Lucas Sanchez v. St. Louis County Public Health and Human Services Department, Minnesota Department of Human Services ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1908
Lucas Sanchez,
Appellant,
vs.
St. Louis County Public Health and Human Services Department,
Respondent,
Minnesota Department of Human Services,
Respondent.
Filed May 23, 2016
Reversed and remanded
Kirk, Judge
St. Louis County District Court
File No. 69DU-CV-15-548
Gwen Updegraff, Legal Aid Service of Northeastern Minnesota, Duluth, Minnesota (for
appellant)
Mark S. Rubin, St. Louis County Attorney, Benjamin M. Stromberg, Assistant County
Attorney, Duluth, Minnesota (for respondent St. Louis County Public Health and Human
Services Department)
Lori Swanson, Attorney General, Patricia A. Sonnenberg, Assistant Attorney General, St.
Paul, Minnesota (for respondent Minnesota Department of Human Services)
Considered and decided by Connolly, Presiding Judge; Stauber, Judge; and Kirk,
Judge.
UNPUBLISHED OPINION
KIRK, Judge
Appellant Lucas Sanchez challenges a decision by the Minnesota Commissioner of
Human Services (commissioner) that he was overpaid benefits under the Supplemental
Nutrition Assistance Program (SNAP) and Medical Assistance (MA). Because the
commissioner concedes that its decision was based on an error of law, we reverse and
remand for further proceedings consistent with this opinion.
FACTS
Sanchez applied for and received SNAP benefits between December 2010 and May
2013 and MA benefits between December 2010 and November 2013. On all applications
and certifications, Sanchez indicated that his household had no income. In April 2013,
anticipating an inheritance, Sanchez decided not to reapply for benefits. Respondent St.
Louis County Public Health and Human Services (the county) notified Sanchez that,
because required forms had not been provided, his SNAP and MA benefits would stop on
June 1, 2013, and May 31, 2013, respectively, and that his two children’s MA benefits
would stop on November 30, 2013.
In June, the county received an anonymous tip that Sanchez and his wife were
selling items on craigslist.org. The county initiated an investigation and located a number
of craigslist ads; motor-vehicle-registration records reflecting eight vehicles and one trailer
registered to Sanchez; and an eBay account registered to Sanchez with selling activity. The
county sent a verification-request form to Sanchez, requesting him to verify any income
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from self-employment between December 2012 and June 2013. Sanchez did not respond
to the request.
The county next sent a letter to Sanchez advising him that the county had
determined that overpayments had occurred in his SNAP and MA benefits, but did not
specify the amounts of any overpayments. The Minnesota Department of Human Services
(department) noticed a hearing before a human-services judge (HSJ) to “decide whether
you have committed an intentional violation of the rules” for SNAP. Sanchez did not
respond or participate in the hearing, and the commissioner issued an order disqualifying
Sanchez from receiving SNAP benefits for a period of one year, and Sanchez did not
appeal.
The county then sent to Sanchez notices of overpayments of SNAP benefits, in the
amount of $14,524, and MA benefits, in the amount of $17,769.35. Sanchez appealed, and
a hearing was scheduled before an HSJ.
Following the hearing, the HSJ issued recommended findings of fact, including that:
[] Appellant describes himself as a tinkerer.
Appellant and his family live on 7 acres of land. Appellant
obtains items from other people for free or low cost and uses
many of the items as parts to repair his house or vehicles.
Appellant also fixes up cars and the cars he cannot fix are
junked. When Appellant junks the car he turns over the title to
the junkyard and relies on them to transfer the title with the
state. Appellant has acquired several items on his property,
such as old propane tanks, old tires, old water heaters, a broken
backhoe, salvaged steel or plywood. Appellant uses these
items to make things and occasionally he lists for sale on either
craigslist or ebay. Appellant also allowed his friends to store
items, such as vehicles, on his property.
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[] Appellant started [an] account on ebay on
February 12, 2012. In the beginning, Appellant bought school
items on ebay and sold some household items such as baking
ware. In January and February 2013, Appellant sold guitars,
amps, and music gear totaling $4,985.00. In April and May
2013, Appellant sold items for his mother’s estate. Appellant
put the proceeds of these sales in the estate account. Appellant
opened an ebay store account around May 2013.
[] Appellant contends that he was selling
household items occasionally. Appellant and his family used
their student loans and tax returns to live during the year. The
household did not have any ongoing source of income. . . .
Appellant did not actually sell the items referenced by the
[county] on craigslist and the majority of the items are still on
the property.
The HSJ recommended a conclusion that the county could not assess overpayments for the
period between December 2010 and December 2012 because it had not requested income
verification for that time period. But the HSJ recommended that the overpayment
assessments be affirmed for all SNAP benefits paid for the period from December 2012
through May 2013 ($2,202) and for all MA benefits paid for the period from December
2012 through September 2013 ($11,160.48) because “the [county] requested verification[]
[and] Appellant did not respond.”
The commissioner adopted the HSJ’s recommended findings, conclusions, and
order and denied Sanchez’s request for reconsideration. Sanchez appealed to the district
court, which affirmed the commissioner’s decision.
Sanchez now appeals to this court.
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DECISION
In reviewing the commissioner’s decision, we apply the standard of review set forth
in the Minnesota Administrative Procedures Act. See Minn. Stat. § 14.69 (2014); Brunner
v. State, Dep’t of Pub. Welfare, 285 N.W.2d 74, 75 (Minn. 1979); Zahler v. Minn. Dep’t of
Human Servs., 624 N.W.2d 297, 301 (Minn. App. 2001), review denied (Minn. June 19,
2001). Under that standard, we may
affirm the decision of the agency or remand the case for further
proceedings; or it may reverse or modify the decision if the
substantial rights of the petitioners may have been prejudiced
because the administrative finding, inferences, conclusion, or
decisions are:
(a) in violation of constitutional provisions; or
(b) in excess of the statutory authority or jurisdiction of the
agency; or
(c) made upon unlawful procedure; or
(d) affected by other error of law; or
(e) unsupported by substantial evidence in view of the
entire record as submitted; or
(f) arbitrary or capricious.
Minn. Stat. § 14.69 (2014). We “review[] the commissioner’s order independently, giving
no deference to the district court’s review.” Zahler, 624 N.W.2d at 301.
Sanchez asserts that the commissioner erred by assessing the entire amount of
SNAP and MA benefits paid to Sanchez as overpayments based solely on his failure to
provide the county with requested information regarding his income. We agree.
Under federal regulations governing SNAP, households applying for benefits are
required to provide certain information to state agencies administering the program as well
as participate in interviews, and the state agency must verify the required information.
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7 C.F.R. § 273.2(d) (2015). “If the household refuses to cooperate with the State agency
in completing the process, the application shall be denied at the time of the refusal.” Id.
“The household shall also be determined ineligible if it refuses to cooperate in any
subsequent review of its eligibility, including reviews generated by reported changes and
applications for recertification.” Id.
With respect to continuing participation, the federal regulations provide that,
“[d]uring the certification period, the [s]tate agency may obtain information about changes
in the household’s circumstances from which the [s]tate agency cannot readily determine
the effect of the change on the household’s benefit amount.” Id. § 273.12(c)(3) (2015).
Under such circumstances, the agency “must pursue clarification and verification of
household circumstances” beginning with a written request for contact. Id.
§ 273.12(c)(3)(i). If the household fails to respond, “the [s]tate must issue a notice of
adverse action . . . which terminates the case, explains the reasons for the action, and
advises the household of the need to submit a new application if it wishes to continue
participating in the program.” Id. § 273.12(c)(3)(ii).
The federal regulations also provide for the recovery of overpaid benefits. Id.
§ 273.18(a)(3) (2015). Federal regulations provide a formula for determining the amount
of benefits that have been overpaid, which generally requires the state agency to subtract
from the correct amount of benefits received from the benefits to which a household is
actually entitled. Id. § 273.18(c) (2015).
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However, as the commissioner now concedes,1 the federal regulations authorize the
collection of overpayments as determined under the formula provided, but do not authorize
the assessment of an overpayment for the entire amount of benefits paid based on the failure
to provide information. Accordingly, the order affirming the overpayments assessed with
respect to SNAP benefits is based on a mistake of law.
To qualify for MA, a household of two or more persons must meet certain income
requirements and its total net assets must not exceed $20,000. See Minn. Stat. § 256B.056,
subd. 3c(a) (2014). Household goods are not included in determining whether a household
has exceeded the total net asset limit. Id., subd. 3c(a)(1). Moreover, under department
policy, the sale of an excluded asset does not count as income. Counties are required to
recover wrongfully obtained MA benefits, but they are limited to recovering the amount
wrongfully obtained, which is the amount in excess of the amount to which a recipient was
entitled. Minn. R. 9505.0015, subp. 49, 9505.0131, subp. 4 (2015). As with SNAP
benefits, there is no authority for the county to recover the full amount of benefits paid
based on the mere failure to provide information. Accordingly, the commissioner’s
decision with respect to MA benefits is based on an error of law.
1
At oral argument, the county expressed frustration at the commissioner’s seeming change
of stance on this issue, arguing that the department has previously advised counties to cite
an overpayment for all SNAP benefits paid when a client refuses to provide information to
establish the amount of the overpayment. We understand this frustration, and we find no
fault in the county’s compliance with guidance from the department. Instead, we conclude
that any such guidance was legally erroneous, and that the commissioner erred by affirming
the overpayment determinations on that basis.
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Appellant requests that this court reverse the commissioner’s decision with respect
to the assessment of overpayment of SNAP benefits and modify the MA overpayment to
$1,577.13, reflecting amounts paid on behalf of his children after he received a life-
insurance payment in July 2013. But appellant has not provided a sufficient evidentiary
basis to substantiate this amount. The commissioner requests that the matter be remanded
for further consideration. Because there is a factual issue regarding appellant’s entitlement
to MA benefits for his children after he received the life-insurance payment, we conclude
that a remand is appropriate.
Reversed and remanded.
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