Valenzuela v. Espy

• Decision Date: 16 December 1993
• Docket Number: No. CIV 93-456-TUC-RMB.,CIV 93-456-TUC-RMB.
• Citation: 860 F. Supp. 1421
• Parties: Sonya VALENZUELA, individually and on behalf of her minor children and on behalf of all others similarly situated, Plaintiffs, v. Michael ESPY, as Secretary of the United States Department of Agriculture and Charles Cowan as Director of the Department of Economic Security, State of Arizona, Defendants.
• Court: U.S. District Court — District of Arizona

860 F. Supp. 1421

Sonya VALENZUELA, individually and on behalf of her minor children and on behalf of all others similarly situated, Plaintiffs, v. Michael ESPY, as Secretary of the United States Department of Agriculture and Charles Cowan as Director of the Department of Economic Security, State of Arizona, Defendants.

No. CIV 93-456-TUC-RMB.

United States District Court, D. Arizona.

December 16, 1993.

William E. Morris and Anne F. Ward, Southern Arizona Legal Aid, Inc., Tucson, AZ, for plaintiffs.

Patricia Arzuaga, Asst. U.S. Atty., Washington, DC, and Robert S. Segelbaum, Asst. Atty. Gen., Phoenix, AZ, for defendants.

ORDER

BILBY, District Judge.

I. STATEMENT OF THE CASE

Plaintiff was denied food stamp eligibility because she was a co-owner of a 1993 Dodge Caravan van which had a purchase price was $17,991.60, a Kelly Blue Book value of $14,000 and a bank lien of $18,000. Plaintiff alleges that her vehicle should be considered an "inaccessible resource" under 7 U.S.C. § 2014(g)(5) since the lien more than the vehicle's fair market value. Defendant Espy, and the State of Arizona by joinder, seek to dismiss this action because the legislative history, the long-standing valuation of vehicles using "fair market value" and the Secretary's interpretation of (g)(5) to preclude vehicles does not allow for such a conclusion.

II. MOTION TO DISMISS STANDARD

"The conditions that must be met before a motion my be granted under Federal Rule of Civil Procedure 12(b)(6) are quite strict. A complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Church of Scientology of Cal. v. Flynn, 744 F.2d 694, 695-696 (9th Cir.1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)). "Dismissal can be based on the lack of a cognizable theory or the absence of sufficient facts alleged under a cognizable legal theory." Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1990). When ruling on a Rule 12(b)(6) motion, the court must accept the allegations as true and construe them in the light most favorable to the plaintiff. Abramson v. Brownstein, 897 F.2d 389, 391 (9th Cir.1990).

III. UNDISPUTED FACTS AND BACKGROUND

The Food Stamp Act, 7 U.S.C. § 2011, et seq., establishes a federally funded, state administered program to supplement the food purchasing power of low income households. The program is funded by the United States Department of Agriculture. The Secretary of Agriculture ("Secretary") is charged by statute with promulgating national uniform eligibility standards for the Food Stamp Program. 7 U.S.C. § 2014(b). Although eligibility for participation in the food stamp program is determined on the basis of national standards, the program is administered in Arizona by the Arizona Department of Economic Security ("DES.") who makes the actual eligibility determinations. In carrying out its duties, DES must adhere to regulations implementing the Act promulgated by the Secretary. 7 U.S.C. § 2013(c).

Subsection 2014(g)(1) grants the Secretary general authority to define the resources a household can own. Under controlling provisions of federal law, a motor vehicle qualifies as a "resource" of the applicant's household which requires further evaluation to determine whether it affects the applicant's eligibility for benefits. Federal legislation includes a general restriction on the value of non-exempt resources that an otherwise-eligible household may own and still qualify for food stamps.

As provided in 7 U.S.C. § 2014(g)(1), the general reserve asset limitations for a household with an elderly or disabled member is $2000. Ownership on non-excluded, or countable assets valued at more than $2,000 therefore operates to disqualify any such household from the program. Section 2014(g) delineates certain assets that must be taken into account in determining a household's total liquid and nonliquid resources countable against the $2,000 limit.

7 U.S.C. § 2014(g)(2) and USDA regulation 7 C.F.R. § 273.8(h) provide that licensed vehicles whose "fair market value" is $4,500 or less are excluded from the reserve. The value in excess of this $4,500 allowance is counted against the reserve. In households with more than one vehicle, the equity value of certain vehicles may be used in calculating the household eligibility if the equity value is greater than the amount the fair market value exceeds $4,500. 7 C.F.R. § 273.8(h)(4), (5), (6).

Prior to 1990, the Secretary thus promulgated regulations providing that state agencies had to exclude certain household resources from countable assets, either in whole or in part depending upon the circumstance and value of the vehicular assets as set forth in 7 C.F.R. § 273.8 Those pre-1990 regulations specifically declared that in valuing the extent to which an automobile used for work-related and other ordinary household transportation was an available resource, state administrators could only disregard any liens on the vehicle up to a maximum amount of $4,500. See 7 C.F.R. § 273.8(h). These pre-1990 regulations also directed state eligibility workers to determine the current Blue Book value of any such household vehicle and then deduct from that amount a maximum of $4,500 even if the vehicle was subject to a valid lien in the amount approaching or exceeding Blue Book value.

In 1990, Congress amended 7 U.S.C. § 2014(g) and inter alia, added subsection (g)(5). This provided that an otherwise eligible household could not be disqualified from the food stamp program based on the ownership of a resource when the sale of that resource would not yield significant funds for the household. Specifically, subsection (g)(5) declared that a household asset must be excluded as an inaccessible resource if "as a practical matter, the household is unlikely to be able to sell it for any significant return because the household's interest is relatively slight or because the cost of selling the household's interest would be relatively great." 7 U.S.C. § 2014(g)(5).

The 1990 amendments directed the Secretary of Agriculture to promulgate rules enabling state agencies to develop standards, consistent with 7 U.S.C. § 2014(g)(5) for identifying inaccessible resources and ensuring that such excluded assets would have no adverse effect on any household's eligibility for food stamps.

In August 1991, the Secretary of Agriculture issued proposed regulations that would have defined an inaccessible resource as one "with an expected sale price of $2,000 or less where the cost of selling the resource exceeds 75% of the expected sale price." 56 Fed.Reg. No. 156, 40166 (August 13, 1991). These regulations which were proposed to implement the 1990 amendments were later withdrawn by the Secretary.

In 1991, Congress further amended 7 U.S.C. § 2014(g)(5) to provide that a resource is inaccessible to a food stamp household if its sale is "not likely to produce a significant amount of funds for the support of the household." 7 U.S.C. § 2014(g)(5) as amended December 13, 1991, by Pub.L. 102-237, Title IX, §§ 902-906, 941(2) ("the 1991 Amendment").

Following the 1991 amendment to subsection (g)(5), the Secretary issued a memorandum, dated December 7, 1991, that instructed states to "exercise their best judgment regarding procedures for applying" the inaccessible resource provisions in the 1990 and 1991 amendments to 7 U.S.C. § 2014(g).

The Secretary has not yet promulgated any regulations, either in interim or final form that implement the inaccessible resource provisions of 7 U.S.C. § 2014(g)(5). On January 31, 1992, the Deputy Administrator of the Food and Nutrition Service issued, under the authority of the Secretary, a notice to its regional offices stating that the inaccessible resource provisions of 7 U.S.C. § 2014(g)(5) do not apply to motor vehicles. The regional offices, in turn, disseminated this directive to all state agencies administering the food stamp program.

Consequently, in determining Plaintiff's eligibility for food stamps, Arizona's DES staff followed the directive and deemed 7 U.S.C. § 2014(g)(5) inapplicable to the valuation of Plaintiff's 1993 Dodge Caravan, thereby treating it as an "available," rather than as an "inaccessible" resource. DES determined that the Kelly Blue Book value of the van to be slightly less than $14,000. From that amount, DES subtracted an exemption of $4,500. The resulting value of $9,500 was deemed a "resource" available to plaintiffs' food stamp household. Following the Secretary's directive, DES made no assessment of whether the Dodge Caravan was an inaccessible resource within the meaning of 7 U.S.C. § 2014(g)(5).

IV. GOVERNMENT'S MOTION TO DISMISS

Michael Espy, Secretary of the United States Department of Agriculture (the "Federal Defendants") and Charles Cowan, Director of the Department of Economic Security, State of Arizona (the "State Defendant") by joinder, assert that this Complaint must be dismissed because the Federal Defendants' interpretation of the regulations in question is a reasonable interpretation of the Food Stamp Act. Additionally, Defendants argue that legislative history demonstrates that Congress did not intend to exclude heavily encumbered vehicles from a household's resources under the "inaccessible resources" provision.

1. Secretary's Interpretation of the Food Stamp Act

The Secretary has interpreted the Food Stamp Act to exclude motor vehicles from the "inaccessible resources" provision. Defendants also argue that a contrary interpretation is not supported by the plain language of the Act or its legislative history.

The Food Stamp Act expressly charges the Secretary with the implementation and administration of the food stamp program. 7 U.S.C. §§ 2013(c), 2014(b). The Supreme Court has stated that "considerable weight should be accorded to an executive...