Southern Mut. Help Ass'n, Inc. v. Califano

Decision Date23 December 1977
Docket NumberNo. 76-1748,76-1748
Citation574 F.2d 518,187 U.S.App.D.C. 307
PartiesSOUTHERN MUTUAL HELP ASSOCIATION, INC., Appellant, v. Joseph A. CALIFANO, Jr., Secretary of Health, Education and Welfare, et al.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (D.C. Civil 74-1293).

Robert Stulberg * and Brenda F. Kohn,* with whom Robert S. Catz, Washington, D. C., was on the brief, for appellant.

Richard A. Graham, Asst. U. S. Atty., Washington, D. C., with whom Earl J. Silbert, U. S. Atty. and John A. Terry and Paul M. Tschirhart, Asst. U. S. Attys., Washington, D. C., were on the brief, for appellees.

Before: BAZELON, Chief Judge, and TAMM and WILKEY, Circuit Judges.

Opinion for the court filed by TAMM, Circuit Judge.

TAMM, Circuit Judge.

Appellant Southern Mutual Help Association (SMHA) commenced this action in the United States District Court for the District of Columbia, challenging a decision by the appellee Secretary of Health, Education and Welfare (HEW) to disapprove, after three years of federal support, an annual application submitted to obtain continued funding for appellant's migrant worker health care facility in Franklin, Louisiana. The Secretary took this action without providing SMHA the opportunity for a hearing. The district court granted the appellee's motion for summary judgment, holding that neither HEW regulations nor the due process clause of the fifth amendment required HEW to hold a hearing. We vacate the order of the district court, and remand to that court with the instruction to remand to the Secretary for further proceedings consistent with this opinion.

I

Under authority of the Migrant Health Act (section 310 of the Public Health Service Act), 42 U.S.C. § 242h (1970), 1 the Secretary of HEW awards grants to public and other nonprofit organizations to establish and operate family health service clinics for domestic agricultural migratory workers. Generally, the "Project Period System" is used to obligate funds for such grants. Under this system, projects are approved for multi-year support, but are funded in annual increments called budget periods. Grantees must file annual, noncompeting applications for continued funding, and HEW "is committed to fund the project in succeeding budget periods, subject to the availability of funds, unless the grantee fails to comply with the terms and conditions of the grant or (HEW) determines that continued funding is not in the best interest of the Government." 2 In 1971, SMHA, a nonprofit Louisiana corporation, was awarded a grant to provide health services to migrant farm workers and sugarcane cutters in southwestern Louisiana. Attached to the letter informing SMHA of its grant was an HEW form entitled "Notice of Grant Awarded." 3 In pertinent part, it contained the following data:

In 1972 and 1973, SMHA filed the required applications for continued funding, and each was approved. A revised "Notice of Grant Award" form was attached to each, and in pertinent part, the 1973 document indicated the following: 4

Significantly, there is no mention on the document of "grant," "grant period," or "grant expiration date." The document does, however, indicate HEW's concern over the fact that SMHA had not yet established a project policy board, designed to promote greater community participation in the project, as required by HEW regulations. 5

In November 1973, HEW instituted its first comprehensive fiscal audit of SMHA. The results of this audit were released on May 22, 1974, and SMHA was advised that it had thirty days to present "any comments or additional information that (it) believe(d) may have a bearing on (HEW's) final determination." 6 On June 6, 1974, SMHA was notified that its 1974 application for continued funding was not being approved, and that the funds instead were to be awarded to a competing applicant, Teche Action Board (TAB).

Stating that it was "unable to find sufficient merit in the continuation of the somewhat cumbersome and unresponsive project administration through SMHA," HEW listed six principal areas of major concern that prompted its decision: 7

1. It is apparent from the considerable amount of correspondence this office has received from individuals and groups located in the Saint Mary Parish area, telephone communications and personal discussion between my staff and interested citizens from the target area that the community has lost confidence in SMHA.

2. SMHA has failed to reconstitute its Board of Directors or to make appropriate provision for the community at large, particularly the target population, to participate in the planning, development and implementation of the project.

3. The sponsor has failed to give consideration to the advice and counsel of the medical and dental committees on Saint Mary Parish, the primary focus of the project's activities.

4. There appears to have been usurpation of the Project Director's administrative and management authority by the Executive Staff of the Southern Mutual Help Association in respect to the negotiation of contracts, i. e., purchase of film, obtaining consultants for staff and board training. Also it is apparent that employment procedures and practices have not been consistent with program guidelines and requirements.

5. The Farm Workers Advisory Board, Professional Advisory Committee and project staff have indicated that they have had virtually no communication with the SMHA Executive Staff or the governing board of SMHA.

6. Of particular concern is the practice of SMHA which allows members of the Board and/or relatives of Board members to work as salaried staff for SMHA-sponsored programs and projects. This creates a basic conflict of interest.

On June 11, SMHA notified HEW that it intended to challenge and appeal the denial decision. 8 On June 25, HEW gave final approval to the TAB proposal, 9 and the next day informed SMHA that "our administrative decision not to renew this grant at the end of the budget period does not constitute grant termination. Therefore, those rules and regulations governing grant termination procedures . . . do not apply in this instance." 10 On July 16, representatives of SMHA met with the HEW regional health administrator to discuss the denial decision, and thereafter this official informed SMHA that the decision would not be altered. 11

SMHA then formally applied for review to the HEW Grant Appeals Board, 12 but was informed that

the decision being appealed is not subject to the jurisdiction of the Board. For the purposes of 45 CFR Part 16 the failure to issue an additional grant in support of a project is not a termination of an existing grant. It is viewed rather as a pre-award decision related to an application for the additional grant . . . . 13

On August 28, 1974, SMHA filed its complaint in the district court, seeking, under 28 U.S.C. § 1331(a) (1970), declaratory and injunctive relief and money damages. 14 Among other causes of action, SMHA maintained that departmental regulations, the Administrative Procedure Act (APA), and the due process clause of the fifth amendment required HEW to provide a hearing prior to deciding not to provide funds for fiscal years 1975 and 1976. 15 The court disagreed with SMHA and granted HEW's motion for summary judgment, stating that it appeared SMHA "was not entitled to an evidentiary hearing before (HEW) on its entitlement to funding of its migrant health services program past June 30, 1974 . . . ." 16 This appeal ensued.

II

Before beginning our analysis in this case, a few preliminary comments appear to be in order. In the two decades immediately preceding the award to SMHA, federal expenditures for grants increased tenfold, from $2.4 billion in 1951 to $27.6 billion in fiscal year 1971. 17 In the next four years, the grant total almost doubled, reaching approximately $52 billion in 1975. 18 The number and variety of federal assistance programs have also expanded, with estimates as to the number of individual domestic grant programs ranging from 500 to over 1000. 19

This spectacular expansion of both the size and scope of grant programs has engendered surprisingly little case law on the administration of federal grants. However, there is no doubt that an ever increasing number of cases in this area will be presented, 20 especially to this court with its unique jurisdiction over many grant-dispensing agencies. While there currently is a need for a fuller body of law concerning this slumbering giant, we must exercise the restraint required of us and continue to apply the law then extant to the facts of each individual case. With these prefatory comments in mind, we turn now to the issues presented in this appeal.

III

With a high degree of acumen, but seemingly little conviction, HEW has, in a single sentence and footnote, challenged SMHA's standing to bring this suit. 21 HEW correctly notes that the program in question was created primarily to benefit migrant workers. The issue, therefore, as pursued in exacting detail by Judge Wilkey at oral argument, is whether SMHA can demonstrate standing in a situation where health services for the migrant workers continued without interruption when TAB was substituted for SMHA. Since the question of standing goes to this court's jurisdiction, we must decide the issue even though the district court did not comment on it. Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969) (principal opinion) (Marshall, J.), citing Flast v. Cohen, 392 U.S. 83, 94-101, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968). See also Tileston v. Ullman, 318 U.S. 44, 46, 63 S.Ct. 493, 87 L.Ed. 603 (1943).

In Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976), the Supreme Court reemphasized the constitutional limitation of federal court jurisdiction to actual cases or controversies....

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