Before Tone, Circuit Judge, Wisdom, Senior Circuit Judge,*fn* and Bauer, Circuit Judge.
The principal issue before us is whether the Eleventh Amendment bars certain claims of recipients of Aid to Families with Dependent Children against a county welfare department. We are thus required to apply Edelman v. Jordan, 415 U.S. 651, 94 S. Ct. 1347, 39 L. Ed. 2d 662 (1974), and Mt. Healthy City School District v. Doyle, 429 U.S. 274, 97 S. Ct. 568, 50 L. Ed. 2d 471 (1977).
Plaintiffs brought this action under 42 U.S.C. § 1983 on behalf of themselves and all Elkhart County welfare recipients entitled to court-ordered child support payments who did not receive those payments because of the Elkhart County Department of Public Welfare's practice of retaining those payments as reimbursements for amounts already paid to the welfare recipients as AFDC under 42 U.S.C. §§ 601-609.*fn1
Plaintiffs assert that the department's practice violated the Equal Protection Clause of the Fourteenth Amendment and the directives of the Department of Health, Education and Welfare's Handbook of Public Assistance, Part IV § 3124 (1966). We find it unnecessary to evaluate plaintiffs' equal protection argument because the defendants' policy is in violation of the handbook, which has the status of an HEW regulation, Worrell v. Sterrett (1968-1971 Transfer Binder), Pov.L.Rep. (CCH) P 10,575 (N.D.Ind.1969); Cf. King v. Smith, 392 U.S. 309, 318 n.14, 319 n.16, 331 n.31, 88 S. Ct. 2128, 20 L. Ed. 2d 1118 (1968), and thus the force and effect of law. The relevant part of § 3124 reads as follows:
Some States, because of . . . percentage reductions . . . make payments that do not meet need in full according to agency standards, but under the plan allow income of the recipient to be applied to make up the difference between the amount of assistance determined to be needed and the payment. Where this method (i. e., payment to the agency) is used the support payment received by the agency must be made available to the family to the extent of the difference between determined need and payment. The part of the support payment that exceeds such difference must be treated as a refund.
Plaintiffs originally sought both damages and declaratory and injunctive relief against the continued enforcement of this policy. Both sides agree that subsequent to the filing of this action the passage of Title IV-A of the Social Security Act, 42 U.S.C. § 602(a)(28) (1974), and its implementation by Ind.Code Ann. §§ 12-1-6-1, Et seq. (Burns), have rendered the injunctive and declaratory relief unnecessary. Only the claim for damages remains.
The trial court granted the defendants' motion for summary judgment, holding that the claims for equitable and declaratory relief were mooted by the subsequent passage of Title IV-A of the Social Security Act, and that the plaintiffs failed to state a claim upon which relief can be granted because they were not harmed by the defendants' acts and therefore were not entitled to damages. The court also denied certification of the class because the named plaintiffs had suffered no harm and therefore were not representative of the purported class. Only damages and the propriety of a class action remain at issue. We conclude that defendants have failed to show the damages are not recoverable and therefore reverse the judgment. We also direct reconsideration of the class issue.
Before reaching the Eleventh Amendment issue we must consider whether plaintiffs' claims for money damages should otherwise survive the defendants' motion for summary judgment.
It appears from the summary judgment papers that, contrary to the District Court's view, the plaintiffs have suffered harm. Plaintiffs had unmet needs (see note 1, Supra ) in the same periods that the county department received and kept support payments made on their behalf. Section 3124 of the HEW Handbook explicitly commands that "the support payment received by the agency must be made available to the family to the extent of the difference between determined need and payment (I. e., unmet needs)." The inescapable conclusion is that because of the department's policy, plaintiffs did not receive as much total income as they would have if the department had complied with federal regulations. Had those regulations been followed, plaintiffs would have received their AFDC and additional benefits.*fn2
We also disagree with the District Court's conclusion that "(i)n accepting and using the child support payments of Plaintiffs . . . the Elkhart County Department of Public Welfare acted in accordance with the terms of the court orders." The orders require that payment be made "to the Elkhart Co. Dept. of Public Welfare to partially reimburse said Department for expenses in connection with and maintenance of said child." Admittedly, this order is subject to more than one interpretation. Partial reimbursement may refer to the entire amount of each support payment or to only so much of each payment as exceeds the family's unmet needs.
We adopt the latter interpretation. When confronted with a court order subject to two possible interpretations, one in compliance with applicable federal regulations, the other in violation of those regulations, we must presume that the ...