Sloan, Leon Sr. v. HUD

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 11, 2000 Decided February 2, 2001

No. 99-5145

Leon Sloan and Jimmie Lee Furby,

Appellants,

v.

United States

Department of Housing and Urban Development,

Appellee.

Appeal from the United States District Court

for the District of Columbia

(No. 98cv1201)

James K. Kearney argued the cause for appellants. With

him on the briefs were James P. Gallatin, Jr., David T.

Hickey, and Andrew J. Hungerman IV.

Scott S. Harris, Assistant United States Attorney, argued

the cause for appellee. With him on the brief were Wilma A.

Lewis, United States Attorney, and R. Craig Lawrence, As-

sistant United States Attorney.

Before: Edwards, Chief Judge, Henderson and Garland,

Circuit Judges.

Opinion for the court filed by Circuit Judge Garland.

Garland, Circuit Judge: Plaintiffs Leon Sloan and Jimmie

Lee Furby appeal from the dismissal of their Federal Tort

Claims Act (FTCA) complaint against the United States

Department of Housing and Urban Development (HUD).

We find that, in light of the discretionary function exception

to the FTCA, the district court properly concluded that it

lacked jurisdiction to entertain plaintiffs' complaint.

I

Sloan and Furby were partners in a contracting business,

J&L Renovation Company (J&L). In 1993, J&L won a

subcontract for interior demolition as part of the rehabilita-

tion of Burns Heights, a public housing project located in

Duquesne, Pennsylvania, and owned by the Allegheny County

Housing Authority (ACHA). HUD provided ACHA with

funds for the project.

HUD's Office of Inspector General (OIG) began to investi-

gate the Burns Heights project in late 1994, after another

contractor alleged that J&L was not complying with lead-

based paint abatement requirements. OIG auditor Mark

Chandler was assigned to conduct a performance audit of the

project. In November 1994, Chandler and HUD attorney

Dane Narode visited Burns Heights and observed demolition

techniques that would have been unacceptable in a project

involving lead-based paint--including the failure to contain

dirt, dust, and paint chips. Chandler and Narode also visited

a landfill, situated about 300 feet from the Monongahela

River, where J&L had been taking plaster debris from Burns

Heights. The landfill was not approved for the dumping of

plaster, as then-applicable Pennsylvania regulations required;

moreover, had the plaster been contaminated with lead paint,

its dumping would have created a health hazard. When the

operator of the landfill discovered the investigators, he chased

them off the site and allegedly threatened to "blow [Narode's]

head off." During a subsequent visit to the site, the investi-

gators observed the operator burying the debris.

Chandler then interviewed David McLean, Director of

Maintenance and Development for ACHA, who told Chandler

that Burns Heights was a lead-based paint abatement project.

ACHA's records, however, indicate that McLean was mistak-

en. Those records reflect that in 1992-93, several tests had

been performed to determine the lead content of debris and

air at Burns Heights; the tests indicated the absence of

hazardous lead levels. The records further reflect that after

receiving those test results in 1993, ACHA agreed that there

was no need for its contractors and subcontractors to follow

hazardous lead-based paint protocols at Burns Heights or to

dispose of demolition debris as contaminated waste.

Although ACHA provided Chandler with copies of the lead

tests, Chandler was not qualified to interpret the results.

Nor did he further inquire as to their meaning or speak with

J&L regarding the scope of work under the demolition sub-

contract. Chandler's final audit report, which was issued by

the OIG in October 1995, found that ACHA had not ensured

compliance with lead-based paint abatement requirements

during the interior demolition of the Burns Heights buildings.

The report did not mention any contractors or subcontractors

by name. OIG, HUD, Report No. 96-AO-209-1804, Review of

Contracted Lead-Based Paint Activities: ACHA, Pittsburgh,

PA (1995) [hereinafter Audit Report].

On August 18, 1995, before completing the audit, HUD

notified Sloan, Furby, and J&L that it was suspending them

from all HUD-related government contracting work, pending

further proceedings that might debar them from such work

for five years. The notice, issued by HUD's Assistant Secre-

tary for Public and Indian Housing, based the suspension and

proposed debarment on three "serious irregularities in

[J&L's] business dealings with the government":

1. Improper cleanup of waste from the lead-based paint

abatement process;

2. Improper disposal of construction debris from the

demolition work; [and]

3. Failure to adhere to contract requirements or HUD

guidelines with respect to ... hazardous waste....

Letter from Asst. Sec'y Joseph Shuldiner to Leon Sloan, Sr.

(Aug. 18, 1995).

Sloan and Furby invoked their right to an administrative

hearing to contest these charges. During the proceeding, the

government withdrew the third charge as unsupported by the

evidence, and the Administrative Law Judge (ALJ) dismissed

the first for the same reason. In re Sloan, HUDBCA No.

96-C-106-D3, at 11-12 (Aug. 30, 1996), 1996 WL 506267.

The ALJ upheld the second charge, although she did so only

because J&L had dumped the debris in an unapproved site,

and not because it posed an environmental hazard. Because

she found no environmental hazard, the ALJ rejected HUD's

request for debarment and terminated the suspensions. Id.

at 12-13. She declined, however, to grant plaintiffs' request

to void the suspensions ab initio. Id. at 14. The Secretary

of HUD affirmed the ALJ's decision. In re Sloan, HUDBCA

No. 96-C-106-D3 (Dec. 18, 1996).

Thereafter, Sloan and Furby filed complaints in the district

court, seeking injunctive and declaratory relief under the

Administrative Procedure Act (APA), 5 U.S.C. ss 702-03, and

damages for constitutional torts under Bivens v. Six Un-

known Named Agents of the Federal Bureau of Narcotics,

403 U.S. 388 (1971). Those actions were consolidated and

subsequently dismissed by the district court. On appeal, this

court affirmed the dismissal of the Bivens claim (on grounds

other than those relied upon by the district judge), but

reversed HUD's refusal to void the suspensions ab initio as

arbitrary and capricious under the APA. Sloan v. Dep't of

Hous. & Urban Dev., 231 F.3d 10, 12 (D.C. Cir. 2000).

On May 13, 1998, Sloan and Furby filed a separate action

for money damages under the FTCA, 28 U.S.C. ss 1346(b),

2671 et seq., alleging that HUD had negligently conducted the

audit of Burns Heights. According to the complaint, HUD's

investigation was conducted in a manner that violated the

laws and professional standards governing auditors, and that

amounted to negligence and professional malpractice under

District of Columbia law. HUD moved to dismiss, asserting

that the discretionary function exception to the FTCA, 28

U.S.C. s 2680(a), deprived the court of subject matter juris-

diction. The district court agreed and granted the motion.

II

On appeal, we review the dismissal of the plaintiffs' FTCA

complaint de novo, Moore v. Valder, 65 F.3d 189, 196 (D.C.

Cir. 1995), and "accept all of the factual allegations in [the]

complaint as true," United States v. Gaubert, 499 U.S. 315,

327 (1991) (quoting Berkovitz v. United States, 486 U.S. 531,

540 (1988)). The FTCA grants federal district courts juris-

diction over claims arising from certain torts committed by

federal employees in the scope of their employment, and

waives the government's sovereign immunity from such

claims. 28 U.S.C. ss 1346(b), 2674. The grant of jurisdiction

and waiver of immunity are subject to a number of express

exceptions. See 28 U.S.C. s 2680. The exception at issue

here, the discretionary function exception, is for "any claim

... based upon the exercise or performance or the failure to

exercise or perform a discretionary function or duty on the

part of a federal agency or an employee of the Government,

whether or not the discretion involved be abused." 28 U.S.C.

s 2680(a). If the discretionary function exception applies, the

district court lacks subject matter jurisdiction over the case.

See Cope v. Scott, 45 F.3d 445, 448 (D.C. Cir. 1995).

In United States v. Gaubert, the Supreme Court set forth a

two-part test for determining whether a challenged govern-

ment action is protected as a discretionary function. First,

the exception "covers only acts that are discretionary in

nature, acts that 'involv[e] an element of judgment or

choice.' " Gaubert, 499 U.S. at 322 (quoting Berkovitz, 486

U.S. at 536). This "requirement of judgment or choice is not

satisfied if a 'federal statute, regulation or policy specifically

prescribes a course of action for an employee to follow.' "

Gaubert, 499 U.S. at 322 (quoting Berkovitz, 486 U.S. at 536).

Second, even if "the challenged conduct involves an element

of judgment," that judgment must be "of the kind that the

discretionary function exception was designed to shield."

Gaubert, 499 U.S. at 322-23 (quoting Berkovitz, 486 U.S. at

536). Because the exception was designed to " 'prevent judi-

cial "second guessing" of legislative and administrative deci-

sions grounded in social, economic and political policy through

the medium of an action in tort,' " the Court concluded that

"the exception 'protects only governmental actions and deci-

sions based on considerations of public policy.' " Gaubert,

499 U.S. at 323 (quoting Berkovitz, 486 U.S. at 537).

III

In the district court, Sloan and Furby argued that neither

HUD's investigation, nor its decision to suspend plaintiffs

from government contract work, is a discretionary act exempt

from challenge under the FTCA. On appeal, plaintiffs no

longer press the latter argument, apparently conceding that

the decision to suspend is covered by the discretionary func-

tion exception. Appellants' Br. at 28. We have no doubt that

it is, but discuss the suspension in some detail because it is

relevant to our analysis of the status of HUD's investigation,

set forth in Part IV below.

The decision to initiate a prosecution has long been regard-

ed as a classic discretionary function. See, e.g., Moore, 65

F.3d at 197 ("[A]ctions that require the prosecutor to exercise

his professional judgment ... are ... quintessentially discre-

tionary."); Gray v. Bell, 712 F.2d 490, 513 (D.C. Cir. 1983)

("Prosecutorial decisions as to whether, when and against

whom to initiate prosecution are quintessential examples of

government discretion ...."); General Dynamics Corp. v.

United States, 139 F.3d 1280, 1283 (9th Cir. 1998). In Butz v.

Economou, 438 U.S. 478 (1978), the Supreme Court held that

"agency officials performing certain functions analogous to

those of a prosecutor should," like prosecutors, "be able to

claim absolute immunity" from suits brought under the Con-

stitution. Id. at 515. In language equally applicable to suits

brought under the FTCA, the Court said:

The decision to initiate administrative proceedings

against an individual or corporation is very much like the

prosecutor's decision to initiate or move forward with a

criminal prosecution. An agency official, like a prosecu-

tor, may have broad discretion in deciding whether a

proceeding should be brought and what sanctions should

be sought.

Id. HUD's decision to suspend plaintiffs, which began a

course of administrative proceedings regarding possible de-

barment, see 24 C.F.R. s 24.411(e), falls well within this

rubric.

That HUD's suspension of plaintiffs is protected by the

discretionary function exception is confirmed by application of

Gaubert's two-part test. First, the decision to suspend is

plainly discretionary in nature, involving "an element of judg-

ment or choice." Gaubert, 499 U.S. at 322. Indeed, the

applicable regulation expressly so states. See 24 C.F.R.

s 24.115 ("Debarment and suspension are discretionary ac-

tions ...."). Although HUD rules require that certain condi-

tions be met before a suspension may issue, see 24 C.F.R.

s 24.400(b) (stating that suspension may be imposed only

when there is "adequate evidence" of specified wrongdoing

and when "[i]mmediate action is necessary to protect the

public interest"), that requirement does not convert the deci-

sion into a nondiscretionary act. Determining whether those

broadly stated conditions exist involves substantial elements

of judgment. See 24 C.F.R. s 24.400(c) ("In assessing the

adequacy of the evidence, the agency should consider how

much information is available, how credible it is given the

circumstances, whether or not important allegations are cor-

roborated, and what inferences can reasonably be drawn as a

result."); cf. Gaubert, 499 U.S. at 329 (holding that Federal

Home Loan Bank Board had discretion regarding appoint-

ment of receiver notwithstanding that governing statute "enu-

merated specific grounds warranting an appointment," be-

cause "the determination of whether any of these grounds

existed depended upon the opinion of the Board" (internal

quotation omitted)).

The HUD regulation's express delegation of discretion to

the suspending official may also, alone, satisfy Gaubert's

second requirement--that the challenged action be based on

considerations of public policy. "When established govern-

mental policy, as expressed or implied by statute, regulation,

or agency guidelines, allows a Government agent to exercise

discretion," Gaubert held, "it must be presumed that the

agent's acts are grounded in policy when exercising that

discretion." 499 U.S. at 324. But it is hardly necessary to

rely on such a presumption here. HUD's regulations place

public policy at the forefront of the decision of the suspending

official. The official must determine, for example, whether

the contractor's violations are "so serious as to affect the

integrity of an agency program," 24 C.F.R. s 24.305(b), and

whether "[i]mmediate action is necessary to protect the public

interest," 24 C.F.R. s 24.400. See also 24 C.F.R. s 24.115

(stating that "[i]n order to protect the public interest, it is the

policy of the Federal Government to conduct business only

with responsible persons," and that debarment and suspen-

sion "are appropriate means to implement this policy"). As

the decision to suspend a contractor is therefore "grounded in

the policy of the regulatory regime," Gaubert, 499 U.S. at 325,

it is protected by the discretionary function exception.

IV

Apparently recognizing that suspension itself is a discre-

tionary function, plaintiffs focus their primary attention not

on the suspension but on the investigation and audit that

preceded it. Although suspension may be discretionary, they

argue, standards of professional practice constrain HUD's

auditors during the investigatory phase and preclude applica-

tion of the discretionary function exception.

This argument fails for two reasons. First, it is impossible

to sever HUD's investigation from the subsequent suspension

in the way plaintiffs urge. Second, even if the investigation

could be severed, it, too, constitutes a discretionary function

under Gaubert.

A

In Gray v. Bell, we held that where the "allegation of

improper investigatory conduct is inextricably tied to the

decision to prosecute and the presentation of evidence," the

discretionary function exception applies and preserves gov-

ernmental immunity. 712 F.2d 490, 516 (D.C. Cir. 1983); see

Moore, 65 F.3d at 196-97; Ernst v. Child & Youth Servs. of

Chester County, 108 F.3d 486, 488-89 (3d Cir. 1997). Gray

involved a suit brought by Acting FBI Director L. Patrick

Gray III. Gray had been investigated and then indicted for

allegedly authorizing warrantless searches of the homes of

friends and relatives of Weatherman Underground fugitives.

After the government agreed to dismiss the indictment, Gray

sued the prosecutors for the "improper, tortious, and consti-

tutionally defective manner in which [the] investigation was

carried out." 712 F.2d at 515. In particular, he contended

that the Justice Department had conducted a grossly negli-

gent pre-indictment investigation, and, as a result, failed to

present exculpatory evidence and instead presented false and

misleading evidence to the grand jury. Id. at 495, 516.

On appeal, this court concluded that Gray's suit was barred

by the FTCA's discretionary function exception, because

there was "no meaningful way in which the allegedly negli-

gent investigatory acts could be considered apart from the

totality of the prosecution." Id. at 516. The "gist of Gray's

complaint," we said, focused "on alleged causal links between

the negligent investigation, the presentation of false and

misleading evidence, and the ultimate prosecution." Id. Un-

der those circumstances, "[s]eparating allegations in the com-

plaint that focus on the investigation from the ultimate prose-

cution merely would elevate the form of Gray's complaint

over its essence." Id.

In this case, as in Gray, the challenged investigation is

inextricably tied to the discretionary, quasi-prosecutorial deci-

sion to suspend plaintiffs from governmental contracting.

The complaint does not allege any damages arising from the

investigation itself, but only harm caused by the suspension to

which it assertedly led. See First Am. Compl. p 200 (reciting

that plaintiffs were damaged by having to challenge wrongful

suspension, defend in debarment proceeding, and appeal

HUD decision); id. p 201 ("Sloan and Furby were further

actually damaged because during the period of their wrongful

suspension they were prevented from obtaining any contract

work from HUD, were prevented from obtaining other con-

tract work as a result of the wrongful suspension and suf-

fered in standing and professional reputation." (emphasis

added)). At oral argument, plaintiffs were given a further

opportunity to disentangle the investigation and suspension

by proffering an amendment to the complaint that would

allege some harm arising from the investigation that was

separate from the suspension itself; they were unable to do

so. Because the allegedly improper investigation thus caused

no injury "distinct from the harm caused by the ultimate

prosecution itself," the former is not "sufficiently separable

from [the] protected discretionary decision[ ]" and "cannot by

itself support suit under the FTCA." Gray, 712 F.2d at 515;

see General Dynamics, 139 F.3d at 1285-86 (holding discre-

tionary function exception protected Defense Department

audit where harm to plaintiff arose from subsequent criminal

prosecution).

B

Even if HUD's investigation of the Burns Heights project

were not inextricably linked to the plaintiffs' suspension, that

investigation would nonetheless constitute a discretionary

function under the Gaubert test. We consider the two ele-

ments of that test below.

1

First, the sifting of evidence, the weighing of its signifi-

cance, and the myriad other decisions made during investiga-

tions plainly involve elements of judgment and choice.1 That

__________

1 See Sabow v. United States, 93 F.3d 1445, 1452-53 (9th Cir.

1996); Black Hills Aviation, Inc. v. United States, 34 F.3d 968,

the conduct at issue here was undertaken by investigators

and auditors rather than by Assistant Secretaries is irrele-

vant. In United States v. Varig Airlines, 467 U.S. 797 (1984),

for example, the Federal Aviation Administration (FAA) had

established a regulatory regime of "spot checking" airplanes

for compliance with safety standards. As the Supreme Court

later explained in Gaubert, Varig "held that not only was this

act discretionary but so too were the acts of agency employ-

ees in executing the program since they had a range of

discretion to exercise in deciding how to carry out the spot-

check activity." Gaubert, 499 U.S. at 325 (citing Varig, 467

U.S. at 820). The discretionary function exception, the Court

held, does not apply "exclusively to policymaking or planning

functions," but rather extends as well to decisions made at

the operational level. 499 U.S. at 325.

Plaintiffs insist that the Burns Heights investigation differs

from others because it took the form of an "audit." "[T]he

actions of government auditors are not discretionary," plain-

tiffs argue, "because compliance with federal audit guidelines

is mandatory." Appellants' Br. at 14.2 It is true that the

Inspector General Act of 1978 commands OIG auditors to

"comply with standards established by the Comptroller Gen-

eral of the United States for audits of Federal ... programs,

activities, and functions." 5 U.S.C. app. 3, s 4(b)(1)(A). But

it is also clear that the auditing standards that plaintiffs

contend HUD transgressed leave ample room for the exercise

of professional judgment. See Gen. Accounting Office, Gov't

__________

973-74 (10th Cir. 1994); Blakey v. U.S.S. Iowa, 991 F.2d 148, 153-

54 (4th Cir. 1993); Pooler v. United States, 787 F.2d 868, 870-71 (3d

Cir. 1986).

2 Although termed an "audit," HUD's investigation was not a

"financial statement audit" designed to determine conformity with

generally accepted accounting principles, but rather a "program

audit"--a variety of "performance audit" intended to assess the

performance of a government program. Compare Gen. Accounting

Office, Gov't Auditing Standards s 2.4 (June 1994), with id.

s 2.7(b). See O'Reilly et al., Montgomery's Auditing 23 (11th ed.

1994) (noting that program audits are often not stated "in terms of

Auditing Standards, at chs. 3, 6 (June 1994) [hereinafter Gov't

Auditing Standards]; cf. Thor Power Tool Co. v. Comm'r of

Internal Revenue, 439 U.S. 522, 544 (1979) ("Accountants

long have recognized that 'generally accepted accounting

principles' are far from being a canonical set of rules that will

ensure identical accounting treatment of identical transac-

tions. 'Generally accepted accounting principles,' rather, toler-

ate a range of 'reasonable' treatments, leaving the choice

among alternatives to management." (citation omitted)).3 In-

deed, those standards expressly state that "[a]uditors should

use sound professional judgment in determining the stan-

dards that apply to the work to be conducted." Gov't Audit-

ing Standards s 3.29.4

__________

economic actions or events" and "may at times stretch the definition

of auditing").

3 The principal standards that plaintiffs contend HUD violated

are: Gov't Auditing Standards s 3.3 ("The staff assigned to con-

duct the audit should collectively possess adequate professional

proficiency for the tasks required."); s 3.11 ("[T]he audit organiza-

tion and the individual auditors ... should maintain an independent

attitude and appearance."); s 3.31 ("Each audit organization ...

should have an appropriate internal quality control system....");

s 6.2 ("Work is to be adequately planned."); s 6.5(g) ("[A]uditors

should ... [i]dentify potential sources of data that could be used as

audit evidence and consider the validity and reliability of these

data."); s 6.22 ("Staff are to be properly supervised."); and s 6.46

("Sufficient, competent, and relevant evidence is to be obtained to

afford a reasonable basis for the auditors' findings and conclu-

sions."). See generally Moore, 65 F.3d at 197 n.15 (holding that

deciding what is required by regulation directing prosecutors to

disclose "substantial" evidence "directly" negating the guilt of a

suspect "is itself a discretionary act").

4 See also OIG, HUD, Consolidated Audit Guide for Audits of

HUD Programs s 1-1 (Aug. 1997) ("This guide is not ... intended

to supplant the auditor's judgment of audit work required."); OMB

Circular A-133, Audits of Institutions of Higher Education and

Other Nonprofit Organizations, 55 Fed. Reg. 10,019, 10,021 (Mar.

16, 1990) ("These principles, to the extent permitted by law, consti-

tute guidance to be applied by agencies consistent with and within

the discretion, conferred by the statutes governing agency action.");

Am. Inst. of Certified Pub. Accountants, Codification of State-

ments on Auditing Standards, AU s 110.04 (1995) ("In the observ-

Plaintiffs' argument here parallels that made by the plain-

tiff in Gaubert, who sought damages for the alleged negli-

gence of Federal Home Loan Bank Board (FHLBB) officials

in the day-to-day management of a failing financial institution.

Gaubert argued that the FHLBB's actions fell outside the

discretionary function exception "because they involved the

mere application of technical skills and business expertise."

499 U.S. at 331. The Court rejected that argument, stating

that while "[i]t may be that certain decisions resting on

mathematical calculations, for example, involve no choice or

judgment in carrying out the calculations," the FHLBB's

actions "involved the exercise of choice and judgment" and

hence fell within the exception. Id. The same is true here.5

As plaintiffs themselves point out, the heart of the auditing

standards is the exhortation that "[d]ue professional care

should be used in conducting [an] audit and in preparing

related reports." Gov't Auditing Standards s 3.26; see id.

s 3.28 ("[E]xercising due professional care means using

sound judgment in establishing the scope, selecting the meth-

odology, and choosing tests and procedures for the audit.").

Plaintiffs endeavor to turn this point on its head, arguing that

because the use of sound professional judgment by auditors is

mandatory, no discretion is left to them. The flaw in this

argument is that the Supreme Court has defined a "discre-

__________

ance of generally accepted auditing standards, the independent

auditor must exercise his judgment in determining which auditing

procedures are necessary in the circumstances to afford a reason-

able basis for his opinion.").

5 This case is readily distinguishable from Appley Brothers v.

United States, 164 F.3d 1164 (8th Cir. 1999), upon which plaintiffs

heavily rely, in which the Eighth Circuit held the discretionary

function exception inapplicable to an Agriculture Department in-

spector's failure to investigate grain shortages at a warehouse. The

court noted that "although the inspector had discretion in selecting

how he would investigate," under express regulations "he had no

discretion not to undertake some investigation." Id. at 1172 (em-

phasis added). Plaintiffs' challenge here, by contrast, is to how

HUD investigated at Burns Heights.

tionary act" as "one that involves choice or judgment." Gau-

bert, 499 U.S. at 325 (emphasis added); see Moore, 65 F.3d at

197 (stating that "actions that require the prosecutor to

exercise his professional judgment ... are ... quintessential-

ly discretionary"). Hence, plaintiffs' argument reduces to

nothing more than the untenable contention that auditors lack

discretion because they must exercise it.

2

Plaintiffs contend that even if the auditors' conduct does

involve an element of discretion, it "does not implicate consid-

erations of public policy or involve the exercise of political,

social, or economic judgment." Appellants' Br. at 22. There-

fore, they argue, the audit fails Gaubert's second prong.

Again, we disagree.

HUD's audit of Burns Heights was part of a national audit

of lead-based paint contracting activities. See Audit Report

at 2, 4. Its objective was to determine whether lead-based

paint abatement at the facility was in compliance with the

demolition contract. Id. at 2. Pursuant to the same auditing

standards cited by plaintiffs, one of HUD's responsibilities

was to determine "the extent to which the desired results or

benefits established by the legislature or other authorizing

body are being achieved." Gov't Auditing Standards s 2.7(b).

The audit concluded that the housing authority had "not

protected tenants or community residents from potential

health problems from improper lead-based paint removal and

disposal." Audit Report at 3. Whether that conclusion is

correct or not, it unquestionably implicates considerations of

public policy.

As was true of the first part of the discretionary function

test, satisfaction of the second is not limited to actions taken

at the policy-planning level. Thus, in Gaubert, the Court held

that the conduct of FHLBB employees "involved the kind of

policy judgment that the discretionary function exception was

designed to shield," notwithstanding that it consisted of day-

to-day decisions regarding the operations of a savings and

loan. Id. at 332. "[T]hose day-to-day 'operational' decisions

were undertaken for policy reasons of primary concern to the

regulatory agencies," the Court said, including preservation

of the assets of the institution "for the benefit of depositors

and shareholders." Id. (citation omitted). See also Varig,

467 U.S. at 815-820. The same is true in this case: the

auditors' decisions were undertaken for policy reasons of

significant concern to HUD, including the protection of ten-

ants living in HUD-funded housing "from potential health

problems from improper lead-based paint removal and dispos-

al." Audit Report at 3.6 Accordingly, the audit falls under

the aegis of the discretionary function exception to the FTCA.

IV

Because the discretionary function exception applies to the

agency actions challenged by plaintiffs, the district court

lacked jurisdiction over their FTCA complaint. The court's

dismissal of the complaint is therefore

Affirmed.

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6 This distinguishes the HUD audit from the placement of road

signs by the National Park Service, which we found to involve

engineering rather than policy judgment in Cope, 45 F.3d at 451-52.

See Berkovitz, 486 U.S. at 545 (indicating that determinations

involving the "application of objective scientific standards" do not

involve policy judgment and are not covered by the discretionary

function exception); see also Black Hills Aviation, 34 F.3d at 976

(holding that quick handling of crash investigation to facilitate

Army activities involves policy judgment); Blakey, 991 F.2d at 153

(holding that course of military investigation "implicates policy

considerations").