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Recent Federal Grants Law Cases

Recent Federal Grants Law Cases. November 2005. Jana Gagner Senior Counsel Federal Assistance Law Division Office of the General Counsel U.S. Department of Commerce. Overview.

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Recent Federal Grants Law Cases

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  1. Recent Federal Grants Law Cases November 2005

  2. Jana GagnerSenior CounselFederal Assistance Law DivisionOffice of the General CounselU.S. Department of Commerce

  3. Overview • This presentation provides limited information about some cases of potential interest to the Federal grants community. • It does not cover all grants-related cases, but provides illustrative selections of general-interest grant cases in common categories arising in the past year.

  4. Overview • This information does not constitute legal advice. • Consult source documentation or legal counsel to verify information about the specific cases or issues mentioned. • This information is intended to be factual, not viewpoint-oriented.

  5. Major topics arising in recent Federal grants cases • Constitutional Spending Clause—various restrictions on Federal funding • Federal funding—religious expression in prisons • Faith-based grants • False Claims Act cases • Appropriations interpretations • Damages in Grant Cases • Accepting Federal funds—limits on State immunity • Land use issues • Miscellaneous

  6. Other legal sources for Federal grants law material • Government Accountability Office • Government-wide Guidance and Rules • Major Agency Actions of interest

  7. Spending Clause Cases

  8. Spending Clause Requirements • When Congress enacts legislation under the Spending Power authorized under the Constitution, that legislation is in the nature of a contract. In return for Federal funds, grantees comply with Federally imposed conditions. • In implementing this power over grantees through award conditions, the Supreme Court has ruled that the conditions must advance the general welfare, must be unambiguous, and must not cross the line into coercion, effectively nullifying the grantee’s choice of whether to accept the funds and the conditions.

  9. Jackson v. Birmingham Bd. Of Educ.__U.S.__, 125 S.Ct. 1497 (Mar. 29, 2005) • In a case regarding whether a high school girls’ basketball coach was unconstitutionally retaliated against because he had complained about sex discrimination in the school’s athletic program, the U.S. Supreme Court, in a 5-4 decision, held that Title IX of the Civil Rights Act covered his claim. • The Court wrote that Congress enacted Title IX, which prohibits sex discrimination, through its power under the Spending Clause. • The Court reviewed and discussed some of its past cases interpreting the Spending Clause. • In accepting its “contract” for Federal funds, the State grantee was on notice that it could be held liable for damages if it retaliated against anyone who complained of sex discrimination under Title IX. • Given Justice O’Connor’s impending retirement and the 5-4 nature of this decision, the outcome of future cases with similarities to cases like this is unknown.

  10. FAIR v. RumsfeldOral Arguments Scheduled for U.S. Supreme Court Dec. 6, 2005 • The Forum for Academic and Institutional Rights (FAIR), a group of law schools and others, contend that a Federal statute called the Solomon Amendment violates the First Amendment rights of its members by conditioning Federal funds to universities on its members’ support of military recruitment on campuses, a concern to them because that recruitment excludes openly gay law students. • On November 29, 2004, the Third Circuit Court of Appeals found the Solomon Amendment unconstitutional under the First Amendment. The ruling was stayed in January 2005, given potential consideration by the U.S. Supreme Court. • The Supreme Court will hear oral arguments in the case on December 6, 2005.

  11. Velazquez v. Legal Services Corp.349 F.Supp.2d 566 (E.D.N.Y., Dec 20, 2004) • A 1996 Federal Legal Services Corporation (LSC) rule restricts how legal aid groups receiving Federal funds can use private funds for various legal advocacy and other activities for indigent clients, such as class action lawsuits. • In this case, some of the restrictions were held unconstitutional. The LSC rules required grantees to have physically separate facilities with separate personnel, as well as financial separation for the unallowable activities funded with private dollars. • The government’s justification for this was that the public might think the government was endorsing the grantee’s positions. • The court deemed this a violation of the grantees' First Amendment rights because the government’s justification did not support imposing such a significant burden, which could be otherwise addressed. • Similar issues regarding the appearance of government endorsement of grantee views could arise in “faith-based grant” cases. If this case is appealed, a court may address this point.

  12. DKT International v. U.S. Agency for International DevelopmentD.D.C., Civil Action Case No. 05-01604 • Under Public Law 108-25 (2003), grantees under the Foreign Assistance Act cannot be required to use an AIDS prevention method for which the organization has a religious objection, grantees are prohibited from using funds to promote prostitution, and funds cannot be issued to groups that do not explicitly oppose prostitution. The law is implemented by USAID Policy Directive 05-04. • A grantee lawsuit asserts that this law is a limitation on first amendment speech rights, and raised other legal and policy concerns. The Federal government’s response, filed October 31, 2005, raised Spending Clause arguments, among others. • Web sites of various non-government organizations involved in AIDS prevention and health care include links to legal documents in pending case.

  13. National Family Planning and Reproductive Health Ass’n., Inc. v. Gonzales391 F.Supp.2d 200 (D.D.C. Sept. 28, 2005) • Congress passed a law restricting funding relating to grantees involved with health care entities that provide, pay for, provide coverage of, or refer for abortions. • A District Court held that the grantees suffered an injury; that this language might have been ambiguous in a colloquial sense but was not unconstitutionally vague, thus it did not violate First Amendment rights of grantees; and it did not impermissibly delegate legislative power to executive agencies. • The case included analysis of the Spending Power.

  14. Spending Clause: Religious Expression in Federally-Funded Prisons

  15. Cutter v. Wilkinson__U.S.__, 125 S.Ct. 2113 (May 31, 2005) • State prisoners in Ohio alleged that they were denied the right to practice their religions due to unwarranted security concerns, in violation of Federal Religious Land Use and Institutionalized Persons Act (RLUIPA). • The Supreme Court held that a part of the RLUIPA increasing the level of protection for the prisoners’ religious rights did not violate the Constitutional provision prohibiting government establishment of religion. • Spending Clause issues were addressed only at a lower court level, not by intermediate Courts of Appeal, although they were mentioned in a concurrence by Justice Thomas. • The case was sent back to lower courts for further action on unaddressed issues, where the Spending Clause issue then begins to be more fully addressed.

  16. Cutter v. Wilkinson423 F.3d 579 (6th Cir., Sept. 13, 2005) • A Federal Court of Appeals ruled that requiring States receiving Federal funds for prison programs to comply with RLUIPA involved a proper exercise of Congressional power under the Spending Clause. • The Court stated that the Act furthered the general welfare of the United States, the language of the statute made it clear to states applying for Federal funds that they were subject to the Act, the conditions were reasonably calculated to address Federal interests in the rehabilitation of prisoners, and the Act did not require states to administer a Federal program; instead, it required states to refrain from acting in a way that interfered with inmates’ exercise of religion.

  17. Warsoldier v. Woodford418 F.3d 989 (9th Cir. July 29, 2005) • A Native American inmate alleged that a California prison policy requiring male inmates to have short hair violated RLUIPA. • A Court of Appeals agreed that the policy imposed substantial burden on the inmate’s religious practice. • Women inmates in the state were allowed to have hair longer than three inches. The purpose of hair grooming policy was to maintain prison security. • The Spending Clause issue was not directly addressed.

  18. Farrow v. Stanley2005 WL 2671541 (D.N.H. Oct. 20, 2005) • A New Hampshire inmate sought to practice Native American religious practices under RLUIPA, which included having access to tobacco, herbs, certain foods, specified activities, and a fire. • The State asked for the court for “Summary Judgment,” to rule for the government without a full hearing of all of the issues, but court indicated that the case will proceed.

  19. Gooden v. Crain389 F.Supp.2d 722 (E.D. Tex. Oct. 5, 2005) • A Muslim state prison inmate in Texas raised RLUIPA in a case in which he was denied permission to grow a quarter-inch beard, in accordance with his religious beliefs. • Among its holdings, a District Court held that RLUIPA does not violate the Spending Clause. Congress can attach conditions on the receipt of Federal funds, such power may be exercised to achieve goals not within other enumerated powers of Congress, and Congress clearly put states on notice that by accepting Federal funds they waived their immunity from lawsuits under RLUIPA. • The State sought to dismiss the case, but now the case is allowed to proceed.

  20. Andreola v. State of Wisconsin2005 WL 2233995 (E.D. Wis. Sept. 2, 2005) • An inmate sought damages after he was unable to obtain a kosher diet when serving time in a county jail. His claim was dismissed on various grounds, except for RLUIPA, for which further proceedings in the case will occur.

  21. Grants and Interpretations of Appropriations Law

  22. Cherokee Nation of Oklahoma v. Leavitt__U.S.__, 125 S.Ct. 1172 (Mar. 1, 2005) • This case raises an important question: when a specific appropriation is expended or unfunded, when must an agency fund an outside party, based on a statutory authorization, from an unrestricted appropriation? • Initially, Indian tribes sued Secretary of Health and Human Services seeking to recover full costs incurred by the tribes pursuant to self-determination health services contracts. A District Court and Appeals Court ruled for HHS. • In a separate case, a tribe appealed a Contracting Officer's denial of its claim for similar costs. The Department of Interior Board of Contract Appeals found in tribe's favor. A different Appeals Court agreed.

  23. Cherokee Nation of Oklahoma • The Supreme Court took up the cases to resolve the conflict between the circuits. • The Supreme Court held that— where Congress had appropriated sufficient legally unrestricted funds to pay the contracts in question, the government could not avoid its contractual obligation to pay contract support costs on grounds of "insufficient appropriations.“ • The funding instrument in this case did not appear to be exactly a procurement contract or a financial assistance instrument, but a “contract” to provide a public benefit specific to the Federal statute at issue. It is unclear how that might affect future grant cases.

  24. Star-Glo Associates, LP v. United States414 F.3d 1349 (C.A. Fed. July 13, 2005) • This case involved a standard appropriations statute for a citrus grower reimbursement program stating that the “Secretary of Agriculture shall use $58,000,000 of the funds of the Commodity Credit Corporation to carry out this section, to remain available until expended.” • The court discussed the Cherokee Nation case, but concluded that the language above established a maximum cap on the available funds. • The eligible applicant submitted a timely application, but funds were exhausted from the program account. The agency was not required to consider whether additional funds from another, overlapping appropriation might exist.

  25. Faith-Based Federal Assistance

  26. Religion and Social Policy Roundtable Legal Updates • http://www.religionandsocialpolicy.org/legal/legal_updates.cfm • George Washington University law professors Lupu and Tuttle are experts on the subject • They track the cases and provide objective information on this web site • Oct 25, 2005: The Federal Emergency Management Agency and Faith-Based Organizations: Disaster Relief following the Gulf Coast Hurricanes- More • Oct 25, 2005: The Federal Emergency Management Agency and Faith-Based Organizations: Repair and Reconstruction of Private Facilities- More • Oct 11, 2005: Lown (and others) vs. The Salvation Army, Inc.; Commissioner, New York City Administration for Children's Services (and others)-More

  27. More Faith-Based Cases from the Roundtable • May 31, 2005: ACLU of Massachusetts v. Leavitt U.S. District Court, District of MassachusettsSuit filed 5/16/05- More • Apr 12, 2005: Freedom from Religion Foundation, Inc. (and others) v. Minnesota Faith/Health Consortium (and others) U.S. District Court, District of Minnesota(Suit filed 3/30/05)- More • Mar 21, 2005: Moeller v. Bradford CountyU.S. District Court, Middle District of Pennsylvania(Suit filed 2/17/05)- More • Mar 15, 2005: American Jewish Congress v. Corporation for National & Community Service (U.S. Court of Appeals for the District of Columbia Circuit, decided 3/8/05)- More • Jan 18, 2005: Freedom from Religion Foundation, Inc. (and others) v. Jim Towey, Director of White House Office of Faith Based and Community Initiatives (and others)- More • Nov 22, 2004: Freedom from Religion Foundation, Inc. (and others) v. Jim Towey, Director of White House Office of Faith Based and Community Initiatives (and others)- More

  28. Additional Information on Faith-Based Grants • National Grants Management Association 26th Annual Training Conference, Washington, D.C., May 2005--Highlights in grants law from the past year, contributed by the Federal Bar Association, includes extensive analysis on faith based grants law cases and Federal agency administrative actions, courtesy of Management Concepts, Inc.: http://www.fedbar.org/govtcontracts_section.html#committees • A couple of recent sample cases follow

  29. Community House, Inc. v. City of Boise2005 WL 2847390 (D.Idaho Oct. 28, 2005) • One issue in this case involved the Boise Rescue Mission, a homeless shelter in which allegations were made that residents were required to attend religious meetings as a condition of receiving services. • The Court enjoined the City from operating a lease with the Mission if such a requirement was in place.

  30. Lown v. Salvation Army __ F.Supp.2d__, 2005 WL 2415978 (S.D.N.Y. 2005) • The Salvation Army, a religious and social services provider funded primarily from government sources, required employees to advance its religious objectives. Former employees sued, alleging discrimination. • The Court held that state and local government agencies did not violate the employees’ equal protection rights by supporting the grantee; also, the grantee did not violate the Establishment Clause because its religion policy was not required by the government.

  31. False Claims Act

  32. U.S. ex Rel. Totten v. Bombardier Corp.380 F.3d 488 (C.A.D.C. Aug. 27, 2004)rehearing en banc denied Dec. 8, 2004 • In a False Claims Act case, someone alleged that a contractor submitted false claims to Amtrak to obtain payment for allegedly defective railroad cars. • The False Claims statute says the false claim must be submitted to the government. The Appeals Court stated that presenting a false claim to a grantee is not presenting a false claim to the government. • Often a court will say that a grantee is not the Federal government, because it is not. Watch these cases closely, however; results may vary, depending on specific statutes and circumstances. False claims, torts, freedom of information, employment, breach of contract, etc. can produce different results in legal cases.

  33. U.S. ex Rel. Totten v. Bombardier Corp • A noteworthy dissenting opinion was issued, Congressional authors raised concerns, and the Department of Justice is particularly concerned about the result of this case. • Elsewhere in the False Claims Act statute, the law refers to “grantees.” Reading the statute as a whole, one could say that Congress intended the part of the law requiring presentment of a false claim to the government to extend to grantees. • The legislative history also indicated that the law was to be applied to grantees.

  34. U.S. ex Rel. Totten v. Bombardier Corp • The majority opinion was written by Judge John Roberts, now Chief Justice of the U.S. Supreme Court. • How this part of the False Claims Act will be interpreted in the future, and by the Supreme Court if cases rise to that level, remains unknown. • During his confirmation hearings, Judge Roberts acknowledged the difficulty of the case.

  35. Totten case: What does the future hold for grant cases involving potential false claims? Judge Roberts: “….it's certainly possible that the majority in that casedidn't get it right. And the dissent, that was a very strong dissent, did get it right. I think the majority got it right.... There was an extensive discussion between the majority and the dissent. The view that you've articulated was certainly presented in a compelling way by Judge Garland, my colleague on the court of appeals…. But I'm happy to concede that it was among the more difficult cases I've had over the past two years. Any time Judge Garland disagrees, you know you're in a difficult area. And the function of his dissent, to make us focus on what we were deciding and to make sure that we felt we were doing the right thing, I think was well-served. But Judge Garland disagreed, and so it's obviously, to me, a case on which reasonable judges can disagree. And I just have to rest on the analysis in the majority opinion.” Senator Grassley noted: “….the Bush administration has filed an amicus brief in the 11th Circuit, arguing that you had misread the False Claims Act in the Totten case…. .In fact, quote, "The Totten majority misconstrued the language and purpose of the False Claims Act…."

  36. U.S. ex rel. Tyson v. Amerigroup2005 WL 2667207 (N.D. Ill., Oct. 17, 2005) • In a case involving allegations of Medicaid fraud, the defense referred to the Totten case and argued that the case should be dismissed. No false claims could have been presented to the Federal government; all claims were presented to the grantee, a state agency. • The Court worked around Totten, observing some distinctions between the funding mechanisms of Amtrak and Medicaid, and determining that the claims would indirectly be presented to the government. • The Court also pointed out other parts of the False Claims Act statute referencing grants and the legislative history.

  37. U.S. ex rel. Main v. Oakland City University426 F.3d 914 (7th Cir. Oct. 20, 2005) • A former university recruiter made allegations regarding university representations for Federal subsidies. • An Appeals Court held that allegations that a university certified it would comply with regulations despite its intent to continue paying recruiters for enrolling students in violation of a Federal regulation stated a claim under the False Claims Act, as students could not have received Federal aid absent the university’s eligibility under Federal education statutes. • Related securities litigation: In re Apollo Group, Inc., __F.Supp.__, 2005 WL 2655275 (D.Ariz. Oct. 18, 2005)

  38. U.S. v. Flaschberger408 F.3d 941 (7th Cir. May 31, 2005) • Indian community college certified compliance with conditions on its Federal grant applications, but certifications about eligible students had been false, as the number of students had been inflated, and most funds went into tribal account.

  39. U.S. ex rel. Gross v. AIDS Research Alliance-Chicago413 F.3d 1139 (C.A.Fed. July 13, 2005) • In a False Claims Act case, the “relator” alleged false certification of compliance with statutory and regulatory requirements regarding AIDS research. • The FCA requires that the certification of compliance be a condition of payment by the government. • In this case, the alleged false statements to the government in “forms, written reports, and study results” were not specific enough to take action.

  40. Damages in Grant Cases

  41. San Juan City College v. United States391 F.3d 1357 (Dec. 9, 2004) • San Juan City College, a for-profit higher education institution, sued the Department of Education for damages for violating a grant agreement by cutting off funding and forcing the school to close without a hearing and to correct deficiencies, as the Department requires. • The Court of Appeals for the Federal Circuit held that the grantee may recover damages from a Federal awarding agency for breach of its grant agreement. The case was remanded to determine whether a breach occurred and if so, the amount of damages. • This may be unprecedented. Ordinarily, the relief provided in grant cases is “equitable,” such as an injunction, rather than money judgments.

  42. Land Use Grants View from atop Connecticut College, New London, Connecticut

  43. Kelo v. City of New London, Conn.__U.S.__, 125 S.Ct. 2655 (Jun 23, 2005) • After approving an integrated development plan designed to revitalize its ailing economy, a city purchased most of the property earmarked for the project from willing sellers, but initiated condemnation proceedings when the owners of the rest of the property refused to sell. The economic development plan included public and private facilities. The unwilling sellers claimed that the taking of their properties would violate the "public use" restriction in the Fifth Amendment's Takings Clause. • The Supreme Court held that the city's proposed disposition of the property for economic development purposes qualifies as a "public use" within the meaning of the Takings Clause. • The Court indicated that the city's determination that the area at issue was sufficiently distressed to justify a program of economic rejuvenation was entitled to deference; the plan unquestionably serves a public purpose, and the takings challenged here satisfied the Fifth Amendment. The Court indicated that promoting economic development is a traditional and long accepted governmental function, and there is no principled way of distinguishing it from the other public purposes the Court has recognized. • The case has generated some public controversy. Some jurisdictions are considering laws limiting their ability take private property for economic development purposes. • Many Federal financial assistance programs involve land use and economic development aspects.

  44. Save Ardmore Coalition v. Lower Merion Township2005 WL 3021087 (E.D. Pa., Nov. 9, 2005) • In a case involving a Federal transportation grant, the extent of compliance with the National Environmental Policy Act (NEPA) was unclear. • Whether the project in this case qualifies as a “major Federal action” under NEPA was uncertain. No final agency decision was made about an environmental impact statement. • The Court stated that further factual development was required before it could determine whether compliance with applicable statutes occurred. • The status of grant activity as a potential “major Federal action” under NEPA is a potential topic for an upcoming Federal Bar Association seminar. If a speaker is scheduled, information will be posted on the grantslaw listserv (sign up through esharp@doc.gov).

  45. State Waiver of Eleventh Amendment Immunity

  46. Stave Waiver of Immunity • The Eleventh Amendment to the Constitution allows States to be immune from lawsuits by others, except to the extent States waive this immunity. • The immunity is waived when States accept Federal funds and agree to conditions on awards that can in lawsuits, such as anti-discrimination requirements. • How this immunity is interpreted is an ongoing source of lawsuits.

  47. Some Recent Immunity Cases • Thomas v. University of Houston, 2005 WL 2902207 (Fifth Cir. Nov. 4, 2005) (includes clarification that the state waives immunity even though the Federal funds are not earmarked for programs that further the anti-discrimination and rehabilitation goals of the statute at issue) • Espinoza v. Texas Dept of Public Safety, 2005 WL 2044547 (Fifth Cir. Aug. 25, 2005) • Williams v. District Bd. Of Trustees of Edison Community College, Fla., 421 F.3d 1190 (11th Cir. Aug. 23, 2005) • Constantine v. Rectors and Visitors of George Mason University, 411 F.3d 474 (4th Cir. June 13, 2005) • Bill M. ex rel. William M. v. Nebraska Dep’t. of Health and Human Services, 408 F.3d 1096 (8th Cir. May 27, 2005) • Pace v. Bogalusa City School Board, 403 F.3d 272 (Fifth Cir. Mar. 8, 2005) (this case also included significant discussion of major Supreme Court and other Federal cases on the constitutionality of imposing conditions on Federal grants)

  48. Miscellaneous Federal Cases • Grant cases related to— • the Freedom of Information Act • the definition of “financial assistance” • due process and audits

  49. Boyes v. U.S. Dep’t. of EnergyNot reported in F.Supp.2d, 2005 WL 607882 (D.D.C. Mar. 16, 2005) • A person filed a Freedom of Information Act request, seeking a copy of a grant file and related materials from the U.S. Department of Energy. The request was granted in part and denied in part. • The case includes significant discussion regarding exemption of certain material from a grant file, particularly trade secrets, as the grant related to General Electric’s design and development of superconducting generators. The proposal also included financial data about GE’s cost and rate structure. The expected level of confidentiality in the grant process was also discussed.

  50. News-Press, Div. Of Multimedia Holdings Corp. v. U.S. Dep’t. of Homeland Security2005 WL 2921952 (M.D. Fla. Nov. 4, 2005) • Media organizations submitted Freedom of Information Act requests for records showing Federal Emergency Management Agency grant aid information related to 2004 hurricanes (including Charley, Frances, Ivan, and Jeanne). • Among other issues, the Court stated it must balance substantial privacy interests of those seeking aid against the public interest in understanding FEMA’s activities. • The Court concluded that the balance weighed in favor of nondisclosure of the Federal assistance beneficiaries.

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