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MAYHEW v. COHEN

December 21, 1984

Shirley MAYHEW, et al.
v.
Walter COHEN, et al.



The opinion of the court was delivered by: POLLAK

 LOUIS H. POLLAK, District Judge.

 In this action, plaintiffs, recipients of federal or state welfare assistance who reside in the Philadelphia area, challenge the process by which the state Department of Public Welfare ("DPW") recoups alleged benefit overpayments. Specifically, plaintiffs contend that the series of three letters through which the state informs affected individuals about the recoupment process do not provide constitutionally sufficient notice of (1) what DPW seeks and why, and (2) what steps a welfare recipient should take to address DPW's claims. Plaintiffs seek to enjoin the state from proceeding with recoupment based on that allegedly insufficient notice. An evidentiary hearing was held on plaintiffs' motion for a preliminary injunction on November 26-27, 1984. In addition, the parties have submitted extensive briefs on the question whether the notice satisfies constitutional requirements.

 On December 19, 1984, I issued an Order on the three motions outstanding in this case: plaintiffs' motion to amend, plaintiffs' motion for class certification, and plaintiffs' motion for a preliminary injunction. The motion to amend was granted as unopposed. The following discussion explains my rulings on the class certification and preliminary injunction motions. I will begin by summarizing the relevant facts, and will then proceed to consider plaintiffs' motions.

 I. STATEMENT OF FACTS

 Under the Omnibus Budget Reconciliation Act of 1981, states are required to make some provision for the recoupment of overpayments of AFDC benefits. 42 U.S.C. § 602(a)(22). See also 45 C.F.R. § 233.20(a)(13) (regulations promulgated by the Secretary of Health and Human Services implementing the statute). By way of complying with this statute, the DPW has promulgated regulations which outline the procedure to be followed in recouping overpayments. See 55 Pa.Code § 255.1 et seq. These procedures are applied to overpayments both of federally funded AFDC benefits and of state funded General Assistance ("GA") benefits. In addition, the overpayments themselves may be the result of any of a number of factors, ranging from the recipient's failure to report income to the state's own administrative error.

 Neither state nor federal regulations prescribe a specific notice form for use in the recoupment program. The state has adopted such a form as a matter of administrative practice, however.

 The state's practice has been to send three letters to those recipients determined, as a preliminary matter, to have received overpayments. These three letters are reproduced as appendices to this Opinion. The first letter (Appendix A) (1) tells the recipient that he has received an overpayment and the amount of the alleged overpayment, and (2) provides a form on which the recipient may specify any of three methods of repayment. (The three methods are payment of the full amount at once, partial payment combined with a 10% reduction in the recipient's benefit checks until the full debt is repaid, and the 10% benefit reduction alone.) The letter states that if the recipient does not respond within fourteen days, the state will automatically select the 10% benefit reduction as the method of repayment. Below the form on which the recipient is to choose his method of repayment, the letter states that "you will have the opportunity to request an appeal and to have a fair hearing when you receive your advance notice notifying you when recoupment will start."

 The second letter (Appendix B) arrives approximately three weeks after the first. The second is shorter than the first, and states simply that the recipient's check will be reduced by a stated amount until the overpayment is fully recouped. The second letter also states that one additional notice will be forthcoming and will provide additional information regarding both the benefit reduction and the recipient's hearing rights:

 
Shortly you will receive an advance notice that your check will be reduced. The advance notice form will inform you of the semi-monthly recoupment amount and the date of the check that grant reduction will begin. When you receive the advance notice form, you have the right to request an appeal and a fair hearing.

 At the hearing held November 26-27, 1984, plaintiffs introduced evidence tending to show a substantial possibility of error in those calculations, stemming largely from the detailed regulations which govern the calculation of the recipient's income, which in turn determines the level of benefits for which the recipient is eligible. Defendants did not deny the fact that such error occasionally occurred, focusing instead on the costliness of providing more detailed notice.

 Plaintiffs allege that the notice used in the state's recoupment program is constitutionally inadequate, in that it fails adequately to advise recipients of their hearing rights, and, as to those plaintiffs who requested hearings, fails to give them sufficient information to prepare for their appeals. Named plaintiffs include individuals at all stages of the recoupment process.

 II. MOTION FOR CLASS CERTIFICATION

 Named plaintiffs seek to represent a class which they define as follows:

 
All AFDC and GA recipients in the Commonwealth of Pennsylvania who
 
(a) have received one or more assistance overpayment recoupment notices and who have recoupment claims pending against them but have not yet had any checks reduced to recoup an overpayment;
 
(b) have received assistance overpayment recoupment notices and who have had one or more checks reduced to recoup the alleged past overpayment;
 
(c) have not yet received assistance overpayment recoupment notices, but will in the future.

 Plaintiffs' Modified Class Definition at 1-2. *fn1" Defendants do not oppose certification. *fn2"

 In order to obtain certification for their proposed class, plaintiffs must satisfy the court that they can represent the proposed class in accordance with the requirements of Rules 23(a) and 23(b)(2). Rule 23(a) states:

 
Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

 Fed.R.Civ.P. 23(a). Under Rule 23(b)(2), a class action may be maintained if it satisfies these four criteria and if:

 
the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.

 Fed.R.Civ.P. 23(b)(2).

 Turning first to the four requirements of Rule 23(a), it appears that the first two -- numerousness of the class and the existence of common questions of law or fact -- are self-evidently satisfied here. The class which plaintiffs seek to represent includes all AFDC and GA recipients in Pennsylvania who have in the past been, or will in the future be, subject to or threatened with a reduction of their assistance benefits because of an alleged past overpayment of such benefits. Defendants, in their Answer, acknowledged that the class numbered in the thousands and that joinder was therefore impracticable. As to the common questions criterion of 23(a)(2), plaintiffs assert that the notice used in the recoupment process is inadequate. This claim is one which all those who have received -- or, indeed, may receive -- such notice would share.

 The third and fourth requirements look to whether the named representatives are able properly to represent the interests of the proposed class. Named plaintiffs meet this test also. In particular, the named plaintiffs include individuals at each possible stage of the recoupment process. See Amended Complaint at paras. 21-105. Thus, named plaintiffs represent the full range of interests of those who have received or will receive the notice challenged here.

 The greatest potential for adverseness of interest, and the greatest cause for hesitation in certifying the proposed class, lies in the potential conflict between (1) welfare recipients who claim that the notice prevented them from preparing adequately for their hearing, and (2) welfare recipients who, for whatever reason, *fn3" have not yet received a hearing on their alleged overpayment. These two categories of plaintiffs share the contention that the state's notice was constitutionally defective; however, the different consequences of the defective notice may lead to different legal results for those who have had hearings than for those who have not. *fn4" This problem is, in my view, resolved by the fact that the named plaintiffs include (1) recipients who have had a hearing for which they allegedly could not prepare adequately (e.g., Deborah Lebron), (2) recipients who have not yet had a hearing but have one scheduled (e.g., Shirley Mayhew), and (3) a recipient (Leonard Pickens) who had no hearing because he allegedly could not understand the notice and therefore did not request a hearing in time. See Amended Complaint paras. 30, 39, 78-80.

 The Rule 23(b)(2) requirement that the opposing party have acted "on grounds generally applicable to the class" is satisfied by the very nature of plaintiffs' claim. The proposed class includes all who have received or will receive the set of notices challenged as constitutionally inadequate. As to all such parties, the government has "acted" -- sent the notices (or is prepared to send the notices) -- in a common fashion for a common purpose.

 Accordingly, I will grant plaintiffs' motion for class certification, reserving the option of either revising the definition of the class or certifying sub-classes under Rule 23(c) should such changes become necessary at a later stage of the litigation.

 III. MOTION FOR PRELIMINARY INJUNCTION

 The parties do not dispute the standard I must apply in deciding whether to grant plaintiffs' motion for preliminary injunctive relief. Plaintiffs must show (1) a reasonable probability of success on the merits and (2) irreparable harm if relief is withheld until the conclusion of the litigation; in addition, I must consider (3) the harm which the requested relief will cause the government and (4) the public interest. Oburn v. Shapp, 521 F.2d 142 (3d Cir.1975); Hill v. O'Bannon, 554 F. Supp. 190, 194 (E.D.Pa.1982). A discussion of how these factors apply in this case follows.

 A. Probability of Success on the Merits

 The parties (correctly) agree that the recoupment program implicates a property interest under the Fourteenth Amendment. Mattern v. Mathews, 582 F.2d 248, 254 (3d Cir.1978), cert. denied, 443 U.S. 912, 99 S. Ct. 3101, 61 L. Ed. 2d 876 (1979). See Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970); Mathews v. Eldridge, 424 U.S. 319, 332, 96 S. Ct. 893, 901, 47 L. Ed. 2d 18 (1976). The dispute therefore centers on the adequacy of the process by which plaintiffs' Fourteenth Amendment "property" has been, or is in danger of being, "denied." Specifically, plaintiffs contend that the series of three letters by which the state notifies a recipient of an overpayment and its consequences offers inadequate notice of (1) the nature and scope of the recipient's right to contest the recoupment, and (2) the reasons for the government's action.

 I derive the standard by which the state's notice must be judged from Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 98 S. Ct. 1554, 56 L. Ed. 2d 30 (1978). In Memphis Light, the Supreme Court held that a municipal utility could not terminate service without providing notice designed to inform the terminated customer of the means by which he could contest the termination. 436 U.S. at 14-15, 98 S. Ct. at 1562-1563. The Court began its discussion of the notice issue by quoting the standard used in Mullane v. Hanover Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950):

 
An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.

 Mullane, supra, 339 U.S. at 314, 70 S. Ct. at 657 (quoted in Memphis Light, supra, 436 U.S. at 13, 98 S. Ct. at 1562). Because the "notice" given in Memphis Light -- a statement that payment was overdue and service would be terminated if it was not forthcoming -- gave no information about how one could appeal the termination, the Court found it inadequate. Memphis Light, 436 U.S. at 14-15, 98 S. Ct. at 1562-1563. Such notice, the Court reasoned, could not possibly achieve the twin purposes of notice under the due process clause: "to apprise the affected individual of, and permit adequate preparation for, an impending 'hearing.'" Id. at 14, 98 S. Ct. at 1562.

 Memphis Light suggests that constitutionally adequate notice (1) must be reasonably calculated to inform recipients of the availability of a hearing, and (2) must offer recipients the opportunity to prepare adequately for that hearing. See also Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S. Ct. 2706, 2712, 77 L. Ed. 2d 180 (1983); Landon v. Plasencia, 459 U.S. 21, 103 S. Ct. 321, 331, 74 L. Ed. 2d 21 (1982); Wolff v. McDonnell, 418 U.S. 539, 564, 94 S. Ct. 2963, 2978, 41 L. Ed. 2d 935 (1974). These broad principles will necessarily yield different notice processes in different circumstances, as the following discussion in Memphis Light shows:

 
The Crafts were told that unless the double bills were paid by a certain date their electricity would be cut off. But -- as the Court of Appeals held -- this skeletal notice did not advise them of a procedure for challenging disputed bills. Such notice may well have been adequate under different circumstances. Here, however, the notice is given to thousands of customers of various levels of education, experience, and resources. Lay consumers of electric service, the uninterrupted continuity of which is essential to health and safety, should be informed clearly of the availability of an opportunity to present their complaint. In essence, recipients of a cutoff notice should be told where, during which hours of the day, and before whom disputed bills appropriately may be considered.

 436 U.S. at 14-15 n. 15, 98 S. Ct. at 1562-1563 n. 15. Whatever particular form the notice takes, however, the state must inform affected parties in such a manner that the hearing process is effective. Hence the Court's two-pronged definition of notice's purpose, covering both knowledge of the existence of a hearing and the opportunity to prepare so that the hearing might be meaningful. *fn5"

 1. Notice of the Availability of a Hearing

 Each of the three notification letters states that the recipient has the right to an appeal and a fair hearing. The first of the letters (Appendix A), however, refers to this right in a single sentence at the bottom of the form on which the recipient is invited to check the preferred means of recoupment. The body of the first letter -- the portion above the repayment form -- never mentions the availability of a hearing. Instead, the letter gives the distinct impression that the state's determination is final. It uses mandatory language -- "you must repay," "if you do not return the bottom portion of this notice, Claims Settlement will use Option C automatically" -- which suggests that the only open question is the method, not the fact, of recoupment. Nor does the provision of a toll-free number to call for questions offer much help: the reader of the letter might plausibly assume that the questions referred to concern the three methods of repayment. Finally, when at the bottom of the form the letter does ...


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