Waters-Haskins v. Human Services Dept.

• Citation: 2009 NMSC 031,210 P.3d 817
• Decision Date: 08 June 2009
• Docket Number: No. 31,300.,31,300.
• Parties: Hazel WATERS-HASKINS, Petitioner-Respondent and Cross-Petitioner, v. NEW MEXICO HUMAN SERVICES DEPARTMENT, INCOME SUPPORT DIVISION, and Pamela Hyde, Secretary, Respondents-Petitioners and Cross-Respondents.
• Court: Supreme Court of New Mexico

210 P.3d 817

2009 NMSC 031

Hazel WATERS-HASKINS, Petitioner-Respondent and Cross-Petitioner, v. NEW MEXICO HUMAN SERVICES DEPARTMENT, INCOME SUPPORT DIVISION, and Pamela Hyde, Secretary, Respondents-Petitioners and Cross-Respondents.

No. 31,300.

Supreme Court of New Mexico.

June 8, 2009.

Susan M. Sita, Special Assistant Attorney General, Office of General Counsel, New Mexico Human Services Department, Santa Fe, NM, for Petitioners.

Joel R. Jasperse, New Mexico Legal Aid, Gallup, NM, Marcia J. Lieberman, New Mexico Legal Aid, Albuquerque, NM, for Respondent.

OPINION

MAES, Justice.

{1} An administrative decision by the New Mexico Human Services Department (the Department) established a claim against Hazel Waters-Haskins (Appellant) for the repayment of food stamp benefits erroneously issued to her. The administrative law judge rejected Appellant's argument that the doctrine of equitable estoppel should bar the Department's claim because the Department's error caused the overpayment. On appeal, the district court upheld the administrative decision. Appellant then sought review from the Court of Appeals on a petition for writ of certiorari. In a split decision, the Court of Appeals reversed the district court "on the ground that it is premature to address equitable defenses because the Department has not yet exercised its authority under federal law to settle, adjust, or compromise the overpayment claim." Waters-Haskins v. N.M. Human Servs. Dep't, 2008-NMCA-127, ¶ 1, 144 N.M. 853, 192 P.3d 1230. On a petition for writ of certiorari from the Department and a cross-petition from Appellant, we reverse the judgment of the Court of Appeals and hold that the doctrine of equitable estoppel bars the Department's overpayment claim.¹

Background

{2} The parties do not dispute the facts found by the administrative law judge. Appellant was a foster parent to her grandchildren until she adopted them on November 24, 1997. Appellant received a foster parent subsidy before the adoption and an adoptive parent subsidy after the adoption from the New Mexico Children, Youth and Families Department (CYFD). Both before and after the adoption, Appellant also received food stamp assistance. In her applications for assistance, Appellant correctly reported the subsidies and the change in the status of the subsidies following the adoption.

{3} The Department properly had excluded Appellant's foster parent subsidy from her income for the purpose of calculating her eligibility for food stamp assistance. See 8.139.400.10(D) NMAC (5/15/2001); 8.139.520.8(E)(3) NMAC (5/15/2001). Following the adoption, the Department should have included the adoptive parent subsidy in Appellant's income, which would have made her ineligible for benefits. However, the Department continued to exclude the adoptive parent subsidy from Appellant's income. Due to this error, Appellant unwittingly received food stamp benefits to which she was not entitled.

{4} The error was discovered in December 2004. Following the revelation of its error, the Department recalculated Appellant's food stamp allotment for an eleven-month period, between February 2004 and January 2005 (the claim period), during which Appellant received $4,476 in food stamp assistance. The Department determined that Appellant had a monthly net income of $1446—including income from Social Security Disability, Supplemental Security Income, and the monthly adoption subsidy—that disqualified her from receiving food stamp assistance during the claim period. The Department then sent a notification letter to Appellant asserting an overpayment claim in the amount of $4,476.

Administrative Opinion

{5} Appellant requested and received an administrative fair hearing to determine whether the Department could establish an overpayment claim against Appellant. Appellant argued that the doctrine of equitable estoppel should prevent the Department from pursuing the overpayment claim, because Appellant properly had reported her income, the overpayment was due to the Department's error, Appellant reasonably relied on the Department to calculate her food stamp allotment accurately, and collection of the overpayment debt would cause Appellant's family extreme hardship. The administrative law judge found in the Department's favor and issued a recommendation to the Director of the Income Support Division that she should issue a final ruling establishing the Department's claim against Appellant. The Director adopted the judge's recommendation and entered the following order:

Issue 1—Initiation of a FSP overissuance claim

The department correctly established an overissuance claim against the food stamp benefits issued to Ms. Waters-Haskins for the months of February 2004 through January 2005. There is no dispute that the claim is a result of department error.

Program policy at 8.139.640.11(B) NMAC requires the department to take action to establish a claim against any household that received more food stamp benefits than it was entitled to receive whether or not the overissuance occurred because of a household or an administrative error. The failure to include the income Ms. Waters-Haskins receives from adoption subsidy was clearly an administrative error. However, policy requires the department to establish the claim.

Issue 2—Equitable estoppel

The FSP is a federally funded program therefore the department is bound by federal law in administering the program. Federal law permits no exception for equitable estoppel in the case of a food stamp overissuance caused by administrative error therefore the department is prevented from applying this principle [to] Ms. Waters-Haskins' claim.

On appeal, the district court affirmed the order.

Court of Appeals' Opinion

{6} In a split decision, the Court of Appeals remanded this case to the administrative hearing judge. The majority held that Appellant has an adequate remedy at law, because the Department may choose to compromise the overpayment claim. Waters-Haskins, 2008-NMCA-127, ¶ 9, 144 N.M. 853, 192 P.3d 1230. As the majority interpreted the Department's regulations, a compromise would resolve the issues of this dispute, making a determination on the more complicated equitable estoppel question unnecessary. Id. Therefore, the majority held that deciding the equitable estoppel claim was premature and "vacat[ed] the judgment of the district court with instructions to remand this matter to the Department to reopen the fair hearing so that the Department may exercise the discretion conferred by federal law to settle, adjust, or compromise the overpayment claim." Id. If the Department does not compromise the claim after remand, the majority reasoned, then Appellant may reinstate her appeal. Id.

{7} Judge Sutin dissented, arguing that "[t]he only issues before the Human Services Department, the district court, and [the Court of Appeals] have been and are whether the doctrine of equitable estoppel can be asserted as a defense to bar enforcement of a food stamp overissuance claim and, if so, whether the recipient established the defense." Id. ¶ 12. Judge Sutin further challenged the majority's interpretation of federal regulations, which would require the Department to exercise its discretion to compromise overpayment claims. Id. ¶ 16. Judge Sutin argued that the Department has the right to establish a claim for overissuance and the discretion to compromise the claim, but that the threshold question to the exercise of that discretion is whether the Department has established a proper claim. Id. ¶¶ 22-24. Therefore, according to the dissent, the majority should have reached the equitable estoppel question and decided whether the doctrine should bar the establishment of the Department's claim. Id. ¶ 22.

{8} We granted the Department's petition for certiorari and Appellant's conditional cross-petition. The parties' petitions raise three issues: (1) whether the Court of Appeals erred by holding that a determination on Appellant's equitable estoppel defense is premature; (2) whether the doctrine of equitable estoppel applies to a food stamp overpayment claims generally; and (3) whether the doctrine of equitable estoppel should act as a bar to the Department's overpayment claim against Appellant.

DISCUSSION

I. Whether the Court of Appeals erred by holding that a determination on Appellant's equitable estoppel defense is premature.

{9} We address this issue with a review of the procedures for establishing an overpayment claim. The federal Food Stamp Program² aims to increase the monthly budget for food and nutrition for qualifying low-income households. 7 U.S.C. § 2011 (2006). Benefit recipients can exchange food stamps at authorized stores for food items, and plants and seeds used to grow food. 7 C.F.R. 271.2 (2009) (defining "eligible foods"). The federal government pays for the benefits, while state agencies, like the Department, administer the program and pay the costs of distributing the benefits. See 7 U.S.C. § 2020 (2006); 7 C.F.R. § 273.18(a)(2)-(3) (2009). Federal statutes and regulations define the extent of a state agency's authority to administer the program and outline the procedure for pursuing overpayment claims.

{10} Prior to seeking to establish a claim, a state agency must first determine whether pursuing a claim is cost effective, and "[a] State agency may opt not to establish and subsequently collect an overpayment that is not cost effective." 7 C.F.R. 273.18(e)(2) ("Pre-establishment cost effectiveness determination."). Agencies independently may determine whether a claim is cost effective by adopting their own regulations, or if the agency has not adopted its own regulations it can rely on federal regulations, under which a claim of $125 or less is not cost effective. 7 C.F.R. § 273.18(e)(2)(ii). The Department follows the federal guidelines because it does not have its own procedures in this area. See 8.139.640 NMAC (5/15/2001, as amended through ...