Alfred CRAWFORD; Daniel Carrasco; Jerry Parker, et al., Plaintiffs-Appellees, v. Russell S. GOULD; William Mayer, et al., Defendants-Appellants
Nos. 93-17303, 93-17305
United States Court of Appeals, Ninth Circuit
Decided June 7, 1995
As Amended Aug. 25, 1995
66 F.3d 1073
Before: TANG, SCHROEDER and TROTT, Circuit Judges.
Argued and Submitted April 12, 1995.
V.
Finally, we conclude that the district court did not err in denying Partington‘s request for leave to amend his complaint. Under
CONCLUSION
For the above reasons, the district court‘s decisions denying Partington leave to amend and dismissing his complaint with prejudice are
AFFIRMED.
Barbara Haukedalen, Deputy Atty. Gen., Sacramento, CA, for defendants-appellants.
Opinion by Judge TANG; Concurrence by Judge TROTT.
TANG, Senior Circuit Judge:
The named plaintiffs in this action filed suit on behalf of a class consisting of all current and future patients involuntarily committed to California state psychiatric hospitals.1 The plaintiffs challenge the defendants’ practice of deducting patients’ money, including Social Security benefits, from the personal deposit accounts maintained for each patient, to reimburse hospitals for the cost of patient care and maintenance.
Defendants, the Secretary of the Cаlifornia Health and Welfare Agency et al. (“California“), appeal from the district court judgment entered after a hearing on cross motions for summary judgment. The district court enjoined California‘s practice of withdrawing patients’ Social Security benefits without their consent. The court also enjoined deduction of any funds from patients’ accounts without adequate notice, including notice that Social Security benefits and Veterans benefits cannot be used to pay the cost of care without a patient‘s consent.
The main issue on appeal is whether
Under California law, patiеnts committed to state psychiatric hospitals are liable for the cost of their “care, support, and maintenance.”
As required by California law, each psychiatric hospital maintains a trust account entitled “patients’ personal deposit fund.”
Shortly after admission, patients are asked to sign the “Authorization for Deposit and Withdrawal.” By signing this form patients agree to deposit their money, including Social Security and Veterans benefits, into the personal deposit fund. The form provides:
I understand that State law requires the deposit into my Personal Deposit Fund of all monies in my possession at the time of my admission to a state hospital ... and any other funds received by or for me during my residence at such a state facility. These funds so deposited may have originated from any private or public source, including such federal agencies as the Social Security Administration and/or the Veterans Administration.
The form also gives the hospital trust officer authority to make withdrawals from the patient‘s account:
Subsequent disbursements from my Personal Deposit Fund may be made by the Trust Officer on my behalf for my care and maintenance, treatment services, clothing, personal purchases and other necessities and incidentals.
The paragraph concludes: “I hereby authorize all such deposits to and withdrawals from my Personal Deposit Fund.”
With respect to Social Security and Veterans Administration benefits, the Authorization adds:
I further understand that federal laws dealing with Social Security or Veterans Administration payments exempt these benefits from legal or equitable claim processes so they will be available for the purpose of assuring my care, maintenance and medical treatment. This Authorization for the use of these benefits is specifically for these stated purposes.
At least five of the six named plaintiffs have either refused to sign the Authorization or have subsequently revoked their authorization.
If a patient refuses to sign the authorization form, California still follows the deposit and withdrawal procedures. Each hospital provides nonconsenting patients with a “Notice of Intended Withdrawal,” which informs the patient of the amount the hospital will be withdrawing monthly from the patient‘s trust account.
Both the Statement of Financial Liability and the Notice of Intended Withdrawal inform patients that they have the right to appeal withdrawals from their hospital accounts. The forms do not set forth information about the appeals process but merely tell patients to contact the trust officer who administers the patients’ deposit fund.2
- of the proposed share of cost and the facts on which the determination was made;
- that the plaintiff has a right to appeal the share of cost determination;
- a description of the appeal process and procedure; and
- that certain federal benefits, specifically Social Security benefits and Veterans benefits, are exempt from legal process and cannot be used to pay the plaintiff‘s cost of care without the patient‘s knowing, аffirmative and unequivocal consent.
California appeals the district court‘s decision regarding Social Security and Veterans benefits.3
I. Social Security Benefits
The first issue on appeal is whether the nonassignment provision of the Social Security Act,
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 undеr this subchapter shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
In Bennett, the Supreme Court held that a state statute authorizing the state of Arkansas to attach a prisoner‘s Social Security benefits, to pay for the costs of incarceration, violates the Supremacy Clause. Id. The Court reasoned that
The Ninth Circuit applied Bennett in a case involving procedures similar to those challenged in the present case. Brinkman v. Rahm, 878 F.2d 263 (9th Cir.1989) (per curiam). Patients involuntarily committed to Washington state mental hospitals were liable to the state for the cost of their care. The state collected the money the patients owed by withdrawing funds, including Social Security benefits, from the patients’ hospital accounts. Id. at 264. The state provided patients with a form entitled “Notice and Finding of Responsibility,” which set forth patients’ liability and explained that Social Security benefits would be applied to their costs of care. The form also explained that patients could appeal the determination of liability to the State Department of Social and Health Services. Id. In a per curiam opinion relying on Bennett, the Ninth Circuit concluded that Washington‘s procedures were inconsistent with, and therefore preempted by,
Like the state of Washington in Brinkman, the state of California tаkes money, including Social Security benefits, from institutionalized patients’ hospital accounts to pay for the cost of their care and treatment. California, like Washington in Brinkman, fails to obtain meaningful consent from patients prior to deducting Social Security benefits. The process California follows appears slightly different because California asks patients to sign an “Authorization for Deposit
Furthermore, California does not deduct Social Security benefits only from accounts of patients who have signed the Authorization form. If patients do not sign the Authorization, the state deducts the money after providing the patient with a “Notice of Intended Withdrawal.” The “Notice” merely informs patients that a stated amount of money will be deducted from their accounts and that they can appeal a withdrawal by contacting the trust officer. This “Notice” does not even mention Social Security benefits although money withdrawn includes such benefits. Like the state of Washington in Brinkman, the state of California deducts patients’ Social Security benefits after providing minimal notice and without obtaining consent. The similarity between the procedures at issue in Brinkman and those California uses requires us to conclude that California‘s procedures are inconsistent with, and therefore preempted by,
Even though the procedures California uses are similar to those set aside in Brinkman, California argues that Brinkman is not dispositive. California‘s arguments require that we explicate the preemption analysis we began in Brinkman. In setting aside the procedures Washington utilized in Brinkman, this court relied on the portion of Bennett, discussed above, which states that
California argues that the category of “other legal process,” consistent with the processes expressly listed, encompasses only judicial process, i.e. collection proceedings initiated pursuant to court order. According to California, Brinkman is distinguishable because the notice to Washington patients provided that, after expiration of an appeal period, the state hospital would “obtain a superior court judgment for the amount of the debt, and invoke further enforcement proceedings, such as garnishment or attachment, if the debt is not paid.” Brinkman, 878 F.2d at 264. Thus, Washington had at least threatened to use the judicial process. Californiа‘s argument fails because the threat of court proceedings contained in the Notice to patients was irrelevant to the Brinkman decision. The court explained that, although court proceedings were mentioned, Washington never initiated such proceedings. “Rather, the hospitals’ practice ... was simply to deduct the funds from the patients’ hospital accounts without notice.” Id. at 265.
Our conclusion, that “other legal process” includes the procedure that California uses to deduct Social Security benefits, is consistent with the purpose of
Fetterusso, a Second Circuit opinion that California cites to support its argument, is distinguishable. The Second Circuit concluded that
Indeed, the Second Circuit indicated that “other legal process” is not limited to court-initiated enforcement proceedings. “Congress intended the words ‘or other legal process’ to embrace not only the use of formal legal machinery but also resort to express or implied threats and sanctions.” Id. at 328. See also King v. Schafer, 940 F.2d 1182, 1185 (8th Cir.1991), cert. denied, Crytes v. Schafer, 502 U.S. 1095, 112 S.Ct. 1171, 117 L.Ed.2d 416 (1992) (“Other legal process” includes a threat to sue representative payees or to withhold state income tax refunds). These decisions are consistent with our conclusiоn that “other legal process” includes state hospitals’ practice of withdrawing Social Security benefits from patient accounts without consent.
In one final attempt to distinguish Brinkman, California argues that the relief the Brinkman district court granted did not require that patients provide consent prior to deduction of Social Security benefits, but only that the state provide notice.4 The remedy the district court granted, quoted in the Ninth Circuit opinion, included:
Order[ing] the defendants to provide adequate notice to the plaintiffs of the defendants’ seizure of their funds, adequate notice of any exemptions that might apply, and adequate opportunity to exercise those exemptions, and adequate notice of how to exercise those exemptions....
Brinkman, 878 F.2d at 266. Referencing this language, California argues that Brinkman requires notice but does not require that beneficiaries consent to deduction of their Social Security benefits.
California‘s interpretation of the Brinkman relief contains several flaws. First, California fails to set forth other portions of the remedy, including: “Enjoin[ing] the defendants and their successors from seizing the plaintiffs’ Social Security funds.” Id. This portion of the relief suggests that Social Security benefits could not be deducted even after notice. Second, the Ninth Cirсuit set forth the district court‘s order in Brinkman in response to an argument raised by the state of Washington but declined to address the argument because Washington had not raised it before the district court. The Ninth Circuit never addressed the adequacy of the order.
Furthermore, the argument that the Brinkman order required only notice but not consent is inconsistent with the holding in Brinkman that
The district court‘s order establishes the procedures the state must follow to effectuate the requirements of
We do not determine the wisdom of exempting Social Security benefits from legal process when a state has provided the beneficiary with care and maintenance. The Supreme Court has determined that
II. Implied Contract
We reject California‘s argument that institutionalized patients have an implied contract with state psychiatriс hospitals, in which patients consent to apply Social Security benefits to their cost of care. California argues that a contract “may be made or evidenced by a statute, and by conduct ensuing thereupon.” San Luis Obispo County v. Gage, 139 Cal. 398, 406, 73 P. 174 (1903). Under
California‘s argument contains at least one fatal flaw. Consent is essential to the existence of a contract.
III. Veterans Benefits
The district court‘s order requires California to provide notice “that certain federal benefits, specifically Social Security benefits and Veterans benefits, are exempt from legal process and cannot be used to pay the plaintiff‘s cost of care without the patient‘s knowing, affirmative and unequivocal consent.” Although the district court provides no further analysis of the exemption for Veterans benefits, the notice requirement constitutes a determination that the nonassignment statute governing Veterans benefits,
By including Veterans benefits in the order, the district court violated the well-established rule that “[a] court may not, without the consent of all persons affected, enter a judgment which goes beyond the claim asserted in the pleadings.” Brawner v. Pearl Assurance Co., 267 F.2d 45, 47 n. 2 (9th Cir.1958) (internal quotation omitted); Armstrong Cork Co. v. Lyons, 366 F.2d 206, 208 (8th Cir.1966) (internal quotation omitted). The patients’ complaint contains five claims: 1) withdrawal of Social Security benefits conflicts with
The patients argue that thе district court amended the pleadings pursuant to
When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment....
While Rule 15 allows liberal amendments to the pleadings, no amendment was made in this case. Rule 15(b) allows a court to revise pleadings to conform to the case as it actually was litigated at trial. 6A Charles A. Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure § 1491 (1990). The present case did not go to trial;
Because the district court did not have the authority to address an issue the parties did not raise, we vacate the portion of the district court‘s order requiring notice with respect to Veterans benefits. We also remand to provide the plaintiffs the opportunity to request an amendment to the pleadings. Amendment would not prejudice California, because it would not require California to undertake an entirely new course of defense, Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990), or to conduct substantial additional discovery. United States v. Pend Oreille Public Utility Dist. No. 1, 28 F.3d 1544, 1552-53 (9th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 1356, 131 L.Ed.2d 214 (Mar. 20, 1995). The parties have already established the relevant facts regarding California‘s procedure for deducting benefits, including Veterans benefits.
IV. Attorney‘s Fees
Because we vacate only the portion of the district court‘s decision requiring notice of an exemption for Veterans benefits, the district court need not recalculate the attorney‘s fees awarded. Attorney‘s fees could not have been awarded for work on the Veterans benefits issue because the parties neither raised nor addressed that issue before the district court.
The judgment of the district court requiring notice and сonsent with respect to Veterans benefits is VACATED and REMANDED for further proceedings consistent with this opinion. The remainder of the judgment is AFFIRMED.
TROTT, Circuit Judge, Concurring.
From a policy point of view, the end result in this case appears—to me at least—to be nonsensical. The State is picking up the bill for the hospitalized patients’ necessities, but cannot obtain reimbursement from the patients’ available funds if the patients resist. Thus, a recalcitrant patient receiving social security payments could pile up in about ten years an untouchable bank account of $250,000 while requiring taxpayers to foot the bill for the costs of his hospitalization. The justification for such a result escapes me, and the upshot of our decision hardly seems consistent with the purpose of the Social Security Act. Could Congress have intended this outcome?
Nevertheless, Judge Tang‘s conclusion seems to be compelled by Brinkman v. Rahm, 878 F.2d 263 (9th Cir.1989) (per curiam).
ORDER
Aug. 25, 1995
Pursuant to appellants’ motion, which appellees have not opposed, the opinion filed June 7, 1995 is amended as follows:
IT IS SO ORDERED.
Notes
All current and future patients involuntarily hospitalized in a California state psychiatric hospital who receive funds at the hospital which are deposited in the patient‘s personal deposit fund at the hospital, and for whom funds on deposit have been or are subject to being applied as payments toward the costs of the patient‘s care and treatment at the hospital.
All members of the class who receive Social Security benefits for whom the State is not the representative payee are members of a sub-class, which is defined as follows:
All current and future patiеnts involuntarily hospitalized in a California state psychiatric hospital who receive Social Security benefits which are deposited in the patient‘s personal deposit fund, for whom the State is not the representative payee, and for whom these funds have been or are subject to being applied as payments towards the costs of the patient‘s care and treatment at the hospital.
Deposited funds in excess of $500.00 may be applied as payment toward the cost of services. A client has the right to appeal this use of funds. The hospital Trust Officer may be contacted for further information or to request an appeal.
The Notice of Intended Withdrawal provides:
You have the right to appeal this withdrawal. To do so, contact the Trust Officer.