PM Farms, Inc. v. Young
| Decision Date | 08 February 2017 |
| Docket Number | 4:15–cv–454–RAW |
| Citation | 233 F.Supp.3d 706 |
| Parties | PM FARMS, INC., Plaintiff, v. Michael YOUNG, Acting Secretary, U.S. Department of Agriculture, Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
Brandon J. Buck, Moore McKibben Goodman & Lorenz, LLP, Marshalltown, IA, for Plaintiff.
Rachel J. Scherle, United States Attorney's Office, Des Moines, IA, for Defendant.
RULING ON JUDICIAL REVIEW
This is an action by plaintiff PM Farms seeking review of a final determination by the National Appeals Division ("NAD") of the United States Department of Agriculture ("USDA") upholding a $10,000 Graduated Pay Reduction ("GPR") penalty for 2013 crop year violations of Highly Erodible Land and Wetland Conservation ("HELC") regulations applicable to certain fields of PM Farms' land. The case is submitted on the administrative record and briefs. (See 8/16/16 Order [15]; 9/27/16 Order [20] ). The matter is before the undersigned pursuant to 28 U.S.C. § 636(c).
Paul and Michelle Veren have farmed in Marshall County, Iowa since the 1980s. The farm has evidently been in the Veren family for many years. At some point the farm was incorporated, as Veren Farms, Inc. and, since 2007, as PM Farms, Inc. (R. 109, 407).2 Paul Veren is President and Michelle Veren is Vice President. PM Farms has been a USDA program benefit recipient.
The production of agricultural commodities on Highly Erodible Land ("HEL") is governed by USDA's HELC regulations set out in 7 C.F.R. Part 12. To be eligible for USDA program benefits, the production of agricultural commodities on HEL must comply with an approved conservation plan. 7 C.F.R. §§ 12.5(a)(2), 12.7(a).
Veren Farms requested a HEL determination from the Natural Resources Conservation Service ("NRCS"). (R. 264, 265). See 7 C.F.R. § 12.6(c)(4). On May 4, 1993 the NRCS issued a determination (the "1993 HEL determination") finding certain farm fields were HEL, while others were not. Specifically, fields 3, 4, 10 and 15 were found to be HEL necessitating a conservation plan, while fields 1, 2, 5, 6, 7, 8, 9, 11, 12, 13, and 14 were found not HEL ("NHEL"). The determination also noted some of the fields were set aside in the Conservation Reserve Program ("CRP") for which a conservation plan would also be required. (R. 264).
At the time of the 1993 HEL determination the farm and tract numbers were Farm 959 and Tract 2441. (R. 264). Later the farm and tract numbers were changed to what they are now, Farm 6427 and Tract 9562. Fields 5, 6, 7, 8, 11, and 14 of former Tract 2441 (all NHEL) were split off, are not included in Tract 9562 or involved in this litigation. (R. 458, see R. 269). The Farm Service Agency ("FSA") assigned new field numbers to account for changed field boundaries and acreage measurements. The FSA and NRCS use different field numbering systems. The fields in dispute are FSA fields 5 and 7. The same fields are, respectively, NRCS fields 8 and 9. The Administrative Judge and NAD Director tended to use the NRCS numbers in their decisions and the Court will as well.
The farm is comprised of adjoining parcels in sections 5, 8, and 9 of Marietta Township in Marshall County totaling 381.4 acres. (See e.g. R. 193, 248 (indicating acreage), 266–269). The 1993 HEL determination fields 3, 4, 10 and 15 aggregated to 207.5 acres. (R. 264).
The Secretary contends HEL fields 3, 4, 10 and 15 in the 1993 determination are within the boundaries of current NRCS fields 8 and 9. PM Farms does not concede this noting the acreage difference between the 207.5 acres in fields 3, 4, 10 and 15 and the 289.3 acres in fields 8 and 9 on which the FSA calculated the disputed GPR. (See R. 165, 264).3 The Secretary responds the acreage difference is attributable to the fact PM Farms is now farming land which at the time of the 1993 HEL determination was set aside in the CRP program. (See R. 102–103, 266–269). There is arguably some indication of this in PM Farms' 2008 submission of a HEL certification form which informed FSA of the Farms' intent to tile through CRP ground in Tract 9562. (R. 102, 103). The 1993 HEL determination was the only HEL determination made by the NRCS prior to the HELC violations at issue.
In December 2011 PM Farms, by Mr. Veren, developed and signed a conservation plan for Tract 9562.4 The plan included fields 8 and 9. (R. 244–254). Aerial maps associated with the plan identify fields 8 and 9 as HEL. (R. 248, 253, 254). In April 2012 PM Farms was notified NRCS would conduct a compliance review of Tract 9562. (R. 231). The resulting review found PM Farms "actively applied a conservation plan system for 2012 with a temporary variance based on a technical error or incorrect plan." (R. 227). Some excessive soil loss was also noted. (R. 229). In view of the variance, PM Farms was notified the tract would again be reviewed in 2013. (R. 227–229). PM Farms was encouraged to update its conservation plan with the local NRCS office. (R. 227).
No changes were made to the 2011 conservation plan prior to the 2013 planting season. 2012 was a drought year. In the Fall of 2012 PM Farms contracted to have hog manure applied to the fields. Heavy rains occurred in the Spring of 2013 which together with the tracks left by the manure application process caused erosion. Mr. Veren felt he had no way to eliminate gullies and plant the fields unless he field cultivated some of the ground by shallow tillage. (R. 186, 201, 270). He advised the local NRCS office of his plan and was told NRCS could offer no options other than no-till. (R. 179, 270).
Mrs. Veren testified she and her husband had many discussions with the Soil Office about their concerns with the unprecedented conditions in 2013 and how to proceed in the right way. The problem as she saw it, and with which other farmers might well agree, was that the rules were "black and white" but farming is not necessarily black and white. She believed that had they followed the rules the erosion would have gotten worse, and they could not have allowed that to happen. (Case 083 audio hearing record commencing 1:01).5
PM Farms proceeded to field cultivate parts of fields 8 and 9 as Mr. Veren had informed NRCS. Mr. Veren testified he did not field cultivate non-erodible land, and only cultivated where he needed to because of the erosion. The cultivation violated PM Farms' conservation plan which incorporated a no-till system.
As PM Farms had been advised, a status review was conducted by NRCS in June 2013. The review resulted in a preliminary technical determination that PM Farms was "Not Actively Applying an Approved Conservation Plan or Conservation System" on Tract 9562 because its farming system had resulted in unacceptable soil loss and uncontrolled "ephemeral gully erosion." (R. 189). PM Farms requested reconsideration. Upon reconsideration the NRCS State Conservationist found the preliminary determination was correct and issued a final technical determination that unacceptable soil loss on fields 8 and 9, and uncontrolled ephemeral gully erosion in field 9 demonstrated PM Farms was not applying an approved conservation system (R. 194), a HELC regulation violation.
In 2014 PM Farms appealed the final technical determination to the FSA and at the same time requested that FSA grant good faith relief for the 2013 HELC violation. (R. 185, 186). The FSA referred the matter to the State Conservationist for reconsideration noting PM Farms' explanation that unusual weather conditions had necessitated the offending tillage activities. (R. 180–182). On May 5, 2014 the State Conservationist confirmed the NRCS final determination. (R. 176–177).
On August 12, 2014 the FSA approved PM Farms' request for a good faith exception. The approval meant PM Farms would not lose USDA benefits because of the 2013 HELC violation. See 16 U.S.C. § 3812(f)(1). Instead, based on the acreage involved, the FSA calculated a GPR penalty of $26,570 which was reduced to the $10,000 maximum allowed under the regulations. (R. 165–167).
PM Farms appealed both the HELC violation and GPR penalty to the USDA's National Appeals Division ("NAD") which assigned two separate case numbers. See n. 2 supra. PM Farms did not dispute the fact it did not follow its approved conservation plan in 2013, or the excessive soil loss and gully erosion found by the NRCS. Rather, it argued in case 083 that the drought in 2012 followed by the excessive rain in 2013 made its no-till conservation plan not technically and economically feasible because without cultivation the extensive erosion in the fields would have prevented or unduly hindered planting in 2013. PM Farms relied on the technical requirements in 16 U.S.C. § 3812a(a) which require the Secretary to ensure standards and guidelines permit the use of a conservation system which is "technically and economically feasible." Id. subsec. (a)(1). PM Farms also complained that discrepancies in field numbers and maps cast doubt on whether the FSA and NRCS were dealing with the same ground.
In case 716 PM Farms appealed on the basis that the good faith determination and GPR assessment were premature while the HELC violation appeal in case 083 was pending. (R. 105 in case 716).
The cases were assigned to NAD Administrative Judge James R. Holman. In the 083 case Judge Holman reversed the FSA decision because the NRCS had not made a HEL determination for fields 8 and 9. The Judge did not address PM Farms' feasibility claim or field number discrepancies complaint finding it unnecessary to do so. (R. 49).
The Administrative Judge did not decide case 716 on the basis presented by PM Farms, that the GPR penalty was premature, and implicitly rejected the argument. Rather, Judge Holman viewed the appeal as "to address the accuracy of the amount of payment reduction imposed" by the FSA. (R. 106 in case 716). He held it was appropriate to find good faith and make a GPR assessment, but that the...
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