                           ___________

                           No. 95-1516
                           ___________

Ronald A. Mahers,               *
                                *
     Plaintiff/Appellee         *
                                *
     v.                         *
                                *
Sally Chandler Halford,         *
                                *
     Defendant/Appellant,       *
                                *
Gary Dean Snow,                 *
                                *
     Plaintiff/Appellee,        *
                                *
     v.                         *
                                *
Thomas Hundley; Sally Chandler  *   Appeal from the United States
Halford; Ruth McVeigh,          *   District Court for the
                                *   Southern District of Iowa.
     Defendants/Appellants,     *
                                *
Roger Gene Van Hoff,            *
                                *
     Plaintiff/Appellee,        *
                                *
    v.                          *
                                *
Thomas Hundley,                 *
                                *
     Defendant/Appellant,       *
                                *
Scott Ray Mabrier, Ralph Meyer, *
Jody L. Stokes, Kannis Johnson, *
Jimmey Lee Cook, William E.     *
Clark; James A. Middleswart,    *
Nathan D. Reed,                 *
                                *
     Plaintiffs/Appellees,      *
                                *
     v.                         *
                                *
Iowa Department of Corrections, *
Sally Chandler Halford, Charles *
Lee, John Thalacker, Mona Burns,*
Steven Wolmutt,                 *
                                *
     Defendants/Appellants.     *
                           ___________

                  Submitted:   October 19, 1995

                      Filed: February 21, 1996
                           ___________

Before BOWMAN, HEANEY, and WOLLMAN, Circuit Judges.
                           ___________


WOLLMAN, Circuit Judge.


     Defendant prison officials appeal from the district court's
order enjoining them from withholding court-ordered restitution
deductions from funds inmates receive from outside sources without
providing an individualized pre-deprivation hearing and requiring
the defendants to repay money that was previously deducted without
a hearing.

                                I.


     Iowa law requires virtually all inmates convicted in Iowa to
pay restitution to crime victim(s) and to the state to cover court
costs, court-appointed attorney fees or the expenses of a public
defender. See Iowa Code § 910.2 (1990). Pursuant to Iowa Code §
910.3, Iowa courts order a set amount of restitution at the time of
sentencing. The Director of the Iowa Department of Corrections
("the Department") then has a restitution plan prepared pursuant to
section 910.5(1). An inmate may have his restitution plan reviewed
by the Iowa District Court at any time during his incarceration.
Iowa Code § 910.7.


     In the spring of 1992, the Department began automatically
applying twenty percent of all money received by an inmate toward
that inmate's restitution obligations. This deduction included not
only money received from prison wages, but also money received from

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outside sources such as family and friends. This case is about the
collection of that twenty percent from outside sources.


     We begin with a timeline charting the statutory and procedural
history relevant to this case. Before March 1992, the Department
deducted restitution only from inmates' prison allowances--that is,
from the money inmates earned while in prison either from working
or from idle pay. When the Department began deducting from money
received from outside sources, several inmates filed suit alleging
that the deductions denied them due process and had no basis under
Iowa law.


     The Department asserted as authority Department policy number
IN-V-106, as amended, which authorized deductions for restitution
payments from all credits to an inmate's account.      The policy
exempted from deduction money given to an inmate for use for a
specific purpose, such as medical costs or funeral trip expenses.


     The   Department   claimed   as  alternate   authority   Iowa
Administrative Code (IAC) rule 201-20.11, which was also in effect
at the time of suit and which provided that credits to an inmate's
account from outside sources could be deducted for criminal
restitution with authorization from the inmate, a court order, or
approval from the warden/superintendent.


     The district court referred the case to a magistrate judge for
recommendations. The magistrate judge found that IN-V-106 had not
been properly promulgated under the rule-making provisions of the
Iowa Administrative Procedures Act.      Having found the policy
invalid, the magistrate judge concluded that it was unnecessary to
determine whether the failure to provide a pre-deprivation hearing
violated the due process clause.


     On October 12, 1994, the district court granted summary
judgment for the inmates, adopting the magistrate judge's report

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and recommendation, but modifying it to consider the due process
issue.   The district court noted that the defendants were also
claiming authority to make restitution deductions under IAC rule
201-20.11. Presuming the validity of the rule, the district court
held that notice and an informal pre-deprivation hearing were
required. The court did not specify the type of hearing required
or whether individual hearings were required in the case of those
inmates receiving weekly or monthly installment payments.


     On February 1, 1995, the district court entered an amended
judgment, which requires the defendants to restore money improperly
taken from plaintiffs' accounts, enjoins them from any further
application of IN-V-106, and enjoins them from applying IAC rule
201-20.11 to deduct from outside sources without first providing
notice and at least informal pre-deprivation process.


     In December 1994, the Iowa Supreme Court held, in a parallel
case brought by a different inmate, that although the Department
had authority to deduct restitution payments from funds inmates
receive from outside sources, the inmates are entitled as a matter
of due process to a one-time informal opportunity to state their
objections, an opportunity that the state procedures in place at
that time did not provide. Walters v. Grossheim, 525 N.W.2d 830
(Iowa 1994).


     The Iowa legislature enacted legislation, effective July 1,
1995, which provides, in part, that:


     [t]he director shall deduct from an inmate account an
     amount established by the inmate's restitution plan of
     payment. . . .    Written notice of the amount of the
     deduction shall be given to the inmate, who shall have
     five days after receipt of the notice to submit in
     writing any and all objections to the deductions to the
     director, who shall consider the objections prior to
     transmitting the deducted amount to the clerk of the
     district court. The director need give only one notice
     for each action or appeal for which periodic deductions

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                                4
     are to be made.



See Iowa Code § 904.702 (West Supp. 1995).

     In compliance with the district court's order, after June 30,
1994, the defendants ceased making deductions from funds received
from outside sources.     Thus, the time period relevant to the
inmates' claims falls between March 1992, when the deductions
began, and June 30, 1994, when they ceased. During the second year
of this period, for reasons largely unrelated to this litigation,
all money collected for restitution was escrowed. During this two-
year period, the defendants engaged in an across-the-board policy
of deducting twenty percent from all money received from outside
sources. At any time during this period an inmate could petition
the court under Iowa Code section 910.7 for a hearing on any matter
related to his restitution plan or payment plan.


     Because the 1995 legislation requiring a pre-deprivation
hearing cures Iowa law of any potential due process problems, the
question of prospective relief is moot. We need review only the
district court's retroactive order requiring the Department to
reimburse prisoners whose money was taken without a hearing. In
reviewing this order, we will not address the inmates' claim that
policy IN-V-106 was improperly promulgated under Iowa law, as
neither party contests, and the district court did not question,
the Department's authority under IAC rule 201-10.11.


                              II.


     We review the district court's grant of summary judgment de
novo, applying the same standard as the district court. Roth v.
U.S.S. Great Lakes Fleet, Inc., 25 F.3d 707, 708 (8th Cir. 1994).
Summary judgment is appropriate only when there is no genuine issue
of material fact and the moving party is entitled to judgment as a

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                                5
matter of law. Id. Finding no factual disputes, we confine our
discussion to whether, as a matter of law, inmates were deprived of
due process by the Department's across-the-board policy of
deducting twenty percent from money received by inmates from
outside sources.


     The inmates do not attack the validity of their restitution
obligations. Nor do they attack the constitutionality of applying
a portion of their prison wages or "idle pay" toward those
restitution obligations. See Buckley v. Barlow, 997 F.2d 494 (8th
Cir. 1993) (upholding deduction of one-half of inmate's idle pay
pursuant to disciplinary committee's restitution order); Hrbek v.
Farrier, 787 F.2d 414 (8th Cir. 1986) (holding that inmates have no
constitutionally protected interest in the wages earned while in
prison).   Instead, they argue that money cannot be taken from
outside source donations to satisfy those obligations without first
providing an individualized hearing, ostensibly to determine
whether the money is for an important purpose that should render it
exempt from deductions.    They contend that an across-the-board
deduction of twenty percent from all money entering prison accounts
violates the Due Process Clause.


     We agree with the district court that inmates have a property
interest in money received from outside sources. See Jensen v.
Klecker, 648 F.2d 1179, 1183 (8th Cir. 1981) (holding that inmates
have a property interest in their money); Sell v. Parratt, 548 F.2d
753, 757 (8th Cir.) (same), cert. denied, 434 U.S. 873 (1977).
Thus, inmates are entitled to due process before they can be
deprived of these monies.    The question to be answered is what
process is due before money received from outside sources can be
applied toward an inmate's restitution obligations.      Mathews v.
Eldridge, 424 U.S. 319 (1976), instructs us to balance three
factors when addressing such a question: 1) the private interest
that will be affected by the official action; 2) the risk of an
erroneous deprivation of such interest through the procedures used,

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                                6
and the probable value of additional or substitute procedures; and
3) the government's interest, including the function involved and
the fiscal and administrative burdens that the additional or
substitute procedural requirement would entail. Id. at 335; see
also Washington v. Harper, 494 U.S. 210 (1990) (applying Mathews
factors to prisoner's due process attack on a prison policy).


     We first address the inmates' private interest in the money
they receive from outside sources. Although incarceration does not
deprive prisoners of the protection of the United States
Constitution, "simply because prison inmates retain certain
constitutional rights does not mean that these rights are not
subject to restrictions and limitations." Bell v. Wolfish, 441
U.S. 520, 545 (1979). Because of the underlying purposes of our
penal system, many privileges and rights are withdrawn or limited
during incarceration. Id. at 546.


     Although the inmates' private interest in their personal funds
is apparent, inmates are not entitled to complete control over
their money while in prison. See Foster v. Hughes, 979 F.2d 130
(8th Cir. 1992) (inmates do not have a constitutional right to
place their money in interest-bearing accounts); Blankenship v.
Gunter, 898 F.2d 625 (8th Cir. 1990) (inmates can be
constitutionally prohibited from using money in their prison
accounts for religious donations).


     Moreover, inmates are not absolutely deprived of the benefit
of their money when part of it is applied toward their restitution
debts. In Beeks v. Hundley, 34 F.3d 658 (8th Cir. 1994), we held
that officials were not barred from applying the proceeds of a
section 1983 damage award they had paid the Iowa inmates to the
inmates' criminal restitution obligations. Specifically, we stated
that inmates received "virtually all the benefit of their § 1983
money judgment when the proceeds were applied to satisfy their
restitution debt." Id. at 661. We find appellees' attempts to

                               -7-
                                7
distinguish Beeks to be unpersuasive. Regardless of factual and
procedural differences between the cases, the general principle
that an inmate whose money is taken and applied toward his court-
ordered restitution debt does not suffer from a total deprivation
of that money is applicable to both cases. When an inmate leaves
prison, he leaves with his restitution debts. Any payment of those
debts while the inmate is incarcerated will work to his ultimate
benefit. Other courts have followed a similar logic. Cf. Campbell
v. Miller, 787 F.2d 217, 222 (7th Cir.) (holding constitutional
prison officials' decision to impound a prisoner's account pending
his compliance with a restitution order and characterizing the
prisoner's complaint as a restriction on his freedom to use his
funds in a particular way, rather than a total deprivation of the
money), cert. denied, 479 U.S. 1019 (1986).


     Turning to the risk of erroneous deprivation through the
procedures used, and the probable value of additional or substitute
procedures, we find no merit in the inmates' argument that they
received no procedural protection before the deductions were made.
In addition to the notice provided by policy IN-V-106, each inmate
was granted the procedural protections of a trial or plea
proceeding to establish guilt, and a subsequent sentencing hearing
to set punishment, including the amount of restitution. See Iowa
Code § 910.3.     The Director of the Department then had an
individualized restitution plan prepared pursuant to section 910.5.
Upon petition by the inmate, any matter related to an inmate's
restitution plan or plan of payment could then be reviewed by the
Iowa District Court at any time during his incarceration. Iowa
Code § 910.7.


      Moreover, the inmates' argument that to satisfy the pre-
deprivation hearing requirements of the Due Process Clause, see
Logan v. Zimmerman Brush Co., 455 U.S. 422, 436 (1982), the
Department was required to provide an individual hearing before any
deductions were made from outside-source funds, is misplaced. The

                               -8-
                                8
inmates limit their analysis to an inappropriately narrow period--
that immediately before the deductions were actually made. The
deprivation in this case actually occurred on a broader level in
three stages. The initial deprivation occurred when, after a full
trial or plea hearing and an opportunity to be heard on claims of
a lack of ability to pay restitution, a restitution plan and a
payment plan were established. At this point, a debt was created
and the inmate was deprived of complete freedom over how to spend
future money until this debt was satisfied.


     Prior to this initial deprivation, the inmates were provided
with both notice and an opportunity to be heard. Moreover, at this
stage, before restitution was set, the court was required to
evaluate an inmate's individual ability to pay.      See State v.
Haines, 360 N.W.2d 791 (Iowa 1985) (noting that it is the
"reasonable ability to pay" standard which allows § 910.2 to pass
constitutional muster). In addition, the plan of restitution and
plan of payment were both subject to modification by the court.
See Iowa Code § 910.7.


     Once this initial deprivation occurred, the inmates' interest
in their money was diminished, much like the limitations on the
freedom to spend money suffered by any person who incurs a debt.
When the Department took the next step of designating specific
procedures for the repayment of an inmate's restitution, the
procedural requirements diminished. See, e.g., Scott v. Angelone,
771 F. Supp. 1064 (D. Nev. 1991) (holding that notice and post-
deprivation grievance procedures are sufficient process to freeze
an inmate's prison trust account until the prisoner pays for
medical expenses he has incurred).      At this second stage of
proceedings, the Department provided prisoners with notice of the
new twenty-percent deduction policy and of the continued
opportunity to contest their payment plans following this
amendment.


                               -9-
                                9
-10-
 10
     At the third stage, deductions were taken from money received
by an individual inmate.     We see no due process need for an
additional hearing at this stage in light of the protections
already afforded the inmates by the foregoing procedures.


     Finally, we consider the third Mathews factor, the
government's interest. In this case, the restitution system serves
the important state interests of compensating victims and teaching
inmates responsibility.   See State v. Kluesner, 389 N.W.2d 370
(Iowa 1986); Haines, 360 N.W.2d at 795.


     Furthermore,    the   state's    interest    in   maintaining
administrative control over prisons is significant. Courts are not
ideally situated to oversee the minute details of prison
administration. Procunier v. Martinez, 416 U.S. 396, 405 (1974).
We are in no position to determine the administrative costs of
providing a hearing before deducting from each incremental deposit
that a prisoner receives from an outside source.1 In the single
year that the money was escrowed, prison officials accumulated
approximately $538,000.     The Department may reasonably have
determined that an across-the-board deduction was the best way to
deal with such large sums of money. We accord deference to such
administrative decisions.

                               III.


     In conclusion, we find that a balancing of the Mathews factors
compels us to hold that the Department's deduction from funds
received from outside sources applied to satisfy an inmate's
restitution obligations during the time in question did not violate
the Due Process Clause.       Given the limited nature of the

       1
        We note that although the Iowa Supreme Court has now
clarified that only one hearing is required to cover routine
periodic donations of money, the district court's holding contained
no such limitation.

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                                11
deprivation, the more-limited due process protections applicable to
prisoners, and the deference to be paid to state decisions
concerning prison administration, we hold that the notice and
hearing procedures provided satisfied the flexible demands of the
Due Process Clause.


     The judgment is reversed, and the case is remanded to the
district court for entry of judgment in favor of defendants.


HEANEY, Circuit Judge, dissenting:


     I agree with the district court that, as a matter of due
process, inmates in Iowa state prisons are entitled to notice and
at least an informal hearing before twenty percent of contributions
to the inmate by family or friends may be taken to satisfy an
inmate's restitution obligation. The district court's position is
consistent with that of the Iowa Supreme Court in Walters v.
Grossheim, 525 N.W. 2d 830 (Iowa 1994), in which the court
highlighted that the Iowa Code requires a restitution plan of
payment "to reflect individualized factors bearing on the inmate's
ability to pay" based on the inmate's "income, physical and mental
health, education, employment and family circumstances." Id. at
832 (citing Iowa Code § 910.5(1)). The Code does not authorize the
"blanket post-restitution-plan deduction from non-wage assets" at
issue in this case. Id.


     The majority states that the Iowa inmates received adequate
procedural protections before deductions were made, in part because
they were given a sentencing hearing at which the court set the
amount of restitution owed.      As the majority points out, the
inmates are not challenging the court's initial restitution
determination; nor would such a challenge be relevant because at
sentencing, the court does not purport to determine the amount that
an inmate can pay each month while in prison in light of all the
factors cited in Grossheim.     These decisions are left to other

                               -12-
                                12
officials to make after an informal hearing.


     The majority also asserts that the inmates received additional
procedural protection through the opportunity to have their
restitution plans reviewed by the Iowa District Court under
section 910.7 of the Iowa Code. Although the inmates may contest
amounts withheld in a post-deprivation hearing, such a hearing may
deprive them of resources at a time when these resources are
necessary to meet needs recognized by the State of Iowa.


     The majority is correct in noting that we should give
deference to state decisions concerning prison administration.
Yet, in the context of deductions from an inmate's outside
resources, the State has determined that a pre-deprivation hearing
is required. Thus, the majority rejects, rather than defers to,
state policy as determined by both the Iowa Supreme Court and the
Iowa Legislature.


     Finally, while it is true that we are obligated to follow our
own precedent, the case the majority relies on, Beeks v. Hundley,
34 F.3d 658 (8th Cir. 1994), did not involve the issue presented in
this case. In Beeks, we specifically stated:


          Beeks and McKenzie also argue that state law and
     their due process rights were violated by the manner in
     which victim restitution was deducted from their prison
     accounts.   These issues were not considered by the
     district court. . . . [N]or were these additional issues
     fairly raised by the informal pro se request for relief.


Id. at 662.


     We should follow the district court and the Iowa Supreme Court
and hold that the inmate's due process rights were violated by Iowa
prison authorities and grant the relief given by the district
court. To do otherwise is to deny inmates the due process to which


                               -13-
                                13
they are entitled under the federal Constitution.   Accordingly, I
would affirm the decision of the district court.


     A true copy.


          Attest:


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




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