USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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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
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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S 254c(b)(4)(B) (1991) (subsequently repealed); and 2) that the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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