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CALIFORNIA-NEVADA METH. HOMES v. FED. EMERG. MAN.

July 10, 2001

CALIFORNIA-NEVADA METHODIST HOMES, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
FEDERAL EMERGENCY MANAGEMENT AGENCY, AN AGENCY OF THE UNITED STATES OF AMERICA; JOE M. ALLBAUGH, EXECUTIVE DIRECTOR OF THE UNITED STATES FEDERAL EMERGENCY MANAGEMENT AGENCY, DEFENDANTS.



The opinion of the court was delivered by: Alsup, District Judge.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS; VACATING HEARING

INTRODUCTION

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.

STATEMENT

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.

ANALYSIS

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 ...


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