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Callahan v. United States Department of Health and Human Services

United States District Court, N.D. Georgia, Atlanta Division

January 16, 2020

RANDALL CALLAHAN, KATRYNA GRISSON, CANDICE SEAMAN, MICHAEL WINGATE, EMORY UNIVERSITY D/B/A EMORY UNIVERSITY HOSPITAL, HENRY FORD HEALTH SYSTEM, INDIANA UNIVERSITY HEALTH, OREGON HEALTH & SCIENCE UNIVERSITY, PIEDMONT HEALTHCARE, THE RECTOR AND VISITORS OF THE UNIVERSITY OF VIRGINIA on behalf of its Medical Center, THE REGENTS OF THE UNIVERSITY OF MICHIGAN on behalf of its academic medical center, Michigan Medicine, SAINT LUKE'S HOSPITAL OF KANSAS CITY, UNIVERSITY OF IOWA, UNIVERSITY OF KANSAS HOSPITAL AUTHORITY, a body politic and corporate and an independent instrumentality of the State of Kansas, UNIVERSITY OF KENTUCKY, VANDERBILT UNIVERSITY MEDICAL CENTER, VIRGINIA COMMONWEALTH UNIVERSITY HEALTH SYSTEM AUTHORITY, THE WASHINGTON UNIVERSITY, and BARNES-JEWISH HOSPITAL, Plaintiffs,
v.
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES through ALEX M. AZAR II in his official capacity as Secretary of the United States Department of Health and Human Services, and UNITED NETWORK FOR ORGAN SHARING, Defendants.

          MEMORANDUM OPINION

          Amy Totenberg, United States District Judge

         I. Introduction ................................................................................................... 4

         II. Background ...................................................................................................... 5

         A. Procedural Background ........................................................................... 5

         B. Issues at Play ........................................................................................... 6

         C. Timeline of Events ................................................................................. 10

         D. The Allocation Policies .......................................................................... 15

         III. Legal Standards ............................................................................................. 17

         A. Standard for a preliminary injunction .................................................. 17

         B. Standard for review of agency action .................................................... 19

         C. Standard for procedural Due Process claim ........................................ 22

         IV. Discussion ..................................................................................................... 22

         A. Threshold issues for APA review .......................................................... 26

         1. Who is the agency? .................................................................. 26

         2. What is the final agency action? .............................................. 52

         3. Plaintiffs' outstanding requests for supplementation of the record ........................................................................................ 57

         B. Was the adoption or substance of the Acuity Circles policy arbitrary and capricious? ..................................................................................... 62

         1. Defendants' determination regarding the legality of DSAs ... 64

         2. The Acuity Circles adoption process ........................................ 76

         3. The merits of the Acuity Circle policy ..................................... 83

         C. Did the adoption of the Acuity Circles policy violate the Due Process Clause? .................................................................................................. 94

         V. Conclusion .................................................................................................... 99

         I. Introduction

         The Plaintiffs in this case, including an array of major hospitals and transplant centers in the South and Midwest as well as individual transplant patients, seek to enjoin the nationwide implementation of Defendants' new policy for allocating donated livers. The Parties' disagreement on how to fairly and properly allocate donated liver organs consistent with over-arching federal legal requirements, touches on a complex welter of data, differing perspectives and conditions that vary throughout the nation. The institutions and patients also stand to be seriously impacted by the policy decision, one way or another.

         The issues at stake have causes, ramifications, and potential legislative remedies that extend beyond the contours of this case. The Court is mindful that this is just one clash in an ongoing struggle to shape national organ transplant policy and that all parties involved view the issues as involving life and death consequences.

         The Court's role in this case is not to determine which policy is best, but whether the policymakers in question acted at very least within legal requirements - that their adoption of the new liver allocation policy was not arbitrary or capricious or in violation of Plaintiffs' procedural due process rights. The Court holds today that Defendants met this basic threshold legal standard. The Court also recognizes, however, the profound issues and institutional disruption created by Defendants' handling of this policy change.

         II. Background

         A. Procedural Background

         Plaintiffs are four transplant candidates (the “Patient Plaintiffs”)[1] and fourteen transplant centers that treat end-stage liver disease patients (the “Transplant Center Plaintiffs”). Plaintiffs filed the instant action on April 22, 2019 against Defendants, the United States Department of Health and Human Services (“HHS”) and United Network for Organ Sharing (“UNOS”) (collectively, the “Defendants”) alleging three Counts.[2] The first Count asserted that the Acuity Circles policy should be set aside on the grounds that it was adopted in violation of the procedural aspects of the regulation governing allocation policy. After expedited briefing and a hearing, the Court denied a preliminary injunction on the first count.[3] However, the Court the following day enjoined Defendants' implementation of the Acuity Circles policy, pending appeal, given the gravity and uncertainty of the legal issues, including the outcome of a then-pending Supreme Court case. (Docs. 74, 82.) The Eleventh Circuit affirmed the Court's decision on Count One on grounds other than those articulated by this Court. Callahan v. United States Dep't of Health & Human Servs. through Alex Azar II, 939 F.3d 1251, 1257 (11th Cir. 2019). The Appeals Court remanded the matter to this Court for consideration of the remaining two counts: specifically, that in adopting the Acuity Circles policy, Defendants violated “the Administrative Procedure Act (“APA”) (5 U.S.C. § 706(1), (2)) as well as the Due Process Clause of the Fifth Amendment.” See Complaint (“Compl”) (Doc. 1).

         The Eleventh Circuit provided specific guidance to this Court as to additional fact finding and analysis to be conducted, particularly as to UNOS's status and actions in this administrative review process. The Circuit directed this Court to analyze whether UNOS has in effect functioned in the realm of organ allocation policy making and administration as a federal agency, state actor, or merely a private contractor.

         B. Issues at Play

         As the Eleventh Circuit recounted in review of this case, “[i]n the United States, organ transplants are a public-private affair.” Callahan v. United States Dep't of Health & Human Servs. through Alex Azar II, 939 F.3d 1251, 1254 (11th Cir. 2019). “The National Organ Transplant Act of 1984 (“NOTA”) requires HHS to appoint and oversee the Organ Procurement and Transplant Network (OPTN)-a private nonprofit responsible for . . . maintain[ing] a list of transplant candidates, implement[ing] a system for allocating donated organs, and ensur[ing] the organs' equitable distribution.” Id. (citing 42 U.S.C. §§ 27, 274(b)). Defendant UNOS serves as the current OPTN.[4] In 1999, HHS issued a “Final Rule, ” codified at 42 C.F.R. §§ 121.1-.13, which governs, among other things, the procedural aspects surrounding the OPTN's issuance of policies, section 121.4, and the substantive criteria the OPTN should consider when determining policies, section 121.8. The Final Rule also provides a procedure for interested parties to submit “critical comments” about the OPTN's performance to the Secretary of HHS, who may either act on them, reject them, or take some other action in response to them. 42 C.F.R. § 121.4(d). The Secretary of HHS exercises these oversight roles through the Health Resources and Services Administration (HRSA), an agency within HHS. The Court will not distinguish between HHS and HRSA for the purpose of this Order.

         This dispute centers on the policy governing liver allocation - the Acuity Circles policy, now set to take effect on January 17, 2020 absent the Court's granting of Plaintiffs' motion for a preliminary injunction. (Doc. 210). UNOS, after extended review, adopted a new policy in December 2017 to replace its 2013 liver allocation policy (which the parties have referred to as the “Current Policy” and which the Court, to avoid confusion, will refer to as the “2013 Current Policy”). Both the 2013 Current Policy and the December 4, 2017 policy (“2017 Revised Policy”) utilize smaller geographic groupings known as Donor Service Areas (“DSAs”) and larger OPTN Regions as allocation mechanisms. Unlike the 2013 Current Policy, the 2017 Revised Policy also takes into account 150 nautical mile circles for allocating livers to severely ill patients. The 2017 Policy was premised on a strategy of evolving, data-based transition to a new, more geographically expansive liver organ placement strategy that would meet the various objections of the Final Rule.

         Three days before the 2017 Revised Policy's adoption, Motty Shulman, the New York Greater Hospital Association's counsel (now representing Intervenors in the instant case) sent a letter to Acting Secretary of HHS on behalf of a liver transplant patient, asking HHS to immediately direct the OPTN to set aside the OPTN's “arbitrary geographic limitations” in its proposed (but not yet adopted) allocation policy. Mr. Shulman later submitted a May 30, 2018 critical comment on under the Final Rule on behalf of his clients (the “May 2018 Critical Comment”). The May 2018 Critical Comment triggered a storm of activity in the organ transplant community. HRSA Administrator Sigounas, on behalf of HHS, wrote UNOS a letter requiring UNOS to respond to the May 2018 Critical Comment. UNOS responded to the comment, but clearly not to Shulmand and his clients' satisfaction. Shulman's law firm, Boies Schiller Flexner, on July 16, 2017, filed a lawsuit, Cruz et al v. U.S. Dept. of Health and Human Services et al, No. 1:18-cv-6371-AT (S.D.N.Y. July 16 2017) in federal court in New York, challenging the HHS/OPTN liver allocation policies, on behalf of his clients. HHS immediately, in effect, sought then to resolve or dispose of the litigation. On July 31, 2018, HHS issued a letter determining that “OPTN has not justified and cannot justify the use of DSAs and Regions” in allocation policy and directing OPTN to adopt a new policy by December 2018 (the “July 2018 Letter”). Though UNOS had already adopted the 2017 Revised Liver Policy, it had not yet gone into effect. Accordingly, this determination effectively left the 2013 Current Liver Policy in place pending adoption of a new policy. In light of HHS's July 31 directive, on August 9, 2018 the Cruz Plaintiffs moved to stay proceedings in the Cruz case pending the OPTN's adoption of a new liver allocation policy, with a status report to be filed by December 21, 2018. The motion and stay were granted by Judge Torres. [5]

         Much as HHS has tried to mark the line of scrimmage at the moment Plaintiffs submitted their critical comment, it would be myopic to ignore the history that led to this moment, from the point Intervenors (Shulman's clients) first challenged UNOS's liver allocation policy, through the adoption of the 2017 Revised Liver Policy, and to the present date. Grasping this context is critical to understanding how the Acuity Circles policy unfolded and what got the Parties here. To aid in providing this context, the Court provides the following timeline. After the timeline, the Court will summarize in very broad terms the differences in the policies.

         C. Timeline of Events

Date

Event

Record Citation

12/1/2017

Intervenor's counsel sends letter to Acting Secretary of HHS Hargan on behalf of Tamiany de La Rosa (age 25, in New York) requesting that the OPTN be directed to revise liver allocation policy to “be based on medical criteria instead of arbitrary geographic limitations such as the Organ Procurement Organization's (OPO) region or the OPO's donor service area (DSA).”

HHS_00007216

12/4/2017

2017 Revised Liver Policy adopted, to be implemented 12/2018. The Policy Notice's Problem Statement identifies the problem to be addressed as follows: “Regional and donation service area (DSA) boundaries determine current liver distribution. . . This leads to a situation where a medically urgent candidate, who may be in close proximity of the donor, but outside of the defined region, has limited access to the donor organ.”

To attempt to remedy this concern, the 2017 Revised Policy superimposes a 150 nautical mile (nm) circle over the donor hospital to potentially reach candidates outside the donor's DSA and Region, among other strategies for protecting candidates. As such, the policy does not entirely eliminate DSAs and Regions, but attempts to reduce their importance to allocation.

UNOS establishes an Ad Hoc Geography Committee to examine the issue further.

HHS_00007007

HHS_00006881

3/1/2018

HRSA Administrator Sigounas responds to Ms. de La Rosa's letter. While not indicating that HHS would take any action in response, he acknowledges that “[t]he development of the current liver allocation and distribution policy began in 2012 when the OPTN Board determined that geographic disparities in liver allocation were unacceptably high.”

HHS_00007225

5/30/2018

Intervenor's counsel Motty Shulman sends a critical comment to HHS Secretary Azar requesting that the 2017 Revised Liver Policy be set aside on the grounds that it does not comply with the Final Rule:

“The new policy approved by the OPTN Board in December 2017, does not solve this problem. As set forth below, the new policy implements an allocation hierarchy that still includes region and DSA criteria.”

HHS_00007228

5/31/2018

The morning after the Shulman critical comment was submitted, UNOS General Counsel Jason Livingston sends HRSA an analysis of the December 2017 Policy, which begins by stating that “Regions and DSAs are arbitrary and capricious, ” but then states that the 2017 Revised Policy “expands distribution beyond the arbitrary regional boundaries.” Explains that the 150 nm circle was not arbitrarily chosen but instead statistically modeled, and that the “use of the DSA is minimized significantly in the new policy.”

HHS_00002070

6/8/2018

HRSA Administrator Sigounas writes to Shulman indicating he has asked OPTN to respond to issues raised by Cruz Plaintiffs.

The same day, Sigounas writes to Dr. Becker, current President of the OPTN, questioning whether the use of DSAs and OPTN regions in liver allocation was consistent with the NOTA and Final Rule.

HHS_00004945 HHS_00007239

6/13/2018

Liver and Intestinal Organ Transplantation Committee meets. The committee considers two options for recommendations to Executive Committee: (1) Insist that the 2017 Revised Policy is compliant with the final rule “because it allocates to most urgent candidates [sic] to a larger area, ” or (2) admit that the 2017 Revised Policy, while “a thoughtfully determined compromise . . . is not compliant with the final rule.”

The committee opts to defend the policy, admitting that DSAs and Regions play a limited role, but insisting that the incorporation of 150 nautical mile circles as units of allocation for the most urgent candidates creates a combination that is “supported by the final rule.”

HHS_00004946, 4960

HHS_0004961

6/22/2018

Emergency Board of Directors' Executive Committee meeting. The Executive Committee determines to direct the Liver Committee to review data and propose a replacement for DSAs/Regions in time for December meeting. Several members support this strategy on the grounds that it puts the “best foot forward for any potential lawsuit if the legal risk materializes.”

HHS_00014110

6/25/2018

OPTN President Dr. Becker responds to the HRSA letter, defending the 2017 Revised Policy on the grounds similar to those outlined by the liver committee, but admitting that DSAs and Regions are “imperfect substitute[s] for proximity between the donor and candidates.” The response outlines a course of action for developing “Final Rule - compliant replacements for DSA and region in liver allocation policy, ” including a special comment period in October or November 2018 and adoption of a replacement for DSAs and Regions at the December 2018 meeting.

HHS_00006877

6/26/2018

Second letter from Shulman, responding to OPTN letter. Shulman demands immediate action, contending that “the OPTN Letter also makes clear that, left to its own devices, the OPTN is incapable of bringing the Liver Allocation Policy into compliance with NOTA and the final rule.”

HHS_00001852

6/29/2018

Letter from Plaintiff Piedmont Healthcare in opposition to 5/30 and 6/26 Shulman letters.

HHS_00010314

7/2/2018

Shulman responds to Piedmont letter.

HHS_00001974

7/6/2018

Letter from Plaintiffs Vanderbilt University Medical Center, et al., in opposition to Shulman letters.

HHS_00001983

7/16/2018

Shulman files the Cruz lawsuit in the Southern District of New York.

HHS_00010321

7/31/2018

HRSA Administrator Signounas responds to Shulman critical comment and UNOS response letter. HRSA determines that “the OPTN has not justified and cannot justify the use of” DSAs and Regions. HRSA requires OPTN to adopt a new policy by December 2018 that does not allocate by regions; letter determines 2017 Revised Liver Policy cannot be justified under the Final Rule.

HHS_00004991

8/10/2018

Cruz court grants Cruz Plaintiffs' motion to stay all proceedings pending UNOS's adoption of a new policy.

9/24/2018

The Scientific Registry of Transplant Recipients (SRTR), a contractor that provides statistical and analytic support to OPTN, publishes analysis report on circle-based allocation policies.

HHS_00009574

10/6/2018

UNOS publishes a policy proposal for both the Broader 2 Circle Policy (B2C) and Acuity Circles policy (AC) on the OPTN website and opens three weeks of public comment October 8 through November 1.

HHS_00008952

11/1/2018 11:10 p.m

UNOS policy analyst, circulates a spreadsheet with 1, 200 public comments, which Plaintiffs have fairly characterized as “virtually unreadable.”

HHS 00001544,

HHS_00001146

11/2/2018 8:30 a.m.

Liver and Intestine Committee meeting votes on policy, less than 24 hours after close of public comment period.

Seventeen comments from major institutions submitted through the public comment email were not provided to committee members.

Liver and Intestine Committee recommends that the OPTN Board support committee's recommendation for the Broader 2 Circle policy (B2C) as opposed to Acuity Circles policy (AC).

HHS_00001542 HHS_00008952

11/30/2018 at 6:27 p.m.

UNOS staff distributes to all OPTN Board members, including Board members associated with Plaintiffs, an amendments booklet for the Sunday-Tuesday, December 2-4 OPTN Board meeting, which includes an amendment to adopt Acuity Circles instead of B2C.

HHS_00002338

12/3/2018

OPTN/UNOS Board meeting. HRSA representatives attending the meeting reiterate to the Board HHS's position that DSAs and Regions do not meet the requirements of the Final Rule.

Mr. Shepherd (Exec. Director of UNOS/OPTN) speaks on the pressure to vote: “we have a very clear letter from the Secretary that insists that the OPTN adopt a new policy that does not include DSA by this meeting . . . a decision not to move forward on one of the - at least one of the liver options today would carry tremendous organizational risk and potentially harm our ability to make these decisions in the future.”

Amendment offered and approved by OPTN Board, adopting Acuity Circle Policy. April 2019 implementation date projected.

HHS_00009374

HHS_00009502

12/19/2018

HRSA Administrator Sigounas writes letter to Sue Dunn, President of the OPTN, approving new Acuity Circles policy and communicating that HRSA expects OPTN to move forward expeditiously with implementation.

HHS_00002213

2/13/2019

Callahan Plaintiffs write critical comment letter to Secretary of HHS Azar opposing the Acuity Circles policy. (“February 2019 Critical Comment”).

HHS_0000001

3/14/2019

Administrator Sigounas refers Callahan critical comment to OPTN.

HHS_0000024

3/15/2019

SRTR issues response to Callahan plaintiffs.

HHS 0000042

3/26/2019

UNOS issues response to Callahan plaintiffs.

HHS_0000026

4/22/2019

Plaintiffs file this lawsuit along with a motion for a temporary restraining order.

4/23/2019

HRSA Administrator Sigounas writes to Callahan Plaintiffs stating no action will be taken by HHS in response to Plaintiffs' critical comment regarding the Acuity Circles policy, leaving the policy in place for implementation.

HHS_00000021

         D. The Allocation Policies

         As the Eleventh Circuit noted, “[u]nder the [2013] current policy, a donated liver is first matched and offered to patients who are Status 1A or 1B - the most gravely ill - and who reside in the DSA or Region where the liver is acquired. If there is no suitable match, the liver is then offered to patients-again, who reside in the same DSA or Region where the liver is acquired-based on their Model for End-Stage Liver Disease (MELD) score, which rates patients from 6 (least ill) to 40 (most ill). If there are no matching candidates in the DSA or Region with a MELD score of 15 or higher, the liver is then offered to outside candidates.” Callahan, 939 F.3d at 1255 n.2.

         The 2017 Revised Policy, which was adopted by UNOS but never went into effect, modified the 2013 Current Policy. The Revised Policy also first matches and offers livers to Status 1A or 1B within the Region, but additionally now superimposes a statistically modeled circle of 150 nautical miles over the procuring hospital, potentially giving an opportunity for severely ill patients within the circle but in a different region access to the liver. Next, within that same Region/circle overlay, the policy offers the liver to patients with a MELD/PELD score of 32 (inclusive of a three-point proximity increase for patients within the circle or the same DSA), or who have an “approved HAT [hepatic artery thrombosis] exception.” If there are no matching candidates, then the liver is offered to candidates within the DSA with a MELD or PELD score of at least 15. (HHS_00007014).

         “The Acuity Circles model draws concentric circular boundaries at 150, 250, and 500 nautical miles from the donor hospital. The model then offers the donated liver based on the following hierarchy: (1) Status-1 candidates within the 500-mile circle; (2) candidates with MELD scores of at least 37 within the 150-mile circle, then the 250-mile circle, then the 500-mile circle; (3) candidates with MELD scores between 33 and 36 within the 150-mile circle, then the 250-mile circle, then the 500-mile circle; (4) candidates with MELD scores between 15 and 28 within the 150-mile circle, then the 250-mile circle, then the 500-mile circle. The Broader 2-Circle model uses the same distance-based circles, but places a premium on proximity-it gives lower priority to candidates with greater medical urgency who are farther away from the donor hospital.” Callahan, 939 F.3d at 1256 n.5.

         The Plaintiff institutions, located in Regions with significant rural swaths of poverty as well as higher under-insurance rates, are predicted by the statistical modeling generated in connection with the Acuity Circles policy to lose their relative position of access to transplant organs. (See, e.g., Compl. ¶ 78; HHS_00009623, 26, 28, 30, 31; HHS_00009860). Areas such as New York State, with greater urban populations, present high organ transplant population demands and higher medical insurance coverage rates, are projected to gain greater liver organ access. (HHS_00009860, 63). The impact on transplant access of issues such as physicians' greater use of “exception” points that may boost patients' transplant rankings (i.e., the measure of the criticality of patients' liver disease status) in regions such as New York that enjoy broader medical coverage (via insurance and state Medicaid expansion, individual wealth etc.) remain in debate between the opposing medical factions here. It is no surprise then, when allocation policies touch on so many societal fault lines, that disputes like the instant case are so deeply contentious.

         III. Legal Standards

         A. Standard for a preliminary injunction

         Under the Administrative Procedure Act, the Court “may issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings” “[o]n such conditions as may be required and to the extent necessary to prevent irreparable injury.” 5 U.S.C. § 705. The “test to be applied as to whether a stay should be entered is the same as that which applies to requests for preliminary injunctions.” Corning Sav. & Loan Ass'n v. Fed. Home Loan Bank Bd., 562 F.Supp. 279, 280 (E.D. Ark. 1983).

         “To support a preliminary injunction, a district court need not find that the evidence positively guarantees a final verdict in plaintiff's favor.” Levi Strauss & Co. v. Sunrise Int'l Trading Inc., 51 F.3d 982, 985 (11th Cir. 1995). Instead, it must determine whether the evidence establishes: (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction were not granted; (3) that the threatened injury to the plaintiff outweighs the harm an injunction may cause the defendant; and (4) that granting the injunction would not be adverse to the public interest. McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998). At the preliminary injunction stage, a district court may rely on affidavits and hearsay materials which would not be admissible evidence for a permanent injunction, if the evidence is “appropriate given the character and objectives of the injunctive proceeding.” Levi Strauss & Co., 51 F.3d at 985 (quoting Asseo v. Pan American Grain Co., 805 F.2d 23, 26 (1st Cir. 1986)); McDonald's Corp., 145 F.3d at 1306. “A request for equitable relief invokes the district court's inherent equitable powers to order preliminary relief . . . in order to assure the availability of permanent relief.” Levi Strauss & Co., 51 F.3d at 987; Federal Trade Commission v. United States Oil and Gas Corp., 748 F.2d 1431, 1433-34 (11th Cir. 1984) (stating that a district court may exercise its full range of equitable powers, including a preliminary asset freeze, to ensure that permanent equitable relief will be possible). However, a preliminary injunction “is an extraordinary and drastic remedy not to be granted unless the movant clearly established the ‘burden of persuasion' as to the four prerequisites.” McDonald's Corp., 147 F.3d at 1306 (internal citations omitted). Significantly, in this Circuit, “a finding of substantial likelihood of success on the merits [is required] before injunctive relief may be provided . . . [and this circuit has] held on occasion that when a plaintiff fails to establish a substantial likelihood of success on the merits, a court does not need to even consider the remaining three prerequisites of a preliminary injunction.” Pittman v. Cole, 267 F.3d 1269, 1292 (11th Cir. 2001); Bloedorn v. Grube, 631 F.3d 1218, 1229 (11th Cir. 2011) (“If Bloedorn is unable to show a substantial likelihood of success on the merits, we need not consider the other requirements.”).

         B. Standard for review of agency action

         The applicable standard under the APA is whether the agency's action is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A); Defenders of Wildlife v. U.S. Dept. of Navy, 733 F.3d 1106, 1114-1115 (11th Cir. 2013). An agency action may be found arbitrary and capricious:

where the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Miccosukee Tribe of Indians of Florida v. United States, 566 F.3d 1257, 1264 (11th Cir. 2009) (quoting Alabama-Tombigbee Rivers Coal. v. Kempthorne, 477 F.3d 1250, 1254 (11th Cir. 2007)).

         “The arbitrary and capricious standard is ‘exceedingly deferential.'” Defenders of Wildlife, 733 F.3d at 1115 (citing Fund for Animals, Inc. v. Rice, 85 F.3d 535, 541 (11th Cir. 1996)).

To determine whether an agency decision was arbitrary and capricious, the reviewing court ‘must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.' This inquiry must be ‘searching and careful,' but ‘the ultimate standard of review is a narrow one.' Along the standard of review continuum, the arbitrary and capricious standard gives an appellate court the least latitude in finding grounds for reversal; ‘[a]dministrative decisions should be set aside in this context ... only for substantial procedural or substantive reasons as mandated by statute, ... not simply because the court is unhappy with the result reached.' The agency must use its best judgment in balancing the substantive issues. The reviewing court is not authorized to substitute its judgment for that of the agency concerning the wisdom or prudence of the proposed action.

Fund for Animals, 85 F.3d at 541-42 (quoting North Buckhead Civic Ass'n v. Skinner, 903 F.2d 1533, 1538-40 (11th Cir. 1990) (footnotes and citations omitted)) (emphasis added).

         In determining whether the agency acted arbitrarily and capriciously, the Court must ask whether the agency “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action.” Black Warrior Riverkeeper, Inc. v. U.S. Army Corps of Engineers, 781 F.3d 1271, 1288 (11th Cir. 2015) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). The Court is not authorized to substitute its judgment for the agency's as long as the agency's conclusions are rational. Defenders of Wildlife, 733 F.3d at 1115 (citing Miccosukee Tribe of Indians, 566 F.3d at 1264); Sierra Club v. Van Antwerp, 526 F.3d 1353, 1360 (11th Cir. 2008); Pres. Endangered Areas of Cobb's History, Inc. (“PEACH”) v. U.S. Army Corps of Eng'rs, 87 F.3d 1242, 1246 (11th Cir. 1996) (“The court's role is to ensure that the agency came to a rational conclusion, ‘not to conduct its own investigation and substitute its own judgment for the administrative agency's decision.'”)). While the Court should “uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned . . . [it] may not supply a reasoned basis for the agency's action that the agency itself has not given.” Black Warrior Riverkeeper, 781 F.3d at 1288 (internal citations omitted).

         The Court has limited discretion to reverse an agency's decision when it “is making predictions, within its area of special expertise, at the frontiers of science . . . as opposed to simple findings of fact, a reviewing court must generally be at its most deferential.” Defenders of Wildlife v. Bureau of Ocean Energy Mgmt., 684 F.3d 1242, 1248-49 (11th Cir. 2012) (quoting Miccosukee Tribe of Indians, 566 F.3d at 1264 (quoting Balt. Gas & Elec. Co. v. Natural Res. Def. Council, 462 U.S. 87, 103 (1983))).

         C. Standard for procedural Due Process claim

         The Due Process Clause of the Fifth Amendment provides “that certain substantive rights-life, liberty, and property-cannot be deprived except pursuant to constitutionally adequate procedures.” Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 541 (1985). “In short, once it is determined that the Due Process Clause applies, ‘the question remains what process is due.'” Id. (quoting Morrissey v. Brewer, 408 U.S. 471, 481 (1972). “An essential principle of due process is that a deprivation of life, liberty, or property ‘be preceded by notice and opportunity for hearing appropriate to the nature of the case.'” Id. at 542 (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313 (1950)). The authority of courts to set agency aside action which does not comply with the constitution is recognized in the APA. 5 U.S.C. § 706(2)(B) (a court may set aside agency action “which is contrary to constitutional right, power, privilege, or immunity.”).

         IV. Discussion

         The Court of Appeals identified several “unavoidably fact-sensitive” questions for the Court to address on remand. Callahan, 939 F.3d at 1266. In furtherance of this directive, the Court has endeavored through several orders to ensure that Defendants have compiled a complete administrative record for review of the final agency action. However, in some ways, this has presented a “cart before the horse” problem. When presented with a claim to set aside agency action, “the court shall review the whole record or those parts of it cited by a party.” 5 U.S.C. § 706(2). “Ordinarily, this inquiry ‘is limited to evaluating the agency's contemporaneous explanation [for its action] in light of the existing administrative record.'” Mayor & City Council of Baltimore v. Trump, No. CV ELH-18-3636, 2019 WL 6970631, at *6 (D. Md. Dec. 19, 2019) (quoting Dep't of Commerce v. New York, 139 S.Ct. 2551, 2573 (2019)).

         Herein lies the problem. As the Court of Appeals recognized, Plaintiffs' claims present several “threshold issues”:

“Plaintiffs' arbitrary-and-capricious claim . . . depends in part on the premise that United Network constitutes an “agency” within the meaning of the APA. 5 U.S.C. § 701(b)(1). And that question-which, so far as we can tell, has yet to be addressed by any federal court- turns on whether United Network exercises “substantial independent [government] authority.”

Callahan, 939 F.3d at 1265 (quoting Dong v. Smithsonian Inst., 125 F.3d 877, 881 (D.C. Cir. 1997)).[6] The Parties dispute not only what act constituted the agency action under review, but indeed who constitutes the agency. This has created a somewhat moving target for the boundaries of the record.

         For example, despite being the party initially responsible for formulating the policy in question, Defendant UNOS has steadfastly denied that it is an administrative agency. This raises questions about to what extent the usual deference and limitations on the record even apply to UNOS. See Dep't of Commerce, 139 S.Ct. at 2573 (2019) (“[I]n reviewing agency action, a court is ordinarily limited to evaluating the agency's contemporaneous explanation in light of the existing administrative record. That principle reflects the recognition that further judicial inquiry into executive motivation represents a substantial intrusion into the workings of another branch of Government and should normally be avoided.”) (citations and internal quotations omitted).

         To further complicate matters, Plaintiffs have brought constitutional due process claims alongside their APA claims. As one district court recently noted, “[t]he case law regarding the propriety of allowing extra-record discovery for constitutional claims asserted alongside APA claims is unsettled.” Mayor of Baltimore, No. CV ELH-18-3636, 2019 WL 6970631, at *6 (allowing discovery). In recognition of the above complexities, and in light of the Court of Appeals' directive to engage in fact finding on remand, the Court has allowed limited, supervised discovery against Defendant UNOS. Where Plaintiffs have uncovered materials in discovery which they contend bear on the formulation and adoption of the Acuity Circles policy, they have sought inclusion of these materials in the record. Defendant HHS has, for the most part, opposed these requests on the grounds that it, not UNOS, is the decisionmaker whose decision is under review. But time and again, HHS has deferred to UNOS, as the OPTN, and has admitted in this case that HHS has not made any formal findings of its own (though arguably such were not necessary). (Transcript of Dec. 17, 2019 hearing at 54:16- 23, Doc. 238).

         The Court has, to some extent, pretermitted resolving this question up until now. For example, in its Order of December 6, 2019, the Court wrote:

When the (b)(1) policymaking structure is viewed as a collaborative decision-making process, it is clear that materials and information which influenced UNOS's policymaking in its role as OPTN also at least indirectly influenced HHS's determination as to whether to modify UNOS's adoption of the Acuity Circles policy via its review of Plaintiffs' critical comment. It bears stating that the HHS-OPTN relationship provided under the Final Rule for a (b)(1) policy appears to be a unique arrangement. In short, how can a reviewing Court determine whether the OPTN assessed the appropriate considerations under Section 121.8 of the Final Rule, and whether HHS similarly did so in turn, if it cannot review the materials and information that the OPTN actually considered as part of the administrative record?

(Doc. 206 at 9). To purportedly answer the Court's inquiry of how it is supposed to determine whether the OPTN (and HHS in turn) assessed the appropriate considerations if it does not have before it all that the OPTN considered, Defendant HHS responded, “[t]his Court may determine whether HHS ‘assessed the appropriate considerations' under the Final Rule by reviewing those documents that HHS actually considered directly or indirectly-that is, the proper administrative record.” (Doc. 219 at 7). But this exactly begs the question.

         Putting it all together, to review the merits of Plaintiffs' APA claims, the Court must do so on a complete record. To ascertain the proper scope of the record, the Court must reach the threshold questions posed by the Court of Appeals. The Court will essentially follow this roadmap for the remainder of this Order, turning first to the APA claim, and second to the due process claim.

         A. Threshold issues for APA review

         1. Who is the agency?

         While no party disputes that HHS (through its HRSA) constitutes an agency, the parties disagree as to whether UNOS, in its role as the OPTN, constitutes an agency. Under the APA, “agency” means “each authority of the Government of the United States, whether or not it is within or subject to review by another agency.” 5 U.S.C. § 701. As recognized by the Court of Appeals, the cornerstone for whether an entity constitutes an agency subject to review is whether it exercises “substantial independent [government] authority.” Callahan, 939 F.3d at 1265 (quoting Dong v. Smithsonian Inst., 125 F.3d 877, 881 (D.C. Cir. 1997).). However, “cases have made it clear that any general definition can be of only limited utility to a court confronted with one of the myriad organizational arrangements for getting the business of the government done . . . The unavoidable fact is that each new arrangement must be examined anew and in its own context.” Washington Research Project, Inc. v. Dep't of Health, Ed. & Welfare, 504 F.2d 238, 245-46 (D.C. Cir. 1974) (citations omitted).

         In Dong, the D.C. Circuit held that the Smithsonian Institution was not an “agency” for the purpose of the Privacy Act, which incorporates the APA's definition of agency. Dong, 125 F.3d at 878. The Smithsonian Institution was established by a federal charter. 20 U.S.C. § 41. The D.C Circuit noted that the federal government plays a role in appointing the Institute's governing body: “nine of the seventeen members of its governing Board of Regents are appointed by joint resolution of Congress, and six of the remaining eight are members of Congress. (The other two are the Vice President and the Chief Justice of the United States). Id. at 879 (citing 20 U.S.C. §§ 42, 43) (internal citations omitted). The plaintiff in Dong, an employee, outlined an “impressive array of links between the Smithsonian and the federal government” in support of her argument that the Smithsonian was an agency:

To list the main ones: the Smithsonian operates under a federal charter granted by Congress in 1846; most of its employees-some 70% according to plaintiff, Brief for Appellee at 16 n.3-are considered federal civil service employees; its Regents, as mentioned, are federal officials or are selected by federal officials; it receives extensive federal funding and must submit a detailed annual statement of its expenditures to Congress, 20 U.S.C. § 49; its use of public monies is subject to the audit and reporting requirements of the General Accounting Office; “[a]ll moneys recovered by or accruing to [the Smithsonian are] paid into the Treasury of the United States, to the credit of the Smithsonian bequest, and separately accounted for, ” 20 U.S.C. § 53; it enjoys federal immunity from taxes and libel actions; it receives representation (as in this case) from the Department of Justice; and it publishes rules and notices in the Code of Federal Regulations and the Federal Register.

Id. at 880 (citations omitted). However, the court ultimately found these links to be insufficient to establish the Smithsonian as an agency, focusing on the word “authority” in the statute. The court held that the Smithsonian lacked “substantial government authority” because it “does not make binding rules of general application or determine rights and duties through adjudication. It issues no orders and performs no regulatory functions.” Id. at 882. The court found that “Congress's delegation to the institution of limited police powers, including arrest powers, on its own grounds . . . [and] authoriz[ation to] the Smithsonian to promulgate regulations in support of its power to maintain safety and order on its premises, ” merely “enable the Smithsonian to protect its own collections and facilities, [and] fall far short of converting the Smithsonian into ‘an authority of the Government of the United States.'” Id.

         Several cases involving Defendant HHS's predecessor department, the Department of Health Education & Welfare (“HEW”), have dealt with more analogous situations here, involving contractors or paid consultants. For example, in Washington Research Project, HEW contracted with groups of consultants, known as IRGs, to review grant applications and submit the recommendations to the government to fund. 504 F.2d at 242. The D.C. Circuit, in determining whether IRGs constituted agencies, noted that “[e]mploying consultants to improve the quality of the work that is done cannot elevate the consultants to the status of the agency for which they work unless they become the functional equivalent of the agency, making its decisions for it.” Id. at 247- 48. The court held that the fact that the IRGs did the primary evaluative work subject to “perfunctory review” did not cross the line into making decisions for the agency: “just as the APA makes the fact that a government authority's decisions are subject to review irrelevant in determining whether that authority is an agency, at least in this case the degree of scrutiny its decisions are given on review is equally beside the point.” Id. at 248. Rather, “[t]he important consideration is whether it has any authority in law to make decisions.” Id.; accord Lombardo v. Handler, 397 F.Supp. 792, 795 (D.D.C. 1975) (“Starting at that point, this Court notes that the [National Academy of Sciences] cannot be said to be making decisions for the E.P.A. with regard to the Clean Air Act. The E.PA. has clearly felt free to make its own decisions irrespective of the Academy's advice.”), affd, 546 F.2d 1043 (D.C. Cir. 1976).

         The D.C. Circuit built on its analysis in Washington Research Project in another case involving Defendant HHS's predecessor, Public Citizen Health Research Grp. v. Dep't of Health, Ed. & Welfare, 668 F.2d 537, 539 (D.C. Cir. 1981). That case involved Professional Standard Review Organizations (PSRO). Somewhat in the vein of HHS's contractual relationship with UNOS, the Secretary there would enter “into an agreement with a “‘qualified organization', which is designated as the PSRO for a particular locale” with “a funding preference to PSROs that are nonprofit, local, physician membership organizations.” Id. (citing 42 U.S.C. § 1320c-1(a), (b)(1)(A) (repealed 1982)).[7] (Of course, UNOS, by contrast, is contracted to fulfill OPTN's national policy responsibilities, rather than performing designated functions solely in a particular locale).

         PSRO's primary responsibilities were “reviewing health care services rendered by or in institutions for which payment may be made under the Medicare and Medicaid programs” and determining “(1) whether the services are or were medically necessary; (2) whether the quality of services meets professionally recognized standards of health care; and (3) whether the services could have been more appropriately rendered in another less expensive manner. Id. (citing 42 U.S.C. § 1320c-4(a)(1)). At the time these statutory procedures were in full effect, the PSRO's responsibilities were implemented in the following manner. After admission of a patient on Medicare or Medicaid, “PSRO members review an admission during the first day of hospital stay to determine whether a patient needs to be hospitalized at all. Based on that review, members predict or ‘assign' the appropriate length of the patient's stay.” Id. at 540 (citing 42 U.S.C. § 1320c-4(a)(2) (repealed 1982)). In the event a patient remains hospitalized longer than the assigned stay, the PSROs “determine whether continued hospitalization is in fact needed.” Id. (citing 42 U.S.C. § 1320c-5(d) (repealed 1982)). If further hospitalization is determined to be “medically unnecessary, the patient must thereafter either leave the hospital or make private payment.”

         Unlike the IRGs in Washington Research Project, no agency need approve these determinations; the determinations by PSRO “shall constitute the conclusive determination on those issues . . . for purposes of payment under this chapter.” Id. at 540 (citing 42 U.S.C. s 1320c-7(c) (Supp. III 1979). However, the D.C. Circuit still found that PSROs were not agencies for three main reasons. First, the court looked primarily to the structure and purpose of the statute, which required the Secretary to contract with qualified organizations to serve as PSROs. The court thus concluded that the “purpose of the statute” was “that a PSRO shall be an organization independent of the government.” Id. The court examined the structure of the PRSO in question:

The Foundation is a corporation organized under the law of the District of Columbia, and not under federal law. It is controlled by a Board of Trustees all of whom are private individuals. Its physician members are paid for their time on an hourly fee basis. Its employees are not government employees. It carries out its work pursuant to a contract with HEW. It is free to contract, and indeed does contract, to perform various functions for state and city agencies and for insurance companies.

Id.

         Next, the court appeared to take a functionalist approach, examining “the nature of the decisions which the Foundation makes.” Id. The court found that the opinions rendered by the PRSOs do not make them “part of a government organization, any more than a single physician, consulted on similar questions and submitting a similar expert opinion, would become part of a government organization.” Id. at 544. The court gave short shrift to the argument that PRSO decisions are conclusive: “[t]rue, the statute makes their favorable opinions conclusive; but a moment's reflection will demonstrate that any other arrangement would be impractical: if the Department undertook to review each of the hundreds of thousands of medical opinions submitted the result would be the creation of an unworkable bureaucratic monster.” Id.

         Lastly, the D.C. Circuit rejected the argument that “pervasive procedural requirements” imposed upon PSROs by the statute and by regulations rendered the PSROs agencies pursuant to Forsham v. Harris, 445 U.S. 169 (1980).[8] Id. at 544. The court held that “those controls are only those necessary to assure that the funds given to PSROs are expended properly, that the PSROs comply with the specifications of their contracts and follow uniform procedures.” Id. While the Supreme Court summarily approved this statutory scheme in another case, [9] the PSROs were widely criticized and phased out by the Peer Review Improvement Act of 1982, included as part of the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248.

         The Court can find few examples of courts determining that an entity is an agency when that entity was not created by statute or regulation as part of the government. For example, Grumman Aircraft Engineering Corp. v. Renegotiation Bd., 482 F.2d 710, 715 (D.C. Cir. 1973), rev'd on other grounds, 421 U.S. 168 (1975) involved the Renegotiation Act of 1951. That act established a Renegotiation Board (or National Board), which engaged in contract renegotiation with government contractors. Regional Boards “were established in 1952 by regulation . . . pursuant to statutory authorization . . .” and made up of “Regional Board members” which were “civil servants.” 421 U.S. at 173 n.6. The Regional Boards in some cases made recommendations regarding excessive profits by contractors which were subject to automatic review by the National Board. However, in other cases, the Regional Boards made final decisions themselves. The D.C. Circuit held that Regional Boards were agencies based in part upon this authority. 482 F.2d at 716. The dispute in that case was not whether the Regional Boards were part of the government, but whether their decisional authority was sufficiently final such that they would constitute an agency in their own right vis-à-vis the National Board.[10] The Supreme Court, in reversing on other grounds, ultimately did not reach the issue. 421 U.S. at 188.

         The Court now turns to the OPTN, cognizant of its responsibility to “examine anew” the structure of the OPTN's authority under NOTA in light of the “myriad organizational arrangements for getting the business of the government done.” Washington Research Project, 504 F.2d at 245-46. In determining whether UNOS, in its capacity as the OPTN, exercises “substantial government authority, ” the Court focuses on the following structural aspects of OPTN:

         (a) The text and purpose of Section 372 of the National Organ Transplantation Act, 42 U.S.C. § 274, including the organizational structure of the OPTN, and the level of government control of operations. See Public Citizen, 668 F.2d at 543-44.

         (b) Whether the OPTN “has any authority in law to make decisions, ” Washington Research Project, 504 F.2d at 248, and the nature of such decisions. Pub. Citizen, 668 F.2d at 543-44. Relatedly, whether the OPTN “make[s] binding rules of general application or determine[s] rights and duties through adjudication.” Dong, 125 F.3d at 882.

         a. Structure and Purpose of OPTN Legislation

         This Part deals specifically with the structure and purpose of statutes which create and organize the OPTN. It does not deal with the statutory provisions that govern the authority and decision-making of the OPTN; those are dealt with in the following Part. Section 372 of NOTA, 42 U.S.C. § 274, authorizes the Secretary of HHS to “by contract provide for the establishment and operation of an Organ Procurement and Transplantation Network.” 42 U.S.C. § 274(a). The statute further provides that the OPTN shall “be a private nonprofit entity that has an expertise in organ procurement and transplantation, ” shall “have a board of directors that includes representatives of organ procurement organizations . . . transplant centers, voluntary health associations, and the general public, ” and “shall establish an executive committee and other committees, whose chairpersons shall be selected to ensure continuity of leadership for the board.” 42 U.S.C. § 274(b)(1).

         Dicta in Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 392 (1995), suggests that statutory designations may be important for determining whether an entity is an agency subject to judicial review under the APA. (Pls.' Br. at 34 n.9, Doc. 216-1).[11] NOTA does not contain a disclaimer of agency status found in other statutes, but Congress's requirement that the OPTN be a “private nonprofit entity” supports the conclusion that Congress did not intend for the OPTN to be a government agency. (But see Pls.' Renewed Br. at 34 n.9 (citing Mem. Op. for the General Counsel, Office of Management and Budget, Status of National Veterans Business Development Corporation, 28 Op. O.L.C. 70, 72 (2004)) (concluding that when a statute lacks the “express disclaimer” that was present in the Amtrak statute “[t]he silence raises the question” of whether the entity should be treated as a government agency)).

         The above is buttressed by the legislative history of NOTA. The Senate Report for the Act stated that the OPTN would be “located in the private sector rather than in government.” S. REP. No. 382, 98th Cong., 2d Sess. 4, reprinted in 1984 U.S. CODE CONG. & ADMIN. NEWS 3975, 3981. In a Senate Committee hearing for NOTA, Senator Nickles stated that the OPTN would not be “a new bureaucracy.” (Def. UNOS's Resp., Ex. A, Senate Comm. Hr'g at 18, Doc. 229-1). Representative Walgreen, a cosponsor of the bill, stated that NOTA will “build on existing transplant organizations, retaining the expertise of medical professionals and the many private, voluntary groups that have developed the services this far.” (Def. UNOS Resp, Ex. B, 130 Cong. Rec. H11087-89, Doc. 229-2). The Court notes, though, Justice Scalia's view that “[w]hether the floor statements are spoken where no Senator hears, or ...


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