We Who Care, Inc. v. Sullivan, Civ. No. 89-0172 P.

• Decision Date: 25 January 1991
• Docket Number: Civ. No. 89-0172 P.
• Citation: 756 F. Supp. 42
• Parties: WE WHO CARE, INC., Paula Horton, and Kim Borrello-Manzo, Plaintiffs, v. Louis W. SULLIVAN, M.D., in his capacity as Secretary of the United States Department of Health and Human Services, and Commissioner, Maine Department of Human Services, Defendants.
• Court: U.S. District Court — District of Maine

756 F. Supp. 42

WE WHO CARE, INC., Paula Horton, and Kim Borrello-Manzo, Plaintiffs, v. Louis W. SULLIVAN, M.D., in his capacity as Secretary of the United States Department of Health and Human Services, and Commissioner, Maine Department of Human Services, Defendants.

Civ. No. 89-0172 P.

United States District Court, D. Maine.

January 25, 1991.

Jack Comart, Pine Tree Legal Assistance, Inc., Augusta, Me., for plaintiffs.

David Collins, Asst. U.S. Atty., Portland, Me., Joyce E. McCourt, U.S. Dept. of Health and Human Services, Boston, Mass., for Louis Sullivan.

Mariana E. Thibeau, Asst. Atty. Gen., Augusta, Me., for Com'r.

MEMORANDUM OF DECISION AND ORDER GRANTING PLAINTIFFS' MOTION FOR JUDGMENT ON A STIPULATED RECORD

GENE CARTER, Chief Judge.

Plaintiffs in this class action challenge a Department of Health and Human Services (HHS) regulation, codified at 45 C.F.R. § 233.20(a)(3)(i)(B)(2), promulgated pursuant to the Aid To Families with Dependent Children program (AFDC or Act). The regulation fixes a ceiling of $1,500 on the amount of equity in an automobile, owned by an AFDC applicant, that the applicant may exclude when determining eligibility for AFDC benefits. Plaintiffs claim that the regulation is arbitrary and capricious, was promulgated in violation of the Administrative Procedure Act, and violates federal law. The case is now before the Court on the respective parties' motions for judgment on a stipulated record.

The Court, for the reasons that follow, will grant Plaintiffs' Motion for Judgment on a Stipulated Record.

Background and Facts

The AFDC program, codified at 42 U.S.C. § 601 et seq, is a cooperative state-federal program designed "to furnish financial assistance ... to needy dependent children and the parents or relatives with whom they are living...." 42 U.S.C. § 601. Participating states must administer the program in conformity with the Act and rules and regulations promulgated by HHS.

The AFDC statute prescribes that families whose combined value of resources exceeds $1,000 (or such lower amount as participating states may determine) are ineligible for aid under the program. 42 U.S.C. § 602(a)(7)(B).¹ The same section provides that states, in determining resources, must exclude "so much of the family member's ownership interest in one automobile as does not exceed such amount as the Secretary may prescribe...." The $1,000 resource limitation and the accompanying automobile exclusion were enacted as part of the Omnibus Budget Reconciliation Act, Pub.L. No. 97-35, 2305, 2320(b)(1), 95 Stat. 844.

In an interim final regulation published on September 21, 1981, the Secretary established $1,500 as the upper limit of the automobile exclusion. See 46 Fed.Reg. 46750. The final regulation, promulgated on February 5, 1982, retained the $1,500 limit. See 47 Fed.Reg. 5648; 45 C.F.R. § 233.20(a)(3)(i)(B)(2).² In justifying the $1,500 figure, the Secretary explained:

We chose $1,500 as the maximum equity value for an automobile on the basis of a Spring 1979 survey of food stamp recipients. Data from that survey suggest that 96 percent of all food stamp recipients who own cars had equity value in them of $1,500 or less. In that the Federal maximum limit should be set within the range of the vast majority of current recipients and given that the food stamp population tends to be, on the average, more affluent than AFDC recipients, this limit appears reasonable and supportable.

47 Fed.Reg. at 5657.

Plaintiffs are members of a class who have applied for or will apply for public assistance through the AFDC program and who have been or will be denied AFDC benefits because they own automobiles with an equity value in excess of $1,500.³ Plaintiffs claim that the automobile equity regulation is arbitrary, capricious and is contrary to the AFDC statute.

The parties have submitted the case on a stipulated record, agreeing that

the record shall consist of the following documents ... admitted to be true copies:

....

2. The complete administrative record pertaining to the September 21, 1981 and February 5, 1982 publication of interim and final regulation 45 C.F.R. § 233.20(a)(3)(i)(B)(2).

The parties have also stipulated that

The complete administrative record as set forth in paragraph three of the Stipulated Record has been provided to Plaintiffs. The Federal Defendant is not aware of any other material which was part of the original administrative record and which has not been provided to Plaintiffs and made part of the stipulated record; paragraph 2.

The administrative record consists of twelve comments received by the HHS in response to the interim final regulation. The food stamp survey mentioned by the Secretary in the Federal Register is not part of the administrative record.

Standard of Review

Before proceeding to the merits, the Court pauses to consider the proper standard of review. "Where, as here, the statute expressly entrusts the Secretary with the responsibility for implementing a provision by regulation, judicial review is limited to determining whether the regulations promulgated exceeded the Secretary's statutory authority and whether they are arbitrary and capricious." McDonald v. Secretary of Health and Human Services, 795 F.2d 1118, 1122 n. 5 (1st Cir.1986) (quoting Heckler v. Campbell, 461 U.S. 458, 466, 103 S.Ct. 1952, 1956, 76 L.Ed.2d 66 (1983)). See also Sullivan v. Zebley, ___ U.S. ___, 110 S.Ct. 885, 890, 107 L.Ed.2d 967 (1990); Schweiker v. Gray Panthers, 453 U.S. 34, 44, 101 S.Ct. 2633, 2640, 69 L.Ed.2d 460 (1981); Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44, 104 S.Ct. 2778, 2781-82, 81 L.Ed.2d 694 (1984).⁴

Whether the automobile equity regulation is "arbitrary and capricious" is determined with reference to Section 10 of the Administrative Procedure Act (APA), 5 U.S.C. § 704 et seq. The Court of Appeals for the First Circuit recently explained this standard of review as follows:

Under Section 10(e)(2)(A) of the APA, this Court must hold unlawful any agency action, findings and conclusions that we find to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law...." 5 U.S.C. § 706(2)(A). If we find instead that a rational basis exists to support the agency's decision, then we cannot disturb that decision. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 290, 95 S.Ct. 438, 444, 42 L.Ed.2d 447 (1974). It is well-established that this standard of review is highly deferential, whereby the reviewing court presumes the agency action to be valid. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971); Pacific States Box and Basket Co. v. White, 296 U.S. 176, 185-86, 56 S.Ct. 159, 163-64, 80 82 L.Ed. 138 (1935); Ethyl Corp. v. Environmental Protection Agency, 541 F.2d 1, 34 (D.C.Cir.), cert. denied, 426 U.S. 941, 96 S.Ct. 2663, 49 L.Ed.2d 394 (1976).

It is important to note that this Court cannot substitute its judgment for that of the agency. Citizens to Preserve Overton Park v. Volpe, 401 U.S. at 416, 91 S.Ct. at 823-24. Rather, we are required to affirm the agency's decision if it is supported by a rational basis. Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. at 290, 95 S.Ct. at 444. We cannot base our decision on what we would decide sitting in the place of the agency, but must determine whether the agency's decision can withstand the arbitrary and capricious challenge on review. We emphasize that though this standard of review is a deferential one, it does not mean that the appellate process is merely superfluous. As the reviewing court, we must be assured that the agency decision was based on relevant factors, and we must make "substantial inquiry" into the facts. Ethyl Corp. v. Environmental Protection Agency, 541 F.2d at 34-35 (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. at 415, 91 S.Ct. at 823).

Conservation Law Foundation, Inc. v. Secretary of the Interior, 864 F.2d 954, 957-58 (1st Cir.1989).⁵

Discussion

Plaintiffs contend that the automobile equity regulation is arbitrary, capricious, and an abuse of discretion. Plaintiffs argue that while HHS purported to rely on a 1979 survey of food stamp households, that survey is not part of the administrative record and the Secretary did not have a rational basis for adopting the regulation.

The food stamp survey, on which HHS purportedly relied, was never a part of the administrative record⁶ and is not before the Court, and the Court has no means of evaluating its methodology or content. The Court, therefore, cannot "make a substantial inquiry" into the factors relied on by HHS in formulating the regulation, and thus it has no basis for holding that the Secretary has provided a "reasoned basis" for its promulgation.

The Secretary argues that the Court may reasonably ascertain the agency's path because HHS not only cited the 1979 food stamp survey but also summarized its results. In some circumstances, a summary of the factors relied on by an agency might be enough to pass an "arbitrary and capricious" test. In this case, however, HHS did not provide even the most basic information concerning the food stamp survey, e.g., who conducted the survey, how many households were interviewed, or the methodology used in conducting the survey. Moreover, the agency ambiguously asserted that the survey "suggested" that 96% of food stamp households owned cars with equity values less than $1,500. The Court is unable to conclude, on the present record, that the agency had a reasoned basis for choosing $1,500 as the equity limitation.

The Court recognizes that in enacting this type of regulation, lines must be drawn and that policy considerations play a substantial part in determining the agency's ultimate choice. But these facts do not absolve the agency from complying with the minimum requirements of the APA, namely, that the...