Foo v. Tillerson, 244 F. Supp. 3d 17

Shar Lyn Foo received monthly deposits from the State Dept. into a First Hawaiian Bank account after her mother Lorna (a survivor annuitant) died in 1997; payments continued until 2011 when the Dept. discovered the error.
In 2012 the State Dept. calculated overpayments (~$311,703) and sought recovery; Foo requested a waiver under 22 U.S.C. § 4047(d) and 22 C.F.R. § 17.2 asserting she was without fault.
The Department refused to consider a waiver, citing 22 C.F.R. § 17.7(a)(2) (the “estate rule”), which disallows waivers where an overpayment was made to an estate.
Foo appealed to the Foreign Service Grievance Board (FSGB), arguing the deposits were made to her (as co-owner/surviving owner of the account under Hawaii law), not to her mother’s estate; FSGB found she failed to supply substantial evidence of ownership and concluded the estate rule barred waiver consideration.
Foo sued under the Administrative Procedure Act (APA), challenging (1) the validity of the estate rule as ultra vires and (2) the FSGB’s application of that rule as arbitrary/capricious.
The District Court upheld the regulatory estate rule as a reasonable interpretation of § 4047(d) but found the FSGB erred in applying the substantial-evidence standard and remanded for the FSGB to consider Foo’s waiver on the merits.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of 22 C.F.R. § 17.7(a)(2) (estate rule)	§ 4047(d) permits waivers for any “individual”; an estate should be eligible for waiver	Statute bars payments to estates (22 U.S.C. § 4047(b)), and § 4047(d) delegates discretion to the Secretary to define scope; excluding estates is reasonable	Court: Chevron step one ambiguous; step two deferentially upholds rule as a permissible construction — estate rule lawful
Application of estate rule by FSGB (substantial-evidence issue)	Foo provided substantial evidence (bank letter, statements, Hawaii statute) showing she owned the account and thus payments were to her, not an estate; FSGB improperly discounted that evidence	FSGB concluded Plaintiff failed to meet the "substantial evidence" burden and thus was ineligible for waiver consideration under the estate rule	Court: FSGB applied a higher-than-required evidentiary standard, misweighed/disregarded competent evidence and Hawaii law; remand to FSGB to consider waiver merits

Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275 (D.C. Cir.) (courts give presumption of validity to agency action)
Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (Sup. Ct.) (two-step deference framework for agency statutory interpretation)
Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44 (Sup. Ct.) (Chevron step one instruction)
Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402 (Sup. Ct.) (courts may not substitute their judgment for the agency under APA review)
Butler v. Barnhart, 353 F.3d 992 (D.C. Cir.) (definition of "substantial evidence")
Fla. Mun. Power Agency v. FERC, 315 F.3d 362 (D.C. Cir.) (substantial evidence standard characterized)
Eagle Broad. Grp., Ltd. v. FCC, 563 F.3d 543 (D.C. Cir.) (statutory construction tools at Chevron step one)
Fin. Planning Ass'n v. SEC, 482 F.3d 481 (D.C. Cir.) (text, structure, and statutory scheme inform step-one analysis)
King v. Office of Pers. Mgmt., 730 F.3d 1342 (Fed. Cir.) (addressed waiver under an analogous overpayments statute)