___________

No. 95-1516

___________

Ronald A. Mahers, *

*

Plaintiff/Appellee *

*

v. *

*

Sally Chandler Halford, *

*

Defendant/Appellant, *

*

Gary Dean Snow, *

*

Plaintiff/Appellee, *

*

v. *

*

Thomas Hundley; Sally Chandler * Appeal from the United States

Halford; Ruth McVeigh, * District Court for the

* Southern District of Iowa.

Defendants/Appellants, *

*

Roger Gene Van Hoff, *

*

Plaintiff/Appellee, *

*

 v. *

*

Thomas Hundley, *

*

Defendant/Appellant, *

*

Scott Ray Mabrier, Ralph Meyer, *

Jody L. Stokes, Kannis Johnson, *

Jimmey Lee Cook, William E. *

Clark; James A. Middleswart, *

Nathan D. Reed, *

*

Plaintiffs/Appellees, *

*

 v. *

*

Iowa Department of Corrections, *

Sally Chandler Halford, Charles *

Lee, John Thalacker, Mona Burns,*

Steven Wolmutt, *

*

Defendants/Appellants. *
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___________

 Submitted: October 19, 1995

 Filed: February 21, 1996

___________

Before BOWMAN, HEANEY, and WOLLMAN, Circuit Judges.

___________

WOLLMAN, Circuit Judge.

Defendant prison officials appeal from the district court's

order enjoining them from withholding court-ordered restitution

deductions from funds inmates receive from outside sources without

providing an individualized pre-deprivation hearing and requiring

the defendants to repay money that was previously deducted without

a hearing.

I.

Iowa law requires virtually all inmates convicted in Iowa to

pay restitution to crime victim(s) and to the state to cover court

costs, court-appointed attorney fees or the expenses of a public

defender. See Iowa Code § 910.2 (1990). Pursuant to Iowa Code §

910.3, Iowa courts order a set amount of restitution at the time of

sentencing. The Director of the Iowa Department of Corrections

("the Department") then has a restitution plan prepared pursuant to

section 910.5(1). An inmate may have his restitution plan reviewed

by the Iowa District Court at any time during his incarceration.

Iowa Code § 910.7.

 

In the spring of 1992, the Department began automatically

applying twenty percent of all money received by an inmate toward

that inmate's restitution obligations. This deduction included not

only money received from prison wages, but also money received from
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outside sources such as family and friends. This case is about the

collection of that twenty percent from outside sources.

We begin with a timeline charting the statutory and procedural

history relevant to this case. Before March 1992, the Department

deducted restitution only from inmates' prison allowances--that is,

from the money inmates earned while in prison either from working

or from idle pay. When the Department began deducting from money

received from outside sources, several inmates filed suit alleging

that the deductions denied them due process and had no basis under

Iowa law.

The Department asserted as authority Department policy number

IN-V-106, as amended, which authorized deductions for restitution

payments from all credits to an inmate's account. The policy

exempted from deduction money given to an inmate for use for a

specific purpose, such as medical costs or funeral trip expenses.

The Department claimed as alternate authority Iowa

Administrative Code (IAC) rule 201-20.11, which was also in effect

at the time of suit and which provided that credits to an inmate's

account from outside sources could be deducted for criminal

restitution with authorization from the inmate, a court order, or

approval from the warden/superintendent.

 

The district court referred the case to a magistrate judge for

recommendations. The magistrate judge found that IN-V-106 had not

been properly promulgated under the rule-making provisions of the

Iowa Administrative Procedures Act. Having found the policy

invalid, the magistrate judge concluded that it was unnecessary to

determine whether the failure to provide a pre-deprivation hearing

violated the due process clause. 

On October 12, 1994, the district court granted summary

judgment for the inmates, adopting the magistrate judge's report
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and recommendation, but modifying it to consider the due process

issue. The district court noted that the defendants were also

claiming authority to make restitution deductions under IAC rule

201-20.11. Presuming the validity of the rule, the district court

held that notice and an informal pre-deprivation hearing were

required. The court did not specify the type of hearing required

or whether individual hearings were required in the case of those

inmates receiving weekly or monthly installment payments. 

On February 1, 1995, the district court entered an amended

judgment, which requires the defendants to restore money improperly

taken from plaintiffs' accounts, enjoins them from any further

application of IN-V-106, and enjoins them from applying IAC rule

201-20.11 to deduct from outside sources without first providing

notice and at least informal pre-deprivation process.

In December 1994, the Iowa Supreme Court held, in a parallel

case brought by a different inmate, that although the Department

had authority to deduct restitution payments from funds inmates

receive from outside sources, the inmates are entitled as a matter

of due process to a one-time informal opportunity to state their

objections, an opportunity that the state procedures in place at

that time did not provide. Walters v. Grossheim, 525 N.W.2d 830

(Iowa 1994). 

The Iowa legislature enacted legislation, effective July 1,

1995, which provides, in part, that: 

[t]he director shall deduct from an inmate account an

amount established by the inmate's restitution plan of

payment. . . . Written notice of the amount of the

deduction shall be given to the inmate, who shall have

five days after receipt of the notice to submit in

writing any and all objections to the deductions to the

director, who shall consider the objections prior to

transmitting the deducted amount to the clerk of the

district court. The director need give only one notice

for each action or appeal for which periodic deductions
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are to be made.

See Iowa Code § 904.702 (West Supp. 1995).

In compliance with the district court's order, after June 30,

1994, the defendants ceased making deductions from funds received

from outside sources. Thus, the time period relevant to the

inmates' claims falls between March 1992, when the deductions

began, and June 30, 1994, when they ceased. During the second year

of this period, for reasons largely unrelated to this litigation,

all money collected for restitution was escrowed. During this twoyear period, the defendants engaged in an across-the-board policy

of deducting twenty percent from all money received from outside

sources. At any time during this period an inmate could petition

the court under Iowa Code section 910.7 for a hearing on any matter

related to his restitution plan or payment plan.

Because the 1995 legislation requiring a pre-deprivation

hearing cures Iowa law of any potential due process problems, the

question of prospective relief is moot. We need review only the

district court's retroactive order requiring the Department to

reimburse prisoners whose money was taken without a hearing. In

reviewing this order, we will not address the inmates' claim that

policy IN-V-106 was improperly promulgated under Iowa law, as

neither party contests, and the district court did not question,

the Department's authority under IAC rule 201-10.11.

II. 

We review the district court's grant of summary judgment de

novo, applying the same standard as the district court. Roth v.

U.S.S. Great Lakes Fleet, Inc., 25 F.3d 707, 708 (8th Cir. 1994).

Summary judgment is appropriate only when there is no genuine issue

of material fact and the moving party is entitled to judgment as a
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matter of law. Id. Finding no factual disputes, we confine our

discussion to whether, as a matter of law, inmates were deprived of

due process by the Department's across-the-board policy of

deducting twenty percent from money received by inmates from

outside sources.

The inmates do not attack the validity of their restitution

obligations. Nor do they attack the constitutionality of applying

a portion of their prison wages or "idle pay" toward those

restitution obligations. See Buckley v. Barlow, 997 F.2d 494 (8th

Cir. 1993) (upholding deduction of one-half of inmate's idle pay

pursuant to disciplinary committee's restitution order); Hrbek v.

Farrier, 787 F.2d 414 (8th Cir. 1986) (holding that inmates have no

constitutionally protected interest in the wages earned while in

prison). Instead, they argue that money cannot be taken from

outside source donations to satisfy those obligations without first

providing an individualized hearing, ostensibly to determine

whether the money is for an important purpose that should render it

exempt from deductions. They contend that an across-the-board

deduction of twenty percent from all money entering prison accounts

violates the Due Process Clause.

We agree with the district court that inmates have a property

interest in money received from outside sources. See Jensen v.

Klecker, 648 F.2d 1179, 1183 (8th Cir. 1981) (holding that inmates

have a property interest in their money); Sell v. Parratt, 548 F.2d

753, 757 (8th Cir.) (same), cert. denied, 434 U.S. 873 (1977).

Thus, inmates are entitled to due process before they can be

deprived of these monies. The question to be answered is what

process is due before money received from outside sources can be

applied toward an inmate's restitution obligations. Mathews v.

Eldridge, 424 U.S. 319 (1976), instructs us to balance three

factors when addressing such a question: 1) the private interest

that will be affected by the official action; 2) the risk of an

erroneous deprivation of such interest through the procedures used,
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and the probable value of additional or substitute procedures; and

3) the government's interest, including the function involved and

the fiscal and administrative burdens that the additional or

substitute procedural requirement would entail. Id. at 335; see

also Washington v. Harper, 494 U.S. 210 (1990) (applying Mathews

factors to prisoner's due process attack on a prison policy).

We first address the inmates' private interest in the money

they receive from outside sources. Although incarceration does not

deprive prisoners of the protection of the United States

Constitution, "simply because prison inmates retain certain

constitutional rights does not mean that these rights are not

subject to restrictions and limitations." Bell v. Wolfish, 441

U.S. 520, 545 (1979). Because of the underlying purposes of our

penal system, many privileges and rights are withdrawn or limited

during incarceration. Id. at 546.

Although the inmates' private interest in their personal funds

is apparent, inmates are not entitled to complete control over

their money while in prison. See Foster v. Hughes, 979 F.2d 130

(8th Cir. 1992) (inmates do not have a constitutional right to

place their money in interest-bearing accounts); Blankenship v.

Gunter, 898 F.2d 625 (8th Cir. 1990) (inmates can be

constitutionally prohibited from using money in their prison

accounts for religious donations). 

Moreover, inmates are not absolutely deprived of the benefit

of their money when part of it is applied toward their restitution

debts. In Beeks v. Hundley, 34 F.3d 658 (8th Cir. 1994), we held

that officials were not barred from applying the proceeds of a

section 1983 damage award they had paid the Iowa inmates to the

inmates' criminal restitution obligations. Specifically, we stated

that inmates received "virtually all the benefit of their § 1983

money judgment when the proceeds were applied to satisfy their

restitution debt." Id. at 661. We find appellees' attempts to
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distinguish Beeks to be unpersuasive. Regardless of factual and

procedural differences between the cases, the general principle

that an inmate whose money is taken and applied toward his courtordered restitution debt does not suffer from a total deprivation

of that money is applicable to both cases. When an inmate leaves

prison, he leaves with his restitution debts. Any payment of those

debts while the inmate is incarcerated will work to his ultimate

benefit. Other courts have followed a similar logic. Cf. Campbell

v. Miller, 787 F.2d 217, 222 (7th Cir.) (holding constitutional

prison officials' decision to impound a prisoner's account pending

his compliance with a restitution order and characterizing the

prisoner's complaint as a restriction on his freedom to use his

funds in a particular way, rather than a total deprivation of the

money), cert. denied, 479 U.S. 1019 (1986).

Turning to the risk of erroneous deprivation through the

procedures used, and the probable value of additional or substitute

procedures, we find no merit in the inmates' argument that they

received no procedural protection before the deductions were made.

In addition to the notice provided by policy IN-V-106, each inmate

was granted the procedural protections of a trial or plea

proceeding to establish guilt, and a subsequent sentencing hearing

to set punishment, including the amount of restitution. See Iowa

Code § 910.3. The Director of the Department then had an

individualized restitution plan prepared pursuant to section 910.5.

Upon petition by the inmate, any matter related to an inmate's

restitution plan or plan of payment could then be reviewed by the

Iowa District Court at any time during his incarceration. Iowa

Code § 910.7.

 Moreover, the inmates' argument that to satisfy the predeprivation hearing requirements of the Due Process Clause, see

Logan v. Zimmerman Brush Co., 455 U.S. 422, 436 (1982), the

Department was required to provide an individual hearing before any

deductions were made from outside-source funds, is misplaced. The
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inmates limit their analysis to an inappropriately narrow period--

that immediately before the deductions were actually made. The

deprivation in this case actually occurred on a broader level in

three stages. The initial deprivation occurred when, after a full

trial or plea hearing and an opportunity to be heard on claims of

a lack of ability to pay restitution, a restitution plan and a

payment plan were established. At this point, a debt was created

and the inmate was deprived of complete freedom over how to spend

future money until this debt was satisfied. 

Prior to this initial deprivation, the inmates were provided

with both notice and an opportunity to be heard. Moreover, at this

stage, before restitution was set, the court was required to

evaluate an inmate's individual ability to pay. See State v.

Haines, 360 N.W.2d 791 (Iowa 1985) (noting that it is the

"reasonable ability to pay" standard which allows § 910.2 to pass

constitutional muster). In addition, the plan of restitution and

plan of payment were both subject to modification by the court.

See Iowa Code § 910.7.

 

Once this initial deprivation occurred, the inmates' interest

in their money was diminished, much like the limitations on the

freedom to spend money suffered by any person who incurs a debt.

When the Department took the next step of designating specific

procedures for the repayment of an inmate's restitution, the

procedural requirements diminished. See, e.g., Scott v. Angelone,

771 F. Supp. 1064 (D. Nev. 1991) (holding that notice and postdeprivation grievance procedures are sufficient process to freeze

an inmate's prison trust account until the prisoner pays for

medical expenses he has incurred). At this second stage of

proceedings, the Department provided prisoners with notice of the

new twenty-percent deduction policy and of the continued

opportunity to contest their payment plans following this

amendment.
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 1

We note that although the Iowa Supreme Court has now

clarified that only one hearing is required to cover routine

periodic donations of money, the district court's holding contained

no such limitation.

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At the third stage, deductions were taken from money received

by an individual inmate. We see no due process need for an

additional hearing at this stage in light of the protections

already afforded the inmates by the foregoing procedures.

Finally, we consider the third Mathews factor, the

government's interest. In this case, the restitution system serves

the important state interests of compensating victims and teaching

inmates responsibility. See State v. Kluesner, 389 N.W.2d 370

(Iowa 1986); Haines, 360 N.W.2d at 795. 

Furthermore, the state's interest in maintaining

administrative control over prisons is significant. Courts are not

ideally situated to oversee the minute details of prison

administration. Procunier v. Martinez, 416 U.S. 396, 405 (1974).

We are in no position to determine the administrative costs of

providing a hearing before deducting from each incremental deposit

that a prisoner receives from an outside source.1 In the single

year that the money was escrowed, prison officials accumulated

approximately $538,000. The Department may reasonably have

determined that an across-the-board deduction was the best way to

deal with such large sums of money. We accord deference to such

administrative decisions.

 

III.

In conclusion, we find that a balancing of the Mathews factors

compels us to hold that the Department's deduction from funds

received from outside sources applied to satisfy an inmate's

restitution obligations during the time in question did not violate

the Due Process Clause. Given the limited nature of the
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deprivation, the more-limited due process protections applicable to

prisoners, and the deference to be paid to state decisions

concerning prison administration, we hold that the notice and

hearing procedures provided satisfied the flexible demands of the

Due Process Clause.

The judgment is reversed, and the case is remanded to the

district court for entry of judgment in favor of defendants.

HEANEY, Circuit Judge, dissenting:

I agree with the district court that, as a matter of due

process, inmates in Iowa state prisons are entitled to notice and

at least an informal hearing before twenty percent of contributions

to the inmate by family or friends may be taken to satisfy an

inmate's restitution obligation. The district court's position is

consistent with that of the Iowa Supreme Court in Walters v.

Grossheim, 525 N.W. 2d 830 (Iowa 1994), in which the court

highlighted that the Iowa Code requires a restitution plan of

payment "to reflect individualized factors bearing on the inmate's

ability to pay" based on the inmate's "income, physical and mental

health, education, employment and family circumstances." Id. at

832 (citing Iowa Code § 910.5(1)). The Code does not authorize the

"blanket post-restitution-plan deduction from non-wage assets" at

issue in this case. Id.

 The majority states that the Iowa inmates received adequate

procedural protections before deductions were made, in part because

they were given a sentencing hearing at which the court set the

amount of restitution owed. As the majority points out, the

inmates are not challenging the court's initial restitution

determination; nor would such a challenge be relevant because at

sentencing, the court does not purport to determine the amount that

an inmate can pay each month while in prison in light of all the

factors cited in Grossheim. These decisions are left to other
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officials to make after an informal hearing. 

The majority also asserts that the inmates received additional

procedural protection through the opportunity to have their

restitution plans reviewed by the Iowa District Court under

section 910.7 of the Iowa Code. Although the inmates may contest

amounts withheld in a post-deprivation hearing, such a hearing may

deprive them of resources at a time when these resources are

necessary to meet needs recognized by the State of Iowa.

The majority is correct in noting that we should give

deference to state decisions concerning prison administration.

Yet, in the context of deductions from an inmate's outside

resources, the State has determined that a pre-deprivation hearing

is required. Thus, the majority rejects, rather than defers to,

state policy as determined by both the Iowa Supreme Court and the

Iowa Legislature.

Finally, while it is true that we are obligated to follow our

own precedent, the case the majority relies on, Beeks v. Hundley,

34 F.3d 658 (8th Cir. 1994), did not involve the issue presented in

this case. In Beeks, we specifically stated:

Beeks and McKenzie also argue that state law and

their due process rights were violated by the manner in

which victim restitution was deducted from their prison

accounts. These issues were not considered by the

district court. . . . [N]or were these additional issues

fairly raised by the informal pro se request for relief.

Id. at 662.

We should follow the district court and the Iowa Supreme Court

and hold that the inmate's due process rights were violated by Iowa

prison authorities and grant the relief given by the district

court. To do otherwise is to deny inmates the due process to which
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they are entitled under the federal Constitution. Accordingly, I

would affirm the decision of the district court.

A true copy.

Attest:

 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.