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Brown v. Stanton


decided: January 30, 1980; As Amended February 29, 1980.


Appeal from the United States District Court for the Southern District of Indiana. No. IP 78-773-C -- James E. Noland, Judge .

Before Cummings and Pell, Circuit Judges, and Grant, Senior District Judge.*fn*

Author: Grant

This case involves a husband and wife who are no longer residing together due to a medical disability which requires the long-term institutionalization of one of the spouses. The court below ruled that, in computing the Medicaid benefits payable to the institutionalized spouse, the State of Indiana may consider the resources of the noninstitutionalized spouse as available to the institutionalized spouse provided the state conducts individualized fact findings regarding the financial needs of the noninstitutionalized spouse before determining what is potentially available. The gravamen of this appeal is that the district court's judgment continues to permit the State of Indiana to enforce the spousal responsibility of a noninstitutionalized spouse through the indirect method of denying the institutionalized spouse his or her full Medicaid benefits, thereby raising the specter of eviction if spousal contribution is not forthcoming. Appellants suggest the proper procedure to enforce spousal responsibility is for the state to provide full benefits to the institutionalized spouse and to then initiate direct action against the unwilling noninstitutionalized spouse under a state spousal support statute.

This class action, brought under 42 U.S.C. § 1983,*fn1 was filed on behalf of James Brown, an incompetent Medicaid recipient, by his guardian, together with his noninstitutionalized spouse. Elizabeth Brown, seeking declaratory and injunctive relief against regulations adopted as part of the Indiana State Medicaid Plan, I.C. 12-1-7-14.9; 42 U.S.C. § 1396 et seq. As a Medicaid recipient, Mr. Brown's expenses at his nursing home were partially paid by the Indiana Department of Public Welfare and the patient himself. Additionally, however, the defendant welfare officials had certain policies and regulations which required that Mrs. Brown pay a certain amount each month over to the nursing home. Her assigned amount was determined in accordance with a state-wide, uniformly applied mathematical formula that did not take into account her own individual financial needs. She was obliged to pay the money each month and, if she did not, the nursing home would be faced with a non-payment situation. Under the Indiana plan, Medicaid funds would not be used to pay any part of the amount assigned to Mrs. Brown. Apparently she was either unable or unwilling to pay her assigned amount to the nursing home. Defendants nevertheless deemed part of Mrs. Brown's income and resources to be "available", within the meaning of 42 U.S.C. § 1396a(a)(17)(B),*fn2 to the Medicaid recipient, Mr. Brown.

The Browns filed this class action to challenge the deeming regulations of defendants. The district court conducted a trial on December 20, 1978, and issued a Memorandum Opinion on February 16, 1979. The court certified the class and declared the challenged regulatory scheme*fn3 to be contrary to 42 U.S.C. § 1396a(a)(17) and thus invalid under the Supremacy Clause. The court stated: "By this ruling the court does not suggest that the state may not seek contributions from a noninstitutionalized spouse. . . . It is the arbitrariness and irrebuttable presumptiveness of the established limits as applied to any given case that renders the challenged state regulations invalid". p. 6 of Mem.Op. The court held that to comply with § 1396a(a)(17) of the Social Security Act, the Indiana welfare regulations must provide for a factual determination in each case that gives "due consideration to the individual obligations and particular needs of each spouse and family",*fn4 citing Herweg v. Ray, 443 F. Supp. 1315, 1319 (S.D.Iowa 1978), appeal pending. After ruling on the merits, the court denied the plaintiffs' request for attorney fees pursuant to 42 U.S.C. § 1988.*fn5

Plaintiffs contend on appeal that (1) the lower court's ruling on the merits, although an improvement in the law, has erroneously stopped short of the required abolition of all Medicaid deeming, and that (2) plaintiffs have erroneously been denied attorney fees.

I Medicaid Deeming

The section of the Social Security Act which is in issue, 42 U.S.C. § 1396a(a) (17), provides in part:

(a) A state plan for medical assistance must

(17) include reasonable standards . . . for determining eligibility for and the extent of medical assistance under the plan which (A) are consistent with the objectives of this subchapter, (B) provide for taking into account only such income and resources as are, as determined in accordance with standards prescribed by the Secretary, available to the applicant or recipient . . ., (C) provide for reasonable evaluation of any such income or resources, and (D) do not take into account the financial responsibility of any individual for any applicant or recipient of assistance under the plan unless such applicant or recipient is such individual's spouse or such individual's child . . .. (Emphasis supplied.)

The crux of the problem is the apparent conflict between subparts (B) and (D) of Section 1396a(a)(17). Subpart (B) provides that only income and resources available to the Medicaid recipient shall be considered while subpart (D) suggests that income and resources of spouses can be considered.

At this juncture we should set out (1) plaintiffs' definition of "deeming" and (2) this court's perception of the levels of inquiry that confront courts faced with situations similar to the case at bar.

(1) Plaintiffs argue that deeming occurs either (a) where a participating state refuses to individualize the spousal responsibility, or (b) where a participating state punishes the institutionalized Medicaid recipient by depriving that person of his or her benefits because the spouse refuses to pay the assigned share of the costs of institutionalization.

(2) The first level of inquiry would be to determine the amount of income and resources belonging to the noninstitutionalized spouse that is potentially available for the support of the institutionalized spouse. This determination must include consideration of factors such as living expenses that do not proportionately decline due to the absence of the institutionalized spouse. The need for an individualized factual determination, rather than an arbitrary irrebuttable presumption, was correctly expressed in the court below. In suggesting a scheme considered acceptable, the court stated: "The contemplated scheme would allow the state to require proof of the particular needs and individual obligations of each spouse and family, and would then deduct these verified sums from the existing resources and income to determine the amount, if any, that is reasonably available for support of the institutionalized spouse." Mem. Op. p. 7. The district court's approach to this first level of inquiry is most equitable and is affirmed without change. However, we must agree with plaintiffs' contention that the lower court's ruling fell short of the abolition of an irrebuttable presumption contained in what we perceive as the second level of inquiry, i. e., whether the income and resources of the noninstitutionalized spouse that have been determined to be potentially available are actually received by the institution on behalf of the disabled spouse. The resulting question then arises: How shall the State of Indiana enforce upon an unwilling spouse the responsibility to contribute?

This second level of inquiry has neither been addressed by this court nor by any other circuit,*fn6 but several district courts have confronted the deeming issue. In Burns v. Vowell, 424 F. Supp. 1135 (S.D.Tex.1976), a spouse required 24-hour care in a nursing home. Plaintiff spouses challenged state regulations that included an irrebuttable presumption that income over a certain level was available to the institutionalized spouse without considering the actual needs or actual contribution of the ineligible spouse. The Burns court defined deeming as "a bureaucratic decision to deem a portion of the income of the non-institutionalized spouse available to the institutionalized spouse". 424 F. Supp. 1135, 1139. In granting a preliminary injunction,*fn7 the court ruled that subparts (B) and (D) of Section 1396a(a)(17) prohibited deeming, and addressed the level one inquiry by stating:

Thus, while the income of a noninstitutionalized spouse can be considered, it must be done through the application of reasonable standards and not on the basis of an irrebuttable presumption that the money is available for the care and support of the institutionalized spouse. . . . . Thus where nursing home care is made available to eligible recipients, their spouses cannot "be held accountable beyond their means'.

424 F. Supp. 1135, 1141. The Burns court commented on the level two inquiry by stating: "The Texas relative responsibility law applies in this case but only insofar as it allows the state "to demand reasonable payment from a spouse or parent who is able.' "*fn8 Id. It is noteworthy that in that court's preliminary injunction, the state welfare agency was ordered to pay, pendente lite, the full amount of the cost of the nursing care of the institutionalized spouse.

In Franssen v. Juras, 406 F. Supp. 1375 (D.Or.1975), a three-judge district court faced a similar challenge by a class of plaintiffs wherein one spouse was an institutionalized Medicaid recipient and the other a noninstitutionalized spouse subject to state regulations that presumed the availability of income above a certain standard allowance. The Franssen court held that the state regulations were invalid as inconsistent with § 1396a(a)(17), and addressed the level two inquiry by noting that subpart (D) of § 1396a(a)(17) is:

intended to authorize a state mechanism for enforcing financial responsibility of relatives, not to permit presumptions forbidden elsewhere in the statute. Oregon until recently had such a mechanism, but it never applied to Medical Assistance and the Plaintiffs here had incomes well below the level that would have activated a demand for contribution. Nothing in our decision in this case, we should note, prevents the State from re-enacting a relative responsibility law and making it applicable to Medicaid, nor from making and enforcing regulations reasonably evaluating the income and resources actually available. We require only that such efforts to impose responsibility conform to federal law.

(Emphasis added.) 406 F. Supp. 1375, 1379.

In Manfredi v. Maher, 435 F. Supp. 1106 (D.Conn.1977), the court similarly*fn9 declared that state welfare regulations that automatically attributed income from the noninstitutionalized spouse were invalid as inconsistent with § 1396a(a)(17). The Manfredi court noted that Connecticut, as Indiana, is one of fifteen states which has elected to assess Medicaid eligibility on the basis of a historical standard, by referring to the state's medical plan which was in effect on January 1, 1972. 42 U.S.C. § 1396a(f). This has relevance in that certain 1977 regulations of the Department of Health, Education and Welfare are inapplicable to states that have exercised the § 1396a(f) option. These 1977 regulations, which apply to only 35 states, have limited any level two presumption of contribution, under the facts of Manfredi, to the first six months after the spouses cease to live together:

Where both spouses apply as aged, blind or disabled or where both spouses are SSI eligible, and cease to live together, income and resources are considered mutually available without proof of contribution for the first six months after the month they cease to live together in a common household. After that, only actually contributed income and resources may be considered in determining the eligibility or amount of assistance of either individual spouse. 42 Fed.Reg. at 2686, 45 C.F.R. § 248.3(b)(2)(i)*fn** (emphasis supplied).

435 F. Supp. 1106, 1112.*fn10 After noting that this regulation did not apply to Connecticut, the Manfredi court nevertheless held that it was unreasonable, under 42 U.S.C. § 1396a(a)(17)(C), for the state to assess the income of two persons on the theory that they maintain a single household (which is HEW's criteria for determining eligibility for and amount of SSI benefits disbursed to an elderly person), when it is a recognized fact that one member of that couple is confined to a long-term medical care facility. The court continued:

Such an assumption flies in the face of simple, economic reality, as the impoverished lifestyle of the named plaintiffs in this action clearly demonstrates. By comparison, it would be highly reasonable to treat such couples as separate individuals for Medicaid purposes;

Indeed, the existence of (Connecticut support statutes) reinforces the cases for separate individual consideration of spouses in the plaintiff class, since they provide the Commissioner with a remedy to employ in cases of unwarranted neglect, where for example, a wealthy individual refuses to support an institutionalized spouse, even though she would be financially able to do so. (Footnotes omitted.)

435 F. Supp. 1106, 1114-15.*fn11

In Gray Panthers v. Secretary, Dept. of Health, etc., 461 F. Supp. 319 (D.D.C.1978), an organization of older adults brought suit to challenge the federal regulations,*fn12 which allow the 15 states electing the § 1396a(f) option to promulgate their deeming regulations. The court held that the federal regulations were invalid as inconsistent with 42 U.S.C. § 1396a(a) (17). In interpreting the "available to the applicant" language in subpart (17)(B), the Gray Panthers court interrelated subpart (D) in a footnote:

Subpart (D) of the statute is not to the contrary. That subpart merely prohibits a state from taking into account the "financial responsibility' of anyone except spouses and parents. While it may allow a state to enforce its financial responsibility laws against a spouse or parent, this subpart does not suggest that the amount of contribution from that person should be a deemed amount. In fact, this is exactly what Congress had intended subpart (D) to mean.

The committee believes it is proper to expect spouses to support each other and parents to be held accountable for the support of their minor children and their blind or permanently and totally disabled children even though 21 years of age or older. Such requirements for support may reasonably include the payment by such relative, if able, for medical care.

S.Rep.No.404, 89th Cong., 1st Sess. 78, reprinted in (1965) U.S.Code Cong. & Admin.News, pp. 1943, 2018 (emphasis added).

461 F. Supp. 319, 322, note 5. While the court's language in this footnote refers to "the amount of contribution" and the "deemed amount", the suggestion of enforcement through state responsibility laws implies that the fact of actual contribution should not be presumed.

Finally, two cases from the District of Minnesota suggest recent support for plaintiffs' position. In Hanke v. Nyhus, 470 F. Supp. 742 (D.Minn.1979), a similar class of plaintiffs challenged state welfare rules that were construed as presuming the availability of income and resources of spouses, who are involuntarily living apart because one spouse is in a nursing home, without proof of actual contribution. The Hanke court, after noting that Minnesota, as Indiana, has taken the § 1396a(f) option, and after referring to the Manfredi, Franssen, Burns and Gray Panthers decisions, supra, held that:

defendants' policy of considering personal property owned by the spouse of an institutionalized MA applicant an available resource regardless of whether the spouse will contribute the property to the applicant's use is inconsistent with the federal statute and regulations which require that only such income and resources as are available to the applicant be considered in determining eligibility for MA benefits. This conclusion in no way affects the right of the state to pursue any claim it may have for contribution from the noninstitutionalized spouse pursuant to relative responsibility laws.

470 F. Supp. 742, 746. Nursing Home Residents' Advisory Council v. Kelly, 470 F. Supp. 747 (D.Minn.1979) was handed down the same day as the Hanke decision and the basic holding is identical except that Hanke dealt with personal property while Kelly dealt with a spouse's interest in real property.

We find that the district court cases discussed above represent the majority trend against all forms of deeming and therefore hold that administrative coercion resultant from state procedures which presume actual contribution is inconsistent with 42 U.S.C. § 1396a(a)(17). In light of the Indiana spousal support statute, I.C. 31-2-2-1,*fn13 we hold that the state welfare agency is required to make an upward adjustment in Medicaid benefits to compensate for the portion left unpaid by an unwilling spouse, and then to proceed under the above statute to seek reimbursement directly from the unwilling spouse. To hold otherwise would be to deny an eligible recipient his full benefits because of the improper action of his or her spouse. Cf. Gunn v. Toia, 45 N.Y.2d 896, 411 N.Y.S.2d 8, 383 N.E.2d 560 (N.Y.Ct.App.1979).

A further justification for our decision exists in a recently promulgated federal regulation of the Health Care Financing Administration, 42 C.F.R. § 433.135 (1978), which reads in part:

Subpart D Third Party Liability

§ 433.135 Third party liability; determination of liability and collection procedures.

(a) Basis and purpose. This subpart implements sec. 1902(a)(25) and 1903(d) (2) of the Act by setting forth State plan requirements concerning

(1) The legal liability of third parties to pay for services provided under the plan; and

(2) Treatment of reimbursements by a third party to a State for medicaid furnished under the plan.

(b) Definitions. For purposes of this subpart, "third party" means any entity that is or may be liable to pay all or part of the medical cost of injury, disease, or disability of an applicant or recipient of medicaid.

(c) Requirements for State plans. A State plan must provide that requirements of paragraphs (d)-(g) of this section are met.

(d) Determining liability of third parties. The medicaid agency must take reasonable measures to determine the legal liability of third parties to pay for services under the plan.

(e) Payment of claims. (1) If the agency has determined that

(i) Third party liability exists for part or all of the services provided to a recipient, and

(ii) The third party will make payment within a reasonable time, the agency must pay only the amount, if any, by which the allowable claim exceeds the amount of the liability.

(2) The agency may not withhold payment for services provided to a recipient if third party liability or the amount of liability cannot be determined, or payments will not be available, within a reasonable time.

(f) Reimbursement for medicaid. The agency must seek reimbursement for medicaid to the extent of a third party's legal liability if

(1) Liability is determined after medicaid is provided to an individual; or

(2) Liability was determined before providing medicaid but the agency failed to make use of it.

We construe § 433.135(e)(2) as supporting our holding that the Indiana welfare agency must make an upward adjustment in the institutionalized spouse's Medicaid benefits if a contribution is not made by an able but unwilling spouse within a reasonable time. In addition, we construe § 433.135(f) as supporting, our holding that the proper method of enforcing spousal responsibility is through the state spousal support statute.*fn14

II Attorney Fees

The question is whether the district court erred in failing to award plaintiffs attorney fees under 42 U.S.C. § 1988, which reads in part:

In any action or proceeding to enforce a provision of sections 1981, 1982, 983, 1985, and 1986 of this title, title IX of Public Law 92-318, or in any civil action or proceeding, by or on behalf of the United States of America, to enforce, or charging a violation of, a provision of the United States Internal Revenue Code, or title VI of the Civil Rights Act of 1964, the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs.

As amended Pub.L. 94-559, § 2, Oct. 19, 1976, 90 Stat. 2641.

The court below denied the request, stating:

Plaintiffs' complaint was predicated upon constitutional claims under 42 U.S.C. § 1983 as well as upon a meritorious statutory claim that ultimately became the sole basis for the Court's decision, the Court having never reached the plaintiff's constitutional issues. . . . And most importantly, the plaintiffs were well acquainted with the numerous published precedents that had dealt with issues identical to those presented herein solely upon the plaintiffs' well-pleaded statutory claim. Under these circumstances the Court is unable to conclude that this action is properly classified as one to enforce the civil rights acts within the meaning and purpose of section 1988.

Mem.Op. at 7, 8.

In Bond v. Stanton, 555 F.2d 172 (7th Cir. 1977), we addressed a circumstance where plaintiffs brought suit under 42 U.S.C. § 1983, yet prevailed on statutory rather than constitutional grounds. In holding that attorney fees were nevertheless recoverable under 42 U.S.C. § 1988, we stated:

It is equally clear that Congress intended that the act extend to statutory claims asserted under § 1983. Congress was aware that many § 1983 cases are, like the present case, decided on statutory rather than constitutional grounds and intended that Pub.L.No.94-559 cover all such cases. See Remarks of Senators Kennedy and Abourezk, 122 Cong.Rec. S17052, 17053 (daily ed. Sept. 29, 1976), and of Representative Drinan, id. at H12159 (daily ed. Oct. 1, 1976).

555 F.2d 172, 174. We further held that the Eleventh Amendment does not bar such fee awards against state officials.

Although it is established that attorney fees may be awarded in cases such as the one at bar, such an award is subject to the limited discretion of the district court. As was stated in Kimbrough v. Arkansas Activities Ass'n., 574 F.2d 423 (8th Cir. 1978):

Our determination that the Act was intended to encompass the instant case does not, of course, require an award of attorney's fees. "(Courts) have wide discretion in determining whether or not an award of attorney's fees is warranted, giving due consideration to the principle that the prevailing party should recover attorney's fees "unless special circumstances would render such an award unjust.' " Planned Parenthood v. Citizens for Com. Action, 558 F.2d 861, 870 (8th Cir. 1977), quoting Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402, 88 S. Ct. 964, 19 L. Ed. 2d 1263 (1968).

574 F.2d 423, 427. Indeed, in our recent opinion in Dawson, et al. v. Pastrick, et al., 600 F.2d 70 (7th Cir. 1979), we expressly characterized the trial court's discretion as narrow, and further reiterated that "In Davis v. Murphy, 587 F.2d 362, 364 (7th Cir. 1978), we noted that "a prevailing plaintiff should receive fees almost as a matter of course.' " at 79.

In Gagne v. Maher, 594 F.2d 336 (2d Cir. 1979), the Second Circuit held that a district court erred in constricting its view of its own discretion by refusing to award any fee for time spent on the fee application. In the case at bar, we hold that the district court likewise erred in its constricted view that it lacked discretionary authority to award fees where the plaintiffs prevailed on a statutory rather than a constitutional claim. We, therefore, remand the attorney fees question to the court below to determine (1) whether the requested fees are exorbitant and (2) whether there are any special circumstances that would render such an award unjust. We note that the fact that plaintiffs are represented by Legal Services Organization of Indiana, which is in part federally funded, does not represent a special circumstance that would preclude an award. Hairston v. R & R Apartments, 510 F.2d 1090 (7th Cir. 1975).*fn15 As the case at bar stands, an award appears appropriate; however, we shall defer to the expertise of the district court in determining the amount. Circuit Rule 18 shall not apply.


PELL, Circuit Judge, dissenting in part, concurring in part.

A result of the majority opinion reduced to a simple statement appears to me to be as follows. A is in a nursing home. Part of the attendant expense are paid by the state. A's spouse is legally obligated to pay for A's support which in this case would be the amount above that paid by the state. A's spouse has income sufficient over and above his or her own needs to pay the amount of the nursing home bill the state has not paid. A's spouse does not wish to do so. A's spouse does not have to do so, and the state has to pay the whole cost.

I do not consider it an answer to say that the state can take action against the spouse to recover that which the spouse was legally obligated to pay. I think it unrealistic to think that the state will engage in a multiplicity of continuing individual lawsuits to recover the money that it should not have had to pay out in the first place. Under the majority opinion, there is an open invitation for the spouse to decide that he or she does not wish to make the excess payment. In this era of inflation, and giving consideration to the human inclination not to pay out money when one doesn't have to, I think it reasonable to conclude that few would decline the invitation.

Unfortunately, and with the greatest respect for the reasoning expressed in the majority opinion, it appears to me that once more a roadblock has been placed in the way of a reasonable and legal endeavor of state authorities to curtail unnecessary expenditures of public funds in social programs. I think the district court correctly struck down the "deeming" test, but provided a reasoned alternative to the state whereby the costs would be borne as they should be, I would adopt the opinion of the district court on this aspect of the matter as the opinion of this court, and therefore respectfully dissent from the majority opinion which overrules that part of the district court opinion.

I also agree with the district court's denial of attorney fees. The majority opinion in remanding on this issue indicates that fees are allowable under 42 U.S.C. § 1988. That section, however, provides for fees where actions are brought to enforce a provision of section 1983 of the Civil Rights Act. Elsewhere the majority opinion in finding jurisdiction relies only on 28 U.S.C. § 1331, which would not seem to encompass claims under section 1983, which claims are covered only under 28 U.S.C. § 1343.

I otherwise concur in the majority opinion.

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