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Alexander v. Polk

December 17, 1984

LUVINIA ALEXANDER, FOR HERSELF AND AS GUARDIAN AD LITEM FOR SHARIFA ALEXANDER, SYLVIA BEY, HER HERSELF AND AS GUARDIAN AD LITEM FOR TRUSTIN BEY, IRENE BURKETT, FOR HERSELF AND AS GUARDIAN AD LITEM FOR ROBERT BURKETT, ANDREA CAREY, FOR HERSELF AND AS GUARDIAN AD LITEM FOR LESLIE BONITA REX, SHEILA MITCHELL, FOR HERSELF AND AS GUARDIAN AD LITEM FOR TAMIKA MITCHELL, AND ELIZABETH TRUITT, FOR HERSELF AND AS GUARDIAN AD LITEM FOR LEON TRUITT, APPELLANTS IN NO. 83-1811
v.
LOUIS POLK, M.D., ACTING DIRECTOR OF THE PHILADELPHIA DEPARTMENT OF HEALTH, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY, PEARL PITT, M.D., WIC COORDINATOR, DIVISION OF MATERNAL AND CHILD HEALTH, PHILADELPHIA DEPARTMENT OF HEALTH, INDIVIDUALLY AND IN HER OFFICIAL CAPACITY, DAVID SORICELLI, D.D.S., DIRECTOR OF COMMUNITY HEALTH SERVICES, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY, CHRISTINE KNISZLEY, M.D., DIRECTOR OF MATERNAL AND CHILD HEALTH PROGRAMS, INDIVIDUALLY AND IN HER OFFICIAL CAPACITY, BARRY DICKMAN, ADMINISTRATOR OF THE WIC PROGRAM, INDIVIDUALLY AND IN HER OFFICIAL CAPACITY, JACK BURKHARDT, ADMINISTRATOR OF THE DIVISION OF MATERNAL AND CHILD HEALTH OF THE PHILADELPHIA DEPARTMENT OF HEALTH, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY, THE DEPARTMENT OF HEALTH OF THE CITY OF PHILADELPHIA, LEONARD BACHMAN, M.D., SECRETARY OF HEALTH OF THE COMMONWEALTH OF PENNSYLVANIA, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY, MARY ANN BRITTON, R.D., STATE WIC COORDINATOR, INDIVIDUALLY AND IN HER OFFICIAL CAPACITY, THE DEPARTMENT OF HEALTH OF THE COMMONWEALTH OF PENNSYLVANIA, APPELLANTS IN NO. 83-1832



ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Author: Gibbons

Before: SEITZ, GIBBONS and HUNTER, Circuit Judges

Opinion OF THE COURT

GIBBONS, Circuit Judge:

This class action challenges the administration of the Supplemental Food Program for Women, Infants, and Children (WIC), 42 U.S.C.A. § 1786 (West 1978),*fn1 by the City of Philadelphia in 1977 and 1978. The plaintiffs are a class of four-year-old children terminated from the WIC program without notice of the opportunity for a hearing, and a single individual, Andrea Carey, terminated by reason of her alleged use of abusive language to a grocery store clerk. The defendants are the City of Philadelphia, a number of its officials named in their individual and official capacities, and the Commonwealth of Pennsylvania. The original complaint, filed in August of 1978, sought injunctive relief and damages against the City and its officials arising from the City's termination of benefits for four-year-old children eligible for the WIC program. In October of 1978 the district court denied plaintiffs' motion for preliminary injunctive relief. Alexander v. Polk, 459 F. Supp. 883 (E.D. Pa. 1978). Thereafter plaintiffs filed an amended complaint adding the Commonwealth as a defendant and seeking the publication of certain "fair-hearing" regulations. The Commonwealth published these regulations in September of 1980. 10 Pa. Bull. 3586 (Sept. 6, 1980). Plaintiffs concede that this publication rendered any claim for relief against the Commonwealth moot. Br. at 2. The City discontinued the policy of terminating children from the WIC program in November of 1978, thereby rendering any claim for injunctive relief against the City moot. Thus only the plaintiffs' claim for damages against the City survives.*fn2

In September of 1983 the district court held in favor of the plaintiffs on liability, concluding that the City violated the 1978 WIC regulations, and due process by failing to provide notice of the right to a "fair hearing." Alexander v. Polk, 572 F. Supp. 605 (E.D. Pa. 1983). The court reasoned, however, that only one class member, four-year-old Leon Truitt, would have prevailed at such a hearing. Accordingly, it ordered compensatory damages of $87.75 on behalf of Truitt, and nominal damages on behalf of Andrea Carey and the plaintiff class. Id. at 623. In the appeal at No. 83-1811, Carey and the class appeal from the award of nominal damages. In the appeal at No. 83-1832, the City of Philadelphia appeals from the damage award in favor of Leon Truitt and the judgment of liability in favor of the class. In No. 83-1811 we reverse and remand for further proceedings on behalf of the class but not Carey. In No. 83-1832 we affirm.

I. The WIC Program

As enacted in 1972, the WIC program provided cash grants to participating states for the purpose of making "supplemental foods" available to children and pregnant or lactating women faced with the risk of malnutrition because of inadequate income.*fn3 Regulations promulgated by the Department of Agriculture required that health departments of participating states administer funds through local agencies, 7 C.F.R. §§ 246.4, 246.6 (1978), and "enter into a signed written agreement with each local agency setting forth the local agency's responsibilities under the Program as prescribed in this part," 7 C.F.R. § 246.6(a) (1978). Between 1974 and February of 1979, the Commonwealth Department of Health administered the WIC Program in Pennsylvania. The local agency responsible for operating the Program in Philadelphia was the Philadelphia Department of Public Health.

The WIC regulations vested general administrative responsibility for the Program in the state agencies.*fn4 In particular, the states were charged with maintaining a "financial management system which provides accurate, current and complete disclosure of the financial status of the Program. . . ." 7 C.F.R. § 246.11(a) (1978). All "program funds control, including, but not limited to, comparisons of actual Program expenditures with budgeted amounts," was the obligation of the states. 7 C.F.R. § 246.11(e) (1978). Responsibility for maintaining records identifying "the source and application of funds expended for Program activities" was also that of the states. 7 C.F.R. § 246.11(c) (1978).

Individual placement decisions, in contrast, were to be made by a "competent professional authority on the staff of the local agency." 7 C.F.R. § 246.7(b)(2)(ii) (1978). The eligibility of each program recipient was to be established by local agencies at an initial "certification visit" and reestablished at six month intervals. 7 C.F.R. § 246.7(d) (1978). During these visits, local agency staff members were to ensure "that those persons in greatest nutritional need are placed in the Program first." 7 C.F.R. § 246.7(b)(2)(ii) (1978). In the event that the Program reached its maximum participation level, local agencies were to apply a system of priorities.*fn5 A recipient could be removed from the Program at a "certification visit if that person, in the competent professional's judgment, [was] no longer believed to be in nutritional need, or if there [were] potential recipients waiting who, according to the priority system, [were] in greater nutritional need." 7 C.F.R. § 246.7(c) (1978).

Recipients removed from the program were entitled to a hearing at which the grounds for removal could be challenged. Section 246.24 directed state agencies to establish a hearing procedure for this purpose,*fn6 and to inform recipients of the right to a hearing during the initial certification visit and in writing at the time of any determination of "ineligibility" for benefits. 7 C.F.R. § 246.24(a) (1978). During the pendency of any such hearings, recipients participating in the Program were to "continue to receive Program benefits until a decision is reached in the fair hearing proceedings." 7 C.F.R. § 246.24(b) (1978).

In its day-to-day operation, the Program functioned as follows:

A deg. potential WIC recipient undergoes a health assessment by a competent professional authority, who evaluates the applicant's nutritional status and makes the determination of eligibility. The certified WIC recipient then receives a prescription for the appropriate food package. The prescription is in the form of a voucher, to which is attached a check drawn on the Commonwealth's account. The recipient designates, from the list of vendors who have agreed with the City to supply the required goods at a specific price, the grocery store at which she will exchange the voucher for the food prescribed. The recipient has thirty days from issuance to cash in the voucher, and the vendor then has sixty days from the expiration date of the voucher to present the check for payment. The checks paid in a given month are reported through the state's data processing system to the Department, which relays that information to the local agency.

459 F. Supp. at 887-88 (footnotes and citations omitted).

II. The City's Operation of the Program

On October 1, 1977, the Commonwealth entered into a written agreement with the Philadelphia Department of Health. App. at 249-62. This agreement provided as a "guideline" a monthly caseload allocation of 15,000 cases, subject to increase if additional Program funds were available.*fn7 Monthly food expenditures were limited to $300,000.*fn8 Thus the contract anticipated an average voucher cost of $20.00 per month. The agreement further provided that the City would "ensure that project staff and program participants are informed of the rights of participants and applicants and of procedures for Fair Hearings approved by the State Health Department." App. at 250.

In November of 1977 the City conducted a tally of all persons who had been issued food vouchers during the prior three or six months.*fn9 Some 19,600 persons -- more than 4000 above the recommended monthly caseload -- proved to have been issued one or more vouchers during this period. The City made no adjustment in this figure, however, for recipients who had become ineligible during the period by reason of changes in age, domicile, or medical condition; for those who only sporadically procured vouchers; or for vouchers never redeemed. 572 F. Supp. at 611. On the basis of this head count, the city initiated a priority system in conformance with section 246.7(b)(2)(ii). Dr. Pearl Pitt, Philadelphia WIC Coordinator, directed local health officials to stop certifying new non-lactating postpartum women -- those women comprising Priority VI -- and four-year-old children with no medical problems -- a subset of Priority V. In addition, Dr. Pitt instructed local officials to remove from the Program recipients then in these categories. The Coordinator adopted a "four-year-old cutoff" because she believed it unnecessary to remove all Priority V recipients from the Program and because the risk of anemia to young children decreased after age three. 572 F. Supp. at 611.

Recipients designated for termination were informed orally (but not in writing) of their removal from the program during their last certification visit. Although recipients had been informed of the right to a hearing during their initial certification visit, the City concedes that they were not so informed at the time of their terminations, either orally or in writing. Pennsylvania, in turn, concedes that at all relevant times it had not published the procedures for WIC hearings required by section 246.24 of the regulations. Id. Nevertheless, the Commonwealth asserted before the district court and continues to assert on appeal that "fair hearings would have been offered had hearings been requested." Id. at 613 & n.14; Br. at 14. Characterizing this explanation as a "post hoc rationalization," the district court concluded that it "cannot accept this post hoc rationalization as fact." Id. at 613.

After initiating its priority system, the City did not determine how many recipients had been removed from each priority class, did not maintain a continuous count of Program participants, and did not reevaluate Program participation until September of 1978.Id. at 612. At that time the City established a level of Program participation of roughly 15,800 persons. At no time, however, did the City actually establish that Program expenditures exceeded the monthly allocation of $300,000.

In fact, Philadelphia's actual WIC expenditures were below levels permitted by the City's contract. The City has estimated the average June, 1978 voucher cost as between $17.25 and $17.85; at these rates, the City's expenditures at the time of the June head count would have been between $272,394 and $281,869, or roughly $20 to $30 thousand below authorized levels. Id. at 612 n.10. Computer records compiled by the Commonwealth after June of 1978 reveal that the actual value of vouchers redeemed during the October 1, 1977 to June 30, 1978 contract period was $2,228.335 -- $471,665 less than the total $2.7 million contract value. Id. at 612. Like the City, the Commonwealth also spent less than its total WIC allotment in 1977 and 1978.It is undisputed that the Commonwealth returned over $1.6 million in unspent WIC funds to the federal government for the 1978 fiscal year. App. at 373-74.*fn10

The Commonwealth, aware that the City was disbursing less than its allotted funds, objected to the City's implementation of a priority scheme. In a letter dated April 10, 1978, the Commonwealth WIC Coordinator instructed:

The State WIC Agency will instruct local agencies when to begin implementation of the priority system for new enrollees. Since the State Agency accepts this responsibility, the State Agency also accepts responsibility for managing food expenditures on a statewide basis. No local WIC agency will be held responsible for food costs expended beyond their allocated amount unless that local agency fails to follow State Agency instructions to implement the priority system.

App. at 193. Similarly, on August 4, 1978, the Director of the Commonwealth's Bureau of Special Services informed Dr. Pitt "that the Philadelphia WIC Program has not spent its total monthly allocation to date and that [it] had authorization to do so by the State WIC Coordinator in a letter dated April 10, 1978." App. at 317. Acting contrary to these instructions, the City continued to apply the priority system until November 27, 1978. In February of 1979 the City ceased to administer the WIC Program.

The City's refusal to abide by the Commonwealth's instructions stemmed from the concededly poor quality of administrative records maintained by the Commonwealth. The district court found that "there was a time delay of two to six months between issuance of vouchers in any month and a local agency's receipt of its expenditure report for that month" from the Commonwealth.*fn11 572 F. Supp. at 610. Consequently, the court found, the Commonwealth "failed to provide an adequate accounting system. . . ." Id. at 612. The court also concluded that the City maintained inadequate administrative records. "City officials chose a questionable methodology for their head count," the court found, "and failed to monitor program participation until nine months later." Id.

The City's distrust of the Commonwealth's statistics led the City to press for indemnification for any contract cost overruns. Although the Commonwealth's April 10, 1978 letter asserted that "no local WIC agency will be held responsible for food costs expended beyond their allocated amount unless that local agency fails to follow State Agency instructions," the Commonwealth did not agree to a contract modification, the City declined to alter its priority scheme. This litigation followed.

III. The District Court's Opinion

1. Existence of a violation

a. Violation of the regulations

The district court concluded that the City did not violate WIC regulations by implementing a priority system in contravention of Commonwealth instructions. "The City's manner of allocating its allotted moneys," the court held, "neither contravened the regulations nor frustrated their underlying policy." 459 F. Supp. at 897 (on motion for preliminary injunction). Gauging the City's actions "not with the benefit of hindsight but with the information that was available to the parties at the time the decision was made," 572 F. Supp. at 612, the court reasoned that the City reasonably concluded that "the Commonwealth's accounting reports could not be relied upon." Id. In the court's view, "t City was, therefore, forced to strike a balance between currently providing services to all eligible recipients on one hand and protecting its fiscal integrity" on the other. Id. The priority system chosen to effectuate this balance, the district court held, was consistent with the regulations.

Nevertheless, the court concluded, the City violated 7 C.F.R. § 246.24 (1978) by providing oral rather than written notification to recipients removed from the program, and by failing to notify these recipients of their right to a fair hearing. The court rejected the City's argument that oral notification of removal was a satisfactory substitute for written notice, observing that "the regulations require that the notice be written." 572 F. Supp. at 613. It also dismissed the City's position that notice of the right to a fair hearing would have been futile because the Commonwealth had failed to promulgate hearing procedures, reasoning that the "City defendants were obligated to follow the dictates of the regulations whether or not those regulations were wise in this specific situation." Id. Finally, the court rejected a proffered distinction between cases of "ineligibility" and "removal." The City had argued that the plaintiffs had simply been "removed" from the WIC program but remained "eligible" for it: the WIC ...


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