Ackerman v. U.S. Dep't of Agric.
| Decision Date | 18 April 2018 |
| Docket Number | Case No. 17-cv-11779 |
| Parties | GREGORY ACKERMAN, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, et al Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Honorable Thomas L. Ludington
On June 5, 2017, a group of farmers and incorporated farms filed suit against a number of insurance companies, the United States Department of Agriculture, the Risk Management Agency, and the Federal Crop Insurance Corporation. ECF No. 1. The Plaintiffs are dry bean farmers in Michigan, Minnesota, and North Dakota who have not received indemnity for crop insurance to which they believe they are entitled. On September 22, 2017, the Federal Defendants filed a motion for partial dismissal and the Insurance Defendants filed a motion for complete dismissal. ECF No. 39, 41. On November 9, 2017, Plaintiffs filed an amended complaint. ECF No. 50. Several weeks later, the motions to dismiss were refiled. ECF Nos. 51, 52. On March 8, 2018, Plaintiffs filed a motion for leave to file a second amended complaint which corrects the names of certain Plaintiffs. ECF No. 64. For the reasons that follow, the motions to dismiss will be granted and the motion for leave to file an amended complaint will be granted.
Plaintiffs are bringing this putative class action "on behalf of all dry bean farmers in Michigan (navy [pea] beans and small red beans), Minnesota (dark red kidney beans), and North Dakota (dark red kidney beans)." Am Compl. at 2, ECF No. 50. Each Plaintiff purchased Dry Bean Revenue Endorsement ("DRBE") crop insurance for their dry bean crops in 2015. Id. "The purpose of this insurance was to protect dry bean farmers against a market price decline." Id. However, even though "dry bean market prices declined greatly in 2015, no indemnity was paid to Plaintiffs." Id. In the present suit, Plaintiffs seek a declaratory judgment invalidating certain administrative determinations related to the DBRE, reforming or invaliding the insurance contracts, and ordering Defendants to pay indemnity to Plaintiffs.
Plaintiffs have named a multitude of insurance companies and several federal government entities as Defendants. The insurance companies each sold DRBE policies in 2015. Defendant United States Department of Agriculture ("USDA") "is a department of the United States Government and is the parent agency of Defendant [Risk Management Agency ("RMA")], which in turn administers Defendant [Federal Crop Insurance Corporation ("FCIC")], a wholly government-owned corporation created under the Federal Crop Insurance Act, 7 U.S.C. § 1501, et seq." Id. at 14.
Pursuant to 7 U.S.C. § 1523(a)(1), the Federal Crop Insurance Corporation may conduct pilot programs for crop insurance. Those proposed programs must be submitted to the FCIC Board. The Board then evaluates "whether a proposal or new risk management tool tested by the pilot program is suitable for the marketplace and addresses the needs of producers of agricultural commodities." Id. The current dispute arises out of a pilot program developed by "Watts andAssociates, a privately owned economic consulting firm located in Billings, Montana." Am. Compl. at 18. The FCIC Board approved the program, titled Dry Bean Revenue Endorsement, in 2012. Id. The pilot program became effective in 2013. Id. After initial success, the FCIC approved an expansion of the pilot program, to include farmers in Michigan, effective in 2014. Id.
Pursuant to that expansion, Michigan dry bean farmers "purchased 1,286 DBRE policies, covering 151,464 acres" in 2015. Id. "Minnesota dry bean farmers purchased 996 DBRE policies, covering 100,732 acres" in 2015. Id. "North Dakota dry bean farmers purchased 5,596 DBRE policies, covering 521,974 acres: in 2015. Id. at 19.
DBRE provides that farmers may elect its coverage only if they already have the "Common Crop Insurance Policy" and the "Dry Bean Crop Provisions" in force. DBRE at 1(b), ECF No. 50, Ex. A. The Common Crop Insurance Policy permits farmers to elect either revenue protection or yield protection for certain crops, not including dry beans. CCIP 2010 Amendments at 1, ECF No. 50, Ex. B. "Revenue protection provides protection against loss of revenue caused by price changes or low yields or a combination of both." Id. "Yield protection provides protection for production losses only." Id. "For crops for which revenue protection is available, a projected price and a harvest price will be determined in accordance with the Commodity Exchange Price Provisions." Id. Yield protection guarantees are "determined by multiplying the production guarantee by the projected price." Id. Thus, for yield protection, the "harvest price is not used." Id. Revenue protection guarantees are "determined by multiplying the production guarantee by the greater of the guaranteed price or the harvest price." Id. Id.
Under the Common Crop Insurance Policy and the Dry Bean Crop Provisions addendum, dry bean farmers do not have the option of obtaining revenue protection. Rather, they are limited to yield protection guarantees. DBRE, however, provides dry bean farmers access to revenue protection guarantees.
DBRE offers two kinds of revenue protection: revenue protection without harvest price exclusion and revenue protection with harvest price exclusion. The coverage for both kinds of protection is calculated similarly. The first step is determining the projected price for dry beans. On or before February 15 of the crop year, the RMA must collect the "offer price and expected contract volume" from dry bean buyers for the various types of dry beans covered by DRBE. DRBE § 7(e)(1)(A). After reviewing that information, the RMA will announce projected prices for bean types "no later than the third business day of March." Id. at § (e)(1)(D). The projected price provides the baseline guarantee for purposes of revenue protection.
Not later than December 15 of the harvest year, the RMA must announce the "harvest price" for each type of bean. Id. at § (e)(2)(E). The harvest price is determined pursuant to the following procedure: "The market price of each type for each day of publication during the period beginning on the first business day in September and ending on the last business day of November will be collected." Id. at § (e)(2)(A). The "publication" mentioned in § (e)(2)(A) refers to the "Bean Market News, a publication of the Agricultural Marketing service, USDA," which publishes weekly market prices for specific types of dry beans in specific regions. § 2. Typically, the market price will be "the sum of the market prices for that type divided by the number of prices included in that sum." Id. at § (e)(2)(D). If the reported market price for a certain date is qualified by "terms that indicate a small volume of sales or no sales" occurred on that date, that market activity willbe disregarded for purposes of calculating the market price. Id. at § (e)(2)(B). And, "if there is a market price for fewer than 50 percent of the dates of publication," no harvest price will be established. Id. at § (e)(2)(C).
The DBRE also provides contingencies for the event that either the projected price or harvest price cannot be calculated pursuant to the procedure provided above. Section 7(e)(3) indicates that, "[i]f a projected price for any of these types cannot be determined as described herein; . . . [t]he projected price will be determined by RMA and announced not later than the third business day of March; and . . . [t]he harvest price will equal the projected price." Section 3(c)(1) explains that if a projected price cannot be calculated for a type of dry bean, coverage for that type of bean will be subject to the terms of § 7(e)(3). Section 3(c)(2) provides that "[i]f the harvest price cannot be calculated for the crop year for a type for which a projected price was determined in accordance with section 7 of this endorsement, the harvest price will be equal to the projected price." Confusingly, the Dry Bean Revenue Insurance Standards Handbook, which is a reference material for DBRE, appears to identify a different contingency procedure for determining the harvest price when it cannot be calculated pursuant to section 7 of the DBRE. DBRE Handbook, ECF No. 50, Ex. D. In Section N, entitled "Inability to Determine a Harvest Price but a Projected Price was Established as Defined," the Handbook explains that "[i]f a harvest price cannot be determined . . . but a projected price was established . . . , RMA will establish the harvest price." Id. at 6.
Importantly, § 3(c) of the DBRE specifies that the contingencies for determining a projected and/or harvest price supersede "section 3(c)(5) of the Basic Provisions." Section 3(c)(5)(ii) of the Common Crop Insurance Policy, which DBRE thus supersedes, provides that when the harvest price cannot be calculated as provided by the provisions of the Common Policy,the harvest price will be determined and announced by the FCIC. Common Crop Insurance Policy § 3(c)(5)(ii), ECF No. 50, Ex. B.
The DBRE provides three examples which demonstrate how indemnity is calculated. First, if a farmer chooses yield protection but not revenue protection, the DRBE protections will not apply. In that scenario, the farmer obtains yield protection for a specific number of acres and specific production guarantee per acre. See § 5 Example 1. In the example provided, the farmer insured 50 acres with a 1,600 lbs. per acre production guarantee, which totaled an 80,000 lbs. production guarantee. Id. That guarantee is multiplied by the projected price for the type of bean, and the resulting sum is the value of the guarantee (in the example, $22,400). If the farmer's actual yield is 25,000 lbs., that amount is multiplied...
To continue reading
Request your trial