The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
Invoking federal-question jurisdiction under 28 U.S.C. § 1331,
the State of Illinois ("Illinois") seeks judicial review
of the disallowance by Secretary Margaret Heckler ("Secretary")
of the United States Department of Health and Human Services
("HHS") of reimbursement claimed by Illinois under Title XX of
the Social Security Act (the "Act"),
42 U.S.C. § 1397-1397f.*fn1 Each party has moved for summary judgment
under Fed.R.Civ.P. ("Rule") 56. For the reasons stated in this
memorandum opinion and order, Secretary's motion is granted and
Illinois' motion is denied.
Illinois has long provided free educational services for
handicapped children, consistent with the declaration in Ill.
Const. art. X, § 1 that every Illinois child has the right to a
"free common school education." See Ill.Rev.Stat. ch. 122, §§
14-1 to 14-12 (in the form enacted by the School Code of 1961
and hence applicable to the years at issue in this case). In
the wake of the federal Education for All Handicapped Children
Act of 1975, 20 U.S.C. § 1411-1420 ("EAHCA"), Illinois stepped
up its efforts to provide "a free appropriate public
educational to all handicapped children" (EAHCA § 1412(3)) and
sought to qualify for federal financial assistance (see
Illinois Mem.Ex. E).
Local school districts, under the guidance of the Illinois
Office of Education, are responsible for identifying children
in need of special education (id.). Other state agencies may
then participate in the treatment and education of the
students, but the Office of Education is charged with
overseeing the educational programs offered by the other
agencies (Illinois Mem. 9; Ill.Rev. Stat. ch. 122, ¶ 14-8.01,
part of the current version of the School Code).
During nearly the entire period relevant to this action,
Illinois' Department of Children and Family Services ("DCFS")
operated three residential schools for the education of
1. the Illinois Braille and Sight Saving School
(now renamed the Illinois School for the Visually
2. the Illinois School for the Deaf; and
Students at those schools were drawn from districts all over
the state that did not offer comparable programs. Indeed, the
lack of classes at the local level was a prerequisite for
admission to at least the first two schools (Illinois Mem. 7).
Illinois has applied to HHS for reimbursement of funds
expended between October 1, 1975 and March 31, 1980 on various
programs covered by Title XX. Its claim included $9,104,702
for operation of the DCFS schools, comprising:
1. $6,311,908 for educational programs and
2. $2,792,804 for room and board expenses.
Initially an HHS regional administrator disallowed all the
claimed expenses. On July 29, 1983 that decision became
Secretary's when the HHS Grant Appeals Board ("Board")
affirmed the disallowance (Illinois Mem.Ex. A).*fn4
Timeliness of This Action
Secretary first argues this action (brought January 15,
1985) is untimely because it was filed nearly 18 months after
Board's decision. Although she concedes there is no directly
applicable statute of limitations, she argues alternatively:
1. Illinois' action is barred by the equitable
doctrine of laches.
2. This Court should (a) borrow a 60-day
statute of limitations from other types of
actions authorized under the Act and (b) apply
that statute retroactively to bar Illinois'
Neither alternative is tenable.
Lingenfelter v. Keystone Consolidated Industries, Inc.,
691 F.2d 339, 340 (7th Cir. 1982) reaffirmed that a laches defense
cannot succeed without a showing of both plaintiff's lack of
diligence and prejudice to defendant:
Laches is principally a question of the inequity
of permitting a claim to be enforced. It is
unlike limitation, which is based merely on time.
Rather, laches is based upon changes of
conditions or relationships involved with the
Only last week our Court of Appeals again confirmed that
twofold aspect of a laches defense (Jeffries v. CTA,
770 F.2d 676, 679 (7th Cir. 1985)):
Laches will bar this claim only if [plaintiff]
had inexcusably delayed in asserting it and
[defendant] has been materially prejudiced by the
Secretary has simply failed to show any "changes of
conditions" or other prejudice (material or otherwise) in
this case. Instead her Mem. 23-28 conjures up the specter of
the administrative havoc and uncertainty that could result if
many other litigants delayed as long as Illinois has in seeking
review of disallowances. Thus Secretary urges this Court to bar
Illinois' claim strictly as a matter of policy and as a
speculative means of deterring other litigants from following
But an appeal to equitable relief must focus on the
circumstances of this case, not another and purely hypothetical
one. Effectively Secretary asks this Court, in the exercise of
its equitable powers, to establish a rigid rule of law under
which any petition for review of a disallowance, if filed 17 or
more months after Board's decision, would be barred regardless
of the individual circumstances of the case.
Such rigidity is antithetic to the very concept of equity.
As Black's Law Dictionary 484 (5th ed. 1979) reflects
(mirroring the origins of courts of equity), equity itself
involves the rejection of rigid rules to accomplish what is
fair and just in a particular situation. Absent a showing of
material prejudice to Secretary (and none has been made), the
equitable doctrine of laches is inapplicable to the
circumstances of this case.
2. Retroactive Application of a Borrowed Statute
Secretary then argues at great length this Court should
borrow and apply
the 60-day statute of limitations applicable to many other
Social Security Act claims, just as the Supreme Court has
applied "borrowed" limitations periods in Wilson v. Garcia, ___
U.S. ___, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985) and DelCostello
v. International Brotherhood of Teamsters, 462 U.S. 151, 103
S.Ct. 2281, 76 L.Ed.2d 476 (1983). She asserts courts are the
appropriate governmental arm to establish a limitations period
for disallowance reviews, because jurisdiction to entertain
such reviews in the first place has been implied by courts
rather than expressly conferred by Congress. State of Illinois,
Department of Public Aid v. Schweiker, 707 F.2d 273, 275, 277
(7th Cir. 1983).
But even if it were assumed proper to apply a "borrowed"
limitations period, and even if Secretary's proposal of a
60-day period were deemed appropriate to that end, that period
should not be applied retroactively to bar Illinois' claim.
Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349,
355-56, 30 L.Ed.2d 296 (1971) teaches a decision may not be
applied retroactively if each of two conditions obtains:
1. That new decision resolves "an issue of
first impression whose resolution was not ...