FL Agency for Workforce Innovation v. U.S. DOL, (11th Cir. 2006)
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IN THE UNITED STATES COURT OF APPEALS
F O R THE ELEVENTH CIRCUIT FILEDU.S. COURT OF APPEALS
ELEVENTH CIRCUIT
APRIL 24, 2006
N o . 05-11664
THOMAS K. KAHN
CLERK
D O L Nos. ARB 04-168 & ALJ 99-JTP-16
F L O R ID A AGENCY FOR WORKFORCE INNOVATION,
Petitioner,
versus
UNITED STATES DEPARTMENT OF LABOR,
Respondent.
P etitio n for Review of a Decision of the
D ep artm en t of Labor
(April 24, 2006)
B efo re CARNES, WILSON and PRYOR, Circuit Judges.
P E R CURIAM:
A p p ellan t Florida Agency for Workforce Innovation ("Florida")1 petitions fo r review of the United States Department of Labor ("DOL") Administrative R ev iew Board's ("ARB") decision disallowing $11,419,499 in federal funds g ran ted to Florida under the Job Training Partnership Act ("JTPA"), Pub. L. No.
9 7 - 3 0 0 , 96 Stat. 1322 (codified as amended at 29U.S.C. § 1501 et seq.) (repealed 2 0 0 0 ) . Pursuant to an audit conducted by the DOL's Office of Inspector General ("O IG "), a DOL Grant Officer ("GO") determined that Florida's expenditure of the f ed e r al monies did not comport with JTPA requirements, and therefore disallowed th e entire $11.4 million. Florida then sought a hearing before a DOL ad m in istrativ e law judge ("ALJ"), who ultimately reversed the GO's decision and f o u n d that Florida had expended the JTPA funds lawfully. The ARB, however, accep ted DOL's petition for further review and reversed the ALJ, affirming the G O 's decision to disallow and recover the $11.4 million. Florida now petitions th is Court to reverse the ARB's decision, arguing that the decision misconstrued s ta tu to r y language, was not supported by substantial evidence, and deprived F lo rid a of due process. We deny the petition and affirm the ARB.
I. BACKGROUND In the mid-1990s, DOL's Employment and Training Administration ("E T A ") granted the State of Florida millions of dollars in JTPA federal funds to assist disadvantaged youths (Title II) and retrain dislocated workers (Title III).
Forty percent of these monies were held in a discretionary "Governor's Reserve" fu n d administered at the state level.2 Florida then used a portion of these reserve fu n d s, in combination with lottery funds and general revenues, to support its P erfo rm an ce Based Incentive Fund ("PBIF"). PBIF, a state program developed in 1 9 9 4 , was designed to reward community colleges and school district programs for r etr ain in g certain qualified students, including JTPA Title III eligible "dislocated w o r k e r s." See, e.g., Fla. Stat. Ann. § 239.249(3) (1995) (repealed 2000).
Participating colleges and school districts received various "incentive" payments as th eir eligible students met certain performance benchmarks (e.g., enrolling, co m p letin g certain courses and finding placement in higher-paying jobs). See id.
These payments increased for each successive level of performance reached, and w e re higher for an eligible JTPA dislocated worker or other qualified student, as o p p o sed to a general student.3 2 Florida allocated the other 60% of the funds among several local service delivery areas known as Regional Workforce Development Boards ("RWDBs") or Private Industry Councils ("PICs"), which used the funds to recruit dislocated workers to enroll in community college and school district retraining programs, and to pay their annual tuition. The GO did not challenge Florida's expenditure of these JTPA Title III funds.
3 In 1994, Florida asked ETA to review the draft PBIF legislation. DOL Assistant Secretary Doug Ross responded with a letter cautioning that "the procurement of any services W h en PBIF was initiated, Florida law capped the amount of a student's an n u al tuition at 10% or 25% of the prior year's cost of completion, depending u p o n the program involved. See Fla. Stat. Ann. § 239.117(4)(a), (5)(a) (1994).
F lo rid a would then attempt, on an annual basis, to calculate the amount of funds n ecessary to cover the projected remainder of students' instructional costs, though th e state legislature had the final say on actual appropriations. Sometimes this c alc u la tio n used the previous year's number of full time equivalent ("FTE") s tu d e n ts and was based on the average instructional cost per FTE student. If an en tity's portion of appropriated funds proved insufficient to cover the remaining c o s ts incurred during a given year, the entity would not be appropriated additional fu n d s to cover the excess costs.4 Although PBIF payments were not factored into th e annual appropriations, an entity could not receive PBIF payments until (1) it h a d exhausted its state appropriated funds, and (2) its level of performance (en ro llm en ts, course completions, and placements) in serving qualified students m atch ed the level of performance from the base year (i.e., the year before PBIF's im p le m e n ta tio n ) .5 Even though PBIF payments for targeted groups (such as e lig ib le dislocated workers) were higher than for other groups, the payments were d esig n ed never to exceed the actual costs of instruction.
In 1996, ETA received complaints that Florida was not spending JTPA fu n d s lawfully§ 1 4 1 (b ), because schools "received incentive payments for serving JTPA p articip an ts, yet did not provide them with instruction or assistance distinguishable fro m that available to the general student population"; (2) costs were not "n ecessary and reasonable for proper and efficient administration of the program," as required by JTPA § 164(a)(2)(A), because the State was already obliged to co v er the non-tuition costs of JTPA eligible students; and (3) funds were used to im p ro v e programs available to all students who met enrollment requirements, but 5 In addition, PBIF participants were required to put a portion of their annual appropriations "at risk" by placing that portion in the PBIF fund and then "earning" it back before receiving any additional PBIF monies.
J T P A § 164(a)(2)(C) requires that costs "not be a general expense required to carry o u t the overall responsibilities of State . . . governments . . . ." In response, Florida asserted that the auditors were operating under two m is c o n c e p tio n s : F irst of all, PBIF was never intended to fund special services for any su b -s et of its clientele . . . . Great pains are taken within Florida's ed u catio n al programs to treat students equally and equitably and not to label and stigmatize students with an association to this program or th at program. Who pays for the tuition, the transportation to get the stu d en t to class, or the day-care for the student's child is transparent to th e instructor. . . . The second misperception that the auditors held is th at the state vocational education system has boundless capacity and th a t if the student has money for tuition from JTPA or whatever so u rce, it is the obligation of the state to serve that student. Equal and e q u ita b le access to programs is an obligation of the state. Unlimited access is not. Vocational education in Florida is not an entitlement p ro g ram .
T h e real benefits obtained by JTPA funds, Florida argued, are realized "not in track in g the individual dollars of any one source of revenue, but rather [in] e x a m in in g the overall funding of Florida's vocational education program and that o f PBIF." PBIF "expanded service capacity and program production of Florida's h ig h skills/high wage programs," particularly "for JTPA Title III and other d isad v an tag ed students." PBIF payments were neither unnecessary nor u n reaso n ab le, because they were constructed never to exceed the actual cost of serv ice and were made only for successful performance by students. Finally, F lo rid a argued, auditors should consider the following: (1) PBIF took advantage of eco n o m ies of scale, because the fixed costs of various programs were already co v ered by general revenue funding, and those programs could therefore be ex p an d ed at a lower variable cost rate; (2) PBIF payments were delayed during its first year in effect, so educational institutions had to cover costs with "loans" from b u d g et areas "where payments could be deferred as capital outlay," which is why P B I F funds were later used to purchase equipment and meet other deferred general co sts; and (3) PBIF encouraged educational entities to initiate or expand high sk ill/h ig h wage programs by offering them up to $25,000 (in general revenue or lo tte ry funding) if they were able to secure a private sector match by an employer w h o hired students from that high skill/high wage program.
O IG was not persuaded. Under Florida's own description of PBIF, the audit rep o rt replied, JTPA funds were not used specifically to assist eligible members of th e requisite target groups. Given that JTPA-eligible students were "transparent," th e y were "entitled to have a share of their educational costs borne by the State, as o c c u r r ed for others in the general student population." OIG also questioned F lo rid a's suggestion that, but for PBIF, schools would not have been able to serve JT P A eligible students or obligated to refocus on high wage/high skill programs.6 U ltim ately, the audit report recommended that ETA recover $11,419,499 in "m issp en t" JTPA funds.
B a se d on the audit report, the GO issued an Initial Determination ("ID") ten tativ ely disallowing the $11.4 million. The ID stated in relevant part: T h e grantee's response to the draft audit report did not provide in fo rm atio n to refute the auditors' position that the uses to which the P B I F program put JTPA funds were unallowable.
....
T h e documentation provided is not sufficient to allow the costs. The a u d it has stated that the incentive payments were used to subsidized [ sic ] Florida's state and local adult educational costs. JTPA funds are to be used in addition to what is already available, not to carry-out [ sic ] the overall responsibilities of the State.
I n response to the ID, Florida stressed that PBIF payments were structured so that th e payments never exceeded actual costs, even for JTPA eligible participants.
Florida also noted that "many of the schools detailed in writing things that were d o n e to attract Title III eligible students." The GO's Final Determination ("FD") n ev er th eles s reaffirmed the $11.4 million disallowance, responding to Florida's co sts argument as follows: "Aggregate cost figures are inadequate as a basis for d eterm in in g whether any of the questioned costs can be allowed. To document the allo w ab ility of these costs, the State must provide documentation of actual costs in cu rred and paid for with the JPTA Title III funds." (emphasis omitted). With resp ect to activities done to attract Title III students, the FD stated: indicates the numbers declined." T h e documents that were provided suggest that some of these funds w ere spent on recruiters, brochures and fliers, as well as on the costs o f creating or expanding curricula for high skill/high wage o c c u p a tio n al skills training. A portion of these costs may very well be a llo cab le to the Title III JTPA program. Before any costs can be d e t e r m in e d to be allowable, the State must provide actual d o c u m e n tatio n of the costs incurred as well as the basis for allocating a portion of those costs to JTPA Title III.
( em p h a sis omitted).
S h o r tly after the FD issued, Florida sought a hearing on the disallowance b efo re the ALJ. See 20 C.F.R. §§ 627.800(a), 627.801. DOL moved for a su m m ary decision, making arguments similar to those raised by the OIG and GO.
After conducting a hearing the ALJ denied the motion, stating that "both the su p p ly side and the demand side must be evaluated in assessing, under Section 1 4 1 (b ), the `availability' of an activity to the JTPA participant." Whether Florida's train in g courses were "available" to JTPA eligible persons in the absence of PBIF, th e ALJ found, was a fact-dependent issue not amenable to summary decision. He th en proceeded to conduct a three-day hearing, receiving into evidence numerous ex h ib its and the testimony of six witnesses. In July of 2004, the ALJ issued a len g th y decision reversing the GO's FD and allowing the $11.4 million in costs.
At its heart, the ALJ stated, DOL's case rested upon an interpretation of JTPA §§ 1 4 1 (b ) and 164 that rendered PBIF's expenditure of JTPA funds inherently u n law fu l. The ALJ considered this interpretation too narrow in light of the p ertin en t regulatory framework, which sought not merely to avoid duplicate or o v erlap p in g payments, but also to "ensure that the best mix of programs and funds is available to the JTPA participant." 59 Fed. Reg. 45,760, 45,767 (Sept. 2, 1994).
While "essentially the same educational services were `available' to dislocated w o rk ers before the State legislature adopted the PBIF program," the ALJ a ck n o w le d g e d , and the State did provide funds to cover non-tuition costs, before th e creation of PBIF the State apparently lacked the focus on the particular target p o p u latio n Congress singled out for special attention in the JTPA.
T h u s, the level of "availability" as measured by the participation of d islo cated workers in the pre-PBIF State system, including funding ab o v e tuitions, was not meaningful for the class of outsourced and d is lo c ated workers Congress intended to benefit. Witnesses in this p r o ceed in g cited studies indicating that dislocated workers simply w ere not being re-trained and re-employed in significant numbers.
T h e PBIF program, to a large extent, changed that. Considered in co n tex t, the "activity" in addition to those that were otherwise "av ailab le" in the area within the meaning of Sections 141(b) and 164 w a s the PBIF program itself.
U n d er this interpretation, and considering the safeguards employed by Florida, the A L J concluded, Florida's PBIF expenditures did not violate §§ 141 or 164 of J T P A . Notably, the ALJ commented that "[d]ocumentation of individual costs as th ey related to individual levels of student achievement in moving through the p ro cess of re-training and finding a job or dropping out was not a focus of this p r o c e e d in g ." D O L appealed the ALJ's decision to the ARB, which was authorized to re n d er a final agency decision in the matter.7 The ARB reversed the ALJ's d ecisio n , characterizing the overall issue as whether the evidence is adequate to establish that the JTPA Title III f u n d s that Florida's PBIF disbursed provided services to Title III elig ib le students "in addition" to those services already provided to g e n e r a l students in accordance with JTPA Section 141(b) or were s p e n t lawfully for the costs of instruction of Title III students that w ere `necessary and reasonable' because they were not costs that state ap p ro p riated funds already covered in accordance with JTPA Section 1 6 4 ( a )( 2 ) (A ) .
R ev iew in g the ALJ's decision de novo, the ARB concluded that Florida misspent JT P A Title III funds because "Florida's records are inadequate to show that JTPA T itle III funds were spent lawfully pursuant to Sections 141(b) and 164(a)(2)(A)," an d "Florida has not adduced convincing evidence to the contrary." Nor did F lo rid a meet the burden of showing that the disallowed costs were otherwise e x p e n d e d for lawful JTPA purposes through other means, because "the record d e m o n s tr ate s that the JTPA Title III funds which Florida's PBIF disbursed were sp en t to fund costs or a `general expense' that was the responsibility of the State a n d not for any specific JTPA purpose in violation of JTPA Section 164(a)(2)(C) . . . ."8 The ARB therefore ordered Florida to repay DOL the $11.4 million pursuant to 29U.S.C. § 1574. Florida now petitions this Court to reverse the decision of the ARB.
II. STANDARD OF REVIEW The JTPA permits a party aggrieved by a final order of the Secretary "with re sp ec t to a corrective action or sanction imposed under section 1574 of [title 29]" to "obtain review of such final order in the United States Court of Appeals having ju risd ictio n over the applicant or recipient of funds." 29U.S.C. § 1578(a)(1) (1 9 9 9 ).9 We have jurisdiction "to make and enter a decree affirming, modifying, o r setting aside the order of the Secretary in whole or in part." Id. at § 1578(b).
The scope of our review, however, is limited. See State of La., Dep't of Labor v. U .S . Dep't of Labor, 108 F.3d 614, 617 (5th Cir. 1997). Section 1578(a)(3) p ro v id es that "[n]o objection to the order of the Secretary shall be considered by th e court unless the objection shall have been specifically and timely urged before th e Secretary. Review shall be limited to questions of law and the Secretary's fin d in g s of fact shall be conclusive if supported by substantial evidence." 29 U .S .C . § 1578(a)(3).
III. DISCUSSION F lo r id a seeks reversal on three principal grounds: (1) the ARB misconstrued J T P A § 141(b); (2) the ARB's decision is not supported by substantial evidence; a n d (3) the ARB improperly based its ruling on a theory of liability different than th at advanced by DOL at the administrative hearing before the ALJ. We address th ese arguments in turn.
S ectio n 141(b) A. W h ere, as here, we review an agency interpretation of a statute that it is resp o n sib le for administering,10 we apply the two-step test set forth in Chevron U .S .A ., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S. Ct. 2778, 2 7 8 1 -8 2 , 81 L. Ed. 2d 694 (1984). See Sierra Club v. Johnson, 436 F.3d 1269, 1 2 7 4 (11th Cir. 2006). If Congress has directly spoken to the precise question at is su e and its intent is clear from the statutory language, we must give effect to that u n am b ig u o u sly expressed intent. See id. However, if the statute is ambiguous or s ile n t with respect to the specific issue, we simply decide whether the agency based its interpretation on a permissible construction of the statute. See id. "We need not co n clu d e that the agency construction was the only one it permissibly could have ad o p ted or even that we would have interpreted the statute the same way that the a g e n c y did." Id. (internal quotes omitted).
JTPA § 141(b) states: ( b ) No duplication of services F u n d s provided under this chapter shall only be used for activities w h ich are in addition to those which would otherwise be available in th e area in the absence of such funds.
2 9U.S.C. § 1551(b) (1999). Florida challenges the ARB's determination that § 141(b) required Florida to show that PBIF "provided services to Title III eligible 10 The JTPA empowers the Secretary of Labor to "prescribe such rules and regulations . .
. as the Secretary deems necessary," and authorizes administrative adjudication by DOL. See 29U.S.C. §§ 1576, 1579 (1999). s tu d e n ts `in addition' to those services already provided to general students . . . ." According to Florida, the ARB's reading "changes the meaning of the statute from o n e which prohibits funding for activities currently available to JTPA participants fro m other funding sources, to a [sic] one which forbids any payments to JTPA p articip an ts for activities which, though never available to them, were previously av ailab le to general students." Florida's argument, DOL counters, rests on the f als e premise that JTPA eligible students were somehow excluded from the general s tu d e n t population prior to the creation of PBIF. In DOL's view, § 141(b) prohibits the use of JTPA funds for services that would have been available to a JT P A eligible student in the absence of JTPA funds. JTPA eligible students, DOL co n ten d s, were covered by state appropriated funds like any other general students, w ith access to the same services. Given that Florida nevertheless paid out JTPA fu n d s (through PBIF) based on the enrollment and performance of Title III eligible s tu d e n ts , DOL reasons, the ARB properly questioned whether those funds were u sed to provide a service to those students beyond what was already "available" to th em by virtue of state appropriated funds.
T h is understanding of "availability," Florida responds, is too narrow.
Florida points to the ALJ's determination that "the level of `availability' as m easu red by the participation of dislocated workers in the pre-PBIF State system, in c lu d in g funding above tuitions, was not meaningful for the class of outsourced an d dislocated workers Congress intended to benefit." A proper construction of "av ailab ility," the ALJ argued, must include not merely the theoretical "supply sid e" availability of a given activity, but also "demand side" factors such as the lik elih o o d that dislocated workers would pursue the activity in the absence of P B I F . He found that [ i]n this instance, the dislocated worker population which traditionally w as not served by the existing State funded adult education programs re c e iv ed a considerable boost by the PBIF program. Considering the term "availability" as used in Section 141(b) of the Act, it would be d if fic u lt to avoid concluding in a broader more meaningful sense that th e PBIF program as a whole was an activity "in addition to" those w h ich had had little success in serving the target population.
F lo rid a also notes that the ALJ relied on pertinent regulatory materials in co n stru in g § 141(b). See, e.g., 20 C.F.R. § 627.220(a) (stating that certain state a n d sub-state entities "shall establish coordination procedures and contractual safeg u ard s to ensure that JTPA funds are used in addition to funds otherwise av ailab le in the area and are coordinated with these funding sources"); 59 Fed.
R eg . 45,760, 45,767 (Sept. 2, 1994) ("The purpose of coordination requirements is to preclude duplicate or overlapping payments among Federal, State, and local p ro g ram s to participants and training institutions and to ensure that the best mix of p r o g r am s and funds is available to the JTPA participant.").
T h e ARB, however, rejected the ALJ's interpretation, emphasizing that "the P B IF program . . . was not the same as a JTPA program." PBIF, the ARB noted, "c o m m in g le d a variety of funds, only a portion of which included JTPA Title III f u n d s , and disbursed `incentive' payments to serve a variety of disadvantaged stu d en ts, only a portion of whom were JTPA Title III dislocated workers." The d isb u rsem en t of incentive payments from commingled funds to serve a variety of d isad v an tag ed students, the ARB stated, "does not establish how the purpose of JT P A Section 141(b) Title III, to provide additional retraining services to d is lo c a te d workers, was served." In other words, the ARB read § 141(b) more n arro w ly than the ALJ, as requiring that JTPA Title III funds be used specifically to provide services to Title III dislocated workers that would not otherwise be av ailab le to those workers as a result of other funding.
F lo rid a asserts that the language of § 141(b) unambiguously favors its p o sitio n . We disagree, for § 141(b) is susceptible to several plausible co n stru ctio n s, depending upon how broadly or narrowly one interprets the terms "activ ities," "in addition to," and "would otherwise be available," none of which is d efin ed by the JTPA. See PDK Labs. v. U.S. D.E.A., 362 F.3d 786, 796 (D.C. Cir. 2 0 0 4 ) ("That a statute is susceptible of one construction does not render its m ean in g plain if it is also susceptible of another, plausible construction . . . .").
Given this ambiguity, we must defer to the ARB's interpretation if it is based on a p erm issib le construction of the statute. See Sierra Club, 436 F.3d at 1264. The A R B 's interpretation meets this standard, for it does not exceed the bounds of the statu to ry language, does not conflict with pertinent regulations, and accords with o th er funding restrictions set forth in the statute. As noted above, 20 C.F.R. § 627.220, which references § 141(b), requires the establishment of coordination p ro ced u res and contractual safeguards "to ensure that JTPA funds are used in a d d itio n to funds otherwise available in the area and are coordinated with these fu n d in g sources." 20 C.F.R. § 627.220(a) (emphasis added). Although the ALJ em p h asized that this requirement was intended not merely to preclude "duplicate o r overlapping payments," but also to ensure the "best mix of programs and f u n d s ," that "best mix" is meant for "the JTPA participant." 59 Fed. Reg. at 45,767 ( em p h a sis added). The ALJ, however, found that PBIF satisfied § 141(b) even th o u g h the beneficiaries of PBIF funds were not necessarily JTPA participants.
The ARB's interpretation avoids this inconsistency. Likewise, the ARB's in te rp r e ta tio n of § 141(b) complements JTPA §§ 107(b) and 141(h), both of which p ro h ib it the use of JTPA funds "to duplicate facilities or services available in the area . . . from Federal, State, or local sources, unless it is demonstrated that the J T P A - fu n d e d alternative services or facilities would be more effective or more lik ely to achieve performance goals . . . ." 20 C.F.R. § 627.420(a)(5) ; see 29 U .S .C . §§ 1517(b), 1551(h) (1999).11 11 For example, under the ARB's interpretation § 141(b) prohibits a state from using JTPA funds to pay, on behalf of a JTPA Title III eligible dislocated worker, the costs of a retraining class at a state university when those costs are already covered by state appropriated F lo rid a insists that the ARB's reading of § 141(b) is unreasonable, because it ig n o r e s the "truism" that "[s]ervices cannot be deemed available to those who lack m e an in g f u l access to them." As the ARB found, however, "[t]he [Regional W o rk fo rce Development Boards] used . . . JTPA Title III funds to recruit d islo cated workers to enroll in community colleges and school district programs fo r retraining and to pay for their annual tuition costs." DOL did not challenge th e s e expenditures. Thus, Florida's claim that dislocated workers lacked "m ean in g fu l access" to retraining services in the absence of PBIF assistance is u n p ersu asiv e. Accordingly, we defer to the interpretation of the ARB.
S u b s ta n tia l Evidence B.
Florida contends the ARB's decision that Florida misspent JTPA funds in v io latio n of §§ 141(b) and 164(a)(2)(A) is not supported by substantial evidence.
"`Substantial evidence' is defined as `such relevant evidence as a reasonable mind m ig h t accept as adequate to support a conclusion.'" State of La., 108 F.3d at 617 (q u o tin g Consol. Edison Co. v. N.L.R.B., 305 U.S. 197, 229, 59 S. Ct. 206, 217, 83 L . Ed. 126 (1938)); see Am. Tower LP v. City of Huntsville, 295 F.3d 1203, 1207 ( 1 1 th Cir. 2002) (explaining that traditional "substantial evidence" standard "r eq u ir es more than a mere scintilla but less than a preponderance"). "[T]he mere fact that a different conclusion might be drawn from the evidence does not n e c es sa rily preclude a determination that an administrative decision was supported b y substantial evidence." State of La., 108 F.3d at 617. However, "when the B o ard does not accept the findings of an ALJ, the evidence and findings of the B o a r d must be examined more critically than if the two had been in agreement." NLRB. v. Ridgeway Trucking Co., 622 F.2d 1222, 1224 (5th Cir. 1980) (per c u r i a m ) .1 2 A s noted above, the GO has a burden of production to offer prima facie ev id en ce sufficient for a reasonable person to conclude that Florida spent JTPA fu n d s unlawfully. See 20 C.F.R. § 627.802(e); Tex. Dep't of Commerce, 137 F.3d at 332. The record, Florida argues, does not support such a conclusion, and in any ev en t it presented evidence sufficient to defeat any prima facie showing. We d isag ree. JTPA § 165(a)(1) requires grant recipients to keep records sufficient "to p erm it the tracing of funds to a level of expenditure adequate to insure that the fu n d s have not been spent unlawfully." 29U.S.C. § 1575(a)(1) (1999). Thus, the G O could make a prima facie case by establishing the inadequacy of Florida's reco rd s. See Tex Dep't of Commerce, 137 F.3d at 332; State of La., 108 F.3d at 12 In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), we adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981.
6 1 7 - 1 8 . Here, the ID and FD consistently stated that Florida had not provided d o cu m en tatio n sufficient to show that JTPA funds were spent in accord with § 141(b); that is, that JTPA funds were used specifically to cover costs incurred by T itle III eligible students for services not already available to those students by v irtu e of other funds. The ARB identified substantial evidence to support this c o n c lu s io n , including: (1) Florida's admission in response to the audit that "PBIF w as never intended to fund special services for any sub-set of its clientele"; (2) testim o n y from PBIF director Steve Campora that PBIF was not designed to d o c u m e n t any additional services provided to Title III dislocated workers and that h e did not know whether additional services provided to Title III participants were e v e r "quantified"; (3) testimony from PBIF administrator Lenny Larson that F lo rid a simply did not try to distinguish between Title III eligible persons and o th er participants in providing services, or to quantify services provided to the T itle III participants; (4) testimony from Robert O'Leary, who helped design PBIF, th a t higher payments were made for providing a service to a Title III dislocated w o rk er than for providing the same service to a general student; and (5) testimony fro m Linda Hartnig, who helped implement PBIF, that there was no documentation th a t additional services were provided to Title III participants. As the ARB further reco g n ized , the GO's determination that Florida's records were inadequate to show c o m p lia n c e with JTPA § 164(a)(2)(A) was based on similar reasoning: if there was "n o apparent distinction" between Title III eligible students and general students w ith respect to services, and those services were already covered by state ap p ro p riated funds, then the "costs" to which JTPA funds were applied were not "n ecessary and reasonable" under § 164(a)(2)(A). See 29U.S.C. § 1574(a)(2)(A) (1999).
In response, Florida challenges the predicate that state appropriated funds co v ered all relevant costs. Even if Title III eligible students received the same "serv ices" as general students, Florida contends, "the actual costs of instruction th a t tuition did not cover exceeded the state's annual appropriation[,] because more JT P A Title III eligible students were served due to the PBIF program during the th r e e years at issue than were served prior to the initiation of PBIF." To that e x te n t, Florida argues, Title III students did receive a service "in addition to" what w o u ld have otherwise been available, and the costs covered by JTPA funds were "n ecessary and reasonable." DOL concedes that, "[t]o the extent . . . community co lleg es and vocational education schools incurred additional non-tuition costs for o v er-cap students, Florida might be able to claim a proportional share of those co sts attributable to JTPA-eligible students." However, DOL argues, Florida p r o d u c e d insufficient documentation of these costs. Indeed, the ARB found that F lo r id a 's evidence was "not sufficient or adequate to establish how much Title III s tu d e n t enrollment increased during the three year period," and did not show that "a n y increased costs of instruction, over and above the amount of the state's annual a p p r o p r ia tio n , were specifically caused by an increase in the number of Title III stu d en ts served because of the PBIF program." Florida disagrees, arguing the r ec o r d shows that, during the years covered by the audit: (1) enrollments increased b y several thousand, nearly doubling, with placements and completions increasing a s well; (2) 3,000 additional economically disadvantaged students were served e ac h year, due to PBIF; (3) by DOL's own count, there were over 13,000 new JT P A enrollees, who cost (theoretically) $38 million per year based on FTE costs; an d (4) PBIF certified courses increased from 179 at 39 institutions to 238 at 47 in s titu tio n s . However, the ARB cited record evidence indicating that there was an u n reso lv ed conflict between Florida's enrollment figures and OIG's enrollment fig u res, which showed that Title III enrollments actually decreased between the first and second years of PBIF.13 Although Florida submitted a table indicating the d eg ree to which non-tuition costs of instruction attributable to "Group 3" students e x c ee d e d the FTE cap on state appropriated funds, Linda Hartnig testified that "G ro u p 3" was not limited to Title III eligible students, but rather included all adult v o catio n al students. Hartnig conceded that she could not specifically attribute the u n fu n d ed FTEs to Title III students. Robert O'Leary testified that he "anticipated" 13 Notably, the ALJ's opinion indicates that Florida, unlike DOL, "counted multiple performances by students such as dual enrollments or placements." an d "expected" that Title III students would incur additional costs, but could not p o in t to any documentation showing that such costs were actually incurred.
Similarly, Lenny Larson could not "quantify" any additional costs incurred to recru it Title III students.
A n y lack of documentation is irrelevant, Florida argues, because the fo llo w in g safeguards incorporated into PBIF rendered it "incapable" of violating JT P A requirements: (1) state appropriations were not reduced because of JTPA fu n d in g ; (2) PBIF payments were designed never to exceed actual costs of in s tr u c tio n ; (3) PBIF prohibited payment until a school exceeded pre-PBIF p erfo rm an ce; (4) PBIF prohibited payment until a school exhausted its annual state ap p ro p riatio n ; and (5) JTPA payments were authorized only to reimburse for JTPA c er tif ie d programs and on behalf of JTPA qualified students.14 The ARB, however, c ite d record evidence that schools "purchased equipment and services that they c o u ld n 't directly relate to JTPA with the proceeds from PBIF[,] which was su b stan tially funded by JTPA . . . ." Lenny Larson testified that the PBIF incentive p aym en ts essentially "reversed" costs for services already rendered, and could be u s e d in "whatever fashion" a school desired, so long as the expenditures were for a w o rk fo rce program. Similarly, Steve Campora testified that schools could use P B IF money anywhere in post-secondary vocational education.15 As the ARB in d ic ate d , such expenditures appear contrary to JTPA § 164(a)(2)(C), which p ro h ib its the use of JTPA funds to cover "a general expense required to carry out th e overall responsibilities of State . . . governments, except as specifically p r o v id e d by this chapter." 29U.S.C. § 1574(a)(2)(C) (1999).
F o r the reasons stated, the ARB's determination§ 1 5 7 5 (a)(1 ) (1999). "Unless the burden of producing the required documentation is p la ce d on recipients, federal grantees would be free to spend funds in whatever w a y they wished and obtain virtual immunity from wrongdoing by failing to keep r eq u ir ed records." Montgomery County v. Dep't of Labor, 757 F.2d 1510, 1513 ( 4 th Cir. 1985).
S h iftin g Theories C.
F lo rid a also contends that the ARB decided this case on a theory different th an that presented by DOL at the administrative hearing before the ALJ, and th erefo re deprived Florida of due process. "We review constitutional challenges to ag en cy orders de novo." See Ala. Power Co. v. FCC, 311 F.3d 1357, 1367 (11th C ir . 2002).
"T h e fundamental fairness inherent in administrative due process cannot p e r m it [an administrative official] to plead a certain charge, insist at hearing that o n ly that charge is being litigated, and then raise a related, but more onerous c h a rg e only after the hearing record is closed." NLRB v. Homemaker Shops, Inc., 7 2
In response, DOL points out that the ID and FD warned from the beginning th a t Florida had not presented sufficient documentation to establish compliance w ith JTPA §§ 141 and 164. This does not matter, Florida argues, because like the C o m p lain t Counsel in Bendix, DOL counsel limited DOL to a different theory of d isallo w an ce at the administrative hearing. See Bendix, 450 F.2d at 541.
Specifically, Florida points to several exchanges between DOL counsel and the A L J that occurred during DOL counsel's opening statement. Counsel asserted that F lo rid a had obligated itself under Fla. Stat. § 239.117 to calculate and provide for n o n - tu itio n educational costs incurred by all students. Thus, counsel argued, "there w as no justification for using governor's reserve JTPA funds for payments to F lo rid a schools where they were pegged to costs that the state had already co m m itted itself by law to bear." Shortly thereafter the ALJ asked whether, if c o u n s el's statutory interpretation was incorrect and the costs were not covered th ro u g h lottery funds or general revenues, counsel's analysis would still apply in th e same way. Counsel responded: "No, Your Honor. It would make a very real d ifferen ce because if indeed, there was no obligation on the part of the state to ed u cate those citizens, but for the availability of JTPA funds, then the facts would b e contrary to the disallowance of the eleven point four million dollars." The ALJ th en asked whether, if Florida's opposing interpretation of § 239.117 was correct, D O L had a problem with the way Florida had documented or calculated costs (that ex ceed ed those covered by tuition). When counsel responded that DOL had not lo o k ed at the case "from that standpoint," and had not made eligibility or cost an alysis an issue, the ALJ restated his question: "Do I correctly understand then, th at you are not concerned about the manner in which they documented those co sts? " A confusing exchange followed, with counsel finally stating that, "at this p o in t, I would not say that we have expressed such a concern." W h ile this colloquy does provide some support for Florida's argument, we are not persuaded that Bendix is instructive here. In that case, a complaint was m ad e that Bendix Corporation's acquisition of Fram Corporation would violate n u m ero u s provisions of the Clayton and Federal Trade Commission Acts. See B en d ix, 450 F.2d at 534-35. However, the Complaint Counsel then decided to d ro p several charged theories of illegality and reformulate his case, ultimately p resen tin g only three theories of illegality to the Hearing Examiner. See id. at 535 3 6 . The Hearing Examiner rejected each of these theories, but the Federal Trade C o m m issio n (the "Commission") nevertheless found against Bendix on the basis o f an entirely separate "toehold" theory of illegality. See id. The Commission's a ctio n violated the APA, the Sixth Circuit concluded, because the toehold theory "w a s never charged, raised, nor tried during the administrative hearing; never p resen ted for consideration by the Hearing Examiner; and not raised as an issue or d iscu ssed by Complaint Counsel in the appeal to the Commission from the order of th e Hearing Examiner dismissing the Complaint." Id. at 537. In the instant case, h o w ev er, the very ID and FD that led Florida to seek an administrative hearing stated that Florida's documentation was insufficient to establish compliance with th e JTPA. Likewise, in its motion for summary decision DOL argued that the d o c u m e n ts submitted by Florida did not show that Title III participants had r ec eiv e d any "additional" services. Thus, Florida did not lack pre-hearing notice th at documentation was at issue.
Although Florida contends, based on the colloquy described above, that D O L nevertheless "limited" its theory of the case at the administrative hearing so lely to a question of statutory interpretation, this claim is inconsistent with the rem ain d er of the hearing record as a whole.16 As is clear from the discussion in 16 Florida claims that to prevail, it needed only to show that (contrary to the claims of DOL counsel) Fla. Stat. § 239.117 did not obligate Florida to cover those educational costs for general students which were not encompassed by tuition. The crucial question for purposes of p art B, supra, there are numerous instances of testimony at the administrative h earin g as to the absence or inadequacy of documentation establishing that Florida co m p lied with JTPA §§ 141 and 164. In addition, towards the end of the hearing th e ALJ asked DOL counsel whether there was "any value in implementing the J T P A " aside from the payment of tuition. Counsel responded that such value had n o t been "quantified" and that DOL had "continually expressed a willingness to r ec eiv e documentation that would show that allowable expenses [and] costs were in c u r r e d ," but that "[w]e have not to this point received any such documentation." When the ALJ, referencing his earlier statements, stated that he thought d o cu m en tatio n of costs was not an issue, counsel responded that the documentation o f costs was "certainly an issue in so far as Florida has asserted that there was extra e ff o r t made with respect to JTPA individuals," and that "no such costs have been su p p o rted at this time." Counsel for Florida, however, did not then object and su g g est that DOL had already limited its theory of the case, or claim that Florida sh o u ld be permitted to introduce additional evidence as to documentation. Nor did F lo rid a raise the matter in its post-hearing briefing. Furthermore, in its Statement o f Exceptions to the ALJ's decision and briefing to the ARB, DOL repeatedly arg u ed that the record evidence was insufficient (or insufficiently substantiated) to e sta b lis h that JTPA eligible individuals received services, as a result of PBIF, that th ey would not have received otherwise.17 Florida did not respond by raising due p ro cess or APA concerns, or by arguing that the ARB could not reach the matter of d o c u m e n ta tio n .18 I n light of the foregoing, the instant case is not one where the agency "c h a n g e [ d ] theories in midstream," Rodale Press, 407 F.2d at 1256, or issued a fin al decision based on a theory not raised at the administrative hearing. See B en d ix, 450 F.2d at 537; Homemaker Shops, 724 F.2d at 544. Thus, Florida has 17 The ALJ stated in his decision that "[d]ocumentation of individual costs as they related to individual levels of student achievement . . . was not a focus of this proceeding." Again, as the ARB properly recognized, while the JTPA does not require that each expenditure be traced to a specific, identifiable individual, see Tex. Dep't of Commerce, 137 F.3d at 332, a recipient must still be able to produce evidence sufficient to establish that JTPA funds were not spent unlawfully. See Part B, supra. The ALJ's narrow reference to "individual costs as they related to individual levels of achievement" simply did not address the issue of documentation in this broader sense.
18 Florida did argue that certain issues were "stipulated as issues not in dispute" before the ALJ, and that DOL should not be permitted to "resurrect" them before the ARB. While Florida identified several of these issues as "the increased number of eligible participants PBIF served, educated and trained," "enrollment of the eligible participants," and "the costs of educating the eligible population," the portions of the hearing transcript to which Florida cites do not in fact contain any "stipulations" on the part of DOL. n o t shown that the ARB deprived it of due process. Even if a due process violation d id occur, however, Florida would also have to show that "there would have been [ a] difference in defending the action" under the theory urged at the hearing, as co m p ared to the theory employed by the ARB. See Bendix, 450 F.2d at 541.
Florida's conclusory statement that "the pre-trial witness and exhibit lists" show it "co u ld have introduced testimonial and documentary evidence further detailing the a d d itio n a l services provided and the reasonableness of the costs" does not suffice to establish prejudice in this regard. Moreover, witnesses such as Linda Hartnig testified to Florida's lack of documentation in terms of the services specifically p ro v id ed to JTPA Title III participants.19 IV . CONCLUSION F o r the reasons stated, we conclude that the ARB's construction of JTPA § 141(b) is entitled to deference, that substantial evidence supports the ARB's d ecisio n to reverse the ALJ and affirm the disallowance of $11,419,499 in JTPA fu n d s, and that Florida has not established a due process violation. Accordingly, w e deny Florida's petition and affirm the order of the ARB.
A F F IR M E D .
1 Petitioner is the successor agency to the Florida Department for Labor and Employment Security, which was the pertinent state entity during much of the relevant time period in this case. We intend the term "Florida" to encompass both Petitioner and its predecessor. utilizing federal funds" would have to comply with § 164 of the JTPA and applicable regulations (i.e., the services purchased had to be "reasonable and cost effective"), duplicate payments would not be allowed, and JTPA Title III reporting and record keeping requirements would apply with respect to eligible dislocated workers who received Title III funded services.
4 Community colleges were required to admit all applicants, regardless of whether the appropriations were sufficient. Once school districts and community colleges exhausted their annual appropriations, they could still charge any additional students (the "overcap" population) for the tuition portion of costs.
6 OIG further disputed the performance data presented in Florida's response, which showed considerable increases in enrollments, completions and placements for Title III eligible students from 1995-97. According to the audit report, Florida "counted students that enrolled in successive years," which essentially inflated enrollment counts. In fact, OIG stated, "discrete counts of the numbers of new JTPA students enrolling in vocational educational courses 7 The JTPA allows a party dissatisfied with an ALJ's decision to request further review by the Secretary of Labor, within certain time limitations. See JTPA § 166(b), 29U.S.C. § 1576(b) (1999). The Secretary has delegated to the ARB the authority and responsibility to resolve such matters. See 67 Fed. Reg. 64,272, 64,272 (Oct. 17, 2002).
8 The ARB noted that the ALJ did not "address or apply the relevant framework regarding the parties' evidentiary burdens in this case," as set forth in 20 C.F.R. § 627.802(e). The GO has a burden of production to offer prima facie evidence sufficient for a reasonable person to conclude that a recipient spent JTPA funds unlawfully. See 20 C.F.R. § 627.802(e); Tex. Dep't of Commerce v. U.S. Dep't of Labor,
9 The Workforce Investment Act of 1998 ("WIA"), 29U.S.C. § 2801 et seq., repealed the JTPA effective July 1, 2000. See Workforce Investment Act, Pub. L. 105-220, § 199, 112 Stat. 936, 1058-59 (1998). Title 1U.S.C. § 109, however, provides: The repeal of any statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute, unless the repealing Act shall so expressly provide, and such statute shall be treated as still remaining in force for the purpose of sustaining any proper action or prosecution for the enforcement of such penalty, forfeiture, or liability.
1U.S.C. § 109. The parties do not identify, and we do not find, anything in the WIA that would release or extinguish any "penalty, foreiture, or liability" of Florida under the JTPA, or eliminate our jurisdiction to hear Florida's petition. funds. JTPA §§ 107(b) and 141(h) then further prohibit the use of JTPA funds to establish an identical, separate retraining class for JTPA Title III eligible dislocated workers only, unless it is shown that such an action would prove "more effective or more likely to achieve . . . performance goals." See 29U.S.C. § 1517(b); 29U.S.C. § 1551(h). 14 At oral argument, Florida's counsel stated that, under the statute authorizing PBIF, no JTPA funds could be provided to a school for JTPA students unless it could be demonstrated that they were for high wage/high skill positions. However, counsel could not identify any specific record evidence establishing that PBIF actually functioned in this way. 15 For example, the ALJ noted the PBIF funds were used to purchase "mannequins, cars, or ammunition which were not necessarily used by the JTPA participants who generated the payment." this case, however, is whether Florida did in fact appropriate state funds to cover non-tuition costs, not whether § 239.117 specifically required it to do so. While DOL has receded from the position that § 239.117 specifically created such an "obligation" on the part of Florida, all parties appear to agree that, during the years in question, Florida did in fact appropriate state funds annually (using the FTE formula, for example) to cover projected non-tuition educational costs for general students, up to a certain point. Thus, we need not address further Florida's arguments as to the proper interpretation of § 239.117. For similar reasons, Florida overstates the significance of DOL counsel's statement that "if indeed, there was no obligation on the part of the state to educate those citizens, but for the availability of JTPA funds, then the facts would be contrary to the disallowance of the eleven point four million dollars." While Florida focuses on the issue of statutory "obligation," the more important language, considering the record as a whole, is "but for the availability of JTPA funds"; i.e., to what extent would Title III eligible dislocated workers not have received training "but for the availability of JTPA funds?" 19 When confronted with the prejudice issue at oral argument, Florida's response was equivocal at best. Counsel declined to concede that there was no additional documentation to produce, but could not identify any such documentation either, and instead asserted that the answer would depend on the type of documentation DOL was seeking.
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This document cites
- U.S. Court of Appeals for the Fifth Circuit - State of Louisiana, Department of Labor, Petitioner, City of New Orleans, Intervenor, v. United States Department of Labor, Respondent., 108 F.3d 614 (5th Cir. 1997)
- U.S. Court of Appeals for the D.C. Circuit - Pdk Laboratories Inc., Petitioner, v. United States Drug Enforcement Administration, Respondent., 362 F.3d 786 (D.C. Cir. 2004)
- US Code - Title 29: Labor - 29 USC 2801 - Sec. 2801. Definitions
- U.S. Code - Title 1: General Provisions - 1 USC 109 - Sec. 109. Repeal of statutes as affecting existing liabilities
- U.S. Code - Title 5: Government Organization and Employees - 5 USC 554 - Sec. 554. Adjudications
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