Walker v. Adams
| Decision Date | 04 October 1984 |
| Docket Number | No. 83-5527,83-5527 |
| Citation | 741 F.2d 116 |
| Parties | Debra WALKER, on behalf of herself and others similarly situated, Plaintiffs- Appellants, v. Buddy H. ADAMS, Secretary, Kentucky Cabinet for Human Resources; John Cubine, Commissioner, Department for Social Insurance; Margaret M. Heckler, Secretary, Department of Health and Human Services; Individually and in their official capacities, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Richard W. McHugh (Lead) (argued), Shaun W. Esposito, Legal Aid Society, Inc., Louisville, Ky., for plaintiffs-appellants.
Ed Swindell, Asst. Regional Atty., Dept. of Health & Human Services, Atlanta, Ga., for Heckler.
John Watson, Dept. of Health and Human Services, General Counsel OASI Division, Baltimore, Md., Stanley A. Stratford, Paul F. Fauri, Cabinet for Human Resources, Frankfort, Ky., for Adams and Cubine.
Robert Greenspan, Appellate Staff, Civil Division, Washington, D.C., Secretary of Health, Deborah Ruth Kant (argued), Ronald E. Meredith, U.S. Atty., Philip J. Dunnagan, Asst. U.S. Atty., Louisville, Ky., for defendants-appellees.
Edward J. Hoort, Detroit, Mich., for amicus curiae, Cindy Vermeulen.
Before EDWARDS and WELLFORD, Circuit Judges, and CHURCHILL, District Judge. *
This is an appeal from an order entered by Judge Ballantine in the Western District of Kentucky, 578 F.Supp. 50, denying plaintiff-appellant Walker's motion for a preliminary injunction in her action challenging a regulation under which she was disqualified for benefits from the Aid to Families with Dependent Children (AFDC) program under the so-called "lump sum" rule.
Defendants are officials of the Kentucky Cabinet for Human Resources, which administers the AFDC program, and the Secretary of Health and Human Services, who administers the federal government's participation in AFDC and promulgates AFDC regulations.
The problem dealt with in this case is how the government should treat a "lump sum" payment, such as an inheritance, insurance settlement, or disability benefits. In 1981 Congress passed the Omnibus Budget Reconciliation Act and the Secretary subsequently developed regulations thereto.
The statute establishing the "lump sum rule" in dispute on this appeal provides:
(a) Contents
A State plan for aid and services to needy families with children must
(17) provide that if a person specified in paragraph (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 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).
42 U.S.C. Sec. 602(a)(17) (1982).
Section 602(a)(8)(A)(i) and (ii), the "disregard" provision, states:
[A state plan for aid and services ... must]
(8)(A) Provide that, with respect to any month, in making the determination under paragraph (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 home 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).
The regulation promulgated by HHS in response to Sec. 602(a)(17) provides:
(a) Requirements for State Plans. A State Plan for OAA, AFDC, AB, APTD or AABD must, as specified below:
(3) Income and resources.
(ii) Provide that in determining need and the amount of the assistance payment, after all policies governing the reserves and allowances and disregard or setting aside of income and resources referred to in this section have been uniformly applied:
(D) Net income available for current use and currently available resources shall be considered; income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance. For AFDC when the assistance unit's income after application of applicable disregards exceeds the State need standard for the family (unless such excess was caused by a regular and periodic extra paycheck from a recurring income source, in which case see Sec. 233.24(d)), the family will be ineligible for aid for the number of full months derived by dividing this total income by the need standard applicable to the family starting with the month in which the income is received. Any income remaining after this calculation is treated as income received in the first month following the period of ineligibility.
45 C.F.R. Sec. 233.20(a)(3)(ii)(D) (1982).
In this case plaintiff Walker received an insurance settlement from an automobile accident which paid her slightly over $5,000. She notified her case worker about the payment that same day, but received no warning about disqualification for AFDC benefits and was not advised to retain the payment for living expenses. She spent substantially all of the funds shortly after their receipt on a used car, car insurance, clothes, furniture, appliances, and groceries. It should be noted that she and her two children had lost all their clothing and some other possessions in a fire a few months earlier. On May 17, she received notice that she was disqualified from AFDC as of June, 1983 for 31 months. She lost her Medicaid eligibility as well.
She seeks a preliminary injunction and a permanent injunction after trial. The District Judge denied the preliminary injunction, holding that she had no likelihood of success on the merits. He also subsequently denied a motion for injunction pending appeal, but on September 2, 1983, a motion panel of this court granted Walker's motion for injunction pending appeal, finding that she had made a sufficient showing of irreparable harm and a likelihood of success on the merits, and noted that the appeal should be expedited.
At issue in the case is whether the lump sum rule in 42 U.S.C. Sec. 602(a)(17) (1982) is limited as appellants claim to AFDC recipients who receive earned income, or whether it also applies to AFDC recipients such as Ms. Walker, who have no earned income.
Appellant Walker contends that the District Judge erred in denying a preliminary injunction against enforcement of the regulation of the Secretary of Health and Human Services quoted above. As indicated, the regulation, 45 C.F.R. Sec....
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