Tongol v. Usery

• Decision Date: 06 August 1979
• Docket Number: Nos. 77-2291,77-3351,s. 77-2291
• Citation: 601 F.2d 1091
• Parties: Reynaldo TONGOL et al., Plaintiffs-Appellees/Cross-Appellants, v. William J. USERY, Jr., et al., Defendants-Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1091

601 F.2d 1091

Reynaldo TONGOL et al., Plaintiffs-Appellees/Cross-Appellants, v. William J. USERY, Jr., et al., Defendants-Appellants/Cross-Appellees.

Nos. 77-2291, 77-3351.

United States Court of Appeals Ninth Circuit.

Aug. 6, 1979.

William T. McGivern, Jr., Asst. U. S. Atty., Richard M. Pearl, San Francisco, Cal., for defendants-appellants.

Asher Rubin, William T. McGivern, Jr., Asst. U. S. Atty., Richard M. Pearl, San Francisco, Cal., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of California.

Before HUFSTEDLER and CHOY, Circuit Judges, and BARTELS, ^* District Judge.

HUFSTEDLER, Circuit Judge:

These appeals raise questions concerning the validity of a federal regulation, 20 C.F.R. § 618.15, prohibiting states from waiving recoupment of overpayments in Federal Supplemental Benefits provided under the Emergency Unemployment Compensation Act of 1974 ("the Act"), P.L. 93-572, 88 Stat. 1869, and the availability of attorneys' fees under the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988, for plaintiffs who successfully challenged the regulation. The district court held that the regulation barring waiver of recoupment was unenforceable in states with statutes permitting waiver. But the district court held that attorneys' fees were not available for the prevailing plaintiffs under the Civil Rights Attorney's Fees Awards Act of 1976. The Secretary of Labor ("the Secretary") appeals the district court's judgment on the merits. Plaintiffs appeal the denial of attorneys' fees.

I

In order to augment existing unemployment compensation programs in states with extraordinarily high unemployment, Congress passed the Emergency Unemployment Compensation Act of 1974. (H.R.Rep.No.93-1549 (1974), 1974 U.S.Code Cong. & Admin.News, p. 6842.) Under the Emergency Extended Benefits program established by the Act, federal funds were provided for states to pay up to 26 weeks of addition unemployment compensation to persons exhausting their rights to compensation under existing programs.

Under the terms of the Act, each state was directed to apply its own unemployment insurance law in administering the Federal Supplemental Benefits. Section 102(d)(2) of the Act provided:

"the terms and conditions of the State law which apply to claims for regular compensation and to the payment thereof shall (except where inconsistent with the provisions of this Act or regulations of the Secretary promulgated to carry out this Act) apply to claims for emergency compensation and the payment thereof."

Although the federal Act was silent on recovery of overpayments, California and at least 24 other states (as well as the District of Columbia and Puerto Rico) authorized waiver of recoupment in certain circumstances. Section 1375 of the California Unemployment Insurance Code provides:

"Any person who is overpaid any amount as benefits under this part is liable for the amount overpaid unless: (a) The overpayment was not due to fraud, misrepresentation or wilful nondisclosure on the part of the recipient, and (b) The overpayment was received without fault on the part of the recipient, and its recovery would be against equity and good conscience."

On February 6, 1975, the Secretary of Labor promulgated regulations requiring states to recover overpayments in Federal Supplemental Benefits ("FSB") regardless of any state laws permitting waiver of recoupment. The regulations provided that:

"(i)f the State agency of the applicable State or a court of competent jurisdiction finds, after a determination and opportunity for a fair hearing thereon, that an individual has received a payment of FSB to which the individual was not entitled under the Act and this Part, whether or not the payment was due to the individual's fault or misrepresentation, the individual shall be liable to repay to the applicable State the total sum of the payment to which the individual was not entitled, and the State agency shall take all reasonable measures authorized under any State law or Federal law to recover for the account of the United States the total sum of the payment to which the individual was not entitled." (20 C.F.R. § 618.15(a).)

The regulations further specified that "(a)ny provision of the applicable State law providing for waiver of recovery of overpayments of compensation shall not be applicable to FSB." (20 C.F.R. § 618.15(f).)

On May 17, 1976, Reynaldo Tongol filed a class action against the Secretary of Labor and three California defendants (the California Employment Development Department and its director, and the California Unemployment Insurance Appeals Board) on behalf of all persons who had received FSB overpayments and who resided in states with laws permitting waiver of recoupment. Tongol sought declaratory and injunctive relief against the enforcement of the regulation prohibiting waiver on the grounds that it violated the equal protection clause of the Fourteenth Amendment and the Emergency Unemployment Compensation Act of 1974.

On January 28, 1977, the district court certified plaintiff class ¹ and granted summary judgment to plaintiffs. The district court held that the regulations "requiring the recovery of FSB overpayments in circumstances not authorized by state law are without statutory authority and are therefore void and unenforceable." The district court enjoined defendants from enforcing the regulations and ordered them to reevaluate the cases of persons against whom overpayments had been assessed.

The district court's decision was largely premised on its previous decision in Martinez v. Dunlop (N.D.Cal.1976) 411 F.Supp. 5, which we affirmed Sub nom. Martinez v. Marshall (9th Cir. 1977) 573 F.2d 555. In Martinez, the district court invalidated another regulation barring waiver of recoupment, 20 C.F.R. § 619.13, that was virtually identical to the regulation at issue here. ² The regulation struck down in Martinez barred states from waiving recoupment of overpayments in Special Unemployment Assistance ("SUA") benefits established by the Emergency Jobs and Unemployment Assistance Act of 1974, P.L. 93-567, 88 Stat. 1845. The program authorizing payment of SUA benefits and the program providing the Federal Supplemental Benefits at issue here were part of a package of programs passed by Congress at the same time to deal with the unemployment problem. (Sen.Rep.No.94-208 (1975), 1975 U.S.Code Cong. & Admin.News, pp. 377, 378-79.) Like the Act at issue here, the Emergency Jobs and Unemployment Assistance Act of 1974 contained a provision mandating the application of state law. The district court in Martinez held that the regulation barring waiver of recoupment was invalid in states with statutes authorizing waiver because it conflicted with the congressional command to apply state law.

On appeal, we affirmed the district court in Martinez. We held "that Regulation 619.13 is not consistent with the legislative purpose of the Act and is in excess of the Secretary's statutory authority . . . ." (Martinez v. Marshall, supra, 573 F.2d at 560.) We observed that the Secretary's regulation was "inconsistent with previous regulations under similar statutory provisions" because waiver of recoupment had been permitted by the Secretary in four earlier unemployment insurance programs. ³ We noted that the Secretary had barred waiver under only two statutes the Disaster Unemployment Assistance Act, 42 U.S.C. § 5121 Et seq., which did not mandate the application of state law, and the Emergency Unemployment Compensation Act of 1974, the program at issue in this case. Although we reserved judgment on the validity of 20 C.F.R. § 618.15, we noted that it "departed from past practices in the area of unemployment compensation regulation." (Martinez v. Marshall, supra, 573 F.2d at 559 n. 4.)

In light of our decision in Martinez, the district court's decision invalidating 20 C.F.R. § 618.15 was entirely proper. Section 618.15 is invalid for the same reasons that 20 C.F.R. § 619.13 was held invalid in Martinez. As we noted in Martinez, both regulations are inconsistent with previous regulations of the Secretary of Labor permitting waiver of recoupment in a variety of unemployment insurance programs. Like the regulation stricken in Martinez, 20 C.F.R. § 618.15 conflicts with the congressional command to apply state law in states, like California, with statutes permitting waiver of recoupment. The Emergency Unemployment Compensation Act of 1974, provides that state law shall apply "except where inconsistent with the provisions of this Act or regulations of the Secretary promulgated to carry out this Act . . . ." (Section 102(d)(2), P.L. 93-572, 88 Stat. 1869.) The reference to "regulations of the Secretary promulgated to carry out this Act," does not indicate that Congress intended to give the Secretary authority to override state law in circumstances where the Act itself is not inconsistent with state law. The direction that state law shall apply would have little meaning if the Secretary had unbridled authority to suspend the application of a state law that is not inconsistent with anything in the balance of the Act. There is no indication that Congress intended to prohibit waiver of recoupment of FSB overpayments when it enacted the Emergency Unemployment Compensation Act of 1974. Indeed, in 1977 Congress amended the program expressly to permit waiver on a nationwide basis. (Emergency Unemployment Compensation Extension Act of 1977, P.L. 95-19, 91 Stat. 39.) We recognized in Martinez that the Secretary's authority to promulgate regulations to carry out the purposes of a congressional program does not permit the enforcement of regulations that are themselves inconsistent with the legislative purpose. Because the Secretary's regulations barring waiver are inconsistent with the legislative purpose of the Emergency Unemployment Compensation Act, the district court properly invalidated ...