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Stuttering Found. of America v. Springer

July 30, 2007

STUTTERING FOUND. OF AMERICA, PLAINTIFF,
v.
LINDA M. SPRINGER, IN HER CAPACITY AS DIRECTOR OF THE U.S. OFFICE OF PERSONNEL MANAGEMENT, DEFENDANT.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Plaintiff Stuttering Foundation of America ("SFA") brings this action against Linda M. Springer, in her capacity as Director of the United States Office of Personnel Management ("OPM"), challenging OPM's denial of SFA's application for inclusion in the 2007 Combined Federal Campaign ("CFC"). SFA argues that OPM's decision was arbitrary, capricious, and contrary to law and should be set aside pursuant to the Administrative Procedure Act, 5 U.S.C. § 706 (2000). Although this action is a challenge to a specific administrative adjudication, its resolution presents a single question of law: Does the inclusion of a "public charity" eligibility requirement in the 2006 CFC regulations violate a federal statute mandating that CFC eligibility requirements remain the same as the criteria specified in the 1984 CFC regulations? See Treasury, Postal Service and General Government Appropriations Act, 1988, Pub. L. No. 100-202, § 618, 101 Stat. 1329-391, 1329-423 (1987) (codified at 5 U.S.C. § 1101 (note)).

SFA filed a motion for a temporary restraining order and preliminary injunction concurrently with its complaint on July 11, 2007. The motion seeks an order suspending OPM's final action that denied SFA's CFC application and instead requiring OPM to include SFA on the 2007 CFC list of national/international participating organizations. With the parties' consent, and pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure, the Court converted SFA's motion into a motion for summary judgment. Now pending before the Court are plaintiff's motion for summary judgment and defendant's cross-motion for summary judgment, both of which have been fully briefed and were the subject of a motions hearing held on July 26, 2007. For the reasons explained below, the Court grants plaintiff's motion for summary judgment, denies defendant's motion for summary judgment, vacates OPM's decision sustaining the denial of SFA's 2007 CFC application, and remands for further consideration of SFA's application by the agency. The Court further enjoins OPM from printing or distributing its national/international charitable organizations list until a final decision is made with respect to SFA's 2007 CFC application on remand.

BACKGROUND

The CFC is "the only authorized solicitation of employees in the Federal workplace on behalf of charitable organizations." 5 C.F.R. § 950.102(a) (2007). During the CFC campaign, which is conducted from September 1 through December 15 each year, see § 950.102(a), federal employees are provided with a list comprised of three parts -- national/international organizations, international organizations, and local organizations, see id. § 950.401(g)(2). "Federal workers may donate to any organization listed as eligible to participate in the Campaign, and, upon request, contributions are either made directly to the Campaign or withheld from their paychecks." Planned Parenthood of Metro. Wash., D.C., Inc. v. Horner, 691 F. Supp. 449, 450 (D.D.C. 1988). The Director of OPM "exercises general supervision over all operations of the CFC," § 950.102(c), and, as part of this supervision, has the authority to determine whether interested organizations qualify for participation in the campaign, id. § 950.201(a)(2).

The facts of this case are not in dispute. On June 29, 2006, OPM published proposed changes to the regulations governing eligibility requirements and public accountability standards for charitable organizations participating in the CFC. See Eligibility and Public Accountability Standards, 71 Fed. Reg. 37,003 (proposed June 29, 2006). One of the proposed changes involved eligibility requirements for organizations seeking inclusion in the national/international and international organizations lists; such organizations would now be required to certify that they are classified as "a public charity under 26 U.S.C. 509(a)." 71 Fed. Reg. at 37,009. Under the version of the regulations then in effect, an organization only needed to "[c]ertify that it is recognized by the Internal Revenue Service as tax-exempt under 26 U.S.C. 501(c)(3) and to which contributions are tax-deductible pursuant to 26 U.S.C. 170." 5 C.F.R. § 950.202(b) (2006).*fn1 At the conclusion of the notice-and-comment period, OPM adopted this change as proposed.*fn2 See Eligibility and Public Accountability Standards, 71 Fed. Reg. 67,276, 67,277 (Nov. 20, 2006) (codified at 5 C.F.R. § 950.202(b) (2007)) (hereinafter "2006 regulations"). OPM stated in its final rule that it had proposed the revision "to clarify that applicant organizations must be public charities, not private foundations, or exclusively government units or instrumentalities thereof." Id. at 67,277.

Plaintiff Stuttering Foundation of America ("SFA") is a non-profit corporation that was established in 1947, and is incorporated in and maintains its principal office in Memphis, Tennessee. Compl. ¶¶ 4, 5; Def.'s Cross-Mot. for Summ. J. Ex. 9 (Letter from MacKenzie Canter, III, counsel for SFA, to Trica Hollis, Chief of Staff & Dir. of Internal Affairs, OPM (Mar. 22, 2007)) (hereinafter "Mar. 2007 SFA Appeal") at 1-2. As its name suggests, SFA is dedicated to providing information and assistance to children and adults who stutter. Compl. ¶¶ 5, 12; March 2007 SFA Appeal at 2. SFA is recognized by the Internal Revenue Service as a tax-exempt, charitable organization within the meaning of 26 U.S.C. § 501(c)(3) (2000). See Compl. ¶ 4; Def.'s Cross-Mot. for Summ. J. Ex. 6 (Letter from MacKenzie Canter, III, to Mark Lambert, Acting Dir., Office of CFC Operations (Feb. 12, 2007)) (hereinafter "Feb. 12, 2007, SFA Letter"). Because SFA also qualifies as a private operating foundation pursuant to 26 U.S.C. § 4942(j)(3), contributions to SFA are tax-deductible under 26 U.S.C. § 170. See Compl. ¶ 4; Def.'s Cross-Mot. for Summ. J. Ex. 2 (Letter from Cindy Schneible, President, Health & Med. Research Charities of Am., to Mark Lambert (Jan. 26, 2007)) (hereinafter "HMR Letter"); id. Ex. 5 (Letter from Jane Fraser, President, SFA, to Mark Lambert (Feb. 5, 2007)) (hereinafter "Feb. 5, 2007, SFA Letter"). SFA further qualifies as a private foundation pursuant to 26 U.S.C. § 509 (2000). See Compl. ¶ 4; HMR Letter.

SFA has participated in every CFC between the years 1992 and 2006. Compl. ¶ 8. An application for participation in the 2007 CFC was submitted on SFA's behalf on January 26, 2007, by a national federation called the Health and Medical Research Charities of America ("HMR"). Compl. ¶¶ 7, 12; HMR Letter; see also 5 C.F.R. § 950.301 (2007) (national federation). HMR's cover letter to OPM explained that it was unable to certify SFA's eligibility because SFA "could not comply with the new regulatory language regarding IRS recognition as a public charity," and thus it was forwarding SFA's application for review as an unaffiliated, national independent charity. HMR Letter; see also 5 C.F.R. § 950.302 (requiring national federations to ensure that "only those member organizations that comply with all eligibility requirements are certified for participation in the CFC").

On February 5, 2007, OPM notified SFA that its application was incomplete because SFA had not certified "statement #2." Def.'s Cross-Mot. for Summ. J. Ex. 4 (E-mail to Jane Fraser, from Office of CFC Operations (Feb. 5, 2007)). Statement #2 reads: "I certify that the [IRS] recognizes the organization named in this application as tax-exempt under 26 U.S.C. 501(c)(3) to which contributions are tax deductible pursuant to 26 U.S.C. 170(c)(2) and the organization is classified as a public charity under 26 U.S.C. 509(a)." Def.'s Cross-Mot. for Summ. J. Ex. 1 (SFA 2007 CFC Application) at 2. In response to OPM's communication, the president of SFA wrote a letter confirming that it did not qualify as a "public charity" but noting that, as a private operating foundation, it had qualified for inclusion in the CFC for the past fifteen years. See Feb. 5, 2007, SFA Letter. SFA followed-up with another letter to OPM, sent via counsel, explaining its view that the "public charity" requirement in the 2006 regulations violated federal law.*fn3 See Feb. 12, 2007, SFA Letter at 4.

OPM formally denied SFA's application for inclusion in the 2007 CFC on March 16, 2007. See Def.'s Cross-Mot. for Summ. J. Ex. 8. As the basis for its decision, OPM stated that SFA had not certified that it was "classified as a public charity under 26 U.S.C. § 509(a)"; rather, OPM noted, the IRS "has classified your organization as a private foundation under Section 501(c)(3) of the Internal Revenue Code." Id. SFA filed an administrative appeal on March 22, 2007. See Mar. 2007 SFA Appeal. OPM issued its final decision sustaining the denial of SFA's application on June 28, 2007. Def.'s Cross-Mot. for Summ J. Ex. 11 (Letter from Tricia Hollis, to Jane Fraser (June 28, 2007)). OPM reasoned that SFA "currently is classified under 26 U.S.C. 501(c)(3) as a private foundation and, therefore, does not meet the criteria" expressed in the 2006 regulations. Id. This lawsuit followed.

STANDARD OF REVIEW

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In a case involving review of a final agency action under the Administrative Procedure Act, 5 U.S.C. § 706, however, the standard set forth in Rule 56(c) does not apply because of the limited role of a court in reviewing the administrative record. See Sierra Club v. Mainella, 459 F. Supp. 2d 76, 89-90 (D.D.C. 2006). Under the APA, it is the role of the agency to resolve factual issues to arrive at a decision that is supported by the administrative record, whereas "the function of the district court is to determine whether or not as a matter of law the evidence in the administrative record permitted the agency to make the decision it did." See Occidental Eng'g Co. v. INS, 753 F.2d 766, 769-70 (9th Cir. 1985); see also Northwest Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1472 (9th Cir. 1994) ("[T]his case involves review of a final agency determination under the [APA]; therefore, resolution of th[e] matter does not require fact finding on behalf of this court. Rather, the court's review is limited to the administrative record."). Summary judgment thus serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review. See Richard v. INS, 554 F.2d 1173, 1177 & n.28 (D.C. Cir. 1977), cited in Bloch v. Powell, 227 F. Supp. 2d 25, 31 (D.D.C. 2002), aff'd, 348 F.3d 1060 (D.C. Cir. 2003).

Plaintiff challenges the denial of its application for inclusion in the 2007 CFC campaign as inconsistent with statutory requirements governing the CFC. Under the APA, the Court must "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). The "scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). A reviewing court must be satisfied that the agency has "'examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.'" Alpharma, Inc. v. Leavitt, 460 F.3d 1, 6 (D.C. Cir. 2006). The agency's decisions are entitled to a "presumption of regularity," Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971), and although "inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one." Id. at 416. That ...


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