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UNITED STATES v. CHENG

November 30, 1993

UNITED STATES, Plaintiff,
v.
JOHN STUART CHENG, aka, JOHN STUART CHANG, Defendant.



The opinion of the court was delivered by: STANLEY A. WEIGEL

 I. Background

 In 1974, Congress authorized the Public Health Service to establish a National Research Service Awards ("NRSA") program for the provision of grants for biomedical and behavioral research or research training. 42 U.S.C. § 289L-1. *fn1" Under the NRSA program, individuals receive federal financial support for tuition, fees and stipends to obtain pre-doctoral and post-doctoral biomedical and behavioral research training at public and private institutions. In return, each individual receiving an award ("awardee") must fulfill a period of obligated service in health research or teaching. 42 U.S.C. § 288(c); 42 C.F.R.§ 660.110. Awardees who fail to perform the required service are liable to the United States for the total amount paid in awards to the individual, plus interest at a rate fixed by the Secretary of the Treasury. 42 U.S.C. § 288(c)(4); 42 C.F.R. § 660.110.

 John Stuart Cheng ("Defendant") was awarded a total of $ 12,840.00 under the NRSA program for the period between September 19, 1978 and September 18, 1981. Defendant signed annual NRSA Payback Agreements ("Agreements") accepting the service obligation. By the terms of the regulations, Defendant's service requirement was 24 months. *fn2"

 In or around April 1988, NRSA determined that Defendant owed NRSA the financial repayment and that this debt was overdue. NRSA then began its collection efforts. On September 7, 1988, NRSA informed Defendant by letter that his debt had been referred to the Internal Revenue Service ("IRS") for collection by offset of any federal income tax refunds to which he might be entitled.

 On or about August 11, 1989, Defendant submitted seven completed Annual Payback Activities Certifications ("APACs") for the years 1981 - 1988 in which he alleged that he had fulfilled his service obligation through his employment as an elementary school teacher at the Oakland Unified School District between September 19, 1982, and June, 12, 1987.

 On November 16, 1989, the Department's senior attorney informed Defendant's attorney (Gordon J. Finwall) that, based upon its review of his APACs and supporting documentation in Defendant's file, the Department had determined that Plaintiff's teaching did not fulfill the service obligation. The Department continued its collection activities. Since 1988, the IRS has withheld approximately $ 7100.00 from Defendant's federal tax refunds in partial repayment of the debt. *fn3"

 On September 17, 1992, Plaintiff sued Defendant to recover the remaining amount due on Defendant's debt. *fn4" On April 30, 1993, Defendant counterclaimed to recover the amounts withheld from his federal income tax refunds, plus interest, attorneys' fees and costs.

 Plaintiff now moves for summary judgment on its claim and for denial of Defendant's counterclaim.

 II. Discussion

 Summary judgment shall be rendered if, "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show 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." F.R.C.P. 56(c).

 Statutory principles govern the relationship between the parties. United States v. Hatcher, 922 F.2d 1402 at 1406 (9th Cir. 1991), citing Rendleman v. Bowen, 860 F.2d 1537, 1541-42 (9th Cir. 1988); United States v. Citrin, 972 F.2d 1044, 1046 (9th Cir. 1992).

 The discretion to determine what constitutes appropriate service for the purposes of the NRSA service obligation resides in the Secretary of the Department of Health and Human Services ("Secretary" or "Department"). *fn5" 42 U.S.C. § 288(c)(3). The Secretary's determination must be upheld unless it is arbitrary and capricious or an abuse of discretion. Administrative Practices Act, 5 U.S.C. § 706; Hatcher, 922 F.2d at 1405-06; Citrin, 972 F.2d at 1049; Rendleman, 860 F.2d at 1543.

 In accepting the award and executing the Agreements, Defendant obligated himself to perform appropriate service for a specified time, or, upon default of this obligation, to repay the United ...


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