Commonwealth of Mass v. Secretary of A
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Commonwealth of Mass v. Secretary of A, (1st Cir. 1993).
Opinion
USCA1 Opinion
January 22, 1993
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 92-1539
COMMONWEALTH OF MASSACHUSETTS,
DEPARTMENT OF PUBLIC WELFARE,
Plaintiff, Appellant,
v.
SECRETARY OF AGRICULTURE, ET AL.,
Defendants, Appellees.
_________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
___________________
_________________________
Selya, Circuit Judge,
_____________
Higginbotham,* Senior Circuit Judge,
____________________
and Cyr, Circuit Judge.
_____________
_________________________
Douglas H. Wilkins, Assistant Attorney General, with whom
___________________
Scott Harshbarger, Attorney General, was on brief, for appellant.
_________________
Arvid E. Roach, II, with whom Virginia G. Watkin, Thomas H.
___________________ __________________ _________
Odom, and Covington & Burling were on brief, for States of
____ _____________________
Alabama, California, Florida, Georgia, Illinois, Kentucky,
Louisiana, Nebraska, Ohio, Oklahoma, West Virginia and Wisconsin,
amici curiae.
Deborah Ruth Kant, Attorney, Civil Division, United States
_________________
Department of Justice, with whom Stuart M. Gerson, Assistant
_________________
Attorney General, A. John Pappalardo, United States Attorney, and
__________________
Barbara C. Biddle, Attorney, Civil Division, were on brief, for
_________________
appellees.
_________________________
_________________________
_______________
*Of the Third Circuit, sitting by designation.
SELYA, Circuit Judge. In federal fiscal year (FY)
SELYA, Circuit Judge.
_____________
1982, lasting from October 1, 1981 through September 30, 1982,
the Commonwealth of Massachusetts distributed food stamps far
exceeding the margin of error allowable under applicable federal
regulations. Consequently, Food and Nutrition Service (FNS), the
branch of the United States Department of Agriculture responsible
for overseeing the food stamp program, imposed a punitive
sanction.
Massachusetts unsuccessfully appealed the sanction to
the Food Stamp Appeal Board (the Board). It then sought judicial
review in federal district court. See 7 U.S.C. 2023 (1982).
___
The court granted summary judgment in favor of the defendants,1
albeit in two steps. See Massachusetts v. United States, 737 F.
___ _____________ _____________
Supp. 120 (D. Mass. 1990) (Massachusetts I); Massachusetts v.
_______________ _____________
United States, 788 F. Supp. 1267 (D. Mass. 1992) (Massachusetts
_____________ _____________
II).
__
Finding the penalty hard to swallow, the Commonwealth
serves up a gallimaufry of issues for appellate mastication.
Although these issues contain some food for thought, they lack
true nutritive value. Consequently, we affirm the judgment
below.
I. FACTUAL PRELUDE
I. FACTUAL PRELUDE
Congress designed the Food Stamp Act of 1964, Pub. L.
____________________
1The Commonwealth named a host of federal defendants in its
suit, including the United States, the Secretary of Agriculture,
the Department of Agriculture, the Board, and FNS. For ease in
reference, we treat the appeal as if the appellees were a single
entity.
2
No. 88-525, 78 Stat. 103 (1964), codified as amended, 7 U.S.C.
___________________
2011-2030 (1982), to provide low-income families with access to
government-subsidized foodstuffs. Although the coupons were
actually disbursed by the participating states, FNS paid fifty
percent of the administrative costs and one hundred percent of
the food subsidy costs. In time, the federal government's
generosity produced an unfortunate side effect; because
overpayments were charged to the federal tab, states had little
incentive to keep distributions in line. To curb this
profligacy, Congress eventually enacted a quality control program
(QCP) to ensure more accurate food stamp distribution. The first
QCP took effect in 1977. Pub. L. No. 95-113, 16, 91 Stat. 976
(1977).
From that point forward, Congress persistently tinkered
with the QCP's features. During FY 1982, the QCP required that
each state survey a sample of its food stamp cases in order to
estimate in what percentage of them it had distributed the wrong
number of food stamps. After receiving the states' tallies, FNS
would set a target error rate (the TER), take a subsample of each
state's cases, recheck them for errors, and employ regression
analysis to blend the federal and state estimates of state error
rates into a single estimated error rate (the EER) for the state.
See 7 U.S.C.A. 2025(g) (West Supp. 1981); 94 Stat. 363 (1980);
___
see also 7 C.F.R. 275.25(d)(6) (1982). If the state's EER
___ ____
surpassed the TER, as determined by FNS, the federal government
3
imposed a monetary sanction.2 Such fines were calculated by
multiplying the total dollar value of state-issued food stamps
for the fiscal year times the difference between the state's EER
Free access — add to your briefcase to read the full text and ask questions with AI
USCA1 Opinion
January 22, 1993
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
_________________________
No. 92-1539
COMMONWEALTH OF MASSACHUSETTS,
DEPARTMENT OF PUBLIC WELFARE,
Plaintiff, Appellant,
v.
SECRETARY OF AGRICULTURE, ET AL.,
Defendants, Appellees.
_________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
___________________
_________________________
Selya, Circuit Judge,
_____________
Higginbotham,* Senior Circuit Judge,
____________________
and Cyr, Circuit Judge.
_____________
_________________________
Douglas H. Wilkins, Assistant Attorney General, with whom
___________________
Scott Harshbarger, Attorney General, was on brief, for appellant.
_________________
Arvid E. Roach, II, with whom Virginia G. Watkin, Thomas H.
___________________ __________________ _________
Odom, and Covington & Burling were on brief, for States of
____ _____________________
Alabama, California, Florida, Georgia, Illinois, Kentucky,
Louisiana, Nebraska, Ohio, Oklahoma, West Virginia and Wisconsin,
amici curiae.
Deborah Ruth Kant, Attorney, Civil Division, United States
_________________
Department of Justice, with whom Stuart M. Gerson, Assistant
_________________
Attorney General, A. John Pappalardo, United States Attorney, and
__________________
Barbara C. Biddle, Attorney, Civil Division, were on brief, for
_________________
appellees.
_________________________
_________________________
_______________
*Of the Third Circuit, sitting by designation.
SELYA, Circuit Judge. In federal fiscal year (FY)
SELYA, Circuit Judge.
_____________
1982, lasting from October 1, 1981 through September 30, 1982,
the Commonwealth of Massachusetts distributed food stamps far
exceeding the margin of error allowable under applicable federal
regulations. Consequently, Food and Nutrition Service (FNS), the
branch of the United States Department of Agriculture responsible
for overseeing the food stamp program, imposed a punitive
sanction.
Massachusetts unsuccessfully appealed the sanction to
the Food Stamp Appeal Board (the Board). It then sought judicial
review in federal district court. See 7 U.S.C. 2023 (1982).
___
The court granted summary judgment in favor of the defendants,1
albeit in two steps. See Massachusetts v. United States, 737 F.
___ _____________ _____________
Supp. 120 (D. Mass. 1990) (Massachusetts I); Massachusetts v.
_______________ _____________
United States, 788 F. Supp. 1267 (D. Mass. 1992) (Massachusetts
_____________ _____________
II).
__
Finding the penalty hard to swallow, the Commonwealth
serves up a gallimaufry of issues for appellate mastication.
Although these issues contain some food for thought, they lack
true nutritive value. Consequently, we affirm the judgment
below.
I. FACTUAL PRELUDE
I. FACTUAL PRELUDE
Congress designed the Food Stamp Act of 1964, Pub. L.
____________________
1The Commonwealth named a host of federal defendants in its
suit, including the United States, the Secretary of Agriculture,
the Department of Agriculture, the Board, and FNS. For ease in
reference, we treat the appeal as if the appellees were a single
entity.
2
No. 88-525, 78 Stat. 103 (1964), codified as amended, 7 U.S.C.
___________________
2011-2030 (1982), to provide low-income families with access to
government-subsidized foodstuffs. Although the coupons were
actually disbursed by the participating states, FNS paid fifty
percent of the administrative costs and one hundred percent of
the food subsidy costs. In time, the federal government's
generosity produced an unfortunate side effect; because
overpayments were charged to the federal tab, states had little
incentive to keep distributions in line. To curb this
profligacy, Congress eventually enacted a quality control program
(QCP) to ensure more accurate food stamp distribution. The first
QCP took effect in 1977. Pub. L. No. 95-113, 16, 91 Stat. 976
(1977).
From that point forward, Congress persistently tinkered
with the QCP's features. During FY 1982, the QCP required that
each state survey a sample of its food stamp cases in order to
estimate in what percentage of them it had distributed the wrong
number of food stamps. After receiving the states' tallies, FNS
would set a target error rate (the TER), take a subsample of each
state's cases, recheck them for errors, and employ regression
analysis to blend the federal and state estimates of state error
rates into a single estimated error rate (the EER) for the state.
See 7 U.S.C.A. 2025(g) (West Supp. 1981); 94 Stat. 363 (1980);
___
see also 7 C.F.R. 275.25(d)(6) (1982). If the state's EER
___ ____
surpassed the TER, as determined by FNS, the federal government
3
imposed a monetary sanction.2 Such fines were calculated by
multiplying the total dollar value of state-issued food stamps
for the fiscal year times the difference between the state's EER
and its TER. See 7 C.F.R. 275.25(d)(3) (1982). If, however,
___
the state's EER was below five percent, the state received a
bonus: the federal government increased its contribution to the
program's administrative costs from fifty percent to sixty
percent. See 7 C.F.R. 275.25(c)(2)(i) (1982).
___
In FY 1982, FNS set Massachusetts's TER at 14.88
percent. After the two sovereigns completed their sampling and
resolved some mathematical bevues by negotiation, FNS figured the
EER to be roughly 16.35 percent and, accordingly, fined the
Commonwealth $1,323,864. The penalty survived scrutiny by both
the Board and the district court.
In this appeal, Massachusetts makes four principal
claims: (1) that the quality control provisions on which the
sanction rested were no longer in effect when FNS imposed the
sanction; (2) that FNS's sampling methodology was so biased as to
offend the Food Stamp Act; (3) that FNS's use of too large a
sample skewed the results; and (4) that FNS erred in refusing to
grant a good-cause waiver. We treat these asseverations in
sequence.
II. LACK OF STATUTORY AUTHORITY
II. LACK OF STATUTORY AUTHORITY
Massachusetts and the amici join in urging that FNS had
____________________
2We discuss infra Part IV the circumstances in which the
_____
imposition of a monetary sanction might be waived.
4
no authority to levy sanctions for FY 1982 because Congress
repealed the QCP effective October 1, 1982. This claim stems
from passage of the Omnibus Budget Reconciliation Act (OBRA),
Pub. L. No. 97-253, 96 Stat. 763 (1982), enacted in September of
1982. OBRA completely revamped the Food Stamp Act's approach to
quality control. The legislation repealed the previously
existing QCP and fashioned a new regimen effective October 1,
1982 (the first day of FY 1983). Massachusetts contends that
this legislative legerdemain undermined FNS's authority
thereafter to impose sanctions for FY 1982.3
It is a hoary rule of the common law that the repeal of
a statute eliminates any inchoate liability for penalties under
the repealed statute. See, e.g., United States v. Reisinger, 128
___ ____ _____________ _________
U.S. 398, 401 (1888). In order to ameliorate this rule, Congress
passed a general savings statute providing in pertinent part that
the "repeal of any statute shall not have the effect to release
or extinguish any penalty, forfeiture, or liability incurred
under such statute . . . ." 1 U.S.C. 109 (1982). On its face,
section 109 seems adequate to preserve the authority by which FNS
purposed to sanction the Commonwealth.
In an effort to escape the savings statute's web,
Massachusetts notes that the QCP allowed waivers of liability
____________________
3Since we can find no indication in the record that
Massachusetts raised this issue before the Board, the point is at
least arguably waived. But, because the issue goes to the
Board's jurisdiction and because the appellees have not advanced
a claim of waiver, we choose to address it, notwithstanding the
possible incidence of procedural default.
5
premised on subsequent corrective measures. See, e.g., 7 C.F.R.
__________ ___ ____
275.25(d)(5) (1982). From this datum, Massachusetts deduces
that it could not have "incurred" liability until such a waiver
was denied an event which took place well after October 1,
1982. The court below found this argument unpersuasive. See
___
Massachusetts II, 788 F. Supp. at 1269 n.3. So do we. The mere
________________
fact that Congress grants an agent the power to waive sanctions
does not turn back the clock and eradicate the reality of the
underlying violation. Thus, we do not believe Congress intended
that liability would be deemed "incurred" under federal law, 1
U.S.C. 109, only when all opportunities for special
dispensations had been exhausted and a previously imposed penalty
had become irreversible. See, e.g., Standard Oil Co. v. Federal
___ ____ ________________ _______
Energy Admin., 612 F.2d 1291, 1294 n.3 (Temp. Emer. Ct. App.
______________
1979) (explaining why costs should be deemed "incurred" even
before the amount has become certain). Rather, we think Congress
intended that states incur liability for their food stamp errors
at the conclusion of the six-month monitoring period, 7 U.S.C.A.
2025(g)(1) (West Supp. 1981) a period which, in this case,
ended September 30, 1982.
We have two main reasons for interpreting the interface
between the Food Stamp Act and the savings statute in this way.
In the first place, it appears well established that the savings
statute was designed to prevent exactly the sort of lapse that
Massachusetts argues occurred here. See, e.g., Hamm v. City of
___ ____ ____ _______
Rock Hill, 379 U.S. 306, 314 (1964) ("The federal saving statute
__________
6
. . . was meant to obviate mere technical abatement such as . . .
a substitution of a new statute with a greater schedule of
penalties . . . ."); United States v. Holley, 818 F.2d 351, 353
_____________ ______
(5th Cir. 1987) (similar). Reading the savings statute to
release from liability any party who had not yet exhausted after-
the-fact remediation would hamper the law's goal, contravene the
Supreme Court's longstanding interpretation of how the statute
should be applied, and encourage violators to petition willy-
nilly for discretionary administrative relief in the hope that
the statutory scheme might be changed betweentimes.
In the second place, the statutory structure predicates
waiver on precedent liability. See 7 U.S.C.A. 2025(g)(1) (West
___
Supp. 1981) (providing that, under the Food Stamp Act's liability
program, an offending state shall pay the imposed fine unless the
Secretary determines that good cause exists for waiver). We do
not think Congress placed the cart to the horse's rear by
accident. Had Congress wished waiver considerations to be part
and parcel of a liability determination, it would simply have
written the Food Stamp Act to premise liability on the absence of
those factors that allow the granting of good-cause waivers.
Congress chose to structure the statute differently, however, and
we must honor its bipartite design in our interpretation. See,
___
e.g., Ingersoll-Rand Co. v. McClendon, 111 S. Ct. 478, 482
____ ___________________ _________
(1990); Greenwood Trust Co. v. Massachusetts, 971 F.2d 818, 824
___________________ _____________
(1st Cir. 1992), cert. denied, 61 U.S.L.W. 3478 (U.S. 1993).
_____ ______
We note, too, that legislative statements surrounding
7
the 1982 repeal of the QCP, while admittedly less than pellucid,
indicate no discernable intent to exonerate states for pre-1983
administrative errors. Quite the opposite: the legislative
history suggests Congress intended to increase the certainty of
penalties beginning with FY 1983. See S. Rep. No. 504, 97th
___
Cong., 2d Sess. 70-71, reprinted in 1982 U.S.C.C.A.N. 1641, 1708-
_________ __
09:
[T]he . . . major flaw in the existing system
[is that] [t]he current penalty . . . has
proven difficult to apply in practice because
of the relatively large amounts involved and,
as a result, the Secretary has [frequently]
chosen to waive its application. The
sanctions established [by the new statute] .
. . should not be waived except when unusual
circumstances intervene.
Given this purpose, it seems unlikely that Congress intended the
1982 repeal to preclude enforcement of the earlier regulations
for 1981 and 1982 in instances where good-cause reviews were
imminent or ongoing, but had not yet been decided.
For these reasons, we reject the Commonwealth's claim
that FNS lacked statutory authority to impose the sanctions in
question.
III. STATISTICAL METHODOLOGY
III. STATISTICAL METHODOLOGY
Having confirmed the vitality of the sanction
provision, we turn next to the Commonwealth's double-jointed
challenge to the statistical methodology that FNS employed.
Before reaching Massachusetts's two substantive arguments, we
think it is useful to explicate the applicable standard of
judicial review.
8
A. Standard of Review.
A. Standard of Review.
__________________
The Food Stamp Act provides for de novo review of final
__ ____
administrative determinations in the district court.4 However,
this searching standard is restricted to liability
determinations. See Broad St. Food Mkt., Inc. v. United States,
___ _________________________ _____________
720 F.2d 217, 220 (1st Cir. 1983); Collazo v. United States, 668
_______ _____________
F.2d 60, 65 (1st Cir. 1981). It does not spill over to penalty
determinations. See Kulkin v. Bergland, 626 F.2d 181, 184 (1st
___ ______ ________
Cir. 1980) (holding that, under the Food Stamp Act,
"administrative remedies or sanctions are subject to a very
limited judicial review"). A court scrutinizing administrative
remedies or sanctions imposed under the Food Stamp Act may only
overturn those actions that appear arbitrary, capricious, or
contrary to law. See Haskell v. United States Dep't of Agric.,
___ _______ ______________________________
930 F.2d 816, 820 (10th Cir. 1991); Woodard v. United States, 725
_______ _____________
F.2d 1072, 1077-78 (6th Cir. 1984); Broad St., 720 F.2d at 219-
_________
21; Hough v. United States Dep't of Agric., 707 F.2d 866, 869
_____ ______________________________
(5th Cir. 1983); Kulkin, 626 F.2d at 184-85.
______
To be sure, both Broad St. and Kulkin involved (1)
__________ ______
____________________
4The statute provides in pertinent part:
[A] State agency . . . may obtain judicial
review [of a final administrative
determination] by filing a complaint against
the United States in the United States court
for the district in which it resides or is
engaged in business . . . . The suit . . .
shall be a trial de novo by the court in
which the court shall determine the validity
ofthe questionedadministrativeaction inissue.
7 U.S.C. 2023(a) (1982).
9
factual findings anent the culpability of food store owners who
accepted food stamps as compensation for prohibited goods, and
(2) determinations about what sanctions were condign, given the
identities of the violators and the nature of the violations.
See Broad St., 720 F.2d at 219; Kulkin, 626 F.2d at 182-83. The
___ _________ ______
question in the instant case is more complex because the two
parts of the calculus liability and sanctions are imbricated:
FNS's determination that Massachusetts's EER was unacceptably
high essentially determined both the Commonwealth's liability and
____
the amount of the resultant sanction. See 7 C.F.R.
___
275.25(d)(3) (1982) (explicated supra pp. 3-4).
_____
Notwithstanding this conflation of liability and
remediation, a reviewing court's path remains clear. Where
liability is at issue, section 2023(a) requires that courts
review administrative determinations de novo. If this statutory
__ ____
bedrock is to endure, inexorably mixed issues of liability and
sanctions must likewise be assessed de novo, even if such a
__ ____
penetrating standard of judicial review intrudes to some extent
into agency decisionmaking in the sanctions area. Thus, insofar
as the Commonwealth's assignments of error implicate the validity
of the EER and, therefore, the amount of the penalty levied,
plenary review is indicated.
We are quick to remark, however, that de novo review in
__ ____
cases of this genre does not give courts an entirely free hand.
Where, as here, the issues before the court are legal in nature,
de novo review of an administrative matter does not mean that the
__ ____
10
district court must devise an entirely new regulatory scheme.
Rather, in respect to liability issues, the court must ensure
that the agency has followed its own regulations and that those
regulations do not exceed the scope of the agency's mandate.
With these precepts in mind, we now address the Commonwealth's
statistical arguments.5
B. Statistical Bias.
B. Statistical Bias.
________________
In order to estimate Massachusetts's food stamp error
rate and thereby determine what (if any) sanction might be
appropriate, FNS sampled 194 of the Commonwealth's cases for
compliance. Massachusetts and the amici urge that the appellees'
sampling methodology is unlawful because the risk of error
inherent in FNS's approximation is not evenly shared between the
state and the federal government. Because FNS's statistical
method effectively determines the Commonwealth's liability as
well as the amount of the sanction to be imposed, our review of
the statistical bias claim is plenary.
We start with the obvious: FNS's sampling is no
different than any other statistical sampling in that it cannot
produce results that reflect the actual error rate with unerring
accuracy. Thus, whatever sampling technique is used, the EER
____________________
5Because the court of appeals and the district court are
constrained to apply exactly the same standards of judicial
review in these situations, we cede no deference to the district
court's views. See Lloyd v. Georgia Gulf Corp., 961 F.2d 1190,
___ _____ ___________________
1193 (5th Cir. 1992); Terry A. Lambert Plumbing, Inc. v. Western
_______________________________ _______
Sec. Bank, 934 F.2d 976, 979 (8th Cir. 1991).
_________
11
will sometimes underestimate and sometimes overestimate a state's
actual error rate. Massachusetts recognizes this fact of
statistical life but complains that it must foot the bill for
overestimations by paying sanctions although if underestimations
occur it reaps no corresponding benefit (e.g., credits that could
____
be used to offset future penalties). As a matter of pure
mathematics, the Commonwealth's theory appears to hold water.
Under the federal scheme, the risk of error causes the penalty
provision to weigh more heavily on the states than on the federal
government.6 Nonetheless, we do not see how this circumstance
renders the scheme unlawful.
The Food Stamp Act provides that a state is liable for
"the dollar value equivalent of the State agency's payment error
rate, as determined by the Secretary," to the extent it exceeds
the higher of the national payment rate or the state error
payment rate minus the national rate of error reduction. 7
U.S.C.A. 2025(g) (West Supp. 1981). There are a number of
mechanisms by which FNS could implement this statutory directive,
each with incumbent advantages and disadvantages. Massachusetts
suggests that this court's right to review liability
determinations de novo leaves us free to rethink the regulatory
__ ____
choice among these various options.
We do not agree. The power of plenary judicial review
____________________
6Of course, the states profit from a similar bias when FNS
awards bonuses for lower error rates. In that instance, the
federal government bears the cost of underestimating state error
rates but gains no offsetting advantage from overestimates.
12
does not obviate the devoir of persuasion in a food stamp case in
which a plaintiff challenges the validity of the regulatory
mosaic. See Kulkin, 626 F.2d at 183. To carry its burden, the
___ ______
plaintiff must still show that the federal agency exceeded its
statutory or constitutional authority. An attempt to make such a
showing must frankly recognize that the art of regulation
involves line-drawing. When Congress entrusts an agency with the
responsibility for drawing lines, and the agency exercises that
authority in a reasonable way, neither the fact that there are
other possible places at which the line could be drawn nor the
fact that the administrative scheme might occasionally operate
unfairly from a particular participant's perspective is
sufficient, standing alone, to undermine the scheme's legality.
See Knebel v. Hein, 429 U.S. 288, 294 (1977) (holding that the
___ ______ ____
availability of more equitable food stamp regulations does not
render the Secretary's particular regulatory scheme invalid);
Louisiana v. Black, 694 F.2d 430, 431-32 (5th Cir. 1982) (same);
_________ _____
see also Chevron U.S.A. Inc. v. Natural Resources Defense
___ ____ _____________________ ___________________________
Council, Inc., 467 U.S. 837, 843 n.11 (1984) ("The court need not
_____________
conclude that the agency construction was the only one it
permissibly could have adopted . . . to uphold [it] . . . .")
(collecting cases); Mourning v. Family Publications Serv., Inc.,
________ _______________________________
411 U.S. 356, 371 (1973) ("That some other remedial provision
might be preferable is irrelevant."). In other words, so long as
the administrative scheme is a valid exercise of the agency's
_____
authority, whether or not a perfect exercise of that authority,
_______
13
the courts must honor it. See Sprandel v. Secretary of HHS, 838
___ ________ _________________
F.2d 23, 27 (1st Cir. 1988) (per curiam) (observing that where
administrative line-drawing is involved, "there are no perfect
solutions").
These principles are dispositive here. Massachusetts
argues, in effect, that a system of credits and debits for each
state would be preferable to, and fairer than, the statistical
methodology selected by FNS. Whether or not this is so, the
Commonwealth has not demonstrated that the system selected by FNS
is an irrational one, that it is arbitrarily conceived, that it
is profoundly flawed, or that it operates in a wholly capricious
manner. Congress directed that the error rate was to be
"determined by the Secretary," 7 U.S.C.A. 2025(g) (West Supp.
1981), and the Secretary implemented this directive through the
application of what all parties agree is routine statistical
sampling. The enabling statute itself sets out the arithmetic
mechanism for determining the sanction, given the error rate; the
Secretary has followed this command, albeit without refining his
statistical estimates. The Secretary might, as Massachusetts
advocates, have installed a more intricate and sensitive
statistical system, but doing so would not necessarily have
represented an improvement. The proposed alternatives would by
all accounts be more complicated to administer and could well
prove less of a deterrent to administrative errors.
In terms of our analogy, the line drawn by FNS, as the
Secretary's designee, seems to have been plotted sensibly, if not
14
with perfect precision; that is, FNS chose a configuration
consistent with statutory imperatives and well within the
universe of plausible approaches. Because the administrative
scheme did not exceed the agency's statutory discretion, summary
judgment was properly granted on this issue. See Valley Citizens
___ _______________
for a Safe Env't v. Aldridge, 886 F.2d 458, 469 (1st Cir. 1989)
_________________ ________
(finding that reasonableness of agency action supported summary
judgment); Kulkin, 626 F.2d at 183 (upholding summary judgment
______
where the disputed facts were immaterial to the plaintiff's
ultimate burden at trial).
C. Oversampling.
C. Oversampling.
____________
The Commonwealth also asserts that FNS violated its own
regulations when it took a subsample comprised of 194 food stamp
cases (as opposed to the 180 cases specified in 7 C.F.R.
275.3(c)(1) (1982)). The district court, while noting that
Massachusetts had not raised the issue before the Board, see
___
Massachusetts I, 737 F. Supp. at 122 n.3, reached the merits and
_______________
ruled that the regulations, while mentioning 180 cases, did not
set a maximum subsample size. Id. at 127. For our part, we see
___
no reason to delve behind the Commonwealth's procedural
default.7 Accordingly, we hold that Massachusetts, by
____________________
7Our inquiry into procedural default has been hindered by
the Commonwealth's failure to follow Fed. R. App. P. 30(d) and
include an index in its appendix of excerpts from the
administrative record. This failure is exacerbated by other
shortcomings in the main appendix: various pages are missing,
illegible, and/or out of sequence. It is, of course, an
appellant's obligation "to provide this court with an appendix
sufficient to support its points on appeal." United States v.
_____________
One Motor Yacht Named Mercury, 527 F.2d 1112, 1113 (1st Cir.
_______________________________
15
neglecting to raise this claim before the Board, waived any right
to object to the sample size.8
In the usual administrative law case, a court ought not
to consider points which were not seasonably raised before the
agency. See United States v. L. A. Tucker Truck Lines, Inc., 344
___ _____________ ______________________________
U.S. 33, 37 (1952) (discussing the "general rule that courts
should not topple over administrative decisions unless the
administrative body . . . has erred against objection made at the
time appropriate under its practice"); Khalaf v. Immigration &
______ _____________
Naturalization Serv., 909 F.2d 589, 592 (1st Cir. 1990)
_____________________
(explaining that issues not raised before an administrative
appeal board cannot be adjudicated in the course of judicial
review); Removatron Int'l Corp. v. FTC, 884 F.2d 1489, 1493-94
_______________________ ___
(1st Cir. 1989); Colin K. v. Schmidt, 715 F.2d 1, 5-6 (1st Cir.
________ _______
1983).
The doctrine of procedural default in the
administrative context is analogous to the established rule that
appellate courts will not entertain arguments which could have
____________________
1975). When, as now, an appellant shirks this duty, it must bear
the onus of any insufficiencies in the record on appeal,
including inadequacies in the appendix.
8The parties have characterized the Commonwealth's failure
to raise the oversampling issue as an "exhaustion" problem. We
do not view it in that light. Administrative exhaustion and
waiver can be concurrent concepts at times, see IV Kenneth C.
___
Davis, Administrative Law Treatise 26:7 (1983), but they are
____________________________
not synonymous here. Because the Board's decision was final and
reviewable by the district court, we believe that Massachusetts
exhausted its administrative remedies. See, e.g., Athehortua-
___ ____ ___________
Vanegas v. Immigration & Naturalization Serv., 876 F.2d 238, 240
_______ __________________________________
(1st Cir. 1989).
16
been, but were not, raised in the trial court. See, e.g.,
___ ____
Clauson v. Smith, 823 F.2d 660, 666 (1st Cir. 1987) (collecting
_______ _____
cases). As in the trial court/appellate court analogy, requiring
parties to develop their arguments in the administrative setting
before seeking judicial review serves several salutary purposes.
We list three such purposes that have direct bearing in this
instance.
First, when the administrative agency is given an
opportunity to address a party's objections, it can apply its
expertise, exercise its informed discretion, and create a more
finely tuned record for judicial review. By way of illustration,
if Massachusetts had appropriately raised the oversampling issue
in this case, we would now have the benefit of both the Board's
interpretation of the applicable regulations and its expert
opinion concerning the ultimate effect of the augmented sample
size. Though different administrative conclusions deserve
different degrees of deference, it is essential to the proper
development of administrative law that courts exercise their
function of judicial review on a well-rounded record. See McKart
___ ______
v. United States, 395 U.S. 185, 194 (1969); see also Valley
______________ ___ ____ ______
Citizens, 886 F.2d at 469 (observing that "the place to attack
________
standard methodology, at least in the first instance, is before
the agency, not before a reviewing court").
A second reason for applying strict rules of procedural
default in the administrative context is to promote judicial
economy. A claim seasonably presented to the appropriate
17
administrative body has an appreciable chance of being put to
rest, or at least narrowed, before it depletes the heavily
burdened resources of the federal courts. Massachusetts, the
amici, and the court below all relate previous instances where
there were problems with sample sizes and, consequently, the
Board overturned FNS sanctions. See, e.g., Massachusetts I, 737
___ ____ _______________
F. Supp. at 122. Thus, raising the issue before the Board might
well have led to its resolution, once and for all.
Finally, enforcing procedural default solidifies the
agency's autonomy by allowing it the opportunity to monitor its
own mistakes and by ensuring that regulated parties do not simply
turn to the courts as a tribunal of first resort. A double
whammy would result if Article III judges encouraged such end
runs by demonstrating a willingness to hear all challenges to
regulatory action regardless of whether the parties raised those
challenges before the affected agency: power would drain from
the agencies and administrative appeals would flood the federal
courts.
To be sure, there are exceptional circumstances under
which a court might dispense with the raise-or-waive rule in the
administrative law context. Cf., e.g., United States v. La
___ ____ ______________ __
Guardia, 902 F.2d 1010, 1012-13 (1st Cir. 1990) (explaining why,
_______
in a criminal case, the court of appeals would exercise its
discretion to review a particular constitutional claim that had
not been raised in the trial court). As a general matter,
however, courts will not entertain an issue that the parties
18
failed to raise in the proper administrative venue unless the
issue is jurisdictional in nature or some other compelling reason
exists. See Tucker Truck Lines, 344 U.S. at 38; Rana v. United
___ __________________ ____ ______
States, 812 F.2d 887, 889-90 & n.2 (4th Cir. 1987). The
______
Commonwealth tenders no such justification here.
Whether FNS appropriately followed its own regulations
in regard to sampling, and the effect and consequences of any
failure to do so, are matters which in no way implicate
jurisdictional concerns. On the contrary, they present the sort
of problems routinely within the Board's purview and at the heart
of its expertise. The Commonwealth has advanced no palatable
excuse for failing to raise the oversampling issue at the proper
time and in the proper forum. Under these circumstances, we
cannot justify any relaxation of the customary rule. The
Commonwealth waived the oversampling issue.9
IV. GOOD-CAUSE WAIVERS
IV. GOOD-CAUSE WAIVERS
Massachusetts argues that it was entitled to a good-
cause waiver as a matter of right and that the district court
erred in summarily rejecting its beseechment. We do not agree.
Unlike questions of statistical propriety, see supra
___ _____
Part III, the matter of a good-cause waiver is not imbricated
____________________
9Incident to this procedural default is the Commonwealth's
quest for reversal on the ground of inconsistent administrative
positions. But here, the Commonwealth is hoist with its own
petard. It did not bring the oversampling issue before the
Board, thus depriving the Board of the chance to explore the
issue in a zoetic context informed by both case-specific facts
and administrative precedents. Because we cannot judge the
Board's consistency on an issue it did not adjudicate, we deem
this related claim to be waived as well.
19
with a fundamental determination of liability but relates solely
to FNS's determination of the appropriate sanction. Thus, the
Food Stamp Act's provision for de novo review of liability
__ ____
findings does not apply.10 Instead, we review the waiver
denial to see whether it was arbitrary, capricious, or contrary
to law. Broad St., 720 F.2d at 220; Kulkin, 626 F.2d at 184. In
_________ ______
so doing, we recognize that an administrative agency enjoys great
latitude to interpret its own rules as long as those
interpretations are reasonable. See Martin v. Occupational
___ ______ ____________
Safety & Health Rev. Comm'n, 111 S. Ct. 1170, 1175-76 (1991)
_____________________________
(explaining that an "agency's construction of its own regulations
is entitled to substantial deference") (quoting Lyng v. Payne,
____ _____
476 U.S. 926, 939 (1986)); accord Udall v. Tallman, 380 U.S. 1,
______ _____ _______
16-17 (1965); Federal Labor Relations Auth. v. United States
_______________________________ ______________
Dep't of the Navy, 941 F.2d 49, 59 (1st Cir. 1991); Dunn v.
___________________ ____
Secretary of United States Dep't of Agric., 921 F.2d 365, 366-67,
__________________________________________
369 (1st Cir. 1990).
____________________
10Indeed, the legislative history reveals that Congress
explicitly rejected the de novo judicial review that
__ ____
Massachusetts would have us indulge on this issue:
Every State against which the Secretary
asserted a claim would have the right to seek
administrative and judicial review of the
claim in accordance with the procedures
contained in section 14 of the Act. None of
these procedures would be applicable to the
Secretary's review of the State's contention
that it had good cause for its failure to
meet the appropriate level of error.
H.R. Rep. No. 788, 96th Cong., 2d Sess. 74 (1980), reprinted in
_________ __
1980 U.S.C.C.A.N. 843, 907.
20
It is in the Secretary's realm to grant or deny a good-
cause waiver.11 See 7 U.S.C.A. 2025(g) (West Supp. 1981).
___
To obtain such a waiver, a state must show, at a bare minimum,
that one of the following events occurred: (1) natural
disasters, civil disorders, labor unrest, or other circumstances
beyond the state's control, adversely affecting program
operations; (2) significant caseload growth; (3) legislative
changes adversely affecting program management; (4)
misapplication of federal policy with erroneous approval from
FNS; or (5) exemplary efforts to reduce the error rate. See 7
___
C.F.R. 275.25(d)(5)(A)-(G). Whereas a threshold showing along
these lines may qualify a state for a good-cause waiver, the
Secretary can still deny the waiver if he finds the state's
showing insufficient either because other factors overshadow the
applicant's compendium of exculpatory factors or because a
particular event or events listed by the applicant cannot
withstand objective scrutiny.12 Id.
___
Massachusetts sought a good-cause waiver on three
grounds, viz., caseload growth, changes in federal laws, and good
____________________
11The Secretary has delegated this power to FNS. See 7
___
C.F.R. 275.25(d)(5) (1982).
12The regulations also provide for an "automatic" waiver in
certain limited circumstances. See 7 C.F.R. 275.25(d)(5)(G)
___
(1982). In order to receive such a waiver, a state must have
implemented an FNS-approved corrective action program in the six
months before the period during which the excessive error rate
materialized, and must meet specially reduced target error rates
thereafter. The record does not indicate that Massachusetts ever
claimed eligibility for an automatic waiver applicable to FY
1982.
21
faith efforts to reduce its error rate. FNS denied the waiver.
In so doing, it took much of the wind from Massachusetts's sails.
Specifically, FNS explained that Massachusetts's caseload growth
was not a sufficient excusatory fact because the figure was
bloated by one-time social security "cash-ins"; that new
legislation was not a factor because the state had four months to
adapt to changes in the law; and that Massachusetts's efforts to
reduce errors were anything but "exemplary." Additionally, FNS
brought an independent set of considerations to bear, stressing
the Commonwealth's steady history of failing to meet program
deadlines and requirements. The Board approved the agency's
decision to withhold a waiver on this ground and the district
court affirmed by summary judgment.
Massachusetts and FNS attempt to rejoin this point-
counterpoint before us. Our role in this setting, however, is
not to weigh the factual averments and assess, on balance, the
merits of a waiver. Rather, "[i]f the court upholds the agency's
finding of violation, the court's only remaining task is to
examine the sanction imposed in light of the administrative
record to judge whether the agency properly applied its
regulations . . . ." Broad St., 720 F.2d at 220. In fine, a
_________
reviewing court may only overturn agency sanction determinations
that are arbitrary and capricious, see id., which is to say,
___ ___
"unwarranted in law . . . or without justification in fact."
Butz v. Glover Livestock Comm'n Co., 411 U.S. 182, 185-86 (1973)
____ ___________________________
(citation omitted); accord Collazo, 668 F.2d at 65.
______ _______
22
In the posture of this case, the idiosyncratic nature
of summary judgment practice gives a slightly different twist to
the operation of the familiar "arbitrary-and-capricious"
standard. Because we are scrutinizing the district court's
disposition of a motion filed under Fed. R. Civ. P. 56(c), we
must approach the record "in the light most hospitable to the
party opposing summary judgment, indulging all reasonable
inferences in that party's favor." Griggs-Ryan v. Smith, 904
___________ _____
F.2d 112, 115 (1st Cir. 1990). In order to prevail, therefore,
the Commonwealth must persuade us that the record evinces a
genuine dispute over some material fact. Emphasizing the items
set forth in support of its waiver application, Massachusetts
says that such a dispute existed. But, this perspective
overlooks the relevant point: the real question is not whether
the facts set forth in support of the waiver application are
disputed, but, rather, whether the administrative record, now
closed, reflects a sufficient dispute concerning the factual
predicate on which FNS relied in denying the waiver to support a
finding that the agency acted arbitrarily or capriciously. We
explain briefly.
On a motion for summary judgment, a fact is material if
it "might affect the outcome of the suit under the governing
law"; a dispute is "genuine" if a reasonable jury could resolve
it in favor of the nonmoving party. United States v. One Parcel
_____________ __________
of Real Property, Etc., 960 F.2d 200, 204 (1st Cir. 1992) (citing
______________________
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
________ ____________________
23
Because the law allows FNS to exercise discretion as long as it
has minimally adequate justification in fact for doing so, the
facts material to the propriety of summary judgment on the good-
cause waiver question are those facts that relate to whether
FNS's denial of the waiver was arbitrary and capricious not the
facts on which a plea for issuance of a waiver might have rested.
See Villanueva v. Wellesley College, 930 F.2d 124, 129 (1st Cir.)
___ __________ _________________
(noting that an appellate tribunal must review summary judgment
in light of the plaintiff's ultimate burden at trial), cert.
_____
denied, 112 S. Ct. 181 (1991). In a nutshell, then, a bona fide
______
skirmish over the veracity and importance of ancillary facts
which the Commonwealth thinks support its waiver application does
not egest the possibility of summary judgment, for it is the
basis underlying the agency's denial of a waiver upon which a
reviewing court must focus. See Town of Norfolk v. United States
___ _______________ _____________
Army Corps of Eng'rs, 968 F.2d 1438, 1448 (1st Cir. 1992)
_______________________
(upholding a grant of summary judgment on the basis that, if an
agency determination is "reasonably supported by the
administrative record, [a reviewing court's] inquiry must end");
see also Villanueva, 930 F.2d at 131 (ruling that summary
___ ____ __________
judgment is proper when a plaintiff disputes some facts, but does
not adduce sufficient evidence from which the trier could
conclude that the defendant failed to meet the applicable legal
standard).
The district court noted that the facts upon which the
Commonwealth relied, "though qualifying it for consideration for
24
a waiver, and indeed possibly warranting a waiver, [did] not
entitle it to a waiver as a matter of right." Massachusetts II,
________________
788 F. Supp. at 1275. We agree with this assessment. We add,
moreover, that, as this court has recognized for many years,
simply rearguing the merits of an agency's discretionary decision
will not forestall summary judgment on such an issue. See, e.g.,
___ ____
Concerned Citizens on I-190 v. Secretary of Transp., 641 F.2d 1,
____________________________ ____________________
7 (1st Cir. 1981). Although we, like the district court, assume
for argument's sake that the subsidiary facts on which the
Commonwealth's waiver application rested are true, the record
nevertheless reveals that FNS weighed these facts against, and
eventually based its denial on, other uncontested facts (e.g.,
____
the contribution of Social Security "cash-ins" to caseload
growth, the superior performance of other states under much the
same circumstances, and Massachusetts's checkered history of
noncompliance with food stamp program directives). Regarding
this latter set of subsidiary facts, there is no dispute. See
___
Massachusetts II, 788 F. Supp. at 1274.
________________
Let us be perfectly clear. We do not suggest that
courts should rubber-stamp agency decisions under the guise of
"arbitrary-and-capricious" review. Had FNS, in this case,
rejected the waiver application on a ground that its regulations
did not contemplate, or without considering the applicant's
stated basis for relief, or in reliance on a manifestly
inadequate factual showing, there might well be room for a court
to find the agency's actions arbitrary and capricious. But,
25
nothing of the kind transpired here. Rather, the record reveals
a situation in which FNS carefully considered the whole and
declined rationally, if not inevitably to grant discretionary
relief.
In the final analysis, Congress elected to delegate the
discretion to award or withhold good-cause waivers of food stamp
penalties to the Secretary not to the federal courts. Where,
as here, the legislature has conferred generous discretion upon
an agency, a reviewing court must contemplate the administrative
record with due regard for that discretion and gauge the
reasonableness of agency action in that light. Given the low
quantum of factual justification necessary to deny a
discretionary waiver under section 2025(g), we are constrained to
conclude that, since FNS's denial of the waiver was based upon a
plausible and essentially uncontested set of reasons documented
in the record and consistent with existing regulations, the
district court correctly ruled in its favor, notwithstanding that
the case was at the summary judgment stage. See Valley Citizens,
___ _______________
886 F.2d at 469; see also Citizens to Preserve Overton Park, Inc.
___ ____ _______________________________________
v. Volpe, 401 U.S. 402, 416 (1971) ("The Court is not empowered
_____
to substitute its judgment for that of the agency.").
V. CONCLUSION
V. CONCLUSION
We need go no further. The Commonwealth's
asseverational array announces an abundance of red meat and
strong drink; yet, its table is spread with far less hearty fare.
Because appellant's arguments afford scant sustenance for its
26
position, the disputed sanction must stand. On the record before
it, the district court did not err in entering summary judgment
in favor of the Secretary.
Affirmed.
Affirmed
________
27
Related
Hamm v. City of Rock Hill
379 U.S. 306 (Supreme Court, 1964)
Udall v. Tallman
380 U.S. 1 (Supreme Court, 1965)
McKart v. United States
395 U.S. 185 (Supreme Court, 1969)
Citizens to Preserve Overton Park, Inc. v. Volpe
401 U.S. 402 (Supreme Court, 1971)
Butz v. Glover Livestock Commission Co.
411 U.S. 182 (Supreme Court, 1973)
Mourning v. Family Publications Service, Inc.
411 U.S. 356 (Supreme Court, 1973)
Knebel v. Hein
429 U.S. 288 (Supreme Court, 1977)
Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc.
467 U.S. 837 (Supreme Court, 1984)
Lyng v. Payne
476 U.S. 926 (Supreme Court, 1986)
Anderson v. Liberty Lobby, Inc.
477 U.S. 242 (Supreme Court, 1986)
Ingersoll-Rand Co. v. McClendon
498 U.S. 133 (Supreme Court, 1990)
United States v. One Motor Yacht Named Mercury, Serial Number 237590
527 F.2d 1112 (First Circuit, 1975)
Donald Kulkin, Etc. v. Robert Bergland
626 F.2d 181 (First Circuit, 1980)
Concerned Citizens on I-190 v. Secretary of Transportation
641 F.2d 1 (First Circuit, 1981)
Colin and Alan K., Minors by John K., Their Next Friend and Father v. Thomas C. Schmidt, Middletown School Committee, Colin K. v. Thomas C. Schmidt
715 F.2d 1 (First Circuit, 1983)
Broad Street Food Market, Inc. v. United States
720 F.2d 217 (First Circuit, 1983)
Sher J. Rana v. United States of America, and Casper W. Weinberger, Secretary, Department of Defense
812 F.2d 887 (Fourth Circuit, 1987)
United States v. Harrol Jerry Holley
818 F.2d 351 (Fifth Circuit, 1987)
Charles Clauson v. Robert D. Smith
823 F.2d 660 (First Circuit, 1987)
Luis N. Athehortua-Vanegas v. Immigration and Naturalization Service
876 F.2d 238 (First Circuit, 1989)
§ 275.3 — Federal monitoring.
7 C.F.R. § 275.3
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