Commonwealth of Mass v. Secretary of A ( 1993 )


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  • January 22, 1993
    UNITED STATES COURT OF APPEALS
    FOR THE FIRST CIRCUIT
    No. 92-1539
    COMMONWEALTH OF MASSACHUSETTS,
    DEPARTMENT OF PUBLIC WELFARE,
    Plaintiff, Appellant,
    v.
    SECRETARY OF AGRICULTURE, ET AL.,
    Defendants, Appellees.
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF MASSACHUSETTS
    [Hon. William G. Young, U.S. District Judge]
    Selya, Circuit Judge,
    Higginbotham,* Senior Circuit Judge,
    and Cyr, Circuit Judge.
    Douglas H.  Wilkins, Assistant  Attorney General, with  whom
    Scott Harshbarger, Attorney General, was on brief, for appellant.
    Arvid  E. Roach, II, with whom Virginia G. Watkin, Thomas H.
    Odom,  and Covington  &  Burling were  on  brief, for  States  of
    Alabama,  California,  Florida,   Georgia,  Illinois,   Kentucky,
    Louisiana, Nebraska, Ohio, Oklahoma, West Virginia and Wisconsin,
    amici curiae.
    Deborah Ruth Kant, Attorney,  Civil Division, United  States
    Department  of Justice,  with  whom Stuart  M. Gerson,  Assistant
    Attorney General, A. John Pappalardo, United States Attorney, and
    Barbara C. Biddle,  Attorney, Civil Division, were  on brief, for
    appellees.
    *Of the Third Circuit, sitting by designation.
    SELYA,  Circuit Judge.    In federal  fiscal year  (FY)
    SELYA,  Circuit Judge.
    1982, lasting  from October 1,  1981 through September  30, 1982,
    the  Commonwealth  of Massachusetts  distributed food  stamps far
    exceeding the margin of  error allowable under applicable federal
    regulations.  Consequently, Food and Nutrition Service (FNS), the
    branch of the United States Department of Agriculture responsible
    for  overseeing  the  food  stamp  program,  imposed  a  punitive
    sanction.
    Massachusetts unsuccessfully appealed  the sanction  to
    the Food Stamp Appeal Board (the Board).  It then sought judicial
    review in federal  district court.  See  7 U.S.C.   2023  (1982).
    The  court granted summary judgment in  favor of the defendants,1
    albeit in two steps.   See Massachusetts v. United States, 
    737 F. Supp. 120
     (D.  Mass. 1990)  (Massachusetts I);  Massachusetts v.
    United States, 
    788 F. Supp. 1267
     (D. Mass. 1992)  (Massachusetts
    II).
    Finding the penalty  hard to swallow, the  Commonwealth
    serves  up a  gallimaufry  of issues  for appellate  mastication.
    Although these issues  contain some food  for thought, they  lack
    true  nutritive  value.   Consequently,  we  affirm the  judgment
    below.
    I.  FACTUAL PRELUDE
    Congress designed the Food Stamp  Act of 1964, Pub.  L.
    1The Commonwealth named a host  of federal defendants in its
    suit, including the United  States, the Secretary of Agriculture,
    the Department  of Agriculture, the Board, and  FNS.  For ease in
    reference,  we treat the appeal as if the appellees were a single
    entity.
    2
    No. 88-525, 
    78 Stat. 103
     (1964), codified as amended, 7 U.S.C.
    2011-2030 (1982),  to provide low-income families  with access to
    government-subsidized  foodstuffs.    Although the  coupons  were
    actually disbursed  by the  participating states, FNS  paid fifty
    percent  of the administrative  costs and one  hundred percent of
    the  food  subsidy  costs.   In  time,  the  federal government's
    generosity   produced   an  unfortunate   side   effect;  because
    overpayments were charged  to the federal tab, states  had little
    incentive  to  keep   distributions  in  line.     To  curb  this
    profligacy, Congress eventually enacted a quality control program
    (QCP) to ensure more accurate food stamp distribution.  The first
    QCP took effect  in 1977.  Pub. L. No. 95-113,   16, 
    91 Stat. 976
    (1977).
    From that point forward, Congress persistently tinkered
    with the QCP's features.   During FY 1982, the  QCP required that
    each state  survey a sample of  its food stamp cases  in order to
    estimate  in what percentage of them it had distributed the wrong
    number  of food stamps.  After receiving the states' tallies, FNS
    would set a target error rate (the TER), take a subsample of each
    state's  cases, recheck  them for  errors, and  employ regression
    analysis  to blend the federal and state estimates of state error
    rates into a single estimated error rate (the EER) for the state.
    See 7 U.S.C.A.   2025(g) (West Supp. 1981); 
    94 Stat. 363
      (1980);
    see also  7 C.F.R.    275.25(d)(6)  (1982).   If the state's  EER
    surpassed the TER, as  determined by FNS, the  federal government
    3
    imposed a  monetary sanction.2    Such fines  were calculated  by
    multiplying the  total dollar  value of state-issued  food stamps
    for  the fiscal year times the difference between the state's EER
    and  its TER.  See 7 C.F.R.    275.25(d)(3) (1982).  If, however,
    the  state's EER  was below  five percent,  the state  received a
    bonus:   the federal government increased its contribution to the
    program's  administrative  costs  from  fifty  percent  to  sixty
    percent.  See 7 C.F.R.   275.25(c)(2)(i) (1982).
    In  FY  1982,  FNS  set Massachusetts's  TER  at  14.88
    percent.   After the two sovereigns completed  their sampling and
    resolved some mathematical bevues by negotiation, FNS figured the
    EER  to be  roughly  16.35 percent  and,  accordingly, fined  the
    Commonwealth $1,323,864.   The penalty survived  scrutiny by both
    the Board and the district court.
    In  this  appeal,  Massachusetts makes  four  principal
    claims:  (1)  that the  quality control provisions  on which  the
    sanction rested were  no longer  in effect when  FNS imposed  the
    sanction; (2) that FNS's sampling methodology was so biased as to
    offend  the Food  Stamp Act; (3)  that FNS's  use of  too large a
    sample skewed the results; and (4) that FNS erred in  refusing to
    grant  a good-cause  waiver.   We  treat  these asseverations  in
    sequence.
    II.  LACK OF STATUTORY AUTHORITY
    Massachusetts and the amici join in urging that FNS had
    2We discuss  infra Part  IV the circumstances  in which  the
    imposition of a monetary sanction might be waived.
    4
    no  authority  to levy  sanctions  for FY  1982  because Congress
    repealed the QCP  effective October  1, 1982.   This claim  stems
    from  passage of  the Omnibus  Budget Reconciliation  Act (OBRA),
    Pub.  L. No. 97-253, 
    96 Stat. 763
     (1982), enacted in September of
    1982.   OBRA completely revamped the Food Stamp Act's approach to
    quality   control.    The  legislation  repealed  the  previously
    existing QCP and  fashioned a  new regimen  effective October  1,
    1982 (the first  day of  FY 1983).   Massachusetts contends  that
    this   legislative   legerdemain   undermined   FNS's   authority
    thereafter to impose sanctions for FY 1982.3
    It is a hoary rule of the common law that the repeal of
    a statute  eliminates any inchoate liability  for penalties under
    the repealed statute.  See, e.g., United States v. Reisinger, 
    128 U.S. 398
    , 401 (1888).  In order to ameliorate this rule, Congress
    passed a general savings statute providing in pertinent part that
    the "repeal of  any statute shall not have the  effect to release
    or  extinguish  any penalty,  forfeiture,  or  liability incurred
    under such statute . . . ."  1 U.S.C.   109 (1982).  On its face,
    section 109 seems adequate to preserve the authority by which FNS
    purposed to sanction the Commonwealth.
    In  an  effort to  escape  the  savings statute's  web,
    Massachusetts  notes that  the QCP  allowed waivers  of liability
    3Since  we  can  find  no  indication  in  the  record  that
    Massachusetts raised this issue before the Board, the point is at
    least  arguably waived.    But, because  the  issue goes  to  the
    Board's jurisdiction and because  the appellees have not advanced
    a claim of waiver,  we choose to address it,  notwithstanding the
    possible incidence of procedural default.
    5
    premised on subsequent corrective measures.  See, e.g., 7  C.F.R.
    275.25(d)(5)  (1982).   From this datum,  Massachusetts deduces
    that it could not  have "incurred" liability until such  a waiver
    was  denied    an event  which took place  well after  October 1,
    1982.  The  court below  found this argument  unpersuasive.   See
    Massachusetts II, 788 F. Supp.  at 1269 n.3. So do we.   The mere
    fact that Congress grants  an agent the power to  waive sanctions
    does not  turn back the  clock and  eradicate the reality  of the
    underlying violation.  Thus, we  do not believe Congress intended
    that liability would  be deemed "incurred"  under federal law,  1
    U.S.C.      109,   only  when   all  opportunities   for  special
    dispensations had been exhausted and a previously imposed penalty
    had  become irreversible.  See, e.g., Standard Oil Co. v. Federal
    Energy  Admin., 
    612 F.2d 1291
    ,  1294 n.3  (Temp. Emer.  Ct. App.
    1979)  (explaining why  costs  should be  deemed "incurred"  even
    before the amount has become certain).  Rather, we think Congress
    intended  that states incur liability for their food stamp errors
    at the conclusion of the  six-month monitoring period, 7 U.S.C.A.
    2025(g)(1)  (West Supp. 1981)    a period which, in  this case,
    ended September 30, 1982.
    We have two main reasons for interpreting the interface
    between the Food Stamp  Act and the savings statute in  this way.
    In  the first place, it appears well established that the savings
    statute  was designed to prevent  exactly the sort  of lapse that
    Massachusetts argues occurred here.   See, e.g., Hamm v.  City of
    Rock  Hill, 
    379 U.S. 306
    , 314 (1964) ("The federal saving statute
    6
    . . . was meant to obviate mere technical abatement such as . . .
    a  substitution of  a  new statute  with  a greater  schedule  of
    penalties . .  . ."); United States v. Holley,  
    818 F.2d 351
    , 353
    (5th Cir.  1987)  (similar).   Reading  the  savings  statute  to
    release from liability any party who had not yet exhausted after-
    the-fact remediation would hamper  the law's goal, contravene the
    Supreme Court's  longstanding interpretation  of how the  statute
    should  be applied,  and encourage  violators to  petition willy-
    nilly for  discretionary administrative  relief in the  hope that
    the statutory scheme might be changed betweentimes.
    In the second place, the statutory structure predicates
    waiver on precedent liability.  See 7 U.S.C.A.   2025(g)(1) (West
    Supp. 1981) (providing that, under the Food Stamp Act's liability
    program, an offending state shall pay the imposed fine unless the
    Secretary determines that good  cause exists for waiver).   We do
    not  think  Congress  placed the  cart  to  the  horse's rear  by
    accident.  Had  Congress wished waiver considerations to  be part
    and parcel  of a  liability determination,  it would  simply have
    written the Food Stamp Act to premise liability on the absence of
    those  factors that  allow  the granting  of good-cause  waivers.
    Congress chose to structure the statute differently, however, and
    we must honor its  bipartite design in our interpretation.   See,
    e.g.,  Ingersoll-Rand  Co.  v.  McClendon, 
    111 S. Ct. 478
    , 482
    (1990); Greenwood Trust Co.  v. Massachusetts, 
    971 F.2d 818
    ,  824
    (1st Cir. 1992), cert. denied, 
    61 U.S.L.W. 3478
     (U.S. 1993).
    We  note, too, that  legislative statements surrounding
    7
    the  1982 repeal of the QCP, while admittedly less than pellucid,
    indicate no  discernable intent to exonerate  states for pre-1983
    administrative  errors.   Quite  the opposite:   the  legislative
    history suggests  Congress intended to increase  the certainty of
    penalties beginning  with FY  1983.   See S.  Rep. No.  504, 97th
    Cong., 2d Sess. 70-71, reprinted in 1982 U.S.C.C.A.N. 1641, 1708-
    09:
    [T]he . . . major flaw in the existing system
    [is  that] [t]he  current penalty  . .  . has
    proven difficult to apply in practice because
    of the relatively large amounts involved and,
    as a result,  the Secretary has  [frequently]
    chosen  to   waive  its  application.     The
    sanctions established [by the new  statute] .
    . . should not  be waived except when unusual
    circumstances intervene.
    Given this purpose,  it seems unlikely that Congress intended the
    1982 repeal  to preclude  enforcement of the  earlier regulations
    for 1981  and 1982  in instances  where  good-cause reviews  were
    imminent or ongoing, but had not yet been decided.
    For these reasons,  we reject the Commonwealth's  claim
    that FNS  lacked statutory authority  to impose the  sanctions in
    question.
    III.  STATISTICAL METHODOLOGY
    Having   confirmed  the   vitality   of  the   sanction
    provision,  we turn  next  to  the Commonwealth's  double-jointed
    challenge  to  the  statistical methodology  that  FNS  employed.
    Before  reaching Massachusetts's  two  substantive arguments,  we
    think  it  is  useful to  explicate  the  applicable standard  of
    judicial review.
    8
    A.  Standard of Review.
    The Food Stamp Act provides for de novo review of final
    administrative determinations in  the district court.4   However,
    this    searching   standard    is   restricted    to   liability
    determinations.   See Broad St. Food Mkt., Inc. v. United States,
    
    720 F.2d 217
    , 220 (1st Cir. 1983); Collazo v.  United States, 
    668 F.2d 60
    ,  65 (1st Cir. 1981).  It does  not spill over to penalty
    determinations.  See Kulkin  v. Bergland, 
    626 F.2d 181
    ,  184 (1st
    Cir.   1980)   (holding  that,   under   the   Food  Stamp   Act,
    "administrative  remedies  or sanctions  are  subject  to a  very
    limited  judicial review").   A court scrutinizing administrative
    remedies or sanctions imposed  under the Food Stamp Act  may only
    overturn  those  actions that  appear  arbitrary, capricious,  or
    contrary to law.  See  Haskell v. United States Dep't of  Agric.,
    
    930 F.2d 816
    , 820 (10th Cir. 1991); Woodard v. United States, 
    725 F.2d 1072
    , 1077-78  (6th Cir. 1984); Broad St., 
    720 F.2d at
    219-
    21; Hough  v. United States  Dep't of Agric.,  
    707 F.2d 866
    , 869
    (5th Cir. 1983); Kulkin, 
    626 F.2d at 184-85
    .
    To be  sure, both  Broad  St. and  Kulkin involved  (1)
    4The statute provides in pertinent part:
    [A] State  agency .  . . may  obtain judicial
    review    [of    a    final    administrative
    determination] by filing a  complaint against
    the United States in  the United States court
    for the  district in  which it resides  or is
    engaged in business  . . . .  The  suit . . .
    shall  be a  trial de  novo by  the court  in
    which  the court shall determine the validity
    ofthe questionedadministrativeaction inissue.
    7 U.S.C.   2023(a) (1982).
    9
    factual findings  anent the culpability of food  store owners who
    accepted food  stamps as  compensation for prohibited  goods, and
    (2) determinations  about what sanctions were  condign, given the
    identities of  the violators  and the  nature of the  violations.
    See Broad St., 
    720 F.2d at 219
    ; Kulkin, 
    626 F.2d at 182-83
    .  The
    question  in the  instant case  is more  complex because  the two
    parts of the calculus   liability and sanctions   are imbricated:
    FNS's determination  that  Massachusetts's EER  was  unacceptably
    high essentially determined both the Commonwealth's liability and
    the  amount  of  the   resultant  sanction.    See  7   C.F.R.
    275.25(d)(3) (1982) (explicated supra pp. 3-4).
    Notwithstanding  this  conflation   of  liability   and
    remediation,  a  reviewing court's  path  remains  clear.   Where
    liability  is  at issue,  section  2023(a)  requires that  courts
    review administrative determinations de  novo.  If this statutory
    bedrock is to  endure, inexorably mixed  issues of liability  and
    sanctions  must  likewise be  assessed de  novo,  even if  such a
    penetrating standard  of judicial review intrudes  to some extent
    into agency decisionmaking in the sanctions area.  Thus,  insofar
    as the Commonwealth's assignments of error implicate the validity
    of  the EER  and, therefore,  the amount  of the  penalty levied,
    plenary review is indicated.
    We are quick to remark, however, that de novo review in
    cases  of this genre does not give  courts an entirely free hand.
    Where, as here, the issues before the court  are legal in nature,
    de novo review of an administrative matter does not mean that the
    10
    district  court must  devise an  entirely new  regulatory scheme.
    Rather, in  respect to  liability issues,  the court  must ensure
    that the agency has  followed its own regulations and  that those
    regulations  do not  exceed the  scope of  the  agency's mandate.
    With  these precepts in  mind, we now  address the Commonwealth's
    statistical arguments.5
    B.  Statistical Bias.
    In order  to estimate Massachusetts's food  stamp error
    rate  and thereby  determine  what  (if  any) sanction  might  be
    appropriate,  FNS sampled  194  of the  Commonwealth's cases  for
    compliance.  Massachusetts and the amici urge that the appellees'
    sampling  methodology  is  unlawful  because the  risk  of  error
    inherent in FNS's approximation is not evenly  shared between the
    state  and the  federal  government.   Because FNS's  statistical
    method  effectively  determines the  Commonwealth's  liability as
    well as the amount of  the sanction to be imposed, our  review of
    the statistical bias claim is plenary.
    We  start with  the  obvious:    FNS's sampling  is  no
    different than any  other statistical sampling in  that it cannot
    produce results that reflect the actual error rate  with unerring
    accuracy.   Thus, whatever  sampling technique  is used, the  EER
    5Because  the court  of appeals  and the district  court are
    constrained  to  apply exactly  the  same  standards of  judicial
    review  in these situations, we cede no deference to the district
    court's views.   See Lloyd v. Georgia  Gulf Corp., 
    961 F.2d 1190
    ,
    1193  (5th Cir. 1992); Terry A. Lambert Plumbing, Inc. v. Western
    Sec. Bank, 
    934 F.2d 976
    , 979 (8th Cir. 1991).
    11
    will sometimes underestimate and sometimes overestimate a state's
    actual  error  rate.    Massachusetts  recognizes  this  fact  of
    statistical life but  complains that  it must foot  the bill  for
    overestimations  by paying sanctions although if underestimations
    occur it reaps no corresponding benefit (e.g., credits that could
    be  used to  offset  future penalties).    As  a matter  of  pure
    mathematics,  the Commonwealth's  theory appears  to  hold water.
    Under  the federal scheme, the  risk of error  causes the penalty
    provision to weigh more heavily on the states than on the federal
    government.6  Nonetheless,  we do not  see how this  circumstance
    renders the scheme unlawful.
    The  Food Stamp Act provides that a state is liable for
    "the dollar value  equivalent of the State agency's payment error
    rate, as determined by  the Secretary," to the extent  it exceeds
    the  higher of  the  national payment  rate  or the  state  error
    payment  rate  minus the  national rate  of  error reduction.   7
    U.S.C.A.    2025(g) (West Supp.  1981).   There are  a number  of
    mechanisms by which FNS could implement this statutory directive,
    each with incumbent advantages and disadvantages.   Massachusetts
    suggests  that   this   court's   right   to   review   liability
    determinations  de novo leaves us free  to rethink the regulatory
    choice among these various options.
    We  do not agree.  The power of plenary judicial review
    6Of course, the states  profit from a similar bias  when FNS
    awards  bonuses for  lower error  rates.   In that  instance, the
    federal government bears the  cost of underestimating state error
    rates but gains no offsetting advantage from overestimates.
    12
    does not obviate the devoir of persuasion in a food stamp case in
    which  a  plaintiff challenges  the  validity  of the  regulatory
    mosaic.   See Kulkin, 
    626 F.2d at 183
    .   To carry its burden, the
    plaintiff must still  show that the  federal agency exceeded  its
    statutory or constitutional authority.  An attempt to make such a
    showing  must  frankly  recognize  that  the  art  of  regulation
    involves line-drawing.  When Congress entrusts an agency with the
    responsibility for  drawing lines, and the  agency exercises that
    authority  in a reasonable way,  neither the fact  that there are
    other possible places  at which the line  could be drawn  nor the
    fact  that the administrative  scheme might  occasionally operate
    unfairly   from  a   particular   participant's  perspective   is
    sufficient, standing alone,  to undermine the  scheme's legality.
    See  Knebel v. Hein,  
    429 U.S. 288
    , 294  (1977) (holding that the
    availability of  more equitable  food stamp regulations  does not
    render  the  Secretary's particular  regulatory  scheme invalid);
    Louisiana  v. Black, 
    694 F.2d 430
    , 431-32 (5th Cir. 1982) (same);
    see  also  Chevron  U.S.A.  Inc.  v.  Natural  Resources  Defense
    Council, Inc., 
    467 U.S. 837
    , 843 n.11 (1984) ("The court need not
    conclude  that  the  agency  construction was  the  only  one  it
    permissibly  could have adopted  . . .  to uphold [it] .  . . .")
    (collecting cases); Mourning v.  Family Publications Serv., Inc.,
    
    411 U.S. 356
    , 371  (1973) ("That  some other  remedial provision
    might be preferable is irrelevant.").  In other words, so long as
    the administrative scheme  is a  valid exercise  of the  agency's
    authority, whether or  not a perfect exercise of  that authority,
    13
    the courts must honor it.  See Sprandel v. Secretary  of HHS, 
    838 F.2d 23
    , 27 (1st Cir.  1988) (per curiam)  (observing that where
    administrative line-drawing is  involved, "there  are no  perfect
    solutions").
    These  principles are dispositive  here.  Massachusetts
    argues,  in effect, that a system  of credits and debits for each
    state would be  preferable to, and  fairer than, the  statistical
    methodology selected  by FNS.   Whether  or not  this is  so, the
    Commonwealth has not demonstrated that the system selected by FNS
    is an irrational one,  that it is arbitrarily conceived,  that it
    is  profoundly flawed, or that it operates in a wholly capricious
    manner.   Congress  directed  that  the  error  rate  was  to  be
    "determined  by the Secretary," 7  U.S.C.A.   2025(g) (West Supp.
    1981), and  the Secretary implemented this  directive through the
    application  of what  all  parties agree  is routine  statistical
    sampling.  The  enabling statute itself  sets out the  arithmetic
    mechanism for determining the sanction, given the error rate; the
    Secretary has followed this  command, albeit without refining his
    statistical  estimates.   The  Secretary might,  as Massachusetts
    advocates,  have  installed   a  more  intricate   and  sensitive
    statistical  system,  but doing  so  would  not necessarily  have
    represented an  improvement.  The proposed  alternatives would by
    all  accounts be more  complicated to  administer and  could well
    prove less of a deterrent to administrative errors.
    In terms of our analogy, the line drawn  by FNS, as the
    Secretary's designee, seems to have been plotted sensibly, if not
    14
    with  perfect  precision;  that  is, FNS  chose  a  configuration
    consistent  with  statutory  imperatives   and  well  within  the
    universe  of  plausible approaches.   Because  the administrative
    scheme did not exceed  the agency's statutory discretion, summary
    judgment was properly granted on this issue.  See Valley Citizens
    for a Safe  Env't v. Aldridge, 
    886 F.2d 458
    ,  469 (1st Cir. 1989)
    (finding that reasonableness of  agency action supported  summary
    judgment); Kulkin,  
    626 F.2d at 183
     (upholding  summary judgment
    where  the  disputed facts  were  immaterial  to the  plaintiff's
    ultimate burden at trial).
    C.  Oversampling.
    The Commonwealth also asserts that FNS violated its own
    regulations  when it took a subsample comprised of 194 food stamp
    cases (as  opposed  to the  180  cases specified  in 7  C.F.R.
    275.3(c)(1)  (1982)).   The  district  court,  while noting  that
    Massachusetts  had  not raised  the issue  before the  Board, see
    Massachusetts I, 
    737 F. Supp. at
    122 n.3, reached  the merits and
    ruled that the  regulations, while mentioning 180  cases, did not
    set a maximum  subsample size.  
    Id. at 127
    .  For our part, we see
    no   reason  to   delve  behind  the   Commonwealth's  procedural
    default.7     Accordingly,   we  hold   that   Massachusetts,  by
    7Our inquiry  into procedural  default has been  hindered by
    the  Commonwealth's failure to follow  Fed. R. App.  P. 30(d) and
    include  an  index   in  its  appendix   of  excerpts  from   the
    administrative  record.   This  failure is  exacerbated by  other
    shortcomings in  the main appendix:   various pages  are missing,
    illegible,  and/or out  of  sequence.    It  is,  of  course,  an
    appellant's obligation  "to provide  this court with  an appendix
    sufficient  to support its points  on appeal."   United States v.
    One  Motor Yacht  Named Mercury,  
    527 F.2d 1112
    , 1113  (1st Cir.
    15
    neglecting to raise this claim before the Board, waived any right
    to object to the sample size.8
    In the usual administrative law case, a court ought not
    to consider points  which were not  seasonably raised before  the
    agency.  See United States v. L. A. Tucker Truck Lines, Inc., 
    344 U.S. 33
    ,  37 (1952)  (discussing the  "general  rule that  courts
    should  not  topple  over  administrative  decisions  unless  the
    administrative body . . . has erred against objection made at the
    time appropriate  under its  practice"); Khalaf v.  Immigration &
    Naturalization  Serv.,   
    909 F.2d 589
    ,  592   (1st  Cir.  1990)
    (explaining  that  issues  not  raised  before an  administrative
    appeal  board cannot  be  adjudicated in  the course  of judicial
    review); Removatron Int'l  Corp. v. FTC,  
    884 F.2d 1489
    ,  1493-94
    (1st Cir. 1989); Colin K.  v. Schmidt, 
    715 F.2d 1
    , 5-6  (1st Cir.
    1983).
    The   doctrine   of    procedural   default   in    the
    administrative context is analogous  to the established rule that
    appellate courts  will not  entertain arguments which  could have
    1975).  When, as now, an appellant shirks this duty, it must bear
    the  onus  of  any  insufficiencies  in  the  record  on  appeal,
    including inadequacies in the appendix.
    8The parties have  characterized the Commonwealth's  failure
    to raise the oversampling  issue as an "exhaustion" problem.   We
    do  not view  it in  that light.   Administrative  exhaustion and
    waiver can be  concurrent concepts  at times, see  IV Kenneth  C.
    Davis, Administrative  Law Treatise    26:7 (1983), but  they are
    not  synonymous here.  Because the Board's decision was final and
    reviewable by  the district court, we  believe that Massachusetts
    exhausted its  administrative remedies.   See,  e.g., Athehortua-
    Vanegas  v. Immigration & Naturalization Serv., 
    876 F.2d 238
    , 240
    (1st Cir. 1989).
    16
    been, but  were  not, raised  in  the trial  court.   See,  e.g.,
    Clauson v. Smith, 
    823 F.2d 660
    , 666 (1st Cir.  1987) (collecting
    cases).  As in the trial court/appellate court analogy, requiring
    parties to develop their  arguments in the administrative setting
    before seeking judicial review serves several salutary  purposes.
    We  list three  such purposes  that have  direct bearing  in this
    instance.
    First,  when  the  administrative agency  is  given  an
    opportunity to  address a  party's objections,  it can  apply its
    expertise, exercise  its informed  discretion, and create  a more
    finely tuned record for judicial review.  By way of illustration,
    if Massachusetts had appropriately raised the oversampling  issue
    in  this case, we would now have  the benefit of both the Board's
    interpretation  of the  applicable  regulations  and  its  expert
    opinion concerning  the ultimate  effect of the  augmented sample
    size.     Though  different  administrative  conclusions  deserve
    different degrees  of deference,  it is essential  to the  proper
    development of  administrative  law that  courts  exercise  their
    function of judicial review on a well-rounded record.  See McKart
    v.  United  States, 
    395 U.S. 185
    ,  194  (1969); see  also Valley
    Citizens,  
    886 F.2d at 469
      (observing that "the  place to attack
    standard  methodology, at least in  the first instance, is before
    the agency, not before a reviewing court").
    A second reason for applying strict rules of procedural
    default  in the  administrative  context is  to promote  judicial
    economy.    A  claim  seasonably  presented  to  the  appropriate
    17
    administrative  body has  an appreciable chance  of being  put to
    rest,  or  at least  narrowed,  before  it depletes  the  heavily
    burdened  resources of  the federal  courts.   Massachusetts, the
    amici, and the  court below all  relate previous instances  where
    there  were problems  with  sample sizes  and, consequently,  the
    Board overturned  FNS sanctions.  See, e.g., Massachusetts I, 
    737 F. Supp. at 122
    .  Thus, raising the issue before  the Board might
    well have led to its resolution, once and for all.
    Finally,  enforcing  procedural default  solidifies the
    agency's autonomy  by allowing it the opportunity  to monitor its
    own mistakes and by ensuring that regulated parties do not simply
    turn  to the  courts as  a tribunal  of first  resort.   A double
    whammy would  result if  Article III  judges encouraged such  end
    runs  by demonstrating a  willingness to  hear all  challenges to
    regulatory action regardless of  whether the parties raised those
    challenges before the  affected agency:   power would drain  from
    the agencies  and administrative appeals would  flood the federal
    courts.
    To be  sure, there are  exceptional circumstances under
    which  a court might dispense with the raise-or-waive rule in the
    administrative  law context.    Cf., e.g.,  United  States v.  La
    Guardia, 
    902 F.2d 1010
    , 1012-13 (1st Cir. 1990) (explaining why,
    in  a  criminal case,  the court  of  appeals would  exercise its
    discretion to  review a particular constitutional  claim that had
    not been  raised  in the  trial  court).   As a  general  matter,
    however,  courts will  not entertain  an  issue that  the parties
    18
    failed  to raise  in the proper  administrative venue  unless the
    issue is jurisdictional in nature or some other compelling reason
    exists.  See  Tucker Truck Lines, 
    344 U.S. at 38
    ; Rana v. United
    States,  
    812 F.2d 887
    , 889-90  &  n.2  (4th  Cir. 1987).    The
    Commonwealth tenders no such justification here.
    Whether FNS appropriately  followed its own regulations
    in regard to  sampling, and  the effect and  consequences of  any
    failure  to  do  so,  are  matters  which  in  no  way  implicate
    jurisdictional concerns.  On the  contrary, they present the sort
    of problems routinely within the Board's purview and at the heart
    of its  expertise.   The Commonwealth  has advanced  no palatable
    excuse  for failing to raise the oversampling issue at the proper
    time  and in  the proper  forum.   Under these  circumstances, we
    cannot  justify  any  relaxation  of  the  customary rule.    The
    Commonwealth waived the oversampling issue.9
    IV.  GOOD-CAUSE WAIVERS
    Massachusetts argues  that it  was entitled to  a good-
    cause  waiver as  a matter of  right and that  the district court
    erred in summarily rejecting its beseechment.  We do not agree.
    Unlike  questions of  statistical propriety,  see supra
    Part III, the  matter of  a good-cause waiver  is not  imbricated
    9Incident to  this procedural default  is the Commonwealth's
    quest for  reversal on the ground  of inconsistent administrative
    positions.   But  here, the  Commonwealth is  hoist with  its own
    petard.    It did  not bring  the  oversampling issue  before the
    Board,  thus depriving  the Board  of the  chance to  explore the
    issue in a  zoetic context informed  by both case-specific  facts
    and  administrative  precedents.   Because  we  cannot judge  the
    Board's  consistency on an issue  it did not  adjudicate, we deem
    this related claim to be waived as well.
    19
    with a fundamental determination  of liability but relates solely
    to FNS's  determination of the  appropriate sanction.   Thus, the
    Food Stamp  Act's  provision  for  de novo  review  of  liability
    findings  does  not apply.10    Instead,  we  review  the  waiver
    denial to see whether it  was arbitrary, capricious, or  contrary
    to law.  Broad St., 
    720 F.2d at 220
    ; Kulkin, 
    626 F.2d at 184
    .  In
    so doing, we recognize that an administrative agency enjoys great
    latitude  to   interpret  its   own  rules  as   long  as   those
    interpretations  are  reasonable.   See  Martin  v.  Occupational
    Safety  & Health  Rev. Comm'n,  
    111 S. Ct. 1170
    ,  1175-76 (1991)
    (explaining that an "agency's construction of its own regulations
    is entitled  to substantial  deference") (quoting Lyng  v. Payne,
    
    476 U.S. 926
    , 939 (1986)); accord Udall  v. Tallman, 
    380 U.S. 1
    ,
    16-17  (1965); Federal  Labor  Relations Auth.  v. United  States
    Dep't  of the  Navy, 
    941 F.2d 49
    ,  59 (1st  Cir. 1991);  Dunn v.
    Secretary of United States Dep't of Agric., 
    921 F.2d 365
    , 366-67,
    369 (1st Cir. 1990).
    10Indeed,  the legislative  history  reveals  that  Congress
    explicitly   rejected   the   de  novo   judicial   review   that
    Massachusetts would have us indulge on this issue:
    Every State against which  the Secretary
    asserted a claim would have the right to seek
    administrative  and  judicial  review of  the
    claim  in  accordance  with   the  procedures
    contained in section 14 of the Act.   None of
    these procedures would  be applicable to  the
    Secretary's review of the  State's contention
    that  it had  good cause  for its  failure to
    meet the appropriate level of error.
    H.R. Rep. No. 788,  96th Cong., 2d Sess. 74  (1980), reprinted in
    1980 U.S.C.C.A.N. 843, 907.
    20
    It is in the Secretary's realm to grant or deny a good-
    cause  waiver.11   See 7  U.S.C.A.    2025(g) (West  Supp. 1981).
    To obtain  such a waiver, a  state must show, at  a bare minimum,
    that  one  of   the  following  events  occurred:    (1)  natural
    disasters, civil disorders, labor unrest, or other  circumstances
    beyond   the  state's   control,   adversely  affecting   program
    operations;  (2) significant  caseload  growth;  (3)  legislative
    changes    adversely    affecting    program   management;    (4)
    misapplication  of federal  policy with  erroneous approval  from
    FNS; or  (5) exemplary efforts to  reduce the error rate.   See 7
    C.F.R.   275.25(d)(5)(A)-(G).   Whereas a threshold showing along
    these  lines may  qualify a  state for  a good-cause  waiver, the
    Secretary  can  still deny  the waiver  if  he finds  the state's
    showing insufficient  either because other factors overshadow the
    applicant's  compendium  of  exculpatory  factors  or  because  a
    particular  event  or  events  listed  by  the  applicant  cannot
    withstand objective scrutiny.12  
    Id.
    Massachusetts  sought  a  good-cause  waiver  on  three
    grounds, viz., caseload growth, changes in federal laws, and good
    11The  Secretary has  delegated this  power to  FNS.   See 7
    C.F.R.   275.25(d)(5) (1982).
    12The regulations also provide  for an "automatic" waiver in
    certain limited  circumstances.   See 7 C.F.R.    275.25(d)(5)(G)
    (1982).  In  order to receive  such a waiver,  a state must  have
    implemented an FNS-approved corrective  action program in the six
    months before  the period during  which the excessive  error rate
    materialized, and must meet  specially reduced target error rates
    thereafter.  The record does not indicate that Massachusetts ever
    claimed  eligibility for  an  automatic waiver  applicable to  FY
    1982.
    21
    faith efforts to  reduce its error rate.   FNS denied the waiver.
    In so doing, it took much of the wind from Massachusetts's sails.
    Specifically, FNS explained  that Massachusetts's caseload growth
    was  not  a sufficient  excusatory  fact because  the  figure was
    bloated  by   one-time  social  security   "cash-ins";  that  new
    legislation was not a factor because the state had four months to
    adapt  to changes in the law; and that Massachusetts's efforts to
    reduce errors  were anything but "exemplary."   Additionally, FNS
    brought an  independent set of considerations  to bear, stressing
    the  Commonwealth's steady  history  of failing  to meet  program
    deadlines  and requirements.    The Board  approved the  agency's
    decision to withhold  a waiver  on this ground  and the  district
    court affirmed by summary judgment.
    Massachusetts  and FNS  attempt to  rejoin  this point-
    counterpoint  before us.  Our  role in this  setting, however, is
    not  to weigh the factual  averments and assess,  on balance, the
    merits of a waiver.  Rather, "[i]f the court upholds the agency's
    finding  of violation,  the  court's only  remaining  task is  to
    examine  the  sanction imposed  in  light  of the  administrative
    record  to   judge  whether  the  agency   properly  applied  its
    regulations  . . . ."   Broad St.,  
    720 F.2d at 220
    .   In fine, a
    reviewing court may only  overturn agency sanction determinations
    that  are arbitrary  and capricious,  see 
    id.,
      which is  to say,
    "unwarranted  in law  . .  . or  without justification  in fact."
    Butz  v. Glover Livestock Comm'n Co., 
    411 U.S. 182
    , 185-86 (1973)
    (citation omitted); accord Collazo, 
    668 F.2d at 65
    .
    22
    In the  posture of this case,  the idiosyncratic nature
    of summary judgment practice gives  a slightly different twist to
    the   operation   of   the  familiar   "arbitrary-and-capricious"
    standard.    Because we  are  scrutinizing  the district  court's
    disposition of  a motion filed  under Fed.  R. Civ. P.  56(c), we
    must approach the  record "in  the light most  hospitable to  the
    party  opposing  summary   judgment,  indulging  all   reasonable
    inferences in  that party's  favor."  Griggs-Ryan  v. Smith,  
    904 F.2d 112
    ,  115 (1st Cir. 1990).   In order to prevail, therefore,
    the  Commonwealth  must persuade  us  that the  record  evinces a
    genuine dispute over  some material fact.   Emphasizing the items
    set  forth in  support of  its waiver  application, Massachusetts
    says  that  such  a  dispute  existed.    But,  this  perspective
    overlooks the relevant point:   the real question is  not whether
    the  facts set  forth in  support of  the waiver  application are
    disputed,  but, rather,  whether the  administrative record,  now
    closed,  reflects  a sufficient  dispute  concerning  the factual
    predicate on  which FNS relied in denying the waiver to support a
    finding that the  agency acted arbitrarily  or capriciously.   We
    explain briefly.
    On a motion for summary judgment, a fact is material if
    it  "might affect  the outcome  of the  suit under  the governing
    law"; a dispute is  "genuine" if a reasonable jury  could resolve
    it in favor of the nonmoving  party.  United States v. One Parcel
    of Real Property, Etc., 
    960 F.2d 200
    , 204 (1st Cir. 1992) (citing
    Anderson v.  Liberty  Lobby, Inc.,  
    477 U.S. 242
    ,  248  (1986)).
    23
    Because the law  allows FNS to exercise discretion  as long as it
    has minimally  adequate justification in  fact for doing  so, the
    facts  material to the propriety of summary judgment on the good-
    cause  waiver question  are those  facts that  relate  to whether
    FNS's denial of the waiver was arbitrary and capricious   not the
    facts on which a plea for issuance of a waiver might have rested.
    See Villanueva v. Wellesley College, 
    930 F.2d 124
    , 129 (1st Cir.)
    (noting that  an appellate tribunal must  review summary judgment
    in  light of  the plaintiff's  ultimate burden  at trial),  cert.
    denied, 
    112 S. Ct. 181
     (1991).  In a nutshell, then, a bona fide
    skirmish  over the  veracity  and importance  of ancillary  facts
    which the Commonwealth thinks support its waiver application does
    not  egest the  possibility of  summary judgment,  for it  is the
    basis underlying the  agency's denial  of a waiver  upon which  a
    reviewing court must focus.  See Town of Norfolk v. United States
    Army  Corps  of  Eng'rs, 
    968 F.2d 1438
    ,  1448  (1st Cir.  1992)
    (upholding  a grant of summary judgment  on the basis that, if an
    agency   determination   is    "reasonably   supported   by   the
    administrative record, [a reviewing court's] inquiry must  end");
    see  also  Villanueva,  
    930 F.2d at 131
      (ruling  that  summary
    judgment is proper when a plaintiff disputes some facts, but does
    not  adduce  sufficient  evidence  from  which  the  trier  could
    conclude that the defendant failed  to meet the applicable  legal
    standard).
    The district court noted that the  facts upon which the
    Commonwealth relied, "though qualifying it for consideration  for
    24
    a waiver,  and indeed  possibly  warranting a  waiver, [did]  not
    entitle it  to a waiver as a matter of right."  Massachusetts II,
    788 F.  Supp. at 1275.  We  agree with this assessment.   We add,
    moreover,  that, as  this court  has recognized  for  many years,
    simply rearguing the merits of an agency's discretionary decision
    will not forestall summary judgment on such an issue.  See, e.g.,
    Concerned  Citizens on I-190 v. Secretary of Transp., 
    641 F.2d 1
    ,
    7 (1st Cir. 1981).  Although  we, like the district court, assume
    for  argument's  sake that  the  subsidiary  facts on  which  the
    Commonwealth's  waiver  application rested  are true,  the record
    nevertheless reveals  that FNS  weighed these facts  against, and
    eventually based  its denial  on, other uncontested  facts (e.g.,
    the  contribution  of  Social  Security  "cash-ins"  to  caseload
    growth, the superior performance of  other states under much  the
    same  circumstances,  and  Massachusetts's checkered  history  of
    noncompliance  with food  stamp program  directives).   Regarding
    this latter  set of subsidiary  facts, there is no  dispute.  See
    Massachusetts II, 788 F. Supp. at 1274.
    Let  us be  perfectly clear.   We  do not  suggest that
    courts should  rubber-stamp agency  decisions under the  guise of
    "arbitrary-and-capricious"  review.    Had  FNS,  in  this  case,
    rejected the waiver  application on a ground that its regulations
    did  not  contemplate,  or without  considering  the  applicant's
    stated  basis   for  relief,  or  in  reliance  on  a  manifestly
    inadequate  factual showing, there might well be room for a court
    to  find the  agency's actions  arbitrary  and capricious.   But,
    25
    nothing  of the kind transpired here.  Rather, the record reveals
    a  situation in  which  FNS carefully  considered  the whole  and
    declined   rationally, if not inevitably   to grant discretionary
    relief.
    In the final analysis, Congress elected to delegate the
    discretion to  award or withhold good-cause waivers of food stamp
    penalties to the Secretary    not to the federal courts.   Where,
    as here,  the legislature has conferred  generous discretion upon
    an agency, a reviewing  court must contemplate the administrative
    record  with  due  regard  for  that  discretion  and  gauge  the
    reasonableness of agency  action in  that light.   Given the  low
    quantum   of   factual   justification   necessary   to   deny  a
    discretionary waiver under section 2025(g), we are constrained to
    conclude that, since FNS's denial of the waiver  was based upon a
    plausible and  essentially uncontested set of  reasons documented
    in  the  record and  consistent  with  existing regulations,  the
    district court correctly ruled in its favor, notwithstanding that
    the case was at the summary judgment stage.  See Valley Citizens,
    
    886 F.2d at 469
    ; see also Citizens to Preserve Overton Park, Inc.
    v. Volpe,  
    401 U.S. 402
    , 416 (1971)  ("The Court is not empowered
    to substitute its judgment for that of the agency.").
    V.  CONCLUSION
    We   need   go   no  further.      The   Commonwealth's
    asseverational  array  announces an  abundance  of  red meat  and
    strong drink; yet, its table is spread with far less hearty fare.
    Because  appellant's arguments  afford  scant sustenance  for its
    26
    position, the disputed sanction must stand.  On the record before
    it, the district court  did not err in entering  summary judgment
    in favor of the Secretary.
    Affirmed.
    Affirmed
    27
    

Document Info

Docket Number: 92-1539

Filed Date: 1/22/1993

Precedential Status: Precedential

Modified Date: 12/21/2014

Authorities (34)

Butz v. Glover Livestock Commission Co. , 93 S. Ct. 1455 ( 1973 )

Ingersoll-Rand Co. v. McClendon , 111 S. Ct. 478 ( 1990 )

Francisco Collazo, D/B/A Cash & Carry, Inc. v. United ... , 668 F.2d 60 ( 1981 )

Town of Norfolk and Town of Walpole v. United States Army ... , 968 F.2d 1438 ( 1992 )

terry-a-lambert-plumbing-inc-v-western-security-bank-formerly-doing , 934 F.2d 976 ( 1991 )

federal-labor-relations-authority-v-us-department-of-the-navy-naval , 941 F.2d 49 ( 1991 )

United States v. Reisinger , 9 S. Ct. 99 ( 1888 )

Removatron International Corporation and Frederick E. ... , 884 F.2d 1489 ( 1989 )

Greenwood Trust Company v. Commonwealth of Massachusetts , 971 F.2d 818 ( 1992 )

United States v. Julio La Guardia, United States of America ... , 111 A.L.R. Fed. 859 ( 1990 )

Valley Citizens for a Safe Environment v. Edward C. ... , 886 F.2d 458 ( 1989 )

McKart v. United States , 89 S. Ct. 1657 ( 1969 )

Citizens to Preserve Overton Park, Inc. v. Volpe , 91 S. Ct. 814 ( 1971 )

Chevron U. S. A. Inc. v. Natural Resources Defense Council, ... , 104 S. Ct. 2778 ( 1984 )

Gerald Griggs-Ryan v. Beulah Smith, Gerald Griggs-Ryan v. ... , 904 F.2d 112 ( 1990 )

Broad Street Food Market, Inc. v. United States , 720 F.2d 217 ( 1983 )

Luis N. Athehortua-Vanegas v. Immigration and ... , 876 F.2d 238 ( 1989 )

United States v. Harrol Jerry Holley , 818 F.2d 351 ( 1987 )

William D. LLOYD, Plaintiff-Appellant, Cross-Appellee, v. ... , 961 F.2d 1190 ( 1992 )

Anderson v. Liberty Lobby, Inc. , 106 S. Ct. 2505 ( 1986 )

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