United States District Court, D. Columbia
For RICHARD ANDERSON, BRYAN BASHIN, JOSEPH CORDOVA, LOERANCE DEAVER, MICHAEL EVANS, JOSEPH FARRELL, MARIAN FULLER, MARTHA GARBER, DIANA KORESKI, SEYMOUR LEVY, JEFFREY MITCHELL, JOHN NELSON, KATHLEEN NIEMI, NOEL NIGHTINGALE, RALPH PACINELLI, BRUCE J. ROSE, JANETTE SHELL, JACQUELYN TELLIER, ALL PLAINTIFFS, Plaintiffs: Heather G. White, LEAD ATTORNEY, The Federal Practice Group, Washington, DC.
For ARNE DUNCAN, Secretary, U.S. Department of Education, Defendant: Heather D. Graham-Oliver, LEAD ATTORNEY, Carl Ezekiel Ross, U.S. ATTORNEY'S OFFICE, Washington, DC; Christian Alexander Natiello, UNITED STATES ATTORNEY'S OFFICE, Criminal Division, Washington, DC; Oliver W. McDaniel, U.S. ATTORNEY'S OFFICE, Civil Division, Washington, DC.
ROSEMARY M. COLLYER, United States District Judge.
This protracted litigation presents two novel legal issues concerning application of the Rehabilitation Act and the Age Discrimination in Employment Act to a federal employer. Over seven years ago, the regional offices of the Rehabilitation Services Administration, a division within the Department of Education, were defunded by the White House budget for fiscal year 2006, which led to office closings and consolidation into the Department's Washington, D.C., headquarters. Disabled and older employees in the regional offices lost their jobs and sued. The subsequent litigation resulted in lengthy discovery, and now, cross-motions for partial summary judgment on Plaintiffs' disparate impact theories of liability. Plaintiffs single out the decision to defund the regional offices, claiming that it constituted age and disability discrimination because of its disparate impact on older and disabled employees. In doing so, Plaintiffs challenge a management decision by officials in the Executive Branch that was designed to achieve a centralized organizational structure, direct supervision, and cost savings, and accordingly is protected by the " business necessity" test. Partial summary
judgment will be entered in favor of the Secretary of Education.
Eighteen current and former employees of the Rehabilitation Services Administration (RSA), a division of the Department of Education's Office of Special Education and Rehabilitative Services (OSERS), filed this suit against Secretary Margaret Spellings in her official capacity.  See Compl. [Dkt. 1]. Richard Anderson, Bryan Bashin, Joseph Cordova, Loerance Deaver, Michael Evans, Joseph Farrell, Marian Fuller, Martha Garber, Diana Koreski, Seymour Levy, Jeffrey Mitchell, John Nelson, Kathleen Niemi, Noel Nightingale, Ralph Pacinelli, Bruce Rose, Janette Shell, and Jacquelyn Tellier (collectively, Plaintiffs)  assert various claims against the Secretary in connection with the decision to cut funding for RSA's regional offices. Id. ¶ ¶ 1-12. The cross-motions for partial summary judgment address one of Plaintiffs' theories of liability as to the Secretary's alleged discrimination on the basis of disability, in violation of the Rehabilitation Act of 1973 as amended (Rehab Act), 29 U.S.C. § 701 et seq., and on the basis of age, in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § § 621 et seq. The relevant material facts are undisputed.
A. Organizational Structure of RSA
The Department of Education (Department) is a multilayered agency comprised of several principal offices and nine program offices. OSERS is a program office charged with implementing programs that support individuals with disabilities. OSERS has three components, of which RSA is one. See Def.'s Reply [Dkt. 88], Ex. 22 [Dkt. 89-5] at 1-2.
As its name implies, Congress established RSA to implement statutory provisions relating to individuals with disabilities. Def.'s Mot. Summ. J. [Dkt. 75], Ex. 6 [Dkt. 76-7] at Attach. C. With the stated mission of " provid[ing] leadership and resources to assist state and other agencies in providing vocational rehabilitation . . . , independent living . . . and other services to individuals with disabilities to maximize their employment, independence, and integration into the community and the competitive labor market," Pls.' Mot. Summ. J. [Dkt. 74-1], Ex. 2 [Dkt. 74-5] at 1, RSA oversees grant programs to state agencies that provide direct vocational rehabilitation services to individuals, id., Ex. 1 [Dkt. 74-4] at 1. Prior to October 1, 2005, RSA maintained ten regional offices. See id., Ex. 6 [Dkt. 74-9]. No other division within OSERS operated regional offices. Def.'s Mot. Summ. J. ¶ ¶ 24-25. Today, only the Department's Office of the Inspector General, Office of Civil Rights, and Office of Federal Student Aid maintain regional offices. Def.'s Reply ¶ 3.
B. Decision to Defund RSA Regional Offices
In February 2005, President George W. Bush released his fiscal year 2006 budget proposal (FY06 budget) for the federal government. With respect to the Department, the FY06 budget reflected a slight decrease in funding for full-time equivalent (FTE) positions. Def.'s Mot. Summ. J., Ex. 1 [Dkt. 76-2] at X-2. The reduction in
FTE stemmed from changes in several of the Department's principal offices, including OSERS. The FY06 budget specified that OSERS would achieve a net decrease of 66 FTE through the consolidation of RSA regional offices into headquarters. Id. at X-3.
Reorganizing RSA by ending funding for regional offices and consolidating them into headquarters was not a novel idea. Regional offices for other programs in the Department had been eliminated in the past, and prior administrations had considered consolidating RSA.  Pls.' Mot. Summ. J., Ex. 29 (Dep. of Edward Anthony, delegated authority to perform functions of RSA Commissioner) [Dkt. 74-32] at 43; Def.'s Reply, Ex. 27 [Dkt. 89-10] at 2. Within the Bush Administration, the idea was considered as early as 2001 by Troy Justesen  and C. Todd Jones, who at that time were both assigned to the White House Task Force on Special Education. Pls.' Mot. Summ. J ¶ 37; id., Ex. 27 (Dep. of Troy Justesen) [Dkt. 74-30] at 59-60.
In 2004, the idea picked up steam. Mr. Justesen was then serving as the Deputy Commissioner of RSA and Acting Deputy Assistant Secretary for OSERS. Pls.' Opp'n [Dkt. 82] ¶ 10. He presented the idea to the White House Domestic Policy Council, which included future Secretary Spellings, as a way to achieve efficiency through centralization in accord with how the Bush Administration managed other programs. Id. ; Def.'s Mot. Summ. J. ¶ 5; id., Ex. 2 (Dep. of David Dunn, senior education advisor to President Bush) [Dkt. 76-3] at 22, 26-28; id., Ex. 3 (Dep. of Secretary Spellings) [Dkt. 76-4] at 51. At some point, the idea was " vetted by the Secretary's office" and presented to the Office of Management and Budget (OMB) during an October 2004 meeting concerning the Department's preliminary budget for fiscal year 2006. Justesen Dep. at 105-06. At the suggestion of Mr. Jones, who was then serving as the Department's Associate Deputy Secretary for Budget, id. at 108; Pls.' Mot. Summ. J. ¶ 38, Mr. Justesen suggested to OMB that closing RSA regional offices would result in savings that could fund other programmatic initiatives, id., Ex. 28 (Dep. of Carol Cichowski, official with Department's Budget Service) [Dkt. 74-31] at 38-39. 
By December 2004, the Administration had decided to defund RSA regional offices in its FY06 budget, id., Ex. 30 (Dep. of John Hager, Assistant Secretary for OSERS) [Dkt. 74-33] at 28; id., Ex. 31 [Dkt. 74-34] at 1, although the RSA Commissioner was not informed until January 2005, id., Ex. 33 (Dep. of Joanne Wilson, RSA Commissioner) [Dkt. 74-36] at 19-20. As of December 2004, RSA's ten regional offices employed sixty-five individuals on a full-time basis and two assistive readers with conditional appointments. See id., Ex. 7 [Dkt. 74-10]; id. ¶ 6. The Department was aware that twenty-five of the full-time employees were disabled, see id. ¶ 10, and fifty-eight would be over the age of forty by the end of 2004, see id. ¶ 11.
Although the FY06 budget was not set for release until February 2005, OSERS executive leadership learned in late January that some RSA regional offices already had informed their staff of the planned closures, prompting staff members to call human resources offices for information. Id., Ex. 23 [Dkt. 74-26] at 3. As a result, OSERS prepared an email to inform RSA staff of the reorganization before the FY06 budget was released. In a January 29, 2005 email concerning the latest draft of the RSA staff notice, OSERS Executive Officer Andrew Pepin wrote to several OSERS officials, including Assistant Secretary Hager and Mr. Justesen, and asked whether the email notice should mention that the consolidation was part of the FY06 budget. He noted that " [a]t this stage [the budget] is out anyway among many folks and by February 7 everyone will know about it anyway," and suggested that " [t]his has to be introduced . . . [as] something the Administration supports for positive reasons which all of you will think up on Monday." Id. at 1. Mr. Justesen responded on the same day, opining: " [W]e should not mention the budget--they don't like us to even mention budget issues before the public date. I think we should treat this as an Administration/Hager action to improve management and not even tie it to the budget in an email." Id. Three days later, on February 1, 2005, the RSA Commissioner sent an email to all RSA staff announcing the consolidation. Id., Ex. 11 [Dkt.74-14] at 1. In her email, the Commissioner stated that the reorganization would streamline resources and ensure uniform implementation of programs, id., and during a subsequent conference call with union officials representing the affected workforce, Assistant Secretary Hager explained the consolidation as " a straight business decision," Def.'s Mot. Summ. J., Ex. 4 [Dk.76-5] at 10.
C. Communication of the Consolidation to the Relevant Stakeholders
Released in February 2005, the FY06 budget provided, as relevant:
Office of Special Education and Rehabilitative Services -- a net decrease of 66 FTE resulting from the consolidation of the functions of the regional offices of the . . . RSA . . . into the central office and the reallocation of staff to reflect program workload. Analysis of 2004 workload data . . . shows that 81.5 FTE have been working directly on the Rehabilitation Services State Grant programs while other similar, but larger, formula grants administered by the Department are operating with 50 to 70 percent fewer staff. (Other HQ staff work indirectly on these programs.) RSA is the only office within the Department that manages
State formula grant programs from the regional offices. The consolidation of the regional offices' functions into the central office and the reallocation of staff will result both in staffing levels more comparable to other Department offices and in improvements in the administration of the Vocational Rehabilitation program through greater program efficiencies, consistent program implementation, and integrated program planning.
Id., Ex. 1 at X-3. Following the release of the FY06 budget, the Department explained the decision to defund RSA regional offices to Congress and RSA staff.
Congress asked Secretary Spellings, who had assumed that office in January 2005, for more information on the reorganization, expressing concern that the office closures would have a deleterious effect on RSA programs. Pls.' Mot. Summ. J, Ex. 38 [Dkt. 74-41] at 1; see also id., Ex. 39 [Dkt. 74-42] at 189; id., Ex. 40 [Dkt. 74-43] at 289. In a letter dated April 8, 2005, Secretary Spellings explained that advancements in electronic communications and data technologies had rendered RSA regional offices an inefficient use of resources. She stated that reorganization also would rectify two issues with the RSA regional offices: (1) difficulties with issuing timely reports on monitoring state agencies; and (2) overstaffing as shown by a workforce analysis, especially in comparison to such programs as the IDEA Special Education Grants to States, 20 U.S.C. § 1411, which had a federal appropriation several times larger than the RSA State Grants program but approximately fifty percent fewer assigned FTE. See id., Ex. 41 [Dkt. 74-44].  Thus, by centralizing RSA programs--as " nearly all Education Department programs" had been already--the Department would achieve greater coordination, accountability, and efficiency. Id. at 1.
OSERS's internal communications regarding the regional office closures paralleled Secretary Spelling's explanation to Congress. Agency emails and memoranda described the consolidation as a " business decision" that was the product of protracted consideration and accorded with the President's management goals for improving the performance of federal agencies. See Def.'s Mot. Summ. J., Ex. 5 [Dkt. 76-6] at 2 (April 1, 2005 email from Assistant Secretary Hager to RSA staff stating that consolidation was " consistent with the President's Management Agenda goals of improving the way government works and generating real results" and had been considered " for several years" ); id., Ex. 6 [Dkt. 76-7] at 2 (April 21, 2005 memorandum from Assistant Secretary Hager to the Executive Director of OSERS describing the RSA reorganization as a way " to more effectively serve the Department and align RSA in a manner that will assist [OSERS] in meeting the President's management initiatives and the Secretary's
priorities" ). During a telephone conference with RSA regional staff on March 8, 2005, Mr. Justesen responded to a question concerning a prior meeting at which Assistant Secretary Hager had promised to disseminate the plan on which the RSA reorganization was based. Mr. Justesen stated that, to his knowledge, no such plan existed. Pls.' Mot. Summ. J., Ex. 34 [Dkt. 74-37] at 21-24. He added that the consolidation was " purely a management decision" that did not require congressional approval and was based on a decision by " the entire chain of command," including OMB, on the " belief in the elected and appointed officials of [the Bush] Administration that the best manner to serve consumers under RSA [was] for a consolidation of regional functions to the central office."  Id. at 24-25. Later in that same call, OSERS' Executive Officer added that " [t]here may be a different surgical way to do this, but we're faced with the language in the President's budget which . . . . doesn't say go ahead and make surgical decisions by cutting [from other divisions]. It says by closing the regional offices." Id. at 39.
D. Closure of the Regional Offices
By the beginning of March 2005, the Department was actively working to implement the FY06 budget's directive. OSERS convened a " Workplace Committee" to analyze the " work in the regions and headquarters to determine how Regional Office functions can best be consolidated into headquarters and how the RSA headquarters staff will be reorganized and re-energized to accomplish these functions." Id., Ex. 74 [Dkt. 74-77] at 1. As Acting Commissioner of RSA, Mr. Justesen started weighing reassignment options. In a March 7 email, he asked Acting RSA Deputy Commissioner Jennifer Sheehy to " find out who exactly directly answers to the commissioner and who answers to the deputy and what [are] their essential (clearly self declared) functions of their jobs" so that he could determine where to locate those functions. Id., Ex. 75 [Dkt. 74-78] at 1. Secretary Spellings requested authority from the Office of Personnel Management (OPM) to offer 85 buyouts and 26 early outs in RSA regional offices and headquarters. Def.'s Mot. Summ. J., Ex. 7 [Dkt. 76-8] at 1; id., Ex. 10 [Dkt. 76-11] at 1. RSA employed 138 people as of April 13, 2005, and the Department calculated that all but twelve RSA employees were eligible for a buyout or early out. Id., Ex. 10 at 1. The Department's Office of Equal Employment Opportunity (EEO) completed an expedited review of the proposed reorganization in which it concurred with the decision but expressed " serious reservations," because " the proposed closure of . . . [RSA's] regional offices will have a disproportionate adverse impact on employees with disabilities currently employed at those offices." Pls.' Mot. Summ. J., Ex. 63 [Dkt. 74-66] at 1.
On May 10, 2005, OPM granted authority for voluntary separation incentive payments and voluntary early retirement buyouts
for all RSA employees in OSERS, both regional and headquarters. See Def.'s Mot. Summ. J., Ex. 7. The Department's Director of Human Resources sent a memo to all RSA staff on May 20, 2005, advising them of these incentives. See id., Ex. 8. In a follow up email dated May 27, 2005, Assistant Secretary Hager warned RSA staff that a Reduction in Force (RIF)--that is, involuntary separation--might be necessary if there were not enough buyouts and early outs to allow OSERS to close RSA regional offices by September 30, 2005. Pls.' Mot. Summ. ...