Amicus Curiae Brief — United States Senate v. Synar

PORARGHMENTs Supreme Court us.

Nos. 85-1377, 85- 85-1379 FilLED

IN THE APR @ 1986

Supreme Court of the Anited States... F. SPANIOL, JR.

OCTOBER TERM, 1985 CLERK

CHARLES A. BOWSHER,

COMPTROLLER GENERAL OF THE UNITED STATES,

y. Anpellant,

MIKE SYNAR, MEMBER OF CONGRESS, et al.,

Appellees.

UNITED STATES SENATE,

vy. Appellant,

MIKE SYNAR, MEMBER OF CONGRESS, et al.,

Appellees.

THOMAS P. O’NEILL, JR., SPEAKER OF THE UNITED STATES

HOUSE OF REPRESENTATIVES, et al.,

y. Appellants,

MIKE SYNAR, MEMBER OF CONGRESS, et al.,

Appellees.

On Appeal from the United States District Court

for the District of Columbia

BRIEF FOR AMICI CURIAE

COALITION FOR HEALTH FUNDING, ET AL.

—

STEPHAN E. LAWTON *

JACK N. GOODMAN

CAROL COLBORN

PIERSON, BALL & DowpD

1200 18th Street, N.W.

Washington, D.C. 20036

(202) 331-8566

Attorneys for Amici Curiae

Coalition for Health

Funding, et al.

April 9, 1986 * Counsel of Record

[Complete list of Amici on inside cover]

AMICI CURIAE

American Council on Education

American Hospital Association

Coalition for Health Funding on behalf of:

American Academy of Pediatrics

American Association of Colleges of Nursing

American Association of Colleges of Pharmacy

American Association of Colleges of

Podiatric Medicine

American Association for Dental Research

American Association of Dental Schools

American Heart Association

American Lung Association

American Nurses Association

American Public Health Association

Association of American Veterinary Medical

Colleges

Association of Schools of Public Health

Association of University Programs in Health

Administration

Cystic Fibrosis Foundation

Infectious Diseases Society of America

March of Dimes Birth Defects Foundation

National Association of Children’s Hospitals

and Related Institutions

National Family Planning and Reproductive Health

Association

National League for Nursing

Planned Parenthood Federation of America

Juvenile Diabetes Foundation International

National School Boards Association

Western Association of Children’s Hospitals

QUESTION PRESENTED

Whether the district court properly ruled that, because

the automatic deficit reduction procedures of the Balanced

Budget and Emergency Deficit Control Act are unconsti-

tutional, the President’s sequestration order issued pur-

suant to those procedures is “without legal force and

effect,” thereby requiring the restoration of all wrong-

fully cancelled funds?

(i)

TABLE OF CONTENTS

Page

GS WT ITI anciccscsciccceecnennesntesccccosenssisnastions i

Re Ge Fe IID dnceccccttcosecceccinicccnsvecsisbessecseties iv

INTERES? OF AMICT CURIARD ........--2--.<.-.-.--......0--+2- 2

ERE Saar A LEN err eer eee 3

A. The Deficit Control Act And Its Impact On

Health And Education Programs ........................ 3

B. The District Court’s Decision ....................000........ 5

SUMMARY OF ARGUMENT ................2......00....0000........ 5

a i 7

I. BECAUSE THE PRESIDENT’S SEQUESTRA-

TION ORDER WAS BASED ON AN UNCON-

STITUTIONAL PROCEDURE, THE ORDER

IS NULL AND VOID OF ANY LEGAL

EFFECT, AND THE rUNDS' PERMA-

NENTLY CANCELLED UNDER SUCH OR-

DER MUST BE RESTORED ...............000.000000..... 7

A. The Court’s Decision Does Not Establish A

si cccrnntncticecieneivnes 10

B. Requiring Restoration Of The Unlawfully

Cancelled Funds Would Further The Pur-

poses Of The Court’s Decision ....................... 15

C. The Equities In This Case Clearly Favor

Restoring The Unlawfully Cancelled Funds.. 16

I al 20

APPENDIX

a nae ee Rae la

Effects of the March 1, 1986 Sequestration Order

On Selected Appropriated Health And Education

SUITE -cschdeecomnubienbadiidieent iechispldienibishinesindidibanaticaiiiaminnasanes 2a

iv

TABLE OF AUTHORITIES

Cases: Page

Atlantic Richfield Co. v. FEA, 463 F. Supp. 1079

ee Sn 9 aaansinatiiannionaeiion 19

Arizona Governing Committee for Tax Deferred

Annuity and Deferred Compensation Plans v.

Norris, 468 U.S. 1078 (1982) .........................------ 9,17

Brown v. Board of Education, 349 U.S. 294

RAS Ran ss risa Ne nr 16

Buckley v. Valeo, 424 U.S. 1 TRF RR 11-12, 13

Cash v. Califano, 621 F.2d 626 (4th Cir. 1980) _........ 9, 10,

14, 19

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) _...... passim

Chicot County Drainage District v. Baxter State

ere 9

Cipriano v. City of Houma, 395 U.S. 701 (1969) ..10, 16, 17

City of Los Angeles Dept. of Water and Power v.

Manhart, 485 U.S. 702 (1978)............................ §, 10,17

City of Phoenix v. Kolodziejski, 399 U.S. 204

PE ae 8 0 2 ne 10

Cochran v. Birkel, 651 F.2d 1219 (6th Cir. 1981),

cert. denied, 454 U.S. 1152 (1982) -...................... 9-10

England v. Louisiana State Board of Medical Ex-

aminers, 375 U.S. 411 (1964) ............................... 10

International Union, United Automobile, Aerospace

and Agricultural Implement Workers of America

v. Donovan, 570 F. Supp. 210 (D.D.C. 1983) _..... 16

INS v. Chadha, 462 U.S. 919 (1983) -.............-......... 11, 15

Kendall v. United States ex. rel. Stokes, 37 U.S.

ces 15

Kennedy v. Mathews, 413 F. Supp. 1240 (D.D.C.

I iia a a a 16

Lemon ». Kurtzman, 411 U.S. 192 (1973) ........... 10, 14, 16

Linkletter v. Walker, 381 U.S. 618 (1965) ............ R

National Ass’n of Broadcasters v. FCC, 554 F.2d

i eis 13-14

National Council of Community Health Centers,

Inc. v. Weinberger, 361 F. Supp. 897 (D.D.C.

et elt 5s SETS OT PRT Ul VEO IESE LPO OUNCES ONDE 15

Northern Pipeline Construction Co. v. Marathon

fs Ge Os FREES or cemoon 9,10

Vv

TABLE OF AUTHORITIES—Continued

Page

Norton v. Shelby County, 118 U.S. 425 (1886) _..... x

Schaefer v. First National Bank, 509 F.2d 1287

(7th Cir. 1975), cert. denied, 425 U.S. 943

ITT codebase atc ata ae 14

State Highway Comm’n v. Volpe, 479 F.2d 1099

I I a a ee a 15

United States v. Johnson, 457 U.S. 537 (1982)...... 8-9, 14

Valencia v. Anderson Bros. Ford, 617 F.2d 1278

(7th Cir. 1980), rev’d, 452 U.S. 205 (1981) ........ 14

Statutes:

Balanced Budget and Emergency Deficit Control

Act of 1985, Pub. L. No. 99-177, 99 Stat. 1037

Sea cinsehaththatdeetadisibiaisiidids pcticidbtaniadietepntadaiegddundadedmbenives 2,

3

ERSTE EI Recta LE SCE 3

i OTE eI 3

LE 4

a 4

Teen 4

CE en 3

ie RS A a ee 12

aT RE ne es ne 12

SE LEE ee 12

Department of Labor, Health and Human Services,

Education and Related Agencies Appropriations,

Act for Fiscal Year Ending September 30, 1986,

Pub. L. No. 99-178, 99 Stat. 1102 (1985)... 4

Further Continuing Appropriations Act of 1985,

Pub. L. No. 99-190, 99 Stat. 1185 (1985)... 4

Social Security Act of 1965, as amended, Pub. L.

No. 89-97, 79 Stat. 291, Title XVIII (codified at

a ee 4

Legislative and Regulatory Materials:

131 Cong. Rec. H9608-09 (daily ed. Nov. 1, 1985)... 12

131 Cong. Rec. H11881 (daily ed. Dec. 11, 1985)... 11-12

131 Cong. Rec. H11885 (daily ed. Dec. 11, 1985)... 11-12

131 Cong. Rec. H11891 (daily ed. Dec. 11, 1985)... 11-12

vi

TABLE OF AUTHORITIES—Continued

181 Cong. Rec. H11893-94 (daily ed. Dec. 11,

SERS ee SS ee a ee oe non 11-12

GS 2: —_C eee 3

Se ssustenmttbnaininiite 4

51 Fed. Reg. 1930 (1986) .................- eee 3

51 Fed. Reg. 1982 (1986) 2.2... ccc cccccncneeee 4

51 Fed. Reg. 1933 (1986) 2.2.2.2... ee cccccececeeeee 4

Sh. & SL) __ | eee eeeenneneee 3,4

51 Fed. Reg. 2818 (1986) ............................................. 3

S. Doc. No. 24, 99th Cong., 2d Sess. (1986) ............... 4,18

21 Weekly Comp. Pres. Doc. 1490 (Dec. 12, 1985)... 13

Miscellaneous:

The Committee for Education Funding, Budget

Impact Alert, The President’s Proposed Budget

for Education and Its Impact for Fiscal Year

ee 19

Hearings on the Federal Childhood Immunization

Program Before the Subcommittee on Health

and Environment of the House Committee on

Energy and Commerce (Mar. 10, 1986) ................. 18

U.S. Department of Health and Human Services,

Health Care Financing Administration, Trans-

mittal No. 86-2 (Feb. 1986) —.......2000002.-...e ee. 17-18

U.S. Department of Health and Human Services,

Health Care Financing Administration, Trans-

mittal No. LM86-1 (Feb. 1986) —......0000000 17-18

U.S. Department of Health and Human Services,

Report on Sequestration Under the Balanced

Budget and Emergency Deficit Control Act of

1985 (Gramm-Rudman-Hollings) for Committee .

on Appropriations 1986 (1986) ~..0000022.2220.. 17,18

IN THE

Supreme Court of the United States

OCTOBER TERM, 1985

Nos. 85-1377, 85-1378, 85-1379

CHARLES A. BOWSHER,

COMPTROLLER GENERAL OF THE UNITED STATES,

. Appellant,

MIKE SYNAR, MEMBER OF CONGRESS, et al.,

Appellees.

UNITED STATES SENATE,

¥. Appellant,

MIKE SYNAR, MEMBER OF CONGRESS, et al.,

Appellees.

THOMAS P. O’NEILL, JR., SPEAKER OF THE UNITED STATES

HOUSE OF REPRESENTATIVES, et al.,

. Appellants,

MIKE SYNAR, MEMBER OF CONGRESS, et al.,

Appellees.

On Appeal from the United States District Court

for the District of Columbia

BRIEF FOR AMICI CURIAE

COALITION FOR HEALTH FUNDING, ZT AL.

The Coalition for Health Funding (the “Coalition’’)

et al. submits this brief amici curiae on behalf of twenty-

five organizations representing health and education in-

2

terests in support of Appellees Mike Synar, Member of

Congress, et al. It is accompanied by the written con-

sents of Appellants and Appellees.

INTEREST OF AMICI CURIAE

The Coalition for Health Funding is a nonprofit coali-

tion of health organizations devoted to promoting and

monitoring the funding of health care programs. The

Coalition is joined in this brief amici curiae by several

health and educational associations which share a similar

interest in promoting funding for health and educational

programs. (A list of amici is set forth in the Appendix

attached hereto.) These associations are involved with

virtually all federally-funded health and education pro-

grams. They represent the educational institutions that

administer federally-funded research, public health and

education grants; the providers of federally-funded health

services, such as hospitals, physicians, nurses and family

planning clinics; the recipients of federal research

grants, student trainees and program administrators;

and the voluntary health organizations that are con-

cerned with the federally-funded programs that impact

upon the health of the American public.

The March 1, 1986 sequestration order mandated by

the Balanced Budget and Emergency Deficit Control Act

of 1985, Pub. L. No. 99-177, reduced duly enacted levels

of support for most health and education programs by

4.3 percent, and reduced payments under the Medicare

program by one percent. Amici curiae and their members

were adversely impacted by these budget cuts, which

forced significant curtailments in grants, traineeships

and scholarships, reimbursement levels, contracts, and

other health and educational services. Thus, these organ-

izations have a direct interest in this Court’s decision

concerning the constitutionality of these budget reduc-

tions.

3

INTRODUCTION

A. The Deficit Control Act And Its Impact On Health

And Education Programs

The Balanced Budget and Emergency Deficit Control

Act of 1985 (the “Deficit Control Act” or “Act’”’), Pub. L.

No. 99-177, 99 Stat. 1037 (1985), popularly known as

the Gramm-Rudman Act, radically changes the federal

budget process in an effort to achieve a balanced federal

budget by the year 1991. In order to reach that goal,

the Act imposes strict year-by-year deficit targets called

“maximum deficit amounts”, and adopts extraordinary

new budget procedures. See Act §§ 201(a) (7), 251-257,

J.A. 104, 109-161.

In accordance with these procedures, on January 15,

1986, the Congressional Budget Office (“CBO”) and the

Office of Management and Budget (“OMB’’) issued a

joint report to the Comptroller General estimating the

deficit for the 1986 fiscal year. Since they determined the

deficit would exceed the designated maximum deficit

amount, they calculated the requisite budget reductions

for both nondefense and defense programs. The budget

reductions amounted to 4.3 percent for most health and

education programs, and one percent for Medicare. 51

Fed. Reg. 1917, 1930, 1934 (Jan. 15, 1986).' On Janu-

ary 21, 1986, the Comptroller General submitted his

report to the President and the Congress appraising the

accuracy of the CBO’s and OMB’s report and making

minor changes. 51 Fed. Reg. 2813 (Jan. 21, 1986). Fol-

lowing the submission of the Comptroller General’s re-

port, on February 1, 1986, the President issued a “seques-

tration” order, containing the budget reductions man-

1 See Act § 256(d) (1) (A), J.A. 151 (setting the maximum per-

missible reduction for Medicare at one percent for fiscal year

1986).

4

dated in the Comptroller General’s report. This seques-

tration became effective on March 1, 1986. S. Doc. No.

24, 99th Cong., 2d Sess. (1986); see Act § 252(a) (6)

(A), J.A. 129. Accordingly, as of March 1, funding for

all non-exempt * health and education programs was cut

by 4.3 percent and funding for the Medicare program

was cut by one percent.

The funds for health and education programs subject

to the President’s sequestration had all been duly author-

ized and appropriated by Congress.’ The health and edu-

cation programs funded under these appropriations acts

include preschool, elementary, secondary and higher edu-

eation, and a full range of health programs involving

research, training, prevention and services. Specific pro-

grams include migrant education; early childhood edu-

cation for handicapped children; student assistance for

college and graduate students; maternal and child health

grants; family planning services; exceptional need

2Certain programs are totally exempt from Gramm-Rudman

cuts. Medicaid, for example, is totally exempt. Act § 255(h), J.A.

148. Other programs are subject to special rules. Jd. § 256, J.A.

148-158. These programs include: the Guaranteed Student Lwvan

program, which was subject to a mandatory reduction of .4 percent

in the special allowance for lenders and a .5 percent increase in the

loan origination fee (51 Fed. Reg. 1932); the Community Health

Centers and Indian Health Services programs, which received a

one percent reduction (51 Fed. Reg. 1934); and the Vocational

Rehabilitation grant program, which was subject to a reduction

in the expected automatic spending increase (51 Fed. Reg. 1927,

19383).

3 Department of Labor, Health and Human Services, Education

and Related Agencies Appropriations Act for the Fiscal Year

Ending September 30, 1986, Pub. L. No. 99-178, 99 Stat. 1102

(1985); Further Continuing Appropriations Act of 1985, Pub. L.

No. 99-190, 99 Stat. 1185 (1985). Payment under the Medicare

program is authorized under Title XVIII of the Social Security Act

of 1965, as amended, Pub. L. No. 89-97 (codified at 42 U.S.C. § 1395

et seq.).

5

scholarships for health professions students; childhood

immunization programs; clinical training for mental

health researchers; and biomedical research on numerous

life-threatening diseases, such as cancer and Acquired

Immune Deficiency Syndrome (AIDS).

B. The District Cou~t’s Decision

On February 7, 1986, the three-judge district court

held that the Deficit Control Act violates the separation

of powers doctrine by granting executive powers to the

Comptroller General, an officer removable by Congress.

Because of this constitutional defect, the court concluded

that “those powers cannot be exercised and therefore the

automatic deficit reduction process te which they are cen-

tral cannot be implemented.” J.A. 78. The court issued

an order declaring the automatic reduction process

unconstitutional and declaring the February 1, 1986

presidential sequestration order issued pursuant to those

unconstitutional procedures “without legal force and

effect.” J.A. 81-82. The court, as required by the judi-

cial review provisions of the Act, stayed the effect of its

judgment pending these appeals. J.A. 82.

SUMMARY OF ARGUMENT

In holding that the automatic deficit reduction proce-

dures of the Deficit Control Act violate the separation of

powers doctrine, the district court not only held that the

application of the Act to future budget reductions is

unconstitutional; it also declared the first reductions

under the Act null and void. Amici endorse the argu-

ments of Appellees in support of the district court’s

analysis of the constitutional issues. This brief, however,

will be limited to the single issue of the district court’s

ruling that, because the budget reductions were made

pursuant to unconstitutional procedures, the February 1,

1986 sequestration order is void and without legal effect.

6

In so ruling, the district court properly applied the long-

standing rule of Anglo-American jurisprudence that judi-

cial decisions are to be accorded retroactive treatment.

Nothing in this Court’s decisions, including the stand-

ards established in Chevron Oil Co. v. Huson, 404 U.S. 97

(1971), dictate a departure from the normal rule of

retroactivity. First, the district court’s decision did not

overturn prior law upon which individuals had relied.

There was no justifiable reliance on the validity of the

Deficit Control Act, since its dubious constitutionality

was foreshadowed well before it was enacted into law

and it was subject to constitutional challenge from the

moment it became effective. In the absence of appropriate

reliance, retroactive relief should be applied.

Second, retroactive application of the district court’s

decision furthers the purpose of the court’s decision by

denying effect to the unconstitutional withholding of duly

authorized funds. Third, the equities in this case clearly

favor voiding the sequestration order and restoring the

funds to the innocent third parties, such as amici, who

have had their legal rights to funds extinguished by

unconstitutional procedures. Accordingly, amici urge the

Court to affirm the district court’s order entirely, includ-

ing its order that the budget reductions wrongfully taken

are null and void, with the effect that these reductions in

lawful appropriations must be restored to the affected

programs.

7

ARGUMENT

I. BECAUSE THE PRESIDENT’S SEQUESTRATION

ORDER WAS BASED ON AN UNCONSTITUTIONAL

PROCEDURE, THE ORDER IS NULL AND VOID

OF ANY LEGAL EFFECT, AND THE FUNDS PER-

MANENTLY CANCELLED UNDER SUCH ORDER

MUST BE RESTORED

The district court properly held that, since the auto-

matic deficit reduction procedures are unconstitutional,

the February 1, 1986 sequestration order issued pursuant

to those procedures is null and void of any legal effect.

J.A. 81-82. Moreover, in the context of discussing

whether the National Treasury Employees Union

(“NTEU”) had standing to challenge the constitution-

ality of the Act, the court indicated that a judicial deci-

sion declaring the Deficit Control Act unconstitutional

would require the restoration of funds:

As to at least the second of the injuries of which

NTEU complains—the imminent permanent cancel-

lation of its members’ COLA benefits by the opera-

tion of the presidential sequestration order—it is

unquestionable that a judicial remedy exists. If we

declare the automatic deficit reduction process in-

valid, no cancellation of the COLA benefits will oc-

cur as a result of that process. Rather, the fallback

deficit reduction process established by subsection

274(f) will come into play, and any cancellation of

COLAs under that process will require the passage

of legislation.

J.A. 35 (footnotes omitted and emphasis added).

Nothing in this Court’s decisions indicate that the dis-

trict court’s holding should not be applied retroactively.

In Chevron Oil Co. v. Huson, 404 U.S. 97 (1971), the

Court established a three-part test for determining

whether in a civil case a decision should be treated retro-

actively :

8

* First, the decision to be applied nonretroactively

must establish a new principle of law, either by

overruling clear past precedent on which litigants

may have relied . . . or by deciding an issue of

first impression whose resolution was not clearly

foreshadowed. .. .

* Second, it has been stressed that “we must...

weigh the merits and demerits in each case by

looking to the prior history of the rule in question,

its purpose and effect, and whether retrospective

operation will further or retard its operation.” . . .

° Finally, “(wljhere a decision . . . could produce

substantia! inequitable results if applied retroac-

tively, there is ample basis . . . for avoiding the

‘injustice or hardship’ by a holding of nonretro-

activity.”

Id. at 106-07 (citations omitted and emphasis added).

The Chevron test developed as an exception to the long-

standing rule of Anglo-American law that judicial deci-

sions are retroactive‘ to account for those extraordinary

circumstances where the Court deemed it appropriate to

depart from the normal rule of retroactivity.

The initial Chevron factor—establishing a clear break

from prior law upon which the parties relied—is the

threshold test for determining whether a decision should

be applied retroactively :

Once it has been established that a decision has “‘es-

tablish[ed] a new principle of law, either by over-

ruling clear past precedent on which litigants may

have relied . . . or by deciding an issue of first im-

pression whose resolution was not clearly foreshad-

owed,” the Court has gone on to examine the history,

purpose, and effect of the new rule, as well as the

4 Sve, e.g., Linkletter v. Walker, 381 U.S. 618, 622-23 and n.6

(1965) ; Norton v. Shelby County, 118 U.S. 425, 442 (1886).

9

inequity that would be imposed by its retroactive ap-

plication.

United States v. Johnson, 457 U.S. 537, 550 n.12 (1982)

(quoting Chevron, 404 U.S. at 106-107) ; see also Cash v.

Califano, 621 F.2d 626, 631 (4th Cir. 1980) (reliance is

the threshold factor). In virtually all of the civil cases in

which decisions have been applied prospectively, courts

have determined that retroactivity was inappropriate

because individuals had relied on prior law and con-

formed their conduct to that prior law or the status quo

ante.®

In contrast, this case does not involve a rule of law

which regulates individual conduct and upon which in-

dividuals have relied. Rather, it involves whether certain

federal budget procedures violate the separation of

powers doctrine. Thus, by its very nature, retroactive

application of the district court’s decision in this case

raises few, if any, of the difficult issues addressed by the

Chevron factors and this Court’s other retroactivity deci-

sions. See Chicot County Drainage District v. Baxter

State Bank, 308 U.S. 371, 374 (1940). Assuming the

Chevron analysis nonetheless is the starting point for de-

termining questions of retroactivity, the Chevron factors

clearly support affirmance of the district court’s decision

to accord retroactive treatment to its order declaring the

presidential sequestration order void of any legal effect.*

5 E.g., Arizona Governing Committee for Tax Deferred Annuity

and Deferred Compensation Plans v. Norris, 463 U.S. 1073, 1105-

07, 1109-10 (1982) (plurality); Northern Pipeline Construction

Co. v. Marathon Oil Co., 458 U.S. 50, 88 (1981); City of Los

Angeles Dent. of Power and Water v. Manhart, 435 U.S. 702, 722-

23 (1978); Chevron, 404 U.S. at 108.

® The courts have also recognized that application of the Chevron

factors “is not accomplished through a discrete reference to each

separate factor, but by an analysis of how they interact with one

another.” Cash v. Califano, 621 F.2d at 629. Thus, to deny retro-

active application, a decision must not only meet the threshold

10

A. The Court’s Decision Does Not Establish A New

Principle Of Law

All of the cases in which this Court has applied deci-

sions only prospectively emphasized the parties’ appropri-

ate reliance on the state of the law prior to the decision.

Several of these cases announced completely new proce-

dural interpretations which would have prejudiced poten-

tial plaintiffs relying on the former law from seeking

relief. In Chevron, for instance, this Court applied pro-

spectively its decision that the state statute of limitations

applied in cases brought under the Outer Continental

Shelf Lands Aci, reasoning that when the plaintiff was

injured and initiated his suit, he could not foresee that

the prior interpretation of the statute would be over-

turned. “The most he could do was rely on the law as it

then was.” Chevron, 404 U.S. at 107.’

Other cases have involved substantive interpretations

of laws in which parties had relied in good faith on prior

legal precedent. In Manhart, this Court gave prospective

treatment to its decision that Title VII of the Civil

Rights Act of 1964 prohibits an employer from requiring

women to make larger pension contributions in order to

obtain the same monthly benefits as men, noting that its

decision imposed “[djrastic changes in the legal rules

governing pension and insurance funds,” and that the

employer, relying on prior law, could have believed his

pension plan was lawful. Jd. at 720-21.*

reliance factor; it must weet all of the Chevron factors. Cochran

v. Birkel, 651 F.2d 1219, 1223 n.8 (6th Cir. 1981), cert. denied,

454 U.S. 1152 (1982). :

7 See also Northern Pipeline, 458 U.S. at 88; England v. Louisi-

ana State Board of Medical Examiners, 375 U.S. 411, 422 (1964).

8 See also Lemon v. Kurtzman, 411 U.S. 192 (1973) (plurality) ;

City of Phoenix v. Kolodziejski, 399 U.S. 204, 213-15 (1970);

Cipriano v. City of Houma, 395 U.S. 701, 706 (1969).

11

By contrast, in this case the dubious constitutionality

of the Deficit Control Act was apparent even before the

bill was signed into law. First, this Court’s unanimous

decision in Buckley v. Valeo, 424 U.S. 1 (1975) (per

curiam), established unequivocally that legislative offi-

cials may not exercise executive duties.® In addition, this

Court’s decision in INS v. Chadha, 462 U.S. 919 (1983),

established that legislation—as well as the repeal of duly

authorized legislation—can only be enacted through con-

stitutionally prescribed procedures. Certainly these deci-

sions paved the way for the conclusion that the Deficit

Control Act violated the fundamental principle of separa-

tion of powers.

Second, the legislative history of the Act demonstrates

that Congress itself recognized that the automatic deficit

reduction procedures raised serious constitutional con-

cerns. During congressional debate on the Gramm-

Rudman bill, members of Congress observed several con-

stitutional defects in the Act.’® Professor Laurence H.

® Appellant Comptrolier General points to a footnote in Buckley

v. Valeo (424 U.S. at 128 n.165) to argue that that decision upheld

the Comptroller General’s authority to exercise administrative

functions. Brief for Appellant Comptroller General of the United

States [“GAO Brief”] at 29. Yet nothing in this Court’s casual

reference to the Comptroller General indicates that, as an officer

removable by Congress, he is authorized to exercise the executive

functions conferred on him under the Deficit Control Act. Indeed,

the footnote does not even address the removal issue. Rather, the

decision makes clear that “administrative functions may .. . be

exercised only by persons who are ‘officers of the United States.’ ”’

424 U.S. at 141 (footnote omitted).

10 Just prior to House passage, Representative Oakar read a letter

into the record from the Chairman of the House Judiciary Com-

mittee, Representative Rodino, detailing his opposition to the bill

on the grounds that this Court’s decision in Chadha established

that “Congress cannot undo a law by anything short of a new law,

and that all laws must be adopted through .. . constitutionally

mandated procedures .. .” and that this Court’s decision in Buckley

v. Valeo reaffirmed that “the principle of separation of powers was

12

Tribe also expressed his views to the Congress that the

bill contained “serious [constitutional] infirmities that

merit the closest attention” and that “[gliving executive

duties to a legislative officer is almost certainly uncon-

stitutional,” citing Buckley v. Valeo."

Given these concerns regarding the constitutionality of

the Act, the framers included provisions facilitating con-

stitutional challenge. First, the Act includes a provision

conferring standing upon Members of Congress to seek a

declaratory judgment and injunctive relief concerning

the constitutionality of the Act. Act § 274(a) (2), J.A.

163. Second, the Act includes provisions for expedited

judicial review of a constittuional challenge. Id. § 274

‘e), J.A. 164.

Moreover, Congress included in the Act a so-called

“fallback deficit reduction” provision to be employed in

the event the automatic deficit reduction process were

declared unconstitutional. Act § 274(f), J.A. 165-66.

Under the fallback. provision, budget reductions can be

required only by a joint resolution of Congress, signed by

the President. Jd. The fallback provision thus represents

an implicit admission by Congress that if the Act were

declared unconstitutional, the budget reductions would be

invalid and would have to be restored, absent lawfully

enacted legislation. Indeed, Appellant Comptroller Gen-

eral of the United States concedes this point in his brief

by observing that, “{s|/ince this fallback depends on the

passage of another law, it is essentially a return to the

status quo ante.” GAO Brief at 5.

not simply an abstract generalization ... .” 131 Cong. Rec. H11893-

94 (daily ed. Dec. 11, 1985); see also id. H11881 (Rep. Waxman)

(court should rule the law unconstitutiona!); id. H11885 (Rep.

Rodino) (bill is unconstitutional); td. H11891 (Rep. Levine)

(same).

11131 Cong. Rec. H9608-09 (Nov. 1, 1985) (letter from Pro-

fessor Laurence H. Tribe to Hon. Mike Synar (Oct. 22, 1985) ).

13

Even the President, when signing the Gramm-Rudman

bill into law, observed that the bill raised “serious con-

stitutional questions” :

In signing [the Gramm-Rudman] bill, I am mindful

of the serious constitutional questions raised by some

of its provisions. The bill assigns a significant role

to the Director of the Congressional Budget Office

and the Comptroller General in calculating the

budget estimates that trigger the operative provi-

sions of the bill. Under the system of separated

powers established by the Constitution, however, ex-

ecutive functions may only be performed by officers

in the Executive Branch. The Director of the Con-

gressional Budget Office and the Comptroller General

are agents of Congress, not officers in the Executive

Branch.”

Finally, Representative Synar initiated his suit seeking

declaratory relief on the constitutionality of the Act on

December 12, 1985, the same day the bill was signed into

law. Thus, there was a constitutional cloud over the Act

from the moment it became effective. No one could have

placed any reliance on the validity of the Act at any

point, for all the actions taken pursuant to its provisions

took place well after its constitutionality was challenged.

A decision declaring the Deficit Control Act unconstitu-

tional thus does not overrule clear precedent; indeed,

such an outcome was foreshadowed by Buckley v. Valeo,

as well as other Supreme Court precedent. Second, the

decision does not change existing law upon which the

parties relied. In National Ass’n of Broadcasters v.

FCC, 554 F.2d 1118 (D.C. Cir. 1976), the United States

Court of Appeals for the District of Columbia Circuit

applied a decision of this Court retroactively to require

the FCC to refund illegally assessed fees where the FCC

12 President’s Statement on Signing H.J. Resolution 327 Into

Law, 21 Weekly Comp. Pres. Doc. 1490, 1491 (Dec. 12, 1985).

14

was unable to demonstrate justifiable reliance on the old

rule:

since the FCC had notice almost from the time it

adopted the schedule that it would be subject to a

challenge in court, there could be no justifiable reli-

ance here. ... For the same reason, because of the

immediate protests and refund requests made by the

petitioners, we reject any idea that the Commission

would be unfairly surprised by our action today as

well as the notion that petitioners’ “transactions”

had become final and should not be disturbed.

Id. at 1132 (footnotes omitted). The same is true in this

case. From the day the bill was signed into law it was

subject to a constitutional challenge, thereby removing

any possibility that Appellants could be unfairly sur-

prised by the district court’s decision.

This Court has recognized that in the absence of justi-

fiable reliance on the prior law, there is no basis for lim-

iting relief prospectively. See Johnson, 457 U.S. at 550

n.12; Lemon v. Kurtzman, 411 U.S. at 203-06. In light

of the extraordinary amount of concern over the con-

stitutionality of the Act, and the fact that it was chal-

lenged in court on the day it became effective, there

simply was no basis for reliance on the validity of the

Act. Thus, since this case does not even meet the thres-

hold reliance factor, there is no reason to apply the deci-

sion prospectively. Accordingly, the retroactivity analysis

need go no further.*

13 See Johnson, 457 U.S. at 550 n.12; Valencia v. Anderson Bros.

Ford, 617 F.2d 1278, 1289 (7th Cir. 1980) (“Having decided that

our ruling in this case establishes no new principle of law, it is un-

necessary to address the remaining prongs of the Chevron Oil

test’), rev’d on other grounds, 452 U.S. 205 (1981); Schaefer v.

First Nationai Bank, 509 F.2d 1287, 1294-95 (7th Cir. 1975), cert.

denied, 425 U.S. 943 (1976) ; Cash v. Califano, 621 F.2d at 631.

15

B. Requiring Restoration Of The Unlawfully Cancelled

Funds Would Further The Purposes Of The Court’s

Decision

Even assuming, arguendo, that the remaining factors

of the Chevron test need be considered, it is clear that

retroactive application of the district court’s decision was

appropriate. The second factor under the Chevron frame-

work is whether, considering the purposes and effect of

the court’s ruling, retroactive application “will further or

retard its application.” Chevron, 404 U.S. at 107. Thus,

in Chevron, this Court determined that a primary pur-

pose of the Lands Act in adopting the state statute of

limitations as federal law was to aid injured employees

by affording them complete and familiar remedies. Thus,

tv apply its decision retroactively to bar the plaintiff’s

claim would be “inimical to the beneficent purpose of the

Congress.” Id. at 108.

In this case, the purpose of an affirmance of the dis-

trict court’s order invalidating the automatic deficit

reduction procedures is to maintain the delicate balance

and separation of powers which underlie our constitu-

tional framework of government. A _ prospective-only

decision in this case which did not require restoration of

withheld funds would retard operation of the rule by

sanctioning the reduction of funds pursuant to uncon-

stitutional means. It is well established that the Execu-

tive lacks any inherent constitutional power to refuse to

spend funds duly appropriated by Congress. Kendall v.

United States ex. rel. Stokes, 37 U.S. 524 (1838); State

Highway Comm’n v. Volpe, 479 F.2d 1099 (8th Cir.

1973) ; National Council of Community Health Centers,

Inc. v. Weinberger, 361 F. Supp. 897 (D.D.C. 1973).

Actions taken pursuant to unconstitutional procedures

have no legal effect. See INS v. Chadha, 462 U.S. 919

(1983). Moreover, this Court has recognized in constitu-

tional adjudication and elsewhere that federal courts have

broad equitable powers to shape relief to meet the neces-

16

sities of a particular case. E.g., Lemon v. Kurtzman, 411

U.S. at 200-01; Brown v. Board of Education, 349 U.S.

294, 300 (1955).'* Thus, affirmance of the district court’s

order would further implementation of the constitutional

rule.

C. The Equities In This Case Clearly Favor Restoring

The Unlawfully Cancelled Funds

The final factor considered under the Chevron stand-

ard is whether retroactive application of the decision

would produce “substantial inequities.” Chevron, 404

U.S. at 107. This inequity factor is closely tied to the

initial reliance factcr. In Cipriano v. City of Houma,

for example, this Court concluded that retroactive appli-

cation of its decision would impose “[s]ignificant hard-

ships . . . on cities, bondholders, and others connected

with municipal utilities” who had relied in good faith on

the validity of the municipal financing scheme. 395 U.S.

at 706. Similarly, in the Chevron decision itself, this

Court concluded that retroactive application of its deci-

sion on the applicable statute of limitations “would also

produce the most ‘substantial inequitable results’ to hold

that the respondent ‘slept on his rights’ at a time when

he could not have known the time limitation that the law

imposed upon him.” Chevron, 404 U.S. at 108 (citations

omitted).

This Court has also applied the doctrine of nonretro-

activity where the parties that would have been adversely

affected by the Court’s decision were innocent of any

14 For example, the federal district courts have equitable power to

require funds improperly withheld to be made available for their

designated purposes even where funds have reverted to the treasury,

e.g., International Union, United Automobile, Aerospace and Agri-

cultural Implement Workers of America v. Donovan, 570 F. Supp.

210, 220 (D.D.C. 1983), or to require that funds improperly with-

held in one fiscal year be spent in the following fiscal year, along

with funds specially appropriated for that second fiscal year. Ken-

nedy v. Mathews, 413 F. Supp. 1240, 1245 (D.D.C. 1976).

i

ee

17

wrongful conduct. In Norris, this Court denied retro-

activity where, under the new rule, “[t|he harm would

fall in large part on innocent third parties.” 463 U.S. at

1110 (O’Conner, J., concurring) (quoting Manhart, 435

U.S. at 722-23); see also Cipriano, 395 U.S. at 706.

In this case, retroactive application of the district

court’s decision would not produce such inequitable

results. Indeed, nonretroactive application of the decision

would cause just the type of harm to innocent third

parties, such as amici and their members, that this Court

felt obligated to avoid in Norris and Manhart. The auto-

matic deficit reductions have resulted in substantial harm

to third parties who have been wrongfully denied their

legel rights to federal funds. Indeed, because the seques-

tration order imposes across-the-board percentage reduc-

tions, smaller programs are most acutely a“ected by the

unlawful withholding of funds. A chart illustrating the

sequestered amounts in selected health and education

programs is set forth in the Appendix attached hereto.

These include mandated budget cuts eliminating:

* $236 million in funding for the National Institutes

of Health (“NIH”) research support, necessitating

across-the-board funding cuts in all on-going re-

search and training programs, irrespective of need

or merit; ©

One percent in payments to all hospitals, physi-

cians, nurses, clinics, nursing homes, medical

equipment suppliers and other health care provid-

ers participating in the Medicare program who

are already operating at severely reduced levels of

reimbursement ; **

15 U.S. Department of Health and Human Services, Repor. on

Sequestration Under the Balanced Budget and Emergency Deficit

Control Act of 1985 (Gramm-Rudman-Hollings) for Committee on

Appropriations 1986, 63-92 (1986) [“HHS Sequestration Report’’].

16 U.S. Department of Health and Human Services, Health Care

Financing Administration, Transmittal No. 86-2 (Feb. 1986) (in-

18

* $10,077,000 in funding for AIDS research at a

time when scientists are coming closer to identify-

ing the cause of and the cure for this fatal dis-

ease ; *

* 424 training grants awarded to young researchers

by the NIH; **

* funding for 65,000 children to receive immuniza-

tions against childhood diseases ; *°

* thirty-five grants of regional and national signifi-

cance from the Maternal and Child Health pro-

gram ; *

* funds under the Community Health Centers pro-

gram to expand health services in ten rural com-

munities for an additional 50,000 people; *

* eighteen health professions scholarships for stu-

dents in exceptional financial need; *

* traineeship positions for 252 public health and 100

nursing students; **

structions to Medicare intermediaries for implementing one percent

reduction in payments) ; Department of Health and Human Services,

Health Care Financing Administration, Transmittal No. LM86-1

(Feb. 1986) (instructions to Medicare carriers for implementing

one percent reduction in payments).

17S. Doc. No. 24, 99th Cong., 2d Sess. 397-430 (1986).

18 HHS Sequestration Report at 65.

19 Hearings on the Federal Childhood Immunization Program

before the Subcommittee on Health and the Environment of the

House Committee on Energy and Commerce (Mar. 10, 1986) (state-

ment of Chairman Waxman).

20 HHS Sequestration Report at 5.

21 Jd. at 6.

22 Td. at 16.

23 Jd. at 18, 24.

ec

19

* some 290,000 middle-income college students from

the Pell grant financial assistance program; ** and

* twenty-eight projects and service to 9,209 students

under the bilingual education program.”

Clearly the equities in this case favor the intended

recipients of federal funds, such as amici, who have had

their legal rights to duly authorized funds extinguished

pursuant to an unlawful procedure. “{T]he equities

weigh more heavily in favor of granting retroactive

relief where the party bearing the burden of retroactive

application can be charged with acting unlawfully.”

Atlantic Richfield Co. v. FEA, 463 F. Supp. 1079, 1086

(N.D. Cal. 1979). Simply because the restoration of

funds will have a financial impact is insufficient to tip

the scales of equity. “A financial impact alone is an

insufficient basis to mandate nonretroactivity.” Cash v.

Califano, 621 F.2d at 632.

Moreover, as noted, since the constitutionality of the

Act has always been in question, there was no basis for

any reliance on its validity. In the absence of some sur-

prise engendered by a new decision, the Appellants can

hardly claim that equities support a ruling of nonretro-

activity. Accordingly, this Court should affirm the dis-

trict court’s decision, thus requiring restoration of all

funds unlawfully cancelled.

*4 The Committee for Education Funding, Budget Impact Alert,

The President’s Proposed Budget for Education and Its Impact

for Fiscal Year 1986, 82 (1986).

25 See generally id. at 61.

20

CONCLUSION

For the reasons set forth herein, the decision of the

district court should be affirmed.

Respectfully submitted,

STEPHAN E. LAWTON *

JACK N. GOODMAN

CAROL COLBORN

PIERSON, BALL & DowD

1200 18th Street, N.W.

Washington, D.C. 20036

(202) 331-8566

Attorneys for Amici Curiae

Coalition for Health

Funding, et al.

* Counsel of Record

April 9, 1986