Winters Ranch Partnership v. Viadero

• Decision Date: 03 October 1995
• Docket Number: CIV. A. No. DR-95-CA-10.
• Parties: WINTERS RANCH PARTNERSHIP, A Texas Partnership and David W. Winters, Sara F. Winters, Thomas D. Winters, and John C. Winters, 5th Floor, Del Rio National Bank Building, 525 South Main, Del Rio, Texas, 78841, Plaintiffs, v. Roger C. VIADERO, Inspector General, United States Department of Agriculture, 14th and Independence Ave., S.W., Washington, D.C., 20250, Defendant.
• Court: U.S. District Court — Western District of Texas

901 F. Supp. 237

WINTERS RANCH PARTNERSHIP, A Texas Partnership and David W. Winters, Sara F. Winters, Thomas D. Winters, and John C. Winters, 5th Floor, Del Rio National Bank Building, 525 South Main, Del Rio, Texas, 78841, Plaintiffs, v. Roger C. VIADERO, Inspector General, United States Department of Agriculture, 14th and Independence Ave., S.W., Washington, D.C., 20250, Defendant.

CIV. A. No. DR-95-CA-10.

United States District Court, W.D. Texas, Del Rio Division.

October 3, 1995.

John R. Foster, Lowrey, Foster & Hodge, Del Rio, TX, Alan R. Malasky, No Pro Hac Vice, Arent Fox Kintner Plotkin & Kahn, Washington, DC, for Winters Ranch Partnership, David W. Winters, Sara F. Winters, Thomas D. Winters, John C. Winters.

Carlotta P. Wells, U.S. Department of Justice, Civil Division, Washington, DC, for Roger C. Viadero.

ORDER

BIERY, District Judge.

Before the Court are summary judgment motions by plaintiffs and defendant which seek first impression interpretation of the Inspector General Act as it applies to the United States Department of Agriculture Inspector General's authority to conduct an audit of plaintiffs' farming operations under certain wool and mohair price support programs. 5 U.S.C. §§ 1-12 app. 3 at 222-250 (Supp.1995) (Inspector General Act of 1978); 7 U.S.C. § 1782 (1988 & Supp.1995) (National Wool Act price support provisions). For the reasons stated below, the summary judgment motion of plaintiffs is granted and the summary judgment motion of defendant is denied.

FACTUAL BACKGROUND

Plaintiffs — Winters Ranch Partnership and its individual partners, David W. Winters, Sara F. Winters, Thomas D. Winters, and John C. Winters (sometimes collectively referred to as "Winters") — operate a ranch headquartered in Del Rio, Texas, where they raise goats and sheep which produce wool and mohair. Plaintiffs, as producers of wool and mohair, have received incentive payments under the wool and price support programs for a number of years, including the years 1991 through 1993.

In August of 1994, the Office of the Inspector General of the United States Department of Agriculture began an audit of the incentive payments received by Winters under the programs for the years 1991 and 1992. Through communications with Winters, the Inspector General expressly referred to his audit as a "payment limitation review" and stated its purpose was "to determine whether the farming operation was carried out in 1991 and 1992 as represented to the agency in charge of eligibility and payment determinations."¹ The Inspector General sought tax returns, operating loan documents, income and expense ledgers, bank statements (including cancelled checks and deposit tickets), property tax statements, equipment listings, documentation of who provided actual labor contributions and types of labor, Texas Employment Commission Employer's Quarterly Reports, documentation of who provided actual management contributions and specific duties, partnership agreements or articles of partnership and any powers of attorney. This review, which is continuing, was later expanded to include the 1993 marketing year. For several months, Winters cooperated in the audit by producing documents responsive to the Inspector General's inquiries.

On December 16, 1994, the Consolidated Farm Service Agency (sometimes referred to as "the CFSA") notified Winters it was commencing its own audit of Winters. According to the CFSA, the purpose of its audit of plaintiffs was to "determine whether ... Winters' farming operations were carried out as represented on the CCC-502, Farm Operating Plan for Payment Eligibility Review, on which the initial payment limitation and payment eligibility determinations were based" for the years 1991, 1992, and 1993. Plaintiffs contend they produced numerous categories of documents and information, most of which were identical to the documents and information previously sought by, and produced to, the Inspector General.

Winters' counsel, on January 4, 1995, informed the Inspector General that plaintiffs would no longer respond to the Inspector General's audit and would instead only respond to the CFSA's review. Upon receipt of this information, the Inspector General issued administrative subpoenas to each of the four individual partners of Winters Ranch. The subpoenas sought information relating to each of the partners' "eligibility to participate in 1991, 1992, and 1993 Consolidated Farm Service Agency programs as a member of Winters Ranch Partnership." The form language of the subpoenas also directed Winters to produce any documents "necessary in the performance of the responsibility of the Inspector General under Public Law 95-452 to conduct and supervise audits and investigations and to promote economy, efficiency and effectiveness in the administration of and to prevent and detect fraud and abuse in and relating to the programs and operations of the Department of Agriculture."

Winters declined to comply with the subpoenas and filed this declaratory judgment action, seeking a determination that the Inspector General exceeded his statutory authority in conducting the audit of Winters. Winters contends the CFSA, alone, has regulatory authority to determine whether a wool and mohair producer has complied with the program statutory and regulatory requirements. Further, according to Winters, inasmuch as the Inspector General's review is unlawful, the administrative subpoenas issued in furtherance thereof are unenforceable. The Office of the Inspector General contends it has not exceeded its authority pursuant to the Inspector General Act and the subpoenas are thus enforceable.

STATUTORY BACKGROUND

The National Wool Act of 1954 established certain wool and mohair price support programs, assigning responsibility for the administration of these price support programs to the Secretary of Agriculture. 7 U.S.C. §§ 1782-1785 (1988 & Supp.1995). The Secretary delegated responsibility for administration of these programs to the Agricultural Stabilization and Conversation Service ("the ASCS") — an agency within the United States Department of Agriculture. 7 C.F.R. § 2.65(a)(28). Pursuant to "The Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994," the responsibilities of the ASCS, including its obligations regarding administration of the wool and mohair price support programs, have been assumed by ASCS' successor agency, the Consolidated Farm Service Agency or "the CFSA." Pub.L. No. 103-354, § 226, 108 Stat. 3178 (1994); 59 Fed.Reg. 66518 (1994).

Under United States Department of Agriculture regulations, the CFSA is authorized to make determinations regarding producers of wool and mohair who participate in the wool and/or mohair price support programs. These determinations include eligibility and payment limitation determinations and determinations regarding participants' compliance with all program requirements. 7 C.F.R. §§ 1468.2, 1468.3, 1468.13(c)-(e). Part of the CFSA's program administration responsibilities include monitoring and determining whether a participant in the wool and mohair price support programs (as well as other price support programs under the CFSA's jurisdiction) is in compliance with program statutory and regulatory requirements. Id. With regard to payment eligibility and payment limitation program requirements, these compliance reviews are termed "end-of-year reviews." U.S. DEPT OF AGRICULTURE, ASCS HANDBOOK, PAYMENT LIMITATIONS FOR STATE AND COUNTY OFFICES 1-PL (Revision 1), Page 7-1 (January 23, 1992). The purpose of the end-of-year compliance reviews conducted by the CFSA is:

To maintain the integrity of payment limitation and payment eligibility provisions, end-of-year reviews are conducted to ascertain that farming operations were carried out as represented when initial determinations were made.

Id.

The defendant is the Inspector General of the United States Department of Agriculture, whose Office of the Inspector General is an independent unit within the Department of Agriculture, established by the Inspector General Act of 1978, as amended. 5 U.S.C. §§ 1-12 app. 3 at 222-250 (Supp.1995). The scope of the Office of the Inspector General's powers are set forth in the Inspector General Act (sometimes referred to as "the Act"). Id. at §§ 2, 4 app. 3 at 223, 225 (Supp.1995). According to the Act, the Office of the Inspector General is prohibited from conducting any of the "program operating responsibilities" delegated to an administrative agency, such as the CFSA. Id. at § 9(a)(2) app. 3 at 245. The Inspector General may, however, conduct audits and investigations relating to the efficiency and economy of program operations and the prevention and detection of fraud and abuse in such programs. Id. at § 2(2) app. 3 at 223. Nevertheless, the scope of the Inspector General's duties and powers is severely limited and there was no intent by Congress to transfer "responsibility for audits and investigations constituting an integral part of the programs involved. In such cases, the Inspector General has oversight rather than direct responsibility." H.R.REP. No. 584, 95th Cong., 1st Sess., at 12-13 (1977).

ANALYSIS

Burlington N. R.R. v. Office Of The Inspector Gen., R.R. Retirement Bd., 983 F.2d 631 (5th Cir.1993), aff'g 767 F.Supp. 1379 (N.D.Tex.1991), is instructive. In March of 1990, the Inspector General of the Railroad Retirement Board notified Burlington Northern Railroad of his intent to audit the company. 983 F.2d at 635. The purpose of the audit was, according to the Inspector General's notification letter and subsequent communications, part of a joint program with the Internal Revenue Service to audit tax contributions and compensation reported under the Railroad Unemployment Insurance and Railroad Retirement Acts. Id. at 635-36. The railroad alleged the audit program being conducted by the Inspector General was "a classic exercise of regulatory authority rather...