DOCUMENT RESUME

ED 201 045EA 013 494

TITLE Awakening the Slumbering Giant: IntergovernmentalRelations and Federal Grant Law. An InformationReport.

INSTITUTION Advisory Commission on Intergovernmental Relations,Washington, D.C.

REPORT NO ACIR-M-122PUB DATE Dec 80NOTE 98p.; A Report of and papers from ACIR's Conference

on Federal Grant Law (Washington, DC, Deceaber 12,1979) .

EDRS PRICE MF01/PC04 Plus Postage.DESCRIPTORS Civil Rights Legislation; Community Development;

Constitutional Law; *Court Litigation; Court Role;Disabilities; *Federal Aid: Federal Courts; FederalGovernment; Federal Programs; *Federal Regulation;*Federal State Relationship: Government Role:*Grants: Legal Problems; Local Government; PublicHealth Legislation; Revenue Sharing; State Courts:State Government

IDENTIFIERS Community Development Block Grant Program;Intergovernmental Relations; Law EnforcementAssistance Administration; Massachusetts v Mellon;*National League of Cities v.Usery; North Zarolina vCalifano: Rehabilitation Act'1973; Supreme court;Tenth Amendment

ABSTRACTEight papers from a one-day conference for lawyers,

judges, and policy-makers discuss the effects on intergovernmentalrelations of the emerging body of laws, regulations, and courtdecisions governing federal grants and their recipients. Theexpanding importance of federal grants, notes an introduction to thepapers, has meant both less leeway for state and local governments toturn down grants and many more court cases involving federal versusstate sovereignty. Accompanied by comments and discussion, the firstpaper examines the current body of federal grant law and its legaland constitutional implications. Three further, papers analyzegovernment and private litigation over two large federal programs,the Community Development and Law Enforcement AssistanceAdministration block grants. A fourth paper gives tips and guidelinesto state and local governments for arguing before the U.S. SupremeCourt. To exemplify the legal, political, and fiscal implications offederal grant law, a paper in the form of a play presents ahypothetical case involving a city government and regulationsregarding the disabled. Two final papers summarize the impact offederal grant law, through the judiciary, on intergovernmentalrelations and traditional federalism. (RW)

***********************************************************************Reproductions supplied by EDRS are the best that can he made

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® AN INFORMATION REPORTr-4

CVcw

U.S. DEPARTMENTOF HEALTH,EDUCATION & WELFARENATIONAL INSTITUTE OF

EDUCATION

THIS DOCUMENT HAS BEEN REPRO-DUCED EXACTLY AS RECEIVED FROMTHE PERSON OR ORGANIZATION ORIOIN-ATING IT POINTS OF VIEW C" OPINIONSSTATED DO NOT NEcEs3AR, REPRE-SENT OFFICIAL NATIONAL INSTITUTE OFEDUCATION POSITION OR POLICY

A report of and papers from ACIR' s Conference onFederal Grant Law, held December 12, 1979 in Washington, D.C.

2

ADVISORYCOMMISSION ONINTERGOVERNMENTALRELATIONSWashington, D.C. 0 December 1980

M-122

AN INFORMATION jF3.7-

ADVISORYCOMMISSIO7'7 ONINTERGOVETALRELATIONSWashington, D.C. Deo-. .:17-z.7 1980

-_22

In December 1979, the Advisory Cc_runissic7a onIntergovernmental Relations held a one-day -anierence on federal grant law. The purpose c

corLerence was to bring together both lawyernon:awyers to discuss the intergoernment_plications of the emerging field of grant lawrelate ACIR's extensive general experier. k,

grants to the subject.While the courts have traditionaliv played axe

role in the workings of our federal system,part in shaping the modern intergovernmer.-.... ..grant-in-aid system has generally been overkxYet certain key legal precedents, as well as nor e.

recent decisions, have laid the ground rules 7-hichdefine the ways states and localities can receive,adapt, and benefit from federal grant programs.As the grant system has become i--gger, brcaderand more intrusive, these decisions have becomeincreasingly importantand sometimes unreason-able.

Can a stateor local governmentafford to re-fuse a federal grant if it finds the rules and regula-tions accompanying that grant unreasonable?Should a state be required to make the uncomfort-able choice between accepting federal money andlosing local control when the grant and its con-comitant conditions apparently infringe on thestate's decisionmaking institutions and politicalprocesses? And, what about the requirements thatapply across the board to all grants? Should a re-ripient really lose all federal dollars if it objects to:implementing one such requirement? Or is there aInit to federal power?

re c,f

:...ourts' answers tc tl-ce and relate:;,21.7' based or .-_17.---edents W:'

.c._.iated = _-,-

..era-,:orErnmenat_i.. grant Perhap: .;i'Vrnie to

rnd lx.wyers t2.9---ng then the natun--:7-zrantt symarn ;and the ofto it. Si:"I'ar?y, r.:olicymalon.sr nd others in.,

intielgurermr,2-antal relatoni.should bethe .:ne relati.:-.,..-isHins and their or_tor::,

v.-ailatAf nadit r the sv :em.In --,..F1;.oti.terer....ceand based on

made the .t --.;'fort to bridge whatn bE7lerrried a gap bet-7---eer_ the legal and policyworlds r)y discussing .makes up the law offe,dr-rni '-."711:1;`,76 and whera, it headed. The over-

teen throughout was the in-Lpact of grantlaw -.ne Lwer.1.7.wernmer.:.:s3:1 system.

It 72.. (.214-qr -±z.scussicas of the daywLie there was car.s.erable variation in in-

crsret 'rf varic-zs cases and implicationswas an apparent consensus that

t. at mates up the field of grant lawthe current and future 'operation

c ow in-:::,..7rgovcrnrnental system.Ore termed the emerging law of

:-._anbering giant. With this con-ferencL and puEication based on it, we atACIR our part to awaken that giant.

Abraham D. BeameChairman

iv a..CIR is grateful to all those who helped makepossible ACIR's conference on grant law and thisvolume based on it.

Special thanks go to those busy attorneys whoassisted us in both planning and executing the ses-sion. Without their time, advice, and expertise, wemight not have been able to tackle this importantarea. This special list includes George Brown,professor at Boston College Law School; ThomasMar=den, former assistant administrator andgeneral counsel, Law Enforcement Assistance Ad-ministration (LEAA); Malcolm S. Mason, formerchairman, Departmental Grant Appeals F -erd,Department of Health, Education, and Weis-...Bill Montalto, assistant project director U t-dinating Committee on a Model PreeuenaletntCode, American Bar Association; Wihamof Rhyne and Rhyne, Washington, )C;Sorett, Office of General Counsel, En ;'-ii!OrtiitProtection Agency; and Bob Wallie:-and Johnson, Washington, DC. John Settle, chair-man, Board of Grant Appeals, Department ofHealth and Human Services, provided immeasur-able assistance in working through, and executingthe Section 504 play.

Acknowledgements

Also due special thanks are the other speakerswho took the time and effort to share their exper-tise and opinions with the group. These includeCharles Lauer, deputy general counsel, LEAA;Henry Monaghan, professor at Cornell LawSchool; Tom Moody, Mayor of Columbus, OH; andCharles Rhyne of Rhyne and Rhyne.

ACIR Assistant Directors Carl Stenberg andDavid Walker participated fully in planning and ex-ecuting the conference as well as enlivening twokey portions of the session.

Without Carol S. Weissert, ACIR's informationofficer, the conference would never have takenplace. She sold ACIR on the idea of the conference,spearheaded both the planning and organizationalefforts, and edited this volume.

Harolyn Adams and Elizabeth A. Bunn providedinvaluable assistance in carrying out conference-related assignments and in preparing manuscriptsfor this volume.

Wayne F. AndersonExecutive Director

Carl W. StenbergAssistant Director

Contents

Part I 1ACIR's Grant Law Conference: Whys and Wherefores

Carol S. Weissert, Information Officer,Advisory Commission on Intergovernmental Relations 3

Part II 7The Law of Federal Grants

Thomas J. Madden, Assistant Administrator/General Counsel, Law Enforcement AssistanceAdministrrtion, U.S. Department of Justice 9

Responses by:Robert Wallick, Steptoe and Johnson 27Malcolm S. Mason, Chairman, Departmental GrantAppeals Board, U.S. Department of Health,Education and Welfare 31

General Discussion 33

Part III 37The Interaction of Federal Grants and the Law:

Community Development and LEAA Litigation asCase Studies

Tam Moody, Mayor, Columbus, Ohio 39An Introduction to the Community Development

Litigation and Its ImpactGeorge D. Brown, Professor, Boston CollegeLaw School 43

Federal Grant Litigation Involving Law EnforcementAssistance Administration

Charles A. Lauer and Thomas 3. Llewellyn, Office ofthe General Counsel, Law Enforcement AssistanceAdministration, U.S Department of Justice 49

Part IV 57State and Local Governments in the Supreme Court

of the United StatesCharles S. Rhyne, Rhyne and Rhyne 59

7...A.. _rant C

Cit- I SC--"T

:ter-. :.n111:'.'771, S. --1.:1:11

So;-7-7.

nvircTV. .

. mission orS. IV::: i-.t.r7t,

:- :mission cr,

tn:-.17: :Handicapped Regt.11.tionsthree acts)

Project Director,Ilodel Procurement Co

Rhyneof Grant Appeals,

ServicesCounsel,

Agency..:.:,:ftrector, Advisory-er=ital Relations-n r:. 'Dfficer, Advisory

7-7-rimautal Relations

Part V . . . .Reflec :ins on -so There a Law of

Feac- GrallttE Is It Leading Us?-7././ifcr:' . .-27. 3. Stevens Professor of Law,

Cc=ell Law ';chk. 9:Federal Judges ...ec!!::.. Grants: A Dimension of

Today'sDavid B. Icair...cr AsEr..-7,1.1.7t Director, AdvisoryCwing 'ssion 1.7L-terg- -mental Relations 0

8

ACIR's Grant Law Confer iceWhys an it he g=---str

L ARO NNW

by Carol S. issertInformatio_l )fficer

The growth and increased corn- _exity of the in-tergovernmental grant system o- a.r- the past sev-eral decades have been monitorec and analyzed bymany, including ACIR.

Not so well studiedespecially by public policyanalystsis a related area whici- has a major im-pact on both the grant system ancl the intergovern-mental network it overlays: litigation surroundingfederal grants.

For, as the grant system has mushroomed, so hasgrant litigation. As Thomas Madden notarticle in this publication, same 100 different casesdealing with grants have been decided in the lastfive years alone.

The type of litigation has changed as well. Publicinstitutions and governments receiving or seekingfederal aid have joined more "traditional" liti-gants, such as beneficiaries of federal aid pro-grams and third parties seeking to block federallyfunded projects, going to the courts to seek redressfor injury or to guarantee their "rights."

The intergovernmental dimensions of thegrowth and changed nature of grant litigation aresignificant. Grant-related cases throw into judiciallaps major decisions and interpretations-that manyprue should be made by the Congress and statelegislaturesnot the courts. They further compli-cate an already complex and too often unworkablegrant system. They change grantor-grantee rela-tionships in ways probably neither wants. Theyslow-up implementation of programs and createmyriad uncertainties which affect grant recipients

and beneficiaries alike. And they r federal-state-local relations by strength hand ofWashington even in instances v- -_Ech ext.;muscle can be said to significant Ihe tradi-tional "balance of power" inhere= a:: federalsystem.

Further, and perhaps most -_-_-mbi,z-some, thedecisions are often made using ::.rers..uents whichwhen applied years ago to a ver:- different grantsystem might have been on the Eiowe'..,n-, intoday's highly complex, marked: :y interdependentgrant system, many seem outdated, simplistic, andwrong.

Federal grant law has, by and large, been left tothe legal community, in spite of -die fact that thedecisions often have a direct =--pact on federal,state, and local policymakers receiving and ad-ministering federal grants. Judges hearing grant-related suits and lawyers tryin= them today fre-quently have little knowledge 7 interest in theworkings of the federal system. Thus, some of themost far-reaching decisions are based on strict,narrow grounds with apparently little or no con-cern for their impact on the operation of our in-tergovernmental system.

In an attempt to bridge the gap between thelegal and policy worlds, on December 12, 197S, theAdvisory Commission on Intergovernmental Rela-tions brought together attorneys and federal,state, and local policymakers to discuss federalgrant law.

The conferenceand this publication based onitdid not attempt to deal with all the many tech-nical aspects related to grant law such as the kindsof remedies available to grantees or with all of thecomplicated legal corcepts involved. Rather,ACIR's basic interest is the broader issue of theimpact of this body of grant law on the intergov-ernmental system.

The legal precedents of grant law are longstand-inggoing back to land grant lawwhen Congressgranted portions of the public domain to each stateto be sold by them, with the proceeds used for thesupport of institutions of higher learning. In 1922(when grants totaled only $118 million of whichnearly 80% went to highways) a case was handeddown which has had major impact on grant law.The case, Massachusetts v. Mellon,' established thenotion that if a state did not wish to comply withspecifications of a federal grant, it could simply re-fuse to accept the grant.

In spite of its superficial validity, the choice of

"not yielding" to federal temptation is far too sim-ple for today's grant system in which some statesand even more localities may not be able to forgofunding supplied by a large federal program if itmakes up a major portion of their budgets. Addi-tionally, the imposition of requirements which ap-ply across the board to all grants raises more ques-tions about the appropriateness of the Mellonprecedent. Does a recipient lose all federal dollarsif it objects to implementing an across-the-boardrequirement? What if the requirement conflictswith the state constitution or structure in a waythat clearly infringes on the state's decisionmakinginstitutions and political processes? Does federalsupremacy apply in all instances?

In a 1978 case, North Carolina v. Califano,2 theU.S. Supreme Court affirmed the opinion of alower court upholding the Constitutionality of afederal law which the North Carolina SupremeCourt ruled violated provisions of its state con-stitution. The lower court said "the validity of thepower of the federal government under the Con-stitution to impose a condition on federal grantsunder a proper Constitutional power does not existat the mercy of the state constitution or decisionsof the state courts."

With this decision, the state was put in the un-enviable position of having to change its constitu-tion or lose all health-related federal funds cominginto the state including Medicaid.

Lower court decisions upholding "conditions"were made in Montgomery County, Maryland v.Califano3 regarding the ability of local govern-ments to overrule decisions of local health servicesagencies; in Macon v. Marshall,4 regardingemployees' rights under grant programs; and inFlorida Department of Health v. Cak fano,6 on theConstitutionality of regulations that in effectbarred reorganization of the state's health depart-menta pioneering effort that had been commend-ed by social services' experts.

The only instance in recent years where theCourt has recognized limits in federal power overthe states was a 1976 Supreme Court case, Na-tional League of Cities (NLC) v. Usery,8 and this in-volved the Commerce, not the Spending, Clause..The suit, brought by the NLC and a number ofstates, questioned the Constitutionality of amend-ments to the Fair Labor Standards Act applyingfederal minimum wage, maximum hour, and over-time rate standards to state and local employees.The Court held that the application of the act to

0

the states and their political jurisdictions was un-constitutional on the grounds that the FLSA wouldsignificantly "impair the states' ability to functioneffectively within a federal system."

Since most cases in this area rely on the federalspending powernot the Commerce Clausethedecision has had limited impact on federal grantlaw.

To date, the Supreme Court has not specificallyconsidered another key element of the moderngrant-in-aid systemnamely requirements placedon all grant programs to accomplish certain na-tional policy goals such as civil rights, environmen-tal protectim, and citizen participation.

Other relatedand still untestedquestions, atthe Supreme Court level at least, are: Can a federallaw specifying that the executive, rather than thelegislative b anch of state government receive and

-.spend federal grant money so intrude on statesovereignty that it violates the Tenth Amendment?Can a recipient refuse federal funding of a pro-gram it has participated in for several years whenit doesn't want to implement certain new require-ments of the program? Can an individual or groupwithin a potential recipient jurisdiction force ac-ceptance of a grant or grants on an alleged denialof a Constitutional right, when the jurisdiction by amajority referendum vote refused to participate?And, are, or should there be, fiscal limitations onthe application of federal supremacy? To date, thecourts have not yielded to the Tenth Amendmentchallenge, even in one lower court case recentlyupheld in the Court of Appeals (County of LosAngeles v. Marsha 11)7 where assertions were madethat compliance would result in virtual bankruptcyof some cities.*

Although the courts have stepped gingerlyaround possible federal coercion and have avoidedusing the NLC precedent in ftonditional spendingcases, the sheer number of cases handed downand the increasing complexity of those cases andthe grants on which they are basedmay wellaugur for an updating of some of the principles

*Still another erosion of the Tenth Amendment argument tookplace in a 1980 case, Maine v. Thriboutot, where the SupremeCourt extended civil rights guaranteed under the 1871 civilrights law (commonly known as Section 1983) to a variety offederal-state programs. The ruling also provided that the statesare liable for attorney's fees of plaintiffs who are successful incourt. In a dissenting opinion, Justice Lewis F. Powell, Jr.,called the decision "a major new intrusion into state sovereign-ty" and cited at least 30 federal-state statutes that could be thebasis of damage claims against states.

6 In spite of its superficialvalidity, the choice of 'notyielding' to federal temptation isfar too simple for today's grantsystem. . . . 9

established when the intergovernmental systemwas less entangled, less costly, and more col-laborative than it is today.

Such an updating will require policymakers at alllevels to more fully understand the implications ofthe law on the workings of the grant system.ACIR's conferenceand this publicationmayhelp lay the groundwork for increased understand-ing by considering such questions as:

What makes up the body of federal grantlaw?Where does this law seem to be taking us?What are the implications of this law forour intergovernmental system?What is the status and what are theimplications of recent litigation involvingtwo major block grantsLEAA and Com-munity Development?

o Are the legal options available to local of-ficials who feel that crosscutting regula-tions are unreasonable and burdensome?

The opening session, a discussion of the law offederal grants and where it is headed, laid the Con-stitutional and legal background for the considera-tion of issues involving grants. Thomas J. Madden,former assistant administrator and general coun-sel of the Law Enforcement Assistance Adminis-tration (LEAA), made the initial presentation.Robert Wallick of Steptoe and Johnson and Mal-colm S. Mason, former chairman, DepartmentalGrant Appeals Board, Department of Health, Edu-cation and Welfare, responded to Madden'spresentation.

The importance of litigation in two areascom-munity development and law enforcementwasthe subject of the second panel session made up ofTom Moody, Mayor of Columbus, Ohio; GeorgeBrown, professor at Boston College Law School;and Charles Lauer, LEAA deputy general counsel.

Charles S. Rhyne of Rhyne and Rhyne, Washing-

ton, DC, who has represented states and localitiesin a number Lf cases before the Supreme Court in-cluding Baker v. Carr and NLC v. Usery, describedhis views of the Supreme Court and federalism atthe luncheon session.

The legal, political, and 5scal implications of fed-eral regulatory actions on state and local govern-ments were illustrated with a dramatization en-titled "Anatomy of a Grant Controversy: Handi-capped Regulations and City Hall" dealing withimplementation of regulations surrounding Sec-tion 504, providing equal rights for the handi-capped. Actors and co-authors of this play wereWilliam Montalto, assistant project director, Coor-dinating Committee on a Model ProcurementCode, American Bar Association; William Rhyne,

Rhyne and Rhyne; Stephen Sorett, Office of theGeneral Counsel, Environmental Protection Agen-cy; John Settle, chairman, Board of Grant Appeals,Department o Health and Human Services; CarlW. Stenberg, assistant director, ACIR; and CarolS. Weissert, information officer, ACIR.

And, Finally, as a way of recapitulating some ofthe discussions of the day, Henry Monaghan,Robert S. Stevens professor at Cornell LawSchool, and David B. Walker, assistant director ofACIR, debated the current impact of the judiciaryon intergovernmental relations and what it mightbe in future years.

The volume contains papers presented by theseparticipants and much of the discussion that fol-lowed their presentations.

FOOTNOTES

'262 U.S. 447 (1923).2445 F. Supp. 532 (E.D.N.C. 1977) affil mem., 435 U.S. 962(1978).

3449 F. Supp. 1230 (D. Md. 1978).

4439 F. Supp. 1209 (M.D. Ga. 1970.6449 F. Supp. 274 (N.D. Fla. 1978), affd 585 F. 2d 150 (5th Cir.1978).

6426 U.S. 833 (1976).7F2ndDC Cir. March 20, 1980, pet. for cert. pend. no.79-1965 (filed June 14, 1980).

art II

The Law of Federal Grantsby Thomas J. Madden

Assistant Administrator/General CounselLaw Enforcement Assistance Administration*

Although federal grant instruments are in manycases exceedingly complex documents and al-though there are hundreds upon hundreds of termsand conditions that govern the expenditure ofgrant funds, there has been only a limited develop-ment of a uniform body of grant law and much ofthat development has come in recent years.1 Innumerous federal court decisions, the courts havetreated grant issues as novel issues even thoughthe issues have already been decided by other fed-eral courts.

An important factor that has limited the develop-ment of a uniform grant law has been the volumeand scope of grants. Prior to the early 1960s, therewere only a relatively small number of grant pro-grams and consequently only a small number oflawsuits involving grants.2 After 1960, the rapidincrease in the number of grant programs and theamount of funds available for grants satisfiedgrantees' programmatic and economic needs andlimited the need to resort to legal action.s

Recently, as state and local governments havebeen pressed for financial resources, as politicallyunpopular grant programs have been pared downor denied what before had been their annual in-crease in funds, and as the total amount of funds

'In July 1980, Thomas J. Madden resigned as LEAA Assis-tant Administrator/General Counsel and joined theWashington, DC, law firm of Kaye, Scholar, Berman, Hays,and Handler where he is involved in grants law practice.

14

available for grants has leveled off in real dollarterms', a number of lawsuits have been brought tochallenge denial of grants or to challenge regula-tions which limit eligibility for grants.

The expansion of procedural and substantive dueprocess concepts in the administrative law areaand the willingness of the Federal Court of Ap-peals for the District of Columbia to apply a stan-dard of reasonableness to actions of federal admin-istrative agencies have also led to more litigationin the .;-rants area6.

In addition, there are now over 20 laws which im-pose national policies on grants and establishterms and conditions that all recipients of grantfunds must follow.6 The vast majority of theselaws, which include Title VI of the Civil Rights Actof 1964,7 and the National Environmental PolicyAct,8 have been enacted since 1964. These lawshave given rise to numerous lawsuits brought by

10 third parties who have been denied assistanceunder a grant, who have been denied the benefitsof the grant, or who have been adversely affectedby a grant.9

Much of the development in the law of grants hascome since 1975. A survey of federal court cases bythe LEAA Office of General Counsel identified al-most 500 different cases which deal with grants.Eighty percent have been decided since 1975.

This paper examines some of the key Constitu-tional and legal precepts that have emerged fromthe federal courts' consideration of matters involv-ing grants and that are at the foundation of the de-veloping body of grant law.

CONSTITUTIONAL FOUNDATION OFGRANTS

The authority of the federal government to act isdefined by the Constitution and a consideration offederal grant law must start with the Constitution.

Congress under Article I, Section VIII, Clause 1of the Constitution is authorized "To lay and col-lect taxes . . . and provide . . . for the general wel-fare of the United States."

In cases such as Massachusetts v. Mellan,10 in1923, United States v. Butler," in 1936, StewardMachine Company v. Davis,12 in 1937, and Okla-homa v. Civil Service Commission,13 in 1947, theSupreme Court recognized that Congress has theauthority under this clause of the Constitution toprovide financial assistance to state and local gov-ernments "to promote the general welfare," andthis is the basic Constitutional authority for most

grant programs.The Supreme Court has held that the power of

Congress to provide for the general welfarethrough financial assistance is not limited to carry-ing out the other powers of Congress specificallyenumerated in the Constitution but must be con-strued to allow the Congress to create any finan-cial assistance program which furthers the generalwelfare, provided that the exercise of power doesnot violate some other provision of the Constitu-tion such as the First, Fifth, or Fourteenth Amend-ment." The Supreme Court has also held that thedetermination of what furthers the general welfareof the nation is uniquely a Congressional func-tion.16

Congress also is authorized under Article IV,Section 3, Clause 2, to dispose of and make allneedful rules and regulations respecting the terri-tory or other property belonging to the UnitedStates. It is under this authority that Congress hasmade land grants to the states.

However, nowhere in the Constitution is there areference to grants, and the actual authority to usegrants to provide financial assistance to furtherthe general welfare or to dispose of land by meansof grants is founded on the "inherent" power ofthe Congress, under the "Necessary and ProperClause" of the Constitution. There is no referenceto contracts or cooperative agreements in the Con-stitution and the authority of the government touse these instruments is likewise founded on theNecessary and Proper Clause.

The Necessary and Proper Clause is found inArticle I, Section VIII, Clause 18 of the Constitu-tion. It follows the enumeration of specific Con-gressional powers including the taxing and spend-ing powers and authorizes Congress:

To make all laws which shall be necessaryand proper for carrying into execution theforegoing powers, and all other powersvested by this Constitution in the govern-ment of the United States, or in any de-partment or office thereof.

The limits of the Necessary and Proper Clausewere first defined by Justice Marshall in McCullochv. Maryland,18 where the Supreme Court stated:

Let the end be legitimate, let it be withinthe scope of the Constitution, and allmeans which are appropriate, which areplainly adapted to end, which are not pro-

f

hibited, but consistent with the letter andspirit of the Constitution, are Constitu-tional."

The Constitution likewise contains no expressprovision which authorizes the federal governmentto enter into agreements with states. Yet the Su-preme Court as early as 1866 in McGee v.Mathias," asserted that a grant from the federalgovernment to a state constituted a contract.19

DUAL FEDERALISM AND THEIMPACT OF GRANTS-IN-AID ON THERESERVED POWERS OF THE STATES

The Tenth Amendment of the Constitution is anexpression of the unique federation embodied inthe United States Constitution.2° The amendmentrecognizes that certain powers of government arevested in the federal government and certainpowers of government are reserved to the states.This principle is commonly referred to as "dualfederalism" and has important significance for anunderstanding of the limits of federal grants-in-aid.

In McCulloch v. Maryland,21 the case quotedearlier, Justice Marshall held that the TenthAmendment does not prohibit the federal govern-ment from taking action which interferes with thereserved powers of the states if the action was pro-per and was within the expressed or impliedpowers of the Congress.

During the Taney era, the holding in McCullochwas narrowed as the Supreme Court fashioned outof dual federalism the concept of "equal sovereign-ty." Under this concept the state governments andthe federal government were considered independ-ent and equal within their own spheres of authori-ty. This concept resulted in the 1871 SupremeCourt decision in Collector v. Day,22 for example,holding that the states in the exercise of their re-served powers are independent of regulation bythe Congress and that the federal governmenttherefore could not impose a tax on the salaries ofstate employees.

This narrow view of dual federalism was stillprevalent in 1918 when in Hammer v.Dagenhart23 the Supreme Court held that a childlabor law which prohibited the transportation ofchild-made goods in interstate commerce was not aregulation of "commerce among the states," butan invasion of the reserved powers of the states.

One of the most succinct statements of the Su-preme Court on dual federalism was made inUnited States v. Butler," when the narrower viewof dual federalism was beginning to change. TheCourt there stated that:

The question is not what power the federalgovernment ought to have, but whatpowers in fact have been given by the peo-ple. It hardly seems necessary to reiteratethat ours is a dual form of government;that in every state there are two govern-mentsthe state and the United States.Each state has all governmental powerssave such as the people, by their Constitu-tions, have conferred upon the UnitedStates, denied to the states, or reserved tothemselves. The federal union is a govern-ment of delegated powers. It has only suchas are expressly conferred upon it and suchas are reasonably to be implied from thosegranted. In this respect we differ radicallyfrom nations where all legislative power,without restriction or limitation, is vestedin a parliament or other legislative bodysubject to no restrictions except the discre-tion of its members.26

The authority of Congress to make grants tostates to carry out programs that required the ex-ercise of the states' reserved powers was first putbefore the Supreme Court in 1922. In the cases ofMassachusetts v. Mellon and Frothingham v.Mellon,26 the Supreme Court considered a chal-lenge to the Constitutionality of a formula grant-in-aid program created by the Maternity Act.27

The Court described the Maternity Act asfollows:

Briefly, it provides for an initial appropria-tion and thereafter annual appropriationsfor a period of five years, to be apportionedamong such of the several states as shallaccept and comply with its provisions, forthe purpose of cooperating with them toreduce maternal and infant mortality andprotect the health of mothers and infants.It creates a bureau to administer the act incooperation with state agencies, which arerequired to make such reports concerningtheir operations and expenditures as maybe prescribed by the federal bureau.Whenever that bureau shall determine

1

that funds have not been properly expend-ed in respect of any state, payments nvi-:be withheld.

In the Massachusetts case the challenge wasbrought by the State of Massachusetts in an orig-inal action in the Supreme Court.

The Court described Massachusetts contentionsas follows:

In the Massachusetts case it is alleged thatthe plaintiff's rights and powers as a sov-ereign state and the rights of its citizenshave been invaded and usurped by theseexpenditures and acts; and that, althoughthe state has not accepted the act, its Con-stitutional rights are infringed by the pas-sage thereof and the imposition upon thestate of an illegal and unconstitutional op-tion either to yield to the federal govern-

12 ment a part of its reserved rights or losethe share which it would otherwise be en-titled to receive of the moneys appropri-ated.28

The Court dismissed Massachusetts' complaintand provided the following rationale:

Probably, it would be sufficient to pointout that the powers of the state are not in-vaded, since the statute imposes no obliga-tion but simply extends an option whichthe state is free to accept or reject.29

The Supreme Court went on to hold as follows:

What, then, is the nature of the right of thestate here asserted and how is it affectedby this statute? Reduced to its simplestterms, it is alleged that the statute consti-tutes an attempt to legislate outside thepowers granted to Congress by the Consti-tution and within the field of local powersexclusively reserved to the states. Nothingis added to the force or effect of this asser-tion by the further incidental allegationsthat the ulterior purpose of Congressthereby was to induce the states to yield aportion of their sovereign rights; that theburden of the appropriations falls unequal-ly upon the several states; and that there isimposed upon the states an illegal andunconstitutional option either to yield tothe federal government a part of theirreserved rights or lose their share of the

moneys appropriated. But what burden isimposed upon the states, unequally orotherwise? Certainly there is none, unlessit be the burden of taxation, and that fallsupon their inhabitants, who are within thetaxing power of Congress as well as that ofthe states where they reside. Nor does thestatute require the states to do or to yieldanything. If Congress enacted it with theulterior purpose of tempting them to yield,that purpose may be effectively frustratedby the simple expedient of not yielding.

In the last analysis, the complaint of theplaintiff state is brought to the naked con-tention that Congress has usurped the re-served powers of the several states by themere enactment of the statute, thoughnothing has been done and nothing is to bedone without their consent; and it is plainthat the question, as it is thus presented, ispolitical and not judicial in character, andtherefore is not a matter which admits ofthe exercise of the judicial power."

In the Butler case the Supreme Court consideredthe nature of the Congress's power under the tax-ing and spending power. At issue in Butlerwas theAgricultural Adjustment Act, which was designedto increase the prices of certain farm products bydecreasing the quantities produced. The decreasewas obtained by making payments of money tofarmers who, ufider contracts with the federal gov-ernment, reduced their acreage and crops. Themoney for the payments was obtained by a tax im-posed on those who first purchased and processedthe farm products.

The Supreme Court held in Butler that the taximposed by the Agricultural Adjustment Act wasan improper attempt to regulate the production offarm goods, which was a matter reserved to thestates under the Constitution.

In reaching this conclusion the Supreme Courtmade a number of findings that relate to grants-in-aid. The Court specifically recognized that publicfunds may be appropriated by the Congress "toprovide for the general welfare of the UnitedStates," under Article I, section 8 of the Constitu-tion, and that the power to appropriate for the gen-eral welfare is not limited to the purposes set out inthe other enumerated powers of the Congressfound in the Constitution.8'

The Supreme Court also held that where the ex-ercise of the taxing and spending power is properthe federal action has supremacy over state ac-tion."

The Supreme Court also distinguished its hold-ing in Massachusetts v. Mellon on grants-in-aid andalso recognized that the authority of Congressunder the taxing and spending power is limited byother provisions of the Constitution which circum-scribe the bounds of Congressional authority."

To Professor Edwin Corwin, the critical differ-ence between Butler and Mellon was that:

The decision turned on the proposition thatthe proposed beneficiaries of federallargess were not free to reject it on ac-count of the sharp competitive relation inwhich they stood to each other. Clearly thisline of reasoning in no wise disturbs thestatement in the Mellon case, withreference to a statute not to be differen-tiated in this respect from any grant-in-aid, that it did "not require the states to door yield anything."34

Within a year after Butler was decided, Roose-velt attempted to "pack" the Supreme Court withjustices who were more tolerant of his views. Thisbrought about a dramatic change in the manner inwhich the Supreme Court viewed the reservedpowers of the states and the taxing and spendingpower.

In 1937, Butler was limited by the SupremeCourt's decision in Steward Machine Co. v. Davis.35In this case the Supreme Court upheld the Consti-tutionality of the Social Security Act. The Courtspecifically upheld one title of the act which im-posed a tax on employers to be used for unemploy-ment benefits and in turn provided for the states toreceive these funds if the states agreed to use thefunds to provide payments to unemployed. TheCourt also sustained a title of the act whichauthorized the federal government to make grantsto states to enable them to administer theunemployment programs.

The Court rejected arguments that the Social Se-curity Act was coercive and a usurpation of thestates' reserved powers. The Court stated that:

It is too late today for the argument to beheard with tolerance that in a crisis so ex-treme the use of moneys of the nation torelieve the unemployed and their depend-

ents is a use for any purpose narrowerthan the promotion of the general wel-fare.36

he Court also held that the Social Security Actrepresented a legitimate attempt to solve the un-employment problem by a cooperative agreementbetween the federal and state governments.

The Social Security Act cases 37 marked a begin-ning of the Supreme Court's return to Marshall'sviews in McCulloch v. Maryland.38 In 1939, Collec-tor v. Day39 was expressly overruled in Graves v.New York." By 1941, the Court's return was com-plete when in United States v. Darby" the Courtmade the following statement about the TenthAmendment:

The amendment states but a truism that allis retained which has not been sur-rendered. There is nothing in the history ofits adoption to suggest that it was more 13than declaratory of the relationship be-tween the national and state governmentsas it had been established by the Constitu-tion before the amendment or that its pur-pose was other than to allay fears that thenew national government might seek toexercise powers not granted, and that thestates might not be able to exercise fullytheir reserved powers . . . .

From the beginning and for many yearsthe amendment has been construed as notdepriving the national government ofauthority to resort to all means for the ex-ercise of a granted power which are appro-priate and plainly adapted to the permittedend."

The Suprmne Court next took up the question ofgrants-in-aid and states' reserved -powers in Okla-homa v. Civil Service Commission." The specificissue was whether the Congress could impose acondition on a grant-in-aid which limited the politi-cal activities of state officials.

The condition in question arose out of the HatchAct. The Hatch Act at that time provided that nostate or local government official could participatein partisan political activities if his or her salarywere paid in whole or in part with funds derivedfrom grants-in-aid. Exceptions were made fogelected officials.

The Supreme Court found that while Congress

had no power !.n regulate the political activities ofstate officials it did have the power to fix the termsunder which appropriated funds could be spent.The Court rejected Oklahoma's contention that theHatch Act violated the Tenth Amendment byauthorizing the Civil Service Commission to with-hold grant funds allocated to the state when thestate failed to comply with the Hatch Act.

The Court rejected this contention as follows:

While the United States is not concernedwith, and has no power to regulate localpolitical activities as such of state officials,it does have power to fix the terms uponwhich its money allotments to states shallbe disbursed.

The Tenth Amendment does not forbid theexercise of this power in the way that Con-gress has proceeded in this case. As

14 pointed out in United States v. Darby, 312U.S. 100, 124, the Tenth Amendment hasbeen consistently construed "as notdepriving the national government ofauthority to resort to all means for the ex-ercise of a granted power which are ap-propriate and plainly adapted to the per-mitted end." The end sought by Congressthrough the Hatch Act is better public ser-vice by requiring those who administerfunds for national needs to abstain fromactive political partisanship. So eventhough the action taken by Congress doeshave effect upon certain activities withinthe state, it has never been thought thatsuch effect made the federal act invalid."

Under the Hatch Act, Oklahoma had the choice ofremoving the official who participated in the pro-hibited political activities or forfeiting twice his an-nual salary in grant funds. The Court found no vio-lation of state sovereignty since Oklahoma"adopted the 'simple expedient' of not yielding towhat she feels is federal coercion."46 The Courtcited Massachusetts v. Mellcm46 to support thispoint.

The Tenth Amendment question is still alive withrespect to grants and the possibility exists that theSupreme Court may find that a grant-in-aid pro-gram crosses the line from inducement to coercion.There is language in both the Butler and theOklahoma cases that admits to this possibility'?Furthermore, the Supreme Court's decision in

The Tenth Amendmentquestion is still alive with respectto grants and the possibilityexists that the Supreme Courtmay find that a grant-in-aidprogram crosses the line frominducement to coercion.

1976 in National League of Cities v. Usery'6 was adefinite retreat from Steward Machine Companyand the Darby cases and has led to a new round oflitigation on the application of the Tenth Amend-ment to grants-in-aid."

In the League of Cities case numerous states andthe National League of Cities, a nonprofit organi-zation which represents in Washington the in-terest of many of the nation's cities, challenged1974 amendments to the Fair Labor StandardsAct (FLSA).5° These amendments extended theact's minimum wage and maximum hour provi-sions to most state and local government em-ployees.

The FLSA, which was originally enacted in 1938,was passed by Congress under its power to regu-late interstate commerce.51 The FLSA was origin-ally found to be a valid exercise of Congressionalpower in the Darby case and not to be an invasionof the states' reserved powers. However, theFLSA did not apply to state and local governmentemployees at that time.

The National League of Cities argued that the1974 amendments severely limited the states' abili-ty to structure employer-employee relationships inareas of government reserved to the states such asfire prevention, police protection and public healthservices. This, the League urged, was not withinthe power of Congress under the CommerceClause. The Supreme Court agreed.

The Supreme Court opened its consideration ofthe case by noting that:

In Fry, supra, the Court recognized thatan express declaration of this limitation isfound in the Tenth Amendment:

While the Tenth Amendment has beencharacterized as a "truism," stating mere-ly that 'all is retained which has not been

surrendered,' United States v. Darby, 312U.S. 100, 124 (1941), it is not without sig-nificance. The amendment expressly de-clares the Constitutional policy that Con-gress may not exercise power in a fashionthat impairs the states' integrity or theirability to function effectively in a federalsystem.62

The Court continued this line of reasoning andthen concluded its discussion as follows:

If Congress may withdraw from the statesthe authority to make those fundamentalemployment decisions upon which theirsystems for performance of these func-tions must rest, we think there would belittle left of the states' "separate and inde-pendent existence." Coyle, 221 U.S. at580. Thus, even if appellants may haveoverestimated the effect which the act willhave upon their current levels and pat-terns of governmental activity, the disposi-five factor is that Congress has attemptedto exercise its Commerce Clause authorityto prescribe minimum wages and maxi-mum hours to be paid by the states in theircapacities as sovereign governments. In sodoing, Congress has sought to wield itspower in a fashion that would impair thestates' "ability to function effectively in afederal system," Fry, 421 U.S. at 547n.17. This exercise of Congressionalauthority does not comport with thefederal system of government embodied inthe Constitution. We hold that insofar asthe challenged amendments operate todirectly displace the states' freedom tostructure integral operations in areas oftraditional governmental functions, theyare not within the authority granted Con-gress by Art. I, §8, cl. 3.63

The Court limited its holding to the powers ofCongress under the Commerce Clause and in afootnote expressly stated that its opinion did notextend to grants. In the footnote the Court statedthat:

We express no view as to whether differ-ent results might obtain if Congress seeksto affect integral operations of state gov-ernments by exercising authority granted

it under other sections of the Constitutionsuch as the spending power. Art. I, §8, cl. 1or §5 of the Fourteenth Amendment."

A number of commentators have speculated up-on the potential impact of League of Cities ongrants and some of these commentators have feltthat League of Cities portended significant prob-lems for the federal government in carrying outthe grant-in-aid program."

The Supreme Court did hold in League of Citiesthat the Tenth Amendment places an affirmativelimitation on the powers of Congress. Earlierdiscussion has shown that the Congress is con-strained by the affirmative limitations of the Con-stitution in carrying out the taxing and spendingpower." Thus, by analogy League of Cities standsfor the principle that the Tenth Amendment placesan affirmative limitation on the powers of Con-gress under the taxing and spending clause.

It is unclear what those limitations are and a lit-tle more than a year after the League of Cities casewas handed down, the Supreme Court summarilyaffirmed the decision by the District Court for theEastern District of North Carolina in NorthCarolina v. Califano," which held that the imposi-tion of a grant condition requiring the state toamend its constitution as a condition of receivingcertain grants did not violate the Tenth Amend-ment.

In this case, the State of North Carolina broughta lawsuit against the Secretary of Health, Educa-tion and Welfare challenging the Constitutionalityof the National Health Planning and Resources De-velopment Act of 1974.58 This act was passed by theCongress "to facilitate the development of recom-mendations for national health planning policy, toaugment areawide and state planning for healthservice, manpower and facilities, and to authorizefinancial assistance for the development of re-sources to further that policy."6g The actauthorizes the Secretary of HEW to make grantsto states to establish state health planning and de-velopment agencies, state health coordinatingcouncils, and health services agencies at the locallevel. The act establishes numerous requirementsfor receipt of assistance designed to improve thequality of health services and to control the costs ofhealth services.

At issue in the North Carolina case was the re-quirement in the National Health Planning Actthat the state establish a certification of need pro-

o

15

gram. Under this F -:ram the state, as a conditionfor receiving fum,,, was required to agree toregulate the build. of new public and privatehealth facilities ar, the provision of public andprivate health services to assure that only thoseservices and facilities found to be needed would beoffered or developed in the state.

If a state fails to negotiate an acceptable agree-ment with HEW by July 1980, the Secretary ofHEW must withdraw funding under the NationalHealth Planning Act as well as "other" federalhealth programs, including Medicaid, the largest ofall grant programs, until such agreement becomeseffective.

The State of North Carolina argued that the actcrossed the line from inducement to coercion andwas a violation of the Tenth Amendment and theSupreme Court's decision in the Steward MachineCompany case.6° The state argued that the require-

16 ments to regulate private institutions violated thestate constitution GIT-1 that by proposing the sanc-tion of withdrawi Medicaid and other healthcare funds the stz,14-, was placed in the untenableposition of having, amend its constitution or for-go substantial fedeni funding for health care. TheCourt on this point stated:

The plaintiff, North Carolina, would . . .

find the condition coercive under theunique circumstances applicable to it. Thissituation arises because the SupremeCourt of North Carolina, by declaring thatthe Constitution of North Carolina, as itpresently exists, proscribes the creationand operation of a state certificate of needmechanism. As a result of that rulingNorth Carolina is threatened with a fui,ureloss of federal aid under some 42 federalhealth assistance programs, a loss whichcan only be avoided by a constitutionalamendment. When a legislative conditionoperates that drastically upon a state, theplaintiff contends, it becomes "coercive,"and not simply inducement . . . . Simplybecause one state, by some oddity of itsconstitution may be prohibited from com-pliance is not sufficient ground, though, toinvalidate a condition which is legitimatelyrelated to a national interest sought to beachieved by a federal appropriation andwhich does not operate adversely to therights of the other states to comply. Were

this not so, any state, dissatisficc r somevalid federal condition on a fe:_ itcould thwart the Congressionalthe expedient of amending its cor by securing a decision of ipreme court. The validity of th_the federal government under ti-tution to impose a condition ralgrants made under a proper Constituuunalpower does not exist at the mercy of thestate constitution or decisions of statecourts."

The Tenth Amendment limits have also beenconsidered by other federal courts after League ofCities and all have upheld the challenged grantlaws.

In the case of Montgomery County, Maryland v.Califano,62 the District Court for the District ofMaryland considered a challenge by MontgomeryCounty to the Constitutionality of another provi-sion of the National Health Planning Act. This de-cision was rendered before the Supreme Court de-cision in the North Carolina v. Califano case. Theissue in this case was a provision that allowed thelocal health services agencies to make decisionswhich could not be overruled by the local countygovernments. The court found there was no provi-sion in the National League of Cities case whichcould be construed as limiting the authority of theCongress to establish the grant program of the Na-tional Health Planning Act with its inducementsand sanctions." The court stated that:

The act imposes no civil or criminal penal-ties on such states or their officials. Whilethe withholding of federal funds in someinstances may resemble the imposition ofcivil or criminal penalties and while eco-nomic pressure may threaten such havocto a state's well-being as to cause the fed-eral legislation to cross the line which di-vides inducement from coercion, that lineis not crossed in this case. Nor does the actdisplace local initiative with federal direc-tives. The act mandates essentially a coop-erative venture among the federal govern-ment and state and local authorities."

In a second case, Macon v. Marshall," also de-cided before North Carolina, the district courtfound that Macon was required to comply with fed-eral regulations governing employees' rights, in-

2.1

The Tenth Amendmentlimits have also been consideredby other federal courts after theLeague of Cities and all haveupheld the challenged grantlaws. 99

eluding local public employees' rights under feder-al grant programs even though under the NationalLeague of Cities case such regulations would be un-constitutional as issued. In furtherance of Con-gress's power to regulate commerce under theCommerce Clause, the court discussed NationalLeague of Cities as follows:

Unlike the amendment to the minimumwage laws which included states and politi-cal subdivisions as employers under theminimum wage laws and thereby requiredstate and political subdivisions to pay theiremployees a Congressionally determinedminimum wage and comply with the manyother federal requirements, the UrbanMass Transportation Act does not directlyrequire or command anything of states ortheir political subdivisions. Neither statesnor political subdivisions are compelled toparticipate in the grand federal schemecreated by the act and thereby receive fed-eral money. The participation is purely attheir option. It is because of this that Ma-c:-,n is not now participatingit has electednot to.66

In a third case, Florida Department of Health v.Califano," the State of Florida brought an actionagainst the Secretary of Health, Education andWelfare challenging the Constitutionality of regu-lations issued by the Secretary of HEW under theRehabilitation Act." This act authorizes grants tostates in meeting the cost of services to the handi-capped. As a condition of receipt of the funds, thestate must designate state agencies to administerthe funds. The state agency must meet certainminimum statutory and regulatory requirements.

The state asserted that the Rehabilitation Act, tothe extent that it conditions grant funds on theadoption by the state of particular governmentalstructure, violated the Tenth Amendment. The

state relied almost exclusively on theCourt ruling in National League of CI ies. Thecourt rejected the state's reading of NationalLeague of Cities and coneLded that the case wasone "where the federal intr'ision is wholly indirectand limited to measures meant to insure the properfunctioning of federally funded programs. "69 TheCourt further stated:

Congress, through the Rehabilitation Act,has extended substantial grants-in-aid tothe states as an inducement for their parti-cipating in a shared program providing vo-cational rehabilitation services to thehandicapped. This inducement carries withit certain conditions Congress deems es-sential to the functioning of the program;however, any state which objects to the"strings" attached to receipt of the federalfunds has the option to refuse both thegrants-in-aid and the objectionable condi- 17tions. The act does not impose a set of co-ercive, mandatory requirements such aswere involved in National League ofCities."

In affirming the district court's decision in NorthCarolina v. Califano, the Supreme Court servednotice that it was not inclined to test thetheoretical or practical limitations that the TenthAmendment places on the Congress's power underthe taxing and spending clause to induce state ac-tion in furtherance of the general welfare of the na-tion. The lower federal courts showed a similar re-luctance after League of Cities and before theNorth Carolina case.

In a short span of years, we have moved far be-yond the handful of grant programs that existedwhen the Supreme Court examined the case ofMassachusetts v. Mellon or even when it consideredthe Steward Machine Company case.

Grant-in-aid programs affect each and every as-pect of state and local government, reaching intothe executive, legislative, and judicial branches.The Health Planning Act intrudes upon state andlocal operations to a greater degree than almostany other grant program. It virtually mandates thepassage of legislation by state or local govern-ments. The consequences of a state's action not tocomport with the Health Planning Act go far be-yond simple termination of assistance under oneprogram but go to all health programs within astate. Withdrawal of federal funds for failure to

22

comply with the Health Planning Act would cripplea state's efforts to maintain health care assistancefor citizens of that state, and yet the SupremeCourt summarily upheld the authority of Congressunder the taxing and spending powers to imposesuch limitation on expenditure of federal fundswithout violating the Tenth Amendment.

It may be that the use of grant programs as aninstrument of national policy has become too per-vasive and too widespread for an argument to bemade that any exercise of the Congress's powerunder the taxing and spending power, short of vir-tual federal usurption of state power by the Con-gress, would be overturned by the Supreme Courtunder the Tenth Amendment."

THE LIMITS OF CONGRESSIONALAUTHORITY TO ESTABLISH

18 GRANT PROGRAMSThe authority of Congress to establish grants-in-

aid under the taxing and spending power as notedearlier cannot be exercised in violation of the af-firmative limitations placed by the Constitution onCongressional powers.

In Shapiro v. Thompson72 in 1969 for example,the Supreme Court considered provisions of theAid to Families with Dependent Children (AFDC)grant-in-aid programs which limited eligibility forAFDC welfare benefits to individuals who lived in3. state for one year.

The Court held that the Social Security Actwhich established the AFDC program could not beread to support the one-year limitation since theone-year limitation violated the Equal ProtectionClause of the Fourteenth Amendment. The Courtstated that:

Congress is without power to enlist statecooperation in a joint federal-state pro-gram by legislation which authorizes statesto violate the Equal Protection Clause.73

In Tilden. v. Richardson,74 the Supreme Courtconsidered a challenge to the authority of Con-gress to authorize grants for the building of facili-ties at church-affiliated colleges and universities.In Tilden. the Court held that provisions of Title Iof the Higher Education Facilities Act of 1968violated the First Amendment by authorizing thechurch-affiliated schools to use the facilities, con-structed with grants, for religious purposes 20

23

years after their initial construction. The Court didhold that grants could be used to build the facilitiesas long as the primary effect of the grant was notto advance or inhibit religion.

A number of federal courts recently heard aseries of challenges to the Constitutionality of theLocal Public Works Capital Development and In-vestment Act of 1976, as amended by the FublicWorks Employment (PWE) Act of 1977.76

The PWE Act established a public works grantprogram to be administered by the Secretary ofCommerce through the Economic DevelopmentAdministration. At issue in these cases was a pro-vision in the PWE Act that prohibited the Secre-tary of Commerce from making grants to localgovernments unless they provided assurances thatat least 10% of the amount of each grant be ex-pended for minority business enterprises (MBE).76

The lawsuits were brought by state associationsof general contractors representing their member-ships' interest and by nonminority contractorsagainst the Secretary of Commerce. The specificquestion presented in these cases was whether theMBE provision violated the plaintiff`' right to dueprocess of law by creating a classiaation whichprovided for the granting of federal assistancesolely on the basis ofrace.

The three courts of appeals that considered theissues all upheld the Constitutionality of the MBEprovision. In Fullilove v. Kreps,77 for example, thesecond circuit noted in 1978 that: "When Con-gress seeks to exercise its spending powers, it isrequired to distribute federal funds in a mannerthat neither violates the equal protection rights ofany group nor continues the effects of violationsthat have occurred in the past."

In Fullilove, the court found that Congress in en-acting the MBE provision provided a set aside offunds to benefit minority contractors and that thepurpose of this benefit was to enact a remedy forpast discrimination.

The court then noted that the government's in-terest in overcoming past discrimination is suffi-ciently compelling to allow the use of racialpreferences.

Fullilove was appealed to the Supreme Courtwhere in the decision of Fullilove v. Klutznick,79the Supreme Court ruled that Congress may re-quire recipients of grants to use 10% of the grantfunds as provided by the MBE provision to procuresupplies and services from businesses owned and

controlled by members of statutorily identifiedminority groups. Justice Burger, who issued theCourt's majority opinion, found that Congressunder the spending power can further nationalpolicy objectives by conditioning receipt of federalmoney upon compliance by the recipient with feder-al statutory directives. In upholding the MBE pro-vision, Justice Burger cited the Supreme Court'sdecision in the Steward Machine Company case. 80

EFFECT OF THESUPREMACY CLAUSE

The "Supremacy Clause" of the Constitution87has been interpreted by the Supreme Court to pro-vide that when Congress passes laws pursuant toits Constitutional powers, conflicting state law andpolicy must yield.

In King v. Smiths' the Supreme Court in 1968considered regulations issued by the State ofAlabama to expend funds received by Alabamathrough grants-in-aid. The grants-in-aid weremade under the Social Security Act for the AFDCprogram.

-I

The Supreme Court noted that "the AFDC pro-gram is based on a scheme of cooperativefederalism."" States, the Court observed, are notrequired to participate ibut those that do par-ticipate are required to submit a plan which con-forms with the requirements of the Social SecurityAct and with HEW rules. The plan must be approv-ed by the Secretary of HEW."

The Supreme Court held that the Alabamaregulations which were incorporated in the plansubmitted to HEW were invalid because they con-flicted with the HEW rules. In an oblique referenceto the Supremacy Clause the Court asserted that:

There is of course no question that thefederal government, unless barred bysome controlling Constitutional prohibi-tions, may impose the terms and condi-tions upon which its money allotments tothe states shall be disbursed, and that anystate law or regulation inconsistent withsuch federal terms and conditions is to thatextent invalid.86

In 1971, in Townsend v. Swank," the SupremeCourt expressly held that a state law which was in-consistent with the AFDC regulations was invalidunder the Supremacy Clause.88

THE LEGAL RELATIONSHIPCREATED BY GRANTS

Although courts once labeled grants as gifts andtrusts, the most consistent view is that moderngrants establish a contractual relationship betweenthe federal grantor and the grantee who acceptsthe federal grant.

Where the grantee is a private party and thegrant is being given to support the activities of agrantee who promises to use the money to furthera national objective, it is easy to define and identifythe elements of a contract.

When the grantee is a state or unit of local gov-ernment. questions of federalism overlay the rela-tionship and enter into the legal equation. Princi-ples like "caveat emptor" seem particularly inap-propriate on the one hand. On the other hand, how-ever, there are two distinct parties to the grant.There is an offer of a grant by the federal govern-ment and an acceptance by the state or local gov-ernment. There is a mutual exchange of promisesevidenced in writing.

An early case which considered the legal natureof federal grants was McGee v. Mathias.89 At issuewas an 1850 act which granted to the states all theswamp and overflowed land in the state then be-longing to the federal government. The grantswere made on the condition that the proceeds forsale of some of the lands be applied, as far as nec-essary, to the reclaiming of the lands for cultiva-tion.

The grants at issue in McGee v. Mathias weremade to Arkansas and accepted for the state by thelegislature.

In McGee the Court stated:

It is not doubted that the grant by theUnited States to the state upon conditions,and the acceptance of the grant by thestate, constituted a contract. All theelements of a contract met in thetransactioncompetent parties, propersubject matter, sufficient consideration,and consent of minds. This contract wasbinding upon the state and could not be vi-olated by its legislation without infringe-ment of the Constitution."

The Supreme Court and the lower federal courtshave consistently treated monetary grants as cre-ating a contractual arrangement. Corwin in hisbook on the Constitution concludes that grants-in-

24

19

66 A federal grant is of coursenot a federal contract as the termis commonly understood.

aid create a quasi-contractual relationship betweenthe national government and the states because:

In entering upon a compact to which Con-gress has given its consent a state acceptsobligations of a legal character which theCourt and/or Congress possess amplepowers to enforce. Nor will it avail a stateto endeavor to read itself out of its obliga-tions by pleading that it has no constitu-tional power to enter upon such an ar-rangement and has none to fulfill its dutiesthereunder.9I

20 Some of the more recent pronouncements of theSupreme Court which have also emphasized thecontractual obligations created by grants includeone of the leading civil rights cases, Lau v.Nichols,92 decided in 1974. In Lau the SupremeCourt found that the San Francisco school districtin accepting education grants from the Depart-ment of Health, Education and Welfare "contrac-tually agreed to 'comply with Title VI of the CivilRights Act of 1964 . . . and all requirements im-posed by or pursuant to that Title . . . ' and also im-mediately to 'take any measures necessary to ef-fectuate this agreement'."93

In 1977, in a case involving grants by the FederalAviation Administration under the Airport andAirway Development Act of 1970,94 the SupremeCourt made numerous references to the "con-tract" between the FAA and its grantee, De KalbCounty, GA.96 The Supreme Court stated at onepoint that:

The operations of the United States in con-nection with FAA grants such as these areundoubtedly of considerable magnitude.However, we see no reason for concludingthat these operations would be burdenedor subjected to uncertainty by variantstate-law interpretations regardingwhether those with whom the UnitedStates contracts might be sued by third-party beneficiaries to the contracts."

Lau and Miree are part of a larger body of impor-tant federal case law in which the courts have

relied on the contract analogy to allow the federalgovernment and third parties to enforce the termsof grants in furtherance of the national policiesestablished by grants.97

A federal grant is of course not a federal con-tract as the term is commonly understood. It is oneentered into under laws specifically authorizing thefederal government to enter into contracts. Feder-al grants are governed by different policies, laws,regulations, and procedures than federal procure-ment contracts.

The differences between grants and contractswere made even clearer in 1978 with the passageof the Federal Grant and Cooperative AgreementAct." This act provides a single generic source ofauthority for all federal agencies to award grants,cooperative agreements and contracts. It does notrepeal or replace existing authority to make grantsbut provides authority to agencies to use either agrant, cooperative agreement, or contract as theappropriate instrument for defining the relation-ship between the federal government and the partywith which the federal government is dealing.

THE APPLICATION OFPRINCIPLES OF ADMINISTRATIVE

LAW TO GRANTS

The federal agencies involved in awarding andadministering grants and in enforcing the termsand conditions of grants are, of course, administra-tive agencies and are governed by that body oflegal principles which has come to be known as ad-ministrative law."

The Administrative Procedures Acti°° is themainspring of federal administrative law and pro-vides the basic legal framework which governs theactivities of federal ageneies.101 The act establishesprocedures for agency rulemaking, agency adjudi-cation, and judicial review of federal adminis-trative agencies' actions.

Agency rulemaking is generally governed by 5U. S.0 . §553.1" This section sets forth proceduresan agency must follow in issuing regulations gov-erning actions taken by the agency. Under 5L.S.C. §553, a general notice of proposed rulemak-ing must be published in the Federal Register. Thenotice must contain the terms and substance of theproposed rule or a description of the subject and is-sues involved. The required publication must ordin-arily be made not less than 30 days before the ef-fective date.

2 L)

After notice, the agency must give persons anopportunity to participate in the rulemakingthrough submission of written data, views or argu-ments, with or without an opportunity for oralpresentation. Following review of the comments,the agency can issue final regulations. Although byits express terms Section 553 does not have to befollowed by agencies in issuing regulations relatingto grants, most major federal grantor agencieshave formally adopted the procedures of Section553 and apply them to all regulations governinggrants.103

In National Welfare Rights Organization v.Mathews,'" the Court of Appeals for the District ofColumbia circuit held that regulations issued bythe Department of Health, Education and Welfareto govern expenditures under the AFDC grantprogram had to be issued in accordance with Sec-tion 553 because the Secretary of HEW had for-mally adopted the rulemaking requirements of Sec-tion 553 for grants.'" The regulations were in-validated because the requirements of Section 553were not strictly followed.

Agency adjudication is governed by 5 U.S.C.Section 554. As used in the APA, "agency ad-judication" can mean any agency action that is notrulemaking. Adjudication, however, has come tomean agency decisionmaking on the record basedon an administrative hearing.'"

The decision to award or not to award a grant or-dinarily falls into an area known as informal agen-cy action which is neither adjudication nor rule-making.'" Federal agencies are given considerablediscretion in deciding whether to award or not toaward grants and there are no provisions of theAPA or other laws which establish general require-ments that federal agencies must follow in award-ing grants.

Where the issue is termination of a grant by afederal agency or suspension of grant funds, many

grant statutes provide for a formal administrativehearing. 108 This is adjudication and in some in-stances these hearings must be carried out in strictaccord with the adjudication requirements of Sec-tion 554 of the Administrative Procedures Act. 1°9

Some agencies also provide by regulation for anadministrative bearing which is in the nature ofagency adjudication. In Southern Mutual Help As-sociation v. Califano,"° the Court of Appeals forthe District of Columbia circuit dire ,,d theDepartment of Health, Education and Welfare tofollow its regulations and provide a hearing to theSouthern Mutual Help Association (SMHA) beforerefusing to provide further assistance."

Where the question presented is the improperdenial of a grant, or the improper award of a grant,the only recourse to those disagreeing with theagency action in the grant area is often a lawsuit infederal court. Such lawsuits can be entertainedunder the judicial review provisions of the Admin-istrative Procedures Act.

In reviewing a federal agency action, the court isgoverned by the standards of 5 U.S.C. 706, whichprovides in part that a court shall "hold unlawfuland set aside agency actions, findings, and conclu-sions which are arbitrary, capricious, in abuse ofdiscretion, or otherwise not in accord with law"and "which are done without the observance ofprocedure required by law."

CONCLUSION

As the forgoing analysis has shown, there is asolid Constitutional and legal foundation for theconsideration of issues involving grants. The use ofgrants as a principal instrument for furthering na-tional domestic policies is firmly established. Moreuniform application of principles examined in thisarticle will follow in the coming years.

FOOTNOTES1 The term "federal grant" as used in this article encompassesany disbursement or transfer of property by the federal gov-ernment which supports programs and projects that benefitthe public and which are accompanied by an agreement by therecipient of the property or disbursement to comply with anyterms or conditions on the use cf the property or disburse-ment. The term includes money and land grants to states,units of local government, public and private institutions, andindividuals as well as cooperative agreements, revenue shar-ing payments and in-kind aid, such as purchase of com-modities. The United States Office of Management and Bud-get in Circular A-11, "Preparation and Submission of Budget

Estimates," defines grants-in-aid as resources provided bythe federal government in support of a state or local programof government service to the public. Under the circular,grants-in-aid include:

a) Direct cash grants to state or local governmentalunits, to other public bodies established under state orlocal law, or to their designees (e.g., federal aid forhighway construction);b) Outlays for grants-in-kind, such as purchases ofcommodities distributed to state or local governmen-tal institutions (e.g., school lunch programs);c) Payments to nonprofit institutions when:1) The program is coordinated or approved by a stateagency (e.g., the medical facilities construction pro-

gram);2) Payments are made directly because of provisionsof a state plan or other arrangements initiated by astate or local government (e.g., federal aid for highereducation),3) Payments are made with the explicit intent of aug-menting public programs (e.g., corimunity action pro-grams);di Federal payments to Indian tribal governments,when:1) The legislation authorizing the payment includessuch entities within the definition of eligibl state orlocal units, or2) The tribal government acts as a nonprofit agencyoperating ,coder state or loca? auspices (as described in(c) above);e) Payments to _egional commissions and organ-izations that are redistributed at the state or locallevel to provide public services;f) Federal payments to state and local governmentsfor research and devel:ipment that is an integral partof the -statc and local government's provision of ser-vices to the general public (e.g.. researchon crime con-trol financed from law enforcement assistance grantsor on mental health associated with the provision ofmental rehabilitation services);

22 g) Shared revenues, a subcategery of grants. Thesepayments to state or local governments are computedas a psrcentage of the proceeds from the sale of cer-tain federal property, products, or services (e.g.,payments from receipts of Oregon and Californiagrant lands) or are tax collections by the federalgovernment that are passed on to state or localgovernments (e.g., internal revenue collections forPuerto Rico).

2 In 1963 there were only 160 grant-in-aid programs author-ized by the Congress. Grants in the amount of approximately$8.3 billiot were awarded to state and local governments. SeeACIR, Categorical Grants: Their Role and Design, A-52,Washington, DC, U.S. Government Printing Office, Table1-5, p. 22 and Tablc 1-7, p. 25.

3 Between 1963 and 1967 the number of grants-in-aid morethan doubled to the level of 379, and by 1976 there were 447grant-in-aid programs. See, ACIR, ibid, Table 1-7, p. 25 andp. 5. Federal grant-in-aid outlays to state and local govern-ments are estimated to be $82.9 billion in 1980. MB SpecialAnalyses Budget of The United States Government, FiscalYear 1980, Washington, DC, U.S. Government Printing Of-fice, p. 212.

4 OMB, ibid. Special Analyses Budget of the United StatesGovernment, Fiscal Year 1980, Washington, DC, U.S. Gov-ernment Printing Office, p. 212.

& See Davis, Administrative Law of The Seventies (1976), 1977Cumm. Supp. at 204-205.

6 These laws impose additional requirements on recipients ofall federal grants separate and apart from the basic require-ments of the statutes creating the grant program. For a list-ing of these statutes see (1) Madden, Future Directions forFederal Assistance Programs, Lessons from Block Grantsand Revenue Sharing, 36 Fed. B.J. 107 (1977), and (2) Mad-den, The Right to Receive Federal Grants and Assistance, 37Fed. B.J. 17, 20 n. 23 (1979).

7 42 U.S.C. S2000d (1976).42 U.S.C. 54231 etseq. (1976).

°See Madden, The Right to Receive Federal Grants and As-sistance, supra n. 6.

'° 262 U.S. 447 (1923)." 297 U.S. 1(1936).12 301 U.S. 548 (1937).

13 33C U.S. 127 (1947)."In United States v. Butler, the Supreme Court discussed the

authority of the Congress to "provide for the general wel-fare" as follows:

As elsewhere throughout the Constitution the section inquestion lays down principles which control the use ofthe power, and does not attempt meticulous or detaileddirections. Every presumption is to be indulged in favorof faithful compliance by Congress with the mandates ofthe fundamental law. Courts are reluctant to adjudgeany statute 'n contravention of them. But, under ourframe of government, no other place is provided wherethe citizen may be heard to urge that the law fails to con-form to the limits set upon the use of a granted power.When such a contention comes here we naturally requirea showing that by no reasonable possibility can the chal-lenged legislation fall within the wide range of discretionpermitted to the Congress. How great is the extent ofthat range, when the subject is the promotion of theganeral welfare of the United States, we hardly needremark. But, despite the breadth of the legislative dis-cretion, our duty to hear and to render judgment re-mains. If the statute plainly violates the stated principleof the Constitution we must so declare. 297 U.S. at 67.

15 "When money is spent to promote the general welfare, theconcept of welfare or the opposite is shaped by Congress, notthe States," Helvering v. Davis, 301 U.S. 619, 645 (1937).

16 17 U.S. (4 Wheat.) 316 (1819).17 17 U.S. (4 Wheat.) at 421.18 71 U.S. 4 Wall. 143 (1866).19 "[lit is not doubted that the grant by the United States to the

state upon conditions, and the acceptance of the grant by thestate, constitutes a contract. All the elements of a contractmet in the transaction-competent parties, proper subject-matter, sufficient coasideration, and consent of minds. Thiscontract was binding upon the state, and could not be violatedby its legislation without infringement of the Constitution."71 U.S. at 155.

2° The Tenth Amendment reads as follows: "The powers notdelegated to the United States by the Constitution, nor pro-hibited by it to the States, are reserved to the states respec-tively, or to the people." U.S. Const. Amend. X.

21 17 U.S. 4 Wheat 316 (1819).22 78 U.S. 11 Wall. 113 (1871).23 247 U.S. 251 (1918).24 297 U.S. 1(1936).25 297 U.S. at S3.26 262 U.S. 447 (1923). The two cases were disposed of to-

gether in a single opinion of the Court.27 42 Stat. 224 (1921).28 262 U.S. at 479, 480.29 262 U.S. at 480.3° 262 U.S. at 482.31 United States v. Butter, 297 U.S. 1, 66 (1936).32 297 U.S. at 74." 297 U.S. at 73, 74,34 Corwin, National-State Cooperation-Its Present Possibili-

ties, 46 Yale Law Journal 599, 621 (1937).35 30i U.S. 548 (1937).36 801 U.S. at 586, 587.37 The Steward Machine Company case and Helvering v. Davis,

301 U.S. 619 (1937), supra. n. 30 are sometimes referred toas the Social Security Act cases.

38 17 U.S. 4 Wheat. 316 (1819).39 78 U.S. 11 Wall. 113 (1871).40 306 U.S. 466, 486 (1939).t1312 U.S. 100 (1941).42 312 U.S. at 124.43 330 U.S 127 (1947).

" 330 U.S. at 143.45330 U.S. at 143, 144."179 U.S. 223 (1900).47 In Butler the court stated that:

Hamilton himself, the leading advocate of broad inter-pretation of the power to tax and to appropriate forthe general welfare., never suggested that any powergranted by the Constitution could be ussd for thedestruction of local self-government in the states.Story countenances no such doctrine. It seems neverto have occurred to them, or to those who have agreedwith them, that the general welfare of the UnitedStates . . might be served by obliterating the consti-tuent members of the Union. 297 U.S. at 77 (1936).See also text acompanying n. 44.

48 426 U.S. 833 (1976).49See text accompanying notes 58.71, infra.55 29 U.S.C. 5201 et seq., as amended (1976). The 1974 amend-

ments are found at 88 Stat. 55.61 U.S. Const. Art. I, sec. 8, cl. 3. This is commonly referred to

as the "Commerce Clause" or "Commerce Power."" 426 U.S. at 842, 843. in this quote, the Court was referring

to Fry v. United States, 421 U.S. 572 (1975) where the Courtheld that the Economic Stabilization Act of 1970 was Consti-tutional as applied to temporarily freeze the wages of stateand local government employees.

58426 U.S. at 851." 426 U.S. at 852 n. 17.55 See for example, Stewart, Pyramids of Sacrifice: Problems

of Federalism in Mandating State Implementation of Nation-al Environmental Policy, 86 Yale L.J. 1196 (1977); andSorett, Materials for Federal Bar Association Seminar onGrant Law, The National League of Cities: A New Anthem?

66 Supra n. 14. See also discussion infra at n. 72 and followingtext.

67 445 F. Supp. 532 (E.D. N.C. 1977), aff'd 435 U.S. 962, 98 S.Ct. 1597 (1978).

58 42 U.S.C. S300k et seq. (1976).59 42 U.S.C. S300k(b) (1976).60 The judge in North Carolina citing an earlier opinion, charac-

terized the inducement in grant programs "as [t]he alter-native whip of economic pressure and seductive favor, whichare legitimate under the constitutional spending power." 445F. Supp. at 535 n. 6, citing State of Maryland v. EPA, 530F.2d 215, 228 (4th Cir. 1975), vacated and remanded, 431U.S. 99 (1977).

61 445 F. Supp. at 535. The court distinguished the League ofCities case in a footnote on two points. First, the court notedthat the National Health Planning Act did not directly regu-late state actions. Second, the court noted that the "constitu-tional authorization in this case is the spending power" 445 F.Supp. at 536.

62 449 F. Supp. 1230 (D. Md. 1978)."The court rejected arguments that League of Cities applied

to the case, noting that the National Health Planning Act"neither impairs the integrity of the states nor unduly re-stricts the freedom of the states to structure their health carefunctions."

" 449 F. Supp. at 1247.65 439 F. Supp. 1209 (M.D. Ga. 1977).66 439 F. Supp. at 1217, quoted in Montgomery County, Md. v.

Califano, supra at 1249.67 449 F. Supp. 274 (N.D. Fla. 1978), ard. 585 F. 2d 150 (5th

Cir. 1978).68 29 U.S.C. 5720 et seg. (1976).69 449 F. Supp. at 284. In a footnote to this quote, the court

stated that:The dissenting opinions of three justices in NationalLeague of Cities provides additional support for this

court's reading of that decision. Apparently it was theunderstanding of the dissenters that the majority didnot intend to rule out Congress' ability to conditionreceipt of grants-in-aid on compliance with federallyimposed restrictions on state government. 426 U.S. at880, 96 S. Ct. 2465 (Brennan, J., dissenting). 449 F.Supp. at 284. n. 13.

70 449 F. Supp. at 284.71 The Court may not have been presented with any such prob-

lem iri examining the exercise of Congressional power underthe Commerce Clause because the intrusions by the Congresson a state's power through the Commerce Clause have beenmore limited and because there is a long history of SupremeCourt concern and involvement with the, application of theCommerce Clause by the Congress. In such cases as NationalLeague of Cities where the exercise of commerce power wasclearly impeding the effective operation of the state and localgovernment, the Supreme Court struck the action asviolating the Tenth Amendment.

The lower federal courts have recently reached similar posi-tions on actions by the Environmental Protection Agencyunder the Clean Air Act. This act is founded on the Com-merce Clause. Where the EPA interpreted this act as authori-ty to require states to pass laws establishing standards forclean air, the courts have generally found that such exerciseof power by EPA to be invalid because it violated the TenthAmendment by impermissibly coercing state action. See 23Maryland v. EPA, 530 F.2d 215 (4th Cir. 1975), vacated onother grounds, sub. nom. EPA v. Brown, 431 U.S. 99 (1977);and Brown v. EPA ,521 F. 2d 827 (9th Cir. 1976), vacated onother grounds, 431 U.S. 99 (1977). This author is not aware ofa single case where the Supreme Court has found a grant pro-gram to be unconstitutional. See Comment, The Federal Con-ditional Spending Power: A Search for Limits, 70 NW. U.L.Rev. 293, 307 (1975).

72 394 U.S. 618 (1969).78 394 U.S. at 641.74 403 U.S. 672 (1971).75 42 U.S.C. 6701 et seq. as amended (1976 and Supp. I 1977).76 The MBE provision, which appears in Section 103(f)(2) of

the PWE Act, 42 U.S.C. S6705(fX2) reads as follows:Except to the extent that the Secretary determinesotherwise, no grant shall be made under this chapter forany local public works project unless the applicant givessatisfactory assurance to the Secretary that at least 10percentum of the amount of each grant shall be ex-pended for minority business enterprises. For purposesof this paragraph, the term 'minority business enter-prise' means a business at least 50 per centum of whichis owned by minority group members or, in case of a pub-licly owned business, at least 51 per centum of the stockof which is owned by minority group members. For thepurposes of the preceding sentence, minority groupmembers are citizens of the United States who are Ne-groes, Spanish-speaking, Orientals, Indians, Eskimos,and Aleuts.

77 584 F.2d 600 (2nd Cir. 1978).78 584 F.2d at 602.79 48 L.W. 4979 (1980).80 48 L.W. at 4986.81 454 F. Supp. 766 (C.D. Calif. 1978). The district court noted

that in 1978 bills had been introduced in the Congress to pro-vide additional funds for grants under the PWE Act. 454 P.Supp. at 775.

82 U.S. Const., Art. VI, cl. 2. The clause reads as follows-,This Constitution, and the laws of the United Stateswhich shall be made in pursuance thereof, and alltreaties made, or which shall be made, under theauthority of the United State', shall be the supreme

law of the land; and the judges in every state shall bebound thereby, anything in the Constitution or laws ofany state to the contrary notwithstanding.

83 392 U.S. 309 (1968)." 392 U.S. at 316.85 392 U.S. at 317.86 392 U.S. at 333, n. 34.87 404 U.S. 282 (1971).88 Youakim v. Miller, 425 U.S. 237 (1976) and Miller v.

Youakim, U.S. , 99 S. Ct. 957 (1979). These cases aroseunder the Aid to Families with Dependent Children grantprogram and were brought by foster parents, who were car-ing for wife's minor siblings, to enjoin state foster care planwhich provided higher AFDC benefits to unrelated parentsthan to related parents. In the first of the cases, the questionof whether Illinois law conflicted with the Social Security Actin violation of the Supremacy Clause was referred back to thedistrict court for resolution. 425 U.S. at 233 and 237. The sec-ond case was an appeal from the judgment of the districtcourt which found that the Illinois law conflicted with the So-cial Security Act and was invalid under the SupremacyClause. 431 F. Supp. 40, 45 (N.D. I 11. 1976) aff'd. 562 F.2d483. On appeal the Supreme Court affirmed. Other cases in-clude: Carleson v. Remilland, 406 U.S.598 (1972); Van Lanev. Hurley, 421 U.S. 338 (1975); and Philbrook v. Glodgett, 421U.S. 707 (1975). In the 1978 North Carolina case cited

24 earlier, the Supreme Court in affirming the district court de-cision upheld a determination by that court that a state con-stitutional provision that was inconsistent with federal lawgoverning the expenditure of grant funds was invalid underthe Supremacy Clause. 445 F. Supp. at 536.

89 71 U.S. 4 Wall. 314 (1866).90 71 U.S. 4 Wall at 318.91 Corwin, The Constitution and What it Means Today, 88

(1964).92 414 U.S. 563 (1974).93 414 U.S. at 568, 569. Lau was a contract case. The Court ex-

pressly stated that it did not decide the matter on the basis ofthe Equal Protection Clause of the 14th Amendment but in-stead relied "solely" on Title VI of the Civil Rights Act.414U.S. at 566. The Court held that the failure of the San Fran-cisco School System to provide English language instructionto students of Chinese ancestry, who did not speak English,or to provide these students with other adequate instructionalprocedures denied these students a meaningful opportunityto participate in the public education program. In a concur-ring 'pinion, joined by the Chief Justice and JusticeBlackman, Justice Stewart found that the respondents, thestudents of Chinese ancestry, were suing as "beneficiaries ofthe federal funding contract between the Department ofHealth, Education and Welfare and the San Francisco UnitedSchool District." 414 U.S. at S 71 n.2 (Stewart, J. concurr-ing).

The Supreme Court's decision of last term in Chapman v.Houston Unified Welfare Rights Organization, 441 U.S. 600(1979), highlights the importance of the contract argument.In that decision, Justice Stevens held, despite a long series ofdecisions which appear to be to the contrary (see Stewart dis-sent 441 U.S. at 672), that an intended recipient of fundsunder federal grant programs could not establish jurisdictionto contest an action by a state grantee in denying benefitsunder the grant statute and 42 U.S.C. §1983, which providesthat every person who under color of state law denies anotherperson any rights, privileges or immunities secured by theConstitution and laws of the United States shall be liable tothe person injured in an action at law.

Prior to Chapman under Rosado v. Wyman, 397 U.S. (1970)and other cases cited supra at note 88, the Supreme Courtheld that suits in federal court by intended beneficiaries of

grants are proper under 42 U.S.C. S 1983, the Social SecurityAct, and 28 U.S.C. 51343 to secure compliance with the SocialSecurity Act.

Third party actions which are not based on Constitutionalclaims must be founded on 28 U.S. 51331, the general federalquestion statute which requires that the amount in con-troversy exceed $10,000. In the Chapman case the issue wasa conflict between state law under the AFDC program andthe Social Security Act. The Court held that the fact that theSupremacy Clause was an issue was not a sufficient basis forinvoking a Constitutional claim under 28 U.S.C. 1343 anddismissed the suit because the plaintiffs did not meet amountin controversy requirement. 441 U.S. at 600. Because of theSupreme Court's decision in Cannon v. The University of Chi-cago, 441 U.S. 667 (1979), the third party beneficiary issue isof less significance in establishing jurisdiction of a federalcourt to hear complaints of intended beneficiaries of federalgrant programs where such complaints may arise in areasprotected by Title VI of the Civil Rights Act, Title IX of theCivil Rights Act, and Section 504 of the Rehabilit,, tian Act of1973 and their analogues. In Cannon the Su ne Courtfound that a woman who established a prima case ofdiscrimination by the University of Chicago in violation of Ti-tle IX had an implied right of action under Title IX and underthe Supreme Court's rationale in Cart v. Ash, 422 U.S. 66(1976) to bring the actior, 'n federal courts. See also Madden,The Right to Receive Federal Grants and Assistance, supranote 6.

94 49 U.S.C. 51701 et seq. (1976).95 Miree v. DelCalb County, Georgia, 433 U.S. 25, 97 S. Ct. 2490

(1977). See also Wheeler v. Barrera, 417 U.S. 402 (1979),where the Supreme Court examined grants made under TitleI of the Elementary and Secondary Education Act of 1965,supra. The Court was asked to find that the State of Missouriwas not carrying out the terms of the grant as awarded by theDepartment of Health, Education and Welfare. The Courtremanded the case to the district court with instructions"simply to assure that the state and local agencies fulfill theirpart of the Title I contract if they choose to accept Title Ifunds." 417 U.S. at 427.

96 97 S.Ct. at 2494.97 In Euresti v. Stenner, 458 F.2d 1115 (10th Cir. 1972), the

court considered an action brought under the Hill-BurtonAct, 42 U.S.C. 5291 et seq., to enforce assurances in a grantfor the building of a hospital. The action was brought bypoorpeople as third party beneficiaries of assurances in the grantthat there would be made available in the facility a reasonableamount of services for people unable to pay for the services.The district court concluded that the Hill-Burton Act did notcreate a contractual relationship between the United Statesand the grantee. The Court of Appeals found that there was acontractual relationship and went on to find that:

The contract between appellees and the State of Col-orado explicitly incorporates the federal statutoryobligation. In turn, the state's obligation to provideassurances of compliance is the sine qua non for thefurnishing of federal funds. Indeed, appellee's obliga-tion is set out specifically in the closing papers signedby the hospital, the state and federal authorities.Nothing could be clearer: In receiving federal funds,appellees obligated themselves to dispense areasonable amount of free hospital services to thoseunable to pay. 458 F.2d at 1118-1119 (footnoteomitted).

In a leading case, cited by the Supreme Court in Lou, the 5thCircuit in Bossier Parish School Board v. Lemon, 370 F. 2d847 (5th Cir. 1967), held that certain black children living inBossier Parish were third party beneficiaries of an agreementarising out of a grant made by the federal government to the

29

Bossier Parish School Board and, as third party beneficiaries,they had a right to seek to enforce the terms of the agree-ment for their benefit between the United States and BossierParish.

In City of Inglewood v. City of Los Angeles, 451 F. 2d 948(9th Cir. 1971), the 9th Circuit held that the City of Inglewoodwas the intended third party beneficiary of assurances con-tained in a grant awarded by the Federal Aviation Adminis-tration to the City of Los Angeles, and that Inglewood could,therefore, bring an action to enforce the terms and conditionsof the grant agreement which were designed to benefit In-glewood.

Other cases involving third party beneficiaries includeRamirez Leal v. City Demonstration Agency, 549 F.2d 97(9th Cir. 1976); Natonabak v. Board of Education of Gallup-McKinley City School District, 355 F. Supp. 716 (D.N. Mex.1973); Poirrier v. St. James Parish Police Jury, 372 F. Supp.1021 (E.D. La. 1974), affd per curiam, 531 F.2d 316 (5th Cir.1976). See also discussion in n. 93.

99 42 U.S.C. 501 et seq.99 Professor Kenneth Culp Davis defines administrative law as

follows:Administrative law is the law concerning the powersand procedures of administrative agencies, includingespecially the law governing judicial review of ad-ministrative action . . . . Simpler definitions are aboutas good: Administrative law is the law of governmen-tal administration. One who 'administers' is one whois carrying out governmental objectives. Ad-ministrative law is the law that governs those who ad-minister any part of governmental activities. Davis,Administrative Law Treatise, §1.1 (2 ed. 1978).

100 5 U.S.C. §§551-559, 701-706.' °' For a comprehensive examination of the impact of the Ad-

ministrative Procedures Act, reference should be made to thetreatises and updates of Professor Davis, including the 1958Administrative Law Treatise and its 1970 update, Davis, Ad-ministrative Law of the Seventies (1978) and the 2nd editionof the Treatise, supra n. 99.

102 The term rule as used in the Administrative Procedures Actincludes "Mlle whole or a part of an agency statement of gen-eral or particular applicability and future effect designed toimplement, interpret, or prescribe law or policy" or whichdescribes "the organization, procedure or practice require-ments of an agency . . . " 5 U.S.C. §551(4). Rulemaking under5 U.S.C. §553 is sometimes referred to as "informal" rule-making to distinguish it from "formal" rulemaking carriedout pursuant to 5 U.S.C. SS556 and 557. "Formal" rulemak-ing encompasses rulemaking required to be made on therecord after opportunity for an agency hearing. Formal rule-making has little application to grants because grant regula-tions are generally not required to be made after opportunityfo' an agency hearing.

The rulemaking requirements of §553 are applicable towhat are sometimes referred to as "substantive" rules. Therequirements are not applicable to what are called inter-pretive rules or statements of policy. The difference betweensubstantive and interpretive rules is one of the more com-plicated issues that has arisen out of the implementation ofthe Administrative Procedures Act. As a general statement,an interpretive rule does not make new law or policy butmerely explains what Congress intended by a particularstatute.

Under Section 552 of the Administrative Procedure Act, in-terpretive rules and statements of general policy must gener-ally be required to be published in the Federal Register. If notpublished in the Federal Register, they must be incorporatedin a grant before they can be held to be binding on a federalagency. On this latter topic see: Yamada, Rules Related toFederal Grant Programs, 38 Fed. B.J. ____ (1979).

101 It is expressly provided in Section 553 that its provisions donot apply to matters "relating to . . loans, grants, benefitsor contracts and the courts have recognized that agencies is-suing grant regulations are not bound by the notice and com-ment provisions of Section 553. See Rodriquez v. Swank, 318F. Supp. 289 (D. Ill. 1970) aff d without opinion, 403 U.S. 901(1971); and Opelika Nursing Home, Inc. v. Richardson, 356F. Supp. 1338 (M.D. Ala. 1973), aff'd, 490 F.2d 841 (5th Cir.1974). Although notice and comment are not necessary, grantregulations may still have to be published in the FederalRegister under 5 U.S.C. §552. See Yamada, supra no. 102.

For a general discussion of rulemaking and grants see:Madden, The Right to Receive Federal Grants and Assistance,supra n. 6; Sky, Rule Making and the Federal Grant Processin the United States Office of Education, 62 U. Va. L. Rev.1017 (1976); and Bonfield, Public Participation in FederalRule Making Relating to Public Property, Loans, Grants,Benefits or Contracts, 118 U. Pa. L. Rev. 540 (1970).

104 533 F.2d 637 (D.C. Cir. 1976).105 The Secretary, by a notice in the Federal Register, 36 Fed.

Reg. 2532 (1971), adopted the rulemaking requirements of 5U.S.C. §553 for all HEW rulemaking. HEW, the court found,was therefore bound to follow the requirements of §553.There is a three-step process which the court held must be fol-lowed in order to meet the requirements of Section 553. Thisthree-step process was outlined in an article quoted by thecourt in National Welfare Rights Organization as follows: 25

Step one of Section 553 will yield the agency's initialproposal, its tenative empirical findings, importantadvice received from experts, and a description of thecritical experimental and methodological techniqueson which the agency intends to rely. Step two will pro-duce the written or oral replies of interested parties tothe agency's proposals and to all the other 'step one'materials. And step three will furnish the final rule,accompanied by a statement both justifying the ruleand explaining its normative and empirical predicatesthrough reference to those parts of the recorddeveloped in steps one and two. 533 F.2d at 649.

The HEW regulations were struck down because the regula-tions did not have. a firm empirical base and did not meet therequirements of S553. Most grantmaking agencies now follow§553 procedures. See Fed. Reg. 36412 (1978). In addition, allfederal agencies are required to obtain comments of affectedstate and local governments in issuing major federal regula-tions. See ExecutiVe 6rder 12.044, 43 Fed. Reg. 12661(1978).

'06 See Davis, Administrative Law of the Seventies §1.01 -1 andDavis, Administrative Law Treatise §1.4 (2d ed. 1978).

107 "'Informal action' means in the prevailing usage, any action(or determination in favor of inaction) that is taken without atrial-type hearing." Davis, Administrative Law Treatise,§1.4 (2nd ed. 1978). The bulk of federal grantor agency ac-tions can be characterized as informal actions. In only verynarrow instances, such as termination of grants or suspensionof funding, is a trial-type hearing required.

'1)8 See Madden, The Right to Receive Federal Grants andAssistance, supra n. 6 at 46 and 47.

'99 No grant can be terminated by the Law EnforcementAssistance Administration until the grantee has receivednotice of the intended termination and has been given an op-portunity for a hearing on the record in accordance with 5U.S.C. §554. See 42 U.S.C. §3757 (1976).

110 574 F.2d 518 (D.C. Cir. 1977).in The Department of Health, Education and Welfare has pro-

mulgated regulations which require the agency to hold hear-ings, if requested, before terminating grants, and the Courtof Appeals found that HEW had terminated SMHA's grantand SMHA was entitled to a hearing.

A Responseby Robert Wallick

Steptoe & JohnsonWashington, DC

Unfortunately, we have only a brief time thismorning for a very large subject. First off, I wouldlike to point to a paradox that a few in this roomhave heard me address before.

I had the pleasure of visiting The People's Re-public of China this fall with my wife and an inter-esting paradox came through to me then. Chinacertainly has one of the most controlled and regu-lated societies in the world. They're incredibly wellorganized and controlled and would be the delightof any computer-type organizer.

On the other hand, they have almost no writtenlaws and regulations. We, the land of the free andthe home of the brave, are being inundated by lawsand regulations. While some would say that ourfreedom comes out of the latter and there is a cer-tain element of truth in it, I would like to point outthat the. real basis for this surge for laws and regu-lations is the that we have a historic aversionto ex post facto t..,ype. laws. We feel that everybodyshould know in advance whether what they're do-ing is right or wrong. But of course, we've longpassed the point of diminishing returns and thevast amount of material we're putting out makes itless likely that people will know what the laws andregulations contain. A second reason for our exces-sive laws and regulations is that we want to reducearbitrariness of decision and to a certain extentthat happens.

I want to address in my brief time three ques-tions. What is this set that we call the law of3j

grants? What should the role of that law be? Anfinally, what is the balance of interest between thegrantee and the grantor? I'll hasten to add that myperspective is probably biased toward the set ofpeople known as grantees. I have not had consider-able experience with third-party litigation exceptwith contractors.

Now, when we talk about what is the set that wecall the law of grants, we must consider the para-meters set by the U.S. Constitution. Since TomMadden has addressed these, I won't deal withthem here. I will give you a reaction that perhapsthat not all speakers will share. I think the limitsthat the federal government has upon its actionsare very distant and very thin. I believe that theConstitution is, in fact, a sword which the Con-gress and the federal agencies can utilize to carryout almost anything they want to carry out, withinreason. We know they can't call for the execution

28 of the Governor of the State of Alabama, but, with-in reason, they can do almost anything they want.

When you look at North Carolinav. Ca lifano andother cases where the Constitution could have beenraised, like Lau v. Nichols and Bakke, the Constitu-tional limits are very thin. The power of the gov-ernment in the grants area is interpreted verybroadly. Someone may come along with a case, butno one has yet.

The second large group of what we call the lawis, of course, statutes enacted by Congress. Thesestatutes de& with crosscutting conditions; theydeal with de. direct program requirements. I knowof no effort in Washington, DC, that is more im-portant and has less chance of success than ACIR'seffort to consolidate and make uniform these laws.I think it's an absolute must that this happen, but Ithink it is absolutely inconceivable that it will hap-pen unless there's a groundswell of political sup-port that's not now apparent. Many of our prob-lems have their foundation in the differences instatutes, differences that really aren't needed, atleast in my humble opinion.

The second aspect of this statutory question isthe question of these crosscutting conditions, andI would respectively suggest that ACIR is deadwrong when it says that what we need is to achieveuniformity of enforcement by placing enforcemertin the hands of a single agency whose principal re-sponsibility may be that enforcement. If you wantthese programs to grind to a screeching halt, yougo that way. I think that with all due respect to theimportance of environment, employment, and his-

torical considerations, they need to be balancedagainst other considerations. And you can onlyachieve that balance in some tribunal that has allthose responsibilities. So I believe that ACIR ismaking a serious mistake in its present effort.*

The next areas are Presidential and executiveorders and 0MB circulars. This is an area that'sgrowing, at least in part, due to the fact that ourcircuit court of appeals is very reluctant to chal-lenge a Presidential exercise of executive order. Idirect your attention to AFLICIO v. Kahn whichupheld the President's efforts to set up a debar-ment of government contractors when they vio-lated price and wage orders outside of the govern-ment contract area with little, and essentially no,statutory base of the fact. This holding illustratesthat the executive order route is open to Presi-dents and is being utilized in many ways. I believethis route will be increasingly important unlessCongress gets its act together better.

The next is agency regulations and other agencypromulgations. The last time I spoke on this issue Igot into trouble, so I'm going to put on my bicyclehelmet that I wore down to work this morning. Thelast time I discussed this area, I had one agencyUMTAcall me and berate me for half an hour.That agency had just put out a thick and well writ-ten, well thought through, careful set of guidelinesfor procurement under 0MB Attachment 0. UM-TA believes these gulf; ',lines are good. And it istrue that most people utilizing them like the regu-lations because they tell them exactly what to do.But when you think in a specialized area, purchas-ing, under one program, UMTA, we have some-thing so thick, you have to be concerned aboutwhere we're headed in this regulation area. I thinkthis specificity is a very dangerous trend. But it'sbecause people out in the states and the localitieswant to know exactly what to do. They like to be-ery the thickness of regulation, but on the otherhand they want to be told specifically what the re-quirements are, in what I believe is a misguided ef-fort to reduce arbitrariness of decision.

And finally there is this great body of decisionallaw which Tom is addressing in the Conscitutional

*ACIR's approach calls for the President to specifically desig-nate not one but several agencies in various policy areas to beresponsible for one or more crosscutting statutes. These desig-nated agencies would be responsible for developing standardrules and requirements for the statutes they have been assignedand they would be required to issue these standards within twoyears of the date of their designation.

32

66 I submit that a law, if it'sreally good, should be almost self-enforcing. 9

area and in administrative procedures area wherethere are large conclusions to be drawn. But unfor-tunately the individual acts are so different, con-clusions are difficult to draw.

The next area I want to address is what shouldbe the role of the law? I would say the role of thelaw is to define a matrix for carrying out the pro-gram. It's not policy. Somebody else sets thepolicy. The question is defining a matrix. And thesecond aspect is the thunderbolt principle of howyou zap significant departures from the matrix.

I submit that a law, if it's really good, should bealmost self-enforcing. The best things come whenwe don't have the Justice Department trying to de-cide whether to bring suit.

The law should be balanced. It mubt hefective and efficient. Now those are not necessarilycompatible requirements and they require somebalancing within t1.em. But I think those are im-portant principles.

Now, let's get to this question of balance be-tween the grantee and grantor. On the govern-mental sideand I mean the federal governmentalsidethere are some fearful thunderbolts. Thefeds can cut off the funds, terminate or cancelgrants, or decide whether to refund or reissue anew grant. These are fearful thunderbolts for youand me. The problem is, how do we get some bal-ance? Sev,:ral recent court cases really involvedthis question: "How far can the federal govern-ment reach out to require something once it'smade a grant action? Even if you don't want thegrant money, how much can it require?" What canthe grantees do?

The grantees can follow the procedures set outby the Administrative Procedures Act and theTucker Act but those are pretty tough. You'd haveto show a pretty arbitrary decision. If an agencyhangs you with due process, you have a tough timetrying to upset it.

There are some hopeful signs in the growing vol-ume of additional administrative procedures andforums. We have administrative law judges atLabor and HUD deciding whether the disqualifica-tion under a mandatory grant is or is not right. Wehave grant appeals boards like HEW's comingalong. We also have some less formalized pro-cedures such as those used by LEAA. The criticalpoint in these is that they have to be impartial. Ifyou are going to have an effective say in theseboards, these administrative remedies have to beimpartial. We also need finality of decision. I amappalled when I hear people discussing seriouslythe question whether a board's decision should befinal or whether the head of the agency can ignoreit.. Why should we go to one if they're not going tobe final? The decisions also have to be effective andefficient. And again those are not necessarily con-sistent requirements.

In spite of the increasing efforts to provide moreremedies in the administrative arena, it will not besimple becaue you have crosscutting conditionsand the crosscutting condition isn't going to likelywind up in front of HEW's board. It's going towind up somewhere else. And you may have to ap-pear before three boards on a termination. Butthat's an area that I hope all of us in this room willwatch carefully and get interested in.

A distinguished member of ACIR once told methat you spell grants "M-O-N-E-Y." And I thinkthat's true. Everybody certainly focuses on moneyand getting their share. But the money supply hastightened down. Thus this question of balance be-comes increasingly relevant. Giving the grantee afew thunderbolts as well as the grantor is very im-portant.

A Responseby Malcolm S. Mason

ChairmanDepartmental Grant Appeals Board, HEW*

I'm very pleased to be able to talk under theauspices of the ACIR because ACIR has broughtto the subject of grants a breadth of perspectivethat is rare and very valuable.

Tom Madden, Bob Wallick, and I have formed akind of team. Wherever there's an empty rostrum,we take it. And we have a set pattern that we fel-low in our talks. No matter what the subject is,Tom gives you a wealth of information, particular-ly about the case law, and Bob gives you a rich in-sight into the typologies that are involved. Thenwhen it's my turn, I tell you that what they havesaid is all wrong from beginning to end. And that'swhat I'm going to do here today.

We started out as good friends and I hope we willcontinue to be good friends, although when I sawBob wearing his helmet this morning I was a littleafraid that maybe our relations were impairing.

The first issue on which Tom, Bob, and I are inbasic disagreement is typified by Tom's remarkthis morningthat if you want to know wherewe're headed, first you have to know where weare. You know that sounds reasonable, very plausi-ble, but it's got some dangerous implications. Thedangerous implication is that it canonizes thestatic. It emphasizes the outmoded paths. And ifwe're interested in where we're headed, we haveto be interested in a dynamic process and we haveto be talking about the future, not the past. And

*Malcolm S. Mason retired from this position in the spring of1980.

34

that's an important change of perspective that isvitally necessary. If I have time I'll give you a cou-ple of examples of that, but I'm bound to give youat least one. This is one on which, again, we in-evitably disagree. Tom tells you that a grant is acontract. And when Bob addresses this question hegenerally says that it is clear that a grant is a con-tract. And my view, which I generally try to statein very restrained and understated terms, is:

No!That point of view of a grant is plausible but it is

fallacious, misleading, and dangerous. The reasonthat it is, is precisely the basic point on which wediffer. It sanctifies the dead past. It rests on caseslike McGee and Mathias, of 1866 or something likethat, and cases that have blindly quoted McGee andMathias ever since. Just think back. First of all,that case and others like it did involve grants, butthey were land grants. They were simply convey-

32 antes. That's what grants meant back in thosedays and, moreover, they were fully executed onone side. What is more important is that whenthese cases were decided there was no system ofgrants such as we have today and there was noteven the beginning of grant law. Courts had toreach for some kind of parallel, some kind of exam-ple, some basis on which to rest the decision. Theydid the best they could. It's an example of reach-ing. But it's time that we recognize that what thosecases dealt with has nothing to do with the grantsystem as it is today or as it's going to be next yearand the year after. And that's what's important.

When I went to law school, which was a long,long time ago, we used to debate cases involvingautomobiles. At that time there was no automobilelaw. Today there are encyclopedias, there are li-braries, of automobile law. But then there was noautomobile law. So what did you do? You reachedfor the cases about horses and wagonsvehiclelawand you applied those cases to the automo-bile. You knew you were wrong, if you had anysense, but you also knew that you had to find some

kind of precedents, some kind of basis and youreached for it.

You knew, of course, that the horse and wagondid not have a wheel that might come off and roll60 miles an hour and kill somebody. It wasn't a ter-ribly good precedent, but it was the best you coulddo. But at some point you had to begin to recognizethat the horse and buggy cases didn't fit the auto-mobile.

And then a little bit later, about the time Istarted practicing, we got airplane cases. Therewas not an airplane law then as there is now. So wetook the automobile cases and tried to build somekind of precedents to apply to airplane cases. Ofcourse that's how lawyers work but that's why youget this misguided notion that grants are con-tracts. But it's time we moved into the jet age. Andif we're interested in really looking to the future ofgrant law, we'd better get rid of this notion.There's a very important parallel that you mightconsider.

Suppose you were practicing marriage counsel-ing and some client came in. You reach for yourWilliston and you say now of course, marriage is acontract. That's right, marriage is a contract.There is an offer and an acceptance and you hopethat each side gets something out of it. That'scalled consideration. There is appropriate formali-ty. But if you start advising your clients on thatbasis, you're going to do them an awful lot of harm.You're going to make some very flagrant mis-takes. For example, Williston will tell you since it'sa contract that you can terminate it by mutual deci-sion. Two parties agree. That's it. Marriage isover. You can have innovation. A husband can sub-stitute an appropriate . . . Well, that's the law ofcontracts.

The essential point is, sure, as an elegance of dis-course you can say that a marriage is a contractand that a grant is a contract, but don't believe it.Don't act on it. Don't get taken in by your meta-phors.

3 5

General Discussion

Wayne Anderson, Executive Director, ACIR:Talk about laying a perfect basis for a questionperiod. He left us hanging there a little bit with anelement of suspense. Thank you Malcolm and theother speakers. First Tom and Bob, do you want aminute for rebuttal? Then we'll have time for a fewquestions.

Wallick: I would just say to my colleague that Iagree that grants are a special kind of contractthat deserve special attention. It is a fact of lifethat the courts are putting it into the cubicle of be-ing contracts because they do satisfy Williston. Icertainly subscribe whole- heartedly to the idea thattreating a grant like a procurement contract for in-stance, would be a poor and very dangerous idea.

Malden: I don't really think there's that much dif-ference between Malcolm and Bob and me. We'vebeen through this periodically. The point I'm try-ing to make is one that Bob made. A grant is a con-tract in the traditional sense. The courts have rec-ognized that. And it's important to understandthat because you've got to deal with the courts andthe courts have to see something they understand.The analogy to the vehicle laws is a good one. It'sexactly how it's developed. We've developed fromthe vehicle law to the automobile law to the air-plane law. And it provides the useful frameworkfor the courts which deal with hundreds of cases.

As the result of considering a grant or a con-tract, we enter into the remedies area Bob talksabout. And the court is able to structure certain

36

remedies which go to the enforcement. But a grantis not a federal procurement contract. It is not gov-erned by the federal procurement regulations orthe armed services procurement regulations or anyof those terms and conditions that govern federalprocurement contracts. The Federal Grants andCooperative Agreement Act makes very clear thatthere is an instrument called a grant, there's an in-strument called a cooperative: agreement, andthere's an instrument callKi a contract. Each ofthese are different instruments and each has dif-ferent legal implications. So I think when you lookat it from the standpoint of remedies, it's impor-tant that you understand that the courts are goingto look at this as a contract.

But we all know that there's a political dimensionand a social dimension to grants that transcendsany contractual considerations. And much of theactivity that occurs in grant areas has got to be

34 measured in this particular political context. It'sgot to be measured in the context of the statuteunder which a grant is enacted, what Congress in-tended and how state and local governments oper-ate. And much of the action takes place in this in-formal level within an agency between state and lo-cal governments. It doesn't get us involved in therights and remedies of grants except as a lastresort.

Anderson: Malcolm, I think you ought to give usyour capsulization of what it is. Is it a cooperativeagreement subject to political execution or what doyou call it?

Mason: Well, in simple terms, I think a grant is aunique relationship created by statute. You do notlook to the law of contracts. You look to the statutethat governs. Every grant program is created bystatute. It must be created by statute, and it's gov-erned by statute. I'll give you anoth i example:The rights and duties of an officer in the army. Youcan describe them in the same way, as an offer, anacceptance, a mutual benefit. It's a contrac.;. Butpeople who tried to assert their rights on the basisof contractual analysis properly got slapped down.Their relationships are governed by the defenselaws of the United States, by the statute.

Anderson: Very good. So you state and local recip-ients consider yourself to have as much flexibilityas an officer in the army.

Wallick: Let me make one other comment.There's a great contracts professor at Yale Law

37

FWe all know that there's a

political dimension and a socialdimension to grants thattranscends any contractualconsiderations. 59

School, Grant Gilmore, who wrote an excellentbook about four or five years ago on the death ofcontracts in which he thinks the whole idea of con-tracts is pushed upon us improperly and just a sub-set of a tort law. So he would go even further thanMalcolm has.

Anderson: The whcle institution is shaky. Here wehave a question.

Lincoln Hoewing, Senate Subcommittee on In-tergovernmental itelations: State and local gov-ernments are increasingly using the referendum todecide questions. I can give you a specific examplein my town, Poolesville, MD. It is a small townwhere we use the referendum to decide many pub-lic questions. One of the things that came up re-cently was that under the community developmentblock grant, there's a certain percentage of hous-ing that has to be low income housing. The townwanted to withdraw from the program because ofthat requirement. However, in a referendum, thepeople voted to continue the program by a vote ofalxmt 2-to-1. I'm bringing this up because of thevoluntary nature of grants. How can a grant beconsdered voluntary when the town's citizensvoted to continue it but the town's commissionersdid not?

Madden: That's the exact issue in the case ofAngell v. Zimmer and was an issue in another case,Shapp v. Sloan, and maybe George Brown can talka little about that when he gets into the next panel.You have this problem in grants. We'll call it anassumption of cost. It's a generic problem. Andthat's a problem you've got in the communitydevelopment block grant. Presumably the towncommissioners for the first two or three years inPoolesville or in Manchester, CN, acted underwhat they thought was the mandate that the peo-ple of the town wanted them to act under. Theycarried out their delegated authority and they pro-ceeded to accept these grants. And each year theyaccepted those grants they made certain

assurances that x percentage of the new housingbuilt in that town would be low income housing orthere would be adequate provisions made for lowincome housing people.

You then, in our political process, get a change.People's views change. People's attitudes change.New commissio:iers are brought in. In this case anew referendum was passed which said we don'twant to provide this housing in this town. We'resatisfied with the way the town is structured. Andyet you have this receipt of funds by this jurisdic-tion tracing back three or four years with these as-surances. And that's what the court's going tohave to decide in the Angell case.

I could take a hard line and say that the assur-ances were made by proper representatives of thatcity and this gets us into the contract area. The cityis therefore bound by those assurances and mustprovide the housing. And that's the position thatthe government is arguing in the case as well assaying that in addition they're bound to take thegrant because the grant will have money in it inthis fifth year that will enable the town to build andprovide low income housing for people.

)Hewing: The thing that raises is if a grant is trulyvoluntary, you shouldn't rely on past assurance. Itshould be a yearly thing.

Madden: Let me give you an example. Yes, youwould say it should be surely voluntary. But thecourts, particularly in the civil rights area, havetaken a different view, and I think rightfully so.Take the case Bossier Parish School Board v.Lemon, a federal court case decided back about1964. You had a jurisdiction take money through-out the 1950s on an assurance that they would pro-vide, without regard to race, color or creed, educa-tion for the dependent children of military person-nel located on the military base in Bossier Parish.They took the money. They built a public schoolwith the money. Title VI of Civil Rights Act of 1964was passed. They took money for about sixmonths. Then Bossier Parish realized what TitleVI meant and they stopped taking the money.They refused to admit the black children to theschools on an equal basis with white children andLemon, who was a military dependent, went tocourt and the United States joined them and sued.They said, look, you took the money, you built theschool, you've got to provide schooling. You madethat assurance. And I think you have to under-stand in our government we may have independentgovernment but they're dependent also. Therewere assurances made. The citizens cannot go backand renege them without violating the provisionsin the grants.

P r4111

The Interaction of Federal Grantsand the Law:

Community Development andLEAA Litigation

by Tom MoodyMayor

Columbus, Ohio

Ihave a special interest in the issue discussed to-day since I am a lawyer and I have served as ajudge in two state trial courts. But I gave up allthat nonsense and became Mayor some eight yearsago. And my experience with the federal grantssystem is very largely that of being a Mayor. Myexperience as a judge with federal grants had moreto do with trying to get them for the court systemthan it did judging anything about them.

My experiences with both the courts and in theMayor's office lead me to the conclusion that a con-ference like this is an excellent idea. There needsto be more of a melding between the fields ofpolicyand the field of the law. And ifwe at ACIR can helpto contribute to bringing these two fields togetherby bridging that gap that currently exists betweenthe two, so much the better. I believe that we'vetaken a step in the right direction today.

My task at this point is to lay the groundwork forour next session dealing with recent legal activityrelating to two important block grants, communitydevelopment and LEAA.

Perhaps it is both ironic and at the same timeunderstandable that these two block grants, de-signed to allow state and local recipients some dis-cretion in how those federal dollars can be used,are prime candidates for legal battles.

Probably the best known of the community de-velopment cases is Hartford v. Hills. This was a

1976 case in which the city of Hartford objected tothe fact that its seven suburbs were not complyingwith the provisions of low income housing requiredin the Housing and Community Development Act of1974.

The most recent and ongoing case involves thetown of Manchester, CN, which is trying to with-draw from the community development programsince it does not want to provide low income hous-ing necessary under the act. That case was re-ferred to several times in our earlier discussion to-day.

No less politically and powerfully charged arecases relating to LEAA. One of the best known re-cent cases is another one that was mentioned earlythis morning, Shapp v. Sloan, a state court casewhich involved LEAA funds. The issue at questionin that case was the state legislature's right to ap-propriate federal dollars, LEAA dollars, in viola-

40 tion of the statutorialy required and Governor-ap-proved state plan for spending those dollars.

The case was appealed to the U.S. SupremeCourt which dismissed it for want of a federal ques-tion.

Our speaker on the topic can follow up here andtell us what has been going on since. I don't believethat we've heard the last of this issue yet. And, as amatter of fact, I will tell you that as a schemingMayor I am thinking of ways to avoid the necessityto consult with the counsel on how to spend thefederal money because of this kind of activity.

These cases and others that our two panelistswill mention point out one .of the key questions ofour conference today and indeed of the entire areaof federal grant law. This question relates to therelationship between the grantor, the federal gov-ernment, and the grantee. In this case we're talk-ing about local and state governments. There aresome indications that the recipients of today areless willing to sit back and quietly acquiesce toWashington's desires in this area. A decade ago su-ing a grantor agency was an extraordinary act. To-day it is frequent, even commonplace. And pickingup on what Malcolm Mason mentioned earlier thismorning, I would say that there is something elsethat is happening which was not mentioned thismorning, and that's what goes on in conversationshort of lawsuits. There is building a considerablebody of de facto unwritten and unknown law be-cause of negotiation between the feds and the localgovernrnenth. And it is a way of resolving lawsuitsand this does not become a part of the literature or

6 Many of the controversiesbetween the feds and the localsoccur not within the main missionof the contract but rather relateto some of the excess baggagethat goes along in thosethings. 99

the standards. But nonetheless, I would have to re-gard that as a kind of de facto law, if that makesany sense at all. It's a contradiction in terms but in-deed the practice is a contradiction in terms.

These lawsuits can seek to overturn grantor fis-cal actions based on noncompliance with federalstrings. Or they can seek to prove grant regula-tions are illegal or unconstitutional. They can chal-lenge federal denial of reimbursement for claimedcosts, or they can question in court the denial of adiscretionary grant.

There is also another area which I think we haveto give constant attention to, but we will not dwellon it long today, and that is' hat many of the con-troversies between the feds and the locals occurnot within the main mission of the contract butrather relate to some of the excess baggage thatgoes along in those things.

Let me give just an example from quite a differ-ent field. I have never had a fight with Washingtonabout the community development act, about Gen-eral Revenue haring, about any of the Depart-ment of Labor acts on the main mission of thoseagreements. My fights are on peripheral matterssuch as whether or not we have complied with re-quirements for affirmative action with regard tominorities and women, and a whole host of othersuch things which are really appendages. I don'tmean to minimize these. We're not questioning theneed for affirmative And the involvement ofwomen and so on, but they're attached to each oneof these things. And this, of course, leaves me tocomment on something that Bob Wallick spokeabout, the single enforcement agency which hethinks is a bad thing. And I really agree with himfrom a philosophical point of view, but my philoso-phy soon dissipates when I'm waging the same waron the same issues with the same facts on sevendifferent standards with seven different agencies

41

enforcing civil rights, for example. And reallywhatI wait to do is do something about housing.

So we have some big dilemmas, both in philoso-phy and practice, that we have not successfully re-solved as a society.

The result of all this has been a burgeoning ofcases falling under the grant law rubric. One think-er on the subject, Richard Cappelli of Temple Uni-versity School of Law has devised a five-part an-swer to the question, "'Why has grant law so ex-ploded?" As one part, he notes the change in think-ing about the grant from the concept of a gift tothat of an entitlement. The ever increasing com-plexity of federal grants, not the least of which isthe popularity of the crosscutting requirements, afrequent target of ACIR criticism, is also part ofthe answer.

The tremendous explosion in the number ofgrantees, primarily due to General Revenue Shar-ing and block grants, is also a factor. I think mostof you are acquainted with the fact that GeneralRevenue Sharing reaches some 39,000 units ofstate and local governments. It is certainly thebroadest grant program which has ever occurred.

The increasing use of formula entitlement ratherthan discretionary grants and increased availabili-ty of the federal court jurisdiction to handle thistype of dispute complete the complicated answer.

Many of the doctrines which once barred accessto federal courts, such as a sovereign immunity,are either gone or in serious disarray today. Thecontinued emergence of these factors and the will-ingness of states and localities to fight back leadone to the conclusion that this activism in the grantlaw area will continue to increase over the nextdecade.

There is another area that I think will contributeto increasing litigation and short of litigation in-crease arguing. And that is that in this day of

grantsmanship and state and local dependenceupon the distribution of the so-called federallargesse, we are seeing more and more fightsamong the locals about who is getting his fairshare. It's the argument of the kids dividing upthe pie that mother has baked. And those ar-guments are assuming greater and greater im-portance both in the political support for legisla-tion and in the attacks against the institutions andagencies which must make those allocations be-cause so many of us feel that the formulas areeither incorrect when devised or incorrectly ap-plied. And the agencies which have long beenrather off to the side in terms of our national his-tory, have now become very important to a lot oflocal people because of the role that they play inour formula distribution.

I would just cite as an example the fact that Ihave had an eight-year running b....ttle with theBureau of Census because they do not know how tocount, and they seriously underestimate the popu-lation of my community which shorts us in some ofour distribution formulas.

I could also point out that I have the same run-ning battle with the Department of Labor whichses a totally incorrect methodology to estimate

the number of unemployed and because we under-estimate the number of unemployed, the number ofminorities, we are getting shorted on all of thoseformulas.

In fairness I must say the Bureau of Census de-nies this and the Department of Labor denies thisand we are in that battle Which will probably beresolved one of these days in court, or hopefully bythe 1980 census in that one area.

Donning my official hat I'm going to tell you thatas moderator of this next session, I'm going to takecopious mental notes on what the two dis-tinguished panelists will say today.

41

An Introduction to theCommunity Development Litigation and

Its impactby George D. Brown

ProfessorBoston College Law School

That there has been a dramatic increase in grantlitigation over the past decade is a propositionwhich is not disputed, and a subject which has beentreated extensively in the legal literature and else-where.) And it is fair to say, I think, that there hasalso arisen a certain uneasiness on the part ofmany students of the federal grant-in-aid system atthe sudden arrival in force of lawyers on the scene.

Realistically, nonlawyers must not only recog-nize the existence of this phenomenon, but also tryto understand it. If anything, the need for under-standing is even greater on the lawyers' side;lawyers and judges need to appreciate the dynam-ics of the grant system far better than they do atpresent. As exhibit A, one might cite the initialdecision of the fifth circuit in Goolsby v. Blurnem-tho,l2. Initially, a 2-to-1 panel ruled that Gen-eral Revenue Sharing funds were just like anyother federal grant, and therefore the expendi-tures of them were subject to the Uniform Reloca-tion Assistance Acts Now, if a court doesn't seethe difference between revenue sharing on the onehand, and, on the other hand, the categoricalgrants which dominated the system when the Relo-cation Act was enacted, we should not be surprisedwhen it renders a questionable decision. What isneeded is an ongoing dialoguea bridge, if youwillbetween the lawyers and the experts in otherdisciplines who are working on grant issues. TheACIR is in an ideal position to provide this bridge.Today's conference is, one hopes, an importantfirst step.

43

Those disputes whichultimately end up in courtreflect political disputes in thesociety at large. 9

The community development (CD) litigation is aninteresting illustration of this point. Let me beginwith a quote from an "Advocacy Guide" to theCommunity Development Block Grant Programput out by a major legal services group.

Struggles over the use of CDBG funds donot simply involve interpretations of theHCDA, but are part of much broader con-flicts over the control and use of resources,and over broad public policy issues.'

As the quote suggests, those disputes which ulti-mately end up in court reflect political disputes inthe society at large. As the volume of grant fundshas expanded, and as Congress has utilized thegrant mechanism to create a panoply of new in-terests, it is hardly surprising that the number ofgrant lawsuits has likewise increased.

Before proceeding further 7. have to enter onedisclaimer about any analysis of the CD cases. It istrue that grant cases in general are hard to find inthe published reports. This difficulty seems evengreater in the CD area. Many of the cases are notreported officially, but are "semireported," that is,they can be found in the Clearinghouse Review orsome other unofficial source.5 Some of them arenot reported anywhere but are passed on by wordof mouth and memoranda among various networksin the CD field.6

Despite the difficulties of getting a fix on theoverall volume of CD litigation it is apparent that itis substantial. I base this statement on the 17 caseswhich I have found in the Federal Reporter andFederal Supplement, the large number of semire-ported cases, and the large number of settlementsthat one reads about in the literature. Others havereached the same conclusion. Writing in 1976,Prof. James Kushner stated that "more legal chal-lenges have been made in the first year of theHCDA than undei the past decade of urban renew-al and categorical grants."7 More recently, the"Advocacy Guide" quoted earlier stated that"each year of the CDBG program has seen an in-creasing number of cases brought . . ."8

Let us take this volume of cases as a given, and

ask ourselves the reason why. Why does this par-ticular statute seem to engender so much litiga-tion? The answer, I think, is to be found in thestructure of the act itself. It invites controversy.Specifically, it invites challenges on the part ofthose within the community whose proposals didnot get funded. The key lies in the change from anumber of categorical grant programs to a singleblock graht. As The Brookings Institution pointsout, the range of eligible activities helped bringnew groups into competition, and forced generalistlocal government officials to make specificchoices.9 Moreover, these choices were highly visi-ble given the act's citizen participation mechanism.

Competition for funds has been intense. The citymanager of Cambridge, MA, testified during re-newal hearings about a program year in which hereceived $8 million worth of requests for $2.8 mil-lion in funds for which Cambridge was eligible.°The natural result of such a situation will be fiercestruggle in the political arena, with an inevitablenumber of losers. As I suggested a moment ago,the typical American pheaomenon will then ensue:people who have lost in that arena will transfer thebattle to the judicial arena, in this case the federalcourt.

With some exceptions courts tend to view the CDcases not as presenting unique questions of "grantlaw," but as forms of the administrative law litiga-tion to which they have become accustomed overthe last half century. For example, the doctrine ofscope of review is applied interchangeably in bothgrant cases and the more typical regulatory con-text.° In fact, the leading case on scope of re-viewCitizens to Preserve Overton Park v.Volpe'sinvolved a third-party challenge to atransportation grant. I would like to focus on CDlitigation of a particular sort; suits by third partieswho claim that they should benefit under the actbut do not receive the appropriate quantum ofbenefits under their community's application."These suits are usually brought against HUD to en-join approval of the application.

The doctrine which has cropped up most fre-quently in these cases has been that of stand-ing. Governmental defendents have consistentlyargued that the plaintiffs lacked standing, that is,that there was not a genuine adversary relation-ship between the would be challengers on the onehand and the defendant on the other hand. The factthat standing has arisen so frequently in this area

4oyitigation is by no means unique. Prof. Richard

Cappalli estimates that the issue surfaces in almostone-half of all grant cases." In the CD context, atleast, the party challenging standing almostalways lases."

The courts have, if anything, been somewhat un-critical in assuming that plaintiffs had sufferedsome harm and did stand to benefit if the court en-joined a community's application in its presentform. An example is Philadelphia Welfare RightsOrganization v. Embry" a challenge to an applica-tion based on insufficient benefit to low incomepersons under that portion which financed housingrehabilitation. The court stated that "reallocationof Title I funds to benefit low income people will di-rectly result in an increase in the availability ofhousing units for low income people," withoutconsidering whether any such reallocation wouldresult from its decree. Unless they wish to abandontraditional standing inquiries, courts would seemto be under a duty to consider whether the plain-tiffs really will be any better off if they secure therelief which they seek. Perhaps their reluctance toengage in an extensive standing inquiry stemsfrom a concern that strict application of SupremeCourt cases such as Simon v. Eastern KentuckyWelfare Rights Organization.19 and Warth v.Seldin2° would lead to conclusions that no one hadstanding to challenge CD applications.21

Of course, that inquiry can be exceedingly com-plex. Recently, minority residents of Boston suedHUD to enjoin the award of a UDAG grant to thatcity. They alleged that Boston did not meet thestatutory criteria of having a demonstrable recordof achievement in improving conditions for racialminorities.22 The district judge found that theylacked standing. He reasoned that if plaintiffs won,Boston would get nothing, and that, apart fromspite, that result did not represent any benefit tothem. The first circuit court of appeals rein-stated the complaint, at least temporarily, al-though it too found the standing issue extremelydifficult." The court reasoned that some plain-tiffs had been harmed by discriminatory housingconditions in Boston, and that if the projects to befunded were administered in nondiscriminatoryfashion, that might well help the plaintiffs by en-hancing their housing opportunities.24 The princi-pal problem with this analysis is that very little ofthe project funds were to be allocated to housing,and what housing there was would not seem tohelp plaintiffs find low cost shelter in an integratedneighborhood."

The court might have found standing if it hadbeen willing to take an expansive view of the statu-tory benefit analysis utilized in some cases.26 Con-gress might be viewed as having granted to plain-tiffs an interest in having UDAG funds awardedonly to communities which had actively worked, orwhich would work, to increase opportunities forminorities. The harm suffered is, thus, not the pre-existing condition, but the award of funds in amanner which does nothing to alleviate it.27

Perhaps the source of much of the first circuit'sdifficulty is its apparent agreement with the sec-ond circuit's decision in the famous, some wouldsay notorious, Hartford litigation." In that caseHartford, and low income residents, sued in feder-al court to enjoin CD grants to a number of itssuburbs on the ground that those communitieswere not correctly preparing the housing as-sistance plan which the act requires as a conditionof receiving funds. In particular, Hartford assertedthat they had failed to plan adequately for low andmoderate income residents who might be "ex-pected to reside" within their borders. Ultimately,the challenge was rejected on the ground that bothHartford and the low income residents lackedstanding to bring the action. A majority of the sec-ond circuit emphasized the fact that if the su-burbs conformed their plans to the act's require-ments, Hartford would therefore get nothing.What the court failed to appreciate however is thatCongress had declared that planning by suburbs toalleviate the municipal overburden of center citiessuch as Hartford would, in effect, lead to betterconditions both for those communities themselvesand for low and moderate income residents whomight wish to move to suburban locations. Thisreasoning was adopted in a Michigan federal dis-trict court opinionCoalition for Block GrantCompliance v. HUD.29 That case relied on the sta-tutory benefit analysis, and rejected the Hartfordrationale.

It is possible that circumstances will arise inwhich third parties wish to sue the grantee direct-ly, rather than suing HUD. A somewhat extremeexample of this configuration is Angellv. Zinsser."In that case a group of residents are attempting toenjoin their town's withdrawal from the program.More frequent might be cases in which plaintiffsseek to enjoin expenditure of the funds until theirown projects are included in the grantee's overallprogram.

Such lawsuits are liable to bring the plaintiffs

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face to face with the doctrine of "implied rights ofaction" under federal statutes. This issue ariseswhen a Congressional enactment creates a duty onthe part of individuals (or governments) to be en-forced by a federal regulatory agency, but does notprovide for suit by other individuals who may suf-fer harm as a result of a breach of that duty. Thequestion then is posed whether a right of actionsuit by such aggrieved individualscan be derivedor "implied" from the statute. Although the Su-preme Court has recently found in favor of a plain-tiff invoking the implied right of action doctrine inthe grant context,31 it has also suggested that itwill utilize a much more restrictive approach in thefuture.32

As of this writing there is the additional possibili-ty that some grant suits of the nature under discus-sion can also be brought under Section 1983 of Ti-tle 42 of the United States Code which provides in

46 part that "every person who, under color of anystatute...of any state or territory, subjects orcauses to be subjected, any citizen of the UnitedStates or other person within the jurisdictionthereof to the deprivation of any right, privileges,or immunities secured by the Constitution endlaws, shall be liable to the party injured in an actionat law, suit in equity, or other proper proceedingsfor redress."33

To conclude, what has been the impact of the CDcases? At first glance they appear to representoverwhelming victories for the government side,since virtually every one has been decided in thedefendant's favor. Nonetheless, plaintiffs' lawyers

claim that the cases have had a tremendous benefi-cial impact on the low and moderate income per-sons whom they represent. They emphasize the ex-tensive leverage which the ability to bring suitgives in overall political bargaining, as well as thepossibility of settlements advantageous to their po-sition. Let me quote again from the "AdvocacyGuide": "Despite the lack of favorable case prece-dent, the cases have had significant favorable im-pact. Many cases have resulted in court settle-ments which greatly altered local policies and prac-tices. Even the judicially unsuccessful cases haveresulted in loCal programs being changed in theways sought by plaintiffs. Other cases weremooted after the city made the sought afterchanges. Moreover, the symbolic effect of certaincases, like Hartford v. Hills, has altered HUD andlocal program behavior." 34

Whatever one thinks of the effect or desirabilityof this litigation, I am certain that the phenomenonis highly upsetting to advocates of the "New Fed-eralism." As you recall, President Nixon's originalgoal in this area was a form of "special revenuesharing," which would get the federal administra-tive agencies completely out of the picture of influ-encing local priorities. As I read the CD cases,what emerges is not only an enhanced role for theagencies, but a dramatic entry of the federal courtsinto the heart of local government law. Regardlessof one's position on the matter, it is surely an inter-esting area of federal grant law at work; and Ithink that we shall see more, rather than less, of itas the years progress.

FOOTNOTES

'E.g., R. Cappalli, Rights and Remedies Under Federal Grants5-7 (1979); F. Michelman and T. Sandalow, Government InUrban Areas, Supplement 275 (1972).

2581 F.2d 456 (5th Cir 1978), rev'd en banc, 590 F. 2d 1369(5th Cir. 1979), Cert. denied, 100 S. Ct. 462 (1979).

342 U.S.C.A. S4601 (1977).'CDBG Training Advisory Comm., "An Advocacy Guide to theCommunity Development Block Grant Program," 12 Clear-inghouse Review 601, 641 (supplement 1979).

5E.g., NAACP, Boston Branch v. Harris, 12 ClearinghouseRev. 915 (D. Mass.), rev'd, 607 F.2d 514 (1st Cir. 1979).

6See Advocacy Guide, supra note 4, at 675-77.TKushner, "Litigation Strategies and Judicial Review UnderTitle I of the Housing and Community Development Act of1974," 11 Urban Law Annual 37,98 (1976).

5Advoccv-v Guide, supra note 4, at 663.3P. Dommell, R. Nathan, S. Liebschutz, and M. Wrightson,Decentralizing Community Development, 198-99 (1978).

'°Housing and Community Development Act of 1977, HearingsBefore the Subcommittee on Housing and CommunityDevelopment of the House Committee on Banking, Financeand Urban Affairs, 95th Cong., 1st Sess. 366.67 (1977) (state-ment of James L. Sullivan).

"City of Hartford v. Towns of Glastonbury, 561 F.2d 1032,1053 (2d Cir. 1977) (Kaufman, C.J., concurring).

'2See e.g., NAACP, Santa RosaSonoma County Branch v.Hills 412 F. Supp. 102, 108 (N.D. Cal. 1976).

'3410 U.S. 402 (1971)."E.g., Broaden v. Harris, 451 F. Supp. 1215 (W.D. Pa. 1978);

Philadelphia Welfare Rights Org. v. Embry, 438 F. Supp. 434(E.D. Pa. 1977); NAACP, Santa Rosa-Sonoma CountyBranch v. Hills 412 F. Supp. 102 (N.D. Cal. 1976); KnoxvilleProgressive Christian Coalition v. Testerm,an, 404 F. Supp.783 (F.D. Tenn. 1975).

"Cappalli, supra, note 1 at 109."Of the eight reported cases in which standing is considered, it

was ultimately the basis of dismissal in only one instance: theHartford litigation. The First Circuit has left open the possi-bility of an eventual standing dismissal in NAACP, Boston

46

Branch v. Harris, 607 F. 2d 514, 526 (1st Cir. 1979). It shouldbe noted that the incidence of standing questions in eight outof 17 reported cases bears out Prof. Cappalli's estimate.

17438 F. Supp. 434 (E.D. Pa. 1977).131d. at 438 (emphasis added).19426 U.S. 26 (1976).20422 U.S. 490 (1975).21See Knoxville Progressive Christian Coalition v. Testerman,

404 F. Supp. 783, 787 (E.D. Tenn. 1975).22Section 119(b) of the act provides, in part, that "Urban de-

velopment action grants shall be made only to cities and ur-ban countries that have, in the determination of the Secre-tary, demonstrated results in providing housing for personsof low-and moderate-income and in providing equal op-portunity in housing and employment for low and moderateincome persons and members of minority groups."

23NAACP, Boston Branch v. Harris, 607 F.2d 514 (1st Cir.1979).

24/d. at 525-26.26The funds requested were primarily for economic and com-

mercial development.26Cf., Traficante v. Meropolitan Life Ins. Co., 409 U.S. 205

(1972)."See City of Hartford v. Towns of Glastonbury, 561 F. 2d

1032, 1057 (2d Cir. 1977) (dissenting opinion)."City of Hartford v. Towns of Glastonbury, 561 F. 2d 1032 (2d

Cir. 1977) Cert. denied, 434 U.S. 1034 (1978).29450 F. Supp. 43 (E.D. Mich. 1978).3°473 F. Supp. 488 (D. Conn. 1979).

31Cannon v. Univ. of Chicago, 99 S. Ct. 1946 (1979).32Transamerica Mortgage Advisers, Inc. v. Lewis, 100 S. Ct.

242 (1979); Touche Ross and Co. v. Redington, 99 S. Ct. 2479(1979); see Cannon v. Univ. of Chicago, 99 S. Ct. 1946, 1968(1979) (Rehnquist and Stewart, JJ., concurring). The courtshave, somewhat automatically, transferred the concept of im-plied right (or cause) of action from the regulatory context inwhich it originated. See, Cappalli, supra note 1, at 115-16.There may be important differences which caution againstsuch an approach. For example, grant statutes do not, bythemselves, establish binding norms of conduct. (Many grantconditions would, in fact, be beyond the power of Congress toenact through coercive legislation). It is only when the grantis accepted that the conditions became binding on thegrantee. Thus a third party beneficiary analysis might bemore appropriate than an implied right of action inquiry.However, grant lawyers differe sharply over whether con-tractural analyses are accurate or helpful in the grant con-text. Compare Cappalli, supra note 1 at 80-93 (grants not con-tracts) with Brown, "Federal Funds and NationalSupremacy: The Role of State Legislatures in Federal GrantPrograms," 28. American University Law Review 279,296-97 (1979) (contractual analysis of welfare litigation).

33The argument is that since grant conditions are "laws" of theUnited States, section 1983 provides an express right of ac-tion. See Tongol v. Usery, 601 F. 2d 1091, 1099-1100 (9th Cir.1979). The Supreme Court appears to have accepted this posi- 47tion in Maine v. Thiboutot, 100 S.Ct. 2502 (1980).

"Advocacy Guide, supra note 4, at 663.

Federal Grant LitigationInvolving Law EnforcementAssistance Administration

by Charles A. Lauer and Thomas S. LlewellynOffice of the General Counsel

Law Enforcement Assistance AdministrationU.S. Department of Justice

With the increasing number and complexity offederal grant programs over the last decade and ahalf, there has been a concomitant growing in-volvement of the federal courts in resolving dis-putes among grantees, granting agencies, andthird parties. Grant law is still in its early stages ofdevelopment but is one of the fastest growingbodies of federal law.

The Omnibus Crime Control and Safe Streets Act("the Act"), originally enacted in 1968, and amend-ed in 1970, 1973, 1974, and 1976, (major amend-ments are also expected in late 1979) establishedone of the major federal grant agencies, the LawEnforcement Assistance Administration (LEAA).LEAA makes block entitlement grants to stategovernments and discretionary grants to state andlocal governments and nonprofit institutions withthe purpose of improving the efficiency and overallquality of the criminal and juvenile justice systems.

Like those of all federal agencies, LEAA's pro-grams are subject to a panoply of statutes and reg-ulations including two authorizing acts, the CivilRights Acts, the National Environmental PolicyAct, and the Administrative Procedures Act,among others. In addition, the programs are sub-ject to a large body ofjudge-made law.

The paper will discuss some highlights ofLEAA's involvement in litigation and how that liti-

45)

gation has affected LEAA's progress. Litigationinvolving federal grant programs usually onlytouches upon small portions of an agency's author-izing legislation. More often, the lawsuits havetheir origin in other federal legislation or Constitu-tional clauses affecting the federal grant program.The cases which go to final court decisions repre-sent only a small percentage of all cases filedagainst an agency. For these reasons, the reportedcases will rarely shed light on the major goals orthe major programmatic issues involving a specificfederal agency's assistance program. An agency'sadministrative hearing and rulemaking proceed-ings are more instructive in this regard. The chiefinformational value of an agency's litigation liesmore in its contribution to the overall knowledgewe possess on the way in which our government as-sistance programs operate. Combined and an-alyzed with all litigation in the federal assistancearena, the information is most useful.

CIVIL RIGHTS LITIGATION

Section 518(c) of the Omnibus Crime Control andSofe Streets Act of 1968, as amended, provides that:

No person in any state shall on the groundsof race, color, religion, national origin, orsex be excluded from participating in, bedenied the benefits of, or be subjected todiscrimination under or denied employ-ment in connection with any program oractivity funded in whole or in part withfunds made available under this title.'

LEAA has frequently become involved in the en-forcement of that section. When LEAA, throughits own investigation, or through notice of a find-ing by a federal court (other than in a suit broughtby the Attorney General), a state court, or a stateor federal administrative agency, determines thata state or local governmental grantee has engagedin a "pattern or practice" of discrimination, it noti-fies the chief state and local executives of the juris-dictions in which the discrimination has occurredand requests that they secure compliance with thelaw. If compliance is not secured and an adminis-trative law judge has not determined that thegrantee will probably prevail on the merits, LEAAsuspends funding of the grantee. The suspensionmay be lifted by the execution of a complianceagreement, compliance with a federal or statecourt order covering all matters raised by LEAA,

or a determination by an administrative law judgethat the grantee is in compliance.2

When the Attorney General files suit against agrantee alleging a pattern or practice of discrimin-ation in violation of the LEAA statute, LEAAmust suspend funding of the grantee after 45 daysunless within that period the United States or thegrantee has obtained a court order to the con-trary.3

The term "program or activity" in Section518(cX1) of the LEAA statute, supra, means theoperations of the agency or unit of government re-ceiving or substantially benefitting from LEAAdollars. That is, LEAA may generally investigatediscrimination in any aspect of the grantee's oper-ation, not just in the particular project it is financ-ing. LEAA regulations so interpret the statute,and that interpretation has been consistently up-held by the federal courts.'

In civil rights suits brought by the Attorney Gen-eral under the Act, the standard of proof has beenheld to be the same as that in suits under Title VIIof the Civil Rights Act of 1964.5 In other words, theAttorney General does not have to prove the ex-istence of an intent to discriminate. Rather, heneed only prove that the practice engaged in hashad a discriminatory impact.

Pending the outcome of such civil rights suits,the grantee is always concerned with the prospectof having its federal aid suspended. In most cases,the grantee will seek an injunction against the sus-pension of funding in federal district court. Allcourts have applied essentially the same standardfor determining whether or not to grant the re-quested relief, which is, the standard normally ap-plied in granting or denying preliminary relief.°The courts examine the petitioning party's likeli-hood of success on the merits of the case, the im-mediacy and intensity of any threat of irreparableinjury to the petitioning party, the balance of thehardships that each party may suffer, and the pub-lic interest.

Consideration of those factors has led to a denialof the defendant's request for injunctive relief in anumber of cases.? In most cases, the courts havegranted the injunction.8 It should be noted that inthe greatest number of the cases where an orderfor an injunction was entered, it was done uponstipulation by the parties.3 The United States willgenerally agree to an injunction where it believesthere is a reasonable likelihood that the matters indispute may be resolved voluntarily.

APPLICATION OF NEPA

The National Environmental Policy Act (NEPA)requires the preparation of an "Environmental Im-pact Statement" (EIS) for any major federal actionthat will affect the quality of the human eiron-ment. NEPA has been held to apply to projectsfunded by LEAA in Ely v. Velde.1° In Ely, resi-dents of Green Springs, VA, challenged theLEAA-assisted construction of a state penal insti-tution in Green Springs, alleging that LEAA hadviolated NEPA by failing to prepare an MS. Afterthe fourth circuit court of appeals ruled thatunder the circumstances of the case an EISwas re-quired, the Commonwealth of Virginia attemptedto go forward with construction by using LEAAfunds for another purpose and spending its ownmoney for the penal center. In "Ely II"11 thefourth circuit ruled that the Commonwealth couldnot so subvert the intended effect of NEPA. Thedecision was consistent with the general principleof grant law that a grantee may not evade theterms and conditions of a grant (whether in theform of statute, regulation, or grant agreement) bydiverting funds originally granted for a projectthat would violate those terms and conditions toanother project, and using its own funds for the of-fensive project.12

NEPA has been held to be very far-reaching incases involving activities of other federal agencies.It may be assumed that it will also be broadly con-strued in its application to LEAA programs.NEPA has been held to require that the MS con-tain full disclosure "of all known possible environ-mental consequences of proposed agency ac-tion."18 The granting agency must consider not on-ly the project's potential impact on the immediatearea of the project site, but the potential impact onany other areas that might be affected as well."

There are limits to the scope of NEPA, however,as demonstrated in Ferguson v. Law EnforcementAssistance Administration.15 In that case, resi-dents of Mecklenburg County, NC challengedLEAA's granting of $105,000 to MecklenburgCounty and the City of Charlotte to fund the opera-tions of undercover drug enforcement agents. Theplaintiffs alleged that the operations of the under-cover agents would have an adverse effect on thesocial environment of the community by "increas-ing the risk of illegal entry of homes, and illegalsearch, seizure and entrapment of citizens," inter

SiLEAA funds are by nomeans unlimited, so there willalways be a number ofdisappointed grantapplicants. 99

alia. In a per curiam affirmance of the districtcourt's decision, the fourth circuit court of ap-peals held that the grant was not a "major federalaction" and that it did not have the potential of ad-versely affecting the "human environment," as theterm was used in NEPA.

While third-parties often are able to challenge anLEAA grant on NEPA grounds in court, judicialreview of an LEAA decision not to preparean EISis limited. In Faircrest Site Opposition Committeev. Levi, 16 an association of property owners soughtto prevent the construction of a juvenile detentioncenter by claiming that LEAA had unlawfullyfailed to prepare an EIS for the project. The courtheld that the standard of judicial review of LEAA'sdecision not to prepare an EIS was the standard ofthe Administrative Procedures Act (APA). Underthat standard, the courts must uphold the agencydecision, unless there is less than substantial evi-dence to support it, or the agency action was arbi-trary, capricious, or an abuse of discretion. Thus,primary responsibility for the enforcement ofNEPA rests with the administrative agencies.Other courts have also applied the APA standardof review in reviewing decisions of other agenciesunder NEPA."

APPEALS OF DISAPPOINTEDGRANT APPLICANTS

LEAA funds are by no means unlimited, so therewill always be a number of disappointed grant ap-plicants. Units of government and nonprofit insti-tutions whose applications for funding have beendenied may feel that the criteria used in the awardprocess was irrational or unfair or that the selec-tion procedure was in some manner improper.Under Section 510(b) of the Act, applicants whohave been funded or received less money than theydeem appropriate, and grantees who have hadtheir funding terminated are entitled to an admin-istrative hearing to challenge LEAA's action. Fol-

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51

lowing the hearing and issuance of the Administra-tion's findings and determinations, a dissatisfiedapplicant or grantee may appeal to the federalcourt of appeals for the circuit in which the appli-cant or grantee is located, in accord with Section511 of the Act. The court of appeals must upholdLEAA's decision if it is supported by substantialevidence based on the entire administrativerecord, and it is not determined to be arbitrary,capricious, or an abuse of discretion.

In the case of Massachusetts Department of Cor-rection v. Law Enforcement Assistance Adminis-tration,18 an applicant had been denied fundingunder an LEAA discretionary grant program en-titled, "Corrections Training Program." LEAAhad received 18 applications under the program,and assembled a panel of experts (including federalexperts not connected with LEAA) to review theapplications and recommend those that they

52 thought should be funded. The panel recommendedawarding funds to two of the applicants, neither ofwhich was the Massachusetts Department of Cor-rection (MDOC). MDOC was notified that its appli-cation had been denied for four reasons:

the application did not reflect coordinationwith the Massachusetts Criminal JusticeTraining Council;the training methodologies to be employedwere not innovative;the approach of the plan would be moreappropriately funded by block grant funds;andMDOC had already received federalcorrections funding for three years.

MDOC promptly requested a hearing on thedenial.

The hearing examiner found that none of thefour reasons given by the review panel for denial ofthe application was supported by substantial evi-dence and that the panel had failed to adhere toLEAA internal guidelines in its selection process.Based on those findings, he recommended thatMDOC's application be reviewed once more. TheAdministrator of LEAA upheld the denial over thehearing examiner's recommendation, finding thatLEAA was not bound by its internal guidelines,and that even if it were, the procedure used in thereview of the applications was fair, and that atleast there was substantial evidence in the recordthat the Massachusetts proposal was not innova-

tive. Exercising its statutory right, MDOC ap-pealed the Administrator's decision to the first cir-cuit court of appeals.

The first circuit upheld the Administrator's de-termination. The court found that there was sub-stantial evidence to support the Administrator'sreason for denial, and that all applicants had beeninformed of the innovation criterion prior to apply-ing. It did not deem significant the fact that of thefour reasons given by the review panel for rejec-tion, only one was used by the Administrator tosupport his determination. What was important,said the court, was whether the Administrator'sdecision was supported by substantial evidence,not whether the recommendation of the reviewpanel was so supported.

Furthermore, the court held that LEAA. was notbound by internal procedural guidelines not pub-lished in the Federal Register or otherwise com-municated to the public. There could be alleged nopublic reliance on such guidelines. Finally, thecourt found that while the precise course of thepanel's proceedings could not be determined fromthe record with any degree of exactitude, theywere not conducted in such a way as to prejudiceMDOC's application.

The case of Champaign County, IL presentedmore complicated questions. Champaign Countyhad applied to LEAA for a discretionary grant forthe construction of a new correctional-court com-plex. The Administrator indicated to officials ofthe county that an amount of money considerablyless than the amount requested would be madeavailable assuming the county complied with appli-cable guidelines and requirements and submittedan application geared to the amount made availa-ble. Subsequently, the Administrator informedChampaign County officials that an additionalamount of money would be available. ChampaignCounty assumed that a new application was not re-quired and further assumed that LEAA, in makingfunds "available," actually awarded funds.

When informed that funds would be returned toWashington unless a letter of intent was receivedimmediately, Champaign County submitted a let-ter indicating that the bulk of funding for the proj-ect would be supplied, by a county referendum. Thereferendum was defeated and the county never ap-propriated any matching funds for the program.The Administrator and Deputy Administrator re-signed at about this time and an Acting Adminis-trator was serving in office. The county requested

an extension to redesign the facility and devisenew methods for funding the project. The requestwas denied by the division head and the grant ap-plication was rejected.

A hearing was held to review what LEAAtermed the denial of an application and whatChampaign County termed the termination of agrant already awarded. At the hearing, Cham-paign County argued that under Section 308 of theAct, the application was approved as a matter oflaw since it had not been denied within 90 days ofsubmission; that in any event, the Administratorhad approved the application and communicatedhis approval to Champaign County, thereby bind-ing the government; and that the Acting Adminis-trator had no authority to take any action with.respect to the grant, since he had not been ap-pointed by the president with the advice and con-sent of the Senate, and was serving in violation ofthe Vacancy Act." LEAA took the position that.the 90-day rule of Section 308 of the Act only ap-plies to applications for block grants; that therecannot be an award without official documentation(31 U.S.C. 200), and that the assistant administra-tor who rejected the grant application had beenlelegated the authority to deny applications by theoriginal Administrator, and that delegation sur-vived the original Administrator's resignation.

The hearing examiner agreed with LEAA that;he 90-day rule of Section 308 of the Act had no ap-kcation to discretionary grants. Thus, it could notxl said that an award had been made by operation

law. The examiner rejected LEAA's argumenthat a formal grant award document was neces-ary to bind the government. But he determinedhat Champaign County, instead of accepting thevard, altered its plans for construction and fund-ng thereof, and thus, was required to submit a re-vised application. The Administration, havingwaited a reasonable period of time for the filing ofnew application and having received none, pro-

erly deobligated the funds. Turning to the issue ofhe authority of the Acting Administrator, theearing examiner determined that the applicationras denied by a properly delegated official.Pursuant to the hearing examiner's recom-

iendation, the LEAA Administrator (this one ap-ointed by the President) upheld the denial. Heetermined, however, that an award documentas necessary to bind the government. The Ad:tinistrator's decision was upheld by the seventhrcuit in Champaign County v. United States Law

Enforcement Assistance Administration.2° Thecourt held that the 90-day rule did not apply to dis-cretionary grants; that under 31 U.S.C. 200 andLEAA guidelines, LEAA funds could not be obli-gated without documentary evidence of a grantagreement; that the letter denying the request foran extension of the application period was ade-quate notice of rejection under the Crime ControlAct; and that the authority of the division head todeny the application, delegated by a former Ad-ministrator, survived the resignation of that Ad-ministrator. The court did not find it necessary toreach the issue of the acting Administrator'sauthority.

THIRD -PARTY CHALLENGES TOLEGALITY OF LEAA PROGRAMS

On several occasions, third-parties have broughtactions challenging the authority of LEAA to fund 53particular programs. Not infrequently, those third-parties are persons prosecuted or facing prosecu-tion as a result of the effectiveness of an LEAAprogram.

An example was litigation involving the Pennsyl-vania Special Prosecutor's Office. In 1974, react-ing to findings of a Pennsylvania investigativegrand jury and the Pennsylvania Crime Commis-sion that official corruption existed in variousplaces in Pennsylvania, the Pennsylvania Depart-memt of Justice applied for LEAA financial as-sistance for the establishment of an office of thespecial prosecutor. LEAA funded the special pro-secutor until 1976, when his operations becamehamstrung by an act of the Pennsylvania GeneralAssembly (discussed infra). A number of Philadel-phia policemen, state officials, and private citizens,faced with prosecution for corruption and perjury,brought actions in state and federal courts to chal-lenge the prosecutorial authority of the office, andthe legality of its funding by LEAA. In Gwinn v.Kane,2' the president of a milk company havingbeen charged by the special prosecutor with per-jury and false swearing in a grand jury proceeding,brought an action in quo warranto against the spe-cial prosecutor could not exist under Pennsylvanialaw. The court found authority for the office in TheAdministrative Code of 1929, which permits theattorney general of Pennsylvania to appoint depu-ties to intervene in local prosecutions in appropri-ate cases. The court considered irrele\ nt theallegation that under the LEAA grant the office

was to engage in statewide prosecution since inthe instant case it was prosecuting in a particulardistrict where a judge and the attorney generaldeemed it necessary.

In Hallman v. Phillips, 22 several Philadelphiapolicemen (some of whom had been charged withcorruption by the special prosecutor, others ofwhom were under investigation) sought an injunc-tion against LEAA's funding of the special prose-cutor. The plaintiffs alleged that the prosecutor'sappointment as a deputy attorney general was in-valid under Pennsylvania law, and in the alter-native that he was carrying out his duties in a man-ner contrary to state law. The district court stayedthe case until similar issues were decided in Penn-sylvania suits such as Gwinn v. Kane, supra. Afterthe Pennsylvania Supreme Court affirmed theGwinn decision, the court lifted the stay, and con-sidered the defendant's motion to dismiss. Because

54 the plaintiffs were not challenging an exercise ofthe Congressional spending power, the court heldthat they did not have standing as taxpayers underFlast v. Cohen,23 and subsequent Supreme Courtdecisions. The court did not expressly rule onwhether the plaintiffs had standing as state crimin-al defendants or targets of state criminal investi-gations but held that they were not entitled to aninjunction because the burden of defending a crim-inal prosecution did not constitute "irreparable in-jurY."

None of the suits challenging the legality of thespecial prosecutor's office was successful. How-ever, the very institution of the suits seriouslyhampered the special prosecutor's work. As dis-cussed, infra, it finally took an act of the GeneralAssembly to destroy the office completely.

More recently, several persons convicted ofcrimes in Texas courts brought actions challengingLEAA's "Sting" and "Career Criminal" pro-grams. Under the former program, state or locallaw enforcement officers set up "fences" in orderto catch thieves and persons trading in stolengoods. Under the latter, state prosecutors attachpriority to prosecutions of repeat offenders and es-tablish systems for the identification and rapid pro-cessing of those cases.

In Brooks v. Dogin,24 a state prisoner seeks aninjunction against LEAA's provision of funds tothe Dallas Career Criminal Division. He allegesthat in prosecutions of defendants processedthrough the Career Criminal program the stateprosecutor preemptorily challenges all black pro-

spective jury members. This, he argues, violateshis and other criminal defendants' rights under theFifth, Sixth and Fourteenth Amendments to theUnited States Constitution, and Civil Rights Act.

In Harper v. Dogin,26 a Texas prisoner con-victed through a Sting operation seeks damagesagainst the LEAA Administrator and an order en-joining LEAA from continuing to support such op-erations. The prisoner alleges that the Stingprogram is tantamount to organized entrapment,and contends that 1,:,is violates citizens' rightsunder the Constitution and the Civil Rights Act.

As these and three similar cases are at the timeof this writing before the District Court for theNorthern District of Texas on motions to dismiss,it would not be appropriate to comment on theirmerits. They are provided as further examples ofefforts of third parties to hamper or stop LEAAfunded state or local operations.

CONFLICTS BETWEEN STATE LAWSAND THE CRIME CONTROL ACT

It is a well established principle of American fed-eralism that where a state law is in direct conflictwith a federal law, the federal law governs. ArticleVI of the Constitution provides that federal law isthe "Supreme Law of the Land." Yet it is often dif-ficult to determine whether or not two laws do infact conflict. This is as true in the area of grant lawas it is in any other area of the law.

From time to time, a state legislature will enact alaw providing that no funds may be disbursed fromthe state treasury, including funds receivedthrough grants from the federal government, with-out an express appropriation by the legislature.Since the LEAA statute and regulations pro-mulgated thereunder provide that the executivebranch of the state government is to control fundsgranted by LEAA, it is arguable that such statelaws are in conflict with federal law. On the otherhand, such state laws do not necessarily deny theexecutive control to the funding authority controlsof the legislature. Where the legislature actuallyexercises that operation, the case is stronger thatthe laws conflict. It might also be argued that suchan act of the legislature violates the "ContractsClause" of Article I of the Constitution.

Two cases involving this problem merit discus-sion. In People ex rel. Kirk v. Lindberg,26 modifiedon denial of rehearing," the director of the IllinoisDepartment of Local Government Affairs sought a

writ of mandamus ordering the state comptrollerto honor a voucher for federal funds in the statetreasury, The tititnol rol lot. Rad re cutlet] to pay thevoucher because no appropriation had been madeof the funds requested, and he believed that the Il-linois Constitution and a state statute prohibite6disbursement of the funds. Section 2(b) of ArticleVII of the Illinois Constitution provides that, "TheGeneral Assembly by law shall make appropria-tions for all expenditures of public funds by thestate." The statute in question made appropria-tions and also provided that federal funds receivedabove the amount appropriated could be expendedonly upon additional appropriation by the GeneralAssembly, except that grants-in-aid for nonstateagencies could be expended absent such appropria-tions. The Illinois Supreme Court, in granting thewrit, held that the statute was unconstitutional be-cause the Illinois Constitution provided that appro-priations bills may only contain appropriations,and that despite the Constitutional prohibition. ofexpenditure of funds without appropriations, somefunds were so expended each year and such ex-penditures had long been upheld in the Illinoiscourts. The court never reached the issue of possi-ble conflict with state law.

The case of Shapp v. Sloan,28 involved the Penn-sylvania Office of the Special Prosecutor. In 1976,the Pennsylvania General Assembly passed Act117 which included the following provision:

The state treasurer is hereby specificallyprohibited from issuing any warrant forrequisitioned funds which were derived, inwhole or in part, from federal funds unlesssuch funds have been specifically appropri-ated by an act of the general assembly.

In the appropriations act that year, Act 117-A,no provision was made for the special prosecutor'soffice. The commonwealth treasurer refused to is-sue a warrant for funds for the office upon requi-sition by the Governor's Justice Commission (theSPA). The Governor brought suit challenging thevalidity of Act 117 and the appropriations actunder the Pennsylvania and United States Consti-tutions. The Governor argued that the exercise oflegislative control over moneys granted by the fed-eral government for use by the state executivebranch violated the doctrine of separation ofpowers. The Pennsylvania supreme court held thatthere was no valid legal basis for such an argu-

ment. The Pennsylvania Constitution gave appro-priation power to the General Assembly, not to theGovernor. The federal money, said the court, wasgranted to the commonwealth, not to any par-ticular branch of the commonwealth government.The ratio of federal money to state money ex-pended by the commonwealth was at that time 1 to3. If federal funds should reach 100% of the statebudget and the executive branch controlled thesefunds, there would be little need for a state legisla-ture. It would be executive assumption of the ap-propriations power that would violate the doctrineof separation of powers.

Addressing the Governor's argument that Act117 violated the Supremacy Clause of the UnitedStates Constitution, the court noted that nowherein the Crime Control Act was it specifically pro-vided that LEAA money was to be granted to thestate executive. It also pointed out that the Ad-visory Commission on Intergovernmental Rela-tions (ACIR) had recommended that state legisla-tures assume greater control over the use of feder-al funds. Consequently, there was therefore notthe "clear and direct conflict" necessary to invali-date a state law under the Supremacy Clause.

The Governor also argued that the acv of the gen-eral assembly was a violation of the ContractsClause of the United States Constitution. Thecourt held that grants from the federal govern-ment to states were not contracts, but were ratherbetter characterized as "conditional gifts." Even ifgrants were considered contracts, said the court, astate "is not prohibited from exercising its sover-eign power for legitimate motives even if in so do-ing it interferes with existing contracts." In exer-cising its appropriations power, the general assem-bly was acting for legitimate motives. Thus, theContracts Clause was not violated.

The Pennsylvania Supreme Court thus refusedto overturn Act 117 or Act 117-A. The Governor'sappeal to the United States Supreme Court wasdismissed in Thornburgh v. Casey.29

CONCLUSION

LEAA's ten-year history reflects that people andorganizations affected by federal assistance legis-lation rarely resort to the federal courts in wayswhich substantially affect the operations of thoseprograms. Intergovernmental conflicts among lo-cal, state, or federal agencies more often presentissues which can be addressed by a federal court.

54

Less often, private citizens' suits are able to obtainreview. Occasionally an agency's legislation is thevehicle for a substantial intergovernmental issue

with potential impact on our system of governmentor on the relationships among governmental com-ponents.

FOGTNOTES

'Similar language appears in Title VI of the Civil Rights Act of1964, which is, of course, applicable to LEAA's programs.

242 U.S.C. Section 3766(cX2).342 U.S.C. Section 3766(cX2XE).428 C.F.R. 42.202(g). See, e.g., United States v. Commonwealthof Virginia, No. 76-0623-R (E.D. Va., filed April 8, 1977).

6United States v. Commonwealth of Virginia, 454 F. Supp.1077 (E.D. Va. 1978).

°United States v. Commonwealth of Virginia, 569 F. 2d 1300(4th Cir. 1978); United States v. County of Fairfax, No. 78-862-A (E.D. Va., filed Jan. 30, 1979); United States v. Countyof Milwaukee. 449 F. Supp. 949 (E.D. Wis. 1978); Capel v.Lamb, No. LV 77.118, RDF (D. Nev., filed August 2, 1978).

/United States v. City of Los Angeles, 595 F. 2d 1386 (9th Cir.1979); United States v. County of Milwaukee, supra; Capel v.Lamb, supra.

8See, e.g., United States v. County of Fairfax, No. 78-862-A(E.D. Va., filed Jan. 30, 1979); United States v. State of Il-linois, No. S-CIV-76-0158 (S.D. Ill., filed Feb. 24, 1978).

,See, e.g., United States v. Jefferson County, Alabama, No.77-H-0683-5 (N.D. Ala., filed July 12, 1977); United States v.County of Baltimore, Maryland, No. H-78-836 (D. Md., filedJune 15, 1978).

10451 F. 2d 1130 (4th Cir. 1971) ("Ely 1")."Ely v. Veldt, 497 F. 2d 252 (4th Cir. 1974)."See, Named Individual Members of San Antonio Conserva-

tion Society v. Texas Highway Department, 446 F. 2d 1013

53

(5th Cir. 1971),"Environmental Defense Fund v. Corps of Engineers, 325 F.

Supp. 728 (E.D. Ark. 1971) dismissed, 342 F. Supp. 1211(E.D. Ark. 1972), affd, 470 F. 2d 289 (8th Cir. 1972).

"Appalachian Mountain Club v. Brinegar, 394 F. Supp. 105(D.N.H. 1975).

18No. 72-2192 (4th Cir., filed Jan. 30, 1973).16418 F. Supp. 1099 (N.D. Cnio 1976).1/See, Silva v. Lynn, 482 F. 2d 1282 (1st Cir. 1973); Morn-

ingside Renewal Counsel Inc. v. U.S. Atomic Energy Commis-sion, 482 F. 2d 234 (2d Cir. 1973), cert. denied, 417 U.S. 951(1974).

"No. 78-1490 (1st Cir., filed Sept. 13, 1979).',Champaign County made the same argument in a suit filed in

District Court for the Eastern District of Illinois in which itsought, inter alia, an injunction against the acting Ad-ministrator's approval of grants and disbursement of federalmoney. Champaign County, Illinois v. Gregg, No. CV 78-0070-D (E.D. Ill.). The district court dismissed the suit.

"No. 78-2622 (7th Cir., filed Dec. 28, 1979).2119 Pa. Comwlth. 243, 339 A. 2d 838 (1975), affd, 465 Pa.

269, 348 A. 2d 900 (1975).22409 F. Supp. 423 (E.D. Pa. 1976).23392 U.S. 83 (1968)."No. CA3-79-1143 F. (N.D. Tex.)."No. CA3-79-1132-F. (N.D. Tex.)."No. 46966 (Sup. Ct. Ill., filed Sept. 27, 1974).2759 III. 2d 38, 320 N.E. 2d 974).28480 Pa. 449, 391 A 2d 595 (1978)."440 U.S. 942 (1979).

Part IV

State an Local GovernmentsIn The Supreme Court

of the United Statesby Charles S. Rhyne

Rhyne and RhyneWashington, DC

As a lawyer who has taken part in many cases inthe Supreme Court of the United States over thepast 40 years, I have been asked to talk to youabout preparation and presentation of cases in thatunique forum. In recent years that Court has in-creasingly become the summit source of decisionsaffecting allocation of government power in ournation and its decisions are of vital concern to allgovernmental officials.

Our system of Constitutional federalism allo-cates governmental powers to the federal govern-ment and to states who often act through theirlocal governments and the Supreme Court is thefinal power arbiter in our nation so all levels of gov-ernment are constantly affected by its decisions.And as Mr. Justice Robert Jackson said: "TheSupreme Court is final not because it is infallible,but it is infallible because it is always final."

I argued my first Supreme Court case againstMr. Justice Jackson (then, Solicitor General of theUnited States) in 1938. It was the case of City ofAtlanta v. Ickes,1 involving the Constitutionalpower of Congress under the Bituminous Coal Actto fix the prices at which states and cities pur-chased coal. Prior to the argument Secretary Ickesissued an exemption of states and cities from theact thus giving Atlanta a victory on jurisdictionalgrounds and avoiding the Constitutional issue.

From the time of that case until now I have rep-resented states and cities in many cases before theSupreme Court, arguing a case there as recently asOctober 29, 1979. Perhaps the most notable to you

of the cases we have been involved in was Baker v.Carr,2 where we won the "one-man, one-vote"decision and National League of Cities v. Usery,3where we won a decision that the federal govern-ment could not fix wages and hours for state andlocal employees.

The flood of cases taken to our highest Court hasnow reached almost 5,000 per year. Of course, allbut about 100 of these are refused review and aredisposed of in about two words, certiorari deniedor appeal dismissed.

The ones which are considered by the Court oral-ly are thoroughly reviewed by briefs and oral argu-ment because the Court considers that they raiseimportant statutory or Constitutional questions itshould decide. Selecting the 100 cases to be briefedand heard orally is a major task of the Court. Thegenerally understood criterion is that if four Jus-tices vote to hear a case it becomes one of the 100.

60 The lawyers on each side generally have one-halfhour to present their oral argument.

Prior to the oral argument the lawyers for eachparty must file the record of the case below andtheir briefs.

Before going further let me dispose of one sub-ject I have been constantly asked to discuss.

The important role the Court plays in the lives ofall Americans is so great as to bury in infamy thecurrent book which attacks that Court. That Jus-tices like lawyers and other humans disagree isnothing new. The authors of that volume havetwisted the words and work of outstanding juristsinto hyperboled squabbles so as to paint an unin-formed and untrue picture of this great institution.But hurt it they cannot, because so great is thepublic esteem for the Court and so low the publicesteem of the book's authors. The Court will behonored for performing its high governmentalfunction long after the book is forgotten.

The worldwide importance of the SupremeCourt is such that hundreds of tributes of admira-tion for it as an institution could be quo+ d. Theirtremendous intellectual effort is constantly praisedby experts in Constitutional law. I will confine my-self to a few quotes beginning with that of Mr. Jus-tice David Brewer of the Supreme Court who saidin 1898: "It is a mistake to suppose that the Su-preme Court is either honored or helped by beingspoken of as beyond criticism." And I refer toCanon One of the American Bar Association'sformer Canons of Professional Ethics which statesin part:

O'

It is the duty of the lawyer to maintaintowards the courts a respectful attitude,not for the sake of the temporary incum-bent of the judicial office, but for themaintenance of its supreme importance.Judges not being wholly free to defendthemselves, are peculiarly entitled to re-ceive the support of the Bar against unjustcriticism and clamor.

We as a people may talk long and loud of ourrights and liberties, but our rights are as nothingwithout a redress and protection in the courts. Thegreat Chief Justice John Marshall so truly said:"The judicial department comes home in its effectsto every man's fireside, it passes upon his proper-ty, his reputation, his life, his all."

That Justices are human no one could or woulddeny. As humans they make mistakes like all of us.Their robes do not transform them into supermen.That they differ, as do all humans, does not war-rant attempts to degrade them personally.

There are no easy decisions before the SupremeCourt. That they split 5 to 4 or 8 to 1 is not as im-portant as the fact that they perform that highfunction which makes our system of governmentwork. Recall the governmental paralysis under theArticles of Confederation due largely to the ab-sence of an organ to decie,-.. great issues. We havethat organ now.

I do not say the Supreme Court is perfect or itsdecisions always correct. No group of humans are,or can be, placed in such a position. But I agreewith Sir Winston Churchill, who in the last greataddress of his career in 1957 to the American BarAssociation at its convention banquet in London'shistoric Guildhall called the Supreme Court of theUnited States the "greatest court on earth." I hadthe honor as President of the American Bar Asso-ciation of introducing Sir Winston. His exactwords were:

The Supreme Court of the United States isthe greatest court in the world. It is thesupremest of the supreme in the field oflaw. And the man who sits here with me,the Chief Justice of the United States, EarlWarren, will go down in history as thegreatest human rights leader, not only ofour generation, but of all generations. Hehas dared to interpret that great documentwhich has its roots in our Magna Charta asmeaning that all persons are equal andfree.

Earl Warren there spoke of the fact that "thegreat principles of our Constitution were the re-fined wisdom of the great law givers of the ageswritten down for the first time as the guiding prin-ciples of a nation." He said the reason so fewchanges have been made in the Constitution as"our nation changed from a wilderness to thegreatest industrial nation on Earth was that theseprinciples were and are immutablethe wisdom ofhumankind, and the dreamed-of guiding stars ofevery woman, man and child on Earth, not justAmericans."

In the debates of the Constitutional Convention,America's founding fathers did indeed envision anational tribunal, a Supreme Court, as the arbiterof power among states and the federal governmentin the new federal system of government.

In their defenses of the newly proposed Consti-tution in The Federalist Papers, both James Madi-son and Alexander Hamilton indicated that such arole was almost inevitable for the Court.

Madison argued that "some such tribunal isclearly essential to prevent an appeal to the swordand a dissolution of the compact" that binds thestates together as a nation.4

Hamilton was just as emphatic in main-taining that there ought always to be aConstitutional method of giving efficacy toConstitutional provisions. . . . The merenecessity of uniformity in the interpreta-tion of the national laws decides the ques-tion. Thirteen independent courts of finaljurisdiction over the same causes, arisingupon the same laws, is a hydra in govern-ment from which nothing but contradictionand confusion can proceed.8

Early in the Court's history, John Marshall as-serted the Court's role as arbiter between thestates and the federal government. In McCulloch v.Maryland,6 he established the Supreme Court as"the ultimate power" in deciding all such ques-tions.

Today, with nearly 200 years of experienceunder the Constitutional system of federalism, therole that Madison and Hamilton predicted for theSupreme Court has indeed been fulfilled. In recentyears, the Court has increasingly become the sum-mit source of decisions of local governments aswell as those governing the federal and state gov-ernments.

In writing their defe ,!es of the proposed Consti-tution in The Federalist, Madison and Hamilton

saw the primary role of the Court as one of the"umpiring" disputes between conflicting state andfederal laws. At that time, it was thought that thenational tribunal would be necessary primarily tomake sure that state law did not conflict with thefederal Constitution and the lay's enacted there-under. In fact it was suggested by Pinkney ofSouth Carolina at the convention that the Consti-tution provide that by law the federal Congresshave power to nullify state laws it disagreed with,but the idea was rejected.

The role of "umpire" was left to the courts andin decision by decision it established the federalgovernment over the states, whittling away littleby little the Constitutional powers of the states.

Recently, however, the U.S. Supreme Court hasrevived the fundamental principles of "federal-ism" explicit in the Tenth Amendment, and the100 references to the states throughout the UnitedStates Constitution, to also question federal lawswhich conflict with the traditional functions ofstate and local government. As a result, the Courtmust do its "umpiring" from several different van-tage points on the playing field of federalism. Theresult has been an ever growing number of majordecisions in recent years affecting municipal andstate governments, some with positive effects, andsome with obviously detrimental effects.

The impact of Supreme Court decisions upon mu-nicipal government is perhaps nowhere more dra-matically illustrated than in the Court's recentland use decisions. The 1926 Supreme Court deci-sion upholding local land use regulation, Village ofEuclid v. Ambler,7 was followed in the succeedingtwo years by four other local zoning cases.8 From1928 to 1974, a period of 46 years, the Court didnot render a new decision in this area; it dismissedappeals or refused certiorari referring to thesefour cases as having settled the federal Constitu-tional law on this subject. Since 1974, however, theCourt has decided nearly twice as many land usecases as it did in all its previous history.

Since 1974, the Court has ruled on such diversetopics as whether a municipality can control the lo-cation of adult movie theaters in a community,8whether a municipality's refusal to rezone a pieceof property in order to permit the construction ofmultiple family housing for low and moderate in-come persons violated Constitutional rights," andwhether a municipality may write into its zoninglaws provisions to prohibit nonrelated personsii orextended family members, such as grandparents,

from living in the same household."The impact of recent Court decisions on munici-

pal government is not limited to land use cases. Injust the past few terms, the Court has ruled thatmunicipal governments are, in many cases, subjectas "persons" to liability under the federal antitrustacts." A little over a year ago, the Court furtherexpanded municipal liability by reversing anearlier decision and holding that municipalities are"persons" for purposes of liability under the CivilRights Act of 1871.14 The potential burden of theadded liability imposed by these two decisions indi-cates how dramatically the Court can reshape theconduct of local government.

The Court has offered significant encourage-ment to municipalities in some areas, however. Itsdecision in National League of Cities to which I re-ferred above is the touchstone for a reaffirmationof the important role of state and local government

62 in the federal system, a role which for many yearslay dormant. In striking down the extension of thefederal wage and hour provisions in the Fair LaborStandards Act to state and local governments, theCourt gave municipalities a major victory in theirefforts to stem the ever-increasing tide of federalintrusion into local affairs.

A major theme of litigation under federal grantswill be the extent to which the presence of federalmoney sanctions the use of grant conditions toachieve what the Court in National League for}ladeas direct regulation.

It is also worth noting that municipalities arenot only involved in Supreme Court litigationwhich impacts on the conduct of local government,but also litigation which impacts on the private sec-tor. Because of the application of Title VII of theCivil Rights Act of 1964 to state and local govern-ment, employment discrimination litigation involv-ing municipalities is of great interest to the privatesector as well. A recent example of such a case wasthe Court's holding, in April 1978, that the City ofLos Angeles' requirement that female employeesmake larger contributions to a pension fund thanmale employees, based on the fact that women, asa class, live longer than men, violated Title VII'ssex discrimination provisions."

And, of course, because of the judicial extensionof the federal antitrust acts to municipalities, at-torneys for municipal governments will also beadding to the body of antitrust law in the privatesector." We in my office are already working onseveral such cases.

Go

6 A major theme of litigationunder federal grants will be theextent to which the presence offederal money sanctions the useof grant conditions to achievewhat the Court in NationalLeague forbade as a directregulation. 5

Similarly, the Court's recent interpretations ofthe Fourth Amendment's Warrant Clause, in casesinvolving police'7 and fire" officials, are equallyapplicable to state and federal officials and theirrecords, as well as newspapers.

I think that it is rather ironic that a court whichhas constantly emphasized that it is being over-worked has recently opened the "floodgates" forlitigation against municipalities in such decisionsas those applying the antitrust acts and the CivilRights Act of 1871 liabilities to municipalities.These and other decisions seem to insure that mu-nicipalities will be among the chief litigants beforethe Court for years to come.

There are several guidelines one must keep inmind in preparing and arguing cases before theCourt. The first is what I like to call the "JacksonRule." That "rule" is that no petition or jurisdic-tional statement should exceed 25 pages. This ruleis based on a statement by the late Mr. JusticeJackson in which he stated it is unreasonable to ex-pect the Justices to read such a petition of morethan 25 pages.

An example of the importance of good short cer-tiorari petition writing was the experience of citiesin Baker v. Carr," the "one-man, one-vote" case.Prior to our successfully getting the Court to hearthe case, 15 previous petitions trying to get reap-portionment before the Court had failed on Mr.Justice Frankfurter's "political thicket" or "politi-cal question" grounds. We wrote a 25-page cer-tiorari petition where others had written over 200pages in some of the 15 cases.

When preparing the petition, the statement ofthe question or questions presented must be care-fully drafted. They should be broad enough to raisethe issues you wish to raise, but concise enough tomaintain their "sex appeal."

An example of the problems that can develop

when sufficient care is not taken with the questionpresented can be seen in the recent ruling in Pro-cunier v. Navarette,2° in which the majority ruledthat state prison officials enjoy qualified immunityfrom an inmate's suit under 42 U.S.C. Section1983, alleging interference with his outgoing mail,unless the officials knew or reasonably should haveknown that their actions would violate the in-mate's Constitutional rights. Mr. Chief JusticeBurger dissented because he said the Court's opi-nion departed from the usual practice of consider-ing only the question upon which certiorari hadbeen granted or questions "fairly comprised' with-in" that question. Whereas the Court agreed toconsider only one question, "whether negligentfailure to mail certain of the prisoner's outgoingletters states a cause of action under section1983," the Court decided a different question,"whether the prison officials are immune from sec-tion 1983 damages for negligent conduct." Mr.Justice Stevens also disagreed with the Court's ap-proach. The disagreement among the Justices overexactly what was the question presented is an ex-ample of the kind of trouble one can get into with-out careful drafting.

While there is no limit to the number of pages abrief on the merits may contain, one should weigheach word, since the Justices are human and haveeyes which hurt after reading long briefs, just likeeveryone else. How would you like to read the peti-tions, briefs, record and reply briefs in nearly 5,000cases, no matter how good your eyes are?

To get the Court to hear oral argument in yourcase you must not only be concise; you must proveyour case is important, unusual and above all with-in the Court's rather "narrowly" defined jurisdic-tion. But a win is a win so it counts just as much ifyou can win on the briefs without an argument.

Above all, the Court has highly technical rulesand interpretations of those rules. And since theCourt is the "end of the road," you are well ad-vised to study these rules carefully as well as theCourt's interpretations of them.

In preparation for oral argument before the Su-preme Court, you should close yourself off as com-pletely as possible from all other matters and con-centrate many days on your preparation. Just as indrafting the petition and brief, every word in oralargument should be weighed carefully, and everyeffort should be made to make one's point briefly.Since the Court, by its questions, will often take upone-half to three-fourths of the time allotted to

you, do not plan to use all the time set for your ar-gument. If possible, one should present only onemajor point or principle confining your argumentto the exact question the Court agreed to hear.

In spite of the fact that the Court takes up muchof your time with questioning, it is possible to makeyour points in response to the Court's questions bybeing responsive to the questioning and then quick-ly moving on to make your point.

In oral argument, you must be keenly aware ofthe full logical extent to which your position can betaken, lest it be dissected and destroyed by theCourt's questions or a showing by your opponentthat your position leads to an absurb coneusion.Remember, those nine Justices do their question-ing of lawyers day after day. They are experts atexposing the slightest weakness in your argument.Of course, this tactic of "reductio ad absurdum"can also be used by you to your advantage. Thebest way to be able to do this is to be armed withsufficient facts from the record with which to showfully the unreasonableness of your opponent's ar-gument.

Indeed, stressing the factual impact of the argu-ments in the case is extremely important; it wasthe deciding factor in National League of Cities v.Usery. In National League, we made an extensiveshowing, by expert testimony and affidavits fromcity managers and other city officials, of the poten-tially disastrous impact the application of the FairLabor Standards Act's wage and hour provisionswould have on state and local government ser-vices, operations, and finances, not only in termsof dollars and cents, but in terms of service cut-backs and jobs lost as well.

An advocate before the Court is prohibited by theCourt's rules from reading his argument. If the ad-vocate reads his argument he will be stopped bythe "Junior" Justice (another Court custom) andtold not to read his argument. One can use an out-line but reading an argument to the Court is abso-lutely prohibited

It is also very unwise to read excerpts from priordecisions of the Court. Remember the Court knowsmore about its own decisions than do others as thebriefs and arguments are replete with repeatedreferences to them.

With the proper factual showing, it is possible toconvince the Court of even the most difficult pro-positions. For example, in Massachusetts v. UnitedStates,2' decided in March of this year, the Com-monwealth

6of Massachusetts objected to the impo-

sition of an annual federal aircraft registration taxon a police helicopter. Not only did the Court rulethat the tax did not violate the implied immunity ofstate government from federal taxation, it con-cluded that even if the state's helicopter neverused the Federal Aviation Administration's navi-gational services, for which the tax was imposed,the state had "benefited" from the services in thesense that they were available for all users. If theCourt can be convinced that a tax on an airplanethat has never left the ground can make the air-ways safe for everyone else, it can be convinced ofany reasonable fact, with the proper showing in therecord. The record is tremendously important andif you wander from it and begin "testifying" youcan expect a quick reprimand from one of theJustices.

This is not to say that social science data cannotbe used effectively and well before the Court. TheCourt's recent ruling that a five-person jury in acriminal case was unconstitutional, relied heavilyon social science studies comparing relative jurysize.22

Nonetheless, the Court's opinions in the pastterm generally underscore the importance of goodfactual presentations. This Court's "pet" methodof analyzing the Constitutionality of state and locallegislation has been an "under-inclusive/over-inclusive" test. In striking down a Massachusetts lawthat prohibited specified businesses from spendingcorporate funds to influence the vote "on any ques-tion submitted to the voters, other than one ma-terially affecting any of the property, business orassets of the corporation," the Court used thisunder-inclusive/over-inclusive analysis.23 Whilecorporate expenditures with respect to a referen-dum were prohibited by the challenged statute,corporate activity with respect to the passage ordefeat of legislation was permitted. The Court sawthis as under- inclusive.

It is therefore extremely important that, in anti-cipation of appellate review, you build a good rec-ord below. Building a good factual record is nowmore important than ever because of the need toprove legislative intent in a number of types ofcases. After the City of Lafayette decision, exten-sive showings of state legislative intent will be nec-essary to avoid municipal antitrust liability. TheCourt's recent decision in Monett, allowing munici-pal liability under 42 U.S. C. Section 1983 wherethere is a showing of a discriminatory municipalpolicy, also calls for the ability to prove or disprove

intent. Finally, the same requirement arises in theConstitutional cases, after Washington v. Davie*and Arlington Heights.

The lesson to be learned from these recent deci-sions of the Supreme Court is that the strongestcase is the case which makes the best factual show-ing. In defending state or local action, the factspresented must adequately justify the challengedaction. In attacking the application of federal ac-tion affecting state and local government, the stateor municipality must make a strong factual show-ing of the way in which the federal action intrudesupon traditional and integral functions of localgovernment, as we did in National League of Citiesv. Usery. We are doing the same in the attack uponthe federal statute mandating federal and stateparticipation in the federal unemployment com-pensation system. In this legislation and other re-lated legislation the federal bureaucrats are deter-mined to get control of state and local budgets andtell state and local governments what taxes theymust impose and how they may spend those taxes.With 85% of local government tax revenues goingto personnel costs and 75% of state tax revenuesgoing to personnel costs, the effect of federal con-trol over state and local personnel is again empha-sized as it was in National League. An article inU.S. News & World Report25 on "How Washing-ton is Moving in on the States" indicated thatthrough the "carrot-and-stick" approach of condi-tioning federal aid to state and local government,"the long arm of Washington is extending its reachacross the nation and threatening to seize what isleft of states' control over their own affairs." Inthat article, Delaware's Gov. Pierre DuPont warnsthat "One day, Washington will swallow us all up ifwe don't put limits on it now."

Modern government is intricate, complex and ex-pensive. The people are frustrated by these func-tions and especially are the people disgusted withthe constant attempts of federal bureaucrats togain more and more control over state and localgovernment services and budgets. The revolt Isense is more against the federal Congress and thePresident's ever expanding spending programsthan against state and local services which thelocal people choose and are willing to pay for bylocal taxes.

When Congress or the President lose sight of theConstitutional principles of federalism upon whichthis country was founded, and which principles, infact, are older than the Constitution itself, there

remains only the Sr.preme Court to reaffirm thoseprinciples. We saw in National League that with awell prepared case, state and local governmentneed not be "swallowed up" by Washington.

Today, as in the days of Madison and Hamilton,the Supreme Court remains the umpire . . . thefinal arbiter of power in the federal system. Witheffective preparation and presentation of theircases before the courts, state and local govern-ments will maintain their vital role in the Constitu-tional scheme of federalism. Without that prepara-tion states and local governments will becomemere "bureaus" of the federal departments andagencies as the "Clean Air Act" cases26 beforethe Supreme Court stated loud and clear!

eill/..FOOTNOTES

As a final word let me say that in my judgmentthe Chief Justice of the United States and the As-sociate Justices who compose the current Courtare just as able, conscientious and hard working asany of their predecessors. They work long and ar-iuous hours in relative isolation performing per-haps the most essential function of our system ofgovernment under federalism. Critics the SupremeCourt always has had and always will have. Disa-greements are guaranteed by the very nature ofthe difficult task they perform. Leaving personali-ties aside and judging them on their judgmentswhich is the only true test, they have earned anddeserve the respect of all Americans both whoagree and who disagree with their deicisons.

1308 U.S. 517.2369 U.S. 1 ;:c; (1962).3426 U.S. 833 (1976).4The Federalist Papers, No. 39.5/bid., No. 80.54 Wheat. 316 (1819).7272 U.S. 365 (1962):sZahn v. Board of Public Worics, 274 U.S. 325 (1927); Gorieb v.Fox, 274 U.S. 603 (1927); Nectow v. City of Cambridge, 277U.S. 183 (1928); State of Washington ex rel. Seattle TitleTrust Co. v. Roberge, 278 U.S. 116 (1928).

9Young v. American Mini- Theaters, 427 U.S. 50 (1976)."Metropolitan Housing Development Corp. v. Village of Arl-

ington Heights, 429 U.S. 252 (1977).11Village of Belle Terre v. Bonzes, 416 U.S. 1 (1974)."Moore v. City of East Cleveland, 431 U.S. 494 (1977).

"City of Lafayette v. Louisiana Power and Light Company,435 U.S. 389 (1978).

"Monell v. Department of Social Services of the City of NewYork, 436 U.S. 658 (19'i8).

"City of Los Angeles v. Manhart, 435 U.S. 702 (1978)."City of Lafayette, supra."Zurcher v. Stanford Daily, 436 U.S. 547 (1978)."Michigan v. Tyler, 436 U.S. 499 (1978)."369 U.S. 186 (1962).20434 U.S. 555 (1978).21435 U.S. 444 (1978)."Ballew v. Georgia, 435 U.S. 223 (1977)."First National Bank of Boston v. Bellotti, 435 U.S. 765

(1978).24425 U.S. 229 (1976).25June 12, 1978, p. 41."EPA v. Brown, EPA v. Maryland, State Air Pollution Con-

trol Board v. Train, District of Columbia. v. Train, 431 U.S.99 (1977).

60

65

Part V

Anatomy of a Grant Controversy:Handicapped Regulations and

City Hall

The following script was developed by ACIR andthe actors whose names are listed below. It is de-signed to illustrate the legal, intergovernmental,political, and fiscal dimensions of implementingone crosscutting requirement (relating to rights ofthe handicapped) in one hypothetical city. It alsopoints out the strong federal influence on decisionsmade at the local level and the importance offederal grants to local budgets and to the opera-tions of some of the most local functions, such asfire protection.

The actors and co-authors of the script were:William Montalto, assistant project director, Coor-dinating Committee on a Model ProcurementCode, American Bar Association; William S.Rhyne, Rhyne and Rhyne, Washington, DC;Stephen Sorett, Office of General Counsel, En-vironmental Protection Agency; John Settle,chairman, Board of Grant Appeals, Department ofHealth and Human Services*; and Carl W.Stenberg, assistant director, ACIR. Carol S.Weissert, ACIR information officer, drafted theoriginal script from which the final was drawn andwas moderator of the session.

'At the time of the Conference, Stephen Sorettwas with the Of-fice of General Counsel, General Accounting Office and JohnSettle was chairman, Board of Assistance Appeals, En-vironmental Protection Agency.

MODERATOR: As a break from the more typicalkind of conference format, we've chosen to enter-tainand we hope enlightenyou with a simula-tion of how a city might respond to pressure to con-form to crosscutting regulations that they feel areunreasonable. What we hope to do in this simula-tion is to describe how a controversy arising out ofthe implementation of crosscutting regulations, inthis case rights of the handicapped, might behandled, what the various positions of players are,what their legal strategies might involve, and whatthe outcome might be. The bottom line is that thegrantee is not without legal rights and has adminis-trative and judicial forums available to enforcethose rights.

So on with our little play. We begin, as do manyacts in real life, with the Congress. In 1973, theCongress passed legislation, Section 504 of the Re-habilitation Act of 1973 providing that "no other-

70 wise qualified handicapped individual of the UnitedStates . . . shall, solely by reason of handicap, beexcluded from participation in, denied benefits of,or subjected to discrimination under any programor activity relating to federal financial assistance."

There is little legislative history surrounding theenactment of Section 504. There were no hearingsheld and almost no attention paid to the law.

It was not until April 1976, that an executiveorder designated HEW with the responsibility tocoordinate the enforcement of Section 504 amongall federal agencies. HEW regulations were pub-lished in 1977. All other agencies were expected tohave theirs by the end of 1978.

In the meantime, various cities, counties, andstates continued building facilities and establishingand running programsthanks to federal money.One of those was a hypothetical city we've calledRiverside, OH, and more specifically the municipalfire department.

Let's assume Riverside's municipal fire depart-ment is the recipient of these federal dollars:

the full city share of General RevenueSharing goes into the firemen's pensionprogram;two new fire houses were built by federalpublic works funds; andduring the past year, the fire departmenthas received a $500,000 grant from thePublic Health Service to train emergencyparamedic personnel, a $25,000 researchgrant from LEAA to develop ways to pre-

vent and detect arson, and a $75,000CETA grant to train disadvantaged per-sons as firemen.

In addition, it receives surplus equipment fromthe federal government aad technical assistancefrom federal agencies including the NationalBureau of Standards, the Department of Housingand Urban Development, Department of Labor,Department of Transportation, Federal Emergen-cy Management Administration, and the Depart-ment of Treasury. So much for the local firehouse.

The situation as we've dreamed it up for River-side involves John Downs, a Vietnam veteran wholost his hearing in the war and who applied for em-ployment by the city fire department as a part ofits paramedic emergency unit. He was trained as aparamedic in the army and could pass the nonhear-ing physical requirements of the job.

Mr. Downs took the written examination re-quired of all fire department cand:dates and scoredthe highest of all those taking the test. However,when the candidates were called in for interviews,Downs wasn't included. When he found out he hadbeen excluded, he requested an interview on thebasis of his outstanding performance on the test.When he was turned down, he went to the localHandicapped United organization which retainedan attorney to fight the case.

That's where our play today begins. We've as-sembled for you these actors who will discuss thiscontroversy, explore the options, and outline theimplications of each.

First we have the MayorMayor Carl Sten-berga young, dynamic Mayor who has activelycourted federal funds and used these dollars torenovate large sections of the downtown area, re-vamp a rather moribund transportation system,and initiate several new social services programswhich have already been adopted by other citiesacross the country.

Mayor Stenberg is very popular in Riverside. Hewas elected to his second term recently with verylittle opposition. And he is thought to have plans torun for higher office in the next few years.

Mayor Stenberg is being urged to fight this caseby the second actor, Bill Rhyne, the city attorney.Rhyne, too is a young, enthusiastic, dedicatedpolitician who has aspirations of higher office, per-haps Mayor Stenberg's job when he leaves.

Bill Montalto represents the HandicappedUnited Group. He works for a public interest law

66

firm here and this represents his first really "big"case since joining the firm, so the outcome is veryimportant to him. He will tell you why he thinkshe's got a "winner" in this case.

And we have a "fed" in this as well. He's chief in-vestigative attorney from HEW's regional Officeof Civil Rights, Steve Sorett. Steve has seen manyof these cases before. He's going to tell you why hethinks the city's best course would be to simplycomply with the regulations.

Finally, we have Judge John Settle, a districtcourt judge whom we'll join in a pre-trial setting inwhich he's going to question all the people in-volved.

Our play takes place in three acts. The first in-volves a meeting between Mayor Stenberg and BillRhyne, the city attorney.

ACT ONE

MAYOR: I'm glad I caught you in your office, Bill.You're a hard man to get hold of.

There have been some new developments in thisDowns situation that I need to talk over with youbecause I'm very upset about them. You rememberthe Downs case don't you?

CITY ATTORNEY: I know a little bit about it.

MAYOR: Well, let me try to refresh your memory.Downs is a Viet Nam veteran who lost his hearingin the war. He has applied for a job as a paramedicwith our fire department. Our fire chief tells methat for some time we've had a city policy that anyperson hired as a paramedic must also be able toserve as a firefighter. Now, that makes sense tome and apparently it's made sense to the fire de-partment because the fire union in particular hassupported this.

But apparently it doesn't make sense to Mr.Downs and to the federal government, perhaps.Mr. Downs scored very high on the written testand certainly is a remarkable candidate in many re-spects. But, in point of fact, he cannot hear. Thechief indicated to me that one of the reasons hewas turned down by the examining board was thefeeling that under crisis conditions it was absolute-ly essential that paramedics be able to assume theduties of a firefighter. If you have a paramedicwho is performing only paramedic duties, what'sgoing to happen, for example, in a fire when thereare oral commands given? It's going to be very dif-ficult for this person to respond.

In light of this situation, we offered Mr. Downsanother position with the city, but he turned the of-fer down. Instead, he felt that we should pursuethis matter of basically whether the fire depart-ment should hire paramedics who could performthe full range of duties expected of regular fire-fighters under emergency situations or whetherthis was unreasonable.

CITY ATTORNEY: Mr. Mayor, where has Downsbeen with his complaint, doyou know?

MAYOR: Well, I understand he's talked to a localorganization, Handicapped United, and there's afeeling that because we do accept federal funds,and in particular the revenue sharing moneys andthe LEAA arson grant being used by the fire de-partment, that we may, in fact, be discriminatingagainst Mr. Downs on the basis of the Rehabilita-tion Act of 1973. And that's what makes me mad,Bill. I just can't understand this. Who makes thepolicy for our citythe Mayor, fire department,and city council, or Mr. Downs and the federalgovernment. What is the basis for this?

CITY ATTORNEY: Mr. Mayor, we're not evensure who makes the policy for the federal govern-ment.

The Rehabilitation Act presents a difficult prob-lem on both sides because it is not a grant statute.It is a requirement applying to all federal grants.This city gets public health service grants, it getslaw enforcement assistance grants, it gets all kindsof other grants and the Rehabilitation Act appliesto all of them. That's bad enough. But both thegrant statutes and the Rehabilitation Act are writ-ten in a broad fashion generally on purpose by theCongress and so each of them has to be fleshed outby agency-drafted regulations. So, we're talkingabout two different statutes and the regulations ofeach agency that administers grants this city.This is going to be a real problem. We don't evenknow which agency is going to support Downs'case, if any of them. That's why I wanted you tocollect the facts to show exactly lit, w importantfederal money is to this city so that we can makeour case on facts.

MAYOR: Well, obviously the feds don't under-stand our city, because our city over the last sever-al years has done many things for handicapped in-dividuals. We have kneeling buses. We've retro-fitted many of our public facilities. We have train-ing programs in many agencies.

6?

What concerns me is the insensitivity of the fed-eral agencies and the unwillingness of Mr. Downsand Handicapped United to see our point of viewhere. We're not talking about a case of discrimina-tion against Mr. Downs as an individual or againsthandicapped people generally. In fact, quite the op-posite. We're concerned here about what is bestfor the public and the public safety.

As you might recall, a few weeks ago when Ilearned of Mr. Downs' complaint and the possibili-ty of Handicapped United and a bunch of federallawyers getting involved in this issue, I asked thecity manager and the fire chief to review the casejust to make sure that we had been absolutely fairto Mr. Downs. I also asked them to review the ci-ty's policy and to take a look at what some of theimplications would be if we respond to Mr. Downs'request or if we choose not to comply.

CITY ATTORNEY: I'll tell you Mr. Mayor, we're72 not going to win without those facts. That's what I

want to hear.

MAYOR: Well, I'll tell you Bill, you're not going towant to hear the facts in some respects bemuse inmy view they are devastating to our city.

CITY ATTORNEY: Well, that's good for me.That's how we're going to win. The worse the factsare to you, the better they are to me.

MAYOR: What may be good for you is not neces-sarily going to be good for me, especially po-litically. This is a no win situation for the city and ano win situation for me personally.

Let me just highlight some of the facts that areinvolved here. We estimate that in the short run,the costs of compliance with Mr. Downs' requestare not overwhelmingperhaps as little as $5,000.But the costs could well escalate to as much as$500,000, just in terms of what would be involvedin revamping our training program, in beefing upour emergency crews and the like just in case asituation were to arise where we would need para-medics but we could not necessarily require themto do firefighting. We are going to have to put onextra personnel, in other words.

What strikes me though as a concern here is ifwe do retrain our firemen and our paramedics, ifwe do make these changes in our personnel sys-tem, what's going 1--.) happen when the police uniongets wind of this? What's going to happen whenthe nurses and the hospitals get wind of this?

What's going to happen when the school teachersget wind of this? Requiring a separate paraprofes-sional Position and not expecting the occupants inthis position to perform emergency duties strikesme as being very costly to our city.

CITY ATTORNEY: How are you going to get themoney to meet this cost?

MAYOR: Well, we would have to reprogram. Idon't think there is any other way to do it. Our bud-get, as you know, is tight. Our citizens aren't goingto go for any more tax increases. If they do, it's go-ing to be suicidal to me and perhaps to the citycouncil.

CITY ATTORNEY: I'll tell you, Mr. Mayor, whenwe try to present this case to Judge Settle, I'd liketo have some understandable and sympatheticfacts. Try to bring it clown to the level of the locallibrary or police static.'.

MAYOR: All right. Our city manager tells me, forexample, that the new library that we plan to con-struct next year, half of which is going to be paidfor by the federal government, half by us, wouldnot be undertaken. We would have to make anacross-the-board 10% reduction in the budget ofour police department and in our fire department.We would have to postpone, as well, the renovationof the municipal park and zoo. A lot of visible ser-vices that I feel our citizens need and want wouldhave to be eliminated or delivered on a delayedbasis.

And that's just if we comply. If we don't comply,I understand we stand to get federal funds cut off.Now, the fire department budget, alone, reflectssome $5 million in federal funds. That's lot ofmoney. In fact, we may lose all federal funds, if thediscrimination case is pressed.

My budget reflects many sources of federal fund-ing and to have these cut off or jeopardized is goingto be a fiscal disaster to the city, not to mention thecosts of litigation here. I can imagine how muchit's going to take to hire the army of lawyers thatprobably would be necessary to backstop you inthis case.

CITY ATTORNEY: The reason that I had you col-lect these facts, Mr. Mayor, is because we're goingto be making new law, especially if this case goesup to the Supreme Court. It would be easy, and 20years ago cities would not have undertaken a caseon any basis other than this, to cite some Constitu-

tional precedent, or cite the legislative history ofthe statute and to ask that thy' case be decided onthat basis.

But there are no clear precedents in this area.There has not been a federal grant case that's goneto the Supreme Court to be considered on a full fac-tual record since the 1976 decision, NationalLeague of Cities v. Usery. That was the case thatdeclared unconstitutional the direct regulation ofcity operations through the wage and hour provi-sions. But that was not a grant case like this one.

MAYOR: You're telling me that there is no clear-cut case law to support what my city manager tellsme is not just an action that relates to the handi-capped but a wide variety of other, perhaps youcould call them social, goals of the governmentwith which I personally happen to agree but whichfrom the standpoint of the day-to-day operation ofthe city programs cause huge cost burdens.

In the LEAA program, for example, the policechief and fire chief have told me that we have tosubmit special certifications to show that we're notdiscriminatingand not just in the handicappedarea, but the employment area and several others.

We have to do environmental impact statements.We have citizen participation procedures. We havehistoric site preservation statements. We have topay prevailing wage rates. We even have to go tosuch ridiculous lengths as to look into the impacton fish and wildlife preservation of constructing ajail or running a juvenile delinquency program.And you tell me we haven't got a precedent forthis?

CITY ATTORNEY: Calm down, now, Mr. Mayor.Let's not take on the whole federal government. Ithink we're going to do better if we construct ourhorror story on just this one crosscutting require-ment, just the Rehabilitation Act. This one causesyou enough problems because it doesn't have any-thing to do with the fire department.

We're not talking about a federal rule of para-medics or a federal rule of firefighters, we're talk-ing about an across-the-board rule that doesn'thave anything to do with any of our programs. Andthat's the case that hasn't been up to the SupremeCourt. That's the law we're going to be making.Does Congress have the power to enact and do theagencies have the power to enforce this kind ofacross-the-board requirement, no matter how it isapplied? That's why when I get to court I want to

stress the application and not just talk about ab-stractions.

But they're going to fight us at every turn.They're going to say, "You took the federal grant.You took it carrot and stick and now you're com-plaining about the stick."

MAYOR: Funny you should mention that. Youknow, I was hoping we wouldn't have to go tocourt on this. I would like to fight other battles us-ing our legal talent. So I tried what you might callpolitical avenues. I called up (HEW) SecretaryHarris' office, for example, to try to explain thesituation and convince them to help us out. I got incontact with someone called an intergovernmentalcoordinator. Can you believe that title?

In any event, this intergovernmental coordinatorsaid the same thing you did, "If you don't like theconditions, don't take the money." I called ourCongressional delegation and made the samepoint. And they told me the same thing. Not onlyaren't the federal bureaucrats sympathetic, but theCongress doesn't understand that we are depend-ent upor.. these federal funds to sustain our ser-vices. It's not a matter of volunteerism. I needthose federal dollars and our taxpayers are entitledto them.

CITY ATTORNEY: How can we prove it?

MAYOR: That's your job.

CITY ATTORNEY: I'll tell you, Mr. Mayor, onething that we learned in litigatingthe (leery case in1976 was that it's really your job. We can presentthe facts persuasively to a court, but you must de-velop the facts showing that this is not a voluntaryprogram, that so much of your budget is federalfunds and that you just can't make a cut withoutcurtailing services. Those are essential to our case.

I think the real document in this case is not alegal brief but the budget showing all the trimmingyou've made already and the cuts you would haveto make to comply with these new demands.

MAYOR: In other words you're tellingme I've gotto stick my political neck out.

CITY ATTORNEY: You have to stack your fac-tual neck of Mr. Mayor. You have to be a witnessin this cas ihild show not only that you've trimmedthe budget as much as you can, but also that the ci-ty really wears the white hat.

One of the problems in this case that's really go-

ing to be brought out by a private plaintiff's at-torney is the accusation that the city is fighting thehandicapped, that the city doesn't want to do rightby the handicapped.

Well, I've gone around city hall and talked to cityofficials. We've done a pretty good job on behalf ofthe handicapped and I want you to be able to showthat.

MAYOR: Well, Bill, I'll tell you. I still think it's ano win situation. if we comply with Mr. Downs' re-quest, it's going to cause service disruptions. It'sgoing to affect our taxpayers and will affect me po-litically. We will certainly continue to receive fed-eral funds, but we will pay a v:ry high price forthem.

If we take on Mr. Downs, I'm going to be labeledas somehow being against the handicapped. So it'sa no-win situation. But I understand what you'resaying. I am willing to stick my neck out politicallyand factually.

CITY Acero.4,.- :it wood help, Mayor, iiyou would des-.-ine to the court exactly the wayyou do accommodate the demands of the tax-payers, exactly how the budget is constructed, howyou've done the trimming, and how you've alreadytried to meet the needs of the handicapped in otherareassuch as access to public buildings andtransportation.

MAYOR: Fair enough. I'll be glad to make thosepoints. And I hope the court, if we get there, willbe receptive to that.

How long do you think this would take to see thisthrough to the conclusion?

CITY ATTORNEY: It depends on what Mr.Downs does. If he brings the case or even if theagency starts the proceeding to terminate thegrant, you're talking about a year to collect the fac-tual record and get a decision out of the agency orthe trial court. You'r.- talking about another yearat the court of appeals. You're talking about an ad-ditional year at least to go up to the SupremeCourt. So, if we're serious about making law in thiscase, you're talking about three years of litigation.There's no easier way.

Certainly we're going to cite the NationalLeague of Cities v.Usery case for the propositionthat the federal government can't impose theseburdens on states and cities. The federal govern-ment and even Downs' attorney are going to say,

"You volunteered for this. You took the grant withall its conditions and you knew what you were get-ting into." But there are other legal issues as well.It's by no means certain that this RehabilitationAct, the act for the benefit of the handicapped,even covers employment. That's one of the legalpositions that we're going to have to research andpresent to the judgethat it requires only equalservices for the handicapped. We're going to haveto research the law and persuade the judge that thekinds of conditions that the federal governmentcan attach to a grant program are limited.

Even if it's true that states and cities volunteerfor the conditions, still there are some conditionsthat are just unconstitutional.

Now, I've read the cases and what I get out ofthem is this: Conditions upholding the integrityand efficiency in the use of federal funds have beenapproved by the Supreme Court. The classic casethere involved the Hatch Act. If you take federalhighway money, you can't give it to political pa-tror,9:-Ie people to dispense. We have no quarrelwith this requirement or with certain audit and re-porting requirements. You don't like the paper-work, but I live with paperwork. I'm not going tobe prepared to make a Constitutional challenge tothat.

I think the second large area of conditions thatI'm not going to challenge is a 'refusal on the partof the federal government to discriminate on thebasis of race, religion, or sex. The federal govern-ment has a perfect right to say, "We will not, our-selves, violate the 14th Amendment and we won'tgive you money to do so either." If this were a racecase or a sex discrimination case, I would have noargument against the federal power to do that andin a sense that helps our case because we're on theside of the angels for other kinds of conditions. Butwe have a real problem in saying that if you take apublic health service grant to train paramedics youmust amend your program to the tune of half a mil-lion dollars to accommodate the handicappednotin a way that you've found is beneficial to the city,but in a way some bureaucrat or even Mr. Downsand his lawyer have found to be beneficial to the ci-ty. That's going to be the essence of our case.That's why I want to show how much it's going tocost to do it. The fact that most cities are doing itdoesn't speak of volunteerism but of the essentialnature of federal money to cities. That's why I'vehad you collect these facts.

And you asked about the cost and time of litiga-

tion. Riverside might not be alone. There wil,5coalition in the Usery case. There's a coalition oiscities in a Constitutional case pending now chal-lenging the federal unemployment law. But evenso, the Usery case was, and the unemploymentcase will be, proved with particular facts from par-ticular citcs.

If you go back and read the Supreme Court'sopinion in the Mary case, it has examples of thetremendous burden, both in money and in disloca-tion of policy that that federal requirement, thewage and hour law, had on cities: Cape Girardeau,MO; Clovis, CA; the State of California; the Stateof Arizona . . . .

MAYOR: OK, you've convinced me, counselor.You have my support. And I may be a private citi-zen by the time this case is finished. But it seems tome that what we're talking about when you getright down to it is who runs the city, the federalgovernment, Mr. Downs, or duly elected officials?And it's that issue that I would like to see taken asfar as we can get in the courts. And I would cer-tainly assure you of my participation here. We'llcontinue our fact finding and we'll stand ready tosee what Mr. Downs, Handicapped United, and thefederal government decide to do in thiscase.

CITY ATTORNEY: OK, Mr. Mayor, as long asyou agree in advance not to make any politicalspeeches from the witness stand, we'll be preparedto go forward with the litigation. And we'll seehow serious Mr. Downs and the federal agenciesare about enforcing this Rehabilitation Act.

ACT TWO

MODERATOR: Now for the other side of the case.A few miles away we have two other actors whoare discussing the Downs-Riverside situation. Wenow go to the office of Stephen Sorett, chief inves-tigative attorney for HEW's regional Office ofCivil Rights where we find Steve conferring withBill Montalto, an attorney retained by Handicap-ped United to represent John Downs. The conver-sation centers on the procedures available toDowns in his controversy with the City of River-side.

HANDICAPPED UNITED: Steve, thanks a lotfor taking the Dovins complaint personally. Youknow, you're a mighty hard guy to track down.You must have an enormous case load.

HEW: Just business as usual, Bill, overworked andunderpaid.

We're spread fairly thin, but we do our best to in-vestigate thoroughly all complaints that appear tohave some substance. Downs' complaint appears tohave something that's certainly worthy of athorough investigation.

HANDICAPPED UNITED: Let me review thosefacts again for you.

HEW: That won't be necessary. Downs' complaintis clear. I'd rather hear the facts as seen by theRiverside fire department.

HANDICAPPED UNITED: Okay, Steve, no ad-vocacy, but how about a little help on what happensnext procedurally. You know I'm new to com-plaints under Section 504.

HEW: Riverside's getting funds from the U.S.Public Health Service, one of HEW's constituentagencies, to run the very paramedic program JohnDowns wanted to enter. Since the city is receivingour money, we have the right to investigate com-plaints for violation of the antidiscrimination pro-visions under Section 504. By taking our fundsRiverside also agreed not to discriminate againstthe handicapped.

HANDICAPPED UNITED: What do you meanthe city has "agreed" not to discriminate? Section504 prohibits them, legislatively, from discriminat-,ing.

HEW: It's part of this carrot and stick. You see,John. Downs' rights are founded on the statute.But they're also supported by the grant agree-ment. In accepting the Public Health Servicefunds, Riverside agreed to comply with a list ofpublic policy requirements, including Section 504.These are the crosscutting requirements we'retalking about right now. These laundry lists of as-surances are common to all federal grant pro-grams and the agencies are enforcing them.

Let me get back to HEW's enforcement pro-cedures under Section 504. Under Presidential Ex-ecutive Order 11914, then-President Ford desig-nated HEW as the agency responsible for develop-ing general regulatory standards for the enforce-ment of Section 504 by the various federalgrantoragencies. These were published on January 13,1978. These regulations are guidance to grantoragencies which must issue individual agencyregulations for the enforcement of Section 504.

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These regulations are then binding on granteeslike the City of Riverside.

As a grantor agency, HEW also issues its ownimplementing regulations.

HANDICAPPED UNITED: So a grantee has todeal with the implementing regulations of each in-dividual grantor.

HEW: That's right. But the individual agency reg-ulations do have to conform with HEW standards.And each grantor agency's regulations have to becleared by HEW. s Office of Civil Rights in Wash-ington before they can become effective.

HANDICAPPED UNITED: The grantee definite-ly has a load to bear with all these different regula-tions. But enough sympathy for the intergovern-mental system. What rights do HEW's proceduresaccord to my client?

76 HEW: The enforcement and hearing procedures ofSection 504 are the same as those under Title VI ofthe Civil Rights Acts of 1964. These procedures areprescribed by the 1978 amendments to the act andtherefore they apply to all grantors.

HANDICAPPED UNITED: Well, we filed thecomplaint. That's the first step for sure.

HEW: That's right. And having determined thatthe complaint isn't frivolous, we'll investigateDowns' complaint. That's the first step of the in-vestigation.

If we find that Riverside does not violate Section504 and HEW's implementing regulations, we'llnotify them in writing that the complaint has beendenied.

If we find noncompliance, however, we'll try tonegotiate a settlement between Downs and the ci-ty. Obviously we'd like to close out this matter by acompromise and accommodation. No hard lineOK?

HANDICAPPED UNITED: Sure, Steve. The cityneed only make Downs a paramedic. Okay, okay,negotiations later. Tell me more about the process.

HEW: Since you're so sure Downs' complaint willbe successful, let's just assume we agree and findRiverside has discriminated against Downs in vio-lation of Section 504.

But first, before I get started, let me tell you thatunder another Executive Order, the Departmentof Justice has overall responsibility for the enforce-ment procedures under Title VI of the Civil Rights

Act of 1964. Justice has issued governmentwidestandards for compliance regulations issued by theindividual departments. Since Section 504's en-forcement procedures are the same as under TitleVI of the Civil Rights Act, these standards fromthe Justice Department must be followed as well asthe enforcement regulations of the individual gran-tor agencies.

HANDICAPPED UNITED: Another set of gov-ernmentwide standards. Do you make it this com-plicated just for fun?

HEW: Hey, I'm just a bureaucrat. I'm not a Con-gressman. And I'm not running for higher office,either.

Seriously, suggestions for reform should be di-rected to Congress, not me. Do you want to hearthe rest of the process or not?

HANDICAPPED UNITED: Please, go on.

HEW: Well, under the Justice Department stan-dards, any efforts at negotiation must be reportedto Justice once they continue for 60 days or more.

Let's assume negotiations fail, as I'm sure theywon't in the Downs case, and both parties arestanding firm. The next step is to have a formalhearing.

HANDICAPPED UNITED: These hearing pro-cedures are the same as those for complaints underTitle. VI of the Civil Rights Act. Isn't that part of acomprehensive set of procedures?

HEW: That's right, in 45 CFR. They don't leavemuch out as they provide the parties a full due pro-cess hearing on the record. The object of the hear-ing is to have both sides provide the facts fully asthey see them. The procedures are designed to pro-vide for a full exposition of all relevant facts, evenif it is at the expense of formal rules of evidence.

HANDICAPPED UNITED: Isn't this formalhearing preceded by a pre-hearing conference?

HEW: Yes. The pre-hearing conference is anotherattempt to resolve the matter by settlement be-tween the parties. It's also designed to narrow thefactual issues of controversy. During the pre-hearing conference the parties exchange exhibitswhich become part of the record. If the exhibit isnot exchanged at this stage, its admission may bedenied later during the actual hearing. The goalhere and throughout is the same. Get the facts onthe table.

HANDICAPPED UNITED: Depositions ale per-mitted, aren't they?

HEW: Yes. Either party may introduce deposi-tions into the record prior to the commencement ofthe hearing. Also, affidavits are admissible at thesame time.

HANDICAPPED UNITED: How about duringthe hearing, examination of witnesses seems to beless constrained than in a court.

HEW: Correct. The procedures are designed toget all relevant facts into the record. For example,cross examinations of the witnesses need not belimited to the subject matter covered on directquestioning, which is quite a departure from atrial. You also should know that the arguments oflaw are confined to written briefs. Your hearing of-ficer will decide the case on a factual basis, but hewon't get into questions of law.

HANDICAPPED UNITED: One of my partnersof the firm mentioned that amicus curiaefriendof the courtparticipation is authorized by therules.

HEW: Any briefs of interested parties do becomepart of the record.

HANDICAPPED UNITED: Great. Riverside'schapter of Handicapped United may be able to seekparticipation of its national organization. The exec-utive director indicated this case is sufficiently im-portant that other organizations interested in therights of the handicapped should be informed andtheir active participation solicited. Maybe we canput together a coalition to fight this matter all theway. But let's get back to the procedures.

All right, the hearing's completed. All the post-hearing briefs and reply briefs have been filed.What's next?

HEW: The hearing officer issues a decision. Eitherparty may then request a review of that decision. Ifno review is requested, the decision is deemed toconstitute a final agency action within the meaningof the Administrative Procedures Act. An appealmay then be taken to court.

Alternatively, the rule provides for appeals to areviewing official, usually to the head of the grant-making agency. In your case, the Public HealthService, and then a second appeal to the Secretary.

Now, this first appeal to the reviewing authorityis an appeal of right. The reviewing authority must

revie,..v the initial decision. However, the secondappeal to the Secretary is discretionary. You'veget no right to it, and she need not agree to anyfurther review for decision on it,

HANDICAPPED UNITED: This supposedly ex-peditious administrative procedure is beginning tosound like it will take a very long time. We'd orig-inally planned to file suit in federal district court.My partners may have been right. Direct judicialaction may have been better than the course of thisadministrative procedure.

HEW: Frankly, I wouldn't expect quick results outof either approach. There's a lot at stake. Both ju-dicial and administrative procedures are going torequire lengthy and costly legal representation.That's why we stress resolution through compro-mise and agreement at the early stages.

HANDICAPPED UNITED: We went the adminis-trative route because we felt the sanctions to befaced by Riverside are greater in the administra-tive forum.

If they are ultimately found to be in violation ofSection 504, all of their federal assistance fundsare subject to termination and in adeition I haveheard that they are not eligible for award of newfunds. That certainly should get their attention.

HEW: It generally does. A city cut off from thatmoney is like a horse in the water which can'tswim.

However, there are some additional and very im-portant wrinkles that you should be aware of.First, the termination of current funding andineligibility for future funding only goes to theagency or the department found to be discriminat-ing. In this case, that means just the fire depart-ment. The sanctions are not applied to all of River-side.

Second, before the sanctions become 'effective,the grantor agency must give N days notice of theintended termination action to the House and Sen-ate oversight committees who have jurisdictionover the agency concerned.

HANDICAPPED UNITED: This administrativeroute is getting less appealing all the time. ThisCongressional oversight element worries me themost. It would seem that a governmental granteewith a strong Congressional delegation couldseemingly delay application of the sanctions even ifthey were found to be in noncompliance with 504.

I a

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HEW: That's right. It's a risk. But remember too,that either party has the right to appeal the admin-istrative decision of noncompliance to the courts.

HANDICAPPED UNITED: Does such an appealautomatically suspend the application of the sanc-tions?

HEW: No, but it would tend to make the agencymove cautiously. And it would give the Congres-sional committees a firm basis for recommendingthat the agency not terminate funding of thegrantee.

HANDICAPPED UNITED: Do you have anyother "good news" for me?

HEW: Let's talk about some other options thatmight be available to Downs.

HANDICAPPED UNITED: It appears to me thatour best course of action may be to file suit under

78 Section 504 like my partner suggested.

HEW: A recent decision in the fourth circuit mayhave cut off your client's private right of actionunder Section 504.

HANDICAPPED UNITED: I'm aware of theTrageser v. Libbie Rehabilitation Center decision,but I don't believe it will be followed generally. Thefourth circuit, you probably know, maintains thatin 1978 when Congress made the enforcement pro-cedures for Section 504 the same as those under Ti-tle VI of the Civil Rights Act, it carried along thejudicially interpreted limitations as well. Elimina-tion of a private right of action except under themost limited circumstances is what was found. Butat least one courtthe southern district court ofNew Yorkhas held that a private action remainseven after the fourth circuit court of appeals deci-sion.

HEW: You're correct about the Trageser case. Butwhat was the name of that New York case again?

HANDICAPPED UNITED: Guardian Associa-tion of New York v. New York City Civil ServiceCommission. It really helps anyone who would belocked out by the Trageser decision.

HEW: That's interesting. Well, you know I thinkyou're still going to have trouble going forward,going alone.

HANDICAPPED UNITED: Well, who's going tojoin us?

HEW: It's possible we could.

HANDICAPPED UNITED: How so?

HEW: You remember I mentioned earlier that theJustice Department has overall responsibility forthe enforcement of Title VI of the Civil Rights Actof 1964? It was given this responsibility by Execu-tive Order 11764. Under that order, Justice has is-sued guidelines to be used by the various federalagencies in preparing Title VI enforcement regula-tions. And without going into too much detail be-fore you've had a chance to read them, I want topoint out that direct judicial action is authorized byus to enforce the assurances contained in the grantagreement. We can go right to court.

HANDICAPPED UNITED: What you're suggest-ing is that if Downs has trouble with the privateright of action, he can bring the action and HEWcould bring the action and then HandicappedUnited could join the suit. That sounds prettygood.

HEW: There may be another benefit too. If Downsgoes for it alone, the relief available to him could beacceptance into the program. That's it. If success-ful, any benefit Downs receives will establish a use-ful precedence in similar cases. But that's about it.Whereas, if the department goes forward to en-force the city's compliance of Section 504 in ac-cordance with the agreements in the grant agree-ment with its promise to do so, then a finding ofnoncompliance would result in an immediate loss

f funds. A court would have found noncomplianceend the enforcement of the sanctions could takeplace subject to a public review, obviously.

HANDICAPPED UNITED: Looking to the con-tractual basis of the grant agreementthegrantee's promises to abide by the various nationalpolicy requirementsseems to be a quicker way toget the desired result, the end of the discrimina-tion, as it applies to Downs and others like him.

Another thing. One of my partners suggestedthat complaints be filed with other grantor agen-cies providing money to Riverside fire department.What effect could this have?

HEW: Since the matter grew out of the same al-legedly discriminatory action, all of the complaintswould be consolidated during the hearing phase atHEW. Prior to that, each agency may choose toundertake its own informal investigation and at-tempt a settlement.

If the city was found in noncompliance, all fundsto the fire department from all of these variousgrantors would be terminated. The financial im-pact certainly would be greater.

A.NDICAPPED UNITED: This has all been veryhelpful. I'm going to have to give it a lot ,)f thoughtand discuss it with my partners. Once you've com-pleted your investigation, we'd be anxious to hearthe results and maybe we can get together and talkagain.

HEW: I wish you good luck.

HANDICAPPED UNITED: Thank you.

ACT THREE

MODERATOR: Now that you've heard all thefacts and procedures of the case, the scene shiftsseveral months later to the chambers of U.S. Dis-trict Court Judge John Settle who is just about tostart the pretrial conference.

JUDGE: Sit down, gentlemen. We've got a busyagenda today. I've got a couple of other cases com-ing up rather quickly.

CITY ATTORNEY: Excuse me, Your Honor, I'veasked the Mayor of Riverside to come with us be-cause the facts are so important in this case. He'llbe pleased to answer any of the court's questions.

JUDGE: Do you have any objection to that, gentle-men?

Welcome, Mr. Mayor. We understand you'reseeking reelection this term.

As you know, gentlemen, this is a pretrial confer-ence to consider two cases which have been con-solidated. I've got the files here. They involve somecommon issues. The cases are as follows:

First, we have an action brought by Mr. Downsof the City of Riverside. As I understand it, Mr.Downs seeks an order whi2h would require the cityto cease discriminating against him on the basis ofhis deafness handicap in violation of the Rehabili-tation Act of 19 73.

Second, we have an action brought against HEWby Riverside to enjoin HEW from terminatinggrants to Riverside. The record indicates thatHEW has determined through a rather involvedand time-consuming process of investigation andadministrative hearings that Riverside discrimin-ated against Mr. Downs in violation of Section 504.

Gentlemen, you're aware that this pretrial con-

ference will be conducted informally and its pur-pose is to narrow the issues in the case and to de-velop a better understanding among all of us, andparticularly me, about what's at issue here andhow best to proceed once we get to court.

I've never had a case under 504. I haven't had achance to look at these files before we came in heretoday sc I may be asking a couple of naive ques-tions and you'll have to enlighten me.

Mr. Montalto, let me ask you first of all, on whatbasis is Mr. Downs claiming that this court hasjurisdiction over this claim? Are you claiming a pri-vate right of action under Section 504?

HANDICAPPED UNITED: Yes, Your Honor.The 1978 amendments to the Rehabilitation Act of1973 added a Section 504 which made available tohandicapped persons the rights and remedies avail-able to other persons under Title VI of the CivilRights Act of 1964. We contend that this confersthe private right of action to a plaintiff in such acase.

JUDGE: Mr. Rhynt,, what's your response to that?

CITY ATTORNEY: Well, if I understand Mr.Montalto's argument, Your Honor, it is that itdoesn't matter what grant program we're talkingabout, when we're talking about the RehabAct. As soon as Congress says it thinks Title VIought to be broader, he believes that it implies aprivate right of action.

I think. Your Honor, the court is going to have tolook at the statute rather than some argument ofcounsel that implies the private right of action. Ithink the threshold question is which statute arewe talking about? Are v, e talking about the PublicHealth Service grznt program in this case theEmergency Medical Services Amendment? Or arewe talking about the Rehabilitation Act itself? Wecontend it is the medical services program which isrelevant here.

I don't think there's any question that the Medi-cal Services Act doesn't imply a private right of ac-tion. It gives money for paramedics, fire trainingand for other health services training, and educa-tion demonstration grant purposes. There'snothing there that talks about the handicapped.

JUDGE: Mr. Rhyne, if he doesn't have a privateright of action under Section 504, does he have anyother remedy?

CITY ATTORNEY: He has a suit under the Civil

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Rights Act. He can join his brethren in suing the ci-ty for all sorts of alleged Constitutional violationsthere. I think that's really the heart of the case,Your Honor. If he's talking about a Constitutionalviolation, he doesn't have much of a case.

JUDGE: He's not arguing a Constitutional viola-tion, he's arguing the violation of Section 504.

CITY ATTORNEY: And that's the deficiency inthe statute as we see it, Your Honor. If this were agrant condition upholding some Constitutionalprinciple, if it were a sex discrimination prohibitionof the Civil Rights Act, if it were any part of TitleVI, we'd have no problems with this case. First, wewouldn't be violating the 14th Amendment andwewould have no problem with the fed,: tal agency en-forcing the Constitution.

But this is a right that Congress and special in-terest groups before the Congress decided they

80 would call discrimination. We think even under theRehabilitation Act there's no private right of ac-tion.

Talking about Title VI, the omnibus civil rightsenforcement provision for federal grants, doesn'thelp Mr. Downs' case because Title VI specificallysays no agency shall bring an enforcement actionand then gees on to say where the purpose of theprogram is employment.

JUDGE: We'll get to employment later. Let'smove on here because we don't have too muchtime.

Mr. Sorett, I understand that HEW wentthrough a fairly extensive process to come up withthe conclusion that Mr. Downs suffered discrimina-tion at the hands of the city.

Can you very briefly describe the process andwhat HEW's findings were? And as I understandit, you are moving now to cut off the grants. Is thatcorrect?

HEW: That's correct, Your Honor. We've made afinding and we want to terminate the funds rightnow. And this is why the city is trying to block ouraction.

First what we did is the ordinary thing. We con-duct& an investigation to determine if the com-plaint, as stated, had any merit to it at all. Wefound that it did.

The next step was we tried to compromise thematter. We got officials of the city together withopposing counsel and we tried to work something

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out. And rapidly it became obvious that we were atloggerheads.

We then went on to an informal hearing as pre-scribed by regulation and at that time we made afinding that Downs is "otherwise qualified" to be aparamedic.

JUDGE: Mr. Rhyne, twhat is the basis upon whichyou claim that this court should review HEW's ac-tion?

If we do review it, what standard of reviewshould we use? Are we talking about an "arbitraryand capricious" standard?

CITY ATTORNEY: Were talkirtg about, I think,really a "higher than rational" basis. We're notchallenging a fact finding. I don't think thatHEW's determination that all paramedics need notbe firemen is fact finding. I don't think arbitraryand capricious really applies here. What we're talk-ing about is interpretation of the law. We're reallytalking about the rationality of the statute and theregulations themselves.

Because this isn't a Constitutional civil rightscave, I think under the doctrine of federalismthroughout the Constitution, both Congress andFEW in its regulations have to have a "higherthan rzt'nnal" basis to support their attempt to re-

riicturi,, Riverside's fire departure : t.

JLI)GE: You seem to acknowledge that on thebasis of HEW's interpretation of these guidelinesand the law, that there has been discrimination andwhat you're attacking is thenderlying law. Is thatcorrect?

CITY ATTORNEY: Well, Your Honor, I supposewe quarrel only with the use of the word discrimin-ation. We think discrimination applies to thosethings that are prohibited by the Constitution. Wethink there's no question what the record shows,that we did not admit Mr. Downs to the fire pro-gram and for vary good reason. There's no ques-tion that we did violate the regulations. We thinkthe regulations are invalid.

When Congress says you shall hire the handi-capped no ,t-ter how much it Costs, and that'sreally what Congress said in this case, they madeno finding of the need for the legislation. Theymade no finding of the costs on states and citieswho must comply with the legislation.

When Congress says that, they should have tocome up with the facts to support that legislative

judgment or that judgment is unconstitutionalunder federalism.

JUDGE: Let me ask a question about that.First of all, a preliminary question because I

think we're getting into the National League ofCities v. Usery case. Before we get to that matter,I want to ask clarification of an issue.

Now, the Usery case did not deal with grants,and as a matter of fact it specifically excluded itsapplication to grant situations. I don't know muchabout grants, but I've always had the impressionthikt they were essentially gifts and that the com-munity is free I :f.% accept or reject them. I assumethat Mayor Stenberg chose to accept these grantsand he took the conditions that came with them.It's rather like a bargain and sale, isn't it?

CITY ATTORNEY: Well, I don't think it is, YourHonor, and I suppose the first premise is whetherMayor Stenberg had a choice, whether he choseanything. I'd like Mayor Stenberg briefly to ad-dress why he didn't feel he had a choice. Because Ithink his intent really is the best proof that takingfederal grants is not really voluntary.

MAYOR: Your Honor, my city, like many citiesacross this country, is hard pressed in these infla-tionary times and we need every available dollarwe can get, not just from our taxpayers but fromthe state government and the federal governmentas well. We use these dollars to support basic ser-vices. We have a commitment to our taxpayerspeople who sent me and my city council to officeto provide services to meet thlir needs. Our 'budgetcontains funds from several different sources andthe issue, as I see it that brings us together today,is one of the costs of compliance. Counsel has indi-cated Congress apparently ignored this cost issueentirely in enacting this legislation and HEW is ig-noring entirely the issue in applying it.

In terms of my particular jurisdiction, YourHonor, for us to comply as Mr. Downs would haveus do it, would cost us several hundred thousanddollars which we don't have. If we don't comply,my fire department alone is going to lose 135 millionand perhaps other city agencies will be cut back aswell.

Either way, i violate a budget commitment that Ihave to my voters.

JUDGE: Mr. Stenberg, you sound a little bit like a

junkie who is being told he's going to be taken offheroin.

MAYOR: Your Honor, you were a Mayor once,and even though I realize that was more than adecade ago when many local governments perhapsweren't as dependent on federal funds as they arenow, surely you received sums from federal andstate agencies that you put into your budget to dis-pense much-needed services. This isn't funnymoney. This isn't seed money. This is basic supportmoney to keep cities running.

I've just returned from the annual meeting of theNational League of Cities. I had rut opportunitythere to talk with several of my colleagues aboutthis situation. The federal government is applyingthese regulations to achieve particular social pur-poses even if they have absolutely nothing to dowith what we are trying to achieve locally. Frommy particular jurisdiction we'r% talking about hun-dreds of thousands of dollars. When you multiplythat by even half of the local governments in thiscountry, you are talking about a billion dollar pricetag for compliance. We feel that price tag is exorbi-tant.

CITY ATT011NEY: Your Honor, if I could justbring home the Mayor's comments within the lawalittle bit. I think his political reaction is a veryhuman reaction. It's also supported in the law.That's the pernicious thing about these crosscut-ting requirements. This requirement, as applied inMr. Downs' case, to hire a deaf person and adopthis changes in the fire department paramedic pro-gram, is not only costly but it also conflicts directlywith the siatutory purposes in the Public HealthService program.

I took a look this morning at the statute thatgives the basic grant and it requires an emergencymedical system to be one that joins the personnelin facilities areawide through a telephone commun-ications system.

So we're not objecting because we don't want tospend money on the handicapped. We're objectingbecause Congress speaks out of both sides of itsmouth in different years and then gives to oneagency the requirement to impose both inconsist-ent requirements on Riverside.

JUDGE: Let me ask you just a couple of questionsto follow up on that. I think you can address themtogether because they both involve economicissues.

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First, I think that you would be willing to agreethat there probably are some valid social demandsthat the federal government can impose on otherlevels of government regardless of costs.

CITY ATTORNEY: Yes, we agree with that, YourHonor.

JUDGE: Secondly, as I understand it, you're argu-ing that the Usery case, as you would have it ap-plied, would require the federal government to is-sue its regulations, only after an examination ofthe economic impact of those regulations on localgovernmental operations. And of kourse the sta-tute doesn't require that. As I understand it youare arguing that the Constitution would requiresuch an assessment.

CITY ATTORNEY: That's correct.

JUDGE: That seems to imply that there are rea-82 sonable and unreasonable burdens that may be

placed on local governments by the federal govern-ment. What should be the line for dettaminingwhen a burden on a local government is unreason-able? How does a court determine that?

CITY ATTORNEY: Your Honor, Pm going towant judge's pay if I have to draw the line. Our po-sition is that we're on the good side of the line, thatthis condition is not one on the supportable side ofthe line.

The way we can make the most sense out of itover at the city attorney's office is by comparingthis case on its facts to the last grant case thatwent up to the Supreme Court North Carolina v.Ca/Van°. In that case, the state objected to a re-quirement under another of HEW's programs forareawide health planningthat it appoint a body todo the planning for the. region.

North Carolina sail, and it was undisputed onthe record, that to appoint such a body would re-quire amending its constitution.

North Carolina made no challenge to the reason-ableness in general of HEW's requirement. It didnot, and we feel could not, say that areawide plan-ning was a bad thing. It did not and could not saythat areawide planning would cost more. The evi-dence suggested it would cost less to plan on anareawide basis than to have duplicative hospitalfacilities.

So North Carolina had to use the stock anti-NewDell objection that the federal government can'tmake it amend its constitution. That argument was

unpersuasive to the trial court and the SupremeCourt summarily afE .ned that ruling.

Now, wherever the line is, that case, upholdingthe grant condition, is quite different from this onewhere we're talking about a half million dollars ayear and where a requirement means that the citymust change its policy that paramedics must befull fledged firefighters. We think that that kind ofimpact, that kind of condition, without any show-ing by Congress or the agency that it's needed orhas a reasonable cost, is invalid.

JUDGE: Mr. Sorett, let me turn to you.As I understand it from looking through thin rec-

ord briefly, the evidence does indicate that the citywould, in fact, suffer a substantial economic loss.There's no question about that. That seems to havebeen established in your own administrative pro-cess and indeed it's clear that there would be somedisruption of the city's activities if it complied withthe letter of your regulations in this case.

Is this something that you can reasonably ig-nore?

HEW: It's not somethinz that we reasonably ig-nore. But at the same time we have to balance thecosts versus the benefits just as an economistmight have to do.

Here HEW has investigated and determined,under its own criteria, that the costs that would beimposed would not be significant. We made this de-termination and that's one of .the reasons whywe're going ahead with what we're doing.

Another factor to be considered is that the costsare certainly justifiable. And we feel, contrary towhat counsel is arguing, that the conditionslaid onthese grants are ones which the Congress and vari-ous social commentators have accepted. As a mat-ter of fact, some people from their own state votedfor this thing. The question is, who speaks for thecity and who speaks for the state?

We have Congress speaking out of both sides ofits mouth. At the same time at the local level youhave various and conflicting opinions, as well. So Ifeel a cost analysis is not so outrageous as counselwould make it seem.

JUDGE: Mr. Rhyne, why does a paramedic have tobe a fireman?

CITY ATTORNEY: Your Honor, I suppose theConstitutional answer is because that's what thecity decided. You asked earlier what remedy Mr.

?ei

Downs would have, if he had a challenge to the ra-tional basis on which the city decided that a para-medic had to be a fireman. He has a remedy forthat in the Civil Rights Act or a direct Constitu-tional case. This case is not so much about whetherthe city is right, but whether the federal govern-ment is right in saying that its judgment is the onethat governs, quite apart from reasonableness. It'salmost a supremacy argument. Washington hasthe grants, the larger tax base, the dollars. Ifstates and localities want some of these dollars,they must do what Washington says, no matterwho is right. In a sense, this case isn't about who isright, it's about whether the federal government isexempt from the requirement to prove that it'sright.

And the federal argument, as I understand it, isthat it must be right because Riverside did nothave to take these grants. That impact analysis hasnothing to do with this case, the rightness of allthese federal determinations had nothing to dowith this case because Riverside has the power towalk away from the program grant and conditions,both. So we think that we're right in our determin-ation in how to run the fire department.

JUDGE: Mr. Rhyne, apparently HEW did do somesort of an impact analysis, either when they issuedthe regs or when they made this decision. I assumeyou take issue with the adequacy of that. But moreimportant than that, I understand your argumentto be art back when it passed the law Congressshould have had an impact analysis done. Is thatcorrect?

CITY ATTOli:NEY: We think that both the Con-gress and the agency shou'd have faced up to theimpact of this.

JUDGE: Let's speak to Congress now. Did Con-gress have a Constitutional obligation to addressthe economic impact of this law?

CITY ATTORNEY: Like any other requirementthat Congress levies on citiespayment of prevail-ing wage and all of the other non-Constitutionalfederal conditions these crosscutting conditionshave to be rationally based, at a minimum.

Moreover, in a challenge to the Constituionalityof legislation, when the city, one city in this case ora collective of cities, makes a showing that the im-pact of compliance with this condition would be se-vere, then I think Congress must have shown a

"higher than rational" basis in passing the legisla-tion. It must show a terrible discrimination againstthe handicapped as part of the "higher than ration-al" basis test, which is used in First Amendmentareas and other areas. It must show that Congresschose the means of curing this handicapped dis-crimination that's least intrusive to state and citygovernments. That's the real thing that's missingin this case. We don't think there was any least ob-trusive means analysis on this legislation.

JUDGE: Let me ask you Mr. Rhyne, moving on toanother subject. Do you think that Section 504reaches employment practices per se?

CITY ATTORNEY: We don't. We think that as amatter of law it does not. Congress certainly ex-pressed no intention of covering employment. Itsaid that the handicapped shall not be discrim-inated against and I think a close reading of astatute like that compels the conclusion that thehandicapped who are protected by the statute arethe beneficiaries of federal grant programs. Bene-ficiaries of the Public Health Service program arethe people who receive emergency medical as-sistance.

It is a clear violation of the statute to discrimin-ate against the handicapped in providing emergen-cy medical services. That doesn't mean that it is aclear discrimination not to hire handicapped para-medics.

JUDGE: Mr. Sorett and Mr. Montalto, do you feeldifferently about that issue?

HANLICAPPED UNITED: I'd like to speak tothat Your Honor. We maintain that 504 protectsand reaches employment. HEW's governmentwideregulations take this position. More recently theDepartment of Justice adopted regulations thattake the same position. We have noted in our briefsthat several district courts have taken thepositionin Florida, in Pennsylvania, in Califor-nia. But more important than that, the legislativehistory of Section 504 demonstrates that it is aremedial statute. It is trying to protect the han-dicapped. We agree with counsel that the wordsare less than clear, but the legislative history whichis set forth in our brief clearly indicates that Con-gress wanted to protect the handicapped when itpassed that statute.

Further, the report which accompanied the 1978amendments that established these proc. dures

noted that the objective was to confirm by legisla-tion HEW's enforcement procedures. I think it'sclearly arguable, and the court can certainly lookto our brief, to see that the legislative history isthere to support the application of Section 504 toemployment.

HEW: Your Honor, I just want to interjectanother thought.

The Law Enforcement Assistance Administra-tion supports our position as well, that the employ-ment practices, per se, are affected by Section 504.The LEAA regulations came out in the FederalRegister (44 Federal Register 54950) on Friday,September 21, 1979. They we re the result of a fullanalysis of court cases and came squarely down onour position.

JUDGE: Did LEAA conduct an economic impactanalysis?

HANDICAPPED UNITED: As a matter of fact,they considered the economic impact and pointedout that the cost nationwide per year to complywould be under $100 million.

JUDGE: What is?

HEW: $100 million is considered the standard todetermine if there is significant economic impact.

CITY ATTORNEY: Your Honor, those bureau-crats certainly didn't come to Riverside. I think asI understand counsel for Mr. Downs' or HEW'sposition it is the standard "we're the expert"routine by federal attorneys. The agencies are thesubject matter experts and they're entitled togreat deference.

Now, the last time they tried this argument wasin the Supreme Court under this very statute, noton the questions before the court this afternoonwhether the Rehabilitation Act coversemploymentbut under the same statute, underSection 504. That was the Southeastern Communi-ty College v. Davis case decided by the SupremeCourt last term in which the Court said that."Although an agency's interpretation of thestatute under which it operates is entitled to somedeference, this Terence is constrained by ourobligation to L or the clear meaning of thestatute." That's what we urge on the court, not thestandard assertion by the federal agency lawyers

that they are the experts on their statutes. Thiscourt is the expert on this statute.

JUDGE: Let me follow up on that with a questionto Mr. Montalto. Based on the Southeastern Com-munity College v. Davis case which was referred toin the record, I'm wondering about the analogy tothis case. In Southeastern, the Court apparentlyheld that there was no obligation under Section504 to make substantial modifications to the opera-tion of a hospital emergency room in order to ac-commodate a handicapped nurse. How is your casedifferent?

HANDICAPPED UNITED: The Southeasterncase held that the college did not have to make afundamental alteration to its training program fora registered nurse. They had a deaf student whojust could not participate in the clinical part of thetraining. We recognize the similarities, but we seeclear differences. Mr. Downs is already a qualifiedmedic. He unquestionably is able to perform theduties of a paramedic. During his service in theUnited States Army he had 27 weeks of training asa paramedic. His training was under the stiffestconditions imaginable. He served as a combatmedic in Viet Nam and, in fact, that's where he losthis hearing.

We recognize that Mr. Downs now has a handi-cap, but despite his hearing loss he can provideemergency medical services. That's the nature ofthe job, emergency medical services.

Riverside doesn't want to give him the opportun-ity to prove that he is competent. He took a writtentest and that's the last he heard.

JUDGE: Can you respond to that briefly, Mr.Rhyne?

CITY ATTORNEY: Your Honor, we think thatthe Soutkeastern. Community College case is on allfours with this one because just as Ms. Davis wasnot qualified to be a nurse as that term was com-monly understood and applied by the college,neither is Mr Downs qualified to be a full-fledgedfire:figh'zer a;, that term is commonly understoodand app's = :.l by the city.

HEW: To respond to that, while we agree thatDowns may not qualify as a full-fledged firefighter,the question remains is why does Downs have to bea full-fledged firefighter in the first place? We

maintain that all he has to do is be a paramedic.One other fact I'd like to bring out about the

Southeastern case is that the Court was impressedby the fact that there was no way this studentcould be trained to be a nurse. How could someonewho is hard of hearing participate in a clinical pro-gram where life and death decisions had to bemade based upon the ability to hear? The courtdecided that whatever training Ms. Davis couldhave received it certainly would not have been thatof a registered nurse. Whereas here, Downs isqualified already. Training is not a factor. The onlyfactor is how do you reasonably accommodate theindividual? We feel accommodation is possible andshould be pursued. That would drive down the costto the city, by the way, to just accommodate this in-dividual.

JUDGE: As I understand it, however, the citywould argue that as in this situation with the nursein an operating room, a fireman needs to be able tohear in order tube able to save lives and respond inan emergency.

HEW: A fireman does, but a paramedic may not.You would not expect a paramedic to be runninginto burning buildings. Some accommodationscould be made. I'm not trying now to lay out a laun-dry list of what may be the accommodations thatare possible. But let me give some examples ofwhat could be done, off the top of my head. A para-medic could work in teams with somebody else whoin turn could be the person who signals the para-medic. When you're dealing with a patient, if thepatient makes inaudible sounds or sounds difficultto hear, a team member could pick up on that andrelay the information to Downs. Downs would not,himself, be placing other people in a life and deathdangerous situation. Instead, Downs, at best,would only be placing himself in a perilous situa-tion. And I feel Downs wants to pursue this course.It's a risk he is willing to undertake. I think heshould be accommodated.

CITY ATTORNEY: Your Honor, if I could re-spond to that. I think that really Mr. Sorett's argu-ment is useful to the court not so much for what hesaid, but because of the very fact that he said it.It's really demonstrative evidence. Here we have alawyer for a federal agency with a better idea ofhow to run the fire department. And that was justthe approach that the Solicitor General took in theNational League of Cities v. Usery case. Oh no, this

wage and hour lay. will not cost as much as statesand cities say it will because the federal LaborDepartment has a better plan.

JUDGE: Let me stop you right there. Busing wascertainly considered to be a better plan. Do youhave an objection to court-ordered busing?

CITY ATTORNEY: Not when a clear violation ofthe Constitution has been shown. But I think it'simportant for the court to realize the practical andpolitical ramifications of granting a federal agencythe power to say that they have a better plan forthe fire department. And I'd like my Mayor to re-sponci to that briefly.

IdAYOR: Your Honor, I'M not an attorney and Ican't cite case law and precedent, but I can pointthis out to the court that this is not an isolatedcase. This is not just a matter between the City ofRiverside, HEW, and Handicapped United. This 85ultimately involves thousands of local governmentsacross the country. It's very obvious to me that thefederal government thinks that it knows how firedepartments at the local level should be run. So-cially, politically, and I think, legally this is abhor-rent. If this is the case, that the federal govern-ment wants to run the local fire halls, then theyshould pay for it. Yet they are unwilling to meetwhat we consider to be the unreasonable costs in-volved here.

JUDGE: Mr. Sorett, let me come back to you for amoment. I note from the record that apparentlythere are all sorts of different rules concerningSection 504 implementation depending on whatagency you're dealing with. Now, this hasn't beena confederation for about 200 years and I think wehave the right to expect the federal government tospeak on a unified basis.

Why shouldn't I find that this disjointed imple-mentation is persuasive evidence of arbitrary andcapricious action on the part of the federal gov-ernment?

HEW: That would just, oe a wrong decision, YourHonor, not to be presumptuous. HEW has issuedagencywide guidelines, though. We have tried tohave all the agencies bounce their regulationsagainst us so that we can come out with some typeof uniform posture on the matter. However, wehave to realize that there are some 500 odd grantprograms on the books right now for supplies, for

services, for construction items. There is no waythat we can attempt to write one uniform regula-tion that would straitjacket all of these differentprograms. That would not be our purpose. We tryto lay out a standard, to outline certain goals to bemet. Then we review those agency regulations be-fore they become effective to see how well theymeet that standard.

Once they're effective, though, we feel it's theobligation of the individual grantor and assisting

agency to administer those standards.

JUDGE: Mayor Stenberg, do you have any com-ment on the differential impact of the maze of dif-ferent regulations implementing the same simplelaw?

MAYOR: They ,2reate many headaches for me,Your Honor, am, for my staff. In fact, we have tohire experts to run through this maze of regula-

86 tions of conflicting programs. These regulations in-crease the administrative costs of doing businesswith the feds enormously. And in particular, theysubject our city to what we consider conflicting,and perhaps arbitrary, federal regulations that at-tempt 1 tell us how we should hire our employees,how wt. should involve our citizens in decisionmak-ing, and basically how we should run our govern-ment. We feel that we should be the ones to runour government, and furthermore, tha,; we've es-tablished a clear receptivity to the needs of thehandicapped by providing special programs andeliminating certain structural barriers impedingtheir access to public services.

Therefore, the federal government's involve-ment through its various agencies telling us how to'meet these needs to varying degrees seems unwar-ranted.

CITY ATTORNEY: Your Honor, the discrepancyamong the federal regulations certainly impeachesthe argument of counsel that an economic impactstudy was done on the HEW's pattern regulation.We're talking about the regulations that were ap-plied here under Public Health Service programs.To say that they have some guidelines for each en-forcinir ency that most of them haven't followedis no answer to the problem of the impact on River-side. The agency lawyers say, "most of themhaven't adopted regulations. So when you have achallenge to the enforcing agency's regulation,look to our economic study of our drafting model."I think you have to look at the economic impact of

the regulations of each agency.If this had been a different grant statute, a dif-

ferent enforcing agency, we might have a differentresult in the case. That would be wrong. I think ourposition is they're all arbitrary and capricious be-cause they're not all the same.

JUDGE: Let me ask one final question here, gen-tlemen. You people seem reasonable. What is itthat's keeping you apart? What we're here about isgetting Mr. Downs a job. Is Mr. Downs willing toaccept another job in the city for equal pay, as I un-derstand has been offered to him?

HANDICAPPED UNITED: Your Honor, counselfor the city and its Mayor have constantly harpedon economics, dollars and cents. I'm talking abouta human resource. We have here a man who is atrained paramedic, who has served as a paramedicin the armed forces, who can perform the duty. Heis willing and anxious to serve the city. We wereshocked that Mayor Stenberg, who is a progressiveMayor, who has done much for the handicapped,turned down this request. There has been this dec-sion that every paramedic must be a fireman.There is good basis for that, but there is also a per-fect opportunity here to set up a paramedic unitthat is not attached to the fire department and Mr.Downs would be one of their most outstandingparamedics. He can do it We believe preservingthis human resource may cost you some dollars,but it counts.

CITY ATTORNEY: Your Honor, I think Mr.Downs' lawyer stated the case in a nutshell. He ad-mits that the city's program is a good one andthat's why the city won't settle. Why should the ci-ty change its fire department because it's easier tohire Mr. Downs and give him the. job that he wantsthan it is to preserve his rights? Even if thisweren't a $500,000 case, this case will establish aprinciple. It will establish the power or the absenceof power in federal agencies to define what a fire-fighter is. It will establish whether a broad cross-cutting requirement for all federal grants applyingto the handicapped is the same as a requirementfor affirmative action in employment of the handi-capped, and it will establish a legal principle for allof these crosscutting requirements on whetherCongress has to pay any attention to what it's do-ing to states and cities. That's certainly our legalposition. That's why the Mayor's here as well.

84

HEW: Let me just reflect quickly. The city's coun-sel is advocating the use of the National League ofCities case in this context. The government strong-ly opposes this. National League of Cities is a funnycase. Let's face it. I've been reading in the papersthis week about the "brethren" on the SupremeCourt and how this case was really decided. To theextent the outcome was based on the law, the caseis limited, we believe, strictly to the CommerceClause area. And it's susceptible to being over-turned even in that area. The Court expresslyreserved the question whether the spending poweror tf. cow-teenth Amendment would allow thefede. ernment the ability to intrude in thestate cocal government affairs. We feel until acourt has ruled on this, that through the spendingpower, the federal government may, indeed, setdown standards by which state and local agenciesmust abide.

Further, spending is not the only Constitutionalbasis by which grant money is given to state and lo-cal governments. It's also considered to be the dis-posal of public funds under Article 4 of the Consti-tution.

Another point I wanted to raise as well iswhether this court is even competent, in all humili-ty again, Your Honor, to deal with this type ofquestion. It is essentially a political question. It'sone which is for the Congress to determine. Therehave been academicians writing on this particularpoint now who maintain that federalism issues

such as those raised in National League of Citiesare nonjustifiable. We submit that if the court doestake on this case, that you do not expand the hold-ing of National League of Cities into the spendingclause or disposal of public fund area.

MAYOR: Your Honor, sine e the matter of politicshas been raised, I feel I should inject a comment, Iam a Mayor, duly elected by the citizens of River-side and am responsible for the operation of thefire department. Mr. Downs is not elected. Mr.Downs is not responsible for the operation of thefire department. HEW is an agency which does nothave direct responsibility to the public for the oper-ation of the fire department.

As a politician I can see no basis, particularly inlight of the extensive efforts we have made in be-half of the handicapped, for our city to change itscourse of action. We would welcome Mr. Downs in-to city employment in a capacity that we feel wouldmake the most advantage of his talents, but cer-tainly not to cause any possible risk to Mr. Downsor to the public.

JUDGE: All right, gentlemen, I suppose we'vegone about as far as we can go in this context. It'sclear that we're not going to settle this case here atchambers. I'll instruct the clerk to set the casedown for hearing. As you probably know, we'vebeen able to reduce our backlog somewhat and an-ticipate that we ought to be able to get to this casewithin 12 to 18 months.

Part VI

Reflections on the Theme:Is There a Law of

Federal Grants andWhere Is It Leading Us?

by Henry MonaghanRobert S. Stephens Professor of Law

Cornell Law School

The question considered today was, is there afederal grant law? And I think it's perfectly appar-ent shat, at least to a lawyer, that's not a singlequestion. It is, as the conference shows, really aseries of different questions. They implicate thesubject of Constitutional law and administrativelaw, and they involve matters of governmentalpractice.

What is interesting is what was common to alltly? speakers this morning. That is their acceptanceof the desirability of federal grants. The disputethis morning, to the extent that there was a dis-pute, reduced itself to the questions of how the pro-grams ought to be administered, not whether ornot there ought to be any federal grant programs.

Perhaps I could add something by consideringthe desirability of the 1, )(ler& grant system. Thepractice is too far ingrained in the system to beoverturned. I understand that perfectly. But it isuseful to consider the impact on the federal struc-ture of our government, and I suggest to you thatit is profound in both theory and practice. Indeed, Ithink it's useful to put the question in a slightlylarger context and to raise some questions aboutthe present structure of our federal government.

In that respect it turns out that I'm scheduled todeliver a paper on the subject of the "Burger Courtand Our Federalism" in about three weeks at theAnnual Association of American Law School

85

Teachers. And I think tht the first six pages ofthat paper have some special pertinence here :.,ridI'd like to use that as the text.

Some deride "federal" government as a weakgovernment. Others find genius lurking in its insti-tutional arrangements. But most people have con-siderable difficulty in identifying what a federalgovernment is, whether the concept be approachedanalytically, legally, descriptively, or normatively.Happily, I don't need to pursue those matters toofar. For like Mr. Justice Black, I'm only concernedwith, to use his wonderful phase, "Our Feder-alism," which has become a staple in discussingConstitutional law. We're concerned, therefore,with Our Federalism, and like Mr. JusticeStewart and the subject of obscenity, we know itwhen we see it.

Constitutional lawyers are concerned with onespecial component of our Our Federalism,

92 namely its legal context. Historically, the major is-sue has been subst.mtive in nature, the extent towhich the basic charge of the Constitution providesor mandate a clear division of power that bothprotects and confinesand I'd like to emphasize inthis group the word "confines,"the central andstate governments in their respective spheres.That question has dominated Constitutional lawfor two centuries.

But that question is now devoid of any signifi-cance. The radical transformation that has oc-curred in the structure of our federalism in nearlytwo centuries of existence has emptied all the legalcontent from the concept of federalism and re-placed it with a frank recognition of the legalhegemony of the national government. By that Imean the national government cayl do virtuallyanything it wants to the states.

All this occurred, well before the arrival of theBurger Court, and that court shows no signs of at-tempting to undo the past. Now in recent years, at-tention has been drawn by academic theorists to asecond process-oriented dimension of Our Federal-ism. We have come to accept as an article of faiththat adequate federal and administrative mecha-nisms should exist to enforce federally securedrights. The Burger Court has been the object ofmuch criticism at this level, some of it of a highlyinflamed character. I think that those criticismshave been vastly overstated and that the BurgerCourt had done little to impair the Warren Court'slegacy of strong federal enforcement of federalrights.

Here, I'd like to address myself to the substan-tive dimensions of federalism. Substantivelyviewed, Our Federalism is the central device bywhich our vast ocean-spanning nation has hoped toreconcile its needs for unity with its needs for di-versity. The other reconciling device, the politicalparty structure, is in a state of tremendous decline.

Pared to its essentials, the legal controversy fo-cuses on the respective authority of the nation andthe states to determine public policy. Who's goingto set the public policy on any given issue? Thatcontroversy has gone through several stages his-torically. In each case, the emerging national con-sensus has become triumphant against any claimsof state autonomy. The early decisions of the Mar-shall Court and the Civil War Amendments, theThirteenth, Fourteenth, and Fifteenth Amend-ments, represented important stages in that pro-cess. While they vindicated nationally formulatednorms against claims of stateor to be more pre-cise, sectionalautonomy, they were not under-stood at the time to establish the complete nationalhegemony of the national government. That devel-opment came during, or more precisely at the endof, a period of national growth and industrializa-tion. Regulatory efforts of this era, the New Deal,for example, brought with them questions relatedto the authority of the national government to reg-ulate a complex, highly integrated economy domin-ated by nationally active corporate giants.

These efforts also brought questions of nationalcompetence to provide a minimum economic se-.curity for American citizens. As a matter of Constitutional theory, the battle was over by 1941.Once again, national authority was vindicated, thistime through judicial acceptance of broad interpre-tations of Congress' power to regulate commerceand Congress' power to spend. Those importantSupreme Court cases are far too well known tomost lawyers to justify any rehearsal.

But it is useful to recall the extent to which theyin fact confirmed a major reshaping of the originalfederal system. Of course, if Chief Justice Marshallwas right in asserting that the power given to Con-gress to regulate commerce among the severalstates was intended to reach "those internal con-cerns of the states which affect the states general-ly," national legislative competence would expandas the economy assumed in the 19th Century a na-tional, industrial, highly interdependent state.

Even so, the present centralization of economiccontrol in the national government would have as-

SiTL3 radical transformationthat has occurred in the structureof Our Federalism in nearly twocenturies of existence hasemptied all the legal content fromthe concept of federalism, andreplaced it with a frankrecognition of the legal hegemonyof the national government., 9

tonished the framers, in practical terms, if not interms of Constitutional theory.

But the real transformation in Our Federalism hasbeen worked by the model federal role in taxation,borrowing, and spending. Here the change seemsto be one of theory. The single most impoe.antevent in 20th Century Constitutional law is enact-ment of the federal income tax which resulted inthe enormous accumulation of federal dollars andsecondly dried up state taxation powers.

This massive accumulation is something theframers would never have thought about. In aieyevent, the framers surely never imagined the sub-ject of this conference. They surely never wouldhave imagined the recent, but now deeply ingrain-ed, practice of massive transfers of federal dollarsto state and local governments, I'm speaking notsimply of the restrictions attached to transfers butthe actual transfers themsel ees.

I think Professor Hamilton is correct in assert-ing the framers envisioned, "a clear separation be-tween state and federal governments, with eachprovided with sources of public revenues necessaryfor support of the functions assigned to it." Thatcertainly represents the assumptions of 1789, andas a matter of course, this model was carried intothe local level. It was the layer cake theory. Eachlevel of government was assumed to have its ownduties and responsibilities and to be able to financethose.

You'll notice the last part of the notion that eachunit of government had functions assigned to it. Aline between those functions assigned to the stateand those functions assigned to federal govern-

ment cannot be maintained by courts without overtresort to a doctrine called dual federalism. Oncethe Supreme Court recognized that Congressionalpower to spend for the general welfare extends be-yond the Article I, Section 8 checklist, 20th Cen-tury Congresses inevitably asserted a right to fi-nance functions that the states had traditionally orexclusively financed. A judicial line was declaredby the Supreme Court between spending for mat-ters of national, as distinguished from matters oflocal, welfare. This results not in a dichotomy bet-ween national and local subjects but a trichotomy,an area of considerable overlap, where both thestate and the federal government can spend.

The slogan of dual federalism necessarily yieldsto another slogan that was trotted eis morn-ing, namely, cooperative federalism. This at anyrate is the premise of the 1937 decision of the Su-preme Court upholding the Soda/ Security Act,and, in essence, reorganizing federal power tospend unlimited except by a specific Constitutionalprohibition such as the First Amendment. Federalmoney with or without corditions attached :may betransfereed not only to the states but to theirsubordinate units of government. No purpose is ex-cluded. Federal resources can be utilized for thespecific purpose of improving the quality of localpolice departments. They can be used for the moregeneral purpose of saving financially hardpressedcities. Ultimately, federal resources may be avail-able to save hardpressed corporations. As a Consti-tutional lawyer, if these results under the Com-merce Clause and spending powers seem inevitableas a matter of the judicial structure of the Consti-tution, the end result is still a profound alterationof the original Constitutional framework. Thepower of the national government to bring aboutcompliance with nationally defined policies,through regulation and conditional spending, is forall practical purposes unlimited. The legal hege-mony of the national government is therefore firm-ly established. Our Federalism is in short a politicalrather than a legal, doctrine.

Now all this was established before the arrival ofthe Burger Court. That Court entered midway inthe current stage of the development toward cen-tralized power. Namely, the extent to which thenational government could guarantee political andcivil rights to its citizens on a national basis. It diesthat in two ways: by providing for more effectiveenforcement of Constitutional norm, such as racialequality and freedom of speech, and by imposing

8,

93

upon states and upon private parties norms beyondthose specified in the Constitution.

Here too it's fair to say that the Burger Courthas confirmed, and on occasion expanded, theviews of its predecessor. Its decisions leave no ma-terial federalism-based doubts as to the Constitu-tional legitimacy of the ever-expanding federalstatutory and administrative guarantees of civilrights and liberties.

The Burger Court has, in short, formulated noserious threat to the primacy of national legislativeauthority. The sole significant decision, the aca-demically much beloved decision, NLC v. User y,apart from being hopele:-,sly in error, does suggestthe existence of some structurally derived restric-tion upon national power to legislate in ways thatimpair integral state functions. But the importantpart about that case is that it has shown no genera-tive power. Moreover, by its own terms, it is not abarrier to national control over the private sector.Nor is it a barrier to national control over thestates themselves through conditioned spending.Nor is it a barrier to national control over thestates themselves if the federal legislation is basedon the Civil War Amendments. And most of whatCongress does currently, or wants to do to thestates currently, can be tied to the C: ,:11 War

Amendments.On the whole, therefore, the Burger Court has

not significantly altered the conventional wisdomthat the Constitution admits the states to the na-tional political process for the protection of theirinterests. If the states lose there, that's the end ofthe game. It's hard for me to see any justificationfor the Court to intervene and know the politicalcontent of decisions reached by Congress on somesupposed invisible radiation out of the TenthAmendment.

To put it in a nutshell again, federalism is a politi-cal and not a legal doctrine in this country and theprincipal custodian of the federal gover.iment isCongress, not the Supreme Court.

The bulk of the Burger Court's substantive inno-vation has been at the non-Constitutional level.The Supreme Court has shown an increasing reluc-tance to displace state law by expansive construc-tion of federal statutes or through the developmentof what we call federaicommon law. The refusal ofthe Court to expand judge-made law at the e7,--,:)enseof state autonomy is an important development.Still I know of no empirical basis for complaint thatthese divisions either singly or in a combinationhave worked a major revision of the previously ex.isting federal-state pattern.

Federal Judges andFederal Grants:

A Dimension of Today'sDysfunctional Federalism

By David B. WalkerAssistant Director, ACIR

The federal judiciary, now, no less than in thedays of John Marshall, is a major institutional con-ditioner of our American federal system and the in-tergovernmental relations which are so much apart of it. The notion that federalism is a static,Constitutional precept, which is chiefly the concernof judges and Constitutional lawyers is, of course,fallacious. And, so is the companion idea thatfederalism has little relationship to the dynamicfiscal, programmatic, and administrative linkageswhich are the since F., of intergovernmental rela-tions. Our Constitutional history aid especially aseries of recent cases clearly indicate that the twoare inextricably linked and a mutual conditioner ofone another.

American intergorc:- mental .iLAations, after all,have existed since 17 and the Court has helpedshape their charactr:. :since 1789. Whether theMarshall, Taney, War, Fuller, Taft,Hughes, Stone, Vinson, Warren, or Burger Courtsare probed and analyzed, an implicit or explicit

ry of federalism was enunciated and intergov-ernmental relations were affected accordirgly.This is not to say that politics, the prig Kcalbranches of the national government, and historicevents (such as wars and depressions) have not 'a,e;their impact. Clearly, they did. The point, howel,er,is that the Supreme Court has served throughodas the ultimate sanctioner or, in some instances,the initial interpretor, of the intergovernmental re-lations of each phase in the evolution of Americanfederalism.

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During its first 146 years, the Court generallyadhered to a dual federalist theory. Neither theMarshall decisions relating to the commerce poweror to the sanctity of contracts nor thos in the firsttwo decades of this century relating ter taxation forregulatory purposes and to the comr ,ee power inany way significar.4 modify this generalization.Thus, court cases and actual governmental prac-tice (through 1933) suggested a basic division offunctional responsibilities between the states andthe nation, a contesting relationship between thetwo levels, and only incidental "sharing" and "col-laboration" and this was as Madison intended.

With the dramatic shift in 1937 in court attitudesand ultimately in composition, federalism became adead or largely irrelevant Constitutional principlefor some scholars. After all, they point out, it wasin the late 1930s that the term "intergovernmentalrelations" was born. Yet, this misses the Constitu-

96 tional point, since all federal systems, no matterwhat their stage of evolution, exhibit some type oflinkages and connections between and among theirgovernmental levels. The fact that such relationswere minimal, not majcf, and more controversialthan cooperative during the pre-1937 period do2snot mean that they did not exist. They obviouslydid.

Intergovernmental relations emerged in the1930s as a concept, distinct from that of federal-ism, because interievel relationships changed dras-tically during the Great Depression. The number ofgrant programs soared as did their dollar amount.Py 1939, total aid outlays were 15 times the 1933figure. The old dual federal theory was graduallybeing eroded, and a new concept of federalism andof intergovernmental relations was beginning toemerge. Moreover, whine this process began in thepolitical branches of the national government, itultimately required the approval of the SupremeCourt; and the way ;n which the latter sanctionedthese developments has been a critical conditionerof it tergovermental relations ever since.

THE "OLD COURT" AND ITS NOTALWAYS "CONSERVATIVE"

DECISIONS

Prior to 1937, the old Court had handed downthree basic decisions regarding federal grants. In apair of Massachusetts cases in the early 1920s, twoprinciples were estahlished:

Congress' spending power, as utilized tofinance grants-in-aid, does not "requirethe states to do or yield anything," sincestates may defeat any alleged "ulteriorpurpose" by "the simple expedient of notyielding" and of withholding "their con-sent."'An indiVidual (in this case a Massachuettsresident) has no right to question the spe-cific purposes for which his federal taxesare used, "since after funds have beenbrought into the Treasury ant: mingledwith other funds, Congress has sweepingpower to dispose of these funds."2

In the controversial Butler case, an equally con-servative Court voided the Agricultural Adjust-ment Act of 1988 in a somewhat convoluted opinionwhich held that its processing tax was not really atax, but a means of regulating agricultural produc-tion and that, while Congress had broad power toappropriate for the general welfare, the crop bene-fits authorized by the act were in fact a system ofagricultural regulations, not a matter of voluntarycompliance or rejection, hence clearly a violation ofthe Tenth Amendment.3

The positions enunciated in these cases, alongwith their ambiguities, are still very much with us,though the question of constraint on Congress'spending power admittedly is more a theoreticthan a practical option now.

THE "NEW DEAL COURT" ANDITS LEGACY

The first evidence of a change in Coll rt opinionregarding the spending power came in late 1937with the St.-ward Machine Co. v. Davis decision. Insanctioning the Social Security Act, the unemploy-ment excise tax on employers was upheld as a le-gitimate use of the tax power and the grants to thestates were viewed as examples of federal-statecollaboration, not of federal coercion. Hence, theywere fully within Congress' power to appropriatefor "the promotion of the general welfare" andconstituted no infringement on the states' "re-served powers."4

From F137 until the mid-1960s, relatively let t'cases arose regarding federal aid. Those that didfocused chiefly on whether certain conditions ;A-tached to specific grants (Hatch Act prohibitiorn .

and eoual treatment of teeipients under a grant'sregulations) violated the Tenth Amendment.3 This

absence of justiciable grant controversies, how-ever, only reflected the times. The growth ingrants both in dollar terms and numbers, after all,was glacial during the period 1945-63. Moreover,the conditions attached to them were relativelyunintrusive and clearly related to program pur-poses, compared to those of today.

If one were to have summarized the state ofgrant case law just prior to the advent of the cur-rent era (1963), the following principles would haveto be cited:

o Congress' power to spend for the generalwelfare via grant programs is not re-stricted to the enumerated powers detailedin Artic'e I, Section 9 of the Constitution.Conditions attached to grants are alegitimate exercise of Congress' power tofix the terms by which federal funds areexpended.The grant device is essentially a co-operative venture entered into freely bythe subnational partners, with theright to refuse to participate cons:the chief means of protecting the po aversreserved to the states under the TenthAmmdment.

Implicit in these principles were potential dan-gers to the long-term viability of federalism as aConstitutional principle. For example:

Is a grant really a collaborative venture,freely entered into by recipient partners?

Can the Court-sanctioned latitudinalpower of Congresb to spend for whatevergrant programs it deems as promoting thegeneral welfare be adequately curbed

:.toes the Court have an obligation to-abandon its passivity in this area, if theconditions attached to grants bear no rea-sonable relationship to the attainment oftheir program objective?

Yet, none of these questions appeared pivotal oreven problematic in the early 1960s. And, nowonder! The grant system then was a relativelymodest affair, involving only $10 billion in 1964,with about 150 separate grants though withthree-quarters of the funds channeled inte, onlyfoul federal-state programs (highways, aid to the

aged, AFDC, and employment security), and con-ditions that related almost wholly to specific pro-gram goals or to their fiscal management. Despitethe nearly 80 years in its making and baking, the"marble cake" of American federalism, as of 1963,was a small one with basically two ingredients (fed-eral and state), and with only a few major verticalswirls in its relatively uncomplicated pattern. Themost fundamental changes wrought by the NewDeal, war, and post-war economic and social devel-opments, after all, were in the federal govern-ment's direct regulatory, promotional, and subsidyroles, as well as in civil liberties and civil rights, notin grants-in-aid. Hence, the heavy focus in Con-stitutional terms was on the commerce power, thetaxing authority as a regulatory device, and theFourteenth and First Amendments in those years,and not on the spending power as it relates to aidprograms.

THE EMERGENCE OF A NEW SYSTEM

The real body of grant-related case law, then, is aproduct largely of the past decade and a half. Assuch, it merely mirrors the extraordinary changesthat occurred in the federal role and in the federalsystempolitically, programatically, administra-tively, fiscally, and, above all, attitudinallyduringthis relatively brief span of time. The nature,scope, and purposes of the federal grant systemhave been transformed in the process and in waysthat have produced an increasingly dysfunctionalfederalism. Witness:

the nearly 900% hike in federal aid flowsbetween 1963 and 1979 (and a 322% hike inconstant dollar terms);the ever-mounting numbe: of aidprograms, with 240 new ones added duringthe Creative Federalism years of Johnsonand another 120 or so during the New Fed-eralism era of Nixon-Ford, to the pointnow where 500 separately authorized andfunded programs are operational;the extension of direct eligibility topractically all local governments, t. s well asto the 50 states and a range of n ;profitbodies, producing a 30% "bypassing" ofstate govet its last year, compared toa 15% figux e in 1968;

the growing reliance on allocating 2-rant01 funds by formula (up to 75% of the v.t0,

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compared to 66% in the mid-1960s), with anew form antsmanship (and of conflictamong the yiiL interest groups) emerg-ing that focuses not on administrators asmuch as on Congress and the need tofashion favorably the formulas (and eligi-bility provisions);

the spread of federal aid to all of the bigefforts of intergovernmental and nationalimport (like welfare, health insurance, en-vironmental programs, transportation,and education) as well as to a profusion ofactivities that not so long ago weredeemed wholly state-local responsibilities(like rural fire protection, libraries, jellyfish control, police, historical preservation,urban gardening, training for use of themetric system, arson, home insulation,meals-on-wheels, snow removal, aquacul-

98 ture, displaced homemakers, education ofgifted children, development of bikeways,aid to museums, pothole repair, runawayyouth, school security, and art education);the change it the forms of federalassistance, at least outwardly, with all thetraditional types of categorical grants(project, project/formula, formula, andopen ended) still in use, along with at leastfive block grants and General RevenueSharing;the extension of conditions to all forms offederal aid, with procedural strings (civilrights, citizen participation, and auditingrequirements) added to GRS in 1976 andmore and more substantive strings addedto block grants as they evolve over time,thus rendering inaccurate the older des-cription of these two forms of aid as essen-tially "no strings" and "few strings" assis-tance programs, respectively;the emergence of a new era of, and a new-style approach to. federal regulation,with the piecemeal enactment of a range ofacross-the-board requirements in the envi-ronmental, equal access, equal rights, relo-cation, historic preservation, and person-nel areas, to cite only the more obvious,thus underscoring the fact that the condi-tions now attached to practically all feder-al assistance are infinitely more complex,more controversial (with more jueirial de-

.92

cisionmaking), more pervasite (in terms ofthe number of jurisdictions affected), andmore penetrating (in terms of the focus ofsome on the internal operations of wholegovernmental jurisdictions) than theirlargejy program-oriented predecessors ofthe mid-1960s;

the growing reliance of certain states andespecially larger and poorer local jursidic-tions on federal aid, with direct aid forcities 500,000 and over soaring from 28%of their own-source revenues in 1976 toover 50% in 1978, which suggests a degreeof fiscal dependence unimaginable even adecade ago; and

finally, the fundamental questions relatingto administrative effectiveness, economicefficiency, and especially accountability,which have been raised by the public andby Presidents as the programs, payrolls,and revenues of subnational governmentshave become ever more intergovernmen-talized.

These ten trends underscore the quasi-revolu-tionary changes in recent American intergovern-mental relations. They suggest a collapse in thepolitical and fiscal constraints that formerly op-erated to sustain federalism. And, they combine toconvey the impression that all significantpolicymaking is done in Washington, but they can-not conceal the fact that little of any servicing sig-nificance is implemented there. Against this back,drop of seemingly mindiess and uncontrollabletendency to intergovernmentalize everything,where and for what has the Court stood?

THE COURT(s) AND CONTEMPORARYINTERGOVERNMENTAL RELATIONS

In large measure, the Supreme Court has ad-hered to its earlier concepts relating to Congreee,'power to spend for any program it deems neces-sary for promoting the general welfare, to Con-gress' concomitant right to attach conditions tosuch programs, and to the grant-in-aid as col-laborative and voluntary, not a coercive or unre-fusable, mechanism for achieving Congress' pro-motional goals. Unlike the Court's assertive stancein nearly ever/ other area of its Constitutional con-cerns (save for the commerce power), in this one

area, its posture ostensibly has been one of re-straint and of deference to Congress. Yet, thepractical effect 11-3 been to help further changes inthe grarts' realm as drastic and as qualitativelydifferent. as t%. )se the Court itself has initiated insuch areas as civil rights, criminal procedures,libel, and reapportionment.

To put it differently, the current Court's atypicalreliance on precedent and past principles have nothelped to stabilize intergovernmental relations norreally to reconcile the old with the new. Instead, ithas simply ratified, with a few exceptions, thenovel course that was launched politically in themid-1960s and has continued unabatedly in the1970s, with little to no attention to the secondary,tertiary, or certainly the long-term E.temic ef-fects of their decisions.

Before getting more judgmental, the manner inwhich the federal judiciary recently has applied itstraditional grant-related precepts should beprobed. First, regarding Congress' power to spendto promote the general welfare, a few constraintshave been imposed. Yet, these have related to vio-latio-es of the First, Fifth, and Fourteenth Amend-ments,6 not to the Tenth. Moreover, deciding whatprograms promote the general welfare still is heldto be a distinctly Congressional function.

Second, the authority of Congress to attach allsorts of conditions to federal aid programs also hasbeen upheld in several cases, even though many ofthese conditions are of a type and have an effectthat contrasts markedly with their predecessorsofthe 1950s or the 1940s. Thus, a requirement thatwould necessitate a state to amend its Constitution(i.e., to authorize its police power to regulate cer-tain private institutions) was upheld by a districtcourt as no violation of the Tenth Amendment.?Similarly, a requirement that had the practical ef-fect of leaving basic public health decisions in thehands of a county planning unit and beyond theauthority of the county executive and board' ofcommissioners was sanctioned as merely part of a"cooperative venture among the federal and stateand local authorities." In another case, a grant re-quirement stipulating a specific (and, many wouldsay arbitrary) pattern of headquarters-field rela-tionships within a state's bureaucracy, which con-travened a duly enacted and highly commendedstate reorganization and which overlooked a provi-sion of the Intergovernmental Cooperation Act of1968, was found valid. The Court contended that itwas not "coercive" or "mandatory" and that the

state had. the right to refuse to participate in theprogram.9

Third, the grant device clearly is still defined innearly the same :ask terms as it was in the early1920s: as a quasi-contractual relationship, hencefreely entered into but with differing obligationsfor the grantor and the grantee. Moreover, theCourt has maintained this interpretation even ininstances where all aid funds in a functional areawould be cut off if a recipient failed to meet all therequirements in one of them (National HealthPlanning Act) and where the gram gram in-volved probably had more regulatailis and re-quirements attached to it than any other (AFDC)."

Fourth, the Court has moved forward andfleshed out the obligations and rights that a grantplaces on the grantor, grantee, and, in the case oftransfer payments grants, on the ultimate recip-ients. Thus, several procedural due process rightsof grant applicants and recipients have been up-held, clarified or established by the Court." More-over, agency regulations concerning eligibility inand rights established by certain grants have beenscrutinized in light of their statutory bases, theirmode of development and promulgation, and theextent to which they aid the intended benefici-aries." In these efforts, the Court has exhibitedsome of its more habitual assertiveness, though al-most always in the context of presumably inter-preting a grant statute. Finally, the Court hassanctioned the application of several of the 60-oddnational social and environmental standards(under a like number of statutes enacted between1964 and 1979) to grant recipients and, in the pro-cess, the rights of third parties have beenstrengthened."

CONCLUSIONTo sum up, thanks to the explosion in federal

grants over the past decade and a half, along withthe real ambiguities regarding grant require-ments, responsibilities, and rights that have ac-companied this development, the federal courtsespecially the High Courthave assumed a majorrole in grants' management. Procedural and evencertain substantive due process rights have beeninjected into the process, sometimes to thegrantor's benefit; sometimes to the grantee's;sometimes to the ultimate recipient's; and some-times to an affected third party.

The paramount thrust of the Court's decisions,however, has beer to reaffirm the supremacy of

9 3

99

CC (The system) neds ajudicial approach and theory thatreflects a genuine sense ofbalance., 9

Congress' power to spend in furtherance of thegeneral welfare, to rarely curb ith authority to at-tach almost any conditions to grantswhether rea-sonably or unreasonably related to the program'sbasic purpose, and to leave the protection of re-served powers almost wholly up to the states andtheir presumed capacity to refuse or to withdrawfrom participation.

A tenuous theory of cooperative federalism maybe deduced from some of these recent decisions.Yet, it lacks content and seems only to suggest

100 that the Court "fees" that grants are a col-laborative, not coercive, way of enlisting recipientparticipation and that "considerable autonomy re-mains vested in grantees to deal with the shape,content, and administration of the aided programsdespite mandated federal standards."14

In leaving the prerogative of determining whatbest promotes the general welfare almost wholly toCongress and in refusing thus far to apply any testof what is really reasonable and really related tothe conditions that are attached, the Court impli-citly has endorsed Congress' currently semian-archic, but politically astute, approach to andprime control of contemporary intergovernmentalrelations. By assuming a passivity in this area,while aggressively asserting ever greater authori-ty for itself in nearly all others, the federal judi-ciary may have avoided some confrontations withthe political branches and with various powerfulpressure groups; but it has won few friends in theprocess and a spectre of legal sophistry has beep.raised.

Of greater significance, of course, is the fate ofthe system that the Court has sworn to uphold.When one ponders the loose legislative and ram-pant interest group politics that dominated the en-actment of most of the grants (notably, the Voca-tional Rehabilitation Amendments of 1978 and theNational Health Planning Act of 1974) whose arbi-trary requirements have been upheld, the need forsome form of judicial arbitration becomes ap-parent. It could well begin with cases involvingconflicts between such conditions and provisions

other Congressional statutes. To leave the defini-tion of the gemiral welfare wholly to a processwhich, in this decade, successfully coopts practical-ly all of the affected functional-interest groups ineach aided area during the course of renewals, is tosuggest that the old and outdated textbooktheorythe Madisonian theory, if you willof thenational law-making is the one to which the Jus-tices still adhere. To focus so heavily on the respon-sibilities of granting agencies and of grantee gov-ernments, while ignoring the more fundamentalresponsibilities the Congress and tlic Court haveunder the Constitution to assure the continuedvitality of the federal system is to dally with symp-toms and not to deal with remedies. To accord ahigher place in the order of things to a narrowlybased social interest group operating under thecloak of an act of Congressover and against theelected officials of a state demonstrably bent onimproving its over all social services delivery sys-tem and with other Congressional statutory provi-sions supporting its case reflects little concernfor programmatic outcome and no sensitivity toreforms in the states.

In short, the system needs more than a confec-tionary judicial theory of cooperative federalism. Itneeds one that is rooted in the realitiespolitical,fiscal, administrative, programmatic, and pro-ceduralof today's intergovernmental relations.Above all, it needs a judicial approach and theorythat reflects a genuine sen-1 of balance.

Thus far, the judiciary een an unwitting col-laborator in shaping a i system in the 1970sthat is impossible managerially, costly in fiscalterms, questionable in its alledgea concern forequity, and, above all, increasingly unaccountablein a political as well as a Constitutional sense.

If there is any real judicial devotion to what Mr.Justice Black referred to as "Our Federalism" notso long ago, then a new stance will have to be as-sumed; some old precedents will have to be dustedoff; and some new ones will have to be established.The irrational judicial (and legal community) fearof the Tenth Amendment mast be exorcised. It nolonger is the refuge of racists, reactionaries, andrural areas (especially rural farm animals). The Su-preme Court, after all, helped to end all that. Yet,it has difficulty recognizing the salutary effects inthe states of some of its own earlier decisions. Inshort, and to rework an old explanation of judicialbehavior: "A switch by nine, could save thesystemin time."

FOOTNOTES

1Massachusetts v. Mellon, 262 U.S. 456 (1923).1Frothinghcan v. Mellon, 262 U.S. 447 (1923).'U.S. v. Butter, 297 U.S. 1(1936).4301 U.S. 548(1937).°Cf. Oklahoma v. Civil Service Commission, 330 U.S. 127(1947) and Ivanhoe Irrigation District v. McCracken, 357U.S. 275 (1954

'Cf. Shapiro v. Thompson, 394 U.S. 618 (1969) and Tilden v.Richardson, 403 U.S. 672 (1971).

'North Carolina v. Califon, 445 F. Supp. 532 (E.D.N.C.1977).

'Montgomery Coun'-;!, ivfay/and v. Califon, 449 F. Supp.1230 (D. Md. 1978).

°Florida Department of Fleo!:3 L. Califano, 449 F. Supp. 274(N.D. Fla. 1978) aff'd Ea.° F. 2d 150 (5th Cir. 1978).

10Cf. North. Carolina-- Califano, supra and King v. Smith, 392U.S. 309 (1968).

11Cf. Richard E. Cappalli, Rights and Remedies Under FederalGrants, Washington, DC, Bureau of National. Affairs, Inc.,1979, pp. 180-243 and Thomas J. Madden, "The Rights toReceive Federal Grants and Assistce," Federal Bar Jour-nal, Vol. 37, Fa111978, pp. 27-29.

°Cf. Madden, op. cit., pp. 29-35 and 50-52.IsCf. Ibid., pp. 49-50.14Capalli, op. cit., p. 12.

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101

Conference on Federal GrarA LawDecember 12,1979VC3hington, DC

8:15-9 a.m.REGISTRATION

9-9:10Welcome and Opening Remarks

Wayne F. Anderson, Executive Director,ACIR

9:10-10:30The Law of Federal Grants: Where Is ItHeaded?

Tom Madden, General Counsel and AssistantAdministrator, LEAA*

Respondents:Malcolm Mason, Chairman, DepartmentalGrants Appeals Board, HEW*Robert Wa !lick, Steptoe a Id JohnsWashington, DC

10:30-10:45COFFEE BREAK

10:45-12:15The Interaction of Federal Grants and TheLaw: Community Development and LEAALitigation as Case Studies

Moderator:Tom Moody, Mayor of Columbus, Ohio andMember of ACIR

Panelists:George D. Brown, Professor, Boston CollegeLaw SchoolCharles Lauer, LEAA Deputy GeneralCounsel

12:30-1:45LUNCHEON

Charles S. Rhyne, Rhyne and Rhyne,Washington, DC

1:45-3:30

Anatomy of a Grant Controversy:Handicapped Regulation:, and City Hall

Moderator:Carol S. WeissertInformation Officer, ACIR

Actors:William Montalto, Assistant Project Direc-tor, Coordinating Committee on a ModelProcurement Code, American Bar Associa-tionWilliam S. Rhyne, Rhyne and RhyneStephen Sorett, Office of General CounselGeneral Accounting Office*John Settle, Chairman, Board of AssistanceAppeals, Environmental ProteltionAgency*Carl W. Stenberg, Assistant Director, ACIR

3:30-3:45BREAK

3:454:30Reflections on the Theme: Is There A Law ofFederal Grants and Where Is It Leading Us?

Henry Monaghan, Robert S. Stevens Pro-fessor of Law, Cornell Law School

Walker, Assistant Director, ACIR

*These titles aro accurate as of December 1979.

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103

A U. S. GOVERNMENT PRO 'a `-'21G OTTME 1980 341-587/6

COMMISSION MEMBERS

Private CitizensAbraham D. I3eame, ACIR Chairman, New York, New York

Bill G. King, AlabamaMary Eleanor Wall, Illinois

Members of the United States SenateLawton Chiles, Florida

William V. Roth, Jr., DelawareJames R. Sasser, Tennessee

Members of the U.S. House of RepresentativesClarence J. Brown, Jr., Ohio

L. H. Fountain, North CarolinaCharles B. Rangel, New York

Officers of the Executive Branch, Federal GovernmentMoon Landrieu, Secretary, Department of Housing and Urban Development

James T. McIntyre, Director, Office of Management and BudgetG. William Miller, Secretary, Department of the Treasury

GovernorsBruce Babbitt, Arizona

John N. Dalton, VirginiaRichard W. Riley, South Carolina

Richard A. Snelling, Vermont

MayorsThomas Bradley, Los Angeles, California

Richard E. Carver, Peoria. IllinoisTom Moody, Columbus, Ohio

John P. Rousakis, Savannah, Georgia

State Legislative LeadersFred E. Anderson, President, Colorado State Senate

Jason Boe, President, Oregon State SenateLeo McCarthy, Speaker, California Assembly

Elected County OfficialsWilliam 0. Beach,.County Executive, Montgomery County, Tennessee

Lynn G. Cutler, ACIR Vice-Chair, Board of Supervisors, Black Hawk County, IowaDoris W. Dealaman, Freeholder Director, Somerset County, New Jersey

9/

What is CiThe Advisory Commission on IntergovernmentalRelations (ACIR) was created by the Congress in1959 to monitor the operation of the Americanfederal system and to recommend improvements.ACIR is a permanent national bipartisan bodyrepresenting the executive and legislativebranches of Federal, state, and local govern-ment and the public.

The Commission is composed of 26 membersnine representing, the :Federal government, 14representing state*. and local government, andthree representing the public. The PreAdent ap-points 20three private citizens and three Fed-eral executive officials directly and four 'gover-nors, three state legislators; four mayors, andthree elected county clficials from slates nom-inated by the National. Governors' .ASsociation,the National Conference, Of: State' Legislatures,the National League' Of Cities/U.S. Conferenceof Mayors, and the National Association ofCounties. The three, Senators are chosen bythe President of the. Senate and the three Con-gressmen by the Speaker olihe House.

Each Commission member serveS a two year termand may be reappointed.

As a continuing; body, the Commission ap-proaches its work !)y,addresslng itself to specificissues and problems,: the resolLtion of whichwould produce improved aooperation..among thelevels of government:land rner.e *effective func-tioning of the federal system.'In addition:to deal-ing with the all important functional and structuralrelationships among the".--:yarlove .gOVernments,the Commission hasr"als61eXtensively. studied criti-cal stresses. currently' being.placed .on traditionalgovernmental 'taxing practices. One of the longrange efforts of the.cOnimiseiOn has been"to seekways to improve Fedeml,:etate, and lobel govern-.mental taxing practicee'and policies .16':.achieveequitable allocatiOn,..: of :;resources, ;increasedefficiency in c011eatiOn and adMinistration, andreduced compliance"burdans upon the.taipayers.

Studies undertakenitiVtheCommission have dealtwith subjects as diVeree.ae transportatian and asspecific as state:.tiniatiOn of Out-of-state,'deposi-tories; as wide:renging 'tier substate 'regionalismto the more speeiellied'.,ISsUe of !coal' revenuediversification. In: selecting:items for..tha'workprogram, the CoMmissidn considers the.ieiativeimportance: and bigenCY.of the problern,its ,man-ageability froM the,PointOf view of finances andstaff availablel:t& ACIR:and .the:extent-,26 whichthe Commissfon'can;;m'akeafrizifful contributiontoward the eelittioh of the

After selecting ..ipiealtio:intergciyerntrentel..issuesfor investigation,';',ACIR:,.10110r3:,eiFrrn_-"tistep :pro-cedure Piet ,p6sUreiriView,and oomrnent:by.rep -resentatives ail ::affeCtedlevels , vIciart6;-:;_ andintereeted].,0641tbe;c0tinilosron- '4frOitbateseach;'16015,.:;and.;fOfrnutifeS=,:.*,: position.Co ninileSicin:4i ridings andrecomrn . .rations; <arepublished -'and draft bills ;and "ex. 'v.:Ordersdeveloped to ''assiat In 'iinPle- -g ACIRpolicies.

9