text:
    Edwin SLADE, Plaintiff, v. The UNITED STATES OF MEXICO, Defendant.
    Civ. A. No. 84-1343.
    United States District Court, District of Columbia.
    July 8, 1985.
    Edwin Slade, pro se.
    Adlai S. Hardin, Jr., Milbank, Tweed, Hadley & McCloy, New York City, Eric L. Richard, Carol A. Corcoran, Washington, D.C., for defendant The United States of Mexico.
   MEMORANDUM ORDER

HAROLD H. GREENE, District Judge.

Plaintiff, pro se, filed this action against the United States of Mexico to recover $472,123, the purported face value of certain “Receipts for Interest in Arrears” which he alleges were issued by the Mexican government pursuant to certain agreements made in 1922. This action was originally filed in the United States District Court for the District of Nevada. On October 28, 1981, that court dismissed plaintiffs complaint for lack of personal jurisdiction over the defendant. Plaintiff appealed and the Ninth Circuit, in an unpublished opinion, 730 F.2d 769, affirmed the court’s finding that it lacked personal jurisdiction, but it nevertheless vacated the lower court’s order of dismissal with instructions to transfer the matter pursuant to 28 U.S.C. § 1406(a). In accordance with plaintiff’s request, the District Court in Nevada transferred the action to this Court on April 30, 1984. Currently pending are the parties’ cross-motions for summary judgment.

In order to understand better the jurisdictional issues raised by Mexico, the background of the agreements under which plaintiff’s receipts were issued and the amendments to those agreements will be summarized.

I

From 1886 to 1910, during the so-called “Diaz regime,” Mexico was engaged in extensive construction projects. In order to finance such projects, the government of Mexico as well as certain municipalities and privately-owned railroads issued bonds and various other debt instruments totalling over $500 million. These bonds were sold world-wide by banking houses in the United States and Europe. The government of Mexico continued to make payments on these debts until 1914, when civil unrest broke out in that country.

After the Mexican government ceased making payments, a number of banking houses, many of which had sold bonds to the public, joined together and formed a committee — i.e., the International Committee of Bankers (the Committee) — to negotiate with the Mexican government for the resumption of payment on the bonds. After several years of negotiation, an agreement was finally reached between the Finance Minister of Mexico and the Committee. This agreement, the “Plan and Agreement of June 16,1922,” was intended to restore certain specified obligations, both private and public, and to provide for the discharge of such obligations on a limited and deferred basis by the Mexican government in accordance with its ability to pay.

Among other things, the Plan provided that,

1. ARREARS OF INTEREST
The payment in cash of all interest due and payable on or before January 2, 1923, on both the Government and the railway obligations, is to be waived by the bondholders.
The payment of interest upon all arrears of interest due and payable on or before January 2, 1923, on both the government and railway obligations is to be waived by the bondholders.

Notwithstanding these provisions, the Plan provided that the government of Mexico would set aside during a 40 year period — i.e., from 1928 to 1968 — sums sufficient to retire the unpaid interest. Holders of coupons for such unpaid interest were required to deposit their coupons with a trustee designated by the Committee who, in exchange for the coupons, would issue receipts for the face amount of the coupons — the same “Receipts for Interest in Arrears” upon which plaintiff sues. In accordance with the Plan, the receipts were to be issued not by the government of Mexico, but by the Committee. The Plan provided, however, that if the Plan was not, for any reason, fully carried out during the next five years, the bondholders would “resume all their contractual rights.”

Upon adoption of this Plan, the Committee drafted a second agreement — the Deposit Agreement of July 1, 1922. This agreement set forth the rights of the holders of coupons for interest in arrears who deposited their coupons with the Committee. By its terms, the Deposit Agreement was “between such holders of the bonds ... and of the coupons or other evidences of indebtedness for or rights to unpaid interest ... as shall become parties to this agreement in the manner herein after provided ... and International Committee of Bankers of Mexico____” The Deposit Agreement also stated that, in the event that the Mexican government defaulted, the holders could recover their deposited coupons or the assignment of rights to interest represented by the receipts from Guaranty Trust Company of New York. Approximately 98% of all the creditors holding bonds and interest coupons covered by the Plan deposited them with the Committee.

Because of continued civil unrest and economic troubles in Mexico, the Mexican government was unable to carry out the 1922 Plan as it had agreed. The Committee and the Finance Minister for Mexico again entered into negotiations and on October 23, 1925 agreed to a supplemental or modified plan — the “1925 Modification.” One of the purposes of the 1925 Modification was to limit the Government’s liability, obliging it to repay only those amounts it could realistically afford. The 1925 Modification differed from the 1922 Agreement in that it distinguished the direct debts of the central government and political subdivisions, on the one hand, from the debts of the railways on the other. With respect to interest on arrears, the 1925 Modification provided that the government would discharge the direct debt and the railways would discharge their own debt.

Between 1923 and 1928, the Mexican government and the railways paid the Committee in excess of $45 million to purchase and redeem the outstanding debts covered by the 1922 Plan and 1925 Modification. In 1928, however, the Mexican government again ceased making payments because of the social and economic conditions in the country. Although the Committee tried to work out another agreement with the Mexican government, it was unable to do so. In 1932, the Committee abandoned negotiations with the intention of distributing the remaining funds it held.

Ten years later, the Mexican government entered into a third agreement with the Committee — the 1942 Agreement. Under this Agreement, the holders of Receipts for Interest in Arrears could receive payments, which had ceased in 1928, directly from the government of Mexico, but such payments would be at less than face value. Before such holders were eligible to receive any payments, however, they had to assign their proportionate interest in the remaining funds held by the Committee to the Mexican government. In 1946, the Mexican government and the Committee entered into a similar agreement with respect to the repayment of railway obligations.

An additional prerequisite to receive payments under either the 1942 or 1946 agreements, was registration of the instruments (including the Receipts for Interest in Arrears), pursuant to the August 4, 1942 decree of the Mexican government. This decree required all holders of obligations of the Mexican government and the National railways which were issued under the Deposit Agreement of 1922 to register their securities with the Mexican government so that the government could determine whether the owners were enemy or non-enemy aliens. The right to register under this decree terminated on December 29, 1951 pursuant to the Law on the Destination of Enemy Bonds (“the Enemy Bonds Act”).

All holders of Receipts for Interest in Arrears who presented their receipts for registration pursuant to the August 4,1942 decree had their receipts retired pursuant to either the 1942 or 1946 Agreement with the Committee. Thus, any Receipts for Interest in Arrears presently in existence, including those held by plaintiff, were not registered as required under the 1942 decree. Moreover, pursuant to the Enemy Bonds Act, all receipts which were not so registered passed to the ownership of the Mexican government, with no rights retained by the holders.

II

By way of further background, the Court notes that this is not the first action to be filed in the United States relating to the Receipts for Interest in Arrears or other instruments issued under the 1922 Agreements. In 1932, a number of bondholders who had deposited their receipts pursuant to the 1922 Deposit Agreement filed a series of lawsuits in New York against the Committee to obtain priority in the distribution of approximately $7 million held by the Committee — the Committee had distributed $33 of the $45 million paid by the government of Mexico between 1923 and 1928 and retained another $5 million for its own expenses. The Mexican government, which also sought to recover this $7 million, argued, by special appearance, that it was a necessary party to the litigation, and that the proceedings could not go forward since the New York courts lacked jurisdiction over it.

Although Mexico’s argument was initially successful, the New York courts ultimately affirmed the findings of the court-appointed referee that the Committee was not an agent of Mexico, and that the government of Mexico was not a party to the Deposit Agreement of 1922 under which the receipts were issued. On that basis, the litigation was allowed to go forward without Mexico, and the Committee was ultimately ordered to make an accounting of the remaining assets it held and to distribute such assets in an appropriate manner.

A second lawsuit was filed against the Committee in 1952, again in a New York State court, to determine the distributive rights of certain claimants to the remaining funds held by the Committee. Among the parties to this action were Guaranty Trust Company of New York and Bankers Trust Company — the stakeholders of the past due interest coupons which were turned over to the Committee in exchange for Receipts for Interest in Arrears. As previously noted, the 1922 Agreements provided that the holders of the receipts could recover the underlying coupons if the Mexican government or the railways failed to provide funds sufficient to purchase or redeem the receipts. The court, however, found that these coupons had no substantial monetary value apart from the offers to purchase made by the Mexican government in 1942 and 1946. Guaranty Trust Company was directed to publish notices stating that depositors could withdraw their coupons and rights to interest from the two banks within the next six months. Following this six month period, the court authorized the banks to destroy the remaining coupons and thereby discharged them from any obligations thereunder. The court also discharged the Committee and ordered that it be dissolved upon payment of its remaining funds to Guaranty Trust Company of New York.

Ill

Based on the foregoing facts, it is clear that, as a matter of substantive contract law, plaintiff cannot recover money due on receipts for interest in arrears issued under the 1922 Deposit Agreement. However, Mexico has not moved to dismiss or for summary judgment on this ground. Rather, it argues that this Court lacks jurisdiction over it under the doctrine of sovereign immunity.

The Foreign Sovereign Immunities Act (FSIA) provides the sole basis for subject matter jurisdiction over suits against foreign states. 28 U.S.C. §§ 1330, 1604. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983); Asociacion de Reclamantes v. United Mexican States, 735 F.2d 1517 (D.C.Cir.1984); McKeel v. Islamic Republic of Iran, 722 F.2d 582 (9th Cir.1983); Goar v. Compania Peruana de Vapores, 688 F.2d 417 (5th Cir.1982); Rex v. Cia. Compania Pervana de Vapores, 660 F.2d 61, 65 (3d Cir.1981); Williams v. Shipping Corp. of India, 653 F.2d 875, 880-81 (4th Cir.1981); Ruggiero v. Compania Peruana de Vapores, 639 F.2d 872, 875-76 (2d Cir.1981). The FSIA, which was enacted in 1976, codified the so-called “restrictive” principle of foreign sovereign immunity. Under this theory, a foreign state is immune from suits for its sovereign or public acts (aetiones jure imperii), but it is not immune for its private or commercial acts (aetiones jure gestionis).

The FSIA sets forth the general rule that “a foreign state shall be immune from the jurisdiction of the courts of the United States,” 28 U.S.C. § 1604; and then lists several specific exceptions to that rule. The exception upon which plaintiff relies is that for commercial activity, the largest and most important exception to immunity. Asociacion de Reclamantes, supra, 735 F.2d at 1520. The Act defines the term “commercial activity” to mean “either a regular course of commercial conduct or a particular commercial transaction or act,” 28 U.S.C. § 1603(d). The Act further provides that “[t]he commercial character of an activity ... be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.” Id.

Mexico concedes that, based on the legislative history of the FSIA, Congress intended to include government borrowing or the issuance of public debt within the commercial activity exception to sovereign immunity. Nevertheless, Mexico argues that the FSIA does not confer subject matter jurisdiction over this case because (1) Congress did not intend the Act to be applied retroactively and (2) even if the FSIA were applicable, the receipts are not analogous to public debt and the activities of the Mexican government with respect to the 1922 Agreement, under which the receipts were issued, do not constitute “commercial activity” within the meaning of section 1605(a)(2). For the reasons stated below, the Court finds that the FSIA cannot be applied retroactively to this case where all the operative events occurred before 1952. Accordingly, plaintiffs action will be dismissed for want of subject matter jurisdiction.

The question of the retroactive application of the FSIA to pre-1952 transactions was recently decided by the United States District Court for the Northern District of Alabama in Jackson v. People’s Republic of China, 596 F.Supp. 386 (N.D. Ala. 1984), a case similar in several respects to the case at bar. In Jackson, a group of United States holders of Hukang Railroad bonds issued in 1911 by The Imperial Chinese government sued the People’s Republic of China to recover the unpaid principal and interest on these bonds. The court after setting aside the default judgment it had previously entered against China, dismissed the action for want of subject matter jurisdiction based on its conclusion that

neither the language of the FSIA nor its legislative history evince that it be retroactively applied; and to apply the FSIA in this action would clearly alter the antecedent rights of China.

596 F.Supp. at 389. The Court finds the reasoning of the Jackson court persuasive and concurs in its holding.

It is axiomatic that retroactive application of statutes is disfavored. Greene v. United States, 376 U.S. 149, 160, 84 S.Ct. 615, 621, 11 L.Ed.2d 576 (1964); In re District of Columbia Workmen’s Compensation Act, 554 F.2d 1075, 1079 (D.C.Cir. 1976). The Supreme Court in Union Pac. R. Co. v. Laramie Stock Yards Co., 231 U.S. 190, 34 S.Ct. 101, 58 L.Ed. 179 (1913), explained this basic canon of statutory construction as follows:

... [T]he first rule of construction is that legislation must be considered as addressed to the future, and not to the past. The rule is one of obvious justice and prevents the assigning of a quality or effect to acts or conduct which they did not have or did not contemplate when they were performed. The rule has been expressed in varying degrees of strength, but always of one import, that a retrospective operation will not be given to a statute which interferes with antecedent rights ... unless such be “the unequivocal and inflexible import of the terms, and the manifest intention of the legislation.” [quoting United States v. Heth, 3 Cranch (7 U.S.) 399, 413, 2 L.Ed. 479.]

231 U.S. at 199, 34 S.Ct. at 102.

From 1922 when the Receipts of Interest of Arrears were issued until 1951 when the deadline for registration under the Enemy Bonds Act occurred, the United States recognized and adhered to the theory of absolute sovereign immunity. Thus, an action, such as this, against a foreign state for the collection of a public debt did not exist during the times relevant to this controversy. In 1952, the Executive Branch formally adopted the restrictive theory of immunity, but it was applied only gradually by the courts in the following years. Thus, in order to apply the restrictive theory of sovereign immunity as codified in the FSIA to this case, the Court would have to find that retroactivity was the “unequivocal and inflexible import of the terms, and the manifest intention of the legislation.” Union Pac. R. Co. v. Laramie Stock Yards Co., supra, 231 U.S. at 199, 34 S.Ct. at 102. This, the Court cannot do.

The statutory language and legislative history of the FSIA provide no support for the retroactive application of the Act to transactions occurring before 1952. To the contrary, the language of the Act is prospective, providing that “claims of foreign states to immunity should henceforth be decided by courts of the United States in conformity with the principles set forth in this chapter.” 28 U.S.C. § 1602 (emphasis added). The prospective nature of the Act is underscored by the fact that Congress delayed the effective date of the FSIA for a 90 day period so as to give foreign states advance notice of the Act’s provisions and the United States’ new policy. 28 U.S.C. § 1602 note.

Moreover, there is nothing in the legislative history to indicate that Congress intended the FSIA to be applied retroactively to transactions predating 1952. The committee reports reveal that the Tate letter played a pivotal role in shaping United States policy concerning the immunity of foreign sovereigns after 1952 and that the FSIA was merely designed to codify the restrictive principle of sovereign immunity embodied in that letter — “[t]he bill is not intended to affect the substantive law of liability.” S.Rep. No. 94-1310, 94th Cong., 2d Sess. 11 (1976); H.R.Rep. No. 94-1487, 94th Cong., 2d Sess. 12 (1976). Retroactive application of the Act would repudiate the immunity of foreign sovereigns for transactions predating 1952 and thus be inconsistent with Congress’ intent not to affect the substantive law of liability.

Finally, to apply the FSIA to the underlying transactions would clearly prejudice the antecedent rights of Mexico. Between 1922 and 1951, the government of Mexico could safely assume that the then existing doctrine of absolute immunity governed any commercial transaction between it and the United States or its citizens. Mexico could therefore not reasonably anticipate being haled into court in the United States for defaulting on public debt instruments. Nor, for that matter, could holders of bonds and interest coupons reasonably expect to bring an action against Mexico in a United States court in the event of such a default. The Court finds that because Mexico may have reasonably relied on these factors in structuring its conduct pri- or to 1952, it would be inequitable to divest Mexico of the absolute immunity it enjoyed in 1922 by applying the FSIA to this case. See Insurance Company of North America v. Marina Salina Cruz, 649 F.2d 1266, 1272 (9th Cir.1981) (In actions arising under the FSIA, it must be determined “whether that Act gives such clear notice to foreign countries as to remove, as a reasonableness factor, the expectations of immunity of agencies of foreign countries performing commercial functions.”).

In conclusion, the Court finds that on the basis of the statutory language and the legislative history of the FSIA as well as the case law and the “Statement of Interest” filed by the Executive Branch in Jackson, supra, the FSIA should not be applied retroactively to commercial activities or transactions of a foreign sovereign occurring before 1952.

ORDERED that defendant’s motion to dismiss be and it hereby is granted; and it is further

ORDERED that this action be and it hereby is dismissed.

      . Plaintiff himself purchased these receipts in 1972.

      . Edwin Slade v. United States of Mexico, CIV-LV-80-44, HEV, filed on February 13, 1980.

      . The Ninth Circuit stated that "if such jurisdiction exists at all, it would seem to be only in New York, or less probably, in the District of Columbia pursuant to 28 U.S.C. § 1391(f)(1)-(4).” Opinion at 3.

      . The motion filed by plaintiff merely states that he is moving for summary judgment "based on the record now before the Court."

      . Although the Committee was formed'for the purpose of protecting the interests of the bondholders, neither the bondholders nor the government of Mexico authorized the formation of the Committee. Rather, it was a self-constituted and self-appointed entity.

      . This agreement was subsequently ratified by the President and Congress of Mexico.

      . This agreement, too, was ratified by the President and Congress of Mexico.

      . The 1925 Modification did not alter the right of the receipt holders to recover the underlying coupons or other instruments in the event that the Mexican government or the railways defaulted.

      . The background information recited above comes from defendant’s brief and the affidavit of Miguel Valdes-Villarreal, exhibit A to defendant’s motion to dismiss or for summary judgment. Plaintiff has not controverted any of these statements of fact.

      . The Executive Branch formally adopted the principle of restrictive sovereign immunity in 1952. 26 Dept. of State Bull. 984-85 (1952) (the "Tate Letter"), reprinted in Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 711-15, 96 S.Ct. 1854, 1869-71, 48 L.Ed.2d 301 (1976). In the so-called "Tate Letter,” the State Department publicly took the position that henceforth it would recommend to the United States courts that as a matter of policy, a foreign state should be granted immunity only for its sovereign or public acts and not for its private acts.

      . 28 U.S.C. § 1605(a)(2) provides that:
      A foreign state shall not be immune from the jurisdiction of courts of the United States or the States in any case—
      in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.

      . See H.R.Rep. No. 1487, 94th Cong., 2d Sess., at 10, 16, reprinted in 1976 U.S.Code Cong. & Admin.News, 6604. See also Delaume, Public Debt and Sovereign Immunity: The Sovereign Immunities Act of 1976, 71 Am.J.Int’l L. 399, 405 (July 1977); Von Mehren, The Foreign Sovereign Immunities Act of 1976, 17 Colum.J. Trans.L. 33, 49 n. 69 (1978).
      The FSIA, as first proposed, contained a section (proposed section 1606) which provided that all debts of sovereigns would remain beyond the jurisdiction of the United States courts. See H.R. 11315, 93d Cong., 1st Sess. (1973); H.R. 11315, 94th Cong., 1st Sess. (1975); Hearings on H.R. 3493 before the Subcommittee on Claims and Government Relations of the House Committee on the Judiciary, 93d Cong., 1st Sess. (1973). The Committee ultimately deleted this section as unnecessary because it found that United States lenders "invariably include an express waiver of immunity in the debt instrument.” H.Rep. No. 94-1487, supra, at 10; S.Rep. No. 1310, 94th Cong., 2d Sess. 7 (1976); U.S.Code Cong. & Admin.News 6609 (1976).
      The United States District Court in Asociacion de Reclamantes, supra, however, made the following observations:

        Proposed section 1606 was ambiguous in that it applied to all debts, not just general governmental obligations. The State Department considered amending it but then decided that no provision was better than a more precise provision which identified only noncommercial debts for general government obligations as eligible for per se sovereign immunity—
      The 1976 House Report specifically discusses the deletion of proposed section 1606 to which the above quoted passage referred. The Committee appears to have ignored the fact that a public debt could exist in other than the commercial lending context. It merely suggests that only public debts "which are of a commercial nature and should be treated like other commercial transactions" are excepted from sovereign immunity ... The non-commercial debt obligation is thus arguably immune by implication and may place the "internal obligations" in dispute in this case outside the scope of Section 1606 exceptions.
      This is in accordance with the historical meaning of a “public debt," which was considered a per se public act and a sufficient basis for sovereign immunity.
      561 F.Supp. 1190, 1195-96 n. 10 (citations omitted).

      . Because the Court finds that the question of the FSIA's retroactivity is dispositive, it need not address the other issues raised by Mexico.

      . In Jackson, the United States intervened on behalf of China by filing a "Statement of Interest" in which it argued against retroactive application of the FSIA to the conduct of foreign states predating 1952.

      . Although the original plan and Agreement of 1922 provided for payments by Mexico until 1968, all the operative events precluding such payments occurred before 1952: the original bonds were issued in the late 1800’s and early 1900's, the interest payments were suspended in 1914, the settlements of receipts through a series of agreements took place in the 1920’s and 1940’s, and the Enemy Bonds Act’s final registration deadline was in 1951.

      . Mexico contends that after the United States endorsed the restrictive theory of sovereign immunity, certain fiscal matters, including the issuance of public debt, continued to be considered governmental in nature and therefore immune. See National City Bank v. Republic of China, 348 U.S. 356, 75 S.Ct. 423, 99 L.Ed. 389 (1955); Victory Transport, Inc. v. Comisara General de Abastecimientos y Transportes, 336 F.2d 354 (2d Cir.1964). Thus, according to Mexico, it was not until 1976 when the FSIA was enacted that the transaction at issue could be regarded as private commercial activity.

      . Other courts which have addressed the issue of retroactivity have reached a similar conclusion. See, e.g., Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 791 (2d Cir.1980) (Congress did not intend for the FSIA to confer subject matter jurisdiction retroactively); Amoco Overseas Oil Co. v. Compagnie Nationale Algerienne, 605 F.2d 648, 654 (2d Cir. 1979) (It was not the "manifest intention of the legislative” to apply the FSIA retroactively. To do moreover, would prejudice very substantial antecedent rights of the parties). Cf. Ohntrup v. Firearms Center Inc., 516 F.Supp. 1281, 1283-84 (E.D.Pa.1981), aff'd, 760 F.2d 259 (3d Cir.1985) (While noting that the substantive immunity principles set forth in the FSIA have been given retroactive effect, the court declined to give the provisions governing subject matter jurisdiction retroactive effect); Yessenin-Volpin v. Novosti Press Agency, 443 F.Supp. 849, 851 n. 1 (S.D.N.Y. 1978) (Based on its finding that the FSIA does not create new rights of immunity but merely codifies the restrictive principle of sovereign immunity, the court concluded that applying the substantive provisions of the FSIA to an action commenced before its effective date would not interfere with the antecedent rights of the parties).
      The Court notes that in all the above-cited cases, the underlying events or transaction occurred and the cause of action accrued after 1952.

      . The Court notes that the FSIA was not enacted until 24 years after the restrictive theory was adopted in 1952. Thus, there was no reason for Congress to consider the question of retroactivity since presumably causes of action more than 24 years old would be barred by the statute of limitations. See Schmidt v. Polish People’s Republic, 742 F.2d 67 (2d Cir.1984). In Schmidt, the court dismissed as time barred an action to recover on defaulted treasury notes issued by the Republic of Poland in 1929 and 1930. The court rejected plaintiffs' argument that the FSIA revived all claims existing against foreign governments before the FSIA’s passage. While noting that the Act enhanced a party’s capacity to obtain personal jurisdiction over a sovereign state, the court found that
      nothing in its language or legislative history indicates that such wholesale reactivation of ancient claims was intended. Moreover, since the “Tate Letter” of 1952, ... foreign sovereign immunity had not extended to the commercial activity of a foreign state, such as is involved here, ... and Congress had no reason whatsoever to believe that it was reviving otherwise dormant claims based on such activity.
      742 F.2d at 71 (citations omitted).

      . The formation of the Committee, the lengthy and repeated negotiations undertaken by that Committee with the Mexican government, and the numerous agreements under which Mexico agreed to repay the debts bolster this finding.

      . In its Statement of Interest filed in Jackson, supra, the United States argued that the FSIA should not be applied retroactively to transactions predating 1952 since to do so would upset the settled expectations of foreign states. See also, Berizzi Brothers Co. v. S.S. Pesaro, 271 U.S. 562, 571-73, 46 S.Ct. 611, 611-12, 70 L.Ed. 1088 (1926); The Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116, 3 L.Ed. 287 (1812).

      . Attached to defendant’s motion to dismiss or for summary judgment.


source: Caselaw Access Project

author: HAROLD H. GREENE, District Judge.

license: Public Domain

text:
    Maurice ADAMS and Ellison Jackson, Plaintiffs, v. Donald P. HODEL, et al., Defendants.
    Civ. A. No. 85-1872.
    United States District Court, District of Columbia.
    July 11, 1985.

      Henry J. Sockbesen, Native American Rights Fund, Washington, D.C., and Michael D. Mason, Idaho Legal Aid Services, Inc., Indian Law Unit, Coeur d’Alene, Idaho, for plaintiffs.
    George P. Williams, Asst. U.S. Atty., Washington, D.C., for Federal defendants.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

On March 29, 1985, the Bureau of Indian Affairs (BIA.) issued a final rule amending the definition of “need” in the regulations used to calculate payment rates under the Indian General Assistance Program. Plaintiffs, who are indigent Indian General Assistance recipients residing in Idaho and Nevada, sued to enjoin the enforcement of the new regulation on the grounds that it violates the Snyder Act of 1921 and the equal protection component of the Fifth Amendment’s due process clause. On June 12, 1985, the Court issued a temporary restraining order enjoining defendants from enforcing the new regulation and requiring them to make General Assistance payments based on the standard previously in force. The parties have now filed cross-motions for summary judgment and the Court has heard oral argument. After carefully considering the submissions of the parties, the Court concludes that the government’s motion must be granted and this action dismissed.

I

The material facts are not in dispute. The General Assistance program is a federally funded public assistance program of last resort that pays benefits to indigent Indians living on or near reservations who are ineligible for other forms of public assistance provided by states in which they reside. The program has. been in place for some forty years in states that do not have their own special Indian assistance programs. Under regulations that have remained essentially unchanged since the inception of the General Assistance program, the BIA has set the “need” level for General Assistance recipients at the Aid to Families with Dependent Children (AFDC) subsistence “need” level established by the state in which the General Assistance recipient resides. Thus, each General Assistance recipient has received benefits at 100 percent of his state’s calculated subsistence “need” level.

The new regulation under challenge here modifies this direct tie between AFDC “need” levels and General Assistance “need” levels. Under the new regulation, in states that employ the so-called “rateable reduction” and therefore do not actually pay AFDC benefits at 100 percent of need, the General Assistance “need” level is based not on the state’s AFDC need level, but on the actual payment rate. Consequently, for Indians such as plaintiffs, who live in states that employ the rateable reduction and therefore do not provide public assistance payments at the full, state-established subsistence level, the effect of the new regulation will be to reduce their benefits significantly. On the other hand, Indians residing in states that actually pay benefits at 100 percent of the state calculated AFDC need level will continue to receive General Assistance payments based on 100 percent of the need level. The crux of the plaintiffs’ challenge to the new regulation is that this resulting disparity in payment rates for Indians living in different states is irrational and violates both the equitable distribution requirement of the Snyder Act, the relevant organic statute, and the equal protection component of the Fifth Amendment’s due process clause.

II

In evaluating plaintiffs’ Snyder Act claims, it is appropriate to begin with the statutory language. As the Supreme Court has recognized, the Snyder Act is nothing more than a generally worded appropriations authorization statute that vests broad discretion in the Secretary of the Interior to administer Indian assistance programs funded by Congress. See Morton v. Ruiz, 415 U.S. 199, 205-12, 94 S.Ct. 1055, 1059-63, 39 L.Ed.2d 270 (1974). The relevant language of this brief statute provides only that

The Bureau of Indian Affairs, under the supervision of the Secretary of the Interior, shall direct, supervise, and expend such moneys as Congress may from time to time appropriate, for the benefit, care, and assistance of the Indians throughout the United States for the following purposes:
General support and civilization, including education.
For relief of distress and conservation of health____

25 U.S.C. § 13. Clearly, nothing in this vague authorizing language requires the Secretary to use the traditional formula for calculating need under the General Assistance program — or, indeed, even to establish such a program.

Plaintiffs contend that, notwithstanding the absence of explicit statutory language, the new regulation violates both the agency’s longstanding construction of the statute, see Norwegian Nitrogen Co. v. United States, 288 U.S. 294, 53 S.Ct. 350, 77 L.Ed. 796 (1933), and a judicially recognized equitable distribution requirement implicit in the statute. See Rincon Band of Mission Indians v. Harris, 618 F.2d 569 (9th Cir.1980). Thus they argue that the new rule is invalid because the BIA has failed to provide a clear statement of the factual basis for its changed construction of the Snyder Act, thereby violating Administrative Procedure Act requirements for reasoned decisionmaking, and because the new rule will illegally discriminate among Indians based on their state of residence.

A.

In support of their argument that the BIA has failed to provide an adequate statement of reasons for the rule change, plaintiffs assert that the BIA improperly based its decision to change the need rule on isolated language in a congressional Appropriations Committee report. Noting that implied repealers of substantive statutes by subsequent appropriations authorizations are strongly disfavored, see Tennessee Valley Authority v. Hill, 437 U.S. 153, 190, 98 S.Ct. 2279, 2299, 57 L.Ed.2d 117 (1978), plaintiffs contend that, in relying solely on this committee report language to justify the rule change, the Secretary failed to comply with the requirements for reasoned decisionmaking. Plaintiffs’ argument is both factually and legally flawed.

As the BIA noted in its publication of the final rule, in 1982 the congressional Conference Committee on Appropriations explicitly and unambiguously directed the BIA to adopt the new rule. The Supreme Court has recognized that such directions from the Appropriations Committee govern the operation of the General Assistance program under the Snyder Act — which is, as has been noted previously, a very broadly worded appropriations authorization statute. See Morton v. Ruiz, 415 U.S. at 205-12, 94 S.Ct. at 1059-63. However problematic may be the establishment and ongoing congressional supervision of a complex social welfare program by means of annual congressional appropriations decisions, cf. Morton, 415 U.S. at 208, 94 S.Ct. at 1061, the BIA’s reliance on explicit directions contained in the Appropriations Committee report, its usual source of directions, can hardly be said to have been improper.

It is also clear that, contrary to plaintiffs’ assertions, both the BIA and Congress identified changed factual circumstances that could justify a departure from the traditional rule requiring General Assistance payments to be made at 100 percent of the state-established need level. As the BIA explained in its publication of the final rule, the passage of the 1981 Omnibus Budget Reconciliation Act (OBRA) resulted in many changes in the AFDC program and concomitant changes in state calculations of their standards of need. In particular, many states significantly increased their standards of need to permit poor families to continue to qualify for Medicaid services, while using the rateable reduction to avoid a concomitant increase in total state AFDC expenditures. Thus, many states increased their need standards to increase (or maintain) eligibility for social welfare programs, while simultaneously departing from the traditional practice of making public assistance payments at 100 percent of need. This change in the traditional calculation of state public assistance need and benefits payment levels, to which the General Assistance payments historically have been linked, was specifically discussed in the BIA rulemaking and therefore constitutes a clearly stated, rational factual basis for the rule change. See ILGWU v. Donovan, 722 F.2d 795, 813-26 (D.C.Cir.1983).

B.

The procedural adequacy of the BIA’s rule change notwithstanding, it would obviously be vulnerable to attack on substantive grounds if, as plaintiffs allege, it violated the Snyder Act. As noted previously, the Snyder Act says nothing whatever about the General Assistance program or the precise level at which General Assistance benefits are to be calculated and paid. Plaintiffs contend, however, that the equitable distribution requirement recognized in Rincon Band of Mission Indians v. Harris, 618 F.2d 569, 573 (9th Cir.1980), mandates the payment of General Assistance at the need level set by each state. They allege that only this method of calculation — the one historically used by the BIA — will result in equal treatment of the Indian General Assistance recipients in the various states by providing each of them with what have been determined to be subsistence level payments in each state.

The critical flaw in this argument is that it fails to take account of the changes in the calculation of state need levels that were noted by Congress and the BIA, as has been explained above. The unlinking by many states of their need and payment standards, and their concomitant increase in need standards, represented a departure in these states from the traditional use of the need standards and created a disparity among the various states in the calculation of public assistance benefits payments. Continued BIA adherence to the state need standards in calculating General Assistance benefits would have incorporated this disparity into the calculation of Indian General Assistance payments. Thus, Indian General Assistance recipients living in states that had raised their need standards, but not their actual AFDC payment levels, would have obtained significant increases in their General Assistance payments, while their counterparts in states that did not make such changes would have experienced no increase in benefits. Assuming that the former rule complied with the equitable distribution requirement, as plaintiffs implicitly claim it does, continued adherence to the old rule itself have violated that requirement.

In contrast, the use of actual state payment levels (the rateable reduction) will ensure that all General Assistance recipients continue to receive assistance at the level of public assistance actually paid by the state of residence. This approach is a rational accommodation to the new disparity in the calculation, and changed purpose, of state need standards, and it is also entirely consistent with the General Assistance program’s traditional purpose of providing needy Indians who do not qualify for public assistance in their states with subsistence benefits comparable to those provided under the state-funded programs. That being so, the Court cannot conclude that the new payment standard is inconsistent with the purposes of the Snyder Act or will result in a clearly irrational, inequitable distribution of General Assistance funds in violation of the Snyder Act. See Morton v. Ruiz, 415 U.S. at 230-31, 94 S.Ct. at 1072; Rincon Band, 618 F.2d at 572-73.

III

Plaintiffs have also argued that, even if the challenged regulation was validly adopted and is consistent with the Snyder Act, it violates the equal protection requirements of the Fifth Amendment. To establish a Fifth Amendment due process— equal protection violation, plaintiffs must show that the challenged classification (1) invidiously discriminates against them, and (2) is not rationally related to the purposes of the General Assistance program. See Weinberger v. Salfi, 422 U.S. 749, 768-70, 95 S.Ct. 2457, 2468-69, 45 L.Ed.2d 522 (1975). Plaintiffs have not satisfied either prong of this test.

First. It is clear that in application the new standard treats all Indian General Assistance recipients identically, its disjunctive language notwithstanding. Under the new regulation all needy Indians qualifying for General Assistance are entitled to benefits based to their state’s actual AFDC payment rate. To be sure, the new regulation defines this actual payment rate differently, depending on whether or not the state equates need and payment or uses the rateable reduction. But this difference in formal definitions cannot obscure the fact that, as a practical matter, the new regulation places all needy Indians in a position equal to their indigent white counterparts. Thus, plaintiffs have failed to establish that the challenged regulation invidiously discriminates against them.

Second. Even if one accepts plaintiffs’ assertion that the challenged regulation treats similarly situated Indians differently, any disparity in treatment is directly and rationally related to the purposes of the General Assistance program. As noted previously, the avowed purpose of the General Assistance program is to serve as a program of last resort that will provide needy Indians with public assistance benefits equivalent to those they would receive if they qualified for state public assistance benefits. Tying the General Assistance payment rates to actual state public assistance payment rates is an obvious and rational means of achieving this purpose of ensuring equivalence in AFDC and General Assistance payment rates within a state, and the comparability of General Assistance payment rates in different states.

Finally, it should be noted that under plaintiffs’ theory the former BIA regulation is no less constitutionally infirm than the regulation challenged here. The gravamen of plaintiffs’ constitutional claim is that state calculated need and benefits payment standards inevitably reflect state political and fiscal concerns to some extent and therefore cannot constitute valid standards for calculating benefit rates for a federally funded public assistance program of nationwide application. Although plaintiffs concede that such a program may take into account variations in the cost of living in various localities, they insist that the due process clause requires the federal government to establish its own statistically valid standard for calculating equitable payment, and that it cannot rely on state standards that are calculated independently and which may not always be precisely comparable. The Supreme Court repeatedly has held, however, that state social welfare regulations need not operate with absolute precision so long as the standard used is rationally related to the purposes of the program and is reasonably accurate. See Salfi, supra; Dept. of Agriculture v. Moreno, 413 U.S. 528, 93 S.Ct. 2821, 37 L.Ed.2d 782 (1973); Dandridge v. Williams, 397 U.S. 471, 485, 90 S.Ct. 1153, 1161, 25 L.Ed.2d 491 (1969). The Court concludes that actual state public assistance benefit need and payment levels are sufficiently accurate statistical proxies for state subsistence levels to withstand this deferential level of constitutional scrutiny.

IV

Plaintiffs have challenged the BIA’s new regulation because they believe that it will result in significantly reduced General Assistance benefits and increased hardship for themselves and for many other indigent Indians across the country. They may well be correct, as the Court noted in granting their motion for a temporary restraining order. But however painful may be the reductions in benefits occasioned by the new regulation, the Court cannot conclude that it violates the Snyder Act or the Fifth Amendment. Accordingly, the government’s motion must be granted, and this action must be dismissed.

      . 50 Fed.Reg. 12527 (1985).

      . 25 C.F.R. § 20.1(s) and (w).

      . 42 Stat. 208, codified at 25 U.S.C. § 13.

      . On June 25, 1985, the Court approved a stipulation by the parties that (1) extended the temporary restraining order for an additional ten days, until July 2, 1985, and (2) provided that defendants would voluntarily comply with the terms of the temporary restraining order for an additional twenty days after the July 2 expiration date, or until the Court ruled on the parties' cross-motions for summary judgment, whichever occurred first. The Court also issued an Order on June 25 that modified the original Order to take account of unavoidable delays in implementing the required reversion to the old General Assistance benefits payment standard by requiring that payments calculated under that standard for the period the temporary restraining order was in effect would have to be reflected in General Assistance checks issued on or after July 14, 1985.

      . See Morton v. Ruiz, 415 U.S. 199, 208, 94 S.Ct. 1055, 1061, 39 L.Ed.2d 270 (1974); M. Price and R. Clinton, Law and the American Indian, (Michie Co. 1983) at 522-23, quoting from R. Wolf, "Needed: A System of Income Maintenance for Indians,” 10 Ariz.L.Rev. 553 (1968).

      . Price and Clinton, supra note 5.

      . Thus, plaintiff Adams, a Kootenai tribe member residing in Idaho, which makes payments based on a calculation using only 55 percent of its AFDC standard of need, will have his General Assistance allotment reduced from $146 to $80 per month. Plaintiff Jackson, a Shoshone-Paiute resident of Nevada, which pays 82 percent of its standard of need, will experience a reduction from $173 to $141.70 per month.

      . The statute occupies the space of approximately one page of the U.S.Code Annotated.

      . Indeed, although the Snyder Act was passed in 1921, the General Assistance Program was not established itntil 1944, more than twenty years later. See Price and Clinton, supra note 5, at 522-23.

      . 5 U.S.C. § 706(2)(A).

      . The summary accompanying the final rule stated that:
      The Bureau is also amending existing Financial Assistance and Social Services Program regulations to implement changes as directed by the congressional directive in the Fiscal Year 1983 Appropriations Conference Report No. 97-978, dated December 17, 1982. The report states on page 20 that: "The managers direct the Bureau [of Indian Affairs] to move expeditiously to implement changes in the general assistance program to bring payments into conformance with State payments in those states where the standard of need exceeds actual payments. The regulations shall provide flexibility for the Bureau to adjust payments as such payments may be adjusted by the States."
      50 Fed.Reg. 12,527.

      . This rather unique system of congressional oversight and direction of the General Assistance program renders this case readily distinguishable from TVA v. Hill, supra, and the other cases cited by plaintiffs for the proposition that appropriations bills do not have the force of law and tbat committee reports are entitled to little weight as indicia of legislative intent. For example, in TVA v. Hill, the court held that subsequent congressional funding of the Tellico Dam could not be considered to have effected an implied repealer of the Endangered Species Act, which was otherwise applicable to that project. 437 U.S. at 191, 98 S.Ct. at 2300. This case, in contrast, does not involve an alleged implied repealer of specific, detailed legislation by a subsequent, completely unrelated appropriations bill; rather, it involves the use of annual appropriations legislation to give substantive content to an appropriations authorization statute which only derives its content from annual appropriations measures. Thus, TVA v. Hill and the other cited cases are simply not in point.

      . P.L. 97-35.

      . See 50 Fed.Reg. 12528.

      . See American Public Welfare Association, Memorandum W-28 (December 28, 1982). The APWA report is specifically cited in the publication of the final rule, see 50 Fed.Reg. 12528.

      . Id. at 1. The APWA report also noted that "Since October 2, 1982, when OBRA took effect, 21 states have raised their need standards and 20 have increased their payment standards." Id. Plaintiff Jackson's home state of Nevada is among those cited as having increased their payment standards. Id. at 2. Nationwide AFDC need standard statistics compiled in 1984 for the House of Representatives’ Committee on Ways and Means indicate that the AFDC standard of need in plaintiff Adams’ home state of Idaho increased from $421 for a family of four in July, 1980 to $627 in January, 1984 — an increase of nearly 49 percent. Deft.Ex. 6, Table 7, at 304. An examination of the standard of need statistics in the table also indicates that the Idaho AFDC standard of need is the tenth highest in the nation, and that the above-noted 49 percent increase in that need standard from 1980 to 1984 was among the highest recorded, in both absolute and percentage terms.

      . For example, the calculation of plaintiff Adams’ General Assistance payments would have reflected the 49 percent increase in Idaho’s need standard between 1980 and 1984, while plaintiff Jackson’s General Assistance payments would have remained constant, reflecting Nevada’s failure to change its AFDC need standard between 1980 and 1984. See Deft.Ex. 6, Table 7, at 304; see also note 16, supra.

      . At oral argument on the motions for summary judgment, plaintiff's counsel suggested for the first time that, since the various states vary significantly in the frequency and generosity with which they compute their AFDC need standards, the former, longstanding General Assistance regulation linking General Assistance payments to state AFDC need standards might also violate the equitable distribution requirement and the due process clause of the Fifth Amendment. He suggested that the Court should require the BIA to undertake studies to establish statistically valid comparative subsistence standards for each of the 50 states. However, nothing in the language or history of the Snyder Act obligates the BIA to undertake such sophisticated comparative studies, nor does the Constitution do so. See infra, page 365. Accordingly, however, desirable such studies might be in establishing more precise determinations of need among indigent Indians in the various states, the Court has no authority to require the BIA independently to undertake such studies and make such determinations rather than relying on state statistical calculations of need and subsistence.

      . Rincon Band, supra, plaintiffs’ primary authority for the proposition that the new regulation violates the Snyder Act, is readily distinguishable from this case. In Rincon Band, the court found that the BIA’s allocation of approximately one percent of its Indian Health Service funds and facilities to services for eligible California Indians, who constituted approximately 10 percent of the population eligible for such services, irrationally discriminated against the California Indians in violation of the equitable distribution requirement implicit in the Snyder Act. 618 F.2d at 571-73. No such clear disparity in allocation of funds has been established here. Moreover, the allocation formula in Rincon Band was found to be completely irrational and to have been implemented without either explicit direction or implicit acceptance by the Congress. Id. at 573-75. Here, in contrast, the BIA has adopted a new regulation, which appears to be a rational means of estimating comparative need levels among indigent Indians, in response to explicit directions from the Congress.

      . The new regulation amends the existing regulation, 25 C.F.R. § 20.1(s), which provides that "need" for General Assistance purposes shall be calculated using the recipient's state AFDC need standard, by adding the following sentence: "However, in any State where the level of payment is less than the standard of need, the Bureau shall use the level of actual payment in determining the amount of financial assistance to be provided to the applicant or recipient residing in that State.” 50 Fed.Reg. 12529.

      . See supra notes 16 and 17.


text:
    NATIONAL TREASURY EMPLOYEES UNION, Plaintiff, v. Loretta CORNELIUS, Defendant.
    Civ. A. No. 85-0129.
    United States District Court, District of Columbia.
    July 15, 1985.

      Lois G. Williams, Director of Litigation, Richard S. Edelman, Elaine D. Kaplan, Asst. Counsel, National Treasury Employees Union, Washington, D.C., for plaintiff.
    Judith F. Ledbetter, Harriet Kerwin, Civ. Div., U.S. Dept, of Justice, Washington, D.C., for defendant.
   MEMORANDUM

HAROLD H. GREENE, District Judge.

On January 4, 1985, the Office of Personnel Management (OPM) issued a final rule, without prior notice or comment and effective immediately. The rule deleted certain provisions in the Code of Federal Regulations, specifically the final sentences of 5 C.F.R. § 531.410(d) and 5 C.F.R. § 536.-302(e). These provisions relate to the appeals process applicable to a denial of within-grade increases and to the termination of grade or pay retention rights. The rationale for the change in the rules was an OPM determination that “the alternative appeals procedures provided for in [these regulations] is beyond OPM’s regulatory authority, since the law does not authorize OPM to create additional appeals mechanisms. These provisions were promulgated in error and must be deleted.” 50 Fed.Reg. 427 (January 4, 1985). Plaintiff seeks declaratory and injunctive relief in support of its claim that this rulemaking was substantively and procedurally flawed.

I

Defendant moved to dismiss this ease on the grounds that there was no case or controversy, that plaintiff did not have standing to maintain this action and that this Court is not the proper forum to decide this case. The Court finds these contentions are without merit.

Plaintiff challenges this rulemaking under the Administrative Procedures Act (APA), 5 U.S.C. § 551 et seq. Preenforcement judicial review of final agency rules is appropriate under the APA, 5 U.S.C. §§ 701-706. Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967); Amalgamated Meat Cutters & Butcher Work v. Connally, 337 F.Supp. 737 (D.D.C.1971). Plaintiff, a union representing federal employees, claims that this regulation violates the Civil Service Reform Act, will result in agencies providing false information to federal employees on the subject of their appeal rights and ultimately result in the loss of those rights through procedural default. In response to this regulation, plaintiff has warned its membership that employees can only preserve their appeal rights by filing both an appeal to the Merit Systems Protection Board (MSPB) and a grievance pursuant to the collective bargaining agreement. The impact of this regulation on plaintiff is “sufficiently direct and immediate as to render the issue appropriate for judicial review at this stage.” Abbott Laboratories v. Gardner, supra, 387 U.S. at 152, 87 S.Ct. at 1517. There is no reason why the Court must wait until a union member loses his right to appeal before considering the validity of these regulations. Furthermore, plaintiffs most compíete and effective remedy is a challenge to OPM’s rulemaking rather than having to litigate the issue on a case-by-case basis with each federal agency.

OPM also argues that judicial review is inappropriate because the change in the regulation is “non-binding guidance OPM offered to federal agencies.” Defendant’s Motion to Dismiss at 8. There is absolutely nothing in the Federal Register notice which suggests that this change is nonbinding or that this is merely OPM’s interpretation of the statute and that other agencies are free to adopt their own statutory interpretation. This situation is quite different from that described by the Court of Appeals in Federal/Postal/Retiree Coalition v. Devine, 751 F.2d 1424 (D.C.Cir. 1985). In that case, the Court of Appeals upheld OPM’s authority to publish a Federal Personnel Manual which, according to OPM affidavits was “precatory and will not bind Federal agencies in the manner of a regulation.” Id. at n. 14. OPM is now attempting to use that case as precedent to argue that its regulations are non-binding and not subject to review under the APA. This attempt must be rejected.

Defendant’s final jurisdictional defense is that the Civil Service Reform Act (CSRA) vests exclusive jurisdiction in the MSPB or the Federal Labor Relations Authority (FLRA) with direct appeal to the Court of Appeals. The exclusivity of the CSRA’s procedures has been well-recognized in cases involving individual employee’s rights. Thus, courts have recognized that aggrieved federal employees must pursue civil service remedies and cannot denominate their claim as an APA claim in order to seek relief in district court. See, e.g., Pinar v. Dole, 747 F.2d 899 (4th Cir. 1984); Veit v. Heckler, 746 F.2d 508 (9th Cir.1984); Carducci v. Regan, 714 F.2d 171 (D.C.Cir.1983). This does not, however, insulate OPM from direct judicial review of challenges to rulemaking under the APA. The Court of Appeals made this clear in National Treasury Employees Union v. Devine, 733 F.2d 114, 117 n. 8 (D.C.Cir. 1984), when it stated:

The appellant has also argued that this case cannot be brought under the Administrative Procedure Act, ... because provisions in the Civil Service Reform Act of 1978 (“CSRA”) ... established the exclusive means to review the decisions at issue here ... This claim is meritless. It is one thing to say that when a statute provides a detailed scheme of administrative protection for defined employment rights, less significant employment rights of the same sort are implicitly excluded and cannot form the basis for relief directly through the courts ... It is quite different to suggest, as appellant does, that a detailed scheme of administrative adjudication impliedly precludes preenforcement judicial review of rules. Cf. International Ladies’ Garment Workers’ Union v. Donovan, 722 F.2d 795, 807 (D.C.Cir.1983) (rejecting similar implications based on enforcement scheme of Fair Labor Standards Act of 1938) [citations omitted].

The analysis used by the Court of Appeals is equally persuasive here and this Court concludes that it has jurisdiction to hear this challenge to OPM rulemaking.

II

The substantive question in this lawsuit is whether the provision in 5 U.S.C. § 5335(c) permitting employees to appeal denials of within-grade increases to the MSPB makes such appeals a matter “specifically provided for by federal statute.” The Federal Register notice states that any matters specifically provided for by federal statute are not subject to a grievance procedure and therefore where the statute states that appeal to the MSPB would be appropriate, the regulation cannot permit utilization of a negotiated grievance procedure. Plaintiff argues that this position is contrary to law because it ignores other applicable provisions of law which indicate that denials of within-grade increases must be processed through the collective bargaining grievance procedure when the individual is covered by a collective bargaining agreement. In order to clarify this dispute the Court must consider the history of several statutes.

Federal employees who have been in grade for a certain period of time are eligible to receive salary increases if their work is “of an acceptable level of competence as determined by the head of the agency.” 5 U.S.C. § 5335(a). If the determination is made that the employee’s work is not at an acceptable level, “the employee is entitled to prompt written notice of that determination and an opportunity for reconsideration of the determination within his agency under uniform procedures prescribed by the Office of Personnel Management. If the determination is affirmed on reconsideration, the employee is entitled to appeal to the Merit Systems Protection Board.” 5 U.S.C. § 5335(c). Uniform procedures were promulgated which provided that employees were to receive written notice of their rights to receive reconsideration within the agency and to appeal to the MSPB. 33 Fed.Reg. 12448 (September 4, 1968). The new final rule which is being challenged essentially returns to the procedures in the original regulation.

In 1978, Congress passed the Civil Service Reform Act (CSRA) which contains in Title YII the Federal Service Labor-Management Relations Act. This statute substantially changed the structure of federal employment by creating an administrative appeals process through the Merit Systems Protection Board, recognizing federal employee rights to bargain collectively and establishing the Federal Labor Relations Authority. The Act requires that collective bargaining agreements contain negotiated grievance procedures, and further states that with limited exceptions these “procedures shall be the exclusive procedures for resolving grievances which fall within its coverage.” 5 U.S.C. § 7121(a). Grievances are defined to include complaints concerning “any claimed violation, misinterpretation, or misapplication of any law, rule, or regulation affecting conditions of employment.” Conditions of employment are defined to exclude matters to the extent such matters are specifically provided for by federal statute. 5 U.S.C. § 7103. The only changes made in the provision on within-grade increases were so-called “technical conforming amendments” changing the reference in the statute from Commission to OPM. Thus, after passage of the CSRA, there existed two potential procedures for appeal of denial of within-grade increases, appeal to MSPB as set out in 5 U.S.C. § 5335(e) and utilization of a collective bargaining grievance procedure as set out in 5 U.S.C. § 7121(a).

New regulations were promulgated after notice and comment, establishing a procedure for reconsideration of a negative determination which took into account both procedures. The regulation stated:

When a negative determination is sustained after reconsideration, an employee shall be informed in writing of the reasons for the decision and of his or her right to appeal the decision to the Merit Systems Protection Board. However, for an employee covered by a collective bargaining agreement, a reconsideration decision that sustains a negative determination is only reviewable. in accordance with the terms of the agreement.

5 C.F.R. § 531.410(d), adopted in 46 Fed. Reg. 2317 (January 9, 1981). Thus as the CSRA was originally interpreted, there was no conflict between the two provisions— federal employees had the right to appeal a negative determination on a within-grade increase to the MSPB under a statutory procedure unless they were covered by a collective bargaining agreement. In the latter case, if the collective bargaining agreement permitted the filing of grievances on a matter, that procedure would be the exclusive procedure and the employee would not have the right to take an appeal to the MSPB.

On January 4, 1985, OPM suddenly announced that this interpretation of the law was incorrect. The new OPM view is that where there is a statutory appeals procedure, such as that established in 5 U.S.C. § 5335, there can be no utilization of a collective bargaining grievance procedure. Accordingly, OPM amended 5 C.F.R. § 531.401(d) by deleting the last sentence. The regulation now reads:

When a negative determination is sustained after reconsideration, an employee shall be informed of the reasons for the decision and of his or her right to appeal the decision to the Merit Systems Protection Board.

Federal employees, whether covered by a collective bargaining agreement or not, are told that they have the right to appeal to the MSPB.

To the extent that the Court can discern OPM’s reasons for amending the rule, the Court concludes that OPM has misinterpreted the relevant statutory provisions and that the amended regulation is not in accordance with law. It is clear from the legislative history that the mere fact that a statutory appeals process exists does not create a conflict with the negotiated grievance procedure. The issue of how the new negotiated grievance procedure would relate to other employee rights was specifically considered in both the House and Senate Committee Reports and the Conference Report. It is clear from these materials that “except for certain specified exceptions, an employee covered by a collective bargaining agreement must follow the negotiated grievance procedures rather than the agency procedures available to other employees not covered by an agreement.” Conference Report, H.R.Rep. No. 1717, 95th Cong., 2d Sess. 157 (1978), U.S. Code Cong. & Admin.News pp. 2723, 2891. The Act contemplates that the negotiated grievance procedure will be the exclusive remedy for some grievances which, absent collective bargaining, would be subject to appeal by statutory right to the MSPB. Defendant’s claim that there is a statutory conflict is not supported by the language of the statute and is contradicted by the legislative history. OPM is correct in its statement that the “law does not authorize OPM to create additional appeals mechanisms,” 50 Fed.Reg. 427 (January 4, 1985). What OPM fails to recognize is that the law does not permit that agency to regulate away an appeals procedure granted by Congress. The amended regulation is inconsistent with law and will be enjoined.

Ill

Even had plaintiff not prevailed on its substantive argument, there is no question that this rulemaking procedure falls far short of that required by the APA. The APA requires that notice of proposed rulemaking shall be published in the Federal Register, that there be a 30 day period between notice and effective date, and that interested persons be given an opportunity to participate in the rulemaking. 5 U.S.C. § 553. It is undisputed that these procedures were not followed in this case. OPM argues that the APA does not apply to these amendments because the regulations as promulgated were “invalid provisions that were inconsistent with OPM’s statutory authority.”

The APA defines rulemaking as “agency process for formulating, amending, or repealing a rule.” 5 U.S.C. § 551. In this case the agency formulated a rule in 1981, after notice and comment, which purported to establish procedures in accordance with law. Those procedures have been relied upon by federal employees and the Federal Circuit. No intervening events have occurred which would cast doubt on the validity of the original regulations, such as passage of a conflicting statute or a relevant court decision. The regulation was repealed and the sole reason given for undertaking this action was that “a review of OPM regulations” had indicated that there was an error in the regulation.

There is some superficial appeal to the government’s argument that a provision which was promulgated in error is void ab initio and can be deleted without more ado. This position has however been rejected by the Court of Appeals in an analogous situation, Consumer Energy Council v. Federal Energy Regulatory Commission, 673 F.2d 425 (D.C.Cir.1982). The reasoning utilized in that case applies with equal force here:

The ... argument that notice and comment requirements do not apply to “defectively promulgated regulations” is untenable because it would permit an agéncy to circumvent the requirements of § 553 merely by confessing that the regulations were defective in some respect and asserting that modification or repeal without notice and comment was necessary to correct the situation. Such a holding would ignore the fact that the question whether the regulations are indeed defective is one worthy of notice and an opportunity to comment.

Id. at 447 n. 79.

Here, OPM claims that the original regulation was defective because it exceeded OPM’s statutory authority. The original rule was promulgated after notice and comment and remained in effect, with no discernible challenges to its appropriateness, for four years. It would significantly erode the usefulness of the APA if agencies were permitted unilaterally to repeal regulations dealing with the substantive rights of individuals under federal statutes, by declaring that the earlier regulations were just a mistake.

Furthermore, as the Court of Appeals noted in Consumer Energy, supra, the question of whether existing regulations are defective or inconsistent with law is itself worthy of notice and an opportunity to comment. Notice and comment ensure that all relevant matters are considered by the agency repealing its regulation and provide a reviewing court with a full record. OPM’s failure to provide notice and an opportunity to comment is not justified by any urgency and there is no indication that the agency would have suffered any harm by complying with the requirements of § 553.

The Court finds that OPM’s failure to provide notice and an opportunity to comment in its repeal of these regulations is inconsistent with the requirements of the APA. The new rule is therefore invalid.

      . Plaintiff filed as an exhibit a copy of a letter from the Employee and Labor Relations Branch of the Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms. This letter makes it clear that at least one Department has interpreted the OPM regulation as a binding, government-wide regulation.

      . Plaintiff challenges both amendments in the Federal Register notice on procedural grounds. See infra. It has limited its substantive challenge to the provision on within-grade increases. 5 C.F.R. § 531.410.

      . This section was added to the Code by the Federal Employees Salary Act of 1965, Pub.L. 89-301, 79 Stat. 1111, reprinted in 1965 U.S.Code Cong. & Admin.News 1113, 1115. The Senate Report states that the reason for requiring the Commission [later OPM] to establish uniform procedures for reconsideration was to avoid variances from agency to agency. S.Rep. No. 910, reprinted in 1965 U.S.Code Cong. & Admin. News 3824. Thus, it appears that Congress intended OPM regulations in this area to have a binding effect upon federal agencies.

      . This interpretation was adopted by the Federal Circuit in Moreno v. Merit Systems Protection Board, 728 F.2d 499 (Fed.Cir.1984), where the court determined that the MSPB did not have jurisdiction over an appeal from a negative determination on a within-grade increase where the petitioner was covered by a collective bargaining agreement and could have utilized the grievance procedure. The grievance procedure was the exclusive remedy.

      . This is contrary to the MSPB regulation defining its appellate jurisdiction. 5 C.F.R. § 1201.-3(B). Therefore, under the new OPM regulation, an individual would be informed that he or she has the right to appeal to the MSPB when the MSPB regulations clearly state that it will not take jurisdiction over such appeals. There is a significant potential that individual federal employees will lose their appeal rights altogether — individuals like Mr. Moreno who pursue appeals to the MSPB only to be told that their exclusive remedy lay with the collective bargaining agreement and that remedy is now time-barred.

      . The Committee Report from the House indicates that the House version of the Act would have permitted employees to elect which procedures to utilize.
      An employee to whom the agreement applies is specifically afforded the choice to have his grievance processed under either a procedure negotiated in accordance with chapter 71 and set forth in the agreement reached pursuant to those negotiations or any applicable appeals procedure established by or pursuant to law.
      In addition, employees could elect to pursue an unfair labor practices claim. Civil Service Reform Act of 1978, H.R.Rep. No. 1403, 95th Cong., 2d Sess. 55 (1978).
      The Senate Report is somewhat more complicated in that it addresses both the scope and the effect of the negotiated grievance procedure. It states:
      The coverage and scope of the [grievance] procedure is left to negotiation between the parties so long as it does not conflict with statute and so long as it does not cover any of the matters specifically excluded from coverage by section 7221(d). Thus, if the parties choose to do so, they may negotiate into coverage under their grievance procedure many of the matters that are covered by statutory appeal procedures, such as appeal from the withholding of within-grade salary increases and appeal from reduction-in-force actions. With the exception of adverse actions and discrimination complaints, where a grievance falls within the coverage of the negotiated grievance procedure, both union and nonunion members of the bargaining unit must use the negotiated procedure to resolve the grievance.
      S.Rep. No. 969, 95th Cong., 2d Sess. 109-10 (1978), U.S.Code Cong. & Admin.News pp. 2723, 2831.
      Thus, it appears that the House version of the statute would have permitted the employee to elect between a statutory appeals process and the negotiated grievance procedure whereas the Senate version would require the employee to follow the negotiated grievance procedure even where a statutory procedure existed. As noted above, during the Conference, the House receded and the Senate version of the bill was accepted with respect to the exclusivity of the grievance procedure. There is no suggestion in the legislative history that the existence of a statutory right of appeal automatically removed the substantive employee claim from the grievance procedure.

      . Defendant cites a number of cases for the proposition that the general language of 5 U.S.C. § 7121(a) cannot repeal sub silentio a preexisting statute which specifically defines employee appeal rights. See, e.g., New Jersey Air National Guard v. FLRA, 677 F.2d 276 (3d Cir.1982). These cases support the government’s position only if the Court were to find that a conflict existed between the two statutory provisions. In New Jersey Air National Guard, the Third Circuit explicitly found that the preexisting statute, the Technicians Act, did not merely create a procedure for handling grievances but rather it imposed a limit on procedures by placing essentially unreviewable discretion in the adjutant general. Thus, the court found that a provision permitting grievances under collective bargaining would be clearly in conflict with the language of the Technicians Act. In the case before this Court, however, it is possible to interpret the two statutory provisions in a way in which there is no conflict.

      . OPM argues that the MSPB procedure is a "personal right of appeal” and notes that under the grievance procedure the union, not the individual, determines whether a denial should be taken to arbitration. Defendant’s Post-Hearing Memorandum at n. 1. The exclusive right of the union to require arbitration is a factor that employees should consider when deciding whether or not to unionize. It is not up to OPM to "protect” employees by unilaterally deciding that certain rights are too “personal” to be subject to the collective bargaining system.