National Federation of Federal Employees v. Devine

• Decision Date: 19 February 1982
• Docket Number: Nos. 81-2224,s. 81-2224
• Citation: 671 F.2d 607,217 U.S.App.D.C. 101
• Parties: NATIONAL FEDERATION OF FEDERAL EMPLOYEES and National Association of Government Employees, Intervenor-Appellee, v. Donald J. DEVINE, Director, Office of Personnel Management, et al., Appellants. NATIONAL TREASURY EMPLOYEES UNION v. Donald J. DEVINE, Director, Office of Personnel Management, et al., Appellants. Christina B. KRYWUCKI, et al. v. Donald J. DEVINE, Director, Office of Personnel Management, et al., Appellants. GROUP HEALTH ASSOCIATION OF AMERICA, INC., on Behalf of 52 of Its Members v. Donald J. DEVINE, Director, Office of Personnel Management, Appellant. Robert H. WALKER, et al. v. Donald J. DEVINE, Director, Office of Personnel Management, et al., Appellants. NATIONAL TREASURY EMPLOYEES UNION v. Donald J. DEVINE, Director, Office of Personnel Management Blue Cross Association and Blue Shield Association, Appellants. to 81-2226, 81-2237, 81-2238 and 81-2251.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 607

671 F.2d 607

217 U.S.App.D.C. 101

NATIONAL FEDERATION OF FEDERAL EMPLOYEES and National

Association of Government Employees, Intervenor-Appellee, v. Donald J. DEVINE, Director, Office of Personnel Management,

et al., Appellants.

NATIONAL TREASURY EMPLOYEES UNION v. Donald J. DEVINE, Director, Office of Personnel Management,

et al., Appellants.

Christina B. KRYWUCKI, et al. v. Donald J. DEVINE, Director, Office of Personnel Management,

et al., Appellants.

GROUP HEALTH ASSOCIATION OF AMERICA, INC., on Behalf of 52

of Its Members v. Donald J. DEVINE, Director, Office of Personnel Management,

Appellant.

Robert H. WALKER, et al. v. Donald J. DEVINE, Director, Office of Personnel Management,

et al., Appellants.

NATIONAL TREASURY EMPLOYEES UNION v. Donald J. DEVINE, Director, Office of Personnel Management

Blue Cross Association and Blue Shield

Association, Appellants.

Nos. 81-2224 to 81-2226, 81-2237, 81-2238 and 81-2251.

United States Court of Appeals, District of Columbia Circuit.

Argued Feb. 10, 1982.

Decided Feb. 19, 1982.

Kenneth M. Raisler, Asst. U. S. Atty., Washington, D. C., with whom Charles F. C. Ruff, U. S. Atty., Washington, D. C., at the time brief was filed, and Royce C. Lamberth and R. Craig Lawrence, Asst. U. S. Attys., Washington, D. C., were on brief, for the Federal appellants. Anthony J. Steinmeyer and Eloise E. Davies, Attys., Dept. of Justice, Washington, D. C., entered appearances for the Federal appellants.

Philip S. Neal, Washington, D. C., for appellants Blue Cross Ass'n and Blue Shield Ass'n.

Catherine Waelder, Washington, D. C., with whom Bruce P. Heppen, Washington, D. C., was on brief, for appellee Nat. Federation of Federal Emp.

R. Kenly Webster, with whom Martin D. Krall and Judith A. Sandler, Washington, D. C., were on brief, for appellee Group Health Ass'n of America, Inc.

Robert M. Tobias, John F. Bufe, and William F. White, Washington, D. C., were on brief for appellee Nat. Treasury Emp. Union.

James R. Rosa, Joseph F. Henderson and Kevin Grile, Washington, D. C., were on brief for appellees Christina B. Krywucki, et al.

Raymond Malloy and Michael J. Crealy, Washington, D. C., entered appearances for intervenor-appellee Nat. Ass'n of Government Emp.

Before ROBINSON, Chief Judge, and WRIGHT and MacKINNON, Circuit Judges.

Opinion for the court PER CURIAM.

PER CURIAM:

Existing regulations require the Office of Personnel Management (OPM) to hold an "open season" annually in November and December to permit federal employees to transfer freely from one health benefit plan to another. On November 6, 1981 the Director of OPM announced that unforeseen emergency circumstances, including last-minute benefit reductions and pending litigation in federal courts, required postponement of the open season that had been scheduled to begin on November 9, 1981. The District Court granted a preliminary injunction on November 18, holding that OPM's action had been illegal and ordering an open season to begin on or before December 7. In these appeals we must decide whether the District Court correctly found that OPM's postponement decision violated the Administrative Procedure Act (APA). We reverse.

I. FACTS

The Federal Employees Health Benefits Program (FEHBP), established by statute in 1960, gives employees a choice among a number of competing health plans in order to encourage the best possible service at the lowest cost. After an employee or retired annuitant has enrolled in a particular plan, the statute provides that he may transfer his enrollment from one participating plan to another "at the times and under the conditions prescribed by regulations" issued by OPM. 5 U.S.C. § 8905(e) (1976). The OPM regulations currently in effect permit such transfers to be made only during open season periods, which are to be held annually from the Monday of the second full work week in November through the Friday of the first full work week in December. 5 C.F.R. § 890.301(d) (1981).

Under this regulation the 1981 open season would have begun on Monday, November 9. On Friday, November 6, however, the Director of OPM issued FPM Bulletin No. 890-77, which postponed open season "to a time which will be announced hereafter, or to the applicable period during 1982 as determined pursuant to 5 C.F.R. § 890.301(d), whichever is earlier." Joint Appendix (JA) 114-115. The bulletin stated a number of reasons for the postponement. Accurate information regarding rates, benefits, and other terms of the 1982 health insurance plans was not available for distribution to employees because contract negotiations had not been completed until October 31, because substantial changes had been made in rates and benefits, and because several pending lawsuits in federal courts created uncertainty with respect to significant aspects of the 1982 program. ¹ In addition, the bulletin asserted that the changes in benefit packages for 1982 were so substantial that "the stability of the FEHB program, the financial integrity of many of the plans, and the welfare of employees and annuitants would be threatened if, as the result of an immediate open season, the actuarial and economic data bases underlying the FEHB program were significantly altered." JA 114-115.

A few days later, on November 12, 1981, OPM published an interim regulation in the Federal Register, immediately effective, amending 5 C.F.R. § 890.301(d) to permit the Director of OPM to cancel or reschedule the annual November-December open season by issuing an FPM Bulletin. JA 118-119, 46 Fed.Reg. 55679-55680 (1981). The notice gave a brief statement of reasons, including the unavailability of accurate information concerning the 1982 plans and the uncertainty of terms caused by pending litigation. It also invited public comments for consideration in final rulemaking regarding rescheduling of open seasons in future years.

A number of health plan carriers and two individual federal employees filed suits in the United States District Court for the District of Columbia, alleging that OPM's failure to hold an open season as scheduled was a violation of the Administrative Procedure Act and a breach of their contractual rights. Plaintiffs sought declaratory and injunctive relief. After a hearing on the motion for preliminary injunction on November 16, 1981, the District Court issued a preliminary injunction on November 18, accompanied by a brief memorandum opinion. JA 36-47.

The District Court held that OPM had failed to demonstrate an emergency that would constitute "good cause" for postponement of open season without notice and comment under Section 553 of the APA. Recognizing that the exceptions to notice and comment procedures should be "narrowly construed and only reluctantly countenanced," JA 39, the court rejected the government's reasons for taking immediate action. Although printing delays precluded an opening date of November 9, 1981 for open season, the court decided, they did not justify an "indefinite postponement." Intervening defendant Blue Cross-Blue Shield had argued convincingly that open season might force it to withdraw from participation in the federal health benefits program, but the District Court attributed the problem solely to the recent 6.5 percent benefit cutback ordered by OPM. Because the court had decided in related litigation that the cutback was illegal, see note 1 supra, it asserted that Blue Cross-Blue Shield's concerns could be alleviated by requiring the government to restore the cutback in Blue Cross-Blue Shield's contract. Finally, the court concluded that the pending litigation challenging the terms of the 1982 contracts did not justify postponing open season. In The preliminary injunction ordered OPM to begin open season on or before December 7, 1981, to issue appropriate informational brochures to all employees, and to announce the open season by an appropriate bulletin. Further, it ordered OPM to rescind its November 6 FPM bulletin and its November 12 notice of interim regulations in the Federal Register. Finally, the court ordered OPM to enter into a contract with Blue Cross-Blue Shield that did not include the 6.5 percent reduction in benefits required by OPM on October 21. JA 47. The injunction was partially stayed by this court on December 4, 1981. ²

its view, the terms of the contract were "definite and determined," JA 43, even though the Court of Appeals might later reverse the District Court's ruling that the 6.5 percent cutback was contrary to law.

On December 21, 1981, by judgment, this court reversed the District Court's decision invalidating the 6.5 percent benefit reduction. ³ OPM reached agreement with the health plan carriers regarding the terms of the 1982 contracts before December 31, 1981.

II. LEGAL ISSUES

Both the government and Blue Cross-Blue Shield have appealed the District Court's preliminary injunction, issued on November 18, 1981, contending that OPM acted lawfully when it postponed the open season scheduled to begin on November 9. We agree that OPM had "good cause" to postpone open season and issue interim regulations without prior notice and comment. 5 U.S.C. § 553(b) (B) (1976). In addition, we conclude that OPM's decision to postpone the scheduled open season was substantively valid; it was not arbitrary, capricious, or an abuse of discretion, id. § 706(b)(2)(A), and it did not violate the contracts between OPM and the health plan carriers.

A. The "Good Cause" Exception to the APA's Notice and Comment Requirements

OPM announced the postponement of the November-December 1981 open season without prior notice and comment under 5 U.S.C. § 553(c) (1976), and subsequently issued interim regulations. In its brief it relies on the "good cause" exception in 5 U.S.C. § 553(b)(B)-when the agency "for good cause" finds that "notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest," and incorporates its finding and a brief statement of reasons in the...