On May 7, 2001, St. Louis County filed its reply, arguing that the full amount of the disallowance determined by the OIG audit is at issue, because the Grant Officer never relied on the Final Determination made by the State of Missouri as to disallowed costs. In support thereof, the County points out that the State's Final Determination ($631,850.37) was issued in February of 1999, yet the Grant Officer's Final Determination ($704,210.00) was not issued until August of 1999 and, therefore, the Grant Officer was not relying upon nor bound by the State's determination of the disallowance in this case. Furthermore, the County concedes that the credibility issue relating to the timesheets was not raised before the State Hearing Officer; however, the County avers that the sole issue before that forum was the State's Final Determination as to disallowed costs and that hearing was not for the purpose of challenging any Federal Determination. Hence, County argues that collateral estoppel should not bar litigation of the timesheet issue because it could not properly be raised before the State tribunal. Finally, the County asserts that its interests were never properly represented by the State and, therefore, the Grant Officer should not be allowed to rely upon the State's Final Determination as to the disallowance, where the County has not yet been given the opportunity to fully litigate the disallowance. The State of Missouri takes the same position in its reply brief, arguing that Complainants should not be estopped from litigating the full amount of the OIG audit, because the findings of the Federal auditors were not at issue in the State forum, nor could they be, for lack of jurisdiction. The State further argues that it has not taken inconsistent positions in separate forums, as asserted by the Grant Officer, because the State never had the opportunity to challenge the underlying methodology of the OIG audit at the State level.

   After carefully considering the arguments of counsel and for the reasons that follow, this Court finds and concludes that summary decision is not proper and the full amount of the disallowed costs, as established by the OIG audit, remains in controversy. As an initial matter, it is important to note that the County's appeal of the State Hearing Officer's determination was limited to the State Department of Economic Development's Final Determination of disallowed costs. This issue was properly before the State forum, as it involved the findings of a State agency. However, the disallowance determined by the Federal auditors of the Office of the Inspector General was never an issue in that proceeding, nor would it have been the proper forum for such a challenge. This is evidenced by the following statement made by Hearing Officer Lawrence J. Altman on pages 7 and 8 of his Findings of Fact and Conclusions of Law dated May 26, 1999:

"It is beyond the jurisdiction of the Hearing Officer to rule upon any findings of a federal agency. For the Hearing Officer to enter any type of finding or ruling regarding a federal agency would be an ultra vires act, something which the Hearing Officer is not inclined to do."

   As to the State's final determination of $631,850.37, the County voluntarily entered into a Stipulation of Dismissal with the State, which was approved by the Judge of the Circuit Court of Cole County. This document expressly provides that

"State declares that to the best of its information and belief, no right of County to pursue its appeal of the federal Grant Officer's Final Determination is waived by County or is diminished in any way by the dismissal of this action by County...."

See Stipulation of Dismissal, attached as Exhibit "B" to St. Louis County's Reply to the Grant Officer's Motion for Summary Decision. (Emphasis added) This passage indicates that the parties acknowledged that the full amount of the Grant Officer's Final Determination remained very much in dispute. Thus, this Court is not persuaded by the Grant Officer's argument that the only sum remaining at issue is that which represents the difference between the State and Federal Final Determinations. The very basis of the voluntary dismissal between the County and the State was the understanding that the County would retain the right to litigate the entire amount in controversy, i.e., the $704,210.00 in disallowed costs established by the OIG audit. The Grant Officer's argument that the State determination has been fully litigated is incorrect; when the County appealed the Hearing Officer's findings, the state argued that this matter was not appropriate for State court, but should be litigated in a Federal forum. Thereafter, the state proceeding was circumvented by the agreement between County and State that this matter should properly be presented in a Federal forum. The parties' voluntary dismissal clearly indicates that the issue of the proper amount of the disallowance has not been fully litigated, as illustrated by the above-referenced passage. Moreover, as there has been no final adjudication on the merits as to the proper amount of the disallowed costs and this Court is not bound by the State's Final Determination, I find that the full amount of the OIG audit sought by the Grant Officer, totaling $704,210.00, remains in dispute and, accordingly, the Grant Officer's motion for summary decision is hereby DENIED.

   As to the Grant Officer's request to limit the triable issues in this case to the alternate cost allocation methods utilized by St. Louis County, that request likewise is DENIED. This Court agrees with the County that the issue of the timesheets' credibility was not properly before the State Hearing Officer, as this issue involves a determination made by the OIG auditors. Moreover, the Grant Officer was not a party to the State proceedings and cannot be said to be a "party in interest" to the State, for purposes of reliance upon the Hearing Officer's findings. As the sole issue before the State forum was the Final Determination of the State agency, the County is not estopped from raising the propriety of the Federal auditors' findings concerning the validity of the timesheets before this Court. This issue could not have been resolved by the State court and, thus, the County's failure to introduce it at the State level does not preclude raising the issue before this Court. Finally, this Court agrees that the interests of the County and State are not identical and therefore, both Complainants should be allowed to litigate the full amount of the OIG's disallowance before this Court. Principles of fairness dictate such a result where, as here, the Grant Officer and the State will ultimately look to the County to satisfy that debt.

   The County further asserts that, in order to address the issue of the timesheets' accuracy, the County has attempted to depose the Federal auditors who concluded that the timesheets were non-complying because they were prepared so as to mirror the County's spreadsheets. However, the Grant Officer advised County that those witnesses would not be made available. As this Court has concluded that all issues concerning whether the County complied with JTPA reporting requirements will be heard after a full evidentiary hearing, the Grant Officer is hereby directed to comply with County in establishing mutually convenient dates and times for taking the testimony of these witnesses.

   The parties are reminded that "it should be a rare occasion when the court is called upon to resolve" discovery disputes. Kreuzfeld A.G. v. Carnehammer, 138 F.R.D. 594, 607 n. 3 (D.C. Fla. 1991). Our Rules of Practice and Procedure, codified at 29 C.F.R. Part 18, provide that the parties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the proceeding. See 29 C.F.R. § 18.14(a). The question of relevancy is to be more loosely construed at the discovery stage than at trial. Oppenheimer Fund, Inc. v. Sander, 437 U.S. 340, 351 (1978)(unanimous decision).

   The parties are entitled to discover any matter that bears on any issue in the absence of privilege. Santiago v. Fenton, 891 F. 2d 373, 379 (1st Cir. 1989)(citing Oppenheimer, 437 U.S. at 351). Accordingly, Employer may object to those interrogatories and/or requests which seek to obtain privileged information. These objections are, of course, subject to the exception provided in 29 C.F.R. 18.14(c). Furthermore, the parties are hereby ORDERED to work cooperatively and expeditiously in completing discovery, keeping in mind the broad nature of the process. Further disputes, if any, shall be submitted to this Administrative Law Judge pursuant to 29 C.F.R. Part 18.21.

   The parties are further advised that, if no settlement is reached, this matter will be heard on Monday, September 24, 2001, commencing at 9:30 A.M. at a hearing site to be identified in a subsequent notice. The hearing shall continue all week and the following two weeks, if necessary. In the event that a fourth week of hearings is necessary, this matter will reconvene on Monday, October 22, 2001. There will be no hearings in this matter during the week of October 15, 2001. This Court experienced considerable difficulty locating courtroom space when this matter was originally scheduled for hearing last year and the undersigned would welcome any suggestions or assistance the parties may offer for obtaining adequate courtroom space in St. Louis. Any pertinent information in this regard should be reported to the Court within thirty to forty-five (30-45) days of receipt of this Order.

   Once a specific hearing site is established, a subsequent notice will set forth the location of the hearing, the pre-hearing exchange deadline, and all other pre-hearing procedures. Any further correspondence or filing of documents in these proceedings shall be directed to the Boston Office of Administrative Law Judges, John W. McCormack Post Office and Courthouse, Room 505, Post Office Square, Boston, Massachusetts 02109.

       DAVID W. DI NARDI
       Administrative Law Judge

Boston, Massachusetts
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