State of Tex. v. U.S., 91-8042

• Decision Date: 28 January 1992
• Docket Number: No. 91-8042,91-8042
• Citation: 951 F.2d 645
• Parties: STATE of TEXAS and Texas Department of Human Resources, Plaintiffs-Appellants, v. UNITED STATES of America and U.S. Department of Agriculture, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 645

951 F.2d 645

STATE of TEXAS and Texas Department of Human Resources Plaintiffs-Appellants, v. UNITED STATES of America and U.S. Department of Agriculture Defendants-Appellees.

No. 91-8042.

United States Court of Appeals, Fifth Circuit.

Jan. 28, 1992.

Edwin N. Horne, Will Pryor, Mary F. Keller, Asst. Attys. Gen., James C. Todd, Chief, Gen. Lit. Div., Dan Morales, Atty. Gen., Austin, Tex., for plaintiffs-appellants.

Bruce G. Forrest, William Kanter, Civ. Div., Appellate Staff, Dept. of Justice, Washington, D.C., Katherine L. Smith, Asst. U.S. Atty., Austin, Tex., Sheila Lieber, Raymond Larizza, Dept. of Justice, Civ. Div., Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Western District of Texas.

Before CLARK, Chief Judge, JONES, Circuit Judge and PARKER ^*, District Judge. ^**

ROBERT M. PARKER, District Judge:

I.

The State of Texas and the Texas Department of Human Services (Texas) appeal from the District Court's Order granting summary judgment in favor of the United States, and the U.S. Department of Agriculture (United States), and awarding prejudgment interest against Texas for the amounts due to the United States. The Court below found that the Food Stamp Appeal Board's decision holding Texas liable for mail issuance losses is not subject to judicial review. Appellant also contends that the District Court erred in permitting the assessment of interest against the state. We affirm in part and reverse in part.

II.

Texas incurred losses in its Food Stamp Program due to U.S. Postal Service employees stealing food stamps that had been mailed by the Texas Department of Human Services to qualified households. These losses are referred to as mail issuance losses. Texas continued to distribute Food Stamps by mail even after it became apparent that losses were unacceptably high, for the purpose of assisting an investigation into the thefts and the prosecution of the thieves. Food Stamp Policy Memo, Index No. 85.04 addresses the question "Can a state agency be relieved from liability for mail issuance losses that occur during the course of a Postal Service investigation? The answer given by the Policy Memo is:

"For normal or routine Postal Service investigation of mail theft, State agencies will not be relieved from liability for mail issuance losses ... However, in extraordinary circumstances where the success of a Postal Service's investigation into heavy food stamp mail issuance losses is contingent upon the State's cooperation by continuing its mail issuance system, requests for relief from liability will be considered on a case by case basis by the FNS Regional Administrator. To be considered, the state must present a convincing argument that it is only continuing with mail issuance in the affected area to cooperate with the Postal Service investigation, and it must make its request in advance of the conduct of the investigation."

Texas did not request a waiver of strict liability prior to the investigation as required in Policy Memo No. 85-04. In fact Texas claims the Department of Human Resources had no record of receiving a copy of the Policy Memo, nor did any Texas official have knowledge of the memo or its criteria for requesting a waiver prior to the investigation in this case. The Policy Memo was issued on November 30, 1984, and properly indexed in 1985, thus giving Texas official notice of its existence and contents.

Texas was notified by the United States that she would be liable for $150,350.00 for mail issuance losses incurred during April--September 1986 and for $262,035.00 for mail issuance losses incurred during October 1986--March 1987. Texas was advised that interest would accrue beginning thirty (30) days after notice.

Texas sought waivers of liability for mail issuance losses in hearings before the Food Stamp Board on each case. The Board determined that tolerance levels were exceeded and affirmed Texas' liability in both cases. The letter notifying Texas of the Food Stamp Board's decision commended Texas for its efforts to cooperate with the U.S. Postal Service in an attempt to curb the thefts. However, the board declined to waive Texas' liability, stating that the efforts were no greater than was to be expected. Texas then filed suit in district court for a de novo review of the Board's action.

III.

The Congress established the Food Stamp Program to improve the nutritional well-being of low income individuals who would have difficulty purchasing a nutritious diet. 7 U.S.C. § 2011 et seq. The Texas Food Stamp Program is administered jointly by the federal government and the Texas Department of Human Services. Eligibility and benefit standards for participation in the program are set by the Food and Nutrition Service ^S of the United States Department of Agriculture, 7 U.S.C. § 2014(b). The Secretary of Agriculture is authorized to issue such regulations as he deems necessary or appropriate for the efficient administration of the Food Stamp Program. 7 U.S.C. § 2013(c). The cost of the food stamps is borne entirely by the United States. The cost incurred by the participating state in the administration of the program is divided between the state and federal governments. 7 U.S.C. § 2025(a). The actual, day-to-day operation of the Texas program is carried out by the Texas Department of Human Services (TDHS). TDHS has authority to deliver the coupons to eligible individuals by mail or over-the-counter. Mail issuance is cheaper, administratively easier and preferred by many recipients who are housebound or without transportation. When Food Stamps are placed in the mail and not received, they must be replaced. If the original coupons and their replacements are both redeemed, the cost to the federal government doubles for that issuance. In 1981, Congress added a section to the Food Stamp Program providing that the States would be liable for mail issuance losses "to the extent prescribed in the regulations promulgated by the Secretary." 7 U.S.C. § 2016(f). The FNS adopted regulations establishing a tolerance level of .05% above which the participating state is held strictly liable for mail issuance losses. Losses up to .05% are absorbed by the U.S. regardless of fault. 47 Fed.Reg. 50682, 7 CFR 274.3.

The Secretary has discretion to waive a valid claim, if to do so would serve the purpose of the statute. 7 U.S.C. § 2022(a)(1). The Food Stamp Policy Memo, Index No. 85.04 describes extraordinary circumstances where relief from liability for mail issuance losses may be considered. The Board determined in this case that a waiver of Texas' liability, requiring the federal government to bear the entire loss would be contrary to the intent and purpose of the regulations. The letter from the Chairman of the Food Stamp Appeals Board advising Texas of the Board's decision concluded with the following language:

"Should the State of Texas be aggrieved by this final determination, it may seek judicial review and trial de novo by filing a complaint against the United States ..."

IV.

Texas sought judicial review. The District Court granted the Motion for Summary Judgment filed by the United States Department of Agriculture holding that Congress bestowed upon the Secretary of the Department of Agriculture complete discretion in the decision to forego an otherwise valid claim against the state. Therefore, the Department's decision regarding the appropriateness of waiver in a particular case is not subject to judicial review. Texas brings her first point of error challenging the appropriateness of the summary judgment order. Texas alleges that there was evidence before the court below raising a genuine issue of fact as to whether or not the Food Stamp Appeals Board recognized their authority under the law to waive strict liability under these facts. The United States answers that, first, the Board's decision is committed to agency discretion by law, and no exploration of the Board's reasoning is allowed. Second, the Board did consider the State's waiver application and declined to grant the waiver. Third, the State never asked the Board to consider Policy Memo 85-04, and so cannot now complain that the Board did not expressly consider it. Finally, the application of Policy Memo 85-04 to the facts as recited by Texas would have made no difference to the outcome of the proceeding. We agree.

The Secretary of the Department of Agriculture is authorized to issue such regulations "as he deems necessary or appropriate for the efficient administration of the Food Stamp Program." 7 U.S.C. § 2013(c). The strict liability scheme was a valid exercise of statutory authority under 7 U.S.C. § 2016(f). The Department has authority to waive claims pursuant to 7 U.S.C. § 2022(a)(1) if the Secretary determines that to do so would serve the purposes of this chapter.

An agency decision not to take enforcement action is presumed to be unreviewable in the courts unless Congress imposes explicit restrictions on the scope of agency enforcement discretion, and provides judicially manageable standards for determining when the agency has violated those restrictions. Heckler v. Chaney, 470 U.S. 821, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985). Congress did not impose any restriction on the scope of agency discretion to grant waivers. There are thus no judicially manageable standards arising from the statute under which the Court can evaluate this case, because it involves an area in which Congress empowered the agency with discretion to waive the charges it determines appropriate. The department's ultimate decision regarding appropriateness of a waiver in this particular case is not subject to judicial review. Texas argues, however, that Food Stamp Policy Memo, Index No. 85.04, created judicially manageable standards for determining if the agency abused its discretion. Even if this were true, we would not hold that the Food Stamp Appeals Board abused its discretion in...