State of Ala. Dept. of Human v. U.S. Dept. Hhs, CIV. 05CV2098 (RJL).

Decision Date23 March 2007
Docket NumberNo. CIV. 05CV2098 (RJL).,CIV. 05CV2098 (RJL).
Citation478 F.Supp.2d 85
PartiesSTATE OF ALABAMA DEPARTMENT OF HUMAN RESOURCES, Child Support Enforcement Division, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Defendants.
CourtU.S. District Court — District of Columbia

Caroline Montrose Brown, Kelly Christine Blevins, Joseph Zambuto, Jr., Covington & Burling, Maureen W. Zaniel, Khadijah Muhammad-Starling, Office of the Attorney General for the District of Columbia, Washington, DC, for Plaintiffs.

Adam D. Kirschner, U.S. Department of Justice, Washington, DC, for Defendants.

MEMORANDUM OPINION

LEON, District Judge.

The state agencies responsible for administering child support enforcement programs in Alabama, Delaware, Hawaii, Indiana, Kansas, Louisiana, New Mexico, Rhode Island, and the District of Columbia have sued the United States Department of Health and Human Services ("HHS") and Michael Leavitt, the Director of HHS, seeking to overturn penalties assessed by HHS against the plaintiffs' Temporary Assistance for Needy Families ("TANF") block grant payments in Fiscal Year ("FY") 2004. Currently before the Court are the parties' cross motions for summary judgment.1 For the reasons stated below the plaintiffs' motions for summary judgment will be DENIED and the defendants' motion GRANTED.

BACKGROUND

In 1996 Congress amended Title IV-A of the Social Security Act to create the Temporary Assistance to Needy Families ("TANF") program, 42 U.S.C. § 601 et seq.. A key element of Congress's broader efforts to reform welfare, TANF replaced the Aid to Families with Dependent Children entitlement program with block grants to eligible states that have approved programs for providing assistance to needy families with children. Id.

In order to be eligible for TANF grants, states are required to operate child support enforcement programs — programs responsible for locating non-custodial parents, establishing paternity and obtaining child and spousal support — in accordance with Title IV-D of the Social Security Act. 42 U.S.C. § 602(a)(2). Title IV-D, in turn, provides federal funding for state child support enforcement programs, but sets strict performance criteria and reporting requirements. 42 U.S.C. § 651, et seq.. States found to be in noncompliance with Title IV-D can be assessed penalties against their TANF grants. 42 U.S.C. § 609.

Among other performance requirements, Title IV-D requires states' child support enforcement programs to achieve a "paternity establishment percentage" ("PEP") of at least 90% for each fiscal year (or, if less than 90%, to show an improvement over the previous year). 42 U.S.C. § 652(g)(1). Under IV-D a state can calculate its PEP either by determining the percentage of children born out of wedlock statewide for whom paternity is established, or by determining the percentage of children participating in the IV-D program for whom paternity is established. 42 U.S.C. § 652(g)(2).

In order to ensure compliance, HHS requires states to submit annual data "concerning the levels of accomplishment ... with respect to applicable performance indicators (including paternity establishment percentages)." 42 U.S.C. § 654(a)(15)(B). HHS, in turn, is required to audit the data to assess the "completeness, reliability and security of the data and the accuracy of the reporting system." 42 U.S.C. § 652(a)(4)(c)(i).

According to HHS regulations promulgated in December 2000, performance data submitted must be 95% error-free. 45 C.F.R. § 305.1. For states calculating their PEP based on the IV-D population, auditors consider inclusion and exclusion errors (i.e. counting a child for whom paternity has not been established or excluding a child for whom paternity has been established). For states calculating their PEP based on the statewide population, only inclusion errors are considered.

States that fail to achieve a 90% PEP or submit data with an error rate greater than 5%, are required to take corrective action in the succeeding year (the "corrective action year"). 42 U.S.C. § 609(a)(8). If a state is not in compliance at the end of that corrective action year, it can be assessed a percentage reduction in its TANF grant award. 45 C.F.R. § 305.61. Prior to assessing a penalty, HHS is required to notify the state in writing, explaining the deficiency and indicating the amount of the potential penalty. 45 C.F.R. § 305.66.

In November, 2003, HHS informed the plaintiffs that they had failed to meet IV-D performance requirements and/or submitted unreliable data in FY 2001 and 2002 and, therefore, were subject to 1% reductions in their FY 2004 TANF grants. Plaintiffs appealed their penalties to the Departmental Appeals Board ("Board"),2 arguing that HHS had failed to provide proper notice as required by C.F.R. § 305.66. Plaintiffs argued that the penalty notice was provided after the end of the corrective action year and, therefore, was inadequate. Several of the states3 further argued that HHS's decision to use different error standards in assessing IV-D and statewide data reliability was unreasonable and, therefore, arbitrary and capricious.

In July and October 2005,4 the Board upheld the penalty awards. In rejecting the states' notice arguments, the Board found that § 305.66 does not provide a specific timeframe or deadline for notification and, therefore, does not require HHS to notify states prior to the end of the corrective action year. Decision of the Departmental Appeals Board, July 28, 2005 ("Board Decision"), p. 12. The Board concluded that under IV-D penalty regime, states are responsible for monitoring their own performance and taking appropriate corrective action. Id. at p. 13.

The Board further held that HHS's decision to use different auditing methodologies was reasonable given the significant differences in the IV-D and statewide data universes; that plaintiffs had failed to show that they had been prejudiced by the different standards; and that no authority entitled the plaintiffs to prior notice of the differing methodologies. Id. at p. 38-39. Accordingly, the Board held that HHS's decision to use the different methodologies was neither arbitrary nor capricious.

In January 2006, plaintiffs filed suit in this Court seeking to overturn the Board's decision and demanding payment of withheld funds. In Count I of the Amended Complaint, plaintiffs argue that the Board erred in holding that HHS had provided adequate notice of noncompliance. In Count II, plaintiffs contest the Board's affirmance of HHS's use of different auditing methodologies to assess error rates. The parties have cross moved for summary judgment.

STANDARD OF REVIEW

Plaintiffs have brought suit pursuant to 42 U.S.C. § 610(c) and the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 et seq..5 Accordingly, the Court will uphold the Board's decision unless it finds the decision to be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706; Back Country Horsemen of America v. Johanns, 424 F.Supp.2d 89 (D.D.C.2006); Defenders of Wildlife v. Babbitt, 130 F.Supp.2d 121 (D.D.C.2001). In making that determination, the Court must give "substantial deference" to an agency's interpretation of its own regulations. Thomas Jefferson University v. Shalala, 512 U.S. 504, 114 S.Ct. 2381, 129 L.Ed.2d 405 (1994); Martin v. Occupational Safety and Health Review Commission, 499 U.S. 144, 111 S.Ct. 1171, 113 L.Ed.2d 117 (1991). The task of the Court "is not to decide which among several competing interpretations best serves the regulatory purpose," rather "the agency's interpretation must be given controlling weight unless it is plainly erroneous or inconsistent with the regulation." Thomas Jefferson University, 512 U.S. at 512, 114 S.Ct. 2381. For the following reasons, the Board's decision here was neither.

ANALYSIS
I. PENALTY NOTICE PROVISION

Plaintiffs argue that HHS violated its own regulations when it failed to provide notice of noncompliance prior to assessing penalties.6 According to the plaintiffs, the plain language of 45 CFR § 305.66 supports the conclusion that the regulatory regime requires notice prior to the end of the corrective action year. The Court disagrees.

First, nothing in the statutory regime requires HHS to notify states of noncompliance prior to the beginning of the corrective action year. In fact, although 42 U.S.C. § 609(c), directs HHS to notify states of certain violations of the TANF program and allows those states to enter into a "corrective compliance plan" prior to assessing a penalty, Congress explicitly exempted IV-D penalties (the penalties at issue here) from that requirement. 42 U.S.C. § 609(c)(4). Accordingly, this Court must only consider whether HHS violated its own regulatory notice requirement.

The notice requirement, 45 C.F.R. § 305.66, provides that:

(a) If a state is found by the Secretary to be subject to a penalty ... [HHS] will notify the State in writing of such a finding.

(b) The notice will:

(1) Explain the deficiency or deficiency which result in the State being subject to a penalty, indicate the amount of the potential penalty, and give reasons for the finding; and

(2) Specify that the penalty will be assessed in accordance with the provisions of 45 C.F.R. 262.1(b) through (e) and 262.7 if the State is found to have failed to correct the deficiency or deficiencies cited in the notice during the automatic corrective year.

Although plaintiffs argue that the language of Section 305.66 is conditional, (i.e. "the penalty will be assessed ... if the State is found...") and, therefore, describes a sequence of events in which the corrective action year follows the notice, the plain meaning of the regulation supports the Board's decision.

Section 305.66(a) clearly provides that HHS must provide written notice of a penalty "if a state is found ... to be subject to a penalty." Under 45 C.F.R. § 305.61, a state...

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  • Adm. Para El Sustento v. Dept. of Hhs of U.S., 08-2169.
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