In the

United States Court of Appeals

For the Seventh Circuit

No. 12-3924

CITIZENS HEALTH CORPORATION,

Plaintiff-Appellant,

v.

KATHLEEN SEBELIUS, Secretary of

Health and Human Services,et al.,

Defendants-Appellees.

Appeal from the United States District Court for the 

Southern District of Indiana, Indianapolis Division.

No. 1:12-cv-00748-SEB-TAB — Sarah Evans Barker, Judge.

ARGUED MAY 28, 2013 — DECIDED AUGUST 2, 2013 

Before EASTERBROOK, Chief Judge, and WILLIAMS and

HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge. Defendant Health and Hospital

Corporation of Marion County, Indiana (“Health and Hospital”) is a municipal corporation that operates a major hospital

andnumerous health care facilities. This appeal arises fromone

of those facilities, a federally funded health center that Health

and Hospital operated in partnership with plaintiff Citizens
2 No. 12-3924

Health Corporation (“Citizens”) to serve the medically

underserved population in Indianapolis. Thehealth center was

funded in part by a federal grant awarded to Health and

Hospital by the federal Health Resources and Services Administration (“HRSA”), which is part of the Department of Health

and Human Services. In 2012, after Citizens and Health and

Hospital had a falling out, Health and Hospital decided to

terminate its partnership with Citizens and relinquish the

federal grant, which still had several years of funding remaining.

In response, Citizens filed this suit against Health and

Hospital, HRSA, and other defendants in federal district court

in an effort to retain the grant funds. The district court granted

summary judgment in favor of all defendants, concluding that

Citizens had no contractual, statutory, or constitutionally

cognizable interest in the grant, and that Health and Hospital

and HRSA were free to terminate the grant without Citizens’

approval. Citizens appeals this decision, and we affirm. 

I. Factual and Procedural Background

A. Section 330 Grants

Section 330 of the Public Health Services Act makes federal

funding available to qualifying health centers that provide

primary health care services to medically underserved populations. 42 U.S.C. § 254b. An entity becomes eligible for section

330 grant funds by submitting an application to HRSA. In

addition to establishing that the entity provides health care to

a medically underserved population area, the entity must

satisfy a number of additional requirements. See 42 U.S.C.

§ 254b(k)(3). Of particular relevance to this case, a qualified
No. 12-3924 3

entity must be able to demonstrate its financial responsibility,

§ 254b(k)(3)(D), and must establish a governing board composed of a majority of individuals who are being served by the

health center, § 254b(k)(3)(H). Entities that satisfy these

requirements and receive section 330 grant funds are designated federally qualified health centers.

Federally qualified health centers may be public or not-forprofit entities. Since public entities sometimes have difficulty

establishing an independent patient-controlled board, HRSA

permits public entities to form health centers with a private

not-for-profit co-applicant. See Health Resources and Services

Administration, Policy Information Notice 1999-09,Implementation of the Balanced Budget Act Amendment of the Definition of Federally Qualified Health Center Look-Alike Entities

for Public Entities (1999). Under a co-applicant structure, the

public agency partners with a co-applicant to satisfy the

statutory requirements.The co-applicant typically provides the

patient-controlled board to oversee the provision ofhealthcare

services while the public agency retains fiscal and general

policy-making authority. The entities have flexibility to

determine their responsibilities, but HRSA requires that the

entities memorialize the agreed allocation of responsibilities in

a written contract. Id. at 6-7. This contract is known as a coapplicant agreement.

B. Citizens and Health and Hospital

Plaintiff Citizens is an Indiana not-for-profit corporation.

Since 1974, Citizens has operated a health center that provides

primary health care services to the medically underserved

population in Indianapolis. In 1994, Citizens began receiving
4 No. 12-3924

section 330 grant funds as a federally qualified health center. In

2001, however, Citizens ran into managerial and financial

difficulties. These difficulties threatened Citizens’ eligibility for

the section 330 grant. 

To continue operating the health center with federal

funding, Citizens partnered with Health and Hospital, which

is again a public entity. Health and Hospital’s health centers

were all controlled by a central board. This meant that Health

and Hospital was not eligible to operate a federally qualified

health center on its own because it did not satisfy the section

330 requirement of having the center controlled by a board

composed of a majority of health center patients. Health and

Hospital and Citizens were therefore natural complements for

each other. Citizens was able to provide the necessary patientcontrolled governing board and Health and Hospital the

financial management responsibility.

As required by HRSA, Health and Hospital and Citizens

formalized this relationship in a written co-applicant agreement. Under the terms of the agreement, Citizens was responsible for the general governance of the health center, providing

primary care medical services, and achieving several specified

performance improvement goals. Health and Hospital was to

provide financial management, approve the health center’s

budget, develop sound management procedures, assist the

Citizens’ board, and “Receive, manage, and disburse” the

section 330 grant funds, for which Health and Hospital had

“ultimate fiscal accountability ... .” HRSA approved the

arrangement and awarded the section 330 grant to Health and

Hospital as grantee. The parties later renewed both the grant

and the co-applicant agreement. 
No. 12-3924 5

In February 2011, the fourth of these co-applicant agreements expired. Unlike in the past, Citizens and Health and

Hospital did not immediately enter into a new agreement.

Health and Hospital maintains that it was reluctant to enter

into a new agreement because, among other reservations, it

was concerned about Citizens’ financial health and stability,

and Citizens had failed to provide it with the financial statements necessary to alleviate its concerns. Because HRSA

requires the public entity and the co-applicant to operate the

center under a co-applicant agreement, HRSA sent both

Citizens and Health and Hospital notice that the health center

was no longer in compliance with the grant program requirements and would lose eligibility for the grant funds unless they

entered into a new co-applicant agreement. 

On September 23, 2011, Citizens and Health and Hospital

entered into a new co-applicant agreement. Unlike the previous multi-year agreements, though, the new agreement was to

be in effect only through February 28, 2012. The agreement

provided options for renewal for up to four successive oneyear terms, through the end of the current grant period. The

new co-applicant agreement, however, imposed no obligation

on either party to renew the agreement. The new agreement

explicitly provided that the agreement could be renewed only

by “written notice sent by either Party and written acceptance

by the other.”

After Health and Hospital and Citizens signed the new

agreement, their relationship did not improve. Health and

Hospital remained troubled by Citizens’ accounting and

management practices, and proposed restructuring the

relationship to give Health and Hospital greater control over
6 No. 12-3924

the health center staff and the provision of medical services.

Citizens was not receptive to the proposed changes. HRSA

visited the center during November 2011 and attempted to

resolve the disagreements, but the attempt at mediating the

dispute proved unsuccessful. 

Health and Hospital then concluded that the current

arrangement was unsatisfactory. Health and Hospital told

Citizens that it would not be renewing the co-applicant

agreement and that it would accordingly relinquish the section

330 grant to HRSA when the agreement expired. Health and

Hospital also notified HRSA on February 14, 2012 that it

intended to relinquish the grant on November 30, 2012. (The

lag between expiration of the agreement and termination of the

grant was to prevent disruption of medical services.)

Citizens, fearing loss of the grant funds and invoking

federal question and supplemental jurisdiction, filed this suit

on June 1, 2012 seeking to enjoin the defendants from terminating the section 330 grant. Citizens asserted constitutional and 1

contractual claims. Citizens alleged that HRSA’s decision to

permit Health and Hospital to relinquish the grant was both

contrary to law and a violation of Citizens’ procedural due

process rights. Citizens also alleged that Health and Hospital’s

In addition to Health and Hospital and HRSA, Citizens sued the 1

Department of Health and Human Services and its Secretary. The claims

against these defendants are indistinguishable from the claims against

HRSA, so for simplicity we refer only to HRSA. Citizens also sued James

Minor and Matthew Gutwein, the board chair and executive director,

respectively, of Health and Hospital. Citizens has not appealed the grant

of summary judgment in favor Minor and Gutwein. 
No. 12-3924 7

release of the grant breached the co-applicant agreement. The

district court granted summary judgment in favor of all

defendants, finding that Citizens had no right to the grant

under federal law and that the co-applicant agreement did not

prevent Health and Hospital from relinquishing the grant after

the contract expired. Citizens Health Corp. v. Sebelius, No. 1:12-

cv-00748, 2012 WL 5985592 (S.D. Ind. Nov. 29, 2012). Citizens

appeals. We have jurisdiction under 28 U.S.C. § 1291. 

II. Analysis

Summary judgment is appropriate if there are no genuine

issues of material fact such that the moving parties are entitled

to judgment as a matter of law. Fed. R. Civ. P. 56(a). We review

the district court’s grant of summary judgment de novo, and we

give the non-moving party the benefit of reasonable inferences

that could be drawn from the record. See Good v. Univ. of

Chicago Med. Ctr., 673 F.3d 670, 673 (7th Cir. 2012). 

Citizens appeals the grant of summary judgment in favor

of both HRSA and Health and Hospital. Citizens contends that

the district court erred in determining that Citizens itself was

not the section 330 grant recipient. As a result, Citizens

maintains, the court incorrectly concluded both that HRSA

acted lawfully when it accepted Health and Hospital’s request

to relinquish the grant and that the Health and HospitalCitizens co-applicant agreement did not prohibit Health and

Hospital from relinquishing the grant after the agreement

expired. We find no error.
8 No. 12-3924

A. Section 330 Grantee

Before turning to the specific claims, we begin with Citizens’ contention that it was the grantee, which is the foundation for all its claims. Citizens’ argument confuses its recent

position as co-applicant for the health center with its earlier

legal status as the section 330 grantee. They are not identical.

Recall that a health center with a co-applicant structure must

memorialize the division of responsibilities in a written coapplicant agreement. In this case, the co-applicant agreement

provided that Health and Hospital was solely responsible for

receiving the grant funds. Consistent with the agreement,

HRSA treated Health and Hospital as the grantee. The undisputed facts show that Health and Hospital was the sole

grantee. 

The notice of grant award provides clear evidence that

HRSA considered Health and Hospital to be the sole grantee.

The grant award contains a box captioned “Grantee Name and

Address.” Health and Hospital’s is the only name listed in the

box. Citizens suggests that we should not take this seriously

because Citizens and Health and Hospital agreed that Health

and Hospital would have its name on the grant only as a

formality to comply with regulations. Citizens points to no

evidence of such a side agreement, and the co-applicant

agreement between Health and Hospital and Citizens belies

the conclusion that this was a meaningless formality. (Even if

there had been a side agreement, it would not bind HRSA

without its consent.) 

We need not consider this possibility further, however,

because the co-applicant agreement demonstrates that the
No. 12-3924 9

parties understood that Health and Hospital would be in

charge of the grant. Section 2.2.4 of the agreement provided

that Health and Hospital was to “Receive, manage, and

disburse Section 330 grant funds” and “have ultimate fiscal

accountability for the Section 330 grant funds.” This language

does not suggest that Citizens had any authority over the

grant. Moreover, the “ultimate fiscal responsibility” language

tracks the definitionofgrantee in the federal regulations. When

a grant is made to a local government entity like Health and

Hospital, the regulations define the grantee as “the government to which a grant is awarded and which is accountable for

the use of the funds provided.” 45 C.F.R. § 92.3. The grant

award, the co-applicant agreement, and the regulations show

beyond dispute that Health and Hospital was the sole grantee. 

The conclusion that Citizens was not a grantee does not

mean that it was at Health and Hospital’s mercy for grant

funds. Rather it means Citizens’ entitlement to grant funds

existed only by contract with Health and Hospital. Section2.2.4

of the Health and Hospital-Citizens’ agreement provided such

an entitlement, though it was only a partial one. During the

agreement’s operation, Health and Hospital was to “ensure

that [Citizens] receives Section 330 grant funds for current

month costs.” For our purposes, though, the critical point is

that the agreement lasted for a shorter period than the grant,

providing the conditions for this dispute. We turn now to the

substance of Citizens’ claims against HRSA and Health and

Hospital.
10 No. 12-3924

B. Claims against HRSA

Citizens invokes the Administrative Procedure Act

(“APA”) to set aside HRSA’s decision to terminate the grant on

Health and Hospital’s request. Citizens argues that thedecision

was “not in accordance with law ....” See 5 U.S.C. § 706(2)(A).

Our review of APA claims is deferential to the agency. We will

defer to the judgment of the agency unless its action was

“arbitrary, capricious, or not in accordance with the law.”

Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123, 1129 (7th Cir.

1988). Citizens argues that the agency’s decision to accept

relinquishment of the grant was unlawful both because it did

not comply with the applicable regulations and because it

deprived Citizens of property without constitutionally adequate process. Regardless of other obstacles these argument

might encounter, both fail for a common reason: Citizens was

not the grantee, and HRSA therefore could not have been

required to afford it any process under the regulations or the

Due Process Clause before terminating the grant. We address

first the regulatory claim and then the constitutional claim. 

1. HRSA’s Compliance with Applicable Regulations

Section 330 grants to local governmental entities are

governed by 45 C.F.R. part 92. The regulations permit the

grantee to relinquish the entire grant by providing the awarding agency with written notice that sets forth the reasons for

termination and the effective date of termination. 45 C.F.R.

§ 92.44(b). There is no requirement that the grantee provide

notice to other entities that may be affected by termination or

that HRSA consult these entities before terminating the grant.
No. 12-3924 11

The regulations therefore empower HRSA to accept the

relinquishment of a grant at the grantee’s request.

The district court correctly applied 45 C.F.R. part 92 to

HRSA’s action and determined that section 92.44 permitted

HRSA to accept Health and Hospital’s relinquishment of the

grant. Because Health and Hospital was the grantee, the

regulations allowed HRSA to terminate the grant at Health and

Hospital’s request after Health and Hospital provided the

required notice. § 92.44(b). Health and Hospital provided

HRSA with the required notice on February 14, 2012, and

HRSA lawfully terminated the grant in response. The district

court applied the proper law and rendered the proper result.

Citizens’ arguments to avoid this logic all rely on the

mistaken theory that Citizens was the grantee. Citizens

contends that the district court erred by applying 45 C.F.R. part

92 of the regulations instead of 45 C.F.R. part 74 because the coapplicant agreement referred to part 74. According to Citizens,

the mention of part 74 in the co-applicant agreement required

HRSA and the district court to apply part 74. The only difference between part 92 and part 74 relevant to this dispute is that

part 74 governs grants to private entities while part 92 governs

grants to state and local governmental entities. Citizens is not

clear about the import of this alleged error; presumably the

significance is that if part 74 governed, it would mean that

Citizenswas the grantee so that HRSA could accept relinquishment of the grant only from Citizens. 

This argument, however, is simply a reframing of the

argument that Citizens is the grantee, and we have already

rejected that argument. Moreover, the co-applicant agreement
12 No. 12-3924

did not purport to alter the governing law. Section 7.1 of the

agreement provided that the “agreement shall be governed

and construed in accordance with applicable federal and state

laws, regulations, and policies, including but not limited to ... 

45 C.F.R. Part 74 ... .” This provision simply means that the

parties intended the applicable laws to govern. Because Health

and Hospital was the grantee, part 92 is the applicable law and

the regulations permitted HRSA to terminate the grant at

Health and Hospital’s request. 

2. Constitutional Due Process

Citizens also argues that HRSA’s decision to terminate the

grant without giving it notice and an opportunity to object

violated its constitutional due process rights. To prevail on this

claim, Citizens must show that HRSA deprived it of a constitutionally protected liberty or property interest and that the

deprivation occurred without constitutionally adequate

process. See Doe v. Heck, 327 F.3d 492, 526 (7th Cir. 2003). The

threshold question in any due process challenge is whether a

protected property or liberty interest actually exists. See

American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 59 (1999);

Cole v. Milwaukee Area Technical Coll. Dist., 634 F.3d 901, 904

(7th Cir. 2011). To have a protectable property interest in a

benefit such as a grant, a person “must have more than a

unilateral expectation of [the claimed interest]. He must,

instead, have a legitimate claim of entitlement to it.” Board of

Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972). A

legitimate claim of entitlement may arise from a contract, a

statute, or a regulation, provided the source of the claim is

specific enough to require the provision of the benefit on a
No. 12-3924 13

nondiscretionary basis. Khan v. Bland, 630 F.3d 519, 528-29 (7th

Cir. 2010). Citizens’ procedural due process claim fails at this

first step. Citizens has failed to offer any evidence indicating

that it had a legitimate claim of entitlement to the grant or that

it was deprived of a protected liberty interest.2

Citizens first contends that federal law provides it with a

claim of entitlement to the grant as grantee. We have already

rejected this argument because only Health and Hospital, as

sole grantee, had an arguable entitlement to the grant funds

from HRSA. There was therefore no basis for Citizens to

conclude that federal law provided it with a legitimate claim of

entitlement to the grant. 

Next, Citizens attempts to locate a property interest in

Indiana employment law. The argument appears to be that the

grant created an employment arrangement in which Citizens

had an expectation of employment throughout the grant term,

and that this expectation is considered a property interest

under Indiana law. Apart from other potential problems with

this argument—the contractual relationship between Citizens

and Health and Hospital would not be “employment” under

Indiana law—the argument fails because Citizens has not

identified any statute, regulation, or portion of the grant that

gave it a continued expectation of employment or any other

contractual relationship arising out of the grant funds. The

closest thing Citizens can point to is the co-applicant agreeCitizens failed to argue this point in the district court. See Citizens Health 2

Corp. v. Sebelius, 2012 WL 5985592, at *8. It is unclear, however, whether the

district court based its decision on waiver, so we review Citizens’ arguments on this point for the sake of completeness.
14 No. 12-3924

ment. But any entitlement that arose from this agreement

would be provided by Health and Hospital under the agreement,

not by HRSA under the grant. Citizens has not alleged and

could not allege that HRSA was bound by the contract, which

had expired in any event. Citizens was not the grantee, and the

applicable regulations do not provide a co-applicant with any

entitlement to the grant funds. Citizens therefore did not have

an ascertainable term of employment with the federal government or with Health and Hospital pursuant to the grant. 

Third, Citizens argues that it has a protected liberty interest

in its reputation and that the termination of the grant harmed

its reputation. Assuming that Citizens will in fact suffer

reputational harm, not all harms to reputation violate constitutionally protected interests. In Paul v. Davis, 424 U.S. 693, 711-

12 (1976), the Supreme Court held that state action that

stigmatizes a person’s reputation is not a deprivation under the

Due Process Clause unless the deprivation alters a previously

afforded right or status. Such status need not be supported by

an affirmative law, such as the freedom a person over twentyone enjoys to purchase liquor in a liquor store, see Wisconsin v.

Constantineau, 400 U.S. 433 (1971) (finding deprivation of

liberty interest when effect of government action was to

prohibit person from purchasing liquor), but the right or status

“must take concrete forms and extend beyond mere

reputational interests ... .” Omosegbon v. Wells, 335 F.3d 668,

675 (7th Cir. 2003). Once again, because Citizens was not the

grantee, HRSA’s acceptance of the relinquishment of the grant

did not deprive Citizens of a legal right or status, a necessary

prerequisite to a finding of a reputational injury that might

violate the federal Constitution.
No. 12-3924 15

Citizens finds no support for its position in Southern Mutual

Help Ass’n, Inc. v. Califano, 574 F.2d 518, 524 (D.C. Cir. 1977),

where the D.C. Circuit held that agency regulations required

the agency to provide a grant recipient a hearing before

terminating a grant under a similar Public Health Service Act

program. In so deciding, the court did not reach the question

of whether the reputational harm from the termination of a

grant constituted a liberty interest protected by the Due

Process Clause. The court simply decided that such harm was

sufficient to convey standing under the APA, a different

question and one that does not speak to the issue in this case.

Southern Mutual Help differs from this case in two other

important respects. First, unlike Citizens, the organization in

Southern Mutual Help was itself a current grantee. Second, the

grant was terminated based on accusations that the organization was “violating departmental regulations, misusing grant

funds, and engaging in activities that create conflicts of

interest.” Id. Neither of these conditions is present here.

Citizens was not the grantee, and there was no determination

by HRSA of any wrongdoing on the part of Citizens that might

have implicated the sort of reputational interests at issue in

Southern Mutual Help.

C. Claims Against Health and Hospital

We now turn to Citizens’ breach of contract claim against

Health and Hospital. Citizens argues that the district court

erred in granting summary judgment by overlooking disputed

issues of material fact. We find the plain text of the co-applicant

agreement unambiguously permitted Health and Hospital to

relinquish the grant when the contract expired. The district
16 No. 12-3924

court therefore did not err by granting summary judgment in

favor of Health and Hospital. 

The co-applicant agreement makes clear that Health and

Hospital was the party responsible for administering the

section 330 grant. The provisions of the agreement that relate

to the grant provided that Health and Hospital was to “Receive, manage, and disburse” the grant funds. And Health and

Hospital was obligated to “ensure that [Citizens] receives

Section 330 grant funds for current month costs.” In sum, the

agreement provided that Health and Hospital was responsible

for securing and disbursing the grant funds to Citizens every

month. The agreement did not obligate Health and Hospital to

disburse funds over the entire course of the grant. The contractual obligation lasted for only the duration of the contract.

When the contract expired, so did Health and Hospital’s

obligation.

The contract also imposed no obligation on either party to

renew (or attempt to renew) the contract when it expired. The

terms on the duration of the agreement are clear. Section 19.1.1

provided that the “Agreement shall be in effect March 1, 2011

– February 28, 2012.” And section 19.1.2 provided that the

agreement may be renewed, but renewal would have required

a written offer by one party and a written acceptance by the

other. No provision in the contract required the parties to

renew the agreement or even to hold discussions before

declining to renew. If the agreement was not renewed, section

19.2.1 provided that the agreement “shall terminate immediately ... .” When the agreement terminated, so did the parties’

obligations, including Health and Hospital’s obligation to

disburse the grant funds to Citizens. Thus the contract did not
No. 12-3924 17

prohibit Health and Hospital from declining to renew the

contract or from relinquishing the grant when the agreement

expired on February 28, 2012. The undisputed facts thus show

that Health and Hospital did not breach the contract when it

relinquished the grant. 

Citizens also suggests that Health and Hospital breached

the contract by failing to mediate the dispute that led it to

decline to renew the contract and relinquish the grant. Article

8 of the contract provided that in the event of a dispute, “the

Parties shall attempt formal mediation, if they mutually agree

to do so.” Citizens suggests that once the parties began

mediation with HRSA, there was an obligation to complete it

before Health and Hospital could terminate the grant. Quite

apart from other problems with this argument, the issue

became moot when the contract expired. Citizens does not

contend that the alleged failure to mediate caused it injury

beyond the termination of the grant, something that we have

already concluded Health and Hospital was within its rights to

do. Once the agreement expired, Health and Hospital was free

to relinquish the grant regardless of any arguable duty to

mediate. The contract did not create a duty to mediate before

declining to renew the agreement; Health and Hospital simply

exercised its right not to renew the contract.

Because the relevant language of the contract is clear, no

disputed issues of material fact precluded summary judgment

in favor of Health and Hospital. Though Citizens makes a

rather barebones assertion that certain affidavits in the record

reveal conflicting accounts of the parties’ expectations about

the grant, the relevant terms of the contract are so clear that we

need not wade into such extrinsic evidence indicating the
18 No. 12-3924

parties’ understandings of the agreement. See Louis & Karen

Metro Family, LLC v. Lawrenceburg Conservancy Dist., 616 F.3d

618, 622 (7th Cir. 2010) (applying Indiana law; extrinsic

evidence not admissible when contract is unambiguous). For

this same reason, there was no reason for the district court to

grant Citizens leave to take additional depositions.

The judgment of the district court is AFFIRMED.