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Allen v. State, Dept. of Health & Social Services, Div. of Public Assistance

Supreme Court of Alaska

March 27, 2009

Carla ALLEN, Appellant,
v.
STATE of Alaska, DEPARTMENT OF HEALTH & SOCIAL SERVICES, DIVISION OF PUBLIC ASSISTANCE, Appellee. Ian Wallis, Appellant,
v.
State of Alaska, Department of Health & Social Services, Division of Public Assistance, Appellee.

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Nikole Nelson, Alaska Legal Services Corporation, Anchorage, for Appellants.

Rebecca C. Polizzotto, Assistant Attorney General, Juneau, Laura C. Bottger and John W. Erickson, Jr., Assistant Attorneys General, Anchorage, and Talis J. Colberg, Attorney General, Juneau, for Appellee.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, CARPENETI, and WINFREE, Justices.

OPINION

FABE, Chief Justice.

I. INTRODUCTION

Carla Allen and Ian Wallis are food stamp recipients who each received an excess of food stamp benefits due to errors made by the State of Alaska Department of Health and Social Services, Division of Public Assistance (hereinafter " the Agency" ). The Agency seeks to recoup these overpaid benefits from Allen and Wallis by reducing their future monthly food stamp allotments. Allen and Wallis assert that Alaska's doctrine of equitable estoppel should prevent the Agency from reducing their future allotments because the overpayments were caused by the Agency's own errors. Because applying equitable estoppel to prevent recoupment of overpaid food stamps would create a conflict with federal food stamp law, which intends for such overpayments to be recouped, we hold that in this context equitable estoppel is preempted by federal law. Allen also asserts that the Agency's notice to her regarding its recoupment action did not comply with federal regulation requirements and due process. Because the notice did not sufficiently inform Allen, as required by federal regulations, of how the claim against her was calculated and of her right to copy Agency records, we conclude that the notice was inadequate.

II. FACTS AND PROCEEDINGS

A. Facts

The facts of these consolidated cases are undisputed. Appellants Carla Allen and Ian Wallis were both recipients of food stamps funded under the federal Food Stamp Act [1] and administered by the Agency pursuant to 7 Alaska Administrative Code (AAC) 46.010 et seq. Due to errors made by the Agency, both Allen and Wallis received an excess of food stamps each month for several months. When the Agency discovered its errors, it gave written notice to Allen and Wallis that it intended to reduce their future monthly food stamp allotments in order to make up for the past overpayments. Both Allen and Wallis objected, giving rise to these actions.

Carla Allen was a food stamp recipient in 2005. In August 2005 she reported to the Agency that her daughter would be leaving

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her household for approximately six months. This should have triggered a downward adjustment of Allen's monthly food stamp allotment, but the Agency failed to act. In November Allen again contacted the Agency regarding her daughter's absence. At that point the Agency recalculated Allen's food stamp allotment based on the reduction in her household size, as it should have done two months earlier. The Agency then mailed a notice to Allen informing her that she had received a total of $304 in excess food stamps during the months of October and November due to the agency's failure to code her daughter out of the household.

Ian Wallis applied for food stamps in May 2004. At his intake interview, Wallis accurately reported that his landlord paid for his heating costs. However, the Agency incorrectly credited him for paying his own heating costs, resulting in a higher food stamp allotment. In October 2004 the Agency discovered its error. The Agency then mailed a notice to Wallis informing him that he had received a total of $448 in excess food stamps during the months of June through October due to the incorrect utility credit.

The Agency's notices to both Allen and Wallis further stated, " [b]eginning next month, we must reduce your food stamp benefit by 10% or $10, whichever is more, until this debt is repaid. The agency can adjust the claim if full payment is not possible." The notices listed several options for faster repayment of the debt, ending with the instructions, " [i]f you cannot make the payments you have agreed to make, or you disagree with this action and want to review our records of the claim, please contact [your caseworker]." The notices also provided charts showing, for each of the months of overpayment, the amount the recipient received, the amount the recipient had been entitled to, and the corresponding amount of overpayment for that month.[2]

B. Proceedings

1. Carla Allen's appeal

After receiving the Agency's notice, Allen requested an administrative hearing. At the hearing, Allen argued that equitable estoppel should prevent the Agency from recouping the overpaid food stamps, and that the Agency's notice to her did not comply with federal regulations. The hearing officer rejected both of these arguments, holding that equitable estoppel is not available as a defense in food stamp overpayment cases and that the notice to Allen met federal regulation requirements. Allen appealed the hearing officer's decision to the Director of Public Assistance, who upheld it.

Allen then appealed to the superior court. In a written memorandum decision and order, Superior Court Judge Charles T. Huguelet affirmed the agency decision on both the equitable estoppel and the notice questions. The superior court looked to language in the Federal Register [3] and determined that Congress intended to preclude the defense of equitable estoppel under the Food Stamp Act. The superior court also decided that the Agency had provided sufficient notice to Allen under 7 C.F.R. § 273.18(e)(3)(iv). Allen then filed this appeal on both the equitable estoppel and the notice questions.

2. Ian Wallis's appeal

After receiving the Agency's notice regarding recoupment of $448 in excess food stamps, Wallis requested an administrative hearing. At the hearing, Wallis, like Allen, unsuccessfully argued that equitable estoppel should prevent the Agency from recouping the overpaid food stamps and that the Agency's notice violated the federal regulations. Wallis appealed the hearing authority's decision to the Director of Public Assistance, who upheld it.

Wallis then appealed to the superior court. Superior Court Judge Craig F. Stowers upheld

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the Agency decision regarding the unavailability of the equitable estoppel defense but agreed with Wallis that the Agency's notice did not meet the federal regulation requirements. Language from the Federal Register,[4] along with Judge Huguelet's decision in Allen's case, persuaded the superior court that Congress intended to preempt state equitable estoppel defenses in the context of food stamp overpayments. The superior court also decided that the Agency's notice to Wallis did not meet the 7 C.F.R. § 273.18(e)(3)(iv)(E) requirement that it show " [h]ow the claim was calculated," because it did not explain how the Agency arrived at the basic amount of Wallis's correct food stamp allotment, from which its calculation of the amount of overpayment flowed. Additionally, the superior court held that the notice was not sufficiently clear regarding " [t]he opportunity to inspect and copy records related to the claim" as required by 7 C.F.R. § 273.18(e)(3)(iv)(H). The superior court also suggested that in order to ...


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