                            _________________

                            Nos. 96-1466/1991
                            _________________

EVELYN BLIEK, Individually and       *
on behalf of all other persons       *
similarly situated; TISH             *
EBERLINE, Individually and on        *
behalf of all other persons          *
similarly situated,                  *
                                     *
     Plaintiffs - Appellees,         *   Appeals from the United States
                                     *   District Court for the
     v.                              *   Northern District of Iowa.
                                     *
CHARLES M. PALMER, In his            *
official capacity as the             *
Director of the Iowa Department      *
of Human Services; KIM D.            *
SCHMETT, In his capacity             *
as Acting Director of                *
the Iowa Department of               *
Inspections and Appeals,             *
                                     *
     Defendants - Appellants.        *


                                _____________

                    Submitted: June 12, 1996

                          Filed: January 2, 1997
                             _____________

Before BEAM, HEANEY, and HANSEN, Circuit Judges.
                              _____________


HANSEN, Circuit Judge.

     Evelyn Bliek and Tish Eberline filed this class action suit pursuant
to 42 U.S.C. § 1983, seeking injunctive and declaratory relief.           The
plaintiffs contended, among other things, that the defendants violated the
plaintiffs' due process rights by failing to notify them of the state's
discretionary authority to settle, adjust, compromise, or deny claims
arising out of overissuances of
food stamps due solely to agency error.     The district court1 granted the
plaintiffs' motion for summary judgment and permanently enjoined the
defendants from initiating or continuing efforts to collect food stamp
overpayments issued as a result of agency error until the defendants
provided notice to the plaintiffs of the state's settlement authority.    The
court gave the parties fourteen days in which to file a report in which
they agreed to the terms of the notice to be provided to the class members.



     Defendants filed a notice of appeal and a motion to stay the
permanent injunction pending the appeal.   We granted the defendants' motion
in part, staying all of the injunction except the portion requiring the
parties to submit for the district court's approval a report agreeing to
the terms of the notice.   The parties subsequently submitted an agreed-upon
form of notice to the district court, and the court approved it and entered
a final judgment in the case.   We affirm the judgment of the court and lift
the stay we previously imposed.


                                     I.


     The named plaintiffs in this case, Evelyn Bliek and Tish Eberline,
both receive food stamps pursuant to the Food Stamp Act of 1977 (the Act),
7 U.S.C. §§ 2011-2032 (1994).   Solely as a result of mistakes made by the
State of Iowa, and unbeknownst to them, Bliek and Eberline were issued more
food stamps than they were entitled to receive under the Act.            Upon
discovering this "agency error," the defendants initiated collection of the
food stamp overpayments by sending each of the plaintiffs a "demand
letter," as prescribed by federal regulations promulgated under the Act.
See 7 C.F.R. § 273.18(d)(3) (1995).        The demand letters informed the
plaintiffs of the alleged overissuances and gave the




     1
      The Honorable Mark W. Bennett, United States District Judge
for the Northern District of Iowa.

                                     2
plaintiffs notice of their administrative appeal rights as to the amount
of overissuances.    The letters did not specifically inform the plaintiffs
that the state has discretionary settlement authority to settle, adjust,
compromise or deny recovery of all or part of the overpayments, even though
a section of the notice headed "Actions That May Be Taken On Overpayments"
listed every adverse action that could be taken, including criminal
prosecution and the filing of a civil suit.           (See Appellants' App. at 119.)


      The plaintiffs filed this cause of action pursuant to 42 U.S.C.
§   1983,   individually   and    on   behalf    of    others   similarly    situated,
challenging the state's policies regarding the collection of overissuances.
The district court certified the class action, describing the class as "all
individuals residing in the State of Iowa who have participated in the food
stamp program in the State of Iowa, who have been determined to have
received an overpayment of food stamp benefits as a result of agency error,
and   who   have   been   subjected    to    collection    efforts   based    on   such
overpayments since September 28, 1991."           Bliek v. Palmer, 916 F. Supp.
1475, 1478 n.1 (N.D. Iowa 1996).        The plaintiffs and the defendants both
filed motions for summary judgment.         Finding no genuine issues of material
fact, the district court rendered an opinion deciding the issues of law,
and as relevant here, granted plaintiffs' motion for summary judgment on
their procedural due process argument regarding the state's failure to
notify the plaintiffs of its settlement authority.              Id. at 1485-93.     The
defendants appeal.


                                        II.


      The Food Stamp Act establishes a federally funded, state-administered
program that provides nutritional assistance to eligible households.                 7
U.S.C. § 2013(a) (1994).         The purpose of the Act is "to safeguard the
health and well-being of the Nation's population by raising levels of
nutrition among low-income households."         Id. § 2011.     Under the food stamp
program, eligible




                                            3
households receive food stamp coupons that can be redeemed for food items
at retail stores participating in the program.              Id. § 2013(a); see also id.
§§ 2014-2015 (setting standards for determining eligibility of households).



       The   Secretary      of   Agriculture      (the   Secretary)    is   authorized       to
formulate and administer the food stamp program, id. § 2013(a), and to that
end has promulgated various regulations, which are set forth at 7 C.F.R.
§§    271.1 - 285.10 (1995).2      The Secretary has delegated to state agencies
the responsibility for administering the program, and thus the state
agencies make the individual eligibility determinations and actually
distribute    the    food    stamps   to    the    eligible      households.         7   C.F.R.
§ 271.4(a).    The State of Iowa participates in the food stamp program and
has designated the Iowa Department of Human Services (DHS) as the state
agency that implements the program.               Iowa Code Ann. § 234.12 (1994).


       If a household is issued more food stamps than it is entitled to
receive, the adult household members are liable for the value of the
overissuances.      7 C.F.R. § 273.18.       In such a case, the Secretary has the
authority to establish a claim against those individuals.                            7 U.S.C.
§    2022(a)(1).     The    Secretary      also    has   plenary    settlement       authority
regarding overissuance claims -- that is, "the power to determine the
amount of and settle and adjust any claim and to compromise or deny all or
part of any such claim or claims arising under [the Act]."                     Id.


       The Secretary has delegated much of his power regarding claims,
including     the   settlement      authority,      to   state     agencies.         7   C.F.R.
§ 271.4(b).    Accordingly, state agencies "shall establish a claim against
any household that has received more food stamp




       2
      Currently, the Food and Consumer Service (FCS) of the
United States Department of Agriculture (USDA) acts on the
Secretary's behalf in overseeing the program. See 7 C.F.R.
§ 271.3(a).

                                              4
benefits than it is entitled to receive . . . ."       Id. § 273.18(a).
     When a state agency (in Iowa, the DHS) determines that a household
has received too many food stamps as a result of agency error, the agency
initiates a collection action by sending the household a demand letter.
Id. § 273.18(d)(3)(i).    The letter that DHS sends out informs the recipient
of the amount of the alleged overissuances and provides a space for the
recipient to indicate the recipient's preferred method of repayment.
Although the letter informs the recipient of his or her right to appeal the
agency's determination and the possibility of a fair hearing on the appeal,
see id. § 273.15 (fair hearings), it does not inform the recipient of the
state agency's settlement authority.       In fact, the present form of notice
states   in large block letters "FEDERAL RULES REQUIRE THAT THE IOWA
DEPARTMENT OF HUMAN SERVICES COLLECT ALL OVERPAYMENTS," without explaining
that those same federal rules give the DHS authority to settle and
compromise an overpayment claim.     (Appellants' App. at 119.)


                                     III.


     The district court granted plaintiffs' motion for summary judgment,
finding they have been denied procedural due process because the state has
failed to inform them of its settlement authority.        We review a grant of
summary judgment de novo, using the same standards as did the district
court.   Dakota Gasification Co. v. Pascoe Bldg. Sys., 91 F.3d 1094, 1097
(8th Cir. 1996).   Thus, we will affirm the grant of summary judgment if the
record shows there is no genuine issue of material fact and the prevailing
party is entitled to a judgment as a matter of law.     Fed. R. Civ. P. 56(c);
Dakota Gasification Co., 91 F.3d at 1097.


     The Due Process Clause of the Fourteenth Amendment guarantees that
no state will "deprive any person of life, liberty, or property, without
due process of law."     U.S. Const. amend. XIV,




                                       5
§ 1.        We engage in a two-part analysis when addressing a procedural due
process argument, asking, first, whether the plaintiffs have a protected
interest at stake, and if so, what process is due.                   Schneider v. United
States, 27 F.3d 1327, 1333 (8th Cir. 1994), cert. denied, 115 S. Ct. 723
(1995).       The state concedes the first point of the analysis, stating:


        Iowa agrees that Food Stamp recipients have a property interest
        protected by the Fourteenth Amendment in the Food Stamp coupons
        and in the cash equivalent that Iowa would attempt to collect
        as repayment of an overissuance of Food Stamps due to agency
        error.   Iowa disagrees with the District Court's conclusion
        that the Due Process Clause requires more process.


(Appellants' Br. at 19.)


        For the most part, the Supreme Court provided the answer to our
second inquiry in Goldberg v. Kelly, 397 U.S. 254 (1970).                There, the Court
held that welfare benefits "are a matter of statutory entitlement for
persons       qualified   to   receive    them"   and   thus   are   a   constitutionally
protected property interest.             Id. at 262.    Further, because the welfare
recipients in Goldberg relied on the benefits for subsistence, the Court
held that the recipients were entitled under the Due Process Clause to a
fair hearing before the termination of the benefits.                     Id. at 264.   In
Atkins v. Parker, the Court eliminated any doubt one might have about the
application of Goldberg holdings to food stamp benefits, noting that food
stamps are a matter of statutory entitlement, just as welfare benefits
are.3       472 U.S. 115, 128 (1985).       Supreme Court precedent




        3
      We note that the plaintiffs do not have a protected
property interest in the actual overissuances of food stamps,
because the protected property interest is only in the benefits
the recipient is "qualified to receive." Atkins v. Parker, 472
U.S. 115, 128 (1985). Likewise, there is no protected property
interest in the plaintiffs' expectation of a settlement or an
adjustment by the state, for the state's settlement authority for
its claim is purely discretionary and gratuitous. See Schneider,
27 F.3d at 1333.

                                              6
dictates that due process includes notice and a fair hearing.                Mullane v.
Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950).              Cf. H.R. Rep.
No. 464, 95th Cong., 1st Sess. 285, reprinted in 1977 U.S.C.C.A.N. 1978
(stating    the   "fair   hearing"    rules   for    food    stamp    recipients    were
implemented in response to Goldberg v. Kelly, 397 U.S. 254 (1970)).


       In determining what process is due in this circumstance, we note that
the need for an adequate notice is also settled law.               Adequate notice is
integral to the due process right to a fair hearing, for the "right to be
heard has little reality or worth unless one is informed."                  Mullane, 339
U.S. at 314.      Adequate notice is that which is "reasonably calculated,
under all the circumstances, to apprise interested parties of the pendency
of the action and afford them an opportunity to present their objections."
Id.    Further, the notice must "apprise the affected individual of, and
permit adequate preparation for, an impending hearing."              Memphis Light, Gas
& Water Div. v. Craft, 436 U.S. 1, 14 (1978) (internal quotations omitted).
Due process is a flexible concept and a determination of what process is
due, or what notice is adequate, depends upon the particular circumstances
involved.    See id. at 14 n.15.


       The need for adequate notice is particularly compelling in the
circumstances of this case, to protect the same interests the Supreme Court
recognized   in   reaching   its     conclusion     that    due   process    required   a
pretermination hearing for welfare recipients.             See Goldberg, 397 U.S. at
264.   Like the welfare recipients in Goldberg, the class members in this
case are, by definition, low-income persons who live "on the very margin
of subsistence."     Mathews v. Eldridge, 424 U.S. 319, 340 (1976).                 They
simply do not have the financial resources to correct with ease by
repayment the state's erroneous overpayments.          Likewise, the plaintiffs are
not as a general matter in the financial position to hire legal counsel to
aid in the interpretation of the notice they receive and to




                                          7
inform them of the state's full authority.4     Therefore, the notice that DHS
gives must be complete, stated in plain language, and reasonably calculated
to afford the plaintiffs an opportunity to raise their objections to the
state's proposed actions.        A plainly written, informative notice is
imperative in these circumstances to make the hearing to which the
plaintiffs are entitled meaningful.
      We conclude that the notice the DHS currently sends to the plaintiffs
in the form of the demand letter is inadequate.     The demand letter informs
the   plaintiffs   that   the   state   has   determined   they   have   received
overissuances as a result of agency error and gives notice that the
plaintiffs may appeal the existence of the alleged overissuances or the
amount, dates, or reason for the alleged overissuances.              The letter
contains a "Repayment Agreement," which essentially asks the recipient to
agree either to a reduced allotment of future food stamp benefits or to a
cash payment schedule.    Although the plaintiffs are informed that they need
not sign the Repayment Agreement, the letter tells the plaintiffs that if
they "do not make an agreement and make all payments, [the state] may take
a future year's income tax refund, other payments that are owed to [the
recipient] from the state, or initiate other appropriate collection
procedures."   (Appellants' App. at 116, 118.)      The letter does not inform
the plaintiffs of the state's settlement power, but rather gives the
impression to the plaintiffs who have no discretionary funds (which, given
the low-income status of the class members, is likely a common situation)
that they have no alternative but to agree to reduce their future allotment
of food stamps.    Given the circumstances of this case, particularly the
financial status of the plaintiffs and the fact that it is the state's own
error that has created this predicament, we have difficulty believing that
this notice is "reasonably calculated . . . to afford [the plaintiffs] an




      4
      We note that the plaintiffs are represented in this action
by attorneys from the Legal Services Corporation of Iowa.

                                        8
opportunity to present their objections."      Mullane, 339 U.S. at 314.   We
                                                    5
therefore conclude that the notice is inadequate.       Cf. Aacen v. San Juan
County Sheriff's Dep't, 944 F.2d 691, 698-99 (10th Cir. 1991) (holding that
notice regarding a judgment execution must inform the debtor, who likely
has few assets or cash reserves, that various state exemptions as to real
and personal property exist);     Finberg v. Sullivan, 634 F.2d 50, 62 (3d
Cir. 1980) (en banc) (holding that a debtor whose sole source of income was
her social security retirement benefits was entitled to be informed that
the benefits were exempt from attachment and garnishment).


     The familiar, three-part test laid out by the Supreme Court in
Mathews v. Eldridge supports our conclusion.    Under the Mathews framework,
we consider


     first, the private interest that will be affected by the
     official action; second, the risk of an erroneous deprivation
     of such interest through the procedures used, and the probable
     value, if any of additional or substitute procedural
     safeguards; and finally, the Government's interest, including
     the function involved and the fiscal and agency burdens that
     the additional or substitute procedural requirement would
     entail.


Mathews, 424 U.S. at 335.   As explained above, we believe the general need
for adequate notice and a hearing concerning an alleged overpayment of food
stamps is clear under Supreme Court precedent.     Applying the Mathews test
to the plaintiffs' specific request for notice of the state agency's
settlement authority, we conclude such notice is necessary to protect the
plaintiffs' due process rights.




     5
      We note that the proposed notice, which has been approved
by both parties and the district court for distribution to the
members of the class in the event our present stay is lifted, is
clear, direct, and informative. It stands in marked contrast to
the complex, confusing, and prolix demand letter currently used
by the DHS to inform recipients of the overpayment.

                                     9
     The first factor in the Mathews test concerns the private interest
affected by the official action.   The plaintiffs in this case have a vital
interest at stake, namely, their subsistence.   Because of their financial
status, the potential deprivation and the hardship the plaintiffs may incur
in their attempt to repay the overissuances is substantial, even if by most
standards the amount of money at stake may be quite small.       Thus, the
private interest affected by the state's silence regarding its settlement
authority weighs heavily in favor of requiring notice.


     The defendants argue that the plaintiffs' interest is not significant
because their future allotment of food stamps cannot be reduced without
their voluntary consent, see 7 C.F.R. § 273.18(d)(3)(viii) (1995).   We note
that although the demand letter technically complies with this regulation's
requirement that the state agency notify the plaintiffs of the voluntary
nature of allotment reduction, this fact is not stated in clear terms.   The
letter states:   "If you fail to make a satisfactory agreement, and the
overissuance was the result of household error or intentional program
violation, your future Food Stamp Benefit will be reduced to repay the
overissuance."   (Appellants' App. at 116, 118.)    Because there are only
three categories of possible reasons for an overissuance -- (1) household
error, (2) intentional program violation, and (3) agency error -- the
unstated negative implication in this reference to the first two categories
is that the state will not reduce future allotments without the consent of
the recipient when the claim stems from the third category, agency error.
Given the other, more explicit statements concerning the state's ability
to take action absent an agreement on the plaintiffs' part, this "notice"
is hardly clear, especially to an untrained eye.6




     6
      It has not escaped our attention that in contrast to the
present notice's unstated negative implication, the notice in use
from 1983 to 1991 clearly and directly stated, "The amount of
food stamps you are eligible to receive will not be affected if
you
can't pay or if you fall behind in your installment payments."
(Appellants' App. at 111.)

                                     10
      More importantly, the defendants' argument misses the point.                    The
plaintiffs, who depend on the state to help them meet their basic
nutritional needs and who have justifiably relied on the accuracy of past
food stamp issuances, find themselves in the predicament of having to find
some way to repay the state for overissuances (already spent on food months
ago) caused wholly by the state agency's error.                  The plaintiffs have a
significant interest in being fully informed of the state's authority to
settle the claim so that they might ask the state to exercise its authority
either before or at the "fair hearing."


      As to the second Mathews factor, the risk of erroneous deprivation
in this case is substantial, for persons who have no idea of the state's
settlement authority are unlikely to ask the state to use its benevolent
powers.   While it is true, as defendants argue, that the state's settlement
authority is a discretionary, gratuitous power, common sense dictates that
the likelihood of the state employing this authority is much less when a
recipient (ignorant of the state's authority) does not request the state
to   do   so   or   provide    the    state   with    information    demonstrating    the
recipient's special needs.           Providing specific information in the demand
letter regarding the state's settlement authority would put the plaintiffs
on notice that they may seek modifications from the DHS in the method and
amount of repayment.         In turn, with the due process protection of notice
in place, the risk of deprivation, erroneous or otherwise, will be reduced.


      Finally,      the    state     concedes      that   its   interest   is   "probably
negligible."    (Appellants' Br. at 24.)           We agree.    What the plaintiffs are
seeking is a mere clarification in the notice the state already issues.
The state can accommodate the plaintiffs with little cost, in either
finances or time.         Furthermore, we




                                              11
subscribe to the district court's view that to the extent that the state
may incur any administrative burden, that burden is "`not overriding in the
welfare context.'"     Bliek, 916 F. Supp. at 1490 (quoting Goldberg, 397 U.S.
at 266).


     Balancing these three factors, the plaintiffs' interest in being
apprised of the state's settlement authority far outweighs the state's
interest in refusing to give notice of it.        "Without forms which paint
distinctly the complete picture," these plaintiffs are deprived of a
meaningful opportunity even to ask the state to exercise its settlement
authority.   Ellendale v. Schweiker, 575 F. Supp. 590, 601 (S.D.N.Y. 1983).
Accordingly, we affirm the district court's holding that "the Due Process
Clause requires a complete explanation of the DHS's authority to settle,
adjust, compromise, or deny all or part of any claim which results from
overissuances."   Bliek, 916 F. Supp. at 1494.


                                      IV.


     For the foregoing reasons, we affirm the judgment of the district
court and lift our stay on the permanent injunction issued by the court.


     A true copy.


             Attest:


                  CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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