The opinion of the court was delivered by: FOGEL
In this class action brought by Marie Buckles, Felicita Alicea, and Nicholas Smeraski, plaintiffs seek to enjoin the Secretary of Health, Education and Welfare, and his agents and delegates, from terminating their Supplemental Security Income (SSI) benefits without advance notice, and the opportunity for a hearing prior to the cessation of such payments to them.
We entered a Preliminary Injunction on December 20, 1974, and ordered the Secretary to pay SSI benefits to a class determined pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure, which consisted of those persons in the Commonwealth of Pennsylvania who (1) had received SSI benefits on or after January 1, 1974, (2) had received state aid to the disabled on or before December 31, 1973, (but not before July 1, 1973), and (3) whose benefits had been, or would be terminated, suspended, or reduced, without notice, and without being given a hearing prior to any termination, suspension or reduction of payments to them.
On January 28, 1975, defendant petitioned the Court to modify the Preliminary Injunction in order to limit the class that had been previously determined to those persons who had already filed or would file a timely request for reconsideration and a hearing pursuant to 20 C.F.R., Part 416, Subpart N, or whose time limit for filing such request for reconsideration and/or a hearing had not expired at the time of the entry of the Preliminary Injunction. We denied this motion without prejudice to defendant's right to seek modification of the class in conjunction with the final order to be entered in this matter.
All parties have agreed that a final determination may be made on the basis of the record developed at the hearing before us on December 18, 1974, which includes the Stipulation presented to the Court on that date, and the memoranda and supplementary materials filed thereafter at our request. Upon consideration of this augmented record, we conclude that a permanent injunction should issue in favor of plaintiffs and the class which they represent.
We shall discuss the issues presented by this controversy in the following order: (1) the legislative and administrative history of the SSI program; (2) the factual basis for plaintiffs' claims; (3) the merits of the case under the due process clause of the Fifth Amendment; (4) the statutory authority to make payments after December 31, 1974; and (5) the form and effect of the final injunction we will enter.
1. The legislative and administrative history of the SSI program.
Because the subject matter of this action has been frequently litigated in the District Courts,
we shall limit our discussion to a broad outline of the SSI program.
It was enacted by Congress in October of 1972, Pub. L. 92-603, 86 Stat. 1465, 42 U.S.C. § 1381 et seq., to replace inter alia, the joint state-federal program known as Aid to the Permanently and Totally Disabled (APTD). The effective date of the SSI legislation was January 1, 1974. The program initially provided that persons who were permanently and totally disabled, as defined under any state plan in effect during the month of October 1972, and who were receiving aid under such plan on the basis of disability during the month of December, 1973, would automatically qualify as disabled persons who were eligible to receive SSI benefits. On December 31, 1973, however, one day before the program was to go into effect, Congress amended the statute by adding to this "grandfather" provision the additional requirement that a potential recipient must have received disability payments under a state plan for at least one month prior to July of 1973. Pub. L. 93-233, 87 Stat. 957. This new proviso, codified in 42 U.S.C. § 1382c(a)(3)(E), had the effect of requiring a disability determination with respect to those persons who had received state aid during the month of December of 1973, but not for any month prior to July of 1973, a class of persons which would automatically have been considered as eligible for disability payments under the old "grandfather" provision.
The SSI program, however, was to become effective the day following the passage of Pub. L. 93-233; hence, the Social Security Administration was unable to make eligibility determinations with respect to these so-called "rollback" individuals before payments were scheduled to begin. Under the circumstances, the agency elected to make payments to all members of the class, pending a determination of eligibility. These payments were purportedly made pursuant to the provisions of 42 U.S.C. § 1383(a)(4)(B), which permitted payments to "presumptively disabled" persons prior to a determination of their eligibility, without subjecting such persons to liability for recoupment of overpayments, should they ultimately be found to be ineligible. Section 1383(a)(4)(B), however, limited such payments to a three month period which was to expire on March 31, 1974. The agency was unable to complete eligibility determinations by that time; it accordingly asked Congress to extend the period of presumptive disability until December 31, 1974. See H.R. No. 93-871, 93d Cong., 2d Sess. Congress agreed, and passed Pub. L. 93-256, 88 Stat. 52 (Mar. 28, 1974), which permitted presumptive disability payments during the entire calendar year of 1974, without liability for repayment if the recipients were subsequently found to be ineligible.
The administrative burden on the agency to process these "rollback" cases was so great, however, that by December of 1974, it was clear that disability determinations could not be completed by the end of that calendar year. On December 2, 1974, James B. Cardwell, Commissioner of Social Security, wrote to then Chairman Wilbur Mills of the House Committee on Ways and Means to report that the agency intended to continue to make SSI payments after December 31, 1974, to those individuals with respect to whom determination of eligibility under the federal criteria had yet to be made. The reason for this decision was that potential eligibles and ineligibles were intermingled in the remaining unprocessed caseload, and the agency would therefore be compelled either to pay all or none of these persons. Commissioner Cardwell stated that "as a matter of good administration, elemental fairness, and proper treatment of beneficiaries and claimants, [the agency] should continue payments to all of the individuals until the SSI eligibility determination is made and effectuated, even though some individuals will thereby be paid who will eventually be found to be rollbacks who do not meet SSI disability criteria."
With respect to the time limitation in Pub. L. 93-256, Commissioner Cardwell noted that "we view the expiration of the period specified in P.L. 93-256 as ending the time when payments can be made on the basis of presumptive disability and not be considered overpayments."
Within this legislative and administrative framework, we will consider the underlying factual situation.
2. The factual basis for the plaintiffs' claims in this action.
The named and class plaintiffs are "rollback" individuals, who received APTD payments from the Commonwealth of Pennsylvania in December of 1973, but not for any month prior to July 1, 1973. During December, 1973, each received a notice from the Social Security Administration stating in substance the following:
You do not need to file an application to get supplemental security income. A gold colored check for the amount shown above * * * will come to you automatically about the first day of each month. This check will take the place of the checks you now get from your state or local public assistance office.
Plaintiffs were never asked to submit any additional information with respect to their eligibility for the SSI program; accordingly, they took no further action to ensure their eligibility, and, in fact, their checks began arriving about the first of each month.
At some point in time thereafter, the agency did decide that plaintiffs were not eligible for SSI payments, because they allegedly had failed to satisfy the criteria for disability mandated under the federal statute. Each plaintiff received a form letter
stating that, after a "careful review" of the evidence in the case, the Social Security Administration had determined that these recipients were ineligible, and that payments would be stopped. On the back of this form, plaintiffs were notified of their right to request a reconsideration of the agency's decision within thirty days of receipt of the notice. Such reconsideration, however, does not provide either an opportunity for personal testimony, nor for cross-examination of adverse witnesses. Further, it is clear that such reconsideration, and, indeed, the entire appeal process in 20 C.F.R., Part 416, Subpart N, is available to a terminated recipient only after benefits have been discontinued. If the reconsideration determination is adverse to the claimant, he can request an evidentiary hearing before an administrative officer. This hearing, however, may not take place for many months;
during this hiatus, all benefits cease.
This action was filed in November of 1974; plaintiffs seek declaratory and injunctive relief against the termination of SSI payments prior to a full and fair hearing on the issue of eligibility. As noted above, we entered a Preliminary Injunction after hearing, based upon plaintiffs' showing that a serious and substantial question exists with respect to the constitutionality of this practice under the standards enunciated in Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970).
In Goldberg v. Kelly, supra, the Supreme Court held that the due process clause of the Fourteenth Amendment requires that a recipient of state public assistance benefits be afforded an evidentiary hearing prior to the termination of payments:
* * * Such benefits are a matter of statutory entitlement for persons qualified to receive them. Their termination involves state action that adjudicates important rights. The constitutional challenge cannot be answered by an argument that public assistance benefits are "a 'privilege' and not a 'right.'" Shapiro v. Thompson, 394 U.S. 618, 627 n. 6, 22 L. Ed. 2d 600, 611, 89 S. Ct. 1322 (1969). Relevant constitutional restraints apply as much to the withdrawal of public assistance benefits as to disqualification for unemployment compensation. Sherbert v. Verner, 374 U.S. 398, 10 L. Ed. 2d 965, 83 S. Ct. 1790 (1963); or to denial of a tax exemption, Speiser v. Randall, 357 U.S. 513, 2 L. Ed. 2d 1460, 78 S. Ct. 1332 (1958); or to discharge from public employment, Slochower v. Board of Higher Education, 350 U.S. 551, 100 L. Ed. 692, 76 S. Ct. 637 (1956). The extent to which procedural due process must be afforded the recipient is influenced by the extent to which he may be "condemned to suffer grievous loss," Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 168, 95 L. Ed. 817, 852, 71 S. Ct. 624 (1951) (Frankfurter, J., concurring), and depends upon whether the recipient's interest in avoiding that loss outweighs the governmental interest in summary adjudication. Accordingly, as we said in Cafeteria & Restaurant Workers Union, Local v. McElroy, 367 U.S. 886, 895, 6 L. Ed. 2d 1230, 1236, 81 S. Ct. 1743 (1961), "consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action." See also Hannah v. Larche, 363 U.S. 420, 440, 442, 4 L. Ed. 2d 1307, 1320, 1321, 80 S. Ct. 1502 (1960).
It is true, of course, that some governmental benefits may be administratively terminated without affording the recipient a pretermination evidentiary hearing. But we agree with the District Court that when welfare is discontinued, only a pre-termination evidentiary hearing provides the recipient with procedural due process. Cf. Sniadach v. Family Finance Corp., 395 U.S. 337, 23 L. Ed. 2d 349, 89 S. Ct. 1820 (1969). For qualified recipients, welfare provides the means to obtain essential food, clothing, housing, and medical care. Cf. Nash v. Florida Industrial Commission, 389 U.S. 235, 239, 19 L. Ed. 2d 438, 442, 88 S. Ct. 362 (1967). Thus the crucial factor in this context -- a factor not present in the case of the blacklisted government contractor, the discharged government employee, the taxpayer denied a tax exemption, or virtually anyone else whose governmental entitlements are ended -- is that termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits. Since he lacks independent resources, his situation becomes immediately desperate. His need to concentrate upon finding the means for daily subsistence, in turn, adversely affects his ability to seek redress from the welfare bureaucracy.
Id., 397 U.S. at 262-264 (footnotes omitted).
Not every interest, however, is protected by the due process clauses of the Fifth or the Fourteenth Amendments. In Board of Regents v. Roth, 408 U.S. 564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972), and its companion case Perry v. Sindermann, 408 U.S. 593, 92 S. Ct. 2694, 33 L. Ed. 2d 570 (1972), the Supreme Court further pinpointed those interests which are within the zone of such constitutional protection:
* * * to determine whether due process requirements apply in the first place, we must look not to the "weight" but to the nature of the interest at stake. See Morrissey v. Brewer, 408 U.S. 471, at 481, 33 L. Ed. 2d 484, at 494, 92 S. Ct. 2593. We must look to see if the interest is within the Fourteenth Amendment's protection of liberty and property.
The Fourteenth Amendment's procedural protection of property is a safeguard of the security of interests that a person has already acquired in specific benefits. These interests -- property interests -- may take many forms.
Thus, the Court has held that a person receiving welfare benefits under statutory and administrative standards defining eligibility for them has an interest in continued receipt of those benefits that is safeguarded by procedural due process. Goldberg v. Kelly [citation omitted].
To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims.
Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law -- rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. Thus, the welfare recipients in Goldberg v. Kelly, supra, had a claim of entitlement to welfare payments that was grounded in the statute defining eligibility for them. The recipients had not yet shown that they were, in fact, within the statutory terms of eligibility. But we held that they had a right to a hearing at which they might attempt to do so.
Board of Regents v. Roth, supra, 408 U.S. at 570-571, 576-577.
The concept of Roth, however, has proven to be extremely elusive when applied to specific factual situations.
In the instant case, the Secretary contends that plaintiffs do not have a protected property interest in SSI benefits until eligibility has been established; in other words, that payments received on the basis of presumptive disability are legally gratuitous, and, hence, do not invoke Fifth Amendment due process protection. In essence, the Secretary maintains that the cessation of payments to plaintiffs was not a termination, within the meaning of Goldberg v. Kelly, but rather an initial determination of ineligibility.
Plaintiffs argue that a protected property interest in continued receipt of SSI benefits arises from two sources: (1) receipt of SSI payments beginning January 1, 1974, accompanied by a notice from the Social Security Administration that checks would come "automatically" without further application; (2) prior entitlement to benefits under the APTD program.
We do not approach this issue in a vacuum. Several recent District Court decisions have analyzed the problem presented by the litigation; there is a sharp split of authority. Indeed, the complexity and subtlety of the due process question in this context is well illustrated in the extensive and well reasoned opinions of the Courts in Hannington v. Weinberger, 393 F. Supp. 553 (D.D.C., 1975), in which summary judgment was entered for the Secretary, and in Saurino v. Weinberger, 396 F. Supp. 992 (D.R.I., 1975), in which a permanent injunction was issued in favor of plaintiffs. While the problem is by no means free from doubt, we believe that analysis and evaluation of the conflicting contentions tip the balance in favor of plaintiffs; we agree with the holding of the Suarino court that plaintiffs have a sufficient property interest in continued receipt of SSI benefits so as to permit them to invoke due process protection prior to the termination of those payments. See, also, Brown v. Weinberger, 382 F. Supp. 1092 (D.Md. 1974).
In reaching this conclusion, we shall assume, arguendo, that receipt of benefits under the three-month presumptive disability provisions of 42 U.S.C. § 1383(a)(4)(B) does not, in and of itself, establish a protected property interest under the Roth standard.
This assumption, however, does not end our inquiry. Plaintiffs are members of a unique class of recipients of presumptive disability payments; their benefits were initiated during the transition period from APTD to SSI, and their situation differs in many essential respects from that of routine, non-"rollback" presumptive disability recipients.
First, all of the named and class plaintiffs were recipients of benefits under the APTD program, prior to the effective date of SSI. In other words, each such individual had been medically determined to be disabled, and was in fact receiving subsistence payments under the joint state-federal welfare program which then existed to meet the needs of persons in this category. Thus, while these persons had not been determined as eligible under SSI criteria, they clearly had a protected property interest in receipt of benefits under the state-federal program which was replaced by SSI.
Second, the SSI program was intended by Congress as a replacement for, and in large part a continuation of, the APTD program, with the difference that it was to be placed under federal supervision, rather than under the joint control which had existed previously. While there are indications in the pertinent legislative history that Congress intended the SSI program to be a "major departure" from traditional state-federal programs, Hannington v. Weinberger, supra, 393 F. Supp. 560, it seems clear that the significant changes were made with respect to the administration of the program, rather than with respect to its purpose, or to the class of recipients intended to be the beneficiaries. Indeed, the House Report to Pub. L. 92-603 clearly states that SSI was intended to replace existing welfare programs for the disabled:
* * * [The] bill would substantially improve the effectiveness of the adult assistance programs under the Social Security Act by providing --
(2) that each aged, blind, or disabled adult would receive assistance sufficient to bring his total monthly income up to [certain basic benefit levels]; and
(3) the cost of maintaining these basic benefit levels for the aged, blind, and disabled will be borne ...