Ruling May Show Sea Change In Territorial Access To Benefits

By Carolina Bolado | June 28, 2020, 8:02 PM EDT

Just weeks after the First Circuit said denying Puerto Ricans Social Security disability benefits is unconstitutional, a federal judge in Guam came to a similar conclusion, signaling a potential sea change in how the courts view U.S. citizens in territories who have traditionally been excluded from a number of federal programs.

On June 19, U.S. District Judge Frances M. Tydingco-Gatewood ruled that there is no rational basis for the federal government to exclude a disabled woman on Guam from receiving the Supplemental Security Income benefits to which she would be otherwise be entitled if she lived in one of the 50 states, the District of Columbia or the Commonwealth of the Northern Mariana Islands.

The decision comes on the heels of the First Circuit's ruling in April that the government's SSI policy violates the equal protection clause by denying benefits to U.S. citizens who live in the territories.

"It is a little bit surprising that these arguments are now prevailing," Columbia Law School professor Christina Ponsa-Kraus said. "The idea that Congress can treat territories differently is still alive and well, and yet if you're talking about individuals suffering discriminatory effects, I think attitudes are changing."

In each of these cases, the government relied on two U.S. Supreme Court cases from 1978 and 1980, Califano v. Torres and Harris v. Rosario , which affirmed that Congress may treat the territories differently from the states with regard to federal benefit programs if it can point to a rational basis for doing so.

The rational basis proffered by the government is that SSI benefits are paid from general revenues funded by federal income taxes, and residents of U.S. territories generally do not pay federal income tax.

But in her summary judgment order, Judge Tydingco-Gatewood noted that residents of the Northern Mariana Islands also do not pay income taxes, yet they have access to these benefits because when they opted to join the United States in 1975, they secured the benefits in their negotiation with the federal government.

"This proffered reason to justify Guam's exclusion from the SSI program when the CNMI is included is illogical and irrational," the judge said.

Ponsa-Kraus, an expert in the constitutional issues surrounding the American territories, said it makes sense that the decision turned on this issue.

For plaintiffs in territories challenging the status quo, making the comparison between a territory and a state can be an uphill battle because of long-standing precedent that Congress can treat territories differently. But when the comparison is between territories, the arbitrariness of the government's decision seems clearer, she said.

To buttress its argument supporting the denial of SSI benefits to Guam residents, the government also said that adding Guam to the SSI program would cost too much and that extending these benefits would disrupt Guam's economy.

Judge Tydingco-Gatewood dispatched both arguments by noting that including Guam would increase the SSI budget by 0.03% and that there is no evidence to suggest an influx of federal funds from other benefit programs has negatively impacted the island's economy.

These exact arguments are the ones the government used to prevail in the Harris and Califano cases in the late 1970s but did not hold up today. Kirkland & Ellis LLP partner Michael Williams, who represents plaintiff Katrina Schaller in the Guam case, said they no longer appear to be enough for the courts to justify the disparate treatment of residents of U.S. territories.

"The decisions that were supposed to dispose of these cases, they seem old, from where we stand today," Williams said. "This notion that providing federal aid to the neediest people will disrupt the economy, this seems antiquated."

A representative for the Social Security Administration declined to comment, deferring to the U.S. Department of Justice, which did not respond to a request for comment.

Williams, who has done some work in the past representing Guam's government in litigation, says he was introduced to Schaller by his former co-counsel, Rodney Jacob, a prominent attorney on Guam who knows the Schaller family.

Katrina Schaller has a degenerative genetic disorder called myotonic dystrophy, just like her identical twin sister Leslie. But Leslie lives in Pennsylvania and receives SSI benefits, while Katrina is not eligible because she lives with their other sister in Guam.

"You couldn't find a better equal protection set of facts," Williams said. "Both are identical, both have the same disease, and yet there's a huge disparity in how the federal government was helping to provide for them."

When Williams and his team argued this case in Guam on Jan. 23, they could not rely on the First Circuit's ruling in U.S. v. Vaello-Madero , which was issued April 10. In that case, the appeals court said the government could not deny SSI benefits to a resident of Puerto Rico.

But on appeal to the Ninth Circuit, Williams says he can point to that decision as persuasive authority for the court to consider. From there, Williams says it's not out of the question that the U.S. Supreme Court might take up the issue.

"Whenever a judge finds there's enough cause to invalidate a federal statute that's been around for 50 years, I suspect that will get the justices' attention," he said.

Ponsa-Kraus said these victories for plaintiffs encourage others to file their own challenges to benefit programs that are not available to residents from the territories. But she added that while attitudes are changing, the fact that Congress can treat territories differently remains, particularly in the political sphere. She pointed to Igartúa v. Trump , in which the First Circuit denied a challenge by a Puerto Rican man who claimed he should have the right to vote in presidential elections. The Supreme Court declined to take up the case in 2018.

Bartholomew Sparrow, a political science professor at the University of Texas at Austin, said the courts in both the Schaller and Vaello-Madero cases issued careful, focused rulings that centered on the Fifth Amendment and due process but did not deal with political liberties or the territorial residents' privileges as citizens.

What he sees is an increased willingness in the public and the courts to chip away at these distinctions between territories and states with regard to economic issues, as long as the question of control of the territories is kept separate.

"I think they'll keep this distinction between these large-scale political consequential things — like voting and full representation — and the financial or regulatory ones, where they can extend what's happening in the states or one territory to all of them," Sparrow said.

Have a story idea for Access to Justice? Reach us at accesstojustice@law360.com.

--Editing by Katherine Rautenberg.

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