Julius Goldman's Egg City v. U.S., 364-75

• Citation: 697 F.2d 1051
• Decision Date: 10 January 1983
• Docket Number: No. 364-75,364-75
• Parties: 30 Cont.Cas.Fed. (CCH) 70,662 JULIUS GOLDMAN'S EGG CITY, Appellant, v. The UNITED STATES, Appellee. Appeal
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

Page 1051

697 F.2d 1051

30 Cont.Cas.Fed. (CCH) 70,662

JULIUS GOLDMAN'S EGG CITY, Appellant, v. The UNITED STATES, Appellee.

Appeal No. 364-75.

United States Court of Appeals, Federal Circuit.

Jan. 10, 1983.

James A. Dobkin, Washington, D.C., argued for appellant. With him on the brief were Edgar H. Brenner, Thomas B. Wilner, Thomas D. Fuller, and Arnold & Porter, Washington, D.C Randall B. Weill, Washington, D.C., argued for appellee. With him on the brief was Asst. Atty. Gen., J. Paul McGrath, Washington, D.C.

Before RICH, Circuit Judge, COWEN, Senior Circuit Judge, and KASHIWA, Circuit Judge.

PER CURIAM.

Appellant appeals from a judgment ^* of the United States Claims Court dismissing appellant's petition. We affirm.

I

Appellant owned poultry which was destroyed on appellee's order for the purpose of controlling an epidemic of an exotic poultry disease. The exotic disease, Velogenic Viscerotropic Newcastle Disease, first appeared in commercial poultry flocks in southern California in November, 1971. When the disease threatened to spread to the whole country, the appellee, through the Secretary of Agriculture (the "Secretary"), on March 14, 1972, acting with statutory authority, declared a national emergency and with the active collaboration of the California health authorities instituted a program to quarantine and destroy the infected flocks and pay the owners the fair market value of their destroyed flocks. 21 U.S.C. Secs. 114-114a, 134-134h (1970); ¹ 9 C.F.R. Secs. 53.1-53.10 (1975). ²

The flocks in eight affected counties were appraised and destroyed, compensation was paid to the owners, and the approximately 160 ranches involved were cleaned and disinfected. This was done by a task force of 1500 persons, including veterinarians and agricultural economists, assembled from the Department of Agriculture's Animal and Plant Health Inspection Service and the California Department of Food and Agriculture. The sum paid initially to all the owners, the initial indemnity, came to $17.7 million, and was supplemented by a further payment of $5.6 million, a total of over $23 million.

On September 7, 1972, the appellee determined that appellant's flock had been exposed to the disease. Appellant operated, in Ventura County, California, the largest egg ranch in the world. It housed some 3.4 million of the 11 million chickens destroyed, was 50 times larger than the average ranch, and three times as large as the next largest. Appellant was not only a table-egg enterprise which could produce 900,000 eggs daily, but, unlike other ranches, also had a feed mill, fertilizer plant, laboratories, facilities for breaking, drying and freezing eggs and storing the product, as well as a distribution system which took the eggs directly to retail supermarkets.

The destruction of appellant's flock and the cleaning and disinfection of its premises were completed on December 26, 1972. On February 1, 1973, the appellee permitted the appellant to begin bringing replacement In October, 1975, appellant filed a petition in the United States Court of Claims for additional payments of indemnities and for further payments under a contract with the appellee by which the appellant undertook the destruction of its flock and the cleaning and disinfection of its premises. The appellee moved for summary judgment which was denied by that court. Julius Goldman's Egg City v. United States, 556 F.2d 1096, 214 Ct.Cl. 345 (1977). On remand, the lower court (then the trial division of the Court of Claims) dismissed appellant's petition after a trial of the facts.

chickens back into its premises. Appellant was paid approximately $5.2 million as an initial indemnity and $2 million as a supplemental indemnity, a total of more than $7.2 million.

Appellant now seeks review of the lower court's decision. In addition, appellant seeks to recover interest on the amounts allegedly due and owing to it since 1972.

II

Appellant primarily argues that the trial judge incorrectly substituted his own standards of fair market value ³ for those standards enunciated and adopted by the Secretary. Appellant contends that the Secretary had enunciated and adopted standards for two separate indemnities and the trial judge incorrectly lumped the two indemnities together in a single sum as compensation for the fair market value of its destroyed flock. Appellant believes that the two indemnities should be considered separately--the initial compensation for fair market value of its destroyed flock and the supplemental compensation for lost profits until its flock could be replaced. We disagree. The trial judge correctly held that the two indemnities should be considered as a single total in order to decide whether the Secretary had made a proper determination of the fair market value of the destroyed chickens as required by statute and regulations.

The appellant also contends that the sum of the two indemnities did not adequately compensate it for the fair market value of its destroyed flock. The statute provides that the Secretary "shall" compensate the owners of diseased animals, destroyed under the section; and that "[s]uch compensation shall be based upon the fair market value as determined by the Secretary, of any such animal * * * at the time of the destruction thereof." 21 U.S.C. Sec. 134a(d) (1970). The fair market value of chickens therefore "shall be determined by the * * * egg production * * * value of such animals." 9 C.F.R. Sec. 53.3(b) (1975).

The Court of Claims has stated on numerous occasions and in particular in its denial of summary judgment in Julius Goldman's Egg City, supra, at 1100-01, that the Secretary's determination of fair market value

[is] to be upheld unless it is found to have been arbitrary, capricious, an abuse of discretion, or violative of the statutory standard. * * * [T]he ultimate standard of decision here will not be the court's own view of 'fair market value' but the propriety of the Secretary's determination under the statutory criterion. * * * Plaintiff has the burden of demonstrating the correctness of its allegations.

In assessing the propriety of the Secretary's determination made pursuant to statutory authority, the reviewing court is guided by the

venerable principle that the construction of a statute by those charged with its execution should be followed unless there are compelling indications that it is wrong ....

Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381, 89 S.Ct. 1794, 1802, 23 L.Ed.2d 371 (1969). See also First Multifund for Daily Income, Inc. v. United States, 602 F.2d 332, 336 (Ct.Cl.1979), cert. denied, 445 U.S. 916, 100 S.Ct. 1275, 63 L.Ed.2d 599 (1980).

A similar standard has been established for the review of an agency's interpretation of its own regulations, that is,

to sustain an administrative interpretation of a regulation issued by it, it is not necessary to find that the agency construction is the only reasonable one, or even that it is the result a court would have reached had the question arisen in the first instance in judicial proceedings. * * * Where administrative control has been authorized by Congress, the judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body.

Nabisco, Inc. v. United States, 599 F.2d 415, 419 (Ct.Cl.1979). See also Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 801, 13 L.Ed.2d 616 (1965). And, when the Secretary's determination involves the exercise of administrative discretion, the review court must defer to his judgment as to where to draw the lines. The Court of Claims has previously observed in Nabisco, supra, at 422, that

[a]ny such line would be open to criticism. This line-drawing, however, is precisely the task for which administrative agencies, with their special expertise and experience, are peculiarly suited to perform effectively; and it is in deference to that experience and judgment that courts refuse to disturb such determinations except when they are shown to be arbitrary. Here, the indicia chosen by the Secretary seem rational and appropriate, and afford a reasonable basis for the difference in treatment. * * * Even if the court itself might have drawn a different line had the matter been left to us, the Secretary's action was clearly within the scope of discretion granted him by the statute.

In its determination of fair market value, the Secretary found that there was no actual market for chickens of various ages in an egg rancher's flock, but rather only a market for day-old chicks or 20-week-old pullets. In light of this fact, the Secretary concluded that $2.00 was a fair market value for an average prime-age 26-week-old chicken, the age an egg-laying chicken becomes profitable. This was calculated by adding the market price of $1.65 for a 20-week-old pullet to the 35-cent estimated average cost of raising such a pullet to 26 weeks. Although $2.00 was the maximum allowable compensation per chicken, that value was not absolute but rather a guideline for negotiating with the ranchers. The value of $2.00 was adjusted upwards or downwards depending on greater or lesser age of the chicken. Thus, each rancher was paid an indemnity in accordance with an agreement reached on the basis of the guidelines, i.e., the $2.00 value and the adjustments.

There was no showing that the Secretary acted unreasonably in basing the initial indemnity guidelines on the value of the average chicken in light of the several factors involved such as the numbers of chickens involved, the difficulties of any appraisal system, and the recriminations and claims inevitably resulting from a customized appraisal. Since the applicable regulations permit the appraisal of animals in groups, 9 C.F.R. Sec. 53.3(b), the Secretary decided the egg-laying chickens had the same value per head. The valuation of domestic animals such as chickens is a matter the Congress has delegated to the Secretary in light...