FEMA Funding Decisions to Get New Scrutiny in Post-Chevron Era

There is a need to maintain flexibility in the legal framework that governs some of the largest federal funding programs, including those administered by the Federal Emergency Management Agency. Any potential slowing or increased rigidity of the process won’t work, as FEMA often must disburse funding quickly and change rules frequently in response to perceived inadequacies of support.

FEMA’s regulations and funding decisions historically have had limited review. Relief has instead been restricted to the agency’s administrative appeal process—which has been criticized as lacking in independence and excruciatingly slow—or, for some claims, to the arbitration process implemented under the Civilian Board of Contract Appeals. After the US Supreme Court decision in Loper Bright v. Raimondo, judicial review may emerge as a new option.

FEMA’s authority is governed by the Stafford Act, which largely permits the agency to administer its programs. But, FEMA is often reactive and issues disaster-specific guidance, sometimes on a regional level, leading to inconsistencies apparent in an event like the Covid-19 pandemic, where costs crossed state lines and FEMA regions. The complex and ever-changing body of policies that apply to FEMA’s programs can frustrate recipients and subrecipients who already are in stressful situations.

Loper Bright acknowledges the limits to judicial review where Congress has allowed agencies to fill in perceived legislative gaps. But, the ruling opened the door for review when there is ambiguity in the intent and level of discretion. Plaintiffs now have a stronger foundation to argue against FEMA’s statutory interpretations and even its decision-making.

FEMA’s grant recipients and subrecipients should be ever more vigilant in both observing the agency’s decisions and questioning their validity within the confines of the Stafford Act.

All parties should pay attention to whether a particular FEMA rule or policy is consistent with proper administrative procedure. The agency, for example, must submit for notice and comment any change that could reduce funding. Potential claimants should examine any problematic rules or policies, and any denials issued, to evaluate whether FEMA’s actions are consistent with Congress’ clear directives.

Under the agency deference that Loper Bright overturned, courts would have almost certainly upheld FEMA’s actions if they were reasonable and not contrary to law. Courts now have an invitation to not only police the limits of FEMA’s direction under the Stafford Act, but also strike down rules, policies, or denials when they determine that FEMA has overstepped.

Several examples bear special mention. Multiple courts have distinguished between FEMA’s discretionary approval and obligation of funding, and later attempts to retroactively recoup it. Central to this is Section 705 of the Stafford Act, which provides that public entity subrecipients “shall not” be subject to FEMA’s retroactive fund recoupment under certain conditions. This prohibition, unlike the majority of the Stafford Act, isn’t written in permissive terms.

FEMA has issued policy guidance to restrict its application. This is one area where, post-Loper Bright, a reviewing court may be comfortable applying its own independent judgment to evaluate FEMA’s actions, rejecting the agency’s interpretive policy in the process.

Another part of the Stafford Act that uses mandatory rather than permissive language is Section 423, which gives FEMA funding recipients and subrecipients the right to appeal. FEMA imposed additional requirements on the process, including how it issues decisions, calculates deadlines, and accepts appeals.

With the demise of what was known as Chevron deference, reviewing courts could review these matters with no deference to FEMA’s position or to its regulations or policy level guidance.

There have also been significant funding denials related to FEMA’s policies applicable to the Covid-19 pandemic. Whether these decisions will go under court review is unknown. Now that the window is at least cracked, and aggrieved subrecipients often face no other viable option for relief, the likelihood of them seeking judicial review is exponentially higher than it was prior to the end of Chevron deference.

Recipient and subrecipient entities under FEMA’s programs must understand how the Loper Bright decision might impact pending or past FEMA grant funding. The deadline applicable to filing for judicial review of FEMA’s decisions is provided by 28 U.S.C. 2401 and is generally six years after the right of action first accrues.

Just days after Loper Bright, the Supreme Court confirmed in its Corner Post decision that the clock starts ticking when a plaintiff suffers a harm, not when the agency issues a rule. That will further broaden the pool of FEMA rules, regulations, policies, and denials that may warrant consideration and submission for judicial review.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Wendy Huff Ellard is shareholder and co-leader of Baker Donelson’s disaster recovery and government services team

Charles F. Schexnaildre is of counsel at Baker Donelson and a member of its disaster recovery and government services team.

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