Hanson v. Espy, 92-1918
| Decision Date | 22 October 1993 |
| Docket Number | No. 92-1918,92-1918 |
| Citation | 8 F.3d 469 |
| Parties | Christian HANSON and Evan Hanson, general partners of and doing business as Hanson Farms, Plaintiffs-Appellees, v. Michael ESPY, * Secretary, United States Department of Agriculture, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Sydney Berde (argued), Doherty, Rumble & Butler, St. Paul, MN, for plaintiffs-appellees.
Richard A. Olderman, Robert S. Greenspan, Dept. of Justice, Civ. Div., Appellate Section; Raymond Fullerton, Dept. of Agriculture, Office of the Gen. Counsel, Washington, DC, Christa A. Reisterer, Asst. U.S. Atty., Office of the U.S. Atty., Madison, WI, and Leslie K. Lagomarcino (argued), Dept. of Agriculture, Washington, DC, for defendant-appellant.
Before RIPPLE and KANNE, Circuit Judges, and WILLIAMS, District Judge. **
This is an appeal by the Secretary of Agriculture ("the Secretary") from a summary judgment order entered in favor of the plaintiffs. The Secretary seeks to deny the plaintiffs disaster benefits under the Disaster Assistance Act of 1988 ("the Act"). 7 U.S.C. § 1421 note, §§ 201-41 (1988). The Secretary deemed the plaintiffs ineligible for disaster benefits because he found them to be persons whose qualifying gross revenues exceeded $2 million annually. In granting summary judgment in the plaintiffs' favor, the district court determined that the Secretary had based his decision on an inaccurate interpretation of the Act's ineligibility provision, 7 U.S.C. § 1421 note, § 231. Hanson v. Madigan, 788 F.Supp. 403 (W.D.Wis.1992). For the reasons that follow, we reverse the judgment of the district court and reinstate the Secretary's decision.
Christian and Evan Hanson are brothers and general partners of Hanson Farms, a partnership located in St. Croix County, Wisconsin. In 1988, a catastrophic drought devastated farms throughout the Midwest, including Hanson Farms. As a result, the Hansons applied for disaster assistance to the St. Croix County Committee of the Agricultural Stabilization and Conservation Service ("the ASCS") 1 pursuant to the Act. On January 12, 1989, the ASCS committee approved the Hansons' application for benefits, issuing a check for $51,218.00 the following day.
However, on December 13, 1989, the Executive Director of the St. Croix County Committee of the ASCS, Richard A. Gade, wrote to Christian Hanson. He requested a copy of Mr. Hanson's 1987 IRS Form 1040. Not long thereafter, Mr. Gade requested the same form from Evan Hanson. Although the brothers had certified on their original applications that their individual gross incomes for 1987 had not exceeded $2 million, Mr. Gade informed the brothers that he was reexamining the matter to determine their eligibility for disaster benefits. The Hansons provided the 1040 forms and all accompanying supplemental schedules, which showed that Christian Hanson's gross revenues from all sources totaled $90,398.82, and that Evan Hanson's gross revenues from all sources totaled $47,245.94.
Nonetheless, on February 15, 1990, Mr. Gade notified the Hansons that they were ineligible for benefits because they individually exceeded the Act's $2 million limit on qualifying gross revenues. Mr. Gade and the ASCS committee based this determination on oral statements Christian Hanson made to Mr. Gade on January 4, 1990 concerning the gross revenues of each of the brothers' nonfarm corporations. R. 194. Christian Hanson's statements were in reference to the Hansons' other business activities. In addition to the Hanson Farms partnership, Christian Hanson was the sole shareholder of the Douglas-Hanson Company, an unrelated nonfarm corporation that in 1987 reported a net loss on gross sales of over $9 million. Evan Hanson was the sole shareholder of Rochester Institutional Foods, also an unrelated nonfarm corporation; it realized a 1987 net profit of approximately $25,000 on gross sales of slightly over $2 million. R. 173. Based on these companies' gross revenues, and the fact that each individual's farm income was less than fifty percent of his total gross income, Mr. Gade and the ASCS committee found the Hansons ineligible for disaster benefits under the Act.
On April 12, 1990, the Hansons appealed the decision to the Wisconsin State ASCS Committee. They argued that the Act did not authorize the inclusion of the gross sales revenues of their unrelated nonfarm corporations in the calculation of their individual gross incomes. However, on June 19, 1990, the state ASCS committee affirmed the County Committee's ruling as well as its reasoning. The Hansons appealed this decision to the Deputy Administrator of the ASCS in Washington, D.C., who also affirmed the ineligibility decision, reiterating that each of the Hansons R. 2.
The Hansons brought an action in the district court for review of the Secretary's decision pursuant to 5 U.S.C. §§ 701-06 (1988). The Secretary contended that its determination regarding the Hansons' gross revenues was, as a finding of fact, "final and conclusive" pursuant to 7 U.S.C. § 1385 and § 1429 (1988). The district court conceded arguendo that those provisions barred review of the Secretary's findings of fact made in connection with the Act. 2 Nonetheless, because the district court found that the Secretary based his findings on an inaccurate interpretation of law, it proceeded to review the Secretary's determination. Hanson, 788 F.Supp. at 406.
The district court's main inquiry focused on the Secretary's interpretation of "person" in two sections of the Act, payment limitations and ineligibility. 7 U.S.C. § 1421 note, §§ 211, 231. In reaching his decision to deny the Hansons benefits, the Secretary gave the word "person" in the ineligibility section the same meaning as the definition of "person" in the payment limitations section, the latter of which the Secretary had defined pursuant to explicit congressional authorization. See 7 U.S.C. § 1421 note, § 211(d)(1). The district court, however, rejected the Secretary's interpretation of "person" in the ineligibility section for three reasons.
First, the court stated that the record did not support the Secretary's argument that such an interpretation constituted the Secretary's regular procedure and therefore deserved deference. Hanson, 788 F.Supp. at 409. Second, regardless of whether it was the Secretary's regular practice to give the term "person" the same meaning for both payment limitations and ineligibility purposes, the district court concluded it owed no deference to such an interpretation because it was not "based on a permissible construction of the applicable statute." Id. (citing Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 2782, 81 L.Ed.2d 694 (1984)). The court found no significance in the 1989 Disaster Act's incorporation of the Secretary's use of the same definition of "person" in both the payment limitations and the ineligibility section. Hanson, 788 F.Supp. at 408-09; see 7 U.S.C. § 1421 note, §§ 109, 151. Finally, the court stated, albeit in conclusory fashion, that the interpretation did not comport with procedural fairness because it did not conform with other rules the Secretary had promulgated and made known to the public. Hanson, 788 F.Supp. at 409. Accordingly, the district court denied the Secretary's motion for summary judgment and granted the Hansons' cross-motion for summary judgment.
We now turn to the merits. We shall first determine the applicable standard of review. We shall then examine the provisions of the Act and corresponding regulations that are at issue in this appeal. Finally, we shall assess the submissions of the Secretary and the Hansons with respect to the appropriate interpretation of these statutes and regulations.
Our starting point in reviewing the Secretary's determination is the Administrative Procedure Act ("the APA"). The APA states that a reviewing court should set aside an agency action only if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A) (1988). In applying this standard, we must focus on "the administrative record already in existence," not on any "new record made initially in the reviewing court." Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973) (per curiam). Thus, we need accord no deference to the district court's disposition. See Daviess County Hosp. v. Bowen, 811 F.2d 338, 342-43 (7th Cir.1987); Sierra Club v. Davies, 955 F.2d 1188, 1192 (8th Cir.1992).
Chevron mandates that our review be two-fold. 3 First, if Congress has directly addressed the statutory question at issue, the matter is resolved, as we shall "give effect to the unambiguously expressed intent of Congress." Id. 467 U.S. at 842-43, 104 S.Ct. at 2781-82. In determining congressional intent, we " 'look to the particular statutory language at issue, as well as the language and design of the statute as a whole.' " Orrego v. 833 West Buena Joint Venture, 943 F.2d 730, 734 (7th Cir.1991) (quoting K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S.Ct. 1811, 1817, 100 L.Ed.2d 313 (1988)). Second, if Congress has not directly addressed the issue, we inquire only whether the Secretary based his decision on "a permissible construction of the statute." Chevron, 467 U.S. at 843, 104 S.Ct. at 2782 (footnote omitted). In undertaking such an inquiry, we cannot substitute our own construction of the Act for the Secretary's if his interpretation is reasonable. Id. at 844, 104 S.Ct. at 2782. Rather, we owe the Secretary's interpretation of the Act deference because "considerable...
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