Opinion for the Court filed by Circuit Judge STARR.
STARR, Circuit Judge:
This case presents procedural and substantive challenges to a rule implementing reductions in federal spending which were mandated by Congress in the summer of 1981. Appellants are participants in the Child Care Food Program, a federal financial assistance program administered by the United States Department of Agriculture. They brought this action in June 1982, challenging a regulation
At the outset of this litigation, plaintiffs moved for a preliminary injunction to set aside the new regulation, on the theory that the Department had misinterpreted the relevant provisions of OBRA. Instead
In Petry v. Block, 697 F.2d 1169 (D.C.Cir.1983), this court reversed the District Court's decision and remanded the case. Our decision "upheld the Secretary [of Agriculture's] interpretation of [OBRA's] amendment" of the Child Care Food Program ("CCFP") statute, but noted that "issues remain for resolution by the District Court relating to the manner in which the challenged regulation was promulgated and its reasonableness in the light of facts presented." Id. at 1171. On remand, appellants argued that the Department's adoption of this regulation ran afoul of both OBRA and Administrative Procedure Act ("APA")
In a Memorandum Opinion and Order dated March 29, 1983, the District Court denied appellants' motion, and granted summary judgment in favor of the appellees. Appellants now seek review of that decision. We affirm.
The Child Care Food Program provides financial assistance to the several States to defray the cost of meals served to needy children in child care centers and day care facilities. CCFP also reimburses a portion of administrative expenses incurred by sponsoring organizations, which supervise day-care homes and assist in the administration of the program.
OBRA, a widely publicized measure passed in 1981, was aimed at reducing the level of federal expenditures. The measure was designed, in relevant part, to make numerous changes in the funding of federal welfare programs, including the program here in question. To this end, OBRA amended the CCFP statute to require a ten percent reduction in amounts paid by the Secretary of Agriculture as reimbursement for sponsoring organizations' administrative expenses.
In the spirit of the day, OBRA placed administrative agencies on an unusually fast track to implement the mandated changes. Accordingly, the measure provided for, among other things, expedited implementation of the reduction in CCFP administrative reimbursements. Specifically, section 820(c) of OBRA directed the Secretary to promulgate implementing regulations "[n]ot later than 60 days after the date of enactment" of OBRA.
The responsibility for developing new reimbursement regulations fell upon the shoulders of the Department's Food and Nutrition Service ("FNS"), which is charged with administering CCFP and other federally funded child nutrition programs. Espying OBRA's likely passage on the horizon, FNS collected data during the summer of 1981 with respect to reimbursement practices, but determined that nothing beyond preliminary steps could be taken prior to OBRA's actual passage. Declaration of George Braley, Deputy Administrator for Special Nutrition Programs, FNS, ¶¶ 5-6 ("Braley Declaration").
The timing of FNS' labors on the new regulation is not disputed by the parties, although the appellants argue vigorously that the Secretary, through FNS, failed to work with sufficient diligence and dispatch in this task. FNS completed the first draft of the regulation in good measure on September 17, 1981. Braley Declaration ¶ 10. After this auspicious beginning, the proposed rule entered FNS' internal clearance procedure on October 2, 1981. Defendants' Response to Plaintiffs' Interrogatories and Request for Production of Documents, reprinted in Appendix ("App."), at 36a. The review of the draft regulation continued in early October, at which point storm clouds of delay loomed large. "[I]t appeared unlikely to FNS that clearance and publication of the proposed rule, allowance for a sixty-day comment period, analysis of comments, and publication of a final rule would be possible by January 1, 1982 ...." Braley Declaration ¶ 10. As a result, FNS withdrew the regulation from the clearance process and redrafted it as an interim rule. The proposed interim rule was placed in the clearance process on October 22, 1981.
These well-laid plans then went awry. In November 1981, an error was discovered in the reimbursement formula set forth in the proposed interim rule which would have resulted in an overreduction of reimbursements. The clearance procedure was again aborted, and the draft regulation reworked to eliminate the error contained in the formula. As the calendar fatefully moved toward New Year's Day, a new draft was completed on December 8, 1981, and promptly placed into FNS' internal clearance procedures.
Clearance proved to be a six-week process. After subsequently gaining agency and OMB clearance, the regulation was finally published on January 26, 1982 as an interim rule. 47 Fed.Reg. 3539-41 (1982).
In light of this procedural history, appellants mount an attack against the new reimbursement regulation on three grounds. First, they argue that the initial issuance of the regulation in January 1982 as an interim rule — with retroactive effect — violated the requirement of section 553(b) of the APA that prior notice be given of a proposed rulemaking and public comment procedures followed. As a second prong of this initial ground of attack, appellants strenuously argue that the circumstances presented here do not justify invocation of the section 553(b)(B) "good cause" exemption from the section 553(b) requirement.
Appellants claim, secondly, that appellees breached their APA obligation to disclose a summary of the information and data relied upon in drafting the regulation sufficient to enable interested parties to submit "meaningful" comments on the interim regulation. Third and finally, appellants charge that the Department's decision to adopt the final rule was arbitrary and capricious, in that the Department failed to consider all relevant evidence in reaching its decision.
We first address the latter two objections, which go to the final rule now in effect, and then consider the "good cause" question, which goes only to the promulgation in 1982 of the now superceded interim rule.
Appellants claim that the Secretary failed to describe adequately the "information and data relied upon in drafting" the interim rule, Appellants' Brief at 28, and that this asserted error fatally infects the rule as adopted. We disagree.
In support of their argument, appellants rather unfairly characterize the information set forth in the January 26, 1982 notice of the interim rule. This notice cited the Department's "review of available data" and information generated by a nationwide study of the Program conducted for the Department by ABT Associates, a private consulting firm, as support for (1) the Department's view of economies of scale in the sponsoring organizations, (2) the Department's estimate of actual payments made under the old regulations, and (3) the adjustments necessary to bring payout rates down to OBRA-mandated levels. It is undisputed that the Secretary made available to requesting parties the ABT study's raw data and the Department's own study. Braley Declaration ¶ 14. The Department, moreover, did not rely upon
Appellants nonetheless argue that the Department's actions were insufficient to ensure informed responses to the interim rule. They apparently are of the view that a much more extensive explanation of the two studies described in the January 26, 1982 notice was required by two prior appellate decisions, namely Portland Cement Ass'n v. Ruckelshaus, 486 F.2d 375 (D.C.Cir.1973), cert. denied, 417 U.S. 921, 94 S.Ct. 2628, 41 L.Ed.2d 226 (1974), and United States v. Nova Scotia Food Products Corp., 568 F.2d 240 (2d Cir.1977). This argument, to put it gently, misinterprets these decisions. In Portland Cement, the "critical defect" was the "inability of petitioners to obtain — in timely fashion — the test results and procedures used on existing [cement] plants which formed a partial basis for the emission control level adopted." 486 F.2d at 392. Similarly, in Nova Scotia, "all the scientific research was collected by the agency, and none of it was disclosed to interested parties as the material upon which the proposed rule would be fashioned." 568 F.2d at 251. The situations presented by those two cases, involving nondisclosure of information or data relied upon by the agency, are a far cry from the case at hand. Here, the agency in its announcement of the rule adequately described the information on which it relied, see 47 Fed.Reg. at 3539-40, and later made that information available upon request. Inapposite as they so manifestly are, Portland Cement and Nova Scotia simply cannot be twisted so as to require notices of proposed or interim rules to contain elaborate reproduction of underlying studies.
Appellants also argue that the Department's adoption of the final CCFP reimbursement rule in the summer of 1982 violated the bedrock requirement of APA section 706(2)(A) that agency action not be "arbitrary" or "capricious." The charge in this respect appears to be that the Secretary failed adequately to consider certain information contained in the comments submitted by opponents of the new regulation. The result of this inattention, appellants claim, is that the Department continued to rely upon allegedly flawed data which formed the basis for the interim rule, thereby rendering the final rule arbitrary and capricious.
Under this well-worn standard of review, it is settled that this court "is not to substitute its judgment for that of the agency." Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983). Rather, the court is to conduct a "`searching and careful' inquiry, the keystone of which is to ensure that the [agency] engaged in reasoned decisionmaking." International Ladies' Garment Workers' Union v. Donovan, 722 F.2d 795, 815 (D.C.Cir.1983) (citations omitted). It is the responsibility of "[t]he agency itself [to] supply the evidence of that reasoned decisionmaking in the statement of basis and purpose" required by section 553(c) of the APA to be published with the final rule. International Brotherhood of Teamsters v. United States, 735 F.2d 1525, 1531 (D.C.Cir.1984). Agency action will normally be found arbitrary and capricious only
Motor Vehicle Manufacturers, supra, 103 S.Ct. at 2867.
It is clear that, measured against this standard, the Department's final rule can by no means be deemed arbitrary or capricious. A review of the Department's June 25, 1982 notice to the final rule belies the claim that the Department "summarily dismiss[ed]" the criticisms contained in the comments as "baseless." Appellants Reply
The position advanced by appellants, and other commenting parties who opposed the new rule, seems to reduce to the idea that the rule was defective because the levels of administrative costs and actual federal reimbursements of those costs varied from State to State, and that this variation was not satisfactorily captured in the rulemaking. The result of this defect, appellants claim, is that the final rule "achieve[s] cost savings in excess of the 10% authorized by statute." Plaintiffs' Response in Opposition to Defendants' Motion for Summary Judgment at 12.
In answer to this challenge, the Department defended its reliance upon two data sources: the ABT Associates statistical study of day care centers mandated by Congress, and reimbursement records from sponsoring organizations operating in the fourteen States where CCFP is administered by the Department.
Id. On the basis of this showing, we agree with the District Court's conclusion that while appellants have "demonstrate[d] individual examples in which" the new regulation would decrease reimbursements by more than 10%, they have "fail[ed] to provide evidence countering the Department's conclusions regarding the program" as a whole. Memorandum Opinion at 11 (emphasis added).
The Department also considered, discussed, and rejected various proposals set forth in the comments with respect to the mathematical formula used in computation of the new reimbursement rates. Id. at 27,542-43. This discussion seems eminently reasonable, evincing a particular concern for the impact of the new rule on smaller sponsoring organizations.
In the course of this discussion, the Department explained that the new rates "cannot be tailored to conditions in a particular State," given that the revised rates "must ensure that expenditures are reduced nationally in compliance with the law." Id. This point seems entirely well-taken. Appellants' contentions in this respect sound rather like an argument that reimbursement rates should not be reduced through any device or formula. While appellants' feelings in this respect are perfectly understandable, they are rendered quite beside the point by the express provisions of OBRA. In sum, the actions by the Secretary here do not remotely approach the level of arbitrariness and caprice.
Having determined that appellants' other APA-based claims are without merit, we turn to the question whether the Secretary erred in promulgating the interim rule. That question squarely presents the issue whether the notice-and-comment procedures mandated by the APA were properly bypassed under the circumstances presented here.
Section 553(b) of the APA provides that "[g]eneral notice of proposed rulemaking shall be published in the Federal Register ...." However, this requirement is not applicable
5 U.S.C. § 553(b)(B).
The Department's January 26, 1982 adoption of the interim rule obviously failed to meet the notice-and-comment requirement of section 553(b). Mindful of this failure, the Secretary invoked the statutorily provided "good cause" exception, observing that "[s]ince the effective date of this [regulation] is January 1, 1982, it is impracticable for there to be prior notice and public comment thereon." 47 Fed.Reg. at 3540. The question before us is whether the Department's recourse to this statutory exception was permissible.
The requirements of section 553 have been elucidated by a growing body of case law. As an elementary principle, it is clear that exceptions to section 553 notice-and-comment procedures are to be "narrowly construed and only reluctantly countenanced." American Fed'n of Gov't Employees v. Block, 655 F.2d 1153, 1156 (D.C.Cir.1981) ("AFGE") (quoting State of New Jersey Department of Environmental Protection v. EPA, 626 F.2d 1038, 1045 (D.C.Cir.1980)). In AFGE, this court stated:
655 F.2d at 1156 (emphasis in original) (citations omitted).
On reviewing the totality of the circumstances presented by this case, we conclude that the Department justifiably invoked the "good cause" exception of section 553(b)(B). For here the combination of several extraordinary factors validates the Department's adoption of the interim rule under the mantle of "good cause."
First, we return to the obvious and overriding factor that OBRA was itself a highly extraordinary piece of legislation, imposing taxing demands on much of the federal bureaucracy. As the Third Circuit has stated, "OBRA was the product of a major, highly publicized, and vigorously debated effort by Congress and the President to reverse the growth of federal spending by systematically reducing the level of expenditures in a wide range of federal programs." Philadelphia Citizens in Action v. Schweiker, 669 F.2d 877, 878 (3d Cir.1982). Further, both Congress and the President articulated a profound sense of "urgency" in the need for implementation of the legislation. Id. at 884.
OBRA imposed a complex web of administrative duties, establishing different effective dates for different provisions. But the Act as a whole clearly envisioned very speedy adoption of the mandated changes. To bring this broad point home to the facts before us, numerous OBRA-mandated modifications in programs administered by FNS presented that office with regulation-drafting
In our view, the extremely limited time given by Congress to the Secretary for adoption of the reimbursement regulations is a crucial factor in establishing "good cause." Contrary to appellants' sweeping assertion that "[t]he record in this case ... is replete with unexplained delays," Appellants' Brief at 20, appellees have persuasively demonstrated that Departmental personnel worked diligently in researching, drafting, and processing the challenged rule. During the period from OBRA's passage to September 17, 1981, when the first draft of the regulation was completed, FNS had to process information contained in two data bases detailing reimbursement statistics for CCFP on a program-wide basis: data from fourteen States where FNS directly administers CCFP, and data from a nationwide sample of States and sponsors conducted by ABT Associates. In particular, it was necessary for FNS "to double check projections and calculations, which increased the time required to obtain the necessary information to formulate a reimbursement schedule." Braley Declaration ¶ 9. Also during this period, FNS staff conducted several meetings "with representatives of sponsoring organizations to discuss ideas about changes in CCFP administrative reimbursement regulations ...." Id. at ¶ 7.
By the time the first draft regulation entered the Department's review process in October 1981, less than 90 days remained before the January 1, 1982 implementation deadline. At the time the Department was considering the possibility of redrafting the regulation as an interim rule, only 75 days remained to complete the process. The Department concluded that under this truncated timeframe it would be "impracticable," 47 Fed.Reg. at 3540, to complete the standard notice-and-comment process in time to meet the January 1 deadline. The decision was thus born, as we have seen, to issue an interim rule.
This decision was entirely reasonable, given the requisite time to conduct a notice-and-comment proceeding. The APA, to be sure, does not specify a minimum time for submission of comments in an informal rulemaking. The Administrative Conference of the United States has opined, for the guidance of administrative agencies, that the shortest period in which parties can meaningfully review a proposed rule and file informed responses is thirty days.
Indeed, the Department's early October pessimism about its chances of completing a standard rulemaking proceeding in a timely fashion appears fully borne out by delays the Department encountered in its efforts to promulgate the interim rule. As described in part I, supra, the discovery of an error in the draft interim rule delayed completion of work on the draft until December 8, 1981. If the Department, instead of producing an interim rule on this date, had completed work on a draft proposed rule, it is clear beyond peradventure that insufficient time would have existed between December 8, 1981 and the January 1, 1982 implementation deadline — even allowing for a late January final adoption of the rule — for a truncated 30-day comment period and reasoned agency consideration of and reaction to the comments.
Further, the hypothetical proposed rule would, as of December 8, 1981, still have been subject to Departmental and OMB clearance — a process which consumed six weeks in the promulgation of the interim rule. While it may be true that the Department would have been under greater pressure to complete its work had it decided to continue work on a proposed rule, it is highly doubtful in light of what in fact happened that the Department would have been able to complete a proposed rule in sufficient time for a standard rulemaking to be completed.
A secondary mitigating factor here is the paucity of personnel in FNS in relation to the amount of work manifestly required to produce the regulations within this abbreviated time frame. Uncontroverted record evidence establishes that during most of this period FNS had only three full-time staff members assigned to work on all OBRA-mandated changes in CCFP and Summer Food Service Program regulations; of these employees, one worked full-time on the CCFP reimbursement regulation. Braley Declaration ¶ 4. While agency understaffing in a rulemaking process would not, without more, normally constitute grounds for the "good cause" exception, the OBRA-mandated regulatory changes here were sufficiently extensive and burdensome to warrant the District Court's consideration of agency personnel shortages in this case.
Our decision with respect to the good cause exception is entirely in keeping with the Third Circuit's recent decision in Philadelphia
In so concluding, we are mindful that strict congressionally imposed deadlines, without more, by no means warrant invocation of the good cause exception. Indeed, this court in State of New Jersey, supra, rejected agency arguments that a "tight statutory schedule" constitutes "good cause." But it is clear beyond cavil that we are duty bound to analyze the entire set of circumstances before us, just as the court did in State of New Jersey. There, unlike here, it was readily available to the agency to publish information (States' proposed classifications of air-quality-control regions as "attainment," "nonattainment," or "unclassifiable" when measured against the Clean Air Act's air quality standards) as a proposed rule and then to receive comments. 626 F.2d at 1042-43.
Under the entire circumstances before us, we therefore conclude, as did the District Court, that the statutorily provided exception was satisfied in this case.
Even were we to conclude that the Secretary did not have good cause to issue the interim rule without notice and comment, we would face hopelessly intractable problems in framing an approrpiate remedy. This unhappy situation is strongly suggested by the very curious posture of appellants' good cause arguments, once their other APA arguments, discussed above, are rejected as without merit. Appellants' across-the-board attack on the final rule constituted the only articulated theory of their case. Once the final rule is affirmed, any relief for the Department's invocation of the good cause exception as to the interim rule would become quite difficult, if not impossible, to frame.
First, the Department's treatment of post-promulation comments offered in this proceeding "suggests that the agency has been open-minded," with the result that "real `public reconsideration of the issued rule' has taken place." Levesque v. Block, 723 F.2d 175, 188 (1st Cir.1983). Thus, any presumption against a "late" comment period following adoption of an interim rule has been overcome in this case, with the result that remand to the agency for further proceedings would not in any event be necessary. Id. at 187-89.
Appellants seemed to concede this point below, stating that they
The District Court concluded from this statement that appellants "only ask that funds be reallocated and ... do not seek expenditures in excess of the statutory maximum." Memorandum Opinion at 4. Appellants have not, however, suggested either below or in this court either a legal rationale to justify or a practical formula to effect such a "reallocation." Indeed, any such reallocation would have to be undertaken pursuant to yet another reimbursement formula, different from the one now in place, but which would also generate the specific cost reductions mandated by OBRA.
Thus, even were we to hold, as appellants invite us to do, that the Secretary improperly invoked the good cause exception, we would find ourselves quite unable to fashion a remedy for enforcement of this rule during the now long-gone interim period. Affirmance of the District Court on this independent ground would be entirely in keeping with the Supreme Court's admonition that a federal court exercising its equitable powers in reviewing agency action "must act within the bounds of the statute and without intruding upon the administrative province, [and] may adjust its relief to the exigencies of the case ...." Ford Motor Co. v. NLRB, 305 U.S. 364, 373, 59 S.Ct. 301, 307, 83 L.Ed. 221 (1939). Accord, Indiana & Michigan Elec. Co. v. FPC, 502 F.2d 336, 346 (D.C.Cir.1974), cert. denied, 420 U.S. 946, 95 S.Ct. 1326, 43 L.Ed.2d 424 (1975).
The judgment of the District Court is therefore
Reimbursement per home Number of homes sponsored per year ------------------------- ---------------------- First 25 homes $53 26-75 homes 41 Each home over 75 35
The new rule provided for a four-tier system, designed to reflect previously unaccounted for economics of scale realized by large sponsoring organizations. Id. 7 C.F.R. § 226.12(a)(3) now allows reimbursement at the following levels:
Reimbursement per home Number of homes sponsored per year ------------------------- ---------------------- First 50 homes $42 51-200 homes 32 201-1000 homes 25 Each home over 1000 22
In marked contrast to the factual setting of the instant case, no statutory deadlines were at work in Marshall. Instead, the Secretary improperly invoked the exigent circumstances of an impending harvest season to justify his precipitous actions. Id. at 621.