313 F. Supp. 3d 62
D.C. Cir.2018Background
- Four nonprofit grantees (Plaintiffs) received programmatic five-year Teen Pregnancy Prevention Program (TPPP) awards for 2015–2020 but funding is disbursed in annual "budget periods."
- In July 2017 HHS issued FY2017–2018 Notices of Award stating the project periods were "shortened" to end June 30, 2018, with no explanation.
- Plaintiffs had submitted required non‑competing continuation materials and were in compliance; loss of funding would terminate programs and staff.
- Plaintiffs sued under the Administrative Procedure Act (APA) seeking vacatur of HHS’s action as arbitrary and capricious for terminating grants without explanation and contrary to HHS regulations.
- HHS defended by characterizing its action as unreviewable discretionary withholding of continuation funding (budget‑period withholding) under its Grants Policy Statement rather than a regulatory "termination."
- The Court held the agency’s action was a termination under HHS regulations, reviewable, arbitrary and capricious, granted Plaintiffs summary judgment, vacated the agency action, and ordered HHS to treat applications as if no termination occurred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHS’s decision is committed to agency discretion (non‑reviewable) | HHS’s cut is reviewable because it is a termination under HHS regs and those regs provide standards. | HHS funding allocation is presumptively unreviewable discretionary decision about appropriations and withholding continuation awards is committed to agency discretion. | The action is reviewable: HHS regulations governing termination provide meaningful standards to judge the decision. |
| Whether HHS "terminated" the grants or merely withheld continuation funding | The Notice shortened the project period and thus ended awards before planned period end — a termination under 45 C.F.R. §75.2/.372. | HHS: "period of performance" is each one‑year budget period; stopping annual funding is withholding, not termination. | Court: "shortening" project period ended the period of performance (project period), so it was a termination under the regulations. |
| Whether the Grants Policy Statement authorizes withholding that avoids termination rules | Plaintiffs: GPS does not override formal regulations; GPS language does not show HHS followed required termination procedures. | HHS: GPS allows an OPDIV to decline non‑competing continuation awards when in the government’s best interest, so no regulatory termination. | Court: GPS cannot trump regulations; GPS language does not show a lawful process or factual basis here and does not avoid termination requirements. |
| Whether HHS’s action was arbitrary and capricious under the APA | Plaintiffs: HHS gave no contemporaneous explanation or required findings (e.g., for‑cause) and acted contrary to its regs, so action is arbitrary and capricious. | HHS: asserts policy concerns and post‑hoc rationales; emphasizes appropriations discretion. | Court: HHS provided no contemporaneous reason and conceded regulations would require explanation; action was arbitrary and capricious and must be vacated. |
Key Cases Cited
- Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016) (agency must provide reasoned explanation for policy changes)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (arbitrary and capricious standard; agency must articulate rational connection between facts and decision)
- Lincoln v. Vigil, 508 U.S. 182 (1993) (expenditure/allocation of appropriations by agency presumptively unreviewable absent statutory constraints)
- Heckler v. Chaney, 470 U.S. 821 (1985) (very narrow exception: actions "committed to agency discretion by law" may be unreviewable)
- SEC v. Chenery Corp., 332 U.S. 194 (1947) (review is limited to the grounds the agency invoked; courts may not accept post hoc rationalizations)
- Milk Train, Inc. v. Veneman, 310 F.3d 747 (D.C. Cir. 2002) (agency funding decisions tied to appropriations can be committed to agency discretion absent constraints)
- Nat'l Envtl. Dev. Ass'n's Clean Air Project v. EPA, 752 F.3d 999 (D.C. Cir. 2014) (agency acts arbitrarily if it departs from statute or its own regulations without explanation)