Michelle Coakley and Lydia Q. Rillo, Individually and Onbehalf of All Other Persons Similarly Situated,plaintiffs-appellants,margaret Soucy and Sandra Sumailo, Plaintiffs/intervenors-appellants, v. Franklin Sunn, Individually and in His Official Capacity Asdirector of the Department of Social Services Andhousing, State of Hawaii, Defendant Andthird Party Plaintiff-appellee, v. Louis W. Sullivan*, Secretary of Health Andhuman Services, Third Party Defendant-appellee, 895 F.2d 604 (9th Cir. 1990)

Recipients of food stamps and aid to families with dependent children ("AFDC") challenge a State of Hawaii interpretation of the federal so-called "lump sum" rule which provides that AFDC recipients whose income temporarily exceeds a certain level become ineligible to receive benefits for a fixed period of time.I

Rillo, an AFDC recipient, was awarded $18,500 in the settlement of a personal injury claim, of which she received more than $11,000. The Hawaii Department of Social Services and Housing ("DSSH"), which administers AFDC for the state, categorizes such personal injury damage awards as "income" under the federal lump sum rule.¹  42 U.S.C. § 602(a) (17) (Supp. V 1987). The rule provides that an AFDC recipient who receives a lump sum of income becomes ineligible for benefits for as many months as the income would last if the recipient were to spend an amount equal to the state's standard of need each month. Id. Therefore, Hawaii disqualified Rillo and her family from receiving AFDC benefits for 21 months, a period it calculated by dividing Rillo's damages award by her monthly AFDC assistance payment of $468.00. Rillo placed her personal injury award into a bank account.

Rillo also had been receiving some $281.00 a month of food stamps prior to her personal injury settlement. As a result of her depositing the award, however, Rillo's bank balance exceeded the food stamp eligibility resource level of $2000;²  therefore, DSSH terminated her benefits under that program as well. Because she had lost her food stamp eligibility, Rillo had to spend some of her lump sum to purchase food. Consequently, Rillo depleted the lump sum prior to the conclusion of her lump sum ineligibility period.³ 

In October 1985, Rillo (and Coakley) filed this class action suit in the district court against DSSH Director Sunn ("the Director") based on federal question jurisdiction. 28 U.S.C. § 1331 (1982). The original complaint contains three claims: (1) that the Director's policy of treating personal injury awards as "income" under AFDC violates certain provisions of the Social Security Act ("the Act"), 42 U.S.C. §§ 602(a) (7), 602(a) (10) and 602(a) (17) (Supp. V 1987); (2) that this same policy violates the equal protection clause of the fourteenth amendment; and (3) that the Director's failure to notify appellants of the policy's impact on AFDC eligibility prior to their receiving personal injury awards was improper. In turn, the Director filed a third party complaint against the U.S. Secretary of Health and Human Services ("the Secretary"). The district court certified a class action, but granted summary judgment upholding the validity of the Director's actions as to the first two of appellants' claims, leaving the third claim relating to "notice" undecided ("the notice claim"). The court also denied the plaintiffs' motion for a preliminary injunction. None of these court rulings is before us.

Appellants then filed an amended complaint alleging a fourth claim ("the unavailability claim") that the Director has "unduly limited the scope" of the so-called "unavailability rule," a federal statutory provision which permits states to recalculate an AFDC recipient's period of ineligibility if the recipient's lump sum income becomes "unavailable." The unavailability rule provides that "the State may at its option recalculate the period of ineligibility ... [if] the income received has become unavailable to the members of the family for reasons that were beyond the control of such members ..." 42 U.S.C. § 602(a) (17).⁴ 

Currently, DSSH shortens an AFDC recipient's ineligibility period under the lump sum rule when, among other things, the income becomes unavailable either because of loss or theft or because the individual with control over the income leaves the home. Haw.Admin. Rule Sec. 17-621-46(e) (1) (1984).⁵  Appellants claim that Hawaii's failure to include them within its "unavailability rule" violates federal law because a portion of their lump sum income has become "unavailable" due to circumstances beyond their control for other reasons. Appellants asked the court in their fourth claim to declare the Director's interpretation of the "unavailability rule" unconstitutional under the due process clause of the fourteenth amendment as well as violative of the federal statute and regulation whence it derived. The Director did not assert a third party claim against the Secretary as to this fourth claim.

The district court eventually dismissed the "notice" claims with prejudice, certified a class with respect to the unavailability claims,⁶  and then dismissed the unavailability claims, again upholding the validity of the Director's action. Appellants timely appeal the adverse judgment on their "unavailability" claim.

II

Article III of the United States Constitution limits our jurisdiction to actions involving actual "cases" or "controversies," a limitation that manifests itself through the doctrine of standing. Secretary of State v. Joseph H. Munson Co., 467 U.S. 947, 954, 104 S. Ct. 2839, 2845, 81 L. Ed. 2d 786 (1984); Ripplinger v. Collins, 868 F.2d 1043, 1047 (9th Cir. 1989). In order to establish standing to pursue a claim under Article III,⁷  a plaintiff must allege personal injury that is fairly traceable to defendant's allegedly unlawful conduct and that the requested relief is likely to redress. Allen v. Wright, 468 U.S. 737, 751, 104 S. Ct. 3315, 3324, 82 L. Ed. 2d 556 (1984) (citing Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 454 U.S. 464, 472, 102 S. Ct. 752, 758, 70 L. Ed. 2d 700 (1982)); Ripplinger, 868 F.2d at 1047. That is, the litigant must allege a distinct and palpable injury to himself; that the injury is somehow directly linked to the challenged activity; and that the injury is one which is apt to be redressed by a remedy the court is prepared to give. See Allen, 468 U.S. at 751, 104 S. Ct. at 3324; see also Wright, Miller, & Cooper, 13 Federal Practice and Procedure, Sec. 3531.4, at 418.

Appellants clearly satisfy the first two elements of the Article III standing inquiry with respect to their unavailability claim. First, they have adequately alleged injury through the loss of their AFDC benefits for the full duration of the lump sum ineligibility period. Second, this loss was occasioned at least in part by the Director's decision not to extend the "unavailability rule" to allow for recalculation in situations like theirs.

We now turn to redressability, and begin by examining the precise contours of the alleged injury for which appellants desire redress to determine whether it can be alleviated by the kind of relief they seek. The precise injury of which appellants complain is their exclusion from Hawaii's unavailability exception. Appellants' prayer for relief seeks a declaration that the Director's interpretation of the unavailability exception to the operation of the federal lump sum statute and regulation violates the fourteenth amendment due process clause as well as the federal statute and regulation.⁸ 

But even were we to issue an order declaring the Hawaii regulation invalid under federal law, it would not redress the injury from which appellants allegedly are suffering. See Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 45, 96 S. Ct. 1917, 1927, 48 L. Ed. 2d 450 (1976) (Court concluding that plaintiffs lacked standing in part because their complaint "suggests no substantial likelihood that victory in this suit would result in [their] receiving the hospital treatment they desire"). Striking down the Hawaii rule would merely result in the denial of the exception's application to those who currently receive it; i.e., those who lost their lump sums due to theft or walk-out. The position of appellants would be unchanged, however, for this case certainly is not an appropriate one for us to compel the state to extend a benefit to an excluded class. See, e.g., Welsh v. United States, 398 U.S. 333, 361, 90 S. Ct. 1792, 1807, 26 L. Ed. 2d 308 (1970) (Harlan, J., concurring); Hays v. Potlatch Forests, 465 F.2d 1081, 1083 (8th Cir. 1972). After all, the governing federal statute does not obligate a State participating in the AFDC program to provide for any exceptions to the ineligibility period mandate of the lump sum rule. 42 U.S.C. § 602(a) (17) (B) (ii) (1982 & Supp. I (1983)).⁹ 

In certain circumstances, even when the court is not prepared to order an extension of benefits, plaintiffs who allege that a statute is underinclusive nonetheless shall be considered to have an injury for which they can obtain redress. See, e.g., Heckler v. Mathews, 465 U.S. 728, 739 & n. 6, 104 S. Ct. 1387, 1395 & n. 6, 79 L. Ed. 2d 646 (1984); Ripplinger, 868 F.2d at 1048. Otherwise, underinclusive statutes effectively would be insulated from constitutional scrutiny. Ripplinger, 868 F.2d at 1048 (citing Arkansas Writers' Project, Inc. v. Ragland, 481 U.S. 221, 107 S. Ct. 1722, 1726, 95 L. Ed. 2d 209 (1987)). In Mathews for example, the Court held that a plaintiff who asserted the right to be free from discriminatory treatment under the equal protection clause--as opposed to a substantive right to any particular amount of benefits--had standing. Mathews, 465 U.S. at 737, 104 S. Ct. at 1394. " [W]hen the 'right invoked is that to equal treatment,' the appropriate remedy is a mandate of equal treatment, a result that can be accomplished by withdrawal of benefits from the favored class as well as by extension of benefits to the excluded class." Id. at 740, 104 S. Ct. at 1395 (citing Justice Brandeis's opinion in Iowa-Des Moines Nat'l Bank v. Bennett, 284 U.S. 239, 247, 52 S. Ct. 133, 136, 76 L. Ed. 265 (1931) (emphasis in original) (footnote omitted)). See also Arkansas Writers' Project, 107 S. Ct. at 1726 (in "numerous decisions," Court has "considered claims that others similarly situated were exempt from the operation of a state law adversely affecting the claimant"), and cases cited therein.

Here, however, appellants have not maintained a right to equal treatment under the federal program based on alleged discrimination against their class. That is, appellants have not asked this court to strike down the Hawaii rule to end allegedly preferential treatment others similarly situated are receiving. As noted above, they have only asked us to declare that the rule violates the federal statute. Therefore, even were we to proceed to the merits¹⁰  and conceivably rule in favor of appellants, their injury is not one which can be redressed by a remedy we are able to provide. As a consequence, appellants have failed to satisfy the Article III standing requirement of redressability.¹¹ 

III

Because we conclude that plaintiffs lack standing, we vacate the district court's summary judgment in favor of DSSH and remand this case to the district court with instructions to dismiss the action without prejudice.

VACATED with instructions to DISMISS.