Petry v. Block, s. 82-1804

• Decision Date: 21 January 1983
• Docket Number: 82-1840 and 82-1884,Nos. 82-1804,s. 82-1804
• Citation: 697 F.2d 1169,225 U.S. App. D.C. 279
• Parties: Joanna PETRY, et al. v. John BLOCK, Secretary of Agriculture, et al., Appellants. Joanna PETRY, et al. v. John BLOCK, Secretary of Agriculture, et al., Appellants. Joanna PETRY, et al., Appellants, v. John BLOCK, Secretary of Agriculture, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1169

697 F.2d 1169

225 U.S.App.D.C. 279

Joanna PETRY, et al. v. John BLOCK, Secretary of Agriculture, et al., Appellants.

Joanna PETRY, et al. v. John BLOCK, Secretary of Agriculture, et al., Appellants.

Joanna PETRY, et al., Appellants, v. John BLOCK, Secretary of Agriculture, et al.

Nos. 82-1804, 82-1840 and 82-1884.

United States Court of Appeals, District of Columbia Circuit.

Argued Dec. 2, 1982.

Decided Jan. 21, 1983.

Nicholas S. Zeppos, Atty., Dept. of Justice, with whom Stanley S. Harris, U.S. Atty., and Leonard Schaitman, Atty., Dept. of Justice, Washington, D.C., were on the brief, for appellants in 82-1804 and 82-1840, and cross-appellees in 82-1884.

Kathleen A. McKee, Alexandria, Va., for appellees in 82-1804 and 82-1840, and cross-appellants in 82-1884.

Barbara Milstein, Washington, D.C., was on the brief for amici curiae, urging affirmance.

Before GINSBURG and SCALIA, Circuit Judges, and GESELL, ^* Judge, United States District Court for the District of Columbia.

Opinion PER CURIAM.

PER CURIAM:

The Secretary of Agriculture appeals a preliminary injunction ordered by the District Court setting aside an interim regulation promulgated by the Secretary pursuant to a recent amendment to the Department's Child Care Food Program (CCFP). See 42 U.S.C. Sec. 1766 et seq. (1976). The sole issue on appeal is whether the District Court misinterpreted the meaning and effect of the amendment in setting aside the regulation.

The CCFP provides financial assistance to the states for meals served to children in day care homes. Under implementing regulations each day care home receiving assistance must have a sponsoring organization to supervise the home and assist in the administration of the CCFP. The sponsoring organizations are in turn reimbursed out of CCFP funds for administrative expenses incurred in supervising the day care homes. See 7 C.F.R. Sec. 226 et seq. (1982). Appellees/cross-appellants are various individuals and organizations who participate in the CCFP in several states.

In 1981, concerned with the rapid increases in the level of federal spending, Congress passed the Omnibus Budget Reconciliation Act ("OBRA"), reducing the expenditures of a variety of federal programs. Pub.L. 97-35, 95 Stat. 357 (Aug. 13, 1981). Included in OBRA were amendments to the CCFP. These amendments ordered the Secretary to reduce federal expenditures for the CCFP. Specifically, section 810(d)(3)(B) of OBRA (codified at 42 U.S.C.A. Sec. 1766(f)(3)(B) (West Supp.1982)) provides:

Family or group day care home sponsoring organizations shall also receive reimbursement for their administrative expenses in amounts not exceeding the maximum allowable levels prescribed by the Secretary. Such levels shall be adjusted July 1 of each year to reflect changes in the Consumer Price Index for all items for the most recent 12-month period for which such data are available. The maximum allowable levels for administrative expense payments, as in effect as of the date of the enactment of this subparagraph, shall be adjusted by the Secretary so as to achieve a 10 percent reduction in the total amount of reimbursement provided to institutions for such administrative expenses. In making the reduction required by the preceding sentence, the Secretary shall increase the economy of scale factors used to distinguish institutions that sponsor a greater number of family or group day care homes from those that sponsor a lesser number of such homes. [Emphasis added.]

Although OBRA was signed into law on August 13, 1981, Congress provided specifically that the amendments to the CCFP were to take effect on January 1, 1982.

On January 26, 1982, an interim rule setting forth new maximum allowable reimbursement rates was published in the Federal Register and made retroactive to January 1, 1982, to comply with the requirements of OBRA. Past experience in the CCFP indicated that sponsoring organizations often were reimbursed at rates less than the maximum allowable rates. In order to achieve the overall ten percent reduction in administrative reimbursements actually provided to sponsoring organizations, the Secretary, among other changes, reduced the maximum allowable rate by considerably more than ten percent in some cases. 47 Fed.Reg. at 3539.

Appellees brought the instant action in the District Court for declaratory and injunctive relief alleging that the regulation was inconsistent with the amendment. Specifically, appellees claim that OBRA directed the Secretary to reduce the then-existing maximum rates by an average of ten percent. Rates for larger sponsors might be reduced by more than ten percent, provided that overall reductions in rates did not exceed ten percent, and provided further that the overall cost saving achieved was no greater than ten percent. Brief for Appellees at 11, 13-14. In no event, according to appellees, could the Secretary reduce all of the maximum rates by more than ten percent. The challenged regulation, appellees contend, violated OBRA in that it effected reductions that, for the most part, ranged from about...