Holston United Methodist Home for Children, Inc. v. Becerra

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HOLSTON UNITED METHODIST HOME FOR CHILDREN, INC., Plaintiff, v. XAVIER BECERRA, in his official capacity as Secretary of the United States Department of Health and Human Services, et al., Defendants.

No. 2:21-cv-185

United States District Court, E.D. Tennessee

November 18, 2022

CYNTHIA R. WYRICK, MAGISTRATE JUDGE

MEMORANDUM OPINION

TRAVIS R. MCDONOUGH, JUDGE

Before the Court is Defendants' motion to dismiss (Doc. 20). This action challenges various actions taken by Defendant United States Department of Health and Human Services (“HHS”). For the following reasons, the Court will GRANT the motion (Doc. 20).

I. BACKGROUND

A. Title IV-E

Federal funding for foster-care programs is available through Title IV-E of the Social Security Act, 42 U.S.C. §§ 670-679c. HHS administers Title IV-E through conditional grants of federal funds to states. 42 U.S.C. §§ 670-679c. Defendant Administration for Children and Families (“ACF”) is the division within HHS responsible for administering Title IV-E funds to states to support adoption and foster-care programs. (Doc. 1, at 4.) The State of Tennessee receives funds from the federal government through ACF's administration of Title IV-E. (Id. at 11.) Title IV-E contains no provision regarding antidiscrimination. See 42 U.S.C. §§ 670-679c.

B. 2016 Grants Rule

In 2014, HHS promulgated a comprehensive regulatory scheme governing the administrative requirements, cost principles, and audit requirements for the federal financial assistance they provide through grants and/or cooperative agreements. Federal Awarding Agency Regulatory Implementation of Office of Management and Budget's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 79 Fed.Reg. 75,871-01 (Dec. 19, 2014) [hereinafter the “Comprehensive Grants Rules”]. In 2016, HHS promulgated a rule modifying and adding regulatory language to the Comprehensive Grants Rules to provide additional guidance to regulated entities. Health and Human Services Grants Regulation, 81 Fed.Reg. 89,393-01 (Dec. 12, 2016) [hereinafter the “2016 Grants Rule”]. The 2016 Grants Rule added the following nondiscrimination language to HHS's grants requirements:

(c) It is a public policy requirement of HHS that no person otherwise eligible will be excluded from participation in, denied the benefits of, or subjected to discrimination in the administration of HHS programs and services based on nonmerit factors such as age, disability, sex, race, color, national origin, religion, gender identity, or sexual orientation. Recipients must comply with this public policy requirement in the administration of programs supported by HHS awards.

(d) In accordance with the Supreme Court decisions in United States v. Windsor and in Obergefell v. Hodges, all recipients must treat as valid the marriages of same-sex couples. This does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law as something other than a marriage.

Id. at 89,395 (formerly codified at 45 C.F.R. § 75.300). HHS promulgated this regulation pursuant to its statutory authority under 5 U.S.C. § 301, which states, “[t]he head of an Executive department or military department may prescribe regulations for the government of his department, the conduct of its employees, the distribution and performance of its business, and the custody, use, and preservation of its records, papers, and property.” This statute, however, contains no provision regarding nondiscrimination. See id. Instead, the Supreme Court has stated that Section 301 is “a ‘housekeeping statute,' authorizing what the Administrative Procedure Act (“APA”) terms ‘rules of agency organization procedure or practice' as opposed to ‘substantive rules.'” Chrysler Corp. v. Brown, 441 U.S. 281, 310 (1979).

The 2016 Grants Rule became effective on January 12, 2017, but, on January 20, 2017, the presidential administration changed, resulting in “changes in compliance and enforcement priorities.” Health and Human Services Grants Regulation, 86 Fed.Reg. 2,257-01, 2,273 (Jan. 12, 2021) [hereinafter “2021 Grants Rule”]. Therefore, as HHS itself noted in the preamble to a later grants rule, “the Department and its grantmaking agencies did not make, and have not made, any concerted effort to obtain recipient compliance with the nonstatutory nondiscrimination provisions since the 2016 rule became effective and have not taken steps to enforce compliance with such requirements.” Id.

i. Religious Waivers

HHS allows non-federal entities seeking grants to receive exceptions from the requirements of the Comprehensive Grants Rules on a case-by-case basis, provided there are unusual circumstances and “exceptions are not prohibited by statute.” Comprehensive Grants Rules, 79 Fed.Reg. at 75,899 (codified at 45 C.F.R. § 75.102). On February 27, 2018, even though the 2016 Grants Rule was never enforced, South Carolina submitted a request for such an exception from the nondiscrimination requirements of the 2016 Grants Rule. Admin. for Child. and Fams., Re: Withdrawal of Approval of Exception from Religious Non-Discrimination Requirement of 45 CFR 75.300(c) (Nov. 18, 2021), https://www.acf.hhs.gov/sites/default/files/documents/withdrawal-of-exception-from-part- 75.300-south-carolina-11-18-2021.pdf at 2 [hereinafter “South Carolina Letter”]. The request stated that faith-based child-placement agencies were essential to recruiting foster families in the state, and the nondiscrimination requirements of the 2016 Grants Rule placed a substantial burden on faith-based agencies in violation of their rights under the Religious Freedom Restoration Act (“RFRA”), 42 U.S.C. § 2000bb, et seq. Id. On January 23, 2019, ACF approved South Carolina's request, excepting it and the child-placement agencies it funds from the nondiscrimination requirements of the 2016 Grants Rule. Id. HHS also granted Texas, Michigan, and various foster-care and adoption services in those states exceptions from the 2016 Grants Rule's nondiscrimination requirements on similar bases as South Carolina's exceptions. HHS, HHS Takes Action to Prevent Discrimination and Strengthen Civil Rights (Nov. 18, 2021), https://www.hhs.gov/about/news/2021/11/18/hhs-takes-action-to-prevent-discrimination-and-strengthen-civil-rights.html [hereinafter “November 2021 Press Release”].

ii. Notification of Nonenforcement

Although HHS had not enforced the 2016 Grants Rule since it became effective, on November 19, 2019, HHS published a formal notification in the Federal Register to inform the public that it would not enforce the 2016 Grants Rule after determining that the rulemaking raised “significant concerns about compliance with the Regulatory Flexibility Act [‘RFA'].” Notification of Nonenforcement of Health and Human Services Grants Regulation, 84 Fed.Reg. 63,809-01, 63,809 (Nov. 19, 2019) [hereinafter “Notification of Nonenforcement”]. HHS announced that it was “exercising its discretion to not enforce the [2016 Grants Rule] with respect to any grantees until the rules have been properly re-promulgated with an impact analysis that hews to the requirements of the RFA.” Id. at 63,811. At the time HHS published the Notification of Nonenforcement, it also “publishe[d] a notice of proposed rulemaking to begin the process of repromulgating, as appropriate, these rules.” Id. at 63,811 n.7.

C. 2021 Grants Rule and Subsequent Litigation

The repromulgation process resulted in HHS issuing a final rule on January 12, 2021. 2021 Grants Rule, 86 Fed.Reg. 2,257-01. The 2021 Grants Rule removed the 2016 Grants Rule's language regarding gender-identity discrimination. Id. at 2,278 (formerly codified at 45 C.F.R. § 75.300). Instead, the nondiscrimination language in the 2021 Grants Rule only incorporates protections from other sources of law:

(c) It is a public policy requirement of HHS that no person otherwise eligible will be excluded from participation in, denied the benefits of, or subjected to discrimination in the administration of HHS programs and services, to the extent doing so is prohibited by federal statute.

(d) HHS will follow all applicable Supreme Court decisions in administering its award programs.

Id.

Before the 2021 Grants Rule even became effective, its repeal of the 2016 Rule's specific nondiscrimination language was challenged as violating the APA for being arbitrary and capricious, an abuse of discretion, or otherwise not in accordance with law. Complaint, Facing Foster Care in Alaska v. HHS, No. 1-21-cv-308 (D.D.C. Feb. 2, 2021), ECF No. 1. The plaintiffs in Facing Foster Care moved for a temporary restraining order staying the effective date, enforcement, and implementation of the 2021 Grants Rule. Plaintiffs' Motion for Preliminary Injunction, Motion for Temporary Restraining Order, and Motion to Stay, Facing Foster Care in Alaska v. HHS, No. 1-21-cv-308 (D.D.C. Feb. 4, 2021), ECF No. 8. HHS then conferred with the Facing Foster Care plaintiffs, and the parties stipulated to postpone the 2021 Grants Rule's effective date by 180 days to allow the agency time to review the Rule. Stipulated Motion to Postpone and Hold in Abeyance, Facing Foster Care in Alaska v. HHS, No. 1-21-cv-308 (D.D.C. Feb. 9, 2021), ECF No. 17. Through HHS's review process and the litigation, the Facing Foster Care court further delayed the 2021 Grants Rule's effective date. See generally Facing Foster Care in Alaska v. HHS, No. 1-21-cv-308 (D.D.C. 2021).

Eventually HHS completed its review of the Rule, and “concluded that the challenged portions of the rule were not promulgated in compliance with the Administrative Procedure Act.” Defendants' Motion for Remand with Vacatur, Facing Foster Care in Alaska v. HHS, No. 1-21-cv-308 (D.D.C. ...