Appeal from the United States District Court for the Northern District of Illinois, Eastern Division - No. 75 C 2156. JOSEPH SAM PERRY and ALFRED Y. KIRKLAND, Judges.
Cummings, Pell and Bauer, Circuit Judges.
This consolidated appeal is from the entry of a preliminary injunction by Judge Perry, sitting as emergency judge, as modified by Judge Kirkland, to whom the case was assigned for trial. The three named plaintiffs filed this complaint on their own behalf and on behalf of those similarly situated seeking to enjoin the defendants from reducing their food stamp benefits on the basis of a change to the "income method" of calculating food stamp benefits until the defendants provide them with an adequate advance notice of the proposed reduction, "including a full statement of all income, and deductions therefrom, taken into account in determining net food stamp income, which determines the monthly cost of food stamps and benefits to plaintiff class." The class consists of all persons in Illinois who were mailed a Notice of Reduction of Food Stamp Benefits and accompanying card pursuant to which their food stamp benefits for July 1975 and subsequent months were being reduced.
Under the Food Stamp Act (7 U.S.C. §§ 2011-2026), a household eligible to participate in the Food Stamp program may purchase stamps at a discounted value, which may then be used to purchase food at retail stores. The difference between the value of the stamps received (the coupon allotment) and the cost of the stamps to the recipient is a bonus (bonus value) providing increased food purchasing power.
Under 7 U.S.C. § 2014(b), the Secretary of Agriculture is required to establish uniform national standards of eligibility for participation by households in the Food Stamp program, and no plan of operation submitted by a state agency is to be approved unless the standards of eligibility meet those established by the Secretary. The Secretary's regulations provide the amount of a household's food stamp benefits be determined under the "income" method. See 7 CFR § 271.3. Through its Department of Public Aid, the State of Illinois participates in the federal Food Stamp Program. Prior to 1975, the defendants had calculated the bonus value of the food stamps on a percentage of the food allowance for an individual household; commencing on July 1, 1975, defendants changed to the income method as required by 7 CFR § 271.3 (c). Under the income method, the bonus value is determined on the basis of "net food stamp income," which is defined as the household's gross income (7 CFR § 271.3 (c)(1)) less certain deductions, such as medical expenses in excess of $10 a month, federal and state taxes, school tuition and fees, etc. See 7 CFR § 271.3(c)(1)(iii). Once the net food stamp income is calculated, the bonus value is determined according to the size of the household from a chart published by the United States Department of Agriculture (Complaint Exhibit D).
As a result of the conversion to the income method for determining the purchase price for food stamps, thousands of persons, including the three named plaintiffs, will be required to pay more for food stamps and therefore receive less bonus value for the same coupon allotment. The named plaintiffs and members of the class were informed of the change in method and reduction in benefits when defendants mailed them a Notice of Reduction of Food Stamp Benefits accompanied by a card indicating the amount of the reduction.
The Notice of Reduction contained a brief statement that because of a federally mandated change in the method of calculating food stamp benefits, the recipient's bonus value would be reduced; the accompanying card contained three figures, representing the recipient's income, the bonus value under the old method and the bonus value under the new method. Nothing sent to the recipient explained how the income method worked. The recipients were not told that the income figure on the card was net food stamp income, not gross income. Nor did the notice explain how that figure was calculated. In addition, the notice did not reveal the underlying data which the defendants used in determining net food stamp income. However, the notice did offer to provide, upon request, a detailed calculation under the income method. Recipients were also told they could appeal in writing to their local office within 60 days and that benefits would not be reduced if the appeal was filed within ten days.
The gravamen of plaintiffs' complaint is that under federal regulations and the due process clause of the Fourteenth Amendment, plaintiffs are entitled to adequate notice from defendants prior to any reductions in their benefits. Plaintiffs claim that the notice of reduction and accompanying card are deficient because they do not provide sufficient information to enable a member of plaintiff class to determine whether an error has been committed. Plaintiffs seek notices that will provide them with the reasons for the proposed agency action, including the foundation upon which the "income" figure is predicated and the deductions which are allowed by law. Such notices would include an explanation of how net food stamp income is calculated, recitation of the specific items of income and deduction used in the recipient's case and a chart enabling the recipient to determine whether he is receiving the amount of benefits to which he is entitled.
In granting a preliminary injunction after hearings on July 3 and 7, 1975, the district court found that the form Notice and accompanying card sent out by defendants do not contain information with regard to the method of calculating income or the information necessary to make that calculation or a chart setting forth the allotment and purchase prices for different size households based on their food stamp income. The court also found that plaintiffs would adequately protect the interests of the class of persons receiving such Notice and card and that injunctive relief was appropriate with respect to the class as a whole.
In its conclusions of law, the district court held that the form Notice and accompanying card were contrary to the requirements of 7 CFR § 271.1(n)*fn1 and of the due process clause. Citing Vargas v. Trainor, 508 F.2d 485, (7th Cir. 1974), certiorari denied, 420 U.S. 1008, 43 L. Ed. 2d 767, 95 S. Ct. 1454, the court concluded that plaintiffs were likely to prevail on the merits of their claim. In balancing the equities, the court found that the harm to the plaintiffs outweighed any administrative inconvenience that would be experienced by the defendants. Consequently, the court entered a preliminary injunction enjoining defendants from reducing the food stamp benefits of the members of the plaintiff class pursuant to the form Notice and accompanying card "until such time that the members of the plaintiff class are provided with adequate advance notice of the reasons for the proposed reduction, including a full statement of all income, and deductions therefrom, taken into account in determining net food stamp income." Defendants were ordered to reinstate the food stamp benefits of the members of plaintiff class to the original benefit level. On July 15, 1975, we refused to stay this preliminary injunction.
After the entry of the July 7, 1975, preliminary injunction, the defendants promulgated Illinois Department of Public Aid Official Bulletin 75.6 (O.B. 75.6), dated August 5, 1975, superseding the official bulletin which was in effect when the preliminary injunction was entered, in an effort to comply with the preliminary injunction. Under O.B. 75.6, defendants' practice would be to "conduct a face-to-face interview with each food stamp recipient [being put on the income method for determining food stamp income], securing current up-to-date income and expense information from each food stamp recipient and calculating food stamp income under the new method" (September 15, 1975, Emergency Motion for Stay Pending Appeal, p. 3). Recipients would complete a two-page application for food stamps (DPA 683) requiring answers to 20 questions. Although an executed Form 683 contains information necessary for defendants to compute eligibility for food stamps and net food stamp income, the recipients are never told which items of information from Form 683 are taken into account as either income or deductions therefrom in order to calculate net food stamp income. After the recipients leave the case-workers' office, the case-workers compute income and deductions to arrive at a net food stamp income figure. This is done on defendants' Form DPA 683B entitled "Determination of Monthly Food Stamp Eligibility Income." O.B. 75.6 further provides that members of the plaintiff class whose food stamp benefits would be reduced based on the information obtained from the interview were to be mailed a Form DPA 157 containing the following statement:
"Your eligibility for food stamps has been redetermined and your net food stamp income has been computed. Your purchase requirement will be based on the net income basis of issuance as required by federal regulation (7CFR 271.3)."
The DPA 157 also advised the recipients that they could meet with a representative of defendants to discuss the reduction and, if dissatisfied by this ...