Smith v. Dep't of Human Servs. Dir.

• Decision Date: 26 June 2012
• Docket Number: 309894.,Docket Nos. 309447
• Citation: 297 Mich.App. 148,822 N.W.2d 616
• Parties: SMITH v. DEPARTMENT OF HUMAN SERVICES DIRECTOR.
• Court: Court of Appeal of Michigan — District of US

297 Mich.App. 148

822 N.W.2d 616

SMITH

v.DEPARTMENT OF HUMAN SERVICES DIRECTOR.

Docket Nos. 309447, 309894.

Court of Appeals of Michigan.

Submitted June 5, 2012, at Detroit.

Decided June 26, 2012, at 9:05 a.m.

Jacqueline Doig and Terri L. Stangl, for plaintiffs.

Bill Schuette, Attorney General, John J. Bursch, Solicitor General, Richard A. Bandstra, Chief Legal Counsel, and Joseph E. Potchen, Assistant Attorney General, for defendant.

Before: SERVITTO, P.J., and METER and FORT HOOD, JJ.

METER, J.

These consolidated appeals involve a class action by individuals whose benefits under a cash-assistance program administrated by the Department of Human Services (DHS) in accordance with the Social Welfare Act, MCL 400.1 et seq., were terminated. In Docket No. 309447, defendant, the DHS Director, appeals as of right the circuit court's order granting summary disposition in favor of plaintiffs with respect to their claim that the DHS Director exceeded her authority by implementing a 60–month time limit for receiving cash-assistance benefits for members of plaintiffs' class. In Docket No. 309894, the DHS Director appeals as of right the injunctive relief ordered by the circuit court on the basis of that determination. We affirm in part and reverse in part.

I. BACKGROUND

This case involves cash-assistance benefits provided to individuals under the Family Independence Program (FIP), as established under the Social Welfare Act and amended by 2011 PA 131, effective October 1, 2011. Pursuant to MCL 400.57a(1), “[t]he department ¹ shall establish and administer the family independence program to provide assistance to families who are making efforts to achieve independence.” The time limit established by the Legislature for FIP assistance to be paid to an individual, beginning October 1, 2007, is “not longer than a cumulative total of 48 months during that individual's lifetime.” MCL 400.57r. A recipient of FIP assistance who does not comply with his or her individual family-self-sufficiency plan is penalized by having payments temporarily or permanently terminated, and those penalty months are still counted toward the 48–month total. MCL 400.57g(4). The Social Welfare Act also contains exclusions from the 48–month limit, even though payment is made to a recipient. MCL 400.57p.

The instant class action arose because the DHS uses federal Temporary Assistance for Needy Families (TANF) funds to administer the FIP, and application of the 48–month limit under the Social Welfare Act with the exemptions established by the Legislature leaves some individuals eligible for FIP benefits even though they have exhausted TANF funds.

The purpose of TANF is to provide flexibility for states in operating a program designed to:

(1) provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives;

(2) end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage;

(3) prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and

(4) encourage the formation and maintenance of two-parent families. [42 USC 601(a).]

42 USC 601(b) specifies that the statutory provisions concerning TANF funds “shall not be interpreted to entitle any individual or family to assistance under any State program funded” by TANF. Federal law generally provides for a 60–month limit on the use of TANF funds,²42 USC 608(a)(7)(A), but that limit is subject to the following express rules of interpretation:(E) Rule of interpretation

Subparagraph (A) shall not be interpreted to require any State to provide assistance to any individual for any period of time under the State program funded under this part [42 USC 601 through 42 USC 619].

(F) Rule of interpretation

This part shall not be interpreted to prohibit any State from expending State funds not originating with the Federal Government on benefits for children or families that have become ineligible for assistance under the State program funded under this part by reason of subparagraph (A). [42 USC 608(a)(7).]

Each of the four plaintiffs in this case received a “NOTICE OF CASE ACTION” from the DHS, dated October 11, 2011, which specified that FIP benefits were being cancelled effective November 10, 2011, for the following reason:

The intended action results from a change in law and policy that placed a lifetime time limit on the receipt of assistance through the Family Independence Program. Your group is no longer eligible for the Family Independence Program because the person(s) listed below has received 60 months or more of benefits, which is the time limit allowable for eligibility.

The notice informed each plaintiff that they had the right to a hearing to contest the DHS's calculation that assistance should stop because of the 60–month limit. The notice was provided to affected recipients of the cash-assistance benefits pursuant to an action in the United States District Court in which the adequacy of prior notices provided by the DHS was challenged by various individuals on procedural due-process grounds. See Kelly v. Corrigan, unpublished order of the United States District Court for the Eastern District of Michigan, entered October 4, 2011 (Docket No. 11–14298).

On October 28, 2011, plaintiffs filed this action against the DHS Director on behalf of themselves and other similarly situated individuals ³ to challenge the DHS Director's authority to impose the 60–month time limit through the implementation of an administrative policy. The circuit court initially granted plaintiffs' motion for a preliminary injunction to enjoin the DHS Director from terminating the cash-assistance benefits on the basis of the 60–month limit. The circuit court also ordered that the case could proceed as a class action on behalf of “all current and future FIP recipients who have been or will be denied or terminated from FIP assistance based on a 60 month limit when they have not received FIP for 48 countable months under the Social Welfare Act.”

In an earlier interlocutory appeal in this case, this Court, in lieu of granting leave to appeal, peremptorily reversed and vacated the preliminary injunction because “[p]laintiffs failed to establish a likelihood of prevailing on the merits of their claim.” Smith v. Dep't. of Human Servs. Dir., unpublished order of the Court of Appeals, entered November 3, 2011 (Docket No. 306846). Following this decision, the DHS Director moved for reconsideration of the circuit court's order granting the class certification. The DHS Director also moved for summary disposition under MCR 2.116(C)(8) and (C)(10) with respect to plaintiffs' substantive claim, while plaintiffs moved for summary disposition under MCR 2.116(C)(10).

The circuit court denied the DHS Director's motion for reconsideration. In addition,it resolved the cross-motions for summary disposition in favor of plaintiffs on the basis of its determinations that (1) the Social Welfare Act created an entitlement to FIP assistance for individuals who comply with the FIP's family-self-sufficiency plan and (2) the DHS Director exceeded her authority under the separation of powers doctrine by imposing time limits that are not authorized by the Social Welfare Act. On the basis of those determinations, the circuit court entered a judgment (1) permanently enjoining the DHS Director from terminating or denying cash-assistance benefits “based on time limits unless and until it is determined that [class members] have received [benefits] for more than forty-eight countable months under the time limits set by the Social Welfare Act” and (2) enjoining the DHS Director from terminating or denying cash-assistance benefits “to Plaintiffs and members of the Class based on a 60 month limit that starts counting months prior to the October 1, 2007 started [sic] date established by statute and does not have the exemptions required by the Social Welfare Act[.]”

The DHS Director filed two appeals with this Court to challenge the circuit court's determinations. In Docket No. 309447, the Michigan Supreme Court denied the DHS Director's bypass application for leave to appeal, but directed this Court to consider the case on an expedited basis, stating:

The Court of Appeals is directed to decide this case on an expedited basis, considering whether (1) the circuit court erred in concluding that defendant may not implement limits on the duration of welfare benefits as part of its authority to establish eligibility criteria for family independence program recipients under MCL 400.57a(3) and/or MCL 400.57b(1)(f) and, if so, (2) whether plaintiffs are entitled to summary disposition on the alternative ground that defendant failed to comply with the requirements of the Administrative Procedures Act [APA], MCL 24.201 et seq. [Smith v. Dep't. of Human Servs. Dir., 491 Mich. 898, 810 N.W.2d 384 (2012).]

II. STANDARD OF REVIEW

We review de novo a circuit court's decision concerning a motion for summary disposition. Driver v. Naini, 490 Mich. 239, 246, 802 N.W.2d 311 (2011). Issues involving statutory construction are also reviewed de novo. Id. Whether the constitutional principle of separation of powers was violated is also reviewed de novo. People v. Garza, 469 Mich. 431, 433, 670 N.W.2d 662 (2003).

Although the circuit court did not state the subpart of MCR 2.116(C) on which it relied to resolve the parties' cross-motions for summary disposition, because the parties' motions relied on evidence that went beyond the documentary evidence filed with plaintiffs' complaint, we find review under MCR 2.116(C)(10) appropriate. See Healing Place at North Oakland Med. Ctr. v. Allstate Ins. Co., 277 Mich.App. 51, 55, 744 N.W.2d 174 (2007). A motion under MCR 2.116(C)(10) tests the factual sufficiency of a claim based on substantively admissible evidence. MCR 2.116(G)(6); Maiden v....