The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 17, 2005 Decided January 27, 2006
No. 04-5429
STATE OF NEBRASKA DEPARTMENT OF HEALTH AND HUMAN
SERVICES,
APPELLEE
v.
DEPARTMENT OF HEALTH AND HUMAN SERVICES AND
MICHAEL O. LEAVITT, SECRETARY OF THE DEPARTMENT OF
HEALTH AND HUMAN SERVICES,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 03cv01873)
Wendy M. Keats, Attorney, U.S. Department of Justice,
argued the cause for appellants. With her on the briefs were
Peter D. Keisler, Assistant Attorney General, Kenneth L.
Wainstein, U.S. Attorney, and Barbara C. Biddle, Assistant
Director. Claire M. Whitaker, Michael J. Ryan, and R. Craig
Lawrence, Assistant U.S. Attorneys, entered appearances.
Phyllis D. Thompson argued the cause for appellee. With
her on the brief was Jon C. Bruning, Attorney General, Attorney
General’s Office of State of Nebraska.
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Before: GINSBURG, Chief Judge, and GARLAND and
BROWN, Circuit Judges.
Opinion for the Court filed by Chief Judge GINSBURG.
GINSBURG, Chief Judge: The United States Department of
Health and Human Services (HHS) appeals from a judgment of
the district court vacating three policy announcements for lack
of notice and comment rulemaking and ordering approval of a
cost allocation plan (CAP) submitted by the State of Nebraska
Department of Health and Human Services (Nebraska). Because
Nebraska challenged only HHS’s rejection of its proposed CAP,
the district court erred in vacating the announcements. The
court also abused its discretion when it determined the CAP
should be approved rather than remanding the matter for the
Department to reconsider its decision without reference to the
policy announcements.
I. Background
The Congress has enacted several statutes aimed at
improving child welfare services provided by the several States.
Title IV-E of the Social Security Act, 42 U.S.C. § 670 et seq.,
makes funds available to state programs that offer “foster care
and transitional independent living programs for children” and
“adoption assistance for children with special needs.” Id. § 670.
Title IV-B of the Act, id. § 620 et seq., offers federal funds to
“State public welfare agencies in [order to] establish[], extend[],
and strengthen[] child welfare services.” Id. § 620(a). The
amount of money a State may receive under Title IV-B is
capped, see id., whereas under Title IV-E a State may obtain
reimbursement without limit for 75% of the costs it incurs to
train employees, see id. § 674(a)(3)(A).
In order to obtain reimbursement under Title IV-E, a State
3
must submit to the HHS Division of Cost Allocation (DCA) a
CAP detailing the State’s expenditures. See 45 C.F.R. §
95.517(a) (limiting financial assistance to that provided “in
accordance with [a State’s] approved [CAP]”). A question that
arises when a State prepares its CAP is how it should allocate
expenditures that benefit more than one federal program. See id.
§ 95.507(a)(4) (DCA evaluates “correctness and fairness” of
State procedures for “allocating all costs to each of the programs
operated by the State agency”). For example, each child
protection and safety worker (PSW) in Nebraska handles cases
under Title IV-B and, we are told, is “expected to handle” cases
under Title IV-E. Nebraska therefore must determine how to
allocate the costs of training PSWs between the two programs.
Title IV-E cases constitute only 21.5% of all child welfare cases
the PSWs manage but, left to its own devices, Nebraska could
allocate all PSW training costs to Title IV-E and thus avoid the
cap on reimbursement under Title IV-B.
Not surprisingly, therefore, allocation decisions have been
constrained by those who pay the piper. The federal Office of
Management and Budget has instructed the States to allocate
their costs so as to produce “an equitable result in consideration
of relative benefits derived” by each federal program. Cost
Principles for State, Local and Indian Tribal Governments, 60
Fed. Reg. 26,484, 26,492 (May 17, 1995). The Administration
for Children and Families (ACF, formerly ACYF) within HHS,
which oversees Title IV-E programs, adopted a similar
requirement of proportional allocation in three policy
announcements, Allowable Administrative Costs of the Foster
Care Program Under Title IV-E of the Social Security Act,
ACYF-PA-87-05 (Oct. 22, 1987); Federal Financial
Participation in the Costs of Training for Employees of the State
Title IV-E Agency, Foster Parents, Adoptive Parents and
Employees of Private Child Placing and Child Care Agencies,
ACYF-PA-90-01 (June 14, 1990); and Allocation of Costs for
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All Training Under the Title IV-E Program, ACF-IM-91-15
(July 24, 1991), each requiring that States allocate the costs of
training child welfare workers “to Title IV-E, State foster care
and other State/Federal programs in such a manner as to assure
that each participating program is charged its proportionate
share of the costs.”
Despite the ACF’s repeated instruction to allocate costs
proportionately, Nebraska submitted a CAP that allocated all the
costs of training its PSWs to Title IV-E and the DCA approved
it in 1993. In 1996, the DCA realized its mistake and directed
Nebraska henceforth to allocate training costs among all
benefitting programs. Nebraska submitted a new CAP but
continued to charge all training costs for 1996 through 1999 to
Title IV-E. The DCA responded in 1999, invoking the three
ACF announcements and directing the State to allocate its
expenditures proportionately among all benefitting programs.
Instead, Nebraska challenged the DCA’s disapproval before the
Departmental Appeals Board (DAB), where it argued the three
ACF announcements were invalid because they had been issued
without the notice and comment required for rulemaking by the
Administrative Procedure Act, 5 U.S.C. § 553. The Board
rejected this argument and upheld the DCA’s decision, after
which Nebraska sought review in the district court.
The State sought declaratory and injunctive relief from the
court, to wit: (1) “a declaration that DCA’s disapproval action
and the Board’s decision upholding DCA’s action are contrary
to law,” and (2) “an injunction restraining HHS from
disapproving the State’s CAP and from refusing to pay 75% of
the total costs that Nebraska incurs to train its foster care
workers.” Compl. ¶ 10. The court granted summary judgment
in favor of Nebraska on the ground that HHS had treated the
ACF announcements as “binding rule[s]” without having
followed the requisite notice and comment procedure. Although
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Nebraska had not challenged the future applicability of the ACF
announcements, the court said in a memorandum opinion that it
would vacate the three announcements and “reinstate the
agency’s previous practice of approving primary program cost
allocation plans” until HHS lawfully promulgated a new
regulation. In its separate order, however, the court did not
vacate the announcements, which caused some confusion.
The district court also determined it could itself “fully
resolve[] the issue of the approvability of Nebraska’s disputed
CAP provision.” In order to determine what HHS’s “previous
practice” of approval had been, the court consulted a 1985
policy memorandum written by the Commissioner of the ACYF
and a 1984 letter to New York State written by another HHS
official.* Based upon those documents the court concluded
Nebraska’s CAP should have been approved.
II. Analysis
On appeal HHS does not challenge the district court’s ruling
that the announcements were invalidly promulgated. Rather it
makes three arguments concerning the relief ordered by the
court. First, HHS maintains the district court did not actually
vacate the three policy announcements because vacatur is not
specified in the order accompanying its memorandum opinion.
Alternatively, if the district court did vacate the announcements,
then it erred. Finally, the district court should have remanded to
*
See Memorandum from Dodie Livingston, Commissioner,
Administration for Children, Youth and Families, to William Acosta,
Regional Administrator, OHDS, and Tommy Sullivan, Regional
Program Director, ACYF (Oct. 7, 1985); Letter from Nicholas
Cordasco, Director, Office of Fiscal Operations, to Robert J. Donahue,
Director, Office of Human Resource Development, New York State
Department of Social Services (June 14, 1984).
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HHS, rather than deciding itself, the ultimate question whether
to approve Nebraska’s CAP in view of the invalidity of the
announcements.
A. Were the Announcements Vacated?
Despite the discussion of vacatur in the district court’s
memorandum opinion, HHS maintains that, because Federal
Rule of Civil Procedure 58(a)(1) requires “[e]very judgment ...
[to] be set forth on a separate document,” the court’s failure to
vacate the announcements in a separate order “raises the
question whether [vacatur] was actually granted.” The question
is, as Nebraska points out, not a hard one. The Supreme Court
has made clear that the “separate document” requirement “is not
designed as a trap for the inexperienced. ... [It] should be
interpreted to prevent loss of the right of appeal, not to facilitate
[it].” Bankers Trust Co. v. Mallis, 435 U.S. 381, 386 (1978)
(internal quotation marks omitted). In this case the district court
in its memorandum opinion “clearly evidenced its intent” to
vacate the announcements, id. at 387; therefore, they were
vacated notwithstanding the court’s failure so to state in the
judgment.
B. Should the Announcements Have Been Vacated?
HHS next argues the district court erred in vacating the
policy announcements because Nebraska did not seek an order
striking down the announcements “on their face[s].” According
to HHS, because Nebraska sought only to overturn the DAB’s
adjudicatory decision concerning its CAP, the proper remedy
was to set aside the Board’s decision and remand the CAP to
HHS for further proceedings. Nebraska, on the other hand,
argues vacatur “is the normal remedy for an unlawful agency
rule” and was proper in this case, for which point it cites
CropLife America v. EPA, 329 F.3d 876 (D.C. Cir. 2003). We
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review the district court’s decision to vacate, as we do any
decision to grant or withhold equitable relief, for abuse of
discretion. See Massachusetts v. Microsoft Corp., 373 F.3d
1199, 1207 (D.C. Cir. 2004).
As is evident from Nebraska’s complaint, the final agency
action challenged in this case was the decision of the Board
upholding, on the basis of the three announcements, the DCA’s
rejection of Nebraska’s CAP. See Compl. ¶¶ 37, 44, 48 (failure
to approve CAP is “inconsistent with congressional intent” and
DAB’s decision “should be reversed”). Hence the State asked
the court to enjoin HHS from rejecting the proposed CAP and
from refusing to pay 75% of the costs Nebraska incurred
training PSWs. Id. ¶ 10. Nowhere in its complaint did
Nebraska request vacatur of the announcements, presumably for
good and sufficient reasons. See, e.g., Fair Employment Council
of Greater Wash., Inc. v. BMC Mktg. Corp., 28 F.3d 1268, 1273
(D.C. Cir. 1994) (no standing to pursue injunction where
plaintiffs failed to allege likelihood defendant would violate
their rights in the future).
We have long held that “[a]n injunction must be narrowly
tailored to remedy the specific harm shown.” Aviation
Consumer Action Project v. Washburn, 535 F.2d 101, 108 (D.C.
Cir. 1976); see also Va. Soc’y for Human Life, Inc. v. FEC, 263
F.3d 379, 393 (4th Cir. 2001) (district court should not have
enjoined agency from applying challenged regulation to any
party when “[a]n injunction covering [plaintiff] alone adequately
protects it from the feared prosecution”); Meinhold v. U.S. Dep’t
of Def., 34 F.3d 1469, 1480 (9th Cir. 1994) (error to enjoin DOD
from applying regulation to all military personnel where
plaintiff “sought only to have his discharge voided and to be
reinstated”); Gulf Oil Corp. v. Brock, 778 F.2d 834, 842-43
(D.C. Cir. 1985) (injunction overbroad where it prohibited
disclosure not only of plan in question but also of all
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“substantially similar” documents). Because Nebraska did not
challenge the validity of the ACF announcements apart from
their application as binding rules in the case before the Board,
and accordingly did not make out a case for continuing relief,
the district court abused its discretion in vacating them.
Nebraska’s reliance upon CropLife America is misplaced.
In that case, the petitioners challenged directly, and we vacated,
a “directive” the EPA had issued without notice and comment
rulemaking. 329 F.3d at 878-79. Although vacatur may or may
not be appropriate when a rule has been held invalid on a
procedural ground, see Allied-Signal, Inc. v. U.S. Nuclear
Regulatory Comm’n, 988 F.2d 146, 150-51 (D.C. Cir. 1993), no
analysis of “the seriousness of the [rule’s] deficiencies” and the
“disruptive consequences of an interim change,” id. (internal
quotation marks omitted), is either necessary or relevant here,
because only the decision, not the rule on which it depends, was
challenged.
C. Should the CAP Have Been Remanded?
Finally, HHS argues the district court should have
remanded to it the question whether Nebraska’s proposed CAP
would have been approved under its “previous practice,” as set
forth in the 1984 Letter and the 1985 Memorandum upon which
the district court relied. Nebraska insists the court did not need
to remand the issue because “[t]he record establishes beyond
legitimate dispute ... [that the CAP] was approvable.”
When a final agency action is challenged in the district
court, that court “sits as an appellate tribunal .... [If it]
determines that [the] agency made an error of law, the court’s
inquiry is at an end: the case must be remanded to the agency
for further action consistent with the corrected legal standards.”
PPG Indus., Inc. v. United States, 52 F.3d 363, 365 (D.C. Cir.
9
1995) (internal quotation marks omitted); see also Esch v.
Yeutter, 876 F.2d 976, 993 (D.C. Cir. 1989) (court should not
“mak[e] the substantive decision” itself). Therefore, it is clear
the district court erred when it ordered approval of Nebraska’s
CAP. The agency must be given the first opportunity to
determine whether Nebraska’s program meets the standard that
was in place before the announcements were issued. As the
Supreme Court has explained, because “agency decisions are
frequently of a discretionary nature or frequently require
expertise, the agency should be given the first chance to exercise
that discretion or to apply that expertise.” McKart v. United
States, 395 U.S. 185, 194 (1969).
The wisdom of this course is brought home by examination
of Nebraska’s claim that the proposed CAP certainly would
have been approved under the HHS guidelines previously in use.
Although the 1985 Memorandum allows training to be charged
entirely to Title IV-E when at least 85% of that training is
“directed toward” a Title IV-E program, that crucial phrase may
be susceptible to more than one interpretation. And it is for
HHS to interpret its own policies in the first instance, see
Aulenback, Inc. v. FHA, 103 F.3d 156, 162-63 (D.C. Cir. 1997),
subject only to quite deferential review by the courts, Carus
Chem. Co. v. EPA, 395 F.3d 434, 439 (D.C. Cir. 2005). The
district court’s decision to approve the CAP was inconsistent
with this allocation of authority between the agency and the
court.
III. Conclusion
The district court erred when it ordered relief beyond
prohibiting the DCA and the DAB from relying upon the three
ACF announcements in determining whether to approve
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Nebraska’s CAP. Therefore, we remand this case to the district
court for further proceedings consistent with this opinion.
So ordered.