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Ortiz v. Eichler

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


June 2, 1986

NILSA ORTIZ, JOHN PEEK, ANNIE MAE REVELLE, MARCINDA JACKSON AND DENISE TRADER, INDIVIDUALLY AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED AND MARSHA CURTIS (PLTF-INTERVENOR) (13)
v.
THOMAS P. EICHLER, IN HIS OFFICIAL CAPACITY AS SECRETARY OF THE DELAWARE DEPARTMENT OF HEALTH AND SOCIAL SERVICES, AND PHYLLIS T. HAZEL IN HER OFFICIAL CAPACITY AS ACTING DIRECTOR OF THE DEPARTMENT DIVISION OF ECONOMIC SERVICES; THOMAS EICHLER AND PHYLLIS HAZEL, APPELLANTS

Appeal from the United States District Court for the District of Delaware (D.C. Civil No. 84-0016).

Author: Aldisert

Before: ALDISERT, Chief Judge, and GARTH and SLOVITER, Circuit Judges.

ALDISERT, Chief Judge.

This appeal requires us to decide two major questions relating to procedures used by Delaware for denying or terminating Aid to Families with Dependent Children (AFDC), Food Stamps and Medicaid benefits. We must first decide the extent of a pre-hearing notice required to be given by Delaware under the due process clause of the 14th Amendment; we must also decide the extent of confrontation of witnesses at the hearings. Delaware authorities are the appellants. They argue that the district court imposed notice requirements that are too detailed and that they should not be required to conduct denial or termination hearings with the formality directed by the court. For the reasons set forth below, we will affirm the district court.

I.

Class representatives of all recipients of or applicants for federally-funded public assistance benefits administered by the Delaware Department of Health and Social Services (hereinafter "claimants") filed an action pursuant to 42 U.S.C. § 1983 against appellants, the Secretary of the Delaware Department of Health and Social Services (DHSS), and the Director of DHSS's Division of Economic Services (DES). They sought declaratory and injunctive relief, objecting to DES procedures for the denial or termination of Aid to Families with Dependent Children (AFDC), Food Stamps and Medicaid benefits. They alleged, inter alia, that these procedures violated the laws and regulations governing these programs, and deprived them of property without due process of law.

Plaintiffs moved for class certification and summary judgment on all but two claims. The district court granted the class certification motion and, in part, their motion for summary judgment. Ortiz v. Eichler, 616 F. Supp. 1046 (D.C. Del. 1985). The district court subsequently issued an opinion on reargument, Ortiz v. Eichler, 616 F. Supp. 1066 (D.C. Del. 1985), entered on order relating to issues decided in these opinions [August 16, 1985 Order (reprinted in appendix in br. for appellants)], and issued a third opinion covering procedures the parties should follow in complying with the court's order. All parties agree that the effect of the three opinions and order was to grant summary judgment as requested by appellees on all but one issue.*fn1 The district court granted declaratory relief on all other issues, August 16, 1985 Order at 1-2; and immediately enjoined DES from considering ex parte evidence and statements of adverse declarants not available for cross-examination. Id. at 3. The court also ordered that commencing October 1, 1985, DES notices of adverse action must comply with all regulatory and due process requirements and that final decision letters must contain all of the information required by federal regulations. Id. at 3-5. Finally, the district court enjoined DES from allowing the state hearing representative to prepare the recommended hearing decision in food stamp cases and ordered that the opportunity for new hearings be given to all class members who were adversely affected by the procedural deficiencies in their prior hearings. Id. at 5-6. The Delaware agencies have appealed.

II.

Before us, DES challenges those portions of the district court's order concerning the pre-hearing notice of agency action and the use of adverse statements of absent witnesses at agency hearings.

Because this appeal involves the application and interpretation of legal principles, the standard of review is plenary. Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 101-02 (3d Cir. 1981). See also Barnes v. Cohen, 749 F.2d 1009, 1013 (3d Cir. 1984) (on review of district court rulings concerning interpretations of federal and state regulations under the AFDC program, standard is whether district court applied correct legal precepts), cert. denied, 471 U.S. 1061, 105 S. Ct. 2126, 85 L. Ed. 2d 490 (1985).

III.

Before addressing the merits of DES's contentions, we must determine whether this appeal is properly before us. The Delaware authorities contend that appellate jurisdiction lies pursuant to 28 U.S.C. § 1291. Br. for Appellants at 1. But claimants counter that the court's order was not final under § 1291 because the order granted only partial summary judgment for claimants. We conclude that appellate jurisdiction lies pursuant to 28 U.S.C. § 1292(a)(1).

Courts of appeals have jurisdiction "of appeals from all final decisions of district courts . . . ." 28 U.S.C. § 1291. Rule 54(b), F.R. Civ. P., expressly provides that an order adjudicating less than all claims in an action with multiple claims is not final unless the district court makes "an express determination that there is no just reason for delay . . . on express direction for the entry of judgment." DES concedes that the district court has not disposed of all of claimants' claims, and DES has not sought a Rule 54(b) determination and certification from the district court. Nor does DES assert that the district court's order is appealable under the "collateral order exception" of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 545-47, 93 L. Ed. 1528, 69 S. Ct. 1221 (1949). Consequently, the district court's order is not appealable under 28 U.S.C. § 1291. Brooks v. Fitch, 642 F.2d 46, 47 (3d Cir. 1981).

Unlike section 1291, however, section 1292 provides for appellate jurisdiction of appeals from "interlocutory orders of the district courts of the United States . . . granting . . . [or] refusing . . . injunctions . . . ." 28 U.S.C. § 1292(a)(1). Because the district court's order granted some of claimants' requests for injunctive relief, this court has jurisdiction of DES's appeal under § 1292(a)(1). The additional declaratory relief from which DES appeals tracks issues virtually identical to those raised by the grant of injunctive relief. Where the additional elements of the district court's order are closely intertwined with those granting or denying injunctive relief, the exercise of jurisdiction over the additional elements is proper. Gomez v. Turner, 217 U.S. App. D.C. 281, 672 F.2d 134, 138 (D.C. Cir. 1982) (appellate review of both injunctive and declaratory relief afforded by district court's partial grant of summary judgment); Adashunas v. Negley, 626 F.2d 600, 602 (7th Cir. 1980) (where injunctive relief was deemed part of order denying motion for partial summary judgment, appellate court could review entire order on appeal "because the denial of injunctive relief is interdependent with the remainder of the appealed order . . . .").*fn2 We now turn to the merits of the appeal.

IV.

Claimants had contended that the notices routinely sent by DES to public assistance claimants prior to denying or terminating benefits were inadequate because the notices failed to explain the reasons for DES's action or to present calculations justifying that action. The district court agreed. It directed DES to issue notices that complied with the requirements of the applicable regulations and due process:

At a minimum, these notices shall . . . 3) provide a detailed individualized explanation of the reason(s) for the action being taken which includes, in terms comprehensible to the claimant, and explanation of why the action is being taken and, if the action is being taken because of the claimant's failure to perform an act required by a regulation, an explanation of what the claimant was required by the regulation to do and why his or her actions failed to meet this standard; and 4) if calculations of income or resources are involved, set forth the calculations used by the agency, including any disregards or deductions used in the calculations, explanations of what income and/or resources the agency considers available to the claimant and the source or identity of these funds, and the relevant eligibility limits and maximum benefit payment levels for a family or assistance unit of the claimant's size.

August 16, 1985 Order at 4.

A.

DES contends that the pre-hearing notice required by the district court goes beyond the minimum requirements of due process and the applicable federal regulations. It argues that order "requires individual level data of an unlimited degree of specificity which would result in a notice virtually incomprehensible to a claimant and would be a substantial administrative burden." Br. for appellants at 14. We disagree.

The district court's order tracks the requirements of "adequate" notice set forth in the applicable federal regulations.*fn3 Although these regulations do not specify precisely the information required for adequate notice, the district court properly looked to requirements mandated by the due process clause to flesh out the details. Garrett v. Puett, 707 F.2d 930 (6th Cir. 1983); Schroeder v. Hegstrom, 590 F. Supp. 121, 127 (D. Ore. 1984). The leading case of Goldberg v. Kelly, 397 U.S. 254, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970), teaches that due process requires that claimants facing termination of public assistance benefits must be given "adequate notice detailing the reasons for a proposed termination . . . ." Id. at 267. Such notice is necessary to protect claimants against proposed agency action "resting on incorrect or misleading factual premises or on misapplication of rules to policies of the facts of particular cases." Id. at 268.

B.

In respecting Goldberg v. Kelly's requirement of "adequate notice detailing the reasons," the court was of the view that this required a statement of the calculations used by the agency. Although vigorously contested by DES, this requirement is amply supported by a formidable array of case law.*fn4 See Dilda v. Quern, 612 F.2d 1055, 1057 (7th Cir.) (per curiam) (the pre-hearing notice of intended reduction or termination of AFDC benefits did not meet due process requirements because, "though it states the ultimate reason for the reduction or cancellation of benefits, the notice fails to provide the recipient with a breakdown of income and allowable deductions" such that "recipients could determine the accuracy of the computations"), cert. denied sub nom. Miller v. Dilda, 447 U.S. 935, 100 S. Ct. 3039, 65 L. Ed. 2d 1130 (1980); Schroeder v. Hegstrom, 590 F. Supp. at 126-130 (AFDC) (citing cases); Jones v. Blinziner, 536 F. Supp. 1181, 1197-1200 (N.D. Ind. 1982) (AFDC and Medicaid). The rationale of these cases, primarily from the Seventh Circuit, has been accepted in this circuit. See Hill v. O'Bannon, 554 F. Supp. 190, 197 (E.D. Pa. 1982) (AFDC); Philadelphia Welfare Rights Organization v. O'Bannon, 525 F. Supp. 1055, 1060-61 (E.D. Pa. 1981) (Food Stamps).

C.

Cases cited by DES in support of a less detailed notice are easily distinguished. The agency action challenged here concerns denying or terminating benefits on an individual, case-by-case basis. Yet DES relied on authority that described so-called "mass changes," such as those resulting from new legislation. See, e.g., Garrett v. Puett, 707 F.2d 930 (6th Cir. 1983) (expressly declining to apply the Seventh Circuit's rationale to changes resulting from new legislation); LeBeau v. Spirito, 703 F.2d 639, 643-44 (1st Cir. 1983). DES also relies on the teachings of Atkins v. Parker, 472 U.S. 115, 53 U.S.L.W. 4686, 86 L. Ed. 2d 81, 105 S. Ct. 2520 (June 4, 1985), but we believe that it is not controlling. There the Supreme Court expressly stated that its decision "does not concern the procedural fairness of individual eligibility determinations. Rather, it involves a legislatively mandated substantive change in the scope of the entire program." Id. at , 53 U.S.L.W. at 4689.

We are persuaded that the district court's formulation was the product of thoughtful analysis supported by reasoned decisions in other courts.

D.

Finally, DES contends that its benefit calculations deal only with "case level data," yet the court requires "individual level data."*fn5 It argues that this will require DES to generate de novo specific and detailed financial data, a burden that is "several orders of magnitude (if not incalculably) greater" than that imposed in cases relied upon by the district court. Br. for appellants at 18 n.16; see also id. at 15 n.14. We feel that DES is reading too much in the court's order.

Nothing in the district court's opinions or order supports DES's assertion that it will be required to provide, de novo, "individual level data" to claimants. The court expressly stated that, "if calculations of income or resources are involved" in the intended agency action, the agency must "set forth the calculations used by the agency . . . ." August 16, 1985 Order at 4 (emphasis added). The district court viewed DES's routine notice procedures as inadequate because they did not contain "the specific calculations used by the agency . . . ." 616 F. Supp. at 106 (emphasis added). The court further stated that, "if calculations of a claimant's income or resources are involved, DES must set forth the calculations it used to arrive at its decision, i.e., explain what funds it considers the claimant to have and what the relevant eligibility limits are." Id. at 1062 (emphasis added). These statements clearly say that DES is to include in the notice only those calculations used by the agency in making its decision. The court's order requires no additional burdens. To suggest otherwise is to exaggerate.

Claimants do not contend that the district court's order requires inclusion of "individual level data." The district court opinions and order do not by their terms require the inclusion of "individual level data." Nor do we read such a requirement into the order. We now turn to the other major issue presented for our consideration, the question of the quality of evidence to be adduced at DES' hearings.

V.

Claimants sought to enjoin DES' practice of considering at hearings adverse statements from declarants who were not available for cross-examination or confrontation at hearings. This practice, they said, violated claimants' rights under the applicable federal regulations to "have adequate opportunity . . . to question or refute any testimony or evidence, including [the] opportunity to confront and cross-examine adverse witnesses.' 45 C.F.R. § 205.10(a)(13)(vi) (1985) (AFDC); accord 42 C.F.R. § 431.242(e) (1985) (Medicaid); 7 C.F.R. §§ 273.15(p)(5), 273.16(e)(2)(ii) (1985) (food stamps). The district court agreed. It held that the DES practice violated the rights of confrontation and cross-examination afforded by the applicable regulations. 616 F. Supp. at 1068. The court expressly declined to reach appellees' additional argument that the DES hearing practices violated claimant's constitutional due process rights, id. at 1068, n.2. The court enjoined DES against "admitting into evidence and considering statements by witnesses not present at hearings for federal public assistance if claimants do not have an opportunity to confront and cross-examine those witnesses." Order of August 16, 1985 at 3.

DES contends that the district court's injunction constitutes "an overbroad prescription of the use of hearsay evidence when the declarant is unavailable." Br. for appellants at 24. Its argument focuses on the limits of the constitutional rights of confrontation in both the administrative, e.g., Goldberg v. Kelly, 397 U.S. 254, 268, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970) (procedural due process right), and criminal, e.g., Ohio v. Roberts, 448 U.S. 56, 65 L. Ed. 2d 597, 100 S. Ct. 2531 (1980) (sixth amendment right), contexts. But the district court based its decision solely on the requirements of the applicable federal regulations, and not on the Constitution. See Featherston v. Stanton, 626 F.2d 591, 593 (7th Cir. 1980) (citing Hagans v. Lavine, 415 U.S. 528, 543, 39 L. Ed. 2d 577, 94 S. Ct. 1372 (1974)). DES provides no authority to support its suggestion that the applicable federal regulations do not mean what they say. We find the language devoid of ambiguity; claimants have the right to "question or refute any testimony or evidence, including [the] opportunity to confront and cross-examine adverse witnesses." 45 C.F.R. § 205.10(a)(13)(vi) (AFDC); accord 42 C.F.R. § 431.242(e) (Medicaid); 7 C.F.R. §§ 273.15(p)(5), 273.16(e)(2)(ii) (food stamps).

Moreover, as we understand the district court's opinion and order, the district court did not prohibit all forms of hearsay evidence. As the district court itself noted, out-of-court statements which technically are hearsay, but where the claimant had an opportunity to cross-examine the witness at a prior court proceeding to which the claimant was a party, or hearsay testimony of DES staff who could be available as witnesses upon request of the claimant, are admissible despite their hearsay nature.*fn6

Similarly, under the district court's order, evidence which falls within recognized hearsay exceptions where cross-examination of the witness would not be meaningful, such as those enumerated in Federal Rule of Evidence 803, are generally not to be precluded from admission at DES hearings. For example, records of regularly conducted activities, public records and reports, vital statistics, records of religious organizations, marriage, baptismal and similar certificates, family records, records of documents affecting an interest in property, statements and documents affecting an interest in property, statements in ancient documents, market reports, commercial publications, learned treatises, judgments of previous convictions, judgments as to personal, family or general history or boundaries are admissible at administrative proceedings. Because DES has no subpoena power, it is only where out-of-court testimony consists of testimony given by live witnesses who could testify at the hearing, but who refuse to do so unless subpoenaed, that such testimony will be precluded from admission and consideration at the administrative hearing. Accordingly, we find no error in the district court's requirement that Delaware respect the federal regulations.

VI.

We conclude, therefore, that the district court's order requiring appellants to provide detailed explanations in pre-hearing notices relating to these federally-funded welfare benefits are consistent with the requirements of the applicable federal regulations and do not exceed the requirements of the due process clause; and that the district court properly required appellants to comply with federal regulations governing the use of adverse statements of absent declarants in administrative hearings to determine eligibility for these welfare benefits.

For the foregoing reasons, the judgment of the district court will be affirmed.


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