Opinion
Civil Action 20-1367
12-06-2021
ONPATH FEDERAL CREDIT UNION v. UNITED STATES DEPARTMENT OF TREASURY, COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND
SECTION “R” (2)
ORDER AND REASONS
SARAH S. VANCE, UNITED STATES DISTRICT JUDGE.
Before the Court are plaintiff OnPath Federal Credit Union's (“OnPath”) motion to supplement the administrative record, and defendant the United States Department of Treasury, Community Development Financial Institution Fund's (“the CDFI Fund”) motion to exclude the expert report of Terrence Ratigan. Defendant opposes the motion to supplement the record, and plaintiff opposes the motion to exclude the expert report.
R. Doc. 51.
R. Doc. 25.
R. Doc. 55.
R. Doc. 37.
For the following reasons, the Court denies plaintiff's motion to supplement the record, and grants defendant's motion to exclude the expert report.
I. BACKGROUND
This case involves a demand by the Treasury Department that OnPath Federal Credit Union repay approximately twelve million dollars in awards that it received from the Treasury's CDFI Program for fiscal years (“FYs”) 2006 through 2009, 2011, and 2012.
The Treasury Department's CDFI Fund supports financial institutions that serve low-income and historically underserved individuals and communities. Institutions seeking support from the CDFI Fund must apply for and receive CDFI certification in order to receive awards. OnPath, a federal credit union based in Louisiana, originally applied for and receivedCDFI certification for FY 2006, and has received technical and financial assistance from the CDFI Fund since that time.
R. Doc. 19-4 at 144 (OIG Audit Report).
Id.
Id. at 3 (OnPath's Application for CDFI Certification) (Dec. 21, 2005).
Id. at 131 (OnPath's Original CDFI Certification) (Jan. 24, 2006).
See Id. at 146 (OIG Audit Report).
On October 4, 2016, the Treasury Office of Inspector General (the “OIG”) began an audit of the CDFI awards received by OnPath. On July 11, 2019, after years of investigation, the OIG issued an audit report on its findings. It found that “the CDFI Fund certified [OnPath] . . . in January 2006 based on invalid information” in OnPath's original application for assistance. The OIG recommended that the Director of the CDFI Fund “determine whether [OnPath] was in default of its . . . Assistance Agreements as a result of submitting invalid information in its Certification Application and Assistance Agreements.” It further recommended that the CDFI Fund “take appropriate action to include . . . requiring [OnPath] to reimburse the CDFI Fund” for certain awards received.
Id. at 177 (CDFI Repayment Demand Letter to OnPath).
See Id. at 135-176 (OIG Audit Report).
Id. at 140.
Id. at 141.
Id.
On November 13, 2019, the Program Manager of the CDFI Fund notified OnPath that, based on the OIG's audit, the CDFI Fund had “determined that, as a result of [OnPath] submitting invalid information in its 2006 Certification Application, the FYs 2006 through 2009, 2011 and 2012 awards made to [OnPath] constitute improper payments in accordance with the Improper Payments Elimination and Recovery Improvement Act of 2012 (31 U.S.C. [§] 3321).” It therefore “terminate[d] the Assistance Agreements” for those years' awards, and “require[d] [OnPath] to repay the CDFI Fund for the aforementioned awards, which total[] $12,298,806.”
Id. at 178 (CDFI Repayment Demand Letter to OnPath). OnPath did not receive an award from the CDFI Fund for FY 2010. See Id. at 146.
Id. at 178.
On May 4, 2020, OnPath filed suit against the CDFI Fund, seeking this Court's review under the Administrative Procedure Act (“APA”). OnPath seeks a declaratory judgment that the CDFI Fund wrongfully terminated the Assistance Agreements, and that OnPath is entitled to the awards that the Fund now demands to be repaid.
R. Doc. 1 ¶ 3.
Id. ¶ 92.
The parties have each filed cross-motions for summary judgment based on the administrative record. The present motions-plaintiff's motion to supplement, and defendant's motion to exclude-pertain to whether the Court will admit and review certain evidence from outside the administrative record.
R. Doc. 19 (The CDFI Fund's Motion for Summary Judgment); R. Doc. 52 (OnPath's Motion for Summary Judgment).
In its motion to supplement the record, plaintiff seeks to introduce three sets of documents not contained in the administrative record. First, it asks the Court to admit a June 18, 2021 report by Terrence Ratigan (the “Ratigan Report”), an “expert in the areas of credit union activities, the certification and re-certification of credit unions as [CDFIs], and the policies, practices, and procedures of the CDFI Fund, particularly as they relate to CDFI credit unions.” Second, plaintiff seeks admission of factual statements regarding OnPath's loans in FY 2004, spreadsheets providing OnPath's loan data for FY 2004, and the CDFI Fund's “Investment Area data” at the time of OnPath's initial application for CDFI certification (collectively, the “loan data”). Third, plaintiff seeks to introduce a November 24, 2020 letter from the CDFI Fund to OnPath (the “2020 Letter”).
R. Doc. 51.
R. Doc. 34-5 at 30-37 (Ratigan Report).
R. Doc. 34-5 at 1 ¶ 2 (Declaration of Terrence Ratigan).
R. Doc. 34-11 at 2 ¶ 6-9 (Declaration of Albert J. Richard).
R. Docs. 34-16 & 34-18.
R. Doc. 34-11 at 6-27.
Id. at 28 (Letter from the CDFI Fund to OnPath) (Nov. 24, 2020).
Defendant opposes the admission of these documents, both in its motion to exclude the Ratigan Report, and its opposition to plaintiff's motion to supplement the record. It argues that the Court should confine its inquiry to the administrative record that existed at the time of the CDFI Fund's decision to demand repayment in 2019.
R. Doc. 25.
The Court considers the parties' arguments below.
II. LEGAL STANDARD
In reviewing agency action under the APA, “the court shall review the whole record or those parts of it cited by a party.” 5 U.S.C. § 706. The “focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court.” Woods v. Fed. Home Loan Bank Bd., 826 F.2d 1400, 1408 (5th Cir. 1987) (quoting Camp v. Pitts, 411 U.S. 138, 142 (1973)). Often called the “record rule, ” this principle limits the Court's review “to the record in existence at the time the agency made its decision, ” Sierra Club v. U.S. Fish & Wildlife Serv., 245 F.3d 434, 444 (5th Cir. 2001) (citing 5 U.S.C. § 706).
The Court may look outside the administrative record in narrow circumstances. The Fifth Circuit has held that “[s]upplementation of the administrative record is not allowed unless the moving party demonstrates ‘unusual circumstances justifying a departure' from the general presumption that review is limited to the record compiled by the agency.” White Oak Realty, L.L.C. v. U.S. Army Corps of Eng'rs, 746 Fed.Appx. 294, 303 (5th Cir. 2018) (per curiam) (citing Medina Cty. Env't Action Ass'n v. Surface Transp. Bd., 602 F.3d 687, 706 (5th Cir. 2010)). In the Fifth Circuit, supplementation of the administrative record “may be permitted” in three situations:
(1) the agency deliberately or negligently excluded documents that may have been adverse to its decision,
(2) the district court needed to supplement the record with “background information” in order to determine whether the agency considered all of the relevant factors, or
(3) the agency failed to explain administrative action so as to frustrate judicial review.Medina, 602 F.3d at 706 (cleaned up) (citations omitted).
Here, there is no contention that the first or third scenarios apply. The Court's inquiry addresses only the second: whether the Court “need[s] to supplement the record with ‘background information' in order to determine whether the agency considered all of the relevant factors.” Id.
III. DISCUSSION
OnPath contends that the Court should supplement the record with the Ratigan Report, the loan data, and the 2020 Letter because (i) they are necessary to determine whether the CDFI Fund considered all of the relevant factors, and (ii) they help to explain complex subject matter.
As a threshold matter, the Court finds that only the former justification is a cognizable reason to supplement the administrative record. The latter contention-that the complex subject matter here warrants supplementation-fails for two reasons. First, plaintiff's authority for this “complexity” exception comes exclusively from jurisdictions outside the Fifth Circuit. See, e.g., Lands Council v. Powell, 395 F.3d 1019 (9th Cir. 2005); ITT Fed. Servs. Corp. v. United States, 45 Fed.Cl. 174 (1999). The Fifth Circuit has enumerated three bases on which a reviewing court may supplement the administrative record, and it does not include “complex subject matter” among them. See Medina, 602 F.3d at 706. Furthermore, even if such a justification were recognized in this jurisdiction, any complex or technical issues in this case are adequately illuminated by the already extensive administrative record, as well as counsel's arguments in their briefs. The Court finds that the complexity of the subject matter in this case does not warrant supplementation of the record with the proffered materials.
The Court thus proceeds to determine whether it “need[s] to supplement the record with ‘background information' in order to determine whether the agency considered all of the relevant factors.” Id. To this end, the Court addresses each of plaintiff's proposed submissions in turn.
A. The Ratigan Report
Plaintiff seeks to supplement the administrative record with a report prepared by Terrence Ratigan, a credit-union expert and consultant.Plaintiff submitted the Ratigan Report as part of its opposition to defendant's motion for summary judgment. The Ratigan Report is an eight-page document, dated June 18, 2021, that summarizes Mr. Ratigan's review and analysis of “the OIG audit report, loan and member share data provided by OnPath, and information in the Administrative Record.” Attached as appendices to the Report are: (i) a prior report by Mr. Ratigan, dated January 2020, titled “Analysis of OnPath CDFI Eligibility 2005-2013” (the “2020 Report”); and (ii) a document dated June 18, 2021, titled “Results and Review of the Administrative Record” (the “Record Review”).
Significantly, the administrative record already contains Ratigan's 2020 Report, as well as an earlier report authored by Mr. Ratigan and submitted to the CDFI Fund in May of 2018. At issue here, then, is whether the Court should supplement the administrative record with two more reports prepared by Mr. Ratigan: the Ratigan Report, and the attached Record Review, both dated June 18, 2021.
The Court finds no reason to do so. As established, the Court may supplement the administrative record if the non-record material helps the Court “to determine whether the agency considered all of the relevant factors.” Medina, 602 F.3d at 706. But the 2021 Ratigan Report and Record Review add nothing of significance to the existing record, which already includes two prior reports from Mr. Ratigan, totaling 28 pages. Plaintiff contends that, at the time of the prior reports, neither OnPath nor Ratigan had access to the full administrative record, and that Ratigan's 2021 materials reflect his “expert review” of the newly available record. But by Ratigan's own admission, “there is nothing in the [administrative record] that alters the central conclusions of the two prior reports.” And indeed, the 2021 materials reach the same conclusions stated in the 2020 Report: that the OIG's investigation was flawed and its conclusions unsupported, that the errors identified in OnPath's original application were common and expected for CDFIs at the time, and that OnPath was in fact eligible for CDFI certification at the time of its application. The Court finds that plaintiff has failed to articulate the unique contribution of Ratigan's 2021 materials. Accordingly, the Court cannot say that it “need[s] to supplement the record” with these materials. Id.
Furthermore, the nature of Mr. Ratigan's role and the contents of his reports reveal that the reports are far more than “background information” warranting supplementation. See Id. Plaintiff states that Ratigan has “provided guidance and technical assistance to hundreds of credit unions, ” and has conducted “considerable advocacy with the CDFI Fund.” Both the 2021 Ratigan Report and Record Review contain extensive advocacy and argumentation that are better suited for legal briefs than expert reports. For example, Ratigan repeatedly emphasizes his skepticism about the origin of the OIG's audit of OnPath. He writes that “[t]here is no indication in the [record] regarding the content of the allegation” that prompted the audit, and says that the CDFI Fund's decision to refer the investigation to the OIG “remains a mystery.” Ratigan elsewhere calls OnPath's eligibility for CDFI certification “the material question” for the purposes of the audit. Ratigan goes a step farther in his 2021 Record Review, advancing a lengthy analogy to an umpire's call in baseball game. He likens the OIG's investigation to an umpire's attempt to answer the “immaterial question” of whether a first baseman came off the bag before catching the ball and tagging a runner out.Ratigan concludes that, because the OIG “ignored or never looked for” evidence that “the right call had been made, ” “a game decided more than a decade ago is now being replayed.” The argumentative nature of the 2021 Ratigan materials undermines plaintiff's contention that these submissions simply provide “background information” necessary for the Court's determination of “whether the agency considered all of the relevant factors.” Id.; see also Buckingham Twp. v. Wykle, 157 F.Supp.2d 457, 467 n.10 (E.D. Pa. 2001) (“A party may not undermine an agency decision . . . with an . . . expert expressing disagreement with the views of . . . the agency . . . . [W]ere it otherwise, virtually every agency action involving expertise or technical analyses could be obstructed by a party who engaged an expert willing to disagree with the views or conclusions of . . . the agency.” (citations omitted)).