Opinion ID: 3010252
Heading Depth: 2
Heading Rank: 2

Heading: Civil Service Regulations

Text: The Commonwealth argues that even if the appointment of Appeals Board members was constitutional, their appointment 2 Section 2104, in relevant part, states as follows: (a) For the purpose of this title, officer, except as otherwise provided by this section or when specifically modified, means a justice or judge of the United States and an individual who is-- (1) required by law to be appointed in the civil service by one of the following acting in an official capacity-- (A) the President; (B) a court of the United States; (C) the head of an Executive agency; or (D) the Secretary of a military department; (2) engaged in the performance of a Federal function under authority of law or an Executive act; and (3) subject to the supervision of an authority named by paragraph (1) of this section, or the Judicial Conference of the United States, while engaged in the performance of the duties of his office. 5 U.S.C. § 2104 22 violated relevant civil service laws (except for the chairperson whose appointment is not challenged on these grounds). Accordingly, in the Commonwealth's estimation, the Board had no statutory power to act. Defendants contend that this argument has been waived since the Commonwealth never raised it before the Board. In addition, defendants argue that the Secretary's decision to appoint excepted service attorneys to the Appeals Board is a matter of nonreviewable agency discretion. The Supreme Court has held that an issue is nonreviewable only in rare instances where the relevant statute is drawn so that a court would have no meaningful standard against which to judge the agency's exercise of discretion. Lincoln v. Vigil, 113 S.Ct. 2024, 2030-31 (1993). Here, we can examine the relevant statutes and regulations to determine whether they grant the Secretary the appointment authority she utilized. Moreover, we retain the discretion to hear issues not raised in earlier proceedings when special circumstances warrant an exception to the general rule that would otherwise result in a waiver. State of New Jersey Dept. of Ed. v. Hufstedler, 724 F.2d 34, 36 n.1 (3d Cir. 1983). Such special circumstances exist here because the Office of Personnel Management explicitly advised Pennsylvania that non-SES Appeals Board positions were in competitive service. (App. at 13a). The Commonwealth learned that OPM's statement was erroneous only after suit was filed in the district court. Accordingly, it would be inappropriate to allow the Commonwealth's reliance on the OPM's erroneous information to prejudice the Commonwealth to the extent of not now considering 23 the merits of its position. Thus, we will reach the merits of the Commonwealth's position. Civil service is defined as all Federal appointive positions except uniformed services. 5 U.S.C. § 2101. The civil service is composed of the competitive service, the excepted service, and the senior Executive Service. See 5 U.S.C. §§2102, 2103. All Executive Branch appointive positions not requiring Senate confirmation and not in the Senior Executive Service are to be in the competitive service unless specifically excepted from the competitive service by or under statute. 5 U.S.C. § 2102. Congress authorized the President, when warranted by conditions of good administration, to make necessary exceptions of positions from the competitive service within the executive branch. 5 U.S.C. § 3302. Subsequently, the President delegated this authority to the Office of Personnel Management (OPM). Exec.Order No. 10577, 5 C.F.R. § 6.1(a). OPM thereafter divided excepted service positions into three categories: Schedules A, B, and C. 5 C.F.R. § 6.2. Schedule A, which allows exception of positions other than those of a confidential or policy-determining character for which it is impracticable to examine, 5 C.F.R. § 213.3101, specifically includes attorneys. 5 C.F.R. § 213.3102(d). Here, the parties have stipulated that the Schedule A attorney appointment authority was utilized to appoint the challenged members of the Appeals Board. Accordingly, the essential dispute is straightforward. In effect, defendants contend that Schedule A specifically provides for the appointment of attorneys to the Appeals Board 24 without regard to the competitive service requirements of the civil service laws. The Commonwealth disagrees. It believes that members of the Appeals Board cannot be hired pursuant to the attorney appointment power of Schedule A since, in reality, these attorneys function as administrative law judges. See Appellant's Brief at 28-30. For the following reasons, we cannot agree with the Commonwealth. Schedule A imposes two limitations on the attorney appointment authority. Under the OPM regulation, such authority is limited to positions other than those of a confidential or policy-determining character for which it is impracticable to examine. 5 C.F.R. §§ 213.3101. Here, the Commonwealth does not question the OPM's determination that attorneys may be appointed under Schedule A authority. Rather, the Commonwealth challenges the Board members' designation as attorneys. Accordingly, we must return to the function of the Board. The Appeals Board reviews final written decisions in a narrowly specified range of disputes arising from HHS programs. See 45 C.F.R. Pt. 16, App. A. In resolving these disputes, Board members are authorized to engage in diverse legal and quasijudicial tasks. Some of these tasks include examining witnesses and evidence, holding hearings and informal conferences, assisting parties to submit relevant information and to rule on requests and motions. See 45 C.F.R. § 16.13. However, contrary to the Commonwealth's assertions, no authority exists for the proposition that Appeals Board members function as administrative law judges. Congress granted administrative law judges (ALJ) 25 the authority to conduct formal hearings in accordance with sections 556 and 557 of the Administrative Procedure Act, (APA).3 By contrast, the Appeals Board has no authority to review any dispute for which a formal hearing is required under the APA. 45 C.F.R. Pt. 16, App. A, § F. Instead, the Board provides a mechanism for reviewing the category of HHS disputes not otherwise designated by Congress for formal adjudication pursuant to either 5 U.S.C. § 554, Title VII or some other statutory scheme. Id. Accordingly, we must reject any attempt to analogize the Board members to administrative law judges. We believe the Schedule A attorney appointment power clearly extends to the challenged members of the Appeals Board. Nothing in the relevant statutory or regulatory scheme restricts the Secretary's appointment of attorneys, under Schedule A, to perform the tasks assigned to the Appeals Board. Title 5 U.S.C. § 3106 merely restricts the employment of an attorney or counsel for the conduct of litigation. Since 5 C.F.R. § 213.3102(d) specifically exempts the challenged members from the competitive service requirements of the civil service laws, we conclude that the Board was not divested of its authority to act. Accordingly, we affirm the district court's holding that the Secretary's appointment of excepted service attorneys to the 3 5 U.S.C. § 3105. The hearing sections of the APA, 5 U.S.C. §556-557, are applicable, with exceptions, when a rule is required by statute to be made on the record after an agency hearing; when an adjudication is required by statute to be determined on the record after an agency hearing; or when the requirement of a hearing is read into a statute to preserve its constitutionality. 26 Appeals Board did not run afoul of civil service statutes and regulations. E. Program Income The Commonwealth contends that even if the Appeals Board members were lawfully appointed, the Board and the district court erred in finding that the JCP fee is program income which must be excluded from reimbursement under 42 U.S.C. § 655(a)(1). Section 655(a)(1) provides, in pertinent part, that: In determining the total amounts expended by any State during a quarter, for purposes of this subsection, there shall be excluded an amount equal to the total of any fees collected or other income resulting from services provided under the plan approved under this part. The Commonwealth claims that the phrase resulting from services provided under the plan approved under this part is ambiguous. Appellant's Brief at 31. One possible reading of the resulting from language is that it qualifies both fees collected and other income. A second possible reading of the language applies the doctrine of the last antecedent to limit the resulting from language so that it qualifies only the other income prong of § 655(a). Id. HHS has promulgated 45 C.F.R. § 304.50, entitled Treatment of Program Income. That regulation states: The IV-D agency must exclude from its quarterly expenditure claims an amount equal to: (a) All fees which are collected during the quarter under the Title IV-D State Plan; and 27 (b) All interest and other income earned during the quarter resulting from services provided under the Title IV-D plan. 45 C.F.R. § 304.50. The Appeals Board construed the regulation as restating the statute's requirement. The Board reasoned that, [i]n order to be collected under the plan, fees must necessarily be collected from services provided under the plan. Appeals Board Decision p. 6. Thus, in its estimation, the proper focus is on the receipt of income from grant related activities, not on how the funds are spent. Moreover, the Board suggested that the underlying reason for this appeal appears to be the IV-D agency's frustration with the fact that the income from the fees is not available for use for IV-D program purposes, yet treating the fees as [program] income reduces the amount of [federal financial participation] available. Appeals Board Decision p. 5 n.4 The Commonwealth accurately describes this practical problem that results from the Board's interpretation of program income. However, as the Board appropriately noted, [t]his problem results from the Commonwealth of Pennsylvania's own action of earmarking the funds for JCP purposes. . .and could be remedied by state legislative action. Id. The district court found the Board's construction of 45 C.F.R. § 304.50 and 42 U.S.C. §655(a)(1) to be reasonable and therefore entitled to deference. The parties dispute the extent to which the Appeals Board's construction of 42 U.S.C. § 655(a) and 45 C.F.R. § 304.50 is entitled to deference. The defendants, citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 28 (1984) and Thomas Jefferson Univ. v. Shalala, 114 S. Ct. 2381, 2386 (1994), claim we owe deference to an administrative agency's construction of a statute and its implementing regulations. The Commonwealth cites to cases holding that when a Board functions as an adjudicatory tribunal and does not make rules or formulate policy, its interpretation is not entitled to any special deference. See Martin v. Occupational Safety & Health Review Commission, 499 U.S. 144 (1991) (reviewing court should defer to Secretary of Labor when Secretary and Board furnish reasonable but conflicting interpretations of ambiguous regulation promulgated by the Secretary under the Occupational Safety and Health Act); Sharondale Corp. v. Ross, 42 F.3d 993 (6th Cir. 1994) (Department of Labor Benefits Review Board acts as adjudicatory tribunal and does not make rules or formulate policy, and thus its interpretation of regulation is not entitled to any special deference). We need not decide the level of deference owed to an HHS Appeals Board decision, because the Board's interpretation of 45 C.F.R. § 304.50(a) and 42 U.S.C. §655(a)(1), withstands even plenary review. Section 655(a)(1) is clear on its face. However, to the extent the regulation detracts from the clear import of this statute, the statute must, of course, prevail. See McComb v. Wambaugh, 934 F.2d 474, 481 (3d Cir. 1991) ([I]n any conflict between a statute and a regulation purporting to implement the statutes provision, the regulation must, of course, give way.); 60 Key Centre, Inc. v. Administrator of General Services Admin., 47 F.3d 55, 58 (2d Cir. 1995) (When . . . a regulation operates 29 to create a rule out of harmony with the statute under which it is promulgated, the regulation is considered a nullity.). However, even if the regulation here has unintentionally clouded an otherwise unambiguous statute, we do not believe that the statute and regulation conflict. See LaVallee Northside Civic Assoc. v. Virgin Islands Coastal Zone Management Commission, 866 F.2d 616 (3d Cir. 1989) (before disregarding a regulation a court must first attempt to reconcile a seemingly discordant statute and regulation). As the Appeals Board reasoned, fees collected . . . under the Title IV-D plan must necessarily result from services provided under the [Title IV-D] plan. Appeals Board Decision at 6. Therefore, under both the statute and the regulation, funds which would not have been generated absent a state's Title IV-D services constitute program income not subject to federal reimbursement. Here, the JCP fee is directly generated by IV-D services. The Commonwealth collects an extra $5 from either the parent requesting the IV-D services or the parent legally obligated to pay IV-D child support when such a case is filed. This fact is not negated merely because the Commonwealth itself has chosen to use the JCP fee in a manner that does not enhance the Child Support Enforcement program in Pennsylvania. Clearly, the Commonwealth may allocate income derived from the JCP fee in any manner it chooses. However, under this statutory scheme, its decision as to how to utilize the income from the fee has no bearing on federal reimbursement for Title IV-D services. 30 The Commonwealth raises an additional argument, relying on 45 C.F.R. § 74.41(c). That regulation pre-dated 42 U.S.C. §655(a)(1). When the district court granted summary judgment for the defendants, §74.41(c) (which governs all HHS grant programs) provided, in pertinent part, that: The following shall not be considered program income: (1) Revenues raised by a government recipient under its governing powers, such as taxes, special assessments, levies and fines . . . 45 C.F.R. § 74.41(c). The Commonwealth contends that the JCP fee is a special assessment within the meaning of § 74.41(c)(1) and therefore need not be considered program income. However, §74.41(c)(1) does not apply when it is inconsistent with Federal statutes [or] regulations. 45 C.F.R. § 74.4(a). Since we uphold the Board's interpretation of 45 C.F.R. § 304.50(a) and 42 U.S.C. § 655(a)(1), § 74.41(c)(1) is inapplicable here because it directly conflicts with § 304.50(a) and § 655(a)(1). Accordingly, we affirm the district court's conclusion that the JCP fee is program income as defined by 42 U.S.C. § 655(a)(1) and 45 C.F.R. § 304.50(a), and thus, may not be reimbursed with federal funds. F. New Evidence The Commonwealth's final contention is that we should remand so that the Appeals Board can consider new evidence uncovered in HHS's belated response to the Commonwealth's Freedom of Information Act (FOIA) request. Appellant's Brief at 36. 31 We will treat the Commonwealth's motion for a remand to the Appeals Board as a motion for a new trial based on newly discovered evidence, and therefore, review the district court's denial of the Commonwealth's motion for an abuse of discretion. See Dunn v. Hovic, 1 F.3d 1362, 1364 (3d Cir.), cert. denied, U.S. , 114 S.Ct. 650 (1993) (motion for new trial reviewed for an abuse of discretion). The purported new evidence is a 1988 policy memorandum (PIQ-88-5) issued by HHS' Office of Child Support Enforcement. The memorandum states that interest earned by North Carolina county courts on child support collections, before being forwarded to the state's IV-D agency, is not program income because the county courts are not under cooperative agreements with the State IV-D agency, and thus, are not bound by state and federal IV-D regulations. The district court denied the remand motion because PIQ-88- 5 can be distinguished from the facts presented here, as DPW administers its Title IV-D program through cooperative agreements with all of Pennsylvania's judicial districts, and the JCP fee is collected by the Pennsylvania Domestic Relations Section of the Court of Common Pleas. We agree. The Commonwealth also suggests that a previously undisclosed 1989 Federal Register statement is new evidence that warrants a remand. However, by definition, a Federal Register notice is public. We are at a loss to understand how such public information should be viewed as new evidence justifying a remand merely because the Commonwealth's initial research apparently somehow failed to find it. 32 The district court acted well within its discretion in refusing to remand this case to the Appeals Board. PIQ memoranda are fact-specific policy documents, not intended to apply broadly, and are due less weight than regulations. Simply stated, they are not binding precedent on the Appeals Board. Finally, even if PIQ-88-5 had some precedential value, we agree with the district court's conclusion that the case before us is distinct and the memorandum was, therefore, of little value to the Appeals Board. Accordingly, we affirm the district court's denial of the Commonwealth's motion for a remand to the Appeals Board. 33