Opinion for the court filed by TAMM, Circuit Judge.
TAMM, Circuit Judge.
Appellant Southern Mutual Help Association (SMHA) commenced this action in the United States District Court for the District of Columbia, challenging a decision by the appellee Secretary of Health, Education and Welfare (HEW) to disapprove, after three years of federal support, an annual application submitted to obtain continued funding for appellant's migrant worker health care facility in Franklin, Louisiana. The Secretary took this action without providing SMHA the opportunity for a hearing. The district court granted the appellee's motion for summary judgment, holding that neither HEW regulations nor the due process clause of the fifth amendment required HEW to hold a hearing. We vacate the order of the district court, and remand to that court with the instruction to remand to the Secretary for further proceedings consistent with this opinion.
Under authority of the Migrant Health Act (section 310 of the Public Health Service Act), 42 U.S.C. § 242h (1970),
* * * * * * Project Period 7/1/71-6/30/76 Grant Period 7/1/71-6/30/76 * * * * * * Budget Period 7/1/71 through 6/30/72 * * * * * * Total Approved Budget $204,584 * * * * * * Future Support Recommended Budget Period Amount (72) 7/1/72-6/30/73 $286,060
***(73) 7/1/73-6/30/74 321,966 ***(74) 7/1/74-6/30/75 341,162 ***(75) 7/1/75-6/30/76 363,328 **** * * * * *
* * * * * *
In 1972 and 1973, SMHA filed the required applications for continued funding, and each was approved. A revised "Notice of Grant Award" form was attached to each, and in pertinent part, the 1973 document indicated the following:
* * * * * * Project Period 7/1/71 through 6/30/76 Budget Period 7/1/73 through 6/30/74 * * * * * * Total Approved Budget $298,403 * * * * * * Recommended Future Support (Subject to availability of funds) Budget Period Total Direct Costs 7/1/74-6/30/75 $341,162 7/1/75-6/30/76 341,162 * * * * * *
Significantly, there is no mention on the document of "grant," "grant period," or "grant expiration date." The document does, however, indicate HEW's concern over the fact that SMHA had not yet established a project policy board, designed to promote greater community participation in the project, as required by HEW regulations.
In November 1973, HEW instituted its first comprehensive fiscal audit of SMHA. The results of this audit were released on May 22, 1974, and SMHA was advised that it had thirty days to present "any comments or additional information that [it] believe[d] may have a bearing on [HEW's] final determination."
Stating that it was "unable to find sufficient merit in the continuation of the somewhat cumbersome and unresponsive project administration through SMHA," HEW listed six principal areas of major concern that prompted its decision:
On June 11, SMHA notified HEW that it intended to challenge and appeal the denial decision.
SMHA then formally applied for review to the HEW Grant Appeals Board,
On August 28, 1974, SMHA filed its complaint in the district court, seeking, under 28 U.S.C. § 1331(a) (1970), declaratory and injunctive relief and money damages.
Before beginning our analysis in this case, a few preliminary comments appear to be in order. In the two decades immediately preceding the award to SMHA, federal expenditures for grants increased tenfold, from $2.4 billion in 1951 to $27.6 billion in fiscal year 1971.
This spectacular expansion of both the size and scope of grant programs has engendered surprisingly little case law on the administration of federal grants. However, there is no doubt that an ever increasing number of cases in this area will be presented,
With a high degree of acumen, but seemingly little conviction, HEW has, in a single sentence and footnote, challenged SMHA's standing to bring this suit.
In Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976), the Supreme Court reemphasized the constitutional limitation of federal court jurisdiction to actual cases or controversies. Standing, of course, is a vital part of this limitation, and "when a plaintiff's standing is brought into issue the relevant inquiry is whether, assuming justiciability of the claim, the plaintiff has shown an injury to himself that is likely to be redressed by a favorable decision." Id. at 38, 96 S.Ct. at 1924.
The only claim before us in this appeal concerns SMHA's entitlement to a hearing. Although the final fiscal year indicated on the various grant documents ended over seventeen months ago, providing SMHA with a hearing would not be an idle gesture, for reasons that follow.
In Tax Analysts & Advocates v. Blumenthal, 184 U.S.App.D.C. 238 at 248, 566 F.2d 130, 140 (1977), cert. denied, ___ U.S. ___, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978), this court noted that, while the zone test is obviously meant to serve as a limitation on those who can use the federal courts to challenge agency actions, it is "a quite generous standard," using as it does the terms "arguably" and "zone." The statutory framework to be scrutinized under this generous standard in the instant case includes the Migrant Health Act, 42 U.S.C. § 242h (1970), and HEW regulations issued under authority of that Act. The statute states that migrant health grants are to be made "to public and other nonprofit agencies, institutions, and organizations . . ." (emphasis added). This explicit reference to nonprofit groups indicates that, while Congress clearly intended that migrant workers should benefit from the funds appropriated under this Act, it also recognized that conduit organizations such as SMHA were necessary to deliver the services contemplated. In consideration of this fact, HEW promulgated regulations, 45 C.F.R. Part 16, establishing a departmental grant appeals process designed "to afford to aggrieved grantees maximum due process . . . in disputes [with] the agency."
As is usually the case, however, the injury in fact requirement presents a more difficult question. The characteristics of an injury in fact, although not always amenable to facile application, are relatively well established.
While SMHA has alleged a number of particularized injuries,
The fact that an injury to the reputation of an organization such as SMHA can serve as a basis for standing has been recognized at least since Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 71 S.Ct. 624, 95 L.Ed. 817 (1951) (plurality opinion). In that case, the Supreme Court stated that the effect of designating the complaining organizations as "Communist" was to "cripple the functioning and damage the reputation of those organizations in their respective communities and in the nation." Id. at 139, 71 S.Ct. at 632 (principal opinion) (Burton, J.); see id. at 140-41, 71 S.Ct. 624. See also Kukatush Mining Corp. v. SEC, 114 U.S.App.D.C. 27, 32, 309 F.2d 647, 652 (1962) (Bazelon, C. J., dissenting).
HEW's action in this case could have a similar crippling effect on SMHA's ability to obtain future grants.
Determining that SMHA has standing to challenge the action by HEW does not lead automatically to the conclusion that it was entitled to a hearing to protest the action. SMHA has contended that departmental regulations, the APA, and the due process clause of the fifth amendment entitle it to a hearing.
As mentioned above, HEW has established a grant appeals process "designed to afford to aggrieved grantees maximum due process . . . ."
At first glance, this definition appears to describe precisely the action taken by HEW, and it is on this basis that SMHA claims entitlement to a hearing. More specifically, SMHA contends that in 1971 it was awarded a five-year grant, divided into five individual budget periods. Under this interpretation, the action taken by HEW in 1974, with two years remaining on the
As noted in Part I above, the only mention of a "grant expiration date in [a] grant award document" was in the initial grant award document, and it lists the grant expiration date as "6/30/76."
However, HEW argues that the action taken was not a "termination," but rather a "pre-award decision related to an application for the additional grant,"
It is settled law that great deference is to be given to an agency's interpretations of its regulations: "the ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation." Bowles v. Seminole Rock Co., 325 U.S. 410, 414, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945); accord, Udall v. Tallman, 380 U.S. 1, 16-18, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). However, it is important to remember that the primary rationale for this doctrine is that deference is accorded to agency expertise, Wilderness Society v. Morton, 156 U.S.App.D.C. 121, 145, 479 F.2d 842, 866 (en banc) cert. denied, 411 U.S. 917, 93 S.Ct. 1550, 36 L.Ed.2d 309 (1973), and an "[a]dministrative construction is less potent than it otherwise would be where it does not rest upon matters peculiarly within the administrator's field of expertise." Thompson v. Clifford, 132 U.S.App.D.C. 351, 364, 408 F.2d 154, 167 (1968). Also, in both Bowles and Udall, the Supreme Court was impressed by the fact that the interpretations under scrutiny had been consistently utilized by the agencies concerned for a significant period of time; indeed, in Udall, the Secretary's interpretation had "been a matter of public record and discussion." 380 U.S. at 17, 85 S.Ct. at 802; see Northern Indiana Public Service Co. v. Porter County Chapter of the Izaak Walton League of America, Inc., 423 U.S. 12, 14, 96 S.Ct. 172, 46 L.Ed.2d 156 (1975) (per curiam). In later cases, the Court has distinguished Udall in instances where the "notoriety" present in that case, id. at 18, 96 S.Ct. 172, was not readily apparent. See, e. g., Zuber v. Allen, 396 U.S. 168, 194, 90 S.Ct. 314, 24 L.Ed.2d 345 (1969). See also United States v. National Association of Securities Dealers, Inc., 422 U.S. 694, 718-19, 95 S.Ct. 2427, 45 L.Ed.2d 486 (1975).
In this instance, neither notoriety of interpretation nor a subject peculiarly within agency expertise is present. There is no indication that HEW had ever in the past been required to interpret the word "termination"
There is a further reason for this court to accord somewhat less weight to the HEW interpretation. As we have noted twice before, the underlying reason for establishing the grant appeals process was to afford grantees maximum due process in disputes with HEW. It appears to us, therefore, that the Secretary was bound to interpret the term "grant termination" in the light most favorable to the grantee. In our view, he has not done so in this case, and while we have given proper deference to his arguments, we reach an opposite conclusion from that reached by both the Secretary and district court.
The most telling argument in favor of SMHA's position is that HEW, in its own regulations, has chosen the "grant expiration date in the grant award document" as its benchmark in defining grant termination under 45 C.F.R. Part 16. As demonstrated above, however, a grant expiration date can be found only on the initial award document, and that date, June 30, 1976, clearly comports with SMHA's position. The second and third grant award documents do not contain grant expiration dates, and since HEW has stated that these documents supersede the initial award documents only in that they authorize the grantee to request an indirect cost rate,
While it is true that 42 C.F.R. § 56.107(e) (1974) lends support to HEW's interpretation,
While this definition applies primarily where the grantee is a state or local government, it may also be applied to other grants.
Further, in the HEW Grants Administration Manual in force at the time of the key events in this case, grant period is defined as "[t]he period for which funds have been awarded; i. e., the remainder of the project period".
Finally, the Grants Administration Manual indicates that there are two basic methods for ending support of a project: "(1) withholding support (failing to fund noncompeting continuation applications) and (2) withdrawing support (termination)."
For the foregoing reasons, we hold that the action taken by HEW was a termination, and, therefore, that by its own regulations, HEW was obliged to provide SMHA with a hearing. We intimate no position on whether HEW, by more carefully drafted regulations,
For the foregoing reasons, we vacate the judgment of the district court and remand to that court with the instruction to remand to the Secretary so that a formal hearing can be held before the Grant Appeals Board.
Vacated and remanded.
I am unable to join in the court's decision for two reasons. First, in my view, SMHA has not established its standing to bring this suit; it has failed in its responsibility clearly to allege facts demonstrating that it is a proper party to invoke the exercise of the court's remedial powers. Second, assuming for the sake of argument that appellant has established standing, I would affirm the District Court's judgment, because I agree on the merits with Judge Flannery that SMHA was not entitled to a hearing before the Grant Appeals Board either under HEW regulations or the Due Process Clause.
I. THE PROBLEM OF STANDING
SMHA has presumably brought this action because it believes that it has sustained
The real interest at stake in this case can best be identified by tracing the flow of grant money as it funnels down from the Congress through various levels of administration, to the ultimate beneficiaries—the migrant workers and their families. That real interest is a public interest, the welfare of the ultimate beneficiaries, not the private interest of SMHA attempted to be asserted here.
At the highest level of grant administration is the Department of Health, Education and Welfare, which each year receives from Congress funds specifically appropriated for the improvement of migrant worker health care. The Secretary of HEW is authorized to use these funds in making grants to public agencies or private non-profit organizations which, in turn, are to establish and operate health care facilities for migrant workers. These grants are made expressly on the condition that the grantee provide persons broadly representative of the target population an opportunity to participate in developing and implementing the funded health care programs.
At the next level of grant administration are the grantees themselves—the public agencies or private non-profit organizations. As far as I am able to tell from the record, these entities are essentially conduits for the funds. The employees of the public agencies and the board members of the non-profit organizations do not derive salaries or otherwise profit from grant money; they have no economic stake in it. Rather, these organizations perform a managerial function with respect to the funds. They plan and implement health care services, ensuring that grant monies are properly applied in their provision. Congress' specification of public agencies and non-profit organizations was purposeful, the theory being that, because such entities have no interest in the grant money and are motivated solely by altruism, they will encourage the target populations' participation in the administration of the funds. This participation, in turn, is supposed to assure program responsiveness. Thus, the very reason organizations such as SMHA receive grant money is their supposed economic disinterest and self-abnegating spirit.
At the final level of grant administration are the health delivery systems—the clinics themselves. It is at this level that grant money is expended for capital construction, equipment, and salaries for medical personnel and other staff. These clinics are the line entities, providing health care services directly to the migrant workers and their families.
As I read the record in this case, all that has happened is that one group of non-salaried volunteer welfare workers (SMHA) has been replaced in its management role by another group of non-salaried volunteer welfare workers (TAB). It is just as if HEW shifted a grant award from one state agency to another state agency. When SMHA's grant was not renewed for a fourth year, HEW simply granted the available money to TAB, another qualified non-profit organization, which then replaced SMHA in its managerial role over the health care clinic. The grant money is now being funneled through that organization to the clinic. Thus the basic health care structure and staff established by SMHA at the outset of the grant is still intact and, although now under the management of TAB, still serves the same area. The migrants—the beneficiaries of the program—have lost nothing, the people who staff the clinics have lost nothing, and it appears to me that SMHA has lost nothing except perhaps the opportunity to help others by administering federal monies.
In order to establish such standing in its own right, however, an association must allege that it has suffered an injury in fact, economic or otherwise. The injury must be alleged with particularity; the association must plead specific and concrete facts indicating that it has sustained an injury. The existence of an injury cannot be left to the imagination of the court.
Despite these requirements, SMHA has failed to allege specifically any facts, either in its original or in its amended complaints, indicating that it has sustained a redressable injury as a result of HEW action. It alleges in its complaint that it has been deprived by HEW action of two years of funding amounting to approximately $700,000 in grant money. At oral argument SMHA's counsel was specifically asked what injury the association had sustained to support its standing. Counsel responded that SMHA had lost its "property interest" in two years of grant money. However, in my view, any such "property loss" is an illusion. SMHA was a conduit. The association itself did not profit from the grant money; it was essentially a board of directors administering the grant funds for the benefit of the migrant workers. Thus, the association had no financial or economic interest in this money. The only persons who are salaried and are being paid government money are the staff personnel actually operating the health clinics. These individuals have largely retained their jobs under the new management of TAB. The clinics are still in operation. In fact, then, SMHA has not "lost" anything.
Equally important is the fact that SMHA's "loss" of funding for two years is simply not redressable. The funds putatively "lost" by SMHA were appropriated by Congress to carry out programs for specific beneficiaries during specific fiscal years—FY 1975 and FY 1976. The programs have been carried out; the funds have been spent; the true beneficiaries have already received the benefits which Congress intended that they receive. This court cannot require Congress to appropriate further funds so that appellant can have the pleasure of administering a redundant program. Nor can we require the Secretary of HEW to award to SMHA grant money appropriated by Congress in
There is another injury mentioned in SMHA's complaint which does involve genuine economic loss to the Association. SMHA claims that, as a result of HEW's withdrawal of support, it was forced to breach various contractual obligations for which it remains liable. It claims damages of $100,000. Certainly these forced breaches have resulted in an injury to SMHA; and certainly this is an injury which this court can remedy. But just as certainly these forced breaches were not caused by HEW's non-renewal of funding. SMHA simply did not have authority to obligate grant money by contract beyond a one year period. This limitation was clearly understood by SMHA. All of the contracts breached by SMHA were contracts running beyond a one year term. To the extent that these contracts purported to obligate grant monies, they were ultra vires, and were entered into solely on the responsibility of SMHA. In no proper sense, then, did HEW's withdrawal of support cause SMHA's lingering liabilities.
What injury has SMHA sustained then as a result of HEW's action? The majority has rested its finding of standing on the theory that SMHA has suffered an injury to its good name and reputation:
This is an interesting notion; the problem is that it represents the court's own imaginative theory of how SMHA was actually injured.
There are no specific or concrete facts alleged in SMHA's complaints, its brief, or oral argument, or elsewhere in the record which support this theory. Although there is in the original and amended complaints a request for $1,000,000 in damages for "injury to good name and reputation", there are no specific and concrete facts regarding this asserted injury alleged in the complaints. This cryptic reference—and good round figure of One Million obviously picked out of thin air—is not sufficient to support the majority's theory regarding appellant's reputational injury.
It seems to me that if one follows the majority's reasoning that the only redressable injury sustained by SMHA has been the tarnishing of its image within HEW and other granting agencies, then one must conclude that this so-called "injury to reputation" really translates into the possibility that SMHA may be given fewer opportunities to administer federal grant money in the future. In other words, the gravamen of SMHA's complaint, at least the only remaining part found tangible by the majority, is that it may have lost opportunities to help other people and have the government pay for it. This interest in being altruistic at the government's expense strikes me as somewhat ephemeral, and I question whether the invasion of an interest of the kind suggested here constitutes a palpable enough injury to establish "injury in fact" under the doctrine of standing.
II. THE MERITS
Assuming that SMHA has standing to bring this action, the issue presented is whether HEW regulations or the due process clause required that HEW provide SMHA with a hearing before withdrawing support for FY 1974 and FY 1975. The District Court concluded, first, that HEW regulations did not require a hearing and, second, that SMHA did not possess a "property interest" in future funding protected by the procedural guarantees of the due process clause. My colleagues, however, conclude that HEW regulations did entitle SMHA to a hearing and therefore find it unnecessary to reach the constitutional question. I am in agreement with the analysis in Judge Flannery's opinion in the District Court and have only a few remarks by way of supplementation.
A. Due Process Clause
In its original and amended complaints, its brief in this court, and its oral argument, SMHA has insisted that it possesses a "property interest" in continued funding protected by the procedural guarantees of the Due Process Clause. Relying on Board of Regents v. Roth
The majority's opinion, however, raises another possible Fifth Amendment issue. Relying on a supposed injury to SMHA's reputation to confer standing on the Association, the majority raises the question whether this reputational injury implicates "liberty interests" sufficient to trigger due process protections. The District Court did not address this question because appellants have never even suggested, either in the District Court or before this Court, an invasion of their "liberty interests." My own view is that any reputational injury sustained by SMHA did not amount to a deprivation of "liberty" within the protection of the Fifth Amendment, and recent Supreme Court decisions squarely support this position.
B. HEW Regulations
The majority correctly points out that HEW regulations concerning the "termination" of grants are confusing and that it is an exceedingly close question whether these regulations did or did not require a hearing under the circumstances of this case. By applying the doctrine of contra proferentem, the majority construes the regulations against HEW and in favor of SMHA. I believe this is wrong for three reasons.
First, I think it appropriate for this court to defer to the Department's interpretation of its own regulations. As far as we can tell the regulations were being interpreted for the first time, and the Department's construction is a reasonable one.
Second, I question whether the doctrine of contra proferentem should be used simply to penalize sloppy draftsmanship. The doctrine is most appropriate in situations where the non-drafting party is relatively inexperienced and has relied on the terms in dispute. In such a case, there is the danger that the more experienced drafter may be taking unfair advantage of the other party. However, these factors did not exist in the instant case.
Third, I believe that the Department's construction of its regulations is most consistent with Congress' intent in enacting the Migrant Health Act. The Department's construction would give a grantee a hearing whenever the grantee had a tangible financial stake in the grant funds, that is, whenever a grant was terminated in mid-term. The appellant's interpretation of the regulations, accepted by the majority, would provide a grantee with a hearing under circumstances where it had no real financial stake but only an ephemeral "reputation" interest to protect, that is, whenever the Department denies a grantee's application for renewal of a grant.
It cannot be denied that Congress enacted the Migrant Health Act to benefit migratory workers and their families and not to benefit public agencies or non-profit organizations. Indeed, it was the very self-abnegating spirit of these organizations which commended them as appropriate vehicles for accomplishing Congress' purpose. Congress might be surprised to see the spectacle of these presumably altruistic organizations squabbling over the grant funds in an attempt to vindicate ephemeral interests at the possible expense of the migrant workers themselves, the true beneficiaries of the Government's largesse. There can be no question but that expanded procedural rights for grantees under this kind of grant program would have a tendency to interfere with the delivery of health services to the program's beneficiaries by delaying, disrupting or degrading the quality of
One other point on overall public policy involved here should be recognized. It is bad enough for efficient government that we must put up with entrenched bureaucracies of government employees who frequently assert that they have a constitutionally given right to perpetuate both the programs and themselves in spending government funds. It is even worse to confer upon—not government agencies and persons who presumably are subject to direction by proper executive authority—but to confer upon miscellaneous private organizations not within government control rights in perpetuity in programs and persons. This is really entrenching a bureaucracy when we entrench private bureaucracies which are by definition beyond effective government control. Hence, if we permit this private non-profit organization standing to sue here by recognizing its claimed ephemeral damage to reputation, and award it a hearing by rejecting the responsible Department's interpretation of its own regulations, we are in effect conferring upon organizations which are purely donee-trustees for the benefit of others a virtual perpetuity in government funds, with a right to challenge any cut-off of monies intended to be pure largesse for the benefit of persons other than this appellant.
First, because this rather peculiarly situated plaintiff-appellant lacks standing by the recognized constitutional requirement of injury in fact, and, second, because I would defer to the interpretation of the regulations made by both the responsible Department and the District Court, I cannot join in the majority's remand for a hearing and therefore respectfully dissent.