New Mexico gave Hazel Waters-Haskins (plaintiff) food stamps for eight years when she did not qualify. Waters-Haskins fostered her grandchildren until adopting them in 1997. The state paid her a foster-parent subsidy beforehand, and an adoptive-parent subsidy afterward. She correctly reported both subsidies in her food-stamp applications, including the status change. Only the foster-parent subsidy, not the adoptive-parent subsidy, was deductible from her income for eligibility purposes. But the New Mexico Human Services Department (defendant) kept deducting her adoptive-parent subsidy and giving her food stamps until 2004. Upon discovering the error, the department correctly calculated her total income at $1446 a month (including social security and disability income), disqualifying her for food stamps. The department assessed an overpayment claim for the preceding 11-month period and sent a letter asserting Waters-Haskins owed the department $4,476. Waters-Haskins requested an administrative hearing, but the judge supported the department’s claim. Waters-Haskins appealed, asserting equitable estoppel barred the department from recovering the overpayment. The appellate court reversed but remanded, reasoning the equitable-estoppel defense was premature unless the department failed to compromise the claim. Both sides appealed, and the New Mexico Supreme Court granted review.