Allen v. Bergland

661 F.2d 1001

Opinions

JAMES DICKSON PHILLIPS, Circuit Judge:

In this case plaintiffs Crezetta Allen and Isaiah and Linda Myers mount a three-pronged attack on the interpretation given by the United States Department of Agriculture (USDA) to its regulations concerning treatment of nonrecurring lump-sum payments received under the Aid to Families with Dependent Children (AFDC) program for purposes of computing the “income” of a recipient who is also entitled to benefits under the Food Stamp program. Finding the challenged interpretation not plainly erroneous, not invalid for want of promulgation under the Administrative Procedure Act (APA) and not violative of the equal protection and due process clauses of the fifth and fourteenth amendments, we affirm the district court’s grant of summary judgment in favor of the USDA.

I

At issue is the USDA’s interpretation of 7 C.F.R. § 271.3(c)(l)(i)(f) and (c)(l)(ii)(e) (1976), which provide:

(1) Definition of income, (i) Monthly income means all income which is received or anticipated to be received during the month. To compute maximum monthly income for purposes of determining eligibility, income shall mean any of the following but is not limited to:

(f) Payments received from federally aided public assistance programs, general assistance programs, or other assistance programs based on need;

(ii) The following shall not be considered income to the households [this list is inclusive and no other exclusions from income shall be allowed]:

(e) Monies received from insurance settlements, sale of property [except for property related to self-employment provided for in subdivision (c)(l)(i)(b) of this section], cash prizes, awards, and gifts, inheritances, retroactive lump-sum Social Security or Railroad Retirement pension payments, income tax refunds and similar nonrecurring lump sum payments.

(Emphasis added.)

In 1974, the . USDA issued the Food Stamp Certification Handbook, a manual of instructions for USDA and state officials concerning the operation of the Food Stamp program. Instruction 2322 found in this Handbook requires that “[a]ll income received by PA [public assistance] households, including the federally-aided public assistance grant ... be counted, in determining adjusted net monthly food stamp income for basis of issuance purposes. . . . PA households will receive only the income exclusions and deductions provided in 2263 and 2264.” Instruction 2263, in turn, essentially tracks the language of 7 C.F.R. § 271.3(c)(l)(ii)(e) in providing for exclusions. Instruction 2322 then concludes with the statement that, “when the PA check is delayed beyond the first month of eligibility as is sometimes the case for households whose PA eligibility has recently been established,” the amount of the check may be averaged or the household provided a varying purchasing requirement or short certification period to cover the period when the check is received.

On the authority of these Instructions, the USDA has consistently directed state agencies administering the Food Stamp program to treat lump-sum payments from the AFDC program as “income” in computing the amount of a recipient’s food stamp bonus. For example, on December 2, 1975, the Southeast Region Director of the Food and Nutrition Service (FNS), the division of the USDA charged with administering the Food Stamp program, issued a regional letter in which, under the title “Lump-Sum Payments,” he stated that, “in line with Section 2322 of 732-1, all monies from PA sources will be considered income.” Similarly, in a July 1977 letter, the FNS advised its Midwest Region office that “retroactive public assistance checks” were considered as “income.” Pursuant to the Food Stamp Act, the state agency charged with the responsibility of carrying out the Food Stamp program in each state must administer the program in accordance with the regulations promulgated by the USDA, as well as the USDA’s instructions and interpretations.

Challenging the USDA’s interpretation and application of 7 C.F.R. § 271.3(c)(l)(i)(f) and (c)(l)(ii)(e) in a manner that reduced their benefits, plaintiffs Allen and the Myers brought suit seeking injunctive and declaratory relief,¹ as well as a retroactive award of benefits, against the USDA, various former and present officials within the USDA who had or have responsibility for administering the Food Stamp program, the South Carolina Department of Social Services (DSS), the agency charged with administering the program in South Carolina, and the director of DSS.

To show that they had been adversely affected by the USDA’s allegedly illegal instruction to include delayed AFDC lump-sum payments in income, plaintiffs presented evidence that Allen applied and became eligible for AFDC assistance in January 1977. Due to customary administrative delay, however, she did not receive any AFDC payments until June 1977. During the months of January through May, Allen did, on the other hand, receive her maximum allowable food stamp coupons at zero purchase price. In June 1977, prior to her certification for food stamps for that month, Allen received her retroactive AFDC benefits for the five months she had been eligible. The payment was made in a separate check for a lump sum of $376.20. At the same time, she also received her first monthly AFDC check in the amount of $74.52.

DSS personnel included Allen’s retroactive lump-sum AFDC payment as “income,” rather than as a “resource,” for purposes of determining her food stamp eligibility and amount in June 1977.² For that reason, she received a food stamp bonus of only $20.00, permitting her to purchase $92.00 (the maximum allowable to Allen) worth of coupons for $72.00.

Isaiah and Linda Myers were certified as eligible for AFDC payments in September 1977. Again, as a result of administrative delay commonly experienced in DSS’s processing of a claim for AFDC, the Myers did not receive a benefit check until October. At that time they received their regular monthly benefit of $96.12 and a nonrecurring retroactive lump-sum payment of $96.12 for the month of September.

DSS personnel included the nonrecurring retroactive payment as “income” to the Myers household for the month of October. As a result, the household received a food stamp bonus of $82.00 rather than the $113.00 bonus it would have received had the lump-sum payment not been included as income.

The case was submitted to the district court on cross-motions for summary judgment. The court granted defendants’ motion for summary judgment because it concluded “that these regulations were valid, that the Secretary’s interpretation is entitled to great weight .... and that the express language and meaning is clear that all payments received from family assistance programs were to be considered income under the regulations.” This appeal followed.

II

A.

The threshold question is whether the USDA’s interpretation of 7 C.F.R. § 271.3(c)(1) was a plainly erroneous one. Courts are “obligated to regard as controlling a reasonable, consistently applied . . . interpretation” of an agency’s regulations by the agency charged with their enforcement, Ehlert v. United States, 402 U.S. 99, 105, 91 S.Ct. 1319, 1323, 28 L.Ed.2d 625 (1971), unless that interpretation is plainly erroneous or inconsistent with the regulation, Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 801-802, 13 L.Ed.2d 616 (1965); accord Fairfax Nursing Center, Inc. v. Califano, 590 F.2d 1297 (4th Cir. 1979); Talley v. Mathews, 550 F.2d 911 (4th Cir. 1977).

The USDA’s essential position is that, while “similar nonrecurring lump-sum payments” are excluded from “income” under 7 C.F.R. § 271.3(c)(l)(ii)(e), that exclusion does not apply to nonrecurring lump-sum AFDC payments because as payments received from a federally aided public assistance program they are to be included in income under 7 C.F.R. § 271.3(c)(l)(i)(f). Moreover, disparate treatment of delayed AFDC payments is justified on the basis of administrative convenience. Because the AFDC and Food Stamp programs are generally administered by the same agency at the state level, AFDC lump-sum payments are relatively easy to anticipate in comparison with other nonrecurring payments such as Social Security or Railroad Retirement pension payments. Since the nonrecurring lump-sum payments described in 7 C.F.R. § 271.3(c)(l)(ii)(e) were excluded from “income” because of the administrative problems that their inclusion would pose, see [1977] U.S.Code Cong. & Ad.News 1704, 2013-14, it is reasonable, contends the USD A, to interpret that subsection as not applying to delayed AFDC payments, which do not pose undue administrative problems.

Plaintiffs contend in opposition that, if subsections (c)(l)(i)(f) and (c)(l)(ii)(e) are to be harmonized, as they must be, see, e. g., United States v. Snider, 502 F.2d 645, 652 (4th Cir. 1974), the more reasonable inter pretation is that regular monthly AFDC payments are to be included in income under (c)(lXi)(f) while nonrecurring lump-sum AFDC payments are to be excluded under (c)(l)(ii)(e). Even assuming, however, that plaintiffs have demonstrated that their interpretation is more reasonable than that of the USDA, this demonstration does not discharge plaintiffs’ burden of showing that the agency’s interpretation is plainly erroneous. See, e. g., United States v. Larionoff, 431 U.S. 864, 97 S.Ct. 2150, 53 L.Ed.2d 48 (1977).

In support of their position, plaintiffs rely almost exclusively on Dean v. Butz, 428 F.Supp. 477 (D.Haw.1977), which is apparently the only other case in which a federal court has been asked to construe 7 C.F.R. § 271.3(c)(1). In Dean, the USDA had instructed the Hawaii Department of Social Services to include security deposits, which were also nonrecurring lump-sum payments made under the AFDC program, as “income” for food stamp purposes because the deposits were payments received from a federally aided public assistance program. The Dean court, however, agreed with the plaintiffs that section 271.3(c)(l)(i)(f) was intended to cover only regular monthly payments and noted that such an interpretation was “consistent with the provision that nonrecurring lump-sum payments are to be excluded from income.” Id. at 481. With all respect, we simply disagree with the Dean court’s analysis because it failed to perceive that the relevant inquiry is whether the department’s interpretation is inconsistent with the regulations and not whether some other interpretation is consistent with those same regulations.

Making what we consider the appropriate analysis, the Florida Court of Appeals has accepted the USDA’s ease of anticipation distinction and upheld the department’s interpretation. Lewis v. State Dept. of Health & Rehabilitative Services, 366 So.2d 904 (Fla.Ct.App.1979). Confronted with an issue identical to the one before this court, the Lewis court adopted the reasoning of the ALJ who had heard the matter that, “[u]sing 7 C.F.R. § 271.3 and the Food Stamp Manual, it is apparent that the AFDC payments should have been counted as income as it is possible to anticipate such payment.”

In further support of its position, the USDA relies upon legislative history, administrative history and basic canons of statutory construction as demonstrating the validity of its administrative interpretation under the proper standard of judicial review. While we think the agency’s reliance upon administrative history³ and canons of statutory construction⁴ not persuasive, we agree that the Food Stamp Act’s legislative history does provide some support for the interpretation’s reasonableness, and to that we now briefly advert.

There is some indication from the legislative history that in adopting the 1977 amendments to the Food Stamp Act, Congress implicitly approved the USDA’s construction of the “income” regulations. In discussing the treatment of public assistance payments, the House Agriculture Committee made it clear that it was aware that delayed public assistance payments received by “new public assistance households” were being counted as “income” under the USDA’s interpretation of the regulations. [1977] U.S.Code Cong. & Ad.News, at 2050. Moreover, the Committee expressed its view that “[p]ayments received from federally aided public assistance programs based on need [should be] included in income by the Department . . ., absent any specific exclusions in the law establishing the assistance payment itself.” Id. at 2003.

Countering this implication from the legislative history, plaintiffs only point to the specific exclusion in the Committee Bill for nonrecurring lump-sum payments. Id. at 2001. This begs the question because the specific statutory exclusion referred to is nothing more than a restatement of the regulation that the Secretary had interpreted not to cover delayed AFDC payments. While Congress’ discussion of the USDA’s interpretation is not so explicit and unequivocal that this court should feel bound by congressional approval of that interpretation, compare United States v. Board of Commissioners, 435 U.S. 110, 98 S.Ct. 965, 55 L.Ed.2d 148 (1978), the failure of Congress to repeal or revise the USDA’s interpretation is at least persuasive evidence that that interpretation is the one intended by Congress, see, e. g., Lorillard v. Pons, 434 U.S. 575, 98 S.Ct. 866, 55 L.Ed.2d 40 (1978).

On the whole, we conclude that the plaintiffs have not made the requisite showing that the USDA’s interpretation of its regulations is plainly erroneous. In consequence, it passes muster under this standard of judicial review.

B.

Plaintiffs next contend, however, that, even if the USDA’s interpretation of § 271.3(c)(1) is not plainly erroneous, the instructions and letters that the USDA relies on in making that interpretation cannot be considered because they have not been promulgated in accordance with the APA. See 5 U.S.C. § 553. Anderson v. Butz, 550 F.2d 459 (9th Cir. 1977) is cited in support of this proposition. Anderson is inapposite, however, because the court there dealt with the distinctly different requirements for publication under the Freedom of Information Act (FOIA) portion of the APA. 5 U.S.C. § 552(a)(1)(D).

After noting the dearth of guidance on whether interpretive rules must be published under the FOIA, the Anderson court adopted the test fashioned by the court in Lewis v. Weinberger, 415 F.Supp. 652, 659 (D.N.M.1976), that an administrative interpretation need not be published under the FOIA if “(1) only a clarification or explanation of existing laws or regulations is expressed; and (2) no significant impact upon any segment of the public results.” Anderson v. Butz, 550 F.2d at 462-63. Since the USDA instruction under consideration in Anderson did have a significant impact on food stamp recipients, the Ninth Circuit held that the instruction could not be applied because it had not been published in accordance with the FOIA. Because the USDA instructions and letters in the present case had an equally significant impact on food stamp recipients, it is clear that those instructions and letters could not be relied upon if the reasoning of Anderson and Lewis were applicable.

In the present case, however, the instructions and letters have allegedly been relied upon in violation of the general APA promulgation provision, which provides that the notice requirements of the APA do not apply “to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice,” 5 U.S.C. § 553(b)(A), and that “interpretative rules and statements of policy” are exempt from APA publication requirements, id. § 553(d)(2). In consequence the relevant inquiry is whether the USDA instructions and letters should be regarded as “substantive rules,” which “create law, usually implementary to an existing law,” or “interpretative rules,” which “are statements as to what the administrative officer thinks the statute or regulation means.” Gibson Wine Co. v. Snyder, 194 F.2d 329, 331 (D.C. Cir.1952). An interpretative rule effectuates no change in policy or law and merely explains or clarifies existing law or regulations. Gosman v. United States, 573 F.2d 31, 39 (Ct.Cl.1978); Springs Mills, Inc. v. Consumer Product Safety Commission, 434 F.Supp. 416, 430 (D.S.C.1977).

Assuming that the USDA’s interpretation of section 271.3(c)(1) is not plainly erroneous, there is no question that the instructions from the Food Stamp Certification Handbook and the letters based on those instructions merely explain or clarify section 271.3(c)(1). Plaintiffs point, however, to two cases in which district courts have found that even USDA interpretative rules, if they are of “general applicability,” must be promulgated and published in accordance with the APA. See Carter v. Blum, 493 F.Supp. 368, 372 (S.D.N.Y.1980); Dean v. Butz, 428 F.Supp. at 480. Because the courts in these cases relied solely on Anderson and Lewis, which address only the FOIA requirements, we respectfully decline to adopt their reasoning. The better view is the one taken by this circuit in Fairfax Nursing Center, Inc. v. Califano, 590 F.2d at 1301, that an agency’s interpretation of its own regulations “need not have been promulgated in accordance with the standard notice and comment procedure.”

C.

Plaintiffs’ final position is that section 271.3(c)(1), as interpreted by the USDA, violates their right to equal protection by unjustifiably according different treatment to a class composed of recipients of delayed AFDC payments than that given to recipients of other similar nonrecurring lump-sum payments. Since there is no question that the USDA’s interpretation creates a separate classification for recipients of delayed AFDC payments, the relevant inquiry is whether that classification is rationally related to a legitimate governmental interest. See, e. g., Dep’t of Agriculture v. Moreno, 413 U.S. 528, 533, 93 S.Ct. 2821, 2825, 37 L.Ed.2d 782 (1973).⁵

In support of the classification’s reasonableness, the USDA contends that, because the AFDC and Food Stamp programs are generally administered by the same state agency, delayed AFDC payments can easily be anticipated by administrative personnel and thus do not create the administrative problems encountered in attempting to anticipate other nonrecurring lump-sum payments. This justification is not an intrinsically unreasonable one, and the Supreme Court has stated that “[a] discrimination will not be set aside if any state of facts reasonably may be conceived to justify it.” McGowan v. Maryland, 366 U.S. 420, 426, 81 S.Ct. 1101, 1105, 6 L.Ed.2d 393 (1961). Plaintiffs challenge the justification’s premise with evidence that the delayed AFDC payment of plaintiff Allen was not accurately anticipated in the present case. The USDA’s justification, however, goes to the generality of cases, and is not rebutted by a single example.⁶ We conclude that the USDA’s interpretation of section 271.3(c)(1) withstands plaintiffs’ equal protection challenge.

AFFIRMED.

Footnotes

1

. Plaintiffs’ claim for injunctive and declaratory relief was effectively mooted by the USDA’s modification of its regulations following passage of the Food Stamp Act of 1977 to specifically exclude from income retroactive lump-sum public assistance payments. See 7 C.F.R. § 273.9(c)(8) (1979). This modification, however, had no effect on the retroactive award of monetary relief, because in enacting the Food Stamp Act of 1977 Congress specifically provided that “[p]ending proceedings under the Food Stamp Act of 1964, as amended, shall not be abated by reason of any provision of the Food Stamp Act of 1977, but shall be disposed of pursuant to the applicable provisions of the Food Stamp Act of 1964, as amended, in effect prior to the effective date of the Food Stamp Act of 1977.” Food Stamp Act of 1977, Pub.L. 95-113, § 1303(b).

2

. Participation in the Food Stamp program is determined by household on the basis of the household’s size and financial condition. Any assets a household has or receives are counted as either “resources” or “income,” and for each of these categories there is a maximum amount that a household may have before being declared ineligible. The amount of “resources” is irrelevant as long as it is below the maximum; the amount of “income,” however, is also used in computing the amount of the food stamp bonus on a sliding scale.

3

. The USDA cites to its 1978 alteration of its regulations to explicitly exclude delayed AFDC payments from “income,” 7 C.F.R. § 273.9(c)(8) (1979), as a strong indication that the regulation under consideration in this case, which contained no specific mention of delayed AFDC payments, was not intended to include them within the exclusions from income. See Federal Insurance Co. v. Speight, 220 F.Supp. 90 (E.D.S.C.1963). The court in Speight, however, relied on the plain meaning of the former law to support the court’s conclusion that the later amendment substantially altered the state’s definition of uninsured motorist. Id. at 95. In the present case, on the other hand, the meaning of 7 C.F.R. § 271.3(c)(l)(ii)(e) is far more ambiguous. For this reason, we would assign little if any weight to USDA’s alteration of its regulations on the treatment of delayed AFDC payments as support for its interpretation of the previous regulation.

4

. The USDA relies upon the canon of statutory construction that “[g]eneral language of a statutory provision, although broad enough to include it, will not be held to apply to a matter specifically dealt with in another part of the same enactment.” D. Ginsberg & Sons, Inc. v. Popkin, 285 U.S. 204, 208, 52 S.Ct. 322, 323, 76 L.Ed. 704 (1932). The USDA contends that the generalized exclusion from income of nonrecurring lump-sum payments does not apply to delayed AFDC payments because those payments are specifically included in income as payments received from federally aided public assistance. Plaintiffs, on the other hand, argue that it is the more specific exclusion of § 271.-3(c)(l)(ii)(e) that controls over the general inclusion of § 271.3(c)(l)(i)(f). We find the opposing contentions on this point simply inconclusive.

5

. We cannot accept the USDA’s position that consideration of this constitutional claim is flatly foreclosed by the Supreme Court’s approval of a USDA regulation including transportation subsidies in income on the ground that, “[s]ince there is no question about the constitutionality of the statute itself, the implementation of the statutory purpose provides a sufficient justification for both the federal regulations and the parallel state regulations to avoid any violation of equal protection guarantees.” Knebel v. Hein, 429 U.S. 288, 296-97, 97 S.Ct. 549, 554-555, 50 L.Ed.2d 485 (1977); accord, Harrelson v. Butz, 547 F.2d 915, 916 (4th Cir. 1977) (upholding validity of regulation in-eluding educational grants in income in partial reliance on Knebel). This contention must fail because both the Supreme Court in Knebel and this court in Harrelson ultimately found the regulations under consideration to be constitutional not because the statute under which they were promulgated was constitutional but because they had a reasonable basis. Knebel v. Hein, 429 U.S. at 294-97, 97 S.Ct. at 553-555; Harrelson v. Butz, 547 F.2d at 916. While Knebel and Harreison may bolster the USDA’s case, an independent inquiry into whether the challenged classification is reasonably justified by a legitimate governmental interest is nevertheless compelled.

6

. At least one court has found that personnel administering the Food Stamp program are able accurately to anticipate delayed AFDC payments. Lewis v. State Dept. of Health & Rehabilitative Services, 366 So.2d 904 (Fla.Ct. App.1979).