Pine Tree v. Secretary

• Court: Court of Appeals for the First Circuit
• Decided: September 16, 1997
• Docket: 97-1054
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT

                                ____________________


          No. 97-1054


                            PINE TREE MEDICAL ASSOCIATES,


                               Plaintiff - Appellant,


                                         v.


                   SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.,


                               Defendants - Appellees.


                                ____________________


                    APPEAL FROM THE UNITED STATES DISTRICT COURT


                              FOR THE DISTRICT OF MAINE


                     [Hon. Morton A. Brody, U.S. District Judge]


                                ____________________


                                       Before


                               Torruella, Chief Judge,


                           Campbell, Senior Circuit Judge,


                             and Boudin, Circuit Judge.


                                _____________________


               Michael A. Duddy, with whom Kozak, Gayer, & Brodek, P.A. was

          on brief for appellant.

               Allison 
                       C. 
                          Giles, Attorney, Civil Division, Department of

          Justice, with whom Frank 
                                    W. 
                                       Hunger, Assistant Attorney General,

          Jay P.  
                  McCloskey, United States Attorney, and       Anthony  
                                                                         J.

          Steinmeyer, Attorney, Civil Division, Department of Justice, were

          on brief for appellees.


____________________


                                 September 16, 1997

                                ____________________



TORRUELLA, Chief 
                                     Judge.  Pine Tree Medical Associates


          ("Pine Tree") brought a suit for injunctive and declaratory relief


          against the Secretary of the Department of Health and Human


          Services ("the Secretary") and the Director of the Bureau of


          Primary Health Care (collectively, "HHS") challenging HHS's denial


          of Pine Tree's application requesting that Farmington, Maine be


          designated a "medically underserved population" ("MUP") under the


          Public Health Service Act ("PHSA"), 42 U.S.C. S 254b 
                                                              et seq.
                                                                      (1997


          Supp.). HHS had denied Pine Tree's MUP application after applying


          criteria and standards that were issued by HHS in June 1995 ("the


          1995 Guidelines"). Pine Tree contends that the standards in


          existence at the time that its application was first filed are the


          ones that should have been applied, and that Farmington merits MUP


          status under those standards. On appeal, Pine Tree repeats two


          legal arguments that were rejected, on summary judgment, by the


          district court: 1) that the 1995 Guidelines violated the notice and


          comment provisions of the Administrative Procedure Act ("APA"), 5


          U.S.C. S 553 (1996), and the PHSA, formerly codified at 42 U.S.C.


          S 254c(b)(4)(B) (1991) (subsequently repealed); and 2) that the


          application of the 1995 Guidelines to Pine Tree's May 18, 1995


          application was impermissibly retroactive. We find the first claim


          to be moot, and affirm the district court's holding on the


          retroactivity claim.


                                     BACKGROUND


                    The pertinent facts were stipulated below, and are


          reviewed in the district court's opinion.    See Pine  
                                                                 Tree  
                                                                       Med.


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Assocs. v. 
                    Secretary of Health & Human Servs.
                                                     , 944 F. Supp. 38, 40-


          41 (D. Maine 1996). A brief overview will serve the purposes of


          this appeal. Pine Tree is a nonprofit corporation that provides


          primary health care services in Farmington, Maine. It sought MUP


          status for the low income population of Farmington in a May 18,


          1995 application to HHS. Pursuant to the PHSA, a health care


          provider that serves a MUP may qualify for substantial, cost-based


          reimbursement under Medicare and Medicaid programs.


                    The PHSA directs the Secretary to establish criteria and


          standards for determining whether to grant MUP status, and


          prescribes, 
                     inter 
                           alia, that one such criterion be "the ability of


          the residents of an area or population group to pay for health


          services."  See 42 U.S.C. S 254b(b)(3)(B) (Supp. 1997) (formerly


          codified at 42 U.S.C. S 254c(b)). In 1976, following notice and


          comment, regulations were adopted regarding the factors to be taken


          into consideration by the Secretary, and these regulations have


          been periodically revised by the HHS without opportunity for notice


          and comment. In 1994, the HHS issued, without notice and comment,


          Summary Procedures for MUP designation. It is not disputed that


          Farmington qualified for MUP designation under the 1994 Procedures.


                    The 1995 Guidelines, issued on June 12, 1995, again


          without notice and comment, revised the 1994 Procedures. At the


          time the 1995 Guidelines were issued, HHS had not yet acted on Pine


          Tree's May 18, 1995 application. Under the 1995 Guidelines, which


          altered the measurement of poverty levels by increasing the size of


          the overall population to be considered in the poverty calculus,


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Farmington was found not to qualify for MUP designation, and Pine


          Tree's application was denied on June 22, 1995.


                    On August 4, 1995, Pine Tree filed a request for


          reconsideration, which the HHS denied on December 8, 1995. In an


          explanatory letter, HHS informed Pine Tree that because the 1995


          Guidelines "included a correction of analytic distortion with


          regard to how the poverty factor was determined," this revision was


          applied immediately to pending requests.    See Stipulated Facts


          q 16. 


                    On January 8, 1996, Pine Tree sued the defendants,


          seeking that the 1995 Guidelines be declared invalid for failing to


          comply with the notice and comment provisions of the APA and the


          PHSA and, in the alternative, seeking a declaration that the 1995


          Guidelines were impermissibly applied retroactively to Pine Tree's


          application. Pine Tree also sought an order enjoining defendants


          from applying the 1995 Guidelines and requiring HHS to designate


          Farmington a MUP based on the standards in effect at the time it


          filed the application.


                    On October 21, 1996, the district court held that under


          the notice and comment provision of the PHSA -- which has since


          been repealed by Congress
                                   -- the 1995 Guidelines were valid despite


          a lack of notice and comment, because they did not modify the HHS's


          initial 1976 regulation, and because the 1994 Procedures, which the


          1995 Guidelines did indeed modify, were not regulations. See 
                                                                       Pine


See infra.


                                         -4-



Tree 
               Med. 
                    Assocs., 944 F. Supp. at 42. The district court also


          held that the 1995 Guidelines fell within the ambit of the APA's


          explicit exception to the notice and comment requirement for


          interpretive rules. Id. at 43; 
                                         cf. 5 U.S.C. S 553(b)(3). Finally,


          the district court held there were no valid retroactivity issues


          raised by the application of the 1995 Guidelines to Pine Tree's


          pending application.


                                     DISCUSSION


                    We review de novo a district court's grant of summary


          judgment.  Ionics v.  Elmwood 
                                        Sensors, 
                                                 Inc., 110 F.3d 184, 185


          (1st Cir. 1997).


          I. Mootness of Notice and Comment Claim


                    On appeal, Pine Tree does not argue that the 1995


          Guidelines are something other than "interpretive rules" under


          section 553(b)(3) of the APA, see Brief for Appellant at 9 ("The


          interpretive rule exception is not relevant to this case"), but


          rather argues that the interpretive rule exception is inapplicable


          because, under the APA, an exception to the interpretive rule


          exception exists where "notice or hearing is required by statute."


          5 U.S.C. S 553(b). Thus, Pine Tree's claim turns on the existence


          of any notice and hearing requirement that is applicable to the


          1995 Guidelines under the PHSA. Unfortunately for Pine Tree,


          Congress deleted the notice and comment provision from the former


          PHSA, which was codified at 42 U.S.C. S 254c(b)(4)(B),   when it


Section 254c(b)(4)(B) formerly stated:


-5-



enacted the Health Centers Consolidation Act, Pub. L. No. 104-299,


          effective October 1, 1996.   See 42 U.S.C. S 254c historical and


          statutory notes (Supp. 1997). In the wake of this repeal, there is


          no language under the PHSA relating to notice and comment for


          modifications of the MUP criteria.


                    Thus, as a practical matter, even were we to disagree


          with the district court today, and conclude that the 1995


          Guidelines were invalid for failing to provide for notice and


          comment pursuant to the former PHSA, as the law is today HHS can


          simply re-issue identical guidelines without notice and comment.


          Given the fact that the briefs, arguments of counsel, and the


          record in this case reveal a firm belief on the part of HHS that


          the 1995 Guidelines corrected a significant error in the previous


          1994 Procedures, we do not doubt that, were the 1995 Guidelines


          struck down, Pine Tree would find itself no closer to its desired


          end, namely the application of the 1994 Procedures to its MUP


          application. This practical matter becomes crystal clear in light


          of our discussion, 
                            infra, of Pine Tree's retroactivity claim, where


The Secretary may modify the criteria

                    established in regulations issued under this

                    paragraph only after affording public notice

                    and an opportunity for comment on any such

                    proposed modifications.


           Although the Health Centers Consolidation Act initially stated

          that it would be effective October 1, 1997, see Pub. L. No. 104-

          299, S 5, 1996 U.S.C.C.A.N. 3645, that effective date was later

          changed by the Omnibus Consolidated Appropriations Act of 1997,

          Pub. L. No. 104-208, S 521, 1996 U.S.C.C.A.N. 187, to October 1,

          1996.  Cf. 42 U.S.C. S 233 historical and statutory notes (Supp.

          1997).


                                         -6-



we hold that Pine Tree was not entitled to have the 1994 Procedures


          apply to their application by virtue of their filing date.


                    An issue becomes moot if intervening events leave the


          parties without a "legally cognizable interest" in our resolution


          of the issue, Powell v. McCormack, 395 U.S. 486, 496 (1969), as


          when "intervening events make it impossible to grant the prevailing


          party effective relief," 
                                  Burlington N. R.R. Co.
                                                         v. 
                                                            Surface Transp.


          Bd., 75 F.3d 685, 688 (D.C. Cir. 1996). The issue of whether the


          HHS's 1995 Guidelines violated the then applicable notice and


          comment provision of the PHSA is mooted by Congress's repeal of


          that provision. A finding in favor of Pine Tree would bring it no


          closer to its desired end, and thus, with regard to this claim, we


          do not find before us a true case or controversy within our


          jurisdiction.  See U.S. Const. art. III, S 2, cl. 1.


          II. The Retroactivity Claim


                    Pine Tree argues that Congress has not granted the


          Secretary the power to issue retroactive rules. Certainly, in the


          absence of an express statutory grant of authority to promulgate


          retroactive regulations, the retroactive application of an agency


          rule is disfavored. Bowen v. 
                                      Georgetown Univ. Hosp.
                                                            , 488 U.S. 204,


          208 (1988). However, in this case Pine Tree places undue


          significance on the act of filing an application with an


          administrative agency. It argues that by applying criteria that


          were issued after it had filed a MUP application, the HHS has


          created a retroactivity problem of the kind discussed in Landgraf


          v. 
            USI Film Prods.
                           , 511 U.S. 244 (1994). 
                                                  See 
                                                      Landgraf, 511 U.S. at


-7-



280 (stating that a statute wields retroactive effect where it


          would "impose new duties with respect to transactions already


          completed"). We agree with the district court that the mere filing


          of an application is not the kind of completed transaction in which


          a party could fairly expect stability of the relevant laws as of


          the transaction date. The concern that retroactive laws threaten


          stability and impair the ability of entities to coordinate their


          actions with respect to the law surely is not implicated where what


          is at issue is the analysis of certain poverty levels in a


          geographic location. Pine Tree obviously could not have adjusted


          poverty levels in Farmington in due regard to the change in MUP


          guidelines. We therefore affirm the district court's finding that


          Pine Tree had no right to have the guidelines that existed at the


          time they submitted a MUP application applied to their application


          rather than new guidelines adopted prior to the review of their


          application. 


                    Only one case has been called to our attention that


          suggests that the act of filing an application with an agency can


          trigger retroactivity concerns.  See Boston Edison Co. v. Federal


          Power Comm'n
                     , 557 F.2d 845 (D.C. Cir. 1977). In that case, it was


          held that an agency could not apply new requirements for


          application filing to applications filed before those requirements


          were issued. See id. at 849 (Federal Power Commission could not


          apply new rule barring data over four months old in rate


          application to application filed before new rule was issued).


          Boston 
                 Edison is readily distinguishable from the instant case.


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There is an obvious difference between rejecting an application


          because it fails to meet a new regulation governing the proper


          format or preparation of applications that was promulgated after


          that application was filed, and rejecting an application because


          the substantive standards for granting the application on the


          merits have changed in the period between filing and review.


          Whereas in the former case, parties have been deprived of fair


          notice as to the application method, and indeed have taken an


          action -- the filing of a certain kind of application -- to which


          the regulation retroactively applies, in the latter, as discussed


          above, fair notice and retroactivity concerns are not raised. Pine


          Tree thus has mustered no support, nor can we find any support, for


          the proposition that filing an application with an agency


          essentially fixes an entitlement to the application of those


          substantive regulations in force on the filing date. 


                    It is worth noting that this is not a case in which new


          MUP criteria have been applied so as to retroactively overturn a


          prior grant of MUP status for a period in the past.           Cf.


          Association of Accredited Cosmetology Schs.
                                                     v. 
                                                        Alexander, 979 F.2d


          859, 865 (D.C. Cir. 1992) (holding that schools' expectation for


          future eligibility for a program is not a vested right triggering


          retroactivity concerns but noting that there may be retroactivity


          problems were new rules applied to undo    past determination of


          eligibility). Rather, HHS applied the 1995 Guidelines


          prospectively, to applications for future MUP designations.


                                     CONCLUSION


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For the reasons stated in this opinion, the district


          court's grant of summary judgment is affirmed.


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