USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-2369
ELLEN BROWN, ET AL.,
Plaintiffs, Appellees,
v.
SECRETARY OF HEALTH AND HUMAN SERVICES,
Defendant, Appellant.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Martin F. Loughlin, Senior U.S. District Judge]
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Before
Breyer,* Chief Judge,
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Campbell, Senior Circuit Judge,
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and Cyr, Circuit Judge.
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Christine N. Kohl, Attorney, Appellate Staff, Civil Division,
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U.S. Department of Justice, with whom Frank W. Hunger, Assistant
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Attorney General, Paul M. Gagnon, United States Attorney, and Barbara
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C. Biddle, Attorney, Appellate Staff, Civil Division, U.S. Department
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of Justice, were on brief for appellant.
Victoria Pulos with whom Deborah Schachter and New Hampshire
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Legal Assistance were on brief for appellees.
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January 17, 1995
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*Chief Judge Breyer heard oral argument in this matter, but did not
participate in the drafting or the issuance of the panel's opinion.
The remaining two panelists therefore issue this opinion pursuant to
28 U.S.C. 46(d).
CAMPBELL, Senior Circuit Judge. This is a class
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action challenging as arbitrary and capricious an Aid to
Families With Dependent Children ("AFDC") regulation
promulgated by the Secretary of Health and Human Services
("HHS") in 1982. The regulation, called the "automobile
resource exemption," limits to $1,500 the equity value of the
automobile a family may own before the automobile's equity
value affects the family's qualification to receive AFDC
benefits. 45 C.F.R. 233.20(a)(3)(i)(B)(2) (1993). The
district court denied defendant's motion for summary judgment
and granted plaintiffs' motion for summary judgment, striking
down the regulation as arbitrary and capricious. We reverse.
I.
AFDC is a joint federal-state program designed to
provide financial assistance to needy, dependent children and
their families. 42 U.S.C. 601 (1988). Although states, as
the primary administrators of the program, are given broad
discretion to define benefit levels and eligibility
requirements, state programs must conform with federal laws
and regulations in order to receive matching federal funds.
Id. Federal HHS regulations set maximum limits on the
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resources a family may own and still qualify to receive AFDC
benefits. Under the regulations in effect before 1975,
families with more than $2,000 in real and personal property
did not qualify for AFDC benefits. 45 C.F.R. 233.20 (a)(3)
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(1974). These early regulations exempted from the
calculation of family resources the value of certain assets,
including, without limitation, the value of one automobile.
Id.
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In 1975, the Secretary of the Department of Health,
Education and Welfare (the predecessor to HHS) amended the
regulations and, for the first time, attempted to place a cap
on the automobile exemption. The new regulation set the cap
at $1,200 retail market value any market value in an
automobile exceeding the $1,200 limit would now count toward
the overall resource limit. 40 Fed. Reg. 12,507 (1975). The
D.C. Circuit, however, subsequently struck down the
regulation in National Welfare Rights Org. v. Mathews, 553
_____________________________ _______
F.2d 637, 643 (D.C. Cir. 1976).1 Thus after 1976, the
automobile exemption was once again governed by the prior
version of the regulation, which completely exempted the
value of one automobile from the calculation of family
resources. See 41 Fed. Reg. 30,647 (1976).
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In 1981, Congress enacted the Omnibus Budget
Reconciliation Act of 1981 ("OBRA"), which amended the AFDC
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1. Although the court found that the governing statute
authorized the Secretary to set resource limits for
participation in the AFDC program, the court held the
regulation invalid because: (1) the Secretary improperly
based the limit on "market" rather than "equity" value; and
(2) the Secretary failed to articulate a sufficient factual
basis for the $1,200 figure. National Welfare Rights Org.,
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533 F.2d at 648-49.
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program by statutorily reducing from $2,000 to $1,000 the
maximum resource limit for AFDC recipients.2 Pub. L. No.
97-35, 95 Stat. 357, 843 (1981); 42 U.S.C. 602(a)(7)(B)
(Supp. V 1993). The purpose of this amendment was to cut
costs and to limit AFDC benefits to only the most needy. See
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Champion v. Shalala, 33 F.2d 963, 967 (8th Cir. 1994). At
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the same time, Congress allowed states to exclude from
calculation of the overall resource limit "so much of the
family member's ownership interest in one automobile as does
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not exceed such amount as the Secretary may prescribe." 42
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U.S.C. 602(a)(7)(B)(i) (Supp. V 1993) (emphasis added).
Pursuant to this delegation of authority, the Secretary of
HHS in 1982 promulgated a regulation setting the automobile
resource exemption at $1,500. 45 C.F.R.
233.20(a)(3)(i)(B)(2) (1993).3 Any equity value4 in an
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2. States were still permitted, however, to set resource
limits at a lower level. 42 U.S.C. 602(a)(7)(B) (Supp. V
1993).
3. The full text of the challenged regulation reads:
The amount of real and personal property
that can be reserved for each assistance
unit shall not be in excess of one
thousand dollars equity value (or such
lesser amount as the State specifies in
its State plan) excluding only: . . .
(2) One automobile, up to $1,500 of
equity value or such lower limit as the
State may specify in the State plan; (any
excess equity value must be applied
towards the general resource limit
specified in the State plan.
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automobile that exceeded this amount would now be counted
toward the $1,000 overall resource limit, which, if exceeded,
leaves a family ineligible for AFDC.
The automobile resource exemption has since
remained at $1,500, although it has received some attention
from both Congress and the Secretary. In 1988, the House of
Representatives passed, as part of the Family Support Act of
1988, Pub. L. No. 100-485, 102 Stat. 2343, 2356 (1988), a
bill containing a provision that would have allowed some
states to experiment with a $4,500 automobile resource
exemption. The Senate version of the bill did not contain
such a provision. The conference committee adopted the
Senate version, but directed the Secretary to review the
automobile resource regulations "and to revise them if he
determines revision would be appropriate." H.R. Conf. Rep.
No. 998, 100th Cong., 2d Sess. 189 (1988), reprinted in 1988
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U.S.C.C.A.N. 2879, 2976-77. After reviewing the regulation,
the Secretary in 1991 declined to revise the figure. 55 Fed.
Reg. 44,524 (1990); 56 Fed. Reg. 17,358 (1991). In a 1992
letter to Senator Dennis DeConcini, the Secretary explained
that increasing the exemption to $3,000 would have cost the
federal government more than $200 million and would have
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45 C.F.R. 233.20(a)(3)(i)(B) (1993).
4. The regulations define "equity value" as "fair market
value minus encumbrances (legal debts)." 45 C.F.R. 233.20
(a)(3)(ii)(F)(4) (1993).
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required corresponding offsets in other programs. See
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Frederick v. Shalala, 862 F. Supp. 38, 40 (W.D.N.Y. 1994).
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II.
Plaintiffs are a class of New Hampshire residents
who own vehicles with equity values in excess of $1,500 and,
but for the Secretary's automobile resource regulation, would
be entitled to receive AFDC benefits. The named plaintiffs
in this case, Ellen Brown and Mary Smith5, are two mothers
on low incomes who were denied AFDC benefits in 1991 and
1992, respectively, because they owned vehicles whose equity
values exceeded the automobile resource exemption, thus
placing them over the general resource limit. Brown owned a
1989 Toyota Celica, Smith a 1990 Mercury Topaz. Both Brown
and Smith live in rural areas of New Hampshire, where there
is no adequate public transportation and an automobile is a
practical necessity.
Plaintiffs filed suit against the Secretary of HHS,
challenging the $1,500 automobile resource exemption as
arbitrary and capricious on two grounds. They argued: (1)
that the regulation was arbitrary and capricious when
promulgated in 1982; and (2) that the Secretary's failure to
adjust the figure for inflation has made it arbitrary and
capricious today. Plaintiffs sought declaratory and
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5. These are not their real names. The district court
granted named plaintiffs leave to use pseudonyms in order to
protect their privacy.
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injunctive relief. Since there were no disputed issues of
materialfact,thepartiesfiled cross-motionsforsummaryjudgment.
The district court denied the Secretary's motion
for summary judgment and granted plaintiffs' motion for
summary judgment, finding the $1,500 automobile resource
exemption arbitrary and capricious today given the
Secretary's failure to adjust it for inflation. The court
wrote: "To use a fourteen-year old standard as a criteria
[sic] of the equity in a motor vehicle in 1979 is an
anachronism considering the purchasing power of a dollar
today." The court enjoined the Secretary from further
relying upon the regulation to deny benefits to otherwise-
eligible New Hampshire residents. The Secretary now appeals.
III.
The issues in this appeal have been the subject of
considerable litigation in the federal courts. The two
courts of appeals that have considered the regulation have
upheld it. Champion v. Shalala, 33 F.3d 963 (8th Cir. 1994);
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Falin v. Sullivan, 776 F. Supp. 1097 (E.D. Va. 1991), aff'd
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per curiam, 6 F.3d 207 (4th Cir. 1993), cert. denied, 114 S.
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Ct. 1551 (1994). Four district courts have also upheld the
regulation. Noble v. Shalala, No. 92-N-2495 (D. Colo. Nov.
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30, 1994); Frederick v. Shalala, 862 F. Supp. 38 (W.D.N.Y.
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1994); Gamboa v. Rubin, No. 92-00397, 1993 WL 738386 (D.
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Hawaii Nov. 4, 1993), appeal filed, No. 94-15302 (9th Cir.
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Jan. 26, 1994); Hall v. Towey, No. 93-1780-CIV-T-21B (M.D.
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Fla. Dec. 10, 1993). Two district courts, not including the
district court in this case, have struck down the regulation.
Lamberton v. Shalala, 857 F. Supp. 1349 (D. Ariz. 1994);
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Hazard v. Sullivan, 827 F. Supp. 1348 (M.D. Tenn. 1993),
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appeal filed sub nom. Hazard v. Shalala, No. 93-6214 (6th
______________________ ______ _______
Cir. Sept. 17, 1993).
We find the opinions of the Fourth Circuit in Falin
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and Eighth Circuit in Champion to be persuasive. We agree
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with them that the regulation was not arbitrary and
capricious when promulgated and is not arbitrary and
capricious today.
A. Regulation Valid When Promulgated
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Our standard of review is very deferential. In
enacting OBRA, Congress explicitly delegated to HHS the
authority to set the figure for the automobile resource
exemption; the states could exempt only "so much of the
family member's ownership interest in one automobile as does
not exceed such amount as the Secretary may prescribe." 42
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U.S.C. 602(a)(7)(B)(i) (Supp. V 1993) (emphasis added). No
standard was legislatively set to guide the Secretary in
prescribing the exemption. Where the delegation of authority
is this complete, a court can overturn the regulation only if
it is "arbitrary, capricious, or manifestly contrary to the
statute." Chevron v. Natural Resources Defense Council, 467
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8
U.S. 837, 844, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984); see
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5 U.S.C. 706(2)(A) (1988).
If Congress has explicitly left a gap for
the agency to fill, there is an express
delegation of authority to the agency to
elucidate a specific provision of the
statute by regulation. Such legislative
regulations are given controlling weight
unless they are arbitrary, capricious, or
manifestly contrary to the statute.
Chevron, 467 U.S. at 843-44; see McDonald v. Secretary of
_______ ___ ________ ____________
Health and Human Serv., 795 F.2d 1118, 1122 n.5 (1st Cir.
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1986). A regulation will be arbitrary and capricious where:
the agency relied on factors which
Congress has not intended it to consider,
entirely failed to consider an important
aspect of the problem, offered an
explanation for its decision that runs
counter to the evidence before the
agency, or is so implausible that it
could not be ascribed to a difference in
view or the product of agency expertise.
Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins., 463
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U.S. 29, 43, 103 S. Ct. 2856, 77 L. Ed. 2d 443 (1983). In
reviewing a regulation, the court may not substitute its own
judgment for that of the agency. Rather, the court must
defer to the agency if the agency's findings have a rational
basis and the regulation is reasonably related to the
purposes of the enabling legislation. Bowman Transp., Inc.
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v. Arkansas-Best Freight Sys., 419 U.S. 281, 290, 95 S. Ct.
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438, 42 L. Ed. 2d 447 (1974); Conservation Law Found. v.
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Secretary of the Interior, 864 F.2d 954, 957-58 (1st Cir.
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1989). As this is an appeal from summary judgment, review of
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the district court's determination is de novo. Gaskell v.
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Harvard Coop. Soc'y, 3 F.3d 495, 497 (1st Cir. 1993).
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In setting the regulation in 1982, the Secretary
relied almost exclusively upon a study of food stamp
recipients6 conducted in 1979.7 The study purported to
show that approximately 96 percent of food stamp recipients
who owned an automobile had an equity value in that
automobile of under $1,500. The Secretary reasoned that the
food stamp survey provided an adequate picture of the equity
ownership of AFDC recipients, since there was a substantial
overlap in the populations of food stamp and AFDC recipients.
Moreover, the percentage may even have been greater than 96
percent in the AFDC population, since food stamp recipients
are, on average, more affluent than AFDC recipients. The
Secretary explained:
We chose $1,500 as the maximum equity
value for an automobile on the basis of a
Spring 1979 survey of food stamp
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6. The food stamp program is governed by 7 U.S.C. 2011
et seq. (1988).
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7. The study was titled: Assets of Low Income Households:
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New Findings on Food Stamp Participants and Nonparticipants,
____________________________________________________________
Report to the Congress, January 1981, Food and Nutrition
Service, U.S. Department of Agriculture. When AFDC
recipients first challenged the instant regulation, the
Secretary was unable to produce a copy of the food stamp
study. Accordingly, the district court in that first case
found the regulation arbitrary and capricious, given the lack
of supporting data in the record. We Who Care, Inc. v.
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Sullivan, 756 F. Supp. 42, 46-47 (D. Me. 1991). The
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Secretary has since been able to produce the study, and
subsequent challenges have included the study in the record.
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recipients. Data from that survey
suggest that 96 percent of all food stamp
recipients who own cars had equity value
in them of $1,500 or less. In that the
Federal maximum limit should be set
within the range of the vast majority of
current recipients and given that the
food stamp population tends to be, on
average, more affluent than AFDC
recipients, this limit appears reasonable
and supportable.
47 Fed. Reg. 5648, 5657-58 (1982).
1. Failure to Consider Other Factors Did Not Violate
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Congressional Intent
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Plaintiffs argue that the regulation, even when
first adopted in 1982, was arbitrary and capricious because
the Secretary, in considering only whether the "vast majority
of current recipients" fell within the new limit, failed to
consider other important factors in setting the $1,500 limit.
Plaintiffs concede that OBRA was enacted primarily to reduce
cost and limit the number of AFDC recipients, but argue that
the court must also look to AFDC's broader purposes of
promoting employment and fostering self-sufficiency. See 42
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U.S.C. 601 (1988); Shea v. Vialpando, 416 U.S. 251, 253, 94
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S. Ct. 1746, 40 L. Ed. 2d 120 (1974). In light of these
purposes, plaintiffs read OBRA's delegation of authority to
the Secretary to set the automobile resource exemption as
indicating that Congress intended to allow each recipient to
retain a safe, reliable vehicle. According to plaintiffs,
the Secretary was obliged to consider such factors as: (1)
the costs of used cars; (2) regional conditions that impact
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transportation needs; (3) the importance of vehicles in
enabling families to become self-sufficient. In considering
only whether the "vast majority" of AFDC recipients would be
affected by the new figure, plaintiffs argue, the Secretary
promulgated a regulation that was inconsistent with
congressional intent. See State Farm, 463 U.S. at 43.
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We do not agree. We have little to add, on this
point, to the opinion of the Eighth Circuit and to the
opinion of the district court in Falin, 776 F. Supp. 1097, on
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which the Fourth Circuit rested its judgment. Falin, 6 F.3d
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at 207. OBRA delegates to the Secretary, and to no one else,
the unqualified authority to prescribe the amount of the
automobile resource exemption. 42 U.S.C. 602(a)(7)(B)(i)
(Supp. V 1993). Congress made no express provision for the
standards that the Secretary was to apply when establishing
the amount of the automobile exemption. Nowhere in the
statute did Congress require the Secretary to ensure to all
AFDC recipients the right to a "safe and reliable" vehicle,
or to pay special attention to the other policy objectives
urged by plaintiffs. Congress left it to the Secretary to
decide what policies should be given priority when figuring
the exemption.
The plain purpose of OBRA, moreover, was to cut
costs by limiting the number of AFDC recipients to only those
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who were most needy.8 To that end, Congress cut the overall
resource limit in half, from $2,000 to $1,000. At the same
time, the value of the automobile, previously completely
exempted, would now be limited by regulation. S. Rep. No.
139, 97th Cong., 1st Sess. 503 (1981), reprinted in 1981
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U.S.C.C.A.N. 396, 769-70. The $1,500 figure the Secretary
adopted, while consistent with OBRA's cost-cutting purpose,
insofar as it placed a cap on the exemption, was not
exceptionally restrictive at the time it was adopted; the
Secretary calculated that it would exempt as many as 96
percent of then-current AFDC recipients. This effect would
appear less draconian than the effect of Congress's halving
the overall resource limit, from $2,000 to $1,000.
After the regulation was promulgated, Congress
itself twice considered and twice rejected any increase in
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8. The Senate report explained the reduction in resource
limit and the grant of authority to the Secretary to
prescribe a limit on the automobile exemption:
The committee believes that the present regulatory
limit allows AFDC to be provided in situations in
which families have resources upon which they could
reasonably be expected to draw. . . . The
committee agreed to limit the value of resources to
assure that aid would be restricted to those most
in need.
S. Rep. No. 139, 97th Cong., 1st Sess. 503 (1981), reprinted
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in 1981 U.S.C.C.A.N. 396, 769-70. See Dickenson v. Petit,
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692 F.2d 177, 179, 181 (1st Cir. 1982) (noting that OBRA was
enacted "to reduce the size of the AFDC grant" and to
"disburs[e] benefits only to the most destitute").
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the Secretary's $1,500 automobile resource limit.9 While
nonaction by Congress is ordinarily a dubious guide, see
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Brown v. Gardner, ___ U.S. ___, 115 S. Ct. 552, 557, 63
_____ _______
U.S.L.W. 4035 (1994), it may become significant where
proposals for legislative change have been repeatedly
rejected, see Bob Jones Univ. v. United States, 461 U.S. 574,
___ _______________ _____________
599-601, 103 S. Ct. 2017, 76 L. Ed. 2d 157 (1983). The
failed legislative attempts since 1982 to increase the
automobile exemption plainly suggest that the regulation as
written was not inconsistent with congressional intent. See
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United States v. Rutherford, 442 U.S. 544, 554 n.10, 99 S.
______________ __________
Ct. 2470, 61 L. Ed. 2d 68 (1979) ("[O]nce an agency's
statutory construction has been fully brought to the
attention of the public and the Congress, and the latter has
not sought to alter that interpretation although it has
amended the statute in other respects, then presumably the
legislative intent has been correctly discerned.")
(quotations omitted).
Plaintiffs read too much from the broader purposes
of AFDC, and not enough from the specific purpose of OBRA,
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9. In 1987, the House of Representatives considered
inserting a provision in the OBRA of 1987 allowing states to
experiment with a $4,500 automobile equity exemption. H.R.
3545, 100th Cong., 1st Sess., 9111(c), 133 Cong. Rec.
29,966, 30,069 (1987). The final version of the statute did
not contain the provision. Pub. L. No. 100-2-3, 101 Stat.
1330 (1987). In 1988, the House again considered adding such
a provision to the Family Support Act, as described supra.
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This proposal was similarly defeated.
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which was the legislation that actually authorized the
Secretary to set the regulation. See Brewer v. Madigan, 945
___ ______ _______
F.2d 449, 457 (1st Cir. 1991) ("The enabling statute . . . is
the principal source of relevant factors to be considered by
the agency in promulgating regulations.") (citations
omitted). Even if, as plaintiffs argue, the existence of the
automobile resource exemption implies that Congress intended
AFDC recipients to be able to retain some kind of
vehicle,10 Congress explicitly delegated the authority to
the Secretary to determine exactly how much of a person's
equity in the vehicle to exempt. See Frederick, 862 F. Supp.
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at 43-44; Gorrie v. Bowen, 809 F.2d 508, 516 n.12 (8th Cir.
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1987) ("appeals to the 'fundamental purpose' of the AFDC
program . . . are unhelpful" where Congress has initiated a
change in policy (citations omitted)); see also Rodriguez v.
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United States, 480 U.S. 522, 526, 107 S. Ct. 1391, 94 L. Ed.
_____________
2d 533 (1987) ("[I]t frustrates rather than effectuates
legislative intent simplistically to assume that whatever
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furthers the statute's primary objective must be the law.")
In setting the limit to include what he believed to be the
"vast majority" of AFDC recipients at that time, the
Secretary acted consistently with OBRA and not inconsistently
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10. We express no opinion on this issue. See infra Part
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III.B.1.
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with the broader purposes of AFDC. Accord Champion, 33 F.3d
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at 967; Falin, 776 F. Supp. at 1101.
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2. Food Stamp Survey Provided Rational Basis
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We find little merit in plaintiffs' assertion that
the food stamp study did not provide a rational basis for the
Secretary's establishment of the $1,500 automobile equity
limit. Plaintiffs argue that the food stamp and AFDC
programs are two distinct programs with different eligibility
requirements. They further insist that there is no support
in the administrative record for the Secretary's assumption
that there is "extensive overlap" in the two populations or
that the food stamp population is, on average, more affluent
than the AFDC population. Plaintiffs say that food stamp
recipients were already subject to an automobile-asset
limitation at the time of the study, while AFDC recipients at
that time were not subject to such a limitation. Thus, the
fact that 96 percent of food stamp recipients owning an
automobile had equity of less than $1,500 may simply have
been a function of the food stamp program's preexisting
equity limits.
Micro-arguments of this sort, however, ignore the
breadth of the Secretary's discretion. The Secretary was not
required to base her regulations only on perfect information.
Rather, the Secretary's policy choice needed only to be
"rational." See State Farm, 463 U.S. at 43; Frederick, 862
___ ___________ _________
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F. Supp. at 42 (stating that the issue is not "whether the
Secretary used the best available source to develop a
regulation, but whether the Secretary's conduct was
reasonable").
The Secretary here acted reasonably in relying on
the food stamp study. Accord Champion, 33 F.3d at 966;
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Falin, 776 F. Supp. at 1101. It is undisputed that the food
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stamp study provided the best data available at the time.
The study was based on a 1979 survey which collected asset-
ownership data from a statistically valid sample of 11,300
households of all income levels nationwide. Paul Bordes, who
provided technical support to the Secretary while the
regulation was being promulgated, noted in his deposition
that equity data on aid recipients were extremely hard to
come by. None of the comments at that time suggested any
other sources of data.11 There was evidence, moreover, of
overlap in the food stamp and AFDC populations. Bordes noted
that in 1981, approximately 80 percent of AFDC recipients
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11. Plaintiffs now suggest that the same raw 1979 census
data that provided the basis for the study could have been
used to perform a separate study on assets among AFDC
recipients. Yet, at the time the regulations were
promulgated, such a study had not been performed and,
according to the Secretary, would have consumed a tremendous
amount of scarce resources to perform. The Secretary was not
required to use the most accurate data theoretically
possible. It was not unreasonable for the Secretary to rely
on the already-available study as an approximate measure of
asset ownership among AFDC recipients, rather than commit
agency resources to the performance of an additional, time-
consuming study.
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also received food stamps. And the assumption that AFDC
recipients were on the whole more affluent than food stamp
recipients was a judgment within the expertise of the agency
to make. That assumption was undisputed at the time. We,
therefore, believe the Secretary acted rationally in relying
on the food stamp study as a rough approximation of
automobile equity ownership among AFDC recipients.
Plaintiffs also point to alleged statistical flaws
in the study itself. Plaintiffs argue that the 96 percent
figure (for food stamp recipients who owned automobiles and
had equity in those automobiles under $1,500) was based on a
computational error, since it erroneously included the
percentage of the recipients who did not own cars at all.
Plaintiffs suggest (and the Secretary now concedes) that a
more accurate figure would be 90 percent. Plaintiffs also
argue that the figure assumes that, within the 17 percent of
recipients for whom there were no automobile-equity data
available, the distribution of automobile equity ownership
was identical to that within the population for which data
were available i.e. that there was no systematic bias in
the reporting of vehicle equity. Plaintiffs argue that this
assumption is unwarranted, since it is reasonable to suppose
that those owning higher valued automobiles would be more
likely to fail to provide information on automobile equity,
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for fear of disqualifying themselves from the program.12
Plaintiffs argue that these statistical flaws rendered the
Secretary's reliance on the study unreasonable.
We agree with the Eighth Circuit in Champion and
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the Fourth Circuit in Falin that, even assuming that the more
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accurate figure is 90 percent, the study still provided a
rational basis for the Secretary's finding that the $1,500
limit was "within the range of the vast majority of current
recipients," since 90 percent is still a "vast majority." 47
Fed. Reg. at 5657; see Champion, 33 F.3d at 967 n.5; Falin,
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776 F Supp. at 1100, aff'd per curiam, 6 F.3d 207. Although
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plaintiffs suggest that systematic bias in underreporting was
possible, they have presented no evidence that it actually
occurred. Where there was no evidence of bias, it was not
unreasonable for the Secretary to assume for the purposes of
calculation that no such bias existed. Thus neither of these
alleged statistical weaknesses rendered the study an
insufficient basis for the Secretary's regulation.
3. Secretary Responded Adequately to Comments
__________________________________________
Plaintiffs also argue that the Secretary failed
adequately to respond to comments and criticisms when
promulgating the regulation. Plaintiffs contend that, during
the rulemaking process, the Secretary received numerous
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12. In support, plaintiffs submitted a report by Peter S.
Fisher, an economist. The report was titled: An Economic
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Analysis of the AFDC $1,500 Motor Vehicle Equity Limit.
______________________________________________________
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comments critical of the $1,500 limit. Some of these
comments criticized the relevance and validity of the food
stamp study. In response, the Secretary wrote:
We stand by our original position. The
choice of $1,500 as the maximum equity
value for an automobile was based on the
data from a Spring 1979 survey of food
stamp recipients. We regard the limit of
$1,500 equity value in an automobile as
reasonable and supportable.
47 Fed. Reg. at 5657. Plaintiffs argue that this was not a
meaningful response to the comments, and that the regulation
therefore violated the notice and comment provisions of the
Administrative Procedure Act, 5 U.S.C. 553(c) (1988)13.
We do not agree. Only a dozen comments were
submitted on the automobile resource exemption, of which ten
took issue with the $1,500 amount. Each of these comments
was fairly brief, criticizing the figure as generally too
low. Only one of them suggested an alternative to the $1,500
figure. None of them suggested any alternative data upon
which to base the figure. Given the nature of the comments,
____________________
13. 5 U.S.C. 553(c) (1988) reads, in relevant part:
After notice required by this section,
the agency shall give interested persons
an opportunity to participate in the rule
making through submission of written
data, views, or arguments with or without
opportunity for oral presentation. After
consideration of the relevant matter
presented, the agency shall incorporate
in the rules adopted a concise general
statement of their basis and purpose.
-20-
20
we do not find the Secretary's brief response so inadequate
as to violate 553(c). Accord Champion, 33 F.3d at 966 n.4;
______ ________
cf. Brewer, 945 F.2d at 457 n.7.
___ ______
We conclude, therefore, that the $1,500 automobile
exemption was neither arbitrary nor capricious when
promulgated.
B. Regulation Valid Today
______________________
Plaintiffs insist that, even if the regulation was
valid when promulgated, it must be arbitrary and capricious
today given the Secretary's failure to increase the $1,500
cap for inflation. While a refusal to amend a rule, like the
promulgation of the rule in the first instance, may be
reviewable under the "arbitrary and capricious" standard,14
"[r]eview under the 'arbitrary and capricious' tag line . . .
encompasses a range of levels of deference to the agency, and
. . . an agency's refusal to institute rulemaking proceedings
is at the high end of the range." American Horse Protection
_________________________
Ass'n v. Lyng, 812 F.2d 1, 4 (D.C. Cir. 1987) (citations
_____ ____
omitted). Thus, a refusal to institute rulemaking "is to be
____________________
14. In Heckler v. Chaney, 470 U.S. 821, 825, 105 S. Ct.
_______ ______
1649, 84 L. Ed. 2d 714 (1985), the Supreme Court held that an
agency's refusal to take ad hoc enforcement action is
presumptively unreviewable. However, it has been held that
the Heckler presumption does not apply to an agency's refusal
_______
to institute rulemaking. American Horse Protection Ass'n v.
_______________________________
Lyng, 812 F.2d 1, 4-5 (D.C. Cir. 1987). See also Heckler,
____ ___ ____ _______
470 U.S. at 825 n.2 (expressly noting that the Court was not
addressing review of an agency's refusal to institute
rulemaking).
-21-
21
overturned 'only in the rarest and most compelling of
circumstances,' which have primarily involved 'plain errors
of law, suggesting that the agency has been blind to the
source of its delegated power.'" Id. at 5 (citations
___
omitted).15 Nothing of the sort appears here.
1. Not Inconsistent With Statute
_____________________________
Plaintiffs reiterate their position that, in light
of AFDC's general scheme, OBRA evinces an intent that AFDC
recipients be able to retain a safe and reliable vehicle.
Plaintiffs then argue that, even if the regulation were
consistent with this purpose when promulgated, the
Secretary's failure to adjust the $1,500 figure for inflation
necessarily makes it inconsistent with this broader purpose
today. The increase in the consumer price index since 1982
has effectively halved the value of $1,500. Accordingly,
that equity level is today consistent only with a car that is
eight to nine years old and has 80,000-120,000 miles on it.
____________________
15. See, 1 Kenneth C. Davis & Richard J. Pierce,
___
Administrative Law Treatise 6.9, at 280 (3d ed. 1994):
___________________________
An agency can have any number of plausible reasons
for declining to [undertake rulemaking], and courts
are poorly positioned to evaluate the reasons most
frequently given by agencies. These include an
agency's decision that . . . the problem is not
sufficiently important to justify allocation of
significant scarce resources given the nature of
the many other problems the agency is attempting to
address. A court rarely has enough information to
second guess agency decisions premised on this type
of reasoning.
-22-
22
Because such a car is not likely to be safe or reliable,
plaintiffs argue, the regulation today violates OBRA's
broader purpose.
As with their argument in the previous section,
plaintiffs read too much into the broad scheme of the AFDC
program and not enough into the cost-cutting purpose of OBRA,
the statute that actually authorized the Secretary to set the
figure. Nowhere does OBRA or the AFDC statute require the
Secretary to set the automobile exemption high enough so as
to enable all or most AFDC recipients to acquire and maintain
a "safe and reliable vehicle." As there was no stated
obligation of this sort in the first instance, there can be
no obligation to implement such a standard now.
The Secretary reasonably defends her continuing
adherence to the $1,500 figure without adjustment for
inflation on the ground that this is consistent with both the
text and purpose of OBRA. There is no language in OBRA
obligating the Secretary periodically to adjust the
automobile resource exemption for inflation, nor, as earlier
discussed, does OBRA tell the Secretary to set the cap at a
figure that will furnish a certain quality or level of
transportation. Instead, by its terms, OBRA gives the
Secretary unqualified discretion to prescribe the figure.16
____________________
16. The district court ignored the fact that Congress has
delegated policy-making in this area to the Secretary. It
thought the $1,500 figure to be inadequate for various policy
-23-
23
Had Congress wanted to require the Secretary to make periodic
adjustments for inflation, it could easily have said so in
the statute, and indeed has done so in other instances. See,
___
e.g., 42 U.S.C. 415(i) (social security benefits) (1988);
____
29 U.S.C. 720(c) (1988) (vocational rehabilitation grants);
5 U.S.C. 8340 (1988) (annuities for retired federal
employees); Omnibus Budget Reconciliation Act of 1993, Pub.
L. No. 103-66, 107 Stat. 312, 675 (1993) (codified at 7
U.S.C. 2014(g)(2) (Supp. V 1993)) (automobile exemption
under food stamp program). Nor given the total absence of
any standards within the statute can an obligation to
adjust for inflation be inferred from a statutory guide to
the Secretary's discretion implying the necessity to maintain
the exemption at a certain level over time.17 Compare
_______
____________________
reasons that it elucidated:
Used today, [the $1,500 automobile equity
exemption] can result in an AFDC recipient losing
his or her job by not allowing the recipient the
availability of a safe operative motor vehicle in
lieu of a schlock vehicle. The end result would be
for the government or other relief agencies making
up the difference in lost income. It destroys
initiative of those who are endeavoring to get off
the public dole and exacerbates the personal
degradation of many who are reluctantly on relief
only as a last resort.
However, the courts are not empowered by Congress to impose
their concepts of good policy on the Secretary.
17. A need to adjust for inflation might be implied, for
example, if the statute had explicitly stated that the
Secretary must set the automobile exemption at an amount high
enough at all times to ensure that AFDC recipients can retain
-24-
24
Maine Ass'n of Interdependent Neighborhoods v. Petit, 659 F.
____________________________________________ _____
Supp. 1309, 1323 (D. Me. 1987). The Secretary, furthermore,
plausibly contends that her failure to adjust the cap is
consistent with OBRA's original purpose to move towards
tightening the AFDC eligibility requirements over time. S.
Rep. No. 139 at 503, reprinted in 1981 U.S.C.C.A.N. at 769-
____________
70; Dickenson, 692 F.2d at 179.
_________
As we have earlier pointed out, it is also highly
significant that Congress has twice since 1981 considered
revising the $1,500 figure and on both occasions has declined
to do so, suggesting its implicit acceptance of the
Secretary's failure to adjust the figure upwards. See
___
Rutherford, 442 U.S. at 554 n.10. Congress itself, moreover,
__________
has never seen fit to adjust for inflation the related
overall resource limit of $1,000 which it set in 1981. See
___
Champion, 33 F.3d at 967. The fact that Congress itself has
________
not adjusted so closely-related a provision for inflation
suggests that the Secretary's similar refusal to adjust the
regulation is not plainly inconsistent with congressional
intent. See American Home Protection, 312 F.2d at 4.18
___ ________________________
____________________
a "safe and reliable vehicle." As we have seen, however,
OBRA provides no such standard to inform the Secretary's
discretion on a continuing basis.
18. Plaintiffs take issue with the Secretary's failure to
adjust the figure after being asked by the conference
committee to review the regulation in the wake of passage of
the Family Support Act of 1988. They argue that the
Secretary's failure to adjust the figure was arbitrary and
-25-
25
We recognize, as a possible argument, that
Congress's action in legislating an express automobile
exemption might be interpreted, by implication, to prevent
the Secretary from ever setting the amount so low as to
eliminate the exemption altogether, i.e. a zero cap or a cap
insufficient to allow most applicants to possess a
serviceable vehicle. Counter to this argument is evidence
strongly suggesting that the automobile exemption which
had for a long time existed as a creature of the Secretary's
earlier regulations was expressly incorporated in the
statute in 1981 in order to make clear the Secretary's
authority and duty to keep the exemption within bounds.
Immediately before OBRA, the automobile exemption had been
unlimited, the Secretary's earlier attempt at a $1,200 cap on
a vehicle's market value having been overturned by the D.C.
Circuit in 1976. National Welfare Rights Organ., 533 F.2d at
______________________________
647. By expressly delegating to the Secretary unqualified
authority to prescribe the equity amount of the exemption,
Congress resurrected a cap and unequivocally put the ball in
the Secretary's court. Given OBRA's primary cost-cutting aim
____________________
capricious. However, the conference committee did not direct
the Secretary to revise the figure; it only asked the
Secretary to review the figure and "revise [it] if he
______
determined revision would be appropriate." 1988 U.S.S.C.A.N.
________________________________________
at 2976-77 (emphasis added). The Secretary reviewed the
regulation and determined that revision was not appropriate.
See 56 Fed. Reg. 17,358, 17,358 (1991). No more was
___
required.
-26-
26
and Congress's evident desire to strengthen, not weaken,
the Secretary's control over the amount of the exemption a
zero cap or its functional equivalent, designed to avoid even
worse offsets in other areas of the program, might well be
within the Secretary's power to prescribe. But we need not
decide if this is so. Even were we to assume, for purposes
of argument, that the Secretary would lack the power to
reduce the exemption to zero or its functional equivalent,
the present case does not involve an amount so low. One
thousand five-hundred dollars may be consistent only with a
car that is eight to nine years old, with 80,000-120,000
miles on it as plaintiffs' expert opined but,
presumably, there are many such cars still on the road.
Nothing in the record indicates to the contrary, or that the
Secretary's continued use of a $1,500 equity figure is the
functional equivalent of eliminating altogether the
automobile exemption.19
We conclude that the Secretary's inaction in
respect to modifying the $1,500 figure for inflation is
supportable both under OBRA's express language and as a
reasonable construction of congressional intent. There is,
____________________
19. That the $1,500 reflects the owner's equity, and not
necessarily the total value of the car, raises a further
question, on which this record sheds little light, as to how
restrictive the exemption is, in practice, in disallowing
serviceable vehicles. Nor do we know how many persons
otherwise eligible for AFDC are currently eliminated by the
$1,500 cap.
-27-
27
therefore, no "compelling" circumstance "suggesting that the
agency has been blind to the source of its delegated power"
such as to warrant our ordering a rulemaking. American Horse
______________
Protection Ass'n, 812 F.2d at 4.
________________
2. Not Inconsistent With Original Rationale
________________________________________
Plaintiffs argue that, even if not necessarily
contrary to OBRA's language and Congress's intent, the $1,500
figure today runs counter to the Secretary's original
rationale for adopting it. In 1982, the Secretary determined
on the basis of the then available data that $1,500 would
include the "vast majority" of AFDC recipients. Because of
the effects of inflation, that can no longer be assumed to be
true, plaintiffs point out. Accordingly, plaintiffs argue,
the regulation is today arbitrary and capricious, as the
figure is inconsistent with the agency's stated rationale.
(This was the argument that prevailed in Hazard v. Sullivan,
______ ________
827 F. Supp. 1348 (M.D. Tenn. 1993), one of the two district
court cases that struck down the regulation).
The Secretary responds, reasonably we think, that
her predecessor's stated rationale for the 1982 regulation
need not be interpreted as an ongoing commitment to ensure
that the vast majority of AFDC recipients are able to retain
an automobile. Rather, the rationale can, and the Secretary
argues should, be interpreted as a desire to "grandfather"
those who were receiving AFDC at that time, i.e. to ensure
-28-
28
that large numbers of existing recipients not be abruptly
terminated. In parsing the language in the federal register,
the Secretary places the emphasis on the word "current":
"the Federal maximum limit should be set within the range of
the vast majority of current recipients . . . ." 47 Fed.
_______
Reg. at 5657-58 (emphasis added). Thus, even assuming that
over time the limit has excluded more and more individuals
from AFDC, that is not necessarily inconsistent with the
original stated rationale. Moreover, nothing in the statute
necessarily requires the Secretary to include the "vast
majority" of AFDC recipients in setting the limit. Indeed,
even though an earlier Secretary emphasized this factor in
1982, nothing obligates the present Secretary to follow the
same policy priorities. See Garnett, 905 F.2d at 782.20
___ _______
____________________
20. Plaintiffs also argue that the failure to adjust the
automobile resource exemption for inflation is arbitrary and
capricious when compared to the Secretary's actions with
respect to similar provisions in other benefit programs.
Plaintiffs point to the vehicle asset limitation under the
Supplemental Security Income ("SSI") program. Plaintiffs
argue that in 1979, prior to the promulgation of the AFDC
automobile resource exemption, the Secretary proposed to
increase the pre-existing SSI automobile exemption to "allow
for inflation." 44 Fed. Reg. 43,265 (1979).
We agree with the Secretary that this does not make the
Secretary's refusal to adjust the AFDC automobile resource
exemption arbitrary and capricious. We note that, despite
initially expressing its intent to do so, the Secretary never
adjusted the SSI automobile exemption for inflation,
concluding instead that such an adjustment was unnecessary.
See 50 Fed. Reg. 42,683, 42,686 (1985). Thus, there is in
___
fact no inconsistency. Furthermore, plaintiffs cite no cases
holding that an agency must treat separate and distinct
benefit programs exactly the same. There may well be good
-29-
29
3. One Final Note
______________
Having concluded that the Secretary's inaction in
failing to adjust the $1,500 automobile resource exemption
for inflation was not violative of the enabling statute or
other law, we wish briefly to comment on a procedural matter
not raised by either party: namely, plaintiffs' bringing of
the inflation claim without first petitioning the Secretary
for an amendment to the $1,500 exemption. Under the
Administrative Procedure Act, "[e]ach agency shall give an
interested person the right to petition for issuance,
amendment, or repeal of a rule." 5 U.S.C. 553(e) (1988)
_________
(emphasis added). Thus, prior to challenging an agency's
failure to revise a rule in light of changed circumstances, a
party can seek redress directly from the agency through a
petition for amendment under 553(e).
Where, as here, plaintiffs seek to raise a host of
factual and policy issues (such as the impact of inflation)
in a matter over which Congress has vested the Secretary with
primary discretion, it was patently appropriate and, in many
instances could be essential, for plaintiffs to have
petitioned the agency before seeking judicial redress. Cf.
___
Myers v. Bethlehem Shipbuilding, 303 U.S. 41, 50-51, 58 S.
_____ _______________________
Ct. 459, 82 L. Ed. 638 (1938) (It is "the long settled rule
____________________
reasons for adjusting some provisions for inflation and not
adjusting others. See Champion, 33 F.3d at 968.
___ ________
-30-
30
of judicial administration that no one is entitled to
judicial relief for a supposed or threatened injury until the
prescribed administrative remedy has been exhausted."). By
presenting the arguments for amendment directly to the
agency, plaintiffs would have placed before the agency their
evidence regarding the effects of inflation on the ability of
AFDC applicants to obtain transportation,21 and would have
enabled the agency to take whatever corrective action it
thought necessary. If the agency had granted the petition,
there would have been no need for judicial review. If, as is
more likely given the prior litigation on this issue, the
agency had denied the petition, then judicial review might
have been greatly facilitated by the existence of a more
developed agency record22 or, at least, of an agency
____________________
21. As it is now, the Secretary was, as far as we are able
to tell, first formally presented with the arguments for
amendment of the rule in the context of an adversary
proceeding.
22. 5 U.S.C. 555(e) (1988) provides:
Prompt notice shall be given of the
denial in whole or in part of a written
application, petition, or other request
of an interested person made in
connection with any agency proceeding.
Except in affirming a prior denial or
when the denial is self-explanatory, the
notice shall be accompanied by a brief
statement of the grounds for denial.
-31-
31
decision clarifying its particular policy reasons for the
denial.23 Thus requiring a petition under these
circumstances serves the purposes of the exhaustion doctrine
(and the related doctrine of primary jurisdiction). See,
___
e.g., Midwater Trawlers Coop. v. Mosbacher, 727 F. Supp. 12,
____ _______________________ _________
15 (D.D.C. 1989) (dismissing claim for failure to exhaust
administrative remedies where plaintiff failed to petition
for rulemaking under 5 U.S.C. 553(e)); Hoffman-LaRoche v.
_______________
Harris, 484 F. Supp. 58, 60 (D.D.C. 1979) (same); cf.
______ ___
Kappelmann v. Delta Air Lines, Inc., 539 F.2d 165, 169, 171
__________ ______________________
(D.C. Cir. 1976) (invoking doctrine of primary jurisdiction
where plaintiff failed to petition for rulemaking under 5
U.S.C. 553(e)); William V. Luneburg, Petitioning Federal
Agencies for Rulemaking, 1988 Wis. L. Rev. 1, 55 (1988).24
____________________
23. Plaintiffs criticize the Secretary's reliance, in her
brief, on arguments which plaintiffs call "post hoc
rationalization[s]" for not adjusting the $1,500 figure for
inflation. But plaintiffs can hardly complain of this where
they voluntarily by-passed the agency in order to come
straight to court. Despite plaintiffs' criticisms, moreover,
some indication of a specific, non-"post-hoc" policy
consideration can be gleaned from the 1992 letter from the
previous Secretary to Senator Dennis DeConcini, already
discussed supra. In that letter, the Secretary explained
_____
that raising the figure to $3,000 would cost the federal
government $200 million and require corresponding offsets in
other programs. See Frederick, 862 F. Supp. at 40.
___ _________
24. The exhaustion doctrine, as applied in this case, is
closely analogous to the doctrine of primary jurisdiction,
under which a court may refrain from exercising jurisdiction
over a controversy until an agency has had a chance to decide
an issue of fact or policy within that agency's jurisdiction
and special competence. See New England Legal Found. v.
___ __________________________
Massachusetts Port Authority, 883 F.2d 157, 171-72 (1st Cir.
____________________________
-32-
32
Nevertheless, while petitioning the agency would
have been the better course, we have considered the merits of
the claim on appeal without having demanded strict adherence
to the doctrine of administrative exhaustion. The doctrines
of administrative exhaustion and primary jurisdiction are
judge-made rules to be applied on a case-by-case basis,
taking into account the purposes of the doctrines. See McGee
___ _____
v. United States, 402 U.S. 479, 483, 91 S. Ct. 2457, 45 L.
______________
Ed. 2d 47 (1971); Pihl v. Massachusetts Dep't of Educ., 9
____ _____________________________
F.3d 184, 190 (1st Cir. 1993); 2 Davis, supra, 15.2 at 307.
_____
In this case, justice would not be served by remanding with
directions to dismiss for nonexhaustion, nor is a remand to
the agency for clarification of its reasons essential. The
claim turns primarily on issues of law concerning the scope
of the Secretary's powers; such issues of law we are equipped
to settle (and have settled) now. Moreover, the Secretary
has not objected to the lack of a petition, and such a
petition would likely be futile anyway as the Secretary
appears to have taken a firm stand, litigating this issue in
several fora. Thus, the exact same issue would likely arise
in the same posture after a petition was denied; resolving it
now would in fact conserve judicial resources. See, e.g.,
___ ____
____________________
1989). Both doctrines serve to allocate decision-making
authority between agencies and the courts, and both doctrines
look to similar considerations of judicial economy, agency
expertise, etc. See 1 Davis, supra, 14.1 at 271.
___ _____
-33-
33
Weinberger v. Salfi, 422 U.S. 749, 765-66, 95 S. Ct. 2457, 29
__________ _____
L. Ed. 2d 47 (1979) (considering claim despite failure to
exhaust where petition would clearly be futile).
While we have, therefore, decided the merits
without requiring exhaustion, the exhaustion point should not
go unnoticed. Had the case turned, as might have occurred
under a different statute or in different circumstances, on
review of the agency's precise policy reasons for inaction,
only a record from within the agency could have yielded a
satisfactory basis for judicial review. A trial in the
district court would not be a viable alternative. See
___
Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 654,
____________________________ _________
110 S. Ct. 2668, 110 L. Ed. 2d 579 (1990); Citizens to
____________
Preserve Overton Park v. Volpe, 401 U.S. 402, 420-21, 91 S.
_____________________ _____
Ct. 814, 28 L. Ed. 2d 136 (1971) (holding that if an agency
provides reasons insufficient to permit a court to review its
rationale, the proper remedy is to remand to the agency for
additional investigation or explanation); see also American
___ ____ ________
Horse Protection Ass'n, 812 F.2d at 7-8 (remanding to agency
______________________
after finding that agency had not provided sufficient reasons
for its denial of a petition for rulemaking); 1 Davis, supra,
_____
8.5 at 394.
V.
In the end, plaintiffs cite no cases, other than
Hazard, that indicate that an agency must periodically
______
-34-
34
consider inflation adjustments in setting its eligibility
standards for government benefits, absent a legislative
directive to do so.25 The few cases that address the issue
point the other way. See, e.g., Garnett, 905 F.2d at 782-83
___ ____ _______
(Secretary not required to adjust guidelines for disability
benefits to reflect changing market conditions, where
statutory grant of discretion to set guidelines broad).
Plaintiffs have, in any case, presented no evidence
indicating that the Secretary's failure to adjust the figure
for inflation is inconsistent with OBRA. Accord Champion, 33
______ ________
F.3d at 968; Falin, 776 F. Supp. at 1101.
_____
Reversed and remanded with directions to dismiss
___________________________________________________
the complaint. No costs.
_________________________
____________________
25. Plaintiffs cite Maine Ass'n of Interdependent
____________________________________
Neighborhood v. Petit, 659 F. Supp. 1309, 1323 (D. Me. 1987)
____________ _____
("MAIN") for the proposition that it is unreasonable for an
agency to fail to consider the effects of inflation when
promulgating a rule. However, we agree with the Secretary
that MAIN is distinguishable. MAIN involved the agency's use
____ ____
of data that was already eight years old at the time that it
was used to promulgate the rule. Moreover, the delegation of
rulemaking authority in that case was more circumscribed.
-35-
35
