[00:00:00] Speaker 02:
Good morning.

[00:00:00] Speaker 02:
Welcome back.

[00:00:02] Speaker 02:
Thank you for your patience.

[00:00:03] Speaker 02:
Let's call the last case, please.

[00:00:07] Speaker 01:
Good morning.

[00:00:07] Speaker 01:
I'm Jillian Cutler, and I represent DiMario Sterling.

[00:00:11] Speaker 01:
I'd like to reserve three minutes of my time for rebuttal.

[00:00:15] Speaker 01:
The court has asked the parties to address two questions, whether there is a protected property interest in the pandemic emergency unemployment compensation benefits, and whether the case is justiciable.

[00:00:28] Speaker 01:
I'll address each in turn.

[00:00:30] Speaker 01:
The key test for determining a due process property interest is whether an individual's eligibility for the benefit is mandated according to objective statutory criteria or whether it is left to the discretion of agency officials.

[00:00:50] Speaker 01:
Here, the Employment Security Department was required to grant P.E.U.C.

[00:00:56] Speaker 01:
benefits to claimants who met the detailed statutory authority that is set out in both the CARES Act and Washington state law.

[00:01:07] Speaker 01:
They had no discretion to deny benefits to individuals like Mr. Sterling who met those criteria.

[00:01:14] Speaker 02:
How should we distinguish this case from the 10th Circuit Winter case, which

[00:01:18] Speaker 02:
That was a different statute, PUA, but had the same sort of mandatory language.

[00:01:24] Speaker 01:
In a couple of ways.

[00:01:27] Speaker 01:
First of all, PUA benefits are for individuals who don't otherwise qualify for the unemployment benefits, and therefore the interplay between the regular benefits and the PEUC benefits is not at issue.

[00:01:42] Speaker 02:
And why is that distinction matter?

[00:01:45] Speaker 02:
Is it because there will be individual discretionary or at least individual determinations by the state to determine eligibility for PUA benefits?

[00:01:56] Speaker 01:
Your Honor, let me take a step back.

[00:01:58] Speaker 01:
I think the Tenth Circuit's decision is distinguishable with regard to mootness.

[00:02:04] Speaker 01:
I think that the decision with regard to whether there is a property interest

[00:02:09] Speaker 01:
is simply incorrect.

[00:02:12] Speaker 01:
And that the court in that case, the district court in that case, erred in the same way that the district court in this case erred by conflating the agency's discretion at a programmatic level, whether to eliminate or end funding for the program with the agency's discretion at an individual level, whether to grant benefits to individual claimants.

[00:02:40] Speaker 02:
But how is the mootness different?

[00:02:43] Speaker 02:
If you're saying, we're not going to draw any distinction between the fact that the PUA, you do have to do these individual assessments.

[00:02:51] Speaker 02:
These are gig workers.

[00:02:52] Speaker 02:
They're not eligible for regular unemployment benefits.

[00:02:54] Speaker 02:
There's some individual assessment that needs to be made, whereas for PEUC, you're automatically eligible if you're eligible for regular unemployment benefits.

[00:03:02] Speaker 02:
So how do we make a distinction on the mootness issue?

[00:03:06] Speaker 02:
Is it that the plaintiffs in winter, none of them qualified for PUA?

[00:03:10] Speaker 02:
I'm just asking for some help in distinguishing.

[00:03:14] Speaker 01:
And here I'm distinguishing between the property interest issue that was involved in winter and then the mootness issue.

[00:03:23] Speaker 01:
The mootness issue, which the 10th Circuit took up, is different in two regards.

[00:03:29] Speaker 01:
In that case, the plaintiff was an independent contractor who is not eligible for regular unemployment benefits, either prior to receiving the PUA or subsequently.

[00:03:43] Speaker 01:
And the relief that they were seeking in that case, the prospective relief, was simply the ability to apply for the benefits.

[00:03:53] Speaker 01:
So the 10th Circuit decided

[00:03:55] Speaker 01:
that because they had been given the opportunity to apply for the benefits during the course of the litigation and the fact that in that case, PUA was no longer active and had been repealed, that it would never arise again because they were not entitled to regular benefits.

[00:04:20] Speaker 02:
So is the $345 of overpayment still on the books at ESD for Mr. Sterling?

[00:04:31] Speaker 01:
It is.

[00:04:33] Speaker 02:
Okay.

[00:04:34] Speaker 02:
Would that then be your just disability argument?

[00:04:39] Speaker 01:
No, not entirely, Your Honor.

[00:04:40] Speaker 01:
Our just disability argument is... But does that help you with your just disability argument?

[00:04:45] Speaker 01:
It does, but it's not required.

[00:04:47] Speaker 01:
It helps.

[00:04:48] Speaker 01:
And of course, that's why the district court, they looked at it twice.

[00:04:51] Speaker 01:
They couldn't make a determination of what was being offset.

[00:04:55] Speaker 01:
and twice said that it can't be resolved on summary judgment.

[00:04:59] Speaker 02:
Your complaint is very vague about whether the overpayments are coming from the regular unemployment benefits or from the PEUC benefits.

[00:05:11] Speaker 02:
So what are you alleging?

[00:05:13] Speaker 02:
That the overpayment is coming from both?

[00:05:15] Speaker 01:
We believe they're coming from both, Your Honor.

[00:05:17] Speaker 01:
And part of the problem is that the records in this case are very unclear about what ESD was doing.

[00:05:26] Speaker 01:
And taking a step back, you know, they said they were assessing him for $12 a week or $13 a week in overpayments.

[00:05:34] Speaker 01:
They ended up assessing over $7,000 and they don't tell us

[00:05:39] Speaker 01:
what the money that they have required him to repay covers.

[00:05:46] Speaker 00:
If I'm understanding correctly, the district court found that there was a genuine dispute of material fact over which payments the offsets were taken from, and that is not subject to interlocutory reviews.

[00:06:00] Speaker 01:
That's correct.

[00:06:04] Speaker 02:
What is the evidence and the record that the overpayments were taken from the unemployment benefits?

[00:06:10] Speaker 02:
Is it just the time period that those redetermination of benefit letters said, hey, you have an overpayment from September 20th of 2020 to

[00:06:21] Speaker 02:
December 26, 2020?

[00:06:23] Speaker 02:
Is that the evidence?

[00:06:25] Speaker 02:
Because that September 20th through 26, he would have only been getting unemployment benefits.

[00:06:31] Speaker 02:
He wouldn't have been getting PEUC benefits.

[00:06:33] Speaker 02:
So is that the evidence?

[00:06:34] Speaker 02:
Or what evidence is the record that overpayment is coming from regular unemployment benefits?

[00:06:38] Speaker 01:
two sources.

[00:06:40] Speaker 01:
You have to kind of merge the records a bit, but yes, in part it's because that $339 is from September 20th through 26th when we know on ER 83 that that was for regular unemployment benefits.

[00:06:58] Speaker 01:
Also on ER 83 it shows

[00:07:01] Speaker 01:
overpayments taken in the last four lines.

[00:07:06] Speaker 02:
The 339, what are you referring to?

[00:07:10] Speaker 02:
Not the 345 that's still on the books today.

[00:07:13] Speaker 02:
What's the 339?

[00:07:14] Speaker 01:
The 339 is what is still on the books today.

[00:07:17] Speaker 01:
But let me be clear that

[00:07:21] Speaker 01:
Mr. Sterling is seeking retrospective relief for the damages and for the prejudgment interest that he is entitled to compensate him for the time that unemployment took these benefits.

[00:07:42] Speaker 00:
So he has a damages claim not only for the amount that was offset but for prejudgment interest.

[00:07:48] Speaker 00:
My understanding is they have returns bulk of the money that was offset except for the 300 plus dollars but have not paid prejudgment interest.

[00:08:00] Speaker 01:
Correct.

[00:08:00] Speaker 00:
So he has a live

[00:08:01] Speaker 00:
damages claim, then there's the question of prospective relief, right, injunctive or declaratory relief for which needs separate, there's a separate Article 3 analysis, correct?

[00:08:14] Speaker 01:
Absolutely, and

[00:08:17] Speaker 01:
We need to take a step back to understand that what he is challenging here is the defendant's practices of using an automated system to retroactively reevaluate claims, assess overpayments, and take the payments without notice.

[00:08:36] Speaker 01:
And that is a practice that is ongoing and that applies equally to regular unemployment benefits and PEUC benefits.

[00:08:46] Speaker 01:
Essentially, it's two sources of funding that is just dropping down into the same system.

[00:08:52] Speaker 00:
So if I understand your argument correctly, even though the PEUC program has now ended,

[00:08:58] Speaker 00:
The due process claim seeking prospective relief is not moot because the state uses the same practices that are at issue here to offset regular state unemployment benefits.

[00:09:15] Speaker 00:
And it's a live issue with respect to current state benefit recipients.

[00:09:22] Speaker 01:
Yes, Your Honor, and under a CHOA, Mr. Sterling meets the low threshold for procedural standing because he

[00:09:36] Speaker 01:
is still an employee in Washington state and could apply for unemployment benefits in the future, he would be subjected to the same policies and procedures that led to this violation.

[00:09:49] Speaker 01:
And so that threat of injury is sufficiently real under a CHOA to provide standing for prospective relief.

[00:10:00] Speaker 02:
Okay, you have nine seconds left, but I'll give you a minute for your rebuttal.

[00:10:06] Speaker 01:
Thank you.

[00:10:06] Speaker 02:
Nine seconds left, but go ahead.

[00:10:08] Speaker 02:
Thank you for that.

[00:10:09] Speaker 02:
Let me hear from counsel for the defendants.

[00:10:28] Speaker 03:
May it please the court, Marsha Chen for the State of Washington.

[00:10:33] Speaker 03:
There is no property interest in a temporary unemployment insurance program that was hastily built during pandemic.

[00:10:40] Speaker 03:
Regardless, Mr. Sterling's prayers for relief are not justiciable.

[00:10:44] Speaker 03:
Before this litigation was ever filed, the department had paid all of the overpayments it had offset and the program had expired.

[00:10:53] Speaker 03:
To have a property interest, Mr. Serling must show that there were quote, rules are mutually explicit understandings that support an entitlement.

[00:11:02] Speaker 03:
Rules are mutually explicit understandings.

[00:11:06] Speaker 03:
Here, the COVID era unemployment benefits were hastily built within a matter of weeks.

[00:11:12] Speaker 03:
There was simply no time to create the rules and mutually explicit understandings necessary for a property.

[00:11:18] Speaker 00:
What did the agreement, essentially the contract between the state and the federal government expressly require the state to provide the PEUC benefits under the same conditions that it provides regular state employment benefits?

[00:11:32] Speaker 03:
Certainly, the CARES Act provision included a general acceptance of the terms and conditions of the regular unemployment benefits.

[00:11:39] Speaker 03:
But that doesn't undermine the first provision of the CARES Act, which gives the state unfettered discretion to participate in the program.

[00:11:46] Speaker 03:
And I think Colson v. Sillman is helpful here.

[00:11:49] Speaker 03:
Colson v. Sillman involved a law that required the state to provide, shall provide, children with disability benefits.

[00:11:58] Speaker 03:
But elsewhere in the statute indicated that those benefits were limited

[00:12:02] Speaker 03:
by what the judgment of the state health officials.

[00:12:06] Speaker 03:
So this is the same.

[00:12:06] Speaker 00:
They couldn't literally just end the program at a whim.

[00:12:10] Speaker 00:
I mean, even under the contrary side, it had to give a certain amount of notice.

[00:12:13] Speaker 00:
It had to continue paying benefits for a certain period of time.

[00:12:17] Speaker 00:
And I don't understand how, I mean, a state can technically just decide we're not going to provide unemployment insurance anymore.

[00:12:27] Speaker 00:
That discretion doesn't mean there is no property interest while the program exists.

[00:12:32] Speaker 03:
Well, certainly there could be the state's acceptance of terms and conditions indicate that there would be a distribution of benefits while the program exists.

[00:12:44] Speaker 03:
But those terms and conditions don't undermine the unfettered discretion that the state had.

[00:12:48] Speaker 03:
And those terms and conditions still do something.

[00:12:50] Speaker 03:
They're not meaningless.

[00:12:52] Speaker 03:
Because the state accepted the terms and conditions allowed under the regular unemployment benefits, that's why Mr. Sterling was successful in challenging his overpayments here.

[00:13:03] Speaker 03:
Those procedures and terms and conditions allowed for Mr. Sterling to successfully challenge his overpayments.

[00:13:09] Speaker 03:
And I want to make sure I make one point.

[00:13:11] Speaker 00:
Are you saying the state had unfettered discretion to deny an individual benefits, even if they were eligible for regular unemployment benefits?

[00:13:19] Speaker 03:
No, Your Honor.

[00:13:20] Speaker 03:
What I'm saying, I want to make sure I'm making the distinction between a difference between programmatic decisions and individual determinations.

[00:13:27] Speaker 03:
And I think counsel's made a point that there might be a property interest in individual determinations, even if there's not

[00:13:33] Speaker 03:
even if there's not a property interest in a mass change or a programmatic thing.

[00:13:39] Speaker 03:
But that doesn't necessarily mean that every government individual determination has a property interest.

[00:13:44] Speaker 03:
There still must be a rule or mutually explicit understanding that there was a property interest here.

[00:13:51] Speaker 03:
And I want to make sure I get to the muteness issue too and clarify

[00:13:56] Speaker 03:
The $339 that still sit on ESD's books isn't money owed to Mr. Sterling.

[00:14:03] Speaker 03:
It was money that was not offset.

[00:14:05] Speaker 03:
So that's money that basically says, John Doe owes me $339.

[00:14:10] Speaker 03:
But it was never actually taken from any amount from Mr. Sterling's benefits.

[00:14:15] Speaker 00:
So there was no- The same position he still owes that money?

[00:14:18] Speaker 03:
No, he does not owe that money.

[00:14:20] Speaker 03:
That money has been frozen so there was no argument of spoiling.

[00:14:24] Speaker 02:
That's the litigation position.

[00:14:25] Speaker 02:
It was on your books that that was an overpayment paid to him that he then owed to return to ESD.

[00:14:34] Speaker 03:
Correct, but that's not a deprivation if it wasn't actually taken.

[00:14:37] Speaker 03:
That's not the deprivation.

[00:14:38] Speaker 03:
The source of the deprivation that Mr. Sterling is challenging is the actual taking of his PEUC benefits.

[00:14:45] Speaker 02:
And I agree that there's confusion as to whether or not the overpayment- What he's challenging is the ESD's administration of the benefits, right, and his due process rights of having

[00:14:56] Speaker 02:
three different letters all sent on the same day with vastly different information.

[00:15:04] Speaker 02:
So why isn't that evidence that this due process violation of just not having information about exactly what does he owe, when are his appeal deadlines?

[00:15:15] Speaker 02:
That's ongoing because the agency is still claiming that he was overpaid and

[00:15:22] Speaker 02:
owes the agency money, whether it's $345, $339, the number keeps changing, which I think is also indicative of the problem of they're just so vastly different numbers in all these various letters from ESD.

[00:15:36] Speaker 03:
Your Honor, I understand that there's full recognition that the program was set up within a matter of weeks and there were errors during the pandemic, the pandemic era unemployment benefits program.

[00:15:46] Speaker 03:
But the $339 was never actually deprived.

[00:15:50] Speaker 03:
It was not taken from Mr. Sterling's benefits.

[00:15:53] Speaker 03:
So in order for there to be a due process rate, due process doesn't promise you perfect notices.

[00:15:57] Speaker 03:
I think that much is indicated in Atkins's- Okay, not perfect, but not several conflicting ones.

[00:16:03] Speaker 03:
Correct.

[00:16:03] Speaker 03:
There's no question that the notices were not perfect, but that's not the source of the due process violation.

[00:16:10] Speaker 00:
The source of the due process violation is the actual deprivation, the ESD's actual taking of the... So doesn't the record show that there was offsets taken from the plaintiff while his appeal was still pending?

[00:16:25] Speaker 03:
Your Honor, and that's sort of the question is whether or not there's a property interest.

[00:16:30] Speaker 03:
Again, due process protects a property interest that's been deprived.

[00:16:34] Speaker 00:
So the threshold question, the only one really that was certified for appeal was whether there is a property interest.

[00:16:40] Speaker 03:
Correct.

[00:16:41] Speaker 03:
And on that threshold question, we would argue that there's no property interest.

[00:16:45] Speaker 03:
And I think that the court can look to Colson v. Sillman and Caps v. Wing, which all indicate that a state's unfettered discretion in participating in the program is not enough to create a property interest.

[00:16:56] Speaker 03:
And that is understandable because every court to have considered the question has found that there's no property interest in COVID era unemployment benefits.

[00:17:05] Speaker 00:
Is there a property interest in the state regular employment benefits?

[00:17:09] Speaker 03:
Yes, Your Honor.

[00:17:10] Speaker 03:
And that's in the pandemic era, unemployment benefits are different from regular UI, which comes from 42 USC 503.

[00:17:20] Speaker 03:
And this is different from extended UI, which also contains a sense of a different law.

[00:17:24] Speaker 00:
And the district court found there's a genuine dispute of material fact as to whether any offsets were made from his regular state unemployment insurance benefits?

[00:17:32] Speaker 03:
No, we do not agree there's a dispute of fact.

[00:17:34] Speaker 00:
Even based on the actual- The district court found there was.

[00:17:38] Speaker 00:
Correct.

[00:17:38] Speaker 03:
The district court found there was, but this court also has an obligation to determine.

[00:17:42] Speaker 00:
We don't have jurisdiction over that in dispute.

[00:17:46] Speaker 00:
That's a genuine, that's a district court's determination of whether there is a genuine dispute of material fact.

[00:17:53] Speaker 03:
Yes, Your Honor, but I think this court still is in obligation.

[00:17:56] Speaker 03:
Every court at every level has a requirement to consider their Article III jurisdiction over a claim.

[00:18:04] Speaker 03:
And here, there is no dispute of fact, because the overpayments were not discovered until 2021.

[00:18:11] Speaker 03:
His regular unemployment benefits expired in 2020.

[00:18:15] Speaker 03:
So there was no chance that any offsets that occurred could have come from the regular unemployment benefits.

[00:18:20] Speaker 02:
If you look at the letters, they say that the overpayment began on September 20th, 2020.

[00:18:29] Speaker 02:
And at that point, he was only on regular unemployment benefits because his PUC benefits didn't start till October 3rd.

[00:18:38] Speaker 03:
Certainly.

[00:18:39] Speaker 03:
But the point is, when he was receiving regular unemployment benefits, he received the overpayment.

[00:18:44] Speaker 03:
He was getting the benefits.

[00:18:45] Speaker 03:
He was getting the regular unemployment benefits.

[00:18:48] Speaker 03:
The district, I'm sorry, the department didn't offset until he was only receiving pandemic-era unemployment benefits.

[00:18:55] Speaker 03:
So the only property that he might have had

[00:18:57] Speaker 03:
was the pandemic-era unemployment benefits.

[00:18:59] Speaker 03:
And that claim is moot.

[00:19:04] Speaker 00:
And if we disagree with you on the threshold property question, then the mootness problem is also going away, correct?

[00:19:10] Speaker 03:
No, Your Honor, we still think that the request for declaratory and injunctive relief is moot because there's no program.

[00:19:18] Speaker 02:
No, but I think the distinction here is you're saying because we collected the money when he was only on PUC benefits, that could only be PUC overpayment.

[00:19:30] Speaker 02:
But what I'm saying is the ESD letters

[00:19:34] Speaker 02:
three different letters of January 29, 2021, they are saying your overpayment of benefits started on September 20th of 2020 when he was exclusively on regular unemployment benefits.

[00:19:48] Speaker 02:
So any overpayment that was recaptured by the state had to have included some regular unemployment benefit payments.

[00:19:58] Speaker 02:
Regardless of the date it was collected,

[00:20:00] Speaker 02:
that government was saying you owe us from overpayments from those regular unemployment benefits?

[00:20:06] Speaker 03:
For sure.

[00:20:07] Speaker 03:
I think there is a dispute as to whether or not the amount is calculated from regular unemployment benefits versus pandemic-era unemployment benefits.

[00:20:15] Speaker 02:
Wouldn't that affect your justiciability argument?

[00:20:17] Speaker 03:
No, because his regular unemployment benefits weren't actually deprived.

[00:20:22] Speaker 00:
That's a very technical argument.

[00:20:26] Speaker 00:
You're saying, though, the issue was that the state believes his state benefits were overpaid.

[00:20:33] Speaker 00:
Isn't that true?

[00:20:34] Speaker 03:
Your honor, just to clarify, if Mr. Sterling had been receiving regular unemployment benefits in 2021, the state would not have offset his, would not have offset his benefits because the state has, the state is not allowed to, it wouldn't normally do so, and it wouldn't do so because- When he was receiving regular state unemployment benefits, the state's position, technically, is that he received too much, correct?

[00:21:02] Speaker 00:
for the regular state unemployment benefits?

[00:21:05] Speaker 03:
He did receive too much, but under our regular state law, we wouldn't have offset them.

[00:21:10] Speaker 00:
So you're saying, but we could offset them freely from the PEUC benefits?

[00:21:15] Speaker 00:
No.

[00:21:16] Speaker 03:
No.

[00:21:16] Speaker 03:
That's not our argument.

[00:21:18] Speaker 00:
Even while his appeal of the contention that he overpaid was pending?

[00:21:24] Speaker 03:
No, we agree that there was an error into whether or not there should have been an offset, whether it's under regular unemployment benefits or pandemic-era unemployment benefits.

[00:21:33] Speaker 03:
But the question is whether or not there's a constitutionally due process right to those benefits.

[00:21:38] Speaker 03:
And it's clear that there's still a procedure for Mr. Sterling to challenge those offsets that were made to his pandemic-era unemployment benefits.

[00:21:46] Speaker 03:
And that's what he successfully did here.

[00:21:48] Speaker 03:
And I just want to make sure it's crystal clear.

[00:21:51] Speaker 03:
If he had been receiving regular unemployment benefits,

[00:21:54] Speaker 03:
ESD would have not offset his regular unemployment benefits at all in 2021.

[00:22:01] Speaker 03:
There's no evidence or allegation that the department had ever offset, would ever offset, or had ever offset regular unemployment benefits.

[00:22:09] Speaker 03:
And that's because the regular unemployment benefits was set up over hundreds of years.

[00:22:14] Speaker 03:
It's been around for hundreds of years.

[00:22:16] Speaker 00:
The department has no... But the state's agreement with the federal government was that you would process the PUC benefits exactly like you process state benefits.

[00:22:27] Speaker 00:
So now you're saying, well, we wouldn't have done the same thing with state benefits.

[00:22:31] Speaker 00:
That makes no sense.

[00:22:33] Speaker 03:
We would say that the federal law that it all stems from certainly requires the state to agree to terms and conditions, but it doesn't also undermine the first provision of the CARES Act, which allows for unfettered discretion.

[00:22:45] Speaker 00:
And I think if you look at the agreement... Discussion as to whether to participate, not discretion to breach those terms, specific terms.

[00:22:53] Speaker 03:
Certainly, there might be a property interest if there was an individual determination.

[00:23:01] Speaker 03:
But here, again, I think Colson Rieselman is instructive.

[00:23:04] Speaker 03:
And Caps v. Wing is instructive.

[00:23:07] Speaker 03:
That the individual determination here, the terms and conditions the state agreed to, allowed for Mr. Sterling to challenge the offsets that were made and allowed him to receive those offsets in response.

[00:23:19] Speaker 03:
That doesn't necessarily mean there's a constitutionally protected right to those benefits.

[00:23:25] Speaker 03:
A constitutionally due process right would chill state participation in those accepting federal emergency funds if just by the mere act of accepting those funds that it would incur a due process right.

[00:23:39] Speaker 02:
I know I'm over time.

[00:23:41] Speaker 02:
Yes.

[00:23:43] Speaker 02:
My colleagues have no further questions, and I don't either.

[00:23:45] Speaker 02:
Thank you very much for your argument.

[00:23:48] Speaker 02:
You went nine seconds over.

[00:23:49] Speaker 02:
I would really encourage you to be extremely brief.

[00:23:57] Speaker 01:
I was just going to say that unless the judges have any additional questions, I don't have anything further.

[00:24:04] Speaker 03:
Thank you very much.

[00:24:06] Speaker 02:
No, thank you very much.

[00:24:08] Speaker 02:
All right, this case is submitted and we are adjourned for the day.

[00:24:10] Speaker 02:
Thank you all.