The opinion of the court was delivered by: DUFFY
This complicated case arises out of a dispute over the confidentiality of records kept in connection with publicly funded day care centers in New York City. The plaintiffs are a group of these day care centers and the parents and children who use them as recipients. Defendants are the state and city officials charged with administering day care. The nub of the controversy is whether or not defendants may require parents and/or day care centers to fill out and submit application forms containing information about the family as a prerequisite to receiving public funds. Plaintiffs claim that this requirement violates the Social Security Act, 42 U.S.C. § 601 et seq. and their constitutional rights as guaranteed by the First and Fourteenth Amendments.
There are approximately 400 publicly funded day care centers in New York City. Pursuant to Section 403, Title IV-A of the Social Security Act, 42 U.S.C. § 603, the federal government reimburses the state for 75 per cent of the cost of the centers, as long as the state maintains an approved plan which conforms to federal guidelines. New York's state plan was approved by the Secretary of Health, Education and Welfare in 1971. Under the state plan, the New York State Department of Social Services (the Department) is responsible for overall administration, but the immediate supervision of day care services is delegated to local agencies such as the New York City Human Resources Administration and its subdivision, the Agency for Child Development (ACD). In New York City, the ACD contracts with individual centers for the actual provision of day care services.
In February 1973, the Department issued an Administrative letter requiring as a condition for state reimbursement, the use of a new eligibility form DSS 2105, "or an approved local equivalent" by all local departments of social services and providers of day care, effective April 1, 1973. The forms were to be filled out for each family by the providers of day care and submitted to the local agency for review. They were part of a new statewide "Social Services Information System" developed in response to federal regulations and intended to strengthen state and local control over the provision of social services.
The state delegated to the city the job of securing compliance from the day care centers. On March 14, Commissioner McMurray of the ACD sent copies of form DSS 2105 to all 400 centers with a memorandum requesting that the forms be completed for all clients currently in the program, or at least as many as possible, by March 23. On March 30, she sent a letter to the centers which had not complied, warning them that no further funds would be authorized unless they submitted the forms by April 9, and informing them of a meeting to be held April 4 to discuss ACD's procedures for compliance. At the April 4th meeting, alternate proposals for providing eligibility information were advanced and taken "under advisement" by Commissioner McMurray. None of the plaintiff day care centers met the April 9 deadline. On April 12, Commissioner McMurray informed them by letter that their funding would be terminated as of April 18, that ACD would no longer be responsible for their insurance, and that their books would be closed and equipment removed by April 30. She enclosed a letter to the parents informing them of "their right to have their status determined" (Exhibit D), and assuring them that "if eligible, your children will be placed in an alternate day care service in your neighborhood." (See Appendix Exhibit C).
On April 23, plaintiffs commenced this action by filing a complaint demanding declaratory and injunctive relief. On April 24 they filed an order to show cause for a temporary restraining order and a preliminary injunction enjoining defendants from (1) terminating services to the individual plaintiffs or (2) requiring submission of DSS 2105, and ordering defendants (3) to resume funding immediately and (4) to refrain from taking any steps to dismantle plaintiff day care centers. The temporary restraining order was denied and the motion for the preliminary injunction was argued before this Court on May 3. Defendants have subsequently cross-moved to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim for relief.
The question whether to grant a preliminary injunction is complicated by the fact that the two groups of plaintiffs present different yet overlapping claims. Both the centers and the recipients allege that the use of form DSS 2105 by the defendants violates the Social Security Act, 42 U.S.C. § 601 et seq. However, the centers' claim is based on the conflict between their duty to obey the State's directives and their duty to abide by the federal regulations, as well as the direct violation of the rights of the recipients. The recipients' claim is limited to violations of their statutory rights. Both groups of plaintiffs also allege that the use of the form infringes their constitutional rights to privacy and equal protection; and further, that it was selectively applied to them because of their membership in an organization advocating community control of day care, thus violating their rights to free speech and association. Finally, the recipients also claim that the manner in which the funding was terminated denied them due process of law and violated their statutory rights to notice and a hearing under Section 402 of the Social Security Act, 42 U.S.C. § 602(a)(4) and regulations thereunder, 45 C.F.R. § 205.10.
I. Standing and Class Action Status
Before this Court can reach the merits, the threshold questions of standing and jurisdiction must be broached. As indicated above, plaintiffs' claims can be divided into two broad categories: (1) those relating to the required submission of form DSS 2105 (the confidentiality claims); and (2) those relating to the procedures followed in terminating the funding (the due process claims). Each category contains both statutory and constitutional claims. The claims in the first category are raised by both the individual and corporate plaintiffs; those in the second category are raised only by the individual plaintiffs. As the direct beneficiaries of the day care services involved, the individual plaintiffs clearly have standing to raise statutory and constitutional claims in either category. Indeed, their standing is not contested.
The standing of the corporate plaintiffs presents a more complicated question. Defendants urge that under a recent ruling of the Second Circuit, the corporate plaintiffs have standing only to raise the statutory claims. In Aguayo v. Richardson, 473 F.2d 1090 (2d Cir. 1973), the Court ruled that the Civil Rights Act, 42 U.S.C. § 1983, does not confer standing on organizations to sue for violations of the constitutional rights of their members. Here, plaintiff day care centers claim that the use of form DSS 2105 violates their own First and Fourteenth Amendment rights in addition to those of their members. It has long been established that corporations as well as individuals are protected by the First Amendment and by the Due Process and Equal Protection Clauses of the Fourteenth Amendment. NAACP v. Button, 371 U.S. 415, 428, 83 S. Ct. 328, 9 L. Ed. 2d 405 (1962); Grosjean v. American Press Co., 297 U.S. 233, 56 S. Ct. 444, 80 L. Ed. 660 (1935). Plaintiff day care centers therefore have standing to raise on their own behalf both First and Fourteenth Amendment claims, as well as the statutory claims. With regard to the claims of their members, they have standing to raise only the statutory claims. Aguayo v. Richardson, supra.
The question of class action status under Rule 23, Fed. R. Civ. P., also requires separate determination for the recipients and the centers. The recipients have met the necessary prerequisites for a class action. It appears from the affidavits that the class numbers in the hundreds, making joinder impractical. There are clearly questions of law and fact common to the members of the class, and the claims raised by the representative parties are typical of those of the class. The affidavits also give adequate assurance that the representative parties will fairly protect the interests of the class. Finally, there can be no question that the defendants have "acted or refused to act on grounds generally applicable to the class, thereby making appropriate injunctive relief or corresponding declaratory relief with respect to the class as a whole." Fed. R. Civ. P. 23(b)(2). The recipients may therefore prosecute this suit as a class action.
The centers, on the other hand, are insufficiently numerous to merit class action status. Plaintiffs have submitted no affidavits regarding class size, although they estimate in their complaint that twenty-five to thirty centers have had their funding terminated. Commissioner McMurray in her affidavit states that "all but about fifteen centers complied" with the directive to submit form DSS 2105. A group as small as fifteen or thirty cannot maintain a class action unless special circumstances make the joinder of all members impracticable. Fed. R. Civ. P. 23(a)(1); Demarco v. Edens, 390 F.2d 836, 845 (2d Cir. 1968); Giordano v. Radio Corporation of America, 183 F.2d 558 (3d Cir. 1950). The primary factor to be considered in deciding whether joinder is practical is the geographical location of the other potential plaintiffs. Dale Electronics, Inc. v. R.C.I. Electronics, Inc., 53 F.R.D. 531 (D.N.H. 1971); Phillips v. Sherman, 197 F. Supp. 866 (N.D.N.Y. 1961). Here the other day care centers are all located within New York City. I therefore find that the class is not so numerous that joinder of all members is impractical. Fed. R. Civ. P. 23(a)(1).
Plaintiffs rely on two bases of jurisdiction, 28 U.S.C. § 1343(3) and (4) and 28 U.S.C. § 1331. Where, as here, a plaintiff sues under 42 U.S.C. § 1983 for a violation of constitutional rights, jurisdiction is conferred by 28 U.S.C. § 1343 unless the claim is so insubstantial as to be frivolous. Baker v. Carr, 369 U.S. 186, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962); Rosado v. Wyman, 397 U.S. 397, 90 S. Ct. 1207, 25 L. Ed. 2d 442 (1970). The due process claims of the recipients are clearly not frivolous. The recipients claim that Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970) requires the state to give them notice and an opportunity for a hearing before terminating the funding of their day care center. In Goldberg v. Kelly, the Supreme Court held that under the Due Process Clause of the Fourteenth Amendment, welfare recipients were entitled to an evidentiary hearing before termination or suspension of benefits. In reaching this decision, the Court balanced the extra expense to the state against the individual's overwhelming need not to be wrongfully deprived of assistance. Plaintiffs urge that the same balancing test applied in the case at bar would compel the same result. Their affidavits show that their need for day care services may be as overwhelming as the need for welfare assistance of the plaintiffs in Goldberg v. Kelly. Under these circumstances, their due process claim cannot be termed legally frivolous. Gasaway v. McMurray, 356 F. Supp. 1194 (S.D.N.Y., 1973).
Since all the claims in this action stem from a "common nucleus of operative fact," United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966), jurisdiction based on any of the constitutional claims provides a source of ancillary jurisdiction over the statutory claims and the other constitutional claims. Aguayo v. Richardson, supra ; Almenares v. Wyman, 453 F.2d 1075, 1083-1086 (2d Cir. 1971). Alternatively, 28 U.S.C. § 1331 confers jurisdiction over the statutory claims of the plaintiff day care centers, since the budget of each center exceeds the $10,000 jurisdictional amount required by Section 1331. The existence of pendent jurisdiction makes it unnecessary to decide whether the recipients' claims could be aggregated to meet the jurisdictional amount.
In deciding whether to grant a preliminary injunction, it is neither necessary nor proper to make a final ruling on the merits. Rather, the Court must limit its determination in this case to the questions of the plaintiffs' likelihood of ultimate success, the nature and degree of harm to the plaintiffs if the motion is denied and, balanced against this, the hardship to the defendants if the motion is granted. Gulf & Western Industries Inc. v. Great Atlantic & Pacific Tea Company, Inc., 476 F.2d 687 (2d Cir., 1973).
In order to avoid reaching the constitutional questions unnecessarily, the statutory claims will be considered first. The recipients allege that defendants disregarded the procedures for notice and hearing established by the Secretary of Health, Education and Welfare pursuant to the Social Security Act, 42 U.S.C. § 602(a)(4). In addition, both the recipients claim that by requiring the use of form DSS 2105 the defendants violated several other provisions of the Social Security Act, 42 U.S.C. §§ 602(a)(7), 602(a)(14), and regulations thereunder.
Turning first to the question of notice and hearing, the recipients claim that the letter sent by defendant McMurray, informing them that the centers were about to lose their funding and that parents should call the "Resource Center" in their area to learn their rights, failed to comply with federal regulations, 45 C.F.R. § 205.10. A glance at the regulations leaves little doubt that they were not followed; the real issue is whether they are applicable. Commissioner McMurray argues that "[the] fair hearing requirements come into play only when the applicant is determined to be ineligible and is refused service for that reason." Since no determination of ...