Olenhouse v. Commodity Credit Corp., 93-3012

• Decision Date: 20 December 1994
• Docket Number: No. 93-3012,93-3012
• Citation: 42 F.3d 1560
• Parties: Don OLENHOUSE, et al., Plaintiffs-Appellants, v. COMMODITY CREDIT CORPORATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1560

42 F.3d 1560

31 Fed.R.Serv.3d 194

Don OLENHOUSE, et al., Plaintiffs-Appellants, v. COMMODITY CREDIT CORPORATION, et al., Defendants-Appellees.

No. 93-3012.

United States Court of Appeals Tenth Circuit.

Dec. 20, 1994.

Karen K. McIlvain, McIlvain Law Office, Madison, KS, for plaintiffs-appellants.

Stephen K. Lester, Asst. U.S. Atty. (Jackie N. Williams, U.S. Atty., with him on the brief), Wichita, KS, for defendants-appellees.

MOORE, Circuit Judge, LOGAN, Senior Judge, and KANE ^*, Senior District Judge.

KANE, Senior District Judge.

This extensive review of an administrative agency case decided on appeal by a district court delineates the standards to which the district court must conform. When acting as a court of appeal, it is improper for a district court to use methods and procedures designed for trial. Moreover, the District Court here permitted the use of a so-called "motion to affirm" as well as a motion for summary judgment in contravention of the established law of this circuit.

Because our standard of review is de novo and because we have been required to scrutinize the 1600 page administrative record, we decide as well the merits of the appeal rather than remand. We reverse the District Court's affirmance of the agency's decision.

A certified class of Kansas farmers ("Farmers") appeal from the order of the United States District Court for the District of Kansas affirming temporary yield and deficiency payment reductions imposed by the Agriculture Stabilization and Conservation Service (ASCS) under a federal price support program for wheat. Program participants are entitled to deficiency payments when the actual market price for wheat falls below the target price set by the Secretary of Agriculture. Payments may be reduced to reflect a decrease in a farm's expected production, but only if that decrease is the result of causes other than a natural disaster or other condition beyond the producer's control.

Due to disastrous rains that destroyed fall plantings and flooded fields, Appellant-Farmers planted their 1987 program wheat after the fall 1986 planting season. The ASCS deemed the late planting a "changed practice" under program regulations, and reduced the yield per acre for which deficiency payments would be made.

The Farmers claim the ASCS's action was arbitrary and capricious in that it was the product of an inadequate administrative appeals process and not supported by substantial evidence in the administrative record. They argue the ASCS misapplied the rules and regulations governing wheat program payments by failing to consider fall rains and failing to determine whether late planting was the result of conditions beyond the Farmers' control. The Farmers also argue county and state ASCS representatives misled them into believing late planting would not affect program yields. Finally, the Farmers claim the imposed reductions constituted a taking of contractual property rights without due process in violation of the Fifth Amendment of the United States Constitution.

Despite our thorough review of the administrative record, we find it difficult to ascertain exactly what the agency did or did not do in this case. ¹ The ASCS's initial decision was made by a single individual and was announced by form letter nearly one year after the wheat had been planted. During the course of that year, agency policy regarding the imposition of yield reductions changed numerous times. The basis upon which this individual reduced the Farmers' yields cannot be ascertained; other than finding the Farmers planted their wheat late, the decision is silent as to the rules applied, the factors considered, or the methods used to calculate the reductions. Most significantly, there is no determination by the individual acting on behalf of the agency that late planting was the result of conditions within the Farmers' control.

The Farmers appealed this initial decision to the state ASCS committee and then the Deputy Administrator, State and County Operations (DASCO). They asserted the late planting was due to conditions beyond their control and done in reliance on information they received from ASCS officials indicating late planting would not result in reductions. Throughout the appeal process, the Farmers sought information regarding the basis for the reductions imposed and the way they were calculated.

Without making any findings of fact or articulating a reasoned basis for its decision, DASCO found "no justification" for relief. DASCO summarily concluded the Farmers were not misinformed and found a determination that late planting was not due to conditions beyond the Farmers' control implicit in the ASCS's action because "the county and state [ASCS] committees are familiar with ... weather conditions for [the Farmers'] area." Aplts.' App. at 49-50.

DASCO's extrapolation escaped the scrutiny of the District Court. Instead of reviewing the administrative record itself, the District Court relied on counsel's statements as to what was in the record and material appended to the government's "Motion to Affirm." The District Court selected isolated bits of this second hand "evidence" and concluded the agency's action was supported by the administrative record. Relying on this extrapolation, the District Court interpreted the wheat program regulations to authorize yield reductions notwithstanding the occurrence of a natural disaster, attributing this interpretation to the agency, and affirming the interpretation as the agency's own. See Olenhouse v. Commodity Credit Corp., 807 F.Supp. 688, 692-93 (D.Kan.1992).

While it found the Farmers' arguments regarding misinformation "persuasive" and opined they "may have a stronger basis for their contentions than defendants do," the District Court construed its review powers narrowly and concluded the agency's findings were "plausible" and therefore not "arbitrary and capricious." Id. at 690, 693. In doing so, the District Court employed neither the procedure nor the standard of review required when agency action is challenged on appeal to a district court in this circuit.

Where questions of due process and sufficiency of the evidence are raised on appeal from an agency's final decision, the district court must review the agency's decisionmaking process and conduct a plenary review of the facts underlying the challenged action. It must find and identify substantial evidence to support the agency's action and may affirm agency action, if at all, only on the grounds articulated by the agency itself. This cannot be done in the context of a motion to affirm, which allows the agency to define the issues on claimants' appeal. The District Court's deviations from established procedure doom its review to prejudicial error.

I. Background

A. Statutory and Regulatory Scheme

1. Overview

Neither the parties in their briefs, nor the District Court in its opinions below, ² addressed comprehensively the statutory and regulatory scheme governing the wheat program at issue. Perhaps this is because the patchwork of statutes, public laws, regulations, internal agency guidelines and interpretive rules applicable to United States Department of Agriculture (USDA) price support programs generally, and the wheat program specifically, epitomize bureaucratic muddle. The statutes and regulations alone span hundreds of pages in multiple volumes of the United States Code and Code of Federal Regulations. Programs are administered and funded by different USDA agencies. These agencies rely on internal guidelines and interpretive rules that are revised frequently. Yet we find an understanding of the regulatory scheme essential to an analysis of the issues raised on appeal, so we begin with an overview of the applicable provisions.

The Commodity Credit Corporation Charter Act, enacted in 1948 and codified at 15 U.S.C. Sec. 714 (1988), authorizes the Commodity Credit Corporation (CCC) to support farm prices as determined by the Secretary of the United States Department of Agriculture (USDA). Specific price support programs were enumerated by Congress in the Agricultural Act of 1949, 7 U.S.C. Sec. 1421 et seq., which authorizes the Secretary of the Department of Agriculture to deliver price supports under those programs through the CCC. See 7 U.S.C. Sec. 1421(a) (1988).

The general administration and supervision of price support programs in the field has been delegated by the Secretary to the ASCS. 7 C.F.R. Secs. 713.2, 1421.2 (1987) ³ (feed grain, rice, cotton, wheat and related programs). Thus, the CCC holds the purse strings and the ASCS runs the programs. Different sets of regulations govern the conduct of each. Compare 7 C.F.R. Secs. 1402-1498 (price support regulations for various grain programs applicable to the CCC) with 7 C.F.R. Secs. 700-799 (regulations governing feed grain, rice, cotton, and wheat programs applicable to the ASCS).

The ASCS administers price support programs through a network of committees. These committees, and the conduct of the ASCS under all USDA programs, are governed not only by the Agricultural Act of 1949, the CCC Charter Act, and their respective regulatory schemes, but also by the Soil Conservation and Domestic Allotment Act of 1935. 16 U.S.C. Sec. 590h(b) (1988 & Supp.1994) (incorporated by reference and made part of the Agricultural Adjustment Act of 1938 and later amended by the Food Security Act of 1985, Pub.L. 99-198, Secs. 1711, 1712 (1985)); see Garvey v. Freeman, 397 F.2d 600, 604 n. 2 (10th Cir.1968).

Three levels of authority exist under the ASCS committee structure. See generally, 16 U.S.C. Sec. 590h(b) (fifth undesignated paragraph) (as amended) (function and election requirements); 7 C.F.R. Secs. 7.1 (selection and functions, generally), 713.2 (grain programs, administration), 1421.2 (grain programs, CCC financing). At the local and state levels, USDA programs are administered by local, county and state ASCS committees. 16 U.S.C. Sec....