UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
NEW LIFE EVANGELISTIC CENTER,
INC.,
Plaintiff,
v.
KATHLEEN SEBELIUS, Secretary of the Civil Action No. 09-1294 (CKK)
U.S. Department of Health and Human
Services,
and
PAUL F. PROUTY, Administrator, U.S.
General Services Administration,
Defendants.
MEMORANDUM OPINION
(December 8, 2009)
Plaintiff, New Life Evangelistic Center, Inc. (“New Life” or the “organization”), filed the
above-captioned matter on July 13, 2009, naming as Defendants, Kathleen Sebelius, in her
official capacity as Secretary of the U.S. Department of Health and Human Services (“HHS”),
and Paul F. Prouty, in his official capacity as Administrator of the U.S. General Services
Administration (“GSA”) (collectively, “Defendants”). New Life challenges HHS’ denial of the
organization’s application made pursuant to Title V of the McKinney-Vento Homeless
Assistance Act (“McKinney Act” or the “Act”) to use a particular piece of federal property
located at 339 Broadway Street, Cape Girardeau, Missouri for a homeless assistance program.
On Tuesday, July 21, 2009, shortly after filing the Complaint in this matter, New Life
filed a [9] Motion for Preliminary Injunction. In order to permit the parties a more generous
(although expedited) schedule for briefing the merits of Plaintiff’s Complaint, as well as to
provide the Court with additional time to adequately consider the parties’ arguments as set forth
therein, the parties agreed that: (1) GSA would not sell the surplus property at issue prior to
January 1, 2010 (and would provide the Court and New Life with 30 days notice of any such sale,
if GSA decided to sell the property at any time after January 1, 2010); and (2) New Life’s [9]
Motion for Preliminary Injunction would be converted into and treated as its opening brief on the
merits of Plaintiff’s Complaint. Pursuant to that agreement, the Court deems New Life’s now-
pending [9] motion as its opening motion on the merits.
As set forth therein, New Life contends that HHS’ decision denying its application for use
of surplus federal property under the McKinney Act is arbitrary, capricious and contrary to the
law. New Life therefore seeks an order vacating HHS’ decision below and remanding this case
back to HHS for further review and explanation. Upon thorough consideration of the parties’
submissions, the administrative record, applicable case law, the relevant statutory and regulatory
authority, as well as the record of this case as a whole, the Court concludes that HHS’ decision
below must be vacated and this case must be remanded to the agency for further action consistent
with this Memorandum Opinion, for the reasons set forth below.
I. BACKGROUND
A. Statutory and Regulatory Background
Congress passed the McKinney Act in 1987, recognizing that “the federal government
‘has a clear responsibility and existing capacity’ to help meet an immediate and unprecedented
crisis due to the lack of shelter for a growing number of individuals and families.” Nat’l Law
Ctr. on Homelessness & Poverty v. U.S. Veterans Admin., 98 F. Supp. 2d 25, 27 (D.D.C. 2000)
(quoting 42 U.S.C. § 1130(a)(1) & (6)). In particular, Title V of the Act, 42 U.S.C. § 11411, and
2
its implementing regulations, 45 C.F.R. § 12a et seq., provide a detailed regulatory framework
for making “unutilized, underutilized, excess or surplus” federal real property available for use
by representatives of the homeless. 45 C.F.R. § 12a.2(a); see also 42 U.S.C. § 14111(a)-(f). The
Act appropriates and modifies, in part, the administrative procedures established by the Federal
Property and Administrative Services Act of 1949 (“FPASA”), 40 U.S.C. § 541, et seq., which
authorizes HHS to dispose of surplus property “as needed for use in the protection of public
health,” 40 U.S.C. § 550(d)(1), a congressional mandate interpreted to include use by
organizations which provide “services (including shelter) to homeless individuals,” 45 C.F.R. §
12.3(e). In order “to use public resources and programs in a more coordinated manner to meet
the critically urgent needs of the homeless,” 42 U.S.C. § 11301(b)(2), the Act instructs HHS,
GSA, and the Secretary of Housing and Urban Development (“HUD”), to cooperate in
identifying, publicizing, and reserving suitable surplus federal real property, id. § 11411(a)-(d).
Of particular relevance to the case at hand, the Act charges HHS with soliciting and evaluating
applications for use of designated properties submitted by representatives of the homeless. Id. §
11411(e).
The process starts with HUD, which is responsible for canvassing the landholding
agencies — i.e., the federal department or agency with statutory authority to control the property,
45 C.F.R. § 12a.1. On a quarterly basis, HUD collects data on properties that are described as
unutilized, underutilized, excess or surplus by the landholding agencies (or that are in GSA’s
current inventory of excess or surplus property).1 Id. §§ 12a.3(a) & (c). Within 30 days of
1
Landholding agencies are required to submit to GSA a report of all properties they
determine are “excess,” 45 C.F.R. § 12a.5(a), which is defined by regulation as “any property
under the control of any Federal executive agency that is not required for the agency’s needs or
3
receipt of this information, HUD is required to make a determination as to the suitability of each
property for use as a facility to assist the homeless and to notify the landholding agency of its
conclusion. Id. §§ 12a.3(a)(1) & 12a.4; see also id. § 12a.5(c); 42 U.S.C. § 11411(a). Pursuant
to the implementing regulations, all properties are determined suitable unless a property is
affected by one or more of certain enumerated conditions.2 See 42 C.F.R. § 12a.6.
Once a landholding agency is notified by HUD that a property has been determined to be
suitable for use to assist the homeless, the agency must advise HUD within 45 days as follows:
(1) with respect to unutilized or underutilized property, the agency must indicate whether (a) it
intends to declare the property excess or to make the property available for use to assist the
homeless or (b) the reasons why the property cannot be declared excess or made available for use
to assist the homeless; and (2) with respect to excess property previously reported to GSA, the
agency must indicate whether (a) there is no compelling federal need for the property, such that it
may be determined surplus or (b) an explanation as to why there is a further and compelling
Federal need for the property, such that it is not presently available for use to assist the homeless.
Id. § 12a.7; see also 42 U.S.C. § 11411(b).
the discharge of its responsibilities, as determined by the head of the agency pursuant to [the
FPASA],” id. § 12a.1. GSA in turn determines whether such excess property qualifies as
“surplus,” — i.e., “excess real property [that is] not required by any Federal landholding agency
for its needs or the discharge of its responsibilities, as determined by the Administrator of GSA.”
Id. If the property has not yet been reviewed by HUD for suitability, as discussed above, GSA is
responsible for forwarding the necessary information to HUD. Id. § 12a.5(b).
2
These include: the presence of national security concerns; the property is located within
and/or near flammable or explosive materials, runway and military airfield clear zones, and/or
floodways; documented deficiencies in the property; or the property is inaccessible. 42 C.F.R. §
12a.6.
4
HUD is then required to publish in the Federal Register a description of any available
property that has been determined suitable for use as a facility to assist the homeless. See 45
C.F.R. § 12a.8(a); see also 42 U.S.C. § 1411(c). Once such information is published, GSA is
authorized to notify certain entities — namely, state and local government units, any known
homeless assistance providers that have expressed interest in the particular property, as well as
any other appropriate organization — that suitable, excess property is available for use. 45
C.F.R. § 12.a5(g). Properties published as available for use to assist the homeless may not be
used by landholding agencies for any other purpose for a period of 60 days from publication of
the notice. Id. § 12a.9(a)(1); see also 42 U.S.C. § 11411(d). Any representatives of the homeless
who are interested in such property must send HHS a written “expression of interest” within that
60-day time period. 45 C.F.R. §§ 12a.9(1)-(3), 12.3. Upon timely receipt of a representative’s
written expression of interest, the property may not be made available for any other purpose until
the application has been resolved. Id. § 12a.9(a)(2).3
Once HHS has received an expression of interest, it sends the interested entity an
application packet, which requires the applicant to provide information including the following:
(1) Description of the applicant organization. The applicant must document that it
satisfies the definition of a “representative of the homeless” . . . . The applicant must
document its authority to hold real property. Private non-profit organizations
applying for deeds must document that they are section 501(c)(3) tax-exempt.
(2) Description of the property desired. The applicant must describe the property
desired and indicate that any modifications made to the property will conform to
local use restrictions except for local zoning regulations.
3
If at the end of the 60-day holding period, no expression of interest has been received for
a particular property, GSA or the landholding agency, as appropriate, may proceed with disposal
of the property in accordance with the law. 45 C.F.R. § 12a.12(a).
5
(3) Description of the proposed program. The applicant must fully describe the
proposed program and demonstrate how the program will address the needs of the
homeless population to be assisted. The applicant must fully describe what
modifications will be made to the property before the program becomes operational.
(4) Ability to finance and operate the proposed program. The applicant must
specifically describe all anticipated costs and sources of funding for the proposed
program. The applicant must indicate that it can assume care, custody, and
maintenance of the property and that it has the necessary funds or the ability to obtain
such funds to carry out the approved program of use for the property.
(5) Compliance with non-discrimination requirements. Each applicant and lessee
under this part must certify in writing that it will comply with the requirements of
[the relevant Federal non-discrimination laws]. The applicant must state that it will
not discriminate on the basis of race, color, national origin, religion, sex, age, familial
status, or handicap in the use of the property, and will maintain the required records
to demonstrate compliance with Federal laws.
(6) Insurance. The applicant must certify that it will insure the property against loss,
damage, or destruction . . . .
(7) Historic preservation. Where applicable, the applicant must provide information
that will enable HHS to comply with Federal historic preservation requirements.
(8) Environmental information. The applicant must provide sufficient information
to allow HHS to analyze the potential impact of the applicant’s proposal on the
environment, in accordance with the instructions provided with the application
packet.
(9) Local government notification. The applicant must indicate that it has informed
the applicable unit of general local government responsible for providing sewer,
water, police, and fire services, in writing of its proposed program.
(10) Zoning and Local Use Restrictions. The applicant must indicate that it will
comply with all local use restrictions, including local building code requirements.
Any applicant which applies for a lease or permit for a particular property is not
required to comply with local zoning requirements. Any applicant applying for a deed
of a particular property, pursuant to § 12a.9(b)(3), must comply with local zoning
requirements, as specified in 45 CFR part 12.
Id. § 12a.9(b); see also Administrative Record (hereinafter “AR”) at 686-715 (copy of
Application Instruction Booklet for HHS’ Federal Property Assistance Program Homeless)
6
(hereinafter “Application Instruction Booklet”). Applications must be received by HHS within
90 days after receipt of the expression of interest, 45 C.F.R. § 12a.9(d); 42 U.S.C. § 11411(e)(2),
and are considered on a “first-come, first-serve basis,” 45 C.F.R. § 12a.9(e)(2). “Upon receipt of
an application, HHS will review it for completeness and, if incomplete, may return it or ask the
applicant to furnish any missing or additional required information prior to final evaluation of the
application.” Id. § 12a.9(e)(1). Applicants are expressly advised, however, that, “[d]ue to the
short time frame imposed for evaluating applications, HHS’ evaluation will, generally, be limited
to the information contained in the application.” Id. § 12a.9(c).4
HHS must complete its evaluation of an application within 25 days of receipt and
promptly notify the applicant of its decision. Id. § 12a.9(e)(2); see also 42 U.S.C. § 11411(e)(3).
Pursuant to the relevant regulations, all applications must be evaluated on the basis of the
following five, non-exhaustive criteria (which are listed in descending order of priority, except
that the final two factors are of equal importance):
(i) Services offered. The extent and range of proposed services, such as meals,
shelter, job training, and counseling.
(ii) Need. The demand for the program and the degree to which the available property
will be fully utilized.
(iii) Implementation Time. The amount of time necessary for the proposed program
to become operational.
4
The Application Instruction Booklet further advises that incomplete applications “will
either result in a disapproval of the application or a request for additional information. It is to the
applicant’s benefit to err on the side of providing too much information as opposed to omitting
information or not providing enough detail. It is the applicant’s responsibility to ensure their
application presents all the information requested in a detailed and compete manner.” AR at 691.
In the event an applicant needs further time to submit a complete application, it may request an
extension of time. 45 C.F.R. § 12a.9(d); AR at 691.
7
(iv) Experience. Demonstrated prior success in operating similar programs and
recommendations attesting to that fact by Federal, State, and local authorities.
(v) Financial Ability. The adequacy of funding that will likely be available to run the
program fully and properly and to operate the facility.
45 C.F.R. § 12a.9(e)(2). In addition, the regulations provide that when construction or major
renovation is not required or proposed by an applicant, “the property must be placed into use
within twelve (12) months from the date of transfer.” 45 C.F.R. § 12.3(c); AR at 689. If an
applicant contemplates construction or major renovation at the date of transfer, “the property
must be placed in use within 36 months from the date of transfer.” 45 C.F.R. § 12.3(c); AR at
689.5 Finally, HHS may add additional evaluation factors as it deems necessary; the application
packet must be revised accordingly to include a description of any such newly-added factors. Id.
§ 12a.9(e)(3).
If HHS approves an application made pursuant to Title V, it notifies the applicant —
now grantee — and undertakes the necessary steps to effect assignment and transfer of the
property. See id. § 12a.10(b).6 As is relevant in this case, if HHS approves an application for
excess or surplus property, it requests GSA assign the property to HHS for subsequent
5
Although New Life initially argued in its opening motion that the regulations at 45
C.F.R. Part 12 do not apply to applications under Title V of the McKinney Act, New Life
subsequently withdrew that argument in its reply. See Pl.’s Reply at 13, n. 11 (indicating that
New Life has “reconsidered and now withdraws this argument”).
6
In the event HHS disapproves of all submitted applications or no completed application
or request for extension was received by HHS within 90 days from the date of the last expression
of interest, the regulations provide that GSA or the landholding agency may proceed to dispose
of the property in accordance with applicable law. 45 C.F.R. § 12a.12.
8
conveyance to the grantee.7 See id. The regulations specify that “[p]rior to assignment to HHS,
GSA may consider other Federal uses and other important national needs; however, in deciding
the disposition of surplus real property, GSA will generally give priority of consideration to uses
to assist the homeless.” Id. § 12a.10(b)(2). Accordingly, GSA will assign the property to HHS
for transfer to the applicant, unless GSA determines that another disposal need is so “meritorious
and compelling” that it outweighs the needs of the homeless. See id.; see also 42 U.S.C. §
11411(f)(3)(A). If GSA or HHS decides to assign the property to a competing request over a
request made by an applicant to use the facility to assist the homeless, the agency must “transmit
to the appropriate committees of the Congress an explanatory statement” for that decision. 45
C.F.R. § 12a.10(b)(3); see also 42 U.S.C. § 11411(f)(3)(B).
Assuming GSA decides to assign the property to HHS, HHS will, upon receipt of the
assignment, transfer the property by quitclaim deed or lease to the grantee. See 45 C.F.R. §
12a.10(b)(1); see also 42 U.S.C. § 11411(3). Title V grantees are entitled to a 100-percent public
benefit discount and receive the surplus federal property at no cost. See 45 C.F.R. § 12.9(a) &
Exhibit A (of the regulation) (stating that the 100-percent public benefit allowance is
“[a]pplicable when [assistance to the homeless] is the primary use to be made of the property.”).
McKinney Act grantees, like other public benefit conveyance recipients, must use the property
according to the terms approved in their application for a period of 30 years from the date of the
initial deed and may not sell, lease, sublease, or otherwise encumber the property without prior
7
If the property at issue is categorized as unutilized or underutilized (as opposed to
excess or surplus), HHS forwards the application to the landholding agency who is then
responsible for executing the lease or permit document, as may be appropriate. 45 C.F.R. §
12a.10(a).
9
written consent. See id. §§ 12a.10, 12.9(c).
B. Factual and Procedural Background8
New Life is a self-described 501(c)(3) organization that provides services to homeless
men, women and children throughout Missouri, Illinois, Kansas and Arkansas. Compl., Docket
No. [1] ¶ 1; see also AR at 717. On July 13, 2009, the organization filed the above-captioned
matter seeking judicial review of HHS’ decision denying New Life’s application for federal
surplus property under Title V of the McKinney Act — more specifically, for use of the federal
building and courthouse located at 339 Broadway Street in Cape Girardeau (the “Broadway
Street Property”). See generally Compl. ¶ 1.
On December, 19, 2008, GSA issued a determination of surplus for the Broadway Street
Property, noting that the excess property had been screened and no longer served a federal need.
AR at 680; see also id. at 157-160. HUD published an availability announcement in the Federal
Register that same day. See Federal Property Suitable as Facilities to Assist the Homeless, 73
Fed. Reg. 77821-01, 77822 (Dec. 19, 2008). As described therein, the 47,867-square-foot
property contained two parcels: (1) a 0.82-acre plot on which the federal building, courthouse
and parking lot were located (“Parcel 1”); and (2) a 0.186-acre garden area known as the May
Greene Garden (“Parcel 2”). AR at 680; see also id. at 157-160, 170.
8
Consistent with well-settled precedent, the Court’s review of HHS’ decision is
“confined to the full administrative record before the agency at the time the decision was made.”
Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 284 (D.C. Cir. 1981). “The focal point for
judicial review should be the administrative record already in existence, not some new record
completed initially in the reviewing court.” Id. Accordingly, although both parties’ briefing at
times references information outside the administrative record, the Court does not consider such
information in discussing the relevant factual and procedural background of this case or in
evaluating the parties’ arguments.
10
New Life filed its expression of interest requesting an application for use of
the property on January 26, 2009, id. at 681, and thereafter filed a formal application on May 1,
2009, id. at 716-1006. In its application, New Life proposed serving “temporary and/or
chronically homeless persons in Cape Girardeau, Missouri and the surrounding twenty-two rural
counties.” Id. at 721. More specifically, New Life proposed providing transitional housing and
related services through its “Core Program” to approximately 125 homeless individuals per year,
20 of whom would also be eligible to receive job training through New Life’s Leadership Job
Training Program, as well as emergency shelter and a free store to an additional 1,100 homeless
individuals per year. Id. at 721-22. These services would be made available to five groups of
homeless persons — single homeless men; single homeless women; homeless women and
children; homeless families; and homeless veterans — with a particular focus on homeless
veterans and families. Id. at 721-22.
By letter to New Life President Rev. Lawrence W. Rice, Jr., on May 28, 2009, HHS
denied New Life’s application for failure to meet the threshold requirements for four of the five
criteria set forth at 45 C.F.R. § 12a.9(e)(2): namely, services offered, need, implementation time,
and financial ability. AR at 1023-26. On July 13, 2009, New Life filed the instant action
challenging that decision. See Compl. Shortly thereafter, on July 21, 2009, New Life moved for
a preliminary injunction. See Pl.’s Mot., Docket No. [9]. The Court held an on-the-record
telephone conference with counsel for all parties that same day. See 7/21/09 Min. Entry.
Pursuant to that discussion, the parties were required to file a joint status report advising the
Court as to how the parties suggested proceeding with the case; in particular, the parties were to
advise the Court whether: (a) they wanted to proceed immediately with briefing Plaintiff’s
11
request for a preliminary injunction on an emergency basis; or (b) whether they had been able to
reach an agreement that would permit the Court and the parties to address the merits of Plaintiff’s
Complaint on a more generous (although expedited) schedule. See 7/24/09 Order, Docket No.
[11].
The parties timely filed the required joint status report on July 23, 2009. See Docket No.
[10]. As set forth therein, the parties agreed that GSA would stay the sale of Parcel 1 of the
Broadway Street Property until January 1, 2010. Id. at 1. Following expiration of that stay, GSA
further agreed that it would provide both the Court and New Life 30 days notice prior to selling
Parcel 1. Id. at 2. With respect to Parcel 2, the parties advised the Court that the area was
currently administered by the United States National Park Service. Id. at 2. As such, GSA did
not have any legal control over the disposition or sale of Parcel 2 and therefore could not
similarly guarantee that it would not be sold, transferred or otherwise unencumbered prior to
January 1, 2010.9 Id. Based on this understanding and agreement by GSA to stay sale of the
majority of the Broadway Street Property that was under its control — i.e., Parcel 1 — the parties
indicated that they had agreed that Plaintiff’s Motion for Preliminary Injunction should be
converted into and treated as New Life’s opening brief on the merits of its Complaint, and that
the parties should proceed directly to brief the merits of the instant lawsuit on a more generous,
but nonetheless, expedited schedule. See id.
Based on the parties’ representations in their joint status report, the Court issued an Order
on July 24, 2009, adopting the parties’ agreement, as set forth above, in full. See 7/24/09 Order,
9
Defendants have since advised that the City of Cape Girardeau took title to Parcel 2 on
September 18, 2009. Defs.’ Opp’n at 8, n.9.
12
Docket No. [11]. Accordingly, as agreed by the parties, New Life’s [9] Motion for Preliminary
Injunction would be converted into and treated as Plaintiff’s opening brief on the merits of the
Complaint. Id. at 1-2; see also Fed. R. Civ. P. 65(a)(2) (“Before . . . beginning the hearing on a
motion for a preliminary injunction, the court may advance the trial on the merits and consolidate
it with the hearing.”). The Court also adopted the parties’ proposed briefing schedule (as later
amended), see 7/24/09 Order at 2; 9/30/09 Min. Order, pursuant to which Defendants’ opposition
and the administrative record were filed on October 9, 2009, and New Life’s reply on November
9, 2009. See id.; see also 9/30/09 Min. Order. By permission of the Court, Defendants also filed
a surreply, see Docket No. [20], and New Life filed a response to that surreply, see Docket No.
[22]. Briefing is now complete, and the merits of New Life’s Complaint are ripe for the Court’s
review and resolution.
II. LEGAL STANDARD
Both parties agree that HHS’ decision to deny New Life’s application for the Broadway
Street Property is properly analyzed under the standard of review set forth in the APA, pursuant
to which a court must set aside an agency action that is “arbitrary and capricious, an abuse of
discretion, or otherwise not in accordance with the law.” 5 U.S.C. § 706. “‘The party
challenging an agency’s action as arbitrary and capricious bears the burden of proof.’” City of
Olmsted Falls v. Fed. Aviation Admin., 292 F.3d 261, 271 (D.C. Cir. 2002) (quoting Lomak
Petroleum, Inc. v. Fed. Energy Regulatory Comm’n, 206 F.3d 1193, 1198 (D.C. Cir. 2000)). To
survive the “arbitrary and capricious” standard, an agency must “‘examine the relevant data and
articulate a satisfactory explanation for its action, including a rational connection between the
facts found and the choice made.” PPL Wallingford Energy LLC v. Fed. Energy Regulatory
13
Comm’n, 419 F.3d 1194, 1198 (D.C. Cir. 2005) (quoting Motor Vehicle Mfrs. Ass’n, v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (internal punctuation omitted). By contrast,
an agency [decision] would be arbitrary and capricious if the agency has relied on
factors which Congress has not intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency expertise. The reviewing
court should not attempt itself to make up for such deficiencies: “We may not supply
a reasoned basis for the agency’s action that the agency itself has not given.”
Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 (quoting Sec. and Exch. Comm’n v. Chenery Corp.,
332 U.S. 194, 196 (1947)).
This standard of review is highly deferential to the agency, so that a Court need not find
that the agency’s decision is “the only reasonable one, or even that it is the result [the Court]
would have reached had the question arisen in the first instance in judicial proceedings.” Am.
Paper Inst., Inc. v. Am. Elec. Paper Serv. Corp., 461 U.S. 402, 422 (1983). The Court is not
entitled to substitute its judgment for that of the agency. Citizens to Preserve Overton Park, Inc.
v. Volpe, 401 U.S. 402, 416 (1971). Finally, an agency decision must generally be affirmed on
the grounds stated therein, and a reviewing court may not attempt to supply “a reasoned basis for
the agency’s action that the agency itself has not given.” Motor Vehicle Mfrs. Ass’n, 463 U.S. at
43. Consistent with this review standard, judicial review is confined to the full administrative
record before the agency at the time the decision was made. Envtl. Def. Fund, Inc. v. Costle, 657
F.2d 275, 284 (D.C. Cir. 1981).
III. DISCUSSION
Before turning to the merits of the parties’ arguments, the Court first pauses briefly to
emphasize once again the limited nature of its review in this case. The Court is not asked to —
14
and does not herein — rule upon the ultimate merits of New Life’s application for the Broadway
Street Property; Congress has charged HHS, and not this Court, with reviewing and considering
in the first instance the merits of applications for surplus federal property under the McKinney
Act. As explained above, the only issue now before the Court is whether HHS, in reaching that
decision, “‘examine[d] the relevant data and articulate[d] a satisfactory explanation for its
action.’” PPL Wallingford Energy, 419 F.3d at 1198 (quoting Motor Vehicle Mfrs. Ass’n, 463
U.S. at 43)).
In the case at hand, HHS determined, based on its consideration of the five factors set
forth in 45 C.F.R. § 12a.9(e)(2), that New Life’s application should be denied because it “failed
to make the necessary showing under” four of the five factors set forth in the regulations —
services offered; need; implementation time; and financial ability. AR at 1026. Importantly, that
decision was the result of a multiple-level balancing test. HHS was required to consider each of
the five factors set forth above before then considering whether, on balance and giving due
weight to the factors as specified by the implementing regulations, New Life’s application should
be granted or denied. The record reflects that HHS ultimately determined , based on its specific
findings regarding each of the five factors, that New Life had not satisfied four of the five
evaluation criteria and that this showing was insufficient, on balance, to support approval of the
application. In other words, HHS concluded that all of the identified deficiencies in New Life’s
application — on balance and giving due weight to each factor — favored denial of the
application. See id. at 1023-26. Consequently, if the Court finds that HHS erred in reaching any
of the underlying conclusions supporting its ultimate decision to deny the application, then the
Court must remand this matter back to HHS for its reconsideration in light of the Court’s
15
findings. It is not for the Court to decide in the first instance whether and how changes to the
underlying factors will affect, if at all, HHS’ ultimate conclusion regarding New Life’s
application. Cf. Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 (“The reviewing court should not
attempt itself to make up for such deficiencies: ‘We may not supply a reasoned basis for the
agency’s action that the agency itself has not given.’”) (quoting Chenery Corp., 332 U.S. at 196);
Palisades Gen. Hosp. Inc. v. Leavitt, 426 F.3d 400, 403 (D.C. Cir. 2005) (“Thus, under settled
principles of administrative law, when a court reviewing agency action determines that an agency
made an error of law, the court’s inquiry is at an end: the case must be remanded to the agency
for further action consistent with the correct legal standards.”) (internal quotations and citations
omitted).
With this legal framework in mind, the Court now turns to the merits of New Life’s
arguments. New Life, in challenging HHS’ decision below, has employed a largely scattershot
approach, asserting that nearly all of the agency’s underlying findings supporting its decision to
deny the organization’s application are arbitrary, capricious and/or contrary to law. Although the
Court finds that many of New Life’s arguments appear to be without merit based on the present
record, the Court nonetheless agrees with New Life that HHS’ decision must be vacated and this
case remanded back to the agency for three principal reasons.
A. HHS Improperly Faulted New Life for Failing to Adequately Explain Services
That Were Not Proposed in the Organization’s Application
First, the Court finds that HHS erred when it faulted New Life for failing to sufficiently
explain how it proposed to deliver primary health care services to its homeless client because the
organization never in fact proposed to provide such services in its application. As set forth in its
16
denial letter rejecting New Life’s application, HHS criticized the organization for failing to make
clear how it “proposes to deliver mental health and substance abuse services, as well as primary
care services” in light of “the high rate of primary healthcare needs and behavioral health issues
among persons experiencing homelessness.” AR at 1024 (emphasis added). As New Life points
out, however, its application does not include any proposal regarding primary health care
services. Although New Life’s application included proposals to provide clients with referrals
for mental health and substance abuse services, see, e.g., id. at 732 (indicating that New Life
would offer “referral[s] to internal and external supportive services including, but not limited to, .
. . in-patient or out-patient mental health care or substance abuse treatment (as needed) or support
groups . . .”), the application does not reflect any similar proposals to assist the organization’s
clients with their primary healthcare needs. See generally AR at 716-1006.10
New Life argues, and HHS does not dispute, that neither the McKinney Act nor its
implementing regulations require that an applicant for surplus federal property demonstrate an
intent to provide primary health care services. Pl.’s Mot. at 16-17; see Defs.’ Opp’n at 12.
Rather, the Act is aimed at providing services such as “meals, shelter, job training and
counseling,” and does not obligate applicants for surplus property to also provide health care
10
HHS provides only one citation to the administrative record that even mentions
“medical” services. See Defs.’ Opp’n at 12 (citing to AR at 724 (“Data may be provided on
specific relevant issues, such as medical, housing, substance abuse, relationships, cross-
addictions, or life skill issues”). Upon closer review, however, this citation does not support
HHS’ apparent claim that New Life proposed to assist clients with their primary health care
needs. The quoted language is taken from the section of New Life’s application discussing
“resident education” and indicates only that New Life intends to provide its clients with
“information and education that is applicable to the clients [sic] needs,” including “[d]ata” on
“medical” issues. AR at 724. It does not suggest that New Life proposed to assist clients with
actually obtaining such services.
17
services. See 45 C.F.R. § 12a.9(e)(2)(i)). Admittedly, as HHS emphasizes, applicants such as
New Life are free to propose the provision of a wide variety of services, including medical
services, as part of their application, and once an applicant chooses to do so, HHS is obligated to
ensure that the application adequately explains how the proposed service(s) will be delivered.
See Defs.’ Opp’n at 12; see also AR at 690 (the list of proposed services in 45 C.F.R. §
12a.9(e)(2)(i) is “not exhaustive” and “other services are considered as they are proposed”). In
this case, however, New Life did not propose assisting clients with their primary health care
needs. Accordingly, HHS cannot require New Life to provide such services nor deny its
application based on the organization’s failure to adequately explain how it will deliver these
medical services where New Life did not propose to actually do so. Cf. Motor Vehicle Mfrs.
Ass’n, 463 U.S. at 43 (“the agency must . . . articulate a satisfactory explanation for its
explanation including a ‘rational connection between the facts found and the choice made’”)
(quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). HHS therefore
erred when it took into consideration New Life’s failure to adequately explain how it would
deliver primary care services, and, for this reason, the matter must be remanded.11
11
The Court notes, however, that it does not agree with New Life that HHS similarly
erred when it faulted the organization for failing to sufficiently explain how it “proposes to
deliver mental health and substance abuse services.” AR at 1024. Focusing on HHS’ use of the
term “deliver,” New Life argues that this language reflects an intention by HHS to “now require[]
every applicant to ‘deliver’ health, mental health and substance abuse services on-site,” rather
than through a referral system. Pl.’s Mot. at 16. The Court is not persuaded on this point.
Although HHS could have used more exacting language and may be well advised to do so on
remand, the Court does not understand HHS’ use of the term “deliver” to suggest that it required
New Life to provide on-site medical services. Rather, read in proper context, it indicates only
that, in HHS’ view, New Life had not clearly articulated how it intended to facilitate (i.e.,
deliver) such services through its proposal to provide its clients with referrals to other agencies.
See AR at 1024.
18
B. HHS Failed to Address Contradictory Evidence Provided by New Life Regarding
the Need for the Proposed Services
Second, HHS erred when it failed to address contradictory evidence submitted by New
Life regarding the population of homeless individuals needing shelter in Cape Girardeau and
surrounding areas. In evaluating whether New Life satisfied the second evaluation criteria,
which looks to the need for the proposed services, HHS concluded that, “[w]hile there may be a
need in Cape Girardeau for additional homeless services, [New Life] fails to demonstrate the
need for a program of the scope and size proposed.” AR at 1024. As set forth in HHS’ denial
letter, the agency based this conclusion solely on certain data submitted by New Life that had
been drawn from a “point-in-time” survey conducted by the Missouri Housing Development
Commission. Id. at 1024-25. New Life’s application, however, also included additional
evidence and statistical data suggesting that the point-in-time data relied upon by HHS in fact
underestimated the number of homeless in Cape Girardeau and the surrounding areas, such that
the actual number of homeless individuals was significantly higher — as high as 2,197 people in
Cape Girardeau city alone. Id. at 740-44.
Significantly, HHS did not address this additional data in its denial letter. Although HHS
now proffers an explanation as to why this additional information does not affect its decision that
New Life failed to adequately establish a need for its proposed services, the denial letter rejecting
the organization’s application is entirely silent on this point. See id. at 1024-25. As explained
above, “the agency must examine the relevant data and articulate a satisfactory explanation for its
action including a ‘rational connection between the facts found and the choice made.’” Motor
Vehicle Mfrs. Ass’n, 463 U.S. at 43 (quoting Burlington Truck Lines, 371 U.S. at 168). An
19
agency errs when it ignores contradictory relevant evidence regarding a critical factor in its
decision. See Morall v. Drug Enforcement Admin., 412 F.3d 165, 178 (D.C. Cir. 2005); see also
El Rio Santa Cruz Neighborhood Health Ctr., Inc. v. HHS, 396 F.3d 1265, 1278 (D.C. Cir.
2005) (finding agency action “arbitrary and capricious because [it] failed adequately to address
relevant evidence before it”). Accordingly, HHS was in error when it relied solely on the point-
in-time data provided by New Life without addressing the additional, contradictory data included
in the organization’s application. On remand, if HHS chooses to continue to rely only on the
point-in-time studies to support its decision, the agency must explain its decision to discount the
other statistical data provided by New Life.12
C. HHS Erred When it Concluded that New Life’s Application Did Not Include
Funding for its Proposed Capital Projects
Third and finally, the Court finds that HHS erred when it found that New Life had not
allocated funds for capital improvements within its proposed budget. AR at 1025. To the
contrary, as New Life points out, attached to its application is a three-page spreadsheet setting
forth the estimated costs for proposed capital projects and proposed revenue sources for those
projects. Id. at 955-58 (“Attachment M-2”). As shown therein, New Life proposed funding its
capital projects through its “Capital Campaign: Transition to Hope,” which consists of a “direct
mail campaign,” “major events (fund-raisers)” and “private foundation grants.” Id. It is unclear
12
In holding that HHS failed to adequately address this contradictory evidence in its
denial letter, the Court makes no finding as to the merits of the agency’s explanations advanced
for the first time in HHS’ briefing on summary judgment; it may be that such explanations are
sufficient, but that is a decision for the agency — not this Court — to make in the first instance.
See Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 (a reviewing court may not attempt to supply “‘a
reasoned basis for the agency’s action that the agency itself has not given’”) (quoting Chenery
Corp., 332 U.S. at 196)).
20
to the Court, then, why HHS concluded in its denial letter that “[t]here are no funds allocated for
capital improvements within the budget.” Id. at 1025. Because HHS’ conclusion appears to
contradict evidence in the record, the Court finds HHS was in error. See Motor Vehicle Mfrs.
Ass’n, 463 U.S. at 43 (it is error for agency to “offer[] an explanation for its decision that runs
counter to the evidence before the agency”). On remand, HHS must explain its conclusion that
New Life did not allocate funding for its proposed capital improvements in light of this
information or remove its reliance on this finding as support for its decision.13
For the reasons outlined above, the Court concludes that HHS’ decision must be vacated
and this case remanded to the agency for further consideration. Although New Life has raised a
plethora of additional challenges to HHS’ decision, the Court finds it unnecessary to address
many of New Life’s remaining arguments in light of the current procedural posture of this case.14
New Life’s motion for summary judgment is therefore GRANTED insofar as it seeks vacatur of
the decision below and remand. Accordingly, HHS’ decision denying New Life’s application is
vacated, and this case is remanded to the agency for further action consistent with this
13
Whether or not HHS ultimately finds that the proposed funding is adequate is a separate
question not presently before the Court.
14
The Court does note, however, that HHS has at times proffered additional explanations
for its decision denying New Life’s application in its summary judgment briefing that do not
appear in its denial letter below. For example, HHS now provides the Court with additional
argument supporting its conclusion that New Life did not satisfy the implementation time
requirement, but such explanations are not included in the denial letter. To the extent HHS
intends to rely on such reasoning on remand or determines that further explanation of any of its
findings is necessary, HHS would be well served to augment the record below with such
additional explanation as may be appropriate. Cf. Local 814, Int’l Bhd. of Teamsters v. Nat’l
Labor Relations Bd., 546 F.2d 989, 992 (D.C. Cir. 1976) (on remand, agency may “submit[] an
amplified articulation” of its reasoning; “[i]f a reviewing court finds the record inadequate to
support a finding of reasoned analysis by an agency and the court is barred from considering
rationales urged by others, only the agency itself can provide the required clarification.”).
21
Memorandum Opinion. Pursuant to 45 C.F.R. § 12a.9(a)(2), the property at issue “may not be
made available for any other purpose until the application has been resolved.”
IV. CONCLUSION
For the reasons set forth above, New Life’s motion for summary judgment is GRANTED
insofar as it seeks vacatur of the decision below and remand. Accordingly, HHS’ decision
denying New Life’s application is vacated, and this case is remanded to the agency for further
action consistent with this Memorandum Opinion. Pursuant to 45 C.F.R. § 12a.9(a)(2), the
property at issue “may not be made available for any other purpose until the application has been
resolved.” An appropriate Order accompanies this Memorandum Opinion.
Date: December 8, 2009
/s/
COLLEEN KOLLAR-KOTELLY
United States District Judge
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