Sloan, Leon Sr. v. HUD

                  United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

      Argued September 11, 2000   Decided February 2, 2001 

                           No. 99-5145

                Leon Sloan and Jimmie Lee Furby, 
                           Appellants,

                                v.

                          United States 
          Department of Housing and Urban Development, 
                            Appellee.

          Appeal from the United States District Court 
                  for the District of Columbia 
                          (No. 98cv1201)

     James K. Kearney argued the cause for appellants.  With 
him on the briefs were James P. Gallatin, Jr., David T. 
Hickey, and Andrew J. Hungerman IV.

     Scott S. Harris, Assistant United States Attorney, argued 
the cause for appellee.  With him on the brief were Wilma A. 

Lewis, United States Attorney, and R. Craig Lawrence, As-
sistant United States Attorney.

     Before:  Edwards, Chief Judge, Henderson and Garland, 
Circuit Judges.

     Opinion for the court filed by Circuit Judge Garland.

     Garland, Circuit Judge:  Plaintiffs Leon Sloan and Jimmie 
Lee Furby appeal from the dismissal of their Federal Tort 
Claims Act (FTCA) complaint against the United States 
Department of Housing and Urban Development (HUD).  
We find that, in light of the discretionary function exception 
to the FTCA, the district court properly concluded that it 
lacked jurisdiction to entertain plaintiffs' complaint.

                                I

     Sloan and Furby were partners in a contracting business, 
J&L Renovation Company (J&L).  In 1993, J&L won a 
subcontract for interior demolition as part of the rehabilita-
tion of Burns Heights, a public housing project located in 
Duquesne, Pennsylvania, and owned by the Allegheny County 
Housing Authority (ACHA).  HUD provided ACHA with 
funds for the project.

     HUD's Office of Inspector General (OIG) began to investi-
gate the Burns Heights project in late 1994, after another 
contractor alleged that J&L was not complying with lead-
based paint abatement requirements.  OIG auditor Mark 
Chandler was assigned to conduct a performance audit of the 
project.  In November 1994, Chandler and HUD attorney 
Dane Narode visited Burns Heights and observed demolition 
techniques that would have been unacceptable in a project 
involving lead-based paint--including the failure to contain 
dirt, dust, and paint chips.  Chandler and Narode also visited 
a landfill, situated about 300 feet from the Monongahela 
River, where J&L had been taking plaster debris from Burns 
Heights.  The landfill was not approved for the dumping of 
plaster, as then-applicable Pennsylvania regulations required;  
moreover, had the plaster been contaminated with lead paint, 
its dumping would have created a health hazard.  When the 

operator of the landfill discovered the investigators, he chased 
them off the site and allegedly threatened to "blow [Narode's] 
head off."  During a subsequent visit to the site, the investi-
gators observed the operator burying the debris.

     Chandler then interviewed David McLean, Director of 
Maintenance and Development for ACHA, who told Chandler 
that Burns Heights was a lead-based paint abatement project.  
ACHA's records, however, indicate that McLean was mistak-
en.  Those records reflect that in 1992-93, several tests had 
been performed to determine the lead content of debris and 
air at Burns Heights;  the tests indicated the absence of 
hazardous lead levels.  The records further reflect that after 
receiving those test results in 1993, ACHA agreed that there 
was no need for its contractors and subcontractors to follow 
hazardous lead-based paint protocols at Burns Heights or to 
dispose of demolition debris as contaminated waste.

     Although ACHA provided Chandler with copies of the lead 
tests, Chandler was not qualified to interpret the results.  
Nor did he further inquire as to their meaning or speak with 
J&L regarding the scope of work under the demolition sub-
contract.  Chandler's final audit report, which was issued by 
the OIG in October 1995, found that ACHA had not ensured 
compliance with lead-based paint abatement requirements 
during the interior demolition of the Burns Heights buildings.  
The report did not mention any contractors or subcontractors 
by name. OIG, HUD, Report No. 96-AO-209-1804, Review of 
Contracted Lead-Based Paint Activities:  ACHA, Pittsburgh, 
PA (1995) [hereinafter Audit Report].

     On August 18, 1995, before completing the audit, HUD 
notified Sloan, Furby, and J&L that it was suspending them 
from all HUD-related government contracting work, pending 
further proceedings that might debar them from such work 
for five years.  The notice, issued by HUD's Assistant Secre-
tary for Public and Indian Housing, based the suspension and 
proposed debarment on three "serious irregularities in 
[J&L's] business dealings with the government":

     1.   Improper cleanup of waste from the lead-based paint 
          abatement process;
          
     2.   Improper disposal of construction debris from the 
          demolition work;  [and]
          
     3.   Failure to adhere to contract requirements or HUD 
          guidelines with respect to ... hazardous waste....
          
Letter from Asst. Sec'y Joseph Shuldiner to Leon Sloan, Sr. 
(Aug. 18, 1995).

     Sloan and Furby invoked their right to an administrative 
hearing to contest these charges.  During the proceeding, the 
government withdrew the third charge as unsupported by the 
evidence, and the Administrative Law Judge (ALJ) dismissed 
the first for the same reason.  In re Sloan, HUDBCA No. 
96-C-106-D3, at 11-12 (Aug. 30, 1996), 1996 WL 506267.  
The ALJ upheld the second charge, although she did so only 
because J&L had dumped the debris in an unapproved site, 
and not because it posed an environmental hazard.  Because 
she found no environmental hazard, the ALJ rejected HUD's 
request for debarment and terminated the suspensions.  Id. 
at 12-13.  She declined, however, to grant plaintiffs' request 
to void the suspensions ab initio.  Id. at 14.  The Secretary 
of HUD affirmed the ALJ's decision.  In re Sloan, HUDBCA 
No. 96-C-106-D3 (Dec. 18, 1996).

     Thereafter, Sloan and Furby filed complaints in the district 
court, seeking injunctive and declaratory relief under the 
Administrative Procedure Act (APA), 5 U.S.C. ss 702-03, and 
damages for constitutional torts under Bivens v. Six Un-
known Named Agents of the Federal Bureau of Narcotics, 
403 U.S. 388 (1971).  Those actions were consolidated and 
subsequently dismissed by the district court.  On appeal, this 
court affirmed the dismissal of the Bivens claim (on grounds 
other than those relied upon by the district judge), but 
reversed HUD's refusal to void the suspensions ab initio as 
arbitrary and capricious under the APA.  Sloan v. Dep't of 
Hous. & Urban Dev., 231 F.3d 10, 12 (D.C. Cir. 2000).

     On May 13, 1998, Sloan and Furby filed a separate action 
for money damages under the FTCA, 28 U.S.C. ss 1346(b), 
2671 et seq., alleging that HUD had negligently conducted the 
audit of Burns Heights.  According to the complaint, HUD's 

investigation was conducted in a manner that violated the 
laws and professional standards governing auditors, and that 
amounted to negligence and professional malpractice under 
District of Columbia law.  HUD moved to dismiss, asserting 
that the discretionary function exception to the FTCA, 28 
U.S.C. s 2680(a), deprived the court of subject matter juris-
diction.  The district court agreed and granted the motion.

                                II

     On appeal, we review the dismissal of the plaintiffs' FTCA 
complaint de novo, Moore v. Valder, 65 F.3d 189, 196 (D.C. 
Cir. 1995), and "accept all of the factual allegations in [the] 
complaint as true,"  United States v. Gaubert, 499 U.S. 315, 
327 (1991) (quoting Berkovitz v. United States, 486 U.S. 531, 
540 (1988)).  The FTCA grants federal district courts juris-
diction over claims arising from certain torts committed by 
federal employees in the scope of their employment, and 
waives the government's sovereign immunity from such 
claims.  28 U.S.C. ss 1346(b), 2674.  The grant of jurisdiction 
and waiver of immunity are subject to a number of express 
exceptions.  See 28 U.S.C. s 2680.  The exception at issue 
here, the discretionary function exception, is for "any claim 
... based upon the exercise or performance or the failure to 
exercise or perform a discretionary function or duty on the 
part of a federal agency or an employee of the Government, 
whether or not the discretion involved be abused."  28 U.S.C. 
s 2680(a).  If the discretionary function exception applies, the 
district court lacks subject matter jurisdiction over the case.  
See Cope v. Scott, 45 F.3d 445, 448 (D.C. Cir. 1995).

     In United States v. Gaubert, the Supreme Court set forth a 
two-part test for determining whether a challenged govern-
ment action is protected as a discretionary function.  First, 
the exception "covers only acts that are discretionary in 
nature, acts that 'involv[e] an element of judgment or 
choice.' "  Gaubert, 499 U.S. at 322 (quoting Berkovitz, 486 
U.S. at 536).  This "requirement of judgment or choice is not 
satisfied if a 'federal statute, regulation or policy specifically 

prescribes a course of action for an employee to follow.' "  
Gaubert, 499 U.S. at 322 (quoting Berkovitz, 486 U.S. at 536).

     Second, even if "the challenged conduct involves an element 
of judgment," that judgment must be "of the kind that the 
discretionary function exception was designed to shield."  
Gaubert, 499 U.S. at 322-23 (quoting Berkovitz, 486 U.S. at 
536).  Because the exception was designed to " 'prevent judi-
cial "second guessing" of legislative and administrative deci-
sions grounded in social, economic and political policy through 
the medium of an action in tort,' " the Court concluded that 
"the exception 'protects only governmental actions and deci-
sions based on considerations of public policy.' "  Gaubert, 
499 U.S. at 323 (quoting Berkovitz, 486 U.S. at 537).

                               III

     In the district court, Sloan and Furby argued that neither 
HUD's investigation, nor its decision to suspend plaintiffs 
from government contract work, is a discretionary act exempt 
from challenge under the FTCA.  On appeal, plaintiffs no 
longer press the latter argument, apparently conceding that 
the decision to suspend is covered by the discretionary func-
tion exception.  Appellants' Br. at 28.  We have no doubt that 
it is, but discuss the suspension in some detail because it is 
relevant to our analysis of the status of HUD's investigation, 
set forth in Part IV below.

     The decision to initiate a prosecution has long been regard-
ed as a classic discretionary function.  See, e.g., Moore, 65 
F.3d at 197 ("[A]ctions that require the prosecutor to exercise 
his professional judgment ... are ... quintessentially discre-
tionary.");  Gray v. Bell, 712 F.2d 490, 513 (D.C. Cir. 1983) 
("Prosecutorial decisions as to whether, when and against 
whom to initiate prosecution are quintessential examples of 
government discretion ....");  General Dynamics Corp. v. 
United States, 139 F.3d 1280, 1283 (9th Cir. 1998).  In Butz v. 
Economou, 438 U.S. 478 (1978), the Supreme Court held that 
"agency officials performing certain functions analogous to 
those of a prosecutor should," like prosecutors, "be able to 
claim absolute immunity" from suits brought under the Con-

stitution.  Id. at 515.  In language equally applicable to suits 
brought under the FTCA, the Court said:

     The decision to initiate administrative proceedings 
     against an individual or corporation is very much like the 
     prosecutor's decision to initiate or move forward with a 
     criminal prosecution. An agency official, like a prosecu-
     tor, may have broad discretion in deciding whether a 
     proceeding should be brought and what sanctions should 
     be sought.
     
Id. HUD's decision to suspend plaintiffs, which began a 
course of administrative proceedings regarding possible de-
barment, see 24 C.F.R. s 24.411(e), falls well within this 
rubric.

     That HUD's suspension of plaintiffs is protected by the 
discretionary function exception is confirmed by application of 
Gaubert's two-part test.  First, the decision to suspend is 
plainly discretionary in nature, involving "an element of judg-
ment or choice."  Gaubert, 499 U.S. at 322.  Indeed, the 
applicable regulation expressly so states.  See 24 C.F.R. 
s 24.115 ("Debarment and suspension are discretionary ac-
tions ....").  Although HUD rules require that certain condi-
tions be met before a suspension may issue, see 24 C.F.R. 
s 24.400(b) (stating that suspension may be imposed only 
when there is "adequate evidence" of specified wrongdoing 
and when "[i]mmediate action is necessary to protect the 
public interest"), that requirement does not convert the deci-
sion into a nondiscretionary act.  Determining whether those 
broadly stated conditions exist involves substantial elements 
of judgment.  See 24 C.F.R. s 24.400(c) ("In assessing the 
adequacy of the evidence, the agency should consider how 
much information is available, how credible it is given the 
circumstances, whether or not important allegations are cor-
roborated, and what inferences can reasonably be drawn as a 
result.");  cf. Gaubert, 499 U.S. at 329 (holding that Federal 
Home Loan Bank Board had discretion regarding appoint-
ment of receiver notwithstanding that governing statute "enu-
merated specific grounds warranting an appointment," be-
cause "the determination of whether any of these grounds 

existed depended upon the opinion of the Board" (internal 
quotation omitted)).

     The HUD regulation's express delegation of discretion to 
the suspending official may also, alone, satisfy Gaubert's 
second requirement--that the challenged action be based on 
considerations of public policy.  "When established govern-
mental policy, as expressed or implied by statute, regulation, 
or agency guidelines, allows a Government agent to exercise 
discretion," Gaubert held, "it must be presumed that the 
agent's acts are grounded in policy when exercising that 
discretion."  499 U.S. at 324.  But it is hardly necessary to 
rely on such a presumption here.  HUD's regulations place 
public policy at the forefront of the decision of the suspending 
official.  The official must determine, for example, whether 
the contractor's violations are "so serious as to affect the 
integrity of an agency program," 24 C.F.R. s 24.305(b), and 
whether "[i]mmediate action is necessary to protect the public 
interest," 24 C.F.R. s 24.400.  See also 24 C.F.R. s 24.115 
(stating that "[i]n order to protect the public interest, it is the 
policy of the Federal Government to conduct business only 
with responsible persons," and that debarment and suspen-
sion "are appropriate means to implement this policy").  As 
the decision to suspend a contractor is therefore "grounded in 
the policy of the regulatory regime," Gaubert, 499 U.S. at 325, 
it is protected by the discretionary function exception.

                                IV

     Apparently recognizing that suspension itself is a discre-
tionary function, plaintiffs focus their primary attention not 
on the suspension but on the investigation and audit that 
preceded it.  Although suspension may be discretionary, they 
argue, standards of professional practice constrain HUD's 
auditors during the investigatory phase and preclude applica-
tion of the discretionary function exception.

     This argument fails for two reasons.  First, it is impossible 
to sever HUD's investigation from the subsequent suspension 
in the way plaintiffs urge.  Second, even if the investigation 

could be severed, it, too, constitutes a discretionary function 
under Gaubert.

                                A

     In Gray v. Bell, we held that where the "allegation of 
improper investigatory conduct is inextricably tied to the 
decision to prosecute and the presentation of evidence," the 
discretionary function exception applies and preserves gov-
ernmental immunity.  712 F.2d 490, 516 (D.C. Cir. 1983);  see 
Moore, 65 F.3d at 196-97;  Ernst v. Child & Youth Servs. of 
Chester County, 108 F.3d 486, 488-89 (3d Cir. 1997).  Gray 
involved a suit brought by Acting FBI Director L. Patrick 
Gray III.  Gray had been investigated and then indicted for 
allegedly authorizing warrantless searches of the homes of 
friends and relatives of Weatherman Underground fugitives.  
After the government agreed to dismiss the indictment, Gray 
sued the prosecutors for the "improper, tortious, and consti-
tutionally defective manner in which [the] investigation was 
carried out."  712 F.2d at 515.  In particular, he contended 
that the Justice Department had conducted a grossly negli-
gent pre-indictment investigation, and, as a result, failed to 
present exculpatory evidence and instead presented false and 
misleading evidence to the grand jury.  Id. at 495, 516. 

     On appeal, this court concluded that Gray's suit was barred 
by the FTCA's discretionary function exception, because 
there was "no meaningful way in which the allegedly negli-
gent investigatory acts could be considered apart from the 
totality of the prosecution."  Id. at 516.  The "gist of Gray's 
complaint," we said, focused "on alleged causal links between 
the negligent investigation, the presentation of false and 
misleading evidence, and the ultimate prosecution."  Id.  Un-
der those circumstances, "[s]eparating allegations in the com-
plaint that focus on the investigation from the ultimate prose-
cution merely would elevate the form of Gray's complaint 
over its essence."  Id.

     In this case, as in Gray, the challenged investigation is 
inextricably tied to the discretionary, quasi-prosecutorial deci-
sion to suspend plaintiffs from governmental contracting.  
The complaint does not allege any damages arising from the 

investigation itself, but only harm caused by the suspension to 
which it assertedly led.  See First Am. Compl. p 200 (reciting 
that plaintiffs were damaged by having to challenge wrongful 
suspension, defend in debarment proceeding, and appeal 
HUD decision);  id. p 201 ("Sloan and Furby were further 
actually damaged because during the period of their wrongful 
suspension they were prevented from obtaining any contract 
work from HUD, were prevented from obtaining other con-
tract work as a result of the wrongful suspension and suf-
fered in standing and professional reputation." (emphasis 
added)).  At oral argument, plaintiffs were given a further 
opportunity to disentangle the investigation and suspension 
by proffering an amendment to the complaint that would 
allege some harm arising from the investigation that was 
separate from the suspension itself;  they were unable to do 
so.  Because the allegedly improper investigation thus caused 
no injury "distinct from the harm caused by the ultimate 
prosecution itself," the former is not "sufficiently separable 
from [the] protected discretionary decision[ ]" and "cannot by 
itself support suit under the FTCA."  Gray, 712 F.2d at 515;  
see General Dynamics, 139 F.3d at 1285-86 (holding discre-
tionary function exception protected Defense Department 
audit where harm to plaintiff arose from subsequent criminal 
prosecution).

                                B

     Even if HUD's investigation of the Burns Heights project 
were not inextricably linked to the plaintiffs' suspension, that 
investigation would nonetheless constitute a discretionary 
function under the Gaubert test.  We consider the two ele-
ments of that test below.

                                1

     First, the sifting of evidence, the weighing of its signifi-
cance, and the myriad other decisions made during investiga-
tions plainly involve elements of judgment and choice.1  That 

__________
     1 See Sabow v. United States, 93 F.3d 1445, 1452-53 (9th Cir. 
1996);  Black Hills Aviation, Inc. v. United States, 34 F.3d 968, 

the conduct at issue here was undertaken by investigators 
and auditors rather than by Assistant Secretaries is irrele-
vant.  In United States v. Varig Airlines, 467 U.S. 797 (1984), 
for example, the Federal Aviation Administration (FAA) had 
established a regulatory regime of "spot checking" airplanes 
for compliance with safety standards.  As the Supreme Court 
later explained in Gaubert, Varig "held that not only was this 
act discretionary but so too were the acts of agency employ-
ees in executing the program since they had a range of 
discretion to exercise in deciding how to carry out the spot-
check activity."  Gaubert, 499 U.S. at 325 (citing Varig, 467 
U.S. at 820).  The discretionary function exception, the Court 
held, does not apply "exclusively to policymaking or planning 
functions," but rather extends as well to decisions made at 
the operational level.  499 U.S. at 325.

     Plaintiffs insist that the Burns Heights investigation differs 
from others because it took the form of an "audit."  "[T]he 
actions of government auditors are not discretionary," plain-
tiffs argue, "because compliance with federal audit guidelines 
is mandatory."  Appellants' Br. at 14.2  It is true that the 
Inspector General Act of 1978 commands OIG auditors to 
"comply with standards established by the Comptroller Gen-
eral of the United States for audits of Federal ... programs, 
activities, and functions."  5 U.S.C. app. 3, s 4(b)(1)(A).  But 
it is also clear that the auditing standards that plaintiffs 
contend HUD transgressed leave ample room for the exercise 
of professional judgment.  See Gen. Accounting Office, Gov't 

__________
973-74 (10th Cir. 1994);  Blakey v. U.S.S. Iowa, 991 F.2d 148, 153-
54 (4th Cir. 1993);  Pooler v. United States, 787 F.2d 868, 870-71 (3d 
Cir. 1986).

     2 Although termed an "audit," HUD's investigation was not a 
"financial statement audit" designed to determine conformity with 
generally accepted accounting principles, but rather a "program 
audit"--a variety of "performance audit" intended to assess the 
performance of a government program.  Compare Gen. Accounting 
Office, Gov't Auditing Standards s 2.4 (June 1994), with id. 
s 2.7(b).  See O'Reilly et al., Montgomery's Auditing 23 (11th ed. 
1994) (noting that program audits are often not stated "in terms of 

Auditing Standards, at chs. 3, 6 (June 1994) [hereinafter Gov't 
Auditing Standards];  cf. Thor Power Tool Co. v. Comm'r of 
Internal Revenue, 439 U.S. 522, 544 (1979) ("Accountants 
long have recognized that 'generally accepted accounting 
principles' are far from being a canonical set of rules that will 
ensure identical accounting treatment of identical transac-
tions. 'Generally accepted accounting principles,' rather, toler-
ate a range of 'reasonable' treatments, leaving the choice 
among alternatives to management." (citation omitted)).3  In-
deed, those standards expressly state that "[a]uditors should 
use sound professional judgment in determining the stan-
dards that apply to the work to be conducted."  Gov't Audit-
ing Standards s 3.29.4
__________
economic actions or events" and "may at times stretch the definition 
of auditing").

     3 The principal standards that plaintiffs contend HUD violated 
are:  Gov't Auditing Standards s 3.3 ("The staff assigned to con-
duct the audit should collectively possess adequate professional 
proficiency for the tasks required.");  s 3.11 ("[T]he audit organiza-
tion and the individual auditors ... should maintain an independent 
attitude and appearance.");  s 3.31 ("Each audit organization ... 
should have an appropriate internal quality control system....");  
s 6.2 ("Work is to be adequately planned.");  s 6.5(g) ("[A]uditors 
should ... [i]dentify potential sources of data that could be used as 
audit evidence and consider the validity and reliability of these 
data.");  s 6.22 ("Staff are to be properly supervised.");  and s 6.46 
("Sufficient, competent, and relevant evidence is to be obtained to 
afford a reasonable basis for the auditors' findings and conclu-
sions."). See generally Moore, 65 F.3d at 197 n.15 (holding that 
deciding what is required by regulation directing prosecutors to 
disclose "substantial" evidence "directly" negating the guilt of a 
suspect "is itself a discretionary act").

     4 See also OIG, HUD, Consolidated Audit Guide for Audits of 
HUD Programs s 1-1 (Aug. 1997) ("This guide is not ... intended 
to supplant the auditor's judgment of audit work required.");  OMB 
Circular A-133, Audits of Institutions of Higher Education and 
Other Nonprofit Organizations, 55 Fed. Reg. 10,019, 10,021 (Mar. 
16, 1990) ("These principles, to the extent permitted by law, consti-
tute guidance to be applied by agencies consistent with and within 
the discretion, conferred by the statutes governing agency action.");  
Am. Inst. of Certified Pub. Accountants, Codification of State-
ments on Auditing Standards, AU s 110.04 (1995) ("In the observ-

     Plaintiffs' argument here parallels that made by the plain-
tiff in Gaubert, who sought damages for the alleged negli-
gence of Federal Home Loan Bank Board (FHLBB) officials 
in the day-to-day management of a failing financial institution.  
Gaubert argued that the FHLBB's actions fell outside the 
discretionary function exception "because they involved the 
mere application of technical skills and business expertise."  
499 U.S. at 331.  The Court rejected that argument, stating 
that while "[i]t may be that certain decisions resting on 
mathematical calculations, for example, involve no choice or 
judgment in carrying out the calculations," the FHLBB's 
actions "involved the exercise of choice and judgment" and 
hence fell within the exception.  Id.  The same is true here.5

     As plaintiffs themselves point out, the heart of the auditing 
standards is the exhortation that "[d]ue professional care 
should be used in conducting [an] audit and in preparing 
related reports."  Gov't Auditing Standards s 3.26;  see id. 
s 3.28 ("[E]xercising due professional care means using 
sound judgment in establishing the scope, selecting the meth-
odology, and choosing tests and procedures for the audit.").  
Plaintiffs endeavor to turn this point on its head, arguing that 
because the use of sound professional judgment by auditors is 
mandatory, no discretion is left to them.  The flaw in this 
argument is that the Supreme Court has defined a "discre-

__________
ance of generally accepted auditing standards, the independent 
auditor must exercise his judgment in determining which auditing 
procedures are necessary in the circumstances to afford a reason-
able basis for his opinion.").

     5 This case is readily distinguishable from Appley Brothers v. 
United States, 164 F.3d 1164 (8th Cir. 1999), upon which plaintiffs 
heavily rely, in which the Eighth Circuit held the discretionary 
function exception inapplicable to an Agriculture Department in-
spector's failure to investigate grain shortages at a warehouse.  The 
court noted that "although the inspector had discretion in selecting 
how he would investigate," under express regulations "he had no 
discretion not to undertake some investigation."  Id. at 1172 (em-
phasis added).  Plaintiffs' challenge here, by contrast, is to how 
HUD investigated at Burns Heights.

tionary act" as "one that involves choice or judgment."  Gau-
bert, 499 U.S. at 325 (emphasis added);  see Moore, 65 F.3d at 
197 (stating that "actions that require the prosecutor to 
exercise his professional judgment ... are ... quintessential-
ly discretionary").  Hence, plaintiffs' argument reduces to 
nothing more than the untenable contention that auditors lack 
discretion because they must exercise it. 

                                2

     Plaintiffs contend that even if the auditors' conduct does 
involve an element of discretion, it "does not implicate consid-
erations of public policy or involve the exercise of political, 
social, or economic judgment."  Appellants' Br. at 22.  There-
fore, they argue, the audit fails Gaubert's second prong.  
Again, we disagree.

     HUD's audit of Burns Heights was part of a national audit 
of lead-based paint contracting activities.  See Audit Report 
at 2, 4.  Its objective was to determine whether lead-based 
paint abatement at the facility was in compliance with the 
demolition contract.  Id. at 2.  Pursuant to the same auditing 
standards cited by plaintiffs, one of HUD's responsibilities 
was to determine "the extent to which the desired results or 
benefits established by the legislature or other authorizing 
body are being achieved."  Gov't Auditing Standards s 2.7(b).  
The audit concluded that the housing authority had "not 
protected tenants or community residents from potential 
health problems from improper lead-based paint removal and 
disposal."  Audit Report at 3.  Whether that conclusion is 
correct or not, it unquestionably implicates considerations of 
public policy.

     As was true of the first part of the discretionary function 
test, satisfaction of the second is not limited to actions taken 
at the policy-planning level.  Thus, in Gaubert, the Court held 
that the conduct of FHLBB employees "involved the kind of 
policy judgment that the discretionary function exception was 
designed to shield," notwithstanding that it consisted of day-
to-day decisions regarding the operations of a savings and 
loan.  Id. at 332.  "[T]hose day-to-day 'operational' decisions 

were undertaken for policy reasons of primary concern to the 
regulatory agencies," the Court said, including preservation 
of the assets of the institution "for the benefit of depositors 
and shareholders."  Id. (citation omitted).  See also Varig, 
467 U.S. at 815-820.  The same is true in this case:  the 
auditors' decisions were undertaken for policy reasons of 
significant concern to HUD, including the protection of ten-
ants living in HUD-funded housing "from potential health 
problems from improper lead-based paint removal and dispos-
al."  Audit Report at 3.6  Accordingly, the audit falls under 
the aegis of the discretionary function exception to the FTCA.

                                IV

     Because the discretionary function exception applies to the 
agency actions challenged by plaintiffs, the district court 
lacked jurisdiction over their FTCA complaint.  The court's 
dismissal of the complaint is therefore

                                                                   Affirmed.

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     6 This distinguishes the HUD audit from the placement of road 
signs by the National Park Service, which we found to involve 
engineering rather than policy judgment in Cope, 45 F.3d at 451-52.  
See Berkovitz, 486 U.S. at 545 (indicating that determinations 
involving the "application of objective scientific standards" do not 
involve policy judgment and are not covered by the discretionary 
function exception);  see also Black Hills Aviation, 34 F.3d at 976 
(holding that quick handling of crash investigation to facilitate 
Army activities involves policy judgment);  Blakey, 991 F.2d at 153 
(holding that course of military investigation "implicates policy 
considerations").