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Rothstein v. Wyman

decided: September 7, 1972.

EDNA ROTHSTEIN ET AL., PLAINTIFFS-APPELLEES,
v.
GEORGE K. WYMAN, AS COMMISSIONER OF THE DEPARTMENT OF SOCIAL SERVICES OF THE STATE OF NEW YORK, AND THE DEPARTMENT OF SOCIAL SERVICES OF THE STATE OF NEW YORK, DEFENDANTS-APPELLANTS



Friendly, Chief Judge, and McGowan*fn* and Timbers, Circuit Judges.

Author: Mcgowan

McGOWAN, Circuit Judge:

The challenge to the decree of the District Court presently before us relates only the remedial provisions of that decree which direct the retroactive payment of public assistance benefits in respect of certain periods in 1969. The welfare programs in question entail the use of both state funds and federal grants. Looking to the statutory scheme which embodies that cooperative approach, we conclude that it was not an appropriate exercise of general equity jurisdiction for a federal court to compel the payments in question. We are also of the view that, in any event, federal jurisdiction to grant such relief is foreclosed by the Eleventh Amendment. Accordingly, we reverse.

I

This litigation derives from a geographic differential in the amount of aid payments in New York City, on the one hand, and a seven-County area adjoining it, on the other. Before July 1, 1969, the Department of Social Services of New York administratively prescribed the standards of assistance, dividing the state into three areas and establishing differentials between them. In April of 1969 the legislature enacted a statute (Social Services Law, McKinney's Consol.Laws, c. 55, § 131-a) which divided the state into four districts, effecting a separation of New York City from the neighboring seven-County area and fixing the figure of $208 (family of four) for the one and $183 for the other. Within a month this statute was amended to empower the Commissioner of Social Services to raise one or more of the other districts up to New York City's level upon a finding by him that the costs of the items of need are above the statutory prescriptions. On June 5, 1969, the Commissioner exercised this authority by a regulation which raised the seven-County allowances from $60 to $65 for an individual, and from $183 to $191 for a family of four (as compared with $70 and $208, respectively for New York City).

Shortly after this action by the Commissioner, this litigation was initiated by residents of the seven-County area on behalf of all recipients of assistance under the category of Aid to the Aged, Blind and Disabled (AABD). The complaint asserted that Section 131-a was in conflict with (1) the Social Security Act and regulations issued under it, 42 U.S.C. §§ 602(a)(1) and 1382(a)(1), 45 C.F.R. § 233.20, and Part II, § 40000 et seq. of the Federal Handbook of Public Assistance, and (2) the Equal Protection Clause of the Fourteenth Amendment. A declaration of the invalidity of the New York statute was sought on these grounds, as was also, on the first of such grounds, an injunction against its enforcement. No reference was made to retroactive payments.

Plaintiffs moved for the convening of a three-judge court, which was done. On August 4, 1969, that court, finding that plaintiffs were likely to succeed in their claim that Section 131-a violated the Equal Protection Clause, stated its purpose to issue a preliminary injunction against the enforcement of Section 131-a "other than according to objective, non-discriminatory standards based upon the cost of the needs . . ." 303 F. Supp. 339, 351. An injunctive order was signed September 12, 1969, with its effective date fixed as October 1, 1969. Intervention was then sought on behalf of seven-County recipients of assistance under the program for Aid to Families with Dependent Children (AFDC). This was granted by an order of October 22, 1969, which extended the preliminary injunction to include them as of November 1, 1969.

On appeal to the Supreme Court, reversal ensued. Wyman v. Rothstein, 398 U.S. 275, 90 S. Ct. 1582, 26 L. Ed. 2d 218 (1970). The Court stated that its recent decision in Rosado v. Wyman, 397 U.S. 397, 90 S. Ct. 1207, 25 L. Ed. 2d 442 (1970), dictated that the statutory grounds alleged in the complaint should have been determined in advance of the constitutional issue. Accordingly, it directed that "the judgment of the District Court is vacated and the case is remanded to that court for an opportunity to pass on the propriety of granting interim relief in accordance with conventional equitable principles on the basis of [the] statutory claims, or, if the question is reached, continuing the present injunction in light of this Court's decision in Dandridge v. Williams, 397 U.S. 471, 90 S. Ct. 1153, 25 L. Ed. 2d 491."*fn1

When the injunctive order of the three-judge court became effective on October 1, 1969 for AABD recipients, and on November 1, 1969 for AFDC recipients, the Commissioner complied by raising the payments in the seven-County level to the level of those in New York City; and they have been the same ever since by virtue of a voluntary stipulation by the Commissioner in the District Court, upon remand from the Supreme Court, to maintain equality pending final determination of the merits. The three-judge court remanded the case to a single judge for hearing and determination of the statutory claim; and, by agreement, the merits were determined on the motion for preliminary injunction.

In addressing the merits, the District Court, 336 F. Supp. 328, considered that there were two questions for it to decide. One was whether there was evidence of cost differences supporting the disparity in payments; and the other was whether, if no such cost justification was apparent, the differential was in conflict with the Social Security Act and regulations issued under it. It found against appellants on both issues; and that determination is not challenged on this appeal.

With respect to the relief to be given, the court professed to some difficulty in resolving the conflicting contentions. It was appellants' submission that the only available remedy was to terminate the further receipt by the state of federal funds. Rosado v. Wyman, 397 U.S. 397, 90 S. Ct. 1207, 25 L. Ed. 2d 442 (1970). Appellees urged that the court should, by injunctive order, restrain appellants from continuing to enforce Section 131-a. King v. Smith, 392 U.S. 309, 88 S. Ct. 2128, 20 L. Ed. 2d 1118 (1968). The court characterized the Supreme Court's decision in Rosado as holding that "where the cost of compliance with federal requirements is 'massive' and the state plan does not have a 'discrete and severable provision whose enforcement can be prohibited' the appropriate relief is for the court to order the cutoff of federal funds. . . ."

Concluding that it was "in a gray area somewhere between King and Rosado," the District Court reasoned as follows:

1. The Section 131-a schedules "are not as clearly severable from the state plan as was the definition of 'parent'" in King v. Smith.

2. The schedules are, however, "more discrete than the state plan involved in Rosado."

3. Although the cost to the state of equalizing the payments of the 125,000 AFDC and AABD recipients in the seven-County area with those of New York City "will result in a substantial cost to the state," this increase "will be nowhere near the cost involved in Rosado."

4. These facts on balance bring this case closer to King than Rosado ; and this finding, when coupled with the severe consequences generally of a termination of federal grants, "makes the injunctive remedy the more appropriate."

5. This case is also distinguishable from Rosado because the legislature's amendment of Section 131-a to authorize the Commissioner to raise the payments in the seven-County area reflects a purpose to continue the programs despite the possibility of higher future payments in compliance with federal requirements.

Thus the court resolved its dilemma by saying that it "adopts the relief granted by the three-judge court and restrains the defendants 'from further enforcement or implementation of § 131-a . . . or from promulgating schedules of grants and allowances of public assistance, or making payments thereof to recipients, other than according to objective, nondiscriminatory standards based upon the cost of the needs of such recipients' . . ."

The court's decision was forthcoming on December 7, 1970. On January 29, 1971, appellees submitted an order which embodied this prospective injunctive relief. But they went further, and included provisions which required appellants (1) to recompute, by reference to the New York City levels, the payments to all recipients in the seven-County area between July 1, 1969, and October 1, 1969 (AABD) and November 1, 1969 (AFDC), and to remit the differentials; and (2) to give notice to all persons who during the periods in question had applied for assistance and been denied it for lack of eligibility under the lower schedules of Section 131-a that they would now be held eligible upon application within 60 days and entitled to receive payments under the higher schedules from the date of their originally unsuccessful applications. Appellants promptly submitted a counter-order omitting any provision for retroactive payments, and a supporting memorandum which estimated the direct cost of such payments at $2,500,000, and alluded to the heavy administrative costs and dislocations involved in trying to ascertain them.

The matter remained in this posture for a year until, on February 8, 1972, the court entered an order and judgment in line with that submitted by appellees. Appellants then sought, by a show cause order issued February 18, 1972, to alter the judgment by deleting the provisions for retroactive payments. Supporting that order was an affidavit by a Deputy Commissioner in charge of operations. He estimated that there were 49,000 eligible cases of former and current recipients, involving payments totalling $1,200,000 and an additional $470,000 in administrative costs. For cases of denied applicants, it was estimated that benefits of $4,000 would be paid at an administrative cost of $50,000.

The District Court denied the motion to alter in a memorandum opinion and order dated February 25, 1972. Although it asserted "the complexity of the issue of retroactivity" as one of the reasons for the long delay in the entry of final judgment, it purported to have no doubts about the propriety of the retroactive award. It characterized the estimates of administrative costs, although not the benefit payments, as "conclusory," but went on to say that the burden of administrative costs could never justify a failure to make retroactive payments because to do so would invariably immunize the state from being compelled to make such payments, and would only encourage the state to violate "constitutional and statutory strictures" until it was enjoined from doing so. As to the payments themselves, the court said that it had earlier awarded them "because the plaintiffs were legally entitled to the unpaid assistance, and because to hold otherwise would be to sanction defendants' lawless conduct," citing Gaddis v. Wyman, 304 F. Supp. 713, 717 (S.D.N.Y.1969), aff'd sub nom., Wyman v. Bowens, 397 U.S. 49, 90 S. Ct. 813, 25 L. Ed. 2d 38 (1970), and Thompson v. Shapiro, 270 F. Supp. 331 (D.Conn.1967), aff'd, 394 U.S. 618, 89 S. Ct. 1322, 22 L. Ed. 2d 600 ...


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