## Facts

- Congress directed the Secretary of Health and Human Services to set AFDC resource limits, including limits on motor-vehicle ownership, consistent with AFDC’s purpose of aiding needy families with dependent children.
- HHS issued a regulation capping the exempt equity value of one automobile at $1,500; equity above that amount counted as a resource that could render a household ineligible for AFDC.
- The Secretary set the $1,500 figure largely by relying on a 1979 Food and Nutrition Service study of food-stamp recipients indicating most had no more than $1,500 in vehicle equity, and by assuming AFDC recipients would have similar or lower vehicle equity.
- Karen Lamberton reapplied for AFDC after family hardship and was denied because her vehicle equity was about $4,375, exceeding the cap, despite her need for the car for work and family transportation.
- A certified class of Arizona applicants and recipients challenged the regulation, seeking declaratory and injunctive relief under the Administrative Procedure Act and the Fifth Amendment’s equal protection component.
- The parties filed cross-motions for summary judgment.

## Issues

1. Whether the $1,500 automobile-equity limit is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law under the APA because it lacks a rational evidentiary basis and is not reasonably related to AFDC’s statutory purpose.
2. Whether the automobile-equity limit violates equal protection principles applicable through the Fifth Amendment by irrationally disadvantaging otherwise-needy applicants who own a modest vehicle exceeding $1,500 in equity.

## Decision

- The court granted summary judgment to the plaintiff class.
- The court held the $1,500 automobile-equity limit invalid under the APA as arbitrary and capricious and otherwise contrary to law.
- The court permanently enjoined the federal and state defendants from enforcing the $1,500 automobile-equity limit to deny AFDC benefits to the class in Arizona.
- Having resolved the case under the APA, the court did not rely on the equal protection claim as an independent basis for relief.

## Legal Principles

- Under the APA, a court must set aside agency action that is arbitrary and capricious; the agency must examine relevant data and provide a reasoned explanation connecting the facts found to the policy choice.
- An agency may not justify a regulation affecting eligibility for subsistence benefits through unsupported assumptions or stale, tangential data drawn from different programs and populations without adequate explanation.
- Resource-limit rules for welfare programs must be reasonably related to the program’s statutory purpose; agency reasoning must account for material real-world conditions that bear on that purpose (including changed economic conditions where relevant).
- Even under deferential review of social-welfare classifications, a rule lacking a rational support in the administrative record cannot be sustained.

## Conclusion

The district court invalidated HHS’s AFDC rule limiting exempt vehicle equity to $1,500 because the agency failed to support the cap with relevant, current evidence or a reasoned explanation tying the chosen figure to AFDC’s objectives, and it enjoined enforcement of the cap against the certified class in Arizona.


Lamberton v. Shalala, 857 F. Supp. 1349 (D. Ariz. 1994)