Hendricks v. ADES/AZ DES

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IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE MELINDA S. HENRICKS, ) ) Appellant, ) ) v. ) ) ARIZONA DEPARTMENT OF ECONOMIC ) SECURITY, an Agency, ) ) and ) ) AZ DES FAA, ) ) Appellees. ) ) __________________________________) DIVISION ONE FILED: 02/16/2012 RUTH A. WILLINGHAM, CLERK BY: DLL No. 1 CA-UB 10-0359 DEPARTMENT C O P I N I O N Appeal from the Appeals Board of the Department of Economic Security of the State of Arizona A.D.E.S. Appeals Board No. P-1154438-BR REVERSED AND REMANDED Melinda S. Henricks Appellant In Propria Persona Mesa Thomas C. Horne, Arizona Attorney General Tucson By Jane A. Butler, Assistant Attorney General Attorneys for Appellee Arizona Department of Economic Security B R O W N, Judge ¶1 Melinda Henricks challenges a decision of the Appeals Board ( Board ) of the Arizona Department of Economic Security ( Department ) finding assistance benefits. her liable for overpayment of cash Henricks asserts she was not prepared for her hearing the Department overpayment alleged because was based on had advised improper stamps, not cash assistance benefits. her that the of food issuance We conclude that Henricks was not afforded due process because the Department failed to properly notify overpayment her hearing. of the We issue therefore to be addressed reverse and at the remand for further proceedings. BACKGROUND ¶2 Henricks received cash assistance benefits for herself and two of her children from October 2007 through May 2009 in the amount of $5093. In October 2009, the Department discovered that one of Henricks s children was a benefits capped child 1 and therefore ineligible for the benefits he received. The Department determined that Henricks had therefore received an overpayment of $1540. ¶3 notice On November 27, 2009, the Department mailed Henricks a captioned OVERPAYMENT. NOTICE OF REPAYMENT OF A CASH ASSISTANCE The notice stated: It has been determined that you received more Cash Assistance (CA) benefits than you were entitled to receive. . . . This 1 is because THE AGENCY A child who is born during a period of time when his or her parent or caretaker is receiving cash assistance or supportive services is ineligible to receive cash assistance for a specified period of time. See Ariz. Admin. Code ( A.A.C. ) R612-308(A). 2 INCORRECTLY ISSUED FOOD STAMPS TO ONE OR MORE INELIGIBLE HOUSEHOLD MEMBERS. Henricks timely requested a fair hearing 2 and the ¶4 Department issued a notice of hearing dated December 14, 2009. Under the Regulations section titled Involved, the Issue notice and read: Section of Overpayment Law and of Cash Assistance Benefits Arizona Revised Statutes, Title 46, Chapter 2, especially section 46-213, Arizona Administrative Code, Title 6, Chapter 12, especially Article 11[.] ¶5 Henricks 2010. At the attended outset, the the hearing in Administrative person January Judge Law in ( ALJ ) informed Henricks that the hearing was for the overpayment of cash assistance benefits. Henricks replied that she believed the purpose of the hearing was to address incorrectly issued food stamps. explained that The Department s the statement representative, regarding food Glen stamps Morris, in the November notice was a misprint and that the overpayment was actually for cash assistance benefits capped child. benefits she received for a In response to the ALJ s question to Henricks of whether she had any witnesses, Henricks responded that she was unaware of the actual problem or things that 2 Arizona Administrative Code R6-12-1002 provides that [a] person who wishes to appeal an adverse action shall file a written request for a fair hearing . . . within 20 days of the adverse action notice date. 3 have happened and therefore she did not know the facts for [her] to have brought witnesses. hearing without further comment The ALJ proceeded with the regarding Henricks s concerns about the notice. ¶6 The Department submitted consisting of more than 200 pages. twenty-eight exhibits, The ALJ took a recess (the record does not disclose how long it was) to give Henricks the opportunity to review the exhibits. technical explanation about overpayment from Henricks. why Morris then gave a highly the Department was seeking He stated that the Department should not have paid cash assistance benefits for one of Henricks s children because the child was benefits capped. Morris explained further that Henricks had no way of . . . knowing about the problem, but unfortunately, the Department . . . doesn t penalize [itself] when it makes an error. ¶7 Following the hearing, the ALJ issued a decision finding that [d]espite the fact that the claimant s overpayment was a result of the Department s error in this case, the claimant is liable for the $1,540.00 overpayment made to her, citing (2005). 3 Arizona Revised Statutes ( A.R.S. ) section 46-213(B) The ALJ s decision did not address the Department s 3 Section 46-213(B) provides in relevant part: If a recipient is overpaid for whatever reason, the recipient is liable for the amount of the overpayment. 4 mistake in informing Henricks that the alleged overpayment was related to issuance of food stamps. ¶8 Henricks petitioned for review of the ALJ s decision, which the Appeals Board affirmed. On her request for further review, the the Board again affirmed decision of the ALJ. Henricks timely filed an application for appeal to this court, which we granted. We have jurisdiction pursuant to A.R.S. § 41- 1993(B) (2011). DISCUSSION ¶9 We are obligated to accept the Board s factual findings unless they are arbitrary, capricious, or constitute an abuse of discretion. Rice v. Ariz. Dep t of Econ. Sec., 183 Ariz. 199, 201, 901 P.2d 1242, 1244 (App. 1995). We will affirm the Board s decision if it is supported by substantial evidence in the record. 4 legal Id. conclusions We are not bound, however, by the Board s and we review properly interpreted the law. ¶10 The law is clear de novo whether the Board Id. that the Department s efforts to recoup funds it allegedly overpaid to Henricks in the form of cash assistance benefits must 4 be carried out within the Henricks presents several new exhibits on appeal and asks that this court compare [her] evidence to [the Department s]. In our discretion, we decline to consider the new material submitted by Henricks. See A.R.S. § 41-1993(B) ( All such appeals shall be limited to the record before the department unless the court orders otherwise. ). Such evidence must generally be submitted at the initial hearing. 5 constraints of the Due Process Clause. See U.S. Const. amend. XIV, § 1 ( nor shall any State deprive any person of life, liberty, or property, without due process of law ); Atkins v. Parker, 472 U.S. 115, 128 (1985) (recognizing that welfare entitlements are a form of property protected by the Due Process Clause). In this context, due process requires that a benefit recipient be given adequate notice detailing the reasons for . . . termination, and an effective opportunity to defend by confronting any adverse witnesses arguments and evidence[.] and by presenting his own Goldberg v. Kelly, 397 U.S. 254, 267- 68 (1970); see also Carlson v. Ariz. State Pers. Bd., 214 Ariz. 426, 430-31, ¶¶ 14-15, 153 P.3d 1055, 1059-60 (App. 2007) ( An essential life, principle liberty, or of due property process be is that preceded a by deprivation of notice an and opportunity for hearing appropriate to the nature of the case. ) (citation and internal quotation omitted). ¶11 Proper notice protects benefit recipients from arbitrariness and erroneous deprivation of benefits by giving them enough information calculations are correct. to assess whether the Department s Allen v. State Dep t of Health & Soc. Servs., Div. of Pub. Assistance, 203 P.3d 1155, 1167-68 (Alaska 2009); see also Goldberg, 397 U.S. at 267-68. In Allen, food stamp recipients received excess benefits due to errors made by a state agency, and the agency pursued an overpayment claim. 6 203 P.3d at 1158-59. Following a ruling in favor of the agency, the recipients challenged the sufficiency of the notice. 1159. The Alaska Supreme Court reversed, finding Id. at that the notice failed to comply with applicable regulations, which are a prerequisite to bringing a recoupment action. Id. at 1169. The court reasoned that a notice lacking in sufficient detail requires a benefits recipient to blindly rely on the calculations of an agency that has admittedly already made a calculation error to that recipient s detriment. Id. The court thus concluded it would be unfair, and a violation of due process, to hold the recipient liable for the Department s own errors allow without her decision. ¶12 to providing her with understand how the sufficient Department information arrived at to its Id. Similarly, Arizona s statutes and regulations relating to administrative procedures require that parties be afforded reasonable notice to provide an opportunity to prepare for a hearing. See A.R.S. § 41-1061(C) (2004) ( Opportunity shall be afforded all parties to respond argument on all issues involved. ). and present evidence Section 41-1061(B) provides that a hearing notice shall include: (1) A statement of the nature of the hearing. 7 and time, place and (2) A statement of the legal authority and jurisdiction under which the hearing is to be held. (3) A reference to the particular sections of the statutes and rules involved. (4) A short and plain statement of the matters asserted. If the agency or other party is unable to state the matters in detail at the time the notice is served, the initial notice may be limited to the issues involved. Thereafter upon application a more definite and detailed statement shall be furnished. ¶13 Additionally, establishing notice benefits. See the Department requirements A.A.C. has relating R6-12-101(2), promulgated to cash -907. rules assistance The Arizona Administrative Code requires that [w]hen the Department plans to take Department adverse shall timely notice[.] action provide against the [a benefit [recipient] R6-12-907(A). recipient], with adequate the and Adequate notice is defined as a notice which explains the action the Department intends to take, the reason for the action, the specific authority for the action, the recipient s appeal rights, and right to benefits pending appeal[.] required to A.A.C. R6-12-101(2). 5 include 1. The date The Department is also the adverse action is effective; 2. The names of the eligible and ineligible persons 5 The Department s determination that a benefits recipient has received an overpayment of cash assistance constitutes an adverse action that entitles the recipient to a hearing. A.A.C. R6-12-101(4), -1001(A)(5). 8 in the unit, if changed by the intended action; and 3. Any effect the intended action may have on the unit members AHCCCS medical eligibility. statutory and A.A.C. R6-12-907(C). administrative We look to these provisions for guidance in determining whether Henricks was provided reasonable notice and an opportunity to be heard. See Allen, 203 P.3d at 1166-70 (evaluating whether regulatory notice requirements were met in determining whether benefits recipient was afforded due process). ¶14 The November notice the Department sent to Henricks stated that the reason Henricks owed an overpayment was that THE AGENCY INCORRECTLY ISSUED INELIGIBLE HOUSEHOLD MEMBERS. FOOD STAMPS TO ONE (Emphasis added.) OR MORE This notice was defective because it did not state the correct reason for the overpayment of cash assistance and it failed to include any information about ineligible. 6 which member of Henricks s household Nor did the notice contain any reference to the particular sections of the statutes and rules involved. A.R.S. § was 41-1061(B)(3). These deficiencies left See Henricks unprepared for her hearing and unable to effectively challenge or verify the Department s calculation of her overpayment. 6 Although not relevant to Henricks s appeal, the notice also lacked the required information regarding AHCCCS eligibility. 9 ¶15 The Department suggests that Henricks received adequate notice because the December 14, 2009, notice of hearing referenced overpayment of cash assistance benefits and cited the general rules and statutes regarding cash assistance. However, the notice of hearing did not cure the defect in the first notice, as the first notice likewise stated that the overpayment was for cash assistance but that the reason for the overpayment was an incorrect issuance of food stamps. And, similar to the first notice, there was no mention as to which member of Henricks s household was ineligible. The second notice, like the first, also failed to provide any information about a benefits capped child or the statutes or rules relied upon by the Department in making the determination that one of Henricks s children was ineligible. Thus, nothing about the general reference to cash assistance in the second notice would have reasonably alerted Henricks that the more specific previous statement regarding food stamps had been corrected or changed. See Smart v. Alaska Dep t of Health and Soc. Servs., 237 P.3d 1010, 1015-16 (Alaska 2010) (viewing all communications from the agency in recipient their received totality to sufficient determine notice of whether an Medicaid overpayment recoupment action). ¶16 It was only at the beginning of the hearing that the Department representative declared the statement regarding food 10 stamps in the first notice to be a misprint. By that time, it was too late for Henricks to have a meaningful opportunity to prepare for the hearing. identify the ONE OR Moreover, the hearing notice did not MORE INELIGIBLE HOUSEHOLD MEMBER OR MEMBERS, another piece of information that would have assisted Henricks in preparing for the hearing. ¶17 The Department also suggests that any defect in the notice was cured because Henricks was given time at the hearing to review the exhibits presented against her. It is unclear from the record how much time Henricks was given to review the more than 200 pages of exhibits, but in any event, a mere recess was an insufficient reasonable remedy opportunity to as Henricks gather was evidence, not afforded locate a potential witnesses, study the relevant legal authorities, and otherwise properly prepare her case. 7 ¶18 The record before us does not support the Board s conclusions that [t]he essential elements of due process were 7 The Department introduced a prehearing summary at the hearing as Exhibit 27. That document may have arguably provided more complete notice to Henricks, especially with regard to which member of her household was ineligible for benefits. However, nothing in the record before us shows that Henricks was given a copy of the prehearing summary as required by A.A.C. R612-1003(C). Moreover, the Board did not reference the prehearing summary, nor has the Department relied upon it on appeal. Regardless, service of the prehearing summary would not have corrected the error in the November notice informing Henricks the overpayment claim was based on food stamps. 11 observed[,] [t]he parties received advance notification of the issues to be considered at the scheduled hearing, and no error exists[] which could have misdirected the Claimant to prepare for a Thus, hearing the regarding Board notification. a erred The FS in Board [(food finding also stamps)] Henricks erred when overpayment. received it proper determined that [t]here was no accident or surprise in the proceedings which could not have been prevented by ordinary diligence. It was not Henricks s responsibility to correct the notification error made by the Department. See Vargas v. Trainor, 508 F.2d 485, 489 90 (holding (7th termination agency's Cir. 1974) notices action that that failed violated due to benefit provide process reduction reasons despite for fact and the that recipients could call to find out the reasons). ¶19 In sum, Henricks liable we for hold that overpayment the of Board s cash decision assistance to find benefits deprived her of a property right without due process of law. See Carlson, 214 Ariz. at 433, ¶ 23, 153 P.3d at 1062 (finding denial of due process based on variance between [the employee s] dismissal notice . . . and the facts upon which the Board upheld dismissal ). to continue pursuit of On remand, if the Department desires its claim 8 against Henricks, 8 it must Pursuant to A.R.S. § 46-213(B), if overpayment liability is established, the Department shall determine the method of 12 provide her with sufficient notice, which at a minimum means compliance with applicable statutes and regulations. 9 ¶20 Henricks next contends that the ALJ incorrectly admitted handwritten documents submitted by the Department into evidence at her hearing. Given our resolution of the notice issue, we need not address this argument. Also, Henricks did not preserve her right to challenge the ruling on appeal because she failed to object to the documents during the hearing. 207, 208, 726 P.2d 623, 624 admission of the handwritten See Campbell v. Warren, 151 Ariz. (App. 1986). However, in our discretion, we address this issue because it is likely to arise securing repayment which is most appropriate to the particular situation. . . . if the recipient has not obtained assistance or services by intentional misrepresentation or if the overpayment was due to an error on the part of the department of economic security, the department may waive a repayment by the recipient. 9 Henricks also argues that the Department should have provided her with copies of its evidence prior to the hearing. As the Department has recognized in its notices, Henricks has the right to inspect and copy all documents relevant to her case. See A.A.C. R6-12-1006(C)(4)(c) (stating the appellant has the right [t]o copy, at a reasonable time prior to the hearing or during the hearing, any documents in the appellant s case file which are relevant to the issues being heard, and all documents the Department may use at the hearing ). This right, however, does not relieve the Department of its responsibility under A.A.C. R6-12-1003 to mail Henricks a copy of its prehearing summary, which must include [t]he decision notice and any other documents relating to the appeal. (Emphasis added.) As noted, supra n.6, nothing in the record indicates that the Department mailed Henricks a copy of the summary or any other documents relating to [her] appeal other than the notices previously discussed. 13 on remand. See State v. Abdi, 226 Ariz. 361, 366, ¶ 18, 248 P.3d 209, 214 (App. 2011). ¶21 The Arizona Rules of Evidence permit the admission of any relevant writings, including handwritten documents. R. Evid. 1001. Ariz. Moreover, ALJs in administrative proceedings have considerably more leeway in deciding what evidence to admit because they are permitted to consider all relevant evidence. A.R.S. § 41-1062(A) (2004); State Div. of Fin. v. Indus. Comm'n of Ariz., 159 Ariz. 553, 556, 769 P.2d 461, 464 (App. 1989). Therefore, assuming the handwritten documents are relevant to the proceeding, they may be properly admitted and considered. 14 CONCLUSION ¶22 Based on the foregoing, we conclude that the Department failed to provide Henricks with adequate notice of the action against her. Accordingly, we reverse the Board s decision and remand this case for further proceedings consistent with this opinion. /s/ _________________________________ MICHAEL J. BROWN, Presiding Judge CONCURRING: /s/ ___________________________________ PATRICIA K. NORRIS, Judge /s/ ___________________________________ PHILIP HALL, Judge 15

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