Opinion ID: 195836
Heading Depth: 2
Heading Rank: 1

Heading: Regulation Valid When Promulgated

Text: 11 Our standard of review is very deferential. In enacting OBRA, Congress explicitly delegated to HHS the authority to set the figure for the automobile resource exemption; the states could exempt only so much of the family member's ownership interest in one automobile as does not exceed such amount as the Secretary may prescribe. 42 U.S.C. Sec. 602(a)(7)(B)(i) (Supp. V 1993) (emphasis added). No standard was legislatively set to guide the Secretary in prescribing the exemption. Where the delegation of authority is this complete, a court can overturn the regulation only if it is arbitrary, capricious, or manifestly contrary to the statute. Chevron v. Natural Resources Defense Council, 467 U.S. 837, 844, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984); see 5 U.S.C. Sec. 706(2)(A) (1988). 12 If Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. 13 Chevron, 467 U.S. at 843-44, 104 S.Ct. at 2782; see McDonald v. Secretary of Health and Human Serv., 795 F.2d 1118, 1122 n. 5 (1st Cir.1986). A regulation will be arbitrary and capricious where: 14 the agency relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. 15 Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867, 77 L.Ed.2d 443 (1983). In reviewing a regulation, the court may not substitute its own judgment for that of the agency. Rather, the court must defer to the agency if the agency's findings have a rational basis and the regulation is reasonably related to the purposes of the enabling legislation. Bowman Transp., Inc. v. Arkansas-Best Freight Sys., 419 U.S. 281, 290, 95 S.Ct. 438, 444, 42 L.Ed.2d 447 (1974); Conservation Law Found. v. Secretary of the Interior, 864 F.2d 954, 957-58 (1st Cir.1989). As this is an appeal from summary judgment, review of the district court's determination is de novo. Gaskell v. Harvard Coop. Soc'y, 3 F.3d 495, 497 (1st Cir.1993). 16 In setting the regulation in 1982, the Secretary relied almost exclusively upon a study of food stamp recipients 6 conducted in 1979. 7 The study purported to show that approximately 96 percent of food stamp recipients who owned an automobile had an equity value in that automobile of under $1,500. The Secretary reasoned that the food stamp survey provided an adequate picture of the equity ownership of AFDC recipients, since there was a substantial overlap in the populations of food stamp and AFDC recipients. Moreover, the percentage may even have been greater than 96 percent in the AFDC population, since food stamp recipients are, on average, more affluent than AFDC recipients. The Secretary explained: 17 We chose $1,500 as the maximum equity value for an automobile on the basis of a Spring 1979 survey of food stamp recipients. Data from that survey suggest that 96 percent of all food stamp recipients who own cars had equity value in them of $1,500 or less. In that the Federal maximum limit should be set within the range of the vast majority of current recipients and given that the food stamp population tends to be, on average, more affluent than AFDC recipients, this limit appears reasonable and supportable. 18 47 Fed.Reg. 5648, 5657-58 (1982). 19
20 Plaintiffs argue that the regulation, even when first adopted in 1982, was arbitrary and capricious because the Secretary, in considering only whether the vast majority of current recipients fell within the new limit, failed to consider other important factors in setting the $1,500 limit. Plaintiffs concede that OBRA was enacted primarily to reduce cost and limit the number of AFDC recipients, but argue that the court must also look to AFDC's broader purposes of promoting employment and fostering self-sufficiency. See 42 U.S.C. Sec. 601 (1988); Shea v. Vialpando, 416 U.S. 251, 253, 94 S.Ct. 1746, 1750, 40 L.Ed.2d 120 (1974). In light of these purposes, plaintiffs read OBRA's delegation of authority to the Secretary to set the automobile resource exemption as indicating that Congress intended to allow each recipient to retain a safe, reliable vehicle. According to plaintiffs, the Secretary was obliged to consider such factors as: (1) the costs of used cars; (2) regional conditions that impact transportation needs; (3) the importance of vehicles in enabling families to become self-sufficient. In considering only whether the vast majority of AFDC recipients would be affected by the new figure, plaintiffs argue, the Secretary promulgated a regulation that was inconsistent with congressional intent. See State Farm, 463 U.S. at 43, 103 S.Ct. at 2866. 21 We do not agree. We have little to add, on this point, to the opinion of the Eighth Circuit and to the opinion of the district court in Falin, 776 F.Supp. 1097, on which the Fourth Circuit rested its judgment. Falin, 6 F.3d at 207. OBRA delegates to the Secretary, and to no one else, the unqualified authority to prescribe the amount of the automobile resource exemption. 42 U.S.C. Sec. 602(a)(7)(B)(i) (Supp. V 1993). Congress made no express provision for the standards that the Secretary was to apply when establishing the amount of the automobile exemption. Nowhere in the statute did Congress require the Secretary to ensure to all AFDC recipients the right to a safe and reliable vehicle, or to pay special attention to the other policy objectives urged by plaintiffs. Congress left it to the Secretary to decide what policies should be given priority when figuring the exemption. 22 The plain purpose of OBRA, moreover, was to cut costs by limiting the number of AFDC recipients to only those who were most needy. 8 To that end, Congress cut the overall resource limit in half, from $2,000 to $1,000. At the same time, the value of the automobile, previously completely exempted, would now be limited by regulation. S.Rep. No. 139, 97th Cong., 1st Sess. 503 (1981), reprinted in 1981 U.S.C.C.A.N. 396, 769-70. The $1,500 figure the Secretary adopted, while consistent with OBRA's cost-cutting purpose, insofar as it placed a cap on the exemption, was not exceptionally restrictive at the time it was adopted; the Secretary calculated that it would exempt as many as 96 percent of then-current AFDC recipients. This effect would appear less draconian than the effect of Congress's halving the overall resource limit, from $2,000 to $1,000. 23 After the regulation was promulgated, Congress itself twice considered and twice rejected any increase in the Secretary's $1,500 automobile resource limit. 9 While nonaction by Congress is ordinarily a dubious guide, see Brown v. Gardner, --- U.S. ----, ----, 115 S.Ct. 552, 557, 130 L.Ed.2d 462 (1994), it may become significant where proposals for legislative change have been repeatedly rejected, see Bob Jones Univ. v. United States, 461 U.S. 574, 599-601, 103 S.Ct. 2017, 2032-34, 76 L.Ed.2d 157 (1983). The failed legislative attempts since 1982 to increase the automobile exemption plainly suggest that the regulation as written was not inconsistent with congressional intent. See United States v. Rutherford, 442 U.S. 544, 554 n. 10, 99 S.Ct. 2470, 2476 n. 10, 61 L.Ed.2d 68 (1979) ([O]nce an agency's statutory construction has been fully brought to the attention of the public and the Congress, and the latter has not sought to alter that interpretation although it has amended the statute in other respects, then presumably the legislative intent has been correctly discerned.) (quotations omitted). 24 Plaintiffs read too much from the broader purposes of AFDC, and not enough from the specific purpose of OBRA, which was the legislation that actually authorized the Secretary to set the regulation. See Brewer v. Madigan, 945 F.2d 449, 457 (1st Cir.1991) (The enabling statute ... is the principal source of relevant factors to be considered by the agency in promulgating regulations.) (citations omitted). Even if, as plaintiffs argue, the existence of the automobile resource exemption implies that Congress intended AFDC recipients to be able to retain some kind of vehicle, 10 Congress explicitly delegated the authority to the Secretary to determine exactly how much of a person's equity in the vehicle to exempt. See Frederick, 862 F.Supp. at 43-44; Gorrie v. Bowen, 809 F.2d 508, 516 n. 12 (8th Cir.1987) (appeals to the 'fundamental purpose' of the AFDC program ... are unhelpful where Congress has initiated a change in policy (citations omitted)); see also Rodriguez v. United States, 480 U.S. 522, 526, 107 S.Ct. 1391, 1393, 94 L.Ed.2d 533 (1987) ([I]t frustrates rather than effectuates legislative intent simplistically to assume that whatever furthers the statute's primary objective must be the law.) In setting the limit to include what he believed to be the vast majority of AFDC recipients at that time, the Secretary acted consistently with OBRA and not inconsistently with the broader purposes of AFDC. Accord Champion, 33 F.3d at 967; Falin, 776 F.Supp. at 1101. 25
26 We find little merit in plaintiffs' assertion that the food stamp study did not provide a rational basis for the Secretary's establishment of the $1,500 automobile equity limit. Plaintiffs argue that the food stamp and AFDC programs are two distinct programs with different eligibility requirements. They further insist that there is no support in the administrative record for the Secretary's assumption that there is extensive overlap in the two populations or that the food stamp population is, on average, more affluent than the AFDC population. Plaintiffs say that food stamp recipients were already subject to an automobile-asset limitation at the time of the study, while AFDC recipients at that time were not subject to such a limitation. Thus, the fact that 96 percent of food stamp recipients owning an automobile had equity of less than $1,500 may simply have been a function of the food stamp program's preexisting equity limits. 27 Micro-arguments of this sort, however, ignore the breadth of the Secretary's discretion. The Secretary was not required to base her regulations only on perfect information. Rather, the Secretary's policy choice needed only to be rational. See State Farm, 463 U.S. at 43, 103 S.Ct. at 2866; Frederick, 862 F.Supp. at 42 (stating that the issue is not whether the Secretary used the best available source to develop a regulation, but whether the Secretary's conduct was reasonable). 28 The Secretary here acted reasonably in relying on the food stamp study. Accord Champion, 33 F.3d at 966; Falin, 776 F.Supp. at 1101. It is undisputed that the food stamp study provided the best data available at the time. The study was based on a 1979 survey which collected asset-ownership data from a statistically valid sample of 11,300 households of all income levels nationwide. Paul Bordes, who provided technical support to the Secretary while the regulation was being promulgated, noted in his deposition that equity data on aid recipients were extremely hard to come by. None of the comments at that time suggested any other sources of data. 11 There was evidence, moreover, of overlap in the food stamp and AFDC populations. Bordes noted that in 1981, approximately 80 percent of AFDC recipients also received food stamps. And the assumption that AFDC recipients were on the whole more affluent than food stamp recipients was a judgment within the expertise of the agency to make. That assumption was undisputed at the time. We, therefore, believe the Secretary acted rationally in relying on the food stamp study as a rough approximation of automobile equity ownership among AFDC recipients. 29 Plaintiffs also point to alleged statistical flaws in the study itself. Plaintiffs argue that the 96 percent figure (for food stamp recipients who owned automobiles and had equity in those automobiles under $1,500) was based on a computational error, since it erroneously included the percentage of the recipients who did not own cars at all. Plaintiffs suggest (and the Secretary now concedes) that a more accurate figure would be 90 percent. Plaintiffs also argue that the figure assumes that, within the 17 percent of recipients for whom there were no automobile-equity data available, the distribution of automobile equity ownership was identical to that within the population for which data were available--i.e. that there was no systematic bias in the reporting of vehicle equity. Plaintiffs argue that this assumption is unwarranted, since it is reasonable to suppose that those owning higher valued automobiles would be more likely to fail to provide information on automobile equity, for fear of disqualifying themselves from the program. 12 Plaintiffs argue that these statistical flaws rendered the Secretary's reliance on the study unreasonable. 30 We agree with the Eighth Circuit in Champion and the Fourth Circuit in Falin that, even assuming that the more accurate figure is 90 percent, the study still provided a rational basis for the Secretary's finding that the $1,500 limit was within the range of the vast majority of current recipients, since 90 percent is still a vast majority. 47 Fed.Reg. at 5657; see Champion, 33 F.3d at 967 n. 5; Falin, 776 F.Supp. at 1100, aff'd per curiam, 6 F.3d 207. Although plaintiffs suggest that systematic bias in underreporting was possible, they have presented no evidence that it actually occurred. Where there was no evidence of bias, it was not unreasonable for the Secretary to assume for the purposes of calculation that no such bias existed. Thus neither of these alleged statistical weaknesses rendered the study an insufficient basis for the Secretary's regulation. 31
32 Plaintiffs also argue that the Secretary failed adequately to respond to comments and criticisms when promulgating the regulation. Plaintiffs contend that, during the rulemaking process, the Secretary received numerous comments critical of the $1,500 limit. Some of these comments criticized the relevance and validity of the food stamp study. In response, the Secretary wrote: 33 We stand by our original position. The choice of $1,500 as the maximum equity value for an automobile was based on the data from a Spring 1979 survey of food stamp recipients. We regard the limit of $1,500 equity value in an automobile as reasonable and supportable. 34 47 Fed.Reg. at 5657. Plaintiffs argue that this was not a meaningful response to the comments, and that the regulation therefore violated the notice and comment provisions of the Administrative Procedure Act, 5 U.S.C. Sec. 553(c) (1988) 13 . 35 We do not agree. Only a dozen comments were submitted on the automobile resource exemption, of which ten took issue with the $1,500 amount. Each of these comments was fairly brief, criticizing the figure as generally too low. Only one of them suggested an alternative to the $1,500 figure. None of them suggested any alternative data upon which to base the figure. Given the nature of the comments, we do not find the Secretary's brief response so inadequate as to violate Sec. 553(c). Accord Champion, 33 F.3d at 966 n. 4; cf. Brewer, 945 F.2d at 457 n. 7. 36 We conclude, therefore, that the $1,500 automobile exemption was neither arbitrary nor capricious when promulgated.