Metropolitan School Dist. of Wayne Tp., Marion County, Ind. v. Davila

• Decision Date: 01 September 1992
• Docket Number: No. 91-3386,91-3386
• Citation: 969 F.2d 485
• Parties: 76 Ed. Law Rep. 386 METROPOLITAN SCHOOL DISTRICT OF WAYNE TOWNSHIP, MARION COUNTY, INDIANA, on behalf of itself and all others similarly situated, Plaintiff-Appellee, v. Robert R. DAVILA, Assistant Secretary, Office of Special Education and Rehabilitative Services, United States Department of Education, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 485

969 F.2d 485

76 Ed. Law Rep. 386

METROPOLITAN SCHOOL DISTRICT OF WAYNE TOWNSHIP, MARION COUNTY, INDIANA, on behalf of itself and all others similarly situated, Plaintiff-Appellee, v. Robert R. DAVILA, Assistant Secretary, Office of Special Education and Rehabilitative Services, United States Department of Education Defendant-Appellant.

No. 91-3386.

United States Court of Appeals, Seventh Circuit.

Argued May 20, 1992.

Decided July 30, 1992.

Rehearing and Rehearing En Banc Denied Sept. 1, 1992.

George T. Patton (argued), George E. Purdy, Margaret M. Bannon, Bose, McKinney & Evans, Indianapolis, Ind., for Metropolitan School Dist. of Wayne Tp., Marion County, Ind.

Sue Hendricks Bailey, Asst. U.S. Atty., Indianapolis, Ind., Barbara C. Biddle, Deborah R. Kant (argued), Appellate Section, Sheila Lieber, Philip R. Reitinger, Dept. of Justice, Civ. Div., Washington, D.C., for Robert R. Davila.

Barry A. Zolotar, Joseph R. Symkowick, Roger D. Wolfertz, Sacramento, Cal., for California Dept. of Educ., amicus curiae.

Before BAUER, Chief Judge, POSNER, Circuit Judge, and GIBSON, Senior Circuit Judge. ¹

BAUER, Chief Judge.

In this appeal, Robert Davila on behalf of the United States Department of Education challenges the district court's grant of summary judgment in favor of the Metropolitan School District of Wayne Township and the plaintiff class. The district court held that a letter purporting to interpret part B of the Individuals with Disabilities Education Act, 20 U.S.C. §§ 1411-20 ("the IDEA-B" or "the Act"), ² was a legislative ruling subject to the notice and comment procedures of the Administrative Procedure Act, 5 U.S.C. § 553 ("APA"). We reverse, and remand for entry of summary judgment in favor of Davila and the Department of Education.

I.

The IDEA-B provides federal funding to states to support the education of disabled children. In order to qualify for funds, a state must establish a policy assuring a free appropriate education ("FAPE") to all disabled children. 20 U.S.C. § 1412(1). Most states distribute the federal monies to local educational agencies that provide services to eligible children. The Office of Special Education and Rehabilitative Services of the United States Department of Education ("OSERS") administers the Act. The rule at issue here was announced by OSERS in a letter written by Davila, the Assistant Secretary for Special Education and Rehabilitative Services, in response to an inquiry from Frank E. New, the Director of Special Education for the Ohio Department of Education.

New asked whether the IDEA requires states to provide educational services to disabled children who are expelled or suspended for an extended period for reasons unrelated to their disability. In his letter, Davila stated that OSERS interpreted the IDEA to require states to continue services in these circumstances. The relevant facts are undisputed: this position was not published in the Federal Register or the Code of Federal Regulations, and public comments were not solicited before it was issued.

The School District for Wayne Township sued the Secretary on behalf of itself and all similarly situated providers of educational services. The School District asserts that OSERS' position places a large financial burden on school districts, and that the districts are entitled to notice of the proposed rule and the opportunity to comment. Both parties filed motions for summary judgment. The district court agreed with the School District that OSERS' position is a legislative rule subject to the notice and comment requirements of the APA. Metropolitan School District of Wayne Township v. Davila, 770 F.Supp 1331 (S.D.Ind.1991). The district court acknowledged that "the issue is whether ... the New Letter is a 'legislative rule' requiring notice and comment under the APA, or ... merely an 'interpretive rule' exempt from the APA's requirements." Id. at 1337.

The court applied a three-factor test to determine that the position taken in the letter is "substantive," and therefore subject to the notice and comment requirements of § 553 of the APA and to the restrictions of 20 U.S.C. § 1417(b), the section of the IDEA delegating law-making authority to the Department of Education. Id. at 1338. These factors were: "(1) it imposes a new and mandatory duty upon all school districts in the United States, (2) the new duty is not expressly required by EHA [now IDEA], and (3) contrary to the New Letter itself it is not required by Honig v. Doe, 484 U.S. 305 [108 S.Ct. 592, 98 L.Ed.2d 686] (1988)." 770 F.Supp. at 1338.

We believe the district court used "substantive" as a synonym for "legislative." This usage appears in several other district court opinions, most notably in the one upon which the district court relied to develop its three-factor test. See National Treasury Employees Union v. Reagan, 685 F.Supp. 1346, 1356 (E.D.La.1988). See also Energy Reserves Group v. Federal Energy Administration, 447 F.Supp. 1135 (D. Kansas 1978). In reviewing (and reversing) Energy Reserves, the Temporary Emergency Court of Appeals treated "substantive" in this context as a synonym for "legislative." Energy Reserves Group v. Federal Energy Administration, 589 F.2d 1082, 1089 (Temp.Emer.Ct.App.1978). See also American Hospital Association v. Bowen, 834 F.2d 1037, 1045 (D.C.Cir.1987). For these reasons, we believe the district court here also used the terms interchangeably.

In addition to its holding that the APA requires OSERS to follow the notice and comment procedures before promulgating the position expressed in Davila's letter to New, the district court found that 20 U.S.C. § 1417(b) requires these procedures. Section 1417(b) provides:

In carrying out the provisions of this subchapter, the Secretary shall issue, not later than January 1, 1977, amend, and revoke such rules and regulations as may be necessary. No other less formal method of implementing such provisions is authorized.

The district court interpreted this language to require that any rules the Department proposed under the Act be published in the Federal Register. Id. at 1337. Based upon its holding that the position announced in Davila's letter to New is "substantive" (legislative), and its reading of § 1417(b), the court concluded that the rule is invalid because OSERS failed to follow the notice and comment procedures of the APA. We find the use of the term "substantive" in this context misleading; an interpretation which explains the meaning of the statute can be just as "substantive" as a legislative rule. We prefer the interpretive/legislative terminology because it avoids any potential confusion.

II.

It is well established that review of a district court's grant of summary judgment is de novo. See, e.g., La Preferida, Inc. v. Cerveceria Modelo, S.A., 914 F.2d 900, 905 (7th Cir.1990). In order to uphold a grant of summary judgment, we must "view the record and all inferences drawn from it in the light most favorable to the party opposing the motion," Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir.1990), and conclude that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). First Wisconsin Trust Co. v. Schroud, 916 F.2d 394, 398 (7th Cir.1990).

In this case, we believe Davila and the Department of Education are entitled to judgment as a matter of law. The APA does not require administrative agencies to follow notice and comment procedures in all situations. Section 553(b)(3)(A) specifically excludes "interpretive rules, general statements of policy, or rules of agency organization, procedure, or practice," from the notice and comment procedures. See e.g., Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565, 100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980) (discussing "information letters" containing statements which begin: "The staff's position is ...") (quoted in Industrial Safety Equipment Association, Inc. v. EPA, 837 F.2d 1115, 1121 n. 11 (D.C.Cir.1988)). Based upon our review of Davila's letter and controlling authority, we conclude that the letter announced OSERS' construction of the IDEA, and hence is an interpretive rule that does not trigger the APA's notice and comment requirements.

We note briefly that this issue is ripe for review. Preenforcement review is appropriate here because the Department of Education has issued its final pronouncement on the subject, and the School District and other plaintiffs must either comply with the Department's interpretation or face potential sanctions. The Department's position mandates that states provide educational services to expelled disabled children in order to comply with the IDEA. "If a rule of conduct cannot be challenged in advance of violating it, the people subject to it are placed in a dilemma: comply with a rule that harms them and that they believe to be invalid or violate the rule at the risk of a heavy penalty if they've guessed wrong and the rule is upheld in the penalty proceeding." Abbs v. Sullivan, 963 F.2d 918 (7th Cir.1992) (citing 4 Kenneth Culp Davis, Administrative Law Treatise § 25:6, at p. 369 (2d ed. 1983)). In this situation, the rule can be challenged directly. Id.

"The distinction between interpretive (or 'interpretative') and substantive (or 'legislative') rules is admittedly far from crystal-clear." Chemical Waste Management, Inc. v. EPA, 869 F.2d 1526, 1534 (D.C.Cir.1989) (citing American Hospital Association v. Bowen, 834 F.2d 1037, 1045 (D.C.Cir.1987)). Chemical Waste considered an EPA interpretation of a regulation which provides: "any solid waste generated from the treatment, storage, or disposal of a hazardous waste, including any leachate is a hazardous waste." 40 C.F.R. § 261.3(c)(2)(i). The EPA determined that the hazardousness of waste does not depend upon the time of its disposal, and thus materials found to be hazardous after disposal could produce hazardous byproducts...