In re Guardianship Estate of Keffeler, No. 67680-1, (Slip Op., October 11, 2001).
In re Guardianship Estate of Keffeler, No. 67680-1, (Slip Op., October 11, 2001).
Oct. 2001 IN RE GUARDIANSHIP ESTATE OF KEFFELER 1
Cause No. 67680-1
[No. 67680-1. En Banc.]
Argued November 8, 2000, June 24, 1999. Decided October 11, 2001.
GUARDIANSHIP ESTATE OF DANNY )
KEFFELER, BY WANDA PIERCE, ) No. 67680-1
Guardian, and other persons )
similarly situated, ) En Banc
)
Respondents, ) Filed: October 11, 2001
)
v. )
)
STATE OF WASHINGTON DEPARTMENT OF )
SOCIAL AND HEALTH SERVICES; LYLE )
QUASIM, Director of the Department )
of Social and Health Services; and )
MICHAEL R. HOBBS, Program Manager )
for the Department of Social and )
Health Services, )
)
Appellants. )
BRIDGE, IRELAND, and GUY, JJ., dissent by separate opinion.
Trial Court: Superior Court, Okanogan County,
No. 96-2-00157-2, John G. Burchard, Jr., J.
Debra E. Casparian, Lawrence S. Lockwood, and William B. Collins,
Assistant Attorneys General, for appellants.
Mansfield Reinbold & Gardner, by Rodney Reinbold; Richard B. Price,
for respondents.
Eugene A. Studer; Deborah R. Kant, United States Attorney; Department
of Justice, by William Kanter and Colette G. Matzzie, amicus curiae on behalf
of Commissioner of the United States So
SANDERS, J. - The plaintiff class asks us to hold the Washington State
Department of Social and Health Services (DSHS) violated that provision
of the Social Security Act (the Act), 42 U.S.C. § 407(a) which forbids
creditor access to Social Security benefits. Here DSHS acts as a
representative payee under 42 U.S.C. § 405(j) for foster children and
then applies the Social Security benefits to reimburse the state budget
for payments made to foster parents for the basic needs of those
children. We are also asked if DSHS's actions deprived the foster
children of their property absent due process and abridged their right to
equal protection of the laws. Lastly the plaintiff class asserts
entitlement to an award of reasonable attorney fees.
We hold DSHS as a representative payee violates § 407(a) of the Act
when it applies Social Security benefits to the current maintenance needs
of foster children for whom it acts as representative payee. Given this
disposition we find it unnecessary to consider the due process and equal
protection claims. We remand for further proceedings, including further
consideration of the reasonable attorney fee award.
ISSUES
1. Does DSHS violate § 407(a) of the Social Security Act when, as a
representative payee under § 405(j) of the Act, it uses Social Security
benefits to pay current maintenance costs of children in foster care?
2. Is the class entitled to an award of reasonable attorney fees?
FACTS
Foster care in Washington is provided by an amalgam of federal, state, and
private funds, although the program is largely state-funded. In fiscal
year 2000, for example, the total foster care budget was $37.4 million in
state funds, plus approximately $12.9 million in federal funds. To be
eligible for federal funding under the Social Security Act, a state must
provide foster care services under a plan approved by the Secretary of
Health and Human Services. 42 U.S.C. § 670. /1 RCW 74.13.031 /2
authorizes DSHS to provide foster care services to children in Washington.
Foster care is generally provided in Washington to children who have
been abused or neglected or have become the responsibility of the state
through our juvenile justice laws, Title 13 RCW. /3 On behalf of these
children, the state pays a schedule of monthly allotments to foster
parents who in turn pay for the basic necessities such as food, shelter,
and clothing for the children in their charge. As of September 1999,
there were 10,578 foster children under DSHS's supervision. An
additional 2,352 children were in the custody of tribal authorities or
child care agencies for whom DSHS paid support. Five hundred sixty-seven
additional children received support through DSHS's Division of
Developmental Disabilities (DDD).
Although DSHS provides foster care for children who need it, it is
Washington public policy to attempt to recover the costs of foster care
from the parents of children in foster care who are primarily liable for
the costs of that care:
It is declared to be the public policy of this state that this
chapter be construed and administered to the end that children
shall be maintained from the resources of responsible parents,
thereby relieving, at least in part, the burden presently borne
by the general citizenry through welfare programs.
RCW 74.20A.010 (support of dependent children act). See also In re
Welfare of Feldman, 94 Wn.2d 244, 250, 615 P.2d 1290 (1980) ("It is true
that parents bear the primary responsibility for the support of their
children.").
In the context of foster care, DSHS implemented the Legislature's
cost recovery policy by regulation:
Parents of children in foster care paid by the department
satisfy their legal obligation to support their children when
there is a superior court order for support by paying the
amounts specified in the order or in the absence of a superior
court order, by paying the amount determined under RCW
74.20A.055 and regulations promulgated in chapter 388-11 WAC.
Former WAC 388-70-075(1) (1976), repealed by St. Reg. 01-08-047 (Apr. 30,
2001).
If parents of a foster child are unavailable or unwilling to reimburse
DSHS for the costs of foster care, DSHS may reimburse itself using "moneys
and other funds" that come into its possession while the child is in its
custody. RCW 74.13.060 provides, in pertinent part:
The secretary [of the Department] or his designees or
delegatees shall be the custodian without compensation of such
moneys and other funds of any person which may come into the
possession of the secretary during the period such person is
placed with the department of social and health services
pursuant to chapter 74.13 RCW. As such custodian, the secretary
shall have authority to disburse moneys from the person's funds
for the following purposes only and subject to the following
limitations:
(1) The secretary may disburse any of the funds belonging to
such person for such personal needs of such person as the
secretary may deem proper and necessary.
(2) The secretary may apply such funds against the amount of
public assistance otherwise payable to such person. This
includes applying, as reimbursement, any benefits, payments,
funds, or accrual paid to or on behalf of said person from any
source against the amount of public assistance expended on
behalf of said person during the period for which the benefits,
payments, funds or accruals were paid.
DSHS implemented RCW 74.13.060 with the following regulation:
(1) If a child in foster care is entitled to financial benefits
the income received shall be used on behalf of the child to
help pay for the cost of the foster care received, except for
resources held in trust for an American Indian child according
to provisions in WAC 388-28-650.
(a) Income includes SSI [Supplemental Security Income], RSDI
[retirement survivors disability insurance], veteran's
benefits, railroad retirement benefits, inheritances, or any
other payments for which the child is eligible, unless
specifically exempted by the terms and conditions of the
receipt of the income.
(b) Receipt of other income as described above shall not
relieve the child's responsible parent(s) of the liability for
payment of child support in accordance with WAC 388-70-075
through 388-70-084.
(2) Any person, agency, or court which receives any payments
on behalf of a child in foster care shall remit such payments
to the office of support enforcement, in accordance with WAC
388-70-082.
(3) Resources in the control of a child in foster care shall
be treated in accordance with WAC 388-28-400 through 388-28-
455.
Former WAC 388-70-069 (1983), repealed by St. Reg. 01-08-047 (Apr. 30,
2001).
Where a child is eligible for Social Security benefits, /4 federal
law provides a process by which a "representative payee" may be appointed
to administer the funds on behalf of the child. Section 405(j) /5 of
the Act authorizes the Social Security Administration (Administration or
SSA) to appoint such a "representative payee" for the child beneficiary:
If the [Administration] determines that the interest of any
individual under this subchapter would be served thereby,
certification of payment of such individual's benefit under
this subchapter may be made, regardless of the legal competency
or incompetency of the individual, either for direct payment to
the individual, or for his or her use and benefit, to another
individual, or an organization, with respect to whom [certain]
requirements . . . have been met (hereinafter in this
subsection referred to as the individual's "representative
payee").
42 U.S.C. § 405 (j)(1)(A); see also 20 C.F.R. §§ 404.2001(b), 416.601(b).
Generally, a representative payee is appointed whenever a beneficiary is
under 18 years of age. The Administration has an order of preference for
representative payees for such children, generally favoring the
appointment of parents or relatives of the child; it will appoint an
authorized agency only if no parent or guardian is available. The
appointment of a state agency like DSHS is the last on that priority
list. /6 42 U.S.C. §§ 405(j)(3)(B), 405(j)(2)(C)(iii)(III); 42 U.S.C. §
1383(a)(2)(B); 20 C.F.R. §§ 404.2021, 416.621.
The Code of Federal Regulations explains the function of
representative payees:
A representative payee may be either a person or an
organization selected by us [the Social Security
Administration] to receive benefits on behalf of a beneficiary.
A representative payee will be selected if we believe that the
interest of a beneficiary will be served by representative
payment rather than direct payment of benefits. Generally, we
appoint a representative payee if we have determined that the
beneficiary is not able to manage or direct the management of
benefit payments in his or her interest.
20 C.F.R. § 404.2001(a).
The appointment of a representative payee such as DSHS may be challenged.
The Administration must notify the beneficiary or legal guardian of the
appointment of a representative payee and must advise that the beneficiary
has the right to a hearing before the Commissioner and judicial review to
challenge any appointment. 42 U.S.C. § 405(j)(2)(E)(i), (ii); 42 U.S.C. §
1383(a)(2)(B)(xi), (xii).
Representative payees, including state agencies, must use Social Security
benefits for the beneficiary, and in the beneficiary's best interest,
under guidelines set forth in the Administration's regulations. 20 C.F.R.
§§ 404.2035(a), 416.635(a). The regulations specifically authorize
representative payees to use benefits to defray the cost of the
beneficiary's "current maintenance," including food, shelter, clothing,
medical care, and personal items. The regulations state, in relevant part:
We will consider that payments we certify to a representative
payee have been used for the use and benefit of the beneficiary
if they are used for the beneficiary's current maintenance.
Current maintenance includes cost incurred in obtaining food,
shelter, clothing, medical care, and personal comfort items.
20 C.F.R. §§ 404.2040(a)(1), 416.640(a). The regulations also specify
that the cost of institutionalized care is an authorized expense. 20
C.F.R. §§ 404.2040(b), 416.640(b).
When monthly SSA and/or SSI benefits exceed the amount needed for
current maintenance, the representative payee is required to conserve and
invest the remaining benefits in trust for the benefit of the
beneficiary. 20 C.F.R. §§ 404.2045(a), (c), 416.645(a), (c). Large
amounts of retroactive benefits must be placed in a separate, dedicated
account and may be used only for certain, enumerated expenditures. 20
C.F.R. § 416.640(e).
If a representative payee misuses benefits, the representative payee
may be removed by the Administration. 42 U.S.C. § 405(j)(1)(A); 42
U.S.C. § 1383(a)(2)(A)(iii). Moreover, a representative payee's misuse
of the beneficiary's funds is a felony. 42 U.S.C. § 408(a)(5). Given
the criminal penalty for misuse of funds, some courts have inferred a
fiduciary relationship between beneficiary and representative payee,
although the statute and implementing regulations do not say as much.
See, e.g., Garvey v. Worcester Housing Auth., 629 F.2d 691 (1st Cir.
1980), cert. denied, 450 U.S. 925 (1981); Bradley v. Austin, 841 F.2d
1288 (6th Cir. 1988); C.G.A. v. State, 824 P.2d 1364 (Alaska 1992); In re
Estate of Merritt, 272 Ill. App. 3d 1017, 651 N.E.2d 680 (1995); Rice v.
Perales, 156 Misc. 2d 631, 594 N.Y.S.2d 962 (Sup. Ct.), aff'd, 193 A.D.2d
1135, 599 N.Y.S.2d 211 (1993).
In September 1999, of the thousands of foster children in the custody of
DSHS pursuant to Title 13 and chapter
74.13 RCW, 1,480 foster care
children were receiving Social Security benefits. Nine hundred
twenty-three children were receiving SSI benefits, 469 were receiving SSA
benefits, and 88 children were receiving both. DSHS acted as a
representative payee for 1,411 children in foster care and in DDD.
Two units within DSHS perform the actual function of representative
payee for the Social Security benefits of class members. The Children's
Administration (Children's) provides services to all foster children
regardless of whether the children also receive Social Security benefits.
These services include monitoring the child's needs, determining special
needs, and developing an individual service plan for each child. The
Trust Fund Unit accounts for Social Security benefits received by DSHS as
representative payee.
When a child is placed in foster care, Children's identifies those
children who may be eligible for Social Security benefits and makes an
application on their behalf. If Children's believes a denial of benefits
is erroneous, Children's will appeal for the child. In each case, DSHS
also applies to the Administration to become the representative payee for
the child (except for developmentally disabled children).
When DSHS receives Social Security benefits as representative payee for
a foster child the funds are deposited in a Foster Care Trust Fund
Account at the Office of the State Treasurer. Although the funds are in
a single account, the Trust Fund Unit maintains an individual "subsidiary
account" for each child for whom benefits are received. /7
Children's is responsible for providing the current maintenance needed
by a child in foster care. However, Children's does not normally
purchase a child's food, shelter, clothing, and other items directly.
Rather, such items are purchased and provided by the child's foster
parent. Children's pays the foster parent a fixed amount based on a
schedule. Where a special item or expenditure is needed, the Trust Fund
Unit will issue a check to either the foster parent or directly to a
store or service provider. Such expenditures are authorized by DSHS in
its discretion as the representative payee.
The Trust Fund Unit typically uses a child's Social Security benefits
to pay for a child's basic foster care expenses. Every month, Children's
generates a report showing the amount of money paid by Children's to a
care provider for each child in foster care. The Trust Fund Unit uses
this report to determine how much of a child's SSI and SSA funds it will
direct the state treasurer to pay to Children's. In general, if the
amount in the trust fund account is adequate to reimburse the entire cost
of foster care, as claimed by Children's, the entire claimed amount is
paid. If the funds in the trust fund account are not adequate to
reimburse the entire cost of foster care, the Trust Fund Unit uses up to
the amount available in the trust fund account. The amount to be paid
for foster care is transferred from the Foster Care Trust Fund Account to
Children's.
As representative payee, DSHS has the discretion to expend a child's
SSA or SSI funds on items other than current basic foster care expenses.
Children's staff may request that a child's benefits be used for extra
items or special needs, such as computers, educational expenses, summer
camps, counseling, toys, clothing, athletic equipment and orthodontics.
When in doubt, the Trust Fund Unit consults with the Administration to
determine whether a particular expenditure is authorized.
Children in foster care for whom a person or entity other than DSHS
serves as representative payee still receive state-supported foster care.
Foster children who do not receive any Social Security benefits are
eligible for state funding for extra items and special needs if funds are
available in the state foster care budget.
DSHS is also authorized to conserve and invest Social Security
benefits for foster children. Funds not used for basic foster care or
special needs are deposited into a single interest-bearing account. The
interest earned on this account is credited to the child's individual
subsidiary account. These funds are ultimately forwarded to a successor
representative payee or paid directly to the child upon emancipation.
There is a $2,000 resource limit on any child receiving SSI benefits
(although funds deposited to the dedicated account are not subject to
this limit). DSHS monitors each child's subsidiary account to ensure the
balance remains below the limit. When a balance is approaching the
resource limit, the Trust Fund Unit notifies Children's of the need to
spend down the account balance. Children's determines what special needs
might be met using the excess funds and requests disbursements from the
Trust Fund Unit. DSHS uses reimbursements to Children's for current
expenses as a means of not exceeding the $2,000 limit. /8
Federal law forbids creditor access to Social Security benefits. 42
U.S.C. § 407(a) provides:
The right of any person to any future payment under this
subchapter shall not be transferable or assignable, at law or
in equity, and none of the moneys paid or payable or rights
existing under this subchapter shall be subject to execution,
levy, attachment, garnishment, or other legal process, or to
the operation of any bankruptcy or insolvency law.
Commonly referred to as an antialienation provision, this statute evinces
Congress's intent to remove Social Security benefits from the reach of
creditors employing legal process. Dionne v. Bouley, 757 F.2d 1344, 1355
(1st Cir. 1985). The statute also prohibits the voluntary transfer or
assignment of Social Security benefits by the beneficiary. Gardner v.
Ewing, 88 F. Supp. 315 (S.D. Ohio), aff'd, 185 F.2d 781 (6th Cir. 1950),
rev'd on other grounds, 341 U.S. 321, 71 S. Ct. 684, 95 L. Ed. 968
(1951); accord Hurd v. Ill. Bell Tel. Co., 136 F. Supp. 125 (N.D. Ill.
1955), aff'd, 234 F.2d 942 (7th Cir.), cert. denied, 352 U.S. 918 (1956).
As the United States Supreme Court noted in Bennett v. Arkansas, 485 U.S.
395, 397, 108 S. Ct. 1204, 99 L. Ed. 2d 455 (1988), any state law
contrary to § 407(a) runs afoul of the Supremacy Clause. Accord Crawford
v. Gould, 56 F.3d 1162, 1165 (9th Cir. 1995).
The present case arose from DSHS's treatment of class representative
Danny Keffeler. Apparently, an overzealous Department employee sought to
have Danny's grandmother and guardian removed as representative payee.
DSHS now asserts this was the only time it has ever tried to remove a
private representative payee. After four years of litigation involving
just Danny, his guardian filed a class action lawsuit in the Okanogan
County Superior Court on Danny's behalf and on behalf of others
"similarly situated." Clerk's Papers (CP) at 1-15. According to the
amended complaint, DSHS has now abandoned its efforts to become the
representative payee for Danny.
The trial court certified the class, and later amended the certification
to include children receiving both SSA and SSI benefits. The class now
consists of "All foster children within the State of Washington, past,
present, and future in foster care that receive [either SSA or SSI
benefits] for whom the State of Washington acts or has sought to act as
`representative payee.'" CP at 574. /9
The gravamen of the class action is that DSHS's actions violate the
antialienation provision of 42 U.S.C. § 407(a) where DSHS, as
representative payee, uses a foster child's Social Security benefits to
reimburse the state for the costs of foster care. The class also
presents several constitutional causes of action. First, the class
alleges DSHS has acted irrationally, invidiously, and arbitrarily and
capriciously in violation of 42 U.S.C. § 1983. Second, the class alleges
DSHS's actions violate the due process clauses of the Washington
Constitution and the Fourteenth Amendment. Third, the class alleges the
state discriminates against the class members "by subjecting them to a
lower standard of living than children who are not so situated."
Finally, the class alleges the state "maliciously, recklessly and
wantonly is invading federally protected funds for its own improper
advantage, to the detriment of Plaintiff and all other foster children's
financial and emotional well-being." CP at 13-14.
In its prayer for relief, the class seeks (i) a permanent injunction
enjoining DSHS from using Social Security payments to offset the cost of
foster care; (ii) reimbursement to class members of all Social Security
payments used by DSHS for reimbursement; and (iii) an award of attorney's
fees.
DSHS moved to dismiss the action, arguing the Administration was an
indispensable party that cannot be sued in state court. In response, the
class argued it was not claiming the Administration has done anything
wrongful, only that DSHS is unlawfully taking Social Security benefits
from the class members in violation of federal law. The trial court
denied the motion, without analysis, in certifying the class.
On cross motions for summary judgment, the trial court filed a
memorandum opinion and entered judgment in favor of the class. The trial
court held DSHS's use of Social Security benefits to reimburse the cost
of foster care violates 42 U.S.C. § 407(a), and DSHS violates procedural
due process by failing to provide notice, beyond that required by federal
law and regulation, of the "intended result" of the appointment of DSHS
as representative payee. The trial court did not address the class'
remaining constitutional arguments, nor did it specifically conclude DSHS
was liable for civil rights violations under 42 U.S.C. § 1983.
The trial court's judgment provided the following relief:
1. An injunction preventing DSHS from taking action to
replace any private representative payee.
2. An injunction preventing DSHS from requiring any private
representative payee to repay DSHS for the cost of maintaining
a child in foster care from Social Security benefit payments.
3. An injunction requiring DSHS to provide written notice
containing certain information to a child's parent(s) or legal
guardian whenever DSHS applies to become a representative payee
for the child.
4. An injunction preventing DSHS from using Social Security
payments to reimburse the costs of foster care.
5. An order requiring DSHS to produce an accounting of
Social Security fund disbursements for all children that had
been in the custody of DSHS for the purpose of receiving foster
care.
6. An order of restitution of Social Security funds used to
reimburse DSHS for foster care expenses.
7. An award of attorney's fees, with the amount to be
determined in the future.
DSHS appealed the trial court's judgment to Division Three of the
Court of Appeals, although no error was assigned to items 1 or 2
referenced above. Because of the importance of the issues in this case,
the Court of Appeals certified the case to us and we granted the
certification. After the first oral argument of the case, we remanded
the matter to the trial court pursuant to RAP 9.11. The parties have
supplemented the record and the trial court has made findings of fact.
ANALYSIS
A. DSHS's actions as representative payee violated 42 U.S.C. § 407(a).
Simply put, if DSHS is appointed representative payee for a foster child
it will confiscate the child's SSI money to benefit the state. However, if
anyone else is appointed, the state will bear the cost of foster care, and
the child's SSI will be available to benefit the child in addition to the
state-funded foster care program. The issue is whether this confiscation
violates federal law. For the reasons which follow we believe it does.
DSHS admits it would probably not even apply to be a representative
payee if it could not rely on the child's SSI benefits to reimburse the
cost of care. By the same token, DSHS admittedly cannot actively seek
reimbursement from benefits paid to private representative payees because
Congress specifically protects Social Security benefits from transfer,
assignment, execution, levy, attachment, garnishment, or other legal
process under 42 U.S.C. § 407(a). /10 Thus, DSHS receives reimbursement
for foster care only if it serves as a representative payee, and it only
serves as representative payee so it can confiscate the child's money. /11
This scheme stands in stark contrast to 20 C.F.R. § 404.2021 which
expressly provides, "Our primary concern is to select the payee who will
best serve the beneficiary's interest." (Emphasis added.) Obviously the
child is better off with any payee other than the state because DSHS must
provide foster care under state law regardless of whether it receives a
reimbursement. /12 DSHS's self-prioritization is extremely disquieting
in the face of a regulatory mandate that we consider these
disenfranchised children before enriching government coffers.
1. DSHS as a creditor
Whether DSHS acts as a creditor when it reimburses itself for
foster care costs out of the foster children's Social Security
Administration (SSA) entitlements is the crucial question. If DSHS's
reimbursement scheme is that of a creditor, the antiattachment provisions
of § 407(a) apply and DSHS's cost recovery policy runs afoul of a federal
statute which preempts state law under the Supremacy Clause of the United
States Constitution. U.S. Const. art. VI, cl. 2.
The facial logic of DSHS's reimbursement scheme demonstrates a creditor
relationship, a relationship involving creditor-type acts, vis-…- vis
foster children and their SSA benefits. Further, while no federal case
addresses the peculiar set of facts involved here, the course of federal
precedent in similar situations arising under § 407(a) undercuts the claim
that DSHS complies with federal law.
In Philpott v. Essex County Welfare Bd., 409 U.S. 413, 93
S. Ct. 590, 34 L. Ed. 2d 608 (1973), the United States Supreme Court
described the broad protection § 407 affords Social Security benefits.
Philpott declared that § 407 barred New Jersey's attempt to
reach federal Social Security disability benefits in order to reimburse
the state for public assistance expenditures made on behalf of the
petitioners. State welfare recipients were made to execute an agreement,
as a condition precedent to receiving welfare benefits, to reimburse the
county welfare board with any funds that came into their possession.
When Philpott refused to turn his SSA disability benefits over to the
welfare board the latter sued to enforce the agreement. The Supreme
Court held § 407 on its face prohibited New Jersey from reaching the
petitioner's federal disability payments, explaining, "We see no reason
why a State, performing its statutory duty to take care of the needy,
should be in a preferred position as compared with any other creditor."
Philpott, 409 U.S. at 416.
Responding to the argument New Jersey may not be a creditor with
respect to the SSA benefits, the Court continued: "§ 407 does not refer
to any `claim of creditors'; it imposes a broad bar against the use of
any legal process to reach all social security benefits. That is broad
enough to include all claimants, including a State." 409 U.S. at 417.
This language evinces a federal policy with respect to SSA benefits-the
"broad bar"-which controls this case.
The Supreme Court again took up § 407(a) in Bennett v. Arkansas,
485 U.S. 395, 108 S. Ct. 1204, 99 L. Ed. 2d 455 (1988), where Arkansas
attempted to attach certain federal benefits paid to individuals
incarcerated in Arkansas prisons to reimburse the state for maintaining a
prison system. Arkansas argued an "implied exception" to the broad bar of
§ 407(a) (as here) where the state is providing public money for the care
and maintenance of the SSA beneficiary. The Court found no such "care and
maintenance" exception for states "given the express language of § 407(a)
and the clear intent of Congress that Social Security benefits not be
attachable." Bennett, 485 U.S. at 397- 98. DSHS in the instant
case attempts to evade § 407(a) by arguing that it simply provides the
"care and maintenance" intended by the SSA. We find that argument as
unavailing, notwithstanding some factual dissimilarities, as did the
Supreme Court.
Closer to home, the Ninth Circuit ruled in Brinkman v. Rahm, 878
F.2d 263 (9th Cir. 1989) DSHS may not deduct SSA benefits as reimbursement
for the costs of care and maintenance, paid out of public funds, for
involuntarily committed mental health patients in state hospitals. The
court noted, "The state collects this debt from the appellees by
withdrawing [Old Age Survivor's and Disability Insurance] funds from
appellees' accounts at the state hospital accounting offices," finding §
407 preempts this procedure. Brinkman, 878 F.2d at 264. There is
not a significant enough difference between DSHS's methods in
Brinkman and its methods of reaching the foster children's SSA
benefits in this case /13 to justify a different result.
The Ninth Circuit again addressed the issue in Crawford v. Gould,
56 F.3d 1162 (9th Cir. 1995) where, under California law, patients
committed to state psychiatric hospitals were held responsible for the
costs of their own incarceration. California accordingly required all
funds and income, including SSA benefits, to which the patient was
entitled to be placed in a hospital trust account from which the state
could deduct as reimbursement the costs of care and maintenance expended
on the patient. The state deducted the money whether or not the patient
authorized the deduction. Holding § 407 preempted this procedure, the
Ninth Circuit held:
Our conclusion, that "other legal process" includes the
procedure that California uses to deduct Social Security
benefits, is consistent with the purpose of § 407. The
nonassignment provision was not designed to preclude use of
only the judicial process to obtain Social Security benefits.
Rather, § 407(a) is designed "to protect social security
beneficiaries and their dependents from the claims of
creditors." The cramped reading of § 407 California urges
would enable the state to obtain Social Security benefits
through procedures that afford less protection than judicial
process affords.
Crawford, 56 F.3d at 1166 (citations omitted).
These cases evince an expansive interpretation of the protections of
§ 407. The thrust of the case law is that Social Security benefits are,
for all intents and purposes, beyond the reach of the state, however
clever or subtle its attempt to seize them. Philpott and the
cases in its line, including Crawford, are on point and
persuasive.
The state claims King v. Schafer, 940 F.2d 1182 (8th Cir.
1991) justifies DSHS's position, particularly because DSHS acts as a
representative payee under 42 U.S.C. § 405(j) for the foster children in
this case. In King the State of Missouri, as representative
payee, received SSA benefits due involuntarily committed mental patients
and reimbursed itself for the care and maintenance costs expended out of
public funds for the patients. The patients argued the state's
application to become the patient's representative payee to accept the
patients' SSA benefits violated the "other legal process" provision of §
407(a). However the King court disagreed, noting the illogic of
presuming § 407(a) would outlaw a procedure (applying to become
representative payee) expressly authorized by § 405(j). "We cannot agree
with the plaintiffs," wrote the King court, "that the
Department's participation in the administrative proceeding to become a
representative payee is the kind of coercive legal process envisioned by
§ 407(a)." King, 940 F.2d at 1185.
In light of King, and the fact that DSHS enjoys the status
of representative payee (for most) of the foster children under § 405(j)
and 20 C.F.R. § 404.2001(a), the significance of the state's
representative payee status requires further discussion. /14
The King plaintiffs challenged the state's procedure for
applying to become representative payee, arguing that procedure
(incident to which the state seized the mental health patient's SSA
benefits) violated § 407(a) as "other legal process." However here it is
not DSHS's procedure to apply to become the foster children's
representative payee that is under attack; rather it is DSHS's practice
of reimbursing itself from the foster children's SSA benefits once it
becomes representative payee.
The difference is subtle, but the distinction is crucial. There is
nothing ipso facto wrong with DSHS applying to become the representative
payee for certain foster children, as § 405(j) and the SSA's accompanying
regulations explicitly contemplate. We may even agree the representative
payee application is not "other legal process." But it is equally clear
the reimbursement process is "other legal process," given the
definition of that phrase furnished by Philpott, Brinkman,
Bennett, and Crawford. Accordingly, King must be
distinguished, as Judge Burchard below correctly concluded, "[T]here is
no legal basis for giving foster children less protection for their
social security benefits than adult welfare recipients, state prisoners
or involuntarily committed mental patients receive." CP at 627 (Trial
Court's Mem. Op. (Sept. 29, 1998) at 7).
The state also claims C.G.A., 824 P.2d 1364 supports its
position. But C.G.A. only said the state may apply to become a
representative payee. C.G.A., 824 P.2d at 1366. The court
did not hold the state could reimburse itself but deferred that
determination to the Social Security agency under the doctrine
of primary jurisdiction. Id. at 1370. Like King,
C.G.A. stands for no more than the uncontested proposition DSHS
may apply to become a representative payee.
DSHS reimbursement is barred by § 407(a) because despite DSHS's
status as representative payee it performs the role of creditor when it
takes the foster child's SSA entitlement to reimburse itself for moneys
spent on the child. A representative payee may not be a "creditor of
such individual who provides such individual with goods and services for
consideration." 42 U.S.C. § 405(j)(2)(C)(i)(III).
However to claim DSHS does not provide goods and services for
consideration is only to say that DSHS is not the kind of creditor which §
405(j) excludes from representative payee status. It is not to say the
definition of a creditor "who provides such individual with goods and
services for consideration," id., is an exhaustive definition of
other creditors who do not, nor is it to say DSHS cannot become a creditor
or act like a creditor despite the fact it is a representative payee. If
DSHS is allowed under § 405(j) to become a representative payee for the
foster children, that fact does not establish the legality of taking the
child's money.
Furthermore, the bare logic of reimbursement also implies a creditor-
debtor relationship. Common sense and dictionary definition of
"reimburse" is "[t]o pay back, to make restoration, to repay that
expended; to indemnify, or make whole." Black's Law Dictionary
1287 (6th ed. 1990). In common parlance one need not make a payback
unless something "loaned" was "owed" by the recipient back to the payee.
In fact the public policy of our state to recover the costs expended from
public funds on foster children implies exactly this sort of debtor-
creditor relationship. /15 As DSHS presently conceptualizes the matter,
RCW 74.13.060 (and its implementing regulation, former WAC 388-70-069) /16
requires it to reimburse itself for the public assistance it has meted
out to foster children from money, including SSA entitlements, that come
into the children's possession. If the Legislature and DSHS did not hold
the costs of foster care were somehow "owed" back to the taxpayers, it
would not claim the right of DSHS to "reimburse" itself on the taxpayer's
behalf.
DSHS's representative payee status further undercuts the legality of
its reimbursement process because a representative payee is charged under
SSA regulation, 20 C.F.R. § 404.2035, with the responsibility to "[u]se
the payments he or she receives only for the use and benefit of the
beneficiary in a manner and for the purposes he or she
determines, under the guidelines in this subpart, to be in the best
interests of the beneficiary." Id. § 404.2035(a)
(emphasis added). We seriously doubt using the SSA benefits to reimburse
the state for its public assistance expenditure is in all cases, or even
some, "in the best interests of the beneficiary."
Using this money for the care and maintenance of the beneficiary, as
required under 20 C.F.R. § 404.2035(a), would indeed be in the best
interest of the beneficiary, but that is significantly different from
using the money to reimburse the state for payments it made for the care
and maintenance of the foster child-especially when that payment to the
state cannot be legally compelled and, moreover, could be used or
conserved for other special needs of the child.
As the state concedes, DSHS takes on a fiduciary or quasi-fiduciary
role when it acts as representative payee. Br. of Appellants at 3.
DSHS's reimbursement procedure hence constitutes a conflict of interest
precisely because DSHS uses the SSA benefits it receives as
representative payee in a manner inconsistent with the best interests of
the foster children entitled to the money. However worthy cost recovery
might be, DSHS cannot violate federal law at the expense of foster
children to accomplish it.
Accordingly we hold each instance of reimbursement makes DSHS a creditor,
or, if not a creditor, then at least committed to a creditor- type action
that is preempted by the "broad bar" of § 407(a). DSHS's application under
§ 405(j) to become a foster child's representative payee is at best
immaterial to the analysis pertaining to its use of SSA benefits as
reimbursement, or is at worst incompatible with that use of the benefits,
as discussed above. Given our view that the state's actions violate the
Supremacy Clause we find it unnecessary to consider other alleged
constitutional infirmities such as deprivation of property without due
process or denial of the equal protection of the law. See U.S.
Const. amend. XIV.
B. The trial court award of attorney fees is not sufficiently specific.
The summary judgment which we review provided:
It is hereby ordered that plaintiff should be awarded
attorney fees, the amount of which, and the theory under which
awarded, shall abide future ruling of this court.
Pl.'s Order Granting Pl.'s Mot. for Summ. J., CP at 666. The quoted
language does not clarify the scope or basis of the attorney fee award
and therefore must be revisited on remand.
Under the American Rule for attorney fees, compensation may be awarded
only if authorized by contract, statute, or a recognized ground in equity.
Bowles v. Dep't of Ret. Sys., 121 Wn.2d 52, 70, 847 P.2d 440
(1993) (citing Painting & Decorating Contractors of Am., Inc. v.
Ellensburg Sch. Dist., 96 Wn.2d 806, 815, 638 P.2d 1220 (1982);
Seattle Sch. Dist. 1 v. State, 90 Wn.2d 476, 540, 585 P.2d 71
(1978)). A well-established equitable ground for awarding attorney fees is
the common fund doctrine. See Covell v. City of Seattle,
127 Wn.2d 874, 891, 905 P.2d 324 (1995); Bowles,
121 Wn.2d at 70;
Seattle Sch. Dist. 1, 90 Wn.2d at 542-45. It applies when a
litigant preserves or creates a common fund for the benefit of an
ascertainable category of persons. Miotke v. City of Spokane,
101 Wn.2d 307, 339, 678 P.2d 803 (1984) (quoting Pub. Util. Dist. No. 1 of
Snohomish County v. Kottsick, 86 Wn.2d 388, 390-91, 545 P.2d 1
(1976)). The doctrine serves important public functions, and, in light of
the purpose of the American Rule for attorney fees, should be applied only
when such functions are met. Accord Covell, 127 Wn.2d at 892
(awarding attorney fees based on the common fund doctrine because the
policy reasons "clearly are supported"). If properly applied, it provides
greater access to those who otherwise may be unable to afford the services
of an attorney. Bowles, 121 Wn.2d at 71.
Although the common fund doctrine provides an avenue whereby attorneys may
be reimbursed from the fund created, other equitable and/or statutory
grounds may allow an affirmative recovery against the nonprevailing party.
42 U.S.C. § 1988, for example, may provide an arguable basis for such an
award; however, neither the trial court nor the parties have adequately
articulated the equitable or statutory basis to impose liability against
the state for reasonable attorney fees and expenses of litigation in the
context of this case. This issue therefore must be considered further on
remand.
CONCLUSION
We therefore hold DSHS violated § 407(a) of the Act when acting as the
representative payee under § 405(j) of the Act by reimbursing itself for
foster care payments, contrary to the Supremacy Clause of the United
States Constitution. We therefore affirm the trial court's result,
remanding for further appropriate proceedings consistent with this
opinion. The class shall recover its statutory costs on appeal without
prejudice to a further award of reasonable attorney fees to be determined
on remand.
ALEXANDER, C.J., SMITH, JOHNSON, and MADSEN, JJ., concur.
_______________
1 The Act authorizes federal assistance for state foster care
services:
For the purpose of enabling each State to provide, in
appropriate cases, foster care and transitional independent
living programs for children who otherwise would be eligible
for assistance under the State's plan approved under part A of
this subchapter [as such plan was in effect on June 1, 1995]
and adoption assistance for children with special needs, there
are authorized to be appropriated for each fiscal year
(commencing with the fiscal year which begins October 1, 1980)
such sums as may be necessary to carry out the provisions of
this part. The sums made available under this section shall be
used for making payments to States which have submitted, and
had approved by the Secretary, State plans under this part.
42 U.S.C. § 670.
2 RCW 74.13.031 provides, in pertinent part:
The department shall have the duty to provide child
welfare services and shall:
(1) Develop, administer, supervise, and monitor a
coordinated and comprehensive plan that establishes, aids, and
strengthens services for the protection and care of runaway,
dependent, or neglected children.
(2) Within available resources, recruit an adequate number
of prospective adoptive and foster homes, both regular and
specialized, i.e. homes for children of ethnic minority,
including Indian homes for Indian children, sibling groups,
handicapped and emotionally disturbed, teens, pregnant and
parenting teens, and annually report to the governor and the
legislature concerning the department's success in: (a) Meeting
the need for adoptive and foster home placements; (b) reducing
the foster parent turnover rate; (c) completing home studies
for legally free children; and (d) implementing and operating
the passport program required by RCW 74.13.285.
3 See, e.g., RCW 13.34.210 (if a child has no parent with
parental rights, court may commit child to DSHS's custody; DSHS in turn
may seek adoption for child or place the child in foster care or other
suitable placement).
4 Children are eligible to receive either Title II Social Security
Administration (SSA) benefits (based on the death or disability of a
parent), or Title XVI Supplemental Security Income (SSI) benefits (based
on the child's own disability), or both.
5 Section 405(j) authorizes the appointment of a representative
payee to receive SSA benefits under Title II. The appointment of a
representative payee to receive SSI benefits under Title XVI is also
authorized. 42 U.S.C. § 1383(a)(2)(A)(ii).
6 The Act prohibits the appointment of a creditor as representative
payee except, inter alia, where the creditor is a relative or legal
guardian of the beneficiary, or the creditor is a licensed state
facility. 42 U.S.C. § 405(j)(2)(C)(i)(III); 42 U.S.C. §
1383(a)(2)(B)(iii).
7 The only exception to this practice occurs when DSHS receives a lump
sum payment of SSI benefits of over six times the monthly benefit amount.
Since October 1996, these lump sum payments have been deposited by the
Administration directly into a dedicated account at a local bank. These
funds cannot be used for basic foster care expenses, and can be expended
only for special needs, primarily related to a child's impairment. Prior
to October 1996, these funds were used to reimburse Children's for past
foster care expenses.
8 Prior to October 1996, some dedicated accounts as well as subsidiary
accounts were spent down by reimbursing Children's for previous basic care
expenditures. In addition, the practice of "account sweeping" sometimes
results in DSHS's taking all of a child's Social Security funds and
applying those funds to accumulated (past) reimbursable foster care
expenses.
9 The actual number of class members cannot be determined from records
available to DSHS. Based on available records there are 7,798 class
members dating back to July of 1991. According to the trial court, "the
claims of the class extend back 18 years plus one year for a total of 19
years back from the filing of the plaintiffs' action, i.e. to 1979."
Court's Findings of Fact on Order of Remand from Supreme Court at 18.
10 The federal code provides, in pertinent part,
The right of any person to any future payment under this
subchapter shall not be transferable or assignable, at law or
in equity, and none of the moneys paid or payable or rights
existing under this subchapter shall be subject to execution,
levy, attachment, garnishment, or other legal process, or to
the operation of any bankruptcy or insolvency law.
42 U.S.C. § 407(a). This section was made applicable to Title XVI
benefits by 42 U.S.C. § 1383(d)(1).
11 The trial court found "[f]or the sole purpose of
obtaining reimbursement for foster care costs, DSHS applies to the
Social Security Administration to be appointed representative payee for
all children in foster care who are eligible for social security
benefits." Clerk's Papers (CP) at 623 (Trial Court's Mem. Op. (Sept. 29,
1998) at 3) (emphasis added).
12 DSHS forecasted it would receive $6.733 million from such
reimbursement, or fully 18 percent of the state's contribution to the
foster care budget of $37 million, for fiscal year 2000. CP at 1899,
1911 (Trial Court's Findings of Fact on Order of Remand, Exs. B, F).
13 DSHS's actual practice, as described by its Office Chief for the Office
of Federal Funding in the Division of Program and Policy for the
Children's Administration, is:
to apply to the Social Security Administration (SSA) to be the
Representative Payee for social security monies whenever a
child is placed in foster care. If SSA chooses to make DCFS
[Division of Children and Family Services] the Representative
Payee, the actual checks are sent to the Department's Office of
Financial Recovery and the money is then transferred to a
suspense account in the Department's Office of Accounting
Services. This money is used to reimburse the
Department for monthly foster care expenses, including
food, clothing, shelter and other personal or medical expenses
as governed by the Code of Federal Regulations. Excess money
is placed in trust accounts which bear interest and the
interest is reported to SSA.
CP at 120 (Aff. of Richard Anderson) (emphasis added).
14 Apparently DSHS is not the representative payee for Danny
Keffeler, the class representative. Keffeler's grandmother apparently
remained his representative payee, despite DSHS's zealous efforts to
remove her. Br. of Appellants at 1-4. This fact is of some interest in
light of King, because the King court found that with
respect to those mental health patients for whom the state was
not the representative payee, the state's attempts to reach the
SSA benefits did constitute "other legal process" and was
preempted by § 407(a). King v. Schafer, 940 F.2d 1182, 1185
(8th Cir. 1991). We doubt the King court's distinction is
internally consistent but refrain from entertaining those doubts, as it
does not further the analysis on this point.
15 That policy finds its statutory expression in RCW 74.13.060:
The secretary [of DSHS] or his designees or delegatees
shall be the custodian without compensation of such moneys and
other funds of any person which may come into the possession of
the secretary during the period such person is placed with the
department of social and health services pursuant to chapter
74.13 RCW. As such custodian, the secretary shall have
authority to disburse moneys from the person's funds for the
following purposes only and subject to the following
limitations:
(1) The secretary may disburse any of the funds belonging
to such person for such personal needs of such person as the
secretary may deem proper and necessary.
(2) The secretary may apply such funds against the amount
of public assistance otherwise payable to such person. This
includes applying, as reimbursement, any benefits, payments,
funds, or accrual paid to or on behalf of said person from any
source against the amount of public assistance expended on
behalf of said person during the period for which the benefits,
payments, funds or accruals were paid.
16 The code states, in pertinent part, that:
(1) If a child in foster care is entitled to financial benefits
the income received shall be used on behalf of the child to
help pay for the cost of the foster care received . . . .
(a) Income includes SSI, RSDI, veteran's benefits,
railroad retirement benefits, inheritances, or any other
payments for which the child is eligible, unless specifically
exempted by the terms and conditions of the receipt of the
income. . . .
. . . .
(2) Any person, agency, or court which receives any
payments on behalf of a child in foster care shall remit such
payments to the office of support enforcement, in accordance
with WAC 388-70-082.
Former WAC 388-70-069(1)(a), (2).
Oct. 2001 IN RE GUARDIANSHIP ESTATE OF KEFFELER (dissent) 1
Cause No. 67680-1
BRIDGE, J. (concurring in part/dissenting in part) - I agree with the
majority that the Washington State Department of Social and Health
Services (DSHS) impermissibly used social security funds to reimburse
itself for past due foster care payments. However, the
majority goes too far in concluding that any use of social
security funds by DSHS violates the antiattachment rule. Under a fair
reading of the controlling federal statute and regulatory authority, DSHS
is entitled to use the funds to pay for current maintenance
costs, provided that any special needs of the children are satisfied
first.
The federal law governing the appointment of representative payees
and the use to which funds received on behalf of beneficiaries can be put
is 42 U.S.C. § 405(j). RCW 74.13.060 allows DSHS to become the custodian
(i.e. representative payee) "without compensation" of social security
funds /1 payable to foster children:
The secretary or his designees or delegatees shall be the
custodian without compensation of such moneys and other funds
of any person which may come into the possession of the
secretary during the period such person is placed with the
department of social and health services pursuant to chapter
74.13 RCW.
Tracking federal law, state law provides that once DSHS becomes the
custodian ("representative payee") of the funds, DSHS is permitted to
spend these funds only for the child's "personal needs" or to
reimburse the state for "the amount of public assistance otherwise
payable to" the child during the period for which the benefits were paid.
RCW 74.13.060(1), (2). Former WAC 388-70-069 (1983), repealed by
01-08-047 (Apr. 30, 2001), specifically allowed the social security
funds to be used on behalf of the child to help defray the state's cost
for foster care:
(1) If a child in foster care is entitled to financial
benefits the income received shall be used on behalf of the
child to help pay for the cost of the foster care received,
except for resources held in trust for an American Indian child
according to provisions in WAC 388-28-650.
(a) Income includes SSI, RSDI [retirement survivors
disability insurance], veteran's benefits, railroad retirement
benefits, inheritances, or any other payments for which the
child is eligible, unless specifically exempted by the terms
and conditions of the receipt of the income.
The majority concludes that "If DSHS's reimbursement scheme is that
of a creditor, the antiattachment provisions of § 407(a) [of the Social
Security Act] apply and DSHS's cost recovery policy runs afoul of a
federal statute which preempts state law." Majority at 23. This
statement is misleading in its scope. The Social Security Act, chapter
7, 42 U.S.C., does not rule out appointment of a creditor as
representative payee in all situations. One of the exceptions to the
antiattachment provisions of the act allows the appointment of "an
individual who is determined by the Commissioner . . . to be acceptable
to serve." 42 U.S.C. § 405(j)(2)(C)(iii)(V). Thus, even if DSHS is
characterized as a creditor, the commissioner of social security may
find, and here has found, DSHS acceptable to serve as a
representative payee for these children in foster care. /2 The
determination of the Social Security Act should control. The real issue,
in my view, is the conflict of interest that arises when DSHS serves both
as a representative payee and as a creditor for the same funds
(which funds belong to the eligible child, the beneficiary) and the
permissible uses of such funds.
Federal regulations not only govern the selection of a representative
payee, but also define the lawful uses to which a representative payee may
put the social security funds entrusted to its care. Specifically, a
representative payee has a responsibility to "[u]se the payments he or she
receives only for the use and benefit of the beneficiary in a manner and
for the purposes he or she determines, under the guidelines in this
subpart, to be in the best interests of the beneficiary." 20 C.F.R. §
416.635(a). Current maintenance, including the cost of food,
shelter, clothing, medical care, and personal comfort items is deemed to
be for the use and benefit of the beneficiary. 20 C.F.R. § 416.640(a).
An example in the regulations clarifies the definition of "use and
benefit" in the context of payments to an institution for current
maintenance of the beneficiary and indicates a clear intent that special
needs of the beneficiary should take precedence over general maintenance
or reimbursement for care. /3 The example states that the representative
payee should deduct the cost of special needs items from the amount paid
to the institution, and also makes clear that any remaining money may be
used for current maintenance.
The majority relies on four federal cases to assert that DSHS may
not use social security funds for current maintenance: Philpott v.
Essex County Welfare Bd., 409 U.S. 413, 93 S. Ct. 590, 34 L. Ed. 2d
608 (1973) (holding that New Jersey may not attach social security
benefits to reimburse itself for welfare benefits); Bennett v.
Arkansas, 485 U.S. 395, 108 S. Ct. 1204, 99 L. Ed. 2d 455 (1988)
(holding that Arkansas may not attach federal benefits for care and
maintenance of prisoners); Brinkman v. Rahm, 878 F.2d 263 (9th
Cir. 1989) (forbidding Washington State from attaching federal benefits
for the care of involuntarily committed mental health patients); and
Crawford v. Gould, 56 F.3d 1162 (9th Cir. 1995) (holding that
California may not deduct the costs of caring for psychiatric inpatients
from a trust account to which social security payments were deposited).
These cases are readily distinguished from the DSHS practice at
issue here. Critically, none of the cited federal cases involve the
expenditure of social security benefits by a state that was designated as
a representative payee. In fact, the class certified in
Brinkman specifically excluded patients for whom the state
served as representative payee. Brinkman, 878 F.2d at 264. As
explained above, under federal regulations a representative payee has
considerable authority to spend the funds entrusted to its control,
provided the expenditures are for the best interests of the beneficiary.
20 C.F.R. § 416.635(a).
Thus, the issue as I see it is not whether DSHS may spend the funds
for current maintenance, provided it gives priority to special needs of
the foster children, but whether it may use those funds to reimburse
itself for past maintenance or for its own administrative
services, such as mileage reimbursements for social workers. The fact
that DSHS in the context of reimbursing itself for past care of
the beneficiary puts its need for reimbursement ahead of the needs of the
foster children further demonstrates the fundamental conflict between its
roles as representative payee and creditor.
The federal mandate to give priority to the special needs of the
beneficiary directly conflicts with the express policy of DSHS to
conserve the expenditure of public assistance funds on foster care and
thereby lighten the burden on the taxpayer. See chapter 74.20
RCW (Support of Dependent Children):
It is the responsibility of the state of Washington through the
state department of social and health services to conserve the
expenditure of public assistance funds, whenever possible, in
order that such funds shall not be expended if there are
private funds available or which can be made available by
judicial process or otherwise to partially or completely meet
the financial needs of the children of this state.
RCW 74.20.010. The state aggressively pursues this recovery policy, not
only seeking money for current maintenance but also sweeping lump sum
payments into the treasury to prevent a child's account from exceeding
the $2,000 resource limit imposed by the SSA.
In order to provide states with an incentive to provide financial
assistance to needy individuals awaiting disposition of their SSI
applications, Congress provided that back payments made at the time the
secretary makes the first payment would be exempt from the
general antiattachment rule. 42 U.S.C. § 1383(g)(2). However, a recent
case held that a retroactive payment after a period of denial is not the
same as an initial payment and therefore does not fall under the
exemption to the antiattachment rule that is found in 42 U.S.C. §
1383(g)(2). Catarine v. Wing, 710 N.Y.S.2d 569, 274 A.D.2d 310
(2000). Accord Conaway v. Soc. Servs. Admin., 298 Md. 639, 471
A.2d 1058 (1984) (holding that the use of conserved social security
benefits to reimburse the cost of past foster care is prohibited). Thus,
the lump sums that DSHS "sweeps" into the treasury to reimburse the state
for past foster care expenses cannot fall under the initial payment
exception. There is no other exception which would validate DSHS's
action.
This sweeping of lump sums not only is unauthorized under any
exception to § 407(a), but also often constitutes double reimbursement.
The sums "swept" to the treasury frequently reimburse the state for
amounts already paid by the federal government under Temporary Assistance
for Needy Families or paid by parental support. DSHS apparently keeps no
accurate record to allow tracing of the "swept" sums.
Under § 407(a), rights to future payments are not transferable or
assignable.
The right of any person to any future payment under this
subchapter shall not be transferable or assignable, at law or
in equity, and none of the moneys paid or payable or rights
existing under this subchapter shall be subject to execution,
levy, attachment, garnishment, or other legal process, or to
the operation of any bankruptcy or insolvency law.
42 U.S.C. § 407(a). DSHS receives the payments not on its own behalf,
but on behalf of the beneficiaries, and is not permitted to assign
pending (i.e., future) payments to the reimbursement of its expenditures
on behalf of the foster children. Where an agency puts reimbursement to
itself ahead of the best interests of the child, ignoring the policy
expressed in the federal regulations to prioritize the child's special
needs, it effectively transfers the payments to its own use. This
transfer from the state in its role as representative payee to the state
in its role as guardian of the public purse is contrary to § 407(a).
Where the agency pursues that policy to the extent of double
reimbursement, the conflict of interest is egregious.
To the extent that RCW 74.20A.010 encourages the state to "sweep" a
child's benefits into the treasury to repay past-due foster care, I agree
with the majority that the statute is incompatible with § 405(j), which
forbids any "substantial conflict of interest" between the payee. U.S.C.
§ 405(j)(2)(C)(iv)(II). See also 42 U.S.C. § 405(j)(1)(A)
(mandating removal of a representative payee if the commissioner or a
court of competent jurisdiction later determines that it has misused any
individual's benefit.) It is also incompatible with § 407(a), which
prevents transfer of the benefits. Under the Supremacy Clause of the
United States Constitution, federal law takes precedence. Thus, any use
of social security funds for purposes other than current care and
maintenance is unlawful, as is giving priority to maintenance over the
children's special needs.
Remedies
I agree with the majority that in relying on RCW 74.20A.010, DSHS has
given preference to the interests of the taxpayer over the special needs
of foster children and has acted as creditor by reimbursing itself for
past payment of foster care, directly contrary to §§ 405(j) and 407(a) of
the Social Security Act. But for reasons already set forth in this
opinion, I would remand this matter to the trial court with directions to
modify the injunction to prevent DSHS from using social security payments
to reimburse the costs of past due foster care or other
expenses not directly related to current maintenance, and to require DSHS
give special needs a higher priority than current maintenance. On
remand, the trial court should order DSHS to produce an accounting of
social security fund disbursements for all children that had been in the
custody of DSHS for the purpose of receiving foster care, establish
restitution of social security funds used to reimburse DSHS for past
due foster care expenses, other expenses not directly related to
current maintenance, and unmet special needs, and determine
appropriate attorney fees.
I thus respectfully concur in part and dissent in part from the
majority opinion.
GUY, and IRELAND, JJ., concur
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1 Social Security (SSA) and Supplemental Security Income (SSI)
benefits.
2 If the commissioner may find an individual acceptable to
serve, he may presumably find an entity acceptable to serve. This
interpretation is reinforced by the fact that the commissioner routinely
appoints entities such as DSHS to serve as representative payees.
3 Example: An institutionalized beneficiary is
entitled to a monthly Social Security benefit of $320. The
institution charges $700 a month for room and board. The
beneficiary's brother, who is the payee, learns the beneficiary
needs new shoes and does not have any funds to purchase
miscellaneous items at the institution's canteen.
The payee takes his brother to town and buys him a
pair of shoes for $29. He also takes the beneficiary to see a
movie which costs $3. When they return to the institution, the
payee gives his brother $3 to be used at the canteen.
Although the payee normally withholds only $25 a
month from Social Security benefit for the beneficiary's
personal needs, this month the payee deducted the above
expenditures and paid the institution $10 less than he usually
pays.
The above expenditures represent what we would
consider to be proper expenditures for current maintenance.
20 C.F.R. § 404.2040(2)(b).