Argued and Submitted, Pasadena, California, February 2, 2015
Appeal from the United States District Court for the Central District of California. D.C. No. 8:14-cv-00534-CJC-JPR. Cormac J. Carney, District Judge, Presiding.
Administrative Procedure Act / Due Process
The panel reversed the district court's dismissal of ASSE International's claims, alleging violations of the Administrative Procedure Act and the Due Process Clause of the Fifth Amendment, and challenging the Department of State's sanctions imposed against ASSE for violating various regulations associated with the Exchange Visitor Program that allows nationals to participate in temporary cultural and educational exchange programs in the United States.
The panel held that the State Department's imposition of sanctions was subject to Administrative Procedure Act review. The panel concluded that the State Department failed to rebut the strong presumption of judicial reviewability because its regulations provided a " meaningful standard" by which the court could review its exercise of discretion in sanctioning ASSE.
Concerning ASSE's procedural due process claim, the panel held that the Due Process Clause did not mandate trialtype proceedings in this case. The panel further held that the State Department did not provide ASSE adequate procedural protections because ASSE did not have a meaningful opportunity to rebut significant portions of the evidence that the State Department used against it. The panel remanded to the district court to decide in the first instance whether ASSE had a protected property interest, and if so, whether the due process violation it suffered was harmless error.
Ira J. Kurzban (argued), Edward F. Ramos, Kurzban Kurzban Weinger Tetzeli & Pratt P.A., Miami, Florida, for Plaintiff-Appellant.
Alisa B. Klein (argued) and Mark B. Stern, Appellate Staff Attorneys, Joyce R. Branda, Acting Assistant Attorney General, André Birotte, Jr., United States Attorney, Beth S. Brinkmann, Deputy Assistant Attorney General, United States Department of Justice, Washington, D.C., for Defendants-Appellees.
Before: Dorothy W. Nelson, Jay S. Bybee, and Sandra S. Ikuta, Circuit Judges. Opinion by Judge Bybee.
BYBEE, Circuit Judge:
Congress created the Exchange Visitor Program (EVP) to allow foreign nationals to participate in temporary cultural and educational exchange programs in the United States. The Department of State administers the EVP, with the assistance of various third-party program sponsors. This case arises out of sanctions that the Department imposed against one of these sponsors, ASSE International (ASSE), for violating various regulations. ASSE challenged the Department's sanctions decision in the United States District Court for the Central District of California, claiming that the agency had acted arbitrarily and capriciously in violation of the Administrative Procedure Act (APA), and that it had violated ASSE's due process rights under the Fifth Amendment. The district court dismissed the suit as unreviewable under the APA because the administration of the EVP is " committed to agency discretion by law." 5 U.S.C. § 701(a)(2). It also dismissed ASSE's constitutional claims on the grounds that the process was " fundamentally fair." We reverse as to both grounds.
In the Mutual Educational and Cultural Exchange Act of 1961, Congress authorized the State Department, through the United States Information Agency " to provide, by grant, contract, or otherwise, for educational exchanges . . . by financing visits and interchanges between the United States and other countries of students, trainees, teachers, instructors, and professors." 22 U.S.C. § 2452(a)(1). The State Department, by regulation, created the EVP to promote educational and cultural exchanges between the people of the United States and of other nations. 22 C.F.R. § 62.1(b). The EVP authorizes various exchange programs for foreign visitors; as relevant here, the EVP authorizes " work-based" training programs to expose foreign college graduates " to American techniques, methodologies, and technologies" in their fields. Id. § 62.2. The State Department oversees the EVP but uses third-party program sponsors to select qualifying visitors, find them educational or training opportunities, and monitor their welfare during their programs. See 22 U.S.C. § 2452; 22 C.F.R. § § 62.1(b), 62.6. The State Department caps the number of participants in any given sponsor's programs by allocating each sponsor a oneyear supply of DS-2019 forms, which are the " Certificate[s] of Eligibility for Exchange Visitor (J-1) Status." 22 C.F.R. § 62.12(d). Sponsors, in turn, distribute one DS-2019 form per EVP applicant, and the applicant uses that form to apply for participation in the EVP program. See About DS-2019, J-1 VISA: Exchange Visitor Program, available at http://j1visa.state.gov/participants/how-to-apply/about-ds-2019/. " The Department of State has the sole discretion to determine the number of Forms DS-2019 to be issued to a sponsor." 22 C.F.R. § 62.12(d)(1). ASSE is one such privately-owned EVP program sponsor and is subject to these regulations.
The Department's regulations provide a framework for implementing the EVP. For instance, a program sponsor must ensure that the " exchange visitor possesses sufficient proficiency in the English language . . . to participate in his or her program." Id. § § 62.10(a)(2), 62.22(d)(1). Program sponsors must ensure that training programs provide " bona fide training" and are not " used as substitutes for ordinary employment or work purposes." Id. § 62.22(b)(1)(ii); see also id. § 62.22(f)(2)(iii), (v). Similarly, sponsors must not put " trainees or interns in unskilled or casual labor positions" or " in positions, occupations, or businesses that could bring the [EVP] or the Department into notoriety or disrepute." Id. § 62.22(j). Sponsors may assign responsibilities to third parties, but any violations committed by such third parties are " imputed to the sponsors" themselves. Id. § 62.22(g)(1). Thus, the sponsors must " [e]nsure that any host organizations and third parties . . . are sufficiently educated on the goals, objectives, and regulations of the [EVP] and adhere to all regulations." Id. § 62.22(f)(1)(v).
The State Department's regulations provide that it may sanction sponsors if its Office of Exchange Coordination and Designation makes at least one of four findings: (1) the sponsor has " [v]iolated one or more" agency regulations; (2) the sponsor has " [e]videnced a pattern of failure to comply" with the regulations; (3) the sponsor has " [c]ommitted an act of omission or commission, which has or could have the effect of endangering the health, safety, or welfare of an exchange visitor" ; or (4) the sponsor has " conducted its program in such a way as to undermine the foreign policy objectives of the United States." Id. § 62.50(a).
In its discretion, the Department can determine whether to impose more serious sanctions (suspension, revocation, or a denial of redesignation to a sponsor) or " lesser sanctions," which can include any combination of a written reprimand, a mandate that the sponsor submit a corrective action plan to remedy the violation(s), and up to a 15% reduction in the number of authorized visitors who may participate in the sponsor's programs. Id. § 62.50(b)(1). The regulations outline the procedure required before " lesser sanctions" may be imposed: the Department must give the program sponsor written notice of its intent to impose lesser sanctions, after which the sponsor has ten days to respond with " a statement in opposition to or mitigation of the sanction," which " may include additional documentary material." Id. § 62.50(b)(2). Then the Department " may, in its discretion, modify, withdraw, or confirm" the sanctions outlined in its initial notice. Id.
ASSE has been an EVP program sponsor for nearly four decades, serving thousands of exchange visitors each year. In 2009, ASSE contracted with a third party, American Career Opportunities (ACO), to assist ASSE with exchange visitors from Japan. ASSE also approved The Cream Pot restaurant in Hawaii as a host organization. In accordance with EVP regulations, ASSE alleges that it " fully vetted" both organizations before contracting with them, and ASSE outlined all of the Department's requirements in the contracts. Id. § 62.22(g). Further, ASSE alleges that it provided extensive training to ACO personnel to be sure that they were " sufficiently educated on the goals, objectives, and regulations of the" EVP. Id. § 62.22(f)(1)(v).
ACO assisted ASSE with the recruitment and placement of a 31-year-old Japanese exchange visitor, Noriko Amari, who began an ASSE-sponsored training program at The Cream Pot. In February 2012, a few weeks after beginning her program, Amari contacted the State Department to lodge a complaint about her training conditions, alleging labor exploitation, excessive work hours, inadequate compensation for work performed, and harassment. The State Department sought an explanation from ASSE regarding Amari's troubling claims. ASSE alleges that it immediately tried to communicate with Amari and offer assistance, but Amari would not respond to ASSE's attempt to talk to her.
Within weeks, the Department initiated a review of ASSE's compliance with the EVP regulations. Based on this review, the Department determined that sanctions were warranted because ASSE had violated several regulations. Id. § 62.50(a)(1). While the Department conceded that ASSE had not directly participated in any harassment and that ASSE had responded to Amari's complaints appropriately, the Department determined that ASSE had failed to ensure that Amari had sufficient English to participate in the program, leaving her vulnerable for abuse--a violation of 22 C.F.R. § § 62.10(a)(2) and 62.22(d)(1). The Department also found that ASSE had failed to ensure that Amari's placement was a genuine training program, not just the fulfillment of a general labor need--a violation of 22 C.F.R. § § 62.22(b)(1)(ii) and 62.22(f)(1)(i). Finally, the Department held ASSE responsible for the conduct of its third-party organization, ACO, and ACO's violations of the regulations--concluding that ASSE violated 22 C.F.R. § § 62.9(f)(2) and 62.22(f)(1)(v). ACO's conduct and ASSE's failure to adequately screen Amari for adequate English, the Department concluded, endangered Amari's health, safety, and welfare, as prohibited by the regulations--providing an additional reason for sanctions under 22 C.F.R. § 62.50(a)(3). In reaching these preliminary conclusions, the Department relied in part on the fact that the Department of Homeland Security had issued Amari a T Visa--a visa for those who are or have been victims of human trafficking--based on her treatment in the training program.
In November 2013, the State Department provided ASSE with a written Notice of Intent to impose sanctions, describing its findings and the three " lesser sanctions" it intended to impose: a written reprimand, a requirement that ASSE provide a corrective action plan, and a 15% reduction in the number of trainees in ASSE's program. Pursuant to its regulations, the Department gave ASSE a ten-day window in which to respond, and ASSE submitted a written response with exhibits. The exhibits included Amari's self assessment of her own English skills and college transcripts showing her successful completion of several English courses at a university in Japan. After considering ASSE's response, the Department determined that lesser sanctions were still warranted, and it issued a final Imposition of Lesser Sanctions.
ASSE filed a complaint in the Central District of California, claiming that the Department's decision to impose sanctions was arbitrary and capricious and should be set aside under the APA, 5 U.S.C. § 551 et seq. ASSE also alleged that the Department's sanctions procedure violated its due process rights. The State Department filed a motion to dismiss ASSE's complaint, arguing that the sanctions imposed against ASSE were unreviewable because sanctions decisions are " committed to agency discretion by law" within the meaning of 5 U.S.C. § 701(a)(2), and asserting that ASSE had received all the process it was due.
The district court granted the motion to dismiss. With respect to ASSE's APA claims, the district court found that the statutes authorizing the EVP--22 U.S.C. § § 2451, 2452(a), and 2455(f)--vested full discretion in the Department to implement the program in a manner that would " strengthen international cooperative relations,"  and that the EVP regulations at issue here did not limit the Department's broad discretionary authority to implement sanctions. The district court also dismissed ASSE's due process claim, finding that ASSE had failed to state ...