Sykes v. Bank of America , 723 F.3d 399 ( 2013 )

12-110-cv
Sykes v. Bank of America
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
_____________________
August Term, 2012
(Submitted: February 15, 2013 Decided: July 24, 2013)
Docket No. 12-110-cv
_____________________
DERRY SYKES,
Plaintiff-Appellant,
-v.-
BANK OF AMERICA, NEW YORK CITY HUMAN RESOURCES ADMINISTRATION, OFFICE OF CHILD
SUPPORT ENFORCEMENT,
Defendants-Appellees,
STATE OF NEW YORK, NEW YORK STATE CHILD SUPPORT PROCESSING CENTER,
Defendants.
_______________________
Before:
SACK, HALL, and LIVINGSTON, Circuit Judges.
_______________________
This appeal presents the issue of whether 42 U.S.C. § 659(a) authorizes levy against
Supplemental Security Income (“SSI”) benefits provided under the Social Security Act to satisfy
the benefits recipient’s child support obligations. We conclude that SSI benefits are not based
upon remuneration for employment within the meaning of § 659(a), and that the section
therefore does not preclude Sykes’s claim. We also hold that the Rooker-Feldman doctrine and
the exception to federal jurisdiction for divorce matters do not preclude the district court from
exercising jurisdiction over the matter. We therefore VACATE that portion of the judgment that
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dismissed Sykes’s claims against the Office of Child Support Enforcement and the New York
City Human Resources Administration and REMAND for further proceedings. Because Sykes’s
complaint has not alleged facts establishing that defendant Bank of America is a state actor for
purposes of 42 U.S.C. § 1983, we conclude that the district court properly dismissed Sykes’s
claims against Bank of America and thus AFFIRM that portion of the judgment. The balance of
the judgment not subject to this appeal is also AFFIRMED.
AFFIRMED IN PART, VACATED IN PART, AND REMANDED.
_______________________
Derry Sykes, pro se, Binghamton, New York.
David L. Tillem, Wilson, Elser, Moskowitz, Edelman & Dicker LLP, White
Plains, New York, for Defendant-Appellee Bank of America.
_______________________
PER CURIAM:
This appeal presents the issue of whether 42 U.S.C. § 659(a) authorizes levy against
Supplemental Security Income (“SSI”) benefits provided under the Social Security Act to satisfy
the benefits recipient’s child support obligations. Plaintiff-Appellant Derry Sykes, a recipient of
SSI benefits, appeals from a judgment of the United States District Court for the Southern
District of New York (Preska, C.J.) sua sponte dismissing Sykes’s amended complaint pursuant
to 28 U.S.C. § 1915(e)(2)(B).1 Sykes sought an Order to Show Cause, a temporary restraining
order, and a preliminary injunction enjoining the New York City Office of Child Support
Enforcement (“OCSE”), New York City Human Resources Administration (“HRA”)
(collectively, the “agency defendants”), and Bank of America from levying against his SSI
1
Sykes initially filed a complaint in the United States District Court for the Middle District of Florida. The District
Court for the Middle District of Florida transferred the case to the District Court for the Northern District of New
York. Sykes amended his complaint, and the District Court for the Northern District of New York transferred the
case to the District Court for the Southern District of New York. See Order of Dismissal at *1 n.1, Sykes v. N.Y.C.
Human Resources Admin., 11 Civ. 7459 (S.D.N.Y. Nov. 17, 2011).
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benefits to enforce a child support order entered by a New York court. The amended complaint
asserted claims under 42 U.S.C. § 1983, alleging violations of Sykes’s due process and equal
protection rights under the Fourteenth Amendment, his right to be free from unlawful seizures
under the Fourth Amendment, and his rights under the Eighth Amendment and the Fair Debt
Collection Practices Act.
The district court concluded that SSI benefits are subject to levy, relying on, inter alia, 42
U.S.C. § 659(a), which subjects certain government benefits to withholding to satisfy
outstanding child support obligations, provided “the entitlement to [those benefits] is based upon
remuneration for employment.” We conclude that SSI benefits are not based upon remuneration
for employment within the meaning of § 659(a), and that the section therefore does not preclude
Sykes’s claim. We also hold that the Rooker-Feldman doctrine and the exception to federal
jurisdiction for divorce matters do not preclude the district court from exercising jurisdiction
over the matter. We therefore VACATE the judgment to the extent the district court dismissed
Sykes’s claims against the agency defendants and REMAND for further proceedings. Because
Sykes’s complaint has not alleged facts establishing that defendant Bank of America is a state
actor for purposes of § 1983, we AFFIRM that portion of the judgment dismissing Sykes’s
claims against Bank of America.
BACKGROUND
By letter dated June 24, 2011, Sykes received notice from the New York State Child
Support Processing Center that monies belonging to him had been restrained in order to satisfy
outstanding child support obligations. Enclosed with the letter was a copy of a restraining notice
issued by OCSE. Pursuant to N.Y. C.P.L.R. § 5222, the notice informed Bank of America that
Sykes owed a total child support debt of $27,590.
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Sykes, acting pro se, sought leave to proceed in forma pauperis and filed an amended
complaint against OCSE, HRA, and Bank of America, seeking relief under 42 U.S.C. § 1983 and
alleging that, by placing an unlawful restraining order on his SSI direct deposit account at Bank
of America, OCSE had violated 42 U.S.C. §§ 407 and 659 and the Fair Debt Collection Practices
Act, deprived him of due process of law and equal protection, and violated his rights under the
Eighth Amendment by rendering Sykes, a cancer survivor, unable to afford the nutrition he
needed. The amended complaint further alleged that Bank of America had denied him his
constitutional and statutory rights by “allowing the placing of an unlawful Restraining Order for
a Judgment of Debt on [his] SSI direct deposit accounts,” Am. Compl. ¶ 5, ECF No. 13, despite
the fact it “fully knew that [SSI] monies and accounts[,] unlike Social Security Disability (SSD)[,
are] immune from garnishment,” id. at ¶ 6. Sykes sought both compensatory and punitive
damages.
In November 2011, the district court sua sponte dismissed Sykes’s complaint pursuant to
28 U.S.C. § 1915(e)(2)(B). The court held that SSI benefits were subject to withholding in
accordance with State law to satisfy the obligation of an SSI recipient to provide child support or
alimony. The court relied primarily on 42 U.S.C. § 659(a), which subjects certain social security
benefits to withholding “to enforce the legal obligation of the [recipient] to provide child
support.” As to Sykes’s claims against Bank of America, the court held that he had not
established that Bank of America was acting under color of state law for purposes of § 1983.
Moreover, according to the court, even if Sykes had established that his SSI benefits were
not subject to levy to satisfy an outstanding child support obligation, any challenge to a state
court child support order had to be dismissed pursuant to the “domestic relations exception to
federal court jurisdiction,” see Ankenbrandt v. Richards, 504 U.S. 689, 703 (1992), and the
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Rooker-Feldman doctrine, see Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280,
284 (2005), divesting federal courts of jurisdiction to consider suits which seek to overturn a
state court judgment. The district court also determined that Sykes had failed to allege a claim
under the Fair Debt Collection Practices Act, because child support obligations did not qualify as
“debts” under that statute. The court reasoned that child support obligations were not incurred to
receive consumer goods or services but were imposed on parents to force them to fulfill their
duty to support their children.
After filing his notice of appeal, Sykes moved for in forma pauperis status before this
Court. A motions panel of this Court granted the motion in part with respect to Sykes’s § 1983
claim that Defendants had violated 42 U.S.C. § 407(a) by levying against his SSI benefits to
enforce a child support order. The Court denied the motion as to Sykes’s claims under the Equal
Protection Clause, the Eighth Amendment, and the Fair Debt Collection Practices Act, and
dismissed his appeal as to those claims on the ground that they lacked an arguable basis in law or
fact. See 28 U.S.C. § 1915(e). Remaining before us is Sykes’s claim that Defendants violated
42 U.S.C. § 407(a) by levying against his SSI benefits.
DISCUSSION
This Court reviews de novo a district court’s sua sponte dismissal of a complaint for
failure to state a claim. Giano v. Goord, 250 F.3d 146, 149-50 (2d Cir. 2001). Pro se complaints
“must be construed liberally and interpreted to raise the strongest arguments that they suggest.”
Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474 (2d Cir. 2006) (internal quotation marks
omitted). The complaint must plead “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim will have “facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
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inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009).
A
We initially address the district court’s holding that it lacked jurisdiction to consider
Sykes’s complaint based on the Rooker-Feldman2 doctrine and the domestic relations exception
to federal jurisdiction. To the extent the court relied on Rooker-Feldman in dismissing the
amended complaint, this was error. The doctrine “is confined to cases of the kind from which
the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused
by state-court judgments rendered before the district court proceedings commenced and inviting
district court review and rejection of those judgments.” Exxon Mobil, 544 U.S. at 284. Sykes
does not complain of injuries caused by a state court judgment, nor does he challenge the validity
or enforcement of the child support order itself. See id. Rather, he challenges only Defendants’
levying against his SSI assets in his bank account in order to enforce the child support order—
conduct which is wholly separate from the validity of the underlying order. Sykes’s complaint
does not fall within the scope of the doctrine.
The district court also erred in holding that the domestic relations exception to federal
jurisdiction barred Sykes’s suit. Federal courts have long abstained from exercising jurisdiction
over matters involving divorce or alimony. See Ankenbrandt v. Richards, 504 U.S. 689, 693
(1992). The Supreme Court in Ankenbrandt clarified this doctrine, and limited its scope to
“divest[] the federal courts of power to issue divorce, alimony, and child custody decrees.” Id. at
703. The Court specifically noted that despite this doctrine, it had long “sanctioned the exercise
of federal jurisdiction over the enforcement of an alimony decree that had been properly obtained
in a state court of competent jurisdiction.” Id. at 702 (citing Barber v. Barber, 62 U.S. (21
2
D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker v. Fid. Trust Co., 263 U.S. 413 (1923).
6
How.) 582, 590-91 (1858)). Sykes does not ask us to issue a new child support decree in this
case. Instead, we are tasked only with determining the lawfulness of Defendants’ actions,
pursuant to a state court’s child support order, requiring Sykes to pay portions of his SSI benefits
toward his child support arrearage. The domestic relations exception, therefore, does not bar our
jurisdiction to decide this issue.
We therefore conclude that the district court did not lack subject matter jurisdiction to
consider Sykes’s claims.
B
Sykes asserts that Defendants’ levy on his account, which he maintains contains only his
SSI funds, violates 42 U.S.C. § 407(a). Section 407(a) provides that “none of the moneys paid or
payable or rights existing under [subchapter II of the Social Security Act] shall be subject to
execution, levy, attachment, garnishment, or other legal process.” Id. In 1974, Congress
amended the Social Security Act to create the SSI program, which was intended to assist those
who could not work because of age, blindness, or disability. See Schweiker v. Wilson, 450 U.S.
221, 223 (1981). The program, part of subchapter XVI of the Social Security Act and codified at
42 U.S.C. §§ 1381-1383f, largely replaced the prior system of federal grants to state-run
assistance programs. See Schweiker, 450 U.S. at 223 n.1. In so doing, Congress made § 407
applicable to SSI benefits “to the same extent as [that provision applies] to subchapter II.” 42
U.S.C. § 1383(d).
In 1975, as part of the Child Support Enforcement Act of 1975, Congress adopted 42
U.S.C. § 659(a), which provides:
Notwithstanding any other provision of law (including [42 U.S.C. § 407] . . .),
. . . moneys (the entitlement to which is based upon remuneration for
employment) due from, or payable by, the United States . . . to any individual . . .
shall be subject, in like manner and to the same extent as if the United States . . .
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were a private person, . . . to any . . . legal process brought[] by a State agency
administering a program under a State plan approved under this part or by an
individual obligee, to enforce the legal obligation of the individual to provide
child support or alimony.
Id. (emphasis added). Section 659(h) provides a list of benefits and compensation which are
“considered to be based upon remuneration for employment, for purposes of this section.” 42
U.S.C. § 659(h)(1). Compensation received “under the insurance system established by
subchapter II,” which includes disability insurance benefits under the Social Security Act, is
considered to be compensation that is “based upon remuneration for employment.” See 42
U.S.C. § 659(h)(1)(A)(ii)(I). SSI benefits, which are established under subchapter XVI, are not
mentioned in § 659(h).
Sykes argues on appeal that the district court erred in holding under § 659(a) that SSI
benefits may be levied against to enforce child support obligations. We note at the outset that
numerous courts have held that, because SSI payments are a form of public assistance unrelated
to the recipient’s earnings or employment, they are not subject to legal process under § 659(a).
See, e.g., Davis v. Office of Child Support Enforcement, 20 S.W.3d 273, 277-78 (Ark. 2000);
Dep’t of Public Aid ex rel. Lozada v. Rivera, 755 N.E.2d 548, 551 (Ill. App. Ct. 2001); Becker
Cnty. Human Servs. v. Peppel, 493 N.W.2d 573, 576 (Minn. Ct. App. 1992); Barnes v. Dep’t of
Human Servs., 42 So.3d 10, 17 (Miss. 2010); Metz v. Metz, 101 P.3d 779, 785 (Nev. 2004);
Burns v. Edwards, 842 A.2d 186, 192 (N.J. Super. Ct. App. Div. 2004); Tenn. Dep’t of Human
Servs. ex rel. Young v. Young, 802 S.W.2d 594, 597 (Tenn. 1990). Cf. Commonwealth v. Ivy,
353 S.W.3d 324, 340 (Ky. 2011) (concluding that the applicability of § 407(a) must be addressed
“case-by-case” such that § 407(a) will not bar restraint of a recipient’s SSI benefits where the
recipient’s “ability [to provide support for his or her child] is clearly established by evidence of
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non-SSI income, of earning capacity, or of SSI income in excess of the recipient’s reasonable
subsistence needs”).
Construing § 659(a), we now join the majority of courts which have addressed the issue.
We hold that SSI benefits are not attachable pursuant to the child support exception in § 659(a)
because they do not constitute monies received in remuneration for employment. This result
comports with the stated reason for which the SSI program was enacted—namely, “‘[t]o assist
those who cannot work because of age, blindness, or disability’ by ‘set[ting] a Federal
guaranteed minimum income level for aged, blind, and disabled persons.’” Schweiker, 450 U.S.
at 223 (internal citations omitted) (quoting S. Rep. No. 92–1230, at 4, 12 (1972)). The purpose
of the SSI program is to provide assistance to those who are unable, due to disability, to earn a
paycheck. Far from being “remuneration for employment,” 42 U.S.C. § 659(a), SSI benefits are
assistance for those who cannot shoulder employment.3
C
Finally, Sykes maintains that the district court erred in dismissing his claim, brought
under § 1983, that Bank of America violated the rights afforded to him by § 407(a).4 To state a
claim under 42 U.S.C. § 1983, the plaintiff must show that a defendant, acting under color of
state law, deprived him of a federal constitutional or statutory right. Rodriguez v. Phillips, 66
F.3d 470, 473 (2d Cir. 1995). A private actor may be liable under § 1983 only if there is a
sufficiently “‘close nexus between the State and the challenged action’ that seemingly private
behavior ‘may be fairly treated as that of the State itself.’” Brentwood Acad. v. Tenn. Secondary
Sch. Athletic Ass’n, 531 U.S. 288, 295 (2001) (quoting Jackson v. Metro. Edison Co., 419 U.S.
3We reach only the question of whether § 659(a) forecloses Sykes’s suit. We thus leave any determination of the
merits of Sykes’s claim to the district court to address in the first instance.
4
The Supreme Court has noted that “suits in federal court under § 1983 are proper to secure compliance with the
provisions of the Social Security Act on the part of participating States.” Maine v. Thiboutot, 448 U.S. 1, 4-5 (1980)
(internal quotation marks omitted).
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345, 351 (1974)). The question is whether the private actor’s conduct “has sufficiently received
the imprimatur of the State” so as to render it an action of the State for purposes of § 1983. Blum
v. Yaretsky, 457 U.S. 991, 1003 (1982). Whether conduct may be fairly attributable to the State
“is a matter of normative judgment, and the criteria lack rigid simplicity.” Brentwood Acad., 531
U.S. at 295. The inquiry is necessarily fact-specific, as “no one fact can function as a necessary
condition across the board for finding state action; nor is any set of circumstances absolutely
sufficient.” Id.We conclude that the facts as alleged in the amended complaint are not sufficient to state
a claim for relief against Bank of America under § 1983. Sykes does not challenge the
lawfulness of New York State's post-judgment garnishment procedures generally, see McCahey
v. L.P. Investors, 774 F.2d 543 (2d Cir. 1985) (upholding these procedures against constitutional
attack). Instead he challenges a particular use of these procedures that he alleges violates a
provision of federal law. He seeks to hold Bank of America liable under § 1983 for its role in
this alleged violation, which consists of its freezing Sykes's bank account in response to OCSE's
restraining notice. But even reading the complaint liberally and drawing all reasonable
inferences therefrom, as of course we must, Erickson v. Pardus, 551 U.S. 89, 94-95 (2007), we
see no basis on which to find that Bank of America was acting under color of state law in
restraining Sykes's account.
First, Bank of America's relationship with OCSE, as it relates to the challenged conduct,
is remote. Sykes's complaint does not suggest that Bank of America's role in levying against his
SSI benefits was any different from that of the traditional garnishee acting pursuant to New York
State's post-judgment garnishment procedures. Bank of America, for all it appears, thus did no
more than comply with the restraining notice issued by OCSE in the same way it would with a
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notice from a private attorney on behalf of a private creditor. There is therefore no suggestion of
“joint participation” or “an inseparable linking or symbiotic relationship arising from any
benefits granted by the state to the[] defendant[].” Dahlberg v. Becker, 748 F.2d 85, 92-93 (2d
Cir. 1984).
Bank of America's conduct was, moreover, purely ministerial. A garnishee has no
discretion to ignore a restraining notice that is valid on its face—whether or not the notice is
issued by OCSE—even if it questions the legal foundation on which the notice is based. See
N.Y. C.P.L.R. § 5222(b) (forbidding a person served with a restraining notice from disposing of
property owned by a judgment debtor or obligor). This is therefore unlike those cases in which
“a private party has taken the decisive step that caused the harm to the plaintiff, and the question
is whether the State was sufficiently involved to treat that decisive conduct as state action.”
Nat’l Collegiate Athletic Ass'n v. Tarkanian, 488 U.S. 179, 192 (1988). Here, it is a state
entity—OCSE—that has taken the decisive action, and the only question is whether the private
party—Bank of America—acts under color of state law by its compulsory, mechanical action
carrying the state entity’s decision into effect.
We are mindful of judicial decisions in which a private party, despite its remoteness from
any government actor, or its lack of discretion, is nevertheless deemed to have acted “under color
of state law” for purposes of § 1983. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 170
(1970); Albert v. Carovano, 824 F.2d 1333, 1341-42 (2d Cir. 1987). But the matter before us is
not covered by the principles established in those so-called “state compulsion” cases. The “state
compulsion” cases largely involve constitutional challenges to laws, customs, or policies adopted
or enforced by private parties as a result of the state’s command or encouragement. The case at
bar, by contrast, alleges a discrete misuse by a state entity of its own otherwise lawful procedure,
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and Bank of America’s limited part in this challenged conduct is of a piece with its recurring,
customary, and usually unproblematic compliance with the directives of generally applicable
state law. Cf. Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 940-42 (1982) (distinguishing
between challenge to “private misuse of a state statute” and challenge to “the procedural scheme
created by the statute”). We think the “state compulsion” theory has little force in a case like
this, where the private party plainly bears no responsibility for the challenged conduct, and
where a remedy against the responsible state entity is fully adequate to effectuate § 1983’s
remedial purposes. Cf. Sutton v. Providence St. Joseph Med. Ctr., 192 F.3d 826, 837-43 (9th Cir.
1999) (“[W]e do not believe that Supreme Court precedent holds that governmental compulsion
in the form of a general statute, without more, is sufficient to transform every private entity that
follows the statute into a governmental actor.”). We therefore conclude that Bank of America
did not act “under color of state law.”5
CONCLUSION
For the foregoing reasons, we VACATE that portion of the district court’s judgment
insofar as it dismissed Sykes’s claims against the agency defendants, AFFIRM the balance of the
district court’s judgment, and REMAND for further proceedings.
5
In light of this holding, we need not address Bank of America’s argument that N.Y. C.P.L.R. § 5209, by its own
force, discharges it from any liability for its compliance with the restraining notice.
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