Elbert v. United States Department of Agriculture

CourtDistrict Court, D. Minnesota
DecidedJune 29, 2021
Docket0:18-cv-01574
StatusUnknown

This text of Elbert v. United States Department of Agriculture (Elbert v. United States Department of Agriculture) is published on Counsel Stack Legal Research, covering District Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Elbert v. United States Department of Agriculture, (mnd 2021).

Opinion

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

RICH ELBERT, JEFF A. KOSEK, REICHMANN

LAND & CATTLE LLP, LUDOWESE A.E. INC.,

and MICHAEL STAMER, individually and

on behalf of a class of similarly situated

persons, Civil No. 18-1574 (JRT/TNL)

Plaintiffs,

v.

UNITED STATES DEPARTMENT OF MEMORANDUM OPINION AND ORDER AGRICULTURE, RISK MANAGEMENT

AGENCY, and FEDERAL CROP INSURANCE CORPORATION,

Defendants.

John D. Tallman, JOHN D. TALLMAN PLLC, 4020 East Beltline Avenue Northeast, Suite 101, Grand Rapids, MI 49525, for plaintiffs.

David W. Fuller, UNITED STATES ATTORNEY’S OFFICE, 300 South Fourth Street, Suite 600, Minneapolis, MN 55415, for defendants.

Plaintiffs, dark red kidney bean farmers from Minnesota, purchased revenue coverage, the Dry Bean Revenue Endorsement (“Endorsement”), to protect against a decline in bean prices as measured by the difference between the spring projected price and the fall harvest price. In 2015, such a decline occurred. However, Plaintiffs were told that, because there was not enough published pricing data to establish a harvest price, it would be set equal to the projected price per the terms of the Endorsement, which converted their revenue coverage into mere yield protection. As a result, they received no recompense.

Plaintiffs brought claims under the Administrative Procedure Act (“APA”) against Defendants—the United States Department of Agriculture (“USDA”), the Risk Management Agency (“RMA”), and the Federal Crop Insurance Corporation (“FCIC”)— arguing that it was arbitrary and capricious for Defendants to allow the Endorsement to

convert their revenue coverage into yield protection. Both parties then moved for summary judgment. On August 21, 2020, the Court granted summary judgment to Defendants.

However, when doing so, the Court relied on regulatory language not yet in effect at the time of the Endorsement’s creation. Additionally, key facts—namely, that substantial changes were made to the relevant policy provision of the Endorsement after the FCIC Board (“Board”) had approved a markedly different one—were only introduced at the last

minute, months after oral argument. Given these compelling circumstances, ones potentially implicating errors of law or fact, the Court granted Plaintiffs permission to file a motion to reconsider. Upon reconsideration, the Court finds that (1) the policy language approved by the

Board was not the same as that finalized in the Endorsement offered for sale; (2) post- approval changes made to the language were “significant” under the regulations then in effect and therefore required resubmission to the Board, which did not occur; and (3) the RMA did not have the authority to independently approve and help finalize these changes in the Endorsement. As such, Defendants violated the APA. Thus, the Court will reverse

its earlier decision, and will deny summary judgment to Defendants and grant summary judgment to Plaintiffs.

BACKGROUND I. FACTUAL BACKGROUND In an earlier decision, Elbert v. U.S. Dep’t of Agric., No. 18-1574, 2020 WL 4926635,

at *2 (D. Minn. Aug. 21, 2020), the Court laid out the relevant facts in detail, which the Court will summarize here. Additionally, the Court will supplement the background as needed.1 A. Federal Crop Insurance

The FCIC provides reinsurance for crop insurance policies approved pursuant to the Federal Crop Insurance Act (“FCIA”). 7 U.S.C. § 1508. Private-party applicants design such policies and policy provisions, and then make what is termed a 508(h) submission to the Board. Id. § 1508(h)(1)(A). The Board must approve a 508(h) submission if it

determines, among other things, that the crop insurance policy will adequately protect the interests of producers. Id. § 1508(h)(3)(A)(i).

1 Additional citations to the administrative record will be paginated with the original FCIC numbering for ease of review and will include a reference to the corresponding docket number. The administrative record was certified as containing “those documents considered by the decision-maker.” (Decl. Zachary White ¶ 4, Aug. 14, 2019, Docket No. 115.) B. The Pulse-Crop Policy 1. The 508(h) Submission

In the fall of 2011, Watts and Associates, Inc., the Northarvest Bean Growers Association, and the USA Dry Pea and Lentil Council (collectively, “Watts”) made a 508(h) submission to the Board.2 (FCIC827, Docket No. 116-34.) For an additional premium, Watts proposed to offer pulse-crop farmers revenue coverage to insure against crop-price

declines, as measured by the difference between the spring projected price and the fall harvest price.3 (See id. at FCIC830.) The Watts submission set out that, because there is no futures market for pulse

crops, the projected price would be set by obtaining the contract prices from processors in January and February. (Id. at FCIC875.) The harvest price would be set based upon weekly sales-price data published by the AMS Bean Market News during the fall months. (Id. at FCIC875–876.)

If AMS data was insufficient to set the harvest price for a crop year, the proposed policy provisions, specifically section 3(c)(2), set out that “[a] harvest price will be determined and announced by FCIC in lieu of the terms contained in the definition of harvest price[.]” (Id. at FCIC988.) Similarly, the Handbook proposed to accompany the

policy stated that “[i]f a harvest price cannot be determined . . . [the] RMA will establish

2 The concept behind the proposed policy was first approved for further development by the Board in November 2010. (FCIC764, Docket No. 116-27.) 3 Pulse crops are legumes harvested for their dry seed. the harvest price.” (Id. at FCIC1017.) In the rating methods section of the submission, Watts also noted that it “recommend[ed] that the projected price be substituted for any

missing AMS monthly harvest price observations” when the harvest price cannot be determined. (Id. at FCIC894.) 2. Expert Review of the Submission

On November 17, 2011, the Board approved expert review of the submission. (FCIC1174, Docket No. 116-35). One expert cautioned that “[h]istorically, there have been occasions when AMS failed to report harvest price data during these months for some types of dry beans.” (FCIC1239, Docket No. 116-38.) The expert also warned

against Watts’s recommendation: In the extreme case where AMS fails to report a price for September, October, and November the harvest price would be equal to the projected price and the revenue insurance product . . . would revert to a yield insurance product . . . We understand the need to have a contingency plan for situations when AMS fails to report a price. However, it seems unfair to growers who pay for revenue insurance for that contingency plan to effectively shift the policy away from revenue coverage and toward yield coverage.4

(Id. at FCIC1240.)

4 As the name implies, yield protection only covers the value of expected crop yields as projected in the spring, not the loss of revenue due to a price decline in the fall. See 7 C.F.R. § 457.8 (defining “revenue protection” and “yield protection”). 3. Docketing of the Submission After expert review of the submission, the RMA presented an executive summary

and docket report for the Board’s review. (FCIC1437, Docket No. 116-45.) The RMA commented upon a general concern involving the recommendation to substitute the projected price for the harvest price when AMS prices were not available, as this would “essentially convert[] the revenue offer to yield protection with the insured paying the

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