
USCA1 Opinion

	




                           UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                ____________________          No. 97-1054                            PINE TREE MEDICAL ASSOCIATES,                               Plaintiff - Appellant,                                         v.                   SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.,                               Defendants - Appellees.                                ____________________                    APPEAL FROM THE UNITED STATES DISTRICT COURT                              FOR THE DISTRICT OF MAINE                     [Hon. Morton A. Brody, U.S. District Judge]                                ____________________                                       Before                               Torruella, Chief Judge,                           Campbell, Senior Circuit Judge,                             and Boudin, Circuit Judge.                                _____________________               Michael A. Duddy, with whom Kozak, Gayer, & Brodek, P.A. was          on brief for appellant.               Allison                        C.                           Giles, Attorney, Civil Division, Department of          Justice, with whom Frank                                     W.                                        Hunger, Assistant Attorney General,          Jay P.                    McCloskey, United States Attorney, and       Anthony                                                                           J.          Steinmeyer, Attorney, Civil Division, Department of Justice, were          on brief for appellees.                                ____________________                                 September 16, 1997                                ____________________                    TORRUELLA, Chief                                      Judge.  Pine Tree Medical Associates          ("Pine Tree") brought a suit for injunctive and declaratory relief          against the Secretary of the Department of Health and Human          Services ("the Secretary") and the Director of the Bureau of          Primary Health Care (collectively, "HHS") challenging HHS's denial          of Pine Tree's application requesting that Farmington, Maine be          designated a "medically underserved population" ("MUP") under the          Public Health Service Act ("PHSA"), 42 U.S.C. S 254b                                                               et seq.                                                                      (1997          Supp.). HHS had denied Pine Tree's MUP application after applying          criteria and standards that were issued by HHS in June 1995 ("the          1995 Guidelines"). Pine Tree contends that the standards in          existence at the time that its application was first filed are the          ones that should have been applied, and that Farmington merits MUP          status under those standards. On appeal, Pine Tree repeats two          legal arguments that were rejected, on summary judgment, by the          district court: 1) that the 1995 Guidelines violated the notice and          comment provisions of the Administrative Procedure Act ("APA"), 5          U.S.C. S 553 (1996), and the PHSA, formerly codified at 42 U.S.C.          S 254c(b)(4)(B) (1991) (subsequently repealed); and 2) that the          application of the 1995 Guidelines to Pine Tree's May 18, 1995          application was impermissibly retroactive. We find the first claim          to be moot, and affirm the district court's holding on the          retroactivity claim.                                     BACKGROUND                    The pertinent facts were stipulated below, and are          reviewed in the district court's opinion.    See Pine                                                                   Tree                                                                         Med.                                         -2-          Assocs. v.                     Secretary of Health & Human Servs.                                                     , 944 F. Supp. 38, 40-          41 (D. Maine 1996). A brief overview will serve the purposes of          this appeal. Pine Tree is a nonprofit corporation that provides          primary health care services in Farmington, Maine. It sought MUP          status for the low income population of Farmington in a May 18,          1995 application to HHS. Pursuant to the PHSA, a health care          provider that serves a MUP may qualify for substantial, cost-based          reimbursement under Medicare and Medicaid programs.                    The PHSA directs the Secretary to establish criteria and          standards for determining whether to grant MUP status, and          prescribes,                      inter                            alia, that one such criterion be "the ability of          the residents of an area or population group to pay for health          services."  See 42 U.S.C. S 254b(b)(3)(B) (Supp. 1997) (formerly          codified at 42 U.S.C. S 254c(b)). In 1976, following notice and          comment, regulations were adopted regarding the factors to be taken          into consideration by the Secretary, and these regulations have          been periodically revised by the HHS without opportunity for notice          and comment. In 1994, the HHS issued, without notice and comment,          Summary Procedures for MUP designation. It is not disputed that          Farmington qualified for MUP designation under the 1994 Procedures.                    The 1995 Guidelines, issued on June 12, 1995, again          without notice and comment, revised the 1994 Procedures. At the          time the 1995 Guidelines were issued, HHS had not yet acted on Pine          Tree's May 18, 1995 application. Under the 1995 Guidelines, which          altered the measurement of poverty levels by increasing the size of          the overall population to be considered in the poverty calculus,                                         -3-          Farmington was found not to qualify for MUP designation, and Pine          Tree's application was denied on June 22, 1995.                    On August 4, 1995, Pine Tree filed a request for          reconsideration, which the HHS denied on December 8, 1995. In an          explanatory letter, HHS informed Pine Tree that because the 1995          Guidelines "included a correction of analytic distortion with          regard to how the poverty factor was determined," this revision was          applied immediately to pending requests.    See Stipulated Facts          q 16.                     On January 8, 1996, Pine Tree sued the defendants,          seeking that the 1995 Guidelines be declared invalid for failing to          comply with the notice and comment provisions of the APA and the          PHSA and, in the alternative, seeking a declaration that the 1995          Guidelines were impermissibly applied retroactively to Pine Tree's          application. Pine Tree also sought an order enjoining defendants          from applying the 1995 Guidelines and requiring HHS to designate          Farmington a MUP based on the standards in effect at the time it          filed the application.                    On October 21, 1996, the district court held that under          the notice and comment provision of the PHSA -- which has since          been repealed by Congress                                   -- the 1995 Guidelines were valid despite          a lack of notice and comment, because they did not modify the HHS's          initial 1976 regulation, and because the 1994 Procedures, which the          1995 Guidelines did indeed modify, were not regulations. See                                                                        Pine                                          See infra.                                         -4-          Tree                Med.                     Assocs., 944 F. Supp. at 42. The district court also          held that the 1995 Guidelines fell within the ambit of the APA's          explicit exception to the notice and comment requirement for          interpretive rules. Id. at 43;                                          cf. 5 U.S.C. S 553(b)(3). Finally,          the district court held there were no valid retroactivity issues          raised by the application of the 1995 Guidelines to Pine Tree's          pending application.                                     DISCUSSION                    We review de novo a district court's grant of summary          judgment.  Ionics v.  Elmwood                                         Sensors,                                                  Inc., 110 F.3d 184, 185          (1st Cir. 1997).          I. Mootness of Notice and Comment Claim                    On appeal, Pine Tree does not argue that the 1995          Guidelines are something other than "interpretive rules" under          section 553(b)(3) of the APA, see Brief for Appellant at 9 ("The          interpretive rule exception is not relevant to this case"), but          rather argues that the interpretive rule exception is inapplicable          because, under the APA, an exception to the interpretive rule          exception exists where "notice or hearing is required by statute."          5 U.S.C. S 553(b). Thus, Pine Tree's claim turns on the existence          of any notice and hearing requirement that is applicable to the          1995 Guidelines under the PHSA. Unfortunately for Pine Tree,          Congress deleted the notice and comment provision from the former          PHSA, which was codified at 42 U.S.C. S 254c(b)(4)(B),   when it                                         Section 254c(b)(4)(B) formerly stated:                                         -5-          enacted the Health Centers Consolidation Act, Pub. L. No. 104-299,          effective October 1, 1996.   See 42 U.S.C. S 254c historical and          statutory notes (Supp. 1997). In the wake of this repeal, there is          no language under the PHSA relating to notice and comment for          modifications of the MUP criteria.                    Thus, as a practical matter, even were we to disagree          with the district court today, and conclude that the 1995          Guidelines were invalid for failing to provide for notice and          comment pursuant to the former PHSA, as the law is today HHS can          simply re-issue identical guidelines without notice and comment.          Given the fact that the briefs, arguments of counsel, and the          record in this case reveal a firm belief on the part of HHS that          the 1995 Guidelines corrected a significant error in the previous          1994 Procedures, we do not doubt that, were the 1995 Guidelines          struck down, Pine Tree would find itself no closer to its desired          end, namely the application of the 1994 Procedures to its MUP          application. This practical matter becomes crystal clear in light          of our discussion,                             infra, of Pine Tree's retroactivity claim, where                                                  The Secretary may modify the criteria                    established in regulations issued under this                    paragraph only after affording public notice                    and an opportunity for comment on any such                    proposed modifications.           Although the Health Centers Consolidation Act initially stated          that it would be effective October 1, 1997, see Pub. L. No. 104-          299, S 5, 1996 U.S.C.C.A.N. 3645, that effective date was later          changed by the Omnibus Consolidated Appropriations Act of 1997,          Pub. L. No. 104-208, S 521, 1996 U.S.C.C.A.N. 187, to October 1,          1996.  Cf. 42 U.S.C. S 233 historical and statutory notes (Supp.          1997).                                         -6-          we hold that Pine Tree was not entitled to have the 1994 Procedures          apply to their application by virtue of their filing date.                    An issue becomes moot if intervening events leave the          parties without a "legally cognizable interest" in our resolution          of the issue, Powell v. McCormack, 395 U.S. 486, 496 (1969), as          when "intervening events make it impossible to grant the prevailing          party effective relief,"                                   Burlington N. R.R. Co.                                                         v.                                                             Surface Transp.          Bd., 75 F.3d 685, 688 (D.C. Cir. 1996). The issue of whether the          HHS's 1995 Guidelines violated the then applicable notice and          comment provision of the PHSA is mooted by Congress's repeal of          that provision. A finding in favor of Pine Tree would bring it no          closer to its desired end, and thus, with regard to this claim, we          do not find before us a true case or controversy within our          jurisdiction.  See U.S. Const. art. III, S 2, cl. 1.          II. The Retroactivity Claim                    Pine Tree argues that Congress has not granted the          Secretary the power to issue retroactive rules. Certainly, in the          absence of an express statutory grant of authority to promulgate          retroactive regulations, the retroactive application of an agency          rule is disfavored. Bowen v.                                       Georgetown Univ. Hosp.                                                            , 488 U.S. 204,          208 (1988). However, in this case Pine Tree places undue          significance on the act of filing an application with an          administrative agency. It argues that by applying criteria that          were issued after it had filed a MUP application, the HHS has          created a retroactivity problem of the kind discussed in Landgraf          v.             USI Film Prods.                           , 511 U.S. 244 (1994).                                                   See                                                       Landgraf, 511 U.S. at                                         -7-          280 (stating that a statute wields retroactive effect where it          would "impose new duties with respect to transactions already          completed"). We agree with the district court that the mere filing          of an application is not the kind of completed transaction in which          a party could fairly expect stability of the relevant laws as of          the transaction date. The concern that retroactive laws threaten          stability and impair the ability of entities to coordinate their          actions with respect to the law surely is not implicated where what          is at issue is the analysis of certain poverty levels in a          geographic location. Pine Tree obviously could not have adjusted          poverty levels in Farmington in due regard to the change in MUP          guidelines. We therefore affirm the district court's finding that          Pine Tree had no right to have the guidelines that existed at the          time they submitted a MUP application applied to their application          rather than new guidelines adopted prior to the review of their          application.                     Only one case has been called to our attention that          suggests that the act of filing an application with an agency can          trigger retroactivity concerns.  See Boston Edison Co. v. Federal          Power Comm'n                     , 557 F.2d 845 (D.C. Cir. 1977). In that case, it was          held that an agency could not apply new requirements for          application filing to applications filed before those requirements          were issued. See id. at 849 (Federal Power Commission could not          apply new rule barring data over four months old in rate          application to application filed before new rule was issued).          Boston                  Edison is readily distinguishable from the instant case.                                         -8-          There is an obvious difference between rejecting an application          because it fails to meet a new regulation governing the proper          format or preparation of applications that was promulgated after          that application was filed, and rejecting an application because          the substantive standards for granting the application on the          merits have changed in the period between filing and review.          Whereas in the former case, parties have been deprived of fair          notice as to the application method, and indeed have taken an          action -- the filing of a certain kind of application -- to which          the regulation retroactively applies, in the latter, as discussed          above, fair notice and retroactivity concerns are not raised. Pine          Tree thus has mustered no support, nor can we find any support, for          the proposition that filing an application with an agency          essentially fixes an entitlement to the application of those          substantive regulations in force on the filing date.                     It is worth noting that this is not a case in which new          MUP criteria have been applied so as to retroactively overturn a          prior grant of MUP status for a period in the past.           Cf.          Association of Accredited Cosmetology Schs.                                                     v.                                                         Alexander, 979 F.2d          859, 865 (D.C. Cir. 1992) (holding that schools' expectation for          future eligibility for a program is not a vested right triggering          retroactivity concerns but noting that there may be retroactivity          problems were new rules applied to undo    past determination of          eligibility). Rather, HHS applied the 1995 Guidelines          prospectively, to applications for future MUP designations.                                     CONCLUSION                                         -9-                    For the reasons stated in this opinion, the district          court's grant of summary judgment is affirmed.                                        -10-
