DRG Funding Corp. v. Secretary of Housing and Urban Development

• Decision Date: 20 February 1996
• Docket Number: No. 94-5150,94-5150
• Citation: 76 F.3d 1212
• Parties: DRG FUNDING CORPORATION, Appellant v. SECRETARY OF HOUSING AND URBAN DEVELOPMENT, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1212

76 F.3d 1212

316 U.S.App.D.C. 159

DRG FUNDING CORPORATION, Appellant v. SECRETARY OF HOUSING AND URBAN DEVELOPMENT, et al., Appellees.

No. 94-5150.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 6, 1995.

Decided Feb. 20, 1996.

John P. Cummins, III, Fairfax, VA, argued the cause and filed the briefs for appellant.

Fred E. Haynes, Assistant United States Attorney, argued the cause for appellees. With him on the brief were Eric H. Holder, Jr., United States Attorney, R. Craig Lawrence and Michael J. Ryan, Assistant United States Attorneys, and Steven M. Goldstein, Attorney, Department of Housing and Urban Development. John D. Bates, Assistant United States Attorney, Washington, DC, entered an appearance for appellees.

Before: WILLIAMS, GINSBURG, and RANDOLPH, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

Concurring opinion filed by Circuit Judge STEPHEN F. WILLIAMS.

Concurring opinion filed by Circuit Judge GINSBURG.

RANDOLPH, Circuit Judge:

On July 3, 1990, the Department of Housing and Urban Development notified DRG Funding Corporation that it owed the government $3.7 million as a result of its default under a mortgage-backed securities program. A year later, having received no payment on the debt, HUD collected by withholding the $3.7 million from a judgment it was to pay the corporation.

HUD had warned the corporation that it would collect the debt through "administrative offset," and the corporation had responded by invoking HUD's administrative review procedures to demand that HUD dismiss the offset action. The corporation renewed that demand soon after HUD collected the debt, arguing before HUD's Chief Administrative Law Judge that the agency lacked authority to collect the debt by offset. An offset avoids " 'the absurdity of making A pay B when B owes A.' " Citizens Bank of Maryland v. Strumpf, --- U.S. ----, ----, 116 S.Ct. 286, 289, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston Nat'l Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 808, 57 L.Ed. 1313 (1913)). HUD regulations promulgated under the administrative offset provision of the Debt Collection Act of 1982, 31 U.S.C. § 3716, allow HUD to use offsets in certain situations. The corporation argued before HUD's Chief ALJ, however, that HUD lacked authority to effect an offset against a money judgment issued by a court against the United States. The ALJ denied the corporation's demand for dismissal, and its request for reconsideration, but granted the corporation's motion to certify the question of HUD's offset authority for review by the Secretary of HUD. ¹ On March 5, 1992, a designee of the Secretary issued a "determination" affirming the ALJ's decision that HUD had authority to effect the offsets and directing the ALJ "to proceed with the administrative process in accordance with [HUD's] regulations."

Rather than proceeding at the administrative level, the corporation filed suit in the district court challenging HUD's refusal to dismiss the offsets under the Administrative Procedure Act, 5 U.S.C. § 706, and asking the court to compel the Secretary of HUD to pay the judgment in full under the federal mandamus statute, 28 U.S.C. § 1361. The district court dismissed the suit on the ground that administrative review of the corporation's challenge was not yet final. We affirm.

The Administrative Procedure Act limits nonstatutory judicial review to "final" agency actions. 5 U.S.C. § 704. This serves several functions. It allows the agency an opportunity to apply its expertise and correct its mistakes, it avoids disrupting the agency's processes, and it relieves the courts from having to engage in "piecemeal review which is at the least inefficient and upon completion of the agency process might prove to have been unnecessary." FTC v. Standard Oil Co. of California, 449 U.S. 232, 242, 101 S.Ct. 488, 494, 66 L.Ed.2d 416 (1980). The requirement of a final agency action has been considered jurisdictional. Public Citizen v. Office of the U.S. Trade Rep., 970 F.2d 916, 918 (D.C.Cir.1992). If the agency action is not final, the court therefore cannot reach the merits of the dispute. ²

Different verbal formulations have been used to determine whether agency action is "final" within § 704's meaning. Is the agency's action "sufficiently direct and immediate" and does it have a "direct effect ... on day-to-day business"? Abbott Laboratories v. Gardner, 387 U.S. 136, 152, 87 S.Ct. 1507, 1517, 18 L.Ed.2d 681 (1967). Has the agency "completed its decisionmaking process" and is "the result of that process [one that] will directly affect the parties"? Franklin v. Massachusetts, 505 U.S. 788, 797, 112 S.Ct. 2767, 2773, 120 L.Ed.2d 636 (1992). Is the agency action "finally operative and decisive"? ATTORNEY GENERAL'S MANUAL ON THE ADMINISTRATIVE PROCEDURE ACT 103 (1947), quoted in Darby v. Cisneros, 509 U.S. 137, 148-49 n. 10, 113 S.Ct. 2539, 2546 n. 10, 125 L.Ed.2d 113 (1993). Has the agency decisionmaker "arrived at a definitive position on the issue that inflicts an actual, concrete injury"? Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 193, 105 S.Ct. 3108, 3120, 87 L.Ed.2d 126 (1985), quoted in Darby, 509 U.S. at 144, 113 S.Ct. at 2543. On the other hand, courts have defined a nonfinal agency order as one, for instance, that "does not itself adversely affect complainant but only affects his rights adversely on the contingency of future administrative action," Rochester Tel. Corp. v. United States, 307 U.S. 125, 130, 59 S.Ct. 754, 757, 83 L.Ed. 1147 (1939), cited in the ATTORNEY GENERAL'S MANUAL at 101-02, as a judicial construction of "final" that will carry over to § 704. And § 704 itself indicates that a "preliminary, procedural, or intermediate agency action or ruling" will be subject to judicial review only after there has been final agency action. See ATTORNEY GENERAL'S MANUAL 101, suggesting that the meaning of "final may be gleaned" from this provision.

No matter which of these formulations we apply, the result here is the same. The ruling of the Secretary's designee is not final agency action. That "determination," to use the agency's parlance, did not complete the administrative proceedings, nor was it meant to do so. The determination specifically directed HUD's ALJ "to proceed with the administrative process in accordance with [HUD's] regulations." Under those regulations, the administrative process reaches the stage of "final agency action" only when a deputy assistant secretary makes a "determination of indebtedness" in a "written decision which includes the supporting rationale for the decision." 24 C.F.R. § 17.110(a). Until that happens, any intermediate decision in the review procedure is necessarily "tentative, provisional, or contingent," see National Treasury Employees Union v. FLRA, 712 F.2d 669, 671 (D.C.Cir.1983), and therefore nonfinal.

The corporation essentially acknowledged as much when it invoked HUD's "interlocutory ruling" procedure, 24 C.F.R. § 26.26, to seek the Secretary's review of the ALJ's decision. An "interlocutory" ruling is a provisional ruling, a ruling that does not end the controversy. The ALJ's ruling--and the designee's determination affirming it--did nothing more than deny the corporation's demand for dismissal. Orders setting cases for hearings despite objections to the agency's jurisdiction have long been considered nonfinal, see Rochester Tel. Corp. v. United States, 307 U.S. at 130, 59 S.Ct. at 757. Such an order is like a district court's denial of a motion to dismiss, which--unlike a final order ending the case--assures its continuation. See, e.g., United States v. Rose, 28 F.3d 181, 185 (D.C.Cir.1994). While the Judicial Code contains an exception allowing appeals from interlocutory district court orders (28 U.S.C. § 1292(b)), the Administrative Procedure Act has no such exception for interlocutory agency decisions.

Moreover, when the corporation first sought administrative review of HUD's offset action, it challenged both the validity of the debt and the way in which HUD had chosen to collect it. The designee's determination addressed only the latter issue. Neither the ALJ nor the designee has ruled yet on the validity of the debts themselves. Thus, while the designee has tentatively affirmed HUD's authority to collect such debts by offset, she has yet to consider whether the corporation owes the government anything. This is no small matter. If HUD's administrative review ends with the conclusion that the corporation has no debt to HUD, the corporation will have no reason to seek a judicial determination of the proper procedure for collecting one. When completion of an agency's processes may obviate the need for judicial review, it is a good sign that an intermediate agency decision is not final. See FTC v. Standard Oil, 449 U.S. at 242, 101 S.Ct. at 494.

The agency action to date has not directly affected the parties or determined their rights or obligations. See Capital Network Sys., Inc. v. FCC, 3 F.3d 1526, 1530 (D.C.Cir.1993). This is not a case in which "no further administrative proceedings are contemplated." See Abbott Laboratories, 387 U.S. at 149, 87 S.Ct. at 1515. It is not a case in which "legal consequences will flow from the agency action" taken thus far. See Port of Boston Marine Terminal Ass'n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71, 91 S.Ct. 203, 209-10, 27 L.Ed.2d 203 (1970). And it is not a case in which the intermediate decision of the agency will have a direct effect on the corporation regardless of the outcome of pending administrative proceedings. See Chemical Waste Management, Inc. v. EPA, 869 F.2d 1526, 1534 (D.C.Cir.1989). Rather, the pending administrative proceedings--proceedings the corporation seeks to short-circuit--will determine the corporation's rights and obligations, and, as we have said, could avert judicial review altogether.

The corporation maintains...