Dawson Farms, LLC v. Farm Service Agency, 06-30917.

• Decision Date: 16 October 2007
• Docket Number: No. 06-30917.,06-30917.
• Citation: 504 F.3d 592
• Parties: DAWSON FARMS, LLC, Plaintiff-Appellant, v. FARM SERVICE AGENCY, A Division of the United States Department of Agriculture; Commodity Credit Corporation; United States Army Corps of Engineers, Vicksburg District; Natural Resources Conservation Service, A Division of the United States Department of Agriculture, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

504 F.3d 592

DAWSON FARMS, LLC, Plaintiff-Appellant, v. FARM SERVICE AGENCY, A Division of the United States Department of Agriculture; Commodity Credit Corporation; United States Army Corps of Engineers, Vicksburg District; Natural Resources Conservation Service, A Division of the United States Department of Agriculture, Defendants-Appellees.

No. 06-30917.

United States Court of Appeals, Fifth Circuit.

October 16, 2007.

Donald L. Kneipp (argued), Kneipp & Hastings, Monroe, LA, for Plaintiff-Appellant.

Janice E. Hebert, Asst. U.S. Atty. (argued), Lafayette, LA, for Defendants-Appellees.

Appeal from the United States District Court for the Western District of Louisiana.

Before SMITH, BENAVIDES and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

The plaintiff, Dawson Farms, LLC, a farm operator, brought suit in the district court against the Farm Service Agency ("FSA"), other agencies of the Department of Agriculture ("USDA"), and the Corps of Engineers, seeking declaratory and injunctive relief and damages. Dawson Farms alleges that the FSA erroneously determined that Dawson Farms must return $107,172.31 in USDA program benefits because of the company's wetlands violations; and that the agency erroneously intends to withhold future benefits from Dawson Farms for the same reason. The district court dismissed the action for lack of subject matter jurisdiction.

The threshold question in this case is whether 7 U.S.C. § 6912(e)—providing that a person shall exhaust administrative appeal procedures before bringing a court action against the Secretary of Agriculture, his department or his delegate—is a jurisdictional prerequisite to subject matter jurisdiction or merely an element of that action. We hold that section 6912(e) is not a jurisdictional rule but the codification of a judicially developed requirement, for which there are recognized exceptions and excuses. In this case, the district court correctly determined that the farm operator failed to exhaust administrative appeal procedures, but it erred in concluding that this failure deprived it of subject matter jurisdiction. Instead of dismissing forthwith on that basis, the district court was required to next address whether the operator had shown that, under the circumstances of this case, it was excepted or excused from the exhaustion requirement. Nevertheless, we affirm the district court's result in dismissing the action, because the farm operator has pointed to no basis in the record or reason in law that supports its exception from the requirement of exhaustion of administrative appeal procedures or that excuses its failure to exhaust all such procedures in this case.

Statutory-Regulatory Structure

1. Eligibility for USDA Benefits under "Swampbuster" Provisions

Under the so-called "Swampbuster" provisions in the Food Security Act of 1985, codified at 16 U.S.C. § 3821, et seq., farmers become ineligible for crop benefits if the USDA determines that the farmer converted wetlands for agricultural purposes. Nat'l Wildlife Fed'n v. Agric. Stabilization and Conservation Serv., 901 F.2d 673, 674 (8th Cir.1990) (quoting 16 U.S.C. § 3821) ("`[A]ny person who in any crop year produces an agricultural commodity on converted wetland shall be ineligible for' federal agricultural subsidies with regard to that commodity."). The USDA defines "converted wetland" as "a wetland that has been drained, dredged, filled, leveled, or otherwise manipulated (including the removal of woody vegetation or any activity that results in impairing or reducing the flow and circulation of water) for the purpose of or to have the effect of making possible the production of an agricultural commodity ..." 7 C.F.R. § 12.2(a); see also 16 U.S.C. § 3801(a)(4). The Food, Agriculture, Conservation and Trade Act ("FACTA"), enacted in 1990, strengthened the Swampbuster provisions. Under FACTA, the USDA may penalize the conversion of wetlands if agricultural commodity production is possible on the converted land, even if no such commodity is actually produced. 16 U.S.C. § 3821(c); 7 C.F.R. § 12.4(a)(3). FACTA also added a stronger penalty: a conversion may incur a total loss of all USDA benefits on all land the individual controls until the wetland is restored or the loss mitigated. 16 U.S.C. §§ 3821(c), 3822(i); see also Holly Hill Farm Corp. v. United States, 447 F.3d 258, 263 (4th Cir.2006).

Two USDA agencies, the National Resource Conservation Agency ("NRCS") and FSA, are responsible for the day-to-day administration of the Swampbuster provisions. The NRCS conducts technical determinations of wetlands conversions for agricultural purposes and also evaluates restoration and mitigation plans. 16 U.S.C. § 3822(j); see also 7 C.F.R. § 12.6(c). Once NRCS determines that an individual violated the Swampbuster provisions by converting wetlands, the FSA will determine (1) whether the individual is ineligible for USDA benefits; (2) whether the violations were made in good faith; and (3) whether any other exemptions apply to the wetlands conversion. 7 C.F.R. §§ 12.6(a), 12.6(b)(3)(viii).

Non-USDA agencies have independent and concurrent authority over determining federal regulatory effects of activities in respect to wetlands.¹ The Clean Water Act and corresponding regulations invest the Corps of Engineers with authority to issue permits and regulate the dredging and filling of certain wetlands. United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 139, 106 S.Ct. 455, 88 L.Ed.2d 419 (1985); see also In Re Needham, 354 F.3d 340, 344-45 (5th Cir.2003). If an individual obtains authorization from the Corps of Engineers, the individual can convert his wetlands without losing eligibility for USDA benefits. See Protection of Wetlands, 62 Fed.Reg. 61215, 61216 (Nov. 17, 1997) ("A person may also remain eligible for USDA program benefits if the action has been permitted by the Army Corps of Engineers ... via the individual permit process."). The Corps of Engineers can also, as in this case, grant an after-the-fact permit, which allows an individual to maintain his eligibility for USDA benefits despite having converted his wetlands. Id.; 33 C.F.R. § 326.3(e)(1). If the Corps of Engineers identifies a particularly serious violation of the Clean Water Act, that agency may recommend the matter to the Environmental Protection Agency ("EPA") for administrative penalties. See 33 U.S.C. § 1319(g)(1)(B) (investing both the EPA and Corps of Engineers with authority to issue administrative penalties); 1989 Memorandum Between The Department of the Army and the Environmental Protection Agency, Federal Enforcement for the Section 404 Program of the Clean Water Act, available at http://www.epa.gov/ owow/wetlands/regs/enfmoa.html (identifying the EPA as the lead agency for flagrant violators and allowing the Corps to recommend to the EPA that "administrative penalty action may be warranted."). The EPA has the authority to issue monetary penalties and enforce environmental laws, including the Clean Water Act, through administrative and legal channels. See 33 U.S.C. § 1319(g)(1)(B); 1989 Memorandum Between The Department of the Army and the Environmental Protection Agency, Federal Enforcement for the Section 404 Program of the Clean Water Act, available at http://www.epa.gov/owow/ wetlands/ regs/enfmoa.html.

2. Appeals of USDA decisions

The underlying dispute concerns Dawson Farms' ineligibility for USDA benefits under the Swampbuster provisions. While the Commodity Credit Corporation, a wholly-owned government corporation under the USDA, administers the nation's major agricultural commodity programs, including the benefits program in this case, Deaf Smith County Grain Processors v. Glickman, 162 F.3d 1206, 1207 (D.C.Cir. 1998), the FSA is the agency invested with the operational authority to make benefits eligibility determinations. Id. FSA eligibility determinations adhere to the general appeals processes within the USDA. Normally, appeals of FSA eligibility decisions, and also NRCS technical determinations, first proceed to the local arms of the FSA, the County and State Committees. See 7 C.F.R. § 12.6; 7 C.F.R. § 780.6 (FSA appeals); 7 C.F.R. § 780.11 (NRCS appeals); see generally United States v. Dierckman, 201 F.3d 915, 918 (7th Cir.2000). At any point, individuals can appeal to the highest appellate authority within the USDA, the National Appeals Division ("NAD"). See 7 U.S.C. § 6996-998; see generally 7 U.S.C. §§ 6991-7002 (2000); see also 7 C.F.R. § 11.1-3 (2002). The district court then can review and enforce any NAD decision. See 7 U.S.C. § 6999. Before a person may bring an action against the Secretary or his department or his delegate, however, the person shall exhaust all administrative appeal procedures as provided by 7 U.S.C. § 6912. Section 6912 states:

Exhaustion of administrative appeals

Notwithstanding any other provision of law, a person shall exhaust all administrative appeal procedures established by the Secretary or required by law before the person may bring an action in a court of competent jurisdiction against—

(1) the Secretary;

(2) the Department; or

(3) an agency, office, officer, or employee of the Department.

The principal issue of law presented in this case is whether 7 U.S.C. § 6912(e) requires the exhaustion of administrative remedies as a prerequisite to federal court subject matter jurisdiction or merely codifies the judicially developed principle under which exhaustion of administrative remedies is favored, but may be excused by a federal court under a limited number of exceptions. Two of the three Circuits that have spoken on the issue have concluded that § 6912(e) is not a jurisdictional prerequisite. See Ace Prop. and Cas. Ins. Corp. v. Fed. Crop Ins. Corp., 440 F.3d 992, 999-1000 (8th Cir.2006); McBride Cotton and Cattle Corp. v. Veneman, 290 F.3d 973, 980 (9th Cir.2002) (concluding that section 6912(e) is non-jurisdictional); but see Bastek v. Federal Crop...