The opinion of the court was delivered by: Alsup, District Judge.
ORDER GRANTING DEFENDANTS'
MOTION TO DISMISS; VACATING
This case poses the question of whether decisions made by the Federal
Emergency Management Agency regarding the allocation of earthquake-relief
funds are subject to judicial review. This order holds that Congress
intended to preclude this type of suit. Accordingly, defendants' motion
to dismiss is GRANTED. The hearing is VACATED.
The following well-pled facts taken from plaintiff's complaint are
presumed to be true for the purpose of this Rule 12 motion. Plaintiff is a
non-profit organization that owns and operates Lake Park, a retirement
community in Oakland. Lake Park is a 12-story L-shaped building, divided
into two wings. One floor on one of the wings contains a skilled-nursing
facility, which provides 24-hour nursing care to residents who require
assisted living. In
1989, Lake Park was damaged in the Loma Prieta earthquake. Plaintiff
subsequently sought disaster-relief funds.
The Stafford Act, 42 U.S.C. § 5124-5204c, and FEMA's regulations
establish different regimes for the provision of federal relief to
victims of natural disasters. In general, the Act and accompanying
regulations define who is eligible to obtain aid from FEMA and what types
of costs are eligible for recovery. Under the regime at issue here, the
Public Assistance Project, 44 C.F.R. § 206.200-228, once the
president declares an area to be a "major disaster," victims of the
disaster can apply for federal assistance through a state agency (the
Governor's Office of Emergency Services in California), which forwards
the request to FEMA. Either a FEMA inspector, state representatives, or
both then prepare a project worksheet for each discrete project for which
the applicant (subgrantee) seeks funding. 44 C.F.R. § 206.202 (d).
The project worksheet must specify the damage caused by the disaster and
"must identify the eligible scope of work and must include a quantitative
estimate for the eligible work." Ibid. Before FEMA obligates any funds to
the state agency (grantee), FEMA must approve the final project
worksheet, and the state agency must submit two different application
forms (SF 424 and SF 424D) for FEMA approval. 44 C.F.R. § 206.202
(e). FEMA then "obligate[s] funds to the Grantee based on the approved
Project Worksheets. The Grantee will then approve subgrants based on the
Project Worksheets approved for each applicant." Ibid.
Pursuant to this regime, between 1989 and 1996, FEMA granted plaintiff
more than $10 million.*fn1 On July 10, 1997, however, FEMA refused to
approve an additional $573,364 in relief that plaintiff requested. This
money, plaintiff claimed, was necessary to construct separate utilities
for the skilled-nursing facility. According to plaintiff, state
authorities mandated the construction of separate utilities, because this
was required by the California Building Code. FEMA regulations, plaintiff
argues, define eligible costs to include costs necessary to meet code
standards in effect as of the date of the disaster. Even though the
Building Code at the time of the earthquake required separate utilities,
plaintiff contends, because plaintiff's skilled-nursing facility was built
under an older, less-stringent version of the building code, it shared
common utilities with the rest of the building.
After FEMA denied plaintiffs request to fund the utility work,
plaintiff filed an appeal with FEMA. On June 4, 1999, FEMA denied the
portion of the appeal related to funding for the skilled-nursing
facility. According to FEMA, the appeal was denied because the work was
required "as a result of the subgrantee's failure to plan for and
schedule required inspections. Because this work was not required as a
direct result of the disaster or by an applicable code, it is not
eligible for funding" (Federal Subgrantee Closeout and First Appeal dated
June 4, 1999, at 6). Plaintiff then filed a second appeal to FEMA's
associate director, which was denied on May 31, 2000. Both appeals,
plaintiff alleges, were denied based upon an erroneous construction of the
California Building Code. Plaintiff seeks declaratory relief under the
Declaratory Judgment Act, 28 U.S.C. § 2201, judicial review of the
denial of its appeals under the Administrative Procedure Act, 5 U.S.C.
§ 701-06, and alternatively to compel FEMA to approve funding for the
construction of separate utilities pursuant to the Mandamus Act, 28
U.S.C. § 1361.
The provision of the Stafford Act central to this case is Section
5148, which provides:
The Federal Government shall not be liable for any
claim based upon the exercise or performance or the
failure to exercise or perform a discretionary
function or duty on the part of a Federal agency or an
employee of the Federal Government in carrying out the
provisions of this chapter.
"This provision precludes judicial review of all disaster relief claims
based upon discretionary actions of federal employees." Graham v. Fed.
Emergency Mgmt. Agency, 149 F.3d 997, 1005 (9th Cir. 1998). The nub of
this motion is whether FEMA's alleged failure to properly construe
California law and thus approve funds for plaintiff was a discretionary
act, immune from judicial review.
No decision has precisely addressed when FEMA's relief-disbursement
decisions under the Public Assistance Project are subject to judicial
review. In Graham, however, the Ninth Circuit addressed FEMA's discretion
under a different portion of the Stafford Act, the Individual and Family
Grant Program. The Individual and Family Grant Program requires a state
to submit a proposed plan to FEMA to obtain funding. Once the plan is
approved, FEMA pays the state 75% of costs incurred by the state in
administering the program. In Graham, the Federated States of
Micronesia, an eligible grantee under the Stafford Act, submitted a
proposal to FEMA for providing relief to its citizens. In part' Micronesia
agreed to provide relief funds to eligible citizens, to provide appeals
to unsuccessful applicants, and to grant meritorious appeals supported by
documentation. FEMA approved the proposal. Subsequently, after FEMA
determined that Micronesia was allegedly approving claims without
requiring proper documentation, FEMA stopped paying its portion of the
claims, including claims that had already been approved by Micronesia.
The court found that FEMA's decision to withdraw funds was not purely
discretionary. First, it noted that construing Section 5148 involved
reconciling the "seemingly contradictory" principles that a party suing
the United States "bears the burden of demonstrating an unequivocal
waiver of immunity" and the "strong presumption that Congress intends
judicial review of administrative action." Id. at 1005. Relying on
Berkovitz v. United States, 486 U.S. 531, 536, 108 S.Ct. 1954, 100
L.Ed.2d 531 (1988), which set forth the standard for determining whether
acts are discretionary under the Federal-Tort-Claims Act, it held that
the discretionary function "exception will not apply when a federal
statute, regulation, or policy specifically prescribes a course of action
for [the agency] to follow." Ibid. (quotation omitted). The court then
examined FEMA's regulations regarding withdrawal of funds under the
Individual and Family Grant Program, which provided that FEMA "may"
withdraw funds if a grantee "has failed to comply with the grant award
conditions." Id. at 1005. It rejected FEMA's argument that the word "may"
gave FEMA unreviewable discretion, because the "Stafford Act's
regulations grant FEMA the discretion to withhold individual and family
grant funds only if the grantee-state has not complied with the award
conditions." Id. at 1006. It noted that FEMA's ...