The opinion of the court was delivered by: LASKER
Among other forms of public assistance, New York State provides aid in the form of shelter allowance to all persons who fall within a certain category of need. N.Y.Soc.Serv.Law § 131-a (McKinney 1976) In August of 1976, in an attempt to distribute limited funds more broadly, New York's Department of Social Services revised its regulations governing shelter allowance to abandon its previous method of allocation based on individual need in favor of new fixed maxima for each social services district based on family size alone. 18 N.Y.C.R.R. § 352.3(a) (as amended August 31, 1976) In the same year, the New York legislature revised the eligibility requirements for Home Relief, a public assistance program maintained solely by New York State, to require participants under the age of 21 to obtain a disposition in a support proceeding against all legally responsible relatives as a condition to receiving aid. N.Y.Soc.Serv.Law § 158 (McKinney 1976)
Plaintiffs, who are participants in a variety of poverty level public assistance programs, do not contest the validity of these changes in assistance; they challenge the manner in which the amendments in the law have been implemented. Specifically, they challenge § 358.8(c)(1) of New York's Social Services regulations, 18 N.Y.C.R.R. § 358.8(c)(1), which authorizes the City and State Departments of Social Services to terminate, suspend or reduce continued assistance to welfare recipients prior to a "fair hearing" decision in all cases in which defendants determine that a change in aid raises no questions of fact but is based solely on a change in law or policy. Plaintiffs seek to have the regulation permanently enjoined and declared unconstitutional under the due process and equal protection clauses of the Fourteenth Amendment. In addition, those plaintiffs who participate in programs funded in part by the federal government, and therefore subject to federal regulation, contend that, as applied to them, § 358.8(c)(1) is invalid under the Social Security Act, 42 U.S.C. § 601 Et seq., and the regulations promulgated pursuant to the Act. See 45 C.F.R. § 205.10(a) (1978).
A. History of the Litigation
On October 26, 1976, the plaintiff class was certified to include all recipients of public assistance benefits in New York State under the programs Home Relief, Aid to Dependent Children (ADC), Aid to the Aged, Blind or Disabled (AABD), Veterans' Assistance (VA) and Medical Assistance (Medicaid).
Home Relief, a form of general public assistance, is funded and administered solely by New York State. The plaintiffs' sole claim as to this program is that it is being administered in violation of their federal due process rights. The four remaining programs to which the class members belong are federally funded, and plaintiffs claim that these programs are being administered in violation of the federal Constitution and also the Social Security Act and its regulations. Assistance in the form of shelter allowance is available as part of several of the programs involved in this suit. Section 131-a of New York's Social Services law, which governs shelter allowance, specifies that this form of relief is available to recipients of Home Relief, Aid to Dependent Children, and Veterans' Assistance. In addition, New York's statute governing Aid to the Aged, Blind or Disabled indicates that shelter allowance may be available to persons in those categories as well. See N.Y.Soc.Serv.Law §§ 250, 255.
At the time of class certification, plaintiffs also sought a preliminary injunction against implementation of the "law or policy exception" of 18 N.Y.C.R.R. § 358.8(c)(1). Finding that all four representatives of the plaintiff class had been denied "aid continuing" even though they raised factual questions which might have entitled them to relief, we held that plaintiffs asserted substantial questions "presenting a fair ground for litigation as to whether the "fact/policy' distinction applied by the state is "inherently unworkable' as a means to achieve the requirements of procedural due process." 421 F. Supp. 1305, 1310 (S.D.N.Y.1976). Accordingly, defendants were preliminarily enjoined from applying the "law or policy exception" to deny aid continuing to any member of the plaintiff class "who timely requests a fair hearing decision on a proposed reduction, termination or suspension of benefits . . ."
In July of 1977, plaintiffs moved for summary judgment under Rule 56, Fed.R.Civ.P. In their statement of "material facts as to which . . . there is no genuine issue to be tried", submitted in accordance with local rule 9(g), plaintiffs incorporated by reference all of the findings of fact made in connection with the application for a preliminary injunction as well as 105 affidavits from members of the plaintiff class who had received notice from defendants that their benefits would be reduced and who attested to issues of fact which might entitle them to prevail at a fair hearing. The motion was denied on the ground that disposition of the matters at issue required testimony subject to cross examination. At trial, testimony was heard from 20 members of the plaintiff class and from experts, called by both sides, on New York's public assistance programs. Plaintiffs now renew their request for relief either in the form of summary judgment, pursuant to Rule 65, Fed.R.Civ.P., or judgment after trial.
18 N.Y.C.R.R. § 358.8(c) applies to "any proposed action to discontinue or reduce assistance payments, (or) medical assistance authorization . . ." It provides that, in cases in which there is a request for a fair hearing within the advance notice period:
"(1) Assistance shall be continued until the fair hearing decision is rendered and through a period consistent with the established policies for issuance of payments or authorization except in a case in which the department has determined, in accordance with Federal requirements, that the issue is one of State policy (including law and department regulations) and neither one of fact or judgment, nor whether the State's policies (including law and department regulations) were correctly applied to the facts of the particular case.
(2) On receipt of a request for a fair hearing the department shall promptly decide whether the case is one that requires assistance to be continued, or does not require that assistance be continued because the issue is one of State policy (including law and department regulations), and the department shall promptly advise the appropriate social services official and the recipient accordingly."
In August of 1976, defendants applied the provisions of § 358.8(c)(1) to approximately 30,000 recipients of shelter allowance who were notified that their benefits were about to be reduced pursuant to the new rent ceilings set out in the Social Services regulations. See 18 N.Y.C.R.R. § 352.3(a).
The notices sent to the shelter allowance recipients advised them that a "fair hearing" to contest the reduction in benefits could be obtained if requested within sixty days. However, the notices did not specify that there were any circumstances under which aid could be continued until the time of the hearing.
Shortly thereafter, defendants again applied the challenged regulation, this time to implement the amendments to the Home Relief statute. Notice was sent to approximately 11,000 recipients of Home Relief that assistance would be discontinued unless a final disposition in a support proceeding had been secured, or the recipient fell within one of six specified exceptions to the new law. Recipients were advised to fill in and send to the State Department of Social Services a questionnaire, on the back of the notice form, which would assist the State in deciding whether a recipient was excepted from the operation of the statute and therefore entitled to continuing aid. Although the amendment to the Home Relief statute was subsequently held to violate the State constitution, and defendants were enjoined from its implementation, Tucker v. Toia, 43 N.Y.2d 1, 400 N.Y.S.2d 728, 371 N.E.2d 449 (1977), some 2600 questionnaires were received by the State (Tr. Sept. 21)* and assistance to a number of recipients was temporarily suspended (Tr. Aug. 235, 245, 274, 281).
Finally, in December of 1977, the New York City Department of Human Resources issued further notices of shelter allowance reductions to 3,000 recipients of public assistance. These notices were substantially the same as those sent previously to shelter allowance recipients: they advised of a new fixed maxima of the right to request a hearing, but did not mention the possibility of aid continuing.
The State concedes that no attempt was made to inform recipients of shelter allowance of the possibility of aid continuing because it had concluded that the reductions raised no questions of fact and therefore, under 18 N.Y.C.R.R. § 358.8(c)(1), the recipients were, as a matter of law, not entitled to a continuation of benefits until a hearing. (Testimony of Peter Mullany, Tr. Sept. 26) However, plaintiffs contend that the shelter allowance reductions raised the following three factual issues which might have entitled a recipient to prevail at a fair hearing: estoppel, excessive hardship and erroneous computation of family size. Moreover, although defendants did attempt by means of the questionnaire to distinguish, prior to discontinuance, between those recipients of Home Relief who fell within the operation of the new statute, N.Y.Soc.Serv.Law § 158, and those who did not, plaintiffs assert that the questionnaire was totally inadequate for that purpose.
A number of class members testified at trial as to the factual questions created in their cases by the shelter allowance reductions.
Six witnesses testified on the issue of estoppel. A good example was Carmen Otoya, the mother of one child, who stated that at the time she applied for public assistance the City Department of Social Services agreed to pay $ 183. per month toward the cost of her mortgage and in consideration for this commitment placed a lien on her house for $ 7,300. Despite this agreement, her assistance was reduced to $ 160. per month in February of 1977. (Tr. Aug. 123-131) Maria Pagan testified that before she signed her lease, she consulted with her caseworker about whether she would receive enough money to pay her rent. When she was told that she would receive $ 185. per month, she signed the lease and submitted it to the Department for approval. Several months later, she was notified that ...