Opinion ID: 2588729
Heading Depth: 3
Heading Rank: 1

Heading: DSHS as a creditor

Text: Whether DSHS acts as a creditor when it reimburses itself for foster care costs out of the foster children's Social Security Administration (SSA) entitlements is the crucial question. If DSHS's reimbursement scheme is that of a creditor, the antiattachment provisions of § 407(a) apply and DSHS's cost recovery policy runs afoul of a federal statute which preempts state law under the Supremacy Clause of the United States Constitution. U.S. Const. art. VI, cl. 2. The facial logic of DSHS's reimbursement scheme demonstrates a creditor relationship, a relationship involving creditor-type acts, vis-à-vis foster children and their SSA benefits. Further, while no federal case addresses the peculiar set of facts involved here, the course of federal precedent in similar situations arising under § 407(a) undercuts the claim that DSHS complies with federal law. In Philpott v. Essex County Welfare Bd., 409 U.S. 413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1973), the United States Supreme Court described the broad protection § 407 affords Social Security benefits. Philpott declared that § 407 barred New Jersey's attempt to reach federal Social Security disability benefits in order to reimburse the state for public assistance expenditures made on behalf of the petitioners. State welfare recipients were made to execute an agreement, as a condition precedent to receiving welfare benefits, to reimburse the county welfare board with any funds that came into their possession. When Philpott refused to turn his SSA disability benefits over to the welfare board the latter sued to enforce the agreement. The Supreme Court held § 407 on its face prohibited New Jersey from reaching the petitioner's federal disability payments, explaining, We see no reason why a State, performing its statutory duty to take care of the needy, should be in a preferred position as compared with any other creditor. Philpott, 409 U.S. at 416, 93 S.Ct. 590. Responding to the argument New Jersey may not be a creditor with respect to the SSA benefits, the Court continued: § 407 does not refer to any `claim of creditors'; it imposes a broad bar against the use of any legal process to reach all social security benefits. That is broad enough to include all claimants, including a State. 409 U.S. at 417, 93 S.Ct. 590. This language evinces a federal policy with respect to SSA benefits the broad barwhich controls this case. The Supreme Court again took up § 407(a) in Bennett v. Arkansas, 485 U.S. 395, 108 S.Ct. 1204, 99 L.Ed.2d 455 (1988), where Arkansas attempted to attach certain federal benefits paid to individuals incarcerated in Arkansas prisons to reimburse the state for maintaining a prison system. Arkansas argued an implied exception to the broad bar of § 407(a) (as here) where the state is providing public money for the care and maintenance of the SSA beneficiary. The Court found no such care and maintenance exception for states given the express language of § 407(a) and the clear intent of Congress that Social Security benefits not be attachable. Bennett, 485 U.S. at 397-98, 108 S.Ct. 1204. DSHS in the instant case attempts to evade § 407(a) by arguing that it simply provides the care and maintenance intended by the SSA. We find that argument as unavailing, notwithstanding some factual dissimilarities, as did the Supreme Court. Closer to home, the Ninth Circuit ruled in Brinkman v. Rahm, 878 F.2d 263 (9th Cir. 1989) DSHS may not deduct SSA benefits as reimbursement for the costs of care and maintenance, paid out of public funds, for involuntarily committed mental health patients in state hospitals. The court noted, The state collects this debt from the appellees by withdrawing [Old Age Survivor's and Disability Insurance] funds from appellees' accounts at the state hospital accounting offices, finding § 407 preempts this procedure. Brinkman, 878 F.2d at 264. There is not a significant enough difference between DSHS's methods in Brinkman and its methods of reaching the foster children's SSA benefits in this case [13] to justify a different result. The Ninth Circuit again addressed the issue in Crawford v. Gould, 56 F.3d 1162 (9th Cir.1995) where, under California law, patients committed to state psychiatric hospitals were held responsible for the costs of their own incarceration. California accordingly required all funds and income, including SSA benefits, to which the patient was entitled to be placed in a hospital trust account from which the state could deduct as reimbursement the costs of care and maintenance expended on the patient. The state deducted the money whether or not the patient authorized the deduction. Holding § 407 preempted this procedure, the Ninth Circuit held: Our conclusion, that other legal process includes the procedure that California uses to deduct Social Security benefits, is consistent with the purpose of § 407. The nonassignment provision was not designed to preclude use of only the judicial process to obtain Social Security benefits. Rather, § 407(a) is designed to protect social security beneficiaries and their dependents from the claims of creditors. The cramped reading of § 407 California urges would enable the state to obtain Social Security benefits through procedures that afford less protection than judicial process affords. Crawford, 56 F.3d at 1166 (citations omitted). These cases evince an expansive interpretation of the protections of § 407. The thrust of the case law is that Social Security benefits are, for all intents and purposes, beyond the reach of the state, however clever or subtle its attempt to seize them. Philpott and the cases in its line, including Crawford, are on point and persuasive. The state claims King v. Schafer, 940 F.2d 1182 (8th Cir.1991) justifies DSHS's position, particularly because DSHS acts as a representative payee under 42 U.S.C. § 405(j) for the foster children in this case. In King the State of Missouri, as representative payee, received SSA benefits due involuntarily committed mental patients and reimbursed itself for the care and maintenance costs expended out of public funds for the patients. The patients argued the state's application to become the patient's representative payee to accept the patients' SSA benefits violated the other legal process provision of § 407(a). However the King court disagreed, noting the illogic of presuming § 407(a) would outlaw a procedure (applying to become representative payee) expressly authorized by § 405(j). We cannot agree with the plaintiffs, wrote the King court, that the Department's participation in the administrative proceeding to become a representative payee is the kind of coercive legal process envisioned by § 407(a). King, 940 F.2d at 1185. In light of King, and the fact that DSHS enjoys the status of representative payee (for most) of the foster children under § 405(j) and 20 C.F.R. § 404.2001(a), the significance of the state's representative payee status requires further discussion. [14] The King plaintiffs challenged the state's procedure for applying to become representative payee, arguing that procedure (incident to which the state seized the mental health patient's SSA benefits) violated § 407(a) as other legal process. However here it is not DSHS's procedure to apply to become the foster children's representative payee that is under attack; rather it is DSHS's practice of reimbursing itself from the foster children's SSA benefits once it becomes representative payee. The difference is subtle, but the distinction is crucial. There is nothing ipso facto wrong with DSHS applying to become the representative payee for certain foster children, as § 405(j) and the SSA's accompanying regulations explicitly contemplate. We may even agree the representative payee application is not other legal process. But it is equally clear the reimbursement process is other legal process, given the definition of that phrase furnished by Philpott, Brinkman, Bennett, and Crawford. Accordingly, King must be distinguished, as Judge Burchard below correctly concluded, [T]here is no legal basis for giving foster children less protection for their social security benefits than adult welfare recipients, state prisoners or involuntarily committed mental patients receive. CP at 627 (Trial Court's Mem. Op. (Sept. 29, 1998) at 7). The state also claims C.G.A., 824 P.2d 1364 supports its position. But C.G.A. only said the state may apply to become a representative payee. C.G.A., 824 P.2d at 1366. The court did not hold the state could reimburse itself but deferred that determination to the Social Security agency under the doctrine of primary jurisdiction. Id. at 1370. Like King, C.G.A. stands for no more than the uncontested proposition DSHS may apply to become a representative payee. DSHS reimbursement is barred by § 407(a) because despite DSHS's status as representative payee it performs the role of creditor when it takes the foster child's SSA entitlement to reimburse itself for moneys spent on the child. A representative payee may not be a creditor of such individual who provides such individual with goods and services for consideration. 42 U.S.C. § 405(j)(2)(C)(i)(III). However to claim DSHS does not provide goods and services for consideration is only to say that DSHS is not the kind of creditor which § 405(j) excludes from representative payee status. It is not to say the definition of a creditor who provides such individual with goods and services for consideration, id., is an exhaustive definition of other creditors who do not, nor is it to say DSHS cannot become a creditor or act like a creditor despite the fact it is a representative payee. If DSHS is allowed under § 405(j) to become a representative payee for the foster children, that fact does not establish the legality of taking the child's money. Furthermore, the bare logic of reimbursement also implies a creditor-debtor relationship. Common sense and dictionary definition of reimburse is [t]o pay back, to make restoration, to repay that expended; to indemnify, or make whole. Black's Law Dictionary 1287 (6th ed.1990). In common parlance one need not make a payback unless something loaned was owed by the recipient back to the payee. In fact the public policy of our state to recover the costs expended from public funds on foster children implies exactly this sort of debtor-creditor relationship. [15] As DSHS presently conceptualizes the matter, RCW 74.13.060 (and its implementing regulation, former WAC 388-70-069) [16] requires it to reimburse itself for the public assistance it has meted out to foster children from money, including SSA entitlements, that come into the children's possession. If the Legislature and DSHS did not hold the costs of foster care were somehow owed back to the taxpayers, it would not claim the right of DSHS to reimburse itself on the taxpayer's behalf. DSHS's representative payee status further undercuts the legality of its reimbursement process because a representative payee is charged under SSA regulation, 20 C.F.R. § 404.2035, with the responsibility to [u]se the payments he or she receives only for the use and benefit of the beneficiary in a manner and for the purposes he or she determines, under the guidelines in this subpart, to be in the best interests of the beneficiary.  Id. § 404.2035(a) (emphasis added). We seriously doubt using the SSA benefits to reimburse the state for its public assistance expenditure is in all cases, or even some, in the best interests of the beneficiary. Using this money for the care and maintenance of the beneficiary, as required under 20 C.F.R. § 404.2035(a), would indeed be in the best interest of the beneficiary, but that is significantly different from using the money to reimburse the state for payments it made for the care and maintenance of the foster childespecially when that payment to the state cannot be legally compelled and, moreover, could be used or conserved for other special needs of the child. As the state concedes, DSHS takes on a fiduciary or quasi-fiduciary role when it acts as representative payee. Br. of Appellants at 3. DSHS's reimbursement procedure hence constitutes a conflict of interest precisely because DSHS uses the SSA benefits it receives as representative payee in a manner inconsistent with the best interests of the foster children entitled to the money. However worthy cost recovery might be, DSHS cannot violate federal law at the expense of foster children to accomplish it. Accordingly we hold each instance of reimbursement makes DSHS a creditor, or, if not a creditor, then at least committed to a creditor-type action that is preempted by the broad bar of § 407(a). DSHS's application under § 405(j) to become a foster child's representative payee is at best immaterial to the analysis pertaining to its use of SSA benefits as reimbursement, or is at worst incompatible with that use of the benefits, as discussed above. Given our view that the state's actions violate the Supremacy Clause we find it unnecessary to consider other alleged constitutional infirmities such as deprivation of property without due process or denial of the equal protection of the law. See U.S. Const. amend. XIV.