Child Support
Case: Harp v. Metcalf - Class Action Settlement Agreement on Child SupportIN THE FIFTH CIRCUIT COURT FOR TENNESSEE
SHARON HARP, et al., FILED: October 23, 2001 vs. No. 99C-3278 NATASHA K. METCALF, Defendant. I. SCOPE OF THE AGREEMENT This Settlement Agreement is entered into by Sharon Harp, et al., on behalf of all similarly situated persons receiving child support through the State of Tennessee's centralized processing and distribution unit, (hereinafter referred to as "the Harp Plaintiffs"), and Defendant Natasha K. Metcalf, Commissioner of the Tennessee Department of Human Services, (hereinafter referred to as "the Defendant") for the express purpose of resolving all remaining claims to relief in the case. This Settlement Agreement sets forth the terms of the settlement between the Parties. This Agreement, voluntarily entered into by the Parties, shall be enforceable as an order of the Court by the Parties and any member of the class approved by the Court who does not opt out of the settlement. This Agreement is legally binding on and judicially enforceable by the Parties as provided herein and it shall be applicable to and binding upon all of the Parties, their officers, agents, employees, assigns and successors. This Agreement may not be used as evidence of liability in any other civil proceeding and is enforceable only by the Parties. II. CASE HISTORY AND STATUS This is a class action lawsuit under 42 U.S.C. § 1983 against Natasha Metcalf as Commissioner of the Tennessee Department of Human Services seeking declaratory relief, injunctive relief, and attorney fees. The original complaint was filed on November 19, 1999. On December 3, 1999, the State filed a Motion to Dismiss. On March 10, 2000, the Plaintiffs filed an Amended Class Action Complaint, and on March 24, 2000, the Plaintiffs filed a Second Amended Class Action Complaint. On May 12, 2000, the State filed a Motion to Dismiss the Plaintiffs' Complaints. On June 23, 2000, the Court certified a class of all Tennessee resident custodial parents whose child support was processed by DHS' centralized collection and disbursement unit. On June 28, 2000, the Court entered an Order granting in part and denying in part the State's Motion to Dismiss the Plaintiffs' Complaints. On July 6, 2000, the Plaintiffs filed a Supplemental Complaint. The Court granted permission to file the Supplemental Complaint by order entered on July 12, 2000. On August 3, 2000, the State filed Answers to the Second Amended and Supplemental Complaints. On October 27, 2000, the State filed a Motion to Dismiss the Supplemental Complaint. The Court issued an order on December 19, 2000, granting in part and denying in part the State's Motion to Dismiss the Supplemental Complaint. On the same date, the Court issued a Memorandum in which he set forth the remaining issues in the case which are as follows: (1) whether DHS provided notice in compliance with constitutional requirements of due process regarding the distribution of child support and the right to an administrative hearing; (2) whether the collection of the five percent (5%) fee from arrearage and/or partial payments was consistent with federal law; (3) whether federal law permitted recoupment of bad checks from current support; and (4) the appropriate remedy for Defendant's failure to provide a monthly notice in compliance with 42 U.S.C. § 654(5) for a three-year period ending in April 2000. On April 27, 2001, these issues were submitted to the Court by way of cross-motions for Summary Judgment. Before the Court issued any decision on the cross motions for summary judgment, the Department decided to discontinue recoupment of bad checks and the collection of the 5% processing fee pursuant to a clarification of federal policy from the federal Office of Child Support Enforcement. Recoupment of bad checks was completely terminated as of May 4, 2001, and collection of the fee will be discontinued effective November 1, 2001. On May 24, 2001, the Court issued a Memorandum and Order specifying several revisions and additions to the Department's current monthly notice of collections that, in the opinion of the Court, were necessary to make the notice compliant with due process. Although the Court made several specific suggestions for improving the notice in keeping with the requirements of due process, the Parties were ordered to attempt a negotiated settlement of this issue. In a separate order filed on June 12, 2001, the Court found the Department's collection of the 5% processing fee on partial and arrearage payments to be in violation of federal law and subsequently ordered all fees collected between June 12th and November 1st to be held in trust by the Department pending further order of the Court. On June 18, 2001, the Court entered an Order finding that the issue of the legality of the Department's prior recoupment practices was moot. To date, the Court has not suggested any remedy for the Department's prior violation of 42 U.S.C. § 654(5) nor has the Court ruled on the Department's arguments that the Plaintiffs' claim is partially barred by the applicable statute of limitations. The Parties have met several times over the past several months to negotiate a resolution to the remaining issues. As part of this process, the Parties have discussed the format of the Monthly Notice of Collections, the disposition of the processing fees collected from June 12th to November 1st, whether Plaintiffs' have a claim to any fees collected prior to this time period, the remedy for the Department's prior failure to comply with 42 U.S.C. § 654(5), and the claim of Plaintiffs' counsel for attorney fees. Except for the issue of attorney fees and costs which may be submitted for a decision by the Court, the Parties have now come to an agreement on all the above issues. III. CLASS DEFINITION On July 13, 2000, the Court entered an Order certifying this case as a class action pursuant to Rule 23.02(2) of the Tennessee Rules of Civil Procedure as to the remaining causes of action requesting declaratory and injunctive relief. The class is defined as: All Tennessee residents who are custodial parents or caretakers of children for whom child support is collected and disbursed pursuant to 42 U.S.C. § 654B and T.C.A. § 36-5-116 through the Defendant's state disbursement unit. Three subclasses are defined as: (1) all Tennessee residents who are custodial parents or caretakers of children who receive Families First cash assistance; (2) all Tennessee residents who were custodial parents or caretakers of children who have previously received Families First or Aid to Families with Dependent Children and for whom the Defendant holds an assignment of the right to child support; and (3) all Tennessee residents who were custodial parents or caretakers of children for whom child support services are provided under Title IV-D, 42 U.S.C. § 651, et seq. but for whom the Defendant does not hold an assignment of the right to child support. IV. DISPOSITION OF MAIN CLAIMS A. DUE PROCESS NOTICE 1. Monthly Notice of Collections Pursuant to the Court's order of May 24, 2001, Defendant has agreed to revise the Monthly Notice of Collections that is required to be provided to current and former Families First recipients by 42 U.S.C. § 654(5). The revisions will provide a more thorough and understandable explanation of disparities between the amount of support collected by the Department and the amount of support disbursed to the custodial parent. As recommended by the Court, the notice will provide a category -- current or former Families First -- and a reason for any disparity that is related to the category. The first page of the monthly notice of collections reports the dates and amounts collected as child support, how the amounts are distributed, and the amount disbursed to the custodial parent. There are additional pages which set forth explanatory text and notice of administrative appeal rights. The explanatory text has two different versions. One version reports child support collections on a monthly basis for those child support cases where the custodial parent is currently receiving Families First benefits. The other version reports child support collections on a monthly basis for those child support cases where the custodial parent formerly received Families First or AFDC benefits. In addition to the format already required by federal statute and regulation, the revised monthly notice of collections will include the following information pursuant to the court order of May 24, 2001: (1) the TCSES case number, (2) the court ordered child support amount for both current and arrears, (3) distribution rules related to the specific category of either current Families First or former Families First as appear on the attached sample, (4) understandable case-specific information regarding negative numbers and adjustments as appears on the attached sample, and (5) information regarding access to administrative review and appeal. The revised monthly notice of collections will also include: (6) the member identification number, (7) the unmet need amount for current Families First recipients, (8) a toll-free number to call with questions about the unmet need amount, (9) general explanatory information, (10) standard rules for distribution as appear on the attached sample, (11) a message keyed to the appearance of a collection from a federal income tax refund offset, and (12) toll free contact numbers for both the IV-D and IV-A programs to facilitate inquiry for any questions or concerns. Attached to this Settlement Agreement is a sample of the format of the revised monthly notice of collections. The actual revised monthly notice of collections shall be substantially in this format. With respect to the message keyed to a collection from the IRS, the Parties recognize that the IRS will not currently permit any such message to specifically identify the source of the payment or to disclose the amount of the taxpayer's refund even indirectly; however, if the IRS changes its policy or federal law will so allow, the Department will use a message that clearly identifies the source of a particular collection as being from a federal income tax refund offset and explain that tax intercepts must be used first to repay Families First grants. The Department has already contracted with Adinah Robertson of Legal Services of Middle Tennessee, Inc., to develop a brochure to help explain to Families First recipients how pass through payments are made, how the unmet need amount is calculated, and simplified language explaining general child support distribution rules for current and former Families First recipients. The anticipated completion date for the brochure is February 2002. The Department will distribute the brochure by an initial mailing to all Families First recipients. This initial distribution will be supplemented by case workers giving it to applicants for Families First benefits at the time of the initial application, by case workers giving the brochure to Families First recipients at the time their cases are reviewed (approximately every six (6) months), and by making the brochure available in county welfare offices. The precise wording of the brochure has yet to be determined; however, Ms. Robertson is to submit a brochure that is readable and understandable by Families First recipients. The Defendant has also agreed to some revision of the form used by custodial parents for the purpose of requesting an administrative hearing. The form shall include at least the following elements: (1) there shall be an initial section to allow the person requesting an administrative hearing to explain what he is complaining about in his own words, (2) there shall be a list of appealable issues with statutory references provided with the form, (3) the form shall include a date along with the signature line, (4) there shall be a general statement of some of the child support distribution issues that can be appealed, (5) there shall be a suggestion to attach any documents that support the person's claim, and (6) will state that, in regard to child support distribution appeals, a failure to comply with the fifteen (15) day deadline for requesting an administrative hearing will not prevent a hearing from being held but that no hearing will be scheduled until after a thirty (30) day review or conciliation period. Attached to this Settlement Agreement is a sample of the format of the revised form for requesting an administrative review from the Department. The actual revised form shall be substantially in this format. 2. Payment Notice Tennessee Code Annotated Section 36-5-116(e)(2) currently requires the Department by April 1, 2002, to provide the following information with every child support payment sent to a custodial parent by the centralized collections and distribution unit: (1) the custodial parent's name, (2) the non-custodial parent's name, (3) the TCSES case number, (4) the court docket number, (5) the amount of the current child support payment issued, and (6) the total of all payments issued to date during the current year. In addition, where available, the following information will be provided to every custodial parent with every payment made through the state central collections and distribution unit: (1) the custodial parent's member identification number, (2) the court location, (3) the court-ordered child support amount for both current and arrears, (4) the date of the court order, (5) the date on which the payment was issued to the custodial parent, (6) information regarding the right to administrative review and appeal, and (7) the toll-free number for accessing child support customer service. A sample of the payment notice is not yet available; however, it shall contain the information described above. The Department will put as much of the information as possible on the check stub. If all the information will not fit on a check stub, then the Department will put the information required by statute on the check stub and the remaining information will be provided on a separate notice. B. VIOLATION OF 42 U.S.C. § 654(5) Since May of 2000, the Department has been in compliance with the requirements of 42 U.S.C. § 654(5); however, the Department did fail to send the required Monthly Notice of Collections from April 1997 to April 2000. To rectify this failure, Defendant will provide a one-time written notice to all affected custodial parents of their right to request a written report of historical collection, distribution, and disbursement information from the Department. Affected parents are those parents who are, as of April 2002, either current Families First recipients or former Families First recipients with unreimbursed grant and who have received a collection on a child support case since October 1, 1999. To all other custodial parents who have received a payment through central collections since October 1, 1999, the Department will provide one-time written notice of the right to request historical collection and disbursement information. The notice will inform custodial parents of the information that is available. The Department is to be allowed the flexibility to send a single notice addressed to all custodial parents, and if it can provide such a notice more quickly and efficiently, then it will do so. Attached to this Settlement Agreement is a sample of the format of the single notice. Any such notice sent by DHS shall be substantially in this format. The reports of historical information will include information regarding the right to request administrative review and appeal; however, the precise format of the report will be determined on a case-by-case basis subject to the nature of the request, the needs of the custodial parent, and the confidentiality requirements of both state and federal law. Reports concerning the collection and distribution summary shall contain at least the following information: (1) the date the payment was received, (2) the effective date of the payment, (3) the total payment received, (4) a payment source code, (5) the payment amount sent to the custodial parent, (6) the amount of any processing fee, (7) and the amount retained by the State. Reports concerning the disbursement of child support shall contain at least the following information: (1) the issue date of the payment to the custodial parent, (2) the check number, (3) the payment status, and (4) the amount sent to the custodial parent. Any reports issued by the Department shall be substantially as described above. C. RECOUPMENT As required by federal policy, the Department has discontinued all recoupment of bad checks through retention by the Department of current support. Thus, for the purposes of relief, the Parties agree that recoupment of bad checks - as well as interim payments - is now moot. The Department will not resume any recoupment in the future except as permitted by both federal law and policy. The availability of attorney fees on this issue will be submitted to the Court. D. STATUTORY PROCESSING FEE As to any processing fees collected from October 1, 1999, when centralized collections began, up to June 12, 2001, the Parties disagree as to the law. The Department contends that due to the doctrine of sovereign immunity, it cannot be compelled to refund any such fees either by the Court or through the administrative hearing process even if - according to the Court's interpretation of federal law - the amount was inappropriately retained. The Plaintiffs contend that while sovereign immunity prevents the Court from directly ordering refunds of such fees, the Court can require the Department to provide class members with notice of the availability of refunds on an individual basis through the administrative hearing process. This issue was the single remaining obstacle to a comprehensive settlement and had the potential to prevent a settlement that is clearly in the best interests of all class members. The Parties hereby resolve this issue as outlined below. Pursuant to the Department's decision to cease collection of the processing fee and the Court's subsequent determination that the Department's treatment of the fee was - in many cases - in violation of federal law, the Department is now holding in trust all fees collected as of June 12, 2001, and will promulgate a public necessity rule which will reduce the amount of the processing fee from 5% to 0%. By November 1, 2001, the processing fee will no longer be collected. After this Settlement Agreement is approved by the Court, the Department will begin the process of reprogramming and distributing as child support all fees collected between June 1, 2001, and October 31, 2001. The precise means for notifying custodial parents of this redistribution have not been determined. However, it is contemplated that a notice will be provided to custodial parents either prior to or contemporaneous with the payment of the redistributed fee amounts. The notice will indicate that the payment should not impact the custodial parent's eligibility for or amount of Families First benefits or food stamps unless the $2,000 resource limit is exceeded in a subsequent month, that the payment will not reduce the amount of any pass through payment that the custodial parent is otherwise entitled to during the month, and that the custodial parent should not report this payment amount to the Families First case worker. The Parties recognize that the processing fees collected from October 1, 1999, through May 31, 2001, are no longer available to the Department and have been spent and/or allocated for child support program expenses, such as the cost of operating and maintaining the centralized collections system, upgrading the centralized collections system and the TCSES computer system, improvements to the centralized collections system, changes to the monthly notices of collections, development of payment notices, the elimination of the processing fee, and lawsuit related expenses. The parties recognize that the Department has spent and will spend several million dollars for these purposes. The Parties also recognize that the cost of administering a processing fee refund process on an individual basis through the administrative hearing process would likely exceed the amount of the processing fees at issue in the vast majority of cases. Thus, an individual refund process is not cost effective and would reduce the funds otherwise available to the Department to implement the changes contemplated by this Settlement Agreement. Further, in view of the dismal condition of the State budget at this time, the Department cannot agree to both the remaining terms of the Settlement Agreement and to an individual claims process for processing fees. It is the professional judgment of Plaintiffs' counsel that the best interests of the class members are better served by the Settlement Agreement without an individual claims process for refund of processing fees rather than the continuation of litigation and the delay or loss of the remedies to be effected under a settlement. Accordingly, the Parties agree that the fees collected prior to June 1, 2001, will be allocated to pay the costs of running the program as well as the program improvements associated with this cause of action. In consideration of these allocations, the Plaintiff class members hereby agree to waive any rights that they might otherwise have to seek the refund or payment of any processing fees collected by the Department from October 1, 1999, to May 31, 2001. Should any such claims be filed by class members who do not opt out of the class for purposes of this settlement, then any such claims shall be dismissed as barred by the Settlement Agreement and the doctrines of res judicata, collateral estoppel, and sovereign immunity. Should any claims be filed by class members who do opt out of the class for purposes of this settlement, the Department will seek the dismissal of such claims based on the doctrine of sovereign immunity and any other available defenses. Nevertheless, no class member shall be denied any right to seek an administrative hearing from the Department on the issue of child support distribution solely because the request for hearing also asserts a claim for reimbursement of processing fees. V. WAIVER AND RELEASE This agreement represents the conclusion of this litigation and is the compromise and settlement of all disputed claims remaining after the Court's order of December 19, 2000. The settlement of any issue shall not be deemed to be an admission of liability or wrongdoing by any party for any reason. The disposition of all other issues raised by Plaintiffs in the second amended complaint - which superceded both the original and first amended complaints - and the supplemental complaint is as indicated in the Court's orders of June 28, 2000, and December 19, 2000. The relief set forth in this Agreement constitutes full and final relief for all the Plaintiff class members on all claims set forth in the second amended and supplemental complaints up to and including the effective date of this Agreement. As to these claims, members of the plaintiff class not opting out, including both custodial parents and their children, will be bound by this Agreement and will be prohibited from raising any such claim in a subsequent cause of action. The Parties further agree that the Settlement Agreement, and all the issues and claims contained therein, will not be subject to appeal by either Party except with respect to the award of attorney fees. VI. IMPLEMENTATION It is anticipated that this Settlement Agreement cannot obtain final Court approval as the judgment in this action until December 2001. Thereafter, the Parties agree to abide by the schedule for implementation as set forth herein with the understanding that the Parties are to use their best efforts to comply with the schedule. This schedule is not intended to be an absolute and definitive one, but rather, the Parties agree to allow reasonable accommodation to each other in accomplishing this schedule. Following the approval of the Settlement Agreement by the Court, the Parties agree that the new monthly notice of collections form will be provided to class members in the eighth month thereafter (i.e., if the Settlement Agreement is approved in December 2001, the new notice will be sent in August 2002 for the month of July). The Parties agree that the payment notices will begin to be furnished to class members in April of 2002. It is contemplated that all additional information will be provided at that time and will appear on the check stub. If the Department encounters difficulties in this process, all statutorily required information will be provided in April 2002, and the additional information will be included as quickly as possible thereafter. The Parties agree that, if possible, a single written notice to the entire plaintiff class of custodial parents of the right to request a written report of historical collection and distribution/disbursement information will be provided in April of 2002. If the previously-defined sub-classes of affected custodial parents must be separately informed of the 42 U.S.C. § 654(5) violation, then notice of access to historical information will not be sent until May of 2002. The brochure explaining unmet need and related topics will be available February 2002, and the initial distribution should be completed within 30 days. The reprogramming of the TCSES computer system to reimburse the processing fees to class members will begin following the approval of this Settlement Agreement by the Court, and it is anticipated to take approximately three months. Following the reprogramming period, the Parties agree that the processing fees will be paid to the class members and credit given to the non-custodial parents over an additional thirty (30) day period. The Parties also agree that DHS will notify the Plaintiffs' counsel in writing when it has complied with various elements of the Settlement Agreement. DHS will notify the Plaintiffs' counsel when each of the following milestones is met and is expressly required to provide to the Plaintiffs' counsel only the following information once it is available: 1. When the revised monthly notices of collection are first sent to current and former Families First recipients, DHS shall provide the number of such notices sent for the first month. 2. When DHS completes the refunds of the 5% processing fees, DHS shall provide the number and total amount of such refunds. 3. When DHS has sent the notices to affected custodial parents and to class members of the right to request and to receive certain collection, distribution and disbursement information, DHS shall report how many payment histories have been requested in the first 30 days following the notice. 4. When the brochure on unmet need has been distributed, DHS shall report how many copies of the brochure have been distributed. The Department will also provide copies of finalized versions of the notices and the brochure to Plaintiffs' counsel for their information. The Department's duty to provide such information to Plaintiffs' counsel shall end the earlier of either one year after the entry of the Court's order approving this Settlement Agreement or when DHS has fully discharged its duty to provide such information under the terms of this Settlement Agreement. The expiration of DHS's duty to provide such information is not intended to limit the right of Plaintiffs to file actions for contempt as appropriate and necessary. However, Plaintiffs shall not file any action for contempt without prior notice to the Department of any breach and sufficient time to cure said breach, which in no case shall be less than sixty (60) days. VII. ATTORNEY FEES AND COSTS
Defendant agrees to pay Plaintiffs' reasonable attorney fees and costs incurred in connection with this litigation but reserves the right to object to any part of the Plaintiffs' fee request on any basis. In the event that the Parties cannot agree to the amount of reasonable attorney fees, expenses, and costs, Plaintiffs shall file their fee application with the Court within sixty (60) days of the entry of the final court order approving this Settlement Agreement. If this issue is, ultimately, decided by the Court rather than by agreement, Defendant reserves her right to appeal. VIII. NOTICE TO THE CLASS
Notice will be provided to the class members in compliance with Rule 23 of the Tennessee Rules of Civil Procedure as determined by the Court. Defendant agrees to cooperate and assist in the mechanics of distribution as necessary. IX. MISCELLANEOUS PROVISIONS A. This Agreement contains the entire Agreement between the Parties. The Agreement may not be modified except in writing, and after approval of a settlement by the Court, may only be modified in writing and with the approval of the Court. B. Each person signing this Agreement warrants and represents that he or she has authority to sign on behalf of himself or herself or of the entity that he or she represents and that this Agreement has been validly authorized and constitutes a legally binding and enforceable obligation of each undersigned party. C. Each person signing this Agreement acknowledges that no promise, agreement, fact or opinion not expressed herein has been made by or to them to induce this Agreement and that this settlement is made with full knowledge of the facts and possibilities of the subject matters of this Agreement. D. The rights and obligations of this Agreement shall inure to the successors and assigns of the Parties. E. Should the Tennessee Legislature at some point in the future eliminate the requirement for the provision of payment notices, this Agreement shall be construed to allow the Department to elect to provide instead monthly notices of collection to all class members, provided that the monthly notices of collections are modified to include all elements currently required to be included in the payment notices pursuant to Tenn. Code Ann. § 36-5-116(e)(2) (Supp. 2000) and this Settlement Agreement. F. If the federal government, through Congress, the Department of Health and Human Services, the Office of Child Support Enforcement, or otherwise, imposes different or additional requirements upon states than those currently in place regarding the centralized collections, processing, or distribution of child support payments, or any other matters within the purview of this Agreement, this Agreement shall not limit the State's responsibility to comply with such federal requirements. Should a conflict arise in the future between the terms of this Agreement and any applicable federal law as subsequently enacted or amended, the provisions of the applicable federal law shall control over the terms of this Agreement. G. If any action beyond the control of the Department, such as a change in state or federal law or action by another governmental agency prohibits the State from performing a material provision of this Agreement, the remaining part shall not be affected and shall remain in full force and effect. H. If any part, term, or provision of this Agreement is held by any court of competent jurisdiction to be illegal or in conflict with any laws of the State of Tennessee or of the United States of America, the validity of the remaining provisions shall not be affected, and the rights and obligations stated in this Agreement shall be construed and enforced as if the Agreement did not contain the particular part, term, or provision held invalid. I. The section and paragraph headings in this Agreement are inserted solely as a matter of convenience and for reference and in no way define, limit, describe or effect the scope or intent of any provision of this Agreement. J. The terms of this Agreement have been negotiated at arms length among Parties represented by experienced counsel. As a result, the rule of "interpretation against the draftsmen" shall not apply in any dispute over interpretation of the terms of this Agreement. K. This Agreement shall be governed by the laws of the State of Tennessee. L. The legal effectiveness of this Agreement is conditional upon court approval. Dated this 17th day of October, 2001. IT IS SO ORDERED: HONORABLE WALTER C. KURTZ DATE: October 17, 2001 THIS SETTLEMENT IS HEREBY AGREED TO: For Defendant Natasha K. Metcalf: STUART F. WILSON-PATTON KIM BEALS For The Plaintiff Class Members: BRIAN PADDOCK, Esq. MARY MASTIN, Esq. |
