Pennsylvania, Department of Public Welfare v. United States Department of Health & Human Services

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit

4-4-1996

Pennsylvania Dept. of Welfare v. US Dept. HHS
Precedential or Non-Precedential:

Docket 94-3692

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 94-3692

COMMONWEALTH OF PENNSYLVANIA,
DEPARTMENT OF PUBLIC WELFARE,
Plaintiff-Appellant
v.

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES;
UNITED STATES OF AMERICA; and
HHS DEPARTMENTAL APPEALS BOARD,

Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

Argued: July 20, 1995
Before: SLOVITER, Chief Judge, SCIRICA
and McKEE, Circuit Judges

(Filed April 4, 1996)

JOHN A. KANE
Chief Counsel

JASON MANNE (ARGUED)
Assistant Counsel

Office of Attorney General of Pennsylvania
Department of Public Welfare
1403 State Office Bldg.
300 Liberty Ave.
Pittsburgh, PA 15222

Counsel for Plaintiff-Appellant
Commonwealth of Pennsylvania

1
Department of Public Welfare

FRANK W. HUNGER
Assistant Attorney General

FREDERICK W. THIEMAN
United States Attorney

MARK B. STERN
CHRISTINE N. KOHL (ARGUED)
Attorneys, Appellate Staff
Civil Division,
Department of Justice
10th & Pennsylvania Avenue, N.W
Washington, D.C. 20530-0001

Counsel for Defendants-Appellees
United States Department of Health and
Human Services ("HHS"); United States
of America; and HHS Departmental Appeals Board

OPINION OF THE COURT

McKEE, Circuit Judge

The Commonwealth of Pennsylvania appeals from a ruling of

the United States Department of Health and Human Services ("HHS")
Appeals Board. The Board upheld a ruling by the Secretary of HHS

that reduced the amount of funding for child support enforcement

activities in Pennsylvania by the total amount of revenue

generated by a Judicial Computerization Fee ("JCP Fee") assessed

on each child support case filed in the Commonwealth.

The district court granted summary judgment against the

Commonwealth of Pennsylvania ("DPW" or "Commonwealth") and in

favor of HHS, the United States, and the HHS Appeals Board

2
(collectively the "defendants"), and this appeal followed. For

the reasons that follow, we will affirm the ruling of the

district court.

I. BACKGROUND

In 1975, Congress enacted the Child Support Enforcement Act,

which is incorporated into the Social Security Act as "Title IV-

D." See 42 U.S.C. § 651 et seq. Under Title IV-D, the federal

government provides funding through HHS to participating states

to assist in obtaining and enforcing child and spousal support

obligations, locating absent parents, and establishing paternity.

See 42 U.S.C. §§ 651, 655. The United States currently pays each

state 66 percent of the "total amounts expended by such State

during such quarter for the operation of the plan," and 90

percent of other specified expenses. 42 U.S.C §§ 655(a)(1)(A),

(a)(1)(B), (a)(1)(C), and (a)(2)(C). The Title IV-D program

complements the federal-state Aid to Families with Dependant

Children program under Title IV-A of the Social Security Act

("AFDC") and is intended to reduce state and federal expenditures

often necessitated by the failure of noncustodial parents to meet

their support obligations.

In order to participate in the Child Support Enforcement

program, each state must submit a plan for HHS approval in which

the state designates the specific organizational unit or agency

responsible for administering the program -- i.e. "the IV-D

agency." See 42 U.S.C. §654(3). The plan must provide, inter

alia, that the state will undertake, when necessary, to establish

3
the paternity of children, to locate absent parents, and to

collect financial support for children through various means,

such as wage withholding, property liens, withholding of

unemployment compensation, and interception of tax refunds. See

42 U.S.C. §§ 654(4), (5), (6); 664; 666(a)(1), (3), (4), (b)(1),

(8).

The Commonwealth of Pennsylvania is a participant in the

Child Support Enforcement program and thus receives Title IV-D

funding from the federal government. The Pennsylvania Department

of Public Welfare ("DPW") is the designated IV-D agency under the

Commonwealth's operating plan. However, Pennsylvania's Title IV-

D program is administered by the Domestic Relations Section of

each county Court of Common Pleas under a cooperative agreement

with the Department of Public Welfare.

In 1981, Congress enacted § 455(a) of the Social Security

Act, 42 U.S.C. § 655(a), which requires states participating in

the Child Support Enforcement program to reduce their claims for

Title IV-D reimbursement by an amount "equal to the total of any

fees collected or other income resulting from services provided

under the plan approved under this part." Thereafter, the

Secretary of HHS promulgated a regulation implementing this

"program income" exclusion of 42 U.S.C. § 655(a)(1). See 45

C.F.R. § 304.50. That regulation provides that:
The IV-D agency must exclude from its quarterly
expenditure claims an amount equal to:

(a) All fees which are collected during the
quarter under the title IV-D State plan; and

4
 (b) All interest and other income earned during
the quarter resulting from services provided under the
IV-D State plan.

45 C.F.R. § 304.50.

In 1990, the Pennsylvania Legislature enacted a law that

imposes the aforementioned $5.00 JCP fee on all initial court

filings. That fee was enacted in order to provide a dedicated

funding source for the computerization of Pennsylvania's courts.

In child support cases, the JCP fee is collected by either the

Domestic Relations section of the particular court, or the

Prothonotary, and these offices hold the fee in trust for the

Pennsylvania Supreme Court. The parties here agree that this fee

cannot be used for child support purposes and must, instead, be

transferred to the Pennsylvania Department of Revenue which makes

the money available to the Supreme Court for computerization of

the courts. This court computerization program does not,

however, include the computerization of the child support system

which is funded by other sources.

Upon learning of the JCP fee, the Secretary of HHS announced

that she would consider the fee collected on IV-D cases to be

"program income" under the Title IV-D program because the fee

"resulted from" child support services. Accordingly, in 1993,

the Secretary notified the Commonwealth that HHS was disallowing

a total of $102,241 in claims that Pennsylvania had made for

federal funding under the Child Support Enforcement program. The

Secretary's disallowance letters explained that because this

extra $5.00 court filing fee is collected "as a direct result of

5
the applicant's request for IV-D services, the fee results from

services provided under the IV-D State plan." The letters

further explained that, in accordance with 42 U.S.C. § 655(a)(1)

and 45 C.F.R. § 304.50, HHS was treating the JCP fees collected

in connection with child support and paternity actions as program

income that reduces net expenditures for purposes of funding

under the Title IV-D program.

The Commonwealth appealed these disallowances to the HHS

Appeals Board. The Commonwealth challenged the Secretary's

conclusion that the funds in question were "program income" as

the funds could only be used for computerization, and

furthermore, the computerization did not even include

computerization of the court's domestic relations activities. The

Commonwealth also challenged the Board's authority to adjudicate

the appeal. The Commonwealth argued that the members of the

Board were appointed in violation of the Appointments Clause of

the United States Constitution, U.S.C.A. Const. Art 2, § 2,

cl.2., and that the appointment was also in violation of civil

service regulations thus invalidating any action taken by the

Board.

A. Proceedings Before the HHS Appeals Board.

The Secretary of HHS created the HHS Appeals Board in the

early 1970's by a regulation promulgated under 45 C.F.R. Part 16.

The regulation gave the Board the responsibility of resolving

disputes such as the one now before us. Congress thereafter gave

the Board additional authority including the ability to resolve

quality control disputes under the AFDC program of Title IV-A.

6
See 42 U.S.C. § 608(j). The Appeals Board is comprised of a

Chairperson and four full-time Board members. The Secretary

appoints each of the members of the Board.

The Appeals Board rejected the Commonwealth's challenge to

its authority, and also rejected the Commonwealth's argument that

the JCP fee is not IV-D "program income" under 42 U.S.C.

§655(a)(1), and 45 C.F.R. § 304.50. The Board reasoned that 45

C.F.R. § 304.50 merely restates Title IV-D's requirement that

fees collected from services provided under a state's Child

Support Enforcement plan are income that must be excluded from

any claim for federal funding. The Board concluded that the JCP

fees in dispute "were charged as initial filing fees in

conjunction with IV-D child support cases" and thus "directly

generated by IV-D services." (App. 20a) The Board also noted

that the Commonwealth treats other court filing fees received in

connection with IV-D services as program income. (App. 181a-

182a). Accordingly, the Board upheld the disallowances.

The Board relied in part upon its own precedent to reject

the Commonwealth's claim that 45 C.F.R. § 74.41(c)(1) applies to

this case. At the time of the Board's decision, that regulation

stated: "[r]evenues raised by a government recipient under its

governing powers, such as taxes, special assessments, levies, and

fines" are not considered program income. 45 C.F.R. §74.41(c)(1)

(1993). The parties stipulated that the JCP fees at issue

constituted "special assessments", but the Board ruled that the

more restrictive income exclusion provision of the statute takes

precedence over the general language of the regulation. See 42

7
U.S.C. § 655(a)(1). The Board concluded that "the proper focus

is on the receipt of income from grant-related activities, not on

how the funds are expended." App. at 23a.

Nor did the Board believe that 45 C.F.R. § 304.21(b)(1)

supported the Commonwealth's position. That regulation provides

that federal funding is not available for court filing fees

unless the court participating in the cooperative agreement with

the state IV-D agency ordinarily pays such fees itself. The

Board found that the Commonwealth failed to present any evidence

that either the Department of Public Welfare or the Domestic

Relations Sections pay court filing fees; rather, the Board

concluded that the fees are paid by the litigants. After its

original ruling, the Board upheld an additional disallowance of

$24,861 in federal funding to the Commonwealth on the same

grounds.

B. Proceedings Before the District Court

The Commonwealth subsequently filed a complaint in the

district court seeking judicial review of the Appeals Board's

decision upholding the disallowances. In that complaint, the

Commonwealth also sought declaratory and injunctive relief on the

ground that the members of the Appeals Board were appointed in

violation of both the Appointments Clause of the United States

Constitution and civil service laws and regulations. The

district court entered summary judgment for the defendants on all

counts, and denied a Commonwealth motion for remand to allow the

Appeals Board to consider a belatedly discovered HHS policy

memorandum. The court held that the agency's construction of the

8
statute at issue is entitled to deference and that the Board's

rulings were based on a reasonable construction of that statute.

The court refused to find that the Board's composition was

improper. This appeal followed.

II. Discussion
A. The Appointments Clause

The Commonwealth first contends that the members of the HHS

Appeals Board were appointed in violation of the Appointments

Clause of the United States Constitution. The Appointments Clause

provides as follows:
[The President] . . . shall nominate, and by and with
the Advice and Consent of the Senate, shall appoint
Ambassadors, other public Ministers and Consuls, Judges
of the Supreme Court, and all other Officers of the
United States, whose Appointments are not herein
otherwise provided for, and which shall be established
by Law; but the Congress may by Law vest the
Appointment of such inferior Officers, as they think
proper, in the President alone, in the Courts of Law,
or in the Heads of Departments.

U.S. Const. Art. II, § 2, cl. 2.

Thus, the Appointments Clause divides all officers into two

classes: principal officers and inferior officers. Only the

former are appointed subject to the advise and consent of the

Senate. See Morrison v. Olson, 487 U.S. 654, 670 (1988).
Accordingly, our inquiry must begin with an analysis of the

nature of Board membership and a determination of whether the

members are "principal officers" or "inferior officers." See

Freytag v. Commissioner of Internal Revenue, 501 U.S. 868, 878

(1991).

9
 However, since employees and lesser functionaries are not

subject to the Appointments Clause, see id. at 880, we must

determine if Appeals Board members are "officers" or "employees"

for purposes of that Clause. "[A]ny appointee exercising

significant authority pursuant to the laws of the United States

is an `Officer of the United States,' and must, therefore, be

appointed in the manner prescribed by § 2, cl. 2, of Article II."

See Freytag, 501 U.S. at 881. Title 45 C.F.R. § 16.13, entitled

"Powers and responsibilities," sets forth the authority of the

members of the Appeals Board. It provides:

In addition to powers specified elsewhere in these
procedures, Board members have the power to issue
orders (including "show cause" orders); to examine
witnesses; to take all steps necessary for the conduct
of an orderly hearing; to rule on requests and motions,
including motions to dismiss; to grant extensions of
time for good reasons; to dismiss for failure to meet
deadlines and other requirements; to close or suspend
cases which are not ready for review; to order or
assist the parties to submit relevant information; to
remand a case for further action by the respondent; to
waive or modify these procedures in a specific case
with notice to the parties; to reconsider a Board
decision where a party promptly alleges a clear error
of fact or law; and to take any other action necessary
to resolve disputes in accordance with the objectives
of these procedures. As will become apparent, the
broad discretion vested in Appeals Board members and
the substantive duties that they perform.

45 C.F.R. Part 16, Appendix A. The broad discretion and

authority vested in the Board clearly establishes that its

members are officers and not employees, and the Board does not

argue to the contrary.

10
 Accordingly, we must address whether the Appeals Board

members are "principal" or "inferior" officers. "The line

between `inferior' and `principal' officers is one that is far

from clear, and the Framers provided little guidance into where

it should be drawn." Morrison, 487 U.S. at 671 (citation

omitted). However, the Supreme Court has identified several

factors that guide our inquiry. These include: (1) the scope of

the officer's duties; (2) the scope of the officer's authority;

(3) the length of the officer's tenure; and (4) whether the

officer is subject to removal by a higher Executive Branch

official. See Id. at 671-672.

In Morrison, the Court considered each of these factors and

concluded that an independent counsel appointed under the Ethics

in Government Act was an inferior officer. The independent

counsel had been appointed by a Special Division of the United

States Court of Appeals for the District of Columbia pursuant to

28 U.S.C. §§ 591 et seq.
Briefly stated, [that statute] allows for the
appointment of an independent counsel to
investigate and, if appropriate, prosecute
certain high-ranking Government officials for
violations of federal criminal laws.

Morrison, 487 U.S. at 660. The independent counsel was given

"full power and independent authority to exercise all

investigative and prosecutorial functions and powers of the

Department of Justice." Id. at 662. In addition, the authority

of the Attorney General to remove the independent counsel was

drastically curtailed and the independent counsel was given the

power to seek judicial review of any attempted removal. See 28

11
U.S.C. §§ 596(a)(1). Nevertheless, despite the broad authority,

discretion, and independence of the independent counsel, the

Supreme Court concluded that the position was an inferior office

under the Appointments Clause. First, the independent counsel

was "subject to removal by a higher Executive Branch official,"

i.e. the Attorney General. This suggested that the independent

counsel was "to some degree `inferior' in rank and authority."

Morrison 487 U.S. at 671. Second, the counsel was "empowered by

the Act to perform only certain, limited duties," which did "not

include any authority to formulate policy." Id. at 671. Third,

the counsel's office was limited in jurisdiction to certain

federal officials suspected of certain serious federal crimes.

Lastly, the counsel's office was limited in tenure because the

appointment did not extend beyond the completion of the

investigation and prosecution for which the counsel was

appointed. Id. at 672.

The Commonwealth argues that application of the Morrison

factors requires a conclusion that Appeals Board members are

principal officers. In so arguing, the Commonwealth stresses the

scope of the Board members' authority. "Indeed, the jurisdiction

of the Appeals Board is broader than that of some of the

specialized Article II Federal courts like that of the Court of

International Trade. 28 U.S.C. §§ 251, 1581." Appellant's Brief

at 19-21. The Commonwealth also stresses that much of the

Board's jurisdiction is statutory and thus beyond the reach of

the Secretary. "[W]hile it is true that the Secretary can

withdraw most of the authority granted to the Appeals Board, she

12
cannot withdraw the Appeals Board's statutory jurisdiction. See

42 U.S.C. § 608(j)". Appellant's Brief at 19-21. Finally, the

Commonwealth argues that the tenure of the Board members supports

principal officer status. The parties have stipulated that Board

members will serve indefinitely unless removed for misconduct.

While conceding that the Secretary has the power to remove

members, the Commonwealth argues that exclusive reliance on the

removal criteria would classify virtually all Executive Branch

officials, except the President and his cabinet, as inferior

officers.

Defendants contend that the Commonwealth grossly inflates

the duties and authority of the Appeals Board.
Appeals Board review is not available, however, in
civil rights cases and matters in which a statute
requires a formal hearing under the APA, 5 U.S.C. 554,
or some other hearing process. 45 C.F.R. pt. 16, App.
A, § F. The Board is also 'bound by all applicable
laws and regulations,' 45 C.F.R. 16.14 -- i.e., it
applies, rather than makes, agency policy. See App.
47a (stipulation) (Board members are not in
confidential or policy-making positions). The
Commonwealth's claim that the Board's authority
'supersedes even that of the Secretary of HHS herself
is thus preposterous.

Appellees' Brief at 20-21. Further, defendants point out that

"Appeals Board members may be removed by the Secretary for

unacceptable performance or cause" and that the Secretary retains

discretion to terminate or reassign all but a few of the Appeals

Board's functions. Appellees' Brief at 21.

We agree that the Appeals Board members are not principal

officers. Like the independent prosecutors in Morrison, the

Appeals Board members are subject to removal by a higher

13
Executive Branch official, i.e. the Secretary of HHS. Although

there are some restrictions on the Secretary's ability to remove

Board members, the Secretary's ability is not nearly as

restricted as that of the Attorney General in Morrison, and the

Board members have no statutory authorization to bring a civil

action challenging their removal as did the special prosecutor in

Morrison. Furthermore, although the term of service on the Board

is not restricted in duration, the Secretary may remove a member

for cause or misconduct at any time, and the Board's powers and

responsibilities are limited by regulation. Finally, and perhaps

most significantly, the Secretary could altogether eliminate the

powers of the Board that are at issue here.

It is true that the Secretary cannot withdraw the Appeals

Board's statutory jurisdiction. See 42 U.S.C. § 608(j)

(providing for HHS Appeals Board review of Title IV-A

disallowance decisions made by a Quality Control panel). The

Commonwealth relies upon Freytag to argue that if Board members

are principal officers for purposes of deciding statutory

jurisdiction cases, then they are principal officers for all

purposes. However, reliance on Freytag is misplaced.

There, a statute authorized the Chief Judge of the Tax Court

to appoint special trial judges and to assign them four

categories of cases. These categories included: (1) any

declaratory judgment proceeding, (2) any proceeding under § 7463

of the Internal Revenue Code, (3) any proceeding in which the

deficiency or claimed overpayment did not exceed $10,000, and (4)

any other proceeding which the Chief Judge may designate.

14
Freytag, 501 U.S. at 873. In the first three categories, the

special trial judge possessed the authority to render a final

decision, however, in the fourth category, the special judge

could only issue proposed findings and recommend a disposition.

The Commissioner of the IRS conceded that the special trial

judges were inferior officers for purposes of the first three

categories of cases, but argued that the judges were "employees"

for the fourth category because the trial judges' duties were

significantly curtailed in that category. Id. at 882. The

Supreme Court rejected this argument reasoning that:
[t]he fact that an inferior officer on occasion
performs duties that may be performed by an employee
not subject to the Appointments Clause does not
transform his [or her] status under the Constitution.
If a special trial judge is an inferior officer for
purposes of [the first three categories of cases], he
[or she] is an inferior officer within the meaning of
the Appointments Clause and . . . must be properly
appointed.

Id. at 882. Similarly we do not believe that the Appeals Board's

statutory grant of jurisdiction to review funding disallowances

of the Quality Control Board transforms the Board's members into
principal officers.

The AFDC program is a public-assistance scheme established

by federal statute. See 42 U.S.C. §§ 601-615 (1982). The

statutory scheme that gave birth to the AFDC program has been

appropriately described as "mind-numbing in complexity." N.Y.

State Department of Social Services v. Bowen, 835 F.2d 360, 361

(D.C. Cir. 1987). "Under the program, the federal government

makes grants to partially fund eligible state programs that

provide cash assistance to low-income families with dependent

15
children." Commonwealth of Pennsylvania v. United States, 752

F.2d 795, 797 (3d Cir. 1984). Under section 608(j), the Board

has quasi-appellate review over AFDC funding disallowance

decisions made by a Quality Control Review Panel. The quality

control system for the program was created to minimize the number

and amount of inappropriate payments made under the AFDC program.

See 45 C.F.R. § 205.40(a). However, while the Board functions as

an adjudicatory body under § 608(j), Board members remain subject

to removal by the Secretary of HHS. Moreover, the Board's powers

under § 608(j) are strictly limited by the statute and

implementing regulations. See 45 C.F.R. §§ 205.40-205.43.

Accordingly, the Board is powerless to review certain findings of

the Quality Control Panel. See 42 U.S.C. § 608(j)(2). Thus, the

authority of the Board as a quasi-appellate body under § 608(j)

is even more limited than the authority the Board has when

reviewing a Title IV-D disallowance.

Of course, "[t]he nature of each government position must be

assessed on its own merits," Silver, 951 F.2d at 1040.

Nevertheless, if special trial judges of the Tax Court are not

principal officers under Freytag, it is difficult to imagine how

Appeals Board members could be principal officers given the

limitations imposed by the foregoing statutory scheme.
[S]pecial trial judges perform more than ministerial
tasks. They take testimony, conduct trials, rule on
the admissibility of evidence, and have the power to
enforce compliance with discovery orders. In the
course of carrying out these important functions, the
special trial judges exercise significant discretion.

16
Freytag, 501 U.S. at 881-82. Perhaps even more importantly, a

special trial judge has the authority to render a final decision

on any of the three specifically described proceedings set forth

above.

Congress' grant of authority to the Chief Judge of the Tax

Court to appoint special trial judges and assign them the

categories of cases described above necessarily includes the

concomitant power to remove them and/or to curtail their duties.

As discussed earlier, the same is true here. Accordingly, we

conclude that the Appeals Board members are "inferior officers"

for purposes of the Appointments Clause.

This does not, however, end our inquiry under the

Appointments Clause. The Commonwealth argues that even if the

Appeals Board members are "inferior officers," their existence is

still a violation of the Appointments Clause because no act of

Congress specifically authorizes their appointment. Appellant's

Brief at 23. The defendants contend that the Social Security Act

provides the Secretary with the necessary authority. See 42

U.S.C. § 913. This section provides, in pertinent part, that:
the Secretary is authorized to appoint and fix the
compensation of such officers and employees and to make
such expenditures as may be necessary for carrying out
the functions of the Secretary under this chapter. The
Secretary may appoint attorneys and experts without
regard to the civil service laws.

42 U.S.C. § 913.1 This authorization is consistent with the

applicable portion of the Appointments Clause that states: "but

1
At the time of the district court's decision, this
provision was codified at 42 U.S.C. § 903.

17
the Congress may by Law vest the Appointment of such inferior

Officers, as they think proper, in the President alone, in the

courts of Law, or in the Heads of Departments." U.S. Const. Art.

II, § 2, cl. 2. On its face, the language of this "excepting

clause" does not require that a law specifically provide for the

appointment of a particular inferior officer. To the contrary,

"the Constitution affords Congress substantial discretion to

fashion appointments within the specified constraints." Silver

v. United States Postal Service, 951 F.2d 1033, 1037 (9th Cir.

1991); see also Ex Parte Siebold, 100 U.S. 371, 397-98 (1880)

("[A]s the Constitution stands, the selection of the appointment

power, as between the functionaries named, is a matter resting in

the discretion of Congress."); Morrison, 487 U.S. at 673 (same).

In recognition of the enormous scope of the Secretary's

responsibilities, Congress gave the Secretary carte blanche to

appoint individuals to assist her in carrying out these duties.

See 42 U.S.C. § 913. We do not believe that this grant of

appointment authority runs afoul of the Appointments Clause. "The

strict requirements of nomination by the President and

confirmation by the Senate were not carried over to the

appointment of inferior officers. A degree of flexibility was

thought appropriate in providing for the appointment of officers

who, by definition, would have only inferior governmental

authority." Weiss v. United States, 114 S.Ct. 752, 765 (1994)

(Souter, J., concurring). Accountability is ensured and

governmental power checked by Congress's assignment of appointing

power to the highly accountable head of a federal department like

18
the HHS. See id. at 765 (Souter, J., concurring) ("the Framers .

. . structured the [appointment of inferior officers] to ensure

accountability and check governmental power: any decision to

dispense with presidential appointment and Senate confirmation is

Congress's to make, not the President's, but Congress's authority

is limited to assigning the appointing power to the highly

accountable President or the heads of departments, or, where

appropriate, to the courts of law."); Freytag, 501 U.S. at 884,

111 S.Ct. at 2631 ("The Framers understood . . . that by limiting

the appointment power, they could ensure that those who wielded

it were accountable to political force and the will of the people

. . . Even with respect to `inferior Officers,' the Clause allows

Congress only limited authority to devolve appointment power on

the President, his heads of departments, and the courts of

law.").

Moreover, requiring Congress to identify the HHS Appeals

Board by name in its statutory grant of authority would be

legislatively unworkable and defeat the purpose of the relaxed

requirements for "inferior officer" appointments. The Framers of

the Constitution created the classification of "inferior

officers" because they foresaw that "when offices became

numerous, and sudden removals necessary," nomination by the

President and confirmation by the Senate "might become

inconvenient." United States v. Germaine, 99 U.S. 508, 510

(1879). The convenience afforded by inferior officer

appointments would hardly be served if we were to require

Congress to account for every potential inferior officer

19
appointment in its statutory grant of authority to the department

head. Here, the highly accountable department head has been

given the discretion to fashion inferior officer appointments to

fit her needs, and she has done so by appointing members to the

HHS Appeals Board. We hold that, in doing so, she acted within

the scope of her authority under 42 U.S.C. § 913.

Notwithstanding this clear congressional grant of

appointment authority, the Commonwealth argues that the Secretary

of HHS has improperly used her ordinary appointment power to

create an extraordinary tribunal. Appellant's Brief at 24. The

Commonwealth claims that the Appeals Board is not directly

accountable to the political leadership because: (1) its members

are civil service members who serve for life; (2) its members are

only indirectly supervised; (3) the members' evaluations have

nothing to do with cases before the Appeals Board; and (4) in

many categories of cases, the Secretary cannot overturn the

Appeals Board's decisions. Appellant's Brief at 25.

Notwithstanding these considerations, the Appointments

Clause does not hint that inferior officers must be as tightly

tethered to the appointing entity or political leadership as the

Commonwealth suggests. Neither Morrison nor Freytag suggests

that inferior officers must have a certain level of supervision

and political accountability in order to survive constitutional

scrutiny. To the contrary, in Morrison, the Court specifically

stated: "the [Ethics in Government] Act simply does not give the

Division the power to `supervise' the independent counsel in the

exercise of his or her prosecutorial authority." 487 U.S. at 681.

20
Common sense establishes that supervision and political

accountability in the sense used by the Commonwealth are

antithetical to the concept of both an independent counsel in

Morrison and a judge in Freytag. Requiring a prosecutor to be

directly supervised by, and accountable to, the very persons he

or she may be charged with investigating and prosecuting would

make a mockery of the authority the Supreme Court sought to

preserve and ratify in Morrison. Similarly, the concept of

supervision and dependence is wholly inconsistent with the notion

of a judge in Freytag.

Furthermore, a requirement that an inferior officer be

subject to direct supervision of the appointing entity, as the

Commonwealth suggests, is at odds with the very test for

"officer" status under the Appointments Clause. That clause

vests such status in "any appointee exercising significant

authority pursuant to the laws of the United States." Freytag,

501 U.S. at 881. It stands to reason that the level of

supervision imposed on the appointee and the appointee's

authority are inversely related. See United States v. Boeing

Co., 9 F.3d 743, 758 (1993) (holding that the authority exercised

by qui tam "realtors" or "informers" who bring suit under the

False Claims Act is not so "significant" that it must only be

exercised by officers appointed in the manner prescribed by the

Appointments Clause because the Executive Branch retains

"sufficient control" over the realtors).

21
 Finally, the Commonwealth's reliance on 5 U.S.C. § 2104(a)

is misplaced.2 This provision merely defines "officer" for

purposes of Title 5 of the United States Code, entitled

"Government Organization and Employees." See 5 U.S.C. § 2104(a).

It has no relevance to "officer" status under the Appointments

Clause, and thus, its reference to "supervision" certainly cannot

be read to restrict the appointment authority conferred by

Article II. Appellees' Brief at 25. Therefore, we hold that the

Appointments Clause is not violated because the Secretary's

general appointment power under 42 U.S.C. § 913 authorizes the

appointment of Appeals Board members.

B. Civil Service Regulations

The Commonwealth argues that even if the appointment of

Appeals Board members was constitutional, their appointment

2
Section 2104, in relevant part, states as follows:
(a) For the purpose of this title, "officer", except as
otherwise provided by this section or when specifically modified,
means a justice or judge of the United States and an individual
who is--
(1) required by law to be appointed in the civil service
by one of the following acting in an official capacity--
(A) the President;
(B) a court of the United States;
(C) the head of an Executive agency; or
(D) the Secretary of a military department;
(2) engaged in the performance of a Federal function under
authority of law or an Executive act; and
(3) subject to the supervision of an authority named by
paragraph (1) of this section, or the Judicial Conference
of the United States, while engaged in the performance of
the duties of his office.

5 U.S.C. § 2104

22
violated relevant civil service laws (except for the chairperson

whose appointment is not challenged on these grounds).

Accordingly, in the Commonwealth's estimation, the Board had no

statutory power to act. Defendants contend that this argument

has been waived since the Commonwealth never raised it before the

Board. In addition, defendants argue that the Secretary's

decision to appoint excepted service attorneys to the Appeals

Board is a matter of nonreviewable agency discretion.

The Supreme Court has held that an issue is nonreviewable

only in rare instances "where the relevant statute is drawn so

that a court would have no meaningful standard against which to

judge the agency's exercise of discretion." Lincoln v. Vigil,

113 S.Ct. 2024, 2030-31 (1993). Here, we can examine the

relevant statutes and regulations to determine whether they grant

the Secretary the appointment authority she utilized. Moreover,

we retain the discretion "to hear issues not raised in earlier

proceedings when special circumstances warrant an exception to

the general rule" that would otherwise result in a waiver. State

of New Jersey Dept. of Ed. v. Hufstedler, 724 F.2d 34, 36 n.1 (3d

Cir. 1983). Such "special circumstances" exist here because the

Office of Personnel Management explicitly advised Pennsylvania

that non-SES Appeals Board positions were "in competitive

service." (App. at 13a). The Commonwealth learned that OPM's

statement was erroneous only after suit was filed in the district

court. Accordingly, it would be inappropriate to allow the

Commonwealth's reliance on the OPM's erroneous information to

prejudice the Commonwealth to the extent of not now considering

23
the merits of its position. Thus, we will reach the merits of

the Commonwealth's position.

"Civil service" is defined as all Federal appointive

positions except uniformed services. 5 U.S.C. § 2101. The civil

service is composed of the "competitive service," the "excepted

service," and the "senior Executive Service." See 5 U.S.C.

§§2102, 2103. All Executive Branch appointive positions not

requiring Senate confirmation and not in the Senior Executive

Service are to be in the competitive service unless "specifically

excepted from the competitive service by or under statute." 5

U.S.C. § 2102. Congress authorized the President, when warranted

by "conditions of good administration," to make "necessary

exceptions of positions from the competitive service" within the

executive branch. 5 U.S.C. § 3302. Subsequently, the President

delegated this authority to the Office of Personnel Management

(OPM). Exec.Order No. 10577, 5 C.F.R. § 6.1(a). OPM thereafter

divided excepted service positions into three categories:

Schedules A, B, and C. 5 C.F.R. § 6.2. Schedule A, which allows

exception of "positions other than those of a confidential or

policy-determining character for which it is impracticable to

examine," 5 C.F.R. § 213.3101, specifically includes "attorneys."

5 C.F.R. § 213.3102(d). Here, the parties have stipulated that

the Schedule A "attorney appointment" authority was utilized to

appoint the challenged members of the Appeals Board. Accordingly,

the essential dispute is straightforward.

In effect, defendants contend that Schedule A specifically

provides for the appointment of "attorneys" to the Appeals Board

24
without regard to the competitive service requirements of the

civil service laws. The Commonwealth disagrees. It believes

that members of the Appeals Board cannot be hired pursuant to the

"attorney appointment" power of Schedule A since, in reality,

these attorneys function as administrative law judges. See

Appellant's Brief at 28-30. For the following reasons, we cannot

agree with the Commonwealth.

Schedule A imposes two limitations on the "attorney

appointment" authority. Under the OPM regulation, such authority

is limited to "positions other than those of a confidential or

policy-determining character for which it is impracticable to

examine." 5 C.F.R. §§ 213.3101. Here, the Commonwealth does not

question the OPM's determination that "attorneys" may be

appointed under Schedule A authority. Rather, the Commonwealth

challenges the Board members' designation as "attorneys."

Accordingly, we must return to the function of the Board.

The Appeals Board reviews final written decisions in a

narrowly specified range of disputes arising from HHS programs.

See 45 C.F.R. Pt. 16, App. A. In resolving these disputes, Board

members are authorized to engage in diverse legal and quasi-

judicial tasks. Some of these tasks include examining witnesses

and evidence, holding hearings and informal conferences,

assisting parties to submit relevant information and to rule on

requests and motions. See 45 C.F.R. § 16.13. However, contrary

to the Commonwealth's assertions, no authority exists for the

proposition that Appeals Board members function as administrative

law judges. Congress granted administrative law judges ("ALJ")

25
the authority to conduct formal hearings in accordance with

sections 556 and 557 of the Administrative Procedure Act,

("APA").3 By contrast, the Appeals Board has no authority to

review any dispute for which a formal hearing is required under

the APA. 45 C.F.R. Pt. 16, App. A, § F. Instead, the Board

provides a mechanism for reviewing the category of HHS disputes

not otherwise designated by Congress for formal adjudication

pursuant to either 5 U.S.C. § 554, Title VII or some other

statutory scheme. Id. Accordingly, we must reject any attempt

to analogize the Board members to administrative law judges.

We believe the Schedule A "attorney appointment" power

clearly extends to the challenged members of the Appeals Board.

Nothing in the relevant statutory or regulatory scheme restricts

the Secretary's appointment of attorneys, under Schedule A, to

perform the tasks assigned to the Appeals Board. Title 5 U.S.C.

§ 3106 merely restricts the employment of "an attorney or counsel

for the conduct of litigation." Since 5 C.F.R. § 213.3102(d)

specifically exempts the challenged members from the competitive

service requirements of the civil service laws, we conclude that

the Board was not divested of its authority to act.

Accordingly, we affirm the district court's holding that the

Secretary's appointment of excepted service attorneys to the

3
5 U.S.C. § 3105. The hearing sections of the APA, 5 U.S.C.
§556-557, are applicable, with exceptions, when a rule is
required by statute to be made on the record after an agency
hearing; when an adjudication is required by statute to be
determined on the record after an agency hearing; or when the
requirement of a hearing is read into a statute to preserve its
constitutionality.

26
Appeals Board did not run afoul of civil service statutes and

regulations.

E. Program Income

The Commonwealth contends that even if the Appeals Board

members were lawfully appointed, the Board and the district court

erred in finding that the JCP fee is "program income" which must

be excluded from reimbursement under 42 U.S.C. § 655(a)(1).

Section 655(a)(1) provides, in pertinent part, that:
In determining the total amounts expended by any State
during a quarter, for purposes of this subsection,
there shall be excluded an amount equal to the total of
any fees collected or other income resulting from
services provided under the plan approved under this
part.

The Commonwealth claims that the phrase "resulting from services

provided under the plan approved under this part" is ambiguous.

Appellant's Brief at 31.
One possible reading of the "resulting from" language
is that it qualifies both "fees collected" and "other
income." A second possible reading of the language
applies the doctrine of the last antecedent to limit
the "resulting from" language so that it qualifies only
the "other income" prong of § 655(a).

Id.

HHS has promulgated 45 C.F.R. § 304.50, entitled "Treatment

of Program Income." That regulation states:

The IV-D agency must exclude from its quarterly
expenditure claims an amount equal to:

(a) All fees which are collected during the quarter
under the Title IV-D State Plan; and

27
 (b) All interest and other income earned during the
quarter resulting from services provided under the
Title IV-D plan.

45 C.F.R. § 304.50. The Appeals Board construed the regulation

as restating the statute's requirement. The Board reasoned that,

"[i]n order to be collected under the plan, fees must necessarily

be collected from services provided under the plan." Appeals

Board Decision p. 6. Thus, in its estimation, the proper focus is

on the receipt of income from grant related activities, not on

how the funds are spent. Moreover, the Board suggested that "the

underlying reason for this appeal appears to be the IV-D agency's

frustration with the fact that the income from the fees is not

available for use for IV-D program purposes, yet treating the

fees as [program] income reduces the amount of [federal financial

participation] available." Appeals Board Decision p. 5 n.4 The

Commonwealth accurately describes this practical problem that

results from the Board's interpretation of "program income."

However, as the Board appropriately noted, "[t]his problem

results from the Commonwealth of Pennsylvania's own action of

earmarking the funds for JCP purposes. . .and could be remedied

by state legislative action." Id. The district court found the

Board's construction of 45 C.F.R. § 304.50 and 42 U.S.C.

§655(a)(1) to be reasonable and therefore entitled to deference.

The parties dispute the extent to which the Appeals Board's

construction of 42 U.S.C. § 655(a) and 45 C.F.R. § 304.50 is

entitled to deference. The defendants, citing Chevron U.S.A.,

Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837

28
(1984) and Thomas Jefferson Univ. v. Shalala, 114 S. Ct. 2381,

2386 (1994), claim we owe deference to an administrative agency's

construction of a statute and its implementing regulations. The

Commonwealth cites to cases holding that when a Board functions

as an adjudicatory tribunal and does not make rules or formulate

policy, its interpretation is not entitled to any special

deference. See Martin v. Occupational Safety & Health Review

Commission, 499 U.S. 144 (1991) (reviewing court should defer to

Secretary of Labor when Secretary and Board furnish reasonable

but conflicting interpretations of ambiguous regulation

promulgated by the Secretary under the Occupational Safety and

Health Act); Sharondale Corp. v. Ross, 42 F.3d 993 (6th Cir.

1994) (Department of Labor Benefits Review Board acts as

adjudicatory tribunal and does not make rules or formulate

policy, and thus its interpretation of regulation is not entitled

to any special deference). We need not decide the level of

deference owed to an HHS Appeals Board decision, because the

Board's interpretation of 45 C.F.R. § 304.50(a) and 42 U.S.C.

§655(a)(1), withstands even plenary review.

Section 655(a)(1) is clear on its face. However, to the

extent the regulation detracts from the clear import of this

statute, the statute must, of course, prevail. See McComb v.

Wambaugh, 934 F.2d 474, 481 (3d Cir. 1991) ("[I]n any conflict

between a statute and a regulation purporting to implement the

statutes provision, the regulation must, of course, give way.");

60 Key Centre, Inc. v. Administrator of General Services Admin.,

47 F.3d 55, 58 (2d Cir. 1995) ("When . . . a regulation operates

29
to create a rule out of harmony with the statute under which it

is promulgated, the regulation is considered a nullity.").

However, even if the regulation here has unintentionally clouded

an otherwise unambiguous statute, we do not believe that the

statute and regulation conflict. See LaVallee Northside Civic

Assoc. v. Virgin Islands Coastal Zone Management Commission, 866

F.2d 616 (3d Cir. 1989) (before disregarding a regulation a court

must first attempt to reconcile a seemingly discordant statute

and regulation). As the Appeals Board reasoned, fees "collected

. . . under the Title IV-D plan" must necessarily "result from

services provided under the [Title IV-D] plan." Appeals Board

Decision at 6. Therefore, under both the statute and the

regulation, funds which would not have been generated absent a

state's Title IV-D services constitute "program income" not

subject to federal reimbursement.

Here, the JCP fee is directly generated by IV-D services.

The Commonwealth collects an extra $5 from either the parent

requesting the IV-D services or the parent legally obligated to

pay IV-D child support when such a case is filed. This fact is

not negated merely because the Commonwealth itself has chosen to

use the JCP fee in a manner that does not enhance the Child

Support Enforcement program in Pennsylvania. Clearly, the

Commonwealth may allocate income derived from the JCP fee in any

manner it chooses. However, under this statutory scheme, its

decision as to how to utilize the income from the fee has no

bearing on federal reimbursement for Title IV-D services.

30
 The Commonwealth raises an additional argument, relying on

45 C.F.R. § 74.41(c). That regulation pre-dated 42 U.S.C.

§655(a)(1). When the district court granted summary judgment for

the defendants, §74.41(c) (which governs all HHS grant programs)

provided, in pertinent part, that:
The following shall not be considered program income:

(1) Revenues raised by a government recipient under its
governing powers, such as taxes, special assessments,
levies and fines . . .

45 C.F.R. § 74.41(c). The Commonwealth contends that the JCP fee

is a "special assessment" within the meaning of § 74.41(c)(1) and

therefore need not be considered program income. However,

§74.41(c)(1) does not apply when it is "inconsistent with Federal

statutes [or] regulations." 45 C.F.R. § 74.4(a). Since we

uphold the Board's interpretation of 45 C.F.R. § 304.50(a) and 42

U.S.C. § 655(a)(1), § 74.41(c)(1) is inapplicable here because it

directly conflicts with § 304.50(a) and § 655(a)(1).

Accordingly, we affirm the district court's conclusion that

the JCP fee is program income as defined by 42 U.S.C. § 655(a)(1)

and 45 C.F.R. § 304.50(a), and thus, may not be reimbursed with

federal funds.

F. New Evidence

The Commonwealth's final contention is that we should

"remand so that the Appeals Board can consider new evidence

uncovered in HHS's belated response to the Commonwealth's Freedom

of Information Act ("FOIA") request." Appellant's Brief at 36.

31
We will treat the Commonwealth's motion for a remand to the

Appeals Board as a motion for a new trial based on newly

discovered evidence, and therefore, review the district court's

denial of the Commonwealth's motion for an abuse of discretion.

See Dunn v. Hovic, 1 F.3d 1362, 1364 (3d Cir.), cert. denied,

U.S. , 114 S.Ct. 650 (1993) (motion for new trial reviewed for

an abuse of discretion). The purported new evidence is a 1988

policy memorandum (PIQ-88-5) issued by HHS' Office of Child

Support Enforcement. The memorandum states that interest earned

by North Carolina county courts on child support collections,

before being forwarded to the state's IV-D agency, is not program

income because the county courts are not under cooperative

agreements with the State IV-D agency, and thus, are not bound by

state and federal IV-D regulations.

The district court denied the remand motion because "PIQ-88-

5 can be distinguished from the facts presented here, as DPW

administers its Title IV-D program through cooperative agreements

with all of Pennsylvania's judicial districts, and the JCP fee is

collected by the Pennsylvania Domestic Relations Section of the

Court of Common Pleas." We agree. The Commonwealth also

suggests that a previously undisclosed 1989 Federal Register

statement is new evidence that warrants a remand. However, by

definition, a Federal Register notice is public. We are at a

loss to understand how such public information should be viewed

as "new evidence" justifying a remand merely because the

Commonwealth's initial research apparently somehow failed to find

it.

32
 The district court acted well within its discretion in

refusing to remand this case to the Appeals Board. PIQ memoranda

are fact-specific policy documents, not intended to apply

broadly, and are due less weight than regulations. Simply

stated, they are not binding precedent on the Appeals Board.

Finally, even if PIQ-88-5 had some precedential value, we agree

with the district court's conclusion that the case before us is

distinct and the memorandum was, therefore, of little value to

the Appeals Board.

Accordingly, we affirm the district court's denial of the

Commonwealth's motion for a remand to the Appeals Board.

33
 III.

For the foregoing reasons, the judgment of the district

court will be affirmed.

34