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November 19, 1979

Carrie MOORE et al.
Aldo COLAUTTI et al.; Lorraine TILFORD et al. v. Aldo COLAUTTI et al.; Carmen Torres, Ruby Washington, Intervening Plaintiffs.

The opinion of the court was delivered by: GREEN


These consolidated actions are brought pursuant to 42 U.S.C. § 1983 and 28 U.S.C. §§ 2201 and 2202 to invalidate and enjoin the policies and practices of the Pennsylvania Department of Public Welfare in obtaining reimbursement from individuals who received state-administered public assistance pending awards of federal Supplemental Security Income benefits. Defendants are state officials employed by the Department of Public Welfare. The plaintiff class consists of recipients of state General Assistance (GA) benefits and recipients of Aid to Families with Dependent Children (AFDC) benefits who are eligible for benefits under the SSI program, 42 U.S.C. § 1381 et seq., and who have been or will be subject to the Department's policies and practices to obtain reimbursement from SSI benefits for assistance granted pending receipt of SSI awards. Jurisdiction is alleged pursuant to 28 U.S.C. §§ 1331, 1343(3) and (4). Plaintiffs request not only monetary damages, but also declaratory, injunctive and notice relief.

 Oral argument on cross-motions for summary judgment was held on March 7, 1979, and the parties then agreed that the factual record, which includes extensive stipulations, was complete and that a final hearing would be unnecessary. Accordingly, the actions were submitted to the Court either for summary judgment or for judgment on the merits as a nonjury case stated.

 For the reasons stated hereinafter, we deny the cross-motions for summary judgment and we award partial declaratory relief in favor of the plaintiffs. We deny plaintiffs' request for monetary damages and injunctive relief. *fn1"

 I. Facts and Procedural History

 These consolidated lawsuits present a case of first impression in the federal courts regarding state recoupment of public assistance from federally awarded SSI benefits. *fn2" The Moore action was filed in the Eastern District of Pennsylvania on May 8, 1975, and the Tilford action was filed in the Middle District of Pennsylvania in June 1975. Shortly thereafter the Tilford case was transferred to the Eastern District and, on September 29, 1975, the cases were consolidated before this Court. After consolidation, several persons requested the right to intervene as plaintiffs, and all intervention motions were granted. *fn3" In addition, on May 5, 1978, the Court approved the parties' stipulation for a class action and after review accepted their definition of the proposed class.

 The plaintiffs have previously filed motions for preliminary injunction and the defendants have previously filed motions to dismiss. By agreement of the parties we deferred ruling on these motions, as set forth in our Order of September 29, 1975. The parties then engaged in discovery proceedings and stipulated to facts for summary judgment. Two documents embody these stipulations. The first document is entitled "General Stipulations", and it describes the official policies and practices of the Department regarding reimbursement of public assistance from SSI benefits. The second document is entitled "Individual Stipulations", and it sets forth areas of agreement concerning the Department's collection actions as to the original plaintiffs and the intervening plaintiffs.

 In addition to these two sets of stipulations, the factual record in these actions consists of the following materials: depositions of defendants and defendant's employees, including claims settlement agents and caseworkers; interrogatories and answers thereto; defendants' answers to plaintiff's request for admissions (though these admissions are superceded to the extent that they may contradict the general or individual stipulations); the officially filed complaints of plaintiffs and intervening plaintiffs (no answers were filed by defendants to any of the complaints as defendants rely on the stipulations); affidavits of plaintiffs; affidavits of class members accompanying plaintiff's Motion for Summary Judgment; affidavits attached to defendant's Motion for Summary Judgment; and appendices of exhibits containing pertinent DPW regulations and memoranda, and various departmental forms and documents relating to reimbursement from SSI benefits. The affidavits were submitted by plaintiffs to show that the Department's caseworkers and claims settlement agents engaged in coercive collection practices beyond the official policy and that this activity continues unabated today throughout the entire state.

 The record in this lawsuit is now closed, and both parties have requested either summary judgment or judgment on the merits. Before discussing the legal arguments and evidence they marshal, we will briefly describe the public policy problem that pervades the dispute.

 The Supplemental Security Income Program (SSI), Title XVI of the Social Security Act, 42 U.S.C. § 1381 et seq., is a federally administered assistance program designed to meet basic subsistence needs of aged, blind and disabled individuals according to uniform eligibility standards and a national base payment level. As with most federal programs, there is a time lag between application for and delivery of the desired service. The General Stipulation states that the delay from the date of application for SSI to the receipt of the first check often exceeds six months. During this interim period, applicants for SSI have, by definition, no means of maintaining themselves. Consequently, they are eligible for and receive Public Assistance from the Pennsylvania Department of Public Welfare.

 This cash assistance is channeled through two programs, Aid to Families with Dependent Children (AFDC) and General Assistance (GA), and it continues until the individuals are determined eligible for and receive their first SSI check. That check, however, is not a monthly check. It is a lump sum SSI check which awards benefits retroactively to the month of application. The lump sum SSI check, as well as the monthly SSI checks, include state funds as a supplement to the federal SSI payment level. Thus, individuals who receive both the public assistance grant (either from AFDC or GA) and the lump sum SSI check "double dip" into both state and federal funds. Because the state regards this "double dipping" as unfair to recipients who must live on one check and an unnecessary drain on the limited pool of available public assistance money, it seeks reimbursement from SSI recipients.

 Prior to 1976, an additional consideration underlay the Department's reimbursement policy toward individuals who received both AFDC and SSI. At that time all income, including public assistance, was considered by the Social Security Administration in determining eligibility for SSI benefits. In the absence of an official reimbursement policy, interim public assistance benefits received would have resulted in a dollar for dollar reduction in the amount of the SSI grant, depressing that grant well below the subsistence level. Moreover, once the first SSI check arrived, the public assistance would have been terminated. Ultimately, the client would have received almost no SSI and no public assistance and would have again faced a protracted delay in getting the SSI benefits increased.

 To forestall this hardship, the Department persuaded the Social Security Administration to treat the public assistance grant as a loan and exclude it in determining SSI eligibility. The Social Security Administration regarded the state assistance as a loan, however, only if the AFDC recipient signed a repayment/reimbursement agreement. Though Congress in 1976 exempted interim assistance based on need as a factor in determining eligibility for and the level of SSI, *fn4" the Department continues to use these agreements to obtain reimbursement from individuals who received AFDC, and this constitutes one of the practices that plaintiffs attack.

Section 407. Assignment. The right of any person to any future payment under this subchapter shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.

 Section 407 was specifically incorporated into the statutory provisions pertaining to the SSI program, see 42 U.S.C. § 1383(d)(1), and although it might be thought that the proscription applies only to private and not to governmental creditors, the Supreme Court held squarely in 1973 that state welfare departments also fall within its coverage. Philpott v. Essex County Welfare Board, 409 U.S. 413, 93 S. Ct. 590, 34 L. Ed. 2d 608 (1973).

 The Philpott decision severely hampered DPW's efforts to recoup interim public assistance from SSI recipients, for it precluded the state from legally requiring reimbursement from the initial lump sum SSI check. Though voluntary reimbursement remained a permissible alternative, benefit levels under both the state and federal welfare programs were so low that individuals often found it necessary to spend the overpayments immediately in order to meet their daily needs. *fn5" In August, 1974, Congress granted relief to the states by adding the Interim Assistance Reimbursement Program to the Social Security Act. Section 1383(g)(1) of Title 42 (42 U.S.C. § 1383(g)(1) (1974)) reads in pertinent part:

Notwithstanding subsection (d)(1) of this section . . . the Secretary may, upon written authorization by an individual, withhold benefits due with respect to that individual and may pay to a state . . . from the benefits withheld an amount sufficient to reimburse the state . . . for interim assistance furnished on behalf of the individual by the state . . . .

 As implemented by the Secretary, the IAR program does not apply to reimbursement of AFDC benefits. "Interim Assistance" was defined in § 1383(g)(3) of Title 42 as "Assistance financed from state or local funds . . .", and the Secretary has interpreted this language to exclude assistance payments, such as AFDC, which are financed in whole or in part from federal funds. 20 C.F.R. 416.1906(b)(3) (1976).

 Currently, the Pennsylvania Department of Public Welfare maintains a bifurcated system of recoupment. Allegedly in compliance with the IAR program, the state requires recipients of GA, a solely state funded program, to sign a PA 176S Reimbursement Authorization form as a condition of eligibility for assistance. This form authorizes the Secretary of HEW to pay the individual's initial lump sum SSI check directly to DPW. Because the benefits received from SSI are generally greater than those received in the GA program, the amount of state interim assistance is deducted from the lump sum check and the balance of the monies is forwarded to the client along with a notice of his right to appeal if he disagrees with the amount of the refund.

 To collect reimbursement from individuals who received interim assistance through AFDC, a state-administered and jointly state and federally funded program, the Department uses an entirely different procedure. Upon applying for AFDC benefits, the individuals are required to sign a PA 176K Agreement and Authorization to Pay Claim form as a condition of eligibility for assistance. This agreement provides, in essence, that the state assistance is a loan which must be repaid by the recipient if funds come into his hands, *fn7" and it is printed on the same form that the Department previously used to dissuade the SSA from considering the interim assistance as income in computing SSI eligibility and award levels. By contrast to GA reimbursement under the IAR program, the SSA forwards the initial lump sum SSI check directly to the AFDC recipient and, consequently, the DPW must collect reimbursement directly from him. The DPW apparently does not receive from the SSA notice that the initial SSI payment has been disbursed; however, caseworkers inform applicants for AFDC benefits that they must notify the Department as soon as the initial lump sum SSI check arrives.

 Pursuant to departmental regulations, responsibility for collection of SSI reimbursement claims is divided between the DPW's Bureau of Claims Settlement (CS) and County Boards of Assistance (caseworkers). The regulations assign caseworkers a secondary role. Generally, caseworkers are to take certain preliminary actions to secure the state's right to reimbursement. These actions include explaining to applicants and recipients their liability for reimbursement and obtaining from them the proper acknowledgments of that liability. *fn8" Primary responsibility for collection of reimbursement rests with the CS Bureau, and caseworkers are to refer claims to it when they are notified by the clients that they have received their initial SSI checks. *fn9" Caseworkers may accept payment of a reimbursement claim when offered by a client and no CS agent is available, but they are not generally authorized to make collections. *fn10"

 When a claim is referred to the CS Bureau, the CS agents either call or write the client and ask the client to come to their office. Occasionally, home visits are made. The General Stipulation states that, when contacting a recipient for the purpose of seeking reimbursement, CS agents are instructed to inform the recipients of the following: (1) that a certain amount of money is owed because of assistance granted pending receipt of SSI benefits; (2) that the recipient signed a PA 176K repayment/reimbursement agreement form; (3) that the recipient is legally obligated to repay the Department the amount claimed above; and finally (4) that upon request by the recipient, the CS agent will provide a computation of the amount owed to the Department. Although the CS agents are instructed that they have no authority to threaten a lawsuit or attachment, garnishment or other legal process to collect reimbursement from the SSI check, they are not instructed by the Department to inform AFDC recipients of the rights granted to them by the Philpott decision and Section 407. Nor are they instructed to advise AFDC recipients of any rights they may have to a hearing regarding the amount of reimbursement or the method of collection.

 Not infrequently, caseworkers give applicants for interim assistance the wrong form to sign, and GA clients erroneously sign a PA 176K form. In this situation, the SSA forwards the initial lump sum SSI check directly to the GA recipient, and reimbursement is collected in the same manner used for AFDC clients.

 Plaintiffs contend that the DPW's official policies regarding reimbursement of both GA and AFDC benefits violate section 407 of the Social Security Act (as applied to SSI by § 1383(d)(1)) and their constitutional rights to due process and equal protection. Moreover, they claim that the caseworkers and CS agents often engage in coercive collection practices unauthorized by the Department regulations. Affidavits and answers to interrogatories submitted by the plaintiffs show that caseworkers instruct clients not to cash the initial lump sum SSI check, but rather to hold on to it until they are contacted by CS agents or to bring it to the Department. *fn11" Similarly, plaintiffs have adduced evidence that both caseworkers and CS agents threaten and ...

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