# State of Oregon, Department of Human Services v. Hutchins

> United States Bankruptcy Court, D. Oregon · March 23, 2021

URL: https://www.frixlaw.com/law-library/cases/10461620

## Case

- **Court:** United States Bankruptcy Court, D. Oregon
- **Decided:** March 23, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

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- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10461620

## How later opinions describe it (automated extraction)

- holding overpayment of disability benefits nondischargeable under § 523(a)(2)(A) for debtor’s failure to report a change in employment status
- holding overpayment of disability benefits nondischargeable under § 523(a)(2)(A

## Opinion text

NWrarechh 20, □□□□
Clerk, U.S. Bankruptcy Court

Below is an opinion of the court.

□□ M. BROWN
U.S. Bankruptcy Judge

NOT FOR PUBLICATION
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF OREGON
In re: Bankruptcy Case
No. 19-31567-tmb7
MARA GISELLA HUTCHINS,
Debtor.
STATE OF OREGON, Department of Human Adv. Proc. No. 19-3086-tmb
Services,
MEMORANDUM OPINION!
Plaintiff,
Vv.
MARA GISELLA HUTCHINS,
Defendant.
This adversary proceeding came before the court for trial beginning on January 5, 2021,
and concluding on January 7, 2021. Plaintiff State of Oregon, Department of Human Services
(the “State” or ““_DHS”) was represented by Carolyn Wade and Belle Na; debtor Mara Hutchins
was represented by Laura Caldara and Amanda Bryan. The State has asserted a claim against
Ms. Hutchins for overpayment of benefits under the Supplemental Nutrition Assistance Program

' This disposition is specific to this case and is not intended for publication or to have a controlling effect
on other cases. It may, however, be cited for whatever persuasive value it may have.
Page 1 — OPINION

(“SNAP”). In this proceeding the State seeks a ruling that Ms. Hutchins’s liability for repayment
of the SNAP benefits is non-dischargeable.
The trial lasted three days, included testimony from fifteen witnesses, and featured sixty-
four documentary exhibits as well as one demonstrative exhibit in which a DHS employee
demonstrated the user experience applying for SNAP benefits online. I listened carefully to the
trial testimony of witnesses, and have since reviewed the notes I took during trial, the recordings
of witness testimony, the parties’ memoranda, and the admitted exhibits. In addition to
examining the factual evidence, I have considered the parties’ legal arguments and reviewed
relevant authorities, both as cited by counsel and as located through my own research. Based on
my review and consideration, I have reached the decision set forth in this opinion. The findings
of fact and conclusions of law set forth herein constitute my findings and conclusions for
purposes of Federal Rule of Civil Procedure 52(a) (applicable via Federal Rule of Bankruptcy
Procedure 7052).
I. General Factual Background
Ms. Hutchins filed a voluntary chapter 7 petition on April 29, 2019, and received a
discharge on August 27, 2019.2 On August 19, 2019, the State commenced this adversary
proceeding by filing a complaint asserting two claims under § 523(a)(2). The evidence received
at trial generally establishes that Ms. Hutchins has led an extremely challenging life. As the
State readily admits, Ms. Hutchins suffered repeated trauma as a child, and as a result she has
been diagnosed with post-traumatic stress disorder (“PTSD”). As an adult, Ms. Hutchins has
struggled with mental health and substance abuse issues, although she has raised a family, met
with professional success as a hairstylist, and has been sober since July 2017. Ms. Hutchins also
has several children,3 and it is clear to me that Ms. Hutchins has worked hard to care for her
children under difficult circumstances. In an effort to provide for her children (two of whom
have special needs), Ms. Hutchins has applied for, and received, SNAP benefits numerous times

2 Unless otherwise indicated, all chapter and section references are to the Bankruptcy Code, title 11,
United States Code.
3 Although Ms. Hutchins testified about her family, she never stated how many children she has. Based
on documentary evidence, it appears that Ms. Hutchins has had between two and four children during the
since 1999. This adversary proceeding concerns the SNAP benefits that Ms. Hutchins received
during the years 2013 through 2017.4
On July 3, 2013, Ms. Hutchins submitted an online application for SNAP benefits.5
According to Ms. Hutchins’s trial testimony, she submitted the July 2013 application right
around the time that she opened a salon called Stylab Salon, LLC (“Stylab”). Ms. Hutchins
continued to operate Stylab at all times relevant to this proceeding. For some portion of this
time, Ms. Hutchins also operated a beauty-product wholesale business called Shear Inspiration
Style LLC, doing business as Sidlab (“Sidlab”). To maintain her SNAP benefits, Ms. Hutchins
submitted additional applications each year from 2014 through 2017. In addition, at roughly the
midpoint of each benefit year, Ms. Hutchins was required to complete an “interim change report”
focused on capturing major changes in household finances.
Ms. Hutchins failed to disclose her ownership of Stylab and Sidlab on her SNAP
applications and interim change reports.6 She also failed to disclose her income from these
businesses, and failed to list several bank accounts owned by her and/or her husband. The State
contends that these errors constitute misrepresentations sufficient to declare the SNAP
overpayment nondischargeable under § 523(a)(2). Ms. Hutchins argues that the omissions result
from her PTSD, which “likely impacted her ability to accurately report factual information” to
the State.7
II. Jurisdiction
I have jurisdiction to decide the claims at issue in this proceeding pursuant to 28 U.S.C.
§§ 1334 and 157(b)(2)(I).
III. Legal Standards
The State seeks a determination of non-dischargeability under both §§ 523(a)(2)(A) and
(B). As relevant here, § 523(a)(2)(A) excepts from discharge a debt “for money [or] property . . .

4 Pretrial Order (ECF No. 92) ¶¶ (C)(15) through (24).
5 Id. ¶¶ 16-17; Trial Exhibit A.
6 Ms. Hutchins’s first SNAP application did disclose income from Sidlab, but it stated that her income
from the company ended on June 7, 2013. Pltf. Exh. A at 5. Despite this statement, Ms. Hutchins
continued to report income from Sidlab on her tax returns in 2014 (Pltf. Exh. T at 6) and 2016 (Pltf. Exh.
V at 8).
to the extent obtained by . . . false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor’s . . . financial condition.” To prevail on a claim under
§ 523(a)(2)(A), a creditor must prove by a preponderance of the evidence that: (1) debtor made
representations, (2) that she knew at the time were false, (3) with the intention and purpose of
deceiving creditor; and, (4) that creditor relied on such representations (5) and sustained loss and
damage as a proximate result.8 A debtor’s intent may be proven by circumstantial evidence.9
Alternatively, instead of an affirmative misrepresentation, a creditor may prove that a debtor
failed to disclose a material fact when the debtor was under a duty to disclose such fact and the
omission was motivated by either an intent to deceive or a reckless disregard for the truth.10
Section 523(a)(2)(B) excepts debts from discharge that arise from the debtor’s issuance
of a false written financial statement. To prevail on a claim under § 523(a)(2)(B), a creditor
most prove, by a preponderance of the evidence, that: (1) the debtor made a representation of fact
respecting the debtor’s or an insider’s financial condition, (2) the representation was material, (3)
the debtor knew the representation to be false at the time, (4) the false representation was made
with intent to deceive the creditor, (5) the creditor justifiably relied on the statement, and (6)
sustained damages as a proximate result.11
IV. Analysis
Ms. Hutchins’s trial presentation relied heavily (but by no means exclusively) on
emphasizing the difficulties she has faced during her childhood and into her adult life. I cannot
fault Ms. Hutchins for bringing her humanity into focus, and in some respects, her life story is
relevant to the case at hand. But ultimately, I must decide this case based on applicable law and
the facts presented at trial. It is well established that bankruptcy courts do not possess a roving
commission to do equity. At all times, including when considering claims of
nondischargeability, this court may only use its equitable powers to carry out specific provisions

8 Younie v. Gonya (In re Younie), 211 B.R. 367, 373 (9th Cir. BAP 1997).
9 Rubin v. West (In re Rubin), 875 F.2d 755, 759 (9th Cir. 1989).
10 Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1246, n.4 (9th Cir. 2001); Advanta Nat’l Bank v.
Kong (In re Kong), 239 B.R. 815, 827 (9th Cir. BAP 1999).
of the Bankruptcy Code.12 No provision of the Code grants me the power to discharge Ms.
Hutchins’s debt based on my sympathy for her. Instead, I must apply established law, which I
will proceed to do.
Citing recent Supreme Court precedent, Ms. Hutchins challenges the State’s ability to
seek a determination of nondischargeability under § 523(a)(2)(A). The law of this circuit holds
that §§ 523(a)(2)(A) and (B) are mutually exclusive.13 Ms. Hutchins points to Lamar, Archer &
Cofrin, LLP v. Appling,14 which holds that a written statement concerning a single asset is
actionable under § 523(a)(2)(B). Based on the holding of Appling, Ms. Hutchins argues that
“[t]he statements at issue in this case are ‘respecting [Ms. Hutchins’s] financial condition’ and as
such, the State of Oregon cannot proceed on its 11 U.S.C. § 523(a)(2)(A) claim against her.”15
Before ruling on this argument, I must first acknowledge that the State’s theory of the
case distinguishes which alleged omissions or misstatements support which claims. The State
argued at trial that Ms. Hutchins’s failure to report the basic fact that she was self-employed
constitutes an actionable omission under § 523(a)(2)(A), while her failure to report the amount of
her income and certain bank accounts constitutes misrepresentation of financial details that is
actionable under § 523(a)(2)(B). With this distinction in mind, I hold that Ms. Hutchins’s
interpretation of Appling fails in light of the Supreme Court’s own explanation of its holding.
The unsuccessful petitioner in Appling argued that requiring a creditor to use § 523(a)(2)(B) to
attack a debtor’s misrepresentation of a single asset would largely gut the applicability of
§ 523(a)(2)(A). In rejecting this argument, the Court cited, with approval, two cases where debts
based on an overpayment of public benefits were held nondischargeable under § 523(a)(2)(A)
because the debtors made misrepresentations regarding their employment status.16

12 Saxman v. Educ. Credit Management Corp. (In re Saxman), 325 F.3d 1168, 1175 (9th Cir. 2003).
13 McCrary v. Barrack (In re Barrack), 217 B.R. 598, 605-606 (9th Cir. BAP 1998).
14 138 S.Ct. 1752 (2018).
15 Def. Tr. Brief (ECF No. 104) at 3-4.
16 Appling, 138 S.Ct. at 1763, n.4 (citing U.S. v. Tucker (In re Tucker), 539 B.R. 861 (Bankr. D. Idaho
2015) (holding overpayment of disability benefits nondischargeable under § 523(a)(2)(A) for debtor’s
failure to report a change in employment status) and U.S. v. Drummond (In re Drummond), 530 B.R. 707
I hold that the two cases cited by the Supreme Court are directly analogous to the State’s
allegations concerning Ms. Hutchins’s concealment of her self-employment, and thus Appling
does not prevent the State from using § 523(a)(2)(A) to challenge Ms. Hutchins’s failure to
disclose the fact that she was self-employed. In a slight departure from the State’s arguments at
trial, the Pretrial Order does contain some references to “income through self-employment” and
omitted “assets” when describing the State’s claim under § 523(a)(2)(A).17 It appears that the
State has abandoned these allegations, but to the extent that it has not, then Ms. Hutchins is
correct that the State cannot use § 523(a)(2)(A) to attack quantitative misrepresentations
regarding income or assets. But Appling makes quite clear that the alleged omissions regarding
Ms. Hutchins’s employment status are actionable under § 523(a)(2)(A).
Having clarified the contours of the State’s § 523(a)(2)(A) claim, I now turn to the
elements that the State must prove. I find no real dispute that Ms. Hutchins made representations
to the State, that she was under a duty to answer truthfully, and that she omitted material facts
regarding her self-employment. Ms. Hutchins’s representations are contained in Plaintiff’s
Exhibits A through E (Ms. Hutchins’s SNAP applications for 2013 through 2017), G through J
(Ms. Hutchins’s interim change reports for 2013 through 2016), and L (a summary of numerous
verbal interactions between Ms. Hutchins and DHS). Although Ms. Hutchins challenges the
accuracy of some of the summaries contained in Exhibit L (an issue that I will discuss later), she
did not actively contest the fact that she made representations to DHS. At a theoretical level, the
State’s allegations could be classified as either misrepresentation or omission—Ms. Hutchins
made extensive representations about her household finance, but failed to disclose her self-
employment. This could arguably be considered a misrepresentation (by focusing broadly on the
picture she presented to DHS) or an omission (by focusing only on the facts that were not
disclosed).18 The distinction does not change the outcome of my analysis. For simplicity’s sake,
I will use the five aforementioned elements of fraud under § 523(a)(2)(A), although later in this

17 Pretrial Order ¶ E(1)(a).
18 See Tallant v. Kaufman (In re Tallant), 218 B.R. 58, 65 (9th Cir. BAP 1998) (failure to disclose
information that one is under a duty to disclose may constitute “a false representation of nondisclosure”
opinion I will analyze some facts under the “reckless disregard” standard used for material
omissions.
Because the State has authenticated the documents in which Ms. Hutchins made
representations regarding her eligibility for SNAP benefits, the State has satisfied the first
element under § 523(a)(2)(A). The remaining elements are all disputed, and I will discuss them
in turn. The evidence produced at trial focused almost exclusively on Ms. Hutchins’s ownership
of Stylab. Accordingly, the following analysis will focus on Stylab. Later in this opinion, I will
separately address the allegations regarding Sidlab.
A. Ms. Hutchins’s Knowledge of Falsity
When addressing her knowledge of falsity, Ms. Hutchins latches onto DHS’s rules for
calculating self-employment income, emphasizing how difficult it can be for laypeople to
understand the State bureaucracy. To be clear, some aspects of the rules are quite complicated,
but to adopt Ms. Hutchins’s framing would elide the more foundational and straightforward
omissions that she made concerning the nature of her businesses and her employment. The issue
here is not DHS’s arcane rules regarding income calculation, but rather the meaning of a simple
question: are you self-employed?
Ms. Hutchins formed Stylab on May 13, 2013 by filing articles of organization with the
Oregon Secretary of State.19 Sometime in 2013, Ms. Hutchins and her father signed a
commercial lease for Stylab’s place of business.20 Ms. Hutchins testified that Stylab opened for
business at approximately the same time as she submitted her 2013 SNAP application (July 2,
2013). On her personal tax returns for each year from 2013 through 2016, Ms. Hutchins reported
Stylab’s revenue (ranging from $24,759 to $156,099) and expenses (ranging from $37,379 to
$136,481).21 Ms. Hutchins testified that she was in charge of operating the salon, at which
various hairstylists worked on a commission basis. In addition, Ms. Hutchins had her own chair,
serving her own customers. She also testified, credibly, that in the early years of the salon, she

19 Pltf. Exh. R.
20 Pltf. Exh. KK. The lease does not indicate the date on which it was signed, and Ms. Hutchins testified
that she could not remember the date of signing; however, the lease term began on July 1, 2013, so
presumably the document was signed sometime before that date.
took the money she earned from her customers and deposited it into the general operating
account to cover the business’s overhead expenses. As a result, even though Ms. Hutchins was
seeing customers, she testified that she did not personally receive and retain compensation from
Stylab until “maybe 2017 or ’18,” at which point she started receiving a $500 monthly draw.
During the years between 2013 and 2017, Ms. Hutchins failed to disclose her ownership of
Stylab on her SNAP applications22 or interim change reports.23
When testifying at trial, Ms. Hutchins described Stylab as a type of partnership between
herself and her father, stating that “My dad had offered to help me kind of get started on a
business and own a salon.” According to Ms. Hutchins, her father loaned her money to start the
business, which lead to her confusion about how to report her ownership: “This money was from
my dad, in my mind—especially during this time—it was my dad’s business, it wasn’t mine until
I paid back the loan . . . . He was like a silent partner, but on paper it was mine.” At a different
point in her testimony, Ms. Hutchins stated “My dad didn’t want legal ramifications if something
horrible happened. But he has said he’s like a silent partner, he just didn’t want to be on paper.”
I find Ms. Hutchins’s testimony about her perceptions of her ownership to be credible,
but at the same time, this testimony supports an inference that she knew her representations to
DHS were false. The SNAP application and interim change reports both contained similar
certifications, signed by Ms. Hutchins, that the applicant has given “complete” information. But
Ms. Hutchins acknowledged that she owned the business “on paper,” at least in part because her
father wanted to avoid the “ramifications” of owning the business. The inescapable result of this
logic is that Ms. Hutchins was the record owner of the business, and one of the resulting
ramifications for her is that she is obliged to report Stylab as her business when agencies such as
DHS require her to provide complete information about her employment.
This finding is further strengthened when I examine the specific statements Ms. Hutchins
made to DHS. There were four interim change reports, each of which asked if anyone in the
applicant’s household was self-employed. Following the self-employment question, the form
contains space to report each household member’s hourly wage, but there are additional lines

22 Pltf. Exhs. A at 5-7, B at 5-6, C at 5-6, D at 5-6, and E at 5-6.
where an applicant can provide details about a household member’s compensation if that person
is not paid hourly. I believe Ms. Hutchins’s testimony that she did not personally draw a salary
from the salon (at least in the early years), however the interim change report contained plain-
language questions and provided space for her to disclose that she worked at her own business
but was not drawing a salary due to its marginal profitability. For Ms. Hutchins to simply omit
any reference to the business bespeaks an intentional withholding of material information, and
her own testimony suggests that she must have been aware of this misrepresentation because she
admits to being the business owner “on paper.”
Furthermore, Ms. Hutchins’s own description of her role at Stylab is irreconcilable with
some of the representations she made to DHS as part of the SNAP application process. At trial,
Ms. Hutchins stated that she saw her role at Stylab as follows: “In my mind, it’s been my dad’s
salon, and I worked there. On paper, yes it is mine, but until those loans are paid off, it is not my
salon.” I found Ms. Hutchins’s testimony in this respect to be believable, but it is highly
probative that when asked to use her own language, she admitted to working at the salon. True,
Ms. Hutchins performed this work for many years without receiving cash compensation, but she
did receive other consideration for her work and she had no difficulty articulating the economic
dynamic at play: her father provided the start-up funding, and rather than receiving a salary, Ms.
Hutchins worked to pay back her father. Once the loan was repaid, the salon was to be hers.
With this firm grasp on the structure of her business, I thus find that Ms. Hutchins must have
known it was false to repeatedly tell DHS that she was not working.24
B. Intent to Deceive or Reckless Disregard for the Truth
As in most cases of alleged fraud, Ms. Hutchins did not overtly proclaim her intent while
applying for SNAP benefits. Accordingly, the State points to circumstantial evidence.25 In

24 In addition to the five SNAP applications and four interim change reports that all failed to disclose Ms.
Hutchins’s self-employment, the record contains three instances of similar oral misrepresentations made
during eligibility interviews conducted by DHS. See Pltf. Exh. L at 26 (June 26, 2014 eligibility
interview stating “Mara reports husband Brian is the only person [in the household] currently employed”),
20 (June 19, 2015 eligibility interview stating “Mara reports not currently not employed [sic]”), and 15
(June 23, 2016 eligibility interview stating “No one in the household is working”).
25 See First Nat’l Bank of Red Bud v. Kimzey (In re Kimzey), 761 F.2d 421, 424 (7th Cir. 1985) (intent to
deceive may be logically inferred from a representation that debtor knows will be relied upon by the
response, Ms. Hutchins takes a scattershot approach to challenging the State’s evidence of intent.
Ms. Hutchins’s counsel began by suggesting that the SNAP application could have been
confusing or challenging to complete for an applicant who was intoxicated. Ms. Hutchins, for
her part, testified that she was using illegal drugs during the years in question, but she could not
recall if she was impaired during the specific times when she completed DHS paperwork. This
line of argument lacks merit because it is the applicant’s duty to answer questions honestly and
forthrightly. There is no evidence that any of Ms. Hutchins’s SNAP applications were submitted
under duress or during exigent circumstances. As explained later, I find that Ms. Hutchins is
intelligent and capable when she is sober. If she chose to complete the applications when she
was not sober, this would constitute reckless disregard for the truth, not a defense to fraudulent
intent. On the other hand, Ms. Hutchins’s allegations regarding the impact of her mental
illness26 are colorable, and deserve careful consideration. I will address the State’s evidence and
Ms. Hutchins’s defenses separately.
1. Circumstantial Evidence Indicates that Ms. Hutchins Intentionally
Concealed Her Employment Status from DHS
Ms. Hutchins testified at trial that she recalled a conversation with a DHS employee who
allegedly provided her with guidance on how to report her work at Stylab. Although Ms.
Hutchins could not recall the date of this conversation or the name of the DHS employee, she
testified that it took place sometime in 2013, she recalls it lasting roughly 90 minutes, and the
employee (who was female) took notes of the conversation. As for the contents of the
discussion, Ms. Hutchins testified, “[I] said that I had a salon, that I worked 40 hours a week at
least, but I didn’t get paychecks, there was absolutely no positive money coming in.” In Ms.
Hutchins’s telling, the DHS employee “said something like ‘So, it’s like you’re a volunteer,’ and
I was like ‘Yes, that’s absolutely— Because I’m spending all this time here, but I’m not making
anything.’ But I wanted her to know that I’m not just sitting at home not doing anything. I’m
really trying to do something.” In regards to her SNAP benefits, Ms. Hutchins testified that the
DHS employee said: “Once I made over X-amount of dollars—and I don’t remember the exact
amount, I think it was like twenty-three hundred or something, I don’t remember—that that’s
when it would change or adjust my case, and to make sure that I let them know as soon as I made
over X-amount of dollars.”
More generally, Ms. Hutchins testified that she did not consider herself as receiving
income from Stylab because she did not personally receive any portion of the business’s net
profits. At least as far as 2013 and 2014 are concerned (when the business was making no, or
minimal, profits) this perception may excuse Ms. Hutchins’s failure to report monthly income
from the salon; however, it does not adequately explain why Ms. Hutchins failed to report the
basic fact that she worked at a business that she owned. Indeed, based on the totality of facts and
circumstances, I find that Ms. Hutchins concealed this information with intent to deceive DHS. I
base this finding on four separate pieces of circumstantial evidence. None of these findings,
standing by themselves, are dispositive, but cumulatively they are sufficient for me to infer that
Ms. Hutchins intentionally concealed the details of her business ownership from DHS.
First, I find that Ms. Hutchins has not sufficiently proven that a DHS employee told her
to not report her work at Stylab, or to report it as volunteer work (the so-called “volunteering
discussion” described two paragraphs above). Although Ms. Hutchins testified at trial that she
could not recall the precise date of the alleged volunteering discussion, she had previously told
DHS that it took place as part of her SNAP eligibility interview in July 2013.27 The notes taken
by the DHS employee who conducted that July 2013 interview do not corroborate Ms.
Hutchins’s account.28 Although Ms. Hutchins’s counsel tried mightily to cast doubt on the
accuracy of the notes kept by DHS workers documenting interactions with Ms. Hutchins, I find
that testimony from multiple State witnesses (including the authors of some such notes)
established the general reliability of these notes, which are collected in Plaintiff’s Exhibit L. It is
true that the notes are not verbatim accounts, so the absence of such a discussion from the July
2013 notes does not definitively establish that the discussion did not take place, but the notes do
generally corroborate the State’s version of events. Furthermore, four different DHS employees
testified about training that SNAP eligibility workers receive, and this testimony persuades me
that the training is thorough and consistent, and it is vanishingly unlikely that a DHS worker who

27 Pltf. Exh. L at 3.
received such training would tell any applicant to report their own business as a volunteer
activity. Furthermore, Ms. Hutchins claims that the DHS worker affirmatively told her to not
report her self-employment income until it exceeded the supposed threshold figure (the number
that Ms. Hutchins cannot remember). Based on the cumulative testimony concerning DHS’s
employee training, I find that this particular statement is so starkly contrary to DHS’s policies
and practices that it is almost certainly not an accurate representation. There may be a basis in
fact for Ms. Hutchins’s perception of the July 2013 discussion, but she has not produced
evidence establishing that her version of events is more likely than not to be accurate.
Second, even if one were to believe Ms. Hutchins’s account of the volunteering
discussion, her answers on the SNAP applications and interim change reports still indicate an
intent to withhold material information from DHS. According to Ms. Hutchins, she was under
the impression that self-employment income only impacted her SNAP eligibility if it was over a
certain dollar amount, but she could not recall the specific amount. If that were her
understanding, then it would have been incumbent upon Ms. Hutchins to report Stylab’s income
so that DHS could then determine whether she was above or below the threshold that she herself
was unable to remember. Indeed, as the State demonstrated, applicants could submit (and the
State would process) SNAP applications that disclosed employment activity but contained no
information on the amount of income associated with such employment. If Ms. Hutchins were
confused about how to compute her income, one would have expected her to report Stylab as her
employer, with either no income or a narrative explanation.29 But this is not what she did.
Instead, she concealed her work at Stylab, even though she admits to not remembering the
amount of the income threshold that she thought governed her eligibility. This omission denied
DHS any type of inquiry notice as to this source of income and further deprived DHS of the
opportunity to ask clarifying questions. Given Ms. Hutchins’s concession that she did not know
what the relevant income threshold was, her concealment of facts that would have allowed DHS
to determine whether she was over the threshold indicates an intent to deceive the State.

29 As discussed later, Ms. Hutchins provided such a narrative explanation when asked about her
Third, Ms. Hutchins’s testimony regarding what she told DHS is contradicted by
documentary evidence. Ms. Hutchins stated at trial that “I did tell them [DHS] that I had a salon
that I worked at, and I didn’t get paychecks. I pretty much am certain that I said that every
year.” Yet this characterization is contradicted numerous times in the record. None of Ms.
Hutchins’s SNAP applications disclosed the existence of Stylab. Most telling is one of the few
documented instances where Ms. Hutchins did reference “volunteer” work. During a June 19,
2015 eligibility interview, a DHS employee noted that Ms. Hutchins reported being “currently
not employed” but that “she’s volunteering time in a salon but in [sic—should be ‘is’?] not being
paid.”30 I find this phrasing to be significant: under any common understanding, the word
“volunteer” encompasses the idea of offering something to a recipient without the expectation of
compensation.31 In Ms. Hutchins’s situation, there was no recipient of her offer of gratuitous
labor, because she was working for herself.32 Indeed, based on the trial testimony concerning
DHS’s SNAP eligibility training, it is obvious to me that Ms. Hutchins knew that if she had
spoken of “volunteering in my salon,” this would have inevitably triggered follow-up questions
from DHS’s employees. Thus, her choice to obscure the nature of the work by misleadingly
referring to “a” salon further bespeaks an intent to conceal material information from DHS.
Fourth, based on Ms. Hutchins’s experience receiving public assistance, it is not credible
to suppose she would have been unaware that her self-employment activities were critically

30 Pltf. Exh. L at 20 (emphasis added). In addition to this interview, there are two other documented
instances of Ms. Hutchins disclosing her “volunteer” work. She reported 30 hours of volunteer work per
week (with no additional details) on her December 2016 interim change report (Pltf. Exh. J at 4); and after
DHS notified her of a potential overpayment, Ms. Hutchins described her recollection of the alleged 2013
“volunteering discussion” (Pltf. Exh. L at 10).
31 For example, Webster’s Third International Dictionary defines the verb form of “volunteer” as “to offer
oneself as a volunteer.” There cannot be an offer without another party to receive it. The same dictionary
lists the noun form as, among other things, “one who renders a service or takes part in a transaction while
having no legal concern or interest.” A transaction generally requires more than two parties.
32 A lawyer may be tempted to disagree with this characterization, since Stylab was actually operated as
an LLC, which is a distinct entity under the law. But Ms. Hutchins’s testimony made clear that she—like
many laypeople—did not view this closely-held LLC as an actual independent entity. Rather, she
“looked through” the LLC and characterized Stylab as either owned by herself, “on paper” (what lawyers
would call legal ownership); or by her father, who provided the startup funds (what lawyers would call
equitable ownership). To the extent that Ms. Hutchins thought she was working for her father, that work
cannot accurately be described as volunteering, since she received consideration (in the form of loan
important to the DHS’s eligibility determination. In 2012, Ms. Hutchins endured a contentious
administrative adjudication regarding her eligibility for childcare benefits administered by DHS.
The key issue in that proceeding was the impact that her self-employment activity had on her
eligibility.33 Ms. Hutchins tries to distinguish the 2012 controversy from the present case by
arguing that her earlier self-employment was working in a hair salon that she did not own, and
for which she received actual cash payments (unlike Stylab, which generated revenue, but no
direct payments to Ms. Hutchins). But this distinction does not adequately explain the omissions
from Ms. Hutchins’s SNAP applications. Ms. Hutchins testified that the money to start Stylab
came from her father, and she thus viewed her father as a “silent partner” while “on paper it [the
business] was mine.” But the very fact that she was a business owner “on paper” should have
led Ms. Hutchins to report her ownership of Stylab, even if only to explain that the business
provided her with no income. This fact is even more compelling when taking into account Ms.
Hutchins’s previous experience with DHS: during the course of the 2012 dispute, Ms. Hutchins
learned that DHS measured self-employment income by referencing schedule C of her Form
1040 individual tax return.34 While Ms. Hutchins did not prepare her own tax returns, her
accountant testified that Ms. Hutchins was actively involved in the return preparation and filing
process; thus, it strains credulity to think that Ms. Hutchins was not aware of the schedule Cs
filed in 2013 through 2017, which showed significant gross revenue attributed to her two
businesses. The discrepancy between her reporting such income to the IRS while failing to
report the basic existence of the businesses to DHS further supports an inference that Ms.
Hutchins acted out of a desire to conceal information from the State.
Having found that the evidence establishes an intentional omission, I turn next to Ms.
Hutchins’s argument that her mental illness prevented her from forming intent due to cognitive
limitations.

33 See Pltf. Exh. L at 43.
2. The Available Evidence Does Not Corroborate Ms. Hutchins’s
Characterization of the Impacts of Her Mental Illness
Throughout the pendency of this proceeding, Ms. Hutchins has repeatedly sought to
blame any misrepresentations on her PTSD, alleging that this condition prevents her from
comprehending “complex” forms. Both parties focused intensely on this issue at trial. After
carefully considering the evidence, I find that Ms. Hutchins’s allegations are unsubstantiated.
I begin with Ms. Hutchins’s own testimony. She did testify to being unclear about the
overall process of applying for and obtaining SNAP benefits (a completely credible assertion,
given the labyrinthine nature of DHS’s policies and procedures). But she did not testify to being
confused by any specific question asked on the DHS forms or in interviews. Instead, when faced
with questions from DHS’s counsel regarding the SNAP applications, Ms. Hutchins provided
clear and articulate explanations of why she provided certain answers to specific questions.
Some of her explanations (such as not thinking she had income from Stylab when she received
no take-home pay) are credible. Other explanations (such as claiming that she thought of herself
as a “volunteer”) are less plausible. But the point here is that Ms. Hutchins did not retreat from
counsel’s questions or profess ignorance; rather, she comprehended the questions, formulated a
reasoned position, and defended it—all in the stressful context of being questioned by counsel
for an adverse party in litigation. She was even able (on the fly, and without assistance from her
own counsel) to correct DHS’s counsel when she believed counsel was inaccurately
summarizing evidence from the record. Accordingly, Ms. Hutchins’s behavior suggests to me
that she had little difficulty in accurately comprehending the comparatively straightforward
questions posed by DHS during the SNAP application process. This conclusion is, however,
subject to two caveats: first, the court lacks psychological expertise; and second, by the time of
the trial Ms. Hutchins had had time to familiarize herself with the issues in dispute. I will thus
consider additional sources of evidence that can fill in these two gaps.
Clinical information concerning the impacts of Ms. Hutchins’s PTSD was provided by
two expert witnesses. The State retained Dr. Molly D. Persky, a licensed psychologist and
certified forensic evaluator, to conduct an independent psychological examination and testify
regarding her findings. Ms. Hutchins offered the testimony of her therapist, Bekah Stines, a
licensed professional counselor.35 I find that the evidence offered by Dr. Persky and Ms. Stines
sufficiently establishes that the omissions on the SNAP applications were not caused by Ms.
Hutchins’s PTSD.36
Dr. Persky based her testimony on an eight-hour examination that she completed under a
court order authorizing an independent psychological examination pursuant to Federal Rule of
Civil Procedure 35.37 Obviously, because Dr. Persky is retained by the State for purposes of this
litigation, she is not a completely disinterested party. Nonetheless, her testimony satisfies me
that she conducted her exam by using generally accepted tools and procedures from the
psychological discipline in order to evaluate the impact of Ms. Hutchins’s PTSD via objective
methods. Dr. Persky’s expert report explains that Ms. Hutchins “is a highly intelligent individual
who is able to comprehend and express verbal and written language . . . [and] is highly skilled at
pattern recognition, abstract reasoning, attention to detail, and interpreting and manipulating
complicated visual information accurately.”38 She also found evidence suggesting that Ms.
Hutchins may exaggerate the symptoms of her mental illness. While testing did not conclusively
establish malingering, results did indicate “exaggeration of symptoms.”39 In synthesizing the
evidence gathered as part of her evaluation, Dr. Persky confirmed Ms. Hutchins’s “genuine

35 Ms. Hutchins also offered the testimony of an additional purported expert witness, Rebecca Bloomfield,
but that testimony plays no role in my decision because Ms. Bloomfield spoke only of generalized issues
and admitted that she had no knowledge of any of facts that are of consequence in deciding this dispute.
Indeed, because of Ms. Bloomfield’s complete unfamiliarity with any facts that bear on the claims or
defenses in this case, it seems that the only point of her testimony was to provoke an emotional response
from Ms. Hutchins who was visibly (and understandably) distressed by having to listen to Ms. Bloomfield
gratuitously describe, in salacious detail, the general type of trauma that Ms. Hutchins suffered as a child.
Thus, Ms. Bloomfield’s testimony was not only irrelevant, but its production at trial appears to have
worked emotional harm on Ms. Hutchins.
36 The parties spent considerable time at trial arguing over the distinction between PTSD (the diagnosis
assigned by Dr. Persky, based on the criteria in the Diagnostic and Statistical Manual (5th ed.)) and
complex PTSD (the terminology used by Ms. Stines, based on the International Classification of Diseases
(11th revision)). Ultimately, this distinction may be meaningful in a clinical setting, but it is not relevant
in this proceeding. The court’s task is not to assign a diagnostic label to Ms. Hutchins, but rather to
determine the impact that her condition has on her ability to understand and truthfully answer questions.
Due to their different credentials, Dr. Persky is able to make a diagnosis, whereas Ms. Stines is not.
Accordingly, I will use the terminology of Dr. Persky’s diagnosis (i.e., PTSD) when discussing Ms.
Hutchins’s mental illness.
37 See ECF No. 79.
38 Pltf. Exh. DD at 3.
mental health difficulties,” but also stated “the evidence of exaggeration calls into question the
veracity of her reporting.”40
Dr. Persky’s trial testimony helped to elaborate on her finding regarding exaggerated
symptoms, and I find this testimony to be instructive. Dr. Persky based her finding on the results
of two tests. First, the Miller Forensic Assessment of Symptoms Test rendered a score that was
somewhat equivocal—although the score “does not indicate that [Ms. Hutchins] was attempting
to malinger symptomology,” Dr. Persky also noted that the score was high enough that Ms.
Hutchins’s “responses may be indicative of overexaggeration of mental health symptoms.”41
Second, Dr. Persky administered the Minnesota Multiphasic Personality Inventory-2-
Restructured Form (“MMPI”), a widely used test that is frequently relied on by courts when
evaluating psychological evidence. Dr. Persky was unable to score the results of Ms. Hutchins’s
MMPI because the answers “indicated that she reported a considerably larger than average
number of somatic symptoms rarely described by individuals with genuine medical conditions.
This level and type of infrequent responding is uncommon even in individuals with substantial
medical problems who report credible symptoms.”42 Dr. Persky adds that Ms. Hutchins’s
answers “very likely indicate[] non-credible reporting of somatic symptoms” and are also
“associated with non-credible reporting of cognitive symptoms.”43 At trial, Dr. Persky provided
persuasive testimony, based on scientific research, that the results of her examination are highly
likely to accurately measure Ms. Hutchins’s cognitive abilities during 2013-2017, even though
the exam was conducted in 2020.
Ms. Stines’s testimony is markedly different, beginning with her own characterization of
her role. Ms. Stines testified on direct examination that she prepared her expert report and
testified at trial in order to “help support and advocate for her [Ms. Hutchins] on her behalf.” On
cross-examination, Ms. Stines affirmed that “in this particular situation” she was acting as an
advocate for Ms. Hutchins. As a mental health professional who depends on establishing and

40 Id. at 4.
41 Id. at 13.
42 Id. at 16.
maintaining rapport with Ms. Hutchins, the existence of mutual trust is undoubtedly a critical
part of Ms. Stines’s clinical work. Her desire to support and advocate for her clients is laudable.
But in the context of litigation, it impairs her usefulness as an expert witness. Ms. Stines was
called to testify whether Ms. Hutchins’s characterization of her mental illness was accurate.44 It
is difficult to conceive of a situation in which a therapist/advocate in Ms. Stines’s position would
risk destroying patient rapport by contradicting her patient in a trial setting. Ultimately, when
Ms. Stines testifies that she finds Ms. Hutchins’s self-assessment credible, the court is unable to
determine whether this opinion is based on clinical expertise or on a desire to advocate for Ms.
Hutchins and strengthen the therapist-patient bond. Accordingly, I give little weight to Ms.
Stines’s opinion testimony. I do, however, find some of the factual components of her testimony
to be noteworthy.
Ms. Stines provided compelling testimony regarding the impacts of Ms. Hutchins’s
trauma. Specifically, Ms. Stines spoke of Ms. Hutchins’s recurring flashbacks, exaggerated
startle response, and occasional periods of dissociation. But Ms. Stines only spoke of these
symptoms in general terms, and did not relate them to Ms. Hutchins’s experience applying for
SNAP benefits. Similarly, while Ms. Hutchins herself testified regarding dissociative events, she
did not state that she experienced any flashbacks or dissociation during her interactions with
DHS. Thus, while the evidence concerning the difficulties Ms. Hutchins experiences as a result
of her PTSD evokes sympathy for her, these types of generalized symptoms do not provide
information relevant to the ultimate question of Ms. Hutchins’s intent.
When asked on direct examination whether she believed that “Ms. Hutchins’s complex
PTSD likely impacted her ability to accurately report factual information,” Ms. Stines responded
affirmatively, based on her observations from the time period when Ms. Hutchins first became
her patient. Ms. Stines said that during that time Ms. Hutchins was disorganized and frequently
did not complete paperwork. Ms. Stines gave one specific example of Ms. Hutchins’s difficulty
with forms: an “outcome based self-assessment form” which Ms. Hutchins completed by simply

44 See ECF No. 71 (“Ms. Stines will testify. . . about . . . the impact of Ms. Hutchins’ complex trauma on
her daily life including her ability to accurately disclose factual information, accurately respond to forms,
replying “yes” to all the questions without understanding the contents. While this example is
probative, I find that it does not prove that Ms. Hutchins was unable to comprehend or accurately
complete forms. I base this finding on three observations.
First, based on Ms. Stines’s description of this incident, it appears that Ms. Hutchins was
not familiar with the purpose of the outcome based self-assessment form until Ms. Stines
provided an explanation. Accordingly, this particular example is materially different from the
SNAP applications, where Ms. Hutchins clearly understood the purpose and had experience with
completing the same form numerous times in the past.
Second, the behavior described by Ms. Stines (i.e., providing a blanket answer to all
questions regardless of actual answers) is not consistent with how Ms. Hutchins completed her
SNAP applications and interim change reports: those documents were not mostly blank (even
though DHS would have accepted such a filing) nor did Ms. Hutchins simply respond to
questions by providing the answer that would have avoided the need to answer follow-up
questions (in DHS’s online SNAP application, a “yes” response often triggers additional
subsidiary questions, while a “no” response often avoids follow-up questions). Instead, Ms.
Hutchins completed the SNAP forms by providing detailed information about the members of
her household (including demographic information) and sources of non-employment income
(such as child support and renting out a room in her house). The answers on Ms. Hutchins’s
SNAP forms indicate a comprehension of detail and an ability to provide information, except for
the consistent omission of her self-employment status.
Finally, while the outcome based self-assessment form is not in the record, other
paperwork from Ms. Stines’s office is, and I find some of these forms to be particularly
instructive. Ms. Hutchins completed an “Adult Intake Form” for the clinic where Ms. Stines
works on December 5, 2017.45 The form is five pages long and asks about numerous aspects of
Ms. Hutchins’s life, including medical history, family relationships, employment, and personal
hobbies. Ms. Hutchins answered all sections of the form in thorough detail, in her own
handwriting. In a section captioned “Social/Cultural Information,” the form contains the
following questions (printed here in Roman type), with Ms. Hutchins’s corresponding answers
(printed here in italics):
Employer: Stylab Salon
Position: Owner/Stylist
Length of time in this position: 5 years (unpaid)46
On another intake form that appears to have been completed at the same time, Ms. Hutchins lists
her employment status as “self employed—own business, no income.”47 These are precisely the
types of disclosure that one would expect Ms. Hutchins to have made on her SNAP applications,
had she provided complete and honest answers consistent with her professed understanding of
her role at Stylab. It also shows that Ms. Hutchins was capable of articulating the nature of her
employment at Stylab. The fact that she disclosed this detail to her therapist, but withheld it
from DHS, further supports a finding that the omission from her SNAP paperwork was
intentional.
In addition to the testimony of Dr. Persky and Ms. Stines, I find that other evidence casts
doubt on Ms. Hutchins’s claim that she has difficulty accurately reporting factual information.
For example, the record indicates that Ms. Hutchins was detailed and proactive in reporting
income changes to DHS that could potentially increase her SNAP benefits.48 Additionally,
Defendant’s tax preparer testified that he regularly contacted Ms. Hutchins to discuss business
records and ask clarifying questions. During those interactions, he found Ms. Hutchins to be
“always someone who was quick to respond, knew what was going on with her business, was
able to explain any items that were complex or not normal. We always could rely on her to help
us through and get good figures for the tax return.” Finally, when DHS asked Ms. Hutchins for
additional detail or verification of financial information, she typically understood the request and
responded promptly,49 and on one occasion she even provided detailed income information
during a phone call when she “was in a rush and driving to work.”50 These examples all

46 Id. at 14.
47 Id. at 16.
48 Pltf. Exh. L at 23 (in August 2014, Ms. Hutchins proactively reported her husband’s loss of
employment to DHS and provided documentary proof).
49 Id. at 41-42 (providing several months worth of self-employment income data).
corroborate what the court observed during Defendant’s testimony: Ms. Hutchins is smart,
responsive, knowledgeable, and shows no signs of cognitive impairment.
In summary, I find the State’s evidence concerning Defendant’s intent to be substantially
more reliable than the evidence introduced by Ms. Hutchins. Ms. Hutchins has produced
uncontroverted evidence of her mental illness, yet when it comes to proving that the illness
impairs her cognitive abilities, her evidence falters. Although Ms. Hutchins did provide some
corroborating evidence (in the form of self-assessment and Ms. Stines’s testimony), the
credibility of this testimony is far outweighed by Dr. Persky’s findings that are based on standard
and reliable techniques of credibility evaluation.51 I also find that the results of Ms. Hutchins’s
MMPI, as interpreted by Dr. Persky, are quite relevant. Although Dr. Persky did not definitively
conclude that Ms. Hutchins was exaggerating her symptoms, Dr. Persky’s testimony in
combination with other evidence allows the court to find that Ms. Hutchins’s PTSD does not
impair her ability to accurately answer questions. In the context of Social Security disability
eligibility, an administrative law judge may set aside medical testimony of expert witnesses
based on test results (including the MMPI) and inconsistencies in the patient’s testimony.52
Here, the MMPI results, Dr. Persky’s testimony, and the inconsistencies in Ms. Hutchins’s self-
assessment all support a finding that Ms. Hutchins omitted information with the intent to conceal
facts from DHS. This evidence is more credible than the testimony of Ms. Hutchins and Ms.
Stines.
C. Reliance
Ms. Hutchins’s attempts to cast doubt on the State’s reliance are wholly unpersuasive. In
brief, Ms. Hutchins chides the State for not consulting other sources of information (such as
Department of Revenue databases) to investigate Ms. Hutchins’s income and verify the
information given on her application.53 This theory lacks merit because for purposes of

51 See Stauss v. Apfel, 45 F.Supp.2d 1043 (D. Or. 1999) (upholding Social Security ALJ’s finding that
psychological evaluations, including the MMPI, outweighed lay testimony regarding impact of
applicant’s disability).
52 See Smith v. Apfel, 1998 WL 833621 (9th Cir. 1998) (unpublished) (when “MMPI results indicated that
[applicant] may have been faking her impairment,” ALJ was correct in discounting psychologist
testimony in light of MMPI results and inconsistencies in the applicant’s description of her disability).
§ 523(a)(2)(A), a creditor need only show that its reliance was “justified,” and is under no duty
to investigate the debtor’s representations.54 Indeed, the same argument advanced by Ms.
Hutchins has been rejected by other bankruptcy courts in cases concerning overpayment of
benefits.55
Ms. Hutchins admitted under cross examination that she completed her SNAP
applications herself and affirmed under penalty of perjury that the statements made in the
applications were true, correct, and complete. The online application allowed Ms. Hutchins to
submit the application while also checking a box stating that she did not understand the
certifications she was asked to make. If that box was checked, DHS would provide additional
explanation during the eligibility interview. But Ms. Hutchins did not check that box, nor did
she testify at trial that she had any difficulty understanding the certifications. Any reasonable
person signing such a certification would realize that DHS intended to rely on the responses
contained in the application, and I find that DHS’s reliance in this case was justified as a matter
of law.
D. Calculation of Damages
Upon discovering income that was omitted from Ms. Hutchins’s SNAP applications,
DHS calculated the amount of benefits that Ms. Hutchins received but to which she was not
entitled (the “overpayment”).56 Ms. Hutchins has advanced a compelling argument that the
calculated amount of the overpayment is inaccurate. But once again, Defendant’s counsel
oversimplifies this issue by appealing largely to the court’s sense of fairness. As explained
below, this issue is much more complicated than simply declaring the State’s calculations unfair.

54 Diamond v. Kolcum (In re Diamond), 285 F.3d 822, 827 (9th Cir. 2002).
55 See U.S. v. Tucker (In re Tucker), 539 B.R. 861, 867 (Bankr. D. Idaho 2015) (argument that Social
Security Administration should have discovered misrepresentation by comparing debtor’s reported
income with Internal Revenue Service records “is far too facile and assumptive to be given weight”).
1. The Problem: Calculating Self-Employment Expenses
SNAP is a federally-created and -funded program administered by states.57 Eligibility for
SNAP benefits is determined by reference to the applicant’s household income.58 In particular,
for purposes of SNAP, household income is defined as gross income less certain enumerated
exclusions.59 As relevant here, one such authorized exclusion from gross income is “the cost of
producing self-employed income.”60 This calculation of self-employment expenses is the cause
of a major dispute between the parties. While Ms. Hutchins denies concealing information from
DHS, she argues in the alternative that even if she did improperly withhold information, DHS
has inaccurately calculated the amount of the overpayment. To fully resolve this disagreement, I
must first briefly describe the legal framework governing SNAP eligibility.
As explained above, the federal law that creates SNAP states that the eligibility of self-
employed applicants is determined by taking their gross self-employment income and deducting
the cost of producing that income (this is basically the same approach used for calculating
federal taxes on self-employment income). Of course, SNAP applications are processed year-
round, and self-employed individuals often do not prepare precise financial statements
throughout the year, so determining self-employment expenses prior to the preparation of the
applicant’s tax return can sometimes be challenging. Presumably to address this difficulty,
Congress amended the SNAP statute as part of the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 (“PRWORA”).61 Section 812 of PRWORA requires the
Secretary of Agriculture to “establish a procedure by which a State may submit a method . . . for
the approval of the Secretary, that the Secretary determines will produce a reasonable estimate of

57 “Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits,” Cong.
Res. Serv. Rpt. No. R42505 (rev. Apr. 11, 2018), available at
https://crsreports.congress.gov/product/pdf/R/R42505.
58 7 U.S.C. § 2014(a).
59 Id. § 2014(c) (gross income standard) and (d) (exclusions from income).
60 Id. § 2014(d)(9).
[applicants’ self-employment expenses] . . . in lieu of calculating the actual cost of producing
self-employment income.”62
After PRWORA was enacted, DHS submitted a proposal to the Secretary of Agriculture
that outlined a simplified method for calculating SNAP applicants’ self-employment expenses.63
The Secretary, through the Department of Agriculture, approved the proposed method, and
approved a subsequent request, approximately one year later, to slightly modify the method.64
Ms. Hutchins makes no allegations that DHS failed to follow Oregon procedural law when
issuing the rule that sets forth the new simplified calculation. The rule remains in effect today,
and it forms the basis for the present dispute.
Oregon’s rule (simplified to strip out details not relevant to the present case) provides as
follows: if a self-employed SNAP applicant has no self-employment expenses, their expense
deduction is zero; otherwise, the deduction is equal to 50% of the applicant’s self-employment
revenue.65 This flat 50% deduction does simplify things, but as Ms. Hutchins has come to learn,
it creates peculiar results for people with high-grossing businesses that are not very profitable. In
Ms. Hutchins’s case, her self-employment expenses during Stylab’s first two years were close to
the break-even point—that is, her expenses were roughly equal to her income. But under DHS’s
rule, she cannot deduct all of her self-employment expenses; she can only deduct an amount
equal to 50% of the revenue.
Ms. Hutchins retained accountant William N. Holmes as an expert witness to testify on
the problems with Oregon’s rule and how it impacts Ms. Hutchins. Mr. Holmes testified that
under the DHS self-employment-expense rule, DHS calculated the amount of the overpayment
correctly. However, if Ms. Hutchins were allowed to deduct all of her self-employment
expenses, as reported on her tax returns, Mr. Holmes found that the overpayment would have

62 Id. § 812 (codified as 7 U.S.C. § 2014(m)).
63 Pltf. Exh. JJ at 1-3.
64 Id. at 4-8.
been $22,930 ($13,000 less than the amount that the State currently seeks to declare non-
dischargeable).66
For purposes of § 523(a)(2), the exception to discharge extends to any legally enforceable
obligation that arises from the transaction in which the debtor obtained money or property
through misrepresentation.67 Accordingly, if Oregon’s regulation concerning calculation of self-
employment income is legally enforceable, then DHS is entitled to recoup the overpayment in
the amount that it has calculated. Alternatively, if the regulation is invalid, then this court may
redetermine the amount of the non-dischargeable debt.
I agree with Ms. Hutchins that the State’s approach to calculating self-employment
income is harsh when applied to people like herself who operate businesses with high gross
receipts and low net profits. But once again, I must reiterate that I do not have a roving
commission to do equity—unfairness alone cannot form the basis for my ruling. At trial, when
asked what authority the court has to set aside DHS’s duly promulgated regulations, Defendant’s
counsel responded that the regulation as applied here is “illogical and unfair.” While I agree
with the criticism to an extent, counsel misstates my authority: both Oregon and federal law are
clear that a court may not indiscriminately substitute its judgment for that of an executive agency
that is acting pursuant to a statutory grant of authority.68 I must therefore decline Ms. Hutchins’s
invitation to invalidate administrative rules based on my own preferences, and instead apply
established principles of administrative law.
2. What Law Applies?
The first analytical step is to determine what law applies. Ms. Hutchins challenges a
regulation promulgated by the State, and the DHS (a State agency) is party to this suit. Oregon
law allows a party in a civil action to collaterally attack the validity of an administrative

66 Def. Exh. 24 at 2.
67 Cohen v. de la Cruz, 523 U.S. 213, 218 (1998).
68 See e.g., Miller v. Or. Liquor Control Comm’n, 42 Or. App. 555, 561 (1979) (“[A]n agency’s
interpretation of its statutory authority is entitled to deference by the courts, and we cannot substitute our
policy ideas for those of the agency.”); Cervantes v. Holder, 772 F.3d 583, 591 (9th Cir. 2014) (in order
to withstand judicial review, “[t]he agency’s interpretation need not be the best construction of the
regulation.69 Thus, Ms. Hutchins’s challenge is procedurally proper and the next step is to
determine whether I should apply Oregon or federal law when deciding the challenge to the rule.
SNAP eligibility is determined by federal law, but self-employment income is determined under
an Oregon regulation. This situation is not uncommon in the modern system of regulatory
federalism, and Oregon law provides guidance: when an Oregon agency is exercising delegated
power pursuant to a federal statute, the state agency’s interpretation of a federal statute is
reviewed using principles of federal administrative law,70 most notably the well-known
framework articulated in Chevron v. Natural Resources Defense Council.71 Thus, Chevron is the
rule of decision that I must use here.
3. Applying Chevron to the Facts of this Case
Chevron requires that I employ a two-step process in weighing Ms. Hutchins’s challenge
to DHS’s simplified self-employment expense rule. First, I must ask if the statutory text is
unambiguous, and if it is, “that is the end of the matter; for the court, as well as the agency, must
give effect to the unambiguously expressed intent of Congress.”72 On the other hand, if the
statute is ambiguous, I proceed to the second step, where “the question for the court is whether
the agency’s answer is based on a permissible construction of the statute.”73
Turning to the first step, I can easily conclude that the relevant language in PRWORA
§ 812 is ambiguous. While the law unambiguously requires the Secretary of Agriculture to allow
states to establish simplified methods for calculating self-employment expenses, the substantive
language used to determine whether such methods are allowable is inherently ambiguous: the
simplified method must produce a “reasonable estimate” of expenses.74 Because “reasonable” is
phrase susceptible to numerous different interpretations, the statute evidences Congress’s intent
to endow the Secretary with considerable discretion in approving proposed methods for

69 Hay v. Or. Dept. of Transp., 301 Or. 129, 135-136 (1986).
70 Friends of the Columbia Gorge v. Columbia River Gorge Comm’n, 346 Or. 366, 377-378 (2009).
71 467 U.S. 837 (1984)
72 Int’l Bhd of Teamsters, Local 2785 v. Fed. Motor Carrier Safety Admin., 986 F.3d 841, 851 (9th Cir.
2021) (quoting Chevron, 467 U.S. at 842-843).
73 Id. (quoting Chevron, 467 U.S. at 843).
simplified calculation.75 I also find Congress’s use of the phrase “estimate . . . in lieu of
calculating the actual cost” to be relevant. Ms. Hutchins complains that DHS’s rule does not
allow her to deduct all of her expenses; however, by authorizing states to estimate self-
employment expenses in lieu of actually calculating the amounts, Congress has explicitly
endorsed scenarios where an applicant’s eligibility will be determined based on some amount
other than their actual expenses. Nonetheless, under § 812, the estimate must be “reasonable,”
which I discuss in the next step of the analysis.
The second step under Chevron requires that I determine whether the agency’s policy is
based on a “permissible construction” of the relevant statute. As noted above, PRWORA § 812
requires that procedures for estimating self-employment income be “reasonable.” In 1997, when
DHS proposed estimating self-employment expenses at 50% of revenue, it did so based on a
1996 study of Oregonians who received Temporary Assistance for Needy Families (“TANF”)
benefits. DHS took every member of the study sample who reported self-employment income
and compared what their SNAP benefits would be using actual expenses versus using the flat
50% estimate. DHS concluded that under the simplified method, the same subset of TANF
recipients would receive benefits within 5% of what they would receive using actual expense
figures.76 Of those sample members who would receive a different amount of benefits under the
simplified rule, DHS concluded that for 86% of households the difference was $30 or less.77
The methodology used by DHS clearly results in some deviation from complete
accuracy. But the question is whether this deviation is “reasonable.” I conclude that it is, largely
based on the Ninth Circuit’s reasoning in Gamboa v. Rubin,78 which is almost precisely on point.
Gamboa involved the Aid to Families with Dependent Children program (“AFDC,” the
predecessor of TANF). In 1981, Congress amended the AFDC statute to specify that applicants

75 See Hall v. U.S. Dept. of Agriculture, 984 F.3d 825, 835 (9th Cir. 2020) (“[A]dministrative
implementation of a particular statutory provision qualifies for Chevron deference when it appears that
Congress delegated authority to the agency generally to make rules carrying the force of law, and that the
agency interpretation claiming deference was promulgated in the exercise of that authority.” (quoting U.S.
v. Mead Corp., 533 U.S. 218, 226-27 (2001)).
76 Pltf. Exh. JJ at 2-3
77 Id. at 3.
78 80 F.3d 1338, 1343-1346 (9th Cir. 1996), vacated sub nom. Gamboa v. Chandler, 101 F.3d 90 (9th Cir.
would only be eligible for benefits if their household possessed assets of $1,000 or less.79 But
that same amendment allowed applicants to exempt the value of one automobile, up to a certain
limit. Rather than specifying the exemption limit in statute, Congress directed the Secretary of
Health and Human Services to issue regulations setting the maximum exemption amount.80 In
1982, the Secretary issued rules setting the automobile exemption at $1,500, a figure based on
household finance data collected as part of a 1979 survey of food stamp recipients.81
The plaintiff in Gamboa was ineligible for AFDC benefits because he owned a car that
pushed him over the asset limit.82 He challenged the Secretary’s exemption calculations as
arbitrary and based on flawed data.83 Applying Chevron, the Court of Appeals found that the
$1,500 exemption, while based on imprecise and incomplete data, was reasonable. In reaching
this conclusion, the court noted that it was joining four other circuits that had reached the same
result.84
At this point, Gamboa’s history becomes more complicated for two reasons, neither of
which change my ultimate conclusion. The first complication is that unlike other courts of
appeals that upheld the exemption limit, the Ninth Circuit held only that the $1,500 automobile
exemption was reasonable when originally promulgated. The court went on to invalidate the
rule as unreasonable because it did not adjust the $1,500 exemption limit for inflation.85 This
detail is inapplicable here, because unlike the AFDC car exemption, DHS’s rule for simplified
self-employment calculations prescribes a percentage, not an absolute dollar amount. Here,
DHS relies on old survey data,86 but Ms. Hutchins has produced no evidence indicating that the

79 Gamboa, 80 F.3d at 1342.
80 Id. (citing 42 U.S.C. § 602(a)(7)(B)(i)).
81 Id.
82 Id. at 1341.
83 Id. at 1344.
84 Id. at 1343.
85 Id. at 1346-1349.
86 I do not believe the age of the survey data imperils the validity of DHS’s rule. When speaking of the
need to adjust for inflation, the Gamboa court indicated that a simple mathematical calculation
(presumably based on the Consumer Price Index) would have been sufficient. In other words, the court
did not expect the Secretary to periodically conduct a new survey in order to update the exemption
amount). See Gamboa, 80 F.3d. at 1347 (“We believe that periodically adjusting the automobile equity
ratio of self-employment expenses to income has materially changed since 1996. Because the
50% limit is expressed as a percentage, inflation is automatically “baked into” the simplified
method, and I conclude that under the reasoning of Gamboa, DHS’s flat-50% rule is a reasonable
interpretation of PRWORA § 812.
The second issue that somewhat complicates Gamboa’s precedential weight is that the
Ninth Circuit, sitting en banc, subsequently vacated Gamboa based on jurisdictional grounds.87
But the ruling vacating the original opinion was based entirely on jurisdiction, and not on any
flaw in the panel’s Chevron analysis. None of the court’s rulings in the intervening years
indicate that the Ninth Circuit would employ a different analysis under Chevron than it used in
Gamboa, and therefore I believe that, under the reasoning articulated in Gamboa, I must uphold
the validity of DHS’s simplified self-employment expense calculation.
E. Omissions Regarding Sidlab
As previous noted, the parties focused almost exclusively on the Stylab salon during trial,
and as a result the above analysis is also focused on Ms. Hutchins’s omissions regarding Stylab.
But the State’s complaint also alleges that Ms. Hutchins omitted her ownership of a second,
smaller, business: Sidlab. Ms. Hutchins testified briefly about Sidlab, which appears to have
been beset by various operational problems. Yet, at the end of the day, I hardly have any
evidence on which to base a ruling.
The only facts in evidence regarding Sidlab are the organizational documents88 and Ms.
Hutchins’s tax returns. Neither party alleges that the tax returns are inaccurate, so I will accept
that data for purposes of my findings. The tax returns indicate that Sidlab produced revenue in
three relevant years: 2013, 2014, and 2016. The amount of Sidlab’s income is material
(especially under DHS’s simplified 50% rule). The only testimony concerning Sidlab came from
Ms. Hutchins, and was quite sparse. She described the business as a “product company” that she
purchased from the prior owner in early 2013. She said the business “sat there on autopilot,” and
she filled orders, but did not receive any money from the business. Ms. Hutchins also confirmed
that her 2013 SNAP application stated that she ceased working for Sidlab on June 7, 2013.

87 Gamboa v. Chandler, 101 F.3d 90 (9th Cir. 1996) (en banc).
But the information on the 2013 SNAP application is contradicted by the fact that the
business continued to produce revenue through 2016, and Ms. Hutchins continued to report that
revenue on her personal tax returns. Ms. Hutchins produced no evidence specifically explaining
this contradiction. To the extent that Ms. Hutchins attributes the omissions to her inability to
understand forms due to her PTSD, this argument fails for the same reasons discussed
previously. Because the State has made a prima facie case regarding the Sidlab omissions, and
Ms. Hutchins has failed to come forward with evidence rebutting the State’s case, I find that Ms.
Hutchins omitted her ownership interest in Sidlab with intent to conceal that income from DHS.
F. Section 523(a)(2)(B)
The State further alleges that Ms. Hutchins concealed the existence of certain assets, and
that the SNAP overpayment is also non-dischargeable under § 523(a)(2)(B). Because I have
already found the entire overpayment to be non-dischargeable under § 523(a)(2)(A), I need not
reach the State’s claims under § 523(a)(2)(B).
V. Conclusion
The facts of this case recall psychologist Lawrence Kohlberg’s famous hypothetical
known as the “Heinz dilemma.” The hypothetical involves a woman, Mrs. Heinz, who is fatally
ill. A new kind of drug may save her life, but it is only available from a pharmacist who
demands an exorbitant price that the woman cannot afford. Mrs. Heinz’s husband tries to
borrow money or bargain with the pharmacist, but these attempts are unsuccessful, so he is
ultimately forced to decide whether to steal the drug. In Kohlberg’s study, a researcher would
read the hypothetical scenario to children and then ask a series of follow-up questions. Among
other themes, the follow-up questions ask the study participants to consider the difference
between legal obligations and moral obligations. Stealing the drug is illegal, but some may
argue that Mr. Heinz has a moral obligation to save his wife’s life, even if it involves breaking
the law.
To be clear, the facts of this case differ in many respects from the facts of the Heinz
dilemma, but the analogy is undeniable. Instead of a dying spouse, Ms. Hutchins was faced with
children to feed. Instead of a greedy pharmacist, she dealt with an imperfect state bureaucracy.
Instead of stealing a drug, she obtained SNAP benefits to which she was not entitled. Almost as
if taking a cue from Kohlberg’s work, Defendant’s theory of this case relied on casting this
proceeding as a battle over morals: emphasizing Ms. Hutchins’s difficult situation and all but
accusing DHS of trying to destroy her life. This is understandable as a litigation strategy, but it
comes with a risk: namely, that in receiving this opinion, Ms. Hutchins might interpret the
court’s ruling as a judgment of her moral worth. That would be an unfortunate mistake.
As evidenced by the lengthy analysis above, this court takes this proceeding very
seriously. The point of bankruptcy is to give debtors a “fresh start,” and this court (like all
bankruptcy courts) construes exceptions to discharge narrowly. But despite Ms. Hutchins’s
theory of the case, this is not a trial about morality. Rather, this is a legal proceeding, and the
law in this area is well-developed. I can neither ignore the facts nor toss aside the law based on
my desire to help Ms. Hutchins succeed in life.
Based on the evidence received, and under settled principles of law, I must find Ms.
Hutchins’s debt to DHS to be nondischargeable under § 523(a)(2)(A). This does not mean that
Ms. Hutchins is a bad person, or that she is undeserving of sympathy. It merely means that the
State has proven the elements of its case. Counsel for the State should submit a proposed
judgment, in compliance with Local Bankruptcy Rule 9021-1, within fourteen days of the date of
this opinion.
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cc: Carolyn Wade
Laura Caldera

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10461620. Public record. Not legal advice.