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RAM v. BLUM

February 9, 1982

RAM, by its chairperson, Lillian Benjamin, on behalf of its members and all others similarly situated, and Cora Hagler, individually and on behalf of all others similarly situated, Plaintiffs,
v.
Barbara BLUM, individually and as Commissioner of the New York State Department of Social Services, James Krauskopf, individually and as Commissioner of the New York City Department of Social Services, and Richard Schweiker, Secretary of Health & Human Services, Defendants



The opinion of the court was delivered by: WARD

INTRODUCTION

This action challenges the legality of the method that the State of New York has determined to employ in order to calculate the amount of an eligible family's monthly grant under subchapter IV-A of the Social Security Act, 42 U.S.C. §§ 601-15. Subchapter IV-A provides for the payment of monthly cash benefits, known as Aid to Families with Dependent Children ("AFDC"), to certain needy families that include a "dependent child," as that term is defined by Sections 406 and 407 of the Social Security Act, 42 U.S.C. §§ 606-07.

 Plaintiffs are RAM, an unincorporated association located in New York State, and Cora Hagler, a resident of New York City. RAM exists to advance the interests of public assistance recipients living in New York State and includes in its membership individuals who are members of families that presently receive AFDC. Hagler's family, which includes herself and her three children, presently receives a monthly AFDC grant. Defendants are Barbara Blum, Commissioner of the New York State Department of Social Services, James Krauskopf, Commissioner of the New York City Department of Social Services, and Richard Schweiker, Secretary of the Department of Health & Human Services.

 In their complaint, plaintiffs allege that the State of New York has determined to treat the amounts mandatorily deducted from the paychecks of family members (for example, amounts withheld for federal income tax purposes) as "income" that should be taken into account in calculating the amount of an eligible family's monthly AFDC grant. Plaintiffs argue that this method of calculation, if implemented, would violate certain of the provisions in the Social Security Act that govern state administration of the AFDC program. Accordingly, the complaint filed in this action seeks a permanent injunction forbidding defendants Blum and Krauskopf from implementing this method of calculation. By order to show cause, plaintiffs have moved for an order (1) certifying this action as a class action pursuant to Rule 23(c), Fed.R.Civ.P., and (2) preliminarily enjoining defendants Blum and Krauskopf, pursuant to Rule 65(a), Fed.R.Civ.P., from implementing the method of calculation challenged by plaintiffs. For the reasons hereinafter stated, plaintiffs' motion is granted.

 BACKGROUND

 A brief recitation of certain background facts is necessary before discussing the merits of plaintiffs' motion. On August 13, 1981, the Omnibus Budget Reconciliation Act of 1981, Pub. L. No. 97-35, 95 Stat. 357 (1981), was enacted into law. Sections 2301 through 2321 of this act made significant amendments in the federal statutory provisions governing the AFDC program, including those provisions that determine the amount of an AFDC-eligible family's monthly grant. See 95 Stat. 843-60 (1981).

 On September 21, 1981, the Department of Health & Human Services ("DHHS") issued interim regulations designed to implement these amendments. See 46 Fed.Reg. 46,750-73 (1981). The interim regulations, which have since been made final, see 47 Fed.Reg. 5648-86 (1982), extensively amended 45 C.F.R. § 233.20 (1980), entitled "Need and Amount of Assistance," the provision that sets forth the method to be used to determine (1) whether a family is eligible to receive AFDC, and (2) the amount of an AFDC-eligible family's monthly grant.

 In an Administrative Directive dated December 9, 1981 (hereinafter "ADM 81-55"), defendant Blum informed "local social services departments," as that term is defined in N.Y.Soc.Serv.Law § 2.17, of how, in the State of New York's view, the AFDC program should henceforth be administered in order to comply with the Omnibus Budget Reconciliation Act of 1981 and the DHHS regulations issued thereunder. ADM 81-55 instructed local social services departments, inter alia, that amounts mandatorily deducted from the paychecks of family members are "income" that should be taken into account in calculating the amount of an eligible family's monthly AFDC grant. In early January of 1982 the New York City Department of Social Services, which is a "local social services department" within the meaning of the New York Social Services Law, see N.Y. Social Services Law § 61.1, commenced taking the administrative steps necessary to put this instruction into effect.

 The instant action was commenced on January 20, 1982, when plaintiffs filed their complaint in this court. The complaint named only Blum and Krauskopf as defendants. In an order dated January 20, 1982, the Court scheduled a hearing on plaintiffs' motion for class certification and a preliminary injunction, and, pending the hearing, restrained defendants Blum and Krauskopf, pursuant to Rule 65(b), Fed.R.Civ.P., from implementing, with respect to any member of the plaintiff class, the State of New York's decision that amounts mandatorily deducted from the paychecks of family members should be treated as "income" to be taken into account in calculating the amount of an eligible family's monthly AFDC grant. On the next day, by order to show cause, plaintiffs filed the class certification/preliminary injunction motion that is the subject of today's decision.

 On January 27, 1982, defendant Blum moved, by order to show cause, for an order pursuant to Rule 19, Fed.R.Civ.P., joining Schweiker as a defendant in this action. This motion was granted by Judge Duffy, sitting in Part 1 of this Court, on January 27, 1982. The entry of defendant Schweiker into the case at this juncture made it impossible for the parties to brief and argue plaintiffs' class certification/preliminary injunction motion prior to the expiration of the temporary restraining order entered by the Court on January 20, 1982. Accordingly, in an order dated January 29, 1982, the Court extended its restraining order of January 20, 1982, until February 9, 1982. The Court heard oral argument on plaintiffs' class certification/preliminary injunction motion during the afternoon of February 3, 1982. At the conclusion of the argument, the Court, perceiving the case to be one of great importance, reserved decision until today in order that the parties and any reviewing court might have the benefit of a reasoned, albeit oral, decision.

 DISCUSSION

 The Court's evaluation of the legal merits of plaintiffs' motion begins with a general discussion of the legal dispute that has brought the parties before the Court. Then, having the contours of the substantive legal issues raised by this action in mind, the Court proceeds to consider, in turn, the class action and preliminary injunction aspects of plaintiffs' motion.

 The Legal Dispute Between the Parties

 As noted, the legal dispute between the parties centers on the proper interpretation of certain federal statutory provisions that govern state administration of the AFDC program. The AFDC program is one of several joint federal-state public assistance programs authorized by the Social Security Act. States that elect to participate in the AFDC program provide assistance to certain needy families that include a "dependent child," as that term is defined by Sections 406 and 407 of the Social Security Act, 42 U.S.C. §§ 606-07. A certain percentage of the funds expended by state governments pursuant to the AFDC program is reimbursed by the federal government. Id. § 603. In return for the federal funds, state governments are required to administer their AFDC programs pursuant to a "state plan" that is in accord with the federal statutory provisions governing the AFDC program and the regulations promulgated thereunder by DHHS. Id. § 602.

 The AFDC program is intended to provide assistance only to families that are "needy." Further, the amount of an AFDC-eligible family's monthly grant is intended to be limited to the extent of the family's "need." The statutory provisions and the DHHS regulations attempt to effectuate these purposes by requiring that the determination of an applicant family's eligibility for AFDC be made by reference to the family's income and resources, and that the calculation of the amount of an eligible family's monthly AFDC grant be made by comparing the income of the family, after certain deductions, to a dollar figure (known, in AFDC parlance, as "the standard of need") that reflects the state's view of the amount necessary to provide for the essential needs, such as food, clothing, and shelter, of a hypothetical family having the same composition as the family in question.

 This lawsuit concerns the method that the State of New York has determined to employ in order to place a dollar value on the income of an AFDC-eligible family for the purpose of comparing an AFDC-eligible family's income to the relevant standard of need in order to determine the amount of the family's monthly AFDC grant. Under its new method of determining the income of an AFDC-eligible family for this purpose, the State of New York begins by determining the gross income, that is, the total monthly salary or wages, of each family member. Next, the dollar amount of each family member's gross income is reduced by a "work expense deduction" and, during the first four months of eligibility, by a "work incentive deduction." The resulting dollar amounts for the various members of the family are then added together to obtain a dollar amount that represents family income. The family receives an AFDC grant equal to the dollar amount, if any, by which its dollar figure for income is exceeded by the relevant standard of need.

 Plaintiffs challenge the first step of the State of New York's method of calculating family income, contending that the State should take as its starting point the net income, that is, the total take-home pay after mandatory payroll deductions such as federal income tax withholding, of each family member. The State of New York's decision to start with gross income rather than net income is based on its interpretation of Section 402(a)(7)(A) of the Social Security Act, 42 U.S.C. § 602(a)(7)(A) ("Section 402(a)(7)(A)"), under which each state plan is required to provide that the state agency charged with administration of the AFDC program shall, in determining the amount of a family's monthly AFDC grant, "take into consideration any...income and resources (other than AFDC itself) of any child or relative claiming (AFDC)." Omnibus Budget Reconciliation Act of 1981, Pub.L.No.97-35, § 2302, 95 Stat. 844 (1981), 42 U.S.C. § 602(a)(7)(A). The issue to be decided in this action, then, is a narrow question of statutory interpretation, to wit: what is the correct meaning of the word "income" as used in Section 402(a)(7)(A)?

 Propriety of Class Certification

 Plaintiff's motion may be dealt with fairly briefly insofar as it seeks an order, pursuant to Rule 23(c), Fed.R.Civ.P., certifying this action as a class action. The class that plaintiff Hagler seeks to represent consists of AFDC-eligible families who reside in New York State, who have earned income, and who either receive or apply for AFDC after December 15, 1981. For the reasons that follow, the Court has determined that this action should be certified as a class action on behalf of a class defined in this manner.

 It is beyond peradventure that the four prerequisites to a class action set forth in Rule 23(a), Fed.R.Civ.P., are satisfied in the present case. None of the defendants have contended otherwise. First, since it is uncontested that there are presently about 10,000 AFDC-eligible families having earned income in New York City alone, the numerosity requirement of Rule 23(a)(1) is clearly met. Second, since all persons having earned income are subject to mandatory payroll deductions, the question of the correct meaning of the word "income" as used in Section 402(a)(7)(A) affects all AFDC-eligible families that have earned income, satisfying the Rule 23(a)(2) requirement of common issues of law or fact. Third, the State of New York's method of determining family income for the purpose of determining the amount of an AFDC-eligible family's monthly grant would, if implemented, affect plaintiff Hagler in essentially the same way as it would affect other members of the proposed class, see Affidavit of Timothy J. Casey, January 21, 1982, at 2, meaning that plaintiff Hagler's claim is "typical" of the claims of class members within the meaning of Rule 23(a) (3) notwithstanding the fact that each person in the proposed class would, owing to the inevitable variance in the level of earned income from person to person, probably present a unique factual situation. See Calkins v. Blum, 511 F. Supp. 1073, 1088 (N.D.N.Y.1981). Fourth, plaintiff Hagler, who has not been shown to have any interest divergent from the class she seeks to represent and who is represented by counsel experienced in welfare rights litigation of this sort, certainly will adequately protect the interests of the class as required by Rule 23(a)(4). See Tunin v. Ward, 78 F.R.D. 59, 66 (S.D.N.Y.1977).

 Nor do defendants make any argument that the action is not "maintainable" as a class action within the meaning of Rule 23(b), Fed.R.Civ.P. Being an action that seeks classwide relief that would redound equally to the benefit of each class member, this action is a paradigmatic Rule 23(b)(2) suit. Marcera v. Chinlund, 595 F.2d 1231, 1240 (2d Cir.), vacated on other grounds sub nom. Lombard v. Marcera, 442 U.S. 915, 99 S. Ct. 2833, 61 L. Ed. 2d 281 (1979). This is clearly the type of case where, as required by the very terms of Rule 23(b) (2), "the party opposing the class has acted or ...


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