Petition — Pavkovic v. Tidwell

8 2 * 1 1 2 * Supreme Court, U.S.

FILED

No. ‘JAN 3 1983

ALEXANDER L. STEVAS

RK

In THE CLE

Supreme Court of the Anited States

Octoser TERM, 1982

IVAN PAVKOVIC, Director, Illinois Department of

Mental Health and Developmental Disabilities,

Petitioner,

vs.

ROBERT TIDWELL, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Tyrone C. FaAHNER

Attorney General, State of Illinois

160 North LaSalle Street, Suite 900

Chieago, Illinois 60601

(312) 793-2503

Attorney for Petitioner

Patricia Rosen

Wiuiam A. WENZEL, III“

Special Assistant Attorneys General

130 North Franklin Street, Suite 200

Chicago, Illinois 60606

(312) 798-2380

Of Counsel * Counsel of Record

Printed by Authority of the State of Illinois (P.O. 31405—55—1-3-82)

QUESTIONS PRESENTED

1. Is standing to sue in federal court conferred un-

der Article III of the Constitution to named plaintiffs

and class representatives who fail to show that they

personally have been injured by the Petitioner’s conduct

and rely instead upon injury to unnamed class members

and to the existence of a “single system” to which named

and unnamed class members are mutually subject?

2. Does use of DMH Form 623 constitute an unlaw-

ful assignment of Title II Social Security Disability

Benefits in contravention of either 42 U.S.C. §407 or this

Court’s ruling in Philpott v. Essex County Welfare Board,

409 U.S. 413 (1973)?

3. Does the “Equal Access to Justice Act” apply to

cases pending on appeal on its effective date?

4. Should the award of attorneys’ fees under 42 U.S.C.

§1988 be calculated by either an allocation of a portion of

the fee award to culpable federal co-defendants under the

“Equal Access to Justice Act” or by proportioning the

§1988 award to accurately reflect the extent to which the

Respondents prevailed on the merits of those claims which

were directed against the Petitioner only?

PARTIES TO THE PROCEEDINGS

Two cases were filed in the District Court for the

Northern District of Illinois and were consolidated by

order of court on March 25, 1974: Tidwell, et al. v. De-

partment of Mental Health of the State of Illinois, et al.,

73 C 3014; and Schreckenberg, et al. v. Weinberger, et al.,

74 C 183.

The named plaintiffs and class representatives in the

district court and court of appeals were:

Robert Tidwell, Eulogio Roman, Richard Geisler,

Robert Schreckenberg, James Harris and James

Sanford.

The defendants in the court of appeals were:

Richard S. Schweiker, Secretary, United States

Department of Health and Human Services; John A.

Svahn, Commissioner, Social Security Administra-

tion; the Illinois Department of Mental Health and

Developmental Disabilities; Ivan Pavkovic, Director,

Illinois Department of Mental Health and Develop-

mental Disabilities; and Robert Mackey, Superin-

tendent, Elgin State Mental Hospital.

iii

TABLE OF CONTENTS

QUESTIONS PRESENTED .. ...... .. . . . . ..

PARTIES TO THE PROCEEDINGS .

nnn

ae nnn ee

. 000%

JURISDICTIONAL STATEMENT . . . .

CONSTITUTIONAL, STATUTORY & R&=GU-

LATORY PROVISIONS INVOLVED ...............

STATEMENT OF THE CASE .. ..

REASONS FOR GRANTING THE WRIT:

I.

DMH FORM 623 PROCEDURES DID NOT

GIVE RISE TO AN ARTICLE III “CASE

Goon

ILSE OF DMH FORM 623 WAS PROPER

UNDER BOTH 42 U.S.C. §407 AND THE

DECISION IN PHILPOTT v. ESSEX COUN-

TY WELFARE BOARD ...... . . . . ..

A. This Form Was Not An Assignment Of

Social Security Benefits . . . . .

B. DMH Use Of Form 623 Was Not Tanta-

mount To Compulsory Legal Process . .

16

21

iv

III.

A FEE AWARD SHOULD BE MEAS-

URED BY THE EXTENT TO WHICH

RESPONDENTS PREVAILED AGAINST

PETITIONER ON THE DMH' FORM 623

. ↄ—— — — 23

IV.

FEDERAL DEFENDANTS ARE LIABLE

FOR ATTORNEYS’ FEES UNDER THE

“EQUAL ACCESS TO JUSTICE ACT,” PUB.

—TJ!. AAA 24

5 r eee 25

APPENDIX

APPENDIX

. Memorandum Opinion and Order of Judgment,

% A

Order of the Seventh Circuit, April 4, 1977 B

. Memorandum Opinion and Order, March 5,

— ³˙·wm ̃ —ͤ— C

Memorandum Opinion and Order, February

PPTP œK K —T—. ͤ D

. Final Order and Judgment, March 25, 1981 E

. Amended Opinion, United States Court of

Appeals for the Seventh Circuit, October 4,

— — — F

. DMH Form 623 (Rev. 1/69) . . . . . . G

V

TABLE OF AUTHORITIES

Cases Page

Baker v. Carr, 369 U.S. 186 (1962) . 16

Bailey v. Patterson, 369 U.S. 31 (1962) ............... 18

Bell & Howell Co. v. Spoor, 225 Ill. App. 256,

11 20

Blum v. Yaretsky, ..... US. ...... 102 S.Ct. 2777

111i 14

Bradley v. Richmond School Board, 416 U.S. 696

1717 ̃ V ——— 24

Department of Health and Rehabilitative Services,

etc. v. Davis, 616 F.2d 828 (5th Cir. 1980) ....... 21

General Telephone Co. v. Falcon, ..... US. ....., 102

. 14

French v. Director, Michigan Dept. of Social Serv-

ices, 92 Mich. App. 701 (1979) . . . . . 15, 22

Golden v. Zwickler, 394 U.S. 103 (1969) . 18

Hensley v. Eckerhart, US. ....., 102 S.Ct. 1610

(No. 81-1244, cert. granted, March 1, 1982) . . 23

Linda R. S. v. Richard D., 410 U.S. 614 (1978) ...... 19

Litwin v. Timbercrest Estates, Inc., 37 III. App. 3d

956, 347 N. E. 2d 378 (1976) . . . . . . eee 20

Moore v. Colautti, 483 F. Supp. 357 (E. D. Pa.

1979), af d., 633 F.2d 210 (3d Cir. 1980) . . 14, 22

O Shed v. Littleton, 414 U.S. 488 (1974) . . 16

Philpott v. Essex County Welfare Board, 409 U.S.

r 21

Rizzo v. Goode, 423 U.S. 372 (1976) . . . 19

Simon v. Eastern Kentucky Welfare Rights Org.,

, ̃ AA 19

Stavros v. Karkomi, 39 III. App. 3d 113, 349 N. E. 2d

// T 20

Tunnicliffe v. Comm. of Penn. Dept. of Pub. Wel-

fare, 483 Pa. 275, 396 A.2d 1168 (1978) ........... 15, 22

vi

United States v. Citizens State Bank, 668 F.2d 444

i eee 24

Warth v. Seldin, 422 U.S. 490 (1975) . . 17

Watch v. Harris, 535 F.Supp. 9 (D. Conn. 1981) 24

Younger v. Harris, 401 U.S. 37 (1971) . 17

Constitutional Provisions

, ̃ TATA 16, 19

, AA A 12, 18, 23

Fourteenth Amendment . . . . . . . e 12

Statutes And Regulations

FEDERAL

,, ——2• consnnsonsonnes 12

,! . 15, 24

, è ͤäf¼I¼. !!!?! 8. 12

e ks sa cahccbbesensenadsnenbnsenlesesennenie 9

I eee 12, 18, 14, 19, 21, 23

t ..... 12

,,, 2 23

. 9, 12

e ̃ . 9

,,, 9

Z eee 12

r è— ÄixjTZZ⸗ĩ⸗ů⸗ůů3ů 3. 12

, . 13

, 23

P. L. 96-481, 5201-08, 94 Stat. 2325 (1980), (amend-

,,,. 15, 24

STATE

Ill. Rev. Stat., ch. hs ae ENCE RL NEES FED 8,9

,, 9, 12

In Tue

Supreme Court of the United States

Ocroper Term, 1982

IVAN PAVKOVIC, Director, Illinois Department of

Mental Health and Developmental Disabilities,

Petitioner,

vs.

ROBERT TIDWELL, et al.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIROUIT

The Petitioner, Ivan Pavkovic, Director of the Illinois

Department of Mental Health and Developmental Dis-

abilities, respectfully prays that a Writ of Certiorari

issue to review the amended opinion of the United States

Court of Appeals for the Seventh Circuit entered in these

consolidated proceedings on October 4, 1982.

OPINIONS BELOW

This matter was first heard and ruled upon in the

United States District Court for the Northern District

of Illinois by a three-judge panel in an unreported per

curiam memorandum opinion and order of judgment on

June 23, 1976. Appendix A. On April 4, 1977, the United

= =

States Court of Appeals found that it was without juris-

diction to hear an appeal of the per curiam ruling prose-

cuted by the Petitioner. Appendix B.

The three-judge district court panel issued a subse-

quent unreported opinion and order on March 5, 1979,

Appendix C. Thereafter, a single member of the panel

ruled on Respondents’ entitlement to attorneys’ fees

under 42 U.S.C. §1988 in an unreported opinion, Ap-

pendix D, and entered a final order and judgment,

Appendix E.

Petitioner's appeal to the United States Court of Ap-

peals for the Seventh Circuit resulted in the issuance

of that court’s original opinion of April 30, 1982. On

consideration of Petitioner’s request for a rehearing, the

court of appeals on October 4, 1982 filed its unreported

amended opinion which is the subject of the instant peti-

tion for a writ of certiorari. Appendix F.

JURISDICTION

The original opinion of the United States Court of Ap-

peals for the Seventh Circuit was filed and issued on

April 30, 1982. Pursuant to an order of court granting a

request for an extension of time, a petition for rehearing

and suggestion for rehearing in banc was filed by Peti-

tioner on May 24, 1982. On consideration of the petition

for rehearing, an amended opinion was filed and issued

on October 4, 1982. In light of the amended opinion, the

petition for rehearing and suggestion for rehearing in

banc was denied. This Petition for a Writ of Certiorari is

filed within 90 days of the date of the amended opinion.

The Court’s jurisdiction is invoked under Title 28 U.S.C.

§1254(1).

.

CONSTITUTIONAL, STATUTORY AND

REGULATORY PROVISIONS INVOLVED

United States Constitution

Article Three:

“Section 2. The judicial Power shall extend to all

Cases in Law and Equity, arising under this Constitution,

the Laws of the United States, and. . to Controversies

Federa! Statutes Involved

42 U.S.C. 54050).

“Direct or indirect certification. (j) When it appears

to the Secretary that the Interest of an applicant entitled

to a payment would be served thereby, certification of

payment may be made, regardless of the legal competen-

cy or incompetency of the individual entitled thereto,

either for direct payment to such applicant, or for his use

and benefit to a relative or some other person.”

42 U.S.C. §407:

“Assignment, The right of any person to any future

payment under this subchapter shall not be transferable

or assignable, at law or in equity, and none of the moneys

paid or payable or rights existing under this subchapter

shall be subject to execution, levy, attachment, garnish-

ment, or other legal process, or to the operation of any

bankruptcy or insolvency law.”

Federal Regulations

20 C. F. R. §§404.1601 et seg. (1970):

404.1601 Payments on behalf of an individual.

When it ee to the Administration that the interest

of a beneficiary entitled to a payment under title II of the

Act would be served thereby, certification of payment

3

may be made by the Administration, regardless of the

legal competency or incompetency of the beneficiary en-

titled thereto, either for direct payment to such bene-

ficiary, or for his use and benefit to a relative or some

other person as the ‘representative payee’ of the bene-

ficiary. When it appears that an individual who is receiv-

ing benefit payments may be incapable of managing

such payments in his own interest, the Administration

shall, if such individual is age 18 or over and has not been

adjudged legally incompetent, continue payments to such

individual pending a determination as to his capacity to

manage benefit payments and the selection of a repre-

sentative payee.’

„6404. 1602 Submission of evidence by representative payee.

Before any amount shall be certified for payment to

any relative or other person as representative payee for

and on behalf of a beneficiary, such relative or other

person shall submit to the Administration such evidence

as it may require of his relationship to, or his responsi-

bility for the care of, the beneficiary on whose behalf

payment is to be made, or of his authority to receive such

payment. The Administration may, at any time there-

after, require evidence of the continued existence of such

relationship, responsibility or authority. If any such rela-

tive or other person fails to submit the required evidence

within a reasonable period of time after it is requested,

no further payments shall be certified to him on behalf of

the beneficiary unless for good cause shown, the default

of such relative or other person is excused by the Ad-

ministration, and the required evidence is thereafter

submitted.”

Ҥ404.1603 Responsibility of representative payee.

A relative or other person to whom certification of pay-

ment is made on behalf of a beneficiary as representative

payee shall, subject to review by the Administration and

to such requirements as it may from time to time pre-

scribe, apply the payments certified to him on behalf of a

beneficiary only for the use and benefit of such bene-

a

ficiary in the manner and for the purposes determined

by him to be in the beneficiary’s best interest.”

“$404.1604 Use of benefits for current maintenance.

Payments certified to a relative or other person on be-

half of a beneficiary shall be considered as having been

applied for the use and benefit of the beneficiary when

they are used for the beneficiary’s current maintenance—

ie., to replace current income lost because of the dis-

ability, retirement, or death of the insured individual.

Where a beneficiary is receiving care in an institution

(see § 404.1606), current maintenance shall include the

customary charges made by the institution to individuals

it provides with care and services like those it provides

the beneficiary and charges made for current and fore-

oe needs of the beneficiary which are not met by the

nat it ut ion.“

„5404. 1606 Use of benefits for beneficiary in institution.

Where a beneficiary is confined in a Federal, State

or private institution because of mental or physical in-

capacity, the relative or other person to whom payments

are certified on behalf of the beneficiary shall give

highest priority to expenditure of the payments for the

current maintenance needs of the beneficiary, includ-

ing the customary charges made by the institution (see

§ 404.1604) in providing care and maintenance. It is

considered in the best interests of the beneficiary for the

relative or other person to whom payments are certified

on the beneficiary's behalf to allocate expenditure of the

payments so certified in a manner which will facilitate

the beneficiary's earliest ible rehabilitation or release

from the institution or which otherwise will help him live

as normal a life as practicable in the institutional en-

vironment.”

par

State Statutes

Ill, Rev, Stat., ch. 91%, §12-12 (1973):

“12-12. Treatment charges. Each patient receiving treat-

ment in a mental health program of the Department,

and the estate of such patient, is liable for the pay-

ment of sums representing charges for treatment of

such patient at a rate to be determined by the Depart-

ment in accordance with this Section. If such patient is

unable to pay or if the estate of such patient is insuf-

ficient, the responsible relatives are severally liable for

the payment of such sums, or for the balance due in case

— the amount prescribed under this Act has been

paid.

No admission or hospitalization of a patient in a state

hospital may be limited or conditioned in any manner by

the financial status or ability to pay of the patient, the

estate of the patient, or any responsible relative of the

patient.

W W + &

Upon request of the Department, the State’s Attorney

of the county in which a responsible relative or a patient

who is liable under this Act for payment of sums repre-

senting treatment charges resides, shall institute appro-

priate legal action against ar.y such responsible relative,

or the patient, or within the time provided by law shall

file a claim against the estate of such patient who fails or

refuses to pay those charges.

In case any patient, the estate of any patient, or the

responsible relatives of such patient are unable to the

treatment charges for the patient provided for by this

Act, then the cost of treatment of such patient shall be

borne by the State.

=

State Rules And Regulations

Department of Mental Health, State of Illinois,

Rule 10.02 (1973):

“Rule 10.02—Handling of Patient's Personal Property

Other Than Clothing

When a patient is admitted to a Department facility,

cash, traveler’s checks, U.S. government securities; etc.,

in his = shall be deposited in his trust fund. A

trust fund receipt listing all items received shall be

made. The original receipt is to be retained in the busi-

ness office; one tl is to be given to the person deposit-

ing the funds, and another copy to the ward supervisor.

All funds subsequently received at the facility for the pa-

tient’s benefit shall be deposited in his trust fund account.

Competent patients with trust funds shall be asked to

sign form DMH-623, Authorization to Release Trust

Funds. The Bureau of Accounting, Reimbursement Serv-

ices or the facility Patient Resource Unit shall be noti-

fied immediately of any refusal to sign form DMH-623.

If the patient does not sign form DMH-623, no funds

from his trust fund made payable to him may be used

to defray treatment charges without a Court Order.

Competent patients whose funds are payable to them-

selves shall be billed for treatment charges and collec-

tion shall proceed as provided by law and Department

procedures.”

*

STATEMENT OF THE CASE

The issues in this case arise from the intersection of

two separate systems (one state, the other federal) for the

handling of Federal Old-Age, Survivors and Disability

Insurance Benefits (Title II, Social Security Act of 1935,

§202, 42 U.S.C. §402 et seg.) paid to individuals who are

confined in state mental institutions in Illinois.

The State System

Illinois law provides that patients receiving treatment

in a mental health program administered by the Illinois

Department of Mental Health and Developmental Dis-

abilities (currently referred to as “DMHDD” but former-

ly called the Illinois Department of Mental Health,

“DMH”) are liable for the payment of sums representing

charges for such treatment. III. Rev. Stat., ch. 91%, §12-

12. At the time these proceedings were instituted when a

patient was admitted to a State facility, DMH made an

inquiry to the Social Security Administration (“Admin-

istration”) regarding whether the patient was eligible to

receive Title II disability benefits. The Administration

responded to this inquiry by informing DMH whether

the patient was eligible for benefits, and, if so, what kind

of benefits and whether the patient was currently re-

ceiving such benefits. If such benefits were currently

being paid to a “representative payee” (explained infra),

DMH would take no further action.

If the patient was eligible for social security benefits

but had not yet received them, then the State hospital

might be requested by the Administration to inform it of

the patient’s capability to manage his own benefits by

filling out Social Security Form 787 and forwarding it to

8

the Administration. This form contained a clinical evalu-

ation which had to be signed by a licensed physician

evaluating the patient’s capability to manage his own

benefits. If this report indicated that the patient was not

capable of managing his own benefits, then a further

investigation was begun by the Administration to ascer-

tain whether the patient or some other person (i.e. a

“representative payee”) should be the payee.

The Representative Payee System

This system was estak'‘shed by federal laws and regu-

lations. See, Title 42 U.S.C. §405(j) and the rules and

regulations issued thereunder, 20 C.F.R. §§404.1601-

1610. Under the Representative Payee System, the Ad-

ministration was empowered to appoint a person to re-

ceive disability benefits on behalf of a beneficiary under

certain circumstances. At the time of this suit, a super-

intendent of a public (state) institution could only be

appointed as a representative payee if the Administra-

tion determined ‘hat the beneficiary was incapable of

managing his benefit payments (20 C.F.R. §404.1601),

the institution was responsible for the care of the bene-

ficiary (20 C.F.R. §404.1602), and the Social Security

Administration could find no other willing or capable

person to receive benefits on behalf of that beneficiary.

The District Office of the Administration had sole dis-

cretion in appointing representative payees.

DMH Form 623

On the other hand, where a patient in a State facility

was competent upon admission, that patient was asked

to sign DMH Form 623 (Appendix G). See, DMH Rule

10.02. If a patient refused to sign this form, he was billed

for his treatment and the hospital followed the collection

procedures set forth in Ill. Rev. Stat., ch. 91%, §12-12. If

a"

the patient did sign the form, he agreed that his benefits

could be used to pay hospital charges for his current care

and maintenance. When this suit was filed, this form

explained that the hospital was authorized by law to

make charges for the cost of the patient’s care and treat-

ment and indicated that the patient consented to endorse

any payments he received while in the hospital for de-

posit in his Trust Fund Account. This form also indicated

that the patient consented to have the hospital debit his

account for charges made for care and treatment. No

such debits were made, however, without later express

authorization by the patient. A patient’s Trust account,

pursuant to DMH rules, was allowed to build up a $400

reserve from which no care and treatment charges could

be paid. Subsequently, such patients were asked to ex-

pressly authorize payment of hospital charges out of this

account by signing a trust fund withdrawal form when

payment was to be made (whether or not they had signed

Form 623). Each patient was also allowed a minimum of

$25 per month for personal needs while in the hospital.

A review of both of these systems reveals the following

possibilities upon the admission of a patient to a State

hospital:

Patient admitted“

for benefits

to DMH facility

receives benefits

a alia Ki

paid to rep.

Patient already

payee (private)

— Form 623 signed

Form 623 not signed

(incompetent) --

Patient is eligible

(competent) --

Patient is ineligible for benefits

Rep. payee (private)

Rep. payee (State)

ft Form 623 signed

Form 623 not signed

* Compare: Figure 1 in the Court of Appeal’s opinion, App. F,

at F-3.

3

The Proceedings Below

The Tidwell Second Amended and Schreckenberg First

Amended complaints are class action, civil rights suits

brought under 42 U.S.C. §1983 alleging the seizure of

Respondents’ Title II disability benefits in violation of 42

U.S.C. §407 and the due process and equal protection

clauses of the Fourteenth Amendment to the Constitution

of the United States and the due process clause of the

Fifth Amendment to the Constitution of the United

States. Federal jurisdiction is asserted to lie under 28

U.S.C. 881331, 1343(3), 133404) and 1361.

Prior to June of 1973, Respondents were involuntary

mental patients at Chicago Reed Hospital, an institution

under the jurisdiction of DMH, who were entitled to

receive disability benefits pursuant to Title II of the

Social Security Act (42 U.S.C. §401 et seq.). Respondents

were found incapable of managing these benefits by the

Administration; however, the Administration found no

close relatives who were willing and able to serve as

representative payees for them. Accordingly pursuant to

20 C.F.R. §404.1601 et seg., the Administration appointed

the superintendent of the mental institution to serve in

that capacity. As representative payee, the superinten-

dent deposited Respondents’ Title II benefits into a

patient trust fund account. DMH Rule 10.02. The trust

fund account of each Respondent was allowed, pursuant

to DMH rules, to build up a minimum $400.00 reserve.

Thereafter, DMH charged the patients’ trust fund ac-

counts an amount authorized by state statute to cover the

current care and maintenance charges for each Respond-

ent while allowing a minimum of $25.00 for personal

needs per month. The imposition of charges for care and

maintenance was expressly authorized by federal regula-

tion. See, 20 C.F.R. §§404.1604, 404.1606.

=)

District Court’s Decision

Pursuant to cross motions for summary judgment filed

by the parties, the three-judge district court panel decid-

ed that the procedures employed by the federal defen-

dants to appoint representative payees violated the

Respondents’ procedural due process rights under the

Fifth Amendment. Memorandum Opinion and Order of

Judgment of June 23, 1976, Appendix A at A-12-A-17.

The federal defendants’ practice of appointing state of-

ficials as representative payees when no other capable in-

dividual was available was found to be consistent with

both constitutional and statutory authority. Appendix A

at A-11, A-12. A declaratory judgment was entered on

behalf of the Respondents that the Illinois procedures, to

the extent that Social Security disability benefits are

assigned prior to receipt, conflicted with 42 U.S.C. §407

in violation of the supremacy clause. Ibid. at A-9, A-10.

Thereafter, the Federal defendants and Petitioner

revised their separate procedures to effect compliance

with the district court’s ruling. The Petitioner modi-

fied DMH Form 623 so that it included a verbatim

restatement of 42 U.S.C. §407 and a statement informing

patients that the form was neither irrevocable nor a

precondition to the receipt of treatment.

On March 5, 1979, the district court held that the revis-

ed federal regulations and procedures satisfied the

deficiencies outlined in the June 23rd Order. Appendix

C. Regarding the Petitioner, the court found that the

revised DMH Form 623 was no longer an assignment of

benefits, and thus, it was consistent with 42 U.S.C. §407.

Additionally, the court granted Respondents’ request for

class certification pursuant to FED. R. CW. P. 23.

Subsequently, Respondents petitioned for an entry of

an award of attorneys’ fees against the Petitioner and the

on ition

Federal defendants. On March 24, 1980, the district court

dismissed the Federal defendants from any responsibility

for fees or costs. On February 6, 1981, the court ruled

that the Petitioner would be responsible for all of the fees

which were awarded. Appendix D. Additionally, the

court awarded a lodestar multiplier of 1.5 to the hourly

rates of all attorneys and paralegals, increasing the fee

award to $102,232.34. On March 25, 1981 final judgment

was entered and Petitioner appealed. Appendix E.

The Appeal

On appeal, the Court of Appeals for the Seventh Circuit

in its amended opinion, Appendix F, found that

Respondents had standing to challenge the legality of

DMH Form 623 even though no Respondent upon admis-

sion to a State facility had been required to sign DMH

Form 623. App. F, at F-5, F-4. The Court of Appeals

found that upon admission to a DMH facility “every

patient was threatened by the Form 623 procedures

the entire system resulted in the deprivation of the Social

Security benefits of every patient . . land] that named

and unnamed [plaintiffs] alike were subject to but a single

system which caused all of them the same injury.” Ibid.

These findings persuaded the court that the standing

rulings of this court in the recent cases of Blum v.

Yaretsky, ...... U. S. , 102 S.Ct. 2777 (1982) and General

Telephone Co. v. Falcon, ...... U. S. ., 102 S.Ct. 2364

(1982) were not controlling. Appendix F, at F-7, F-8.

The appellate court rejected Petitioner’s argument

respecting the lawfulness of DMH Form 623 procedures

as based upon a “restrictive definition of assignment based

on Illinois law”, Appendix F, F-9, and upheld the dis-

trict court’s ruling that DMH Form 623 constituted an

impermissible assignment of benefits under 42 U.S.C.

§407. In so doing, the court distinguished Moore v.

1

Colautti, 483 F. Supp. 357 (E. D. Pa. 1979), Hd, 633 F.2d

210 (3d Cir. 1980); French v. Director, Michigan Dept. of

Social Services, 92 Mich. App. 701, 285 N.W. 2d 427

(1979); and Tunnicliffe v. Commonwealth of Pennsylvania

Dept. of Public Welfare, 483 Pa. 275, 396 A.2d 1168 (1978).

Appendix F, at F-10, F-11.

On the issue of attorneys’ fees under 42 U.S.C. §1988,

the court approved of the actions of the district court in

assessing against the Petitioner, without apportionment

or reduction, substantially all the time spent by

Respondents’ counsel litigating the validity of the

Federal Representative Payee system. The district court

was found not to have committed reversible error by

making a finding of a civil conspiracy between the

Petitioner and the Federal defendants to buttress its un-

apportioned fee award. The Court of Appeals however

agreed with Petitioner that the application of the 1.5

multiplier was unjustified and reversed this aspect of the

ruling below.

The appellate court failed to address Petitioner’s con-

tention that the provisions of the “Equal Access to Justice

Act”, Pub.L. 96-481, §201-08, 94 Stat. 2325 (1980) (amen-

ding 28 U.S.C. §2412), respecting federal liability for at-

torneys’ fees, became applicable to the pending con-

troversy on October 1, 1981 and required an apportion-

ment of the fee award based upon the culpability of the

Federal defendants.

—

REASONS FOR GRANTING THE WRIT

DMH FORM 623 PROCEDURES DID NOT GIVE RISE

TO AN ARTICLE III “CASE OR CONTROVERSY.”

The jurisdiction of the federal courts is limited by the

case or controversy requirement of Article III of the Con-

stitution of the United States. Unless a party demon-

strates a “personal stake in the outcome,” Baker v. Carr,

369 U.S. 186, 204 (1962), the dispute may not be adjudi-

cated by the federal courts.

As the Seventh Circuit noted in its opinion, “[i]f a

patient entering an Illinois institution was determined to

be competent, the patient was asked to sign DMH Form

623.” On the other hand, Hilf a patient was determined to

be incompetent, a representative payee was appointed to

receive the patient’s disability benefits.” (Appendix F at

F-2, F-3). It is axiomatic that no single patient could have

been simultaneously subjected to both DMH Form 623

and the representative payee system, since one cannot be

both competent and incompetent at the same time. None

of the Respondents was found to be competent upon

admission to a State institution; hence, none of them

signed DMH Form 623, nor were they asked to do so.

Furthermore, there was no evidence in the record

which supported the conclusion that Respondents were

under “a real and immediate threat” of harm by the use of

Form 623 sufficient to confer standing upon them, O Shea

v. Littleton, 414 U.S. 488, 496 (1974), since no evidence was

presented that any one of them was likely to be subjected

to this form in the immediate future because, although

found to be incompetent, they were actually competent

and would, therefore, be requested to sign DMH Form

oe om

623. Nor was any showing made that any other patients

had been subjected to both DMH Form 623 and the

representative payee system while confined in a State

institution. Thus, the possibility that Respondents would

suffer such an injury in the future was completely

“imaginary or speculative.” Younger v. Harris, 401 U.S.

37, 42 (1971). Since Respondents were not harmed or

threatened with injury by the use of this form, they

lacked standing to contest its legality. Warth v. Seldin,

422 U.S. 490, 499 (1975).

Despite the foregoing, the Seventh Circuit held that

Respondents had standing to sue because “every plaintiff

was subject to the same system of deprivation, and in the

end, every plaintiff suffered the identical harm—depriva-

tion, of Social Security benefits. Only the precise means

by which the injury was inflicted were different.” (Ap-

pendix F, F-6). This is both factually and legally inac-

curate. While it is true that every patient at a State insti-

tution was subject to either the representative payee sys-

tem or Form 623, this does not create a “single” system

applicable to all patients. In fact, there were two mutually

exclusive systems, and every patient was subject to one or

the other of them.

Assuming, arguendo, that the Seventh Circuit correct-

ly determined that the use of Form 623 was improper be-

cause it was an impermissible assignment of Social Secur-

ity benefits (see Argument II, infra, for a discussion of

this point), then the conclusion that such individuals were

illegally deprived of their benefits logically follows. How-

ever, the conclusion that the named plaintiffs suffered pre-

cisely the same injury is a non sequiter because the district

court held that it was not per se illegal to appoint the State

superintendent to serve as a representative payee. (Appen-

dix A at A-12). Thus, the creation of a trust fund account

to hold those benefits would only have been improper if the

3

Respondents were competent and should have been re-

ceiving their own benefits, a fact not yet established. It

is quite possible, and just as reasonable, to assume that

were hearings held regarding the competency of each

of the Respondents, each will again be found incompe-

tent and the State superintendent will be once again

appointed as the representative payee. Thus, all Respond-

ents were not subjected to the same system, nor did they

necessarily suffer the same injury.

A mere possibility of injury has never been sufficient to

confer standing to sue. Golden v. Zwickler, 394 U.S. 108,

108 (1969). Since the Respondents suffered no actual

harm or imminent threat of injury from the use of this

form, they lacked standing to contest its validity. The

contrary holding of the Seventh Circuit will result in a

plethora of actions being filed by individuals who par-

ticipate in some type of governmental program (e.g.,

social security, public assistance, etc.) claiming that some

portion of that program which they had not yet been

subjected to, but which may affect them in the future

is illegal. This results in a lack of the “concrete adverse-

ness” which has always been the touchstone of standing

principles.

Furthermore, the fact that the Respondents did suffer

one type of injury at the hands of the Federal defendants

did not operate to give them standing on behalf of others

who suffered a different injury attributable to Petitioner.

Uninjured plaintiffs cannot bring suit on behalf of an in-

jured class and cannot “represent a class of whom they

are not a part,” Bailey v. Patterson, 369 U.S. 31, 32-33

(1962). A class cannot have standing independently of a

1 The two types of injury suffered were: 1) the use of Form

623 to deprive patients of their social security benefits, and

2) a 1 — of due process in connection with the appoint-

ment of a representative payee.

-_ =

named plaintiff who himself establishes a controversy

with the defendant. Simon v. Eastern Ky. Welfare Rights

Org., 426 U.S. 26, 40 n.20 (1976); Rizzo v. Goode, 423 US.

372-73 (1976); Linda R. S. v. Richard D., 410 US. 614,

617 (1973). A rule of class standing would confer upon

any uninjured person a “roving commission” to seek out

violators of federal law and would render the plaintiff's

attorney the only real party in interest.

By failing to heed this Court’s most recent standing,

Blum v. Yaretsky, ..... U. S. ., 102 S.Ct. 2777 (1982),?

and class representation rulings, General Telephone Co.

v. Falcon, ..... U. S. ., 102 S.Ct. 2364, 2370-2372 (1982),

the Court of Appeal’s decision stands in clear conflict

with controlling precedent of this Court and should be

reversed.

USE OF DMH FORM 623 WAS PROPER UNDER

BOTH 42 U.S.C. §407 AND THE DECISION IN PHIL-

POTT v. ESSEX COUNTY WELFARE BOARD.

In essence, the Seventh Circuit has judicially engrafted

a “full disclosure” requirement onto 42 U.S.C. §407 in

holding that the use of DMH Form 623 constituted a pro-

hibited assignment of benefits. Despite the fact that it

was undisputed that Form 623 was revocable at any

time, the Seventh Circuit still found that it was an

assignment of benefits because the form did not state that

it was revocable. This decision ignores all of the relevant

Illinois contract law concerning assignments. A review of

this law reveals the following:

te. jor does 8 7 — who has been subject to Poco

uct of one kind possess by virtue of that 322

sary stake in oy ope conduct of another kind, al — simi-

lar, to which he not been subject.” Blum v. Yaretsky, supra,

102 S.Ct. at 2783.

—20—

A. This Form Was Not An Assignment Of Social Security

Benefits.

In Illinois, an assignment operates to transfer to the

assignee all of the right, title and interest of the assignor

in the assigned property. Litwin v. Timbercrest Estates,

Inc., 37 Ill.App.8d 956, 347 N.E.2d 378, 379 (Ist Dist.

1976). When a valid assignment is effected, the assignee

acquires a of the interest of the assignor in the property

which is transferred. Stavros v. Karkomi, 39 Ill.App.3d

113, 349 N.E.2d 599, 607 (Ist Dist. 1976). In this case, the

execution of Form 623 transferred no present owner-

ship interest in the social security benefits of patients to

the State because: 1) the benefits were still paid to the

patient himself, and the checks had to be endorsed by the

patient prior to being deposited in his trust fund avcount;

2) hospital charges were not automatically paid out of the

trust fund account, the patient still had to execute a

“withdrawal form” before such charges were paid; and 3)

Form 623 was revocable at any time. Clearly, therefore,

this form could not have been an assignment of social

security benefits because the patient retained complete

control over his benefits, even after those benefits were

deposited in his trust fund account.

In reality, DMH Form 623 was simply an agreement to

pay current care charges out of a particular fund—the

patient’s trust fund account. It is well settled in Illinois,

as in other jurisdictions, that an agreement to pay bills or

charges out of a particular fund is not an assignment of

such fund or any part thereof. As long as the owner re-

tains any control over the funds, or the power to revoke

the agreement, no assignment has been made. Bell &

Howell Co. v. Spoor, 225 III. App. 256, 264 (1922). Here

the patients had both control over the funds and the

power to revoke the agreement, so no assignment had

been made.

~

Finally, since the State is still using a modified version

of this form to do precisely the same thing that was done

in the past, the form could not have been an “assignment”,

otherwise it would still be one. The addition of the dis-

claimers did nothing to change the nature of the agree-

ment and, therefore, the fact that the court authorized

the State to continue to use this agreement is inconsistent

with the holding that the agreement constituted an im-

permissible assignment of benefits.

B. DMH Use Of Form 623 Was Not Tantamount To Com-

pulsory Legal Process.

This case is not controlled by the Supreme Court's de-

cision in Philpott v. Essex County Welfare Board, 409

U.S. 413 (1973). In Philpott the Supreme Court precluded

a state from suing a social security beneficiary to recover

from his current benefits for care which the State pro-

vided to him in the past. The Court held that as to those

services already rendered, the state was a creditor just

like any other and 42 U.S.C. §407 barred the action.

However, the Court in Philpott did not address the sole

issue presented in this case regarding the anti-assignment

provision of §407—whether it precludes social security

benefits from being used for exactly what they were in-

tended to provide for, i. e., the current care and mainte-

nance costs of the beneficiary. In Department of Health

and Rehabilitative Services, etc. v. Davis, 616 F.2d 828

(5th Cir. 1980), the Court noted:

The purpose of social security benefits for the disa-

bled is to provide for their care and maintenance.

The purpose of the social security exemption is to

protect social security beneficiaries from creditor's

claims . . . this exemption evidences a clear legis-

lative purpose of precluding beneficiaries from di-

verting their social security payments away from the

statute’s seminal goal of furnishing financial, medi-

cal, rehabilitative and other services to needy indi-

viduals. 42 U.S.C. 6801. Neither the purpose of the

benefits, nor the purpose of the exemption, is ac-

complished by barring Florida from reimbursement.

The federal grants are for the purpose of assuring

the beneficiary's care and maintenance and the state

seeks nothing more than to apply them to the rea-

sonable cost of Glasscock’s care. Id. at 831.

Even where state welfare departments have induced

patients to sign agreements to repay them for current

care out of future social security benefits, the validity of

suck agreements has been sustained as long as the agree-

ments were voluntary. Moore v. Colautti, 483 F. Supp.

357 (E.D. Pa. 1979), d., 633 F.2d 210 (3d Cir. 1980);

French v. Director, Michigan Dept. of Social Services, 92

Mich. App. 701, 285 N.W.2d (1979); Tunnicliffe v. Comm.

of Penn. Dept. of Pub. Welfare, 483 Pa. 275, 396 A.2d 1168

(1978).

In sum, the use of Form 623 was merely an attempt to

utilize the social security benefits for precisely the purpose

which Congress intended—the payment of current care

and maintenance costs. The Court of Appeal’s decision is a

perversion of that legislative intent and is irrational.

When a patient is incompetent and has a representative

payee appointed, that payee is obligated—by the provi-

sions of federal law and regulations—to apply the social

security benefits to pay for current care costs irrespective

of whether the beneficiary is confined in a State institu-

tion. On the other hand, where the patient is competent

and his own beneficiary, then the court has ruled that

his benefits must be protected from being used for pre-

cisely the same thing. This is an anomalous result which

must be reversed.

oo

A FEE AWARD SHOULD BE MEASURED BY THE

EXTENT TO WHICH RESPONDENTS PREVAILED

AGAINST PETITIONER ON THE DMH FORM 623

ISSUE ONLY.

There were three issues on the merits litigated in the

district court: (1) the constitutionality under the Fifth

Amendment of the Federal Representative Payee system;

(2) the constitutional and statutory validity for the ap-

pointment of state officials as representative payees

where no other capable individual is available to perform

that function; and (3) the legality of DMH Form 623

under 42 U.S.C. §407.

Respondents prevailed against the Federal defendants

on the first issue and against the Petitioner on the third

issue but lost on the second issue. The Court of Appeals

erred in failing to reduce or proportion the award of at-

torneys’ fees pursuant to 42 U.S.C. §1988 to accurately

reflect the extent to which Respondents prevailed on the

merits of their claims against Petitioner. Hensley v.

Eckerhart., ..... US. ....., 102 S.Ct. 1610 (No. 81-1244, cert.

granted, March 1, 1982).

The appellate court’s affirmance of the “finding” of a

conspiracy between Petitioner and the Federal defen-

dants is totally without support in the record below.

While the court asserts that “this case was disposed of by

the three-judge panel on summary judgment and no find-

ings of fact are required by Fed.R.Civ.P. 56”, App. F at

F-12, n.10, the order of June 23, 1976 expressly states

that the seventeen page memorandum opinion “consti-

tutes this court’s findings of facts”, App. A at A-17, and

as such, that opinion is devoid of any suggestion of a con-

spiracy.

8

But for Seventh Circuit’s misreading of the record re-

specting a conspiracy on the representative payee-due

process issue, Respondents have, at most, prevailed on

only one issue against Petitioner. Accordingly, the fee

award should be reversed as unreasonable due to the

failure of the trial court to correctly proportion the

award to accurately reflect the limited victory which

Respondents achieved against Petitioner.

IV.

FEDERAL DEFENDANTS ARE LIABLE FOR AT-

TORNEYS’ FEES UNDER THE “EQUAL ACCESS TO

JUSTICE ACT”, PUB. L. 96-481.

While this appeal was pending, the provisions of the

“Equal Access to Justice Act”, Pub. L. 96-481, §201-08, 94

Stat. 2325 (1980) (amending 28 U.S.C. §2412), respecting

federal liability for attorneys’ fees, became effective on

October 1, 1981. The Act is applicable to this litigation,

Bradley v. Richmond School Board, 416 U.S. 696 (1974),

United States v. Citizens State Bank, 668 F.2d 444, 446

(8th Cir. 1982), Watch v. Harris, 535 F.Supp. 9, 14 (D.

Conn. 1981), and was cited by Petitioner to the Court of

Appeals. The Federal defendants submitted a brief to the

Seventh Circuit on the applicability of the new statute.

The Court of Appeals however failed to address this issue

in either its original or amended opinion. The Court's re-

fusal to address the Federal defendants’ liability for fees

is fundamentally unfair and violative of Pub. L. 96-481.

Fees, if justified at all, should be apportioned among the

defendants based on their respective culpability.

—25—

CONCLUSION

For the reasons set forth above, Petitioner respectfully

requests that a Writ of Certiorari issue to review the

amended opinion and judgment of the Court of Appeals

for the Seventh Circuit.

Respectfully submitted,

Tyrone C. FaRNAR

Attorney General, State of Illinois

160 North LaSalle Street, Suite 900

Chicago, Illinois 60601

(312) 793-2503

Attorney for Petitioner

Patricia Rosen

Wiuiam A. WENZEL, III“

Special Assistant Attorneys General

130 North Franklin Street, Suite 300

Chicago, Illinois 60606

(312) 793-2380

Of Counsel * Counsel of Record

A-

APPENDIX A

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ROBERT TIDWELL, EULOGIO ROMAN, JAMES

HARRIS, JAMES SANFORD, ROBERT SCHRECK-

ENBERG and RICHARD GEISLER, similarly situated,

Plaintiffs,

Nos. 73-C-3014 v.

and 74-C-183

CASPAR WEIN BERGER, Secretary of the United

States Department of Health, Education and Welfare, in-

dividually and in his official capacity, JAMES B.

CARDWELL, Administrator of the Social Security Ad-

ministration, individually and in his official capacity,

ARTHUR E. HESS, Acting Commissioner of the Social

Security Administration, individually and in his official

capacity, and LE ROY P. LEVITT, Director of the II-

linois Department of Mental Health, individually and in

his official capacity,

Defendants.

MEMORANDUM OPINION AND

ORDER OF JUDGMENT

(Filed June 25, 1976)

Before SPRECHER, Circuit Judge, PARSONS and

DILLIN,* District Judges.

* Honorable S. Hugh Dillin, United States District Judge for

the Southern District of Indiana, is sitting by designation.

A-2

PER CURIAM. These cases raise questions concern-

— state and federal procedures in relation to the dis-

tribution and use of Social Security disability benefits for

individuals confined to state mental institutions in II-

linois. A three-judge panel has been convened pursuant to

28 U.S.C. §§ 2281, 2282. Plaintiffs seek declaratory and

injunctive relief against both the state and federal defen-

dants. The issues have been presented to us on cross-

motions for partial summary judgment.

I

All of the named plaintiffs are and have been eligible

to receive Social Security disability benefits. In addition,

both cases involve individuals who are or were at one

time confined in state mental institutions. At least some

of the named plaintiffs, were subject to Illinois’

procedure for obtaining permission in advance for the

use of disability benefits payable to the patient, for the

payment of charges of the institutions to which they were

confined, allegedly in violation of 42 U.S.C. § 407. In ad-

dition, at least some of the plaintiffs at some point while

confined in the state institution had their benefits paid

directly to the superintendent of their institution pur-

suant to Social Security representative payee procedures

and allegedly in violation of 42 U.S.C. §§ 405(j), 407 and

procedural due process requirements.

1 Since it becomes relevant for the determination of precisely

what relief is appropriate, we describe the situation of the

named plaintiffs in more detail. The named plaintiffs are

Robert Tidwell, Eulogio Roman, Robert Schreckenberg, James

Harris, James Sanford and Richard Geisler.

Tidwell was a volun 7 at the Chicago Read Mental

Health Center from April 1973 to June 1973. While at the in-

stitution payments of his Social Security benefits were paid to

the superintendent of the institution.

Roman was entitled to benefits as of September 1972 and

they were made payable to the Chicago Read Mental Health

Center as of that date.

(Footnote continued on following page)

A-3

The defendants include the Secretary of H.E.W., the

Administrator of the Social Security Administration, and

the Director of the Illinois Department of Mental Health.

A

Pursuant to ILL. REV. STAT. ch. 91%, § 12-12, Illinois

charges state institution patients for treatment and other

costs in accordance with their ability to pay. In accord-

ance with this policy the Department of Mental Health

has adopted Rule 10.02, which provides that a trust fund

shall be established for each patient to hold his cash,

checks, government securities and the like. Additionally,

Rule 10.02 provides that “[clompetent patients with

trust funds shall be asked to sign Form DMH-623,

Authorization to Release Trust Funds.”

continued

Schreckenberg was a voluntary patient at the Elgin State

Hospital from April 1964 to April 1975. While there benefits

were paid to the superintendent of the institution. Plaintiff is

now a patient of “Waukegan Chateau” a halfway house in

Chicago and payments are made directly to him.

Harris has been a voluntary patient at the Elgin State

Hospital since March 1972. From August 1972 to January 1974

disability insurance benefits were paid to the superintendent of

the institution as representative payee.

Sanford was a r at the Elgin State Hospital from 1958

to December 1973 and for approximately four months in 1974.

In 1973 and 1974 disability insurance benefits were paid to the

superintendent as representative payee. He is presently a resi-

dent patient as the Grassmere Halfway House in Chicago and

his brother William is presently serving as representative

payee.

Richard Geisler was from May 1971 to May 1973 a patient at

the Chicago Read Mental! Health Center and the Chester Max-

imum Security Hospital. While a patient at these institutions,

social security disability benefits were paid to the respective

institutions as representative payee. Upon his discharge plain-

tiffs father was named representative payee and presently

payments are made directly to the plaintiff.

A-4

Form 623 authorizes the superintendent to charge the

patient’s account for treatment charges, clothing,

maintenance, commissary purchases and other personal

expenses. The patient agrees to endorse any check receiv-

ed for deposit in his account. The agreement covers

Social Security disability benefit checks. No patient is re-

quired to sign the form, and if he does not no funds may

be used to defray treatment charges without a court

order. Form 623 does not on its face state that a patient is

not required to sign the form or that his consent is

revocable at any time. Finally, it does not state that the

agreement covers Social Security disability benefits

which would otherwise not be subject to legal attach-

ment. Plaintiffs challenge this procedure as violative of

the provisions of 42 U.S.C. § 407 prohibiting assignment

of future Social Security disability benefits.

B

Another way in which Social Security disability

benefits of state mental institution patients are used to

pay institution charges is through the designation of the

superintendent of the institution as representative payee

for the patient. The NN challenge this practice and

the procedure by which it is implemented.

42 U.S.C. 5 4050j) provides that when the interest of a

beneficiary would be served thereby certification of pay-

ment may be made to a relative or some other person.

The procedures for the appointment of a representative

payee are implemented pursuant to 20 C. F. R. § 404.1601

et seg. The Social Security Administration subscribes to

the basic concept that it is generally in the interest of an

adult beneficiary to make direct payments. Represent-

ative payment is made only upon a finding and deter-

mination that due to physical or mental incapacity, the

beneficiary’s best interest would be served thereby. In

the case of institutionalized beneficiaries the procedures

for representative payee are usually initiated by an

application from the institution.

A-5

Incapacity is evidenced by commitment to an institu-

tion, a declaration of legal incompetence, injudicious use

of funds, and other indications of inability to handle

funds, although none of these criteria are conclusive. In

addition, medical evidence of incapacity is provided by

institution medical personnel through the use of a stan-

dard Social Security form. On rare occasions Social

Security personnel will question the medical evidence

and arrange for a direct interview with the beneficiary.

The findings of “field personnel” are sent to a “claims

authorizer” for review and for determination that

representative payment is or is not required. At the time

these lawsuits were filed only the applicant for represent-

ative payee status was notified that the decision that

representative payment was required had been made,

although at the present time a legally competent

beneficiary will be notified of that decision. The decision

that representative payment is required is an initial

determination for which a panoply of administrative and

judicial review rights are provided. 20 C.F.R. § 404.905.?

The second determination to be made by the Social

Security Administration is who should serve as repre-

sentative payee for an institutionalized and incapable

beneficiary. This selection is usually made contem-

poraneously with the determination that representative

payment is required. The representative payee must be

qualified to protect the beneficiary’s interest, must sup-

ply evidence to this effect, 20 C.F.R. § 404.1602, is respon-

2 If the beneficiary contests the determination that represent-

ative 1 tonem is necessary, he is entitled to a reconsideration

of that decision. 20 C. F. R. § 404.907-916. If upon reconsidera-

tion, the beneficiary is not satisfied with the decision, he is en-

titled to a trial-type hearing before an administrative law

judge. 20 C.F.R. § 404.917-921. This hearing affords the

neficiary the right to personally appear, to confront and

cross examine witnesses, and to present any evidence on his

behalf. The decision of the administrative law judge is

reviewable by the appeals council, 20 C.F.R. §§ 404.940,

404.948-950, whose decision is reviewable by an appropriate

federal district court. 42 U.S.C. § 405(g).

A-6

sible for using such funds to provide for the benef ic iary's

current maintenance, 20 C.F.R. § 404.1604, which if the

beneficiary is institutionalized includes charges for care

and treatment. 20 C.F.R. § 404.1606. The selection

process takes into account the stated policy that the payee

have an ongoing relationship with the beneficiary. Ac-

cordingly, priority is given selection of a family member,

guardian, or friend. Institutions. public or private, sup-

posedly are chosen to serve as payee only when there are

no other persons available to serve in that capacity.

The designation of an institution superintendent as

payee is not in all cases dependent on whether other in-

dividuals are available, as some degree of discretion is

exercised by the administrator in his decision.“ At the

present time the designation of a representative payee is

not an initial determination, is committed to agency dis-

cretion, and is exempted from the hearing process and

judicial review. Proposed regulations would make this an

initial determination and provide notice and hearing

rights for all except legal incompetents. Even the propos-

ed procedures would not provide a hearing prior to the

designation of an institution superintendent as payee.

Plaintiffs contend that the designation of state mental

institution personnel as representative payee violates the

policy of 42 U.S.C. §§ 405(j) and 407. Alternatively, tliey

contend that the procedures outlined violate procedural

due process.

II

Jurisdiction in these cases is alleged to be based on 28

U.S.C. §§ 1361, 1831, 134303) and 13434). At the outset

we are met with a challenge to the jurisdiction of this

court.

8 A change from an individual representative payee to an in-

stitutional payee will occur if the payee dies, mes in-

capable of managing the benefit payments, no longer wishes to

serve as payee, fails to use the funds properly or is not

otherwise suitable to act as representative payee.

A-7

28 U.S.C. § 1361 grants jurisdiction for “any action in

the nature of mandamus to compel an officer or employee

of the United States or any agency thereof to perform a

duty owed to the plaintiff.”

The federal defendants argue that a decision to make

payments to a representative payee and the selection of

the payee are decisions committed to the discretion of the

Social Security Administration. Without challenging that

proposition it is clear that the plaintiffs in these cases are

not seeking review of any particular administrative deci-

sion, but rather, are seeking injunctive and declaratory

relief with respect to whether as a matter of law, state

mental institution personnel may serve as representative

payees and whether the procedures leading up to such a

designation are consistent with procedural due process

requirements. These are not questions left to the discre-

tion of administrative officials. Jurisdiction as to the

federal defendants in properly invoked under 28 U.S.C.

§ 1361.4 Frost v. Weinberger, 515 F.2d 57, 61-62 (2d Cir.

4 The federal defendants argue that the recent Supreme

Court case of Weinberger v. Safi, 95 S. Ct. 2457 (1975), is dis-

positive of this case and forecloses a finding of jurisdiction. We

note at the outset that 5 involved the interpretation of a

particular statute (42 U.S.C. 5 405(h)) which on its face

precluded district courts from exercising jurisdiction over

suits to recover benefits under Title II of the Social Security

Act based on section 41 of Title 28, 1940 edition (now sections

1331 to 1348, 1350 to 1357, 1359, 1397, 1399, 2361, 2401 and

2402 of Title 28). The action in these cases is premised on 28

§ 40st was Beso neg 2 5 at the = 16 — ss

was ‘ 0 ere is language in Salfi whic

might read as precluding all jurisdiction with respect to

Social 770805 benefits other than jurisdiction b on 42

U.S. C. 8 405(g) we do not read it so broadly. This is especially

so where in these cases the plaintiffs do not attack any par-

ticular administrative decisions, but attack certain policies and

ee employed 15 the Social Security Administration.

hese cases are unlike Sali in that some of the matters which

plaintiffs challenge, particularly the selection of an institution

superintendent as representative payee, were not initial deter-

minations and therefore could not have been considered by

(Footnote continued on following page)

A-8

1975); Martinez v. Richardson, 472 F. 20 1121, 1125-26

(10th Cir. 1973); Mattern v. Weinberger, 519 F.2d 150,

155-57 (3d Cir. 1975), vacated sub nom. Mathews v.

Mattern, 44 U.S.L.W. 3663 (May 24, 1976) (vacated for

consideration in light of Mathews v. Eldridge); Elliot v.

Richardson, 371 F. Supp. 960, 967-68 (D. Hawaii 1974)

vacated sub nom. Mathews v. Elliott, 44 U.S.L.W. 3663

(May 24, 1976) (vacated for consideration in light of

Mathews v. Eldridge). But see Jamieson v. Weinberger,

379 F. Supp. 28 (E.D. Pa. 1974); Dawson v. Weinberger,

skip op. No. 72-C-146-R (W. D. Va. 1973), aff'd 409 F. 2d

1407 (4th Cir.), cert. denied, 419 U.S. 854 (1974).

Jurisdiction over the state defendants with respect to

the use of Department of Mental Health Form 623 is

proper under 28 U.S.C. § 1343(3).5

4 continued

8 review of an administrative decision pursuant to 42

S.C. § 405(g). The availability of such review under § 405(g)

for the matters in Salfi was considered a decisive factor by the

majority in Salfi. Salfi, supra at 2465. See Johnson v. Robison,

415 U.S. 361, 373-74 (1974). Furthermore, as noted in Mathews

v. Eldridge, 44 U.S.L.W. 4224, 4227 (Feb. 24, 1976) Ҥ 405(h)

precludes federal question jurisdiction in an action challenging

denial of claimed benefits.” This action is not challenging

denial of benefits, but is challenging — en in by

the Social Security Administration. Moreover, the exhaustion

requirement of 5 40&g) (noted in Mathews v. Eldridge) cannot

in any way be met, as no procedures presently exist which the

plaintiffs can exhaust.

As an alternate ground of jurisdiction, we note that section

10 of the Administrative Procedure Act, 5 U.S.C. § 701-706,

provides an independent jurisdictional basis and that such

jurisdiction is not barred by § 405(h). Sanders v. Weinberger,

522 F.2d 1167 (7th Cir. 1975), cert. granted sub nom. Mathews v.

Sanders, 44 U.S.L.W. 3682 (June 1, 1976).

5 The plaintiffs all a denial of due process and equal

protection with to the challenged procedures. Although

we decide the issues raised on supremacy clause grounds, we

do — 7 — — 124800 tie and oo

jurisdiction is proper under section ns v. Lavine,

415 U.S. 528 (974). =

A-9

III

Pursuant to Illinois procedures and Department of

Mental Health Form 623 described in Part I, supra, state

mental institutions are able to obtain Social Security dis-

ability benefits ble to the patients and use these to

offset charges of such institutions.

42 U.S.C. § 407 provides:

The right of any person to any future payment un-

der this subchapter shall not be transferable or

assignable, at law or in equity, and none of the

moneys paid or — or rights existing under this

subchapter shall be subject to execution, levy, at-

tachment, garnishment, or other legal process, or to

the operation of any bankruptcy or insolvency law.

The state defendant argues initially that this section is

inapplicable to his p ures. He argues that since he is

using the funds for the very purpose for which they are

given to the plaintiffs (support and maintenance of the

patient),* that the legislative rationale behind section 407,

that is to prevent the use of these funds for other pur-

poses, is being fulfilled.

We believe that Philpott v. Welfare Board, 409 U.S. 413

(1973), forecloses this argument. Defendant attempts to

6 20 C. F. R. § 404.1606 provides:

Where a beneficiary is confined in a Federal, State or

private institution because of mental or physical incapaci-

ty, the relative or other person to whom ents are

certified on behalf of the beneficiary shall give highest

priority to expenditure of the ents for the current

maintenance needs of the beneficiary, including the cus-

tomary charges made by the institution (see § 404.1604)

in providing care and maintenance. It is considered in the

best interests of the beneficiary for the relative or other

. to whom payments are certified on the beneficiary’s

half to allocate expenditure of the payments so certified

in a manner which will facilitate the beneficiary’s earliest

possible rehabilitation or release from the institution or

which otherwise will help him live as normal a life as prac-

ticable in the institutional environment.

A-10

distinguish that case on the grounds that the Philpott

plaintiffs were required to sign the chailenged forms in

that case prior to receiving assistance. This, however,

does not change the fact that where New Jersey in that

case sought to be paid back for assistance rendered, the

Court stated section 407 “imposes a broad bar against the

use of any legal process to reach all Social Security

benefits.” Id. at 417. The fact that the agreement was re-

gered to be signed in that case does not detract from the

ourt’s holding that attempts to obtain repayment for

assistance rendered through an assignment of interest in

funds to be received, violates section 407.

The Illinois defendant next contends that the agree-

ments signed do not constitute an assignment since

they can be revoked at any time, are not required to be

signed and because the funds are required to be used for

the benefit of the patient.

The fact that the patients need not sign the agreement

or can revoke their assent at any time does not make this

any less an aay eye while it is in effect. Similarly, we

disagree with the defendant that his form does not con-

stitute an assignment because the form only authorizes

the trustee to use funds for the patient’s benefit. Clearly,

once the form is signed and payments of Social Security

funds, which pursuant to section 407 could not otherwise

be reached, have been made, the patient has lost his right

to control his funds. Even if we were inclined to agree

with the Illinois defendant in his attempts to characterize

this agreement as something other than an 3

we would be persuaded otherwise because of the fact that

Form 623 does not disclose to the patient that the agree-

ment may be revoked at any time, or that it covers Social

Security disability benefit payments for which, but for

the agreement, he would be under no legal compulsion to

use for payment to the state for institution charges.

Since section 407 makes the right to any future pay-

ment of disability benefits non-transferable, we hold that

the Illinois form and procedure violates plaintiffs’ rights

ursuant to that section and that informed consent must

obtained prior to each charge made against a patient’s

A-11

trust- account if Social Security disability benefits in that

account will be affected.

IV

Plaintiffs contend with respect to the procedures of the

federal defendants that 42 U.S.C. §§ 405(j) and 407 taken

together preclude the appointment of superintendents of

state institutions as representative payees. They argue

that section 405(j) requires a representative payee to

represent the best interests of the patient’ and section 407

represents a policy against compelling payment of Social

Security benefits to any creditor, and that since the

superintendent of an institution will use the funds to pay

the patient’s institutional charges he will be in the posi-

tion of a creditor and could not act in the best interest of

the patient.

The federal defendants on the other hand contend that

the statutory scheme does not preclude the appointment

of an institutional superintendent as a representative

payee. They argue that when a determination has been

made that the patient is incapable of handling his own

financial affairs and there exists no other person to act as

a responsible payee, that the best interest of the patient

requires the appointment of the superintendent as

representative payee. In addition, they point out that

although section 407 represents a policy decision not to

allow creditors, including state institutions, to legally at-

tach plaintiff's Social Security benefits, that section by no

means bars the use of such funds to pay for services

rendered by the institution. Indeed, the disability

benefits for which the plaintiffs are eligible are intended

7 42 U.S.C. § 40(j) provides:

When it ap to the Secretary that the interest of an

applicant entitled to a payment would be served thereby,

certification of payment may be made, regardless of the

5 — competency or incompetency of the individual en-

titled thereto, either for direct nt to such applicant,

or for his use and benefit to a relative or some other person.

A-12

to be used for the support and maintenance of the patient,

and that even when a non-institutional payee is appointed

he is expected to use the funds for the support and

maintenance of the patient, notwithstanding the fact that

the state would be without power to enforce collection of

these funds.“

We recognize the inherent conflict of interest in allow-

ing the state superintendent to act as payee especially

where if someone else were * the state would be

helpless to recover these funds. We can neither find nor

were we directed to any specific congressional pro-

vision forbidding the appointment of an institutional

superintendent as representative payee. In addition, we

cannot hoe | that where a thorough investigation has been

conducted and no other payee is suitable that it is per se

improper and not in the best interest of the patient to

designate a state official as payee. The go 's request

for declaratory and injunctive relief forbidding the

federal defendants from naming state institut ion

superintendents as representative payees for patients

pursuant to 42 U.S.C. § 405(j) is denied.

Plaintiffs next contend that the procedures employed

by the federal defendants in the selection of an in-

stitutional superintendent as representative payee vio-

lates procedural due process requirements.

The procedures outlined in Part I, supra, do not

provide beneficiaries who are institutionalized with an

opportunity to challenge the selection of a state official

as representative payee prior to that determination. In

the past few years there have been numerous cases

delineating when and under what circumstances due

process requires provision of an administrative hearing

or other administrative safeguards prior to the termina-

tion or reduction of property rights.

We note that the failure to use the funds for the support

and maintenance of the patient can lead to the appointment of

a new representative payee.

A-13

The plaintiffs rely on a line of cases beginning with

9 Kelly, 397 U.S. 254 (1970), for the propos it ion

that prior to the selection of the superintendent at the

beneficiary's institution as 9 jg ar payee notice be

— and a hearing be held.“ Defendants on the other

and rely on cases such as Arnett v. Kennedy, 416 U.S.

134 (1974), for the proposition that due process does not

require a prior hearing in all cases where property rights

are involved. i

The most relevant decision of the Supreme Court in

this line is also the most recent. In Matheus v. Eldridge,

44 U.S. L. W. 4224 (Feb. 24, 1976), the Court considered

whether an evidentiary hearing was required prior to

termination of disability insurance benefits under the

Social Security Disability Insurance Program. As it has

done in prior cases, it employed a balancing test

weighing three factors:

first, the private interest that will be affected by the

official action; second, the risk of an erroneous

deprivation of such interest through the procedures

used, and the probable value, if any, of additional or

substitute procedural 1 — oa hon and finally, the

government’s interest, including the function in-

volved and the fiscal and administrative burdens

that the additional or substitute procedural require-

ment would entail. (44 U.S.L.W. at 4229.)

The private interest involved here is much like the

private interest involved in Mathews v. Eldridge:

9 ny o North Finishing, Inc. v. Di-Chem, Inc., 419

US. 60 (1975 Lopez, 419 9 U.S. 565 (1975); Fuentes v.

407 US 972); Bell v. Burson, 402 U.S. 535 (1971);

Mule, 2 397 U.S. 280 1970); Sniadach v. Fami-

ly Finanee Corp. 337 (1969).

10 See also Mitchell v. W. T. Grant Co., 416 U.S. 600 (1974);

1 v. ge wa ang 515 F. 2d 57 A Cir. ** Dawson v

, slip op. No. 72-C-146-R (W. D. Va. 1 5 400

rod 14 (4th PCr. , cert. denied, 419 U.S. 854 (1974

A-14

Since a recipient whose benefits are terminated

— assigned to a representative payee] is awarded

ull retroactive relief if he ultimately prevails, his

sole interest is in the uninterrupted receipt of this

source of income 2 final administrative deci-

sion on his claim. His potential injury is thus similar

in nature to that of the welfare cit tone in Goldberg,

see 397 U.S., at 263-264, the nonprobationary federal

employee in Arnett, see 416 U.S., at 146, and the

wage earner in Sniadach. See 395 U. S., at 341-342.

(44 U.S.L.W. at 4230-31.)

The Court went on to note that only in Goldberg v. Kelly,

supra, had the Court held that due process requires an

evidentiary hearing—and that because termination of

welfare benefits “may deprive an eligible recipient of the

very means by which to live while he waits.” 397 U.S. at

264 (emphasis in original). The Court in Eldridge

differentiated disability benefits from welfare benefits in

that eligibility for disability benefits is not based on

financial need.

Weighing the different factors here from those in

Goldberg and Eldridge, we come out with the conclusion

that the private interest present in this case weighs in the

balance similar to that in Eldridge. On the one hand, the

— interest is less because unlike Eldridge, the

nefits here are not being terminated, but only

transferred to the custody of a representative payee. On

the other, the interest is greater because, unlike

Eldridge, the benefits are more certainly the sole source

of support for the individuals, as they are institutional-

ized at state hospitals and have no relatives who can

provide alternative support.

As to the second factor—the risk of an erroneous

deprivation because of the procedures used, and the

probable value, if any, of additional procedural safe-

8 present case differs significantly from

ldridge. In Eldridge, the Court found the Ad-

ministrative procedures used in terminating a bene-

ficiaries disability benefits were “elaborate.” pro-

cedures included continuing communication between

A-15

the disabled worker and the agency which enables the

agency to monitor the worker’s health. Whenever the

agency's tentative assessment of the beneficiary's health

differs from the beneficiary’s own assessment, “the

beneficiary is informed that benefits may be terminated,

provided a summary of the evidence 9 which the

ro determination to terminate is based, and af-

orded an opportunity to review the medical reports and

other evidence in his case file. He also may respond in

writing and submit additional evidence.” 44 U.S.L.W. at

4230. Upon such a record, the monitoring agency makes

a decision which is then reviewed by an examiner at the

Social Security Administration. Thus, in Eldridge, the

beneficiary receives continuing notice of the status of his

claim for benefits, specific notice when termination is

threatened including the basis upon which this decision

will be made, an opportunity to review his file, and, final-

ly, an opportunity to submit additional evidence.

None of these procedural safeguards are available to

beneficiaries in the present case. During the process to

determine whether a beneficiary is competent to handle

his benefits and, if not, who should be appointed as

representative payee, notice is not given, the beneficiary

is not informed as to why the decision is being con-

sidered, and even if he learns of the pending determina-

tion, he cannot get access to his file to examine the

documents therein. Clearly he cannot submit materials

on his own behalf. Only shortly after filing of this suit

did the Social Security Administration even establish

procedures whereby the beneficiary is notified that the

Administration has decided to 1 a representative

payee. Of course, no evidentiary hearing is held prior to

the appointment of a representative payee.

As to the need for a hearing, the Court in Eldridge

noted that since the decision to discontinue benefits

would turn in most cases, upon “routine, standard, and

unbiased medical reports by physician specialists. . . the

potential value of an evidentiary hear ing... [would be]

substantially less in this context than in Goldberg.” 44

U.S.L.W. at 4232. The question in Eldridge turned on

rather routine medical judgments and thus the absence

A-16

of a hearing did not deprive the beneficiary of a signifi-

cant safeguard.

In the decision making process under scrutiny here the

question of competency is not susceptible to routine

medical judgments and standard scientific tests. As we

understand, often the evidence considered at these deter-

minations consists of little more than conclusory

statements made by staff physicians at the beneficiary's

institution. Without any opportunity to rebut such

statements, benefits could be assigned to a representative

payee on the most flimsy of allegations. Thus, in this area

where judgments can never be standardized, the need for

the minimal safeguard of giving the beneficiary oppor-

tunity to examine and challenge the evidence is great.

The final factor to be considered is the public interest.

The Court in Eldridge noted:

Financial cost alone is not a controlling weight in

determining whether due process requires a par-

ticular procedural safeguard prior to some ad-

ministrative decision. But the Government’s interest,

and hence that of the public, in conserving scarce

fiscal and administrative resources, is a factor that

must be weighed. (44 U.S.L.W. at 4233.)

And it found that the “ultimate additional cost [of prior

evidentiary hearings] in terms of money and ad-

gp pee burden would not be insubstantial.” Jd.

laintiffs in this suit ask us to require that eviden-

6 earings be held prior to appointment of a

2 resentative payee. We note as did the Court in

ridge that the cost of prior evidentiary hearings

would not be insubstantial. In weighing the con-

siderations we find that the private interest present here

is not as significant as that in Goldberg since no one in the

38 case will be deprived of the means by which to

ive by the appointment of a representative payee. Thus,

although a hearing which allowed the decision maker the

opportunity of meeting the beneficiary would provide the

— safeguard, it is not constitutionally required.

he private interest, as we have noted, although not as

A-17

great as that in Goldberg, is still significant. Further-

more, the administrative procedures in the present case

obviously lack any procedural safeguards. The need for

these safeguards is greater here than in Eldridge, in that

the determination here is made on evidence presenting

an inherent possibility of unreliability. Weighing these

factors in the balance, and taking our cue from the

procedures noted in Eldridge, we hold that during a

determination to appoint a representative payee the

beneficiary: must be 1) given notice that such action is

under consideration (the notice must contain a summary

of evidence supporting such action); 2) provided access to

all evidence and materials which will, or might be, used

in making the determination; 3) provided with an oppor-

tunity to submit materials on his behalf; and 4) if a

representative payee is appointed, given notice of such

action containing complete information as to the

beneficiary’s rights to further challenge the decision."

V

ORDER

(1) The fo ing opinion constitutes this court’s find-

ings of fact and conclusions of law.

(2) The court finds that the Illinois procedure of seek-

ing payment for state institutional charges by having

legally competent patients assign their rights to future

Social Security disability benefits pursuant to ILL. REV.

STAT. ch. 91%, § 12-12, and Department of Mental Health

Rule 10.02 and Form 623 to be in conflict with the

1 against such assignments found in 42 U.S.C.

It is hereby ordered and adjud that a declaratory

judgment be entered on behalf of the named plaintiffs

1 These procedures are required only in decisions regarding

the incapacity of an individual and the appointment of a

re tive in situations where the payee —

will be a state official. We need not decide whether the pro-

cedures need be applied in other situations.

A-18

that the herein described Illinois procedures to the extent

that Social Security disability benefits are assigned prior

to receipt, is in conflict with 42 U.S.C. § 407 and thereby

violative of the supremacy clause.

(3) The court finds no constitutional or statutory

authority prohibiting the appointment of state officials as

representative payees, where no other capable individual

is available to perform that function and accordingly

plaintiff’s request for declaratory and injunctive relief to

that effect is denied.

(4) The court finds that the procedures presently

employed by the Social Security Administration and the

federal defendants named herein to appoint state mental

institution superintendents as representative payees pur-

suant to 42 U.S.C. § 405(j) and regulations promulgated

thereunder violate — due process rights.

It is hereby ordered and adjudged that with respect to

the named plaintiffs a declaratory judgment be entered

to the effect that the designation of a state official as

representative payee, without following the procedures

layed out below, is violative of the patient’s procedural

due process rights. To comply with due process, the

beneficiary must be: 1) given notice that a determination

to appoint a representative payee is being considered,

containing a summary of evidence supporting such ac-

tion; 2) provided access to all materials which will, or

might be, used in making the determination; 3) provided

an opportunity to submit materials on his behalf; and 4)

if a representative payee is appointed, given notice of

such action containing complete information as to the

beneficiary’s rights to further challenge the decision.

Dated at Chicago, Illinois this 23rd day of June, 1976.

/s/ Robert A. Sprecher

United States Circuit Judge

/s/ James B. Parsons

United States District Judge

/s/ S. Hugh Dillin

United States District Judge

B-1

APPENDIX B

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

(ARGUED FEBRUARY 15, 1977)

April 4, 1977.

[UNPUBLISHED ORDER NOT TO BE

CITED PER CIRCUIT RULE 35

Before

Hon. THOMAS E. FAIRCHILD, Chief Judge

Hon. WILBUR F. PELL, Circuit Judge

Hon. PHILIP W. TONE, Circuit Judge

ROBERT TIDWELL, et al., on behalf of themselves and

others similarly situated,

Plaintiffs-A ppellees,

No. 76-1853 and v.

No. 76-1854 (consolidated)

LE ROY P. LEVITT, Director of the Illinois De -

ment of Mental Health, individually and in his official

capacity and THE DEPARTM OF MENTAL

HEALTH OF THE STATE OF ILLINOIS,

Defendants-A ppellants.

(Caption Continued on Following Page)

B-2

ROBERT SCHRECKENBERG, et al., individually and

on behalf of all others similarly situated,

Plaintiffs-A ppellees,

v

LE ROY P. LEVITT, Director of the Illinois Department

of Mental Health, and ROBERT MACKEY, Superinten-

dent of Elgin State Hospital,

Defendants-A ppeliants.

Appeal from a ThreeJudge United States District Court for the

Northern District of Illinois, Eastern Division.

No. 73-C-3014, No. 74-C-183

Robert A. Sprecher, James B. Parsons, 8. Hugh Dillin

Judges Presiding.

ORDER

In these consolidated cases plaintiffs challe certain

ractices of the Illinois Department of Mental Health, the

nited States Department of Health, Education and

Welfare, and the Social Security Administration. Declar-

atory and injunctive relief was sought on behalf of all

current or former patients in Illinois state mental hospi-

tals whose Social Security benefits nad been “seized”

pursuant to federal and state administrative practices.

A three-judge district court was convened and, on cross

motions for summary judgment, that court entered a

declaratory judgment holding that the federal pro-

cedures used to appoint representative payees violated

the due process clause, and that the Illinois procedures

used to seek ent for institutional care conflicted

with the Socia urity Act. No class certification was

made. After the district court issued its opinion, the

federal defendants filed a motion under Rule 59(e), Fed.

R. Civ. P., to alter or amend the judgment, and the state

defendants filed a notice of appeal. The state’s appeal

B-3

raised the single issue of whether the execution of

Department of Mental Health Form 623 operated as an

assignment of future Social Security disability payments,

in conflict with 42 U.S.C. § 407, and therefore violated

the supremacy clause.

Prior to oral argument this court ordered the parties to

submit supplemental briefs regarding its jurisdiction

over the state’s appeal from the order of the three-judge

district court. The briefs satisfied us on this point, but at

oral argument it came to our attention for the first time

that (1) jurisdiction might be lacking because of the

pendency of the federal defendants’ Rule 59(e) motion,

and (2) that, even if jurisdiction existed, plaintiffs’ stand-

ing to raise the claim against the Illinois defendants

which was the subject of this appeal was questionable

because none of them had executed the challen Form

623. Accordingly, we requested the parties to file another

set of supplemental briefs, addressed to the issues of

plaintiffs’ standing to sue with respect to the claim in-

volved in this appeal and our own jurisdiction. Those

briefs have now been submitted, and we have ordered the

record su — 4. with an affidavit regarding plain-

tiffs’ standing to sue and a copy of the federal defendants’

Rule 59e) motion.

After examining these supplementary materials, we

conclude that we lack jurisdiction over the appeal. As is

apparent from Rule 4(a), Fed. R. App. P., the pendency of

a Rule 59 motion suspends the finality of the judgment as

to all parties. No certification pursuant to Rule 54b) hav-

ing been entered, the Illinois defendants may not take

their appeal at this time. In view of our holding on the

jurisdiction issue, we obviously cannot reach the issue of

plaintiffs’ standing to sue. That issue may now be resolv-

ed by the district court.

APPEAL DISMISSED.

C-

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ROBERT TIDWELL, et al.,

Plaintiffs,

Nos. 73 C 3014 v.

74 C 183

JOSEPH CALIFANO, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

PRELIMINARY STATEMENT

This opinion addresses defendants’ motion for this

court to alter or amend its Memoranduin Opinion and

Order of June 23, 1976. In addition, we have before us

plaintiffs’ motion for class certification.

BACKGROUND

In this case plaintiffs filed suits for declaratory and in-

junctive relief on behalf of all individuals who had been,

or were at that time patients in Illinois state mental

hospitals. Plaintiffs alleged that the federal and state

defendants’ procedure for the distribution and use of

Social Security disability benefits violated 42 U.S.C.

5407, 1983, and the Fifth and Fourteenth Amendments of

the United States Constitution. Plaintiffs’ cases were con-

rae and plaintiffs subsequently moved for class cer-

tification.

C-2

On June 23, 1976, we ruled on cross motions for sum-

mary judgment, indicating in a declaratory judgment

against the federal defendants that procedures employed

by them in their appointment of representative payees

pursuant to 42 U.S.C. §405(j) and 20 C.F.R. §404.1601-

1610 violated due process. We, however, found no con-

stitutional or statutory authority which would prohibit

any appointment of representative payees and thus

denied plaintiffs’ request for injunctive relief against any

such appointments by federal defendants.

With respect to the state defendants, we found that the

Illinois “ok gene of having legally competent patients

assign their rights to future Social Security disability

benefits for payment of institutional charged pursuant to

Ill. Rev. Stat. ch. 91% §12-12, and Department of Mental

Health Rule 10.02 and Form 623 was in conflict with the

rohibition against such assignments found in 42 U.S.C.

07. Accordingly, we entered a declaratory judgment

against the use of those procedures to seize Social Securi-

ty funds, The federal defendants subsequently filed a mo-

tion to alter or amend this opinion and order of judgment

under F. R. C. P. 59%e).

On Juby 22, 1976, state defendants filed a notice of

— with the Seventh Circuit. At that time, however,

plaintiffs’ motion for class certification and federal defen-

dants’ motion to alter or amend were still pending with

this court. On April 4, 1977, the Court of Appeals found it

was without jurisdiction to hear the appeal since the Rule

59(e) motion to alter or amend suspended the finality of

the district court’s order absent certification pursuant to

Rule 54(b). In accord, the Court of Appeals dismissed the

state defendants’ appeal pending this court’s resolution of

plaintiffs’ motion for class certification and federal defen-

dants’ motion to alter or amend. It is these motions that

we now will address.

C-3

MOTION TO ALTER OR AMEND

I

In our Order of June 23, 1976 (hereinafter Order), we

found that the federal defendants’ procedures for

designation of state institutions as representative payees

violated procedural due process on the grounds that, “at

the present time the designation of a representative

payee is not an initial determination, is committed to

agency discretion, and is exempted from the hearing

rocess and judicial review.” (Order, p.6). Based on this

inding, we ordered the federal defendants to reform

their representative payee procedures. To comply with

due process, we held that during a determination to ap-

point a representative payee the beneficiary must be:

(1) given notice that such an action is under con-

sideration, containing a summary of evidence

supporting such action;

(2) provided access to all evidence and materials

which will, or might be, used in making the

determination;

(3) provided with an opportunity to submit

materials on his behalf; and

(4) if a representative payee is appointed, given

notice of action containing complete information

as to the beneficiary’s rights to further

challenge the decision. (Order, p.17).

The federal defendants contend that the revised

regulations presently in effect, comport with the re-

quirements of due process of law by “substantially

satisfy[ing] the [Olrder.“ Specifically federal defendants*

argue that the revised regulations make the decision that

representative payment is required an initial determina-

tion for all legally competent adults, and make the deci-

sion regarding the appropriate payee an initial deter-

mination for all individuals, including minors and legal

* Unless otherwise indicated the word defendants refers to

the federal defendants only.

C-4

incompetents, citing Social Security Administration

Claims Manual (hereinafter CM) T 3011-3019 and 20

C. F. R. §404.905.

As to legally competent adults, the defendants explain

that the new regulations require that advance notice be

provided prior to the determination that a representative

payee be appointed, (the “need determination”) and prior

to the determination to appoint a specific payee (the

“payee determination”). 3 CM 13011 and T3019,

defendants indicate that the advance notice provides the

competent beneficiary with the opportunity to protest

both determinations before they are formalized and to

submit additional information. If, however, the bene-

ficiary does not come forward within 10 days to pro-

test, or where his protest is denied, the protest action

is processed. If a r is denied, the beneficiary is sent

a formal notice of the determination and provided infor-

mation regarding his or her right to appeal. (CM T 3011,

T 3019, 8470).

Defendants also maintain that the revised regulations

change procedures for appointing representative payees

for beneficiaries who have been adjudged legally in-

competent. In these cases, defendant indicates that the

panoply of rights afforded under an initial determination

apply after the beneficiary has been deemed incom-

petent but before a representative payee has been ap-

N is, after the need determination but be-

ore the payee determination. In other words, the find-

ing of incompetency is subject to agency discretion and

nonappealable. The determination re ing who will be

appointed representative payee is, however, an initial

determination and is therefore subject to full advance

notice and post-decision appeals procedure as delineated

in 20 C.F.R. ec eng The notice prior to the payee deter-

mination, defendant alleges, affords the legal represent-

ative of the beneficiary an opportunity to object to the

proposed payee selection and to submit information. The

proposed action to name a representative payee is

processed if the beneficiary fails to protest within 10 days

or if his protest is denied.

C-5

Thus, according to the federal defendants, the revised

regulations provide competent adult beneficiaries with

notice, hearing, and right to appeal at the need stage and

at the representative stage. Incompetent beneficiaries in-

cluding all minors are provided with the initial deter-

mination safeguards mentioned above only at the

representative stage.

Plaintiffs’ basic challenge to defendants’ claims is that

„Although. . the new regulations do provide substantial

procedural protections on appeal, these regulations do

not fulfill the Order . . which requires procedural

safeguards be made available to the beneficiary ‘during a

determination to appoint a representative payee.“

Specifically, 1 argue that the revised regulations

do not provide for notice to the beneficiary of a deter-

mination to appoint a representative payee until after

that initial determination at the n stage has been

reached. Plaintiffs also indicate that because the present

regulations provide for a summary of evidence support-

ing the particular determination only when requested by

the beneficiary, the beneficiary may not receive the sum-

mary before his hearing. In addition, plaintiffs maintain

that their right of access “to all materials which will, or

might be, used in making the determination” (citing

Order, p. 17), is restricted in that they must request the

information per the Privacy Act, 5 U.S.C. §552a and the

Social Security Administration Regulations Number 1,

20 C.F.R. 401.1 et seq. instead of being provided the

poe geet the agency, and that even after the request,

certain medical evidence may be deleted. Finally, plain-

tiffs assert that, although they have the right to submit

evidence, present notice forms do not specify the method

of submission.

At the outset, it is important to separate carefully

plaintiffs’ objections. Since initial determinations now

are provided for competent beneficiaries at both the need

and payee stages, and incompetents at the payee stage,

objections addressing the lack of right afforded by an in-

itial determination necessarily refer to the need stage in

which the beneficiary may be found incompetent. The

situation may be schematized as follows:

Defendants’ remaining objections refer to the sufficiency

of the procedural rights provided by the initial deter-

mination, that is the right to a summary of evidence, the

right to access of materials, and the right to submit

evidence. Our task, therefore, is to determine whether

due process requires an initial determination at the In-

competency Need Stage and whether due process re-

quires more than the “panoply of administrative and

judicial review rights” which are provided by the initial

determination where it is required.

In our Order we indicated that Mathews v. Eldridge,

424 U.S. 319 (1976), addresses the issue of whether

procedures prior to and during the selection of a

representative payee meet due process standards. In

weighing the different factors then under consideration

and juxtaposing our findings against the Eldridge

criteria,? we held that “the administrative procedures in

1 We described the rights provided by an initial determina-

tion in our Order as follows:

If the beneficiary contests the determination that repre-

sentative t is n , he is entitled to a recon-

sideration of that decision. If upon reconsideration, the

beneficiary is not satisfied with decision, he is entitled

to a trial-type pee Sone an administrative law Judge.

This hearing affords the beneficiary the right to person

appear, to confront and cross-examine witnesses, and to

present any evidence on his behalf. The decision of ad-

ministrative law judge is reviewable by the ap coun-

cil, whose decision is reviewable by an appropriate federal

district court. (citation omitted) (Order p. 5).

2 In Eldridge, the United States Supreme Court empl

balancing test weighing three footers: n

First, the private interest that will be affected by the of-

ficial action; second, the risk of an erroneous deprivation of

(Footnote continued on following page)

C-7

the present case obviously lack any procedural safe-

guards.” (Order, p.17). We also found, however, that,

although need stage hearings would provide the greatest

safeguards, they were not constitutionally required.

(Order, p.16).

It was in the context of these findings that we set forth

the criteria, heretofore mentioned, that must be followed

during a determination to appoint a representative

payee. We have examined the revised ps ne a and

now find that they satisfy our criteria and therefore com-

port with due process requirements.

First, plaintiffs’ objection that the new regulations fail

to provide for an initial determination at the Incompeten-

cy Need Stage is inconsequential since we previously held

that such a hearing is not Constitutionally mandated and

we reiterate that view here. (Order, p.16). Second, plain-

tiffs’ claim that the beneficiary may not receive a sum-

mary of evidence before his hearing is now satisfied since

his hearing now may be reviewed by an appropriate

appellate body established by 20 C.F.R. 404.905. This is

an adequate procedural safeguard. Third, plaintiffs now

have access to pertinent materials. The fact that they

must proceed under the Privacy Act and the Social

Security Administration Regulation 1 to obtain this in-

formation, and that certain medical evidence may be

deleted from these materials, is not necessarily unfair or

unreasonable. Finally, these regulations provide the

beneficiary with an opportunity to submit evidence on his

own behalf and advise him of the procedures therefor.

2 continued

such interest through the procedures used, and the

probable value, if any, of adaitional or substitute

procedural safeguards; and finally, the government’s in-

terest, including the function involved and the fiscal and

administrative burdens that the additional or substitute

procedural requirement would entail. (424 U.S. at 435).

C-8

II

In our Order we found that Department of Mental

Health Form 623 provided for an assignment of social

Sr funds in violation of 42 U.S.C. §407.

e stated:

“Even if we were inclined to agree with the Illinois

defendant in his attempt to characterize this agree-

ment as something other than an assignment, we

would be persuaded otherwise because of the fact

that Form 623 does not disclose to the patient that

the agreement may be revoked at any time, or that it

covers Social Security disability benefit payments

for which, but for the agreement, he would be under

no legal compulsion to use for payment to the state

for institution charges.”

The deficiencies in Form 623 noted at that time are

now remedied. Revised Form 623 now discloses to the

patient that the agreement may be revoked at any time

and that the execution of the agreement is not a precondi-

tion to the receipt of treatment. (State Defendants’

Memorandum on the Status of the Case, July 7, 1977, Ex-

hibit B). As now revised the form leaves the patient with

sufficient control of his future benefits to be not an

assignment nor a transfer but an authorization and a

limited trust revocable at will.

MOTION FOR CLASS CERTIFICATION

Plaintiffs have moved for class certification pursuant

to Rule 23 F.R.C.P. Specifically, they argue that cer-

tification is proper since declaratory and injunctive relief

is sought against the enforcement of allegedly un-

constitutional statutes, citing Poe v. Menghini, 339 F.

Supp. 986 (D. Kan. 1972) and Gesicki v. Oswald, 336 F.

Supp. 371 (S.D. N.Y. 1971). In view of our finding that

the Social Security’s revised regulations comport with

due process requirements, the need for injunctive or

declaratory relief is obviated, and, except where cer-

tification of the class exists as a matter of right, when

otherwise it would serve no useful purpose the request for

it should be denied.

C-9

Plaintiffs however claim that, irrespective of the need

for injunctive relief, class certification should be ordered

because the proposed class is entitled to monies “seized

and applied” by the state defendants prior to the Social

Security revisions and damages resulting from it. This

claim appears to be based on two theories: an ordinary

§1983 theory and a theory based upon the concept of

restitution. (Plaintiffs’ Second Amended Complaint, filed

March 7, 1974.)

The ordinary §1983 damage theory is that defects in

the former procedures employed in the selection of a

representative payee caused injury to the civil rights of

the plaintiffs’ class in violation of 42 U.S.C. §1983. For

this claim to result in an award there would have to be a

showing of some type of actual personal abuse. (Carey v.

Piphus, 46 U.S.L.W. 4224 (March 21, 1978)). Otherwise,

only a nominal recovery would be appropriate. Ibid. at

4229. Here plaintiffs do not allege any actual personal in-

jury from the seizure and application of the beneficiaries

funds, and, thus, only a nominal recovery could be ap-

propriate. The possibility of dispersement of a mere

nominal Ar not itself justify certification of

the class. (Callahan v. Sanders, 339 F. Supp. 814, at 819

n. 6 (M.D. Ala. 1971)).

The restitution theory similarly results in a finding

that no monies, or at best nominal funds, would be

available for distribution. Plaintiffs do not claim that the

money in question was acquired or used for any pu. pose

other than for the care of the patient. What they urge is

that the State would have been obliged to spend the

amounts it spent on them had they not been receiving

disability benefits or had they received the checks

themselves and spent them. In other words, plaintiffs do

not claim that the funds were diverted, but that they

were used without their consent under circumstances in

which plaintiffs were not obligated to use or allow the use

of them for their institutional care. There can be no doubt

about the fact, however, that funds of a mental patient in

a State institution are subject to the use of the state to

reimburse it for its care of the patient. Illinois Annotated

C-10

Statutes 91%, §12-12 (Supplement 1978) (Smith-Hurd).

Cf. In re Estate of Zagoras, 11 Ill. App. 3d 355, 296 N. E.

2d 641 (1973). Further, the intent of Congress was to

make its Social Security Fund, under proper procedures,

available to the state for its care of mentally disabled

recipients. eral Social Security Act, 42 U.S.C. §1396

et seq. (Supplement 1978). The state should not be re-

33 to disgorge itself of funds used in good faith for

the patient even though the procedure may have been in

error. The general impact of the Illinois Mental Health

Code, and in particular Chapter 91%, Sections 12-10

through 12-12, is that the State should seek reim-

bursements of amounts spent on patients care, and, that

persons acting in faith in administering the

— should be absolved of any liability for their

andling of patients and their affairs. Here again, it

would seem then that, since no monies would be available

for distribution, certification and notification of the class

would be useless. It should be pursued only where cer-

tification exists as a matter of right.

In view of all the foregoing, we have here a situation in

which, considering all several damage claims of the

plaintiffs, no funds could be available for distribution to

— — of the class being represented by the named

plaintiffs.

One final consideration remains. The rule in this cir-

cuit is that class certification may not be denied on the

ground of lack of “need” where the prerequisites of Rule

23 are met. Fujishima v. Board of Education, 460 F. 2d

1355, 1360 (7th Cir. 1975); Vickers v. Trainor, 546 F.2d

739, 747 (7th Cir. 1976); Vergara v. Hampton, No. 77-

2102 (7th Cir. Aug. 24, 1978). We find that plaintiffs have

met the requirements of Rule 23.“ Class certification,

8 Plaintiffs have satisfied the 23(a) prerequisites to class cer -

tification. A sufficient number of recipients are involved so to

rg aco impracticable. Weeks v. Bareco Oil Co., 125 F. 2d

84 (7th Cir. 1941). Plaintiffs allegations concerning the

utilization of Form 623 and certain representative payee

procedures are common and typical to the purported class.

(Footnote continued on following page)

C-11

therefore, although not necessary, should be made. Cer-

tification, however, would not justify notification other

than by the posting of the outcome of these proceedings

on the bulletin boards of the institutions of the Depart-

ment of Mental Health of the state for a period of 30 days.

Fujishima, supra at 1360. And, out of an abundance of

caution, such notification should inform those who may

be members of the class that the nature of these

proceedings will not result in a judgment for money

damages sufficient to permit any fund for distribution to

the member of the class.

In conclusion, federal defendants’ motion to alter or

amend should be and the same hereby is granted. And,

for the reasons stated, plaintiffs’ motion for class cer-

tification should be and the same hereby is allowed.

Dated at Chicago, Illinois, this 5th day of March, 1979.

/s/ Robert A. Sprecher

United States Circuit Judge

/s/ James B. Parsons

United States District Judge

/s/ S. Hugh Dillin

United States District Judge

continued

Swanson u. American Consumer Industries, 415 F.2d 1326,

1333 (7th Cir. 1969). Finally, there is no indication that the

class representatives will be antagonistic to the concerns of the

general class membership.

Plaintiffs also are in compliance with 23(b). Specifically,

they have established under 23(b1) that separate actions by

individual recipients would create a risk of inconsistent or

varying adjudications and would impede the ability of other

members not parties to the adjudication 1. — their in-

terests. See Generally, Technolograph Pri Circuits Ltd. v.

Methode Electronics, 285 F. Supp. 714 (N. D. III. 1968).

D-1

APPENDIX D

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ROBERT TIDWELL, et al.,

Plaintiffs,

Nos. 73 C 3014 v.

74 C 183

JOSEPH CALIFANO, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs initially appeared before this court challeng-

ing the state and federal procedures employed in the dis-

tribution and use of social security benefits for in-

dividuals confined to mental institutions in Illinois. In its

Memorandum reer and Order of June 23, 1976 (Order

I), the court held that the federal procedure for appoint-

ing a representative payee was a violation of due process

of law. However, the court declined to accept plaintiffs’

assertion that the practice of appointing an institutional

superintendent as representative payee violated any con-

stitutionally or statutorily protected rights of the in-

mates. The court also ruled that the state’s use of the II-

linois Department of Health Form 623 amounted to a

future assignment of social security benefits in con-

travention of 42 U.S.C. §407. As a result of the litigation,

both the state and federal procedures were modified to

comport with the rulings of this court. In a subsequent

memorandum opinion of March 5, 1979, we approved the

changes made in both procedures.

D-2

Pursuant to 42 U.S.C. §1988 plaintiffs now request at-

torneys’ fees for the time and costs spent litigating this

matter. The federal defendant is not a party to this action

as it was dismissed because the court was without

jurisdiction to award fees against the United States. The

oo is the only party against whom fees may

Defendant, in opposition to the payment of fees for

plaintiffs’ attorneys, first argues that plaintiffs lacked

standing to challenge Form 623 because, allegedly, none

of them ever signed it. Defendant has misconstrued the

issue. Whether plaintiffs signed Form 623 or not, they

were members of a class who were unjustly deprived of

all or part of their social security benefits due to a con-

spiracy between the state and federal defendants. Form

623 was one important aspect of that conspiracy.' Clear-

ly, plaintiffs had standing, to challenge both state and

federal procedures. Further, implicit in the designation

of class certification (Order II, March 5, 1979) was a find-

ing of standing.

Defendant next contends that this court is without

jurisdiction to award fees because of plaintiffs’ delay in

requesting attorneys’ fees. Specifically, they claim that

the order of March 5th, 1979, constituted a final judg-

ment and, therefore, failure to move for attorneys’ fees

within ten * of that time became a bar to entertaining

any mot ion for fees. (Plaintiffs cite Rule 59(e) of the

Federal Rules of Civil Procedure.) Whether the order of

this court was a final judgment under Rule 59%e) is irrele-

vant here. After judgment is rendered in a civil rights

case, a petition for fees can be made under §1988 and is

not governed by Rule 5%e). Knighton v. Watkins, 616

F.2d 795 (5th Cir. 1980) distinguishing Stacey v.

Williams, 446 F. 2d 1366 (5th Cir. 1971).

Defendant argues in the alternative that any award of

fees should be substantially reduced because the plaintiffs

A fact not directly addressed by either side is that plaintiffs,

patients of a mental institution, may well have lacked the

requisite capacity to make a valid execution of Form 623.

D-3

did not prevail on all the issues against the state. Accord-

ing to defendant this raises the question of whether the

plaintiffs could even be deemed prevailing parties within

the language of §1988. The courts have liberally construed

this section to permit the allowance of attorneys’ fees in

this type of litigation as long as there are no special cir-

cumstances which would render an award unjust. Sethy

v. Alameda County Water Dist., 602 F.2d 894 (9th Cir.

1979, cert. denied, 444 U.S. 1046 (1980); Criterion Club of

Albany v. Board of Commissioners of Daugherty County,

Georgia, 594 F.2d 118 (5th Cir. 1979); Davis v. Murphy,

587 F. 2d 362 (7th Cir. 1978).

To be a prevailing party within the meaning of §1988 a

per need not win on all the issues. Bly v. McLeod, 605

2d 134 (4th Cir. 1979), cert. denied, 445 U.S. 928 (1980);

Dawson v. Pastrick, 600 F.2d 70 (7th Cir. 1979). In the in-

stant case, plaintiffs were successful in two of three

issues presented, thus prompting the state and federal

governments to make substantial changes in their

rocedure for the disbursement of social security

nefits. Plaintiffs, further, were successful in their

endeavors to obtain class certification, thus benefiting the

neral public. As a result of this action, enero a ve

rought about needed relief, not just for themselves but,

more importantly, for present and future members vf the

class. Their suit has operated as a catalyst to prompt the

defendants to — 5 their procedure in a way which will

provide a substantial benefit to patients in the state’s in-

stitutions. Fluhr v. Roberts, 463 F.Supp. 745 (W. D. Ky.

1979). There is no question about the fact that plaintiffs

are prevailing parties as that term is used in the fee

awarding provisions of §1988.

Defendant, State of Illinois, being successful on one

issue was permitted to continue the practice of appoint-

ing an institutional superintendent as representative

payee for inmates of the institution. The principle ques-

tion which remains in this regard is whether, based upon

the success of defendant on a single issue, a reduction in

the attorneys’ fees claimed is warranted. The court is

of the opinion that a reduction on this basis is not

D-4

warranted. The cases hold that under circumstances such

as these, the success of the defendant on a collateral issue

would not justify a reduction in fees generated by the

—— party. Northeross v. Board of Education

emphis City, 611 F.2d 624 (6th Cir. 1979), cert. denied,

18 (1980); Hughes v. Repko, 578 F. 2d 483 (3d

ir. "

It is true that some courts have advocated a propor-

tionality theory for recovery when a plaintiff does not win

on all the issues. See Nadeau v. He , 581 F.2d 275

Ist Cir. 1978); Batiste v. Furnco Construction Corp., 503

2d 447 (7th Cir. 1974) cert. denied, 420 U.S. 928 (1975).

However, the court finds that at least two reasons exist

for not following such a course in this case. First, the

issue on which the state prevailed is not of comparable

significance to those issues on which the plaintiffs were

successful. Second, full allowance of fees for legal ser-

vices are properly allowable when a claim of public

magnitude is successfully pursued even though some of

the same services may also have been rendered in the in-

stance of a second claim in which the party did not

prevail. Hughes v. 1 578 F. 2d 483 (3d Cir. 1978). In

the recent case of Northcross v. Board of Education of

Memphis City, 611 F.2d 624 (6th Cir. 1979), the court,

directly addressing this issue, rejected the theory of

proportionality. Id. at 36.

As was stated earlier in this opinion, the federal defen-

dant has been excused from payment of attorneys’ fees,

thereby leaving the question of whether the state should

be required to pay the full cost of this litigation while its

co-conspirator is absolved of paying for its conduct. In ad-

dressing such an issue it is wise to examine the purpose

of §1988. The section a government on both the

state and federal levels to hold in high esteem the civil

— of its people. Those of its people who succeed in

this purpose are deemed to be advancing the best in-

terests of the general public. Martin v. Wray, 473

F.Supp. 1131 (E.D. Wis. 1979). To dilute an award by

attempting to pr rate it as the state defendant would

have court do nere, would serve to frustrate the pur-

pose of this act. If not assured of adequate compensation,

D-5

counsel might be dissuaded from engaging in complex

cases involving the civil rights of groups of persons

who otherwise would be unable to afford to pay for ade-

quate representation.

In Arkansas Community Organizations For Reform

Now v. Arkansas State Board of Optometry, 468 F.Supp.

1254 (E.D. Ark. 1979), a §1988 case, the court held that a

losing defendant must bear the full cost for all matters

that cannot be clearly attributed to another defendant.

Taking into consideration the results reached in this case,

and the purpose for which §1988 was enacted, it is in-

escapable that the state defendant is liable for the full

time spent litigating matters pertaining to both defen-

dants. In the instant case however, plaintiffs have volun-

tarily agreed to reduce their request for fees by an

amount which represents all time spent solely on matters

involving the federal defendant.“

Defendant contends that “special circumstances” exist

which would render an awar “aren 17 1 improper

in this case, citing Newman v. Piggie Enterprises,

Inc., 390 U.S. 400 (1968). Defendant maining 15 in all

respects this suit was settled prior to | ac mam gf of 42 U.S.C.

§1988 except for the motion of the federal defendant to

alter the court’s first order. However, the state defendant

overlooks the fact that their own appeal from that order

was pending when §1988 was enacted and that the provi-

sion for attorneys’ fees would be applicable where an

appeal from the civil ty, case is pending. Crowe v.

Lucas, 595 F.2d 985 (5th Cir. 1979); Alicea Rosado v.

Garcia Santiago, 562 F.2d 114 (Ist Cir. 1977).

As to defendant’s claim that excessive 3 of

hours necessitates a reduction in fees, the court agrees.

See, 2 v. District Court of Polk —＋ 4 447

F.Supp 72 (S.D. Iowa 1977). A review of the docket

2 It should be noted that the rity of time spent in

litigating this case was devoted to claims which involved both

state and federal defendants and that this time would not have

been less had only the state been sued.

D-6

sheets, the pleadings and briefs, discloses several in-

stances of duplication. In assessing fees these hours will

be taken into consideration.

Defendant next asserts that no award whatsoever

should be granted to the Cook County Legal Assistance

Foundation because of the nature of the organization.

Their proposition is without substance. With regard to a

legal association the fee awarded should reflect the

market value of the services provided, not the actual cost

to the foundation. Urbina v. Quern, 482 F.Supp. 1013

(N.D. Ill. 1980); Lackey v. Bowling, 476 F.Supp. 1111

(N. D. III. 1979). We find fees to be properly recoverable

by the legal assistance foundation.

In its final argument the State of Illinois claims that it

should not be required to pay attorney’s fees to Daniel M.

Friedland. The state argues that Mr. Friedland did not

make any appearances or author any written document

filed in the case. As it was, Mr. Friedland was eng in

the Indiana case of McBride v. Secretary of the United

States, No. I.P. 73 C 26. Because McBride and Tidwell

raised many of the same issues and, in the interest of

judicial economy, the Chief Judge of the Seventh Circuit

designated a gag district court to serve in both

matters. In 1976 the McBride case was dismissed in its

entirety on grounds of mootness and standing. As men-

tioned above, Mr. Friedland represented citizens of the

State of Indiana in litigation directed against that state.

Considering the field of interstate relations, it is rea-

sonable to assert that taxpayers of one state should not

be given the responsibility of paying the obligations of

citizens of another state. Cf. Bigelow v. Virginia, 421 U.S.

809 (1974), and Missouri ex rel. Gaines v. Canada, 305

U.S. 337 (1938). In Gaines, the United States Supreme

Court made this statement:

Manifestly, the obligation of the State to give the

protection of equal laws can be performed only

where its laws operate, that is, within its own

jurisdiction. It is there that the equality of legal

rights must be maintained. That obligation is im-

posed by the Constitution upon the States severally

D-7

as govenmental entities,—each responsible for its

own laws establishing the rights and duties of per-

sons within its borders. It is an obligation the burden

of which cannot be cast by one State u another,

and no State can be excused from performance by

what another State may do or fail to do. That

— arate responsibility of each State within its own

sphere is of the essence of statehood maintained un-

der our dual system.

350 U.S. at 350.

In Bigelow, the Court stated that:

A State does not acquire power or supervision over

the internal affairs of another State merely because

the welfare and health of its own citizens may be

affected when they travel to that State. It may seek

to disseminate information so as to enable its citizens

to make better informed decisions when they leave.

But it may not, under the guise of exercising inter-

nal police powers, bar a citizen of another State from

disseminating information about an activity that is

legal in that State.

Supra, at 824-25. Thus Bigelow stands for the proposition

that no one state has the right to conduct the internal af-

fairs of another. Read in conjunction with Gaines, the

converse of this maxim becomes a truism: no state may

cast its own internal obligations upon the shoulders of a

sister state.

The people of Illinois should not be taxed to compensate

an attorney from Indiana whose only relationship to the

Tidwell case was his participation in the McBride matter,

an Indiana concern, heard by the same panel of judges.

Irrespective of the prevailing parties in McBride, the

State of Illinois was never party to that litigation and

should not now be required to subsidize either side. When

Mr. 1 request for fees is considered in light of

all the fo ing. it is clear that it should be denied. Ac-

<< riedland’s petition for attorney's fees is

D-8

After a careful examination of the record, defendant’s

allegation of duplication, the need for attorneys, the com-

lexity and novelty of this litigation and numerous other

actors, see generally, Johnson v. Georgia Highway Ex-

press, Inc., 488 F. 2d 714 (5th Cir. 1974) the following con-

clusions regarding fee awards are made:

1. The hourly fees requested by the individual

plaintiffs are fair and reasonable based upon an ex-

amination of current market rates. See e. g.,

ortheross v. Board of Education of Memphis City

Schools, 611 F.2d 624 (6th Cir. 1979); Corpus v. Es-

telle, 605 F.2d 175 (5th Cir. 1979), cert. denied, 445

U.S. 919 (1980); Population Services International v.

Carey, 476 F.Supp. 4 (S.D. N.Y. 1979).

2. The number of hours requested by the plain-

tiffs for a period of litigation spanning 7 year is not

excessive.

3. Fees are properly recoverable for time and

costs spent litigating the fee issue. Weisenberger v.

Huecker, 593 F. 2d 49 (6th Cir. 1979) cert. denied, 444

U.S. 880 (1979); Urbina v. Quern, 482 F.Supp. 1013

(N.D. Ill. 1980).

4. A lodestar 2 of 1.5 is eminently fair

and reasonable to apply to the awards of the law

firm of Sachroff, rager, Jones, Weaver &

Rubenstein Ltd., and the Cook County Legal

Assistance Foundation, premised upon the impor-

tance of the results achieved in this case. See, Pop-

ulation Services International v. Carey, 476 F.Supp.

4 (S.D. N.Y. 1979); Imprisoned Citizens Union v.

Shapp, 473 F.Supp. 1017 (E.D. Pa. 1979).

It is hereby ordered that the state defendant in this

cause is to pay the following amounts to plaintiffs for at-

torneys’ fees, expenses and advances:

1. An amount of $99,644.84 for the firm of

Sachnoff, Schrager, Jones, Weaver & Rubenstein.

(See Appendix for computations.)

D-9

2. An amount of $2587.50 for the Cook County

Legal Assistance Foundation. (See Appendix for

computations.)

Enter:

/s/ James B. Parsons

United States District Judge

Dated: February 6, 1981

E-1

APPENDIX E

IN TH? UNITED STATES DISTRICT COURT

FOR TIE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ROBERT TIDWELL, et al.,

Plaintiffs,

No. 73 C 3014 v.

JOSEPH CALIFANO, et al.,

Defendants.

FINAL ORDER AND JUDGMENT

UPON MOTION by the plaintiffs for entry of a final

order and judgment in accordance with the Federal

Rules of Civil Procedure and in accordance with prior

orders of this Court:

IT IS HEREBY ORDERED AS FOLLOWS:

(1) A class is certified of all beneficiaries of social

security payments from 1968 to the present while

residents in institutions of the Illinois Department of

Mental Health and whose social security payments were

paid to the State of Illinois as representative payee or

through withdrawals of funds of trust accounts author

ized by DMH Form 623. All such persons shall be bounc

by this order.

(2) Because the orders of this Court have applied only

to injunctive and declaratory relief under Rule 23 (b) (1)

and Rule 23 (b) (2) of the Federal Rules of Civil

Procedure and have not certified any class under Rule 23

(b) (3) of the Federal Rules of Civil Procedure, there is no

E-2

requirement that notice be sent to individual members of

the class and no members of the class will be permitted to

opt out of the judgment entered hereby. This order will

not affect whatever rights individual plaintiffs may have

to seek damages in appropriate state forums. This court

makes no judgment on the availability of any such

damages.

(3) Attorneys fees are awarded to plaintiffs in ac-

cordance with this Court’s order of February 6, 1981.

(4) This Order will constitute final judgment and the

clerk shall enter it accordingly pursuant to Rule 58.

Dated: March 25, 1981

/s/ James B. Parsons

Chief Judge

United States District Court

F-1

APPENDIX F

AMENDED OPINION

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 81-1402, 81-1654

ROBERT TIDWELL, et al.,

Plaintiffs-Appellees,

V.

RICHARD SCHWEIKER, etc., et al.,

Defendants-Appellees,

and

IVAN PAVKOVIC, etc.,

Defendant-Appellant.

ROBERT SCHRECKENBERG, et al.,

Plaintiffs-Appellees,

V.

RICHARD S. SCHWEIKER, etc., et al.,

Deſendunts-Appellees,

and

IVAN PAVKOVIC, ete., et al.,

Defendants-A ppellants.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

Nos. 73-C-3014, 74-C-188—James B. Parsons, Judge.

ARGUED DECEMBER 8, 1981—DECIDED OCTOBER 4, 1982*

* On consideration of the petition for rehearing, this amended

opinion has been filed and issued this 4th day of October, 1982.

In light of the amended opinion, the petition for rehearing is

denied. Also the petition for rehearing en banc is denied, no

active jud me oy | requested a vote on the s tion for an

en bane rehearing in light of the amended opinion.

F-2

Before CUMMINGS, Chief Judge, SwYGERT, Senior Cir-

cuit Judge, and CUDAHY, Circuit Judge.

SwYGERT, Senior Circuit Judge. In 1973 plaintiff-

pe Robert Tidwell, for himself and on behalf of a

class cage gi d situated, filed a complaint against the

Director of the Illinois Department of Mental Health

DMH“)! An amended complaint was later filed in

which Tidwell named the Secretary of the United States

Department of Health, Education and Welfare? and the

Administrator of the Social Security Administration“ as

additional defendants (“federal defendants”). In 1974

plaintiff-appellee Robert Schreckenberg, for himself and

on behalf of others similarly situated, filed a suit iden-

tical to the Tidwell complaint. The two suits were con-

solidated pursuant to the state defendant’s motion.‘ The

plaintiffs challen the statutory and regulatory

scheme providing for the payment of Social Security dis-

ability benefits (“Social Security benefits” or “disability

benefits”) to institutionalized mental patients.

Specifically, plaintiffs alleged that their disability

benefits were unlawfully seized by the state and federal

defendants in violation of 42 U.S.C. §§ 407 and 1983 and

the Fifth and Fourteenth Amendments of the Constitu-

tion. The plaintiffs’ disability benefits were subject to

seizure by one of two methods:

(1) If a patient entering an Illinois institution was

determined to be competent, the patient was asked

to sign DMH Form 623. The form allowed the state

to accumulate disability benefits and other assets in

The DMH is now called the, “Department of Mental Health

and Developmental Disabilities.” Leroy Levitt, the original

defendant in this case, has been replaced by Ivan Pavkovic,

the present director.

2 Caspar Weinberger, former Secretary of HEW, has been

replaced by Richard Schweiker.

8 John Svahn is presently the Commissioner of the Social

Security Administration.

The Tidwell and the Schreckenberg plaintiffs will be

referred to collectively as “Tidwell.” Unless otherwise stated,

the state defendants will be referred to as “the State.”

F-3

a trust fund. When the assets in the fund reached

$400, the state could use the surplus to pay the sup-

pert costs incurred by the patient at the institution.

MH Form 623 did not disclose to the patient that

the poe would be cared for regardless of

whether the form was signed, that the agreement

was revocable at any time or that the agreement

covered Social Security disability benefits, which

ve 10 otherwise subject to legal process. See

igure I.

(2) Ifa patient was determined to be incompetent,

a representative payee was appointed to receive the

patient’s disability benefits. The superintendent of

the patient’s institution was appointed as the payee

if there was no other person available, such as a

family member, to serve in that capacity. The

process for appointing a representative payee did

not provide notice to the patient or an opportunity

for the patient to submit evidence. Once a represent-

ative payee was appointed, the disability benefits

were accumulated in a trust fund identical to that

used in conjunction with Form 623. See Figure I.

FIGURE I

Path of 8.8. Benefits

IDMH Institution

Competerit Patients

Incompetent Patients

DMH ba 623 R

epresen 5 Payee

—̃

Trust tablished

Under ‘Rule 10.02

F-4

A three-ju court was impaneled to consider the

ues ra y this suit. On June 23, 1976 the court

found that the Illinois statutory and regulatory scheme

involving the use of DMH Form 623 was in conflict with

42 U.S.C. § 407 and, therefore, violated the supremacy

clause of the Constitution. The three-judge court also

found that the appointment of an Illinois institutional

—— og as a representative payee was not per se

unlawful, but that the procedures actually used to ap-

point such a payee violated due process standards. The

court orde specific remedial steps to cure both

violations.

r to this ruling, both the State and the

federal defendants altered their procedures relating to

patients’ disability benefits. On March 5, 1979 the three-

judge court amended its 1976 order and determined that

the revised federal procedures for appointing a *

sentative ee now comported with due process. The

court also found that revised DMH Form 623 was

no longer an assignment in violation of 42 U.S.C. § 407.

— Tidwell's motion for class certification was

granted.

After this decision, plaintiffs’ attorneys filed motions

in the Northern District of Illinois pursuant to 42 U.S.C.

§ 1988 requesting attorney's fees against both the State

and federal defendants. The court concluded that fees

could not be awarded against the federal defendants and

Tidwell voluntaril uced fees attributable solely to

these defendants. On February 6, 1981, the district court

held that the State was responsible for all remaining at-

torney’s fees and applied a 1.5 lodestar multiplier to the

hourly rates of all attorneys and paralegals.

The State now appeals from the final judgment of the

court on four grounds:

1) Tidwell did not have standing to challenge the

gality of DMH Form 623;

(2) the original Form 623 was not an assignment

n violation of 42 U.S.C. § 407;

a rt district court erred in awarding attorney's

F-5

(4) the district court erred in failing to apportion

attorney’s fees between the state and federal defen-

dants and by applying a lodestar multiplier.

Tidwell contends that all the issues raised on appee! by

the State are moot except whether the award of at-

torney’s fees was proper. We shall first consider the

mootness issue.

Tidwell argues that the underlying controversy in this

case has been extinguished and further review by this

court would be meaningless. Tidwell bases this argu-

ment on the fact that the State defendant voluntarily

altered DMH Form 623 and the new form has been in

effect for more than five years; the challenged activity

has ceased and there is no reasonable expectation that

the conduct will be repeated.

The record does not show that the State’s actions were

“voluntary.” The DMH altered Form 623 only after the

three-judge court declared it illegal and this conduct

was in compliance with the judgment of the court. If a

party believes an order is incorrect, the remedy is to

comply promptly with that order or judgment (absent a

stay) and then to appeal. Maness v. Meyers, 419 U.S.

449, 458-59 (1979). A party does not lose the right to

appeal simply because it complies with an order of the

court. Further, in the instant case, there is reason to

believe that the conduct complained of ey pee

In its reply brief, the State reaffirmed its belief that the

original Form 623 was legal and, stated that if allowed

to do so, it would reinstitute the form's use. Where a

reasonable expectation exists that the conduct will be

repeated, the issue is not moot. Johnson v. Board

Education, 664 F.2d 1069, 1071-72 (7th Cir. 1981).

Because we have concluded that none of the issues

raised in the State’s appeal are moot, we now turn to the

merits of those arguments.

II

The State contends that Tidwell lacks standing to

challenge Form 623 because neither he nor any of the

F-6

other named plaintiffs signed the form or were even

asked to sign it. The record in this case, however, dis-

closes that when a patient was admitted to a DMH facil-

ity an inquiry was made to determine whether that

patient was competent or incompetent. At this point, as

the district court expressly found, every patient was

threatened by the Form 623 procedures. In addition,

whether a patient eventually signed the form (if found

competent) or had a representative payee appointed (if

found incompetent), the entire system resulted in the

deprivation of the Social Security benefits of every

atient. These undisputed facts. delineated in greater

ength earlier in this opinion, establish that the plain-

tiffs in this action, named and unnamed alike, were sub-

ject to but a ~— — which caused all of them the

same injury.“ Standing to challenge this system, in

which the State was a knowing and active participant,

is not defeated simply because the named 7 aintiffs did

not actually sign Form 623. Every plaintiff was threat-

ened by Form 623 upon entering the facility, every

plaintiff was subject to the same system of deprivation,

and in the end, every plaintiff suffered the identical

harm—deprivation of Social Security benefits. Only the

— means by which the injury was inflieted were

erent.

The recent Supreme Court case of Blum v. Yaretsky,

50 U.S.L.W. 4859 (No. 80-1952) (June 25, 1982), whic

discusses standing, does not compel a different result. In

that case, Medicaid patients in a nursing home brought

an action on behalf of themselves and other members of

a class to challenge nursing home procedures which

allowed the transfer or discharge of such —* with-

out notice or hearing. The named plaintiffs had been

transferred to lower levels of care, but they sought to

represent other class members who all ly had been

transferred to a higher level of care. The Court held

that they lacked standing to challenge transfers to

higher levels of care. The Court found that “[nJothing in

5 See Part IV, i for a discussion of the State's role and

culpability in both prongs of the system of deprivation.

F-7

the record available to this Court suggests that any of

the individual respondents have been either transferred

to more intensive care or threatened with such trans-

fers.” Jd. at 4861. The plaintiffs contended that the

standing requirements of Article II] were nevertheless

met because other unnamed class members had been

transferred to higher levels of care under the contested

procedure, but the Court rejected this contention:

Respondents .. . “must allege and show that they

ersonally have been injured, not that injury has

n suffered by other, unidentified members of the

class to which they belong and which they purport

to represent.” Warth v. Seldin, 422 U.S. 490, 502

(1975). Unless these individuals “can thus demon-

strate the requisite case or controversy between

themselves personally and [defendants], ‘none may

seek relief on behalf of himself or any other mem-

ber of the class.’ O'Shea v. Littleton, 414 U.S. 488,

494 (1974).”

Id. at 4861 n.13 (emphasis added). The Court then

emphasized that a transfer to a lower level of care was

very different from a transfer to a higher level, noting

that first, patients may refuse transfer to a higher but

not lower level of care without jeopardizing Medicaid

benefits, and second, transfer to a lower level necessar-

ily results in a reduction in Medicaid benefits while

— to a higher level means an increase in those

nefits.

In the instant case, unlike Blum, the injury suffered

by all of the class members was the same—deprivation

of Social Security benefits. Further, as the district court

found, all of the class members upon entering a DMH

facility were threatened with the same system of depri-

vation, which included Form 623. Therefore, applying

the analysis of Blum to the facts in the case at bar, we

conclude that the named plaintiffs have standing under

Article III to challenge both Form 623 and the repre-

sentative payee procedure.

The State also challenges the district court’s deter-

mination that the claims of the named plaintiffs were

F-8

typical of the claims of all members of the class. We

conclude that the district court properly found that the

requirements of Rule 23 were met in this case. We

believe that it was unnecessary for the named plaintiffs

actually to have signed Form 623 to be proper repre-

sentatives for the entire class.

In General Telephone Co. v. Falcon, 50 U.S.L.W. 4638

(No. 81-574) (June 15, 1982), the plaintiff as an individ-

ual and as a class representative sought to challenge

alleged discrimination by the defendant in both hirin

and promotion. The Court concluded that the nam

plaintiff, whose claim charged the defendant with dis-

crimination in promotion, could not under Rule 23

represent other class members who had not been hired.

As the Court found, not being hired and not being pro-

moted are quite different injuries. In addition, the Court

recognized that there could easily be a tension, espe-

cially at the remedial stage, between those class mem-

bers seeking promotion and those seeking initial em-

ployment. In the case at bar, however, there is no such

tension since every patient suffered the identical injury

(deprivation of Social Security benefits) via a single sys-

tem of deprivation.

The named plaintiff in a class action must have stand-

ing under Article III and be a proper class representa-

tive under Rule 23. For the reasons stated, we conclude

that Tidwell satisfied the requirements for both.

III

We with the rr court that the original

DMH Form 623 violated 42 U.S.C. § 407. Section 407

provides:

The right of any person to any future payment

under a subchapter shall not be — Mate, bm or

assignable, at law or in equity, and none of the

moneys paid or a or rights existing under

this subchapter shall be subject to execution, levy,

attachment, garnishment, or other legal process, or

to the operation of any bankruptcy or insolvency

aw.

F-9

The Supreme Court has issued one opinion to date on the

scope and purpose of section 407: Philpott v. Essex Coun-

ty Welfare Board, 409 U.S. 413 (1973). Though not

irectly analogous to the facts of this case, Philpott is in-

structive. In Philpott an individual named “Wilkes”

applied for assistance from the Essex County, New

Jersey, Welfare Board. As a condition for receiving the

assistance, the Board required Wilkes to execute a reim-

bursement agreement. The agreement had the effect of

a judgment and allowed the rd to obtain reimburse-

ment out of subsequently discovered or acquired proper-

ty. Wilkes began receiving assistance from the Board,

and soon after he was awarded lump-sum retroactive

disability benefits under the Social Security Act. Wilkes

declined to repay his interim assistance and the Board

sued to reach the bank account in which Wilkes had

deposited his benefit check. The Supreme Court held

that section 407 on its face prevented the Board from

reaching these funds. The Court concluded that the

language of section 407 is all inclusive and it “imposes a

broad bar against the use of any legal process to reach

all Social Security benefits.” Jd. at 417.

Despite the breadth of Philpott, the State insists that

Form 623 was not an assignment; it was revocable and

voluntary, the funds were used for the purpose they

were granted for, and the agreement did not manifest a

present intent on the part of the mental patient to

transfer all his rights or complete control. We are not

persuaded by these arguments.“

Even though Form 623 was revocable, it still re-

mained a transfer or assignment while it was in effect.

Further, we are not convinced that it was voluntary. No-

where on the face of the form did it state that a patient

would be treated regardless of whether he signed the

form or that the agreement was revocable. The restric-

tive definition of assignment based on Illinois law ad-

vanced by the State ignores the language and the pur-

pose of section 407. An agreement n not have per-

manence or transfer complete control of 1

benefits before it falls within the ambit of section 407.

6 Philpott forecloses the State’s argument that section 407

does not apply when the benefits are used for the purpose for

which they were granted.

F-10

The State cites three cases which it believes require a

reversal of the three-judge court.’ In these three cases,

Moore, French, and Tunnicliffe, the facts are similar.

Applicants for Social Security benefits were granted in-

terim assistance by a local welfare department. There

was generally a six-month delay between the date the

federal benefits were applied for and the date they were

received. The first federal payment included a lump-

sum E for benefits retroactive to the application

date. The local department required the recipient to

sign a loan ement and an authorization to pay a

claim. When the recipient received his Social Security

benefits, including his lump-sum retroactive payment,

he became obligated to pay back the interim assistance

to the local agency. The agreements in all three cases

were held valid even though a recipient was required to

sign the agreement before receiving interim assistance

and even though the a ments did not disclose a per-

son’s rights under Philpott or section 407.

Moore, French, and Tunnicliffe are distinguishable

from the facts in the instant case and we do not believe

they support the State’s ition. The ments were

nothing more than an obligation to pay back a loan and

they did not delineate the source of the repayment. The

agreements did not subject Social Security benefits to

any legal process nor did they transfer control of Social

Security benefits to the State. Most importantly, unlike

Form 623, these agreements did not result in monthly

Social Security checks 7 being received and dis-

bursed by the state agency.“ If a recipient from Moore,

’ Moore v. Colautti, 483 F. Supp. 357 (E.D, Pa. 1979), affd,

633 F.2d 210 — Cir. 1960); h v. Director, —

*. of Social ices, 92 Mich. App. 701 (1979); Tunnic fe

5 N of Pennsylvania Dept. of Public Welfare, 4

a. ;

* In Moore, supra, n.12, some of the lump sum Social

Security checks were actually received by the state agency,

not the OP ape of the Social Security benefits. The agency

paid itself the money owed oe te recipient and then paid the

remainder to the recipient. The checks were paid directly to

the state agency in accordance with the Interim Assistance

(Footnote continued on following page)

F-11

French, or Tunnicliffe chose not to repay the — 42

cy. the Social Security funds could not be reached. In

the instant case, the recipients had no choice of whether

to pay the State for the service they received; the state

received and cashed their checks. Further, the DMH

was obligated to pay its own expenses first when a trust

was created pursuant to Form 623, putting the State in

the ition of a preferred creditor; a position found il-

legal by the Supreme Court in Philpott.

We are convinced that Form 623 is a transfer or an

assignment in violation of section 407. Unless a patient

in a DMH institution is advised that he will receive

treatment regardless of whether he signs Form 623, that

Form 623 is revocable, and that the form covers Social

Security benefits not subject to legal process, it cannot

be said that Form 623 is voluntary or that the patient

retains enough control to remove the agreement from

the ambit of section 407.

IV

42 U.S.C. § 1988 gives courts the discretion to award

attorney’s fees to the prevailing party in civil rights

suits. It is clear that Tidwell has prevailed in this litiga-

tion. The plaintiffs succeeded on two of their three sub-

stantive elaims“ and were instrumental in prompting

substantial changes in the procedures for disbursement

of disability benefits to mental patients. This broad

remedial relief inured to the benefit of all mental

patients in Illinois because plaintiffs also succeeded in

their motion for class status. For Tidwell to be consid-

ered the prevailing party, it was not necessary that he

revail on all three claims. See Dawson v. Pastrick, 600

2d 70, 78 (7th Cir. 1979); Parham v. Southwestern Bell

continued

Reimbursement P , 42 U.S.C. § 1384 g (1). Direct pay

ments to state agencies under section 1383(gX1) do not violate

section 407.

pT only — Le yg did not I on was the claim

appointmen a represe ve payee was a se

violation of the Constitution. aa

F-12

Telephone Co., 433 F.2d 421 (8th Cir. 1970). The record

does not disclose any special circumstances which would

render the award of fees unjust. See Newman v. Piggie

Park Enterprises, Inc., 390 U.S. 400, 402 (1968).

V

The only remaining issue is whether the amount of the

fees awarded was erroneous. The State contends that the

award was excessive for several reasons:

(1) The State was held responsible for fees relating

to issues involving only the federal defendant;

(2) the fees awarded to the Cook County Legal

— Foundation (“CCLAF”) are duplicative;

an

(3) the use of a 1.5 lodestar multiplier was er-

roneous.

We reject the State’s first two arguments but agree with

its third contention.

The State insists that the illegal appointment of a

representative pa ee involved only federal culpability

and the State of Illinois should not be held liable for at-

torney’s fees relating solely to this issue. The State’s

assertion of innocence is directly controverted by the

findings of the district court. The court found that a con-

spiracy existed between the state and federal defen-

ants. 0 To prove the existence of a civil conspiracy, it is

not necessary to show an express agreement. All that is

required is that the participants share a “general con-

spiratorial objective.” Hampton v. Hanrahan, 600 F.2d

600, 621 (7th Cir. 1979). In the instant case, the illegal

diversion of Social Security benefits from the plaintiffs

10 The State argues that a finding of conspiracy was never

made by the three-judge court. A single district court judge

first identified the existence of a conspiracy in his order award-

ing attorney's fees. It was not necessary for the three-judge

court to have made the finding of conspiracy. This case was

— 2 of by the three-judge panel on summ * ee

and no findings of fact are 2 by Fed R. Ch. P. .

F'-13

to the state defendant was the common conspiratorial

objective.

Relying on Arnold v. IBM, 637 F.2d 1350 (9th Cir.

1981), the State next argues that the conduct of the

DMH was not the 1 cause of Tidwell's injuries:

the appointment of a representative payee is not illegal

per se and the only illegal aspect of the procedure was

solely within the control of the federal defendants.'! Not

only is Arnold factually distinguishable from the instant

case, 2 it was not necessary for the state defendant to

have had control over the illegal procedures when the

DMH willingly participated in and benefited from the

procedures. Arnold requires only that the defendant

‘personally pase in a deprivation of the plain-

tiff’s rights.” 637 F. 2d at 1355. The DMH’s participation

in a conspiracy is clearly established by the record. The

appointment of a DMH superintendent as a represent-

ative payee was usually initiated by the state institu-

tion. The institution was required to fill out a five-page

application and submit evidence indicating that the in-

stitution was responsible for the patient’s care. Each

time a DMH institution superintendent applied to be-

come a representative payee, the DMH set in motion a

series of acts where the reasonable outcome was a con-

n The State of illinois did have some control over the ap-

pointment of a representative ee. This is demonstrated 5

the fact that the State amended III. Rev. Stat. ch. 91% § 2-10

1979) to require informed consent before a service provider

DMH superintendent) can be appointed a representative

payee.

1 In Arnold v. IBM, supra, the Ninth Circuit held that no

causation was proven where IBM created a task force which

violated plaintiff's constitutional rights. Although IBM was

the “but for“ cause of plaintiff's injuries, the court found that

IBM did not have sufficient control over the task force to be

held responsible for its actions. The instant case is dis-

tinguishable because the DMH set in motion a series of acts

when the DMH knew or should have known that a con-

stitutional injury was the only reasonable outcome. In Arnold

a constitutional violation was not a reasonable outcome of es-

tablishing the task force.

F-14

stitutional 8 See Johnson v. Duffy, 588 F.2d 740,

743 (9th Cir, 1978). The representative payee procedures

involved both federal and state liability and it was well

within the district court’s discretion to assess attorney

fees against the state on this important issue.

In arguing that the attorney’s fees awarded to CCLAF

are duplicative, the State maintains that both sets of at-

torneys billed for briefs on the same issue and both sets

of attorneys billed for the same court appearance. The

State, however, has overlooked the procedural posture of

this case. As stated above, this suit involved two sets of

plaintiffs: the Tidwell plaintiffs and the Schreckenberg

gen In accordance with a stipulation, an attorney

or the Tidwell plaintiffs was designated lead counsel

for the consolidated cases. Almost all the hours billed by

CCLAF were for work done prior to the certification of

the class; the two groups of plaintiffs were still separate

and distinct up to this point. The only work performed

by CCLAF after the class certification related to the

petition for attorney’s fees.“ We do not believe that the

district court overlooked any duplication of efforts.

Having examined all of the factors for determining

the appropriateness of a fee award as outlined in Waters

v. Wisconsin Steel Workers of International Harvester

Co., 502 F.2d 1309 (7th Cir. 1974), cert. denied, 425 U.S.

997, we believe that it was an abuse of discretion to

attach a 1.5 multiplier to the attorney’s fees awarded in

this case. The district court premised the multiplier on

the importance of the results achieved by Tidwell’s at-

torneys. We agree with the district court that the results

achieved are important, but we do not think that this

1 The State points out that CCLAF billed for an appearance

not corroborated by the docket. In plaintiffs’ motion for at-

torney’s fees, reference was erroneously made to a court

appearance on January 8, 1980. The correct date was

December 27, 1979. This ypogra hical error is no reason to

deny or limit the award of fees and the error would have been

l in the district court if defendants had raised the

ssue W.

F-15

factor alone justifies the use of the multiplier.* The

quality of the attorney’s services was reflected in the

hourly rates and the facts of this case are relatively

simple. This suit was indeed novel when filed but not so

different or unique as to warrant a multiplier. The other

factors outlined in Waters were not important enough

to be mentioned by the district court and we agree that

these factors were insignificant.

The district court’s order is affirmed in part and

reversed in part. The cause is remanded to that court to

recompute the attorney’s fees in accordance with this

opinion.“

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

4 It is possible that results alone might justify a multiplier

but this is not the case here.

The only aspect of the fee award that the State agrees

with is the denial of fees to appellant M. Daniel Friedland.

The district court held that it would be unjust to tax the State

of Illinois for Friedland’s fees because Friedland represented

an Indiana plaintiff and his case was directed at Indiana of-

ficials. Friedland a! well have had some connection with the

attorneys for the Illinois plaintiffs, but we cannot say the

court abused its discretion by denying fees to him.

G-1

APPENDIX G

DMH-623

Rev. 1-69

STATE OF ILLINOIS

DEPARTMENT OF MENTAL HEALTH

8 a patient at N

(Patient's Name) Institution Name)

do hereby state that I have been fully informed and I am

aware that the Department of Mental Health is author-

ized to make determinations of the charges for my treat-

ment and to charge me or my estate at the prevailing

maximum rate for patients; and, if I am unable to pay,

that my responsible relatives may be requested to pay an

amount chargeable under the statutes of the Department.

I hereby consent to the deposit in the

(Institution Name)

Trust Fund to my account all monies received by me at

the hospital during my stay at . To

(Institution Name)

that end, I hereby agree to endorse any checks received

by me so that they can be deposited in my trust fund ac-

count. I understand that these funds will be disbursed by

the Superintendent on my behalf for my maintenance,

treatment charges, clothing, commissary purchases and

other personal incidental purchases for my self as long as

G-2

I am a patient at Tnatination Name) , and I hereby

consent to such disbursements. I understand that any

balance remaining in my account will be returned to me

upon my discharge from , after

(Institution Name)

all outstanding charges have been determined and paid

in accordance with the rules and regulations of the De-

partment of Mental Health.

Dated

Witness:

Dated: