DATE: May 23, 1988
CASE NO. 87-JTP-19
NEBRASKA INDIAN INTER-TRIBAL
DEVELOPMENT CORPORATION,
COMPLAINANT,
v.
U.S.DEPARTMENT OF LABOR
RESPONDANT,
and
REGION VII AMERICAN
INDIAN COUNCIL,
DEFENDANT.
BEFORE THE SECRETARY OF LABOR
DECISION AND ORDER OF REMAND
This is a challenge by Complainant, Nebraska Indian Inter-
Tribal Development Corporation (Nebraska Indian), to the award to
Defendant, Region VII American Indian Council (AIC), of a two year
Native American grant for Woodbury County, Iowa, from July 1,
1987, to June 30, 1989, under Section 401 of the Job Training
Partnership Act (JTPA), 29 U.S.C. § 1671 (1982). Nebraska
Indian was one of the competing, unsuccessful applicants for the
grant for Woodbury County which was awarded to AIC. Nebraska
Indian requested a hearing before an administrative law judge
(ALJ) under 20 C.F.R. § 636.10 (1987).[1]
AIC was notified by the Grant Officer by mailgram that hearing
would be held on Nebraska Indian's challenge and of AIC's
opportunity to participate as a party in interest. AIC's counsel
responded by letter to the Grant Officer notifying him of their
representation of AIC and requesting that copies of all future
notifications and other correspondence be served on AIC's counsel
as well as AIC. That letter was never responded to and such
[PAGE 2]
service was never made, either by the Grant Officer, his counsel,
Nebraska Indian, or the ALJ.[2] Thirteen days before the hearing
was to be held on November 3 to November 5, 1987, the Executive
Director of AIC was notified by telephone by a representativ of
the Grant Officer that the hearing would begin on November 3,
1987. There is disagreement between the Grant officer and AIC as
to what AIC was told in that telephone call, as well as subsequent
calls before and during the hearing, with respect to whether AIC
was permitted to or should participate in the hearing.
Compare Affidavit of Mayme Mattwaoshshe, Executive Director
of Region VII, with Affidavit of Veronica Dabney, Department of
Labor Manpower Development Specialist. AIC did not appear and did
not participate in the
hearing.
At the close of the hearing, the ALJ issued an oral ruling,
which was followed on December 11, 1987, by a brief written
Decision and Order Confirming Ruling.[3] The ALJ reversed the
Grant Officer's determination that AIC met the responsibility
requirements under 20 C.F.R. § 632.11(d) for its JTPA grant
for
Woodbury County. The ALJ ordered the Grant officer, by March 1,
1988, to designate Nebraska Indian the JTPA Native American
grantee for Woodbury County, unless he [the Grant Officer] found
Nebraska Indian did not qualify. The ALJ ordered the Grant
officer, by July 1, 1988, to complete a new responsibility review
of AIC to determine whether AIC meets the responsibility
requirements of JTPA for areas, other than Woodbury County,
covered by its grant. In addition, the ALJ ordered the Grant
Officer to impose "financial integrity mechanisms" on AIC by
November 23, 1987, "to assure the safekeeping and proper
accounting of JTPA funds" until a new grantee is designated for
Woodbury County and the new responsibility review of AIC ordered
by the ALJ completed. Those fiscal controls were to be imposed on
November 23, 1987, without regard to the pendency of appeals from
the ALJ's order.
On December 11, 1987, the ALJ also issued an Order Denying
Region VII Motions [sic] to Intervene and to Reopen Hearing. AIC
had made that motion on November 13, 1987. The ALJ held that AIC
had adequate notice of the hearing but had not taken any steps to
intervene until after the hearing was held.
The Grant Officer and AIC filed exceptions to the ALJ's
decision. The Grant Officer excepted to the ALJ's order that the
Grant Officer impose fiscal controls on AIC and that the Grant
Officer conduct a new responsibility review of AIC. The Grant
Officer did not except to the ALJ's order that AIC be undesignated
[PAGE 3]
and Nebraska Indian be designated the Native American JTPA grantee
for Woodbury County. AIC excepted to the denial of its motion to
intervene and seeks reversal of the ALJ's decision and
reinstatement of the Grant Officer's original determination
awarding the JTPA Native American grant for Woodbury County to
AIC. In the alternative AIC seeks a remand to a new ALJ to reopen
the hearing with AIC participating as a party.
Nebraska Indian opposes AIC's motion to intervene and urges
affirmance of the ALJ's denial of that motion. Nebraska
Indian has taken no position on the Grant Officerts exception to
the ALJ's decision. I accepted the case for review on January 26,
1988.
DISCUSSION
The Administrative adjudication section of JTPA, 29 U.S.C.
§ 166, provides that, after a hearing before an ALJ the
decision of the ALJ constitutes final action by the Secretary
unless a party has filed exceptions within 20 days. If exceptions
are filed, and the Secretary accepts the case for review within 30
days of such filing, the ALJ's decision does not become final if
the Secretary issues her decision within 180 days of the date the
case is accepted for review, or until 180 days have elapsed from
that date with no decision having been issued by the Secretary.
In other words, an ALJ's decision which has been excepted to
and accepted for review has the status only of a recommended
decision, and has no force and effect of its own until the passage
of 180 days without issuance of a decision by the Secretary.
Therefore, the ALJ had no authority in this case to order the
Grant Officer to take any action notwithstanding the pendency of
appeals. ALJ Decision and Order Confirming Ruling para. 3.
Because I conclude, as discussed in more detail below, that I will
not adopt the ALJ's recommendation that special financial
integrity mechanisms be imposed on AIC, or that the Grant Officer
be ordered to undertake a special responsibility review of AIC,
those parts of the ALJ's order will be vacated.
Because I have also concluded that AIC is an indispensable
party which should have been joined in this proceeding, the ALJ's
order that AIC be undesignated as the JTPA Native American grantee
for Woodbury County will be vacated and this matter will be
remanded to the Administrative Law Judge to reopen the hearing
with the participation of AIC with the full rights of a party.
Both Nebraska Indian and the Grant Officer assert that because AIC
had knowledge of the hearing but did not comply with 29 C.F.R.
§ 18.10(c) (1987), the ALJ's order denying AIC's motion to
intervene
[PAGE 4]
should be affirmed. I do not agree that that section of the Rules
of Practice and Procedure for Administrative Hearings Before the
Office of Administrative Law Judges, 29 C.F.R. Part 18, governs
this situation. Section0 18.10(c) addresses the situation
analogous to permissive intervention under Rule 24(b) of the
Federal Rules of Civil Procedure (FRCP). Section 18.10(d)
contemplates denial of a petition to intervene if the ALJ
determines the petitioner doe not have the requisite interest,
implying that the party seeking to intervene may not be
indispensable. Here, it can hardly be gainsaid that AIC is "'a
party [ ] (whose] interest are sufficiently substantial that a
court should not proceed to a decision on the merits in its
absence.'" NLRB v. Doug NealManagement Co., 620 F.2d 1133,
1139 (6th Cir. 1980), quoting from Boles v. Greenville Housing
Authority, 468 F.2d 476, 478 6th Cir. 1972). The rationale
for this rule the court explained in Doug Neal Management,
is that "the interests of an unjoined party are especially
vulnerable in that they are not vigorously asserted by counsel
before the court. As a result it is possible that the true nature
and extent of these interests may not be explored until after they
are irreparably prejudiced.'" 620 F.2d at 1139, quoting
Boles, 468 F.2d at n.3.
In Wichita and Affiliated Tribes of Oklahoma V. Hodel,
788 F.2d 765 (D.C. Cir. 1986), three Indian Tribes disputed with
the Department of the Interior and among themselves the method of
distribution of the income from property held in trust for them by
the United States. Analyzing whether a cross claim of one of the
tribes against the other two could proceed when the two cross
defendants could not be joined because they had not waived their
tribal immunity, the court said "[c]onflicting claims by
beneficiaries to a common trust present a textbook example of a
case where one party may be severely prejudiced by a decision in
his absence." 788 F.2d at 774. The court quote Moore's Federal
Practice on Rule 19 of the Federal Rules of Civil Procedure (FRCP)
that "[w]here the purpose of the suit is the disposition of a
fund, a trust, or an estate to which there are several claimants,
all of the claimants are generall indispensable.' 3A Moore's
Federal Practice, para. 19.08 at 19-165 (1984) 788 F. 2d at 774.
See also Cass Clay, Inc. v. Northwestern Public Service
Co., 63 F.R.D. 34 (D.S.D 1974) (all persons having conflicting
claims to a fund are indispensable parties to its disposition.)
None of the parties here, nor the ALJ, took adequate steps to
assure that the case did not go to hearing without the presence of
AIC, even though it was the liability of AIC for alleged
mismanagement which, after all, was at issue. AIC itself, and its
[PAGE 5]
counsel, were not aggressive in protecting AIC's rights by making
direct contact with counsel for Nebras Indian and counsel for the
Grant Officer, as well as the Office of Administrative Law Judges.
I cannot conclude, however, that AIC's inaction was tantamount to
a default, since its counsel did respond to the Grant Officer's
mailgram notice, requesting to be served with all pleadings in the
case. There has been no explanation why the Grant Officer and his
counsel apparently ignored this letter and never served AIC with
copies of all subsequently filed documents in the case. Nebraska
Indian itself probably should have served AIC with copies of its
request for hearing and all subsequent pleadings. Under 29 C.F.R.
18.10(a) "a party against whom relief or other affirmative action
is sought...shall be designed as a 'defendant' or 'respondant,'
as appropriate."
Moreover, the ALJ should have taken a more active role to
assure that the party whose grant was threatened with termination
was before the court and given an opportunity to defend itself.[4]
Under Rule 19(a) of the Federal Rule of Civil Procedure a
party must be joined "if . . . (2) he claims an interest relating
to the subject matter of the action and is so situated that the
disposition of the action in his absence may (i) as a practical
matter impair or impede his ability to protect that interest.....
[and] [i)f he has not been so joined, the court shall order
that he be made a party." (Emphasis added).[5] As explained
in Wright and Miller, Federal Practice and Procedure, § 1611
(1986), "[i]f joinder is feasible[6] , the court must order it;
the court has no discretion at this point because of the mandatory
language of the rule." (footnote omitted).
I note also that even though the absence of an indispensable
party was not raised below, a reviewing court is not precluded
from raising it sua sponte. "'When necessary...a court of
appeals should, on its own initiative, take steps to protect the
absent party, who of course had no opportunity to plead and prove
his interest below. Provident Tradesmens Bank and TrustCo. v. Patterson, 390 U.S. 102, 111, 88 S. Ct. 733, 738, 19
L.Ed. 2d 936 (1968).'" NLRB v. Doug Neal Management, 620
F.2d at 1139, quoting Boles v. Greenville, 468 F.2d 479
n.4.
For the reasons discussed above, therefore, the ALJ's order
reversing the Grant Officer's designation of AIC as the Native
American JTPA grantee for Woodbury County, Iowa is VACATED, and
this matter is REMANDED to the Administrative Law Judge to reopen
the hearing with the participation of AIC as a party.
The Grant officer excepted to the ALJ's order that special
[PAGE 6]
fiscal controls be imposed on AIC and that a new responsibility
review of AIC for the remainder of its grant be conducted by July
1, 1988. The Grant Officer points out that 20 C.F.R. §
632.12(a), under which, as noted above, the hearing here
presumably was held, limits the available remedy in an appeal from
denial of designation as a Native American JTPA grantee to the
right to be designated in the future. The regulation sets a clear
limit on the ALJ's authority in a case of this kind. An ALJ does
not have the authority to order remedies with respect to the
administration of grants and apparent misexpenditure of funds
which are not properly before him in the nondesignation appeal.
By purporting to order such remedies, the ALJ has in effect
assumed the administration, management, and quasi-prosecutorial
roles of the Grant Officer and his counsel. The ALJ's order that
the Grant Officer impose special fiscal controls on AIC and
conduct a new responsibility review of AIC therefore is VACATED.
The recommended order of the ALJ is VACATED and this matter is
REMANDED to Administrative Law Judge Brenner for further
proceedings consistent with this decision.
SO ORDERED.
Secretary of Labor
Washington, D.C.
[ENDNOTES]
[1] Although not explicitly referred to in Nebraska Indian's
request for hearing or in the ALJ's hearing notices or Decision
and Order Confirming Ruling, the authority for holding a hearing
under 20 C.F.R. Part 636 on a challenge to the designation of a
Native American grantee is contained in 20 C.F.R. §
632.12(a), and the hearing presumably was held pursuant to that
section.
[2] The Grant Officer concedes that "this letter was
inadvertently not responded to in writing by the Grant Officer."
Grant Officers Brief to the Secretary of Labor at 8.
[3] It would have been appropriate and helpful in
this review (and probably more fully complied with the
requirements of the Administrative Procedure Act, 5 U.S.C. §
557(c) (1982)), if the ALJ had prepared a full written decision,
after an opportunity for the parties to submit briefs or proposed
findings and conclusions.
[4] I would note, for example, that "numerous exhibits and
testimony . . . were admitted over the Grant Officer's strenuous
objections". Grant Officer's Brief, supra, at 9, and of course
AIC had no opportunity to object, cross examine, or offer exhibits
or testimony in its own defense. Prejudice to the interests of
AIC is not mitigated by the presence of the government at the
hearing because the government's interest is not necessarily
coextensive with that of AIC. Wichita andAffiliated
Tribes of Oklahoma v. Hodel, 788 F.2d at 775. See also
Manygoats v. Kleppe, 588 F. 2d 556, 558 (10th Cir. 1977).
[5] The Federal Rules of Civil Procedure govern "any
situation not provided for or controlled by" 29 C.F.R. Part 18. 29
C.F.R. § 18.1(a).
[6] Joinder may not be feasible, for example, where a party is
beyond service of process or where joinder would destroy complete
diversity (thus making the party "indispensable"), considerations
which are not applicable to administrative actions such as this.
