743 F.3d 382
2d Cir.2014Background
- Richard Guertin, Corporation Counsel for Middletown, NY, was indicted (2004) with the mayor and a development director for alleged misuse of HUD CDBG funds; after a bench trial Guertin and co‑defendants were acquitted on the charged offenses.
- HUD previously approved reimbursement of legal fees for the development director (Novesky) because his prosecution arose from actions in the ordinary course of employment and related to CDBG administration.
- HUD’s Associate General Counsel denied reimbursement for Guertin and the mayor, finding their challenged activities were personal (advising the mayor on private business dealings) and thus not "required in the city’s administration of the CDBG program," relying on OMB Circular A‑87.
- Guertin sued under the Administrative Procedure Act and asserted due‑process and equal‑protection claims; the district court granted summary judgment to the government and upheld HUD’s denial.
- The Second Circuit reviewed de novo whether HUD’s denial was arbitrary and capricious under the APA and whether the record compelled reimbursement without remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HUD’s denial of reimbursement was arbitrary and capricious under the APA | Guertin: HUD wrongly concluded his fees arose solely from private representation of the mayor; the indictment and trial record show most conduct was in his public role advising on CDBG administration | HUD: The verdict and trial record show Guertin acted as private counsel for the mayor in key transactions, so fees are not reimbursable under OMB Circular A‑87 | Court: HUD acted arbitrarily and capriciously because its factual premise (that Guertin acted only for the mayor’s private benefit) was unsupported by the indictment and trial record; denial vacated and reimbursement ordered |
| Whether remand to HUD for further explanation was required | Guertin: Record plainly shows fees were "required in the administration" of the federal program; no useful purpose in remand | HUD: (implicit) further agency proceedings could address any factual ambiguities | Court: No remand; this is one of the rare cases where the administrative record compels the result, so court ordered HUD to authorize reimbursement |
| Applicability of OMB Circular A‑87 to reimburse criminal defense costs | Guertin: Legal expenses required in administration of federal programs are allowable under A‑87; his defense costs fit that category given acquittal and trial findings | HUD: A‑87 excludes legal expenses arising from personal/private dealings; applies to deny reimbursement here | Court: A‑87 permits reimbursement where legal expenses are required in administration of the federal program; here the expenses qualify |
Key Cases Cited
- Dixson v. United States, 465 U.S. 482 (1984) (municipal grantee control over CDBG funds)
- Bechtel v. Admin. Review Bd., 710 F.3d 443 (2d Cir. 2013) (APA arbitrary‑and‑capricious review principles)
- Natural Res. Defense Council, Inc. v. U.S. Food & Drug Admin., 710 F.3d 71 (2d Cir. 2013) (summary‑judgment standard and reviewing agency explanations)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency must examine relevant data and provide satisfactory explanation)
- Nat’l Assoc. of Home Builders v. Defenders of Wildlife, 551 U.S. 644 (2007) (limits on judicial substitution of agency judgment)
- Fla. Power & Light Co. v. Lorion, 470 U.S. 729 (1985) (remand is generally appropriate but not required in rare circumstances)
- Islander E. Pipeline Co. v. McCarthy, 525 F.3d 141 (2d Cir. 2008) (review requires consideration of all relevant data)