The opinion of the court was delivered by: MUNSON
The named plaintiffs, on behalf of themselves, their minor dependent children residing with them, and all persons similarly situated, have instituted a class action, civil rights suit for declaratory, injunctive, and monetary relief. Their claim is that the defendants' practice and policy of considering New York State Higher Education Services Corporation (HESC) loans as income under the AFDC program contravenes the Higher Education Act of 1965, the Supremacy Clause, the Equal Protection Clause of the Fourteenth Amendment, and various federal and state statutes and regulations regarding the AFDC program. Ms. Jamroz, on behalf of herself and a class she seeks to represent, additionally challenges the defendants' practice and policy of presumptively regarding non-exempt loan and grant monies as available income for the purpose of denying, reducing or terminating AFDC benefits, without regard to whether such monies are in fact available. Such a budgeting policy, Ms. Jamroz avers, violates the Due Process Clause of the Fourteenth Amendment, and several federal and state statutes and regulations concerning the AFDC program. Individually, Ms. Jamroz also seeks to enjoin the defendants Blum and O'Connor from reducing her AFDC benefits by virtue of their consideration of her HESC loan as non-exempt income. The gravamen of this claim is that any reduction would be without notice and opportunity to be heard, and thus violative of her rights to procedural due process, as guaranteed by the Due Process Clause of the Fourteenth Amendment, and by federal and state regulations governing the hearing process. Finally, Ms. Jamroz and Mr. Hilbert request various forms of restitution for themselves and for absent class members.
Presently before this Court are motions by the plaintiffs for class action certifications and for summary judgment, and by the defendants for consolidation and dismissal, or, in the alternative, for cross-summary judgment.
Ms. Jamroz and Mr. Hilbert have each been recipients of AFDC, Ms. Jamroz from the Sullivan County Department of Social Services and Mr. Hilbert from the Schenectady County Department of Social Services. Both plaintiffs attended colleges during the 1978-1979 academic year, receiving HESC loans and other grants and loans to defray their educational expenses. After hearing appeals from the respective county departments of social services concerning the amount of AFDC benefits that the plaintiffs should receive, the State Commissioner concluded that the amount by which the HESC loans exceeded the plaintiffs' educational expenses should be regarded as non-exempt income and that this income should be prorated over the periods of the loans. The State Commissioner based these conclusions upon her administrative directive 77 ADM-134, which provides that HESC loans are "not made or insured by the U.S. Commissioner of Education/DHEW-Office of Education and therefore not exempt ..." The parties appear to agree that had HESC loans been characterized as "federal", or as loans "made or insured" by the U.S. Commissioner, they would have been disregarded in determining AFDC eligibility. See Higher Education Act Amendments of 1968, § 507, Public Law 90-575, 82 Stat. 1014.
As a result of applying 77 ADM-134, the AFDC benefits of both plaintiffs were reduced. In this regard, Ms. Jamroz goes on to contend that the defendants improperly prorated over the academic year the amount by which the HESC loan and other non-exempt educational grants exceeded her educational expenses without regard to whether such excess monies were actually available. Specifically, the plaintiff avers that during the Fall semester, she received first a state-funded, non-exempt Tuition Assistance Plan (TAP) grant, all of which funds went to her college, and then a Basic Educational Opportunity Grant (BEOG), which the parties agree was properly disregarded by the defendants as an exempt federal grant. Next, in late October, Ms. Jamroz asserts that she secured an HESC loan, spending most of this money toward the purchase of a car, which was apparently the only means available for her to attend school, and the remainder of the loan on living expenses. In December, the plaintiff states that she received a notice from the Sullivan County Department of Social Services, informing her that it intended to reduce her AFDC benefits because of the "excess" funds from the TAP award. At a fair hearing, Ms. Jamroz attempted to demonstrate that she had depleted all monies from the educational grants, thus lacking the "excess" income attributed to her, and that the Department should regard her car as an educational expense. In her Decision After Fair Hearing, the State Commissioner apparently presumed all TAP, and HESC, monies in excess of the plaintiff's educational expenses to be currently available income, pursuant to 77 ADM-134.
Furthermore, Ms. Jamroz raises an individual claim concerning an alleged absence of adequate notice and opportunity to be heard on the matter of reducing her AFDC benefits. The initial notice that she received from the Sullivan County Department of Social Services regarding a reduction of benefits, Ms. Jamroz avers, concerned the TAP grant, and not the HESC loan. At the hearing relating to the TAP award, the presiding officer raised the issue of whether the HESC loan should have been included as an available resource, and informed the Department that the HESC loan should not have been treated as exempt income. Ms. Jamroz objected to a consideration of this issue, arguing that she was not prepared to address the matter because of a lack of notice. The Department then stated that it would provide the plaintiff with a new notice before it would increase the reduction on the basis of any finding that the HESC loan was non-exempt income. In her Decision After Fair Hearing, however, the State Commissioner authorized an increased reduction of AFDC benefits based upon the excess of HESC monies over educational expenses, but made no mention either of new notice to Ms. Jamroz or of the Department's statement before the hearing officer. Following this Decision, the Department informed the plaintiff that it would indeed reduce her AFDC benefits, and without new notice.
At issue in this action are the defendants' failures to disregard HESC loans, to ascertain whether any "excess" educational monies may in fact be actually available, and to provide Ms. Jamroz an additional notice of reduction.
Before turning to the merits of the plaintiffs' claims, it is first necessary to address the defendants' motion to consolidate Jamroz with Markel v. Blum, 509 F. Supp. 942. Both cases concededly raise the common question of whether HESC loans are monies "made or guaranteed" by the Commissioner of Education.
Under Rule 42 of the Federal Rules of Civil Procedure, a court has the discretionary power to order consolidation when there is commonality of factual or legal issues. See, e.g., Waldman v. Electrospace Corp., 68 F.R.D. 281 (S.D.N.Y.1975). Where, however, delay or undue prejudice would result from consolidation, a court generally ought to maintain separate actions. See, e.g., Farbenfabriken Bayer A.G. v. National Distillers & Chemical Corp., 324 F. Supp. 156 (S.D.N.Y.1971). Here, in view of the absence of a total identity of issues, consolidation would appear to unduly delay both actions. Accordingly, the motion to consolidate is denied.
The defendants move to dismiss the complaint for want of jurisdiction. With respect to this motion, the plaintiffs allege that this Court has jurisdiction under 28 U.S.C. § 1343(3). For the reasons set forth in Markel, the Court agrees with this allegation. See Chapman v. Houston Welfare Rights Organization, 441 U.S. 600, 99 S. Ct. 1905, 60 L. Ed. 2d 508 (1979). In this regard, the constitutional claims asserted by both plaintiffs satisfy the substantiality requirements of Hagans v. Lavine, 415 U.S. 528, 536-37, 541, 543, 94 S. Ct. 1372, 1378-79, 1381, 1382, 39 L. Ed. 2d 577 (1974), and thus this Court shall assume jurisdiction over the plaintiffs' pendent statutory claims. Moreover, the defendants' arguments concerning abstention and the failure of the plaintiffs to exhaust State judicial remedies have been treated by this Court in Markel, and shall not be treated here.
Accordingly, because jurisdiction lies under § 1343, the defendants' motion to dismiss for want of jurisdiction is denied.
Both plaintiffs seek class action certification under Fed.R.Civ.P. 23(a) and 23(b) on behalf of all persons who have had or will have their public assistance in the AFDC category terminated, reduced, or denied due to the defendants' practice and policy of treating loans insured by the HESC as income or resources for AFDC purposes. Ms. Jamroz also seeks to bring a separate class action suit pursuant to Fed.R.Civ.P. 23(a) and 23(b) on behalf of all persons who have had or will have their AFDC benefits reduced, terminated, or denied due to the defendants' policy and practice of treating the mere receipt of non-exempt educational loan and grant monies which exceed educational expenses as actually available income or resources, without regard to whether such non-exempt monies are in fact available during such period.
In order to receive class action certifications, the plaintiffs must satisfy the numerosity, commonality, typicality, and adequacy of representation requirements of Rule 23(a).
With respect to the numerosity requirement set forth in Rule 23(a)(1), the papers submitted by the plaintiffs regarding both proposed classes indicate that at least five persons at Ms. Jamroz' college alone were recipients of HESC loans and public assistance. Common sense would lead one to conclude that the number of persons state-wide in the proposed classes is sufficiently large to warrant class action certification.
With respect to the commonality requirement contained in Rule 23(a)(2), the class which both plaintiffs seek to represent is alleged to raise a question of law common to all its members, namely, whether federal law and regulations and the Constitution permit the defendants to count as income under the AFDC program educational loans insured by the HESC. All members of the class that Ms. Jamroz alone seeks to represent are alleged to present the common question of whether the Constitution, as well as federal and state law and regulations, permit the defendants to count as available income and resources, for the purpose of determining eligibility for an amount of assistance under the AFDC program, monies which have been previously spent and which are not presently available as actual income. Insofar as these questions indeed appear to underlie the claims of the members of the respective classes, the commonality requirement of Rule 23(a)(2) is met.
With respect to the criteria of Rule 23(a)(3) and (4), the asserted injuries of the named plaintiffs indeed typify the injuries of the absent class members, and both Ms. Jamroz and Mr. Hilbert, and their attorneys, appear capable of adequately and fairly representing the class members.
Having concluded that the plaintiffs meet the requirements of Rule 23(a), this Court must now consider whether the plaintiffs satisfy Rule 23(b)(2). In regard to the first proposed class, the plaintiffs aver that the defendants have acted or refused to act on grounds generally applicable to the class by their refusal to exempt HESC loans as income for AFDC purposes. In regard to the second proposed class, Ms. Jamroz contends that the defendants have again acted or refused to act on grounds generally applicable to the proposed class by their application of an irrebuttable presumption that non-exempt education loan and grant monies received in excess of educational expenses are actually available over the course of the entire school year to meet the student's needs, without regard to whether such excess grant and loan monies are in fact available. Given these averments, it appears that the threshold requirements of Rule 23(b)(2) are met. Moreover, the plaintiffs have also satisfied the Second Circuit's standard in Davis v. Smith, 607 F.2d 535 (2d Cir. 1978), vacated and remanded on other grounds, 607 F.2d at 540 (2d Cir. 1979), which requires the plaintiff to "present additional reasons for obtaining certification of the class under Rule 23(b)." Id. at 540. Because of the problems of enforcement and mootness, there is no just reason for the denial of certification under Rule 23(b)(2), and the defendants' arguments to the contrary are without merit. See Markel v. Blum, supra.
Accordingly, the plaintiffs' motions for class action certification are granted.
Turning now to the merits of this action, the Court is mindful of its duty to examine first the plaintiffs' non-constitutional arguments in order to avoid reaching constitutional questions. See, e.g., Wolston v. Reader's Digest Association, Inc., 443 U.S. 157, 160-61 n. 2, 99 S. Ct. 2701, 2704 n. 2, 61 L. Ed. 2d 450 (1979); Califano v. Yamasaki, 442 U.S. 682, 692, 99 S. Ct. 2545, 61 ...