Christopher v. Montgomery County Department of Health & Human Services

BATTAGLIA, Judge. This case requires us to consider whether a food stamp recipient must be receiving disability benefits in order to be entitled to an “uncapped” “excess shelter cost deduction” under the Maryland Food Stamp Program. Determining that “receives” means “actual receipt,” we conclude that the decision of the Administrative Law Judge (hereinafter the “ALJ”) that the appellant must actually be receiving disability benefits to be entitled to the uncapped excess shelter cost deduction was correct, and we affirm the judgment of the Circuit Court for Montgomery County, which had affirmed the ALJ’s decision. I. Background A. Facts Luella Christopher, the appellant, worked for the Library of Congress as a foreign affairs analyst until she was terminated on December 23,1994 “for reasons of disability.” Christopher has challenged the Library of Congress’ determination, maintaining that she is not disabled and that she should be ¹⁹³ reinstated to her former position.

Christopher has not received any disability benefits and alleges that her appeal of her termination has prevented her from recovering such benefits. Christopher took a part-time job with General Nutrition Centers and, in 1995, also began receiving food stamps for “an assistance unit of one person.” When Christopher first applied for food stamps with the Montgomery County Department of Health and Human Social Services (hereinafter the “Department”), she received an “uncapped excess shelter cost deduction” of $1000.98, which, when combined with her average monthly earned income of $713.93, qualified her for food stamps. 1 In April 2002, the Department determined that Christopher was eligible to continue to receive food stamps, and approved her for $135 per month for a six month period. On May 18, 2002, the Department sent Christopher a notice informing her that it had changed her food stamp payment to $110, explaining that the $135 amount was incorrect because Christopher was “erroneously receiving an uncapped shelter deduction based upon disability.” In its notice to Christopher, the Department stated that, in order to receive the uncapped shelter cost deduction, food stamp recipients must either be at least 60 years old or be receiving disability benefits. Christopher was 57 at the time and was not receiving disability benefits.

Arbitration proceedings are still pending to resolve whether Christopher was properly terminated based on her alleged disability. Christopher continues to work at General Nutri ¹⁹⁴ tion Centers on a part-time basis. She does not consider herself disabled and has not received any form of disability income or pension since she first challenged the Library of Congress’ determination to terminate her employment. If she is unsuccessful at arbitration, she claims she would be entitled to no less than $1,346 per month in disability benefits based on a general “statement of benefits” she received from the Library of Congress before she was terminated. 2 B. Procedural History On August 6, 2002, Christopher requested an administrative hearing regarding the Department’s decision to reduce her food stamp allotment, contending that the Department’s determination “countermand[ed] the spirit of the law which is to provide certain benefits such as the uncapped shelter deduction to disabled individuals instead of denying [the] same on a technicality.” A hearing was held on September 24, 2002 before Administrative Law Judge Eleanor Wilkinson, who heard testimony from Christopher and a representative from the Department.

ALJ Wilkinson concluded that the Department correctly reduced Christopher’s allotment when it determined that she was not eligible for the uncapped shelter deduction. Under COMAR 07.03.07.431(3), 3 the ALJ explained, a food stamp recipient is entitled to the uncapped shelter cost deduction if he or she is at least 60 years old or disabled. The ALJ then ¹⁹⁵ pointed out that “disabled is defined by COMAR 07.03.07.02B(6),” which defines disabled as an individual who “receives” or “is receiving” Supplemental Security Income benefits, federal or state disability benefits under the Social Security Act, disability retirement benefits, interim assistance benefits pending receipt of Supplemental Security Income, or disability-related federal medical assistance. 4 Because Christopher was not receiving any of the disability benefits required by the definition of disabled found in COMAR 07.03.07.02B(6), AL J Wilkinson concluded that Christopher was not entitled to the uncapped shelter cost deduction: “There is simply no provision under governing regulations that permits an individual who is not receiving some form of disability benefit to qualify as disabled and receive the uncapped shelter deduction.” Christopher filed a timely petition for judicial review in the Circuit Court for Montgomery County, alleging that the Department improperly reduced her food stamp benefits. On June 9, 2003, the Circuit Court affirmed the ALJ’s decision.

Observing that Christopher “admitted she did not qualify as an individual entitled to benefits as illustrated in [COMAR] 07.03.07.02B(6),” the court determined that the ALJ properly ruled that Christopher cannot be considered “disabled” for the purposes of receiving the uncapped excess shelter cost deduction. ¹⁹⁶ Christopher noted an appeal to the Court of Special Appeals, and this Court issued, on its own initiative, a writ of certiorari, Christopher v. Dept. of Health, 379 Md. 98 , 839 A.2d 741 (2004), prior to any proceedings in the intermediate appellate court. Christopher presents the following questions for our review: 1. Whether [the Department’s] decision that COMAR 07.03.17.431(3) — which permits an uncapped shelter deduction for individuals “receiving” federal disability benefits— precludes an uncapped deduction for [Christopher], who was deemed eligible to receive federal disability benefits but has not actually received them because the disability determination is under appeal, is arbitrary and capricious because it penalizes an individual for exercising her right to appeal and arbitrarily distinguishes between individuals who are eligible to receive disability benefits based on whether they appeal their disability determinations. 2. Whether [the Department’s] denial of an uncapped deduction to [Christopher] under COMAR 07.03.17.431(3) deprives her of equal protection under the 14th Amendment to the U.S. Constitution and Article 24 of the Maryland Declaration of Rights because there is no rational basis for distinguishing among individuals determined to be entitled to disability benefits based on whether they appeal their disability determinations.

We conclude that the ALJ’s decision was correct and affirm the judgment of the Circuit Court for Montgomery County.

II

Standard of Review We observe at the outset that Christopher conflates two different standards of review when she contends that the Department “erred as a matter of law” because “its interpretation of COMAR 07.03.17.431(3) and COMAR 07.03.17.02B(6) is arbitrary and capricious” as it penalizes her “for exercising her legal right to appeal her disability determination.” As we shall explain, the statutory standards allowing reviewing courts to reverse or modify agency decisions are different depending upon the agency’s action. See Spencer v. Mary ¹⁹⁷ land State Bd. of Pharmacy, 380 Md. 515, 527-29 , 846 A.2d 341, 348-49 , 2004 WL 439310 , at ⁶ (2004). Contrary to Christopher’s contention, if the Department “erred as a matter of law,” the question is not whether the Department abused its discretion by acting “arbitrarily and capriciously,” but whether the agency interpreted and applied the law correctly. Our review of administrative agency decisions made by the Montgomery County Department of Health and Human Services, which administers state social services for Montgomery County, is governed by Section 10-203(d) of the Administrative Procedure Act (hereinafter the “APA”). 5 Maryland Code, § 10-203(d) of the State Government Article (1984,1999 Repl.

Vol.). When we consider an administrative agency decision, we review the agency’s decision applying the same statutory standards as used by the preceding reviewing court. Spencer, 380 Md. 515, 523-25 , 846 A.2d 341, 345-47 , 2004 WL 439310 , at ⁴; Watkins v. Dept. of Public Safety and Corr. Services, 377 Md. 34, 46 , 831 A.2d 1079, 1086 (2003); Maryland Div. of Labor and Industry v. Triangle General Contractors, Inc., 366 Md. 407, 416 , 784 A.2d 534, 539 (2001); Gigeous v. Eastern Correctional Inst., 363 Md. 481, 495-96 , 769 A.2d 912, 921 (2001) (citing Public Serv.

Com’n v. Baltimore Gas & Elec. Co., 273 Md. 357, 362 , 329 A.2d 691, 694-95 (1974)). The statutory standards allowing reviewing courts to reverse or modify agency decisions are found in Section 10-222(h)(3) of the APA. Under the provision, agency decisions may be reversed or modified if the court concludes that an agency finding, conclusion, or decision: (i) is unconstitutional; (ii) exceeds the statutory authority or jurisdiction of the final decision maker; ¹⁹⁸ (iii) results from an unlawful procedure; (iv) is affected by any other error of law; (v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or (vi) is arbitrary or capricious.

As we explained in Spencer, 380 Md. 515, 527-29 , 846 A.2d 341, 348-49 , 2004 WL 439310 , at ⁶, the six standards may be grouped into three categories: conclusions of law, findings of fact, or discretionary action. See also Department of Health and Mental Hygiene v. Campbell, 364 Md. 108, 118 , 771 A.2d 1051, 1057 (2001)(explaining that “the issue for the reviewing court is whether the administrative agency committed an error of law, or whether its decision is supported by substantial evidence, or is ‘arbitrary or capricious’ ”). The first four standards apply when an agency makes a “conclusion of law.” The fifth standard applies when an agency makes a finding of fact. The sixth standard applies when an agency acts in its “discretionary capacity.” Spencer, 380 Md. 515, 527-29 , 846 A.2d 341, 348-49 , 2004 WL 439310 , at ⁶; see also Maryland Transp.

Authority v. King, 369 Md. 274 , 799 A.2d 1246 (2002) (discussing the arbitrary and capricious standard). The tests differ for each category. Determining whether an agency’s “conclusions of law” are correct is always, on judicial review, the court’s prerogative, although we ordinarily respect the agency’s expertise and give weight to its interpretation of a statute that it administers. Watkins, 377 Md. at 46 , 831 A.2d at 1086 (quoting Baltimore Lutheran High School v. Employment Sec. Admin., 302 Md. 649, 662 , 490 A.2d 701, 708 (1985)); see also Total Audio-Visual Sys., Inc. v. Dept. of Labor, 360 Md. 387, 394 , 758 A.2d 124, 127-28 (2000).

Of course, even though an agency’s interpretation of a statute is often persuasive, “the reviewing court must apply the law as it understands it to be.” Supervisor of Assessments of Baltimore City v. Chase Assocs., 306 Md. 568, 574 , 510 A.2d 568, 571 (1986). Nevertheless, “an administrative agency’s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts.” Board of ¹⁹⁹ Physician Quality Assurance v. Banks, 354 Md. 59, 69 , 729 A.2d 376, 381 (1999). With respect to an agency’s findings of fact, a reviewing court applies the substantial evidence test, determining “whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.” Id. at 68 , 729 A.2d at 380 (quoting Bulluck v. Pelham Wood Apts., 283 Md. 505, 512 , 390 A.2d 1119, 1123 (1978)). Again, the reviewing court generally defers to the agency, appraising its fact-finding and subsequent inferences from that fact-finding, if supported by the record, in a light most favorable to the agency.

Id. at 68, 729 A.2d at 381 (citing CBS v. Comptroller, 319 Md. 687, 698 , 575 A.2d 324, 329 (1990)). Finally, the court applies the arbitrary and capricious standard when it reviews an agency’s discretionary functions. As we observed in Spencer, when an agency acts in its discretionary capacity, it is taking actions that are specific to its mandate and expertise and, unlike conclusions of law or findings of fact, have a non-judicial nature. For this reason, we “owe a higher level of deference to functions specifically committed to the agency’s discretion.” Spencer, 380 Md. 515, 529-31 , 846 A.2d 341, 349-50 , 2004 WL 439310 , at ⁷. “[A]s long as an administrative agency’s exercise of discretion does not violate regulations, statutes, common law principles, due process and other constitutional requirements, it is ordinarily unreviewable by the courts.” Maryland State Police v. Zeigler, 330 Md. 540, 557 , 625 A.2d 914, 922 (1993).

Courts thus generally only intervene when an agency exercises its discretion “arbitrarily” or “capriciously.” Id. at 558 , 625 A.2d at 922 .

III

Discussion The basis of Christopher’s argument rests on her assumption that, had she not appealed the Library of Congress’s termination of her employment “for reasons of disability,” she would be eligible to receive disability benefits and, consequently, would be deemed “disabled” for the purposes of receiving the entire or “uncapped” excess shelter cost deduction as ²⁰⁰ opposed to the limited or “capped” deduction. We shall assume, for the sake of this discussion, that the fact-finder had a basis for concluding that Christopher, indeed, would have been entitled to disability benefits had she not taken her appeal. Claiming, thus, that she forfeited disability benefits she would have received otherwise in order to appeal her employer’s termination decision, Christopher goes on to maintain that the Department “erred as a matter of law” for two reasons when it denied her the “uncapped” excess shelter cost deduction. According to Christopher, the Department’s “interpretation of COMAR 07.03.17.43I(3) and 07.03.17.02B(6) is arbitrary and capricious ... because it penalizes Christopher for exercising her legal right to appeal her disability determination .... [and] impermissibly distinguishes between individuals who have been determined to be disabled based on whether the individual has appealed that decision....” Christopher thus urges that she should be “deemed to be constructively receiving disability benefits” under the relevant COMAR regulations.

Furthermore, in Christopher’s view, “constructive receipt means that [she] is ‘receiving’ benefits for purposes of the statute and regulation, but the amount of the benefits actually received is zero due to [her appeal of the Library of Congress’ disability determination].” Christopher also contends that the Department deprived “her of equal protection of the laws under both the Equal Protection Clause of the 14th Amendment to the U.S. Constitution and Article 24 of the Maryland Declaration of Rights because a distinction between individuals who have been determined to be disabled, based on whether the individual has appealed that decision, is not rationally related to any legitimate government interest.” She maintains that “there is no rational government interest inherent in placing an individual who has been determined to be disabled, and therefore lost job and compensation, in a position of where that individual must forego the right to appeal that determination or otherwise receive lower food stamp assistance than other disabled ²⁰¹ individuals who choose not to appeal their disability determinations.” The State argues that the ALJ correctly found that Christopher was not entitled to the uncapped excess shelter cost deduction because she is not “disabled” as defined by state and federal law. According to the State, under COMAR 07.03.17.02B(6), the definition of disabled for the purposes of the uncapped excess shelter cost deduction turns on whether the individual actually receives a disability benefit. Moreover, in the State’s view, there is no “catch-all definition of ‘disabled’ that would permit an individual who receives no type of compensation for a disability but whom an employer has terminated on the basis of a disability to be considered a ‘disabled’ household member.” Because the ALJ “adhered to the plain meaning of the words defining disabled,” the State maintains that the ALJ cannot be considered to have acted arbitrarily or capriciously. The State also contests Christopher’s argument that, by appealing her termination from the Library of Congress, she receives a smaller food stamp benefit than if she had declined to appeal.

The State disputes Christopher’s claim that she is constructively entitled to “zero” benefits while her employment matter is on appeal. It argues instead that, if Christopher were to be awarded disability benefits of $1,346 per month, and if she were to receive such, the benefits would count as income “which would have only been partially offset by the uncapped shelter deduction.” As such, according the State, the amount of food stamps Christopher would be entitled to receive would decrease to approximately $71.00 per month. The State thus rejects Christopher’s argument that she is penalized for appealing her disability determination. Finally, the State maintains that the equal protection guarantees under Article 24 of the Maryland Declaration of Rights and the Fourteenth Amendment to the United States Constitution are not violated by the requirement that individuals receive disability benefits in order to be.considered disabled for the purposes of the uncapped excess shelter cost deduc ²⁰² tion.

The definition of “disabled” required for the uncapped excess shelter cost deduction, in the State’s view, is rationally related to the legitimate government interest in treating those who receive disability income differently than those who do not for the purpose of calculating food stamp benefits. As the State explains it, because additional income ordinarily reduces an individual’s food stamp allotment, the uncapped excess shelter cost deduction is a means of “offsetting” or “mitigat[ing] the negative effect of that income” when the income is disability benefits. A. The ALJ’s Decision 1. The Food Stamp Program The Food Stamp Act, 7 U.S.C. §§ 2011 , et. seq., is a state administered program funded by the federal government to provide low-income individuals with “an opportunity to obtain a more nutritious diet.” 7 U.S.C.A. § 2013 (a) (West 1999); see West v. Bowen, 879 F.2d 1122, 1124 (3d Cir.1989). “The Secretary of Agriculture prescribes the standards for eligibility for food stamps, but state agencies are authorized to make individual eligibility determinations and to distribute the food stamps to eligible households, which may use them to purchase food from approved, retail food stores.” Atkins v. Parker, 472 U.S. 115, 117 , 105 S.Ct. 2520, 2523 , 86 L.Ed.2d 81, 85 (1985) (footnote omitted); see 7 U.S.C.A. § 2014 (b) (West Supp.2003).

In order to participate in the Food Stamp Program, states must comply with the Food Stamp Act and the Secretary’s regulations. 7 U.S.C.A. §§ 2020 (a), 2025 (West 1999). Maryland law requires the Department to implement the program in conformity with federal and state law and regulations. Maryland Code, Art. 88A, § 13A(e) (1957, 2003 Repl. Vol.)(stating that “the administration of State programs by Montgomery County shall ... be governed by State and federal regulations”). 6 ²⁰³ Eligibility for food stamps is largely determined by a household’s income.

Section 2014(a) of the Food Stamp Act provides: “Participation in the food stamp program shall be limited to those households whose incomes and other financial resources, held singly or in joint ownership, are determined to be a substantial limiting factor in permitting them to obtain a more nutritious diet.” See also Knebel v. Hein, 429 U.S. 288, 289 , 97 S.Ct. 549, 551 , 50 L.Ed.2d 485, 488 (1977). As a general rule, the recipient’s food stamp allotment decreases when his or her income increases. See West, 879 F.2d at 1124 . Although “[hjousehold income for purposes of the food stamp program shall include all income from whatever source,” see 7 U.S.C.A. § 2014 (d) (West Supp.2003)(emphasis added), certain exclusions (regarding incoming revenue) and deductions (regarding expenses) apply.

For example, federal energy assistance payments may be “excluded” from the income calculation. See West v. Sullivan, 973 F.2d 179, 181 (3d Cir.1992). Benefits, such as social security disability benefits, are not “excluded” under the program, however, and thus ordinarily constitute income. 7 See Stevens v. Jackson, 800 F.Supp. 344, 345 (W.D.Va.1992)(explaining how a household’s food stamp allotment was reduced because the household received social security disability benefits). In addition to excluding certain incoming revenue from the applicant’s total income calculation, certain deductions also apply. 7 U.S.C.A. § 2014 (e).

Deductions serve to account for ²⁰⁴ many of the applicant’s necessary expenses, see Knebel, 429 U.S. at 296 , 97 S.Ct. at 554 , 50 L.Ed.2d at 492 , thus reducing the applicant’s total income calculation and increasing the amount of food stamps for which his or her household is eligible. Some of the allowable deductions include child care expenses, medical expenses, and “excess shelter costs.” 7 U.S.C.A. § 2014 (e). COMAR 07.08.17.43 outlines how “net monthly income” is to be calculated in Maryland pursuant to federal law. 8 Under the regulation, net income is the applicant’s gross income minus certain deductions. ²⁰⁵ The deduction at issue here is the “excess shelter cost deduction,” which allows applicants to subtract from their gross income a limited or “capped” amount of allowable excess shelter costs. 7 U.S.C.A. § 2014 (e)(6)(A). 9 Allowable “excess shelter costs” include, inter alia, monthly utility costs such as heating and cooking fuel, electricity, and water adding up to more than half of the household’s income. COMAR 07.03.17.48I; see also Maryland Department of Human Resources Food Stamp Manual § 212.3 available at http://www.dhr.md.us/stamp/manual (last visited May 10, 2004).

Although the amount of the excess shelter cost deduction is “capped” for most food stamp applicants at approximately $378, 10 elderly or disabled households are eligible for an unlimited or “uncapped” deduction, which allows them to subtract all of their “excess shelter costs” from their gross income. 7 U.S.C.A. § 2014 (e)(6)(B). 11 Specifically, COMAR ²⁰⁶ 07.03.17.431(3), which is derived from 7 C.F.R. § 273.9 (d)(6)(h), 12 provides: “If the household contains an elderly or disabled member as described in Regulation .02B of this chapter, the total amount of the excess shelter cost is subtracted.” In short, elderly and disabled applicants are eligible for the “uncapped” excess shelter cost deduction, which allows them to deduct all of their excess shelter expenses, while all other applicants are eligible only for a “capped” amount. The consequence of this regulation is that elderly and disabled food stamp recipients receive a greater benefit under the excess shelter cost deduction than other applicants do because, by subtracting all of their allowable shelter costs from their gross income instead of just the limited, capped amount, their “net income” is reduced to a greater extent. See Huberman v. Perales, 884 F.2d 62, 64 (2d Cir.1989)(explaining how a disabled woman’s food stamp allotment increased significantly because she was eligible for the uncapped shelter deduction instead of the capped one). Lower net ²⁰⁷ income, as we have noted, generally results in an increased food stamp allotment.

See 7 U.S.C.A. § 2014 . In order to receive the uncapped excess shelter cost deduction, food stamp recipients must be 60 years of age or older or disabled. Section 2012(r)(2) of the Food Stamp Act defines a “disabled member” of a household eligible for food stamps in terms of someone who receives benefits. Under the provision, an “elderly or disabled member” includes someone who: (A) receives supplemental security income benefits ... or (B) receives Federally or State administered supplemental assistance ..., interim assistance pending receipt of supplemental security income, disability-related medical assistance .. ., or disability-based State general assistance benefits ...; (3) receives disability or blindness payments ... or receives disability retirement benefits from a governmental agency because of a disability considered permanent under section 221(i) of the Social Security Act (42 U.S.C. 421(i))____ Section 271.2 of Title 7 of the Code of Federal Regulations states that “elderly or disabled member” for the purposes of the Food Stamp Program includes a member of a household who: (2) Receives supplemental security income benefits under title XVI of the Social Security Act or disability or blindness payments under titles I, II, X, XIV, or XVI of the Social Security Act; (3) Receives federally or State-administered supplemental benefits under section 1616(a) of the Social Security Act provided that the eligibility to receive the benefits is based upon the disability or blindness criteria used under title XVI of the Social Security Act; (4) Receives federally or State-administered supplemental benefits under séction 212(a) of Pub.L. 93-66 ; (5) Receives disability retirement benefits from a governmental agency because of a disability considered permanent under section 221(i) of the Social Security Act. *** ²⁰⁸ (10) Receives an annuity payment under ... the Railroad Retirement Act ...

(11) Is a recipient of interim assistance benefits pending the receipt of Supplemented Security Income, a recipient of disability related medical assistance under title XIX of the Social Security Act, or a recipient of disability-based State general assistance benefits provided that the eligibility to receive any of these benefits is based upon disability or blindness criteria established by the State agency which are at least as stringent as those used under title XVI of the Social Security Act (as set forth at 20 CFR part 416, subpart I, Determining Disability and Blindness as defined in Title XVI). 13 COMAR 07.03.17.02B(6) defines disabled similarly. In Maryland, a disabled person for the purposes of the Food Stamp Program is someone who: (a) Receives Supplemental Security Income benefits or other federal or State-administered payments when eligibility to receive the benefits is based upon the disability or blindness criteria of the Social Security Act; * * * (f) Is receiving a disability retirement benefit from a government agency because of a disability considered permanent under the Social Security Act; (g) Is receiving a railroad retirement disability annuity ...; (h) Is receiving interim assistance benefits pending receipt of Supplemental Security Income; or (i) Is receiving disability-related federal medical assistance. 14 In sum, for the purposes of the Food Stamp Program generally and the uncapped shelter cost deduction specifically, an individual is disabled if he or she receives certain disability benefits. ²⁰⁹ 2. The ALJ’s Conclusion of Law In defining whether receiving disability means actual receipt in COMAR 07.03.17.02B(6), we begin the analysis by noting that the principles governing our interpretation of a statute apply when we interpret an agency rule or regulation. Maryland Comm’n on Human Relations v. Bethlehem Steel Corp., 295 Md. 586, 592-93 , 457 A.2d 1146, 1149-50 (1983); Carnage Hill Cabin John, Inc. v. Maryland Health Resources Planning Comm’n, 125 Md.App. 183, 248-249 , 724 A.2d 745, 778 (1999).

As we have said many times, a statute’s plain