Another Court Victory in Reynolds

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Another Court Victory in Reynolds v. Giuliani: Court Refuses to Set Aside Injunction, Finding that City Has Not Shown Compliance with Federal Law; Parties Prepare for Trial

From Dec. 2000 Welfare News

Plaintiffs won another stunning victory last July in Reynolds v. Giuliani, their challenge to New York City Jobs Centers practices that illegally deny access to Food Stamps, Medicaid, and cash benefits, when federal District Court Judge William J. Pauley denied New York City’s request to set aside the January 1999 preliminary injunction, denied the state defendants’ motion to dismiss the complaint, and certified a class. The court’s action means that the City remains under court order to comply with legal requirements protecting the rights of individuals to apply for assistance and is still barred from continuing to convert Income Support Centers to Jobs Centers.

Reynolds in the first case in the country to challenge welfare reform implementation practices that lead to illegal denials of the right to apply for TANF, state-funded cash assistance, Medicaid, and Food Stamps as well as unlawful denials of those benefits, including emergency cash assistance and expedited Food Stamps processing. Congress preserved the Medicaid and Food Stamp programs in 1996 when it eliminated AFDC and replaced it with the TANF block grant program, recognizing that these benefits are important for people seeking to move from welfare to work. However, participation in these critical programs has declined across the country with welfare reform implementation, in part due to state and local policies and practices to discourage or divert people from seeking cash and other assistance.

In January 1999, after finding that the City’s practices at Job Centers unlawfully deterred individuals and families from applying for assistance and illegally denied emergency benefits to needy applicants, the court ordered the City to comply with federal and state law regarding the application process and stayed the City from converting more Income Support Centers to Job Centers. As part of its order, the Court required the City to submit a Corrective Action Plan showing how it would bring itself into compliance with law and to demonstrate that the Corrective Action Plan was successful.

The City, incorporating suggestions and concerns from plaintiffs, drafted a Corrective Action Plan. It then sought to have the Court vacate the stay against conversions of Income Support Centers to Job Centers. Plaintiffs opposed that request and were able to show that the City’s self-monitoring was so flawed that it could not be used to prove improved performance. Plaintiffs also submitted proof documenting ongoing violations of law and harm to applicants for assistance. In July 1999, on the eve of an evidentiary trial, the City withdrew its request.

The City redesigned its self-monitoring and prepared new monitoring reports. It then argued to Court that the entire injunction, not just the stay against conversions, should be set aside based on the results of the re-designed monitoring. The plaintiffs challenged the new monitoring methodology and results in a three day evidentiary hearing and submitted voluminous proof demonstrating that the City was still engaged in many of the same unlawful practices that led to the imposition of the Court’s order.

In July 2000 the court ruled against the City in an exhaustive 105 page decision in which it agreed with plaintiffs that the monitoring was flawed and that the City still had not demonstrated its compliance with federal and state law. It also rejected the state defendants’ arguments for dismissal of the complaint.

City’s Flawed Monitoring Does Not Show That Job Centers Are Complying With Federal Requirements. To support its claim that its corrective action efforts had been successful and that Job Centers were no longer illegally discouraging and denying applicants, the City relied on various efforts it had undertaken, primarily audits of almost 1900 case files from Jobs Centers and Income Support Centers, but also other quality assurance efforts, such as spot-checks of Jobs Centers and Income Support Centers and a review of the outcome of fair hearing appeals. Essentially the City sought to argue that its Jobs Centers were performing as well as its Income Support Centers and that the injunction was no longer necessary.

The Court focused first on the City’s audits. After a thorough review of the audit procedure and the method used by the City to select the sample cases for review and extensive expert witness evidence offered by both sides, it found that the sample was not representative of the overall population and, therefore, the Court could not project the audit results to the population of all applicants for assistance. The Court also found that the City’s audit instrument was inadequate.

Plaintiffs once again submitted proof, in part drawn from the City’s own records, to show that applicants were still being deterred from applying for assistance or were not having their applications processed as required by law once they managed to overcome the deterrence. The Court agreed with plaintiffs that the City’s audits could not be trusted because they were not conducted in accord with generally accepted statistical standards. Furthermore, the Court found that the other limited oversight measures that the City relied on “shed little light on whether the centers are complying with federal requirements.” The Court therefore refused to set aside the preliminary injunction.

The Court’s ruling is particularly important because, in addition to discussing the level of proof necessary to support the City’s request, the ruling made clear that the Court could not assume compliance with law merely from the adoption of a Corrective Action Plan. In Reynolds, while the Corrective Action Plan may have been reasonably intended to address many of the policy deficiencies, there was little evidence that the Plan had been translated into practice across the board. In fact, plaintiffs’ counsel’s own monitoring continues to demonstrate wide-spread problems.

Court Rejects State Defendants’ Efforts to Dismiss the Complaint. The Reynolds decision is also the first post-Blessing v. Freestone decision to reaffirm the responsibility of the State agency for the acts or failures to act of local agencies when it delegates duties to those local agencies. Applying single state agency requirements as well as clear statutory language imposing duties on the state agencies, the Court rejected the state defendants’ arguments that the claims against them should be dismissed because the city defendants have responsibility for administering the welfare programs and the state defendants are not accountable for the city defendants’ mistakes. The court agreed with plaintiffs’ arguments that under federal law the state defendants have a duty to assure that the Food Stamp and Medicaid programs are administered in compliance with federal law. This duty includes the responsibility for active supervision of how local agencies administer welfare programs.

The state defendants also had made several technical arguments to have the complaint against them dismissed. The Court had no trouble rejecting them. First, relying on well-established case law allowing federal lawsuits seeking injunctions against state officials to assure their compliance with federal law, the court rejected the state defendants’ arguments that the 11th Amendment to the U.S. Constitution barred plaintiffs’ claims against them. Second, it concluded that plaintiffs met the test for stating a cause of action under 42 U.S.C. 1983 for violations of specific provisions of the Food Stamp Act, the federal Medicaid law, and procedural due process. Third, the court rejected the state defendants’ arguments that the complaint should be dismissed because the plaintiffs had not exhausted administrative remedies, noting that exhaustion is not required.

Developments Since the July Court Decision. Following two unsuccessful attempts to develop and implement its own monitoring, the City has agreed to work co-operatively with plaintiffs to design and carry out a plan to audit the City’s performance. Plaintiffs’ expert has designed an audit protocol and has developed an auditing instrument and City defendants have agreed to both. Under the Court’s supervision, the parties are now engaged in a joint audit of cases from September 2000. The parties have agreed that they will accept the outcomes of the auditing conducted, provided that is done pursuant to the agreed upon principles of auditing, and confine their arguments to the legal conclusions to be drawn from the results of the audit. A full evidentiary hearing is scheduled for February 12, 2001.