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January 21, 1981

Ethel CLEARY, on behalf of herself and all other persons similarly situated, Plaintiff,
Barbara B. BLUM, Individually and as Commissioner of the New York State Department of Social Services, Defendant

The opinion of the court was delivered by: DUFFY


Ethel Cleary is a 73 year old widow who suffers from arteriosclerosis and exemia, a circulatory ailment. Mrs. Cleary is also an amputee. Although Mrs. Cleary's resources are insufficient to meet the costs of necessary medical care and services, she does not qualify for public assistance because her resources exceed certain allowable limits. Instead, Mrs. Cleary is eligible for Medicaid *fn1" benefits because she is deemed to be a "SSI-related medically needy" *fn2" person.

Eligibility for and the amount of Medicaid assistance to which a SSI-related medically needy person is entitled depends on the amount the applicant is able to contribute towards his own expenses. An applicant's "liability" is determined by subtracting from his annual net income an amount which the applicant may retain to meet his personal needs. If the net income exceeds the amount allowed for personal needs, the excess is considered available to meet the individual's medical expenses. 42 U.S.C. § 1396a(a)(17); 42 C.F.R. § 435.800 et seq.

 When Mrs. Cleary applied for Medicaid benefits, however, the defendant failed to correctly compute her liability. Specifically, the defendant failed to subtract $ 240 from Mrs. Cleary's total annual income as required by law, *fn3" before determining the amount of Mrs. Cleary's income which exceeds her personal needs allowance. As a result, plaintiff is required to contribute $ 20 more a month for her medical expenses than a person who receives public assistance under the Aid To Families with Dependent Children Program (hereinafter "AFDC"). This outcome directly contravenes the holding in Aitchison v. Berger, 404 F. Supp. 1137 (S.D.N.Y.1975), aff'd, 538 F.2d 307 (2d Cir. 1976), cert. denied, 429 U.S. 890, 97 S. Ct. 246, 50 L. Ed. 2d 172 (1976) (exempt income may not be less than AFDC standard of need).

 After exhausting her administrative remedies, Mrs. Cleary instituted this § 1983 class action on March 9, 1979. Plaintiff alleged that the New York Department of Social Services' (hereinafter the "defendant") determination of eligibility for and the amount of medical assistance to which SSI-related medically needy persons are entitled is contrary to federal statutory and constitutional law. After discovery and negotiations, the parties entered into a consent decree which was approved by the court on March 11, 1980.

 The plaintiff now seeks an award of costs and attorneys' fees pursuant to the Civil Rights Attorneys' Fees Awards Act of 1976 (hereinafter "Fees Act"), 42 U.S.C. § 1988. The defendant opposes such an award arguing that the court is without subject matter jurisdiction and that an award of attorneys' fees is inappropriate because the case was terminated by settlement. Defendants also allege that an award in this case will discourage settlements in similar cases.

 The court rejects each of these arguments and holds that plaintiff's attorneys are entitled to a fee award of $ 3,951.92.


 Defendant first objects to the award of attorneys' fees on jurisdictional grounds. Defendant argues that the district court lacked jurisdiction over this matter because plaintiff's claims failed to state a constitutional claim of sufficient substance to support federal jurisdiction under 28 U.S.C. § 1343(3) or to meet the $ 10,000 threshold of 28 U.S.C. § 1331.

 I accepted jurisdiction of this matter on the theory that plaintiff presented a constitutional claim sufficient to confer jurisdiction under 28 U.S.C. § 1343(3). See Hagans v. Lavine, 415 U.S. 528, 94 S. Ct. 1372, 39 L. Ed. 2d 577 (1974). The constitutional question asserted by the plaintiff is clearly substantial, to wit: whether New York's disparate treatment of two classes of potential Medicaid recipients in determining their eligibility for Medicaid, and the amount of Medicaid to which they were entitled, violated the equal protection clause of the fourteenth amendment. This issue is neither frivolous nor devoid of merit. As a matter of law, there is federal jurisdiction over this issue, including pendent statutory claims. Id.

 In any event, the court has jurisdiction over plaintiff's Social Security Act claim due to a recent amendment of 28 U.S.C. § 1331. Federal Question Jurisdictional Amendments Act of 1980, Pub.L.No.93-259 (amending 28 U.S.C. § 1331 (1958)). As amended, § 1331 no longer imposes an amount in controversy requirement on cases arising under the Constitution, laws or treaties of the United States. Id. The Act applies to all actions pending on the date of the enactment of the Act. Id.

 I hold that the instant action is still pending even though the only remaining issue is that of attorneys' fees. See Rainey v. Jackson State College, 551 F.2d 672 (5th Cir. 1977); see also Bradley v. School Board of City of Richmond, 416 U.S. 696, 94 S. Ct. 2006, 40 L. Ed. 2d 476 (1974). As a result, the court has jurisdiction of this action.

 The defendant's second contention is that the plaintiff is not a "prevailing party" who is entitled to attorneys' fees under the Fees Act, 42 U.S.C. § 1988, since the case ended in a settlement rather than through an order of the court.

 This argument was rejected by the Second Circuit in Gagne v. Maher, 594 F.2d 336 (2d Cir. 1979), aff'd, 448 U.S. 122, 100 S. Ct. 2570, 65 L. Ed. 2d 653 (1980) (fees awarded where dispute settled by consent decree). In Maher, both the Second Circuit and Supreme Court relied upon the Senate Report for Section 1988 which stated that "for purposes of the award of counsel fees, parties may be considered to have prevailed when they vindicate rights through a consent judgment or without formally obtaining relief." S.Rep.No.1011, 94th Cong., reprinted in (1976) U.S.Code Cong. & Ad.News 5908, 5912; accord, Kopet v. Esquire Realty Co., 523 F.2d 1005, 1008 (2d Cir. 1975). The Supreme Court in Maher concluded that "the fact that respondent prevailed through a settlement rather than through litigation does not weaken her claim to fees. Nothing in the language of Section 1988 conditions the District Court's power to award fees on full litigation of the issues or on a judicial determination that plaintiff's rights have been violated." Gagne v. Maher, 448 U.S. at -- , 100 S. Ct. at 2575. Rather, the purpose of the Fees Act is "to remove financial impediments that might preclude ...

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