The opinion of the court was delivered by: BECKER
EDWARD R. BECKER, DISTRICT JUDGE
On July 11, 1974, we filed a three-judge court opinion in this 42 U.S.C. § 1983 case which deals with the
right of patients confined in state mental hospitals in Pennsylvania to control and manage their own property as against: (1) the right of the Commonwealth to summarily seize and control it for the duration of the hospitalization, without prior notice or hearing on the issue of the patient's competency to control that property; and (2) the right of the Commonwealth to appropriate part of the patient's property in satisfaction of the cost of care and maintenance without prior or subsequent hearing on the correctness of the Commonwealth's assessment.
377 F. Supp. 1361, 1362 (E.D.Pa. 1974). The "bottom line" of that opinion was a declaration that § 424 of the Pennsylvania Mental Health and Mental Retardation Act of 1966, 50 P.S. § 4424, read in conjunction with § 501 of that Act, 50 P.S. § 4501, offended the equal protection and due process clauses of the Fourteenth Amendment. We issued an injunction (hereinafter "original decree") against the further application of section 424. No appeal was taken.
We were aware when we filed our opinion that compliance with the original decree required major changes in the manner of handling the funds of mental patients in Pennsylvania institutions and that implementation could not be accomplished overnight.
We could not have anticipated, however, that almost two-and-one-half years after the original decree we would be filing the present opinion deciding motions interposed by state officials attacking its validity on the grounds that we had adjudicated a case not before us, and that we had lacked subject matter jurisdiction. Nor could we have perceived that the case would proceed to the point where the Commonwealth would attempt to repudiate the instrument finally devised for implementing the original decree, a consent decree entered on April 4, 1975, (hereinafter "consent decree") on the grounds that the general counsel for the Pennsylvania Department of Welfare who signed the consent decree and submitted it to the Court was unauthorized to do so.
An understanding of the present motions requires a brief description of the interim history of the case. After our July 11, 1974 decision we heard nothing until early 1975 when counsel for plaintiff and an intervening plaintiff
moved that the defendants, including Secretary of Welfare Frank S. Beal, be adjudged in contempt for failure to comply with the original decree. There followed a period of negotiation, pursuant to which the parties entered into a stipulation for the consent decree. The consent decree incorporated comprehensive regulations to be adopted by the Pennsylvania Department of Public Welfare as a means of implementing the original decree. The stipulation included provisions for repayment to mental patients of sums withheld pursuant to the statutory procedure which we invalidated. The stipulation was signed on the Commonwealth's behalf by Assistant Attorney General Marx S. Leopold who was General Counsel for the State Department of Welfare, and by Assistant Attorney General Cecil Maidman who, along with Leopold, had conducted the litigation on the defendants' behalf before the three-judge court. The consent decree was approved by the undersigned on April 4, 1975. The regulations were personally approved by defendant Frank S. Beal, Secretary of Welfare, and approved as to legality by the Pennsylvania Department of Justice. They were published in the Pennsylvania Bulletin on April 19, 1975, and certification of publication was filed with the Court.
The consent decree did not end the undersigned's involvement in the matter, for notwithstanding the new regulations it appeared that the problems involved in implementation could benefit from the mediation efforts of the Court, and we embarked upon a series of implementation conferences.
First, the problems of obtaining suitable guardians for the small funds involved (most banks were uninterested) were not inconsiderable, and a dispute arose between counsel as to the appropriate means of handling the matter. In the many implementation conferences, a variety of options were explored.
Second, the processing of the many Guardian Petitions required by the two Vecchione decrees met with resistance from the State Court system which contended that it was understaffed and ill-equipped to handle the enormous volume of necessary petitions.
However, through mediation, we were able to stave off a constitutional confrontation between the State and Federal Courts (see n.5) and the State Attorney General, who with the cooperation of the State Court Administrator is now moving ahead with the processing of the Vecchione guardian petitions. Third, there arose a dispute between counsel as to the Welfare Department's procedure for preliminary determinations of competency pursuant to the consent decree, and we mediated that as well.
The biggest problem, however, did not involve any of the foregoing, but was, as is so often the case, a matter of money. At one of our implementation conferences it appeared that the Commonwealth had withheld from mental patients after the original decree some 9.1 million dollars which it was bound to repay by the terms of the consent decree; i.e., notwithstanding the original decree the revenue agents had continued to seize and appropriate patients' money up until April 4, 1975 with the result that virtually all of it was returned by the revenue agents to the State Treasury general fund in payment of care and maintenance. The Commonwealth was unable at the time to free up the funds for repayment.
Moreover, the Commonwealth began to contend that the repayment of such sums would violate the Eleventh Amendment to the Constitution and that the consent decree was signed by Assistant Attorneys General who lacked power or authorization. Additionally, the Commonwealth began to question the viability of the original decree by asserting that counsel in presenting the case had failed to inform the court that Mrs. Vecchione's funds, and the vast bulk of the funds held by Revenue Department Agents (hence affected by the original decree) were funds received from the Social Security Administration (or other federal agencies such as the Railroad Retirement Board) which the Pennsylvania Revenue Department Agents were holding, not subject to section 424, but pursuant to representative payee procedures established by agreement with the Social Security Administration (or other agency). As Mr. Leopold put it in a "Petition for Clarification" filed on July 10, 1975, the Court and plaintiffs and defendants "apparently assumed" that the funds at issue were section 424 funds but they (allegedly) were not.
Further implementation conferences with the undersigned continued.
The Commonwealth had designated Deputy Attorney General Donald Murphy, a high level Justice Department official, to act as the Commonwealth's representative, and Mr. Murphy attended the various conferences along with Joseph Kennedy, Esquire, Chief of the Revenue Department's Bureau of Institutional Collections, Paul Carey, the new General Counsel for the Welfare Department, and representatives of the Social Security Administration, including a regional representative, Mr. Thomas L. Toole, and an HEW attorney Larry Bailine. Notwithstanding the allegations of the "Petition for Clarification," the Commonwealth represented at these conferences that the monies in question would be repaid;
moreover, Mr. Toole represented that the Social Security Administration would abide by the Vecchione decree.
We heard nothing for some time and had thought that the problems were solved. However, on February 18, 1976, the Commonwealth defendants filed a Motion to Vacate and/or Modify the Consent Decree. At conferences following the filing of the motion the Commonwealth attorneys first took the position that they attacked only the consent decree, not the original decree. In due course, however, it appeared that they were attacking both. Because it appeared that resolution of the issues posed by the Commonwealth's motion might take some time, we continued our implementation conferences, and worked out two Interim (Implementation) Orders, dated May 26, 1976. The Commonwealth agreed to advance implementation, because it has at all times stated that it agrees with the principles of the July 11, 1974 Vecchione opinion, except those sequellae which it is litigating.
The motion to vacate and/or modify is founded upon Fed.R.Civ.P. 60(b). Inter alia, it raises those questions about subject matter jurisdiction, the Eleventh Amendment, and the validity of the consent decree to which we have already referred. The plaintiffs filed an answer, not only countering the allegations of the motion, but also suggesting with considerable force that what the defendants were attempting to do was to relitigate a two-year old decree.
A briefing schedule was established, depositions were taken, and on September 30, 1976, a hearing on the motion was held before the three-judge court. The hearing consisted mainly of legal argument: the evidentiary foundation was supplied by a stipulation based upon the various depositions. There was, however, one factual development of note: counsel for the defendants (who, everyone seemed to agree, were authorized Commonwealth representatives) agreed that Messrs. Leopold and Maidman were authorized to represent the Commonwealth defendants in the initial three-judge court proceeding and that the defendants were bound by the stipulations which they had made therein. These included stipulations which establish that the funds of the plaintiff Mrs. Vecchione which came from Social Security payments were held by the Revenue Agent pursuant to section 424.
On October 8, 1976, the undersigned, acting on behalf of the three-judge court, entered an order denying the motion to vacate and/or modify with the notation that our opinion (explaining the decision) would follow. This is that opinion. Inasmuch as the defendants have filed a notice of appeal to the United States Court of Appeals for the Third Circuit, and the record has been transmitted to that Court, this opinion will be transmitted as a (certified) supplement to the record.
The defendants have also moved pending appeal for a stay. Because it is an anomalous motion we rescribe its prayer:
Defendants respectfully move this Court for an Order staying the operation of this Court's Order of October 8, 1976, denying Defendants' Motion to Vacate and/or Modify. By this Motion defendants seek to stay the requirements of the Order of April 4, 1975, and reinstate the terms of this Court's two Interim Orders of May 26, 1976, pending determination of the appeal in this case.
We do not perceive that there is any such thing as a Motion to Stay an Order denying a Motion to Vacate and/or Modify an earlier unappealed-from decree. To the extent such a motion could exist, we fail to perceive how it could do anything but cause a reversion to the status quo ante, i.e., the unenforced but unappealed-from July 11, 1974 decree and/or the April 4, 1975 consent decree. Nor do we believe that the interim orders can alter this view, for those orders were on their face only a device to advance implementation while the defendants were litigating the motion to vacate and/or modify. Furthermore, the standards for a stay pending appeal have not been met. In this regard we note principally that we find no likelihood of success on the merits and that the grant of a stay, if it were possible, would cause irreparable harm to many of the institutionalized mental patients in Pennsylvania. In view of both of the foregoing factors, the harm which would certainly result to those institutionalized patients outweighs the claimed risk of harm to defendants. Further, we believe that the grant of a stay would be contrary to the public interest. For these reasons and those set forth in this opinion the motion for a stay has been (by an Order filed December 14, 1976) denied.
II. The Subject Matter Jurisdiction Issue
Although technically no motion to vacate the 1974 judgment has been presented, for the purposes of this phase of the court's opinion we will conform our analysis to defendants' contentions and will consider defendants' claim that the 1974 judgment was void in light of the factual record developed in connection with this motion. This will involve an analysis of the requirements of the Social Security Act and its regulations and a factual inquiry into the activities of state revenue agents who also served as the representative payees of social security benefits.
First of all, we believe that the defendants' theory of the operation of the supremacy clause cannot withstand close examination. Section 424(1) itself provides in plain terms that the authorized state revenue agent
shall. . . take custody of, receive and manage in accordance with this section . . . any other benefits or payments to which such person covered by the provisions of this act may be entitled. [Emphasis supplied.]
On its face, 424 therefore requires a state revenue agent to comply with its terms in handling social security benefits. Obviously, this does not mean that the state may compel the Social Security Administration (SSA) to appoint the state revenue agent as its representative payee. Nonetheless, when the SSA chooses to make a state revenue agent the recipient of a patient's social security benefits it is within a state's power to require simply that the agent should still act in accordance with his state legislative directives. We believe this to be the reasonable interpretation of 424 in this setting. There is positively nothing in the Social Security Act or the SSA regulations which requires Pennsylvania to offer its revenue agents for unconditional service as representative payees.
The federal regulations and the federal statute are on their face consistent with 424 in all details but possibly one.
The SSA regulations provide that the SSA shall make its own determination of a patient's competency.
Defendants observe that at the point a patient's personal assets exceeded $2,500 he or she would be entitled to an adjudication of competency under 424(4) and to the appointment of a guardian in the event he or she was declared incompetent. Defendants then conclude that the federal regulations make the SSA's decision on competency the legally operative one for purposes of appointing a representative payee, thereupon suggesting that the federal law should prevail and that the revenue agent must continue to receive payments regardless of the appointment of a guardian for state purposes. This conclusion fails to recognize that the revenue agent, upon receiving an appointment as the payee of the SSA, would not be absolutely and permanently bound to continue in that capacity. In the event a state guardian were appointed, the revenue agent's duties as payee could simply terminate leaving the SSA to accept the guardian as its representative payee or look elsewhere.
Another factual element of defendants' voidness theory must also be discussed. Counsel for defendants have insisted upon the existence of an "agreement" between SSA and the Commonwealth rendering 424 and 501 inapplicable to the treatment of social security payments by revenue agents. The significance of this asserted long-standing agreement between state and federal administrators would in any event be uncertain because of the broad directive of section 424(1) and because of the evidence set forth above suggesting actual compliance with 424 by revenue agents/representative payees. But in addition to all this, the deposition testimony of Deputy Attorney General Donald J. Murphy, a Justice Department representative during the implementation conferences and a one-time director of the Department of Institutional Collections within the Welfare Department, reveals that there was not even a specifically ascertainable beginning to the "agreement" which was at best no more than an informal understanding. Moreover, Murphy testified: (1) that his successor in the Bureau of Collections who served in that position prior to the 1974 Vecchione litigation expressed his belief that the so-called agreement was defunct and (2) that an SSA district manager indicated in a letter dated December 21, 1972, that there was no operative understanding and that section 424 was to be followed.
If these administrative officials denied the very existence of an understanding which defendants say must override the limitation on a revenue agent's authority in 424, it should not be surprising that we decline to place any confidence in the defendants' reference to it.
Based upon the record which has been presented to us in connection with the present motion, we believe that the operation of sections 424 and 501 was in fact a live issue in the 1974 Vecchione case. We are persuaded to this result, in sum, both because the social security statute and regulations (and any claimed agreement) did not through the supremacy clause forbid a state revenue agent to function under the 424 procedure, and because the evidence demonstrates that responsible officials for the SSA and the Commonwealth themselves recognized that 424, consistently with its plain meaning, should be and was in fact followed even when the revenue agent was serving as a representative payee for social security payments. It may of course be true that the SSA could have been profitably joined as a defendant in the 1974 action. However, because we find that revenue agents/representative payees were operating under state law, there did indeed exist a case or controversy and it was therefore within the Article III jurisdiction of this court to adjudge sections 424 and 501 unconstitutional. To the extent defendants' motion to vacate or modify the 1975 consent decree is construed as a 60(b)(4) motion asserting the voidness of the 1974 judgment it must thus be denied.
B. The Availability of 60(b)(4) Relief
Even apart from our finding that the defendants' denial of the plaintiff's standing is incorrect, we find ourselves in disagreement with defendant's position on the availability of 60(b)(4) relief in the circumstances of this case. At one end of the spectrum is the self-explanatory rule that a judgment rendered in the absence of subject-matter jurisdiction is a legal nullity, unable to ripen with age into a valid judgment. See Misco Leasing, Inc. v. Vaughn, 450 F.2d 257, 260 (10th Cir. 1971). At the other end is the principle, sometimes referred to as the boot-strap principle, that a court possesses the jurisdiction to decide whether it has subject matter jurisdiction. See, e.g., Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 84 L. Ed. 329, 60 S. Ct. 317 (1940) (requiring only an opportunity to litigate at the outset the jurisdictional issue); Stoll v. Gottlieb, 305 U.S. 165, 83 L. Ed. 104, 59 S. Ct. 134 (1938); Dobbs, ...