Coleman v. Block

• Decision Date: 02 June 1987
• Docket Number: No. A1-83-47.,A1-83-47.
• Citation: 663 F. Supp. 1315
• Parties: Dwight COLEMAN et al., Plaintiffs, v. John R. BLOCK, Secretary of Agriculture, et al., Defendants.
• Court: U.S. District Court — District of South Dakota

663 F. Supp. 1315

Dwight COLEMAN et al., Plaintiffs, v. John R. BLOCK^*, Secretary of Agriculture, et al., Defendants.

No. A1-83-47.

United States District Court, D. North Dakota, Southwestern Division.

May 7, 1987.

Supplemental Memorandum and Order June 2, 1987.

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James T. Massey and Lynn A. Hayes, St. Paul, Minn., for plaintiffs.

Arthur R. Goldberg, Dept. of Justice, Civ. Div., Washington, D.C., for defendants.

Memorandum and Order

VAN SICKLE, District Judge.

Plaintiffs' First Amended Supplemental Class Action Complaint was filed January 21, 1986. The factual background of the supplemental complaint is provided in Coleman v. Block, 632 F.Supp. 1005 (D.N.D. 1986). Defendants have brought a motion for an order granting a summary judgment of dismissal of the supplemental complaint, filed June 16, 1986. The motion has been exhaustively briefed, and was the subject of a hearing held March 23, 1987.

The supplemental complaint presents fourteen claims for relief, all of which are challenged by the summary judgment motion. Defendants asserted in their briefs and at the hearing that the first, second, third, and fifth claims for relief are no longer at issue, having been resolved to the satisfaction of the parties, though without any formal settlement agreement. Plaintiffs acquiesced to this assertion, and have not pressed or defended these four claims at any time in these summary judgment proceedings.

The first and second claims allege that the FmHA regulations published November 1, 1985, eliminated the previous priority given to security releases for necessary family and farm living and operating expenses, and that this regulatory change was arbitrary and capricious and constituted a taking without just compensation. FmHA's policy on living and operating releases was subsequently modified, apparently to plaintiffs' satisfaction. The third and fifth claims allege that no hearing or appeals process was available to borrowers who were unable to reach agreement with the FmHA county supervisor on the use of future farm income, or who were denied requested releases of security for living and operating expenses, in violation of the due process clause of the Fifth Amendment to the United States Constitution. Access to FmHA's appeal process has since been extended to these situations, again apparently to plaintiffs' satisfaction. Summary judgment dismissing these four claims will be ordered.

The sixth claim alleges that FmHA's form 1962-1, which is the document used in forecasting farm income and expenses, is virtually impossible to complete, and so should be set aside as an arbitrary and capricious abuse of discretion. This claim is the subject of settlement discussions which apparently are nearing fruition. Briefing and resolution of this claim has been stayed in anticipation of settlement.

The summary judgment motion against the other nine claims for relief remains for review. Five of these claims are based on section 706 of the Administrative Procedures Act:

To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—

(1) compel agency action unlawfully withheld or unreasonably delayed; and

(2) hold unlawful and set aside agency action, findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

5 U.S.C. § 706.

Claims 4, 7, 9, and 12 invoke § 706(2)(A), claims 7 and 12 invoke § 706(2)(C), claims 11 and 12 invoke § 706(2)(D), and claim 11 invokes § 706(2)(E). The "substantial evidence" standard of subsection (E) is only applicable to administrative actions or findings that are based on a hearing record. Camp v. Pitts, 411 U.S. 138, 140-141, 93 S.Ct. 1241, 1243, 36 L.Ed.2d 106 (1978). The rulemaking procedure utilized by FmHA in this case was the informal notice and comment method under 5 U.S.C. § 553(c), not the formal hearing method under 5 U.S.C. §§ 556 and 557. Since the administrative actions now at issue were not based on a hearing record, 5 U.S.C. § 706(2)(E) is not applicable to this case, and plaintiffs' complaint will be dismissed to the extent it is based on that subsection.

A federal court reviewing agency action pursuant to 5 U.S.C. § 706(2)(A) will normally consider only the administrative record on which the action was based. Arkla Exploration Co. v. Texas Oil & Gas Corp., 734 F.2d 347, 357 (8th Cir.1984). Supplementary material can be admitted and considered for the limited purpose of explaining the record. Id. The court can consider additional evidence only if the record and the supplementary material do not provide an adequate basis for judicial review. Independent Meat Packers Association v. Butz, 526 F.2d 228, 238-239 (8th Cir.1975). If the supplemented record does provide an adequate basis for review, the issues are ripe for summary judgment. Bank of Commerce of Laredo v. City National Bank of Laredo, 484 F.2d 284, 288-289 (5th Cir.1973), cert. denied, 416 U.S. 905, 94 S.Ct. 1609, 40 L.Ed.2d 109 (1974). It is apparent that issues raised by a review of agency action pursuant to subsections (C) and (D) of 5 U.S.C. § 706(2) will as a rule involve only questions of law, and so also will be ripe for summary judgment, unless the record before the court is wholly inadequate.

The administrative record was filed with this court on January 21, 1986 (Docket No. 263). The record consists of the following:

1. A set of documents referred to as the "pretermination package." These are the forms used by FmHA in the course of taking adverse actions against borrowers between November 14, 1983, and October 19, 1984. This set of forms replaced those that were in use when this court's permanent injunction was issued, and was superseded by the new forms and regulations currently at issue.

2. The proposed regulations as published on November 30, 1984, at 49 FR 47007.

3. More than 250 written comments submitted to FmHA concerning the proposed regulations. These comments are discussed below.

4. A letter from Administrator Vance Clark dated October 23, 1985, requesting publication of the final regulations in the Federal Register.

5. The final regulations as published on November 1, 1985, at 50 FR 45740.

The vast majority of the comments submitted to FmHA are letters from private individuals, presumably farmers. Almost all of these are form letters, apparently composed, printed, and distributed by various parties, and then signed and submitted individually. The letters vary somewhat in tone and content, but all express strong opposition to some provisions of the proposed regulations. The provisions targeted by the letters, however, are not at issue before this court, either because the conflict concerning them has been resolved as outlined above, or because they were not challenged in the supplemental complaint.

Of the remaining comments, six are short letters from FmHA officials directed at matters not at issue in this case. A seventh letter, from James D. Reifsteck, Chief, FmHA Farmer Programs, Illinois, criticizes one aspect of the proposed text of FmHA form 1924-26, which is at issue. Mr. Reifsteck's criticism of subsection II(D) of form 1924-26 is quite brief, but is relevant to one aspect of plaintiffs' tenth claim for relief.

Another letter is signed by a Richard D. Long, Assistant Inspector General for Analysis and Evaluation. It is not clear whether Mr. Long is attached to FmHA or some other agency, but in any event his letter does not address any provision challenged by the supplemental complaint. "The Office of the Inspector General" also submitted an unsigned eight page critique of the proposed regulations. This comment is aimed mainly at technical and stylistic changes. One of the suggested changes would have clarified the subsection that describes the effect of a borrower's failure to return, by the specified time, a completed form 1924-26. The critic would insert the statement that the borrower would thereby "forfeit the right to administrative appeal." The suggested language is certainly more clear than that of the proposed rule, but it was not adopted in the final version. Indeed, the final version omits any direct statement at all of the fact that failure to file the form results in losing the right to appeal the adverse action. The approach of FmHA to such matters can perhaps be inferred from the note pencilled in beside this suggestion: "We don't want to use the word `forfeit.'" Another suggestion made by the comment was to replace a subsection in the proposed rules with a new version beginning with the following sentence: "The applicant or borrower has a right to know the specific reasons for intended adverse actions." A comment pencilled in beside this suggestion reads: "Stay away from words like `right.'" Although other aspects of the suggested replacement paragraph were incorporated in the final version, this first sentence was not adopted.

A letter by two New Mexico attorneys addresses an issue not before this court. Another letter is by Martha Miller, an attorney for the plaintiffs in the Curry v. Block litigation. In Curry, a statewide class of Georgia FmHA borrowers challenged FmHA loan servicing practices. See Curry v....