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. e du/thir dc ir c uit_1996/5UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 95-3699

____________

COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF PUBLI C WELFARE, Appellant

v.

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVI CES; UNITED

STATES OF AMERICA

___________________

ON APPEAL FROM THE UNITED STATES DISTRICT C OURT

FOR THE WESTERN DISTRICT OF PENNSYLVANI A

____________________

(D.C. Civil No. 94-01689)

Argued September 30, 1996 Before: ALITO and McKEE, Circuit Judges
, and GREEN Senior District Judge*

(Opinion Filed: December 4, 1996)

____________________

OPINION OF THE COURT

____________________

John A. Kane
Chief Counsel Jason W. Manne (Argued)
Assistant Counsel Office of Attorney General of Pennsylvania Department of Public Welfar e 300 Liberty Avenue 1403 State Office Building Pittsburgh, PA 15222

Counsel for Appellant

* The Honorable Clifford Scott Green, Senior Distri ct Judge for the Eastern District of Pennsylvania, sitting by de signation.Frank W. Hunger

Assistant Attorney General
Frederick W. Thieman United States Attorney

Barbara C. Biddle Irene M. Solet (Argued) Attorneys, Appellate Staff United States Department
Of Justice Civil Division, Room 3617 10th & Pennsylvania Avenue, N.W. Washington, D.C. 20530-0001

Counsel for Appellees

ALITO, Circuit Judge: This case arises out of a debt of $800,885 that the Pennsylvania Department of Public Welfare ("Pennsyl vania") owed the United States Department of Health and Human Se rvices ("HHS"). HHS notified Pennsylvania of the debt in June 1991. (App. 235a-239a) Pennsylvania initially balked at having to pay, but eventually, in June 1993, paid the entire princ ipal amount. (App. 16a) The dispute that remains is over the in terest on the debt. HHS charged Pennsylvania interest at the pri vate consumer rate of 15.125%, which was significantly higher tha n the rate usually charged by federal agencies to states, the current value of funds rate of 8%. Pennsylvania refused to pay t he allegedly exorbitant interest and brought this action, claimi ng primarily: (a) that HHS's use of the private consumer rate was not only arbitrary and capricious but inconsistent with the common law and (b) that HHS did not follow the proper procedures i n enacting its interest rate regulation. The district court found Pennsylvania's substantive claims to be without mer it and its procedural challenges to be time-barred. We affirm

. I. Until January 1987, HHS had a policy of no t charging
states interest on disallowances under the Aid to F amilies with Dependent Children program ("AFDC"). (Dist. Ct. Op . at 2) On January 5, 1987, however, HHS repealed the existing regulation and put in place a new policy under which all of it s debtors, including states and local governments, were to be charged a rate of interest based on the prevailing private consume r rates. (App. 202a & Dist. Ct. Op. at 2) HHS's action was in response to congressional enactment of the Debt Collection Act of 1982 ("DCA"), which aimed at increasing the efficiency o f government
efforts to collect debts owed to the United States. See S. Rep. No. 378, 97th Cong. 378, 2d Sess. (1982), reprinted in 1982 U.S.C.C.A.N. 3377. Although the DCA expressly excl uded states and local governments from its ambit, see 31 U.S.C. § 3701 (1983), it did not limit HHS's ability to assess in terest underthe common law, see United States v. Texas, 507 U.S . 529, 530

(1993). Accordingly, with certain exceptions not a t issue here, HHS's regulations called for the imposition of inte rest on debts owed by states and local agencies in the same way a s it was imposed on other debtors. (App. 202a) See 52 Fed. Reg. 261 (1987) (codified at 45 C.F.R. § 30.13). Under the HHS regulations at issue, intere st on debts
owed to HHS accrues from the date notice of the deb t is mailed to the debtor, unless the debt is paid within 30 days of the notice. See 45 C.F.R. § 30.13(a). The regulations provide that the rate to be charged shall be the "rate of interest as fix ed by the Secretary of the Treasury after taking into conside ration private consumer rates of interest." Id. The regulations do not provide for administrative review of the imposition of interest, but allow the Secretary to waive the interest if: ( i) the debt or interest "resulted from the agency's error, action or inaction . . . and [is] without fault on the part of the debto rs" or (ii) collection "would defeat the overall objectives of a Departmental program." 45 C.F.R. § 30.13(h). At issue is interest on a sum of $800,885 that was owed by Pennsylvania to HHS. HHS gave Pennsylvania noti ce of the debt in June 1991. (App. 235a-239a) Pennsylvania, howe ver, chose not to reimburse the federal government within 30 days, which would have enabled it to avoid any and all interest payme nts. (App. 10a) By the time Pennsylvania paid the principal a mount in July 1993, $232,173.22 in interest charges had accumulat ed, and interest was continuing to accrue at 15.125% per an num. (App. 14a & Dist. Ct. Op. at 2). Pennsylvania sought administrative review of the interest assessment, but HHS's Departmental Appeals Board informed it that it lacked jurisdiction to review t he interest assessment. (App. 18a-21a) The Board noted, howev er, that the form of administrative review available to Pennsylv ania was a request to the Secretary for a waiver of interest, but Pennsylvania had not sought such a waiver. (App. 2 1a). Pennsylvania commenced this action in Octo ber 1994, alleging that HHS's imposition of interest on it wa s arbitrary and violative of the common law. (App. 9a-13a) Pe nnsylvania also attacked the procedures by which HHS promulgat ed its interest rate regulations as inadequate. (App. 9a- 13a) In February 1995, HHS responded with a motion for part ial dismissal and summary judgment, arguing that Pennsylvania's s ubstantive challenges were meritless and that its procedural c hallenges were time-barred. The district court granted the motion , adopting as its own opinion the Report and Recommendation of Ch ief Magistrate Judge Mitchell. Pennsylvania appeals.

II. A. Challenges to the Application of the Reg ulation Pennsylvania makes three attacks on HHS's application of the interest rate regulation. It argues: (i) th at charging it interest without making an individualized determina tion as to the appropriateness of the charge was violative of the common law; (ii) that charging it the private consumer rate as opposed to the current value of funds rate was arbitrary and viola tive ofgovernment-wide policies; and (iii) that the use of a rate

certified by the Treasury for a different federal p rogram contravened HHS's own regulations on how the applic able interest
rate should be determined. (i) Violation of the Common Law Pennsylvania argues that HHS's interest ra te regulation violates the common law because it fails to require a case-bycase determination of whether or not interest is ap propriate and, if so, how much interest should be charged. We fin d no support for this argument in the law that Pennsylvania cite s. The parties do not dispute that the federa l government is permitted to charge states interest on their deb ts. SeeUnited States v. Texas, 507 U.S. 529, 530 (1993) (United States has a federal common law right to collect prejudgme nt interest on debts owed to it by the states). Instead, the disp ute is over the process by which interest can be charged. Penn sylvania points to the Supreme Court's decision in Texas as support for its argument. Specifically, Pennsylvania points to language in Texas that says that "courts," in awarding prejudgm ent interest, are to "weigh competing federal and state interests ." Id. at
536. But Texas does not help Pennsylvania. In that case,
where there was an "individual case" in front of a district court, the Supreme Court said that the court consid ering the question "should weigh the federal and state intere sts involved." Id. at 533. But the Court neither said, nor implie d, anything about whether or not an agency could pre-specify th e rate it was going to charge states that were delinquent on a pa rticular class

of debts. Pennsylvania asserts that the general hold ing of Texaswas that Congress, in enacting the DCA, intended to hold sta tes to a more lenient standard than private debtors. H owever, the mere fact that Congress intended to exempt states f rom mandatorily having to pay at least the minimum rate specified by the DCA does not show that Congress either intended to exempt states from interest payments altogether, an argume nt rejected in Texas, see id. at 539, or that Congress intended to impose on federal agencies the costly task of an individualiz ed consideration of the appropriateness of the rate to be applied in every case where a state is delinquent on its payme nts. Cf. id. at 537-38 ("[I]t does not at all follow that becaus e Congress did not tighten the screws on the States, it therefore intended that the screws be entirely removed"). In sum, Pennsylvania has not given us a ba sis to read into the federal government's common law right to c harge the states interest the costly and cumbersome obligatio n that a federal agency make an individualized determination as to the appropriate interest rate in every case where a sta te owes a debt. To impose such additional costs on federal a gencies would undermine their right to charge interest by signifi cantly increasing the cost of charging such interest. In addition, the regulation in question al lows the state to ask for a waiver of the interest charged. It states: Waivers. The Secretary may waive collecti ngall or part of interest, administrative co sts

or late payment penalties, if-

(1) The debt or the charges resulted from the agency's error, action or inaction (other than normal processing delays) and without fault on the part of the debtors; or

(2) Collection in any manner authorized un der this regulation would defeat the overall objectives of a Departmental program. 45 C.F.R. § 30.13(h). Even assuming that there is an obligation on the part of a federal agency to allow room for discretionary determinations as to how much interest to charge, t he waiver provision would appear to satisfy such a requiremen t. Under Section 30.13(h)(2), the Secretary has the ability to choose not to charge any or part of the interest due (especial ly if the state presents a compelling case). 45 C.F.R. § 30. 13(h)(2). Pennsylvania, however, has explicitly stipulated th at it does not meet the requirements for a waiver, (Pennsylvania B r. at 10) even though, to us, the class of cases that could fit in to the waiver category appears very broad. (ii) Arbitrary and Inconsistent with Government-Wid e Policies Pennsylvania argues that government-wide p olicies require the use of the current value of funds rate, and that HHS acted arbitrarily and capriciously in charging the private consumer rate. We are not empowered to substitute our judgment for that of the agency unless its action was irrati onal, not based on relevant factors, or outside statutory aut hority. SeeCitizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971). We find none of those conditions present h ere. The government-wide policy specific to int erest rates
is set out in the Federal Claims Collection Standar ds, which state in relevant part:
The rate of interest assessed shall be the

rate of the current value of funds to the U.S. Treasury (i.e., the Treasury tax and loan account rate), as prescribed and published by the Secretary of the Treasury in the Federal Register and the Treasury Fisc al Requirements Manual Bulletins annually or quarterly, in accordance with 31 U.S.C. [§ ] 3717. An agency may assess a higher rate if it reasonably determines that a higher rat e is necessary to protect the interests of t he
United States. 4 C.F.R. § 102.13 (emphasis added). The language of the regulation unambiguous ly allows HHS to charge a rate higher than the current value of f unds rate, so long as it is reasonably in the government's intere st. In this case, HHS charged the market rate of interest. Tha t is almost per se reasonable, but is doubly so where the agenc y in question is seeking to provide its debtors with incentives t o clear theirdebts promptly.

(iii) Inconsistent with Internal Regulations Pennsylvania's next argument is that HHS's charging it the private consumer rate was inconsistent with HHS 's own regulations authorizing that the private rate be ch arged. At issue is the language in the regulation that "the S ecretary shall charge an annual rate of interest as fixed by Secre tary of the Treasury after taking into consideration private co nsumer rates of interest prevailing on the date that the Departm ent becomes entitled to recovery." 45 C.F.R. 30.13(a)(1). Her e, HHS did use a rate fixed by the Secretary of the Treasury. But Pennsylvania argues that HHS was not permitted to use a rate det ermined in conjunction with a different federal program. Pennsylvania's argument is unavailing. We owe "substantial deference to an agency's construction of its own regulation." Elizabeth Blackwell Health Center For Women v. Knoll, 61 F.3d 170, 183 (3d Cir. 1995), cert. denie d, 116 S. Ct. 816 (1996) (citing Martin v. Occupational Safety an d Health Review Comm'n, 499 U.S. 144, 150-51 (1991)). We "m ust defer to the Secretary's interpretation unless an `alternati ve reading is compelled by the regulation's plain language or by other indications of the Secretary's intent at the time o f the regulation's promulgation.'" Thomas Jefferson Univ . v. Shalala, 114 S. Ct. 2381, 2386-87 (1994) (quoting Gardebring v. Jenkins, 485 U.S. 415, 430 (1988)). The plain language of t he regulation here does not compel Pennsylvania's suggested readi ng. Nor has Pennsylvania pointed to any indications of the Secr etary's intent at the time of promulgation that support its readin g. Relying on an approximation of the private interest rate on th e market that was determined for a different federal program was reasonable under the regulation. We cannot say that HHS viola ted its own regulation. B. Procedural Challenges to the Regulati on Statute of Limitations Pennsylvania asserts that HHS's interest r ate regulation, adopted over eight years ago, is invali d because it was adopted pursuant to inadequate notice and comme nt procedures. The applicable statute of limitations for civil act ions against
the United States under the Administrative Procedur es Act ("APA") is six years. See, e.g., Dougherty v. United State s Navy Bd., 784 F.2d 499, 500-01 (3d Cir. 1986). The regulatio n at issue was promulgated in final form in January 1987, and this suit was brought in October 1994. Hence, Pennsylvania has t o demonstrate
that the statute of limitations was tolled for its claim to survive. We agree with the district court that Pen nsylvania
failed this task. The essence of Pennsylvania's argument tha t the statute
of limitations has not run is that its claim was no t "ripe" until less than six years before suit was filed. Ripenes s is largely a prudential doctrine designed "to prevent the courts , through avoidance of premature adjudication, from entanglin g themselves in abstract disagreements over administrative polic ies, and also to protect the agencies from judicial interference until an
administrative decision has been formalized and its effects feltin a concrete way by the challenging parties." Abb ott

Laboratories v. Gardner, 387 U.S. 136, 148-49 (1967 ). In conducting a ripeness analysis, the court must cons ider whether or not the question is purely legal and easy to res olve, whether the agency or court has an interest in postponing r eview, and the extent to which the parties will be caused hardship if review is withheld. See Eagle-Picher Indus., Inc. v. EPA, 75 9 F.2d 905, 915 (D.C. Cir. 1985); Erwin Chemerinsky, Federal Ju risdiction, §§ 2.4.2 & 2.4.3, 116-125 (1994); Cf. Artway v. Attorn ey General of N.J., 81 F.3d 1235, 1247 (3d Cir. 1996). Pennsylvania provides us with little assis tance in evaluating its ripeness challenge. Its opening bri ef does not even mention the term "ripeness," let alone make a substantial argument as to why its claim was not ripe at the ti me of promulgation of the regulation. Instead, Pennsylva nia's opening brief merely states conclusorily that suit could no t have been realistically brought at the time of promulgation o f the regulation because there was no "substantial threat " of "real or immediate" harm at that time. (Pennsylvania Br. at 23) The first time that Pennsylvania mentioned the term "ri peness" was in its reply brief, but once again that brief contains nothing except a conclusory assertion that there was no sub stantial threat of real and immediate enforcement of the reg ulation at the time of its promulgation. (Pennsylvania Reply Br. at 9) These conclusory assertions are not enough. We hold the ripeness argument waived. See Laborers' Int'l Union of N. Am. v. Foster Wheeler Corp., 26 F.3d 375, 398 (3d Cir.) ("An issu e is waived unless a party raises it in its opening brief, and for those purposes `a passing reference to an issue . . . wil l not suffice to bring that issue before this court.'" (citation omitted) (ellipsis in original)), cert. denied, 115 S. Ct. 3 56 (1994); Service Employees Int'l Union v. Local 1199 N.E., 7 0 F.3d 647, 653 n.7 (1st Cir. 1995) (argument mentioned in pass ing, but not squarely argued, is waived). In any event, Pennylvania's ripeness chall enge fails on its merits. As a threshold matter, we note that th e ripeness challenge here arises in an unusual setting. Penns ylvania's argument isn't the typical argument that its claim is ripe today and should be adjudicated. Rather, the argument is that Pennsylvania's claim was not ripe in 1987, when HHS 's interest rate regulation was promulgated. In effect, Pennsy lvania wants us to conduct a hypothetical retrospective ripeness analysis. As a general matter, courts are not well suited to dec ide hypothetical questions about what they might have d one in the past. See Eagle-Picher, 759 F.2d at 914. If court s were to "routinely conduct retrospective ripeness analyses where a late petitioner offers no compelling justification for n ot having filed his claim in a timely manner, [it]. . . would wreak havoc with the congressional intention that repose be bro ught to final agency action." Id. In this case, however, we can make the rip eness determination easily. The Abbott Laboratories ripe ness test involves consideration of: (I) the hardship to the parties of withholding consideration and (II) the fitness of t he issues forjudicial decision. 387 U.S. at 149; Pic-A-State Pa ., Inc. v.

Reno, 76 F.3d 1294, 1298 (3d Cir. 1996). We evalua te these factors in light of the circumstances that were in existence at the time of the promulgation of HHS's interest rate regulation. (I) Hardship to the Parties The central question here is the extent to which denying the plaintiff judicial review would cause i t hardship. See Chemerinsky, Federal Jurisdiction § 2.4.2, 116- 23. We conclude that had Pennsylvania made its procedural challenges at the time of the promulgation of the regulation, a f ederal court would have determined that postponing review would cause Pennsylvania hardship. At the outset, we note that Pennsylvania d oes not dispute that it had notice of HHS's regulations mor e than six years before October 1994, when the instant suit wa s commenced. HHS had proposed the repeal of its former regulatio n in the Federal Register in 1985 and had received public co mment on its proposed rule changes that same year. (Dist. Ct. O p. at 3 n.2) Further, in April 1988, HHS issued an Action Transm ittal Memorandum to all state agencies administering prog rams under Title IV of the Social Security Act (which covers A FDC), alerting them that, in accordance with its regulations, HHS was going to charge interest on disallowed paid claims for which states had received federal financial participation. (Dist. C t. Op. at 3 n.2). Pennsylvania argues that its claim was not ripe at the time of promulgation of the regulation because it h ad no outstanding debts at the time and hence was not imm ediately subject to an interest charge. In essence, the cla im is that there was no hardship at the time of the promulgati on of the regulation. That is like saying that an increase i n the interest rate charged for late payments on a credit card pre sents no hardship to the customer because the customer has n ot yet made a delayed payment under the new and higher interest r ate. We disagree with that premise. Instead, we think it m ore likely that the customer will have to change his behavior at the time he
is informed of the rate hike in order to avoid the risk of having to pay the higher interest rate and hence will suff er a direct hardship at the time of the rate hike. The fact th at the new, higher interest rate is a contingent future charge does not preclude it from causing harm to the party at the t ime it is put into place. Cf. Riva v. Massachusetts, 61 F.3d 100 3, 1012 (1st Cir. 1995) (fact that harm from adoption of a plan negatively affected payments that plaintiff was to receive man y years into the future did not preclude adjudication of claim a t the current time; the plan concretely harmed plaintiff in creat ing uncertainty regarding his future income stream); cf . also Lorance v. AT & T Technologies, Inc., 490 U.S. 900, 906-08 (1989) (in suit challenging a seniority system that allegedly discriminated against women, Court ruled that plaintiffs could su e at the time the system was put into place without waiting for t he system's adverse effects because the very adoption of the pl an imposed a concrete harm on the plaintiffs). Had Pennsylvania challenged the regulation at the timeof its promulgation, that would have eliminated the uncertainty

as to its obligations thereunder. The elimination of this uncertainty as to whether or not it could be charge d a rate of interest as high as the rate applicable on the priv ate consumer market would have made it easier for Pennsylvania t o decide how long it wanted to delay on payments it owed HHS. C oncurrently,
HHS would also have benefitted from the resolution of uncertainty regarding the validity of its regulation. (II) Fitness of the Issues for Resolution Once again we look retrospectively to the time of promulgation of the regulation. The question is wh ether the
issues were fit to be resolved at the time and whet her the agency or court would have had an interest in postponing r eview. SeeEaglePicher, 759 F.2d at 915; see also Artway, 81 F.3d a t 1249 ("The more that the question presented is purely on e of law, and
the less that additional facts will aid the court i n its inquiry, the more likely the issue is to be ripe, and vice-v ersa.") Pennsylvania's challenge would have been to whether HHS followed the proper notice and comment procedures in the ena ctment of its regulation. All the facts pertaining to such a cha llenge would have been fully developed and available at the time of the promulgation of the regulation. Delay would not ha ve allowed the development of additional facts, and would only hav e served to
make the relevant facts harder to retrieve. In sum, the "injury" to Pennsylvania occur red at the time of the alleged procedural improprieties, and P ennsylvania was "aggrieved" at the time of promulgation of the regulation. See JEM Broadcasting v. FCC, 22 F.3d 320, 326 (D.C. Cir. 1994); Shiny Rock Mining Corp. v. United States, 906 F.2d 1362, 1365-66 (9th Cir. 1990). Hence, Pennsylvania's procedural challenge should have been brought within six years of the pr omulgation of the regulation. C. Exclusion of Documents and Incomplete R ulemaking

Record In addition to challenging HHS's notice an d comment procedures, Pennsylvania argues that the district c ourt erred in excluding certain documents from the record on the ground of privilege and in granting summary judgment on an in complete rulemaking record. From what we can discern, the d ocuments Pennsylvania seeks pertain to the rulemaking proces s and not the application of the rule. Pennsylvania has failed t o apprise us of how these documents or a more complete rulemakin g record would change or influence our conclusions as to HHS's app lication of the regulation. Therefore, we see no basis for rev ersing the
decision of the district court.

III.
The decision of the district court is affi rmed. Costs are awarded to the appellee, the United States.