for Review of a Decision of the Department of Education
Agency Docket No. 12-35-R
JULIE CARNES and JILL PRYOR, Circuit Judges, and CONWAY,
CONWAY, District Judge:
Georgia Department of Education petitions the Court to review
the final decision of the Secretary of Education ("the
Secretary") ordering Georgia to repay approximately $2.1
million of federal grant funds to the United States
Department of Education. The Secretary denied Georgia an
equitable offset for the amount of funds due to be repaid
following an audit. For the reasons that follow, we deny the
petition to review the Secretary's decision.
United States Department of Education ("the
Department") awarded a $10.7 million grant to the
Georgia Department of Education ("Petitioner") to
be distributed to local education entities in 2007 under the
21st Century Community Learning Centers grant program, which
targeted students at high-poverty, low performing schools.
Following the Department's award of the federal grant,
Georgia held a competition to award subgrants to local
education agencies and community-based non-profits that
provide academic enrichment opportunities such as tutorial
services to help students during non-school hours. The
competition required an eligible entity to submit an
application, and Petitioner used a peer-review process to
award the subgrants.
receipt of a "suspicious activity report" in May
2007 from a bank for one of the local grant recipients, state
auditors ultimately uncovered evidence of a "complex
fraud scheme" involving several Georgia Department of
Education employees as well as members of the independent
external peer review panel and some of the subgrant
recipients who manipulated the outcome of the grant
competition. As "a result of apparent collusion and
management override of internal controls, " the auditors
found the grant competition was "severely flawed."
The auditors determined that three of Petitioner's
employees had inappropriately overridden internal controls
and intentionally altered the results of the independent
external peer-reviewed competition so that seventeen
lower-scoring applicants received subgrants even though
other, unfunded applicants had received higher scores. The
auditors noted that the highest-ranking applicants, as
determined by the independent external peer review panel,
received reduced funding and, in some cases, no funding.
Petitioner's internal audit found employees had
manipulated the outcome of the 2007 grant competition in
favor of certain community-based organizations who were
connected to one of Petitioner's employees.
2012, the Department responded with a preliminary
determination letter finding that Petitioner had failed to
follow its own procedures when conducting the grant
competition, and the harm to the federal interest was the
total amount of funds awarded to sixteen entities that did
not qualify for funding and a seventeenth entity that
received more funds than the amount for which it qualified.
The Department demanded that Petitioner refund the full $5.7
million diverted to the lower-scoring programs; the parties
subsequently stipulated to the reduced amount of $2.1 million
based on the relevant statute of limitations.
appealed the Department's $2.1 million refund demand to
the Office of Administrative Law Judges, requesting an
"equitable offset" for the entirety of the amount
demanded, arguing it had spent non-federal grant funds that
aided beneficiaries in the same manner Congress had intended
in enacting the legislation governing the grant program. The
Department objected to any equitable offset or reduction
because of the extent of the fraud. The administrative law
judge denied Petitioner's request for an equitable
offset, as did the Secretary of Education. Petitioner seeks
review of the agency's final decision, arguing that the
Secretary erred by denying Petitioner any equitable
argues the Secretary's consideration of the underlying
fraud scheme as reason to deny the equitable offset violates
the statute's "proportional- to-harm" recovery
rule and invokes what Petitioner characterizes as an
"unclean-hands" defense without a principled
explanation for the change in course.
Standard of Review
Court reviews the Secretary's decision to determine
whether the Secretary's findings are supported by
substantial evidence and whether they reflect the application
of proper legal standards. Bell v. New Jersey, 461
U.S. 773, 792, 103 S.Ct. 2187, 2198, 76 L.Ed.2d 312 (1983);
Bennett v. Kentucky Dep't of Educ., 470 U.S.
656, 666, 105 S.Ct. 1544, 1550, 84 L.Ed.2d 590 (1985);
see 20 U.S.C. § 1234g(c) (factual findings are
conclusive "if supported by substantial evidence").
Substantial evidence is "such relevant evidence as a
reasonable person would accept as adequate to support a
conclusion." Moore v. Barnhart, 405 F.3d 1208,
1211 (11th Cir. 2005). It is "more than a scintilla, but
less than a preponderance." Hale v. Bowen, 831
F.2d 1007, 1011 (11th Cir. 1987) (internal quotation marks
omitted). The "limited" substantial evidence review
"precludes deciding the facts anew, making credibility
determinations, or re-weighing the evidence."
Moore, 405 F.3d at 1211; see also Dyer v.
Barnhart, 395 F.3d 1206, 1211 (11th Cir. 2005).
court may set aside the Department's final decision only
if is "arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law." 5 U.S.C. §
706(2)(A). The arbitrary and capricious standard is
"exceedingly deferential." Sierra Club v. Van
Antwerp, 526 F.3d 1353, 1360 (11th Cir. 2008) (quotation
marks omitted). An agency's decision will not be
overturned as long as the agency "examine[d] the
relevant data and articulate[d] a satisfactory explanation
for its action including a rational connection between the
facts found and the choice made." Motor Vehicle
Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463
U.S. 29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 443 (1983) (the
standard is "narrow, and a court is not to substitute
its judgment for that of the agency"). Agency actions
are arbitrary and capricious when the agency "has relied
on factors which Congress has not intended it to consider,
entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so
implausible that it could not be ...