Nat. Crop Ins. Services v. Federal Crop Ins., 02-3952.

• Decision Date: 05 December 2003
• Docket Number: No. 02-3952.,02-3952.
• Citation: 351 F.3d 346
• Parties: NATIONAL CROP INSURANCE SERVICES, INC.; Farmers Alliance Mutual Insurance Company; The Alliance Insurance Company, Appellants, v. FEDERAL CROP INSURANCE CORPORATION; Ann M. Veneman; Phyllis W. Honor, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

351 F.3d 346

NATIONAL CROP INSURANCE SERVICES, INC.; Farmers Alliance Mutual Insurance Company; The Alliance Insurance Company, Appellants, v. FEDERAL CROP INSURANCE CORPORATION; Ann M. Veneman; Phyllis W. Honor, Appellees.

No. 02-3952.

United States Court of Appeals, Eighth Circuit.

Submitted: October 24, 2003.

Filed: December 5, 2003.

Counsel who presented argument on behalf of the appellant was P. John Owen of Overland Park, KS. Thomas H. Boyd of St. Paul, MN appeared on the brief.

Counsel who presented argument on behalf of the appellee was E. Roy Hawkens, Justice Dept., Washington, D.C. Robert S. Greenspan, Justice Dept., Washington, D.C. appeared on the brief.

Before LOKEN, Chief Judge, and LAY and HEANEY, Circuit Judges.

HEANEY, Circuit Judge.

Two insurance companies and an insurance trade association brought an action seeking declaratory and injunctive relief against the Federal Crop Insurance Corporation (FCIC)¹ alleging that the FCIC issued a bulletin, MGR-01-010 (Bulletin), that unlawfully changed crop insurance policy provisions in violation of the Federal Crop Insurance Act (FCIA), the Administrative Procedure Act (APA), and various FCIC regulations. The FCIC moved to dismiss the suit, arguing that this action could not be heard by the district court until the plaintiffs exhausted their administrative remedy before the Board of Contract Appeals (BCA) of the United States Department of Agriculture (USDA). The district court² granted the FCIC's motion to dismiss and this appeal followed. For the reasons stated below, we reverse the district court, remand for further proceedings in accordance with this opinion, and direct the district court to stay those proceedings pending the outcome of the current actions between the sugar beet growers and their insurance companies.

BACKGROUND

The plaintiff/appellants in this case are National Crop Insurance Services, Inc. (NCIS), Farmers Alliance Mutual Insurance Company (Farmers Alliance), and The Alliance Insurance Company (Alliance) (hereinafter Insurers). Farmers Alliance and Alliance are both private insurance companies that provide crop insurance under the authority of the FCIA. NCIS is a trade association comprised of such companies. This case was consolidated with several other actions currently pending in the District of Minnesota brought by numerous Minnesota growers against members of NCIS, including Farmers Alliance and Alliance, who insured those growers' 2000 sugar beet crop.³

The Insurers provided multi-peril insurance to sugar beet farmers in southern Minnesota. The FCIC, as authorized by the FCIA, executed a Standard Reinsurance Agreement with the Insurers. In October 2000, the crops of several sugar beet growers in southern Minnesota suffered severe freeze damage. The growers filed insurance claims, but the claims were generally denied based on a failure to provide timely notice of loss, as required by the insurance contracts.⁴ On March 2, 2001, the FCIC issued MGR 01-010, the Manager's Bulletin at issue in this case, which stated that: (1) sugar beets that were harvested after October 6, 2000, may have suffered an insurable loss within the insurance period; (2) the notice of loss deadline may not be enforceable against the growers whose losses were not discoverable until after the deadline passed; (3) the decision whether to cover these claims resides solely with the insurance companies; and (4) the FCIC would reinsure any eligible freeze-damage claim paid by the insurance companies.

The Insurers sued the FCIC, seeking declaratory and injunctive relief, alleging that the Bulletin was both unlawful and unlawfully issued. According to the Insurers, the Bulletin: (1) expands coverage of the 2000 sugar beet crop beyond harvesting, in violation of 7 U.S.C. § 1508(a)(2); (2) purports to find coverage despite the fact that timely loss notice was not given, in violation of 7 C.F.R. §§ 457.8 and 457.109; (3) unlawfully waives or varies policy provisions, in violation of 7 C.F.R. § 457.8; (4) was issued without regard to whether it would affect the actuarial soundness of the crop insurance program, in violation of 7 U.S.C. § 1506(o) and 1508(d)(1); and (5) amends promulgated regulations without complying with the notice and comment provisions of the APA. The Insurers sought full indemnification for any liability for the growers' claims pursuant to 7 U.S.C. § 1508(j)(3). The FCIC moved to dismiss the suit arguing that Insurers failed to exhaust their administrative remedy before the USDA's BCA. The district court granted FCIC's motion to dismiss, holding that it lacked jurisdiction because the Insurers failed to exhaust their administrative remedies pursuant to 7 C.F.R. § 400.169, as required by 7 U.S.C. § 6912(e). The Insurers appeal the dismissal of their suit.

ANALYSIS

The only issue before us is whether the Insurers were required to exhaust their claim before the BCA prior to bringing this action in district court. Reviewing the district court's determination that it lacks jurisdiction due to the Insurers failure to exhaust administrative remedies de novo, In Home Health, Inc. v. Shalala, 272 F.3d 554, 559 (8th Cir.2001), we hold that the Insurers are not required to bring this claim before the BCA, and, therefore, the district court has jurisdiction to hear this case.

All administrative appeals established by the Secretary of Agriculture must be exhausted before a lawsuit may be brought against an agency of the USDA, such as the FCIC. 7 U.S.C. § 6912(e). The BCA has jurisdiction over disputes involving the FCIC. 7 C.F.R. § 24.4. Specifically, § 24.4(b) states that the BCA has jurisdiction over FCIC determinations "pertaining to standard reinsurance agreements under 7 C.F.R. § 400.169(d)." For challenges involving Manager's Bulletins, paragraph (c) of § 400.169 applies. Paragraph (c) states that the BCA does not have jurisdiction to hear appeals about bulletins which do not "interpret, explain, or restrict the terms of the reinsurance agreement." The district court held that exhaustion was required under paragraph (c) because the Bulletin "interprets, explains or restricts the terms of the reinsurance agreement." In re Sugar Beet Crop Ins. Litig., 228 F.Supp.2d 999, 1005 (D.Minn.2002).

Whether the Bulletin does or does not "interpret, explain, or restrict" the reinsurance contract, however, is not the dispositive issue here. We read § 400.169 to require administrative appeals when a dispute between an insurance provider and the FCIC, pertains to coverage under a reinsurance...