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145612-3, 145622-3 - Smith, et al. v DHS Director

Megan Smith, Nicole Kelly, Roshawnda Williams, and Nicole Johnson,
 
Jacqueline Doig
 
Plaintiffs-Appellees,
 
v
(Appeal from Ct of Appeals)
 
 
(Genesee – Neithercut, G.)
 
Department of Human Services Director,
 
Kristin M. Heyse
 
Defendant-Appellant.
 
______________________________
 
 
Megan Smith, Nicole Kelly, Roshawnda Williams, and Nicole Johnson,
 
 
 
Plaintiffs-Appellants,
 
v
(Appeal from Ct of Appeals)
 
 
(Genesee – Neithercut, G.)
 
Department of Human Services Director,
 
 
 
Defendant-Appellee.
 

Summary

Family cash assistance programs are jointly funded and administered by the federal and state governments under Title IV-A of the Social Security Act, 42 USC 601 et seq.; the states receive federal funding from block grants through the Temporary Assistance to Needy Families program. Under federal law, states cannot use TANF funds for cash assistance to recipients for longer than 60 months, but recipients who meet state-defined hardship standards – up to 20 percent of a state’s average monthly caseload – can be exempt from the 60-month lifetime limit. Federal law allows, but does not require, states to use their own funds to continue cash assistance to recipients who have exhausted their eligibility for federal TANF payments; federal law also permits states to place lifetime time limits on family cash assistance programs.
 
As of October 1, 2007, Michigan’s Social Welfare Act (MCL 400.1 et seq.), which previously did not impose time limits on cash assistance, was amended to limit recipients to a lifetime total of 48 months from the amendment’s effective date. MCL 400.57r. However, the months that a recipient received benefits under a hardship exemption – extended to working single parents or caregivers for disabled family members – did not count toward the 48-month total. MCL 400.57p. Effective October 1, 2011, the Michigan Legislature restricted the exemption criteria, but the plaintiffs, and others in their class of recipients, continued to qualify as hardship cases.
 
But effective October 1, 2011, the Michigan Department of Human Services changed its policy to end state welfare benefits for recipients who had exceeded their 60 months of eligibility under federal law and to end all hardship exemptions under Michigan law. The policy, as stated in the DHS Bridges Eligibility Manual, reads:
 
On 10/1/2007, Michigan law reduced the cumulative total of FIP to 48 months during an individual’s lifetime. Notwithstanding, under the Family Independence Program, a family is not eligible for assistance beyond 60 consecutive or non-consecutive federally funded months. Federally funded countable months began to accrue for FIP on 10/1/1996. Counts accrued for every month a family received FIP, including months that met hardship criteria. As of 10/1/2011, no hardship criteria exist in Michigan.
 
Based on this new policy, approximately 11,000 recipients were scheduled to have their benefits terminated as of October 1, 2011. On September 11, 2011, DHS sent termination notices to the affected recipients. The plaintiffs sued DHS in federal district court, arguing that the notice was inadequate and deprived them of due process of law; the plaintiffs also challenged the termination under state law. After the federal court ruled that the September 11 notices were deficient, DHS mailed new notices; the federal court ruled that these notices were constitutionally adequate and dismissed the plaintiffs’ federal suit. DHS began terminating benefits for the plaintiffs and others who no longer qualified under the new policy.
 
The plaintiffs sued DHS Director Maura Corrigan in Genesee County Circuit Court, alleging that the new eligibility policy conflicted with existing statutory requirements. They also maintained that DHS had violated the Administrative Procedures Act by not promulgating the policy change under the APA’s rulemaking provisions. The circuit court granted the plaintiffs a preliminary injunction to stop DHS from enforcing the policy; the court also certified the class of plaintiffs as those who would have their benefits terminated. DHS appealed, and the Court of Appeals vacated the injunction, finding that the plaintiffs had failed to show a likelihood of prevailing on the merits of their claim. The Court of Appeals remanded the case to the circuit court for further proceedings.
 
On remand, both sides moved for summary disposition. The DHS director argued that the new policy was well within her authority to set eligibility requirements under the Social Welfare Act, and to set eligibility criteria needed to secure federal funds. Moreover, removing the plaintiffs and their class from eligibility was necessary to help Michigan meet its federal work-participation goals, the defendant maintained. The plaintiffs claimed that they have an entitlement to cash assistance under the Social Welfare Act, based on hardship criteria that they still meet, and that DHS’ new policy conflicts with the SWA. The circuit court agreed with the plaintiffs, ruling that they are entitled under the SWA to 48 months of benefits; the DHS director exceeded her authority, and violated the separation of powers clause of Michigan’s constitution, in establishing eligibility requirements that conflict with the SWA, the court ruled. The trial court’s ruling allowed the plaintiffs to continue receiving cash assistance. (Because the Court of Appeals later denied the defendant’s motion to stay the effect of the circuit court’s order, the plaintiffs continue to receive benefits).
 
DHS pursued appeals to the Court of Appeals and Supreme Court. Ultimately, in a June 26, 2012 published opinion, the Court of Appeals affirmed in part and reversed in part the circuit court’s decision. With regard to the plaintiffs’ statutory entitlement claim, the Court of Appeals found that the DHS director did have the authority to promulgate the 60-month eligibility limit. Various provisions of the SWA, when read together, gave the defendant broad discretion to promulgate eligibility criteria, including time limits based on federal law, the appellate court said.
 
With respect to the plaintiffs’ claim that the DHS directive violated the Administrative Procedures Act, the Court of Appeals said that, to the extent that DHS’ policy terminates FIP cash assistance paid with federal funds, no APA rulemaking is required; DHS is following a federal mandate, and there is an express exemption in the APA for such policies, the appellate panel said (MCL 400.6(4)). But to the extent that state funds are involved, DHS cannot enforce its new policy until a rule has been promulgated under the APA, the panel said.
 
The plaintiffs and DHS both appeal. The plaintiffs challenge the Court of Appeals holding that the DHS director acted within her authority and that there is any exemption from APA rulemaking. The defendant seeks to overturn only the part of the ruling requiring APA rulemaking where state funds are involved.
 
In a Sept. 21, 2102 order, the Supreme Court said it would hear oral argument on whether to grant the parties’ applications for leave to appeal or take other action. The Court ordered the parties to address “(1) whether the defendant properly implemented the 60-month limitation on Family Independence Program cash assistance benefits without rulemaking under the Administrative Procedures Act (MCL 24.201 et seq.), and (2) whether the defendant had the authority to implement the 60-month limitation on Family Independence Program cash assistance benefits and whether this limitation conflicts with any provisions of the Social Welfare Act (MCL 400.1 et seq.).”