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BOARD OF EDUC. OF THE CITY SCH. DIST. OF NEW YORK

January 10, 1979

BOARD OF EDUCATION OF the CITY SCHOOL DISTRICT OF the CITY OF NEW YORK et al., Plaintiffs,
v.
Joseph CALIFANO, Jr., Secretary of the Department of Health, Education and Welfare, et al., Defendants



The opinion of the court was delivered by: WEINSTEIN

AMENDED MEMORANDUM AND ORDER

An application by the plaintiff, the New York City Board of Education, for 1978-79 funding under the Emergency School Aid Act (ESAA), 20 U.S.C. § 1601 Et seq. (Supp. II 1972) has been denied by the defendant, the Department of Health, Education and Welfare (HEW) on the ground that the Board is ineligible because it "had in effect . . . (a) practice, policy or procedure" of discrimination on the basis of race in assigning teachers after June 23, 1972. 20 U.S.C. § 1605(d)(1)(B) (Supp. II 1972). The Board's request for a waiver of ineligibility, pursuant to 20 U.S.C. § 1605(d)(3) (Supp. II 1972), has also been denied on the theory that a waiver is not available until the effect of the discriminatory practice has been fully eliminated; HEW maintains that teachers must have been reassigned "so that no school is identified as intended for students of a particular race." 45 C.F.R. § 185.44(d)(3).

HEW has an unduly limited view of its statutory discretionary powers to grant a waiver. Since this misapprehension is based upon an error of law, this court has power to grant relief. 5 U.S.C. § 706. For the reasons discussed below, the matter must be remanded for further consideration.

 I. Preceding Events

 A. Underlying Facts

 An explanation of HEW's denial of the Board's application for 1978-79 funding requires some retracing of the events of the past three years.

 In March of 1976 HEW's Office of Civil Rights (OCR) notified the Board that its employment practices, particularly the discriminatory methods of selection and assignment of teachers, violated laws barring discrimination in federally financed programs. 42 U.S.C. § 2000d; 20 U.S.C. § 1681. Among OCR's findings was one that the Board had "assigned teachers, assistant principals and principals in a manner that has created, confirmed and reinforced the racial and/or ethnic identifiability of the system's schools." Caulfield v. Board of Ed. of City of New York, 583 F.2d 605, 608 n. 3 (2d Cir. 1978). OCR requested a remedial plan.

 An application for 1977-78 ESAA funding was filed by the Board in January, 1977. HEW denied the application because of the Board's discriminatory teacher assignment practices. OCR's findings made the Board ineligible for ESAA funding under the statute and regulations absent a waiver by HEW.

 Opinions by this court and the Court of Appeals have found substantial basis for these administrative decisions. See Board of Ed. of City Sch. Dist. Etc. v. Califano, 584 F.2d 576 (2d Cir.), Petition for rehearing denied, -- - F.2d -- - (1978); Board of Education v. Califano, No. 77-C-1928 (E.D.N.Y.1977). A writ of certiorari challenging denial of 1977-78 funds is now before the Supreme Court. The Court of Appeals has stayed the transfer of the 1977-78 ESAA funds previously earmarked for the Board pending a determination by the Supreme Court.

 On September 7, 1977, the Board and OCR entered into a Memorandum of Understanding detailing a plan to remedy the challenged employment practices. This Memorandum obligated the Board to promptly begin a program that would within three years eliminate the effects of the alleged discrimination in the selection or assignment of teachers and supervisors. Execution of the plan, OCR has agreed, will constitute compliance with federal statutes. The full text of the agreement is set out as an appendix to the opinion of this court in Caulfield v. Board of Ed. of City of N. Y., 449 F. Supp. 1203, 1227-1230 (E.D.N.Y.1978) which describes its history in some detail.

 New York City teachers, supervisors and administrators have brought two related actions challenging the implementation of the September 7 agreement. See generally Caulfield v. Board of Ed. of City of N. Y., 449 F. Supp. 1203 (E.D.N.Y.1978). A procedural due process objection to the proceedings leading to development of the plan has been rejected by the Court of Appeals. See Caulfield v. Board of Ed. of City of New York, 583 F.2d 605 (2d Cir. 1978), Reversing Caulfield v. Board of Ed. of City of N. Y., 449 F. Supp. 1203 (E.D.N.Y.1978). Substantive objections to the legality and constitutionality of the plan, however, are still before this court.

 The present action concerns the Board's application for 1978-79 ESAA funding. In June 1978, HEW informed the Board that it was still ineligible under the ESAA statute and regulations. This determination of ineligibility relied in large part upon the data collected in the 1976 OCR investigation that had also constituted the basis for the denial of 1977-78 ESAA funding. Reliance for the ruling was placed on 20 U.S.C. § 1605(d)(1)(B) (Supp. II 1972), and its implementing regulation, 45 C.F.R. § 185.43(b)(2). Both trigger ineligibility upon any discriminatory hiring or assignment practice that occurs "After June 23, 1972 " (emphasis supplied); thus, the 1975-76 data collected in the OCR investigation can constitute a basis of ineligibility for the application for 1977-78, 1978-79, and any following years.

 Subsequently the Board filed an application for a waiver of ineligibility for 1978-79 funding pursuant to 20 U.S.C. § 1605 (Supp. II 1972) and its implementing regulations, 45 C.F.R. 185.43(b)(2), 185.43(d)(4) and 185.43(d) (5). By letter dated September 28, 1978, HEW denied the application on the ground that a waiver is possible only when the effects of the discriminatory practice have been fully eliminated, that is, when teachers and supervisors have actually been reassigned "so that no school is identified as intended for students of a particular race." 45 C.F.R. § 185.44(d)(3).

 B. Procedure in this Court

 This court has held hearings on applications for a temporary restraining order and preliminary injunction requiring HEW to preserve and set aside the 1978-79 ESAA funds for which the Board appeared to be eligible absent findings of discrimination. Without such a stay and injunction the funds previously set aside by HEW for the Board for the 1978-79 school year would have been reallocated to other school districts; both the City and the students in its schools would have suffered a permanent loss. Upon appropriate findings, preliminary relief was granted. The parties agreed that no oral testimony would be offered and that the application for a final injunction should be decided upon the administrative record and other documents submitted to the court.

 II. Statutory Scheme

 Congress passed ESAA as Title VII of the Education Amendments of 1972. Pub.L.No.92-318, tit. VII, § 701-720, 86 Stat. 354 (1972), 20 U.S.C. §§ 1601 Et seq. (Supp. II 1972). The Act provides financial assistance to local educational agencies and other eligible organizations to promote the elimination of the effects of discrimination and other minority disadvantages. 20 U.S.C. § 1601(b) (Supp. II 1972). Funding is available for a variety of enumerated activities that further these goals. 20 U.S.C. §§ 1606-1608, 1610 (Supp. II 1972). The Second Circuit has described the legislation as "a program purposefully designed "to aid in desegregating schools and support quality integrated schools.' " Board of Ed. of City Sch. Dist., Etc. v. Califano, 584 F.2d 576, 578 (2d Cir. 1978), quoting S.Rep.No.604, 92d Cong., 2d Sess. (1972).

 Distribution of ESAA funds is administered by HEW's Assistant Secretary for Education. His discretion is limited both by the Act and by administrative regulations adopted pursuant to the Act by HEW's Office of Education. 45 C.F.R. § 185.01 Et seq., 38 Fed.Reg. 3452 (Feb. 6, 1973).

 An applicant must demonstrate that it is implementing one of three types of desegregation plans: "a plan undertaken pursuant to the order of a court or other appropriate body, a plan approved by HEW as adequate under Title VI, or one of several types of voluntary plans." Robinson v. Vollert, 411 F. Supp. 461, 465 (S.D.Texas 1976) (summarizing 20 U.S.C. § 1605(a)). In addition to establishing eligibility, an applicant must also show that it has not become ineligible by engaging in any of the disqualifying acts, practices, policies or procedures prohibited by the statutes and regulations. 20 U.S.C. § 1605(d)(1) (Supp. II 1972); 45 C.F.R. § 185.13(1). The statutory disqualifying provision involved in this case makes ineligible any local educational agency that has in effect, after June 23, 1972, a practice, policy or procedure of discrimination in the hiring, promotion or assignment of its employees. 20 U.S.C. § 1605(d) (1)(B) (Supp. II 1972). It provides:

 
(d)(1) No educational agency shall be eligible for assistance under this chapter if it has, after June 23, 1972
 
(B) had in effect any practice, policy, or procedure which results in the disproportionate demotion or dismissal of instructional or other personnel from minority groups in conjunction with desegregation or the implementation of any plan or the conduct of any activity described in this section, or otherwise engaged in discrimination based upon race, color, or national origin in the hiring, promotion, or assignment of employees of the agency (or other personnel for whom the agency has any administrative responsibility);

 The accompanying administrative regulation prohibits the assignment of full time teachers "in such a manner as to identify any of such schools as intended for students of a particular race, color or national origin." It reads:

 
(2) No educational agency shall be eligible for assistance under the Act if, after June 23, 1972, it has had or maintained in effect any other practice, policy, or procedure which results in discrimination on the basis of race, color, or national origin in the recruiting, hiring, promotion, payment, demotion, dismissal, or assignment of any of its employees (or other personnel for which such agency has any administrative responsibility), including the assignment of full-time classroom teachers to the schools of such agency in such a manner as to identify any of such schools as intended for students of a particular race, color, or national origin.

 45 C.F.R. § 185.43(b)(2).

 Once an applicant has been found ineligible, ESAA funds are available only if a waiver of ineligibility is granted. The Act conditions the granting of a waiver upon the cessation of the activity which led to ineligibility. There must be a:

 
determination that any practice, policy, procedure or other activity resulting in ineligibility has ceased to exist, and that the applicant has given satisfactory assurance that the activities prohibited in (the subsection defining ineligibility) will not reoccur.

 20 U.S.C. § 1605(d)(3) (Supp. II 1972). Promulgation of waiver regulations which "insure that any practice, policy or procedure, or other activity resulting in the ineligibility has ceased to exist or occur . . . (and) that such activities do not reoccur . . . ." is permitted by the Act. 20 U.S.C. § 1605(d)(1) (Supp. II 1972). The regulation governing the requirements for a waiver when the ineligibility resulted from the discriminatory assignment of teachers provides that no school shall be identified by race on the basis of the teachers assigned to it, and specifies allowable ranges of racial disparities.

 
(3) In the case of ineligibility resulting from discriminatory assignment of teachers as prohibited by § 185.43(b)(2), such applications for waiver shall contain evidence that such agency has assigned its full-time classroom teachers to its schools so that no school is identified as intended for students of a particular race, color, or national origin. Such nondiscriminatory assignments shall, in the case of a local educational agency implementing a plan described in § 185.11(a), conform to the requirements of such plan with respect to the assignment of faculty. In the case of local educational agencies not implementing such a plan, or implementing such a plan which contains no provision as to assignment of faculty, such assignments shall be made so that the proportion of minority group full-time classroom teachers at each school is between 75 per centum and 125 per centum of the proportion of such minority group teachers which exists on the faculty as a whole.

 45 C.F.R. § 185.44(d)(3).

 III. Denial of the Application for a Waiver

 The Board's challenge to the validity of HEW's denial of the application for a waiver of ineligibility for 1978-79 ESAA ...


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