602(a)(8) clearly excludes from the period of ineligibility specified in § 602(a)(17) those AFDC recipients who have no earned income in the month of reciept of a personal injury award. Second, they maintain that since money received in compensation for personal injuries merely restores the injured party to the status quo, it does not constitute "income" within the meaning of the lump sum rule. According to plaintiffs, such funds must be treated as "resources," which would render the recipient ineligible for benefits only as long as total resources exceeded the state's standard of need for the family.⁵ Under the defendants' current treatment as "income" subject to the lump sum rule, the period of ineligibility varies depending on the amount of the lump sum and continues for a time certain, regardless of when the funds are exhausted.

A full statement of the facts surrounding the three original plaintiffs' claims appears in this court's opinion of June 28, 1983 and will not be repeated here. See 578 F.Supp. at 41, 42. It is sufficient to note that of the five named plaintiffs, four received nonrecurring lump sum income from personal injury awards which resulted in the establishment of a period of ineligibility for AFDC benefits. The remaining plaintiff Reed, received a worker's compensation award and was similarly ineligible for AFDC benefits. For all plaintiffs, the lump sums were allegedly exhausted before the expiration of their respective periods of ineligibility.

Before proceeding to a disposition of the summary judgment issues the court will address plaintiffs' motion for class certification.

CLASS CERTIFICATION

Plaintiffs contend that since defendants' policies are in effect throughout the Commonwealth, class relief is the only appropriate vehicle for vindication of their rights. They seek a classwide injunction enjoining defendants from applying the lump sum rule to AFDC recipients without earned income and to recipients of personal injury awards, as well as a classwide declaration of plaintiffs' rights to reimbursement of benefits improperly denied beginning October 1, 1981. Plaintiffs further assert that should the court determine that their AFDC benefits were unlawfully terminated or reduced after October 1, 1981, appropriate relief would include issuance of a notice to all class members informing them of the court's decision and advising them of any state administrative procedures available for reimbursement of benefits improperly denied.

Pursuant to Rule 23 of the Federal Rules of Civil Procedure, a class may be certified by the court if it meets the four criteria of subsection (a) which requires that:

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

In addition, at least one of the conditions set forth in subsection (b) must be fulfilled in order to maintain a class action. Plaintiffs invoke subsection (b)(2) as applicable to their case. That section provides for classwide relief if:

the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief with respect to the class as a whole.

For the reasons stated, the court believes that classwide relief is necessary and appropriate, but that the class, as drawn by the plaintiffs, is overinclusive. Therefore, the court will certify the following class of individuals in this case:

All those persons in Virginia whose benefits, since 10-1-81, have been, continue to be, or will be denied, reduced, or terminated solely because of the "lump-sum" policies set out at 45 C.F.R. § 233.20(a)(3)(ii)(D) and at ADC Manual § 305.4c whose "lump-sum" was or will be derived from compensation for personal injuries.

Neither the plaintiffs nor the state defendants have been able to determine the exact number of cases where the denial or termination of AFDC benefits was based solely on the receipt of personal injury awards or settlements. The record indicates, however, that from October 1, 1981 through August 1983 at least 669 AFDC cases were terminated and 100 applications for benefits were denied because of the lump sum rule. See Defendants' Responses to Interrogatories. The...