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MIL-KA-KO RESEARCH & DEV. CORP. v. OFFICE OF ECONO

December 19, 1972

MIL-KA-KO RESEARCH & DEVELOPMENT CORPORATION et al., Plaintiffs,
v.
OFFICE OF ECONOMIC OPPORTUNITY and United States of America, Defendants


Corcoran, District Judge.


The opinion of the court was delivered by: CORCORAN

CORCORAN, District Judge.

 This controversy is before the Court on cross motions for summary judgment of the defendant United States and the plaintiff, Mil-Ka-Ko Research and Development Corporation (hereinafter Mil-Ka-Ko).

 I

 Under the authority of the Economic Opportunity Act of 1964 (EOA) 42 U.S.C. ยง 2701 et seq. the Office of Economic Opportunity (OEO) extended to Mil-Ka-Ko certain funds to develop anti-poverty projects for the benefit of poor residents of the Kona Coast, Island of Hawaii. Funding began with a grant action dated June 29, 1970 effective July 1, 1970 which was to expire by its own terms on December 31, 1971. *fn1" The grant was subsequently extended until May 31, 1972. On May 12, 1972 the OEO informed the plaintiff that it would decline to refund the grant *fn2" beyond May 31, 1972.

 Mil-Ka-Ko commenced this action May 17, 1972 asserting that the denial of refunding was agency action affecting certain fundamental rights of its members and that in light of recent decisions of the United States Supreme Court, Board of Regents v. Roth, 408 U.S. 564, 92 S. Ct. 2701, 33 L. Ed. 2d 548 (1972); Perry v. Sindermann, 408 U.S. 593, 92 S. Ct. 2694, 33 L. Ed. 2d 570 (1972); Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970) such action could not be taken without first affording the plaintiff the benefits of procedural due process guaranteed by the Fifth Amendment to the United States Constitution.

 The defendant United States counters that a denial of refunding is not a termination or suspension of an ongoing program and that the plaintiff is entitled to only a "show cause" hearing as provided by statute before the exercise of agency discretion. The defendant further asserts that such a show-cause hearing was granted the plaintiffs on May 27, 28 and 29, 1972 in Hilo, Hawaii, that the responsible official -- with the record of that hearing before him -- remained unswayed as to the ability of Mil-Ka-Ko to perform as required and that the OEO accordingly declined to refund the program.

 The plaintiff replies that the net effect of a decision not to refund is to be equated to a suspension or termination of a grant and therefore, that the provisions of the EOA (Sec. 2944(2)) providing only for a show cause hearing is constitutionally defective.

 Thus at the outset the Court must determine

 (1) whether the decision not to refund is really a "termination" or "suspension" in disguise, as the plaintiff suggests, and

 (2) the ultimate question of whether the net effect of such a decision is such that it requires the defendant to afford parties in the position of the plaintiff an "opportunity for a full and fair hearing" with the safeguards such procedures entail.

 II

 Obviously a deprivation of property may not be effected without due process. Goldberg v. Kelly, supra ; Cafeteria Workers v. McElroy, 367 U.S. 886, 81 S. Ct. 1743, 6 L. Ed. 2d 1230 (1961). However, it remains to be seen ...


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