Eastern Band of Cherokee Indians v. Donovan

• Decision Date: 17 July 1984
• Docket Number: No. 83-1416,83-1416
• Citation: 739 F.2d 153
• Parties: EASTERN BAND OF CHEROKEE INDIANS, Appellant, v. Raymond J. DONOVAN, Secy. of Dept. of Labor; David T. Copenhafer, Acting Dir., Office of Special Targeted Programs, DOL; William J. Kacvinsky, Dir., Bur. of Apprenticeship Training; Herbert Fellman, Div. Chief, Indian Native American Programs and United States Department of Labor, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 153

739 F.2d 153

EASTERN BAND OF CHEROKEE INDIANS, Appellant, v. Raymond J. DONOVAN, Secy. of Dept. of Labor; David T.

Copenhafer, Acting Dir., Office of Special Targeted

Programs, DOL; William J. Kacvinsky, Dir., Bur. of

Apprenticeship Training; Herbert Fellman, Div. Chief,

Indian Native American Programs and United States Department

of Labor, Appellees.

No. 83-1416.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 7, 1983.

Decided July 17, 1984.

Ben Oshel Bridgers, Sylva, N.C. (Holt, Haire, Bridgers & Bryant, P.A., Sylva, N.C., on brief), for appellant.

Kenneth D. Bell, Winston Salem, N.C. (Charles R. Brewer, U.S. Atty., Max O. Cogburn, Jr., Asst. U.S. Atty., Asheville, N.C., on brief), for appellees.

Before WINTER, Chief Judge, MURNAGHAN and CHAPMAN, Circuit Judges.

CHAPMAN, Circuit Judge:

This controversy arises from a dispute between the Eastern Band of Cherokee Indians (Tribe), a recipient of federal funds under the Comprehensive Employment and Training Act of 1973 (CETA) as amended, 29 U.S.C. Sec. 801 et seq. (1978) ¹ (CETA or the Act) and the Department of Labor of the United States (DOL or the Department), concerning the interpretation of an agreement between the Tribe and DOL relative to the repayment of disallowed grant costs. The Tribe appeals the decision of the district court which concluded the Tribe had failed to exhaust its administrative remedies and dismissed the action for lack of subject matter jurisdiction. Finding that the Tribe failed to exhaust the Act's administrative remedies, that judicial review of this CETA dispute is by law placed with the Court of Appeals for the Fourth Circuit only after administrative procedures have been exhausted, and that the Tribe's claims do not rise to the level of a constitutional violation, we affirm.

I

The Tribe is a federally recognized Native American Indian Tribe which has qualified as a prime sponsor under CETA and as such has received funds under the CETA program since 1974. The defendants include DOL as well as employees and officers of DOL who entered a written agreement with the Tribe. ² All CETA prime sponsors are subject to periodic audits to assure that federal funds are expended in a manner consistent with the Act, Regulations, and other applicable standards. On September 11 and September 21, 1981, a grant officer for DOL issued final determination letters to the Tribe, notifying it that audits revealed $53,534.69 in improper expenditures for fiscal years 1974-1976. The Tribe did not challenge the dollar amount of its liability, and thus did not request a hearing to review any part of the grant officer's final determination. See 20 C.F.R. 676.88(f). Having conceded that it owed the government $53,534.69, the Tribe entered into an agreement (stipulation) with DOL for the Tribe's repayment of the disallowed costs. The stipulation provided that the Tribe would pay, out of non-grant funds, certain salaries and provide certain services totalling $53,534.69. The stipulation also stated that "The Grantee and the Department further agree that payment consistent with this stipulation is full final and complete settlement of the debt of $53,534.69 .... This agreement shall be incorporated in full into the annual plan subpart of the Grantee's Fiscal Year 1982 Annual Plan." When implementation of this stipulation began during the subsequent grant period, DOL requested that the Tribe "submit a modification to your Fiscal Year 1982 Comprehensive Employment and Training (CETA) grant ... deobligating the amount of $53,534.69" to reflect the disallowed CETA funds and prevent the Tribe from repaying the debt with CETA money. The Tribe objected to the reduction of its grant, and on May 26, 1982 requested a hearing before an administrative law judge "concerning the final determination of [the] audit."

By letter dated June 16, 1982 DOL informed the Tribe that, "while we consider [the Tribe's] appeal [of the September 1981 final determination] barred by the stipulation and untimely under the provisions of 20 C.F.R. Sec. 676.88(f), you are, of course, free to pursue whatever procedures and remedies may be available under the CETA regulations governing complaints, investigations, and sanctions at 20 C.F.R. Part 676 Subpart F... A copy of these recently published regulations is enclosed for your convenience." The letter also suggested that the Tribe promptly execute the appropriate modifications to its 1982 CETA grant to expedite DOL's processing of the Tribe's applications for certain subsequent funds to be used in connection with the Tribe's summer youth program.

After receiving DOL's letter, the tribe abandoned its request for a hearing before an administrative law judge. On July 7, 1982, the Tribe consented to the modification of its grant on the condition that its consent would not prejudice its right to contest the legality of the actions taken by DOL. On July 15, 1982 DOL approved the Tribe's request for funds to be used in its summer youth program.

Rather than present this dispute through the Act's administrative complaint system, the Tribe brought this action in district court alleging breach of contract, improper coercion, and denial of due process. The Tribe sought an order declaring that the written agreement constituted a full and fair settlement of the Tribe's debt to the Department, and that the Tribe should not be required to make any payment to DOL except to pay for the salaries and services noted in the agreement. The Tribe also demanded the reinstatement by DOL of $53,534.69 to the Tribe's current CETA budget. The Tribe sought to invoke the district court's jurisdiction under 28 U.S.C. Secs. 1331 and 1362, asserting the controversy arose under the laws of the United States, including the Comprehensive Employment and Training Act of 1973, as amended, 29 U.S.C. Sec. 801, et seq. The district court dismissed the Tribe's suit for lack of jurisdiction because the Tribe had failed to exhaust its administrative remedies. The court stated:

[t]he case at bar is more than a contract case between the Secretary and the Tribe. It involves the amount of CETA funds the Tribe as prime sponsor is to receive and whether the Tribe has repaid the amount disclosed by the audit. In the event the Tribe is not satisfied with the Secretary's ruling it may then proceed in the Court of Appeals for the Fourth Circuit as provided by Sec. 107, 29 U.S.C.A. Sec. 817.

II

It is a "long settled rule of judicial administration that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Myers v. Bethlehem Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638 (1938). Exhaustion is generally required as a matter of preventing premature interference with agency processes, to afford the parties and the courts the benefits of agency experience and expertise, to compile a record which is adequate for judicial review and to allow the agency to function efficiently and have an opportunity to correct its own errors. Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 2466, 45 L.Ed.2d 522 (1975).

CETA provides for administrative remedies when violations of its provisions occur. See 29 U.S.C. Sec. 816 (1978). Basically, CETA provides a multi-tiered system for the resolution of grievances under the Act. At the local level CETA requires that each prime sponsor establish grievance procedures through which "participants, subgrantees, contractors, and other interested persons" in the program may have complaints expeditiously resolved. 29 U.S.C. Sec. 816(a)(1) (1978). When a complainant has failed to resolve the grievance under this procedure, he may then file a complaint at the federal level with the Secretary of Labor. 29 U.S.C. Sec. 816(b) (1978). Complaints are then investigated, and initial and final determinations are made by a grant officer. If unsatisfied with the final determination, a complainant may, within ten days of receipt of the final determination request a hearing before an ALJ. 20 C.F.R. Sec. 676.88(f). The ALJ's decision becomes the final decision of the Secretary unless the Secretary modifies or vacates the decision within 30 days after it is served. 20 C.F.R. Sec. 676.91(f). Judicial review of the final decision of the Secretary is available in the U.S. Court of Appeals. 29 U.S.C. Sec. 817(a).

Although these specific statutory and regulatory procedures appear on their face to be designed for the resolution of complaints against recipients of CETA funds, they have been held to preclude jurisdiction in district court of claims against the Secretary as well. CETA Workers Organizing Committee v. City of New York, 617 F.2d 926, 934-36 (2d Cir.1980); Consortium of Community-Based Organizations v. Donovan, 530 F.Supp. 520, 526-36 (E.D.Cal.1982); Adams v. City of Chicago, 491 F.Supp. 1257 (N.D.Ill.1980); Serghini v. City of Richmond, 426 F.Supp. 326 (E.D.Va.1977). In CETA Workers, participants in the Public Service Employment component of CETA brought suit against prime sponsors and various city, state, and federal officials charged with the program's administration, including the United States Secretary of Labor and a Regional Administrator for the Labor Department. The plaintiffs' principal claims were that the local defendants had failed to provide job training and services required by the Act, and that the federal defendants had failed to monitor a prime sponsor and enforce certain elements of CETA. The Second Circuit affirmed the district court's dismissal of the claims against the federal defendants for lack of subject matter jurisdiction. The court held, inter alia, that the Act does not expressly or impliedly authorize a private right of action against the Secretary of DOL and his Regional Director by participants alleging failures to monitor a prime sponsor's CETA program and ensure enforcement of applicable law. The court found the provision for...