The opinion of the court was delivered by: STEWART
Plaintiff, Willie McLean, brings this action on behalf of himself and others,
seeking to enjoin the enforcement of certain federal and state regulations, promulgated under the Work Incentive Program ("WIN") of the Social Security Act ("SSA"), 42 U.S.C. § 601 Et seq. Named as defendants are David Mathews, the Secretary of Health, Education and Welfare ("HEW"), W. J. Usery, Jr., the Secretary of Labor, (the "federal defendants"), Phillip Ross, the Industrial Commissioner of the New York Department of Labor, and Stephen Berger (then) Commissioner of the New York Department of Social Services ("the state defendants").
Plaintiff claims that both federal and state regulations, (See 29 CFR § 56.50, 29 CFR § 56.51, and 29 CFR § 56.77 and 18 NYCRR § 388.9(a) and (d), set forth in Appendix A), which deregister, for fixed time periods, individuals who have failed, without good cause, to participate in the WIN program, conflict with express provisions of the SSA (specifically, 42 U.S.C. § 602(a)(19)(A) and 42 U.S.C. § 602(a)(19)(F), set forth in Appendix B) and with the intent of the legislation as expressed in 42 U.S.C. § 630 (See Appendix C). Plaintiff also asserts that, by establishing fixed time period sanctions, the regulations create an unconstitutional irrebuttable presumption as to the duration of an individual's failure to participate without good cause. Plaintiff seeks a declaration that the regulations violate his rights under both the SSA and the constitution and asks for preliminary and permanent injunctive relief, prohibiting the enforcement of the regulations.
The federal defendants, arguing against plaintiff's motion for preliminary relief, assert that this court is without jurisdiction over plaintiff's claims. Similarly, the state defendants have filed a motion to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure ("F.R.Civ.P."). We consider these jurisdictional questions before we turn to plaintiff's motion for preliminary relief.
Plaintiff asserts that this court has jurisdiction, pursuant to 28 U.S.C. § 1361, 28 U.S.C. § 1331, and 5 U.S.C. § 701-s 704 over the federal defendants. We agree with plaintiff that 28 U.S.C. § 1361 provides us with jurisdiction to hear his claims. Plaintiff asserts that defendants Mathews and Usery have a non-discretionary ministerial duty to issue regulations which do not conflict with the statutory provisions of the SSA. Plaintiff finds such an obligation in the language of 42 U.S.C. § 1302, which states that the Secretaries of HEW and Labor
"shall make and publish such rules and regulations, not inconsistent with this chapter, as may be necessary to the efficient administration of the functions with which each is charged under this chapter."
Plaintiff claims that the regulations quoted above conflict with statutory provisions in the chapter and are thus promulgated in violation of § 1302. As § 1302 does establish a statutory obligation to regulate consistently with the chapter, and as mandamus is a proper remedy for breach of such a duty,
we conclude that plaintiff has made a sufficient showing of § 1361 jurisdiction to permit us to proceed to the merits of plaintiff's claim. We note that our conclusion as to jurisdiction is not a decision of the merits but only permits us to consider whether the interpretation of the statute urged upon us by plaintiff is correct.
See Bell v. Hood, 327 U.S. 678, 66 S. Ct. 773, 90 L. Ed. 939 (1946) and Mattern v. Weinberger, 519 F.2d 150, 156-157 (3d Cir. 1975), appeal pending -- - U.S. -- - (1976).
Plaintiff also asserts that we have jurisdiction over the federal defendants under 28 U.S.C. § 1331. As the cause of action clearly arises under the laws of the United States, the principal controversy between the parties as to the viability of § 1331 jurisdiction is whether the $ 10,000 jurisdictional amount has been met. Plaintiff claims that he, and the class he seeks to represent, share a common interest in the distribution of a single fund, the state welfare monies, which exceeds $ 10,000. See, e.g. Bass v. Rockefeller, 331 F. Supp. 945 (S.D.N.Y.1971), Vacated as moot, 464 F.2d 1300 (2d Cir. 1971). See also Moore v. Betit, 511 F.2d 1004 (2d Cir. 1975).
Defendants dispute the applicability of the "common trust" theory to the present action and argue that certain elements necessary to find a "trust" are not present. As we have already found jurisdiction under § 1361, and as we have deferred class determination,
we believe that it is proper not to decide the applicability of the Bass doctrine at this point. Similarly, we decline to decide whether the Administrative Procedure Act, ("APA") 5 U.S.C. § 701 Et seq., also urged by plaintiff as a jurisdictional basis, provides an independent source of jurisdiction. We note that the law on this question is unsettled but that some district courts within this circuit have premised jurisdiction upon the APA. See generally Aguayo v. Richardson, 473 F.2d 1090 (2d Cir. 1973), Cert. denied, 414 U.S. 1146, 94 S. Ct. 900, 39 L. Ed. 2d 101 (1974) and cases cited therein. See also Sanders v. Weinberger, 522 F.2d 1167 (7th Cir. 1975) and Ortego v. Weinberger, 516 F.2d 1005 (5th Cir. 1975).
Turning to the state defendants, we find jurisdiction is proper under the theory of pendent jurisdiction.
See United Mine Workers v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966). Here, the federal and state claims arise from the same factual setting and involve the same legal question whether deregistration from the WIN program for a fixed time period is a sanction permitted under the SSA. In making the determination of whether the federal regulations are consistent with the Act, we will necessarily implicate the validity of the state regulations.
Thus, it is appropriate to consider the questions of the validity of the federal and the state regulations together.
New York State, arguing against the discretionary exercise of pendent jurisdiction, asserts that it has independent legislative authority to issue regulations which are complementary to the federal law and that, even if we were to find the federal regulations unlawful, the state regulations may still stand. See New York Dept. of Social Services v. Dublino, 413 U.S. 405, 93 S. Ct. 2507, 37 L. Ed. 2d 688 (1973). Assuming that the New York regulations must be considered separately from the federal regulations, declining to permit pendent jurisdiction here would we believe, unjustifiably tax both the parties and the courts.
See Astor-Honor Inc. v. Grosset & Dunlap, Inc., 441 F.2d 627, 629-630 (2d Cir. 1971).
Finally, we note that here we have decided to permit both claim and party pendency, a decision sanctioned by this circuit in Almenares v. Wyman, 453 F.2d 1075 (2d Cir. 1971), Cert. denied, 405 U.S. 944, 92 S. Ct. 962, 30 L. Ed. 2d 815 (1972).
Because we find jurisdiction over the federal defendants pursuant to 28 U.S.C. § 1361 and jurisdiction over the state defendants under the doctrine of pendent jurisdiction, we deny defendants' motion to dismiss for lack of jurisdiction. We also deny the state defendant's motion to dismiss for failure to state a claim upon which relief can be granted. Taking the allegations of the complaint as true (Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)), plaintiff has set forth sufficient facts and raised substantial legal claims to require this court to consider the merits of his claim.
Turning now to plaintiff's motion for preliminary injunctive relief,
a more complete explanation of the factual setting of this action is required. Willie McLean and his family receive benefits under New York State's Aid to Families with Dependent Children ("AFDC") program. Registration in the WIN program is a condition of eligibility in the program. In 1974, McLean complied with this requirement and registered with the WIN program. However, later in that year, the Secretary of Labor made a determination that McLean had failed, without good cause, to participate in WIN. The sanction of a 90-day deregistration (as described in 18 NYCRR 388.9 and in 29 CFR § 56.50 and § 56.51) was imposed and the McLean family's AFDC allotment was reduced by the amount of Willie McLean's proportionate share.
In July of 1974, McLean re-registered with the WIN program; later that year he received further sanctions after he had been found to have refused to participate without good cause.
The instant action arises out of the imposition on December 5, 1975, of the six month deregistration, pursuant to 18 NYCRR § 388.9(a) and (d) and 29 CFR § 56.77(a). As a result of this sanction, the McLean family's AFDC grant has been reduced from $ 264.80 to $ 212.60. See 18 NYCRR § 388.9(d)(3).
McLean premises his claim that the fixed time periods of deregistration violate the SSA upon two sections of the statute. First, quoting the legislative "Statement of purpose" at 42 U.S.C. § 630,
McLean argues that the stated intent of Congress to permit an individual to "acquire a sense of dignity . . . as a wage-earning member of society," requires that an individual not be excluded from eligibility in WIN for fixed time periods. Secondly, plaintiff quotes the language of 42 U.S.C. § 602(a)(19)(F), which states that:
"if And for so long as any . . . individual . . . has been found by the Secretary of Labor . . . to have refused without good cause to participate . . . or to have refused without good cause to accept employment (that individual's) . . . needs shall not be taken into account in making the determination . . . (of the family's AFDC benefits)".
McLean claims that the phrase "if and for so long as" limits administrative discretion under the Act; McLean argues that the only sanction authorized by the statute is one which corresponds directly with the time period in which an individual refuses to participate.
Under plaintiff's reading of the statute, the regulations establishing the fixed 90-day and 6 month exclusionary periods conflict with both the express legislative purpose and the statutory language of § 602(a)(19)(F) and are therefore invalid. Claiming irreparable harm from imposition of the sanction, McLean seeks a preliminary injunction prohibiting enforcement of the regulations.
Defendants vigorously dispute plaintiff's argument that the Act only permits sanctioning an individual during the period in which that person refuses to participate. Turning initially to 42 U.S.C. § 633(g), § 639, and § 1302,
defendants argue that the Secretaries of HEW and Labor are invested with broad discretion to implement WIN. Defendants contend that the contested regulations provide reasonable sanctions, consistent with the legislative intent for the program. Further, the federal defendants submit that the language of § 602(a) (19)(F), which appears in a section of the statute describing the application of WIN to state AFDC plans, would be taken out of context if read to limit their discretion. The state defendants also argue that plaintiff misinterprets both the scope of discretion permitted under the statutes and the language of § 602(a)(19)(F). The state defendants believe that it is equally reasonable to read that section as permitting the Secretary to bar a registrant indefinitely once the Secretary has found a wilful failure to participate. In sum, defendants all argue that the penalty provisions function as important incentives and are administratively efficient mechanisms to fulfill the legislative intent of having WIN participants develop a sense of self-worth as wage-earning members of our society.
We are presented with this question of legislative intent and statutory interpretation on plaintiff's application for preliminary injunctive relief. Thus, we do not decide who will ultimately prevail on the merits of the claim, but only whether plaintiff has made
"a clear showing of either (1) probable success on the merits And irreparable injury, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation And a balance of hardship tipping decidedly" in his favor. (emphasis in the original). Gresham v. Chambers, 501 F.2d 687, 691 (2d Cir. 1974) (citations omitted). See also Brown & Williamson Tobacco Corp. v. Engman, 527 F.2d 1115 (2d Cir. 1975) and Aquayo v. Richardson, supra, 473 F.2d at 1112.
In the instant action, we evaluate plaintiff's claims under the second test.
Turning first to the strength of plaintiff's legal arguments, we do not agree at this juncture that the deregistration penalties contravene the legislative intent expressed in 42 U.S.C. § 630. Section 630 states that WIN was passed to establish a job training program and to provide incentives and opportunities for AFDC recipients to be employed. Plaintiff claims that this purpose is violated when an otherwise eligible and willing person is precluded from participation in the training programs as a result of deregistration. When an individual is deregistered, his or her needs are disregarded from a family's AFDC grant. In addition, that individual is prevented from receiving any other WIN benefits, including job-training, counseling, and job-referral services. Although deregistration is not explicitly authorized by the Act, while the sanction of a decrease in the AFDC grant is specifically set forth, the Act does expressly delegate rulemaking power to the federal defendants. 42 U.S.C. § 639 and § 1302. Given this grant of authority, plaintiff has not yet shown that deregistration, the penalty chosen by the Secretaries, is inconsistent with the furnishing of incentives to AFDC recipients to propel them into the work force. Rather, the potential loss of access to job-training and job placement opportunities which results from deregistration may serve as a deterrent for those who would refuse to participate.
Thus, although we understand plaintiff's argument that an individual who is so sanctioned under the regulations is precluded from the very benefits which Congress hoped would function as positive incentives to becoming a wage-earner, we do not believe that the creation of negative incentives is beyond the discretionary powers which Congress invested in the Secretaries of HEW and Labor.
Therefore, on the issue of whether plaintiff has shown sufficiently serious questions going to the merits, we conclude that plaintiff has not made a clear showing based upon the overall legislative purpose of WIN to entitle him to preliminary relief.
The second basis for plaintiff's claim that the Act does not permit deregistration as a penalty is § 602(a)(19)(F). Here, plaintiff has raised sufficiently serious questions going to the merits of the interpretation of the phrase "if and for so long as" to meet the test for preliminary relief of Gresham, supra.
In interpreting statutory language, a court is instructed to give words their ordinary meaning. Wisdom v. Norton, 507 F.2d 750, 753-754 (2d Cir. 1974), petition for rehearing denied, 520 F.2d 938 (2d Cir. 1975). While the interpretation given to statutes by the agencies entrusted with their operation is given considerable weight, (Dublino, supra, 413 U.S. at 421, 93 S. Ct. 2507), agency readings cannot supersede the language of the Act. Wisdom v. Norton, supra, 507 F.2d at 756.
Defendants, in arguing against plaintiff's plain sense reading of § 602(a)(19) (F) have not presented arguments which defeat the seriousness of the issues raised. The state defendants' alternative reading of the language, which would permit permanent deregistration as a sanction, raises the possibility that the penalty would alter the eligibility requirements established by Congress and is thus not as reasonable an interpretation as plaintiff's. The federal defendants argue that § 602 deals with the requirements for state AFDC programs and thus does not apply directly to them nor limit their discretionary powers. However, WIN is implemented by its relationship to state AFDC programs. Thus, we do not conclude that the fact that the words appear in a section entitled "State plans for aid and services to needy families with children; contents; approval by Secretary" renders them inapplicable to the federal defendants.
Other arguments advanced by defendants also do not defeat the gravity of plaintiff's claim. The federal defendants turn the court's attention to other language within § 602(a)(19)(F), which provides that a person who would otherwise be subject to sanctions may have a reprieve from the imposition of the penalty if he or she accepts 60 days of counseling. Defendants argue that the 60 day counseling option would be rendered meaningless under plaintiff's reading of the Act. We do not agree that the 60 day counseling provision has any bearing upon the type of sanction allowed by the statute. Congress may well have provided that the penalty of a decrease in an AFDC allotment, rather than deregistration, could be avoided by voluntary agreement to participate in counseling.
The defendants also contend that if plaintiff is accurate in his reading of the Act, the administrative burden would be enormous. However, administrative convenience cannot override statutory requirements.
Turning to the second element of the test of whether a preliminary injunction should issue, we find that plaintiff has established that the present harm to him is grave while the hardships imposed upon defendants by the grant of injunctive relief is slight. Plaintiff's family's AFDC grant has been decreased, so that his family of four is given $ 212.60 on which to live for the month. In addition, plaintiff's access to food stamp and medicaid benefits have been affected by the imposition of the WIN sanction. (See Plaintiff's Reply Memorandum, pp. 12-15). Thus, McLean's ability to purchase food, pay for shelter, and meet the monetary requirements for living is substantially impaired by the imposition of the arguably unlawful penalty. Such daily needs cannot be compensated by an award of monetary relief at the end of this litigation. In contrast, New York State's coffers will not be greatly harmed by their monthly payment to McLean of the $ 52.50. Under these circumstances, we find that the balance of hardships tips decidedly in favor of plaintiff.
In summary, we grant plaintiff's application for preliminary injunctive relief and we deny defendants' motion to dismiss.
Subpart F Deregistration and Sanctions
(a) All deregistrations shall be performed by the WIN sponsor.
(b) A deregistration is necessary when an individual is held to have refused to participate without good cause; an incorrect non-exemption determination has been made; or an individual becomes exempt. Deregistration is also necessary when an individual becomes ineligible for AFDC except in the case where he is participating in the PSE or OJT components or is employed and receiving WIN-funded supportive services.
(c) The welfare agency shall notify the WIN sponsor of any change which will affect an AFDC recipient's welfare or exemption status in such a way as to warrant deregistration.
(d) Except in those cases where the WIN sponsor has been notified that an AFDC grant has been discontinued for reasons involving other than WIN program issues the WIN sponsor shall notify the IMU of all deregistrations.
(e) Any WIN registrant, except a volunteer, who is determined to have failed or refused without good cause to appear for appraisal; or any certified WIN registrant, except a volunteer, who after counseling has been offered, continued to refuse to participate in the WIN program without good cause shall be ...