Opinion ID: 2709451
Heading Depth: 2
Heading Rank: 2

Heading: Claims against HRSA

Text: 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 the decision 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 Citizens was 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 agree- 2 Citizens failed to argue this point in the district court. See Citizens Health Corp. v. Sebelius, 2012 WL 5985592, at . 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, 71112 (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.