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CAULK v. BEAL

September 28, 1977

ADRIENNE CAULK on behalf of herself and as guardian ad litem for ALICIA CAULK and ANECHA CAULK, et al. and DELAWARE COUNTY WELFARE RIGHTS ORGANIZATION
v.
FRANK BEAL, et al.



The opinion of the court was delivered by: NEWCOMER

 Newcomer, J.

 This action arises in the aftermath of the Pennsylvania legislature's budgetary crisis of August 1977. Due to the failure of the legislature to pass a budget and thereby supply the funds necessary to support public assistance checks, such checks were not issued from August 5 to August 21, 1977. Public assistance checks normally are issued twice a month and thus it was the first check of the month that was withheld. For many food stamp recipients, public assistance funds are the sole means by which they purchase food stamps; recognizing the problem that faced many food stamp participants by the withholding of the public assistance checks, the Department of Public Welfare established a program whereby public assistance recipients would be allowed their food stamp allotments on credit. These recipients were informed that they could receive their food stamps with no current payment, provided that they sign a form authorizing the Department to deduct from a future assistance check the amount that they ordinarily would have paid for food stamps during this period. Recipients electing to participate in this program signed such forms and did receive such food stamps on credit. After the budget was passed on August 20th, the Department issued both the first and second public assistance checks for the month of August; the second check, in many instances, was reduced by the food stamp credit. Plaintiffs, public assistance recipients, now move for a preliminary injunction against the defendants enjoining them from reducing public assistance checks in this manner in the future and further directing the defendants to make refunds to persons who have already had their public assistance checks reduced. Plaintiff's motion, will be granted in part and denied in part.

 In order to understand the present position of the parties, it is necessary to review the several steps that have occurred thus far in the litigation. After the Department began reducing the second August public assistance check to reflect the amount advanced to purchase the food stamps, the plaintiffs instituted this action on August 24, 1977. On that date, upon plaintiff's motion, Judge Van Artsdalen, the emergency judge, entered a temporary restraining order which enjoined defendants from reducing public assistance checks on account of the credit food stamp arrangement and to return to all those recipients whose checks had been reduced the full amount that had been deducted. On September 1, 1977 after a hearing to extend the temporary restraining order, Judge Van Artsdalen modified his earlier order so as not to require the defendants to refund the amount already deducted from public assistance checks and further to allow the defendants to reduce the final checks to be received by those public assistance recipients of whom the State had prior notice were no longer going to be eligible for assistance. On September 9, 1977, after agreement of all the parties, this Court extended the temporary restraining order, as modified, and set it to expire on September 23, 1977 at 6:00 p.m.

 The Court finds that it has jurisdiction over both the plaintiffs' statutory and constitutional claims. As plaintiffs bring this action under 42 U.S.C. § 1983, this Court has jurisdiction over the constitutional claims under 28 U.S.C. § 1343(3). And since the plaintiffs' constitutional claims to due process and equal protection of the laws are not insubstantial, this Court also has pendent jurisdiction over plaintiffs' statutory claims. United Mine Workers v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966).

 As this Court now reviews the merits of the plaintiffs' motion for a preliminary injunction, it is necessary to delineate what standard must be used to determine whether the plaintiffs' request will be granted. The United States Supreme Court instructed in Doran v. Salem Inn, Inc., 422 U.S. 922, 45 L. Ed. 2d 648, 95 S. Ct. 2561 (1975) that

 
The traditional standard for granting a preliminary injunction requires the plaintiff to show that in the absence of its issuance he will suffer irreparable injury and also that he is likely to prevail on the merits. It is recognized, however, that a district court must weigh carefully the interests on both sides. Id. at 931.

 After reviewing the facts and law involved in this case and applying the standard enunciated in Doran v. Salem Inn, Inc., this Court finds that the plaintiffs are entitled to a preliminary injunction.

 Turning to the question of whether the plaintiffs have established that it is likely that they will prevail on the merits, this Court believes that it is likely that at least, in part, the plaintiffs will be successful on their claims. First, plaintiffs have contested the legal viability of the credit food stamp program instituted by the Department of Public Welfare. Based on the Equal Protection Clause of the Fourteenth Amendment and the Food Stamp Act, 7 U.S.C. § 2011 et seq., itself, plaintiffs contend that free, rather than credit food stamps should have been issued to those persons who did not receive their public assistance checks in the first three weeks of August. Under 7 U.S.C. § 2016, the maximum charge for a food stamp allotment is thirty percent of household income. Plaintiffs argue that as they were not receiving any income in the beginning of August when they wanted to obtain food stamps, the food stamps should have been issued pursuant to the Food Stamp Act without monetary consideration. The Department of Agriculture defines monthly income (that which is to be applied in determining household income) as "all income which is received or anticipated to be received during the month," (emphasis added). 7 C.F.R. § 271.3(c)(1). The defendants argue that it could have been anticipated that the plaintiffs would receive their public assistance checks during the month of August. Plaintiffs, on the other hand, urge this Court to recognize that there was no reason for the Department to anticipate that such indefinitely suspended income would be received by the plaintiffs during the month and therefore they should have been considered to have no income during the month of August and consequently issued free food stamps under the Food Stamp Act. To bolster their position the defendants ask us to take judicial notice of the fact that the flow of monies in the Commonwealth has never been interrupted for an entire month due to the failure of the legislature to pass a budget; upon recognizing this fact, the defendants then would have this Court find that it was reasonable to anticipate that the plaintiffs would receive their public assistance checks during the month. While the Court may at the full hearing for an injunction take judicial notice of the Commonwealth's past record, it does not necessarily lead the Court to the conclusion that it was reasonable to anticipate that the plaintiffs would receive their public assistance checks during August. The checks were in fact received in August, but not until after August 20th, heading toward the conclusion of the month. The question that must be asked is not whether the checks should have been anticipated to be received sometime in the future, but sometime in the month of August. The answer to this question is not clear to the Court and it is quite possible that when dealing with the necessities of life, such as food, one should be more conservative in determining what events should be anticipated.

 However, even if the Court were to find that the public assistance checks should have been anticipated to be received during the month of August, the plaintiffs would then ask the Court to rule that the use of the concept of anticipated income under the Department of Agriculture's regulations is contrary to the Food Stamp Act and therefore improper. It appears that only one case has been decided which addresses this issue. In Gutierrez v. Butz, 415 F. Supp. 827 (D.D.C. 1976), plaintiffs challenged the use of the concept of anticipated income as it applied to migrant workers. Apparently, migrant workers who applied for food stamps at the commencement of the work season and who had no available income would either be denied food stamps or required to pay a very high price for them because the state had determined that it could be anticipated that later during the month they would obtain sufficient income to purchase food at regular prices. In Gutierrez the plaintiffs did not challenge the finding that such income could be anticipated to be received during the month; they did contest a process which allowed "the family to go hungry for one to three week intervals between certification and the actual receipt of the anticipated income." Id. at 830. The Gutierrez court found that the Department of Agriculture had exceeded the scope of its authority under the Food Stamp Act in promulgating the anticipated income concept in as much as it was contrary to the mandate of the Food Stamp Act which required needy families to be supplied sufficient funds to obtain food. Without striking down the entire regulation, the Court, in that case, found the provision violative of the Act as applied to households which were destitute of income and resources at the time of application for food stamp assistance. Without resolving the issue now, it should be said that the reasoning that lead to the decision in Gutierrez may be found controlling in this case. Here when the plaintiffs needed food stamps in the beginning of August they had no income, even though as in Gutierrez income might be anticipated to be received during the month. And as articulated in Gutierrez, it is the mandate of the Food Stamp Act to supply such people as those in the plaintiffs' situation with the appropriate assistance so that they can feed themselves. Defendants argue that Gutierrez is inapposite here, because unlike this case, there the migrant workers were not guaranteed retroactive payments. However, the workers in Gutierrez were not challenging the fact that they would have money at the end of the month to pay their food bills; in fact, it appears that they admitted that fact. Rather, they were questioning the present denial of assistance at a time when they had no money, which it appears is the same challenge that the plaintiffs in this case have presented to the Court. And it should be noted that, although the migrant workers did not challenge the assumption they would have the money at the end of the month to support their nutritional needs, the Court in Gutierrez did not order that the migrant workers be issued food stamps on credit. Although this Court will not decide at this time the issues presented of whether the Department of Public Welfare's credit program contravened either the Food Stamp regulations or the Food Stamp Act, the Court does now find that it is reasonably likely that the plaintiffs may prevail on one or both of these claims.

 The plaintiffs also claim that the credit program violated the Equal Protection Clause of the Fourteenth Amendment invidiously discriminating between non-public assistance by recipients whose income was indefinitely suspended and who were reauthorized food stamps to reflect the non-receipt of the suspended income and not on any credit arrangement and the treatment of these plaintiffs. As this claim has neither been briefed or discussed in oral argument by either counsel and necessarily is dependent on a decision regarding whether the plaintiffs had income under the regulations involved, the Court will refrain from further discussion of the issue until after the hearing for a permanent injunction.

 The second claim put forth by the plaintiffs to support their motion for a preliminary injunction is the argument that the recoupment provisions of the Department of Public Welfare's credit program are not authorized by the Food Stamp Act, 7 U.S.C. § 2011 et seq., the Social Security Act, 42 U.S.C. § 301 et seq., or the regulations promulgated under these acts. Apparently, the plaintiffs are correct in their assertion that the regulations and the acts do not explicitly authorize this recoupment plan. Under the Food Stamp regulations there is no provision for recoupment if excess free coupons are issued; rather a demand must be made asking the recipient to return the excess. 7 C.F.R. 271.7(f). Under the Social Security Act regulations, generally recoupment of an overpayment is not allowed unless the recipient has income or resources "exclusive of the current assistance payment currently available in the amount by which the agency proposes to reduce payments." 45 C.F.R. 233.20 (12)(i)(A)(1). As it seems the Department has not made the determination required by 45 C.F.R. 233.20(12)(i)(A)(1) regarding these plaintiffs, it could not recoup the claimed extra payment under this regulation. Under 45 C.F.R. § 233.20(12)(i)(A)(2) a recoupment without such a determination is allowed if there is an overpayment caused by the recipient's willful withholding of information and then only under paragraph (f) of that section if it limits the payments that may be deducted at any one time so as not to cause undue hardship on recipients. This latter provision in the regulations does not appear to apply in this case. Furthermore, there does not seem to be any explicit authorization to recoup food stamp overpayments from public assistance checks.

 However, the lack of specific authorization for recovery of the outlaid funds in this case does not resolve the question of whether the recoupment provisions in the Department's credit food stamp program are permissible. Defendants' witnesses in the September 1, 1977 hearing before Judge Van Artsdalen asserted that this credit food stamp program cost the government three million dollars. Thus, it is understandable that if the food stamps were correctly issued on credit, rather than for no consideration, the defendants would have a substantial interest in recovering the expended funds. The defendants assert that the recoupment regulations found in the Food Stamp and Social Security Act regulations do not fit the peculiar circumstances of this emergency program. This in fact might be the case. In Hagans v. Berger, 536 F.2d 525 (2d Cir. 1976), the New York State Department of Social Services had promulgated a regulation which allowed the state to make advance allowances of rent subsidies to recipients before the time when their allowances were due, in order to prevent the eviction of recipient families. This program was instituted because numerous recipients diverted shelter allowances to other purposes, became delinquent in rental payments, and were thereby threatened with eviction. Under the regulations, these advances were only allowed if the recipient requested such advances in writing and also requested that his or her grant be reduced to reflect the advance in equal amounts over the next six months. When this regulation was challenged under the recoupment procedures of the Social Security Act and its regulations, the Second Circuit found that the recoupment provisions did not apply since the regulations spoke to recoupment of an "overpayment" and an overpayment was defined under the regulations as a "financial assistance payment received by or for an assistance unit, for the review month, which is in excess by at least $5.00 of the amount that should have been paid to such assistance unit." 45 C.F.R. 205.40(a)(4). The Court found that the ...


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