Full opinion text
OPINION DAVID S. PORTER, Senior District Judge. I. PROCEDURAL POSTURE This case is now before this Court for final disposition pursuant to instructions of the United States Court of Appeals for the Sixth Circuit. In May 1974 the Board of Education of the Cincinnati City School District [hereinafter Board] filed this suit, challenging the Department of Health, Education and Welfare’s [HEW] decision that they were ineligible for funding under the Emergency School Aid Act [ESAA], 20 U.S.C. §§ 1601-19 (Supp.1974). The Board sought declaratory relief under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202. In April 1975, acting in the belief that the matter was submitted on the merits for judicial review on cross-motions for summary judgment (docs. 7, 11), this Court decided on the record then before it that the Board’s motion should be denied while HEW’s should be granted (docs. 20, 21). We determined that HEW’s ineligibility determination was not arbitrary, capricious, or otherwise inconsistent with the Administrative Procedure Act, (5 U.S.C. § 706(2)(A)-(D)), the ESAA, or the regulations promulgated thereunder, 45 C.F.R. §§ 185.01 et seq. Board of Education of the City School District of the City of Cincinnati v. Department of Health, Education and Welfare, Region 5, 396 F.Supp. 203 (S.D.Ohio 1975). On appeal the Sixth Circuit Court of Appeals affirmed our denial of the Board’s motion, but reversed our grant of summary judgment to HEW. The Sixth Circuit reminded us that courts “should be slow in disposing of a case of any complexity on motion for summary judgment.” Board of Education of the City School District of the City of Cincinnati v. Department of Health, Education and Welfare, Region 5, 532 F.2d 1070, 1071 (6th Cir.1976). The Court found that summary judgment was improper in this instance because all four of the grounds advanced by HEW for denial of the funds involved genuine issues of material fact. Id. The Sixth Circuit therefore ordered “the case remanded for appropriate evidentiary hearing and findings of fact.” Id. Moreover, the Court of Appeals stated that the factual issues in the school desegregation case Bronson v. Board of Education, No. C-l-74-205 (S.D.Ohio), involved many of the same issues of fact, which “should be determined either before or contemporaneously with the determination of the issues of fact in the present case.” Id. We were directed “not to enter a final judgment in this present case until a final judgment has been entered in Bronson.” Id. The Sixth Circuit also ordered that the $1,200,000 escrow account established by this Court’s order be maintained until the final disposition of the litigation at both the trial and appellate court levels. Id. Following the remand of this case, the Board supplemented its complaint, alleging that HEW improperly denied the school district funds again in the 1976 ESAA program for the same reasons it had improperly denied the 1974 grant application (doc. 41). This Court entered a preliminary injunction directing HEW to hold in escrow the funds requested in the 1976 application (doc. 43). After we denied HEW’s motion to dissolve the preliminary injunction relating to the 1976 application (doc. 50), the parties agreed to reduce the amount to be held in escrow for the 1976 application to $1,696,762 (doc. 60). The Sixth Circuit affirmed our denial of HEW’s motion for reconsideration and dissolution of the preliminary injunction, agreeing that it was proper for the supplemental proceeding on the 1976 application to be stayed pending the resolution of the Bronson litigation (doc. 62). On June 22, 1984 a consent decree was entered in the Bronson case, thus resolving it without trial on the merits. The settlement of that case, albeit without adjudication of the issues of fact, meant that we could proceed to final judgment in this case. Therefore this case was reactivated in September 1984. Our first goal was to comply with the Sixth Circuit’s instruction that we conduct an “appropriate evidentiary hearing and findings of fact.” 532 F.2d at 1071. Unfortunately the Bronson litigation offered us little guidance in resolving whatever issues of fact were common to both cases, so we sought to determine the proper procedure to follow in carrying out the Sixth Circuit’s mandate. At our request, in October 1984 the parties submitted briefs on the question of the proper scope of our review in this case (docs. 67, 69, 70). With regard to the issue of the appropriate record for review, HEW also pointed out that the complete administrative record had not ever been submitted to this Court. Doc. 69 at 13. They proposed that they would assemble such a record, after which the Board would have an opportunity to file additional material. Id. Rather than ruling immediately on the scope of and proper record for review, we waited until HEW filed what they considered to be the complete administrative record, to which extensive reference will be made herein. In addition to the documents that had been before this Court in 1975, they submitted all non-privileged documents and data gathered by HEW from the Board, and the analyses and correspondence generated within HEW during its review of the Board’s 1974 and 1976 ESAA applications. Altogether, seven boxes of material were submitted. Once the record had been supplemented, we scheduled a hearing on the adequacy of HEW’s fact-finding process. At the request of counsel for the Board, this hearing was postponed to allow them enough time to review the administrative record and determine whether depositions would be necessary to supplement it. On February 6,1985 a meeting was held with counsel for both parties at which the schedule for the hearing was discussed. See doc. 74. At the conference, counsel for the Board indicated that they were not then prepared to specify what, if any, additional discovery they wished to undertake to supplement the record. In a letter dated February 26,1985, counsel for the Board informed this Court that they would “argue the inadequacy of the fact-finding process basically from the ‘administrative record’ as presented to us by the defendants.” They also anticipated presenting limited testimony from John Grate, a Cincinnati School District employee who had been principally responsible for preparing and coordinating the ESAA applications. The evidentiary hearing was never held, however, because counsel for the Board ultimately decided they did not want to call any witnesses. In the absence of any additional evidence or testimony on the adequacy of the fact-finding process, the parties were asked to submit proposed findings of fact and conclusions of law addressing both the scope of judicial review and the merits of the case. After receipt of these submissions (docs. 78, 79, 80, 81), this Court called a status conference to discuss what further proceedings were appropriate in this case. At the conference, held May 6, 1986, counsel for the Board stated that they wanted to supplement the paper administrative record submitted by HEW. Specifically, the Board wanted the Court to consider an affidavit of John Grate, which had been filed already as an attachment to the Board’s memorandum opposing dissolution of the preliminary injunction (doc. 46). In addition the Board requested the inclusion of the depositions of O.O. Barr and Mary Jane Calais which had been taken in the Bronson case. After some discussion, counsel for HEW agreed that they would not object to these additions to the record (doc. 84 at 8). The Board agreed to supply these additional documents to the Court and HEW. HEW also agreed to give the Board copies of the documents that had been withheld from the administrative record, and which this Court ruled were not privileged (doc. 82). The Board was allotted three weeks in which to supplement their brief to this Court in light of these additions to the record, which they did (doc. 85). HEW was given an additional week thereafter for a reply, but they chose not to do so. Following oral argument on June 6, 1986, the parties were asked to address the issue of whether interest could be ordered on the money held in escrow. Plaintiffs filed a memorandum (doc. 88), as did defendants (doc. 90). The case was thus finally submitted for disposition on the merits. II. STANDARD OF AND RECORD FOR REVIEW It is undisputed that our review of HEW’s decision is governed by the Administrative Procedure Act, 5 U.S.C. § 706. What is disputed is the appropriate subsection for us to apply in this case. The APA provides that a reviewing court shall “decide all relevant questions of law” and “hold unlawful and set aside agency action, findings, and conclusions” if they are found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A), or if they do not meet constitutional, statutory, or procedural requirements. 5 U.S.C. §§ 706(2)(B)-(D). The court “shall review the whole record” in making these determinations. 5 U.S.C. § 706. The vast majority of administrative decisions are reviewed under these provisions. If, however, the matter is “reviewed on the record of an agency hearing,” the reviewing court may set the action aside if it is “unsupported by substantial evidence.” 5 U.S.C. § 706(2)(E). Alternatively, a reviewing court may set aside an agency action that is “unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.” 5 U.S.C. § 706(2)(F). Plaintiffs contend that the facts in this case are subject to de novo review under section 706(2)(F) because HEW’s action was adjudicatory in nature and HEW’s fact-finding procedures were inadequate. Doc. 67 at 3-7, citing Camp v. Pitts, 411 U.S. 138, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); Newsome v. Vanderbilt University, 653 F.2d 1100 (6th Cir. 1981). Specifically, the Board contends that HEW did not conduct hearings with appropriate procedural safeguards. Doc. 67 at 5. Nor did HEW maintain a complete contemporaneous record of their fact-finding and decision-making process. Id. The Board also argues that HEW did not conduct an independent fact-finding procedure to aid its determination of the unconstitutionality of the Board's nonimplementation of the 1973 busing resolution. Id. Finally, the Board contends that ex parte communications between HEW and parties other than the Board affected the denial of their application, and that the failure of HEW to disclose these contacts underscored the inadequacy of HEW’s fact-finding process. Id. at 7-8. Although HEW agrees that the decision to deny funding was an adjudicative decision, they contend that it is not subject to de novo review under section 706(2)(F). Doc. 69 at 8. HEW asserts that its fact-finding procedures were adequate because they were adopted pursuant to duly promulgated regulations which placed the burden of establishing eligibility on the prospective grantee. Id. at 9. The regulations implementing ESAA did not require hearings regarding eligibility prior to an award of assistance. See 45 C.F.R. § 185.-46(e) (1974). Moreover, HEW points out that they compiled a substantial record of the steps leading to their decision, and the reasons therefor, which were communicated to the Board. Id. at 8. We find that the key issue is whether HEW’s fact-finding procedures were adequate. There is little to guide us, however, in making that determination. The two key Supreme Court cases on this question, Camp v. Pitts, 411 U.S. 138, 93 S.Ct. 1241, and Overton Park, 401 U.S. 402, 91 S.Ct. 814, upon which both parties rely, offer little assistance. In both of these cases, the Supreme Court determined that the fact-finding was not inadequate. Moreover, there are few cases holding that agency fact-finding was so deficient that de novo review was required. But see, Porter v. Califano, 592 F.2d 770, 782-783 (5th Cir.1979) (finding substantial bias). In the Sixth Circuit, however, it is clear that de novo review “is the exception rather than the rule” unless such review is provided by statute. Upjohn Manufacturing Co. v. Schweiker, 681 F.2d 480, 483 (6th Cir.1982). In that case the Sixth Circuit rejected the assertion that informal fact-finding procedures were “inadequate in the sense that they are subject to de novo review.” Id. In this case HÉW’s informal fact-finding produced a vast quantity of documents and statistics, which suggest that their procedure was comprehensive if not particularly selective. In light of the law in this Circuit, therefore, we find that a de novo hearing within the meaning of 5 U.S.C. § 706(2)(F) is not appropriate here. Rather, we believe the proper standard of review is that of §§ 706(2)(A)-(D). Thus, we must determine if HEW’s decisions, were “arbitrary, capricious, an abuse of discretion, or otherwise unlawful,” § 706(2)(A), or whether they fail to meet procedural, statutory, or constitutional requirements, §§ 706(2)(B)-(D). We think that this conclusion is consistent with the Sixth Circuit’s instructions when they remanded this case to us. The Court of Appeals’ direction “for appropriate evidentiary hearing and findings of fact,” 532 F.2d at 1071, did not mean that we should hold a trial and make up a new record in our Court. Such a mandate would be inconsistent with the Supreme Court’s holding in Camp v. Pitts that a trial de novo was inappropriate for court review of a similar informal, adjudicatory agency decision. See 411 U.S. at 142, 93 S.Ct. at 1244. Since we cannot interpret the Court of Appeals’ instructions to be contrary to Supreme Court precedent, we believe they did not intend us to hold a de novo trial of the facts upon which HEW based its decision. We still must ascertain what they did mean by their instruction concerning the “appropriate evidentiary hearing and findings of fact.” Most simply it means that we are to decide the disputed issues of material fact which the Sixth Circuit found to exist with regard to each of the four grounds advanced by HEW for denying ESAA funds. See 532 F.2d at 1071. Thus, instead of deciding this complex case on cross motions for summary judgment, we should allow both parties to submit evidence in addition to the administrative record, if necessary, to support their position, and then base our findings of fact thereon. This does not constitute a de novo review within the meaning of section 706(2)(F). Rather, defendants have pointed out, this is a proper interpretation of the Sixth Circuit’s instructions when read in light of Overton Park. In that case the Supreme Court instructed the district court that review of the Secretary’s decision It is also noteworthy that O.O. Barr, an HEW Office of Civil Rights official involved in Cincinnati’s eligibility determination, believed this to be the decisive issue. See Finding 77. ... is to be based on the full administrative record that was before the Secretary at the time he made his decision. But since the bare record may not disclose the factors that were considered or the Secretary’s construction of the evidence it may be necessary for the District Court to require some explanation in order to determine if the Secretary acted within the scope of his authority and if the Secretary’s action was justifiable under the applicable standard. 401 U.S. at 420, 91 S.Ct. at 825 (emphasis added). The defendants thus urge us to conclude that the Court of Appeals’ instruction meant that we should “hold a hearing to determine what is properly in the administrative record and whether any additional explanation by way of testimony or other evidence is necessary to properly review the Secretary’s decision.” Doc. 69 at 12. We agree. Thus, the Court of Appeals would have us take evidence and make findings of fact in order to evaluate the Board’s claim that HEW’s decisions must be set aside. Moreover, this interpretation of the Court of Appeals’ order is proper in light of their further instruction that “[t]he issues of fact involved in Bronson should be determined either before or contemporaneously with the determination of the issues of fact in the present case.” 532 F.2d at 1071. We believe that this order indicates that the Court of Appeals thought, as do we, that the critical question in both cases was one which we found to be unresolvable on the record that was before us in 1975. That is, whether the nonimplementation of the previously adopted desegregation plan was a constitutional violation by the Board, rendering them ineligible for ESAA funds. The Sixth Circuit expected that this issue would be resolved in Bronson. The Bronson case settled, however, without any such findings or admissions of discriminatory acts by the Board. Thus we are left with a critical issue that must be resolved in this case. As to the proper record for review, we recognize that the Administrative Procedure Act provides that we “shall review the whole record or those parts of it cited by a party.” 5 U.S.C. § 706. The Supreme Court has interpreted this to mean that we should review “the full administrative record that was before the Secretary at the time he made his decision,” Overton Park, 401 U.S. at 420, 91 S.Ct. at 825, or “the administrative record already in existence.” Camp, 411 U.S. 138, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1973). The Board has argued that this Court’s review should not be confined to the administrative record submitted by HEW. Rather, they contend that they are entitled to supplement that record by presenting additional testimony and evidence to this Court. Doc. 67 at 8-15. The Board asserts that this is necessary to enable them to prove that the principal, if not the sole reason for HEW’s conclusion that the Board was ineligible for ESAA funding was the Board’s failure to implement their December 10, 1973 busing resolution. They assert that they would also be able to prove that there has been improper ex parte contacts between HEW decision-makers and the Cincinnati Chapter of the NAACP. Id. at 14. Moreover, they allege that they could show that the three other grounds proffered by HEW for ineligibility were actually “hypertechnical justifications for the ineligibility decision.” Id. at 13. HEW has opposed any supplementation of the record to include material which was not “before” the agency official making the challenged decision. Doc. 69 at 13-15. In particular, they object to any inquiry into the mental processes of the administrative officials who made the ineligibility decision. Id. at 13. According to HEW, such inquiry is appropriate only in unusual circumstances, such as when there has been a strong showing of bad faith or improper behavior. Id. In this case, HEW asserts, the Board “has only made a bare-bones allegation of impropriety which is contradicted by the sequence of events surrounding the decisions.” Id. at 15. We disagree. The Board has made specific allegations regarding the reason for HEW’s denial of ESAA funding to them, and we believe that they are sufficiently plausible to justify the admission of additional evidence in support of their theory. Moreover, these allegations relate specifically to the non-implementation issue which we must decide due to the absence of any findings in Bronson on the constitutionality of the Board’s actions. Finally, the admission of these additions to the record appears proper in light of the Sixth Circuit’s instructions to us. In particular, we think that the consideration of documents prepared in connection with the Bronson case is proper because the Sixth Circuit told us to postpone our decision until the resolution of that case. The documents in question are depositions of two HEW officials that describe HEW’s decision-making process with regard to the Board’s application. Consequently they are also appropriate for us to consider because they “disclose the factors that were considered or the Secretary’s construction of the evidence.” Overton Park, 401 U.S. at 420, 91 S.Ct. at 825. We therefore consider their inclusion in the record necessary to comport with our understanding of the Court of Appeals’ instructions to us as discussed above. Pursuant to the above legal analysis, this Court gave both parties an opportunity to supplement the administrative record compiled by HEW should they so desire. The Board requested that three additional documents be included in the record, and HEW did not object. See document 85 at 8. Thus, we have consensus between the parties on what constitutes the entire administrative record on which we may base our decision. In summary, this case is now submitted for final disposition on the merits, as distinguished from being submitted on cross-motions for summary judgment. Consequently our present analysis must be far different from that employed in 1975. Instead of being bound by the requirements of Federal Rule of Civil Procedure 56, and determining whether there are disputed material facts, we must now make findings of fact and conclusions of law on the Board’s charges that HEW improperly denied them ESAA funding in 1974 and 1976. We must do this in light of the standard of review established by sections 706(2)(A)-(D) of the Administrative Procedure Act. Thus, we must determine whether HEW’s rejections were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law,” 5 U.S.C. § 706(2)(A), and if the decisions “meet constitutional, statutory, or procedural requirements.” 5 U.S.C. § 706(2)(B)-(D). We must determine, for example, whether HEW’s funding decisions evidenced bias or other improper motive, and whether the nonimplementation of the December resolution was really the sole reason for HEW’s decisions. Moreover, we must also decide all relevant questions of law, including whether HEW was correct that the Board was ineligible for ESAA funds because it had unlawfully discriminated against children by failing to implement the Board’s December 1973 desegregation resolution. Our task is formidable in light of the fact that we must do all of this on the basis of an unwieldy administrative record, and without the benefit of a decision regarding these matters in Bronson, in which a resolution was expected by the Court of Appeals that would be dispositive of this case. We now proceed to that task. III. FINDINGS OF FACT At the request of the Court, the Board submitted proposed findings of fact and conclusions of law (doc. 78) to which HEW responded (doc. 79) and the Board replied (doc. 80). Both parties were permitted to submit additional briefs in light of our ruling regarding privileged documents and the expansion of the administrative record (docs. 82, 85), but only plaintiffs chose to do so. (Doc. 85.) We have used these submissions as a framework which we have adapted in light of our own independent review and analysis of the complete record, and the relevant law. A. BACKGROUND 1. In 1963 a class action suit was filed against the Cincinnati Board of Education alleging, inter alia, that the Board was operating de facto racially segregated schools. Deal v. Cincinnati Board of Education, 244 F.Supp. 572 (S.D.Ohio 1965), aff'd, 369 F.2d 55 (6th Cir.1966), cert. denied, 389 U.S. 847, 88 S.Ct. 39, 19 L.Ed.2d 114 (1967) [Deal I], aff'd on other issues, 419 F.2d 1387 (6th Cir.1969), cert. denied, 402 U.S. 962, 91 S.Ct. 1630, 29 L.Ed.2d 128 (1971) [Deal II]. The Deal litigation lasted over eight years, and included two decisions by this Court, two appeals to the Sixth Circuit, and two denials of certiorari by the Supreme Court. In sum, the result of this litigation was a 1966 holding that the Board had no constitutional duty to alleviate the racial imbalance that was found to exist in the Cincinnati public schools because it had not been intentionally caused by the Board. Deal I, 369 F.2d at 61, 63-65. Moreover, both this Court and the Court of Appeals concluded that numerous specific actions and policies of the Board challenged by the Deal plaintiffs did not violate their constitutional rights. Deal II, 419 F.2d 1387. Specifically, the Court of Appeals affirmed the district court’s finding that there was no evidence that the Board assigned teachers or other staff members on the basis of race. Id. at 1394. To the contrary, the Court found “that the Board was actively attempting to integrate its staff at all levels____” Id. The Sixth Circuit found “no inequality of educational facilities based upon racial classifications,” and no evidence of gerrymandering of school boundary lines to exclude blacks from certain schools. Id. at 1392, 1394. 2. During the pendency of Deal, the Cincinnati Board of Education adopted a resolution entitled “Statement of Position on Race.” (Box 6, Folder 2, Board Minutes of February 28, 1966.) The resolution stated in part: On March 9, 1964 the Board adopted a policy statement on the selection of sites for schools, establishment of attendance area boundary lines and assignment of pupils. This statement of the Board’s position expresses the present policy of the Board to avoid predominantly Negro schools to the extent that the Board has any control over the causes which create such predominance; but stated that in exercising its control, the Board would not deviate from the requirement of Ohio law that schools be located where they will be most convenient for the largest number of students. The Board also expressed its willingness to make race of students one of the elements to be considered in the establishment of attendance zone lines along with other factors which have always been considered, such as safety of children, travel distance, capacity of the school and close relationship between parents and teachers. ****** The Board and the administration have taken many positive actions to achieve these ends: the employment and assignment of integrated staffs have been increased markedly; interracial experiences for children in predominantly Negro and white attended schools have been amplified; district boundaries have been drawn to avoid predominantly Negro-attended schools in those situations where that has been possible; efforts have been intensified to provide multiracial instructional materials; steps have been multiplied to compensate for educational and other deprivations in some communities and deliberate efforts have been made to insure good human relations both within the classroom and in out-of-class activities. This Board and the administration have examined these past and current efforts and are seeking additional successful approaches. A careful examination of techniques that have been tried in other cities reveals that procedures such as bussing, open enrollment, deliberate balancing, shifting of attendance boundaries, [and] reorganization of grades or educational parks have not contributed a total solution for all situations. Nevertheless, the leadership of the school system does not wish to close the door on further experimentation and innovation. All reasonable approaches to better interracial experiences will be considered, and those that seem likely to work will be tried on an experimental basis. It is stressed that no single technique will solve this problem in the Cincinnati school district or any other large city. Id. at 59-60. 3. In 1967, a group of business leaders commissioned a study of the Cincinnati Public Schools which was completed in August, 1968. Titled Report: Cincinnati School Survey, this study became known as the Campbell Report. (Box 5, File 4A, Nos. 16 and 17.) One aspect of this wide-ranging study was a review of interracial education. The Campbell Report stated, “[W]e recommend that the Cincinnati School System should work toward the provision of high quality integrated education for all children under its jurisdiction.” Id. at 91. (Emphasis in original.) The Campbell Report recommended, inter alia, experimental programs and concluded that “Cincinnati should develop plans for gradually integrating all its schools, to the limits that the geographic distribution of its population permits.” Id. at 91-92. 4. As a result of the Campbell Report, a number of community-wide task forces were established to review its recommendations. One such group was the Task Force Committee on Education and Race, which in March, 1969 recommended, among other things, that the Board of Education declare it to be “the policy of the Cincinnati Board of Education that quality integrated education is the highest goal of the Cincinnati Public Schools.” (Box 1, Folder 1, No. 11 at 38.) In furtherance of this goal, the Board adopted several integrative program goals, which are summarized in the findings below. 5. On June 8, 1970 the Planning Program and Organization Committee of the Cincinnati Board of Education reported that it believed that the Board should include among its stated goals that of fostering better intercultural understanding. At the June 8, 1970 meeting the Board also resolved to consider as one of its program goals “the provision of quality interracial and intersocio-economic educational experience for both the student and the teacher of the Cincinnati Public School System, thereby giving both the student and the teacher a more realistic knowledge of the multi-cultural nature of our society.” (Box 6, Folder 4, Board Minutes of June 8, 1970 at 225.) 6. On June 29, 1970 the Board adopted the following statement as part of its “Program Goals for 1971”: F. Intercultural Understanding. It is basically desirable to have intercultural, interracial, and intersocio-economic understanding for all students in order to prepare them for citizenship in a pluralistic and democratic society and to foster cooperation and understanding rather than friction and misunderstanding within the schools themselves. Therefore, it will be one of the goals of the Cincinnati Board of Education to provide interracial and intersocio-economic educational understanding for both the students and the teachers of the Cincinnati Public School system thereby giving the students and the teachers a more realistic knowledge of the multi-cultural nature of our society. Recognizing that provincialism contributes to misunderstanding among groups separated by geography as well as other factors, the schools must devise methods for regular dialogue among representatives of different areas, bringing differences and even conflicting views into the open discussion and examination. Better intercultural understanding comes about as a result of effective communication among staff, community, and students who share in the development of common goals. Effective programs to do this job are very difficult to devise; yet the community looks more and more to the schools to help solve problems which might have their roots in the community. One suggested approach to the problem is to strengthen present community associations. Such associations may provide the needed medium of communication among staff, parents, community and students in the local school context. Much work has been done and much work still has to be done in the area of human relations, and it requires the wholehearted involvement of all groups concerned if it is to succeed. Ohio law requires the equal opportunity for every child to attend the most convenient school regardless of race, creed or national origin. With this in mind, the Board of Education supports the neighborhood school concept. Nothing in the goal set forth in this Section F shall conflict with the legal requirement of convenience nor require the voluntary or involuntary transportation of students. (Box 6, Folder 4, Board Minutes of June 29, 1970 at 255.) 7. On July 10, 1972 the Board authorized the appointment of a Task Force to Study Racial Isolation. (Box 6, Folder 5, Board Minutes of July 10, 1972 at 358.) Pursuant to Board action on September 11, 1972, the Division of Research, Statistics and Information prepared a report in which they classified schools according to the feasibility of relieving overcrowding through school district changes. Redistricting a school district was not regarded as a feasible alternative, however, “if it seemed likely that nearly all pupils transferred would be of one race and would in the situation under review tend to increase segregation in any school affected.” (Box 5, Folder 6A, No. 7.) On December 11,1972 the Board adopted the Policy on Grouping. (Box 6, Folder 5, Board Minutes of December 11, 1972 at 483.) On February 26, 1973 it received the Majority and Minority Reports of the Task Force to Study Racial Isolation. (Box 7, Folder 3, Nos. 11 and 12.) The Task Force members differed in their views, with the result that the Majority Report contained three alternative proposals and the Minority Report presented a view which differed substantially from that expressed in the first two alternatives of the Majority Report. After the Board’s receipt of the Task Force’s Reports, on March 12, 1973, Board member Robert S. Brown made the following statement which appears in the minutes of the Board meeting of that date: The Board of Education should not impose any method upon the school system, including busing, to achieve racial balance. The Board’s duty is to foster joint participation by schools and communities in recognizing and resolving educational inequities. Without mutual planning and support for acceptable and effective methods, we face the specter of the least acceptable method of all — court ordered busing, with all its limitations. We know of no community, black or white, in Cincinnati which favors this alternative. (Box 6, Folder 5, Board Minutes of March 12, 1973, emphasis in original.) 8. On March 26, 1973 the Board of Education adopted a formal policy statement, based upon the language of the 1968 Campbell Report and the Task Force Report on Education and Race, as follows: Quality integrated education is the highest goal of the Cincinnati Public Schqols. While this purpose shall remain clear, devices used to achieve this goal may vary with time and circumstances. Whenever a relevant decision is to be made, the potential for achieving integration shall be assigned a high priority. Board Policy No. 5145.1. (Box 6, Folder 5, Board Minutes of March 26, 1973.) On that same date member Brown made the following statement: STATEMENT OF MEMBER BROWN One of the unfortunate aspects of the current debate of the Racial Isolation Report is the degree to which the superficial and inflammatory issue of busing, has been permitted to obscure the paramount tragedy of segregation. I have no brief for busing except as the only method so far conceived to get children from their homes to their schools. If another way could be found, Cincinnati would not spend $1,600,000 per year, to transfer children to their “neighborhood schools.” While it is self-evident that solutions, enjoying public support and acceptance, should be adopted, as far as possible, tangential concerns, such as transportation, should not be permitted to eclipse the urgency of the problem itself. An excellent educational program in an integrated setting should be, to my mind, the most critical priority of this school board. Recent events, however, have left me unclear as to whether this priority is shared by other Board members. For that reason I recommend for adoption, the attached policy statement based on the 1968 Task Force on Race and Education, which examined the recommendations in the Campbell Report, to replace the March 1964 statement of the Board. This statement, with which board members have long been familiar, does not, as this Board should not, take any positions with respect to questions of methodology such as busing, magnet schools, or redistricting. Those issues should be resolved gradually on a pragmatic basis. It does make clear the urgency of integration as an integral part of “quality education” and justifies the careful deliberation on which we should now embark. Id. at p. 99. 9. On July 9, 1973 the Superintendent reported to the Board about steps being taken for reducing racial isolation, which were as follows: PROPOSAL FOR REDUCING RACIAL ISOLATION On March 26, 1973, the Board of Education adopted as policy “... that quality integrated education is the highest goal of the Cincinnati Public Schools. While this purpose shall remain clear, devices used to achieve this goal may vary with time and circumstances. Whenever a relevant decision is to be made, the potential for achieving integration shall be assigned a high priority.” As a matter of record, the Administration wishes to report that the following is the first step toward implementation of that policy and includes plans that will involve staff and students in September, 1973. The incidence of racially identifiable staff will be reduced through attrition and transfer. New teachers will be assigned to school on the bases of: 1) their area of training and certification, and 2) their race. The intent will be to have the racial balance of each school staff approach the racial composition of the staff of the entire school system with ten percent leeway in either direction. A number of years will be required to reach this goal through attrition; therefore, we will work with teachers and the recognized teacher organization to encourage volunteer transfers so that the goal will be reached as rapidly as possible. An open enrollment plan for students will be implemented in September, 1973, under the following conditions: 1) that the receiving schools have available space, and 2) that the transfers will improve racial balance. Those schools which are not enrolled to capacity have been identified. Numbers of students the school may receive and the racial composition of students acceptable to the receiving school have also been identified. Exemplary programs, alternate forms of education, and courses unique to a receiving school will be identified. Parents and students will be encouraged, but not coerced, to take advantage of this opportunity. (Box 6, Folder 5, Board Minutes of July 9, 1973 at 300.) On that same date Board member Ronald Temple made a statement opposing the foregoing proposal. That statement concluded: In sum, I have concluded that the only systematic educationally sound way to attack the problem of racial isolation and educational reform is through racially balanced alternative programs and schools. Ultimately this would include every school in the district. Practically, let us make a beginning this September. Id. at 302 (emphasis supplied.) 10. On August 1, 1973 Superintendent Waldrip notified the teaching staff of the inauguration of the Board’s staff balancing policy commencing September 1,1973. His letter of that date states, in part: On July 9 I set before the Board of Education and Cincinnati citizens my suggestions for reducing racial isolation within our schools. Toward that end we are inaugurating in September, 1973, a voluntary open enrollment procedure for students. We would like also to offer staff members a similar opportunity. (Box 7, Folder 4, No. 2.) B. THE EMERGENCY SCHOOL AID ACT 11. By July 1973 the Board began to formulate an application for funding under the Emergency School Aid Act (ESAA), 20 U.S.C. §§ 1601-19, which had been enacted in 1972. (Box 1, Folder 5, No. 1). The ESAA was intended to aid school districts in the voluntary reduction of minority group isolation. It included the following statement of “Congressional findings and purpose:” a) The Congress finds that the process of eliminating or preventing minority group isolation and improving the quality of education for all children often involves the expenditure of additional funds to which local educational agencies do not have access. b) The purpose of this chapter is to provide financial assistance— 1) to meet the special needs incident to the elimination of minority group segregration and discrimination among students and faculty in elementary and secondary schools; 2) to encourage the voluntary elimination, reduction or prevention of minority group isolation in elementary and secondary schools with substantial proportions of minority group stu-' dents; and 3) to aid school children in overcoming the educational disadvantages of minority group isolation. 20 U.S.C. § 1601 (1974 Supp. IV). The ESAA also expressed support for neighborhood schools, providing “Nothing in this chapter shall be construed as requiring any local educational agency which assigns students to schools on the basis of geographic attendance areas drawn on a racially nondiscriminatory basis to adopt any other method of student assignment.” 20 U.S.C. § 1618 (1974 Supp. IV). Moreover, ESAA prohibited the Act from being construed as requiring “the assignment or transportation of students or teachers in order to overcome racial imbalance.” 20 U.S.C. § 1652 (1974 Supp. IV). 12. The Emergency School Aid Act grants were administered by HEW’s Assistant Secretary for Education. Applications for ESAA funds were processed by Office of Education staff subject to the Act’s provisions and the administrative guidelines adopted by the Office of Education pursuant to the Act, 45 C.F.R. § 185.01 et seq. (1974). The Act provided for basic grants, 20 U.S.C. § 1605(a)(1), and pilot grants, 20 U.S.C. § 1605(b). The ESAA grant process involved two facets. First, was the “civil rights” portion of the review which established the school district’s eligibility for assistance. The criteria for eligibility were set forth in 20 U.S.C. § 1605 and in the corresponding regulations at 45 C.F.R. § 185.11. These provisions generally required that the school district had implemented (or would, if assistance was made available) a desegregation plan aimed at eliminating, reducing or preventing foreseeable minority group isolation in the schools. Once this “basic” eligibility was established, it was necessary to determine if any of the “limitations on eligibility” of 45 C.F.R. § 185.43 applied. The “limitations on eligibility” provided that an educational agency was ineligible for assistance if it had transferred property to discriminatory nonpublic schools, § 185.-43(a), if it had demoted or dismissed minority group personnel, § 185.43(b), if it had or maintained class assignment procedures resulting in classroom segregation, § 185.-43(c), or if it discriminated in other ways against children, § 185.43(d). The determination of whether a school desegregation plan met those eligibility criteria was made entirely by the Office of Civil Rights (OCR) and presented to the Office of Education for routine adoption. Deposition of Mary Jane Calais, at 8, 10. The chief OCR investigator who reviewed Cincinnati’s eligibility for ESAA funding was Ortha 0. Barr, Jr., a Civil Rights Specialist in HEW’s Cleveland office. He reported to the Director of the Cleveland OCR office, Ruth Hart Stromberg. Strom-berg’s immediate supervisor was OCR Regional Director, Kenneth A. Mines, who in turn reported to the OCR Director in Washington. The second prong of the grant process was an evaluation of the eligible proposals according to criteria set forth in 20 U.S.C. § 1609(c), and detailed in the objective guidelines set out at 45 C.F.R. § 185.14. These criteria included “objective” factors, such as the need for ESAA funds as indicated by the number of minority children in the district compared to other districts in the state, and the effective net reduction to be accomplished by the plan. There were also “educational and programmatic” factors, including the proposed activities, staffing, delivery of services, parent and community involvement, and resource management. 45 C.F.R. § 185.14(a), (b). Each proposal within a state was reviewed by a non-federal panel, including persons from inside and outside the state, who were of different races, and who were either community members or educational professionals. Once these evaluations were completed, the proposals which had been determined to be eligible by OCR in each state were ranked according to their scores and funded in the order of their ranking. ESAA’s “funding criteria” required that the limited available funds, (which had been apportioned among the states), be awarded to applicants “from a State ... in the order of their ranking on the basis of the criteria set out in this section until the sums allotted to such State” were exhausted. 45 C.F.R. § 185.14(c)(2). If all of the money allocated to each state was not thereby exhausted, the remaining money was reallocated to eligible projects elsewhere. C. CINCINNATI’S 1974 ESAA PROPOSAL 13. On August 2, 1973 representatives of the Cincinnati public schools, including Superintendent Donald R. Waldrip and Assistant Superintendent John Grate, met in Chicago with several ESAA program officers, officials from the Office of Civil Rights (OCR), and Mary Jane Calais, Regional Commissioner of the U.S. Office of Education (OE), Region V. (Box 1, Folder 5, No. 2.) The Cincinnati officials discussed their plan for ESAA funding, with particular attention on their desegregation plan. Id. According to the uncontroverted affidavit of John Grate, “At this time the affirmative actions of CBE [Cincinnati Board of Education], namely, voluntary transfer, staff assignment and the Aiken building program to reduce racial isolation were discussed and supportive documents transmitted. Dr. Waldrip and Mr. Grate were advised that these actions formed the basis of eligibility for ESAA funds and were encouraged to pursue application for funds.” Affidavit of John Grate, September 20, 1974, Attachment to Document 11, at 1. [Hereinafter 1974 Grate Affidavit.] 14. On August 6, 1973 Waldrip wrote to Calais indicating that Cincinnati intended to file its “application at the earliest possible funding opportunity.” (Box 1, Folder 5, No. 3.) He indicated that Cleveland OCR officials viewed the Board-approved plans to reduce racial isolation through staff assignments, student transfer, and school building construction as constituting “the beginning of eligibility.” Id. Moreover, Waldrip informed Calais that “[o]ne component of our plan calls for voluntary student transfers with alternative and exemplary programs representing incentives.” Id. Waldrip expressed his eagerness to obtain 1974 ESAA funds in order to “enhance our chances of success in the first year of our program to initiate ESAA programs to attract children and parents into the schools involved in the voluntary transfer program.” Id. 15. In September, Grate and other members of the Board staff attended meetings conducted by Ohio Department of Education and HEW officials to learn of ESAA guidelines and procedures for making application. 1974 Grate Affidavit at 1. 16. On October 5,1973 a letter of Intent to Apply for ESAA funds was filed with Louis Irons, EEO Program Manager, U.S. Office of Education Region V. Id. 17. In October the Board adopted the Report of its Facilities Committee which recommended that approximately $1.4 million “be expended to enlarge the capacity and enhance the design of the new elementary school in the Cheviot-Midway-West-wood area so as to permit construction of a magnet school which will reduce racial isolation.” (Box 6, Folder 5, Board Minutes of October 8, 1973.) 18. On October 24, 1973 the Superintendent’s Administrative Conference decided to focus the ESAA program on an Aiken High School District Instructional Component, a Staff Development Component, and a magnet school component. 1974 Grate Affidavit at 2. 19. John Grate headed the proposal development task force which began preparing the manuscript and collecting the necessary data. Id. 20. On November 13, 1973 Grate telephoned an unidentified Equal Opportunity Specialist in HEW’s Chicago office to inquire about assurances needed for the ESAA application. (Box 1, Folder 5, No. 5.) 21. During November the eligibility and program components of the Board’s application were the subject of meetings with school administrators and consultants, the Aiken Internal Task Force, the District-Wide Advisory Council made up of community and neighborhood representatives, and personnel from the Ohio Department of Education. 1974 Grate Affidavit at 2. 22. At this time the Cincinnati Board of Education included Robert S. Brown, Janet S. Duff, Rev. Tecumseh X. Graham, Virginia K. Griffin, Charles D. Lindberg, Mary T. Schloss, and Ronald J. Temple. School Board elections in November, 1973 resulted in the election of two new members, scheduled to take office in January, 1974. The new Board was considered to be more conservative regarding integration than the outgoing Board. The so-called “liberal” Board members, including Brown, Duff, Graham, and Temple, reportedly believed “that the ‘conservative’ board would be unlikely to continue the steps already taken toward reduction of racial isolation in the school district.” “Board May Integrate Schools,” Cincinnati Post, December 10, 1973. (Box 6, Folder 7, No. 1.) Brown was quoted as having said that the Board election results showed that reduction of racial isolation on a gradual basis was an option “no longer open to us.” Id. 23. At the December 10, 1973 Board meeting, member Ronald J. Temple moved for the adoption of a “Resolution Ordering the Racial and Economic Integration of Pupils in the Cincinnati Public Schools.” (Box 6, Folder 5, Board Minutes of December 10, 1973 at 459.) The resolution called for the rescission of school district lines, assignment of children to schools on the basis of race and family income, and busing to achieve that racial and economic integration by September 1, 1974. Id. Lame-duck Board members Graham and Duff joined Temple and Brown in voting for the adoption of the resolution. Id. At the same meeting, Superintendent Waldrip recommended that the Board apply for ESAA funds by the December 26, 1973 deadline. Id. at 469. 24. During December a draft of the ESAA application was submitted to schools, central administration, and the District-Wide Advisory Council for review and comment. 1974 Grate Affidavit. A Public Hearing was held on December 17, 1973. (Box 1, Folder 1, ESAA Application at VI-8, 1-23.) 25. Cincinnati’s application for ESAA funding was submitted on December 26, 1973. (Box 1, Folder 1.) (1) CINCINNATI’S ELIGIBILITY FOR FUNDING 26. Two days after the submission of Cincinnati’s proposal, on December 28, 1973, a form titled “OCR Verification of Applicant’s Plan Status” was completed by the Office of Civil Rights. (Box 1, Folder 1.) The form indicated that the Board could be considered for ESAA assistance because it “has adopted and is implementing” a plan “to eliminate or reduce minority group isolation in one or more of [Cincinnati’s] minority group isolated schools,” as required by 45 C.F.R. § 185.11(b)(2). 27. Cincinnati’s desegregation plan was described in Section II of the application, entitled “Plan for Reducing Racial Isolation.” According to the application, Cincinnati’s eligibility for ESAA funds was “built upon the implementation of voluntary plans to reduce minority group isolation in the school district.” Id. at II — 1. Three specific plans were cited as having been implemented or being in the process of implementation to reduce or prevent racial isolation, including a building program, transfers of staff, and an open enrollment plan. Id. The Board’s December 10, 1973 Resolution was included as the last two pages of this section, at 11-15 to 17, but this plan was otherwise neither integrated into the application, nor even mentioned. For example, the ESAA Program Overview on IV-25 indicated that there were three components to it, viz, the Aiken Area Instructional Component, Staff Development, and Magnet Schools; there is no mention of compulsory busing or the elimination of all neighborhood school districts. The Timetable of Major Events in the ESAA Program, listing steps necessary for its preparation and implementation, at IV-116 to 119, makes no mention of the assignment of students to schools on racial and economic bases, nor of the September 1, 1974 deadline for achieving that goal via compulsory busing. We think it significant that there is no indication in the entire ESAA application of any procedures to implement the December 10 Resolution or to make it a part of the plan for reducing racial isolation. Thus we disagree with defendants, and find that despite its inclusion in the application, the December 10 Resolution did not constitute an integral part of Cincinnati’s overall program for achieving desegregation. (Cf. Doc. 79 at 7.) 28. At its regular meeting on January 14, 1974 the Board approved a Plan for Quality Integrated Education. Five Board members, including Robert Braddock, Virginia K. Griffin, Henry Kasson, Mary T. Schloss, and Charles D. Liridberg, voted in favor of the resolution while Robert S. Brown and Ronald J. Temple opposed it. (Box 6, Folder 6, Board Minutes of January 14, 1974 at 15.) In addition, the Board approved some Findings concerning the December 10 “Brown-Temple” Resolution, including assertions that the Resolution had not been in good faith, that it was “incomplete, inaccurate, misleading, and erroneous,” that it was unworkable and inadequate, and that it resulted in unclear and conflicting directives. Id. at 9-13. 29. The Plan for Quality Integrated Education adopted in January 1974 had the following features: a) Mandatory balancing of teaching staff by September 1, 1974, so that each school’s teaching staff would substantially approximate the racial balance of the teaching staff district wide. b) An immediate affirmative action program for hiring of non-professional personnel, such that the racial balance of the non-professional staff approximate the racial balance of the adult population of the school district. c) An immediate affirmative action plan arrived at by substantially increasing the percentage of black administrators and supervisors within the school system, to continue even during times of staff reduction. d) An expansion of the Open Enrollment Program, whereby students could transfer to another school if that school had the capacity and if the transfer would improve racial balance. e) An expansion of the Alternative Schools Program. f) An increase in the opportunity for interracial interchanges among students. g) An attempt to cooperate with other school districts to insure quality integrated education to all students in the metropolitan area. h) An across-the-board effort to upgrade the quality of education in all schools. Id. at 13-15. ’ 30. The day after the Board’s adoption of the Plan, HEW’s Equal Opportunity Specialist O.O. Barr wrote to J.C. Johnson, President of the Cincinnati Chapter of the NAACP. (Box 1, Folder 5, No. 8.) Barr indicated that he had been unable to reach Johnson by telephone at the Cincinnati NAACP office, and that he was “most anxious” to speak with Johnson “concerning the situation in the Cincinnati Public Schools.” Id. Mr. Barr did talk with Johnson January 18, 1974 (Box 1, Folder 5, No. 11). Barr then wrote to Johnson on January 21 to request a meeting with him in Cincinnati during the week of March 4. Id. In that letter Barr requested that Johnson advise him “in the event your organization files any legal actions against the Cincinnati School Board.” Id. 31. On January 18, 1974 Barr also called John Grate about the need for additional information to establish Cincinnati’s ESAA eligibility. (Box 1, Folder 5, No. 9.) That same day Ruth Hart Stromberg (Chief of HEW’s Elementary and Secondary Education Board OCR, Cleveland) wrote to Superintendent Waldrip reiterating Barr’s message about the importance of providing additional information. Id. Although Stromberg’s six-page letter set forth ten points about which she sought additional information, she was most concerned with Part I which she labeled, “Implementation of Desegregation Plan.” Under that heading, she indicated that “there is a serious question” whether Cincinnati had “satisfied the eligibility for assistance requirements as set forth in Section 185.11 of the Regulations.” Id. She also stated that “[i]t was most important” to receive the material requested in Part I of the letter as soon as possible.” Id. In Part I, Stromberg acknowledged that “the district’s application does not specifically allege reliance upon the desegregation plan adopted by the Board of Education on December 10, 1973,” but she nonetheless wanted information about the steps underway or projected for its implementation. Id. She also told Waldrip that he should contact Mr. Barr if he had any questions. 32. Mr. Grate sent some of the requested material to Mr. Barr on February 1, 1974. (Box 1, Folder 5, No. 13.) As of February 8 Stromberg had not received it, however, and she wrote to Waldrip, emphasizing “the absolute necessity of furnishing evidence at the earliest'possible time that the provisions of Section 185.11 of the Regulations have been satisfied. This matter is quite urgent because until such time as your District has demonstrated that it has met the eligibility requirements of Section 185.11, there is no basis for conducting a further review.” (Box 1, Folder 5, No. 15.) The requested material had apparently been addressed incorrectly. (Box 1, Folder 6, No. 16.) Replacement materials were sent February 11 and additional materials were sent February 20. (Id., Nos. 17, 18.) Mr. Barr requested additional information and documents on February 22, 1974. (Id., No. 20.) 33. HEW sent an OCR review team to conduct an on-site civil rights eligibility review from March 4-7, 1974. On the first day of that review Barr met with NAACP representative Johnson as prearranged through correspondence dated January 21, January 28, February 2, and February 28 (Box 1, Folder 6, Nos. 10, 11, 14 and 22.) The notes from the meeting are brief, but they indicate that Barr and Johnson discussed discrimination in private schools and the impact of some proposed budget reductions on teacher in-service training and special programs. (Box 1, Folder 5, No. 24.) Barr was also given the telephone numbers of Mr. and Mrs. Spencer. Id. 34. On March 7, 1974 the OCR review team met with Superintendent Waldrip, John Grate, and James Jacobs for a closing conference. The typed minutes of the meeting prepared by Barr and another OCR representative indicate that the plaintiffs were advised of specific additional materials needed to assure technical compliance. (Box 1, Folder 5, No. 25.) With regard to “Implementation of Desegregation Plan,” Waldrip was told to keep OCR “fully informed regarding any and all steps taken to implement any desegregation plan.” Moreover, he was told that “[t]his is a potential legal problem in view of the 6th. Circuits [sic] position regarding implementation of desegregation plans.” Id. When Waldrip asked “whether it would have been better to have left the December 10, 1973 Resolution out of the Application,” he was told that it would have made no difference “because the passage of the Resolution was a matter of record.” Id. In response to Waldrip’s question as to “whether the adoption of the January 14, 1974 Resolution made the District ineligible,” he was informed that “this was a legal question” and that “OCR only gathered the facts.” 35. Although it is unclear from the record when the “Title VII ESAA Review Report” (Box 1, Folder 4) resulting from this inspection was actually completed, the Report refers to events as late as April 18, 1974, so it could not have been completed prior to the date. The ESAA Review Report indicated that Cincinnati’s “[bjasic ESAA eligibility was founded upon implementation of an Open Enrollment Plan beginning September 1973.” Id. Although the “very minimal” reduction of minority group isolation resulting from this plan did not make Cincinnati ineligible for funding, the Report indi