Appeal from an order entered by the United States District Court for the Southern District of New York (Duffy, D.J.) dismissing the plaintiff's complaint for lack of subject-matter jurisdiction and denying plaintiff's motion for class certification and summary judgment. The Court of Appeals held: (1) a disabled individual who is part of a family unit receiving AFDC aid pending a determination of his eligibility for Supplemental Security Income (SSI) is entitled to SSI benefits retroactive to the date of his application, less the amount of AFDC income attributable to him during the interval between the filing of his application and the finding of eligibility; (2) the proper means of calculating the amount of AFDC income attributable to the SSI recipient for purposes of determining his retroactive SSI benefits is an "incremental" rather than "per capita" method of apportionment; (3) the District Court had jurisdiction since the Secretary's refusal to adhere to the decisions of his own Appeals Council mandating use of an "incremental" method could be deemed a constructive waiver of the exhaustion of administrative remedies requirement of 42 U.S.C. § 405(g) and § 1383(c)(3); and (4) the case was not moot.
Waterman, Moore and Gurfein, Circuit Judges.
This appeal involves an interplay between the Federal Supplemental Security Income Law ("SSI") - the national cash assistance plan for needy persons who are also disabled, blind, or aged, 42 U.S.C. §§ 1381 et seq. (Title XVI of the Social Security Act) - and the statute providing for Aid to Families with Dependent Children ("AFDC") as administered by the State of New York, 42 U.S.C. §§ 601 et seq. (Title IV of the Social Security Act); New York Social Services Law §§ 131 et seq. When a person who is part of a family which has been receiving AFDC aid becomes eligible for SSI cash benefits, his entitlement to SSI benefits begins with the month of his application, 42 U.S.C. § 1382(c)(2). Hence, when the disabled applicant is ultimately found eligible for SSI, he is entitled to claim retroactive benefits from the date of his application. A claimant found eligible for SSI who received AFDC aid during the SSI determination period is entitled to the relevant SSI payment level less certain income received, which includes the amount of AFDC received by the claimant during the period, 42 U.S.C. § 1382(b).*fn1
The statute does not specify how much of the amount paid to a family unit under AFDC during the period while the application is being considered by SSA is to be deemed to have been received by the newly eligible SSI recipient during the retroactive period. In the case of New York State residents, to determine what portion of the family unit AFDC benefit was attributable to the new SSI beneficiary, the Secretary of Health, Education and Welfare takes the number of persons in the family unit, and simply subtracts for SSI purposes, the share which the new SSI recipient purportedly received on a "per capita basis." He ignores the fact that the difference between the AFDC benefits received during the retroactive period and what the family unit actually gets after the family member goes on the SSI rolls is not a per capita difference. The plaintiffs contend that an "incremental", rather than per capita method, must be used in calculating retroactive benefits; they argue that the actual difference between what the family unit received under AFDC before one member became eligible for SSI, and what the family unit received thereafter is the proper amount to be attributed to the particular claimant.
This action for declaratory and injunctive relief arising under subchapter XVI of the Social Security Act, 42 U.S.C. § 1381 et seq. and 28 U.S.C. § 2201 was begun in the Southern District of New York. Jurisdiction was alleged under 42 U.S.C. § 1383(c)(3) and 28 U.S.C. § 1361.*fn2 Plaintiffs Veronica and Robert Jones sued on behalf of themselves and all similarly situated recipients of and applicants for SSI benefits who have, or will, receive deficient SSI payments by virtue of defendant's use of an illegal method for computing retroactive SSI benefits. The defendants are the Secretary of HEW, the Director of Region II, and the Commissioner of the Social Security Administration, New York Region. New York State officials are not parties to this action.
The plaintiffs moved for class certification and for summary judgment on December 10, 1976. The defendants moved to dismiss the complaint. The District Court (Hon. Kevin Duffy, Judge) found that the plaintiffs' substantive claim was "meritorious" and "not disputed" but that he was constrained by "the state of the law" to hold that the Court was without jurisdiction to entertain the claim.
Judge Duffy held that the plaintiffs' failure to exhaust available administrative remedies, as required by 42 U.S.C. § 405(g) would bar them from proceeding under either 42 U.S.C. § 1383(c)(3), which applies § 405(g) to Title XVI, or the mandamus statute, 28 U.S.C. § 1361. The District Court emphasized that the utility of the exhaustion requirement was particularly apparent in this action since other SSI claimants had received the relief sought here through individual pursuit of their administrative remedies.*fn3 The District Court denied plaintiffs' motions for summary judgment and class certification and entered judgment dismissing the complaint on June 8, 1977. The court did, however, retain jurisdiction until September 6, 1977 to allow the Secretary to give Mrs. Jones an administrative hearing, in default of which the court would entertain a motion to vacate the dismissal of the complaint. On July 26, after a hearing, an Administrative Law Judge rendered a decision which favored Mrs. Jones' method of computation and awarded her retroactive benefits. Notice of appeal to this court had already been filed on July 17, 1977.
The conclusion of the District Court that the plaintiffs' claim was "meritorious" is, we think, correct. Appellant Veronica Jones is a disabled recipient of SSI who received AFDC benefits from January to June 1976, the period during which SSA was determining her eligibility for SSI. In June, the Social Security Administration ("SSA") determined that she was eligible for SSI benefits, retroactive to January, the month of her application. During this SSI determination period, Mrs. Jones and her two children received $348.50 per month in AFDC payments. When Mrs. Jones began receiving SSI, she was removed from the AFDC grant as required by law, 42 U.S.C. § 602(a)(24), infra ; New York Social Services Law, 18 Code of Regs. § 352.30(b).*fn4 This resulted in a monthly decrease of $57.50 monthly in the AFDC grant, from $348.50 to $291.00, a decrease of only 16.5% rather than of 33 1/3% (the per capita percentage). Accordingly, if she actually had been receiving SSI benefits from January, the month of her application, the AFDC payment to the remaining family unit would have been reduced by only $57.50. Yet, in computing her retroactive benefits from January to June, SSA determined that one-third of the $348.50 monthly grant, or $116.00 rather than the $57.50 was attributable to her as income from the AFDC payments, and was deductible from her SSI entitlement. This was avowedly done in accordance with a purported per capita method of determining AFDC attribution based on an expressed belief that New York State uses the per capita method in its AFDC program. The Joneses requested reconsideration from SSA, contending that only $57.50 monthly of the family AFDC income was legally attributable to Veronica. SSA reconsidered but adhered to its challenged per capita method.
Appellants' proposed class is composed of two subclasses: (a) SSI recipients who have received reduced retroactive SSI benefits because of the use of the per capita method; and (b) AFDC recipients who have applied for SSI benefits, are waiting SSA determination of eligibility and who, if eligible, will receive reduced retroactive benefits because SSA uses the per capita method with respect to New York State residents.
The statute, 42 U.S.C. § 602(a)(24), provides:
"a) A State plan for aid and services to needy families with children must -
" (24) [provide that] if an individual is receiving benefits under subchapter XVI of this chapter [SSI], then, for the period for which such benefits are received, such individual shall not be regarded as a member of a family for purposes of determining the amount of the benefits of the family under this subchapter [AFDC] and his income and resources shall not be counted as income and resources of a family under this subchapter."
There is no explanation of how much of the total AFDC family grant is to be attributed to a family member for the interval pending determination of his SSI eligibility.
The Secretary's policy has been to request from the State agency administering the AFDC program the information needed to determine what share of an AFDC grant should be attributed to the SSI beneficiary, Supplemental Security Income Claims Manual, Dep't of HEW § 12340.1. When a State defines the attributable amount as the difference between the AFDC grant before and after the exclusion of the SSI recipient, the incremental method of computation is used. When the State declines to give the information requested, or, like New York State, declares an alleged "policy" that the individual needs of each family member are considered equal, the Secretary assumes that all members have shared equally in the AFDC grant, and he then employs the per capita method.*fn5 The "policy" letter of the New York Department of Social Services on which the Secretary relies is set out in the margin.*fn6 The letter in the margin is both general and misleading. We take it to mean simply that New York does not allocate differing amounts of benefits based on an individual's position in the household. That general interpretation is consistent with the author's own subsequent construction of his letter: "It does not ...