The opinion of the court was delivered by: JONES
These three consolidated actions have been brought to declare unlawful and enjoin what the plaintiffs alleged to be the unlawful dismantlement of the Office of Economic Opportunity (OEO) by the defendant, Howard J. Phillips, Acting Director of OEO. The plaintiffs in Local 2677, American Federation of Government Employees, et al. v. Phillips, Civil Action No. 371-73 (hereinafter Local 2677), by an amended complaint, are the labor organization-bargaining agent for the Washington, D.C. headquarters employees of OEO, and two individual OEO headquarters employees. Suit is brought on behalf of all OEO employees throughout the country who have been or are about to be adversely affected by the alleged unlawful acts of the defendant. The plaintiffs in West Central Missouri Rural Development Corp., et al. v. Phillips, Civil Action No. 375-73 (hereinafter West Central), are four Community Action Agencies (CAAs) as designated pursuant to 42 U.S.C. § 2790 (1970), which bring their suit on behalf of all 930 CAAs receiving funds from OEO under section 221 of the Economic Opportunity Act of 1964, as amended, 42 U.S.C. § 2808 (1970). In the third suit, National Council of O.E.O. Locals, A.F.G.E., AFL-CIO, et al. v. Phillips, et al., Civil Action No. 379-73 (hereinafter National Council), the plaintiffs are the exclusive agency-wide representative for all nonsupervisory OEO employees, an association of CAA executive directors, three CAAs, two headquarters employees of OEO, several CAA employees, and several beneficiaries of programs funded by OEO through CAAs. National Council is likewise brought as a class action on behalf of all OEO employees, all CAAs and their employees, and all beneficiaries of CAA programs.
Jurisdiction is based on 28 U.S.C. §§ 1331, 1343, 1361 and 2201-2202 (1970), as well as for review of administrative action under 5 U.S.C. §§ 701-706 (1970).
At a hearing on March 2, 1973, the Court granted the defendant's uncontested motion for consolidation and allowed the plaintiffs certain limited expedited discovery of Phillips by interrogatories and set a timetable for the filing of motions. At that time the defendant filed an affidavit indicating his intention not to take any action, prior to March 15, 1973, relating to transferring or discontinuing any OEO program which would finally and irrevocably adversely affect the rights of OEO employees. The terms of that affidavit were extended to March 23, 1973, at the Court's request. Subsequently, on March 7, 1973, the application for a temporary restraining order in Local 2677 was argued and denied. The case is now before the Court on the plaintiffs'
motions for preliminary injunction, the defendant's motion to dismiss or in the alternative for summary judgment, and the plaintiffs' cross-motions for summary judgment, which supercede and incorporate the prior motions for preliminary injunction.
The plaintiffs' statements of material facts as to which there is no genuine dispute, filed in accordance with Local Rule 9(h), have not been controverted by the defendant, except as they may contain legal conclusions. Those material facts in turn are merely an elaboration of the Rule 9(h) statement submitted by the defendant, and thus the Court finds that there are no material facts in dispute and the case is ripe for summary judgment.
Consideration was also given at oral argument to transferring National Council to the Northern District of Illinois for possible consolidation with the suit plaintiffs sought to join there. The defendant's counsel objected, noting that argument was scheduled for four days later on the motion for preliminary injunction in that suit. In view of that circumstance, the Court decided that a transfer would be untimely.
The plaintiffs assert that the defendant has been acting illegally for several reasons. It is sufficient for the disposition of these cases to consider only three of their contentions. First, the plaintiffs claim that the Economic Opportunity Amendments of 1972 (hereinafter 1972 Amendments), Pub. L. No. 92-424, 86 Stat. 688 (1972), in particular sections 2(a), 3(c)(2), and 28, forbid the defendant from taking the actions he has to terminate OEO funding of CAAs. Second, the claim is made that the activities of the defendant regarding the alleged termination of CAA functions is an illegal reorganization because the terms of the Reorganization Act, 5 U.S.C. §§ 901-913 (1970) have not been complied with. Finally, the plaintiffs contend that the defendant's directives are illegal and of no effect because he failed to publish them in the Federal Register as required by section 22 of the 1972 Amendments, 42 U.S.C.A. § 2971b. The defendant has raised several technical defenses in addition to his defenses on the merits. The Court finds against the defendant on these points for reasons set forth below.
The Court finds for the plaintiffs on all three of these basic substantive theories.
The defendant argues that these cases are brought prematurely and thus fail to present a justiciable case or controversy. An examination of the uncontroverted facts reveals that this contention is totally unfounded and that the present cases present a justiciable case or controversy.
On January 29, 1973, President Nixon submitted his 1974 Budget Message to Congress. That budget message set forth the administration's plan to transfer responsibility for certain OEO functions to other agencies. The message specifically notes that
No funds are requested for . . . [OEO] for 1974. Effective July 1, 1973, new funding for . . . [CAAs] will be at the discretion of local communities. . . . With Community Action concepts now incorporated into ongoing programs and local agencies [if the budget proposals are approved], the continued existence of OEO as a separate Federal agency is no longer necessary.
The defendant has attached this excerpt from the budget message to his affidavit filed in support of his motion for summary judgment as an indication of the plan he is pursuing as Acting Director of OEO.
On January 29, 1973, the defendant issued a memorandum to all OEO regional offices, attached as Exhibit A to the complaint in West Central, regarding the "termination of section 221 [CAA] funding." That memorandum, at page two, further noted that the cessation of funding would rescind individual designations as CAAs. OEO Instruction 6730-3, issued March 15, 1973, at page two, repeats the same instruction of the defendant that CAA funding will cease and further warns that use of funds by a CAA for any purpose except phasing out its activity or the failure of a CAA to submit an "acceptable" phaseout plan 120 days prior to the termination of section 221 funding will result in summary suspension of OEO funds. The same Instruction 6730-3 sets out 21 pages of guidelines for CAAs to follow in shutting down their section 221 operations, with various deadlines to be met throughout that process.
Thus, as stated in the uncontroverted West Central statement of material facts not in issue, all program evaluations and processing of CAA applications for purposes other than phasing out CAA activities have stopped. CAAs have been instructed to stop purchasing or repairing essential equipment. The day-to-day business operations of CAAs have been hindered if not halted by the unwillingness of third parties to deal with CAAs because of the announcement by the defendant of the termination of funding. The orderly continuation of CAA functions, discussed in more detail infra, has been halted or severely disrupted by the requirements imposed by OEO regarding termination. Finally, CAA employees are leaving their jobs in anticipation of the cessation of funding in compliance with OEO directives.
The defendant asserts that the complaint of the plaintiffs is premature because the defendant's compliance with his statutory duties regarding CAAs cannot be determined until June 30, 1973. The basic theory underlying this assertion is that until that time the defendant will be in compliance with all applicable statutes because the OEO's CAA function will not cease before that date and because he will reserve and make available for obligation to CAAs in fiscal year 1973 the $328,900,000 mandated by section 3(c)(2) of the 1972 Amendments.
Article III of the Constitution does limit the jurisdiction of this Court to actual cases or controversies, and forbids the adjudication of hypothetical questions upon which the Court would render only an advisory opinion. Golden v. Zwickler, 394 U.S. 103, 108, 110, 89 S. Ct. 956, 22 L. Ed. 2d 113 (1969). A case or controversy in the constitutional sense "must be definite and concrete, touching the legal relations of parties having adverse legal interests." Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 240-241, 57 S. Ct. 461, 464, 81 L. Ed. 617 (1937). In the absence of an immediate adverse effect on parties in a concrete situation, a dispute is too hypothetical for the proper exercise of the judicial function. Longshoremen's Union v. Boyd, 347 U.S. 222, 223-224, 74 S. Ct. 447, 98 L. Ed. 650 (1954).
In determining whether a dispute has matured to the point at which it becomes a case or controversy, a court may look to the announced intentions of the defendant to take adverse action against a plaintiff. Younger v. Harris, 401 U.S. 37, 42, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971). If a plaintiff is "either presently or prospectively subject to the regulations, proscriptions, or compulsions that he . . . [is] challenging," then he has presented a case or controversy for judicial resolution. Laird v. Tatum, 408 U.S. 1, 11, 92 S. Ct. 2318, 2325, 33 L. Ed. 2d 154 (1972). The plaintiffs here are subject to both presently effective orders and those which require them to take action in the future which they challenge as unlawful. The defendant has left no doubt of his intention to act in accord with those orders.
Surely it cannot be maintained that the plaintiffs must wait until the CAAs have gone out of existence before they may challenge acts of the defendant which they claim are illegal. Courts do not require that an injury be complete before they will adjudicate the issues. The present case is no abstract disagreement over policies which have not as yet affected the plaintiffs in a concrete way. The controversy is so concrete that a delay in judicial consideration would work extreme hardship on the plaintiffs. Cf. National Automatic Laundry & Cleaning Council v. Shultz, 143 U.S. App. D.C. 274, 443 F.2d 689 (1971).
In rebuttal the defendant argues that no case or controversy can exist until Congress appropriates money for OEO to operate in fiscal 1974. The plaintiffs, however, do not argue that OEO must spend new funds in fiscal year 1974 which have not been appropriated. Rather they challenge as unlawful the current and announced practices of the defendant as they affect the plaintiffs today, even though those practices will affect them as well after June 30, 1973. In that context, this case is justiciable.
The defendant contends further that this case is not justiciable because it involves a political question. That theory is bottomed on the assumption that what the plaintiffs really ask of this Court is for it to interject itself between the Executive and Legislative branches of the federal government regarding the Executive budget proposals for OEO for fiscal year 1974. If that were the circumstance, the defendant would clearly be correct. But the Court holds that not to be the circumstance and that this case does not present a nonjusticiable political question.
As will be elaborated in the discussion of the merits of this case, the plaintiffs are challenging the defendant's exercise of his statutory powers as Acting Director of OEO as unlawful and in direct violation of certain statutory obligations. The plaintiffs do not seek to force Congress to appropriate any funds or to require the defendant to spend any funds which have not been appropriated. Rather they seek to enjoin the defendant from acting in a manner other than that consistent with laws already passed by the Congress and signed by the President. It is their contention that Congress has already spoken through law on the manner in which the OEO, and in particular the CAA program of OEO, must be operated and that the defendant is acting contrary to that mandate.
Therefore this dispute is one which readily is within the judicial power. It is the type of case which the federal courts regularly encounter and decide. See, e.g., Ringer v. Mumford, 355 F. Supp. 749 (D.D.C. 1973). Thus there is no problem with formulating "judicially discoverable and manageable standards for resolving" the dispute. Powell v. McCormack, 395 U.S. 486, 518, 89 S. Ct. 1944, 1962, 23 L. Ed. 2d 491 (1969), quoting Baker v. Carr, 369 U.S. 186, 217, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962). Briefly, the Court must determine whether an executive official is following the explicit mandates of the Congress and the Constitution, which is the judicial function in our tripartite government. Baker v. Carr, supra, at 211, 82 S. Ct. 691. Cf. Marbury v. Madison, 5 U.S. (1 Cranch) 137, 2 L. Ed. 60 (1803).
No problem of a clear textual commitment to another branch of government of the matter under consideration here is present. Powell v. McCormack, supra, 395 U.S. at 518, 89 S. Ct. 1944; Baker v. Carr, supra, 369 U.S. at 211, 217, 82 S. Ct. 691. The textual commitment most apposite to the instant case is that of the President under Article II, section 3, of the Constitution to "take Care that the Laws be faithfully executed." The plaintiffs claim that the defendant, an executive official, is in violation of his duties under 42 U.S.C. § 2808 (1970) to implement the Economic Opportunity Act, in particular as last amended by the Congress. No nonjusticiable political question is presented in this case.
The defendant argues that in reality these are unconsented suits against the United States which must be dismissed because of sovereign immunity. In support of this theory, it is contended that enjoining the defendant would be a judgment which would draw upon the Treasury because it would require the expenditure of funds not yet appropriated, and further that it would interfere with the public administration of the laws. Thus the well known rule that a suit nominally against a government official is in actuality an unconsented suit against the United States would require dismissal. Land v. Dollar, 330 U.S. 731, 738, 67 S. Ct. 1009, 91 L. Ed. 1209 (1947).
The defendant would be right if the characterization of the issues were correct. But this argument proceeds on a fundamentally incorrect premise. The relief which the plaintiffs seek would not be a drain on the public purse. No injunction to spend unappropriated funds is sought. What the plaintiffs do demand is that the defendant be enjoined from acting in a manner which violates his statutory duties under the Economic Opportunity Act or that he be declared to be acting unconstitutionally. Thus this suit clearly falls within the exception to the doctrine of sovereign immunity which allows suits against federal officials who have allegedly acted beyond their statutory powers or have exercised their statutory powers in a constitutionally void manner. Dugan v. Rank, 372 U.S. 609, 621-622, 83 S. Ct. 999, 10 L. Ed. 2d 15 (1963); Larson v. Domestic & Foreign Corp., 337 U.S. 682, 689, 69 S. Ct. 1457, 93 L. Ed. 1628 (1949).
Even though a judgment of this Court will require that funds be expended in its implementation, there is no draw upon the public treasury. It is undisputed that Congress has appropriated monies for the operation of OEO through June 30, 1973. Pub. L. No. 92-607, 86 Stat. 1503. Therefore any order of this Court requiring the defendant to act in accordance with the mandate of Congress would draw upon funds appropriated for that purpose.
Sovereign immunity has also been waived in a second manner. Jurisdiction in this suit is partially based on the review of administrative action pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 701-706 (1970). In cases in which the Administrative Procedure Act is applicable, it is the law of this Circuit that that Act serves as a waiver of sovereign immunity. Scanwell Laboratories, Inc. v. Shaffer, 137 U.S. App. D.C. 371, 385, 424 F.2d 859, 873 (1970); Constructores Civiles de Centroamerica, S.A. v. Hannah, 148 U.S. App. D.C. 159, 459 F.2d 1183 (1972). As the Court of Appeals recently held in Knox Hill Tenant Council v. Washington, 145 U.S. App. D.C. 122, 129, 448 F.2d 1045, 1052 (1971):
There is nothing new about judicial entertainment of suits which charge that federal officials are acting outside of, or in conflict with, the responsibilities laid upon them by the Congress or the Constitution. Whether such charges are true, and, if so, what remedial action the court should or may direct, are questions partaking of the merits, and not of jurisdiction to explore the merits. (Footnote omitted.)
Thus this Court has jurisdiction to interfere with the public administration in cases in which it is charged that the administrator has violated his statutory and constitutional responsibilities.
Standing in Local 2677 and National Council
The plaintiff OEO employees in Local 2677 and National Council complain of the defendant's actions in terminating CAA funding and functions as an unlawful exercise of his statutory powers as Acting Director of OEO and as violative of the Reorganization Act, 5 U.S.C. §§ 901-913 (1970). They argue that the abolition of OEO itself, the avowed goal of the defendant, see supra will adversely affect them in that they will be and are losing their jobs either through reductions in force or outright firings. The defendant argues that the unions lack standing to assert these claims on behalf of their employees and that, in any event, they have failed to exhaust their administrative remedies and thus are precluded from bringing suit at this time. These contentions are without merit and the Court finds that the union plaintiffs in Local 2677 and National Council have standing and are not barred by the doctrine of exhaustion of remedies.
No general discussion of the evolving law of standing is needed to demonstrate that the union plaintiffs have asserted the required claim of injury in fact to an interest arguably within the zone of interests to be protected or regulated by the statutes which they claim the defendant is not carrying out. See Sierra Club v. Morton, 405 U.S. 727, 733, 92 S. Ct. 1361, 31 L. Ed. 2d 636 (1972). The loss of jobs is certainly a claim of injury in fact. Although the union plaintiffs may not be the primary intended beneficiaries of the statutes which they claim the defendant's actions violate, they need only be intended beneficiaries to have standing. Constructores Civiles de Centroamerica, S.A. v. Hannah, 148 U.S. App. D.C. 159, 165, 459 F.2d 1183, 1189 (1972); Peoples v. United States Department of Agriculture, 138 U.S. App. D.C. 291, 293, 427 F.2d 561, 563 (1970). The plaintiffs' interest in continued employment is one that the statutory and constitutional provisions which they claim are being violated were intended to protect.
Lodge 1858 also dictates that this case not be dismissed for failure to exhaust administrative remedies. The exhaustion requirement contemplates an effective remedy before it comes into play. In Lodge 1858, the employees could not challenge the statutory validity of the outside contracts in a civil service proceeding and thus it would have been futile to require them to exhaust that "remedy" before challenging the administrator's action in court. In the present case, it would likewise be outside the scope of civil service authority to determine whether the defendant was acting within his statutory duties in terminating the CAA function of OEO and OEO itself. Id. at 166-167, 436 F.2d at 896-897.
Having rejected the defenses to jurisdiction of the defendant as inapplicable to the present proceeding, the Court now turns to the substantive consideration of the plaintiffs' claims.
Termination of CAA Funding as Violative of the Economic Opportunity Act of 1964, as Amended
As set forth earlier,
on January 29, 1973, President Nixon submitted his 1974 Budget Message to Congress. The budget message requests that no funds be appropriated OEO in fiscal year 1974. CAA functions are to be transferred to local agencies through the use of special revenue sharing. The existence of OEO as a federal agency is to cease. On the same date, the defendant issued a memorandum to all OEO regional offices, regarding the "termination of section 221 [CAA, 42 U.S.C. § 2808 (1970)] funding."
Before discussing this termination program in more detail, a brief outline of the CAA function of OEO will help place this controversy in the proper perspective.
A CAA is a state, a political subdivision of a state, a combination of political subdivisions, or a public or private non-profit agency formally designated as a CAA by a state or appropriate political subdivision. The CAA designation is official for purposes of receiving funds and administering programs upon ratification by the Director of OEO. 42 U.S.C. § 2790 (1970).
After official designation, a CAA is the local apparatus for citizen participation in the policy planning and implementation of the community action program (CAP) which
includes . . . a sufficient number of projects or components to provide . . . a range of services and activities having a measurable and potentially major impact on causes of poverty in the community or those areas of the community where poverty is a particularly acute problem.
42 U.S.C. § 2790(a)(1) (1970).
In addition, a CAA must carry out the purposes of the Act in conformity with criteria prescribed by the OEO Director. Each CAA plans and administers its programs through a board composed of elected public officials, community leaders, and democratically selected representatives of the poor in the area served by the CAA.
In addition, CAAs are eligible to apply for grants from OEO under section 222 of the Act, 42 U.S.C.A. § 2809, to fund specific antipoverty programs, such as legal services, comprehensive health services, and alcoholic counseling and recovery. Section 222 also enables CAAs to receive funds to administer programs under the Act funded by other federal agencies, such as Headstart preschool and elementary funds from the Department of Health, Education, and Welfare, and several work training and employment programs funded by the Department of Labor. Official designation as a CAA entitles it to receive funding from different federal departments for certain programs under the Act on a priority basis. If funds are available for the program in the area served by the CAA, the CAA receives the funds automatically in preference to other potential recipients. Section 221 funds typically pay the overhead on facilities that are used to dispense those other services for which CAAs may obtain OEO and other federal funds.
In September 1972, the Congress passed the Economic Opportunity Amendments of 1972, Pub. L. No. 92-424, 86 Stat. 688, and that Act was signed into law by the President. Section 2(a) of the Amendments authorized and directed the continuance of the CAP program, as administered by CAAs, through the end of fiscal year 1975. 42 U.S.C.A. § 2837.
Section 3(c)(2) of the Amendments, note 5, supra, authorized and earmarked certain funding levels for section 221 programs through June 30, 1974. Finally, section 28 of the Amendments (42 U.S.C.A. § 2942 note) provides that
Notwithstanding the provisions of section 602(d) of the Economic Opportunity Act of 1964, the Director of the Office of Economic Opportunity shall not delegate his functions under section 221 and title VII of such Act to any other agency.
The January 29, 1973, memorandum of the defendant Phillips instructed all grantees of funds under section 221 that they must begin phasing out their programs because the fiscal year 1974 budget does not provide any funds for section 221 grants. Grantees which were scheduled for refunding between that date and June 30, 1973, and which were otherwise qualified for refunding,
would receive phase-out grants only of up to six months' duration. Section 221 grantees with current funding scheduled to expire after July 1, 1973, would receive no further grants and would be required to use the current grant to phase out their operations. No funds at all would be available to any CAA after December 31, 1973.
OEO Instruction 6730-3, issued March 15, 1973, is more explicit in its terms regarding phase-out activities of CAAs. The instruction directs, at page 1, that
No costs chargeable to Section 221 grant funds shall be incurred except costs directly related to the orderly phase-out of the grantee's Section 221 activities, once the phase-out period commences (usually 45 to 90 days before the end of the grant period).
Instruction 6730-3 requires that each section 221 grantee prepare a phase-out plan and budget conforming to the requirements of the instruction and submit it 120 days prior to the date of termination of section 221 funding. The failure of a CAA to submit that plan in an acceptable form will lead to summary suspension and the stoppage of further checks from OEO. The phase-out plan is required to be in great detail, and a checklist is provided, with different aspects of the phase-out plan to be accomplished at set times before the section 221 grant expires. Extensions are unavailable even if funds remain unexpended at the end of the funding period.
The phase-out plan is to provide for the progressive release or reassignment of personnel. Accrued leave and termination pay, social security and withholding taxes are to be paid out of remaining funds. All personal property both of the CAA and the federal government is to be inventoried 150 days prior to the termination of the grant period. Leases are to be paid and terminated. CAA records are to be indexed and forwarded to OEO. Fourteen pages of checklists and further specific instructions follow the eleven pages which detail the phaseout method described above. Under this state of facts, the Court is compelled to find that the defendant is terminating the CAA function of OEO and that CAAs are being required to use their funds to phase out their programs rather than carry out their purposes under section 221 of the Act.
The plaintiffs claim that the defendant's program to terminate OEO's CAA function now is unlawful because the Congress last fall in section 2(a) of the 1972 Amendments, note 10, supra, provided that the Director of OEO "shall" carry out section 221 programs through June 30, 1975. The plaintiffs acknowledge that if Congress fails to provide funds for OEO to operate after June 30, 1973, either by continuing resolution or an appropriation, the defendant has no obligation to spend any money. But they argue that until funds to expire on June 30, 1973, the defendant is bound to operate OEO as before January 29, 1973, through the duty imposed upon the President under Article II, section 3, to "take Care that the Laws be faithfully executed." The plaintiffs construe the defendant's obligation under section 2(a) of the 1972 Amendments to continue to operate section 221 programs to be to carry out section 221 functions until either no funds are left or Congress terminates the program. This would entail the ...