King Cnty. v. Azar
King Cnty. v. Azar
Opinion of the Court
ORDER
This matter comes before the Court on Plaintiff King County's ("King County" or the "County") motion for a preliminary injunction and summary judgment (Dkt. No. 20) and Defendants Alex Azar and the U.S. Department of Health and Human Services' ("Defendants") cross-motion for summary judgment (Dkt. No. 26). Having thoroughly considered the parties' briefing and the relevant record, the Court finds oral argument unnecessary and hereby GRANTS King County's motion for summary judgment (Dkt. No. 20) and DENIES Defendants' cross-motion for summary judgment (Dkt. No. 26) for the reasons explained herein.
I. BACKGROUND
A. Factual Background
Congress established the Teen Pregnancy Prevention ("TPP") Program in 2010 "to fund medically accurate and age appropriate programs that reduce teen pregnancy." (Dkt. No. 1 at 1, 6) (citing Consolidated Appropriations Act, Pub. L. No. 111-117,
In July 2015, King County received a Tier 2B
In July 2017, HHS approved King County's continuation application for year three of the grant. (Dkt. No. 21-1 at 202.) HHS issued a Notice of Award ("NOA") allocating funds for the ensuing budget year, but also stating that the agency was "[shortening] the project period" from June 30, 2020 to June 30, 2018. (Id. ) This was the only notice King County received of HHS's decision shortening its grant by two years, and HHS provided no further explanation. (Dkt. No. 20 at 9.) TTP Program grants across the country were similarly summarily "shortened." (Id. ) King County appealed HHS's action to the agency, characterizing it as a "termination" that failed to comply with HHS regulations. (Dkt. No. 21-1 at 2.) The County received no response. (Dkt. No. 20 at 9.) Despite HHS's "shortening" of TPP Program project periods to end at the close of the 2017-2018 budget period, on March 23, 2018, Congress appropriated year-four funds for the TPP Program. (Dkt. No. 21 at 2.)
King County challenges HHS's action as arbitrary and capricious and contrary to law, and the agency's refusal to process its year-four continuation application as an unlawful withholding of agency action. (Dkt. No. 20 at 13.) Defendants respond that King County had no entitlement to a five-year grant, and HHS acted within its lawful discretion. (Dkt. No. 26 at 9.)
B. Procedural Posture
King County moves for summary judgment on its claim that HHS's termination of its grant violated the Administrative Procedure Act ("APA") (Count I).
II. SUMMARY JUDGMENT UNDER THE APA
The APA provides for judicial review of agency actions or any person "adversely affected or aggrieved" by a "final agency action for which there is no other adequate remedy in a court."
III. DISCUSSION
This matter turns, in large part, on the proper characterization of the challenged action. King County contends that HHS's decision to shorten its five-year project period was a premature grant "termination." (Dkt. No. 20 at 13.) HHS regulations allow for "termination" of a Federal award: (1) when a grantee "fails to comply with the terms and conditions of the award," (2) "for cause," (3) with a grantee's consent, or (4) at the grantee's request.
In contrast, Defendants characterize HHS's action as a "withholding" of future non-competing continuation awards, a decision not to issue a continuation award, or a decision to re-compete appropriated TPP Program Funds. (Dkt. Nos. 26 at 2, 25; 39 at 4.) Accordingly, Defendants maintain HHS's termination regulation does not apply. Instead, Defendants base their arguments on language in HHS's Grant Policy Statement ("GPS") providing that the agency may "[withhold] a non-competing continuation award" if: (1) adequate Federal funds are not available; (2) a grantee fails to show satisfactory progress; (3) a grantee fails to meet the terms and conditions of the award; or (4) "for whatever reason , continued funding would not be in the best interests of the Federal government." (Dkt. No. 28 at 250) (emphasis added). Defendants argue that each NOA issued to King County incorporated this standard, which provides HHS unfettered discretion to manage grant funds without judicial oversight. (Dkt. No. 39 at 3-4.)
Defendants have attempted to convince multiple courts of their position with no success.
A. Termination
HHS's decision to "[shorten] the project period" constituted an award termination within the meaning of HHS regulations.
The plain language of the regulations compels this finding. HHS regulations define "termination" as "the ending of a Federal award in whole or in part at any time prior to the planned end of [the] period of performance."
Defendants argue that "period of performance" means "budget period." (Dkt. No. 26 at 13.) This interpretation is inconsistent with the definitions referenced above and the regulations' broader text. HHS regulations define "period of performance" as "the time during which the non-Federal entity may incur new obligations to carry out the work authorized under the Federal award."
Indeed, agency practice undermines Defendants' position. HHS staff internally referred to the challenged action as "[shortening] the period of performance [to] 1 year" and a reduction of "the performance period ." (Dkt. No. 22-1 at 40, 42) (emails from career HHS officials Don Wright and Amy Farb on June 29 and July 2, 2017) (emphasis added). This usage is consistent with other HHS grant announcements that describe periods of performance "not to exceed five years," alongside budget periods of 12 months. (Dkt. No. 37-8 at 14-15.) It is clear that agency practice treats periods of performance as extending beyond individual budget periods and as synonymous with project periods. See Policy and Research, LLC ,
In light of the clear text of the regulation and agency practice, the Court need not defer to the agency's alternative interpretation advanced for the purposes of this litigation. Christopher v. SmithKline Beecham Corp. ,
B. Anti-Deficiency Act
Defendants argue that Plaintiff's position equating "project period" with "period of performance" would create an Anti-Deficiency Act ("ADA") violation. (Dkt. No. 26 at 10-13; 39 at 4.) The ADA provides that "an officer or employee of the United States Government...may not...involve [the] government in a contract or obligation for the payment of money before an appropriation is made."
The Court finds that HHS's project period/period of performance model satisfies ADA requirements. Defendant relies on Leiter v. United States to argue that it must have an absolute right to terminate the award at the end of each budget year for the grant to comply with the ADA. (Dkt. No. 26 at 18.) In Leiter , the Supreme Court found that a multi-year contract with a government agency must be contingent on appropriation of funds and the government's affirmative continuation of the agreement each year.
It is true that HHS policy and regulations limit situations in which the agency can decline to continue an award during a grant period. (See Dkt. No. 21-1 at 41);
*1174Planned Parenthood of Greater Wash. & N. Idaho , No. C18-0055-TOR, slip op. at 13-14 (cooperative agreements do not obligate unappropriated funds, but represent HHS's commitment not to act in a way that is arbitrary and capricious or otherwise contrary to law during the project period). This structure makes sense from a policy perspective, providing stability for science-based research projects that cannot be completed in one year. Accordingly, the Court finds Defendants' ADA arguments unpersuasive.
C. Applicability of the GPS & NOA
Defendants also attempt to avoid agency regulations through reliance on the GPS and King County's NOA. The Court finds these documents preempted by regulation and otherwise factually irrelevant to the challenged action.
Defendants argue that the terms and conditions of the County's award, incorporated by reference from the GPS, allow HHS unbridled discretion in determining each year whether to "renew grant funding." (Dkt. No. 39 at 3, 10.) Defendants rely on the following statements in the GPS: (1) "projected levels of future support are contingent on...the continued best interests of the Federal government," and (2) the agency may decline to approve a continuation award if "for whatever reason , continued funding would not be in the best interests of the Federal government." (Id. ; see Dkt. No. 28 at 157, 250.)
These terms conflict with, and are therefore superseded by, agency regulations. Page one of the GPS states that the policy document applies "unless there are statutory, regulatory, or award-specific requirements to the contrary." (Dkt. No. 28 at 111.) The document's terms and conditions portion also explicitly states that "in the case of a conflict, statutes and regulations take precedence over [GPS] requirements." (Id. at 163.) The controlling NOA reinforces this principle, providing that in the case of inconsistent policies applicable to the grant, regulations prevail over the NOA's terms and conditions. (Dkt. No. 21-1 at 180.) Finally, HHS regulations explicitly supersede "all administrative requirements, program manuals, handbooks, and other non-regulatory materials that are inconsistent" with their requirements.
Defendants deny any conflict between the GPS and HHS regulations. But the Court has already concluded that HHS regulations regarding award termination apply to the challenged action. See supra section III.A. This regulation supersedes any conflicting policy guidance on the issue, regardless of whether the GPS is incorporated by the grant agreement or *1175defines "termination" differently. See Amal. Sugar Co. v. Vilsack ,
Furthermore, there is no factual basis to conclude that HHS's action constituted a "withholding" within the terms of the GPS. Defendants characterize HHS's action as a decision not to issue a continuation award-also described in the GPS as a "withholding." (Dkt. Nos. 28 at 250, 39 at 10.) The GPS section addressing withholdings provides that an operating division "may decide not to make a non-competing continuation award within the current competitive segment " for certain reasons, including a finding that continued funding is not in the government's best interest. (Dkt. No. 28 at 250) (emphasis added). This is not what HHS did. HHS made a decision about future awards in the context of approving a continuation award for the current competitive segment. King County had not even submitted a non-competing application for the next year. As the Court in Policy and Research, LLC , pointed out-there were no funds for the agency to withhold at the time.
D. Reviewability
In a final effort to avoid scrutiny under the APA, Defendants argue that HHS's decision to shorten the grant project period is not subject to judicial review. (Dkt. Nos. 26 at 18, 39 at 13.) The APA embodies a "basic presumption of judicial review." Abbott Labs. v. Gardner ,
Defendants first argue that HHS's decision "whether to make continuation awards or re-compete funds" is committed to agency discretion because there is no meaningful standard for the Court to apply. (Dkt. No. 26 at 25.) As discussed above, the challenged agency action was an award termination. HHS regulations provide a clear standard against which the Court may judge this action.
*1176Nor does HHS's choice to shorten TPP Program awards fall into the category of decisions traditionally left to agency expertise. Defendants rely on Alan Guttmacher Inst. v. McPherson to argue that courts cannot review decisions not to renew grant funds.
Defendants mischaracterize the challenged action when they label it an allocation decision between various grant options. (Dkt. Nos. 26 at 33, 39 at 15.) HHS made a blanket decision to terminate TPP Program grants, refusing to even consider King County's year-four application for a continuation award. This action did not involve "weighing the technical merits of various research grants." Planned Parenthood of Greater Washington, et al. , No. C18-0055-TOR, slip op. at 24. Defendants' cited cases involving such decisions are inapposite. See Kletschka v. Driver ,
E. Arbitrary and Capricious and Contrary to Law
A court reviewing agency action must "hold unlawful and set aside agency action...found to be...arbitrary and capricious, an abuse of discretion, or not otherwise in accordance with law."
HHS failed to articulate a satisfactory explanation for its decision to shorten King County's project period. In fact, HHS never gave the County an explanation. (Dkt. Nos. 21 at 3; 21-1 at 202.) Defendants argue HHS could decline to renew funding "for whatever reason" and that "policy concerns" in the "public record" were reason enough. (Dkt. No. 26 at 29.) The Court has already found the GPS's "whatever reason" standard inapplicable to the challenged action. See supra section III.C. Moreover, Defendants' cited "policy concerns" are not part of the administrative record and are based on documents issued well after HHS shortened the grant policy period. (See id. at 28) (citing Dkt. No. 28 at 355, 359) (August 27, 2017 HHS "Fact Sheet" and a November 22, 2017 letter to Senator Patty Murray). As Defendants well know, the Court cannot consider post hoc justifications or materials outside of the administrative record. See Chenery Corp. ,
The APA also requires a court to set aside agency action that is "not in accordance with law."
Finally, the APA provides that a court "shall compel agency action unlawfully withheld."
IV. CONCLUSION
For the foregoing reasons, King County's motion for summary judgment (Dkt. No. 20) is GRANTED as to Counts I and II and DENIED as moot as to Count III, its motion for a preliminary injunction is DENIED as MOOT, and Defendants' cross-motion for summary judgment (Dkt. No. 26) is DENIED.
The Court hereby VACATES HHS's decision to terminate King County's grant award and ORDERS the agency to accept and timely process the County's year-four non-competing continuation application as if HHS had not terminated King County's grant award. The application must be processed in accordance with the regulations in 45 C.F.R. section 75, as applicable to Plaintiff as a recipient of grants with five-year periods of performance beginning on July 1, 2017 and ending on June 30, 2020. HHS is ORDERED to process the application in sufficient time for any funding to be *1178made available to King County by August 1, 2018. The Clerk is DIRECTED to close this case.
The Court uses the term "grant" synonymously with "cooperative agreement."
TPP Program Tier 2B awards focus on "[increasing] the number of evidence-based TPP interventions available by rigorously evaluating new or innovative approaches for preventing teen pregnancy and related high risk behaviors." (Dkt. No. 22-1 at 104-05.) The awards were issued in the form of "cooperative agreements" with OAH. (Dkt. No. 20 at 6.)
The County chose not to advance its arguments that HHS acted contrary to the Continuing Appropriations Act of 2018, the Consolidated Appropriations Act of 2017, and the Impound Control Act, in light of HHS's announcement that it would re-complete appropriated funds for FY18. (Dkt. No. 36 at n. 2.) Thus, the Court will not address these issues.
Count III, based on equitable relief to preserve a remedy, has been mooted by HHS's agreement to refrain from obligating any moneys appropriated for the TPP Program through August 31, 2018. (Dkt. No. 20 at 13 n. 5.)
See Policy and Research, LLC v. HHS, et al. , No. C18-0346-KBJ,
Defendants minimize this cross-reference. (Dkt. No. 39 at 4.) However, it is a "recent and considered addition to HHS regulations." Healthy Teen Network , No. C18-0468-CCB, slip op. at 9 n. 6. HHS amended the definition of "project period" to cross-reference "period of performance" to avoid confusion from a shift in use of the terms.
Leiter involved a multi-year contract for a building lease contingent only on appropriation of funds. The Government Accountability Office has suggested a more permissive approach for grants, the case remains highly persuasive. See 1 U.S. Gov't Accountability Office, GAO-04-261SP, Principles of Federal Appropriations Law , 5-49-5-50 (3rd ed. 2004).
Defendants' argument relies largely on reframing King County's suit as a demand for a guaranteed additional two years of funding. The Court rejects this premise and notes the County asks only that "HHS adhere to the dictates of the APA and its own regulations" and allow it to submit future continuation applications, to be reviewed in accordance with those provisions. (See Dkt. Nos. 36 at 12; 39 at 3, 4.) Defendants also assert that the County's interpretation would entitle it to appropriated funds "so long as it complied with the terms of the grant." (Dkt. No. 39 at 7.) This dramatic statement ignores HHS's ability to terminate a grant for cause, or to modify its regulations to adopt the "best interest" standard for which Defendants advocate here.
The governing regulations were issued in 2014 and amended in 2016, whereas the GPS was drafted in 2007. See FAA Regulatory Implementation of OMB's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,
The Court has found that these regulations supersede language found in the GPS and thus provide the controlling standard for this Court's review of the challenged action. Therefore, the Court will not address reviewability under Defendants' proposed "best interests" standard.
Defendants also rely on a concurrence in Cal. Human Dev. Corp. v. Brock , to argue that allocation of grant funds is committed to agency discretion by law.
Reference
- Full Case Name
- KING COUNTY v. Alex M. AZAR, in his official capacity as Secretary, U.S. Dept. of Health and Human Services and U.S. Dept. of Health and Human Services
- Cited By
- 3 cases
- Status
- Published