Timeliness

Appeal Brief

Appeal Letter

Appeal Analysis

Background

In September 2008, Hurricane Ike brought torrential rain, hurricane force winds, and a storm surge to the City of Galveston, Texas.  The hurricane caused severe damage to the Port of Galveston (Applicant).  FEMA prepared several Project Worksheets (PWs) to document damage to multiple facilities owned by the Applicant, including the following:

• Gulf Copper Production Facility (PW 5200) – The facility sustained roof and building damage.FEMA obligated $150,877.03 for repairs and $1,312.00 for estimated direct administrative costs (DAC), less $50,877.03 in anticipated insurance proceeds.

• Pelican Island Terminal Administrative Building (PW 12004) – The facility sustained roof and building damage. FEMA obligated $1,304,544.17 for repairs and $5,000.00 for estimated DAC, less $268,229.00 in anticipated insurance proceeds.

• Gulf Copper Plate Shop (PW 12377) – The shop sustained damage and accumulated construction debris, muck, sand, and salt around and within the facility.FEMA obligated $187,298.91 for emergency protective measures and cleanup and $1,312.00 for DAC, less $187,298.91 in anticipated insurance proceeds.

• Gulf Copper Electric Shop (PW 12846) – The shop sustained roof and building damage.FEMA obligated $56,062.00 for repairs and $672.00 in DAC, less $56,734.00 in anticipated insurance proceeds.

• Gulf Copper Electric Shop (PW 12863) – The shop sustained building damage and accumulated construction debris, muck, sand, and salt around and within the facility.FEMA obligated $7,925.13 for emergency protective measures and cleanup and $284.00 in DAC, less $4,975.68 in anticipated insurance proceeds and $1,949.45 in National Flood Insurance Program (NFIP) reduction.

On September 7, 2010, FEMA deobligated funding totaling $1,147,844.17 (reflecting the total of costs above, less the anticipated insurance proceeds and NFIP reduction for PW 12863), determining the Applicant did not have legal responsibility for maintenance and repairs to the facilities because the Applicant’s lease agreement with Gulf Copper & Manufacturing Corporation (Gulf Copper or Lessee) stated that the Lessee was responsible for damage caused by the hurricane.[1]  The Texas Department of Public Safety, Division of Emergency Management (Grantee) notified the Applicant on September 16, 2010 of the deobligations for all five PWs.[2]  The Grantee also sent the Applicant a “Project Application Summary” attached to a letter dated October 12, 2010, which noted the deobligation of each of the five PWs.[3]

First Appeal

In five separate letters dated June 28, 2011, the Applicant appealed FEMA’s determinations deobligating funding for PWs 5200, 12004, 12377, 12846, and 12863.[4]  In its appeals, the Applicant claimed that because it relied on FEMA’s determination of eligibility and adhered to the scope of work established in the PWs, it should not be required to return obligated funds that it already spent to repair the facilities.[5]  In addition, the Applicant stated that the severity of the damage caused by the storm surge exceeded any expected or anticipated damage and the Applicant could not reasonably expect the Lessee to adhere to the requirements of the lease, and in order to ensure continuity of operations and protect its assets, it was necessary for the Applicant to perform the repairs.[6]  Finally, the Applicant argued FEMA’s deobligation of the PWs placed an undue burden on the Applicant and violated Section 705(c) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act).[7]

In five letters dated January 6, 2012, FEMA Region VI Regional Administrator (RA) denied the Applicant’s appeals.[8]  The RA determined the Lessee operated the Applicant-owned facilities pursuant to a lease agreement with the Applicant.  The RA noted that the lease specifically obligates the Lessee, at its own cost, to repair or replace any property damaged or destroyed property if such property is destroyed by hurricane or other causality.[9]  Last, the RA determined that Section 705(c) of the Stafford Act did not relieve the Applicant of its obligation to return the grant funds received because Section 705(c) pertained to disaster grant closeout procedures and was not applicable to the deobligations on the five PWs, as the projects had not entered closeout.[10]  In each decision, the RA also informed the Applicant of its right to submit second appeals through the Grantee.  The RA stated that if the Applicant decided to pursue second appeals, they must be submitted to the Grantee within 60 days of the Applicant’s receipt of the determinations.[11] 

The Grantee prepared notification letters dated February 10, 2012, accompanied by the RA’s appeal decisions, and according to the Grantee’s records, sent these notifications to the Applicant.  In its notifications, the Grantee reiterated the Applicant’s right to file second appeals and informed the Applicant such appeals must be submitted within 60 days of receipt of the determinations.[12]  The Applicant thereafter wrote to the Grantee on February 19, 2013 requesting updates on multiple PWs and appeals, including the appeals for PWs 5200, 12004, 12377, 12846, and 12863.[13]  The Grantee replied on February 21, 2013 and stated that FEMA denied those appeals and denial letters from the Grantee were sent to the Applicant on February 10, 2012.[14] 

In July 2014, during a meeting between the Grantee, FEMA and the Applicant to discuss various issues, the Applicant contended it was never notified of the RA’s decisions denying its first appeals.  The Grantee then sent notification of the denials to the Applicant in a letter dated July 25, 2014.15] 

Second Appeal

The Applicant appealed the RA’s decisions in one consolidated letter dated October 17, 2014 for $1,147,844.17.[16]  In its second appeal, the Applicant claims that although the RA’s decisions are dated January 6, 2012, it received notification on August 20, 2014 and timely filed its appeal within 60 days of that notification.[17]  The Applicant asserts it has legal authority over the facilities leased to Gulf Copper and it is fiscally responsible to protect its assets.[18]  It further argued that FEMA cannot force the Applicant to return previously received funds pursuant to 705(c) of the Stafford Act, which protects applicants from financial losses when they properly spend approved grant funds and FEMA subsequently determines that those grant funds should not have been awarded.[19]  

In a letter dated October 23, 2014, the Grantee concurs with the Applicant’s appeal, and provides that its records indicate that it notified the Applicant on two previous occasions, but cannot confirm with certainty that it did so prior to the date claimed by the Applicant. [20]  As such, the Grantee supports the Applicant’s right to appeal and requests that FEMA consider the appeal to be in compliance with the timeframe requirements set forth in Title 44 of the Code of Federal Regulations (44 C.F.R.) § 206.206(c).[21]  Although the Grantee’s letter is dated October 23, 2014, there is no record of it being sent by the Grantee nor received by FEMA Region VI or FEMA Headquarters within 60 days of the Applicant’s second appeal submission. 

The Applicant submitted an additional letter directly to FEMA on December 9, 2014 to inform the Agency of a court decision concerning Section 705(c) of the Stafford Act.[22]  The Applicant stated that it believed the results of the decision supported a positive outcome for its five second appeals.[23]

FEMA’s Director of Public Assistance replied to the Applicant on September 1, 2016 to explain that FEMA’s records demonstrate that the RA denied the appeals in January 2012, but that the Applicant had not submitted its request to appeal the determinations within the statutory timeframe. [24]  Consequently, the Director concluded the first appeal decisions represent FEMA’s final administrative actions on the matters and FEMA’s Recovery Policy FP 205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures (Mar. 31, 2016), implementing Section 705(c), does not apply to the issues raised because the policy does not apply to matters for which the Agency has taken final administrative action.[25]

The Grantee responded to FEMA on October 24, 2016.[26]  The Grantee contends that it identified “conflicting information” regarding the Applicant’s compliance with the requirements under 44 C.F.R. § 206.206(c).[27]  It states that its administrative record indicates that the Applicant “was formally notified of the first appeal determination on February 10, 2012 and was informally notified in a letter to the [Applicant] dated February 21, 2013.”[28]  The Grantee further states that its records indicate that it was “diligent in notifying the [Applicant] of the determination in a timely manner, [but] is unable to confirm with certainty that the appropriate [Applicant] officials received the [Grantee’s] notification.”[29]  As such, it requests FEMA consider the Applicant’s second appeal as timely.[30]  The Grantee also transmitted to FEMA the October 2014 appeal from the Applicant, in addition to its October 2014 concurrence letter.

Discussion

Timeliness of Second Appeal

Section 423 of the Stafford Act,[31] as implemented by 44 C.F.R. § 206.206, allows an eligible applicant to appeal any PA eligibility determination.  An applicant must submit an appeal within 60 days of receiving notice of the appealable action.[32]  Following receipt of an applicant’s appeal, a grantee has 60 days to forward it together with a written recommendation to FEMA.[33]  Neither the Stafford Act nor 44 C.F.R. provide FEMA with the authority to grant time extensions.[34]  In addition, appeals must contain documented justification supporting an applicant’s position.[35]  In this instance, there are conflicting claims concerning when the Applicant first received notification of the RA’s decisions.  In considering the Applicant’s and Grantee’s claims that the Applicant timely submitted its second appeal, FEMA must rely exclusively upon the documentation submitted on appeal. 

The Applicant indicates it was not notified until August 2014 that FEMA denied its first appeals, with the Grantee’s records supporting earlier notification dates.[36]  While the date the Applicant was first notified is in dispute, the appeal is untimely regardless of whether the Applicant received notification in February 2012, February 2013, or August 2014.  The Grantee received the Applicant’s second appeal in October 2014, but did not transmit the appeal to FEMA until October 2016.  This is more than 24 months after the Grantee received the Applicant’s second appeal in October 2014, and 57 months after the issuance of the first appeal decisions in January 2012.[37]  In the RA’s denials of the Applicant’s first appeals, he advised the Applicant and Grantee that Federal regulations afforded each entity 60 days to submit second appeals upon receipt of notification.[38]  The Grantee failed to submit the second appeal within the required statutory and regulatory timeframe.[39]  As such, the Applicant’s second appeal rights lapsed.[40]

Stafford Act Section 705(c)

Section 705(c) holds that “a State or local government shall not be liable for reimbursement or any other penalty for any payment made under [the] Act if – (1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.”[41]  FEMA issued FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, to establish the criteria necessary to implement Section 705(c).  If all of Stafford Act Section 705(c)’s criteria are met, FEMA is prohibited from recouping grant funds even if it later determines that it made an error in determining eligibility.[42]  Section 705 must, however, be read in context with all sections of the Stafford Act, especially in this case, Section 423.[43]  As reflected above, Section 423 affords applicants 60 days after receipt of notice to appeal any eligibility determination.  After the 60-day period ends, an applicant’s right to appeal is exhausted, the opportunity to seek remedy through the administrative PA appeals process lapses, and the Agency’s action becomes final.  Consistent with this element of finality, FP-205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, provides that the Section 705(c) prohibition does not apply where appeal rights are exhausted and FEMA has made a final administrative decision.[44]  A more expansive interpretation of Section 705’s bar against recovering funds would otherwise render the finality of Section 423 inoperative or superfluous.[45] 

The Grantee and Applicant both argue that Stafford Act Section 705(c) precludes FEMA from deobligating and/or recovering funding it allowed erroneously in PWs 5200, 12004, 12377, 12646, and 12863.[46]  However, the second appeal was submitted past statutory and regulatory timeframes.  As FEMA’s Recovery Policy FP 205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures does not apply to matters for which appeal rights have lapsed and are exhausted, the Agency’ first appeal decisions are the final administrative action and its guidance implementing Stafford Act Section 705(c) cannot be applied to the issues raised in the Applicant’s second appeal.[47]

Conclusion

The second appeal was not filed within the required statutory and regulatory timeframe.  FEMA’s Recovery Policy FP 205-081-2, Stafford Act Section 705, Disaster Grant Closeout Procedures, implementing Stafford Act Section 705(c) protections, does not apply to the Applicant’s untimely appeal.  Consequently, the Applicant’s second appeal is denied.