Pine Tree v. Secretary

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S 254c(b)(4)(B) (1991) (subsequently repealed); and 2) that the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.


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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,


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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.

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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:


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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).

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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


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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.


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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


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For the reasons stated in this opinion, the district

court's grant of summary judgment is affirmed.


















































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