Melissa Kay Snider, an Infant by Her Next Friends, Wallace A. Snider and Mildred A. Snider, David Snider, an Infant by His Next Friend, Wallace A. Snider and Mildred A. Snider, and Lisa Nicholas, Marion Allen and Jeffrey Nicholas, an Infant by His Next Friend Marion Allen, on Behalf of Themselves and All Those Similarly Situated v. Kenneth Creasy, Harlan Wolfe

Citations: 728 F.2d 369; 1984 U.S. App. LEXIS 24948Docket: 82-3731

Court: Court of Appeals for the Sixth Circuit; February 29, 1984; Federal Appellate Court

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Plaintiffs, including minor mothers and their children, filed a lawsuit under 42 U.S.C. Sec. 1983 against the Ohio Department of Public Welfare (ODPW) for treating federal Old Age Survivors and Disability Insurance (OASDI) benefits as income for determining eligibility for Aid to Families with Dependent Children (AFDC) benefits. The district court denied class certification but granted summary judgment for plaintiffs, permanently enjoining ODPW from considering OASDI payments made via a representative payee as income for AFDC eligibility calculations. Defendants appealed, raising the issue of whether this practice conflicts with Social Security Act regulations. The undisputed facts indicate that minor mothers received OASDI benefits through representative payees and that the ODPW's policy led to the exclusion of their children from AFDC benefits by deeming excess OASDI as available income. Specifically, Melissa Snider's benefits were calculated based on her parents' income without including her OASDI benefits, leading to her exclusion from assistance, which in turn affected her son David's eligibility. Similarly, Lisa Nicholas's OASDI benefits were also deemed available, reducing her child's AFDC grant.

The district court granted summary judgment in favor of the plaintiffs, invalidating Ohio's policy that considered OASDI payments received through representative payees as income for calculating AFDC benefits. The court's decision was affirmed based on the understanding that summary judgment is appropriate when there are no genuine disputes regarding material facts, as established in the cited case law. The facts were uncontested, and the issue was purely legal, making it suitable for summary judgment.

AFDC is a federal public assistance program aimed at supporting needy children without parental care, as established by the Social Security Act of 1935. The Supreme Court ruled that states must align their programs with the Social Security Act to qualify for federal funding. The plaintiffs argued that Ohio's deeming policy conflicted with federal regulations governing OASDI payments, particularly the obligations of representative payees to use funds solely for the beneficiary's benefit.

Ohio's policy was found to undermine the representative payee's responsibility by automatically deeming benefits as available to someone other than the intended beneficiary. The district court supported its ruling by referencing similar cases, Riddick v. D'Elia and Barnes v. Reagen, which also invalidated state policies that misallocated OASDI benefits in a manner contrary to federal regulations. In Riddick, the state's policy conflicted with the requirement that benefits be used only for the beneficiary’s best interest, thereby preventing compliance with federal guidelines.

In Barnes v. Reagen, the court determined that a state public welfare department's policy treating OASDI benefits paid to a representative payee as income for AFDC eligibility was in violation of federal regulations (20 C.F.R. Sec. 404.2035). These regulations mandate that a representative payee must use benefits solely for the beneficiary's best interest, and Ohio's policy undermines this obligation by reallocating funds, stripping the payee of discretionary spending authority. Such a policy is deemed impermissible and poses a risk of criminal liability for the representative payee if obligations are not met.

Defendants acknowledged the requirement for funds to be used for the beneficiary's best interest but argued that since funds reach the beneficiary, they qualify as income for AFDC calculations. This argument is countered by 45 C.F.R. Sec. 233.20(a)(3)(ii)(D), which clarifies that only net income available for current use can be considered for AFDC eligibility. Consequently, OASDI benefits received by representative payees cannot be classified as income under these regulations.

While deeming income may be appropriate in certain cases, as established in Schweiker v. Gray Panthers, that case involved direct payments to beneficiaries rather than through a representative payee, highlighting a significant distinction.

OASDI benefits paid through a representative payee are not considered income for an Aid to Families with Dependent Children (AFDC) applicant or recipient, impacting eligibility calculations. However, OASDI benefits paid directly to an AFDC applicant or recipient are counted as income. The policy that conflicts with federal regulations governing Social Security is deemed invalid under the Supremacy Clause, leading to the affirmation of the district court's summary judgment.

Circuit Judge Contie concurs with the majority's decision that the Ohio Department of Public Welfare (ODPW) cannot deem OASDI benefits paid to a representative payee as income for AFDC eligibility purposes. While agreeing with the judgment for plaintiff Nicholas, Contie believes the judgment for plaintiff Snider should be reversed. The judge cites Barnes v. Reagen, which allows ODPW to include OASDI benefits as income if evidence shows they are used for the AFDC applicant's maintenance needs. Snider's stipulation that her OASDI benefits are spent on her needs serves as direct evidence that the benefits should be counted as income in determining her AFDC eligibility. Contie argues that the district court failed to recognize this stipulation and advocates for its consideration in reversing the judgment for Snider.