Bottoms Farm P'ship, Bell Family P'ship, Bell Planting Co. v. U.S. Dep't of Agric., Risk Mgmt. Agency, & Fed. Crop Ins. Corp.

• Decision Date: 24 March 2017
• Docket Number: No. 4:15-CV-1073-SPM,4:15-CV-1073-SPM
• Parties: BOTTOMS FARM PARTNERSHIP, BELL FAMILY PARTNERSHIP, BELL PLANTING CO., and NEZ FARMS, INC., Plaintiffs, v. UNITED STATES DEPARTMENT OF AGRICULTURE, RISK MANAGEMENT AGENCY, and FEDERAL CROP INSURANCE CORPORATION, Defendants.
• Court: U.S. District Court — Eastern District of Missouri

BOTTOMS FARM PARTNERSHIP, BELL FAMILY PARTNERSHIP,BELL PLANTING CO., and NEZ FARMS, INC., Plaintiffs, v. UNITED STATES DEPARTMENT OF AGRICULTURE, RISK MANAGEMENT AGENCY,and FEDERAL CROP INSURANCE CORPORATION, Defendants.

No. 4:15-CV-1073-SPM

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

March 24, 2017

MEMORANDUM AND ORDER

This is an action for judicial review of a final agency action under the Administrative Procedure Act, 5 U.S.C. § 701, et seq. This case is before the Court on the cross-motions for summary judgment filed by Plaintiffs (Doc. 35) and Defendants (Doc. 38). Both motions have been fully briefed, and the Court has heard oral argument on them. The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(c)(1). (Doc. 28). For the following reasons, Defendants' motion will be granted, and Plaintiffs' motion will be denied.

I. FACTUAL BACKGROUND

Plaintiffs in this case are four entities that conduct farming operations in Missouri: Bottoms Farm Partnership, Bell Family Partnership, Bell Planting Co., and Nez Farms, Inc. (collectively, "Plaintiffs"). Defendants in this case are the United States Department of Agriculture ("USDA"), the Risk Management Agency ("RMA"), and the Federal Crop Insurance Corporation ("FCIC") (collectively, "Defendants"). In their Complaint, Plaintiffs seek a declaratory judgment and injunctive relief arising from administrative determinations issued by FCIC and RMA.

The Federal Crop Insurance Act ("FCIA") was enacted "to promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance and providing the means for the research and experience helpful in devising and establishing such insurance." 7 U.S.C. § 1502(a). Defendant FCIC is a federal government-owned corporation within the USDA that was created to "carry out the purposes" of the FCIA. 7 U.S.C. § 1503; 31 U.S.C. § 9101(3). Defendant RMA is an agency of the USDA and is charged with supervision of FCIC and with regulation and oversight of the FCIA. 7 U.S.C. § 6933.

Pursuant to the FCIA, FCIC is authorized to act as a reinsurer to Approved Insurance Providers ("AIPs"). 7 U.S.C. § 1508. An AIP is "a private insurance provider that has been approved by [FCIC] to provide insurance coverage to producers participating in the Federal crop insurance program established under this subchapter." 7 U.S.C. § 1502(b)(2). "In order to qualify for reinsurance through the FCIC, the policies written by [AIPs] must comply with the FCIA and its accompanying regulations." Davis v. Producers Agric. Ins. Co., 762 F.3d 1276, 1284 (11th Cir. 2014). "Consequently, the FCIA generally establishes the terms and conditions of insurance, . . . even though the crop insurance policy is between the farmer and an [AIP]." Id. (internal quotation marks omitted).

During the time periods relevant to this litigation, Plaintiffs conducted farming operations, including rice production, in Stoddard County, Missouri. In 2012, each of the Plaintiffs purchased federally reinsured policies of Multi-Peril Crop Insurance that provided revenue protectioncoverage for their 2012 rice crop from Rural Community Insurance Services ("RCIS"), an AIP. As an AIP, RCIS entered into a Standard Reinsurance Agreement with FCIC.

The policies issued to each Plaintiff, like other policies issued under the Federal crop insurance program, include three sets of provisions: (1) the Common Crop Insurance Policy Basic Provisions (the "Basic Provisions"), which are common to all crops and are codified in the Code of Federal Regulations at 7 C.F.R. § 457.8 (2012); (2) the Rice Crop Provisions, which are specific to the particular crop that is being insured and that are codified in at 7 C.F.R. § 457.141 (2012); and (3) the "Special Provisions of Insurance 2012 and Succeeding Crop Years for Stoddard County, Missouri—Rice ("Special Provisions")," which govern rice grown in Stoddard County, Missouri and are not codified in the Code of Federal Regulations.

At issue in this case is the following provision, contained in the Special Provisions:

Insurance Availability

. . .

In addition to the definition of Planted Acreage specified in section 1 of the Crop Provisions, the following must have occurred immediately following seeding. If these activities have not occurred, the acreage will be considered "acreage seeded in any other manner" and will not be insurable:

1. levees are surveyed and constructed;

2. levee gates are installed and butted; and

3. the irrigation pump is operable, ready to be started in the event sufficient rainfall has not been received, and turned on to provide sufficient water for the purposes of germination or elimination of soil crusting.

(Administrative Record 59).

As a result of substantial damage to their rice crop in 2012, each of the Plaintiffs filed claims with RCIS for the 2012 crop year. RCIS denied the Plaintiffs' claims on the ground that the acreage was not insurable due to the alleged failure to comply with the Special Provisions—specifically, the failure to survey and construct levees immediately after seeding and the failure to immediately fully install levee gates following seeding.

Plaintiffs disagreed with RCIS's interpretation of the Special Provisions, and the parties entered into policy-mandated arbitration pursuant to RMA Manager's Bulletin No. MGR-12-003.1 and Section 20(a) of the Basic Provisions. The arbitration proceedings have been consolidated and are being held in abeyance pending the resolution of the issue presented in this action.

Section 20 of the Basic Provisions provides for mandatory arbitration of disputes involving determinations made by an AIP. Specifically, Section 20(a) provides:

[I]f you and we fail to agree on any determination made by us . . . , the disagreement may be resolved through mediation in accordance with Section 20(g). If resolution cannot be reached through mediation, or if you and we do not agree to mediation, the disagreement must be resolved through arbitration in accordance with the rules of the American Arbitration Association (AAA) . . .

(1) All disputes involving determinations made by us . . . are subject to mediation or arbitration. However, if the dispute in any way involves a policy or procedure interpretation, regarding whether a specific provision or procedure is applicable to the situation, how it is applicable, or the meaning of any policy provision or procedure, either you or we must obtain an interpretation from FCIC in accordance with 7 CFR part 400, subpart X or such other procedures as established by FCIC.

(i) Any interpretation by FCIC will be binding in any mediation or arbitration.

(ii) Failure to obtain any required interpretation from FCIC will result in nullification of any agreement or award.

(iii) Any interpretation by FCIC of a policy provision is considered a determination that is a matter of general applicability.

(iv) Any interpretation by FCIC of a procedure may be appealed to the National Appeals Division in accordance with 7 CFR part 11.

(AR 107-08).

In accordance with this provision, RCIS and Plaintiffs jointly sought an interpretation of the Special Provisions from FCIC. (AR 3-7). The joint request stated that the parties sought an interpretation "in accordance with Bulletin MGR-05-018." (AR 3). Manager's Bulletin MGR-05-018 provides rules and procedures by which parties can obtain an interpretation from FCIC, asrequired by Section 20(a), of "procedure"; it does not expressly discuss how to obtain an interpretation of a "policy provision." (AR 118-24).

In the request for interpretation, RCIS asserted that the provision of the Special Provisions at issue should be interpreted to require that "a producer must, no later than immediately following seeding of the fields, construct the entire levee system for all of the fields including preparation and installation of levee gates throughout all fields." (AR 6). Plaintiffs asserted that the provision should be interpreted to "only require that such levees, levee gates, and irrigation pumps as are required to enable the producer to put sufficient water on the field in the event it is needed for the purposes of germination or the elimination of soil crusting be in place immediately following seeding." (AR 6).

On December 17, 2014, RMA issued FCIC's interpretation of the Special Provisions, in which it adopted RCIS's interpretation (the "FCIC Interpretation"). (AR 9-13). It stated:

FCIC agrees with [RCIS's] interpretation. FCIC does not agree with [Plaintiffs'] interpretation. Any time a term is not defined in the policy, its common meaning is used and that is found in any standard dictionary. The Merriam-Webster dictionary defines "immediately" as "without any delay." This means the listed activities must occur right after planting has ended, weather permitting, without any delay. If weather prevents these activities, they must commence as soon as the weather permits.

Therefore, FCIC does not agree with [Plaintiffs'] interpretation that the Special Provisions only require that such levees, levee gates, and irrigation pumps as are required to enable the producer to put sufficient water on the field in the event it is needed for purposes of germination or the elimination of soil crusting, be in place immediately following seeding. FCIC also does not agree that interior levees do not have to be installed immediately following planting in order for the acreage to be insurable.

The Special Provisions statement specifies what activities must occur immediately following seeding, including:

1. levees are surveyed and constructed;

2. levee gates are installed and butted; and

3. the irrigation pump is operable, ready to be started in the event sufficient rainfall has not been received, and turned on to provide sufficient waterfor the purpose of germination or elimination of soil crusting.

These are specific activities that must

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