Arizona Court of Appeals Division One Holds That the Arizona Department of Economic Security Failed to Provide a Benefits Recipient With Adequate Notice Concerning the Basis for Its Contention That the Recipient Received a Cash Assistance Overpayment.

Melinda Hendricks received cash benefits for herself and two of her children from October 2007 through May 2009 in the amount of $5,093.  In October 2009, the Department of Economic Security (the “Department”) discovered that one of Henricks’s children was a “benefits capped child” and therefore ineligible for the benefits he received.  On November 27, 2009, the Department mailed Henricks a notice captioned “NOTICE OF REPAYMENT OF A CASH ASSISTANCE OVERPAYMENT.”  The notice stated: “It has been determined that you received more Cash Assistance (CA) benefits than you were entitled to receive. . . . This is because THE AGENCY INCORRECTLY ISSUED FOOD STAMPS TO ONE OR MORE INELIGBLE HOUSEHOLD MEMBERS.”  Henricks timely requested a “fair hearing” and the Department issued a notice of fair hearing dated December 14, 2009. 

Henricks attended the hearing in person in January 2010.  At the outset, the Administrative Law Judge (“ALJ”) informed Henricks that the hearing was for the overpayment of cash assistance benefits.  Henricks replied that she believed the purpose of the hearing was to address incorrectly issued food stamps.  The Department’s representative explained that the statement regarding food stamps in the November notice was a misprint and that overpayment was actually for cash assistance benefits she received for a “benefits capped child.” 

Following the hearing, the ALJ issued a decision finding Henricks liable for the overpayment made to her.  The decision did not address the Department’s mistake in informing Henricks that the alleged overpayment was related to issuance of food stamps.  Henricks petitioned for review of the ALJ’s decision, which the Appeals Board affirmed.  Henricks then filed an application for appeal to the Court of Appeals, which it granted.

In Arizona, the law is clear that the Department’s efforts to recoup funds it allegedly overpays to recipients in the form of cash assistance benefits must be carried out within the constraints of the Due Process Clause.    Due process required, among other things, that the recipient be given adequate notice detailing the reasons for termination, and an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence.  In fact, Arizona’s statutes and regulations relating to administrative procedures expressly require that the recipient receive “adequate and timely notice” whenever the Department plans to take adverse action against the recipient.  A.A.C. R6-12-907(A).  “Adequate notice” is defined as “a notice which explains the action the Department intends to take, the reason for the action, the specific authority for the action, the recipient’s appeal rights, and right to benefits pending appeal.”  A.A.C. R6-12-101(2).  In this case, the Court of Appeals concluded that the notice the Department sent to Henricks was plainly defective because it did not state the correct reason for the overpayment of cash assistance and it failed to include any information about which member of Henricks’s household was ineligible.  Because these deficiencies left Henricks unprepared for her hearing and unable to effectively challenge the Department’s calculation of her alleged overpayment, the Court of Appeals held that the Board’s decision to find Henrick’s liable for overpayment of cash assistance benefits deprived her of a property right without due process of law.  The Court therefore reversed the Board’s decision and remanded the case for further proceedings consistent with its opinion.

Justice Brown authored the opinion; Judges Norris and Hall concurred.