Steen v. United States

• Court: Court of Appeals for the Federal Circuit
• Decided: November 20, 2006
• Docket: 2006-1109
• Status: Published

Opinion

United States Court of Appeals for the Federal Circuit

06-1109

RON STEEN,

Plaintiff-Appellant,

v.

UNITED STATES,

Defendant-Appellee.

Joel D. Kaufman, Steptoe & Johnson, LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Tina Potuto Kimble.

David S. Silverbrand, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant- appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was Jeffrey Kahn, Attorney, Office of General Counsel, United States Department of Agriculture, of Washington, DC.

Appealed from: United States Court of International Trade

Judge Evan J. Wallach United States Court of Appeals for the Federal Circuit

___________________________

DECIDED: November 20, 2006 ___________________________

Before BRYSON, Circuit Judge, ARCHER, Senior Circuit Judge, and GAJARSA, Circuit Judge.

BRYSON, Circuit Judge.

Ron Steen, a commercial fisherman, seeks review of a ruling by the Court of

International Trade upholding the decision of the Department of Agriculture denying his

application for a “trade adjustment assistance” cash benefit. We affirm.

I

A

The Trade Act of 1974, Pub. L. No. 93-618, 88 Stat. 1978 (1975), provides for

various forms of trade adjustment assistance for U.S. workers harmed by competition

from imported goods. See 19 U.S.C. §§ 2271-2321. In 2002, Congress amended the

statute to extend trade adjustment assistance to “agricultural commodity producers” similarly harmed by competition from imports, Trade Act of 2002, § 141, Pub. L. 107-

210, 116 Stat. 933, 946-53, codified at 19 U.S.C. §§ 2401a-2401g.

In somewhat simplified summary, the pertinent statutory scheme operates as

follows: A group of producers of a particular agricultural commodity who feel they have

been adversely affected by imports of agricultural products are entitled to file a petition

with the Secretary of Agriculture seeking certification of eligibility for adjustment

assistance. The Secretary is required to certify the commodity producers for adjustment

assistance if the Secretary determines (1) that the national average price for the

particular commodity in the most recent marketing year is less than 80 percent of the

national average price for that commodity for the five previous years and (2) that

increases in imports of that commodity or of goods directly competitive with it have

contributed importantly to the price decline. 19 U.S.C. § 2401a(c).

In the event a producer group is certified, any individual producer covered by that

group certification is eligible for certain non-monetary benefits, such as free information

regarding the feasibility of substituting other commodities for those adversely affected

and technical assistance to improve production and marketing of the adversely affected

commodities. See 19 U.S.C. § 2401e(a)(1)(D). Each producer covered by a

certification may also apply for a trade adjustment allowance, i.e., a cash benefit. To be

eligible for that benefit, the producer must submit information establishing, among other

requirements, that the producer’s “net farm income (as determined by the Secretary) for

the most recent year is less than the producer’s net farm income for the latest year in

which no adjustment assistance was received by the producer.” Id. § 2401e(a)(1). The

amount of the cash benefit paid to the producer is based on the amount of the

06-1109 2 commodity produced by the applicant in the most recent marketing year and the amount

by which the market price of the commodity has fallen during that year, relative to the

average price during the previous five years. Id. § 2401e(b). The maximum yearly cash

benefit for any producer under the program is $10,000. Id. § 2401e(c). Benefits will not

be paid to producers having an adjusted gross income above a certain level. Id.

§ 2401e(a)(2).

Following the enactment of the 2002 Act, the Secretary of Agriculture

promulgated formal regulations implementing the statute. See Trade Assistance for

Farmers, 68 Fed. Reg. 50,048 (Aug. 20, 2003). In doing so, the Secretary specified that

the Act applies not only to farmers but also to certain fishermen. In particular, the

regulations make statutory benefits available to domestic fishermen whose catch

competes directly with imported aquaculture products and who are adversely affected

by those imports. The regulations define aquaculture as farm fishing, or the rearing of

marine animals in a controlled environment for human consumption. 68 Fed. Reg. at

50,049; 7 C.F.R. § 1580.102.

Paralleling the statute, the regulations state that any producer of a certified

commodity is entitled to free information and technical assistance in adjusting to import

competition and may also be eligible for adjustment assistance in the form of cash

payments. 7 C.F.R. §§ 1580.301(e), 1580.302. Again paralleling the statute, the

regulations require a producer applying for monetary benefits to certify, among other

things, that his “net farm or fishing income for the most recent tax year was less than

that during the producer’s pre-adjustment year.” Id. § 1580.301(e)(4). In their original

form, the regulations defined “net fishing income” for individuals as “net profit or loss

06-1109 3 . . . reported on Internal Revenue Service Schedule C or C-EZ (Form 1040) . . . during

the tax year that most closely corresponds with the marketing year under

consideration.” Id. § 1580.102 (2004). That definition was subsequently amended to

omit the reference to Schedule C. In its current form, the pertinent regulation defines

net fishing income to mean “net profit or loss . . . reported to the Internal Revenue

Service for the tax year that most closely corresponds with the marketing year under

consideration.” Id. § 1580.102 (2006). Because Mr. Steen’s application for benefits and

the Secretary’s action on that application were both completed before the regulations

were revised in November 2004, Mr. Steen argues that the original version of the

definitional regulation, not the amended version, applies to his claim. The government

does not expressly dispute that contention, and for purposes of this appeal we assume

the earlier version of the regulation applies to Mr. Steen’s application.

B

In 2003, a group of Pacific salmon fishermen from Washington state successfully

petitioned for trade assistance eligibility under the 2002 Trade Act. As a member of that

group, Mr. Steen subsequently filed an individual application for monetary benefits. The

Secretary denied his application on the ground that he had failed to show that his net

fishing income in 2002 was lower than his net fishing income in 2001.

Mr. Steen then filed a complaint in the Court of International Trade challenging

the Secretary’s denial. He noted that although his income from all commercial fishing

ventures increased between 2001 and 2002, his fishing income from the imported

commodity in question—Pacific salmon—decreased during the same period. That is,

while his net income from all fishing activities increased from $4,573 to $9,915, his

06-1109 4 earnings from Pacific salmon fell from $9,885 to $2,631. He argued that under the

statute his net fishing income should be calculated with respect to the imported

commodity only and should not be calculated by taking into account his income from

other commercial fishing activity.

In a thorough opinion, the Court of International Trade rejected Mr. Steen’s

argument and upheld the Agriculture Department’s decision denying his application.

We sustain the trial court’s ruling and its analysis in all respects.

II

While he divides his argument into multiple parts, Mr. Steen’s legal position boils

down to a single proposition: that Congress’s reference to “net farm income,” as applied

to the fishing industry, should be understood to mean net income from the particular

commodity for which an adjustment assistance certification has been granted, rather

than net income from all fishing activity. As the trial court correctly concluded, that

argument is flawed in several respects: it is at odds with the plain meaning of the term

“net farm income” (and its regulatory extension, “net fishing income”) as well as with

other portions of the statute; it is unsupported by the goals Congress intended the

statute to promote; and it is contrary to the Secretary’s reasonable definition of the

statutory term, to which we are obligated to defer.

First, the terms “net farm income” and “net fishing income” are not easily read to

mean “net income from a single commodity” as applied to a farmer or fisherman whose

income derives from multiple commodities. The natural way for Congress to express

that narrower concept would have been to refer to “net farm income from the certified

06-1109 5 commodity.” Had Congress done so, there would have been a compelling case for

interpreting the parallel regulatory term “net fishing income” in the same narrow fashion.

However, Congress chose the broader terminology. Moreover, it did so in the context of

a statute that contains several other provisions that are expressly limited to the

particular certified import commodity. For example, the statute refers to the price of the

certified commodity, 19 U.S.C. § 2401a(c)(1), increases of imports of articles like, or

directly competitive with, the certified commodity, id. § 2401a(c)(2), the amount of the

certified commodity covered by the producer’s application for benefits and produced in

the marketing year, id. §§ 2401e(a)(1)(A), 2401e(b)(1)(B), and the information and

technical assistance given to the producer “in adjusting to import competition with

respect to the adversely affected agricultural commodity,” id. § 2401e(a)(1)(D). In this

setting, where Congress expressly referred to the market for the particular commodities

when it was appropriate to do so, the nearly inescapable inference is that when

Congress used the broader term “net farm income,” it meant to encompass income from

all farm products, not simply adversely affected commodities; the same inference

applies to the regulatory term “net fishing income.” See Keene Corp. v. United States,

508 U.S. 200, 208 (1993), quoting Russello v. United States, 464 U.S. 16, 23 (1983)

(“[W]here Congress includes particular language in one section of a statute but omits it

in another . . . , it is generally presumed that Congress acts intentionally and purposely

in the disparate inclusion or exclusion.”).

The Supreme Court made the same point forcefully in a closely analogous

setting in Patterson v. Shumate, 504 U.S. 753 (1992), a case involving the meaning of

the term “applicable nonbankruptcy law.” The petitioner in that case argued that the

06-1109 6 term should be construed to refer exclusively to state law. In response, the Court

pointed out that the natural reading of the term was not restricted to state law and that

the Bankruptcy Code contains other references to sources of law in which it limits those

sources to “state law.” The Court then explained that the Code “reveals, significantly,

that Congress, when it desired to do so, knew how to restrict the scope of applicable

law to ‘state law’ and did so with some frequency. . . . Congress’ decision to use the

broader phrase ‘applicable nonbankruptcy law’ in [the provision at issue] strongly

suggests that it did not intend to restrict the provision in the manner that petitioner

contends.” Id. at 758.

The same analysis applies here. In particular, it applies to Mr. Steen’s argument

that the references to “the adversely affected agricultural commodity” in subsections

2401e(a)(1), 2401e(a)(1)(A), and 2401e(a)(1)(D) indicate that the reference to “net farm

income” in subsection 2401e(a)(1)(C) must be limited to net income from the adversely

affected commodity. In fact, the opposite inference is stronger, as the “adversely

affected agricultural commodity” language is conspicuously absent from subsection

2401e(a)(1)(C). Congress’s use of that restrictive language in subsections 2401e(a)(1),

2401e(a)(1)(A), and 2401e(a)(1)(D) makes clear that it knew how to refer to particular

commodities when it intended to limit the scope of the statute in that manner. Its choice

of the facially broader term “net farm income” in a contiguous provision, subsection

2401e(a)(1)(C), seems plainly intended to convey a different, and broader, meaning.

In his brief, Mr. Steen argues that the background and underlying purpose of the

statute make it evident that the term “net farm income” must be accorded a more

06-1109 7 restrictive interpretation, even if the language of the statute does not compel that

conclusion. But Mr. Steen’s brief promises more than it delivers. The legislative history

is devoid of any suggestion that the purpose of the statute requires “net farm income” to

be read in the manner Mr. Steen suggests. As for the more general contention that a

broad reading of the term would defeat the goals Congress set for the statute, Mr. Steen

cites no persuasive evidence to that effect. Limiting statutory benefits to affected

producers who experience a reduction in their “net farm income” from all commodities

ensures that persons who do not suffer an overall loss in their farming (or fishing)

income are not eligible for cash benefits under the adjustment assistance program. It is

unsurprising that Congress would elect to provide cash benefits only to persons whose

overall financial well-being has suffered as a result of import competition; those are the

producers who have suffered the equivalent of a loss of employment, as is required

under the other trade assistance provisions. See S. Rep. No. 107-134 at 33; 147 Cong.

Rec. S6924 (daily ed. June 26, 2001) (statement of Sen. Conrad). Moreover, one of

Congress’s purposes in enacting the adjustment assistance statute was to enable

persons potentially affected by import competition to adjust their production so as to

avoid the impact of the competing imported goods. S. Rep. No. 107-134 at 33; see 19

U.S.C. § 401e(a)(1)(D). Because persons whose net income has risen may be said to

have successfully adjusted to the competition from imports, there is no reason to

suppose that Congress would want them to share in the cash benefits afforded under

the statutory program.

In promulgating the regulations implementing the 2002 statute, the Department of

Agriculture made precisely the same point. Responding to concerns that diversified

06-1109 8 producers would be disqualified if their net earnings increased due to income from other

commodities, the agency explained that such a result was consistent with the purpose

of the statute, which was “to assist producers to adjust to imports by providing technical

assistance to all and cash payments to those facing economic hardship.” 68 Fed. Reg.

at 50,048. The Department recognized that all members of the certified group have

been sufficiently injured by increased import competition to merit some type of

assistance, but it took the position, consistent with the statute, that only a subset are

deserving of monetary benefits. Accordingly, neither the plain statutory language nor

the overall purpose of the statute supports Mr. Steen’s argument that the term “net farm

income” should be read in the manner he proposes.

C

Even if the meaning of the term “net farm income” were not clear on its face and

in light of its context, we would still reach the same conclusion in this case because

Congress expressly delegated to the Secretary of Agriculture the responsibility to

determine “net farm income” in the statutory formulation. The 1974 Trade Act gave the

Secretary of Labor authority “to prescribe such regulations as may be necessary to

carry out the provisions” of the Act, 19 U.S.C. § 2320, and the 2002 Trade Act gave the

Secretary of Agriculture that authority with respect to the new provisions granting

adjustment assistance for those engaged in agriculture, 19 U.S.C. § 2401(6).

Moreover, the statute expressly granted the Secretary authority to define “net farm

income” by referring to “net farm income (as determined by the Secretary).” Id.

§ 2401e(a)(1)(C). Because the Secretary acted pursuant to an express delegation of

authority by Congress, and did so through formal notice and comment rulemaking, the

06-1109 9 regulation is entitled to broad deference from this court. In Chevron U.S.A. Inc. v.

Natural Resources Defense Council, Inc., 467 U.S. 837, 843-44 (1984), the Supreme

Court addressed this situation directly and stated that in such cases judicial deference

to the agency’s regulation is very broad: “If Congress has explicitly left a gap for the

agency to fill, there is an express delegation of authority to the agency to elucidate a

specific provision of the statute by regulation. Such legislative regulations are given

controlling weight unless they are arbitrary, capricious, or manifestly contrary to the

statute.” See Nat’l Treasury Employees Union v. King, 132 F.3d 736, 739 (Fed. Cir.

1998); New York Guardian Mortgage Co., 916 F.2d 1185, 1191 (Fed. Cir. 1990); see

also Cathedral Candle Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352, 1363 (Fed. Cir.

2005). In this case, the Secretary’s regulatory definition of the term “net farm income,”

as applied to fishing income, was reasonable and cannot be condemned as arbitrary,

capricious, or manifestly contrary to the statute.

Mr. Steen argues that the Secretary’s interpretation was not faithful to the statute

because the regulation adopts the meaning of “net farm income” used in the Internal

Revenue Code, rather than employing a definition not tied to another legal standard.

We disagree that in determining what constitutes “net farm income” (or “net fishing

income” under the regulations), the Secretary is barred from using the standards

applied under the Internal Revenue Code as a basis for making that determination.

As part of his argument that the Secretary may not adopt the Internal Revenue

Code standard for defining net farm income, Mr. Steen contends that the Secretary

must make a case-by-case determination of net farm income consistent with the

purposes of the Trade Adjustment Act, rather than “blindly relying on the IRS’s

06-1109 10 definition.” We disagree that the regulation is impermissibly rigid or that it led the

Department of Agriculture to commit legal error in this case. The Secretary relied on

Schedule C of Mr. Steen’s tax returns for 2001 and 2002 to determine his net fishing

income. There is no suggestion that those documents include income from sources

other than fishing. Thus, this is not a case in which reliance on tax returns has resulted

in a determination that does not reflect the applicant’s net income from all fishing

sources. Decisions by the Court of International Trade in other cases suggest that

income from other sources included in the pertinent tax returns should not be included

as part of the calculation of “net fishing income.” See Selivanoff v. U.S. Sec’y of Agric.,

No. 05-00374, 2006 Ct. Intl. Trade LEXIS 52, at *11 (Ct. Int’l Tr. Apr. 18, 2006)

(appropriate for agency to interpret “net fishing income” to include all commercial fishing

income and to exclude non-fishing income); Do v. U.S. Dep’t of Agric., 427 F. Supp. 2d

1224, 1231 (Ct. Int’l Tr. 2006) (not proper to include gains or losses from the sale of

business assets in determining “net fishing income”). Moreover, the regulations make it

reasonably clear that the determination of net farm income or net fishing income is not

to be made solely on the basis of tax return information if other information is relevant to

determining the producer’s net income from all farming or fishing sources. The

regulations provide that, in certifying a loss in net farm or fishing income, the producer

shall provide either supporting documentation from a certified public accountant or

attorney, or relevant documentation and supporting financial data, such as financial

statements, balance sheets, and reports prepared for or provided to the Internal

Revenue Service or another U.S. government agency. 7 C.F.R. § 1580.301(e)(6).

Thus, the regulations are not solely and inflexibly linked to the producer’s tax returns for

06-1109 11 this purpose. In any event, because all of Mr. Steen’s income at issue in this case

came from fishing, we need not address in detail the circumstances in which other

income or expenses may, or must, be considered in determining net fishing income. It

is enough to note that Mr. Steen does not contend that his tax returns distort the net

amount of his income derived from all fishing sources in the two relevant years; those

are the income figures that the statute and regulations require the Secretary to use in

making the determination of eligibility for a trade adjustment award.

D

In addition to the arguments addressed above, Mr. Steen presents four

arguments based on particular statutory or regulatory language to support his proposed

construction of the statutory term “net farm income” and the corresponding regulatory

term “net fishing income.” First, he argues that the Secretary’s definition of “net farm

income” and “net fishing income” conflicts with section 2401a(e)(2) of the Trade Act.

That provision requires the Secretary to treat separate classes of goods within a single

agricultural commodity as separate commodities for purposes of determining group

eligibility, the national average price, and the level of imports. 19 U.S.C. § 2401a(e)(2).

Mr. Steen contends that because the statute requires those determinations to be made

on a commodity-by-commodity basis, it thwarts the statutory purpose to define “net

fishing income” as including income obtained from all the producer’s fishing activities.

That argument, however, is a non sequitur. The statute explicitly provides for

commodity-by-commodity treatment for purposes of group certification, national average

price, and the level of imports, but does not in any way indicate that determining

whether a particular producer has had a net loss of income as a result of import

06-1109 12 competition must likewise be determined based on a single commodity. To the

contrary, it is perfectly sensible for the statute and the regulations to base certain

eligibility criteria on imports and prices of a particular commodity, but to limit cash

benefits to those suffering an overall loss of income from farming or fishing. Moreover,

as noted above, the fact that the statute omits reference to the commodity-by-

commodity approach when addressing “net farm income” supports the inference that

such a limitation was not intended with respect to that provision. Accordingly, the

Secretary’s definition of “net fishing income” does not conflict with section 2401a(e)(2).

Second, Mr. Steen argues that the terms “net farm income” and “net fishing

income” must be interpreted so as to ensure that imports are the principal cause of

injury to the applicant farmer or fisherman. He grounds his argument on the use of the

term “adversely affected agricultural commodity producer” in section 2401e to describe

those eligible for monetary benefits. If “net farm income” or “net fishing income”

included income from all farming or fishing activities, he argues, the statute would not

require “proof that the person receiving benefits was adversely affected by the imports

at issue.” That argument fails, however, because nothing in the statute explicitly

requires the producer to prove that his overall loss of income is attributable to the

imports; nor is it “absurd,” as Mr. Steen argues, to interpret the statute in the way the

Secretary has done.

While it is true that under the Secretary’s interpretation a producer whose loss of

income from fishing is principally attributable to causes other than import competition

could theoretically be eligible for cash benefits, the amount of the producer’s benefits

would still be based on the amount of the affected commodity he produced in the most

06-1109 13 recent year and the reduction in the price of that commodity during that year. Those

requirements make it unlikely that a producer would actually make money on the

adversely affected commodity yet suffer a net loss of income overall so as to be eligible

for cash benefits under the statute. And even in such a case, the producer would still

have been better off in the absence of import competition, so the cash benefit would

have the effect of making up for the difference in the income the producer earned from

the commodity in question and the greater amount the producer would have earned in

the absence of imports.

Third, Mr. Steen argues that the Secretary’s definition of “net farm income”

imposes an “extra-statutory” limitation on who can receive monetary benefits, since the

statute already contains two explicit limitations—a limitation based on the producer’s

gross income and a limitation based on the producer’s aggregate receipt of benefits

under the trade adjustment assistance program. 19 U.S.C. § 2401e(a)(2). He claims

that restricting those eligible for monetary benefits using the Secretary’s definition of net

income improperly contravenes Congress’s intent by imposing a limitation on eligibility

that goes beyond the explicit statutory limitations. This argument ignores the fact that a

decline in “net farm income” is a statutorily mandated requirement and will invariably

exclude producers who do not fail the enumerated limitations. The express statutory

direction to the Secretary to limit eligibility to those who suffer a net loss in farm income

demonstrates the flaw in Mr. Steen’s argument that the only limitations on eligibility for

cash benefits are the gross income and aggregate benefits limitations found in section

2401e.

06-1109 14 Finally, Mr. Steen argues that the regulations implementing the 2002 amendment

to the Trade Assistance Act apply “only to aquaculture, i.e., fish raised on farms” and

that it is therefore improper “to permit benefits to be paid (or denied) based on a

producer’s non-aquaculture income.” That argument is predicated on a

misunderstanding of the scope of the regulations. The regulations make it clear that a

fisherman whose fishing income (including non-aquacultural products) is adversely

affected by imported aquacultural products is eligible for benefits. See 68 Fed. Reg. at

50,049; 7 C.F.R. § 1580.102. Thus, the term aquaculture, as used in the regulations,

refers to the imported products and does not have the effect of restricting the scope of

the term “net fishing income” for purposes of determining eligibility for benefits.

For these reasons, and for the reasons set forth in detail in the opinion of the

Court of International Trade, we uphold the court’s decision denying trade adjustment

cash benefits to Mr. Steen.

Each party shall bear its own costs for this appeal.

AFFIRMED.

06-1109 15