Court Opinion

ID: 2964882
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:32:34.211239+00
Date Added: 2024-06-11T11:43:03.032512
License: Public Domain

USCA1 Opinion

	

                           UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT
                                ____________________
          No. 97-1054
                            PINE TREE MEDICAL ASSOCIATES,
                               Plaintiff - Appellant,
                                         v.
                   SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.,
                               Defendants - Appellees.
                                ____________________
                    APPEAL FROM THE UNITED STATES DISTRICT COURT
                              FOR THE DISTRICT OF MAINE
                     [Hon. Morton A. Brody, U.S. District Judge]
                                ____________________
                                       Before
                               Torruella, Chief Judge,
                           Campbell, Senior Circuit Judge,
                             and Boudin, Circuit Judge.
                                _____________________
               Michael A. Duddy, with whom Kozak, Gayer, & Brodek, P.A. was
          on brief for appellant.
               Allison 
                       C. 
                          Giles, Attorney, Civil Division, Department of
          Justice, with whom Frank 
                                    W. 
                                       Hunger, Assistant Attorney General,
          Jay P.  
                  McCloskey, United States Attorney, and       Anthony  
                                                                         J.
          Steinmeyer, Attorney, Civil Division, Department of Justice, were
          on brief for appellees.
                                ____________________
                                 September 16, 1997
                                ____________________

                    TORRUELLA, Chief 
                                     Judge.  Pine Tree Medical Associates
          ("Pine Tree") brought a suit for injunctive and declaratory relief
          against the Secretary of the Department of Health and Human
          Services ("the Secretary") and the Director of the Bureau of
          Primary Health Care (collectively, "HHS") challenging HHS's denial
          of Pine Tree's application requesting that Farmington, Maine be
          designated a "medically underserved population" ("MUP") under the
          Public Health Service Act ("PHSA"), 42 U.S.C. S 254b 
                                                              et seq.
                                                                      (1997
          Supp.). HHS had denied Pine Tree's MUP application after applying
          criteria and standards that were issued by HHS in June 1995 ("the
          1995 Guidelines"). Pine Tree contends that the standards in
          existence at the time that its application was first filed are the
          ones that should have been applied, and that Farmington merits MUP
          status under those standards. On appeal, Pine Tree repeats two
          legal arguments that were rejected, on summary judgment, by the
          district court: 1) that the 1995 Guidelines violated the notice and
          comment provisions of the Administrative Procedure Act ("APA"), 5
          U.S.C. S 553 (1996), and the PHSA, formerly codified at 42 U.S.C.
          S 254c(b)(4)(B) (1991) (subsequently repealed); and 2) that the
          application of the 1995 Guidelines to Pine Tree's May 18, 1995
          application was impermissibly retroactive. We find the first claim
          to be moot, and affirm the district court's holding on the
          retroactivity claim.
                                     BACKGROUND
                    The pertinent facts were stipulated below, and are
          reviewed in the district court's opinion.    See Pine  
                                                                 Tree  
                                                                       Med.
                                         -2-

          Assocs. v. 
                    Secretary of Health & Human Servs.
                                                     , 944 F. Supp. 38, 40-
          41 (D. Maine 1996). A brief overview will serve the purposes of
          this appeal. Pine Tree is a nonprofit corporation that provides
          primary health care services in Farmington, Maine. It sought MUP
          status for the low income population of Farmington in a May 18,
          1995 application to HHS. Pursuant to the PHSA, a health care
          provider that serves a MUP may qualify for substantial, cost-based
          reimbursement under Medicare and Medicaid programs.
                    The PHSA directs the Secretary to establish criteria and
          standards for determining whether to grant MUP status, and
          prescribes, 
                     inter 
                           alia, that one such criterion be "the ability of
          the residents of an area or population group to pay for health
          services."  See 42 U.S.C. S 254b(b)(3)(B) (Supp. 1997) (formerly
          codified at 42 U.S.C. S 254c(b)). In 1976, following notice and
          comment, regulations were adopted regarding the factors to be taken
          into consideration by the Secretary, and these regulations have
          been periodically revised by the HHS without opportunity for notice
          and comment. In 1994, the HHS issued, without notice and comment,
          Summary Procedures for MUP designation. It is not disputed that
          Farmington qualified for MUP designation under the 1994 Procedures.
                    The 1995 Guidelines, issued on June 12, 1995, again
          without notice and comment, revised the 1994 Procedures. At the
          time the 1995 Guidelines were issued, HHS had not yet acted on Pine
          Tree's May 18, 1995 application. Under the 1995 Guidelines, which
          altered the measurement of poverty levels by increasing the size of
          the overall population to be considered in the poverty calculus,
                                         -3-

          Farmington was found not to qualify for MUP designation, and Pine
          Tree's application was denied on June 22, 1995.
                    On August 4, 1995, Pine Tree filed a request for
          reconsideration, which the HHS denied on December 8, 1995. In an
          explanatory letter, HHS informed Pine Tree that because the 1995
          Guidelines "included a correction of analytic distortion with
          regard to how the poverty factor was determined," this revision was
          applied immediately to pending requests.    See Stipulated Facts
          q 16. 
                    On January 8, 1996, Pine Tree sued the defendants,
          seeking that the 1995 Guidelines be declared invalid for failing to
          comply with the notice and comment provisions of the APA and the
          PHSA and, in the alternative, seeking a declaration that the 1995
          Guidelines were impermissibly applied retroactively to Pine Tree's
          application. Pine Tree also sought an order enjoining defendants
          from applying the 1995 Guidelines and requiring HHS to designate
          Farmington a MUP based on the standards in effect at the time it
          filed the application.
                    On October 21, 1996, the district court held that under
          the notice and comment provision of the PHSA -- which has since
          been repealed by Congress
                                   -- the 1995 Guidelines were valid despite
          a lack of notice and comment, because they did not modify the HHS's
          initial 1976 regulation, and because the 1994 Procedures, which the
          1995 Guidelines did indeed modify, were not regulations. See 
                                                                       Pine
                              
            See infra.
                                         -4-

          Tree 
               Med. 
                    Assocs., 944 F. Supp. at 42. The district court also
          held that the 1995 Guidelines fell within the ambit of the APA's
          explicit exception to the notice and comment requirement for
          interpretive rules. Id. at 43; 
                                         cf. 5 U.S.C. S 553(b)(3). Finally,
          the district court held there were no valid retroactivity issues
          raised by the application of the 1995 Guidelines to Pine Tree's
          pending application.
                                     DISCUSSION
                    We review de novo a district court's grant of summary
          judgment.  Ionics v.  Elmwood 
                                        Sensors, 
                                                 Inc., 110 F.3d 184, 185
          (1st Cir. 1997).
          I. Mootness of Notice and Comment Claim
                    On appeal, Pine Tree does not argue that the 1995
          Guidelines are something other than "interpretive rules" under
          section 553(b)(3) of the APA, see Brief for Appellant at 9 ("The
          interpretive rule exception is not relevant to this case"), but
          rather argues that the interpretive rule exception is inapplicable
          because, under the APA, an exception to the interpretive rule
          exception exists where "notice or hearing is required by statute."
          5 U.S.C. S 553(b). Thus, Pine Tree's claim turns on the existence
          of any notice and hearing requirement that is applicable to the
          1995 Guidelines under the PHSA. Unfortunately for Pine Tree,
          Congress deleted the notice and comment provision from the former
          PHSA, which was codified at 42 U.S.C. S 254c(b)(4)(B),   when it
                              
           Section 254c(b)(4)(B) formerly stated:
                                         -5-

          enacted the Health Centers Consolidation Act, Pub. L. No. 104-299,
          effective October 1, 1996.   See 42 U.S.C. S 254c historical and
          statutory notes (Supp. 1997). In the wake of this repeal, there is
          no language under the PHSA relating to notice and comment for
          modifications of the MUP criteria.
                    Thus, as a practical matter, even were we to disagree
          with the district court today, and conclude that the 1995
          Guidelines were invalid for failing to provide for notice and
          comment pursuant to the former PHSA, as the law is today HHS can
          simply re-issue identical guidelines without notice and comment.
          Given the fact that the briefs, arguments of counsel, and the
          record in this case reveal a firm belief on the part of HHS that
          the 1995 Guidelines corrected a significant error in the previous
          1994 Procedures, we do not doubt that, were the 1995 Guidelines
          struck down, Pine Tree would find itself no closer to its desired
          end, namely the application of the 1994 Procedures to its MUP
          application. This practical matter becomes crystal clear in light
          of our discussion, 
                            infra, of Pine Tree's retroactivity claim, where
                              
                    The Secretary may modify the criteria
                    established in regulations issued under this
                    paragraph only after affording public notice
                    and an opportunity for comment on any such
                    proposed modifications.
           Although the Health Centers Consolidation Act initially stated
          that it would be effective October 1, 1997, see Pub. L. No. 104-
          299, S 5, 1996 U.S.C.C.A.N. 3645, that effective date was later
          changed by the Omnibus Consolidated Appropriations Act of 1997,
          Pub. L. No. 104-208, S 521, 1996 U.S.C.C.A.N. 187, to October 1,
          1996.  Cf. 42 U.S.C. S 233 historical and statutory notes (Supp.
          1997).
                                         -6-

          we hold that Pine Tree was not entitled to have the 1994 Procedures
          apply to their application by virtue of their filing date.
                    An issue becomes moot if intervening events leave the
          parties without a "legally cognizable interest" in our resolution
          of the issue, Powell v. McCormack, 395 U.S. 486, 496 (1969), as
          when "intervening events make it impossible to grant the prevailing
          party effective relief," 
                                  Burlington N. R.R. Co.
                                                         v. 
                                                            Surface Transp.
          Bd., 75 F.3d 685, 688 (D.C. Cir. 1996). The issue of whether the
          HHS's 1995 Guidelines violated the then applicable notice and
          comment provision of the PHSA is mooted by Congress's repeal of
          that provision. A finding in favor of Pine Tree would bring it no
          closer to its desired end, and thus, with regard to this claim, we
          do not find before us a true case or controversy within our
          jurisdiction.  See U.S. Const. art. III, S 2, cl. 1.
          II. The Retroactivity Claim
                    Pine Tree argues that Congress has not granted the
          Secretary the power to issue retroactive rules. Certainly, in the
          absence of an express statutory grant of authority to promulgate
          retroactive regulations, the retroactive application of an agency
          rule is disfavored. Bowen v. 
                                      Georgetown Univ. Hosp.
                                                            , 488 U.S. 204,
          208 (1988). However, in this case Pine Tree places undue
          significance on the act of filing an application with an
          administrative agency. It argues that by applying criteria that
          were issued after it had filed a MUP application, the HHS has
          created a retroactivity problem of the kind discussed in Landgraf
          v. 
            USI Film Prods.
                           , 511 U.S. 244 (1994). 
                                                  See 
                                                      Landgraf, 511 U.S. at
                                         -7-

          280 (stating that a statute wields retroactive effect where it
          would "impose new duties with respect to transactions already
          completed"). We agree with the district court that the mere filing
          of an application is not the kind of completed transaction in which
          a party could fairly expect stability of the relevant laws as of
          the transaction date. The concern that retroactive laws threaten
          stability and impair the ability of entities to coordinate their
          actions with respect to the law surely is not implicated where what
          is at issue is the analysis of certain poverty levels in a
          geographic location. Pine Tree obviously could not have adjusted
          poverty levels in Farmington in due regard to the change in MUP
          guidelines. We therefore affirm the district court's finding that
          Pine Tree had no right to have the guidelines that existed at the
          time they submitted a MUP application applied to their application
          rather than new guidelines adopted prior to the review of their
          application. 
                    Only one case has been called to our attention that
          suggests that the act of filing an application with an agency can
          trigger retroactivity concerns.  See Boston Edison Co. v. Federal
          Power Comm'n
                     , 557 F.2d 845 (D.C. Cir. 1977). In that case, it was
          held that an agency could not apply new requirements for
          application filing to applications filed before those requirements
          were issued. See id. at 849 (Federal Power Commission could not
          apply new rule barring data over four months old in rate
          application to application filed before new rule was issued).
          Boston 
                 Edison is readily distinguishable from the instant case.
                                         -8-

          There is an obvious difference between rejecting an application
          because it fails to meet a new regulation governing the proper
          format or preparation of applications that was promulgated after
          that application was filed, and rejecting an application because
          the substantive standards for granting the application on the
          merits have changed in the period between filing and review.
          Whereas in the former case, parties have been deprived of fair
          notice as to the application method, and indeed have taken an
          action -- the filing of a certain kind of application -- to which
          the regulation retroactively applies, in the latter, as discussed
          above, fair notice and retroactivity concerns are not raised. Pine
          Tree thus has mustered no support, nor can we find any support, for
          the proposition that filing an application with an agency
          essentially fixes an entitlement to the application of those
          substantive regulations in force on the filing date. 
                    It is worth noting that this is not a case in which new
          MUP criteria have been applied so as to retroactively overturn a
          prior grant of MUP status for a period in the past.           Cf.
          Association of Accredited Cosmetology Schs.
                                                     v. 
                                                        Alexander, 979 F.2d
          859, 865 (D.C. Cir. 1992) (holding that schools' expectation for
          future eligibility for a program is not a vested right triggering
          retroactivity concerns but noting that there may be retroactivity
          problems were new rules applied to undo    past determination of
          eligibility). Rather, HHS applied the 1995 Guidelines
          prospectively, to applications for future MUP designations.
                                     CONCLUSION
                                         -9-

                    For the reasons stated in this opinion, the district
          court's grant of summary judgment is affirmed.
                                        -10-