State of California Department of Social Services v. Thompson

"The practice of relatives or kin parenting children when their parents cannot is a time-honored tradition in most cultures." Kinship Care: A Natural Bridge: A Report of the Child Welfare League of America (1994). Increasingly, our own society has turned to relatives for assistance in providing foster homes to children in need of them.1 The issue here is under what circumstances foster parents who are related to their foster children can receive funds under the Aid to Families with Dependent Children Foster Care Program ("AFDC-FC").

AFDC-FC is a federal program administered by the States with federal financial participation. The program helps defray the cost of caring for needy foster children and thereby serves as an incentive for both kin and non-kin individuals and families to take in these children. Broadly speaking, eligibility for AFDC-FC funds depends on whether a child was eligible for AFDC benefits prior to being placed in foster care.2

In Miller v. Youakim, 440 U.S. 125, 99 S.Ct. 957, 59 L.Ed.2d 194 (1979), the Supreme Court held that foster parents who were related to the foster children in their care were entitled to AFDC-FC benefits on the same basis as unrelated foster care providers. Id. at 145-46, 99 S.Ct. 957. We are now asked to determine the scope of this eligibility for AFDC-FC. Specifically, we confront here the question whether, as the Secretary of the Department of Health and Human Services ("Secretary") posits, a child can receive AFDC-FC benefits only if he was AFDC-eligible in the home from which he was removed, termed "the home of removal."

It is helpful at the outset to understand the "home of removal" concept central to the Secretary's position. The "home of removal," in the Secretary's lexicon and as we use the term in this opinion, is the child's "legal" home with his or her parents or legal guardians — that is, with the adults who have legal custody of the child. Under the statute governing AFDC-FC, a child is considered to have been legally removed from such a home when removal occurs pursuant to either a judicial decree or a voluntary agreement. See 45 C.F.R. § 1356.21(k)(1). Once the child is so "removed" from this home, the home becomes the "home of removal." After this "legal" removal, a child is usually placed in foster care. Often, prior to legal removal a child will be physically removed from his or her parents' home and placed in the interim with a relative who provides daily care to the child.

The circumstances of the Intervenor-Appellant, Enedina Rosales, provide an example of these concepts: Ms. Rosales's grandson, Anthony, was placed informally in her custody prior to his official removal from his mother's home, because he was being abused in his mother's home. After the judicial decree issued legally removing Anthony from his mother's custody, Anthony remained with his grandmother, Ms. Rosales, and she became his official foster parent. In this scenario, the "home of removal" is Anthony's mother's home. It does not matter that Anthony had already been physically removed from his mother's home prior to the official removal by judicial decree. See 45 C.F.R. § 1356.21(k).

As can be seen in Anthony's situation, so-called AFDC-linkage, on which eligibility for AFDC-FC benefits depends, could be based either on the home of removal, Anthony's mother's home, or on his interim home with his related caregiver, his grandmother. Here, the distinction is crucial, because Anthony was not AFDC-eligible in his mother's home, but was eligible in his grandmother's home at the time the removal petition was filed. As will become clear, there are also other circumstances in which the distinction matters.

The Secretary maintains that under the statute, only AFDC-eligibility in the home of removal is pertinent. The district court deferred to the Secretary's interpretation of the applicable statute, 42 U.S.C. § 672,3 and held that eligibility for AFDC-FC could be based only on AFDC eligibility in the home of removal. Ms. Rosales now appeals the district court's order denying her motion for summary judgment and granting the Secretary's motion to dismiss.

The AFDC-FC program, part of Title IV-E of the Social Security Act, provides funds to assist with the cost of foster care for dependent children. See §§ 672, 674, 675(4)(A). The program provides "foster care maintenance payments" which "cover the cost of (and the cost of providing) food, clothing, shelter, daily supervision, school supplies, a child's personal incidentals, liability insurance with respect to a child, and reasonable travel to the child's home for visitation." § 675(4)(A). Both the state and the federal government contribute funds to the program, which then are distributed by state agencies. See §§ 670-672, 674.

The federal government will not contribute funds unless a state has a plan in place that meets the requirements of the federal statute. § 671(a). Among other requirements, a state plan must provide measures to ensure adequate standards for foster care homes and child care institutions. § 671(a)(10). Each plan must assure that every child receiving foster care payments is given appropriate care and services. § 671(a)(16); see also §§ 675(1), 675(5). The plan must also provide for the facilitation of a child's return to his or her own home. § 671(a)(15). If a state plan complies with the federal requirements, the Secretary must approve the state plan and provide the requisite federal financial contribution. See § 671(b).

The federal requirement at issue here is contained within § 672(a), which provides:

Each State with a plan approved under this part shall make foster care maintenance payments ... under this part with respect to a child who would have met the requirements of [§ 606(a) or § 607] (as such sections were in effect on July 16, 1996) but for his removal from the home of a relative (specified in [§ 606(a)] (as so in effect)), if —

(1) the removal from the home occurred pursuant to a voluntary placement agreement entered into by the child's parent or legal guardian, or was the result of a judicial determination to the effect that continuation therein would be contrary to the welfare of such child and (effective October 1, 1983) that reasonable efforts of the type described in [§ 671(a)(15)] for a child have been made;

(2) such child's placement and care are the responsibility of (A) the State agency administering the State plan approved under [§ 671], or (B) any other public agency with whom the State agency administering or supervising the administration of the State plan approved under [§ 671] has made an agreement which is still in effect;

(3) such child has been placed in a foster family home or child-care institution as a result of the voluntary placement agreement or judicial determination referred to in paragraph (1); and

(4) such child —

(A) would have received aid under the State plan approved under [§ 602] (as in effect on July 16, 1996) in or for the month in which such agreement was entered into or court proceedings leading to the removal of such child from the home were initiated, or

(B)(i) would have received such aid in or for such month if application had been made therefor, or (ii) had been living with a relative specified in [§ 606(a)] (as in effect on July 16, 1996) within six months prior to the month in which such agreement was entered into or such proceedings were initiated, and would have received such aid in or for such month if in such month he had been living with such a relative and application therefor had been made.

§ 672(a).

As of July 1996, § 606(a) set eligibility requirements for AFDC by defining a "dependent child" as:

a needy child (1) who has been deprived of parental support or care by reason of the death, continued absence from the home ... or physical or mental incapacity of a parent, and who is living with his father, mother, grandfather, grandmother, brother, sister, stepfather, stepmother, stepbrother, stepsister, uncle, aunt, first cousin, nephew, or niece, in a place of residence maintained by one or more of such relatives as his or their own home, and (2) who is (A) under the age of eighteen, or (B) at the option of the State, under the age of nineteen and a full-time student in a secondary school....

§ 606(a) (1996). Former § 607 added to this definition needy children who met the age requirements of § 606(a) and who had "been deprived of parental support or care by reason of the unemployment" of the parent who was the principal earner in the family. § 607 (1996).

The problem underlying this lawsuit arises from the confluence of four circumstances: First, all too often parents or legal guardians find themselves unable to care for their children, so the children are placed informally in the homes of relatives.

Second, the former AFDC program (like the present TANF program) provided that children living with specified relatives other than their parents or legal guardians could be AFDC-eligible. See § 606(a) (1996).4 Because relatives other than parents have no obligation to support a child financially, children living with relatives other than their parents can be eligible for welfare benefits due to their own economic circumstances, rather than those of their caregivers. See 45 C.F.R. § 206.10(a)(1)(vii) (1996) (AFDC application need not include non-parents in assistance unit); see also Randi Mandelbaum, Trying to Fit Square Pegs into Round Holes: The Need for a New Funding Scheme for Kinship Caregivers, 23 Fordham Urb. L.J. 907, 914 (1995) (describing "child-only" AFDC benefits provided to children living with relatives).

Third, under the Supreme Court decision in Miller v. Youakim, states must permit relatives, including relatives who could apply for and receive AFDC or TANF benefits for a child in their care, to serve as foster parents for that child and to receive AFDC-FC if otherwise eligible. See id., 440 U.S. at 146, 99 S.Ct. 957.

Finally, because of Congress's recognition that foster children have special needs, since 1968 the amount of money provided to foster children has been considerably more generous than that provided under AFDC or now TANF to children living with their own parents or informally with relatives. See id. at 143, 99 S.Ct. 957; Pub.L. No. 90-248, § 205(b) (1968); see also Shelley Waters Boots & Rob Geen, Family Care or Foster Care? How State Policies Affect Kinship Caregivers, New Federalism: Issues and Options for the States, The Urban Institute, Series A, No. A-34, Tbl. 1, at 4 (July 1999) (AFDC benefit in 1996 for a single child in California was $293 compared to the $410 AFDC-FC benefit); Mandelbaum, supra, at 916 (nationwide, AFDC-FC benefits in 1995 were two to four times greater than AFDC benefits).

As a result of these four factors, a child can be AFDC-eligible while living with relatives who are later appointed by the state as that child's foster parents, and can, if qualified, receive AFDC-FC benefits considerably higher than the child would receive if he or she lived with the same relatives informally outside the foster care system. In dispute here is under what circumstances a child who is unofficially living with a relative at the time of removal from his or her legal home — the home of removal — and is AFDC-eligible in that relative's home, is eligible for the higher AFDC-FC benefits if that relative becomes the state-appointed foster parent for the child.

The Secretary maintains that such a child is not always eligible for AFDC-FC. According to the Secretary, under § 672(a), a child can only receive AFDC-FC benefits if he would have been AFDC-eligible in the home from which he was removed at the time the removal petition is filed or a voluntary placement agreement signed, and he was living in that home within six months of the filing of the petition.5

Ms. Rosales maintains that the statute contains no such explicit restrictions and should not be interpreted to contain them. According to Ms. Rosales's construction of § 672(a), a child who is AFDC-eligible while living informally in a relative's home at the time the removal petition is filed can receive foster care benefits in that relative's home if the relative later becomes the child's foster parent.

B. The Land v. Anderson Decision and its Aftermath

In May 1997, the California Court of Appeal considered whether a relative's home that is not the home of removal can be used to establish eligibility for AFDC-FC. Land v. Anderson, 55 Cal.App.4th 69, 63 Cal.Rptr.2d 717 (2 Dist.1997). Prior to Land, the California Department of Social Services ("DSS") interpreted § 672(a) as mandating AFDC-FC benefits for a child only if (1) the child was living in the home of removal at the time the petition was filed or within six months prior thereto; and (2) the child was AFDC-eligible in the home of removal. See, e.g., Land, 55 Cal.App.4th at 73, 63 Cal.Rptr.2d 717.6 The state plan so provided, the Secretary approved that plan, and California distributed AFDC-FC funds accordingly.

The Land court held that the DSS regulations implementing the state plan and, consequently, the State's AFDC-FC program were contrary to the plain meaning of § 672(a). The court read the statute as allowing AFDC linkage if a child was living with a relative other than the relative from whom the child was removed, as long as the child was eligible for AFDC in the home of the relative with whom he was living in the month the petition for removal was filed. See Land, 55 Cal.App.4th at 83, 63 Cal.Rptr.2d 717. The court therefore concluded that California's requirement that the child have been AFDC-eligible in the home from which the child was removed was in violation of § 672(a). Land, 55 Cal.App.4th at 77-84, 63 Cal.Rptr.2d 717.

In response to the Land decision, DSS proposed state plan amendments. Specifically, DSS proposed that any child living with a relative caregiver in the month the removal petition was filed (or within six months prior to that date) could qualify for AFDC-FC if the child was eligible for AFDC in either a relative's or a parent's home during that time. See California Dept. Social Servs. Manual of Policies and Procedures, Manual Letter No. EAS 99-04, § 45-202.332, at 552 (effective May 3, 1999);7 DSS All-County Letter No. 97, Dec. 23, 1997.

The Secretary rejected the proposed state plan amendment, explaining in a letter to DSS that the proposed amendment was not in compliance with the federal statute and "longstanding policy of HHS," which require that:

at the time of the removal petition, the AFDC-eligible child: (1) was living in the home of the parent or relative from whom the child was removed; or, (2) had been living with that parent or relative within the six months prior to the filing of the removal petition. A child who is living with another relative, whether or not receiving AFDC, is not a title IV-E foster care eligible-provider if proceedings to remove the child from the parent are initiated more than six months after the date when the child is no longer living with the parent.

HHS Letter to DSS, April 3, 1998. (Emphasis added.)

DSS filed a petition for review of the Secretary's rejection directly in this court, but the appeal was dismissed for lack of jurisdiction. See California v. Shalala, 166 F.3d 1019 (9th Cir.1999). We stated, however, that a district court would have jurisdiction to review the agency's decision under the Administrative Procedure Act ("APA"), 5 U.S.C. §§ 701-706. See id. at 1020.

Meanwhile in August 1997, Linda Allen, a foster care provider, filed a petition in state court seeking a writ of mandate requiring California to provide AFDC-FC benefits to her related foster children pursuant to Land. DSS filed a cross-petition and cross-complaint against the Secretary seeking to secure matching funds for any payments that might be ordered by the court. After the Secretary removed the case to federal court, the district court granted the Secretary's motion to dismiss the case. See Allen v. Anderson, No. 98-2128 (C.D.Cal., May 1, 1998).

While Allen was pending, the California legislature enacted Cal. Welf. and Insts. Code § 11402.1, which prohibits DSS from paying any state funds for additional children made eligible for AFDC-FC by Land and the resulting state plan amendment "until and unless federal financial participation is obtained." Cal. Welf. & Insts. Code § 11402.1.8 DSS appealed Allen to this court, but we dismissed the appeal as moot in light of the August 1998 enactment of § 11402.1. See Allen v. Anderson, No. 99-55127 (9th Cir. Oct.13, 1999).

In 1999, DSS sought district court review under the APA, 5 U.S.C. § 702, of the Secretary's determination that the state plan amendment did not comply with the requirements of § 672. Ms. Rosales, a court-appointed foster parent for her grandson, moved to intervene.

DSS had removed Ms. Rosales's grandson, Anthony, from the custody of his mother when he was five months old, because of physical abuse. Anthony would not have been eligible at that time for AFDC benefits in his mother's home (the home of removal) because as the Secretary explains, "the family from which the child was removed — headed by the child's mother — did not meet the income and resources limitations of the AFDC program and therefore was not financially eligible for AFDC benefits."

Los Angeles County welfare officials physically removed Anthony from his mother's home and asked Ms. Rosales to take him into her home. Ms. Rosales subsequently became Anthony's court-appointed foster parent in August 1997, after Anthony was officially removed from his mother's custody. Because of Anthony's special needs and repeated hospitalizations, Ms. Rosales took leaves of absence from her job to care for him and was ultimately fired. She then applied for welfare benefits for herself and Anthony. Ms. Rosales currently receives TANF benefits for Anthony and works part-time, but has difficulty providing for Anthony's needs without AFDC-FC benefits.

Anthony qualified for AFDC in his grandmother's home at the time the removal petition was filed. DSS initially denied AFDC-FC benefits to Anthony because he was not AFDC-eligible in his mother's home in the month the removal petition was filed, as required by the state plan invalidated in Land. In November 1998, after the Land decision, DSS issued an administrative hearing decision in Ms. Rosales's favor, overturning its previous denial of benefits. In January 1999, however, DSS informed Ms. Rosales that she would not receive any benefits on Anthony's behalf because of the new state law, Cal. Welf. and Insts. Code § 11402.1.

Neither the Secretary nor the State of California opposed Ms. Rosales's motion to intervene. The court ordered intervention. Ms. Rosales did not file a separate pleading. Instead, in her motion to intervene, she simply joined in DSS's "contention that California is entitled to federal financial participation in AFDC-FC benefits paid pursuant to Land."

The Secretary filed a motion to dismiss the action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). All the parties then stipulated to stay this action pending the outcome of the Allen appeal. After we dismissed Allen as moot, DSS successfully moved to have the district court opinion in Allen vacated. California v. Shalala, 115 F.Supp.2d 1191, 1194 (E.D.Cal.2000)[hereinafter "California"]. The parties in this action then requested that the stay be lifted, and Ms. Rosales filed a motion for summary judgment, in which DSS joined.

The district court granted the Secretary's motion to dismiss and denied Ms. Rosales's summary judgment motion. Deferring under Chevron v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to the Secretary's interpretation of the requirements laid out by § 672(a), the district court upheld the Secretary's rejection of the state plan amendment. California, 115 F.Supp.2d at 1194-95.

After first holding that the statute was not clear and unambiguous, the district court turned to the second prong of Chevron analysis and concluded that the Secretary's interpretation was a permissible one. Id. at 1195-96. The district court characterized the Secretary's interpretation as "granting AFDC benefits to a child `who would meet all the requirements of [the AFDC program] [in his home of removal] but for his removal,' if any of the three requirements outlined in Section 672(a)(4) are [sic] met." (Italicized phrase added by district court). The court thought it "reasonable to conclude that the necessary AFDC eligibility be established in the home of removal, under each of the three ways." Id. The district court therefore upheld the Secretary's interpretation, citing Chevron once more. See id.

California did not appeal the district court decision, but Ms. Rosales filed a timely appeal in this court.

The facts here are undisputed by the parties, so we must determine whether Ms. Rosales or the Secretary was entitled to prevail as a matter of law. See Vierra v. Rubin, 915 F.2d 1372, 1376 (9th Cir. 1990).

As an initial matter, the Secretary maintains that there is no live controversy because California has chosen not to appeal the district court's decision. In fact, the controversy over the state's AFDC-FC plan is quite live: The California appellate decision, Land, holding that California's policy of not extending benefits based on AFDC-linkage to the homes of relatives runs afoul of the federal statute, remains good law; the proposed state plan — amended to meet the requirements of Land — has not been withdrawn; and there is a legislative directive that DSS pursue approval of the proposed state plan. Additionally, as we discuss later, the outcome of this suit is of critical importance to Ms. Rosales, as approval of her interpretation of the statute would lead to her receiving AFDC-FC benefits on behalf of her grandson.

Also, while it appears that Ms. Rosales could have filed an independent lawsuit challenging the Secretary's interpretation of § 672, see 5 U.S.C. § 702, this suit can continue even if Ms. Rosales could not have brought an independent lawsuit. Intervenors in suits with a governmental party can often continue an appeal after the governmental party has declined to do so, even if they would not have been proper parties at the outset. Idaho Farm Bureau Fed'n v. Babbitt, 58 F.3d 1392, 1398 (9th Cir.1995) (allowing intervening environmental groups to appeal judgment setting aside endangered species listing even though Fish and Wildlife Service did not pursue appeal); Didrickson v. U.S. Dep't of Interior, 982 F.2d 1332, 1338 (9th Cir.1992) (allowing Friends of the Sea Otter to appeal invalidation of federal regulations, despite government's decision to forego appeal); Yniguez v. Arizona, 939 F.2d 727, 732-34 (9th Cir.1991) (allowing intervenor to appeal where state declined to appeal after losing in district court); National Wildlife Fed'n v. Lujan, 928 F.2d 453, 456 n. 2 (D.C.Cir.1991).

In each of these cases the intervenor-appellant was allied with the original defendant, not the plaintiff. We see no analytical difference, however, when the intervenor-appellant is a plaintiff-intervenor. In the cited cases the defendant-intervenors could not properly have been sued as defendants, yet they were allowed to appeal district court decisions. We see no reason why a plaintiff-intervenor who could not have brought suit originally cannot remain in an extant lawsuit as the sole appellant, provided that she meets the Article III standing requirements.9 See Didrickson, 982 F.2d at 1338 ("Generally, an intervenor may appeal from any order adversely affecting the interests that served as the basis for intervention, provided that the requirements of Article III are satisfied."); see also Diamond v. Charles, 476 U.S. 54, 68, 106 S.Ct. 1697, 90 L.Ed.2d 48 (1986).

To have standing, Ms. Rosales must demonstrate that (1) she has suffered an "injury in fact;" (2) there is a causal connection between the injury and the alleged misconduct — the injury must be "fairly ... trace[able] to the challenged action of the defendant;" and (3) it must be "likely" that the injury will be "redressed by a favorable decision." See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); see also Alameda Newspapers, Inc. v. City of Oakland, 95 F.3d 1406, 1412 (9th Cir.1996) (intervenor can demonstrate standing on appeal "by alleging a threat of particularized injury from the order [she] seek[s] to reverse that would be avoided or redressed if [her] appeal succeeds"); Beno v. Shalala, 30 F.3d 1057 (9th Cir.1994).

Ms. Rosales has alleged a "particularized" and "actual" injury — the denial of AFDC-FC benefits for her foster child. See Lujan, 504 U.S. at 560, 112 S.Ct. 2130. It is undisputed that Anthony would have been AFDC-eligible in Ms. Rosales's home during the petition month. If we decide that the state plan amendments are indeed consistent with federal law, then Anthony would be eligible for the higher maintenance amounts due under AFDC-FC.

That some additional steps by the State may be required to provide Ms. Rosales's benefits is of no moment. The State is likely to take those steps: California can only continue to receive federal participation in its AFDC-FC program if its state plan conforms to the proper interpretation of the federal statute. See § 671. California's economic interests and the legislative intent expressed in Cal. Welf. and Insts. Code § 11402.1 indicate that California intends to secure that federal financial assistance. It therefore seems likely that a decision by this court that a child must be eligible for AFDC-FC if AFDC-eligible in the home of any specified relative would redress Ms. Rosales's injury. Such a showing is sufficient, as Ms. Rosales need only show that it is likely that our decision will redress her injury, not that it will do so. See Lujan, 504 U.S. at 568, 112 S.Ct. 2130; see also Beno, 30 F.3d at 1064(showing "that a favorable decision might not redress plaintiff's injury" does not defeat standing).

The Secretary maintains that regardless of the outcome of Ms. Rosales's appeal, the state is bound by res judicata principles to the district court judgment, so Ms. Rosales's appeal cannot redress her injuries. It is true that res judicata principles would, at present, prevent the State itself from pursuing a second action against the Secretary. See 18A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 4433 (1986, 2002 supplement) (describing the settled principle that "the bare act of taking an appeal" does not defeat the res judicata effect of a federal district court decision); see also Robi v. Five Platters, Inc., 838 F.2d 318, 327 (9th Cir.1988). As this is an appeal in the same case, however, the doctrine of res judicata simply has no applicability.10

To the extent the Secretary may be suggesting that he will not be bound by any decision reversing the judgment below, he is incorrect. Once a decision of the district court is reversed, the "judgment cannot serve as the basis for a disposition on the grounds of res judicata or collateral estoppel." Ornellas v. Oakley, 618 F.2d 1351, 1356 (9th Cir.1980) (citations omitted); cf. Jones v. Bates, 127 F.3d 839, 851 n. 12 (9th Cir.1997). Thus, if the judgment of the district court is reversed, the Secretary would be bound by our decision for all purposes.

The Secretary also contends that Ms. Rosales failed to preserve her right to continue this case on appeal because she did not file a separate complaint. Contrary to the Secretary's view, no separate pleading was required, as both Ms. Rosales and the state sought the same result, a judicial determination that AFDC-FC benefits are available for all children who are AFDC-eligible in a relative's home on the date of removal. See Beckman Indus. v. Int'l Ins. Co., 966 F.2d 470, 474 (9th Cir.1992) (allowing intervenors to proceed without filing separate pleadings where it was clear from the motion to intervene what result intervenors sought); Spring Const. Co., Inc. v. Harris, 614 F.2d 374, 376-77 (4th Cir.1980) (allowing intervention absent pleading where sufficient notice of intervenor's position was given); see also 7C Wright, Miller & Kane, § 1914 ("If the intervenor is content to stand on the pleading an existing party has filed, it is difficult to see what is accomplished by adding to the papers in the case a new pleading that is identical in its allegations with one that is already in the file." (emphasis added)).

Chevron requires reviewing courts to apply a two-step framework to questions of statutory construction. First, we inquire "whether Congress has directly spoken to the precise question at issue," in which case we "must give effect to the unambiguously expressed intent of Congress." Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778. If the "statute is silent or ambiguous with respect to the specific issue," we move to the second step and must defer to the agency's interpretation if it is "based on a permissible construction of the statute." Id. at 843,