RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Fullenkamp, et al., v. Veneman No. 03-3731 ELECTRONIC CITATION: 2004 FED App. 0294P (6th Cir.) File Name: 04a0294p.06 Clair, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Benjamin F. Yale, Ryan K. Miltner, Kristine H. Reed, BENJAMIN F. UNITED STATES COURT OF APPEALS YALE & ASSOC. CO., Waynesfield, Ohio, for Appellants. Jeffrey Clair, UNITED STATES DEPARTMENT OF FOR THE SIXTH CIRCUIT JUSTICE, Washington, D.C., for Appellee. _________________ _________________ MICHAEL FULLENKAMP , et al., X Plaintiffs-Appellants, - OPINION - _________________ - No. 03-3731 v. - MARTHA CRAIG DAUGHTREY, Circuit Judge. The > plaintiffs in this case are dairy farmers who annually produce , over 2.4 million pounds of milk. They challenge the ANN M. VENEMAN, in her - capacity as Secretary of the regulations promulgated by the defendant Secretary of - Agriculture to implement the federal Milk Income Loss United States Department of - Contract Program, 7 U.S.C. § 7982. When a producer signs Agriculture, - a contract to join the program, it begins receiving monthly Defendant-Appellee. - payments on the eligible milk it produces and, under the - statute’s transition rule, a lump-sum payment for eligible milk N it produced between December 1, 2001, and the month before Appeal from the United States District Court the contract was signed. The statute includes a limitation for the Northern District of Ohio at Cleveland. restricting the quantity of milk upon which payment can be No. 02-07431—Ann Aldrich, District Judge. made each fiscal year to 2.4 million pounds. The Department of Agriculture regulations under attack here apply the Argued: June 17, 2004 limitation to payments under the transition rule as well as to the monthly payments. The district court found that the Decided and Filed: September 2, 2004 statute did not unambiguously forbid the Secretary’s interpretation of the statute and, moreover, that the Before: DAUGHTREY, GIBBONS, and COOK, Circuit Secretary’s interpretation was reasonable. The court therefore Judges. denied the plaintiffs’ motion for injunctive relief and granted the Secretary’s motion to dismiss. _________________ For the reasons set out below, we affirm. COUNSEL ARGUED: Benjamin F. Yale, BENJAMIN F. YALE & ASSOC. CO., Waynesfield, Ohio, for Appellants. Jeffrey

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FACTUAL AND PROCEDURAL BACKGROUND (2) Limitation. The payment quantity for all producers on a single dairy operation during the months On May 13, 2002, President Bush signed into law the Farm of the applicable fiscal year for which the producers Security and Rural Investment Act of 2002, Pub. L. No. 107- receive payments under subsection (b) shall not exceed 171, 116 Stat. 134 (2002), which, in § 1502, created an 2,400,000 pounds. . . . income support program for dairy farmers that provides for direct federal payments to milk producers when a specific ***** statutorily-prescribed price index falls below a certain level. See id. at § 1502, codified at 7 U.S.C. § 7982. In order to (f) Signup. The Secretary shall offer to enter into receive payments through the program, dairy farmers must contracts under this section during the period beginning enter into a contract with the Secretary of Agriculture. Once on the date that is 60 days after the date of enactment of a dairy farmer has entered into a contract, the farmer is this Act [May 13, 2002], and ending on September 30, eligible for two categories of payments: (1) monthly 2005. payments on eligible production beginning the month the farmer enters into the contract and ending September 30, ***** 2005, see 7 U.S.C. § 7982(g); and (2) a retroactive, lump-sum payment for production during the “transition” period (h) Transition rule. In addition to any payment that is between December 2001 and the month in which the farmer otherwise available under this section, if the producers on enters the contract. See § 7982(h). The statute does not a dairy farm enter into a contract under this section, the specify a month in which dairy farmers must enter contracts, Secretary shall make a payment in accordance with the just that the Secretary must offer such contracts from July formula specified in subsection ( c) on the quantity of 2002 until September 2005. See 7 U.S.C. § 7982(f). eligible production of the producer marketed during the period beginning on December 1, 2001, and ending on Section 7982 reads, in pertinent part: the last day of the month preceding the month the producers on the dairy farm entered into the contract. (b) Payments. The Secretary shall offer to enter into contracts with producers on a dairy farm located in a In October 2002, the Secretary of Agriculture issued participating State under which the producers receive regulations implementing the dairy assistance program. payments on eligible production. Under the regulations, the cap in § 7982(d)(2) limiting payment quantity to 2.4 million pounds of milk per year was ***** made applicable to transition period payments under § 7982(h), as well as to the monthly payments for milk (d) Payment quantity. produced after a contract has been signed. See 7 C.F.R. §§ 1430.207(b). In response, the plaintiffs filed this action, (1) In general. Subject to paragraph (2), the payment seeking a declaratory judgement that dairy producers who are quantity for a porducer during the applicable month entitled to payments during the transition period are entitled under this section shall be equal to the quantity of to a lump-sum payment on all the milk produced and eligible production marketed by the producer during the marketed during the transition period, not just 2.4 million month. pounds a year. They requested an injunction compelling the No. 03-3731 Fullenkamp, et al., v. Veneman 5 6 Fullenkamp, et al., v. Veneman No. 03-3731

Secretary to modify the regulations at 7 C.F.R. § 1430 to interpretation of a statute it administers, we must first ask allow dairy producers uncapped transition payments. “whether Congress has directly spoken to the precise question at issue.” Id. at 842. If, after “employing traditional tools of The district court denied the plaintiffs’ motion for statutory construction,” id. at 843 n.9, we determine that injunctive relief and granted the Secretary’s motion to dismiss Congress’s intent is clear, then “that is the end of the matter; the case.1 With respect to the cap on transition payments, the for the court, as well as the agency, must give effect to the court found that § 7982 does not unambiguously forbid the unambiguously expressed intent of Congress.” Id. at 842-43. regulations from making transition payments subject to the However, “if the statute is silent or ambiguous with respect to cap and that the Secretary’s regulation was permissible and the specific issue, the question for the court is whether the reasonable. Applying Chevron deference, the court upheld agency’s answer is based on a permissible construction of the the Secretary’s determination that the cap applies to transition statute.” Id. at 843; see also Barnhart v. Thomas, 124 S.Ct. payments as well as prospective payments under the contract. 376, 380 (2003) (applying Chevron). See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984). This appeal followed. II. The Application of the Cap to Transition Payments ANALYSIS Both the plaintiffs and the defendant in this case argue that Congress spoke directly to the issue of whether the payment I. Standard of Review cap in § 7982(d)(2) applies to transition payments. Obviously, however, they do not agree on what Congress The parties agree that Chevron, 467 U.S. 837, governs this said. The plaintiffs argue that Congress clearly intended that case.2 Under Chevron, in reviewing an agency’s the cap not apply to transition payments and that the Secretary’s regulations therefore violate the statute. The Secretary, on the other hand, contends that Congress clearly 1 The defendant’s motion was styled a motion to dismiss under Rule intended that all payments under § 7982 would be limited by 12(b)(1) of the Federal Rules of Civil Procedure or, in the alternative, for the cap and that the Department’s regulations are consistent summary judgment under Rule 56. The d istrict court said it was granting with the statute. Both parties argue that the plain language of the defendant’s motion to dismiss, but also made clear that it was considering the case on the merits and not dismissing based on subject the statute, legislative history, and the structure and purpose matter jurisdiction. It therefore appears that it was either a dismissal for of the statute support their positions. failure to state a claim or a grant of summary judgment rather than a dismissal for lack of subject matter jurisdiction. Even if the dismissal were considered a dismissal for lack of subject matter jurisdiction, we can affirm a district court’s judgment on any grounds supported by the record. See Peterson Novelties, Inc. v. City of Berkley, 305 F.3d 38 6, 394 (6th Cir. 2002).

2 Chevron deference is appropriate “when it appears that Cong ress promulgate appropriate regulations necessary to implement the chapter. delegated authority to the agency generally to make rules carrying the It specified that those regulations were to be made without regard to force of law, and that the agency interpretation claiming deference was notice and comment rule-making procedures. The regulations at issue in promulgated in the exercise of that authority.” United States v. Mead this case, final regulations made without prior notice and comment, were Corp., 533 U.S. 218, 226-27 (2001) . In 7 U.S .C. § 7991(c), C ongress promulgated under the authority given to the Secretary in § 7991 (c). See authorized the Secretary and C omm odity C redit Corporation to 67 Fed. Reg. 64 454 (O ct. 18, 2002). No. 03-3731 Fullenkamp, et al., v. Veneman 7 8 Fullenkamp, et al., v. Veneman No. 03-3731

1. Statutory Language that orders the Secretary to offer to enter into contracts with dairy farmers under which the farmers will receive payment In statutory construction cases, “[t]he first step ‘is to for eligible milk production. The plaintiffs assert that determine whether the language at issue has a plain and transition payments are not payments under subsection (b). unambiguous meaning with regard to the particular dispute in They maintain that § 7982 creates two similar but distinct the case.’” Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, programs that cover farmers during different periods – one, 450 (2002) (citation omitted). The plaintiffs argue that the described in subsection (e), that covers farmers during the plain language of § 7982 unambiguously requires the period after they sign contracts and another, described in Secretary to make transition payments without limitation. subsection (h), that covers farmers for the period before they They point out that subsection (h) requires payment on sign contracts – and that “payments under subsection (b)” eligible production and note that Congress did not limit the refers to the payments under the first program, not the second. definition of “eligible production” in either subsection (a) or They argue that interpreting “payments under subsection (b)” (h). They argue that if Congress had intended the cap to to include both transition and monthly payments renders the apply to transitional payments, it could have written the phrase “subsection (b)” superfluous, since, under such an statute to say so in subsection (h) itself. As the Secretary interpretation, the limitation could have been written to just points out, however, subsection (h) provides that payments read: “payments under this section.” As the plaintiffs point shall be made according to the formula in subsection (c),3 out, however, citing to Director, Office of Workers’ which incorporates the payment quantity in subsection (d), Compensation Programs, United States Department of Labor the subsection that includes the payment cap. Thus, v. Goudy, 777 F.2d 1122, 1127 (6th Cir. 1985), statutes according to this reading of the statute, the fact that should be read to give every word and clause effect. Citing subsection (h) itself does not include a limitation on quantity to other canons of statutory interpretation, the plaintiffs also is not determinative because the payment formula for which assert that the statute is remedial and should be construed it provides incorporates the payment cap in subsection (d)(2). liberally in favor of the beneficiaries. By its terms, however, the payment cap in subsection (d)(2) In response, the Secretary asserts that transition payments applies only to “payments under subsection (b).” Thus, the are “payments under subsection (b).” She points out that central question in this case is whether transition payments dairy farmers receive transitional payments only if they sign are “payments under subsection (b),” the section of the statute contracts, as authorized in subsection (b). She further notes that in excepting payments under subsection (h) from the payments that start on the first day of the month in which the 3 contract is signed, subsection (g)4 contemplates that payments Subsec tion (c), entitled “amount,” provides as follows: Paym ents to a producer under this section shall be calculated by multiplying (as determined by the Secretary) – 4 (1) the payment quantity for the producer during the Subsection (g), entitled “duration of contract,” provides as follows: applicable month established under subsection (d); (1) In general. Except as provided in paragraph (2) and (2) the amount equal to – subsection (h), any contract entered into by producers on a (A) $16.94 p er hundredweight; less dairy farm under this section shall cover eligib le production (B) the Class I milk price per hundredweight in Boston marketed by the producers on the dairy farm during the under the applicable Federal milk marketing order; by period starting with the first day of [the] month the (3) 45 percent. producers on the dairy farm enter into the contract and No. 03-3731 Fullenkamp, et al., v. Veneman 9 10 Fullenkamp, et al., v. Veneman No. 03-3731

under subsection (h) are payments covered by the contract. of the statute sufficiently clarify the ambiguity in the statutory She contends that if Congress had intended to limit the cap to language. See Gen. Dynamics Land Sys., Inc. v. Cline, 124 the monthly contract payments, it would have made more S.Ct. 1236, 1248 (2004) (looking to text, structure, purpose, sense to have the limit apply to “payments under subsections and history of Act to find it unambiguous); United States v. (e)-(g),” the subsections dealing with the monthly payments, Choice, 201 F.3d 837, 841 (6th Cir. 2000) (explaining that the rather than to “payments under subsection (b),” the subsection plain language of the statute is the starting point for statutory discussing the contracts in general. Furthermore, the interpretation, but that the structure and language of the Secretary questions whether the canons of statutory statute as a whole can aid in interpreting the plain meaning interpretation cited by the plaintiffs are relevant here, arguing and that legislative history can be looked to if the statutory that the program is not remedial and that the cap is an language is unclear). eligibility limitation rather than an exception. Finally, she contends that nothing in the structure or purpose of the statute Both parties are able to explain how their position fits into suggests that Congress intended to create two separate the overall structure of the statute and furthers the statute’s programs or to distinguish between the retroactive transitional purpose. The Secretary asserts that her interpretation of the payments and the prospective monthly payments. statute gives the cap a meaningful role in the statute’s operation, whereas the plaintiffs’ interpretation would largely Focusing on the statutory language, we conclude that it is nullify the cap because large producers would be able to unclear whether the phrase “payments under subsection (b)” circumvent the cap by waiting until September 2005 to sign includes transition payments or not. As the defendant points a contract and then receive “transitional payments” for the out, transition payments are received only if the dairy farmers entire period between December 2001 and August 2005. enter into contracts and, therefore, such payments can be seen to be payments under subsection (b). At the same time, as The plaintiffs object to this argument and to the district noted by the plaintiffs, this interpretation does render the court’s acceptance of it, asserting that the district court and phrase “subsection (b)” superfluous. Furthermore, when Secretary have usurped the role of Congress and injected their subsection (e) refers to “a payment under a contract under this own political viewpoints into a carefully-crafted section,” it is referring to the monthly payments, thereby congressional compromise. Furthermore, they argue, implying that transition payments are not considered Congress intended for large producers to be able to avoid the payments under § 7982 contracts. In short, we conclude that production caps. They assert that the overall purpose of the although Congress may have had an intent regarding whether program was to assist dairy farmers and that Congress wanted transition payments were “under subsection (b) ,” that intent to cover all eligible production, but that it carefully is not stated clearly in the language of the statute. constructed the program in a way that would force large farmers to wait until the end of the covered period if they 2. Legislative History, Structure, and Purpose wanted to receive payments on all their eligible production in order to refrain from encouraging large farmers to further Neither the legislative history of the statute nor the parties’ increase production and in order to push costs of the program explanations of how their interpretations further the purpose to later fiscal years. Similarly, both parties cite legislative history that supports their positions. The plaintiffs claim that the transition ending on Septemb er 30, 200 5 . . . . No. 03-3731 Fullenkamp, et al., v. Veneman 11 12 Fullenkamp, et al., v. Veneman No. 03-3731

payments in § 7982 serve as a replacement for the Northeast [T]he prospective “monthly” program which provides Dairy Compact, which did not have production caps. As the monthly payments . . . has a 2.4 million pound cap as set Secretary points out, however, the Northeast Dairy Compact forth in (d). . . . This “limitations” language was inserted was not a federal assistance program but an agreement among out of a concern that an uncapped program would lead to Northeastern states to regulate prices. See Organic Cow, significant increases in production of milk. Also, there LLC v. Ctr. for New England Dairy Compact Research, 335 was a concern that farmers would reorganize in the future F.3d 66, 67-68 (2d Cir. 2003) (describing the Compact). As just to get higher payments under the national program. the Secretary further notes, previous programs supporting dairy farmers included payment caps or gave discretion to the These concerns do not apply to the benefits paid out Secretary, who then capped the amount of milk eligible for under subsection (h) because farmers would need time assistance. See, e.g., Omnibus Consolidated and Emergency machines to go back in the past and increase their Supplemental Appropriations Act, 1999, Pub. L No. 105-277, production or to change their legal structure § 1111(d), 112 Stat. 2681 (1998) (providing $200 million to retrospectively. Indeed, the amount of production provide assistance to dairy producers “in a manner covered by (h) is the amount of “eligible production” as determined by the Secretary”); Dairy Market Loss Assistance defined in section [7982(a)(2)]. Program, 64 Fed. Reg. 24933 (May 10, 1999) (capping payment to 2.6 million pounds). Similarly, both milk 148 Cong. Rec. S4032 (May 8, 2002) (statement of Sen. assistance programs that were in the Farm Bill before it went Leahy). to conference included caps. See H.R. 2646, 107th Cong. § 132 (2002) (as amended and passed by Senate) (capping In sum, looking at the statutory language, legislative payment at lesser of average quantity of milk in which farmer history, and overall structure and purpose of the statute, we had interest during each of a specified three-year period or 8 find the intention of Congress with regard to the application million pounds). In addition, the conference report does not of the subsection (d)(2) cap to transition payments unclear. mention a difference between monthly and transition payments with regard to the payment cap, simply noting, in 3. Reasonableness its description of the program, that: “Producers, on an Under Chevron, if Congress has not spoken directly to the operation-by-operation basis, may receive payments on no question at issue, the Secretary’s interpretation of the statute more than 2.4 million pounds of milk marketed per year. will be upheld so long as it is reasonable. See Smiley v. Retroactive payments will be made covering market losses Citibank (S.D), N.A., 517 U.S. 735, 744-45 (1996) (“Since we due to low prices since December 1, 2001.” H.R. Conf. Rep. have concluded that the Comptroller's regulation deserves No. 107-424 at 446 (2002), reprinted in 2002 U.S.C.C.A.N. deference, the question before us is not whether it represents 141, 171. the best interpretation of the statute, but whether it represents At the same time, the plaintiffs point out that some a reasonable one.”); see also Barnhart v. Thomas, 124 S.Ct. members of Congress, particularly Senators Leahy and at 382. In this instance, we conclude that the Secretary’s Jeffords, indicated that they understood that the cap in § 7982 interpretation of the statute is imminently reasonable. As was to be applied to the monthly payments and not to discussed above, transition payments pursuant to subsection transition payments. Senator Leahy, for example, in (h) could rationally be considered payments under subsection discussing the Farm Bill’s conference report, noted that: (b), because they are contingent upon the recipients signing No. 03-3731 Fullenkamp, et al., v. Veneman 13

contracts authorized under subsection (b). Furthermore, capping the transition payments along with the monthly payments creates a consistency throughout the program and ensures that the cap has a meaningful role in the statute. CONCLUSION For the reasons set out above, we find that the Secretary’s construction of the statute was permissible, and we therefore AFFIRM the judgment of the district court in favor of the defendant.