Head Start Family Educ. Program, Inc. v. Cooperative Educational Service Agency 11, 94-2515

• Decision Date: 27 January 1995
• Docket Number: No. 94-2515,94-2515
• Citation: 46 F.3d 629
• Parties: HEAD START FAMILY EDUCATION PROGRAM, INC., Plaintiff-Appellant, v. COOPERATIVE EDUCATIONAL SERVICE AGENCY 11, West Central Community Action Agency, Inc. and United States Department of Health and Human Services, Administration for Children and Families, Region V, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 629

46 F.3d 629

HEAD START FAMILY EDUCATION PROGRAM, INC., Plaintiff-Appellant, v. COOPERATIVE EDUCATIONAL SERVICE AGENCY 11, West Central Community Action Agency, Inc. and United States Department of Health and Human Services, Administration for Children and Families, Region V, Defendants-Appellees.

No. 94-2515.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 31, 1994.

Decided Jan. 27, 1995.

Edward F. Vlack, III (argued), Greta Mack, Davison & Vlack, River Falls, WI, for Head Start Family Educ. Program, Inc.

Robert W. Burns (argued), Angela M. Samsa, Godfrey & Kahn, Green Bay, WI, for Cooperative Educational Service Agency 11.

Francis X. Rivard, Glenwood City, WI, for West Cent. Community Action Agency, Inc.

Barbara F. Altman, Dept. of Health and Human Services, Region V, Office of Gen. Counsel, Chicago, IL (argued), Richard D Humphrey, Asst. U.S. Atty., for Department of Health and Human Services.

Before BAUER, KANNE and ROVNER, Circuit Judges.

BAUER, Circuit Judge.

Plaintiff Head Start Family Education Program, Inc. ("HSFEP"), a Wisconsin nonprofit corporation, filed this suit challenging the award of a grant to defendant Cooperative Educational Service Agency 11 ("CESA 11"), a Wisconsin public agency, by the defendant United States Department of Health and Human Services ("HHS"), Administration for Children and Families ("ACF"), Region V, under a federal Head Start program. The district court granted summary judgment to all defendants, and we affirm.

I.

The Head Start programs are federal programs with the stated purpose of appropriating funds for the delivery of "comprehensive health, educational, nutritional, social, and other services to economically disadvantaged children and their families." 42 U.S.C. Sec. 9831(a). Congress authorized the Secretary of HHS (the "Secretary") to provide financial assistance to an agency designated as a Head Start grantee "for the planning, conduct, administration, and evaluation of a Head Start program." 42 U.S.C. Sec. 9833(a). A Head Start grantee may delegate all or part of its responsibilities for operating a Head Start program to a "delegate agency." 42 U.S.C. Sec. 9837(a); 45 C.F.R. Sec. 1301.2.

A Head Start grantee must comply with "standards of organization, management, and administration" prescribed by the Secretary to achieve the objectives of the program. 42 U.S.C. Sec. 9839(a). The Secretary may terminate the funding of a Head Start grantee if the grantee has failed to meet established program requirements. 42 U.S.C. Sec. 9841(a)(3); 45 C.F.R. Secs. 1303.10-11. Upon termination of a grantee, the Secretary may select a new grantee among competing eligible applicants. 42 U.S.C. Sec. 9836(d). The Secretary's authority to select and terminate Head Start grantees in Wisconsin has been delegated to the Assistant Regional Administrator of ACF's Office of Family Supportive Services.

From approximately 1967 through August 1992, defendant West Central Community Action Agency, Inc. ("WESTCAP"), a Wisconsin nonprofit corporation, was the designated Head Start grantee in the Wisconsin counties of Barron, Chippewa, Dunn, Pepin, Pierce, Polk, and St. Croix. WESTCAP delegated all of its responsibilities for operating the Head Start program in this region to HSFEP in 1981. Tension developed between WESTCAP and HSFEP in late 1991, and ACF terminated WESTCAP's Head Start grant in August 1992 because WESTCAP and HSFEP were unable to form a written delegate agreement. HSFEP therefore was no longer a delegate agency under the program.

ACF began the process of selecting a permanent replacement grantee for the region in November 1992 by preparing a Request for Grant Proposal ("RFGP"), a manual which described the program's requirements and the ACF's procedure for selecting a new grantee in the region. A copy of the RFGP was provided to each applicant. HSFEP, WESTCAP, and CESA 11 applied for the grant. No other applications were received. ACF appointed an independent panel to review and score the applications according to objective criteria set forth in the RFGP. HSFEP received 236 points, WESTCAP received 157 points, and CESA 11 received 223 points. The maximum possible score was 250 points. ACF then eliminated WESTCAP's application from consideration. After further reviewing the remaining applicants, ACF selected CESA 11. CESA 11's grant was effective on July 1, 1993, and has been funded indefinitely.

HSFEP then filed this suit under section 702 of the Administrative Procedure Act ("APA"), 5 U.S.C. Secs. 701-06. HSFEP contends that it submitted the only "approvable" application to ACF because the other applications violated the Head Start Act, 42 U.S.C. Sec. 9831 et seq., and HHS regulations. The district court granted the defendants' motion for summary judgment, and HSFEP appeals.

II.

We reject the defendants' assertion that HSFEP has no standing to challenge the grant award to CESA 11 because HSFEP had no statutory right to be awarded the Head Start grant. Article III of the Constitution requires that the plaintiff has suffered an "injury in fact" which is fairly traceable to the challenged action of the defendant and "likely," as opposed to merely "speculative," to be "redressed by a favorable decision." Lujan v. Defenders of Wildlife, --- U.S. ----, ----, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992). Section 702 of the APA, under which HSFEP asserts standing, confers standing to "[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute." 5 U.S.C. Sec. 702. HSFEP's complaint must also be within "the zone of interests to be protected or regulated by the statute or constitutional guarantee in question." Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970). HSFEP contends that it should have been awarded the Head Start grant because it was the only eligible applicant under the Head Start Act and HHS regulations. HSFEP's claim clearly satisfies the requirements of Article III and is also sufficient to confer standing under section 702 of the APA. See National Fed'n of Fed. Employees v. Cheney, 883 F.2d 1038, 1052-53 (D.C.Cir.1989) (a disappointed bidder for a government contract award has standing under Article III and section 702 of the APA.), cert. denied, 496 U.S. 936, 110 S.Ct. 3214, 110 L.Ed.2d 662 (1990).

Defendants also contend that judicial review of ACF's selection of CESA 11 is precluded by section 701(a)(2) of the APA, which provides that agency action is not subject to judicial review "to the extent that" the action "is committed to agency discretion by law." ¹ 5 U.S.C. Sec. 701(a)(2). The APA embodies a "basic presumption of judicial review," Abbott Laboratories v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 1511, 18 L.Ed.2d 681 (1967), and section 701(a)(2) is "a very narrow exception" to this presumption which applies "in those rare instances where 'statutes are drawn in such broad terms that in a given case there is no law to apply.' " Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 820, 28 L.Ed.2d 136 (1971) (citation omitted). Under section 701(a)(2), "review is not to be had if the statute is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion. In such a case, the statute ('law') can be taken to have 'committed' the decision-making to the agency's judgment absolutely." Heckler v. Chaney, 470 U.S. 821, 830, 105 S.Ct. 1649, 1655, 84 L.Ed.2d 714 (1985). Section 702(a)(2) applies to those categories of administrative decisions which courts have traditionally regarded as "committed to agency discretion." See Lincoln v. Vigil, --- U.S. ----, ----, 113 S.Ct. 2024, 2031, 124 L.Ed.2d 101 (1993) (collecting cases).

Section 701(a)(2) "requires careful examination of the statute on which the claim of agency illegality is based." Webster v. Doe, 486 U.S. 592, 600, 108 S.Ct. 2047, 2052, 100 L.Ed.2d 632 (1988). A review of the statutes and regulations allegedly violated by the selection of an ineligible applicant as a Head Start grantee reveals that there is ample "law to apply" by a reviewing court. Section 9836(a) of title 42 requires that a Head Start grantee designated by the Secretary must have "the power and authority to carry out the purposes of this subchapter and perform the functions set forth in section 9837 of this title within a community." Section 9837, in turn, contains a detailed description of these required powers and functions. Section 9836(d) sets forth nine factors which the Secretary "shall consider" in determining the effectiveness of each applicant to provide Head Start services. Section 9836(g) provides that "[t]he Secretary shall require that the practice of significantly involving parents and area residents affected by the program in selection of Head Start agencies be continued." Section 9838 requires that the chief executive officer of the State be given an opportunity to disapprove the grant award before a grantee is selected by the Secretary. Finally, HHS regulations contain additional selection procedures, program performance standards, and staffing requirements. See 45 C.F.R. Parts 1302, 1304, 1306, and 1308.

Our conclusion that judicial review is appropriate is also supported by the nature of HSFEP's claim. HSFEP concedes that the Secretary has discretion to select a Head Start grantee among eligible applicants but contends that the Secretary violated the Head Start Act and its own regulations in concluding that WESTCAP and CESA 11 were eligible applicants. An agency's failure to follow its own regulations has traditionally been recognized as reviewable under the APA. ² Webster, 486 U.S. at 602 n. 7, 108 S.Ct. at 2053 n. 7 (collecting cases).

III.

Our review of ACF's selection of CESA 11 is limited to whether the agency's decision was "arbitrary,...