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City of Camden v. United States Department of Labor

argued: September 29, 1987.

CITY OF CAMDEN, NEW JERSEY, PETITIONER
v.
UNITED STATES DEPARTMENT OF LABOR



Petition from the United States Department of Labor, Case No. 79-CETA-102.

Gibbons, Chief Judge, Mansmann and Aldisert, Circuit Judges.

Author: Aldisert

ALDISERT, Circuit Judge

In this case involving the Comprehensive Employment and Training Act (CETA), the City of Camden, New Jersey, petitions us to set aside the Secretary of Labor's order requiring the City to repay certain misspent federal funds. We will deny the City's petition.

I.

The petition involves Camden's CETA hiring during 1974 and 1975. At all times relevant here, the City was a prime sponsor under a CETA grant administered by the Department of Labor, Employment and Training Administration. Beginning in January 1975, the Department's New York Associate Regional Administrator, acting as Grant Officer, conducted an investigation into charges of nepotism and political influence in the City's employment of CETA participants. The investigation resulted in a determination by the Associate Regional Administration, on March 3, 1978, that 51 participants had been improperly hired and that CETA funds in varying amounts paid to the City should be repaid. The aggregate amount of the City's liability was determined to be $337,587.10.

The City requested, and was granted, a hearing before an Administrative Law Judge to contest its liability. During the course of the proceedings, the Associate Regional Administrator withdrew his challenge to the employment of several individuals so that the case before the ALJ eventually involved 44 individuals. On April 8, 1980, the ALJ issued a decision affirming the Associate Regional Administrator with respect to 26 hires and reversing as to 18. Of the affirmances, five involved violations of nepotism regulations and 21 involved political patronage violations.

On May 7, 1980, the City telegraphed an appeal of the ALJ's decision to the Secretary of Labor. The Secretary subsequently asserted jurisdiction and issued his final decision on October 16, 1986. The Secretary's decision reversed the ALJ as to three findings of improper employment and affirmed as to the remaining disallowances. The Secretary reduced the City's debt to $173,052.82 and ordered this amount repaid.

II.

The CETA legislation, originally enacted in 1973, Pub. L. No. 93-203, 87 Stat. 838, was substantially revised by the CETA Amendments of 1978, Pub. L. No. 95-524,92 Stat. 1909. CETA was designed to establish employment and training programs for unemployed and economically disadvantaged persons; the programs were to be carried out by "prime sponsors," states or units of local government. See 87 Stat. 541. The applicable CETA statutes and regulations in effect during Camden's disputed hiring practices prohibited both nepotism and political patronage in the selection and advancement of participants in the program. See id. at 855 (section 208(f) of the Act); 29 C.F.R. § 96.26(b) (1974), 29 C.F.R. § 98.23(b) (1975) (political patronage); 29 C.F.R. § 96.26(c) (1974), 29 C.F.R. § 96.48 (1975) (nepotism). CETA was phased out as of September 30, 1983, Pub. L. No. 97-300, §§ 181(a), (e), (f)(4), 96 Stat. 1354-55 (1982). CETA's successor statute is the Job Training Partnership Act of 1982, Pub. L. No. 97-300, § 164, 96 Stat. 1348.

Camden raises three challenges to the Secretary's order or repayment. First, it contends that the six-year delay by the Secretary in ordering repayment is an abuse of administrative power. It argues that the Secretary's order should not be enforced due to a change in the City's financial condition during the time lapse. Second, it claims the order of repayment should be set aside because of the Secretary's failure to consider the equities under 29 U.S.C. § 816 (Supp. V 1976) in arriving at his decision. Finally, the City alleges that the Secretary's decision is not based on substantial evidence.

We may overturn the Secretary's decision if his factual determinations are not supported by substantial evidence. 29 U.S.C. § 817(b) (Supp. V. 1976) (section 107(b) of the Act). See Atlantic County v. United States Dep't of Labor, 715 F.2d 834, 837 (3d Cir. 1983). Under the Administrative Procedure Act, the Secretary's decision cannot be arbitrary, capricious, and abuse of discretion, or otherwise not in accordance with the law. See 5 U.S.C. § 706.

III.

The Secretary is empowered to recoup CETA funds advanced to governmental entitles when it becomes clear that such funds were misspent. Atlantic County, 715 F.2d at 836-37. In the context of an analogous statute, the Supreme Court has recognized that federal grant programs have a contractual aspect. "The State gave certain assurances as a condition for receiving the federal funds, and if those assurances were not complied with, the Federal Government is entitled to recover amounts spent contrary to the terms of the grant agreement." Bennett v. Kentucky Dep't of Educ., 470 U.S. 656, 663, 84 L. Ed. 2d 590, 105 S. Ct. 1544 (1985) (Elementary and Secondary Education Act of 1965); see also Bennett v. New Jersey, 470 U.S. 632, 639, 84 L. Ed. 2d 572, 105 S. Ct. 1555 (1985) (same). In Heckler v. Community Health Serv. of Crawford County, Inc., 467 U.S. 51, 63, 81 L. Ed. 2d 42, 104 S. Ct. 2218 (1984), the Court stated that ...


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