VAN PELT, Senior District Judge:
This is an action brought by welfare recipients to adjudicate their [152] rights under The Food Stamp Act of 1964, as amended, 7 U.S.C. § 2011 et seq. (1970). The defendants are the United States Department of Agriculture, the Secretary of the United States Department of Agriculture, the Administrator of the Agriculture Department’s Food and Nutrition Service, and the Food Stamp Division Director of the Agriculture Department’s Food and Nutrition Service. The plaintiffs are welfare recipients in New York and Connecticut who, through State administrative error, have been denied participation for varying periods in the food stamp program.1 Specifically the plaintiffs, having won fair hearing determinations that benefits were wrongfully withheld, challenge the policy of the food stamp program2 which refuses to permit retroactive food [153] stamp benefits to welfare recipients who have been denied their right3 to participate in the food stamp program. Plaintiffs seek declaratory and injunctive relief against the implementation of this policy. In addition the plaintiffs seek to prosecute this suit as a class action under Rule 23 of the Federal Rules of Civil Procedure and seek a nationwide order which would, in effect, grant retroactive benefits to “all impoverished persons in the nation who are denied retroactive food stamp adjustments although food stamps had been wrongfully withheld from them due to administrative error.” Plaintiffs claim jurisdiction is based on 28 U.S.C. §§ 1331, 1332, 1337, 1361 and 5 U.S.C. § 702. Declaratory relief is sought under 28 U.S.C. §§ 2201 and 2202.
The district court,4 after examining the legislative scheme of the food stamp program, held that the policy of denying retroactive benefits violated the purposes of the Food Stamp Act and that the federal defendants were liable for food stamp benefits which had previously been erroneously denied. The district court also held that the relief was to take the form of forward adjustments5 rather than stamps issued retroactively. In addition, the district court held that the action was properly denominated a class action.6 The class action aspect of the decision was stayed by the order of two circuit judges.
The issues before this court on appeal are: 1) Whether the federal government should be liable for retroactive adjustments or whether the State which wrongfully denied the food stamp benefits should be held liable; 2) Whether the State administrative agencies and officials are indispensable parties to this [154] action; 3) Whether the district court properly denominated this a class action. Before proceeding with a discussion of these issues, a brief summary of the Food Stamp Act and the food stamp program is necessary.
The Food Stamp Act was passed in 1964 to “safeguard the health and well-being of the Nations [sic] population and raise levels of nutrition among low-income households.” 7 The program is designed to operate in the normal channels of trade. Its basic operation is relatively simple. A low-income household, which is eligible, is charged a certain amount of money depending on the amount of income and the number of persons in the household,8 and in return receives food stamp coupons of a greater face value than the amount paid. These stamps are then redeemable at participating retail stores at their face value and are used to obtain a nutritionally adequate diet. The program is administered at the national level by the Food and Nutrition Service of the United States Department of Agriculture. ' In order for a household to be eligible for the program it is necessary for the State in which the household resides to participate in the program. Participation by each State is voluntary. If a State decides to participate, the certification of eligible households and payment for and issuance of the food stamp coupons is handled by local State agencies.9 The Secretary of the United States Department of Agriculture establishes national uniform standards of eligibility for some households.10 Other standards of eligibility are established by local State agencies.11
As for the financial aspects of the program, the Food Stamp Act provides that: “Coupons issued and used as provided in this chapter shall be redeemable at face value by the Secretary [of Agriculture] through the facilities of the Treasury of the United States.” 12 The Act also provides that: “Funds derived from .the charges made for the coupon allotment shall be promptly deposited in a separate account maintained in the Treasury of the United States for such purpose.” 13 In addition, “Coupons issued pursuant to this chapter shall be deemed to be obligations of the United States within the meaning of section 8 of Title 18.” 14 Finally the Act also provides that Congress shall appropriate funds to cover the cost of the program,15 to wit, the difference between the amount received for the food stamp coupons and the face value of the stamps. Each State which participates in the program is made responsible for financing out of its own funds the administrative costs which it incurs in carrying out its duties under the Act.16 In addition, the Act provides that:
Free access — add to your briefcase to read the full text and ask questions with AI
VAN PELT, Senior District Judge:
This is an action brought by welfare recipients to adjudicate their [152] rights under The Food Stamp Act of 1964, as amended, 7 U.S.C. § 2011 et seq. (1970). The defendants are the United States Department of Agriculture, the Secretary of the United States Department of Agriculture, the Administrator of the Agriculture Department’s Food and Nutrition Service, and the Food Stamp Division Director of the Agriculture Department’s Food and Nutrition Service. The plaintiffs are welfare recipients in New York and Connecticut who, through State administrative error, have been denied participation for varying periods in the food stamp program.1 Specifically the plaintiffs, having won fair hearing determinations that benefits were wrongfully withheld, challenge the policy of the food stamp program2 which refuses to permit retroactive food [153] stamp benefits to welfare recipients who have been denied their right3 to participate in the food stamp program. Plaintiffs seek declaratory and injunctive relief against the implementation of this policy. In addition the plaintiffs seek to prosecute this suit as a class action under Rule 23 of the Federal Rules of Civil Procedure and seek a nationwide order which would, in effect, grant retroactive benefits to “all impoverished persons in the nation who are denied retroactive food stamp adjustments although food stamps had been wrongfully withheld from them due to administrative error.” Plaintiffs claim jurisdiction is based on 28 U.S.C. §§ 1331, 1332, 1337, 1361 and 5 U.S.C. § 702. Declaratory relief is sought under 28 U.S.C. §§ 2201 and 2202.
The district court,4 after examining the legislative scheme of the food stamp program, held that the policy of denying retroactive benefits violated the purposes of the Food Stamp Act and that the federal defendants were liable for food stamp benefits which had previously been erroneously denied. The district court also held that the relief was to take the form of forward adjustments5 rather than stamps issued retroactively. In addition, the district court held that the action was properly denominated a class action.6 The class action aspect of the decision was stayed by the order of two circuit judges.
The issues before this court on appeal are: 1) Whether the federal government should be liable for retroactive adjustments or whether the State which wrongfully denied the food stamp benefits should be held liable; 2) Whether the State administrative agencies and officials are indispensable parties to this [154] action; 3) Whether the district court properly denominated this a class action. Before proceeding with a discussion of these issues, a brief summary of the Food Stamp Act and the food stamp program is necessary.
The Food Stamp Act was passed in 1964 to “safeguard the health and well-being of the Nations [sic] population and raise levels of nutrition among low-income households.” 7 The program is designed to operate in the normal channels of trade. Its basic operation is relatively simple. A low-income household, which is eligible, is charged a certain amount of money depending on the amount of income and the number of persons in the household,8 and in return receives food stamp coupons of a greater face value than the amount paid. These stamps are then redeemable at participating retail stores at their face value and are used to obtain a nutritionally adequate diet. The program is administered at the national level by the Food and Nutrition Service of the United States Department of Agriculture. ' In order for a household to be eligible for the program it is necessary for the State in which the household resides to participate in the program. Participation by each State is voluntary. If a State decides to participate, the certification of eligible households and payment for and issuance of the food stamp coupons is handled by local State agencies.9 The Secretary of the United States Department of Agriculture establishes national uniform standards of eligibility for some households.10 Other standards of eligibility are established by local State agencies.11
As for the financial aspects of the program, the Food Stamp Act provides that: “Coupons issued and used as provided in this chapter shall be redeemable at face value by the Secretary [of Agriculture] through the facilities of the Treasury of the United States.” 12 The Act also provides that: “Funds derived from .the charges made for the coupon allotment shall be promptly deposited in a separate account maintained in the Treasury of the United States for such purpose.” 13 In addition, “Coupons issued pursuant to this chapter shall be deemed to be obligations of the United States within the meaning of section 8 of Title 18.” 14 Finally the Act also provides that Congress shall appropriate funds to cover the cost of the program,15 to wit, the difference between the amount received for the food stamp coupons and the face value of the stamps. Each State which participates in the program is made responsible for financing out of its own funds the administrative costs which it incurs in carrying out its duties under the Act.16 In addition, the Act provides that:
“If . . . there has been gross negligence or fraud on the part of the State agency in the certification of applicant households, the State shall upon the request of the Secretary deposit into the separate account authorized by section 2016 of this title, a sum equal to the amount by which the value of any coupons issued as a result of such negligence or fraud exceeds the amount that was charged for such coupons under section 2016(b) of this title.” 17
From an examination of these provisions it is clear that Congress intended for the federal government to be responsible for the cost of the benefits or “bonus” portion of the program, to wit, the difference between the face value of the coupons and the amount that the law-in[155] come households pay for their coupons. It is likewise clear that the administrative costs of certification and distribution are to be borne by the participating States. Other courts faced with the same problem of statutory interpretation have so held. Tindall v. Hardin, 337 F. Supp. 563 (W.D.Pa.1972), aff’d sub nom. Carter v. Butz, 479 F.2d 1084 (3d Cir. 1973); Stewart v. Butz, 356 F. Supp. 1345 (W.D.Ky.1973).
It is true that the States are liable to the federal government for additional expenses which the federal government incurs as a result of errors or fraud in certification or in undercharging recipients for food stamps.18 However, this case does not involve liability for additional expense incurred by the federal government. This case involves benefits for which the federal government is responsible but which were not paid out earlier. This statutory provision cited in note 18 may well limit State liability for substantive benefits to the instances enumerated therein. That question we do not need to determine in this case.
The defendants argue that even assuming that the States are liable only for administrative expenses that the cost of retroactive food stamp benefits is an administrative expense since the question of retroactive benefits would never have arisen had there been no State administrative errors. Although at first glance this argument appears to have weight, a closer examination shows that it is entirely without merit. The fact that benefits were denied by the States to needy recipients does not make the cost of their retroactive adjustments an administrative expense. Retroactive adjustments, by their very nature, do not add to the budgeted expense of operating the program. It is merely expense which through error is delayed in its final payment.
The defendants also argue that if liability for retroactive benefits due to administrative errors is not placed upon the States that the States will not have any incentive to effectively administer the program. While the problem of effective administration of governmental programs is a legitimate concern of both the Congress and the States, it cannot and should not be used as a device to shift primary responsibility for benefits under the food stamp program. An examination of the Act, as pointed out above, discloses that the federal government is responsible for the benefits under the food stamp program.19 The States have an incentive to carefully administer the Act since they must finance any fair hearings which are requested by recipients who feel that they were wrongfully terminated. If the Congress feels that the States need a stronger incentive in order to assure efficiency in their administration of the program, it can so provide by amending the Act.
The defendants also argue that the court in Carter v. Butz, 479 F.2d 1084 (3d Cir. 1973), a case dealing with this same problem, erroneously relied upon the doctrine of sovereign immunity in determining that the federal government rather than the States were liable for retroactive benefits. However, this argument is not persuasive. To the extent that sovereign immunity was relied on by the Court of Appeals for the Third Circuit it was that the Food Stamp Act did not create a cause of action for the welfare recipients against the State based on negligence. In any event this court does not base its decision upon any sovereign immunity which the State may possess but rather upon the fact that the statute creating the federal right clearly shows a congressional intent to hold the federal government liable for all the benefit costs of the food stamp program.
We hold that the federal government is liable for retroactive food stamp benefits. Every other court which has dealt with the question is in agreement. [156] Tindall v. Hardin, 337 F.Supp. 563 (W.D.Pa.1972), aff’d sub nom. Carter v. Butz, 479 F.2d 1084 (3d Cir. 1973); Stewart v. Butz, 356 F.Supp. 1345 (W.D.Ky.1973).
The defendants also contend that the States involved here, New York and Connecticut, are indispensable parties under Rule 19 of the Federal Rules of Civil Procedure and since they were not joined as defendants that the action should be dismissed.20 The district court held that the States failed to meet the standards for indispensability imposed by the Supreme Court in Provident Tradesmens Bank & Trust Company v. Patterson, 390 U.S. 102, 88 S.Ct. 733, 19 L.Ed.2d 936 (1968), and that joinder of the States was not warranted. In the Provident ease the Supreme Court raised the following question in determining whether joinder was necessary: “Can the decree be written so as to protect the legitimate interests of the outsiders and, if so, would such a decree be adequate to the plaintiff’s needs and an efficient use of judicial machinery?” 21
In this action the plaintiffs seek to adjudicate their rights vis-a-vis the federal government and request recission of federal policy. The order of the district court met the requirements set forth in Provident. The order was sufficient to meet the plaintiffs’ needs. The interests of the States were protected as no liability was imposed on them. Only the federal defendants were held responsible for retroactive benefits. The district court noted correctly that the defendants’ argument as to the indispensability of the States assumed the strength of its case on the merits. We find that the federal defendants and not the States are liable, and hence there is no such strength.
Finally, the plaintiffs seek to prosecute this action as a class action with a nationwide class. To hold each State an indispensable party would require that each State participating in the food stamp program be joined as a party. In view of our decision on the merits, this is as unnecessary as it would be unwieldy.
The plaintiffs urge that a class action is necessary in order to implement a uniform nationwide policy of retroactive adjustments. The plaintiffs contend that there are 11 million persons in the nation who are participating in the food stamp program. They do not describe how many of them have been wrongfully denied participation in the food stamp program and are entitled to retroactive adjustments. Probably this number is known only to the defendants. Neither of the other two cases involving responsibility for retroactive food stamp adjustments which have gone to judgment have given the nationwide relief sought in this action. In Tindall v. Hardin, 337 F.Supp. 563 (W.D.Pa.1972), the district court did not allow that action to proceed as a class action partly because it felt that the federal government would voluntarily rescind the policy that is the basis of this suit and partly because it felt that the precedential value of the judgment would make a class action unnecessary. Neither of these hopes have been fulfilled. On appeal the Third Circuit upheld this determination as within the discretion of the trial court although it hinted that it might have decided otherwise. In Stewart v. Butz, 356 F.Supp. 1345 (W.D.Ky.1973), the court in ordering retroactive food stamp benefits allowed the action to proceed as a class action and ordered relief to “All Food Stamp recipients in the Western District of Kentucky who, having won ‘fair hear[157] ing’ determinations that their food stamps were wrongfully withheld, have been denied retroactive benefits by the federal government.”22 This did not have the effect of nationwide relief.
íhe district court, as noted above, determined that this was properly a class action.23 On review we are aware that: “The question of whether to allow a suit to proceed as a class action is one primarily for the determination of the trial judge. If he applies the correct criteria to the facts of the case, the decision should be considered to be within his discretion.” Gold Strike Stamp Company v. Christensen, 436 F.2d 791, 792-793 (10th Cir. 1970). See also, City of New York v. International Pipe and Ceramics Corporation, 410 F.2d 295, 298 (2d Cir. 1969). Keeping this standard of review in mind, we conclude that the class action determination by the district court should be upheld. In order to proceed as a class action the four requirements of subsection (a) of Rule 23 of the Federal Rules of Civil Procedure must be met. The district court specifically so found.24 In addition, the plaintiffs must meet one of the requirements established under subsection (b) of Rule 23. Here it is clear that the defendants have failed to grant retroactive adjustments to all those who have won fair hearing determinations that they were wrongfully denied participation in the food stamp program. Thus, the subsection (b)(2) requirement of Rule 23 has been met.
Nevertheless, defendants argue that the class action determination limits the needed discretion of the Secretary of Agriculture in administering the food stamp program. The plaintiff class was described by the trial court in such a way that they are all entitled to adjustments. Thus it would follow that the Secretary could not lawfully regulate otherwise and his discretion is in no way impaired.
Since the class action determination was within the discretion of the district court and the proper criteria was applied, the decision is affirmed. The stay granted pending the outcome of this appeal is dissolved.
For the reasons stated above the judgment of the district court is affirmed in all respects.