St. Regis Mohawk Tribe, New York v. Brock

• Citation: 769 F.2d 37
• Decision Date: 17 July 1985
• Docket Number: No. 1258,D,1258
• Parties: ST. REGIS MOHAWK TRIBE, NEW YORK, Petitioner, v. William E. BROCK, Secretary of Labor, Respondent. ocket 85-4042.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 37

769 F.2d 37

ST. REGIS MOHAWK TRIBE, NEW YORK, Petitioner, v. William E. BROCK, Secretary of Labor, Respondent.

No. 1258, Docket 85-4042.

United States Court of Appeals,

Second Circuit.

Argued May 22, 1985.

Decided July 17, 1985.

Richard J. Dauphinais, Native American Rights Fund, Boulder, Colo. (Jeanne S. Whiteing, Native American Rights Fund, Boulder, Colo.), for petitioner.

Jeffrey A. Hennemuth, Atty., U.S. Dept. of Labor, Office of the Solicitor, Washington, D.C. (William E. Brock, Secretary of Labor, Francis X. Lilly, Sol. of Labor, Seth D. Zinman, Associate Sol. for Legislation and Legal Counsel, William H. DuRoss, III, Associate Sol. for Employment and Training, Harry L. Sheinfeld, Counsel for Litigation, U.S. Dept. of Labor, Office of the Solicitor, Washington, D.C. and Jonathan Kay, Office of the Regional Solicitor, U.S. Dept. of Labor, New York City), for respondent.

Before LUMBARD, FRIENDLY and PRATT, Circuit Judges.

FRIENDLY, Circuit Judge:

This is a petition by the St. Regis Mohawk Tribe of Indians (the Tribe) pursuant to 29 U.S.C. Sec. 817(a) ¹ to review a decision of the Secretary of Labor (the Secretary) which denied the Tribe's request for review of a decision and order of an Administrative Law Judge (ALJ). The ALJ's decision disallowed expenditures of $39,045.03 made by the Tribe in connection with two grants under the Comprehensive Employment and Training Act (CETA), 29 U.S.C. Secs. 801-999 (as amended), and directed repayment of the disallowed expenditures out of non-CETA funds.

The Tribe is a small tribe of Indians located in northeastern New York near the Canadian border. Beginning in 1975, it sought funds under CETA in order to become a prime sponsor of employment and training programs for tribal members, 97% of whom were at or below the poverty level. We are here concerned with Grant No. 99-6-522-30-127 (Grant No. 127), covering the period from September 15, 1975 to January 31, 1977, and Grant No. 99-6-522-30-54 (Grant No. 54), covering the period from October 1, 1976 to December 31, 1978. After modifications, a total of $273,503 was awarded under Grant No. 127, and a total of $1,012,830 was awarded under Grant No. 54.

The grants were audited in early 1978, and an exit conference upon completion of the audit was held on May 5, 1978. For Grant No. 127, expenditures of $5,351 were recommended for disallowance and expenditures of $16,255 were questioned, a total of $21,606. For Grant No. 54, which the audit reviewed only through September 30, 1977 (although with extensions the grant ran until the end of 1978), expenditures of $36,881 were recommended for disallowance and expenditures of $92,179 were questioned, a total of $129,060.

On November 18, 1980, the Director of the Grant and Audit Closeout Task Force in the Employment and Training Administration (the Grant Officer) issued an initial determination disallowing the entire $21,606 in expenditures made under Grant No. 127 that had been questioned or recommended for disallowance by the auditors. This initial determination was silent with respect to Grant No. 54. In January and June, 1981, the Tribe submitted additional information to the Department of Labor (the Department). On July 23, 1981, the Grant Officer issued a revised initial determination disallowing the same $21,606 under Grant No. 127 and adding to this the $129,060 in expenditures questioned or recommended for disallowance by the auditors in connection with Grant No. 54. On September 28, 1981, nearly three-and-a-half years after the initial audit, the Grant Officer issued a final determination, disallowing only $68,334 in expenditures made under the two grants.

The Tribe filed a request for a hearing before an ALJ on October 13, 1981. The hearing was held on December 17, 1982, and additional briefing was completed in June, 1983. The ALJ did not issue a decision By letter dated January 30, 1985, the Tribe requested that the Secretary dismiss the case and set aside the ALJ's order on the grounds that the final determination of the Grant Officer had been untimely under Sec. 106(b) of CETA and the regulations promulgated thereunder, 20 C.F.R. Secs. 676.86, .88. The Secretary declined to accept the case for review, and, pursuant to 20 C.F.R. Sec. 676.91(f), the ALJ's decision and order became the final order of the Secretary. The Tribe was formally notified of the denial of review by the Secretary in a letter dated March 1, 1985, and this petition to review followed. We deny the petition.

and order until January 4, 1985. He reduced the Grant Officer's disallowance to $39,045.03, and held that the Tribe was required to repay that sum to the Department out of non-CETA funds.

DISCUSSION

The Tribe does not dispute the merits of the finding that it misused CETA funds in the amount of $39,045.03. Rather, it asserts that the Secretary cannot recover these because of two principal legal barriers which we will now discuss.

I. The 120-Day Period for a Final Determination

The Tribe argues that "collection is outside of the Secretary's jurisdiction because he failed to issue his Final Determination within 120 days of receipt of the audit" as required by Sec. 106(b) of CETA, 29 U.S.C. Sec. 816(b), and the Secretary's regulations thereunder, 20 C.F.R. Sec. 676.88. The statute, as substantially revised in the CETA Amendments of 1978, Pub.L. No. 95-524, 92 Stat. 1909, 1926, provides (emphasis added):

Whenever the Secretary receives a complaint from any interested person or organization ... which alleges, or whenever the Secretary has reason to believe (because of an audit, report, on-site review, or otherwise) that a recipient of financial assistance under this Act is failing to comply with the requirements of this Act, the regulations under this Act or the terms of the comprehensive employment and training plan, the Secretary shall investigate the matter. The Secretary shall conduct such investigation, and make the final determination required by the following sentence regarding the truth of the allegation or belief involved, not later than 120 days after receiving the complaint. If, after such investigation, the Secretary determines that there is substantial evidence to support such allegation or belief that such a recipient is failing to comply with such requirements, the Secretary shall, after due notice and opportunity for a hearing to such recipient, determine whether such allegation or belief is true.

The Secretary's regulations amplify the emphasized sentence as follows:

Final determination. If all the parties and the Grant Officer cannot informally resolve any matter pursuant to paragraph (d), the Grant Officer shall, not later than 120 days after the filing of the complaint (or receipt of a final audit or investigation report in the absence of a complaint), provide each party with a final written notice in duplicate by certified mail, return receipt requested, that (1) indicates that efforts to informally resolve matters contained in the initial determination pursuant to paragraph (a) have been unsuccessful, (2) lists those matters upon which the parties continue to disagree, (3) lists any sanctions, and required corrective actions, including any other alteration or modification of the plan, grant, agreement or program intended by the Grant Officer, and (4) informs the parties of their opportunity to request a hearing pursuant to these regulations. The Grant Officer shall also mail a copy of his final determinations to any parties in interest.

20 C.F.R. Sec. 676.88(e). The Secretary does not dispute that the audit report was received by the Department more than 120 days before the date of the Grant Officer's final determination of July 23, 1981, but maintains that this does not bar the Government from recovering misspent funds.

The proposition advanced by the Tribe, that Congress meant to bar the Government from recovering funds provided by United States taxpayers and misspent by a grantee unless the Secretary succeeds in making a final determination within the short period of 120 days from the time he first receives information raising the possibility of misuse, is not, to say the least, of the sort that commands instant assent. ² Despite its acceptance by two courts of appeals, see Lehigh Valley Manpower Program v. Donovan, 718 F.2d 99 (3 Cir.1983); City of Edmonds v. United States Dep't of Labor, 749 F.2d 1419 (9 Cir.1984); Pierce County v. United States Dep't of Labor, 759 F.2d 1398 (9 Cir.1985), we must subject it to most careful scrutiny. ³

Although Sec. 106(b) states that the Secretary "shall" issue his final determination within 120 days, it does not specify the consequence of his failure to do so. The Tribe argues that anything less than a complete bar on further administrative action is inconsistent with Congress' use of the verb "shall"; any other interpretation, the Tribe argues further, would render the 120-day deadline unenforceable and hence meaningless. The Secretary responds that interpreting the 120-day deadline as a limitation on the Secretary's authority is inconsistent with the "broad remedial intent of the CETA Amendments of 1978," which added Sec. 106(b). According to the Secretary, enforcement of the 120-day provision is limited to the right of an interested party to compel the Grant Officer to complete his investigation forthwith or to force the Department to proceed immediately with an administrative hearing.

The Tribe puts on the word "shall" a weight it cannot bear in the present context. In numerous cases construing similar statutes directing that administrative action "shall" be completed within a specified time, courts have enunciated a general rule that

[a] statutory time period is not mandatory unless it both expressly requires an agency or public official to act within a particular time period and specifies a consequence for failure to comply with the provision.

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