New Life Evangelistic Center, Inc. v. Sebelius

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
NEW LIFE EVANGELISTIC
CENTER, INC.,
Plaintiff,
v.
KATHLEEN SEBELIUS, Secretary of the Civil Action No. 09-01294 (CKK) (DAR)
U.S. Department of Health and Human
Services,
and
MARTHA N. JOHNSON, Administrator,
U.S. General Services Administration,
Defendants.
MEMORANDUM OPINION
(December 1, 2010)
Plaintiff New Life Evangelistic Center, Inc. (“New Life”) commenced this action on July
13, 2009, naming as defendants Kathleen Sebelius, in her official capacity as Secretary of the
U.S. Department of Health and Human Services (“HHS”), and Martha N. Johnson, in her official
capacity as Administrator of the U.S. General Services Administration (“GSA”) (collectively,
“Defendants”).1 In the first instance, New Life challenged HHS’ denial of New Life’s
application, made pursuant to Title V of the McKinney-Vento Homeless Assistance Act, 42
U.S.C. §§ 11301 et seq. (the “McKinney Act” or the “Act”), to use a particular piece of federal
1
Ms. Johnson was automatically substituted as a defendant in this action upon her
appointment as Administrator of the GSA. See Fed. R. Civ. P. 25(d) (“when a public officer who
is a party in an official capacity . . . resigns, or otherwise ceases to hold office,” during the
pendency of an action, “[t]he officer’s successor is automatically substituted as a party”).
property in Cape Girardeau, Missouri for establishing a homeless assistance program. On
December 8, 2009, after conducting a searching review of the administrative record and the
parties’ respective submissions, this Court vacated the denial and remanded the action for further
proceedings below. On remand, HHS again denied New Life’s application and issued a second
denial letter. Presently before the Court is New Life’s [35] Second Motion for Vacatur and
Remand, through which New Life challenges both the substantive bases for the second denial
letter and the procedural underpinnings of the proceedings conducted on remand. After
reviewing the parties’ submissions, including the attachments thereto, the administrative record,
the relevant authorities, and the record of the case as a whole, the Court shall DENY New Life’s
Second Motion for Vacatur and Remand and DISMISS this action in its entirety, for the reasons
set forth below.
I. BACKGROUND
The Court assumes familiarity with its prior opinion in this action, which sets forth in
detail the factual and procedural background of this case, see New Life Evangelistic Ctr., Inc. v.
Sebelius, 672 F. Supp. 2d 61 (D.D.C. 2009), and shall therefore only address the factual and
procedural background necessary to address the issues currently before the Court.
A. The McKinney Act and the Accompanying Regulatory Framework
Congress passed the McKinney Act in 1987, recognizing that “the federal government
‘has a clear responsibility and an existing capacity’ to help meet an immediate and unprecedented
crisis due to the lack of shelter for a growing number of individuals and families.” Nat’l Law
Ctr. on Homelessness & Poverty v. U.S. Veterans Admin., 98 F. Supp. 2d 25, 27 (D.D.C. 2000)
(quoting 42 U.S.C. § 11301(a)). In particular, Title V of the Act, 42 U.S.C. §§ 11411-11412, and
2
its implementing regulations, 45 C.F.R. §§ 12a.1 et seq., provide a comprehensive legal
framework for making “unutilized, underutilized, excess or surplus” federal real property
available for use by representatives of the homeless. Id. § 12a.2(a). In the process, the Act
appropriates and modifies, in part, the administrative procedures established by the Federal
Property and Administrative Services Act of 1949, 40 U.S.C. §§ 541 et seq., which authorizes
HHS to dispose of surplus property “as needed for use in the protection of public health,” id. §
550(d)(1), a congressional mandate interpreted to include use by organizations that provide
“services (including shelter) to homeless individuals,” 45 C.F.R. § 12.3(e).
Under the McKinney Act, HHS is charged with soliciting and evaluating applications by
representatives of the homeless for the use of properties designated as suitable “surplus” federal
property. 42 U.S.C. § 11411(e). The process starts, however, with the Secretary of Housing and
Urban Development (“HUD”), which is responsible for canvassing landholding agencies to
collect data on properties that are designated as unutilized, underutilized, excess, or surplus. 45
C.F.R. § 12a.3. HUD is required to publish in the Federal Register a description of any available
property that has been identified as suitable for use as a facility to assist the homeless. 42 U.S.C.
§ 11411(c); 45 C.F.R. § 12a.8(a). Thereafter, any representative of the homeless that may be
interested in such property must send HHS a written “expression of interest” within sixty days.
45 C.F.R. § 12a.9(a). Upon receipt of a written expression of interest, the property may not be
made available for any other purpose until the application has been resolved. Id. § 12a.9(a)(2).
Once HHS has received an expression of interest, it sends the interested party an
application packet, which requires the applicant to provide certain information, including, among
other things, (i) a description of the applicant organization, (ii) a description of the property
3
desired, (iii) a description of the proposed program, (iv) a description of the applicant
organization’s ability to finance and operate the proposed program, and (v) a certification of
compliance with non-discrimination requirements. Id. § 12a.9(b); see also Appl. Instruction
Booklet at AR686-715.2
Applications must be received by HHS within ninety days after receipt of an expression
of interest. 42 U.S.C. § 11411(e)(2); 45 C.F.R. § 12a.9(d). Upon receipt, HHS “review[s] [the
application] for completeness and, if incomplete, may return it or ask the applicant to furnish any
missing or additional required information prior to final evaluation of the application.” 45
C.F.R. § 12a.9(e)(1). However, “[d]ue to the short time frame imposed for evaluating
applications, HHS’ evaluation will, generally, be limited to the information contained in the
application.” Id. § 12a.9(c). Indeed, the Application Instruction Booklet advises:
[Incomplete applications] will either result in disapproval of the
application or a request for additional information. It is to the
applicant’s benefit to err on the side of providing too much
information as opposed to omitting information or not providing
enough detail. It is the applicant’s responsibility to ensure their [sic]
application presents all the information requested in a detailed and
complete manner.
Appl. Instruction Booklet at AR691.
HHS must “evaluate each completed application within 25 days of receipt and . . .
promptly advise the applicant of its decision.” 45 C.F.R. § 12a.9(e)(2); see also 42 U.S.C. §
11411(e)(3). By regulation, all applications must be evaluated on the basis of the following five,
non-exhaustive criteria (which are listed in descending order of priority, except for the final two
2
Citations to “AR” refer to the Administrative Record. See Docket Nos. [14], [15], [33],
[37].
4
factors, which are of equal importance):
(i) Services offered. The extent and range of proposed services,
such as meals, shelter, job training, and counseling.
(ii) Need. The demand for the program and the degree to which
the available property will be fully utilized.
(iii) Implementation Time. The amount of time necessary for the
proposed program to become operational.
(iv) Experience. Demonstrated prior success in operating similar
programs and recommendations attesting to that fact by
Federal, State, and local authorities.
(v) Financial Ability. The adequacy of funding that will likely
be available to run the program fully and properly and to
operate the facility.
45 C.F.R. § 12a.9(e)(2) (emphasis added). In addition, the regulations provide that, when
“construction or major renovation is not required or proposed, the property must be placed into
use within twelve (12) months from the date of transfer.” Id. § 12.3(c). When major
construction or renovation is required or proposed, the property must be placed into use within
thirty-six months from the date of transfer. Id. Finally, the regulations reserve to HHS the right
to add “[a]dditional evaluation factors . . . as deemed necessary,” provided the application packet
is revised accordingly. Id. § 12a.9(e)(3).
B. Factual and Procedural Background
1. The Initial Denial of New Life’s Application
New Life is a self-described 501(c)(3) organization that provides services to homeless
men, women, and children throughout Missouri, Illinois, Kansas, and Arkansas. Compl., Docket
No. [1], ¶ 1; see also Appl. for Surplus Fed. Property (“Appl.”) at AR717. On December 19,
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2008, HUD published an availability announcement for the federal building and courthouse
located at 339 Broadway Street in Cape Girardeau, Missouri (the “Broadway Street Property”),
which had been identified as no longer serving a federal need. See Fed. Property Suitable as
Facilities to Assist the Homeless, 73 Fed. Reg. 77821-01 (Dec. 19, 2008).
On January 26, 2009, New Life filed its expression of interest requesting an application
for use of the property, see Jan. 26, 2009 Ltr. from B. Calkins to H. Ransom at AR681, and filed
a formal application on May 1, 2009, see Appl. at AR716-1006. In its application, New Life
proposed serving “temporary and/or chronically homeless persons in Cape Girardeau, Missouri
and the surrounding twenty-two rural counties.” Id. at AR721. More specifically, New Life
proposed providing transitional housing and related services through its “Core Program” to
approximately 125 homeless individuals per year, 20 of whom would also be eligible to receive
job training through New Life’s Leadership Job Training Program, as well as emergency shelter
and a free store to an additional 1,100 homeless individuals per year. Id. at AR721-22.
By letter to New Life President Rev. Lawrence W. Rice, Jr., dated May 28, 2009, HHS
denied New Life’s application for failure to meet the threshold requirements for four of the five
criteria set forth in the relevant regulations – namely, services offered, need, implementation
time, and financial ability. See May 28, 2009 Ltr. from P. Bartley to L. Rice at AR1023-26.
2. The Court’s Remand Order
On July 13, 2009, New Life commenced this action seeking judicial review of HHS’
decision. See Compl. Shortly thereafter, on July 21, 2009, it moved for a preliminary injunction,
see Pl.’s Mot. for Prelim. Inj., Docket No. [9], which was subsequently converted into and
treated as New Life’s opening brief on the merits, see Order (July 24, 2009), Docket No. [11], at
6
1-2. On October 9, 2009, Defendants filed an opposition and the administrative record. See
Defs.’ Mem. of P. & A. in Opp’n to Pl.’s Opening Merits Br., Docket No. [13]; AR1-1028,
Docket Nos. [14], [15]. New Life filed a reply on November 9, 2009, and Defendants filed a
surreply on November 18, 2009. See Pl.’s Reply in Supp. of its Mot. for Summ. J., Docket No.
[17]; Defs.’ Surreply in Supp. of their Mem. in Opp’n to Pl.’s Opening Merits Br., Docket No.
[20].
On December 8, 2009, after conducting a searching review of the administrative record
and the parties’ respective submissions, this Court vacated HHS’ decision and remanded the
action for further proceedings below. See New Life Evangelistic Ctr., 672 F. Supp. 2d at 61. In
remanding, the Court identified three specific defects in HHS’ decision. First, because New
Life’s underlying application did not include any proposal regarding primary health care services,
HHS erred in criticizing New Life for failing to make clear how it proposed to deliver such
services.3 Id. at 72-73. Second, HHS erred in relying exclusively on a “point-in-time” survey
conducted by the Missouri Housing Development Commission to conclude that New Life failed
to demonstrate a sufficient need for a program of the size and scope proposed, as New Life had
submitted other evidence and statistical data; to the extent HHS intended to rely only on the
point-in-time survey, it was required to explain its decision to discount contradictory evidence.
Id. at 73-74. Third, because New Life’s proposal included a description of estimated costs for
proposed capital projects and revenue sources for those projects, HHS erred in concluding that
New Life failed to allocate funds for capital improvements in its budget. Id. at 74-75. The Court
3
At the same time, the Court concluded that HHS did not err in faulting New Life for
failing to sufficiently explain how it proposed to deliver mental health and substance abuse
services. New Life Evangelistic Ctr., 672 F. Supp. 2d at 73 n.11.
7
declined to address New Life’s additional challenges to the decision, electing instead to remand
the action for further proceedings below. Id. Although it did note that “HHS would be well
served to augment the record below with such additional explanation as may be appropriate,” the
Court did not impose any specific conditions or limitations on the nature of the proceedings on
remand. Id. at 74 n.14; see also Order (Dec. 8, 2009), Docket No. [23].
3. The Proceedings on Remand
Shortly after the Court’s remand order, on December 11, 2009, New Life wrote to HHS
concerning the nature of the proceedings on remand. See Dec. 11, 2009 Ltr. from E. Waters to
D. Rybicki at AR1059-60. Specifically, New Life “propose[d] that before HHS reevaluates the
application per the Court’s [remand] order, New Life [] supplement its application.” Id. at
AR1059. By letter dated December 28, 2009, HHS rejected New Life’s proposal, indicating that
New Life’s original application was “complete” and taking the position that the relevant
regulations reserve to HHS the discretion to request further information. See Dec. 28, 2009 Ltr.
from D. Rybicki to E. Waters at AR1061-62.
By letter dated May 14, 2010, HHS again denied New Life’s application and issued a
second denial letter (the “Second Denial Letter”). See May 14, 2010 Ltr. from P. Bartley to L.
Rice (“2d Denial Ltr.”) at AR1215-1225. As before, albeit in considerably greater detail and
based on somewhat distinct reasoning, HHS denied New Life’s application for failure to meet the
threshold requirements for four of the five criteria set forth in the relevant regulations – namely,
services offered, need, implementation time, and financial ability. Id. On July 19, 2010, New
Life filed the present motion for vacatur and remand, challenging both the substantive bases for
the Second Denial Letter and the procedural underpinnings of the proceedings conducted on
8
remand. See Pl.’s Mem. of P. & A. in Supp. of Pl.’s Second Mot. for Vacatur & Remand (“Pl.’s
Mem.”), Docket No. [35-1]. Defendants filed an opposition, and supplemented the
administrative record to include additional materials referenced in denying New Life’s
application. See Defs.’ Mem. of P. & A. in Opp’n to Pl.’s Second Mot. for Vacatur & Remand
(“Defs.’ Opp’n”), Docket No. [41]; Defs.’ Not. of Suppl. Filing of Admin. Record, Docket No.
[33]; Defs.’ Not. of Suppl. Filing of Admin. Record, Docket No. [37]. On August 26, 2010,
Plaintiff filed a reply. See Pl.’s Reply to Defs.’ Opp’n to Pl.’s Second Mot. for Vacatur &
Remand (“Pl.’s Reply”), Docket No. [42]. The motion is now fully briefed and ripe for
adjudication.
II. LEGAL STANDARD
Both parties agree that HHS’ decision to deny New Life’s application for the Broadway
Street Property is properly analyzed under the “arbitrary or capricious” standard set forth in the
Administrative Procedure Act (the “APA”). See 5 U.S.C. § 706(2)(A) (“The reviewing court
shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be . . .
arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law”). New
Life, as the party challenging the agency action, bears the burden of proof. Abington Crest
Nursing & Rehab. Ctr. v. Sebelius, 575 F.3d 717, 722 (D.C. Cir. 2009) (citing City of Olmsted
Falls v. Fed. Aviation Admin., 292 F.3d 261, 271 (D.C. Cir. 2002)). In assessing the merits of
New Life’s challenge, the Court begins with the presumption that HHS’ action was valid. Grid
Radio v. Fed. Commc’ns Comm’n, 278 F.3d 1314, 1322 (D.C. Cir.), cert. denied, 537 U.S. 815(2002).
Agency action must generally be affirmed on the grounds originally stated by the agency;
9
a reviewing court may not attempt to supply “a reasoned basis for the agency’s action that the
agency itself has not given.” Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983). Nor may counsel’s “post hoc rationalizations,” offered
for the first time on judicial review, substitute for an agency’s obligation to articulate a valid
rationale in the first instance. El Rio Santa Cruz Neighborhood Health Ctr., Inc. v. U.S. Dep’t of
Health & Human Servs., 396 F.3d 1265, 1276 (D.C. Cir. 2005). Consistent with these principles,
judicial review is typically confined to the administrative record before the agency at the time the
decision was made. Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 284 (D.C. Cir. 1981).
In order to avoid a finding that the challenged agency action was arbitrary or capricious,
the “agency must [have] examine[d] the relevant data and articulate[d] a satisfactory explanation
for its action.” PPL Wallingford Energy LLC v. Fed. Energy Regulatory Comm’n, 419 F.3d
1194, 1198 (D.C. Cir. 2005) (quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43) (internal
quotation marks omitted). In articulating the reason for its action, the agency “must have
provided a ‘rational connection between the facts found and the choice made.’” Int’l Union,
United Mine Workers of Am. v. Mine Safety & Health Admin., __ F.3d __, 2010 WL 4180677, at
*4 (D.C. Cir. Oct. 26, 2010) (quoting Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43) (internal
notations omitted). An agency’s decision may be said to be arbitrary or capricious if any of the
following apply: (i) its explanation runs counter to the evidence before the agency or is so
implausible that it could not be ascribed to a difference of view or the product of agency
expertise; (ii) the agency entirely failed to consider an important aspect of the problem or issue;
(iii) the agency relied on factors which Congress did not intend the agency to consider; or (iv) the
decision otherwise constitutes a clear error of judgment. Motor Vehicle Mfrs. Ass’n, 463 U.S. at
10
43; accord Jicarilla Apache Nation v. U.S. Dep’t of Interior, 613 F.3d 1112, 1118 (D.C. Cir.
2010).
This standard of review is highly deferential to the agency; a court need not find that the
agency’s decision is “the only reasonable one, or even that it is the result [the court] would have
reached had the question arisen in the first instance in judicial proceedings.” Am. Paper Inst.,
Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 422 (1983). That is, it is not enough for the
agency decision to be incorrect; so long as it has some rational basis, the court is bound to uphold
the decision. Hosp. of Univ. of Pa. v. Sebelius, 634 F. Supp. 2d 9, 13 (D.D.C. 2009) (citing
Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971)). At bottom, the
reviewing court is not entitled to substitute its judgment for that of the agency. Overton Park,
401 U.S. at 416.
Finally, in evaluating agency action under the “arbitrary or capricious” standard, the
reviewing court must take “due account . . . of the rule of prejudicial error.” 5 U.S.C. § 706. Just
as the burden of establishing that the agency action is arbitrary or capricious rests with the party
challenging agency action, so too must that party establish that the errors ascribed were
prejudicial. Jicarilla Apache Nation, 613 F.3d at 1121 (citing PDK Labs. Inc. v. U.S. Drug
Enforcement Agency, 362 F.3d 786, 799 (D.C. Cir. 2004)). The question of whether an error was
prejudicial is necessarily contextual, and courts must proceed with a case-specific application
based upon an examination of the record. Jicarilla Apache Nation, 613 F.3d at 1121. However,
where the party challenging agency action fails to show that the agency’s error may have affected
the outcome of the proceedings below, the error is not prejudicial, and it would be senseless to
vacate and remand for further proceedings. Id.11
With these principles in mind, the Court turns to the merits of the present motion.
III. DISCUSSION
New Life tenders three principal arguments in support of its claimed entitlement to a
second vacatur and remand: (i) New Life first claims, in essence, that HHS acted arbitrarily or
capriciously on remand by engaging in a procedurally defective decisionmaking process, see
infra Part III.A; (ii) New Life next contends that, even if HHS’ conduct on remand was not
procedurally defective, the Second Denial is nevertheless substantively arbitrary or capricious,
see infra Part III.B; and (iii) finally, New Life appears to argue that, even if HHS’ decision was
not otherwise arbitrary or capricious, the Court should nevertheless permit New Life to file a
revised application to account for changed circumstances arising in the time since this action was
first commenced, see infra Part III.C. The Court addresses each argument in turn.
A. New Life Has Failed to Establish that the Proceedings on Remand Were
Procedurally Defective
New Life first claims that HHS acted arbitrarily or capriciously on remand by “engag[ing]
in a one-sided reevaluation process that gave the agency every advantage, []while denying New
Life any similar benefit.” Pl.’s Mem. at 4. In other words, New Life claims that HHS’
decisionmaking process on remand was procedurally defective. New Life’s four specific
complaints are as follows: (i) HHS improperly supplemented the administrative record on
remand with materials unfavorable to New Life’s position, see infra Part III.A.1; (ii) HHS
improperly rejected New Life’s request to supplement its application on remand, see infra Part
III.A.2; (iii) HHS unreasonably delayed the issuance of its decision on remand, purportedly in
violation of statutorily required time limits, see infra Part III.A.3; and (iv) the circumstances of
HHS’ decisionmaking process on remand suggest that the agency was acting not out of a desire
12
to act as a neutral decisionmaker, but rather to insulate its decision from judicial review, see infra
Part III.A.4. For the reasons set forth below, the Court concludes that none of the foregoing
complaints renders HHS’s decision arbitrary or capricious, an abuse of discretion, or otherwise
not in accordance with law.
1. HHS’ Supplementation of the Record on Remand
New Life first contends that HHS acted arbitrarily or capriciously by supplementing the
administrative record on remand with approximately two hundred additional pages of materials
unfavorable to New Life’s position. Pl.’s Mem. at 4-7. For at least two reasons, the contention
is unavailing: first, the Court finds no error in HHS’ course of conduct; and, second, even
assuming that HHS erred, New Life has failed to carry its burden of establishing that such error
was prejudicial.
a. HHS Retained the Discretion to Supplement the Record on
Remand
It is beyond dispute that a reviewing court may allow an agency to supplement the record
with additional evidence following remand. See, e.g., Union Elec. Co. v. Fed. Energy
Regulatory Comm’n, 890 F.2d 1193, 1196 (D.C. Cir. 1989) (“On remand the Commission may
wish to supplement the record with such [additional] evidence.”). Equally non-controversial,
however, is the proposition that an agency’s review on remand must be responsive to the court’s
mandate. Process Gas Consumers Grp. v. Fed. Energy Regulatory Comm’n, 292 F.3d 831, 840
(D.C. Cir. 2002). The only question here is whether HHS was permitted to supplement the
record by the terms of this Court’s remand order.
The Court’s remand order and accompanying memorandum opinion are, quite simply,
silent on the question of how HHS was to treat the evidentiary record on remand. While the
13
Court did suggest that “HHS would be well served to augment the record below with such
additional explanation as may be appropriate,” the Court did not impose any specific conditions
or limitations on the nature of the proceedings below. New Life Evangelistic Ctr., 672 F. Supp.
2d at 74 n.14 (emphasis added); see also Order (Dec. 8, 2009), Docket No. [23]. As such,
nothing in the metes and bounds of this Court’s remand order precluded HHS from
supplementing the record on remand.
At the same time, “[w]hen the court does not require additional fact gathering on remand
. . . the agency is typically authorized to determine, in its discretion, whether such fact gathering
is needed.” Chamber of Commerce of the U.S. v. Secs. & Exch. Comm’n, 443 F.3d 890, 900
(D.C. Cir. 2006); see also PPG Indus., Inc. v. United States, 52 F.3d 363, 366 (D.C. Cir. 1995)
(“there is no principle of administrative law that restricts an agency from reopening proceedings
to take new evidence after the grounds upon which it relied are determined by a reviewing court
to be invalid.”). Such an approach is consonant with the general preference to leave to the
agency’s discretion to decide how, in light of internal organizational considerations, it may best
proceed upon remand. Fed. Power Comm’n v. Transcon. Gas Pipe Line Corp., 423 U.S. 326,
333 (1976) (per curiam). Accordingly, although this Court’s remand order admittedly could have
been more clear by expressly affording HHS leave to supplement the factual record on remand,
and certainly the better practice would have been for the parties to have sought clarification prior
to engaging in extended proceedings below, the Court concludes that HHS was permitted to
exercise its discretion to collect and consider additional evidence on remand. Its election to do
so cannot be characterized as arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.
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b. New Life Has Failed to Establish Prejudicial Error
As a separate and independent grounds for upholding HHS’ decision in this regard, New
Life has failed to satisfy its burden of establishing that the ascribed error was prejudicial. First,
although the two hundred pages added to the administrative record consist of a variety of
documents,4 New Life has only specifically objected to two: letters from two homeless assistance
providers in the Cape Girardeau area, Safe House for Women (“Safe House”) and Mending
Hearts Recovery (“Mending Hearts”), in which those providers disclaim any formal referral
relationship with New Life. Pl.’s Mem. at 4. To the extent New Life objects to any other
documents, it has, quite simply, failed to discharge its burden of establishing that HHS’ decision
to supplement the record with those documents was, even if presumed to be erroneous,
prejudicial.
Meanwhile, with respect to the letters from Safe House and Mending Hearts, it is true that
both letters are referenced in the Second Denial Letter. Specifically, in addressing the extent and
range of services proposed by New Life – i.e., the “services offered” criterion – HHS highlighted
that New Life had identified Safe House and Mending Hearts as service providers with which it
had established referral relationships, and provided that “[i]n unsolicited correspondence to HHS,
the executive directors of [Safe House] and [Mending Hearts] disputed the claims made by [New
Life] in its application.” 2d Denial Ltr. at AR1216. This, however, was hardly the linchpin of
HHS’ analysis; rather, HHS broadly determined that, while “it is acceptable for an applicant to
4
Simply by way of example, the two-hundred pages added to the administrative record
upon remand include: a copy of this Court’s December 8, 2009 Memorandum Opinion, AR1029-
50; the Second Denial Letter, AR1215-25; copies of correspondence between New Life and HHS
following remand, AR1059-62; and a copy of the definition of “homelessness” under the
McKinney Act, AR1056-58.
15
propose providing services via referrals . . . [New Life’s] application fails to adequately support
its proposal and demonstrate that [it] would successfully implement the referral program it
proposes.” Id. at AR1217. Indeed, in the Second Denial Letter, HHS expressly stated that the
letters from Safe House and Mending Hearts “not only call into question [New Life’s] ability to
provide referrals to mental health and substance abuse services, they also serve to highlight why
it is inadequate to rely simply on informal partnerships, arrangements, or telephone
conversations.” Id. In other words, HHS referenced the two letters as illustrative examples of
what it viewed as a more fundamental failing with New Life’s application – i.e., the failure to
adequately describe how New Life intended to implement the referral program it proposed. Nor
was this the only basis that HHS cited as grounds for rejecting New Life’s showing under the
“services offered” criterion; HHS separately determined that New Life’s proposed staffing model
was inadequate for the scope and extent of services proposed. Id. at AR1217. In short, because
the reference to the letters from Safe House and Mending Hearts was far from essential to the
agency’s analysis under the “services offered” criterion, New Life has failed to establish that their
inclusion in the administrative record, even if erroneous, was prejudicial. See Pittsburgh & Lake
Erie R.R. Co. v. Interstate Commerce Comm’n, 796 F.2d 1534, 1543 (D.C. Cir. 1986) (ascribed
procedural error not prejudicial where it related to issues “irrelevant” or “tangential” to the
agency’s conclusion); Olson v. Clinton, 602 F. Supp. 2d 93, 104 (D.D.C. 2009) (plaintiff failed
to demonstrate that alleged procedural errors tainted the decision below and thereby caused him
prejudice).
Further preventing New Life from demonstrating prejudice is the question of what relief
it would be entitled to in the event of an error. In the formal rulemaking context, a party may
16
demonstrate prejudicial error by showing that the agency relied upon documents that were not
previously disclosed, and establishing that it could have mounted a “credible challenge” to those
documents. Owner-Operator Indep. Drivers Ass’n, Inc. v. Fed. Motor Carrier Safety Admin.,
494 F.3d 188, 202-03 (D.C. Cir. 2007). But, as set forth in greater detail below, see infra Part
III.A.2, New Life simply has no comparable procedural right in this setting, an informal
adjudication for which neither notice-and-comment nor an on-the-record hearing is required. As
such, even if the Court’s remand order could somehow be construed to restrict HHS’ discretion
on remand, the Court would simply issue an amended order expressly allowing HHS leave to
consider additional evidence, at which juncture New Life would have no right of response or
rebuttal. There is no need to compel an agency to go through the “empty exercise of repeating a
procedure according to rules where the result of the procedure is foreordained,” Wilkinson v.
Legal Servs. Corp., 27 F. Supp. 2d 32, 63 (D.D.C. 1998), and therefore New Life’s first
argument fails on this ground as well.
2. New Life’s Request to Submit a Supplemental Application
In truth, New Life’s complaint is less that HHS supplemented the record with additional
materials in support of its Second Denial Letter, but rather that it did so while simultaneously
“reject[ing] New Life’s request to supplement its application.” Pl.’s Mem. at 4. As described
above, shortly after the Court’s remand order, New Life wrote to HHS proposing to supplement
its application before HHS commenced the reevaluation process. See Dec. 11, 2009 Ltr. from E.
Waters to D. Rybicki at AR1059-60. HHS rejected the proposal, taking the position that New
Life’s original application was “complete” and that the relevant regulations reserve to the agency
the right to request additional information. See Dec. 28, 2009 Ltr. from D. Rybicki to E. Waters
17
at AR1061-62. New Life’s argument is premised upon a fundamental misunderstanding of its
procedural rights in this specific setting, an informal adjudication in which New Life had no
entitlement to respond to or rebut HHS’ evidentiary showing, or to submit countervailing
evidence in support of its position beyond whatever it included in its original application.
Because New Life had no such right under the APA or the McKinney Act and its accompanying
regulations, New Life’s argument fails.
a. The APA Does Not Confer Upon New Life a Right to Supplement
the Record
The APA’s provisions do not specify the procedures that are to govern the great bulk of
agency adjudications – i.e., those for which an on-the-record hearing is not statutorily required.
See Occidential Petroleum Corp. v. Secs. & Exch. Comm’n, 873 F.2d 325, 337 (D.C. Cir. 1989)
(“no provision of the APA contains specific procedures to govern an informal agency
adjudication”); see generally Peter L. Strauss, Administrative Justice in the United States 210-12
(2d ed., Carolina Academic Press 2002). The provisions governing formal rulemaking
proceedings, adjudications for which an on-the-record hearing is statutorily required, and
proceedings relating to applications for a license required by law, see 5 U.S.C. §§ 553-554, 556-
558, have no direct application to the informal adjudication setting. Meanwhile, the one
provision of any possible relevance to the immediate context imposes only modest obligations on
the acting agency:
Prompt notice shall be given of the denial in whole or in part of a
written application, petition, or other request of an interested person
made in connection with any agency proceeding. Except in affirming
a prior denial or when the denial is self-explanatory, the notice shall
be accompanied by a brief statement of the grounds for denial.
Id. § 555(e). In sum, in this setting, the APA requires only (i) prompt notice of the denial of any
18
written application, and (ii) a brief statement of the grounds for denial. Unlike other agency
proceedings, the APA does not confer upon participants in informal adjudications the right to
“present his case or defense by oral or documentary evidence, to submit rebuttal evidence, [or] to
conduct such cross-examination as may be required for a full and true disclosure of the facts.”
Id. § 556(d).
b. Neither The McKinney Act Nor its Regulations Confer Upon New
Life a Right to Supplement the Record
The inquiry cannot end with the APA: if the McKinney Act or the relevant regulations
confer upon applicants for the use of surplus federal properties certain procedural rights above
and beyond those contemplated by the APA, then those rights must be honored. However, at
least in terms of the application process, the procedures contemplated by the McKinney Act are
few: (i) HHS must, with the concurrence of the relevant landholding agency, “grant reasonable
extensions” of the time to submit an application, 42 U.S.C. § 11411(e)(2); (ii) HHS must
“review, make all determinations, and complete all actions on the application” within twenty-five
days after receipt, id. § 11411(e)(3); and (iii) HHS must “maintain a written public record of all
actions taken in response to an application,” id. Nothing in the McKinney Act requires HHS to
allow New Life to submit any information, evidence, or argument beyond whatever may be
included in the original application.
The relevant regulations are more fulsome in articulating the procedures attaching to the
application process, but not significantly so. Most notably for our present purposes, the
regulations provide as follows: (i) “[u]pon request from the applicant, HHS may grant extensions
[to submit applications], provided that the appropriate landholding agency concurs with the
extension,” 45 C.F.R. § 12a.9(d); (ii) “[u]pon receipt of an application, HHS will review it for
19
completeness, and, if incomplete, may return it or ask the applicant to furnish any missing or
additional required information prior to final evaluation of the application,” id. § 12a.9(e)(1); (iii)
HHS must “evaluate each completed application within 25 days of receipt and . . . promptly
advise the applicant of its decision,” id. § 12a.9(e)(2); and (iv) HHS must evaluate each
application on the basis of the specified evaluation factors, as well as any additional factors
identified in the application packet, id. § 12a.9(e)(2)-(3).
Of these procedural requirements, only one has any relevance here – namely, the
requirement that, “[u]pon receipt of an application, HHS . . . review it for completeness.” Id. §
12a.9(e)(1). The regulation goes on to provide that, “if incomplete, [HHS] may return [the
application] or ask the applicant to furnish any missing or additional required information prior
to final evaluation of the application.” Id. Two matters are worthy of note here. First, the
quoted language applies, if at all, only when HHS determines that an application is incomplete;
where the application is complete, the regulations are silent as to the furnishing of additional
information. This interpretation is not only mandated by the conditional “if complete” that
begins the sentence, but also by the provision’s use of the terms “missing” and “additional
required information,” which would have no applicability to complete applications. Second,
even with respect to incomplete applications, the sentence structure and the use of the term
“may” unambiguously evinces an intention to vest in HHS the discretion whether or not to seek
further information from applicants. See Jama v. Immigration & Customs Enforcement, 543 U.S.
335, 346 (2005) (“The word ‘may’ customarily connotes discretion.”). Such an interpretation is
virtually compelled by the separate provision of the regulations warning applicants that “[d]ue to
the short time frame imposed for evaluating applications, HHS’ evaluation will, generally, be
20
limited to the information contained in the application.” 45 C.F.R. § 12a.9(c).
To summarize, nothing in either the McKinney Act or the regulations requires HHS to
allow applicants to submit supplemental materials once an application has been deemed
complete; even where applications are incomplete, HHS retains the discretion to decide whether
to request and accept additional materials.
c. HHS Did Not Act Arbitrarily or Capriciously in Denying New
Life’s Request to Supplement its Application
On remand, HHS again determined that New Life’s application was “complete,” as that
term is used in the McKinney Act and its accompanying regulations. See Dec. 28, 2009 Ltr. from
D. Rybicki to E. Waters at AR1061-62. Notably, New Life has never suggested that its
application was not “complete,” a fact highlighted by HHS in its opposition papers but left
conspicuously unaddressed by New Life in its reply. See Defs.’ Opp’n at 6 (“[New Life] has
never argued that its application is incomplete, nor does it so argue here.”); Pl.’s Reply at 1-4.
Instead, in the proceedings below, New Life sought to introduce additional materials “that New
Life would have filed had HHS engaged in a more appropriately interactive process.” Dec. 11,
2009 Ltr. from E. Waters to D. Rybicki at AR1059. That is, New Life did not claim then, and
does not claim now, that the information it sought to provide on remand was “additional required
information” or information “missing” from its original application. 45 C.F.R. § 12a.9(e)(1).
If anything, the materials – characterized by New Life as “evidence . . . elaborating on the
changed circumstances in Cape Girardeau . . . and the increasing need for New Life’s proposed
Title V program,” Pl.’s Reply at 7 – are designed to rebut or respond to the deficiencies in New
Life’s application that were identified by HHS in the initial proceedings below and in the course
of litigation before this Court, a transparent attempt to reopen an evidentiary submission phase to
21
the informal adjudication below that never existed in the first place. What New Life wants, in
essence, is “a more . . . interactive process,” Dec. 11, 2009 Ltr. from E. Waters to D. Rybicki at
AR1059, one in which it is permitted to engage in a dialogue with HHS over the merits of its
application for use of the Broadway Street Property. It is here that New Life’s argument becomes
particularly problematic, rendering it necessary for this Court to examine its role in assessing the
procedural sufficiency of an agency’s decisionmaking process in matters where the governing
statute and regulations are silent.
New Life does not argue that the relief it seeks is required by the McKinney Act itself or
by the supporting regulations (plainly, it is not), and therefore New Life’s argument rises and
falls upon the APA. Unfortunately for New Life, the APA “sets forth the full extent of judicial
authority to review executive agency action for procedural correctness,” Fed. Commc’ns Comm’n
v. Fox Television Stations, Inc., __ U.S. __, 129 S. Ct. 1800, 1810 (2009), and, as set forth above,
the APA simply does not confer upon participants in informal adjudications a right to supplement
the evidentiary record, or to submit countervailing evidence or argument. To put it bluntly,
nothing contemplated by the APA is even remotely comparable to an “interactive process”
between the participant and the agency. As such, it is unsurprising that New Life resorts to
notions of “fundamental fairness” in an attempt to resurrect its claim, Pl.’s Mem. at 5-7, but this
avenue is foreclosed by decades of settled jurisprudence precluding courts from imposing upon
agencies specific procedural requirements not contemplated by the governing statutory and
regulatory framework.
In the seminal case of Vermont Yankee Nuclear Power Corp. v. Natural Res. Def.
Council, Inc., 435 U.S. 519 (1978), the Supreme Court held that a court reviewing an agency
22
rulemaking proceeding may not impose upon the agency procedural requirements beyond those
that Congress specifically set forth in the APA. Describing agencies’ freedom to fashion their
own procedural rules as “the very basic tenet of administrative law,” id. at 544, the Supreme
Court described the limits of the reviewing court’s role in no uncertain terms: absent
constitutional constraints or extremely compelling circumstances, agencies are free to fashion
their own procedural rules and pursue methods of inquiry as they see fit, id. at 524, 543.
Consistent with these principles, the court should not “explore the procedural format or . . .
impose upon the agency its own notion of which procedures are ‘best’ or most likely to further
some vague, undefined public good.” Id. at 549.
The general principles announced in Vermont Yankee were extended to the informal
adjudication setting in Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633 (1990), where
the Supreme rejected an argument remarkably similar to the one now pressed by New Life.
There, the Court of Appeals concluded that the agency’s decision, made in the context of an
informal adjudication, was arbitrary or capricious because it did not, inter alia, apprise the
petitioner of the material on which it was to base its decision or provide the petitioner with an
opportunity to offer contrary evidence. Id. at 653. Reconciling Vermont Yankee with its prior
opinion in Overton Park, 401 U.S. 402, the Pension Benefit Court provided that, in the informal
adjudication context, the relevant question is whether the agency’s procedures below, whatever
they may be, suffice to “provide an explanation that will enable the [reviewing] court to evaluate
the agency’s rationale at the time of the decision.” Pension Benefit, 496 U.S. at 654. The Court
was unequivocal that Vermont Yankee’s basic thrust still applied: in the informal adjudication
setting, “courts are not free to impose upon agencies specific procedural requirements that have
23
no basis in the APA” or the governing legislation. Id. In so holding, the Supreme Court faulted
the Court of Appeals for focusing on notions of “fundamental fairness” and for critiquing the
agency for failing to afford the petitioner a greater role in its decisionmaking process; because
those criticisms had no basis in the APA or the relevant legislation, the Court of Appeals had run
afoul of Vermont Yankee. Id. at 655; see also Occidental Petroleum, 873 F.2d at 338 (Vermont
Yankee would forbid the reviewing court from “imposing upon the agency specific procedural
steps that must be followed in order to create a reviewable record” of an informal adjudication
proceeding). The relief now sought by New Life is nearly identical to the relief rejected by the
Supreme Court in Pension Benefit; the Court can see no reason (and New Life has certainly
provided none) to depart from the Supreme Court’s commandments in this case.
Over the past three decades, courts have applied the principles first announced in
Vermont Yankee time and time again. The Court will only mention two here. The first, Process
Gas Consumers Grp. v. Fed. Energy Regulatory Comm’n, 930 F.2d 926 (D.C. Cir. 1991),
illustrates how these principles might apply to agency proceedings upon remand. In Process
Gas, the D.C. Circuit Court of Appeals was asked to review a decision issued by the Federal
Energy Regulatory Commission (“FERC”) for the second time, a decision rendered on remand
after the Court of Appeals concluded that FERC had erred in approving a gas surcharge to
support research by the Gas Research Institute (“GRI”). Id. at 928. During the proceedings on
remand, FERC “requested and received new submissions from GRI justifying its end-use
research proposals,” but “denied a request by certain participants for discovery of background
documents supporting GRI’s new submissions.” Id. at 929. In its decision following remand,
FERC adopted GRI’s analysis. Id. The petitioners then raised a variety of challenges to the
24
procedures that FERC used on remand, “contend[ing] that FERC unfairly structured its
procedures in favor of GRI” by denying their discovery requests and adopting most of GRI’s
conclusions. Id. at 929-30. The Court, quite simply, rejected each of the procedural challenges,
on the basis that the agency “has broad discretion to decide what procedures to use in fulfilling
its statutory responsibilities.” Id. at 930 (internal quotation marks and notations omitted).
Similarly, here, HHS was well within its discretion in deciding to supplement the record with a
small number of documents consistent with its prior determination while simultaneously
determining that it was not appropriate to permit New Life to submit additional materials; these
are matters that Congress has entrusted to HHS.
More recently, in Dist. No. 1, Pac. Coast Dist., Marine Eng’rs’ Beneficial Assoc. v. Mar.
Admin., 215 F.3d 37, 42-43 (D.C. Cir. 2000), the D.C. Circuit Court of Appeals rejected a claim
that “fundamental fairness” may be used to create procedural rights where the APA and the
relevant legislation envision none. In that case, the petitioner claimed that the agency denied it
“fundamental fairness” in violation of the APA by accepting and relying upon ex parte
communications in granting an application to transfer registry of vessels outside the United
States. Echoing Vermont Yankee, the Court held that, “[i]n the absence of any statutory or self[-
]imposed limitation, [courts] have no jurisdiction to review under the APA an agency’s
procedural decision regarding how best to make a substantive decision committed by law.” Id. at
43. Furthermore, the Court rejected the petitioner’s attempt to side-step these limitations on
judicial review by arguing that, once the agency requested comments from interested parties, it
effectively forfeited its discretion to rely upon such comments without first providing the public
an opportunity to respond to them. Id. The Court reasoned that “how [the agency] deals with
25
those comments are procedural decisions that, like the underlying substantive decision, are
matters within the agency’s discretion.” Id. These pronouncements apply with no less force
here.
Simply put, HHS retained broad discretion on remand to decide whether, and if so how,
to collect and consider additional materials in support of its determination. Agencies are, of
course, free to adopt additional procedures as they see fit, but this Court is “without authority” to
impose such procedural requirements against HHS’ will in the absence of a constitutional or
statutory command or extremely compelling circumstances, none of which are present here.
Natural Res. Def. Council, Inc. v. Nuclear Regulatory Comm’n, 216 F.3d 1180, 1190 (D.C. Cir.
2000); see also Transcon. Gas Pipe Line, 423 U.S. at 333 (warning that, inter alia, dictating to
the agency methods and procedures “clearly runs the risk of propelling the court into the domain
which Congress has set aside exclusively for the administrative agency.”) (internal quotation
marks and notations omitted). Accordingly, the Court concludes that HHS did not act arbitrarily,
capriciously, or otherwise not in accordance of law, nor abused its discretion, by supplementing
the record with additional materials in support of its Second Denial Letter while simultaneously
denying New Life’s request to supplement its application.
3. The Timing of HHS’ Second Denial Letter
The third procedural error ascribed by New Life to the proceedings on remand – i.e., that
HHS unreasonably delayed the issuance of its decision, Pl.’s Mem. at 5 – does not warrant a
different result. New Life’s argument is that, by issuing its Second Denial letter “a whopping
157 days” after this Court’s remand order, id., HHS ran afoul of the twenty-five day time
limitation placed upon its evaluation process by the McKinney Act and its supporting
26
regulations.5 New Life’s argument here fares no better than its predecessors for two reasons:
first, because HHS was not required to issue its decision within twenty-five days of remand, it
committed no error; and second, even if HHS’ delay somehow constituted error, New Life has
nevertheless failed to carry its burden of establishing that the error was prejudicial.
a. HHS Was Not Required to Issue its Decision Within Twenty-Five
Days of Remand
The inquiry begins with the statutory and regulatory landscape. The two relevant
provisions are essentially coterminous. Section 11411(e)(3) of the McKinney Act provides, in
relevant part:
No later than 25 days after receipt of a completed application, the
Secretary of Health and Human Services shall review, make all
determinations, and complete all actions on the application.
42 U.S.C. § 11411(e)(3). Meanwhile, the regulations provide as follows: “HHS will evaluate
each completed application within 25 days of receipt and will promptly advise the applicant of its
decision.” 45 C.F.R. § 12a.9(e)(2).
Unsurprisingly, the parties offer conflicting interpretations of these provisions.
Defendants maintain that the time limitations contemplated by § 11411(e)(3) and its
accompanying regulation relate only to the initial submission of an application, and have no
applicability to the agency’s reconsideration of an application upon remand from the district
court. Defs.’ Mem. at 5 n.1. Although never expressed with model clarity, New Life’s
contention appears to be that the provisions should be read to require HHS to act within twenty-
5
Although it need not belabor the point, the Court notes that New Life does not explain
why, if it actually believed that HHS was obligated to render a decision within twenty-five days
after remand, it proposed to HHS that it be afforded a total of fifty-two days to submit a revised
application. See Dec. 11, 2009 Ltr. from E. Waters to D. Rybicki at AR1059-60.
27
five days after remand. Pl.’s Reply at 2.
In resolving these conflicting interpretations, the threshold determination for the Court,
although one not addressed by the parties, is the level of deference to be afforded Defendants’
proffered interpretation. The basic legal framework is well-established and non-controversial:
unless Congress has directly spoken to the question at issue, the court’s role is limited to
determining whether the agency’s construction of a statute it administers “is based on a
permissible construction of the statute.” Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 843 (1984); see also Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994)
(agency’s interpretation of its own regulation must be given controlling weight unless plainly
erroneous or inconsistent with the regulation). That framework becomes somewhat more
complicated where, as here, multiple agencies are charged with administering a statute and
enacting enabling regulations. See, e.g., Regulations to Carry Out the Requirements of Title V of
the McKinney Act, 56 Fed. Reg. 23789-01 (May 24, 1991) (identifying HHS, GSA, and HUD as
promulgators of joint interim final rule).
In this Circuit, where multiple agencies are charged with administering a statute, a single
agency’s interpretation is generally not entitled to Chevron deference; instead, the court must
review the agency’s interpretation de novo. Grant Thornton, LLP v. Office of Comptroller of the
Currency, 514 F.3d 1328, 1331 (D.C. Cir. 2008); but see 1185 Ave. of Ams. Assoc. v. Resolution
Trust Corp., 22 F.3d 494, 497 (2d Cir. 1994) (adopting middle-ground approach affording some
deference, but short of full Chevron deference, to the interpretation proffered by a single agency);
Bd. of Trade of Chicago v. Secs. & Exch. Comm’n, 187 F.3d 713, 719 (7th Cir. 1999) (suggesting
“it is possible to defer simultaneously to two incompatible agency positions”). The alternative, it
28
is said, “would lay the groundwork for a regulatory regime in which either the same statute is
interpreted differently by the several agencies or the one agency that happens to reach the
courthouse first is allowed to fix the meaning of the text for all.” Rapaport v. U.S. Dep’t of
Treasury, Office of Thrift Supervision, 59 F.3d 212, 216-17 (D.C. Cir. 1995), cert. denied, 516
U.S. 1073 (1996). Of course, there would be no comparable concern if all three agencies charged
with administering the McKinney Act pressed the same interpretation before this Court, but only
two of the three, HHS and GSA, are parties to the present proceeding. Compare Individual
Reference Servs. Grp., Inc. v. Fed. Trade Comm’n, 145 F. Supp. 2d 6, 23 (D.D.C. 2001)
(regulations were the result of coordinated effort among the defendants), aff’d, 295 F.3d 42 (D.C.
Cir. 2002). Accordingly, even though there is no such indication, the existence of an alternative
agency interpretation is at least theoretically possible.
Nevertheless, the Court is not convinced that the exception to Chevron deference should
apply here. This is because, whereas preceding subsections of § 11411 define the responsibilities
of other agencies, see, e.g., 42 U.S.C. § 11411(a), (c) (describing HUD’s responsibility for
canvassing landholding agencies and collecting data on surplus properties), Subsection (e) speaks
to the role and responsibilities of HHS alone. The same holds true for the relevant regulation,
which mentions other agencies only insofar as defining HHS’ role vis-à-vis those agencies. See,
e.g., 45 C.F.R. § 12a.9(e)(4) (requiring HHS to notify GSA of the relative rankings among
competing applications). By all accounts, the statutory and regulatory text have delegated to
HHS the primary responsibility for overseeing the application process attendant to Title V of the
McKinney Act. There is therefore some support for the argument that the exception to Chevron
deference that arises where multiple agencies are charged with administering a statute should not
29
apply in this instance, where the text has carved out an area more clearly the domain of one
agency over another. To the Court’s knowledge, no court within this Circuit has yet addressed
the precise issue, and, ultimately, the Court finds it unnecessary to do so here. Even applying de
novo review to the parties’ conflicting interpretations, HHS’ interpretation must prevail.
New Life’s argument is predicated upon a strained, and ultimately unacceptable,
interpretation of the relevant statutory and regulatory language. The McKinney Act requires
HHS to review an application for surplus federal property “[n]o later than 25 days after receipt of
a completed application.” 42 U.S.C. § 11411(e)(3) (emphasis added). By its plain language, the
provision has no bearing upon the timing of agency decisionmaking upon receipt of an order of
remand from a district court. The accompanying regulation demands the same treatment; the
relevant provision only requires HHS to “evaluate each completed application within 25 days of
receipt.” 45 C.F.R. § 12a.9(e)(2). It too has nothing to say about the timeframe for an agency’s
response upon receiving an order of remand from the district court.
New Life’s attempts to make an end-run around this plain language bear no fruit. New
Life first suggests that any construction of the word “receipt” to mean only “initial receipt”
would contravene Congress’ pronouncement that “all actions relative to a Title V application
should be completed in 25 days.” Pl.’s Reply at 2 (citing H. Conf. Rep. No. 101-645, at 101)
(internal emphasis and notations omitted). But the operative word in each provision is not so
much “receipt” as it is “application,” and the interplay between the two; the statute and its
regulation only set a deadline for HHS to act upon receipt of an application, that and nothing
else.
Perhaps recognizing that its interpretation is not supported by the text itself, New Life
30
next suggests that Defendants’ reading would allow the agency to “render[] an unlawful
decision” and “then arbitrarily enlarge the Title V processing timeframe on remand, with no
apparent limits.” Pl.’s Reply at 2. The suggestion that Defendants’ reading would insulate the
timing of agency action on remand from judicial review misses the mark for several reasons. As
an initial matter, this Court is not free to re-write the unambiguous language chosen by Congress
merely on the basis that policy considerations might counsel in favor of a different result; the
statutory command is clear, and this Court is obligated to respect that command. In any event,
despite New Life’s hyperbolic averments to the contrary, interpreting the statute and the
regulation by their plain meaning would not yield the world of arbitrary agency action conjured
up by New Life. First, this Court highly doubts that HHS would strategically and intentionally
render an unlawful decision merely to enlarge the time it has to consider an application; not only
would it be nonsensical for HHS to improperly deny an application in order to buy itself more
time to consider the application, the underlying decision would nevertheless remain subject to
judicial review. Second, although the reviewing court must of course take into account the
general reluctance to intervene in the practice and procedure of the agency decisionmaking
process, there is no per se bar to a reviewing court specifying some timeframe for the agency’s
consideration upon remand, or, for that matter, encouraging the parties to reach some agreement
as to the general timing for the proceedings on remand. Third, and finally, New Life’s argument
completely ignores that the APA provides a remedy for agency action “unreasonably delayed.” 5
U.S.C. § 706(1); see also Norton v. S. Utah Wilderness Alliance, 542 U.S. 55, 63 (2004) (claims
may proceed where agency “failed to take a discrete agency action that it is required to take”).
In sum, even applying de novo review to the relevant provisions, the Court finds that
31
HHS was under no obligation to render its decision within 25 days of remand. By logical
extension, its failure to do so was not arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.
b. New Life Has Failed to Establish Prejudicial Error
Furthermore, as a separate and independent ground supporting the Court’s decision in this
regard, New Life has once again failed to demonstrate that HHS’ conduct, even if erroneous, was
also prejudicial. Even crediting New Life’s interpretation, and even assuming that vacatur was
necessary, HHS would be free to simply reissue its decision 25 days following a second remand.
Again, courts are not required to compel an agency to go through the “empty exercise of
repeating a procedure according to rules where the result of the procedure is foreordained,”
Wilkinson, 27 F. Supp. 2d at 63, and the Court declines to do so here. See also Barnhart v.
Peabody Coal Co., 537 U.S. 149, 158-59 (2003) (expressing a reluctance to void subsequent
agency action for failure to comply with statutory timing where statute itself does not specify a
consequence for noncompliance).
New Life’s argument that it was prejudiced by the alleged delay because the information
in its application “had become stale by the date of decision, over one year later,” Pl.’s Reply at 3,
fails for at least two reasons. First, because the foundation of New Life’s argument is that HHS
erred by taking more than 25 days to act on remand, the relevant “delay,” if any, extends not from
the time of New Life’s original application to the date of HHS’ decision upon remand, but rather
from the date of this Court’s remand order to the date of HHS’ decision upon remand. That
period was a mere 132 days (i.e., the full 157 days it took HHS to render its decision, subtracting
the 25 days during which New Life believes HHS could have rendered a timely decision). But
32
New Life has adduced no evidence that would support a finding that its application became
“stale” only in the course of those 132 days, as opposed to the full year that intervened between
HHS’ decision on remand and New Life’s original application. Second, even assuming,
arguendo, that New Life was capable of making such a showing, in claiming that “HHS could
have cured [the] harm by permitting New Life to supplement is application,” Pl.’s Reply at 3,
New Life again rests its argument on an untenable premise. For the reasons described above, see
supra Part III.A.2, New Life simply has no procedural right to supplement the record on remand,
and therefore it could not be prejudiced even if HHS’ delay prompted a desire on New Life’s part
to supplement the record. Stated differently, the “prejudice,” if any, emanates not from HHS’
alleged delay, but from the failure of the APA or the McKinney Act to confer upon applicants a
right to submit supplementary materials.
4. Generalized Allegations of Bad Faith
The fourth and final procedural error ascribed by New Life to HHS’ decision on remand,
to the extent it is even independent of matters previously discussed, is that the circumstances of
HHS’ decisionmaking process suggest that HHS was acting not out of a desire to act as a neutral
decisionmaker, but rather to insulate its decision from judicial review. See Pl.’s Mem. at 4-7.
This purported ground for vacatur and remand is easily disposed of and merits little attention
here.
New Life, as the party challenging agency action, bears the burden of establishing that
HHS acted arbitrarily or capriciously. Abington Crest, 575 F.3d at 722. In assessing whether
New Life has discharged this burden, this Court must afford HHS’ decision a presumption of
regularity. Grid Radio, 278 F.3d at 1322. To put it generously, New Life’s generalized,
33
conclusory, and wholly unsupported allegations of agency bad faith fall short of the
circumstances that would justify overcoming this presumption and concluding that New Life has
discharged its burden of proof. Cf. Holy Land Found. for Relief & Dev. v. Ashcroft, 219 F. Supp.
2d 57, 65 (D.D.C. 2002) (“conclusory allegations of bad faith and inadequate procedures,” and
claims that the agency’s action was a “sham” with a “predetermined outcome” were insufficient
to warrant heightened review), aff’d, 333 F.3d 156 (D.C. Cir. 2003), cert. denied, 540 U.S. 1218(2004).
Because New Life attributes no further procedural errors to the proceedings on remand,
the Court concludes that New Life has failed to carry its burden of establishing that HHS’
procedural decisions on remand were arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law. At bottom, New Life’s unhappiness with the outcome on remand,
while understandable, cannot be ascribed to the process below: New Life was afforded all the
process to which it was due under the APA, the McKinney Act, and the supporting regulations.
B. New Life Has Failed to Establish that HHS’ Decision on Remand Was
Substantively Defective
New Life next contends that, even if HHS’ conduct below on remand was not
procedurally defective, the Second Denial Letter is nevertheless substantively arbitrary or
capricious. Pl.’s Mem. at 7-13. New Life’s objections in this regard are three-fold: (i)
New Life first asserts that the Second Denial Letter violates a permanent injunction entered
against HHS in a separate action, see infra Part III.B.1; (ii) New Life next argues that the Second
Denial Letter is arbitrary or capricious because it faults New Life’s proposed staffing model,
which HHS approved in the context of other applications, and because it required New Life to
establish formal referral arrangements with local service providers, see infra Part III.B.2; and (iii)
34
finally, New Life suggests that HHS violated its own regulations by requiring New Life to fully
implement its proposed program within a year, see infra Part III.B.3. For the reasons described
below, none of the ascribed errors provides a basis for vacating the Second Denial Letter and
remanding for further proceedings.
1. The Permanent Injunction in the NLCHP Litigation
New Life first asserts that HHS, in the course of evaluating New Life’s application under
the “financial ability” criterion – which requires an assessment of “[t]he adequacy of funding that
will likely be available to run the program fully,” 45 C.F.R. § 12a.9(e)(2)(v) – contravened a
permanent injunction entered against HHS by this Court in Nat’l Law Ctr. on Homelessness &
Poverty v. U.S. Veterans Admin., No. 88 Civ. 2503 (RCL) (D.D.C.) (the “NLCHP Litigation”),
an injunction which more or less provided that, where applicants for the use of federal property
represent that they intend to seek federal grant funds under Title IV of the McKinney Act, HHS
must afford that representation a certain solicitude in determining whether the applicant has the
“financial ability” to administer the proposed program. The Court does not agree that the Second
Denial Letter runs afoul of the injunction,6 and its analysis here proceeds in two parts: (i) because
the parties sharply dispute its scope, the Court begins by reviewing the nature of the permanent
injunction entered in the NLCHP Litigation; (ii) thereafter, the Court shall explain why the
injunction has no applicability here.
6
In the Second Denial Letter, HHS determined that New Life “fail[ed] to demonstrate
the requisite financial ability,” a conclusion it based on a wide range of considerations, including
(i) “a financial analysis of [New Life’s] past financial performance, (ii) “overly optimistic
projected revenues,” and (iii) “inadequate projected expenses.” 2d Denial Ltr. at AR1222-25.
HHS only referred to federal grant funds in connection with the second component – projected
revenues – and even then only as one part of its analysis. Id.
35
a. The Scope of the Permanent Injunction in the NLCHP Litigation is
Limited
By way of background, many applicants seek federal funding through Title IV of the
McKinney Act, 42 U.S.C. §§ 11360 et seq., in order to obtain the necessary funds to administer a
proposed homeless assistance program under Title V of the Act. As a general matter, the federal
government makes financial assistance available under Title IV through three grant programs, the
precise contours of which are not germane here. See 42 U.S.C. §§ 1401, 11381, 11403. The
financial assistance application process, entrusted primarily to HUD, is structured around a
community-based system whereby applications for Title IV grant funds are funneled through
what is known, in administrative parlance, as a “Continuum of Care” – i.e., a local network of
homeless assistance providers, state and local governments, and other interested parties. See Not.
of Funding Availability (NOFA) for the Continuum of Care Homeless Assistance Program, 73
Fed. Reg. 39840-01 (July 10, 2008). Among other things, the NLCHP Litigation addressed the
extent to which an applicant for the use of federal of property under Title V of the McKinney Act
could rely upon the prospect of obtaining federal funding under Title IV of the Act in order to
satisfy the “financial ability” criterion.7
7
Strictly speaking, the NLCHP Litigation did not directly address the “financial ability”
criterion set forth in 45 C.F.R. § 12a.9(b)(4), which requires an applicant for the use of federal
property under Title V of the McKinney Act to include in its application an indication “that it can
assume care, custody, and maintenance of the property and that it has the necessary funds or the
ability to obtain such funds to carry out the approved program of use for the property.” Rather,
the immediate provisions at issue were 45 C.F.R. § 12a.8(b)(2), (4), which together require that
any requests by HHS for the assignment of federal surplus property be based upon a finding that
“[t]he applicant is willing, authorized, and in a position to assume immediate care, custody, and
maintenance of the property” and “has the necessary funds or the ability to obtain such funds, to
carry out the approved program.” Because the provisions are essentially coterminous, the
distinction is immaterial in this setting.
36
Turning now to the contours of the NLCHP Litigation, in 1988, this Court issued a
preliminary injunction against the federal agencies responsible for administering the McKinney
Act, including HHS and GSA. See Nat’l Coalition for the Homeless v. U.S. Veterans Admin.,
695 F. Supp. 1226 (D.D.C. 1988) (Gasch, J.). That preliminary injunction was subsequently
converted into a permanent injunction. See Nat’l Coalition for the Homeless v. U.S. Veterans
Admin., No. 88 Civ. 2503 (OG), 1988 WL 136958 (D.D.C. Dec. 15, 1988) (Gasch, J.).
Thereafter, the plaintiffs in that action moved for an order enforcing the injunction, and, in 1991,
the Court issued an enforcement order (the “Enforcement Order”). See Nat’l Law Ctr. on
Homelessness & Poverty v. U.S. Veterans Admin., 765 F. Supp. 1 (D.D.C. 1991), aff’d, 964 F.2d
1210 (D.C. Cir. 1992).
Although the Enforcement Order addressed various aspects of the regulatory framework
for implementing the McKinney Act, only one is relevant here – i.e., the Court’s treatment of
HHS’ refusal, in applying the “financial ability” criterion, “to accept an [applicant’s] intent to
seek funding under Title IV as a sufficient financial showing.” Id. at 11. At the heart of the
Court’s decision was a concern that HHS’ interpretation of the “financial ability” requirement
had placed a certain class of applicants in an untenable situation: on one hand, an applicant could
be denied federal funds under Title IV on the grounds that its application for the use of federal
property under Title V had not been approved; on the other hand, HHS would not approve an
application where the applicant’s financial ability was based on Title IV funds alone. Id. To
address this concern, the Court ultimately incorporated into its permanent injunction a
requirement that HHS “allow an intent to apply for Title IV funds to be sufficient to satisfy the
homeless provider’s financial showing requirement.” Id. at 13.
37
The scope of this aspect of the Court’s permanent injunction has been the subject of
considerable dispute among the parties. What is clear, however, is that the Court did not
foreclose HHS from considering an applicant’s financial ability under any circumstances.
Indeed, the Court “recognize[d] that it is only prudent for [HHS] to require applicants to make
some financial showing,” and only rejected a regulatory approach that would absolutely require
applicants to identify “an alternate source of funds” above and beyond federal funding under
Title IV. Id. at 11; see also id. at 14 (“defendants cannot reject an application on the basis that an
alternative source of funding has not been identified.”). By its terms, the Enforcement Order
imposes no specific restrictions on HHS’ ability to evaluate the sufficiency of an applicant’s
showing of financial ability where that applicant relies solely on sources of funding other than
federal grant funding under Title IV, or relies on such sources in addition to Title IV funding.
The Enforcement Order was not the last word on the matter. On appeal, the D.C. District
Court of Appeals affirmed the Enforcement Order, but only after giving it a particular
construction, the contours of which are dispositive of the question now before the Court. As
interpreted by the Court of Appeals, the Enforcement Order “require[s] only that HHS give
qualified approval to a wholly unfunded, otherwise acceptable application for surplus property.”
Nat’l Law Ctr. on Homelessness & Poverty v. U.S. Dep’t of Veterans Affairs, 964 F.2d 1210,
1212 (D.C. Cir. 1992) (emphasis omitted). At the same time, the Court of Appeals
acknowledged that an applicant’s “mere intent” to apply for federal funds under Title IV does not
suffice to show that it has the requisite financial ability to take title to the property at issue. Id. at
1213. Critically, the Court of Appeals saw the Enforcement Order as concerning only “a
particular kind” of applicant – namely, one that (i) “intends to apply” for federal funds under
38
Title IV, (ii) “has no other source of funding,” and (iii) “in all other respects is eligible to receive
the requested property.” Id. at 1212. This construction was not mere dictum, but a necessary
premise of the Court of Appeals’ decision.8
At first glance, the narrowness of the Court of Appeals’ interpretation might not appear to
make much sense; if an intent to seek Title IV funding should suffice on its own, one might
logically surmise that an intent to seek Title IV funding coupled with additional sources of
funding should suffice as well. But the potential incongruity is easily explained. The Court of
Appeals’ conclusion that this aspect of the permanent injunction applied only to “a particular
kind” of applicant, id., is a direct outgrowth of this Court’s concern that a specific class of
applicants – i.e., applicants who claimed no other source of funding and were otherwise qualified
– was forced into a “Catch-22,” a situation in which applications were being denied under Title
IV for non-compliance with Title V and vice versa, Nat’l Law Ctr., 765 F. Supp. at 11. Because
this concern did not have the same resonance outside the designated class, it was eminently
sensible to limit the scope of the permanent injunction to those applicants who intended to apply
for federal funds under Title IV, had no other source of funding, and were otherwise eligible to
receive the property sought. Nat’l Law Ctr., 964 F.2d at 1212. While policy considerations
arguably may counsel in favor of a broader injunction, and while the Court might reach a
different conclusion if presented with the same question today, that does not change the fact that
the permanent injunction is so limited, the only salient fact necessary for resolution of the issues
now before the Court.
8
Indeed, New Life is hard-pressed to evade this conclusion. See Pl.’s Reply at 5 (“New
Life agrees that the D.C. Circuit [Court of Appeals] discussed the injunction as applied to
applicants that are ‘wholly unfunded, but otherwise acceptable’”).
39
Not long after the Court of Appeals’ decision, the matter was revisited by this Court when
the agencies responsible for administering the McKinney Act requested a modification of the
permanent injunction. See Nat’l Law Ctr. on Homelessness & Poverty v. U.S. Veterans Admin.,
819 F. Supp. 69 (D.D.C. 1993) (Gasch, J.). Although New Life appears to vest a fair amount of
significance in this decision, Pl.’s Reply at 5, it is actually of little consequence. In that decision,
the Court found it unnecessary, as the agencies had requested, to expressly incorporate the D.C.
Circuit Court of Appeals’ interpretation of the Enforcement Order into the permanent injunction
itself. Nat’l Law Ctr., 819 F. Supp. at 74. While the Court may have “rejected HHS’[] request,”
Pl.’s Reply at 5, it did not (nor, for that matter, could it) reject the Court of Appeals’
interpretation itself. Instead, it essentially found that, by virtue of the Court of Appeals’
affirmance of the Enforcement Order, that interpretation was already part and parcel of the
permanent injunction. Nat’l Law Ctr., 819 F. Supp. at 74. As if that were not enough to
foreclose New Life’s argument, the Court in any event expressly “adopt[ed]” the Court of
Appeals’ interpretation. Id. Accordingly, properly construed, the permanent injunction upon
which New Life relies requires only that HHS afford qualified approval to an application for
surplus property where the applicant (i) intends to apply for federal funds under Title IV, (ii) has
no other source of funding, and (iii) is otherwise qualified to receive the property in all other
respects.9
9
The final chapter in the NLCHP Litigation was written ten years ago, when the Court
issued an additional enforcement order having no immediate bearing on this case. See Nat’l Law
Ctr. on Homelessness & Poverty v. U.S. Veterans Admin., 98 F. Supp. 2d 25 (D.D.C. 2000)
(Lamberth, J.).
40
b. Because New Life Relied on Other Sources of Funding and Was
Not Otherwise Qualified, the Permanent Injunction Does Not
Apply to New Life’s Application
Having now defined the scope of the permanent injunction, the Court turns to the
question of whether the injunction applies in this case, which requires relatively little in the way
of explication. For at least two separate reasons, New Life is not the “particular kind” of
applicant captured within the ambit of the permanent injunction. In reaching this conclusion, the
Court assumes, without deciding, that New Life has sufficiently stated an intention to apply for
federal funds under Title IV, and therefore meets the first essential characteristic of the covered
class.10
First, the record is clear: New Life does not depend exclusively on Title IV funding in
support of its application, nor has it ever suggested otherwise despite the fact that it serves as an
important component of Defendants’ opposition. See, e.g., Table of Projected Revenues at
AR949-54; Financial Stmts. and Suppl. Information at AR959-72; see also Defs.’ Opp’n at 8;
Pl.’s Reply at 4-5. As such, New Life does not qualify as the “particular kind” of applicant
10
In opposition to New Life’s motion, Defendants rely in part upon a declaration from
Robyn S. Raysor (“Raysor”), the Deputy Director of the Office of Special Needs Assistance
within HUD, for the proposition that, despite signaling its intention to do so, New Life has taken
no actual steps to apply for Title IV funding. Defs.’ Opp’n at 8 n.3; see also Decl. of Robyn S.
Raysor (“Raysor Decl.”), Docket No. [41-1]. In that declaration, Raysor avers that New Life did
not apply for Title IV funding to any Continuum of Care network in Missouri for fiscal-year
2009, and was therefore ineligible to receive Title IV funds for that year. Raysor Decl. ¶¶ 10-11.
The precise import of Defendants’ argument is not altogether clear, but the implication appears to
be either that New Life has unduly delayed seeking Title IV funds or that its expressed intention
to seek such funds is not bona fide. Even assuming the declaration testimony (which is not part
of the administrative record) is a proper subject for this Court’s consideration, Defendants cite to
no authority suggesting that these facts would take New Life out of the class covered by the
permanent injunction. However, because adequate and independent grounds exist for the Court’s
disposition, the issue need not be decided here.
41
covered by the permanent injunction, Nat’l Law Ctr., 964 F.2d at 1212, and its argument fails on
this ground alone.
Second, even setting aside the “financial ability” requirement, HHS separately determined
that New Life failed to meet the threshold requirements for three other criteria – namely, services
offered, need, and implementation time. See 2d Denial Ltr. at AR1215-1225. For the reasons
stated elsewhere, see infra Parts III.B.2 and III.B.3, the Court concludes that New Life has failed
to carry its burden of demonstrating that HHS acted arbitrarily or capriciously in determining that
New Life failed to satisfy the “services offered” and “implementation time” criteria. Meanwhile,
New Life has challenged HHS’ determination with respect to the “need” criterion – which
pertains to “[t]he demand for the program and the degree to which the available property will be
fully utilized,” 45 C.F.R. § 12a.9(e)(2)(ii) – only insofar as HHS’ findings are contradicted by
supplemental materials allegedly evidencing the exacerbation of “an already dire need for
homeless assistance in greater Cape Girardeau.” Pl.’s Mem. at 14. For reasons previously
explained, see supra Part III.A.1, the existence of these materials does not render HHS’ decision
arbitrary or capricious. As Defendants correctly note, New Life has otherwise failed to dispute
“a single fact contained in the five pages of . . . findings exhaustively analyzing and refuting the
statistical claims [relating to the need for the proposed program] in [New Life’s] application.”
Defs.’ Opp’n at 16. As such, HHS’ findings with respect to the “need” criterion are uncontested.
Because HHS’ determinations with respect to all three of these criteria – services offered, need,
and implementation time – were not arbitrary or capricious, New Life was not “otherwise
qualified” to receive the property in all other respects, Nat’l Law Ctr., 964 F.2d at 1212, and its
argument fails on this ground as well.
42
2. New Life’s Proposed Staffing Model and Arrangements with Local
Services Providers
The second substantive error ascribed by New Life to HHS’ determination concerns the
“services offered” criterion, pursuant to which HHS evaluates “the extent and range of proposed
services.” 45 C.F.R. § 12a.9(e)(2)(i). Specifically, New Life contends that HHS acted arbitrarily
or capriciously in faulting New Life’s proposed staffing model, which HHS had approved in the
context of other applications, and in requiring New Life to establish formal referral arrangements
with local service providers. Pl.’s Mem. at 9-10, 12-13. Because New Life fundamentally
misconstrues the nature of HHS’ findings in both instances, neither contention warrants vacatur
or remand.11
a. New Life Has Failed to Carry its Burden of Establishing that HHS
Erred in Addressing the Proposed Staffing Model
Beginning with New Life’s proposed staffing model, New Life’s overarching argument is
that rejecting its application on the basis of its staffing model would be inconsistent with HHS’
prior decisions approving of the same staffing model in connection with other programs (and, as
such, would be arbitrary or capricious).12 Pl.’s Mem. at 9-10. Defendants, for their part,
persuasively counter that its decision was a contextual one: i.e., that the staffing model proposed
by New Life was inadequate given the specific size and scope of the program New Life proposed
11
As a separate and independent ground for upholding HHS’ decision in both respects,
New Life utterly failed to address Defendants’ counter-arguments on reply, rendering those
arguments conceded. See Defs.’ Opp’n at 12-14.
12
In passing, New Life also suggests that it “borders on the absurd” for HHS to fault
New Life for failing to identify specific individuals as clinical social workers. Pl.’s Mem. at 9.
Simply put, the Court does not read the Second Denial Letter to impose such a requirement. 2d
Denial Ltr. at AR1217.
43
for the Broadway Street Property. See 2d Denial Ltr. at AR1216-17. Among other things, HHS
took stock of the size and diversity of the community to be served, noting that New Life
anticipated “serv[ing] 125 individuals per year through transitional housing and an additional
1,100 persons through emergency shelter and a free store” and that the overall community served
would span single men, single women, children, families, and veterans. Id. at AR1216. It then
went on to break down in considerable detail the staffing model proposed by New Life, including
the number and qualifications of staff, which would consist of four full-time and four part-time
staff members in year one. Id. at AR1217. Based on this analysis, HHS concluded as follows:
“given the broad range of clients proposed to be served through the program, and the complex
needs likely to be present among program participants, the proposed staffing model is insufficient
to provide services for the number of individuals the program intends to serve.” Id. By any
account, HHS examined the relevant data, brought its expertise to bear on the issue, articulated
an explanation for its action, and drew a rational connection between the facts found and the
choice made, the very essence of reasoned decisionmaking. The Court is not free to second-
guess this assessment here; New Life has failed to carry its burden of establishing that HHS’
determination was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law.
b. New Life Has Failed to Carry its Burden of Establishing that HHS
Erred in Addressing its Arrangements with Service Providers
Before turning to the heart of New Life’s argument concerning its proposed referral
arrangements with local service providers, a preliminary matter must be addressed: here, New
Life again critiques HHS’ reference to the letters from Mending Hearts and Safe House, and cites
to materials that are not a part of the administrative record to intimate that its ability to establish
44
arrangements with local service providers has recently improved. For reasons described in
greater detail elsewhere, the first argument fails because HHS did not err by supplementing the
record on remand; the second argument fails because, absent rare circumstances, which New Life
has not even attempted to establish here, a court’s review of agency action must be based on the
administrative record. See Envtl. Def. Fund, 657 F.2d at 284. This leaves the essential thrust of
New Life’s argument – i.e., that it is arbitrary or capricious for HHS to require applicants to
establish formal referral relationships with local service providers. Pl.’s Mem. at 12. This
Court’s review of New Life’s application and HHS’ decision reveals no such error.
In its application, New Life indicated:
New Life . . . strives to establish informal working relationships with
other homeless service providers to secure client access to a [sic]
extensive multitude of services other than those offered by [New
Life]. Each program area shall have procedures to provide for
coordination and impending communication between the internal
programs and external agencies.
Furthermore, when applicable, New Life staff members will assist
residents in accessing local advocacy groups, consumer groups, self-
help groups or other organizations that may aid and nurture the client
in the recovery process.
Appl. at AR726. Elsewhere in its application, New Life refers in passing to, inter alia,
“[l]inkages and referral[s] to internal and external supportive services including, but not limited
to, benefit programs, in-patient or out-patient mental health or substance abuse treatment . . . or
support groups,” id. at AR732, “referrals with . . . women’s alcohol and substance abuse
programs,” id. at AR729, and “cooperating with all local agencies providing child-care,” id. at
AR728.
Responding to these proposals, HHS underscored in its Second Denial Letter that,
45
“throughout [New Life’s] application, referral relationships are described as informal and
supported only by references to telephone conversations.” 2d Denial Ltr. at AR1216.
Additionally, HHS highlighted that New Life submitted no documents identifying “specific
commitments to facilitate delivery of these services or to provide referrals.” Id. As a
consequence, HHS found that, while “it is acceptable for an applicant to propose providing
services via referrals . . . [New Life’s] application fails to adequately support its proposal and
demonstrate that [it] would successfully implement the referral program it proposes.” Id. at
AR1217. Its conclusion in this regard was but one basis for its broader determination that New
Life had failed to satisfy the “services offered” criterion, a determination that also rested on the
perceived inadequacy of New Life’s proposed staffing program. Id.New Life’s first attack on HHS’ determination – i.e., that “there is no requirement that a
Title V applicant have a formalized relationship with other organizations in order to make
referrals,” Pl.’s Mem. at 12 – is a strawman. HHS has never asserted, either in the proceedings
below or before this Court, that the McKinney Act requires applicants to establish formal referral
relationships with local service providers. Rather, HHS’ defense rests on the contours of the
“services offered” criterion itself; pursuant to the governing regulations (the validity of which
New Life does not challenge), HHS is required to evaluate “the extent and range of proposed
services, such as meals, shelter, job training and counseling.” 45 C.F.R. § 12a.9(e)(2)(i). As the
application packet makes clear, the list is non-exhaustive; “other services are considered as they
are proposed” by the applicant. Criteria for Appl. Review at AR690; see also 45 C.F.R. §
12a.9(b)(3) (an “applicant must fully describe the proposed program and demonstrate how the
program will address the needs of the homeless population to be assisted.”). Accordingly, once
46
New Life itself proposed offering such referral services, HHS appropriately evaluated the
application to assess whether New Life had sufficiently articulated how the services would be
delivered, regardless of whether they would be delivered directly or through an affiliated service
provider.
New Life’s second basis for assailing HHS’ determination fares no better. In cursory
fashion and without citation to the administrative record, New Life asserts that “the lack of such
formal commitments in no way detracts from New Life’s ability to make such referrals.” Pl.’s
Mem. at 12. Nevertheless, consistent with its mandate, HHS brought its expertise to bear upon
New Life’s proposals, and concluded that New Life’s vague and unsubstantiated assurances
“fail[ed] to adequately support its proposal and demonstrate that [it] would successfully
implement the referral program it proposes.” 2d Denial Ltr. at AR1217. This Court is not in a
position to weigh New Life’s unsupported assertion that all that is required for a successful
referral program is “little more than an awareness of the services offered in the community, and a
list of telephone numbers,” Pl.’s Mem. at 12; Congress has entrusted such matters to the
agencies, not this Court. Ultimately, the only conclusion supported by the record is that HHS
examined the relevant data, articulated the reason underlying its decision, and drew a rational
connection between the facts found and the choice made; as a result, while New Life may
understandably disagree with HHS’ determination, mere disagreement cannot discharge its
burden of establishing that the determination was arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.
47
3. Implementation Time
The third and final substantive error attributed by New Life to HHS’ determination on
remand concerns the “implementation time” criterion, which obligates HHS to evaluate “[t]he
amount of time necessary for the proposed program to become operational.” 45 C.F.R. §
12a.9(e)(2)(iii). Separately, the regulations further provide that, when “construction or major
renovation is not required or proposed, the property must be placed into use within twelve (12)
months from the date of transfer.” 45 C.F.R. § 12.3(c). New Life does not dispute that it would
need at least two years to fully implement the proposed program and that no “major”
construction or renovation is required for the Broadway Street Property; instead, New Life argues
that HHS erred by interpreting § 12.3(c) as requiring applicants to implement their proposed
program in twelve months if no major construction is involved. See Pl.’s Mem. at 11; Defs.’
Opp’n at 10; Pl.’s Reply at 5-7.
The parties’ disagreement turns on the meaning of the phrase “placed into use.” 45
C.F.R. § 12.3(c). New Life reads the provision as merely requiring applicants to place the
property into some use within the twelve-month time period, without ever explaining what
quantum of use would suffice. Pl.’s Reply at 5-7. Defendants maintain that the provision
requires that the entire program proposed by the applicant, and not just certain components or a
portion thereof, must be placed into use within the twelve-month time period. Defs.’ Opp’n at
11. In other words, Defendants maintain there is no room for “piecemeal program
implementation.” Id. For the reasons described above, see supra Part III.A.3.a, the Court shall
resolve these competing interpretations applying a de novo standard of review; under that
standard, HHS’ interpretation must prevail.
48
Because it provides the answer to the question presented, the Court begins with a more
fulsome citation to the disputed provision, which inexplicably is given short shrift by the parties:
[1] Where construction or major renovation is not required or
proposed, the property must be placed into use within twelve (12)
months from the date of transfer. [2] When construction or major
renovation is contemplated at the time of transfer, the property must
be placed in use within 36 months from the date of transfer. [3] If the
applicable time limitation is not met, the transferee shall either
commence payment in cash to the Department for each month
thereafter during which the proposed use has not been implemented
or take such further action as set forth in § 12.12 as is deemed
appropriate by the Department. *** [4] If the facility has not been
placed into use within eight (8) years of the date of the deed, title to
the property will be revested in the United States, or, at the discretion
of the Department, the restrictions and conditions may be abrogated
in accordance with § 12.9.
45 C.F.R. § 12.3(c) (emphasis added). While the first two sentences of the provision may not
define the relevant “use,” the third sentence makes explicit what is implied throughout: the “use”
referred to in § 12.3(c) is the “proposed use” – namely, the use proposed by the applicant. Read
in its proper context, the first sentence clearly requires that the property be “placed into [its
proposed] use” within the twelve-month period. Id. This interpretation of the first two sentences
gains support from the sentences that follow. The third sentence in the provision imposes a
monthly sanction upon an applicant that fails to implement the “proposed use” for the property, a
sanction that would be rendered largely nugatory by an interpretation that would broaden
“proposed use” to mean “some proposed use” or “less than the entirety of the proposed use.”
The delinquent transferee could simply put the property to the barest of uses, refuse to implement
the program for which the property was granted, and disclaim any obligation to pay the monthly
fine. The same holds true for the fourth sentence; if “use” were interpreted to mean something
less than the entirety of the proposed use, there would be no force to the reversionary clause.
49
Again, an obstructionist transferee would always be able to conjure up some minimal use for the
property. Further, although by no means dispositive, interpreting “use” as proposed by
Defendants serves the salutary purpose of ensuring that § 12.3(c) and § 12a.9(e)(2)(iii), which
requires HHS to assess “[t]he amount of time for the proposed program to become operational”
(emphasis added), are interpreted consistently and work in tandem. For each of these reasons,
the Court concludes that New Life has failed to carry its burden of establishing that HHS erred in
assessing New Life’s compliance with the “implementation time” criterion.
At the same time, New Life concedes that, pursuant to 45 C.F.R. § 12a.9(e)(2)(iii), HHS
retained the discretion to consider the amount of time necessary for the proposed program to
become operational as a factor in evaluating an application. Pl.’s Reply at 6. Despite this
concession, New Life fails to articulate why HHS’ reliance upon the projected two-year
implementation time for New Life’s proposed program constituted prejudicial error, supplying a
separate and independent ground for upholding HHS’ decision.
C. New Life Is Not Otherwise Entitled to an Order Allowing it to Submit a
Supplemental Application
As a final resort, New Life appears to suggest that, even if HHS’ decision was not
otherwise arbitrary or capricious, the Court should, after vacating and remanding this action for
further proceedings on the administrative level, order HHS to accept a supplemental application
by New Life in light of the passage of time. Pl.’s Mem. at 13-15. In support, New Life
maintains that changed factual circumstances – including rising unemployment, rising
foreclosures, and shrinking state budgets for social services – have contributed to an even greater
need for homeless assistance in the Cape Girardeau area. Pl.’s Mem. at 14. New Life also
contends that, since the filing of its original application, it has established a presence in the Cape
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Girardeau area, has already established a waiting list for its Outreach Facility after approximately
three months of operations, and has received referrals from providers of homeless assistance.
Pl.’s Mem. at 14-15. For at least three reasons, any one of which is sufficient to deny the relief
sought, New Life’s assertions are unavailing.
First, it is black letter law that, except in rare circumstances, a court’s review of agency
action must be based on the administrative record. See Envtl. Def. Fund, 657 F.2d at 284. As
Defendants correctly note, the materials relied upon by New Life were not part of the
administrative record, and as such are not properly subjects for the Court’s consideration.
Second, and more to the point, for all the reasons stated at length above, see supra Part
III.A.2.c, the Court cannot impose upon HHS specific procedural requirements that have no basis
in the APA or the McKinney Act, Pension Benefit, 496 U.S. at 653, and is therefore without
authority to order HHS to allow New Life to supplement its application.
Third, and finally, because the Court concludes that vacatur and remand is not
appropriate, New Life’s request to supplement the record fails ipso facto. The APA “sets forth
the full extent of judicial authority to review executive agency action,” Fox Television Stations,
129 S. Ct. at 1810, and now that this Court has concluded that HHS’ decision was neither
arbitrary nor capricious, the Court’s inquiry is at an end.
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IV. CONCLUSION
The Court has considered the remaining arguments tendered by the parties, and has
concluded that they are without merit. Therefore, and for the reasons stated above, the Court
shall DENY New Life’s [35] Second Motion for Vacatur and Remand and DISMISS this action
in its entirety. An appropriate Order accompanies this Memorandum Opinion.
Date: December 1, 2010
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
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