Esch v. Yeutter, 87-5340

CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)
Writing for the CourtBefore WALD; SPOTTSWOOD W. ROBINSON, III
Citation876 F.2d 976
PartiesPatrick ESCH, et al. v. Clayton K. YEUTTER, Secretary, U.S. Department of Agriculture, Appellant.
Docket NumberNo. 87-5340,87-5340
Decision Date25 May 1989

Page 976

876 F.2d 976
278 U.S.App.D.C. 98
Patrick ESCH, et al.
Clayton K. YEUTTER, Secretary, U.S. Department of
Agriculture, Appellant.
No. 87-5340.
United States Court of Appeals,
District of Columbia Circuit.
Argued April 12, 1988.
Decided May 25, 1989.

Page 977

Appeal from the United States District Court for the District of Columbia (Civil Action No. 87-00885).

John M. Facciola, Asst. U.S. Atty., with whom Jay B. Stephens, Joseph E. diGenova, U.S. Attys., John D. Bates, R. Craig Lawrence, Michael J. Ryan, Royce C. Lamberth, Asst. U.S. Attys., and Terrence G. Jackson, Atty., Dept. of Agriculture, Washington, D.C., were on the brief, for appellant.

William R. Scanlin, Washington, D.C., and Walter S. Boone, III, of the bar of the Dist. of Columbia Court of Appeals, pro hac vice, by special leave of Court, with whom Scott A. Mills, Falls Church, Va., was on the brief, for appellees. Alexander J. Pires, Jr., Washington, D.C., also entered an appearance for appellees.

Before WALD, Chief Judge, and ROBINSON and STARR, * Circuit Judges.

Opinion for the Court filed by Circuit Judge ROBINSON.


The Esch family has farmed in the United States for more than a century. Currently, nine brothers and sisters own a 20,000-acre wheat and corn farm in Baca County, Colorado. They challenged in the District Court a decision by the Department of Agriculture to partially suspend their participation in two federal farm subsidy programs. 1 That court overruled the Department's objection that subject-matter jurisdiction lay in the United States Claims Court 2 and, after supplementing the agency record with testimony by agency decisionmakers, 3 granted in large part the relief sought. 4

We conclude that the District Court was to adjudicate the case. We find that the circumstances warranted supplementation of the agency record to ensure effective judicial review. We sustain the court's conclusion that the Department fatally departed from its own regulations in meting out the suspension under attack. We modify the court's judgment in one respect, and affirm it as modified.


A. The Problem

In the District Court, appellees pressed for annulment of the Department's decision to suspend $628,055.33 in program payments assertedly due them. 5 They predicated jurisdiction upon the general federal-question statute, 6 and a waiver of sovereign immunity upon the judicial review provision of the Administrative Procedure Act. 7

The Department assails the District Court's assumption of jurisdiction on the

Page 978

ground that appellees' claim is really one for money damages in excess of $10,000, and as such is cognizable only in the Claims Court. 8 The Tucker Act vests in the Claims Court jurisdiction 9 over

any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States.... 10

The Department argues that

because the only possible effect of the injunction the Esches sought and the court awarded was to require the Secretary to make payments to the Eschs, this action, in effect, was one for monetary relief exceeding $10,000 and should have been dismissed or transferred to the Claims Court. 11

Appellant maintains that appellees' suit

was founded either upon the Constitution (their due process claim), a regulation of an executive department (7 C.F.R. Sec. 795), or an express contract with the United States.... 12

B. The Decision in Bowen v. Massachusetts

One might seriously question whether appellees' claim falls under either the Tucker Act's contractual 13 or noncontractual 14 jurisdiction. At any rate, we reject the fundamental premise of the Department's argument--that appellees' action is for money damages, and therefore must be brought in the Claims Court. Our decision on jurisdiction pivots on Bowen v. Massachusetts, 15 wherein the Supreme Court expressly repudiated the notion that suits seeking monetary relief from the Federal Government are necessarily suits seeking "money damages" cognizable exclusively in the Claims Court. 16

In reaching its decision, the Court looked first to the APA's waiver of federal sovereign immunity in Section 702 17 and its specifications in Section 704 regarding actions

Page 979

reviewable in federal courts. 18 Section 702 provides in relevant part:

A person suffering legal wrong because of agency action ... is entitled to judicial review thereof. An action in a court of the United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party. 19

Section 704 extends reviewability generally to "final agency action," 20 but only if "there is no other adequate remedy in a court." 21 The Court then considered and rejected the proposition that an action complaining of an agency's disallowance of a federal grant is necessarily one for "money damages" beyond the purview of the APA's waiver of sovereign immunity. 22

C. Availability of APA Review

With the benefit of the analysis in Bowen, we approach the question whether the Esch suit is cognizable under the APA. 23 At issue here, as in Bowen, is whether the suit is one "seeking other than money damages" and therefore within Section 702's waiver of immunity. 24 It might also be ascertained whether litigation of the controversy in the District Court was bound by Section 704 because of the availability of an adequate remedy in another court. 25 To these and related problems we now

Page 980

turn. 26

Bowen concerned the Department of Health and Human Services' administration of the federal Medicaid grant program, which authorizes reimbursement of state medical expenditures for services that are rehabilitative in nature. 27 When HHS concludes that a state is making unauthorized expenditures, 28 it may either initiate a compliance proceeding, the result of which is judicially reviewable in the courts of appeals, 29 or merely disallow federal funds for a particular item or category of items, for which no judicial review is expressly authorized by the Medicaid statute. 30

Massachusetts' Medicaid program covered the expenses of mentally retarded persons in intermediate care facilities, which were staffed and administered jointly by the State's Departments of Mental Health and Education. 31 HHS concluded that expenditures made for persons in facilities were not for rehabilitative services because they were rendered partly by Department of Education personnel. 32 Consequently, it disallowed $6,414,964 in payments. 33

After exhausting its administrative remedies, 34 Massachusetts sued in a federal district court, invoking general federal-question jurisdiction 35 and asserting a Section 702 waiver of federal sovereign immunity. 36 That court, without questioning its power to do so, issued an injunction after concluding that the state's "services in question were in fact rehabilitative." 37 The injunction

simply "reversed" the Board's decision disallowing reimbursement of the sum of $6,414,964 in [federal financial participation] under the Medicaid program.... [I]n a second opinion relying on the analysis of the first, the court reversed the Board's second disallowance determination. It entered an appropriate judgment.... That judgment did not purport to state what amount of money, if any, was owed by the United States to Massachusetts, nor did it order that any payment be made. 38

The case eventually reached the Supreme Court, which in the course of its decision addressed the meaning of Section 702's "money damages" restriction and Section

Page 981

704's barrier to APA reviews of agency action "for which there is [an] adequate remedy in a court." 39

1. "Money Damages" in 5 U.S.C. Sec. 702

The money damages limitation was added to Section 702 by a 1976 amendment which indisputably was "intended to broaden the avenues for judicial review of agency action by eliminating the defense of sovereign immunity in cases covered by the amendment." 40 The Court found that the amendment did not bar the state's suit for two reasons:

First, insofar as the complaint sought declaratory and injunctive relief, it was certainly not an action for money damages. Second, and more importantly, even the monetary aspects of the relief that the State sought are not "money damages" as that term is used in the law. 41

As to the second point, the Court emphasized that its

cases have long recognized the distinction between an action at law for damages--which are intended to provide a victim with monetary compensation for an injury to his person, property, or reputation--and an equitable action for specific relief--which may include an order for the reinstatement of an employee with back pay, or for "the recovery of specific property or monies, ejectment from land, or injunction either directing or restraining the defendant officer's actions." 42

The Court differentiated a suit envisioning reversal of a disallowance decision from one for damages as recompense for an injury. The distinguishing factor was that Massachusetts did not request monetary compensation for a legal wrong suffered; rather, it sought the very thing which it has been deprived of which happened to be the payment of money. The Court drew liberally on this circuit's Maryland Department of Human Resources, 43 and observed that

Maryland is seeking funds to which a statute allegedly entitles it, rather than money in compensation for the losses, whatever they may be, that Maryland will suffer or has suffered by virtue of the withholding of those funds. If the program in this case involved in-kind benefits this would be altogether...

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