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.

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,

(1986) . All

reasonable inferences and all credibility issues are resolved in

favor of the nonmoving party. See Barreto-Rivera v. Medina-

Varqas,

(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.,

(1986); Torres v. E.I. Dupont De Nemours & Co.,

(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.,

(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,

Title VIII,

§ 801(a),

, as amended

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

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

. See

. 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

(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..

(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

. 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."

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.

(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 "Aquaculture means the reproduction and rearing of aquatic

species in controlled or selected environments . . .

"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."

(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.

.

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

(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

(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,

, 111 (1st Cir. 2000) (quoting Motor Vehicle Mfrs. Ass'n, Inc. v. State Farm M u t .

A u t o . Ins. C o .,

(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,

(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.,

(2001) (citing Chevron U.S.A. Inc. v. Natural Res.

Def. Council,

(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

, 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.,

(1st Cir. 2000); Rogan v. Menino,

(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

16