Afton Alps, Inc. v. United States, Civ. No. 5-74-43.

• Decision Date: 01 November 1974
• Docket Number: Civ. No. 5-74-43.
• Citation: 392 F. Supp. 543
• Parties: AFTON ALPS, INC., et al., Plaintiffs, v. UNITED STATES of America et al., Defendants.
• Court: U.S. District Court — District of Minnesota

392 F. Supp. 543

AFTON ALPS, INC., et al., Plaintiffs, v. UNITED STATES of America et al., Defendants.

Civ. No. 5-74-43.

United States District Court, D. Minnesota, Fifth Division.

November 1, 1974.

COPYRIGHT MATERIAL OMITTED

Irving R. Brand, David Karan, Maslon, Kaplan, Edelman, Borman, Brand & McNulty, Minneapolis, Minn., for plaintiffs.

Robert G. Renner, U. S. Atty., and Stephen G. Palmer, Asst. U. S. Atty., Minneapolis, Minn., for U. S.

Robert S. Fastov, Chief, Litigation and Liquidation Div., Economic Development Admin., Washington, D. C., for Dent, Blunt and EDA.

William P. Dinan, City Atty., and Robert E. Asleson, Asst. City Atty., Duluth, Minn., for Waide and Spirit Mountain Recreation Area Authority.

MEMORANDUM OPINION

HEANEY, Circuit Judge, by designation.

Congress enacted the Public Works and Economic Development Act, 79 Stat. 552, 42 U.S.C. §§ 3121-3226, on August 26, 1965. In its prologue section to the operative provisions of the Act, Congress declared:

* * * That the maintenance of the national economy at a high level is vital to the best interests of the United States, but that some of our regions, counties, and communities are suffering substantial and persistent unemployment and underemployment; * * * that to overcome this problem the Federal Government, in cooperation with the States, should help areas and regions of substantial and persistent unemployment and underemployment to take effective steps in planning and financing their public works and economic development; that Federal financial assistance, including grants to communities, industries, enterprises, and individuals in areas needing development should enable such areas to help themselves achieve lasting improvement and enhance the domestic prosperity by the establishment of stable and diversified local economies and improved local conditions, provided that such assistance is preceded by and consistent with sound, long-range economic planning * * *.

42 U.S.C. § 3121.

In December of 1972, the City of Duluth applied to the Economic Development Administration, the governmental agency authorized to effectuate the provisions of the Act, for a grant of approximately $600,000. The grant monies were to be used to partially finance a multimillion dollar winter and summer recreational facility. The facility, commonly referred to as the Spirit Mountain Project, would be managed and operated by the Spirit Mountain Recreation Area Authority. Following several conferences, reports and studies, the EDA, through the Assistant Secretary of Commerce, made an offer of grant of $600,000 to the City of Duluth. On August 21, 1973, the City accepted the offer.

The plaintiffs, fourteen ski resorts, have brought this action asking the Court to declare that the grant is invalid and to enjoin the defendants from disbursing or accepting the grant funds. The plaintiffs' case revolves around the interpretation and application of Section 702 of the Act. 42 U.S.C. § 3212. The plaintiffs contend that the Assistant Secretary has not properly interpreted or applied Section 702, and that he relied upon factually erroneous information in reaching his conclusion. They argue that his decision is, for these reasons, arbitrary and capricious.¹

The defendants dispute the plaintiffs' contentions. Moreover, they maintain that the Court lacks subject matter jurisdiction, that the plaintiffs lack standing to bring the action, that the decision of the EDA officials is nonreviewable, and that the plaintiffs' action is barred by sovereign immunity and laches.

The Court finds that it has jurisdiction under 28 U.S.C. § 1331. The plaintiffs have raised a substantial federal question concerning the interpretation and application of a law of the United States and the amount in controversy exceeds $10,000, whether measured by the amount of the grant which the plaintiffs seek to enjoin ($600,000) or the loss of business alleged to have been incurred by one or more of the plaintiffs.² Moreover, 42 U.S.C. § 3211 specifically provides that the Secretary is authorized to be sued in any United States District Court, and jurisdiction is conferred upon such District Court without regard to the amount in controversy.

The plaintiffs have standing to bring this action. They are arguably within the zone of interests to be protected by the statute, and have alleged a likelihood of economic injury. Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970).

The plaintiffs' action against the United States is dismissed on grounds of sovereign immunity, since the United States has not consented to such suit. See, Dugan v. Rank, 372 U.S. 609, 83 S. Ct. 999, 10 L.Ed.2d 15 (1963); Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949). The action against the Economic Development Administration is dismissed for the same reason, since that entity is a non-suable executive agency of the United States. See, Blackmar v. Guerre, 342 U.S. 512, 515, 72 S.Ct. 410, 96 L.Ed. 534 (1952); Benson v. City of Minneapolis, 286 F.Supp. 614, 619-620 (D.Minn.1968).

The actions against defendant Frederick B. Dent, Secretary of Commerce, and defendant William W. Blunt, Assistant Secretary of Commerce, are not barred by the doctrine of sovereign immunity and will not be dismissed.³ The plaintiffs allege that the Assistant Secretary acted beyond his authority and that, as such, his actions were void. The claim, therefore, falls within an exception to the sovereign immunity doctrine. See, New Mexico State Game Comm'n v. Udall, 410 F.2d 1197, 1199 (10th Cir.), cert. denied, 396 U.S. 961, 90 S.Ct. 429, 24 L.Ed.2d 426 (1969); Coalition for United Community Action v. Romney, 316 F.Supp. 742, 746 (N.D. Ill.1970); Dugan v. Rank, supra 372 U. S. at 621-622, 83 S.Ct. 999, 10 L.Ed.2d 15 (dictum); Malone v. Bowdoin, 369 U.S. 643, 647, 82 S.Ct. 980, 8 L.Ed.2d 168 (1962) (dictum); Larson v. Domestic & Foreign Commerce Corp., supra 337 U.S. at 689-690, 69 S.Ct. 1457, 93 L.Ed. 1628 (dictum). For reasons which will be apparent later in this opinion, we need not determine whether an injunction can properly be issued against the Assistant Secretary.

The plaintiffs' claim is not barred by laches. Under all the circumstances, it was commenced within a reasonable time.

The Assistant Secretary's decision on the Section 702 question is subject to judicial review.

* * * Section 701 of the Administrative Procedure Act, 5 U.S.C. § 701 (1964 ed. Supp. V), provides that the action of "each authority of the Government of the United States," * * * is subject to judicial review except where there is a statutory prohibition on review or where "agency action is committed to agency discretion by law." * * *

* * * The exception for action "committed to agency discretion." This is a very narrow exception. Berger, Administrative Arbitrariness and Judicial Review, 65 Col.L.Rev. 55 (1965). The legislative history of the Administrative Procedure Act indicates that it is applicable in those rare instances where "statutes are drawn in such broad terms that in a given case there is no law to apply." S.Rep. No. 752, 79th Cong., 1st Sess., 26 (1945).

Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 820-821, 28 L.Ed.2d 136 (1971).

Here, as in Overton Park, there is no indication that Congress sought to prohibit judicial review. Similarly, the Assistant Secretary's decision does not fall within the exception for action "committed to agency discretion." Section 702 is not drawn in such broad terms that there is no law to apply. Its terms are clear and specific. It provides simply:

No financial assistance under this chapter shall be extended to any project when the result would be to increase * * * the availability of services or facilities, when there is not sufficient demand for such * * * services, or facilities, to employ the efficient capacity of existing competitive commercial and industrial enterprises.

The task then is to determine whether the Assistant Secretary's decision with respect to the Section 702 question was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Administrative Procedure Act, § 10(e), 5 U.S.C. § 706(2)(A). Citizens to Preserve Overton Park v. Volpe, supra, 401 U.S. at 416, 91 S.Ct. 814, 28 L.Ed.2d 136; Environmental Defense Fund v. Corps of Engineers of the United States Army, 470 F.2d 289, 300 (8th Cir. 1972), cert. denied, 412 U.S. 931, 93 S.Ct. 2749, 37 L.Ed.2d 160 (1973).

THE EDA METHOD IN APPLYING SECTION 702 WAS NOT CONTRARY TO LAW

After a careful review of the evidence, including that portion of the Spirit Mountain EDA file received as an exhibit, oral testimony and other exhibits, the Court finds that the action of the Assistant Secretary in approving the grant was not unlawful. That is, the method used by the EDA was not contrary to the dictates of Section 702. That method is as follows: When the projected market growth (new demand) is sufficient to absorb the output of the proposed facility (production of the applicant), Section 702 will not be violated since none of the existing market demand will be taken from competitive facilities within the market area. In this case, the EDA determined that the projected market growth within the next three years would consist of 133,000 new "skier days." It also determined that Spirit Mountain would draw 122,000 skier days within the three years following the opening of the facility. It concluded that since Spirit Mountain would not fully serve the projected new demand, Section 702 would not be violated. This method is based on the assumption that existing ski facilities have no special claim to the new business.

While there are a number of methods that could be used in making the Section 702 determination, and while some might be preferable to the one chosen by the EDA, the Court cannot say that the...