Hy-On-A-Hill Farm v. Agriculture CV-00-443-JD 07/31/01 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Hy-On-A-Hill Trout Farm, Inc.
v. Civil No. 00-443-JD Opinion No. 2001 DNH 137 Dan Glickman, Secretary of Agriculture, et al.
O R D E R
The plaintiff, Hy-On-A-Hill Trout Farm, Inc., seeks review
of the decision of the National Appeals Division of the United
States Department of Agriculture ("USDA") denying the Farm
benefits under the 1999 Crop Disaster Program. The Farm also
alleges that the decision was a discriminatory application of the
Program's requirements in violation of the Farm's Fifth Amendment
equal protection and due process rights. The defendants, Dan
Glickman, Secretary of Agriculture, Norman G. Cooper, Director,
National Appeals Division, and James McConaha, State Executive
Director of the USDA Farm Service Agency, move for summary
judgment. The Farm objects.
Standard of Review
Summary judgment is appropriate when "the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." Fed. R. Civ. P.
56(c). The party seeking summary judgment must first demonstrate
the absence of a genuine issue of material fact in the record.
See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) . All
reasonable inferences and all credibility issues are resolved in
favor of the nonmoving party. See Barreto-Rivera v. Medina-
Varqas, 168 F.3d 42, 45 (1st Cir. 1999) .
A party opposing a properly supported motion for summary
judgment must present competent evidence of record that shows a
genuine issue for trial. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 256 (1986); Torres v. E.I. Dupont De Nemours & Co.,
219 F.3d 13, 18 (1st Cir. 2000). A material fact is one that
"has the potential to change the outcome of the suit under the
governing law" and a factual dispute is genuine if "the evidence
about the fact is such that a reasonable jury could resolve the
point in favor of the nonmoving party." Grant's Dairy--Me., LLC
v. Comm'r of Me. Dep't of Aqric., Food & Rural Res., 232 F.3d 8,
14 (1st Cir. 2000) .
Background
Hy-On-A-Hill Trout Farm, Inc. operates a commercial fish
hatchery in Plainfield, New Hampshire, raising brown and rainbow
2 trout for stocking and for human consumption. The Farm operated
for twenty-five years without having water shortages caused by
drought. The Farm experienced its first large trout losses due
to drought conditions during the spring and summer of 1999.
The Farm applied in January of 2000 for assistance under the
1999 Crop Disaster Program. The 1999 Crop Disaster Program was
enacted "to make emergency financial assistance available to
producers on a farm that have incurred losses in a 1999 crop due
to a disaster, as determined by the Secretary." Agriculture,
Rural Development, Food and Drug Administration, and Related
Agencies Appropriations Act of 2000, Pub. L. 106-78, Title VIII,
§ 801(a), 113 Stat. 1175, as amended Pub. L. 106-113, 113 Stat.
1536 (1999) (hereafter, the pertinent part of the Act will be
referred as the 1999 Crop Disaster Program or Program and will be
cited by section only without repeating the public law citation).
The terms and conditions applicable to the 1999 Crop Disaster
Program are provided in regulations at 7 C.F.R. Part 1478. See §
8 2 4 (a). In addition, the Deputy Administrator for Farm Programs
issued a handbook, the "Handbook 2-DAP," for guidance in the
administration of the 1999 Crop Disaster Program.
The Farm's application for relief was denied by the county
committee of the Farm Service Agency based on a provision of the
Deputy Administrator's handbook. The Farm appealed the decision
3 to the National Appeals Division. After an evidentiary hearing,
the Hearing Officer held that the provision of the handbook
relied on by the county committee was stricter than the
applicable regulations and that the handbook provision did not
"logically flow" from the published regulations. The county
committee's decision was reversed as erroneous.
The Administrator of the Farm Service Agency filed a request
with the Director of the National Appeals Division for review of
the Hearing Officer's decision. The Director reversed,
concluding that the county committee's rejection of the Farm's
application was not erroneous. In support of the determination,
the Director reasoned that the Secretary of Agriculture
authorized the Deputy Administrator of Farm Programs to issue
instructions on how to implement the Crop Disaster Program, that
the regulations required aquacultural species to be raised in a
controlled environment, including an adequate water supply, and
that the Farm's loss of trout was due to an inadequate water
supply. The Farm then brought suit in this court.
Discussion
The Farm brings two claims for relief. First, the Farm
contends that the decision to deny the Farm's application for
Program benefits must be set aside under the review provided by
4 the Administrative Procedures Act at 5 U.S.C.A. § 706 and asks
that it be awarded benefits under the Program. Second, the Farm
contends that the decision was discriminatory in violation of the
Fifth Amendment because other aquaculture farmers received
benefits for fish losses caused by drought and agriculture
farmers who did not comply with the requirements of the 1999 Crop
Disaster Program also received benefits.1 The defendants move
for summary judgment on both claims.
A. Review under the Administrative Procedures Act
Judicial review of a decision made by an agency of the
Department of Agriculture is governed by the Administrative
Procedures Act, as codified at 5 U.S.C.A. § 706. See 7 U.S.C.A.
§ 6999. As is pertinent to this case: "[t]he reviewing court
shall- . . . hold unlawful and set aside agency action, findings,
and conclusions found to be- (A) arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law; . . . (C)
in excess of statutory jurisdiction, authority, or limitations,
or short of statutory right; . . . (E) unsupported by substantial
1The Farm appears to distinguish its first claim, seeking review under the APA, from its second claim, stating a constitutional violation. As such, it appears that the Farm is not seeking a second basis for review under the APA, pursuant to 5 U.S.C.A. § 706(2)(B), by alleging a constitutional violation.
5 evidence § 706(2) . "In making the foregoing
determinations, the court shall review the whole record or those
parts of it cited by a party, and due account shall betaken of
the rule of prejudicial error." § 706.
_____ 1. The record for review.
The defendants move to strike an exhibit submitted by the
Farm in support of its objection to summary judgment. Since the
court has not considered the disputed exhibit in ruling on the
motion for summary judgment, it is not necessary to decide
whether the exhibit should be stricken from the record. For
purposes of the present motion for summary judgment, the
defendants have preserved their right to object to the disputed
exhibit. See Perez v. Volvo Car Corp.. 247 F.3d 303, 314 (1st
Cir. 2001). The motion is deemed moot and is denied without
prej udice.
2. Provisions of the 1999 Crop Disaster Program used to
decide the Farm's application.
The Act implementing the 1999 Crop Disaster Program
authorizes funds from the Commodity Credit Corporation for
emergency financial assistance "to producers on a farm that have
incurred losses in a 1999 crop due to a disaster, as determined
6 by the Secretary." § 801(a). The Program covers losses in
quantity or quality to crops and "severe economic losses due to
damaging weather or related condition" as qualifying losses and
lists losses to fisheries as a covered crop. See § 801(c), (d).
Congress authorized the Secretary and the Commodity Credit
Corporation to "promulgate such regulations as are necessary to
implement [the Program]." § 824(a). Congress exempted the
promulgation of Program regulations from certain restrictions
including the notice and comment requirements of 5 U.S.C.A. §
553. See i d .
The Program regulations provide the terms and conditions by
which "the Secretary of Agriculture will make disaster payments
available to certain producers who have incurred losses in
quantity or quality of their crops due to disasters." 7 C.F.R. §
147 8.1. The Program was to be "carried out in the field by State
and county Farm Service Agency (FSA) committees" who "do not have
the authority to modify or waive any of the provisions" of the
applicable regulations. 7 C.F.R. § 1478.2(a), (b). The
regulations provide that "[p]roducers will be able to receive
benefits under this part for losses to eligible 1999 crops as
determined by the Secretary." Id.; see also § 1478.4(a).
"Disaster means damaging weather including drought . . ." and
eligible crops include aquaculture. 7 C.F.R. § 1478.3.
7 "Aquaculture means the reproduction and rearing of aquatic
species in controlled or selected environments . . . Id.
"Aquacultural species means any species of aquatic organism grown
as food for human consumption . . . propagated and reared in an
aquatic medium by a commercial operator on private property in
water in a controlled environment." 7 C.F.R. § 1437.3 (as
incorporated by § 1478.3). Disaster benefits are available only
for "aquacultural species that were planted or seeded on property
owned or leased by the producer where that land has readily
identifiable boundaries, and over which the producer has total
control of the waterbed and the ground under the waterbed," but
are not available for naturally growing species. 7 C.F.R. §
1478.18.
To approve benefits for a producer, the county committee
must determine that because of a disaster, the producer sustained
a loss in excess of thirty-five percent of the value of the crop.
See 7 C.F.R. § 1478.11(a)(3). Disaster benefits are not
available for value losses caused by "poor management decisions
or poor farming practices as determined by the county committee
on a case-by-case basis" or "[t]hat are not as a result of a
natural disaster." § 1478.11(b)(1), (3).
The handbook issued by the Deputy Administrator of the FSA
included a section pertaining to aquaculture which states that "eligible aquacultural species must be raised: ... in water in
a controlled environment." Handbook 5 51A, Admin. Rec. at 6.
The handbook defined the irrigation and water quality components
of a controlled environment as follows: "Drought shall not be a
major peril as all aquacultural operators shall have systems and
practices in place to ensure that the aquacultural species have
adequate, quality water or aquatic medium." Handbook 5 51D,
Admin. Rec. at 8. In evaluating the producer's control over
irrigation and water quality, the county committee was to
consider "whether the source of water is adequate to ensure
continued growth and survival of the aquacultural species even in
the event of severe drought [and] whether the aquacultural
facility sustained losses in previous years because of water
shortages or water supply interruption." Id. The handbook
further provided that operators who did not provide the required
growing environments were ineligible for benefits. See Handbook
5 51F, Admin. Rec. at 10.
In this case, the county committee denied the Farm's
application based on the definition of controlled environment in
the handbook. Because the Farm lost trout due to severe drought,
the committee reasoned that the Farm did not have systems and
practices in place to ensure the survival of the trout in the
event of severe drought. On appeal, the National Appeals
9 Division Hearing Officer found that the committee's determination
was erroneous in light of the Farm's twenty-five year history
without a loss of trout and that the handbook provision, being
stricter than the applicable regulations, did not logically flow
from the regulations. On review, the Director of the National
Appeals Division reversed the Hearing Officer's determination,
holding that the provisions of the handbook were authorized and
consistent with the regulatory requirements that aquacultural
operators provide a controlled environment and an adequate water
supply.
3. Review of the decision to deny benefits.
The defendants contend that the decision to deny the Farm's
application for benefits was rational and entirely consistent
with the applicable regulations. As such, the defendants' motion
addresses review pursuant to 5 U.S.C.A. § 706(2)(A), but does not
address the other standards under § 706(2), that are alleged in
the Farm's complaint. Therefore, for purposes of the present
motion, the court's review is limited to § 706(2)(A).
Under § 706(2)(A), the court reviews the agency's decision
to determine whether it was "arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." In that
context, "the court may not substitute its judgment for that of
10 agency officials but rather must focus on whether 'the agency[]
examine[d] the relevant data and articulate[d] a satisfactory
explanation for its action including a 'rational connection
between the facts found and the choice made.'" Sistema
Universitario Ana G. Mendez v. Rilev, 234 F.3d 112 , 111 (1st Cir. 2000) (quoting Motor Vehicle Mfrs. Ass'n, Inc. v. State Farm M u t .
A u t o . Ins. C o ., 463 U.S. 29, 43 (1983)). Although the court's
review of agency action is deferential, "in order to avoid being
deemed arbitrary and capricious, an agency decision must be
rational." Citizens Awareness Network, Inc. v. United States
Nuclear Regulatory Comm'n, 59 F.3d 284, 290 (1st Cir. 1995) .
Agency interpretations made pursuant to an express
delegation of authority by Congress to the agency to fill a
specific statutory gap are binding unless they are "procedurally
defective, arbitrary or capricious in substance, or manifestly
contrary to the statute." United States v. Mead Corp., 121 S. Ct
2164, 2171 (2001) (citing Chevron U.S.A. Inc. v. Natural Res.
Def. Council, 467 U.S. 837, 843-44 (1984)). In this case,
neither side disputes the deference due the regulations
promulgated by the Secretary pursuant to § 824 and codified at 7
C.F.R. Part 1478. Therefore, for purposes of this case, those
regulations are deemed to be binding.
The defendants argue that the handbook provisions, on which
11 the decision to deny the Farm benefits was based, are also
entitled to deference as the agency's controlling interpretation
of the Program.2 In that regard, the defendants contend that the
handbook appropriately defines "controlled environment," used in
the regulatory definition of aquaculture, to exclude drought.3
The Farm contends that the handbook provisions are contrary to
the Program's implementing statute, as interpreted by the
regulations, and far from being entitled to deference, are
grounds for setting aside the defendants' decision. The
defendants concede that the regulations include drought within
the definition of covered disasters for which aquaculture
2Since the defendants filed their motion for summary judgment, the standard for assessing deference has been clarified by the Supreme Court in Mea d , 121 S. C t . at 2171-77. Although the defendants filed a reply memorandum, after Mead issued, to further argue the issue of deference, they did not address the Mead analysis.
3The record offers no basis to conclude that the handbook was an authorized, authoritative, or persuasive interpretation of the applicable regulations. See Mead Co r p ., 121 S. C t . at 2175. In addition, contrary to the handbook definition, the term "controlled environment," when read in context, appears to refer to an environment that allows the reproduction and rearing of specific aquatic species, which were planted or seeded by the operator, and that prevents naturally growing species from entering the aquaculture environment. See 7 C.F.R. §§ 1478.3, 1478.18, & 1437.3. In other words, "controlled environment" appears to focus on the type of aquatic species that is being raised, planted versus naturally occurring, not the ability of the operator to avoid the effects of drought.
12 operators may be eligible to receive benefits and acknowledge
that the handbook imposes an "exclusion of drought as a covered
peril for aquaculture." Def. Mem. at 13.
Nevertheless, the defendants argue that aquaculture is
appropriately excluded from coverage for drought losses based on
policy considerations. In support of that theory, the defendants
contend that aquaculture operators can avoid the effects of
drought with appropriate practices, which is not possible with
respect to other weather-related disasters. As a result, the
defendants argue, it is appropriate to exclude drought as a
covered disaster for aquaculture.
Whatever merit the defendants' novel policy theories may
have, those theories are not part of the statutory and regulatory
scheme enacted to implement the Program. As such, the
defendants' arguments are not material to whether their decision
to deny benefits was rational and consistent with the law as it
actually exists. The regulations expressly provide that benefits
would be available to aquaculture producers who experienced
eligible losses caused by drought, while the handbook excludes
aquaculture producers who experienced losses caused by drought.
Therefore, since the handbook provisions and the defendants'
decisions based on those provisions are not in accordance with
the regulatory provisions of the Program, the defendants have not
13 shown that they are entitled to summary judgment with respect to
review under § 706(2)(A).
Although the record appears to support the Farm's claim
under § 706(2)(A), absent a cross-motion for summary judgment
from the Farm, the court will not consider summary judgment sua
sponte. See Garcia-Avala v. Lederle Parenterals, Inc., 212 F.3d
638, 643-44 (1st Cir. 2000); Rogan v. Menino, 175 F.3d 75, 79
(1st Cir. 1999).
B. Fifth Amendment Claims
The Farm also alleges in its complaint that the defendants'
decision to deny it benefits was discriminatory in violation of
the equal protection and due process clauses of the Fifth
Amendment. As noted previously, it is not clear what cause of
action underlies this claim. The defendants move for summary
judgment on the Fifth Amendment claims, contending that their
decision did not violate the Fifth Amendment.
With respect to equal protection, the defendants argue that
because the Farm is not a member of a protected class, the
decision does not offend the Fifth Amendment unless the
handbook's exclusion of aquaculture from eligibility for drought
relief lacked a rational basis. The defendants argue that the
handbook's provisions are rational for the same reasons advanced
14 with respect to § 706(2)(A) review. Since the defendants were
not successful in showing that the handbook was a rational
interpretation of the Program's implementing statutes and
regulations, they cannot rely on that argument for summary
judgment on the Farm's equal protection claim.
The defendants construe the Farm's due process claim to
allege that they mistakenly paid benefits to some aquaculture
farmers who did not qualify for benefits, constituting arbitrary
administration of the Program in violation of due process. The
defendants contend that a due process claim cannot be premised on
negligence and that the decision to deny the Farm benefits had a
legitimate rational basis.
In response, the Farm continues to lump its equal protection
and due process claims together, as a claim for discriminatory
application of the Program. The Farm makes no separate
recognizable argument in support of a due process claim, but
instead focuses entirely on its equal protection claim. To the
extent the Farm intended to allege a separate due process claim,
it appears to have abandoned such a claim in response to summary
judgment, and the defendants are entitled to summary judgment
with respect to that claim.
15 Conclusion
For the foregoing reasons, the defendants' motion for
summary judgment (document no. 25) is granted as to the
plaintiff's Fifth Amendment due process claim and is otherwise
denied. The defendants' motion to strike (document no. 29) is
denied without prejudice.
SO ORDERED.
Joseph A. DiClerico, Jr. District Judge
July 31, 2001
cc: Brad W. Wilder, Esquire T. David Plourde, Esquire