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Jeffries v. Swank

United States District Court, N.D. Illinois, Eastern Division

September 30, 2016

VIRGINIA JEFFRIES, et al. Plaintiffs,
HAROLD O. SWANK, Defendant.


          Rubén Castillo Chief Judge.

         Mark Hyzy (“Hyzy”), proceeding pro se, brings this motion to intervene in this case pursuant to Federal Rule of Civil Procedure 24, seeking enforcement of a permanent injunction in this case and recovery of penalty payments that he alleges the Illinois Department of Human Services (“the Department”) owes to him. (R. 4, Mot. to Intervene.) In its response to the motion to intervene, the Department includes a motion to dismiss several counts of Hyzy's proposed complaint under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, Hyzy's motion is granted and the Department's motion to dismiss is granted in part and denied in part.


         This case began more than 45 years ago, when Virginia Jeffries filed an action under 42 U.S.C. § 1983, on behalf of a class seeking declaratory and injunctive relief. Jeffries v. Swank, 337 F.Supp. 1062, 1064 (N.D.Ill. 1971). The class consisted of recipients and applicants for public assistance under the Social Security Act who had not received final decisions on administrative hearings by the Illinois Department of Public Aid within 60 days of their request for a hearing.[1] Id. In 1972, the district judge entered an order requiring the Department to take administrative action within those 60 days unless the applicant had requested a delay in the hearing. (R. 5, Hyzy's Mem., Ex. B.) Two years later, the court modified the order to allow the Department 90 days to take action, following a change in the Social Security Act. (Id., Ex. C.) In 1975, the court required the Department to issue a $100 payment to any applicant if the 90-day deadline was not met, as well as an additional $100 payment for each additional 30 days that elapsed after the 90-day deadline. (Id., Ex. D.) The Department was required to submit monthly reports detailing how many applicants were not receiving administrative decisions within 90 days and the total delays in their cases, a practice which continued until 1984. (Id., Ex. B; id. Ex. C.) From 1984 until Hyzy filed his motion to intervene, there were no filings or proceedings in this long-settled case.[2] (R. 1, Docket.)

         Hyzy was hospitalized for an illness in September 2013 and was later sent to a nursing home in October 2013. (R. 22, Compl. in Intervention ¶ 6.) After being discharged, Hyzy fell at home and was again sent to a hospital and nursing home. (Id.) At this time, Hyzy had neither health insurance nor any income. (Id. ¶ 7.) Over a period of about 16 months, Hyzy filed five applications for Medicaid benefits. (See id.) His first two applications were granted, although issues later arose leading Hyzy to appeal them. (R. 5, Hyzy's Mem. at 2.) His other three applications were initially denied. (R. 22, Compl. in Intervention at 4, t.1.)

         Hyzy requested appeals in each of these five applications. (Id. ¶ 8.) The hearings for his first four applications were consolidated and held by telephone on May 19, 2015, while the fifth hearing was held on October 20, 2015. (Id. at 5, t.2; R. 5, Hyzy's Mem. at 2-3.) The period of delay between Hyzy filing these appeals and the dates of the hearings ranged between 138 and 363 days. (R. 22, Compl. in Intervention at 5, t.2.) The precise events of the May 19 hearings are unclear based on Hyzy's account, but he alleges that he was sworn in, gave testimony, and prevailed on one of his claims. (Id. ¶ 13.) For reasons not reflected in the present record, Hyzy allegedly withdrew his appeals during these hearings.[3] (R. 22, Compl. in Intervention ¶ 13; R. 16-2 ¶ 2.) After he withdrew his appeals, the Department refused to pay him any penalty payments for the delays preceding the hearings. (R. 22, Compl. in Intervention ¶ 13.) The fifth appeal was decided in Hyzy's favor, and the Department issued a $200 penalty payment to him on January 28, 2016. (R. 16-2 at 9-10; R. 16-3 at 2.) Although the delay between Hyzy filing his appeal and the final administrative decision totaled 209 days, the Department alleges that 81 days of this time resulted from Hyzy's own request for an extension. (R. 16-2 at 3.)

         Hyzy filed his motion to intervene on September 3, 2015. (R. 4, Mot. to Intervene.) In March 2016, the Department filed a response opposing Hyzy's motion. (R. 16, Def.'s Resp.) The Department argued that Hyzy's claims were moot, as he voluntarily withdrew his first four appeals and was allegedly paid appropriately for the delay of his fifth appeal. (Id. at 3-5.) Further, the Department argued that Hyzy's motion to intervene should be denied as he had not provided a pleading to support his motion in accordance with Federal Rule of Civil Procedure 24(c). (Id. at 5-6.) In his reply, Hyzy argued that the Department was required to pay him for hearing delays even if he later withdrew those appeals, and thus withdrawing the appeals did not moot his case. (R. 17, Hyzy's Reply at 3.) He also contested whether he had been paid enough for the delay on his fifth appeal. (Id. at 4-5.) Hyzy acknowledged his failure to provide a Rule 24(c) pleading, but requested that the Court allow him to cure his inadvertent and good-faith error. (Id. at 6-7.)

         On April 1, 2016, the Jeffries class (“the Class”) filed its response to Hyzy's motion to intervene through its original counsel. (R., Original Pls.' Reply 18.) The Class argued that the Department's response suggested an incorrect reading of the orders in the underlying Jeffries litigation. (Id. at 4.) Under the Class's interpretation, the Jeffries permanent injunction requires that the $100 penalty payment is due as soon as the Department has gone beyond the 90-day time limit, regardless of whether the appeal is withdrawn. (Id. at 5.) The Class raised concerns that the Department may be encouraging applicants to withdraw their appeals without informing them of the Department's policy. (Id.) The Class requested that this Court enter and continue Hyzy's motion and require the Department to submit a report detailing those cases in which appeals were not decided within 90 days, those cases in which appeals were withdrawn after the 90-day period, and those cases in which the penalty payments were issued in accordance with the Jeffries permanent injunction. (Id. at 5-6.)

         On May 26, 2016, this Court issued an order granting Hyzy leave to file a Rule 24(c) pleading setting forth any claims on which Hyzy seeks to proceed. (R. 21, Order at 1-2.) The Court also required the Department and the Class to respond, including information regarding the Department's current policies governing hearing delays. (Id. at 2.)

         Hyzy, still proceeding pro se, filed his proposed pleading on June 16, 2016. (R. 22, Compl. in Intervention.) Although it is at times unclear, Hyzy's proposed complaint seeks relief on several grounds. First, Hyzy seeks relief under 42 U.S.C. § 1983, alleging that the Department's failure to hold his hearings within 90 days infringed his due process and equal protection rights, as well as the Supremacy Clause of the U.S. Constitution and the Social Security Act and its relevant regulations. (Id. ¶¶ 20-33.) He also brings several claims based on the Department's alleged violations of the Jeffries orders by failing to hold his hearings within 90 days, failing to implement a favorable decision within 90 days, failing to pay him the penalty payments for those delays, and improperly calculating the delay in his fifth appeal. (Id. ¶¶ 45-81.)

         The Department's response, filed July 29, 2016, argues that most of Hyzy's claims are unavailing and that any remaining claims do not entitle him to intervene in the present case. (R. 26, Def.'s Suppl. Resp.) First, the Department argues that Counts 2 and 3 of the proposed complaint, which assert claims based upon “the Applicant's rights under the Supremacy Clause, ” (R. 22, Compl. in Intervention ¶¶ 33, 38), fail because the Supremacy Clause does not grant any individual rights, (R. 26, Def.'s Suppl. Resp. at 2). Second, the Department claims that all counts based on alleged violations of the Jeffries orders will be mooted by the Department's voluntary payment to Hyzy of the amount that he calculates is due to him. (Id. at 2-4.) The Department is careful to clarify that this offer to compensate Hyzy is not an admission that he is entitled to these payments, but it asserts that its offer to make the requested payments removes any personal stake that Hyzy has in the litigation. (Id. at 4.) Third, the Department argues that Hyzy has no basis to intervene in the present case because he does not seek to change the underlying Jeffries orders and the Department's offer to pay moots his individual claims. (Id. at 5-7.) The Department's response also describes the application process for benefits covered by the Jeffries orders, noting in particular that:

The Department has and continues to pay appellants under the Jeffries Orders where appropriate. The Department pays an appellant where there is a payable Final Administrative Decision issued. The Department considers a payable Final Administrative Decision to be one where a Hearing Officer conducts and completes a hearing concerning an assistance appeal, and writes a recommended decision which is subsequently adopted by the Secretary of DHS. A case which is [disposed] of in any other manner (for instance, a withdrawal by the appellant), is not considered by the Department to be subject to a Jeffries payment.

(Id. at 11.) The Department also notes that there is not “a separate enforcement mechanism that an appellant may use to contest Jeffries payments, ” though “an appellant may pursue judicial review of any Final Administrative Decision through the Circuit Courts” of Illinois. (Id. at 12.)

         Hyzy filed a reply responding to these arguments on August 10, 2016. (R. 28, Hyzy's Reply.) Hyzy's reply to the Supremacy Clause argument is unclear, but appears to follow two principle lines of argument. First, he seems to argue that because the Department acted “under color of state law” in failing to hold his hearings on time, its actions violate the Supremacy Clause by failing to comport with the Social Security Act's 90-day requirement. (Id. at 2.) Second, he argues that the district court already decided that failing to hold hearings violated the Supremacy Clause in the original Jeffries litigation, and thus issue preclusion bars its relitigation. (Id. at 2-3 (citing Jeffries, 337 F.Supp. at 1065).) Regarding the Department's argument that his claims are moot, Hyzy replies that he has rejected its settlement offer and no further negotiations are underway. (Id. at 3.) He notes that the U.S. Supreme Court held in Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (2016), that a rejected settlement offer does not moot a plaintiff's case, and he further observes that the Department's settlement offer understates his requested actual damages and ignores his requested compensatory and punitive damages. (Id. at 3-4.) Finally, he contends that intervention is appropriate because he intends to enforce the Jeffries orders as a third-party beneficiary and seek the appropriate compensation under the orders and through his other causes of action based on the same body of law. (Id. at 7-9.)

         The Class filed a response on August 16, 2016, in which it supports Hyzy's intervention in the case. (R. 30, Original Pls.' Suppl. Resp. at 3.) Even if Hyzy's claims were found to be moot or his motion to intervene were denied, the Class argues that it would retain an interest in ensuring that the Department continues to comply with the Jeffries orders. (Id.) Accordingly, the Class asks this Court to determine whether the Jeffries permanent injunction allows the Department to avoid paying the $100 per month penalty if applicants withdraw their appeals and, if so, what notice must be given to the applicants to ensure that the withdrawal is knowing and voluntary. (Id. at 4.) The Class argues that the permanent injunction requires that the payment is due as soon as the Department has exceeded the 90-day time limit and that, even if the Department's interpretation prevails, applicants must receive written notice of their rights under Jeffries and of the consequences of withdrawal. (Id. at 5, 7-8.)


         Rule 24 provides two possible paths for intervention, intervention of right and permissive intervention, that may be pursued by a timely motion. Fed.R.Civ.P. 24. “The timeliness requirement forces interested non-parties to seek to intervene promptly so as not to upset the progress made toward resolving a dispute.” Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 797 (7th Cir. 2013). Courts should consider four factors to determine whether a motion is timely: “(1) the length of time the intervenor knew or should have known of his interest in the case; (2) the prejudice caused to the original parties by the delay; (3) the prejudice to the intervenor if the motion is denied; (4) any other unusual circumstances.” Id. at 797-98 (citation omitted). The determination whether a motion is timely is “committed to the sound discretion of the district judge” and “is made under the totality of the circumstances.” South v. Rowe, 759 F.2d 610, 612 (7th Cir. 1985).

         Under Rule 24(a)(2), a court must allow intervention of right to any movant who “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.” Fed.R.Civ.P. 24(a)(2). Under Rule 24(b), a court may, in its discretion, allow a movant to intervene if he “has a claim or defense that shares with the main action a common question of law or fact” if it will not “unduly delay or prejudice the adjudication of the original parties' ...

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