Grashoff v. Payne

478 F.Supp.3d 735

Susan GRASHOFF, Plaintiff,

v.Frederick D. PAYNE, in his official Capacity as Commissioner of the Indiana Department of Workforce Development, Defendant.

Cause No. 1:19-CV-00276-HAB

United States District Court, N.D. Indiana, Fort Wayne Division.

Signed August 11, 2020

Adam C. Mueller, Kathleen Belle Cullum, Indiana Legal Services Inc., Indianapolis, IN, Martha M. Lemert, Burt Blee Dixon Sutton & Bloom LLP, Fort Wayne, IN, for Plaintiff.

Jill G. Haddad, Meredith B. McCutcheon, Robert A. Rowlett, Rebecca McClain, Winston Lin, Indiana Attorney General's Office, Indianapolis, IN, for Defendant.

OPINION AND ORDER

HOLLY A. BRADY, JUDGE

On twenty-four separate occasions, Plaintiff Susan Grashoff ("Grashoff") under-reported her income on weekly unemployment vouchers to the tune of $2,828.75. Once her deception was discovered by the Indiana Department of Workforce Development ("DWD"), Grashoff forfeited all benefits she received for each week of her under-reporting ($8,952.00) and the DWD assessed her an additional 25% civil penalty ($2,238.00), all pursuant to Indiana statute, IC § 22-4-13-1.1. In total, Grashoff's $2,828.75 under-reporting fiasco netted her a combined forfeiture and civil penalty of $11,190.00. She concedes that the amounts assessed are correct under the Indiana statute, but filed suit asserting these amounts violate the Eighth Amendment's guarantee against excessive fines.

Before the Court are cross-motions for summary judgment filed by Grashoff and the Commissioner of the DWD ("the Commissioner"). (ECF Nos. 32, 34)¹ At the request of the parties, the Court held oral argument on the motions. Having considered the briefs and arguments of the parties, the Court concludes that the forfeiture provision of Indiana Code § 22-4-13-1.1 is remedial, not punitive, and the civil penalty provisions in Indiana Code § 22-4-13-1.1 are not grossly disproportionate to the harm they seek to deter and thus, do not constitute excessive fines under the Eighth Amendment.

FACTUAL BACKGROUND

The underlying facts in this case are undisputed. In October 2016, Grashoff applied for and became eligible to receive weekly unemployment insurance ("UI") benefits administered by the DWD. Her initial weekly benefit amount was $373.00.

Grashoff applied for UI benefits and submitted all subsequent weekly vouchers, utilizing the DWD's online portal. This portal provides access to the Claimant Handbook and also provides a series of warnings to claimants at different stages of the submission process. Claimants must answer a series of questions, including whether they worked the week in question, and click through various warnings to finally submit their weekly claim vouchers. The warnings advise claimants in no uncertain terms that the failure to report all income earned during a particular week can lead to serious consequences. Grashoff found those out here.

Grashoff earned part-time income through her employment with the YMCA but, from December 10, 2016 through May 27, 2017, she failed to report any of that income on her weekly claim vouchers. The amount of her under-reporting varied weekly; at the low end, she underreported $12.18, while at the high end, she under-reported $198.55.

Indiana's statutes differentiate between fraudulent violations of the UI reporting rules and non-fraudulent violations. Upon discovery of a failure to report income, the DWD investigates the claimant's submissions, determines the overpayment amount, determines whether the claimant committed fraud, and assesses the appropriate statutory remedy. If determined to be a non-fraudulent overpayment, Ind. Code § 22-4-13-1(d) applies to determine the improperly paid benefits that must be repaid. This amount will not accrue interest, result in the forfeiture of all benefits, or have any other penalty assessed. If determined to be a fraudulent or knowing overpayment, the DWD applies Ind. Code § 22-4-13-1.1(a) to require forfeiture of the entire weekly benefit for "any week in which the failure to disclose or falsification caused benefits to be paid improperly." Additionally, a claimant is subject to a graduated civil penalty for each instance in which the individual knowingly failed to disclose income. Ind. Code § 22-4-13-1.1(b). For a first instance, the statute imposes a civil penalty of 25% of the benefit overpayment. Second and third instances impose penalties of 50% and 100%, respectively, of the benefit overpayment.

In Grashoff's case, upon the DWD's discovery of her under-reporting, it determined that she knowingly violated the reporting requirements and applied the statutory forfeiture and penalties provisions in Ind. Code § 22-4-13-1.1. Her forfeiture amount was calculated at $8,952.00, the aggregate of the full weekly benefits she received in each of the weeks in which she underreported. The DWD assessed an aggregate civil penalty of $2,238.00, or 25% of the overpayment amount of $8,592.00. Parsed out in a weekly calculation, Grashoff forfeited $373.00 in benefits for each of the 24 weeks she under-reported her income and was assessed a civil penalty of $93.25 for each of those same weeks. This determination was upheld on appeal to the Unemployment Insurance Appeals Board as it concluded that "the Claimant did knowingly fail to disclose or falsified facts in the filing of her vouchers, and is liable to repay all benefits received. Claimant is also liable for civil penalties assessed on the claim." (ECF No. 33-19). Grashoff was not prosecuted criminally for fraud.

APPLICABLE STANDARD

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The movant bears the initial responsibility of informing the district court of the basis of its motion and identifying those portions of designated evidence that demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After "a properly supported motion for summary judgment is made, the adverse party must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (quotation marks and citation omitted).

A factual issue is material only if resolving the factual issue might change the outcome of the case under the governing law. See Clifton v. Schafer , 969 F.2d 278, 281 (7th Cir. 1992). A factual issue is genuine only if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party on the evidence presented. See Anderson , 477 U.S. at 248, 106 S.Ct. 2505. In deciding a motion for summary judgment, the court "may not ‘assess the credibility of witnesses, choose between competing reasonable inferences, or balance the relative weight of conflicting evidence.’ " Bassett v. I.C. Sys., Inc. , 715 F. Supp. 2d 803, 808 (N.D. Ill. 2010) (quoting Stokes v. Bd. of Educ. of the City of Chi. , 599 F.3d 617, 619 (7th Cir. 2010) ). Instead, it must view all the evidence in the record in the light most favorable to the non-moving party and resolve all factual disputes in favor of the non-moving party. See Anderson , 477 U.S. at 255, 106 S.Ct. 2505.

DISCUSSION

This case boils down to one question: are the penalty and forfeiture schemes in Ind. Code § 22-4-13-1.1 excessive fines violative of the Eighth Amendment?² Given the impact fraud has on the administration of public programs, this Court concludes below that the challenged provisions here do not come anywhere near a level of constitutional concern. Before turning to that ultimate question, however, the Court must work through the preliminary issue of standing.

A. Standing

Federal courts have jurisdiction over certain cases and controversies. U.S. Const. Art. III, § 2. Standing is "the irreducible constitutional minimum" that determines which cases and controversies "are of the justiciable sort referred to in Article III." Lujan v. Defs. of Wildlife , 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The party invoking federal jurisdiction must establish the elements of standing: (1) that she suffered an injury in fact, (2) that the injury is causally connected to the challenged conduct of the defendant, and (3) that the injury is likely to be redressed by a favorable judicial decision. Id. at 560–61, 112 S.Ct. 2130.

The Commissioner asserts that Grashoff lacks Article III standing to challenge any portion of the statute to which she was not subjected. He concedes, for instance, that Grashoff has standing to challenge Ind. Code § 22-4-13-1.1(a) as well as the portion of § 1.1(b) — the 25% penalty provision — under which she was penalized, but not the additional portions of § 1.1(b)(2) and (3). Essentially, he argues that because she has not been penalized under these provisions, she has suffered no "injury in fact" and thus, she cannot demonstrate Article III standing to challenge these statutory provisions. Similarly, since she suffered no injury under those provisions, there is no likelihood that a favorable decision as to those provisions would provide her with redress.

As noted supra , Ind. Code § 22-14-13-1.1(b) sets forth a graduated penalty scheme commensurate with a claimant's offense level:

(b) In addition to amounts forfeited under subsection (a), an individual is subject to the following civil penalties for each instance in which the individual knowingly fails to disclose or falsifies any fact that if accurately reported to the department would disqualify the individual for benefits, reduce the individual's benefits, or render the individual ineligible for benefits or extended benefits:

(1) For the first instance, an amount equal to twenty-five percent (25%) of the benefit overpayment.

(2) For the second instance, an amount equal to fifty percent (50%) of the benefit overpayment.

(3) For the

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