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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 24, 1995 Decided April 21, 1995

No. 94-5035

NATIONAL TREASURY EMPLOYEES UNION, ET AL.,

APPELLANTS

v.

RICKI R. TIGERT, CHAIR,

FEDERAL DEPOSIT INSURANCE CORPORATION, ET AL.,

APPELLEES 

Appeal from the United States District Court

for the District of Columbia

(No. 90cv02161)

Timothy B. Hannapel argued the cause for appellants. With him on the briefs were Gregory

O'Duden, Elaine D. Kaplan, and Barbara A. Atkin.

Roderick L. Thomas, Assistant United States Attorney, argued the cause for appellees. With him on

the briefs were Eric H. Holder, Jr., United States Attorney, R. Craig Lawrence and Michael J. Ryan,

Assistant United States Attorneys, and Thomas A. Schulz, Robert G. Clark, and Gregory F. Taylor,

Attorneys, Federal Deposit Insurance Corporation. John D. Bates, Edith S. Marshall, and David B.

Orbuch, Assistant United States Attorneys, entered their appearances.

Before: WALD, RANDOLPH, and ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: Appellants National Treasury Employees Union and two of its

members ("NTEU") appeal from the grant of summary judgment upholding Office of Personnel

Management ("OPM") regulations allowing the Federal Deposit Insurance Corporation ("FDIC") to

bypass the competitive service hiring process for certain employees in its Division of Liquidation.

NTEU challenged the regulations under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A), as

arbitrary, capricious, and contrary to the civilservice laws, but the district court concluded that OPM

had considered the appropriate factors, addressed relevant policy considerations, and acted

"consistent with the evidence" in approving the FDIC's hiring authority. National Treasury

Employees Union v. Hove, 840 F. Supp. 165, 170-71 (D.D.C. 1994). NTEU appeals on the ground

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that OPM had no factual basis for extending the FDIC'stemporary hiring authority during the 1980s

because changing circumstances in the banking industry made it practicable to examine potential

employees for liquidator positions. NTEU also contends that the district court erred in refusing to

consider the legality of 1993 revisionsto the OPM regulations, and it appealsthe denial of its motion

to amend the complaint to include a challenge to the 1993 regulations. Finding these contentions

unpersuasive, we affirm.

I.

All civilservice employeesin the executive branch ofthe federalgovernment, other than those

in the Senior Executive Service, are either in the "competitive service" or the "excepted service." 5

U.S.C. §§ 2102(a)(1), 2103(a); see generally National Treasury Employees Union v. Horner, 854

F.2d 490, 492 (D.C. Cir. 1988). Competitive service employees, who are hired primarily on the basis

of their score on a "competitive examination," receive a number of benefits not enjoyed by those in

the excepted service. See Allen v. Heckler, 780 F.2d 64, 65 (D.C. Cir. 1985). Of significance here,

excepted service employees do not have the same rights as competitive service employees to have

their seniority considered when they apply for competitive positions and to "bump" employees with

less seniority in the event of a reduction in force. See 5 C.F.R. §§ 351.501-351.502 (1994).

Congress authorized the President, when warranted by "conditions of good administration,"

to make "necessaryexceptions of positionsfromthe competitive service"withinthe executive branch.

5 U.S.C. § 3302. The President delegated authority to OPM to "except positions from the

competitive service when it determines that appointmentsthereto through competitive examinations

are not practicable." Executive Order No. 10,577, 5 C.F.R. § 6.1(a) (1994). OPM thereafter divided

excepted service positions into three categories: Schedules A, B, and C. 5 C.F.R. § 6.2. Pursuant

to its Schedule A authority, which allows exception of "positions other than those of a confidential

or policy-determining character for which it is not practicable to examine," 5 C.F.R. § 6.2, OPM

adopted a regulation allowing the FDIC to hire certain employees to work on bank liquidations

without complying with the ordinary civil service requirements. 5 C.F.R. § 213.3133. OPM first

granted this authority in 1938 and renewed or amended it in 1954, 1982, 1985, 1989, and 1993.

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Initially, the FDIC used its Schedule A hiring authority primarily to engage former employees

of a failed bank to work on that bank'sliquidation. With the advent of the banking crisis of the 1980s,

however, the FDIC began to coordinate bank liquidations through regional service centers, from

which a cadre of permanent competitive service employees worked alongside temporary Liquidation

Grade employees on bank liquidations. Although the FDIC generally hired the Liquidation Grade

employees in response to a single bank closing, it often extended their terms as new bank closings

created the immediate need for further liquidation assistance. In 1985, OPM amended the FDIC's

Schedule A authority to allow it to hire new temporary employees for a period of five years after a

bank closing and to extend their employment on an annual basis as needed. At the same time, OPM

noted that "the state of the banking community will probably stabilize at some point. Then, the

conditionsjustifying Schedule A appointments will no longer exist." In 1989, OPM again revised the

regulation to reflect the FDIC's new responsibilities in savings and loan liquidations. 5 C.F.R. §

213.3133(a) (1989). When NTEU filed suit, the regulation excepted from competitive service:

[a]ll Liquidation Graded, temporary field positions concerned with the work of

liquidating the assets of closed banks or savings and loan institutions, of liquidating

loans to banks or savings and loan institutions, or of paying the depositors of closed

insured banks orsavings and loan institutions. New appointments may be made under

this authority only during the 5-year period following a bank or savings and loan

institution closing and/or establishment of a consolidated liquidation site.

Id.

Toward the end of the 1980s, the number of bank failures handled by the FDIC steadily

declined. As a result, the FDIC planned a massive reorganization and reduction of its liquidation

workforce, under which the FDIC will consolidate its operations into five regional service centers

staffed almost exclusively with competitive service employees. On December 2, 1993, OPM largely

eliminated the FDIC's future Schedule A authority for temporary Liquidation Grade employees.

Beginning in January, 1994, the FDIC could no longer make new Schedule A appointments under

§ 213.3133(a), but could retain current Liquidation Grade employees under their excepted status

through June 1, 1996. Prospectively, the FDIC could hire temporary excepted Schedule A employees

only within 60 days of a bank closing and could retain them for no more than two years. See 59 Fed.

Reg. 10023, 10024 (March 2, 1994).

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In the complaint, which was filed before the 1993 modifications to the FDIC's Schedule A

authority, NTEU alleged that competitive examinationsfor the Liquidation Grade positions were not

impracticable and therefore that the regulations extending FDIC's Schedule A authority were

arbitrary, capricious, and contraryto the civilservice law in violation ofthe Administrative Procedure

Act. See 5 U.S.C. § 706(2)(A). Furthermore, NTEU sought an order for the FDIC to convert all

NTEU members appointed to Liquidation Grade positionsto non-temporary, competitive positions.

In response to the FDIC's and OPM's motion for summary judgment, the district court ruled that the

record supported OPM's extension of the FDIC's Schedule A authority through the 1989

modifications on the ground that a competitive examination was impracticable. National Treasury

Employees Union v. Hove, 840 F. Supp. at 170-71. The court noted that "plaintiffs do not appear

to be challenging the OPM's December 2, 1993, action as arbitrary and capricious or otherwise

contrary to law," and indicated that if NTEU wished to assert such a challenge, it could file a separate

complaint. Id. at 168 & n.6.

On the same day that the district court granted summary judgment, NTEU moved to amend

the complaint to encompass the 1993 amendments. In its motion, NTEU argued that to the extent

the 1993 regulations revoke the FDIC'slong-term Schedule A hiring authority, the 1993 regulations

confirmthat the use of the challenged hiring authority throughout the 1980s was unlawful, and to the

extent that OPM refused to convert current Liquidation Grade positions to competitive service

positions, the 1993 regulations are arbitrary and capricious and contrary to law. The district court

denied the motion to amend, concluding that the 1993 revisions did not affect the validity of the 1989

regulations. National Treasury Employees Union v. Hove, No. 90-2161, slip op. (D.D.C. Feb. 9,

1994). The court again noted that NTEU could bring an independent challenge to the 1993

regulations. Id. at 2.

II.

Preliminarily, we reject appellees' contention that a July 1994 memorandum of understanding

between NTEU and the FDIC moots the instant appeal. The memorandum of understanding, which

addressesthe rights ofLiquidation Grade employees during the reorganization and downsizing ofthe

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FDIC'sliquidation staff, appearsto assume that the FDIC's Schedule A hiring authority will continue

through May 1996. Nowhere in the document does NTEU acknowledge that the hiring authority is

lawful. Nor does the memorandum purport to settle the current dispute between the parties over the

validity of OPM's conclusion that competitive examination wasimpracticable throughout the 1980s.

Cf. Douglas v. Donovan, 704 F.2d 1276, 1278-79 (D.C. Cir. 1983). Therefore, because the

memorandum of understanding neither eliminates the expectation that FDIC's retention of the

excepted Liquidation Grade workers will continue nor "completely and irrevocably eradicate[s] the

effects of the alleged violation," County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979), NTEU's

appeal is not moot.

Regarding the legality of the Schedule A hiring authority, NTEU contends that the district

court erred in granting summary judgment because OPM had no basis for concluding that it was

impracticable to examine for Liquidation Grade positions. The court reviews OPM's decision to

exempt employees from the competitive service under § 706(2)(A) of the Administrative Procedure

Act, which providesthat the court may set aside agency action if it is "arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); see NTEU v. Horner,

854 F.2d at 498. The "scope of review under the "arbitrary and capricious' standard is narrow and

a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). Nonetheless, the court must " "determine

whether the agency's decisionmaking was reasoned,' i.e., whether it considered the relevant factors

and explained the facts and policy concerns on which it relied, and whether those facts have some

basis in the record." NTEU v. Horner, 854 F.2d at 498 (quoting American Horse Protection Ass'n

v. Lyng, 812 F.2d 1, 5 (D.C. Cir. 1987)). Applying this deferential standard of review, we conclude

that OPM's extension of temporary Schedule A authority to the FDIC throughout the 1980s was

neither arbitrary and capricious nor otherwise contrary to the law. See Diamond v. Atwood, 43 F.3d

1538, 1540 (D.C. Cir. 1995) (grant of summary judgment reviewed de novo ).

NTEU does not quarrel with the legalstandard that OPM applied, but it contends that OPM

did not have an adequate factual basis for the conclusion that it was impracticable to examine

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1Hence, we have no occasion to consider whether converting Liquidation Grade employees

without administering competitive examinations is an appropriate remedy. Compare NTEU v.

Horner, 854 F.2d at 499, with Allen v. Heckler, 780 F.2d at 71. 

competitive service employeesfor LiquidationGrade positions. NTEU makes three arguments: first,

in the 1980s, when the FDIC's liquidation practices changed from isolated events to industry-wide

phenomena and its staffing changed from bank-specific liquidation teams to regional offices with

employees working on multiple liquidations, the justification for temporary Liquidation Grade

positions waned and eventually ceased to exist; second, the immense growth in the number of

Liquidation Grade employees during the 1980s made examinations practicable when OPM extended

the FDIC's Schedule A hiring authority in 1989; and third, the 1993 regulations confirm that

examination ofLiquidation Grade employees was practicable during the 1980s and that OPM should

have limited the FDIC's Schedule A authority to former employees of failed banks in the period

immediately following a bank closure. None of these arguments persuades us that OPM's decision

was arbitrary and capricious.1

First, the record shows that OPM recognized the changing nature of the banking industry in

the 1980s and extended the FDIC's Schedule A authority because the banking crisis required the

FDIC to respond to an unpredictable number of bank failures that might erupt in any region at any

time. In December 1984, for example, the FDIC pointed out that the number of bank failures had

accelerated at a higher than expected rate in 1983 and 1984 and declared that it could not have met

its obligations to depositors without the ability to "supplement the resources of the Division of

Liquidation" with temporaryworkers. Whereas in 1982 the FDIC had anticipated approximately 100

liquidations involving $5-40 million in assets over the next two years, as of December 1993 it found

itself with more than 170 liquidations with a book value of $4.4 billion. Consequently, although the

FDIC had initially planned to use a career field force to liquidate closed banks, it needed quickly to

hire hundreds of additional workers to handle the burgeoning number of liquidations. OPM knew

about the regionalization of the FDIC's liquidation efforts when it extended the FDIC's Schedule A

authority in 1985, noting that the "FDIC has consolidated regional bank liquidationsinto Liquidation

Regional Offices," from which "[t]emporary employees... work on more than one bank liquidation."

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2Beginning in 1989, OPM's Personnel Manual required agencies seeking approval of excepted

service positions to provide statistics on the anticipated number of excepted employees. Fed.

Personnel Manual Ch. 213, Subch. 2-4a(3)(a)(iv) (1989). NTEU does not specifically challenge

OPM's failure to require the FDIC to comply with this requirement, but points to the regulation as

evidence that the number of excepted employees is a "relevant factor" to be considered in

Nonetheless, OPM recognized that the FDIC's liquidation offices had "fluctuating" and often

"emergency hiring needs" that resulted from additional bank closings or complications from a single

liquidation. Based on this record, OPM reasonably extended the FDIC's Schedule A authority in

1985 because the "urgency of initial hiring, desirability of picking up some staff from closed banks,

and uncertain future employment needs" made competitive examination impracticable.

Similarly, in its 1989 request for additional Schedule A authority, the FDIC pointed out that

the Schedule A authority enabled it to hire local individuals "as soon as FDIC takes custody of a

closed bank" and reiterated that the urgency of initial hiring, the temporary nature of the work, and

the inability to anticipate hiring needs allsupported extending Schedule A authority. The FDIC also

noted that its ability to hire Liquidation Grade employees had eliminated the need for "an

unnecessarily large permanent staff of experienced liquidators and support personnel" in bank

liquidations and had thereby enabled it to "restrain costs based on actual versus anticipated staffing

needs." OPM's letter approving the FDIC's request concurred that "the necessity for providing a

means to rapidly hire the personnel necessary for critical situations demanding immediate attention

and action" justified the Schedule A authority. OPM therefore had ample evidence upon which to

base its conclusion that, despite the regionalization of the FDIC's liquidation efforts, competitive

examination of Liquidation Grade employees wasimpracticable throughout the banking crisis of the

1980s.

NTEU's second contention is no more persuasive. NTEU contends that OPM's 1989

extension of the FDIC's Schedule A hiring authority was arbitrary and capricious because the agency

did not consider the escalating number of Liquidation Grade employees during the early and mid1980s, which rose from 224 employees in 1982 to 11,102 in 1993. Nothing in the statute, the

Executive Order, or OPM'sregulationsrequires OPM to consider the number of excepted employees

in deciding whether competitive examination for positions is impracticable.2 Cf. NTEU v. Horner,

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deciding whether competitive examination is impracticable. See NTEU v. Horner, 854 F.2d at

498. In the absence of any indication that OPM intends to bind itself to consideration of

particular factors, however, the court has no occasion to interpret the Personnel Manual to

constrain OPM's discretion in determining whether competitive examination is impracticable. See

Jackson v. Culinary School of Washington, Ltd., 27 F.3d 573, 585-86 (D.C. Cir. 1994); Vietnam

Veterans v. Secretary of the Navy, 843 F.2d 528, 536-38 (D.C. Cir. 1988). 

3NTEU maintains that a 1982 OPM decision to convert Liquidator-at-Large positions into

competitive service positions indicates that growth in the work force is a factor that OPM must

consider in deciding whether competitive examination is impracticable. Although OPM did find

the size of the Liquidator-at-Large workforce important to its conclusion that examination was

practicable, differences between the functions of Liquidators-at-Large and Liquidation Grade

employees explain OPM's treatment of the two groups. Whereas Liquidators-at-Large report

directly to the FDIC's Washington office and are permanent employees specifically hired to

oversee numerous bank liquidations, Liquidation Grade employees generally work on particular

bank closings within a local market that they know well. Although their terms may be extended

as additional bank failures create new liquidation demands, the FDIC's need for Liquidation Grade

employees, unlike Liquidators-at-Large, depends on bank closing activity within their region,

requires staffing "on a very short-term notice," and fluctuates in an unpredictable way. 

854 F.2d at 499. Further, the record shows that OPM was aware that the number of temporary

Liquidation Grade employees had steadily grown throughout the 1980s asthe banking crisis spread.

In 1985, for example, OPM recognized the "massive demands" upon the FDIC's division of

liquidation caused by the burgeoning number of bank failures  "42 in 1982, 48 in 1983, 79 in 1984,

and 29 so far this year, with 800 banks still on the "problem list' "  and noted that the FDIC would

have to retain some excepted employees and hire others "to handle extra work generated by new bank

closings." In light of the large number of bank failures in the 1980s, the fact that OPM did not find

the rising number of Liquidation Grade employees sufficient to make competitive examination

practicable does not make its decision arbitrary and capricious.3

Third, NTEU contendsthat the December 1993 revisions, which sharply curtailed the FDIC's

Schedule Aauthority, implicitly acknowledged that the FDIC could have met its hiring needsthrough

the competitive service in the 1980s. According to NTEU, the 1993 regulations, which give the

FDIC only 60 days to hire temporary employees after a bank closure and limit such temporary

employment to two years, illustrate that OPM and the FDIC irrationally and arbitrarily departed from

the pre-1980s scheme of excepted employment only for immediate, bank-specific needs. This

argument overlooksthe fundamental difference between the FDIC's hiring needsin the 1980s and its

anticipated needs after 1993. As discussed, both OPM and the FDIC attributed the need for

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extensions of excepted employment in the 1980s to the proliferation of bank failures and the

unpredictability of future hiring needs. By the late 1980s, the number of bank failures decreased to

a steady, predictable flow. OPM decided to restrict the FDIC's Schedule A authority in 1993

"[b]ased upon the conditions that exist today in the banking world," i.e., the decline in new bank

failures and the reorganization ofthe FDIC'sliquidation procedures, which made it feasible to handle

a predictable number of liquidations with a steady work force. The 1993 revisions by no means

evidence an "acknowledgement" that the earlier hiring authority was illegal; instead, they reflect a

response to changed circumstances, which OPM predicted as early as 1985.

In light ofthe unpredictable nature of bank closings, the immediacyofthe FDIC's employment

needs, and the inability to anticipate whether new bank closings in the area might erupt and require

additional employees, OPM reasonably could conclude that a competitive service requirement was

impracticable because it would hinder the FDIC's ability to liquidate banks efficiently during the

banking crisis of the 1980s. Consequently, OPM's authorization and extension of Schedule A

authority to the FDIC had ample support in the record and was not arbitrary and capricious, and the

district court properly granted summary judgment on NTEU's Administrative Procedure Act claim.

Nor do we find persuasive NTEU's contention that the district court erred by failing to

consider the legality of the 1993 regulations in granting summary judgment. NTEU's challenge to

the 1993 regulations is limited to OPM's refusal to convert incumbent Liquidation Grade positions

to competitive service positions. Contrary to NTEU's contention, this challenge is not "part and

parcel" of its original complaint, which focused on the legality of OPM's conclusion that competitive

examination of Liquidation Grade employees was impracticable. Instead, the dispute over the 1993

regulationsraises new legal and factual questions, such as whether conversion wasrequired by other

OPM regulations and whether, assuming OPM had discretion not to convert, its decision relied on

impermissible factors or was otherwise arbitrary and capricious. Because the 1993 regulations do

not bear upon the claim in NTEU's initial complaint, the district court could properly conclude that

the complaint did not contest the legality of the December 1993 action.

NTEU's alternative contention, that the district court abused its discretion in denying the

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4Thus, we need not reach NTEU's challenge to the denial of the motion to compel production

of the full administrative record underlying the 1993 modification. 

motion to amend the complaint to add a direct challenge to the 1993 revisions, is also unavailing.

This court's review is limited to inquiring whether the refusal to allow an amendment was "based on

a valid ground." See Gaubert v. Federal Home Loan Bank Bd., 863 F.2d 59, 69 (D.C. Cir. 1988);

see also Fed. R. Civ. Proc. 15(a). Although "[l]eave to amend should ordinarily be freely granted to

afford a plaintiff "an opportunity to test his claim on the merits,' the Supreme Court has noted that

when the amendments would serve no purpose, the court is on solid ground in denying a motion for

leave to amend." Gaubert, 863 F.2d at 69 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

Here, because the 1993 regulations do not affect the legality of OPM's decision to extend the FDIC's

Schedule A authority during the banking crisis of the 1980s, the amendment would not strengthen

NTEU's original claim. Id. To the extent NTEU sought to add new claims based on OPM's refusal

to convert Liquidation Grade positions into competitive service positions, the district court did not

abuse its discretion in denying the amendment, which bore "only tangential relationship" to the

original claim. Cf. Anderson v. USAir, Inc., 818 F.2d 49, 57 (D.C. Cir. 1987). NTEU suffered no

prejudice by the denial because it can file an independent challenge to the 1993 regulations. Id.; see

also United States Labor Party v. Oremus, 619 F.2d 683, 692 (7th Cir. 1980).4

Accordingly, because the record demonstrates that OPM was not arbitrary and capricious in

extending the FDIC's Schedule A hiring authority during the banking crisis of the 1980s, and the

district court did not abuse its discretion in denying the NTEU's motion to amend its complaint, we

affirm the grant of summary judgment and the order denying the motion to amend.

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