Drg Funding Corporation v. Secretary of Housing and Urban Development

76 F.3d 1212, 316 U.S. App. D.C. 159, 1996 U.S. App. LEXIS 2562, 1996 WL 69839

• Court: Court of Appeals for the D.C. Circuit
• Decided: February 20, 1996
• Docket: 94-5150
• Status: Published

Opinions

Opinion for the Court filed by Circuit Judge RANDOLPH.

Concurring opinion filed by Circuit Judge STEPHEN F. WILLIAMS.

Concurring opinion filed by Circuit Judge GINSBURG.

RANDOLPH, Circuit Judge:

On July 3, 1990, the Department of Housing and Urban Development notified DRG Funding Corporation that it owed the government $3.7 million as a result of its default under a mortgage-backed securities program. A year later, having received no payment on the debt, HUD collected by withholding the $3.7 million from a judgment it was to pay the corporation.

HUD had warned the corporation that it would collect the debt through “administrative offset,” and the corporation had responded by invoking HUD’s administrative review procedures to demand that HUD dismiss the offset action. The corporation renewed that demand soon after HUD collected the debt, arguing before HUD’s Chief Administrative Law Judge that the agency lacked authority to collect the debt by offset. An offset avoids “‘the absurdity of making A pay B when B owes A.’ ” Citizens Bank of Maryland v. Strumpf — U.S. -, -, 116 S.Ct. 286, 289, 133 L.Ed.2d 258 (1995) (quoting Studley v. Boylston Nat’l Bank, 229 U.S. 523, 528, 33 S.Ct. 806, 808, 57 L.Ed. 1313 (1913)). HUD regulations promulgated under the administrative offset provision of the Debt Collection Act of 1982, 31 U.S.C. § 3716, allow HUD to use offsets in certain situations. The corporation argued before HUD’s Chief ALJ, however, that HUD lacked authority to effect an offset against a money judgment issued by a court against the United States. The ALJ denied the corporation’s demand for dismissal, and its request for reconsideration, but granted the corporation’s motion to certify the question of HUD’s offset authority for review by the Secretary of HUD.¹ On March 5, 1992, a designee of the Secretary issued a “determination” affirming the ALJ’s decision that HUD had authority to effect the offsets and directing the ALJ “to proceed with the administrative process in accordance with [HUD’s] regulations.”

Rather than proceeding at the administrative level, the corporation filed suit in the district court challenging HUD’s refusal to dismiss the offsets under the Administrative Procedure Act, 5 U.S.C. § 706, and asking the court to compel the Secretary of HUD to pay the judgment in full under the federal mandamus statute, 28 U.S.C. § 1361. The district court dismissed the suit on the ground that administrative review of the corporation’s challenge was not yet final. We affirm.

The Administrative Procedure Act limits nonstatutory judicial review to “final” agency actions. 5 U.S.C. § 704. This serves several functions. It allows the agency an opportunity to apply its expertise and correct its mistakes, it avoids disrupting the agency’s processes, and it relieves the courts from having to engage in “piecemeal review which is at the least inefficient and upon completion of the agency process might prove to have been unnecessary.” FTC v. Standard Oil Co. of California, 449 U.S. 232, 242, 101 S.Ct. 488, 494, 66 L.Ed.2d 416 (1980). The re quirement of a final agency action has been considered jurisdictional. Public Citizen v. Office of the U.S. Trade Rep., 970 F.2d 916, 918 (D.C.Cir.1992). If the agency action is not final, the court therefore cannot reach the merits of the dispute.²

Different verbal formulations have been used to determine whether agency action is “final” within § 704’s meaning. Is the agency’s action “sufficiently direct and immediate” and does it have a “direct effect ... on day-to-day business”? Abbott Laboratories v. Gardner, 387 U.S. 136, 152, 87 S.Ct. 1507, 1517, 18 L.Ed.2d 681 (1967). Has the agency “completed its decisionmaking process” and is “the result of that process [one that] will directly affect the parties”? Franklin v. Massachusetts, 505 U.S. 788, 797, 112 S.Ct. 2767, 2773, 120 L.Ed.2d 636 (1992). Is the agency action “finally operative and decisive”? Attorney General’s Manual on the Administrative Prooedure Act 103 (1947), quoted in Darby v. Cisneros, 509 U.S. 137, -n. 10, 113 S.Ct. 2539, 2546 n. 10, 125 L.Ed.2d 113 (1993). Has the agency deci-sionmaker “arrived at a definitive position on the issue that inflicts an actual, concrete injury”? Williamson County Regional Planning Comm’n v. Hamilton Bank, 473 U.S. 172, 193, 105 S.Ct. 3108, 3120, 87 L.Ed.2d 126 (1985), quoted in Darby, 509 U.S. at-, 113 S.Ct. at 2543. On the other hand, courts have defined a nonfinal agency order as one, for instance, that “does not itself adversely affect complainant but only affects his rights adversely on the contingency of future administrative action,” Rochester Tel. Corp. v. United States, 307 U.S. 125, 130, 59 S.Ct. 754, 757, 83 L.Ed. 1147 (1939), cited in the Attorney General’s Manual at 101-02, as a judicial construction of “final” that will carry over to § 704. And § 704 itself indicates that a “preliminary, procedural, or intermediate agency action or ruling” will be subject to judicial review only after there has been final agency action. See Attorney General’s Manual 101, suggesting that the meaning of “final may be gleaned” from this provision.

No matter which of these formulations we apply, the result here is the same. The ruling of the Secretary’s designee is not final agency action. That “determination,” to use the agency’s parlance, did not complete the administrative proceedings, nor was it meant to do so. The determination specifically directed HUD’s ALJ “to proceed with the administrative process in accordance with [HUD’s] regulations.” Under those regulations, the administrative process reaches the stage of “final agency action” only when a deputy assistant secretary makes a “determination of indebtedness” in a “written decision which includes the supporting rationale for the decision.” 24 C.F.R. § 17.110(a). Until that happens, any intermediate decision in the review procedure is necessarily “tentative, provisional, or contingent,” see National Treasury Employees Union v. FLRA, 712 F.2d 669, 671 (D.C.Cir.1983), and therefore nonfinal.

The corporation essentially acknowledged as much when it invoked HUD’s “interlocutory ruling” procedure, 24 C.F.R. § 26.26, to seek the Secretary’s review of the ALJ’s decision. An “interlocutory” ruling is a provisional ruling, a ruling that does not end the controversy. The ALJ’s ruling — and the designee’s determination affirming it — did nothing more than deny the corporation’s demand for dismissal. Orders setting cases for hearings despite objections to the agency’s jurisdiction have long been considered nonfinal, see Rochester Tel. Corp. v. United States, 307 U.S. at 130, 59 S.Ct. at 757. Such an order is like a district court’s denial of a motion to dismiss, which — unlike a final order ending the ease — assures its continuation. See, e.g., United States v. Rose, 28 F.3d 181, 185 (D.C.Cir.1994). While the Judicial Code contains an exception allowing appeals from interlocutory district court orders (28 U.S.C. § 1292(b)), the Administrative Procedure Act has no such exception for interlocutory agency decisions.

Moreover, when the corporation first sought administrative review of HUD’s offset action, it challenged both the validity of the debt and the way in which HUD had chosen to collect it. The designee’s determination addressed only the latter issue. Neither the ALJ nor the designee has ruled yet on the validity of the debts themselves. Thus, while the designee has tentatively affirmed HUD’s authority to collect such debts by offset, she has yet to consider whether the corporation owes the government anything. This is no small matter. If HUD’s administrative review ends with the conclusion that the corporation has no debt to HUD, the corporation will have no reason to seek a judicial determination of the proper procedure for collecting one. When completion of an agency’s processes may obviate the need for judicial review, it is a good sign that an intermediate agency decision is not final. See FTC v. Standard Oil, 449 U.S. at 242, 101 S.Ct. at 494.

The agency action to date has not directly affected the parties or determined their rights or obligations. See Capital Network Sys., Inc. v. FCC, 3 F.3d 1526, 1530 (D.C.Cir.1993). This is not a case in which “no further administrative proceedings are contemplated.” See Abbott Laboratories, 387 U.S. at 149, 87 S.Ct. at 1515. It is not a case in which “legal consequences will flow from the agency action” taken thus far. See Port of Boston Marine Terminal Ass’n v. Rederiaktiebolaget Transatlantic, 400 U.S. 62, 71, 91 S.Ct. 203, 209-10, 27 L.Ed.2d 203 (1970). And it is not a case in which the intermediate decision of the agency will have a direct effect on the corporation regardless of the outcome of pending administrative proceedings. See Chemical Waste Management, Inc. v. EPA 869 F.2d 1526, 1534 (D.C.Cir.1989). Rather, the pending administrative proceedings — proceedings the corporation seeks to short-circuit — will determine the corporation’s rights and obligations, and, as we have said, could avert judicial review altogether.

The corporation maintains that it will suffer great hardship if the court does not intercede now, yet claims of hardship “will rarely overcome the finality and fitness problems inherent in attempts to review tentative decisions.” Public Citizen Health Research Group v. Commissioner, Food & Drug Admin., 740 F.2d 21, 31 (D.C.Cir.1984). The corporation’s claims of hardship are, at any rate, not particularly impressive. The corporation is bankrupt. It could not use the money even if it had it. Thus, the designee’s determination cannot have a “direct effect” on the “day-to-day business” of the corporation, see Abbott Laboratories, 387 U.S. at 152, 87 S.Ct. at 1517, because the corporation has no “day-to-day business” to conduct. Cf. Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546, 69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949). There simply cannot be any significant hardship in forcing a bankrupt corporation to wait for its money — if it has any coming — until the end of the administrative review process it began. In the meantime, the corporation is not being forced to choose between “disadvantageous compliance and risking serious penalties,” Public Citizen Health Research Group, 740 F.2d at 31 (quoting 4 K. Davis, Administrative Law TREATISE 369 (2d ed. 1983)), as was the plaintiff in Ciba-Geigy Corp. v. EPA, 801 F.2d 430 (D.C.Cir.1986). In that case, the denial of immediate review would have left the plaintiff to choose between immediate compliance with an EPA labeling requirement— which it believed would result in a devastating loss in sales — and exposure to serious civil and criminal penalties. Id. at 439. The corporation faces nothing of the sort here. It is merely being forced to pursue its claim through the administrative process it invoked. If the corporation thinks that process is taking too long, it may seek relief under 5 U.S.C. § 706(1). If the corporation is unhappy with the outcome of that process once it has ended, it may seek judicial review then. At that point, HUD’s ultimate decision on the proper collection procedures will have merged into its overall decision on the merits of the corporation’s claims. Contrast Cohen, 337 U.S. at 546, 69 S.Ct. at 1225-26. In the meantime, we will not interfere with the work of the agency.

The district court also was right in not compelling the agency to pay the corporation before that work is done. At oral argument, the corporation attempted to portray its ease as nothing but a garden-variety attempt to enforce a judgment through the federal mandamus statute, 28 U.S.C. § 1361. While mandamus may be an appropriate way to enforce a judgment in some circumstances, see Hines v. United States, 105 F.2d 85, 93 (D.C.Cir.1939),³ the district court chose not to go that route. Mandamus is an extraordinary remedy, available only if other relief is inadequate. Women’s Equity Action League v. Cavazos, 906 F.2d 742, 751 (D.C.Cir.1990). As we have already indicated, the other relief available here is adequate: the bankrupt corporation may file suit after the administrative review is final.

Affirmed.

1 . In the meantime, HUD notified the corporation that it had collected another $687,516 for a different debt through administrative offset against a second district court judgment. Administrative review of that offset was consolidated with the review of the first one, and both are before us now.

2 . The corporation argues that the district court should have considered the merits here even if the agency action were not final because, it says, the offset action involves an outright violation of a clear statutory right. See Peter Kiewit Sons’ Co. v. U.S. Army Corps of Engineers, 714 F.2d 163, 168-69 (D.C.Cir.1983). Because the corporation failed to raise this argument below, we do not consider it now. See Marymount Hosp., Inc. v. Shalala, 19 F.3d 658, 663 (D.C.Cir.1994).

3 . In Hines, this court used mandamus to compel the government to pay a judgment when "nothing" else remained to be done under the statutory scheme then in effect. 105 F.2d at 93. Here, something else does remain to be done: The administrative review procedures — set forth in regulations, authorized by statute, and invoked by the corporation — are not yet finished. Those procedures are not "nothing,” and until they are completed, HUD’s decision whether to pay the judgment cannot be considered "ministerial.” See id.

ilinas is thus inapposite for reasons other than those expressed in the concurring opinion, which offers an able dissertation on one of the issues the corporation is litigating before the agency— whether HUD may collect the corporation's debt by offset. Furthermore, outside the context of an argument it failed to raise below, see note 2, supra, the corporation never argued before this court that it is entitled to mandamus before there has been final agency action.