Whitney Brothers v. U.S. Secretary of Agr., Slip Op. 07-162.
| Decision Date | 06 November 2007 |
| Docket Number | Slip Op. 07-162.,Court No. 06-00426. |
| Citation | 521 F.Supp.2d 1399 |
| Parties | WHITNEY BROTHERS, INC., Plaintiff, v. UNITED STATES SECRETARY OF AGRICULTURE, Defendant. |
| Court | U.S. Court of International Trade |
Steven D. Schwinn, Attorney, The John Marshall Law School, and Maria Caldera, Student Attorney, University of Maryland School of Law, for Plaintiff.
Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson, Director; Patricia M. McCarthy, Assistant Director; Delisa M. Sanchez, Trial Attorney, Civil Division, Commercial Litigation Branch, U.S. Department of Justice, for Defendant.
Jeffrey Kahn, of Counsel, Office of the General Counsel, U.S. Department of Agriculture, International Affairs & Commodity Programs Division, for Defendant.
This matter is before the court on a motion for judgment upon the agency record. Defendant, the U.S. Department of Agriculture ("USDA" or "Defendant"), moves pursuant to USCIT R. 56.1 to request that this Court affirm the agency decision by the USDA, which denied Plaintiff trade adjustment assistance ("TAA") benefits. Plaintiff, Whitney Brothers, Inc. ("Whitney Brothers" or "Plaintiff"), argues in opposition that Defendant's agency determination was not supported by substantial evidence and otherwise failed to adequately explain its reasoning. Plaintiff requests that this Court deny Defendant's motion and remand the matter to the USDA with special instructions to reconsider its application for TAA benefits. After considering all the briefs and other papers1 filed in this matter and for the reasons that follow, this Court holds that the USDA's findings of fact with regard to this matter are supported by substantial evidence on the record and that the USDA's legal conclusions are not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Accordingly, the USDA's motion is granted and its administrative determination is affirmed.
On February 21, 2006, the National Grape Cooperative Association, representing Concord juice grape producers from the State of Washington, petitioned the Foreign Agricultural Service of the USDA for TAA certification. Trade Adjustment Assistance for Farmers, 71 Fed.Reg. 15,691 (Dep't Agric., Mar. 29, 2006) (notice) [hereinafter "TAA: Concord Grapes"]. The FAS approved the petition, effective March 15, 2006, following an investigation that determined that "increased imports of grape juice, non-concentrated (frozen and not frozen) contributed importantly to a decline in producer prices of Concord juice grapes in Washington by 36 percent during August 2004 through July 2005, when compared with the previous 5-year average." Id. Under the TAA program, following petition certification by the USDA, qualified Concord grape producers became eligible to apply for TAA cash benefits.
Whitney Brothers is a family-operated grape farm, located in Prosser, Washington, which grows Concord grapes.2 (Pl. Resp.Br.1.) As a result of the approved certification, Plaintiff was eligible to apply Dirt TAA benefits. The application filing deadline for Concord grape juice producers seeking TAA benefits for fiscal year 2006 was set for June 26, 2006. TAA: Concord Grapes, 71 Fed.Reg. at 15,691. Plaintiff filed its application with the local branch office of the USDA's Farm Service Agency on May 24, 2006 for TAA cash benefits concerning crop year 2004. (Administrative Record ("AR") at 1.) Along with its application, Plaintiff also submitted to the USDA part of its 2003 and 2004 tax returns (the Schedules F, Internal Revenue Service ("IRS") form 1040) as well as its USDA forms CCC-526. (Confidential ("Conf.") AR at 2 & 3; Compl., Ex. 3 & 4; AR at 13-22.)
Thereafter, the USDA notified Plaintiff by letter, dated October 16, 2006 (the "October 16 Letter"), that its TAA benefits application had been denied. (AR at 37.) The letter stated that Whitney Brothers was denied TAA benefits because it (1) failed to "provide a completed form CCC-526 by the certification deadline (September 30) to verify that [its] average adjusted gross income did not exceed program limits" and (2) "did not provide acceptable documentation of net farm ... income by the certification deadline (September 30) to show that [its] net income declined from that reported during the petition's preadjustment tax year." (Id.) A subsequent letter from the USDA, dated November 19, 2006, reiterated the denial of Plaintiff's application and informed them that they had sixty days from November 6, 2006 in which to file an appeal to this Court. (AR at 39.)
Plaintiff timely filed a letter complaint, pro se, to the U.S. Court of International Trade on November 20, 2006. Pursuant to Administrative Order 06-01 of this Court, Plaintiff retained counsel.3 On March 30, 2007, Defendant moved for judgment on the agency record requesting that this Court affirm USDA's denial of Plaintiffs application for TAA benefits. This motion is now before the court.
The USDA maintains that it denied the Whitney Brothers's application for TAA cash benefits because its "2004 net farm income4 was not less than its 2003 net farm income" as the TAA statute requires. The USDA determined that Plaintiffs (Id. at 8.)
Defendant in its reply brief concedes that Whitney Brothers had indeed provided a completed form CCC-526, as evidenced by its presence in the administrative record. (See Def.'s Reply Br. 11.) Thus, USDA acknowledges that its October 16 Letter is "not accurate in this regard." (Id.) Accordingly, this Court will treat the matter as conceded.
Whitney Brothers contends that the USDA's determination is not supported by "substantial evidence" since the agency failed to conduct a "reasonable inquiry" as required under 19 U.S.C. 2401e(a)(1) (2000) and it failed to "cogently" explain the basis for its determination. (Pl. Resp.Br.5.) In essence; Plaintiff argues that the statute requires that the USDA "determine an applicants' net farm income[]' [and] not merely determine the meaning of `net farm income.'" (Id. ().) Plaintiff goes on to assert that the USDA merely compared the "net farm income" lines from Plaintiffs 2003 and 2004 tax returns (lines 36, Schedules F, IRS forms 1040) and conducted no further inquiry — a determination that is "per se invalid." (Id. at 8-11.) The USDA, Plaintiff argues, had "an obligation" to conduct a "reasonable inquiry" — it "must determine an applicant's `net farm income' based on the `record as a whole,' including the various factors that went into calculating the applicant's net income as reported" to the IRS. (Id. at 8 (citations omitted).) Whitney Brothers insist that the USDA failed to consider its "non-recurring deduction" that formed part of Plaintiffs calculation of "net farm income" for 2003:
[H]ad the Department examined the tax forms more closely, it would have noted that Plaintiffs net farm income in 2003 was drastically distorted by a one-time, non-recurring deduction in the amount of $82,655 (reflected in line 34c) for restoring the farm's irrigation system.... In contrast, in 2004, no similar deduction was taken.... Thus, if not for this deduction, which accounted for 31% of Plaintiffs gross income, Plaintiffs net farm loss in 2003 would have been $58,597, less than Plaintiffs 2004 net farm loss of — $109,018 ... [entitling them] to TAA cash benefits.
(Id. at 13-14.)
In addition, Plaintiff argues that there were "other varying operating expenses" reported as deductions on its tax returns that "distorted" its net farm income. (Id. at 14.) Whitney Brothers assert, for example, that its deductions for hired labor (line 24 of the 1040 tax return) went from $60,117 in 2003 to $49,830 in 2004; gasoline, fuel, and oil deductions (line 21 of the 1040 tax return) went from $72,088 in 2003 to $36,927 in 2004; and supplies purchased (line 30 of the 1040 tax return) dropped from $23,472 in 2003 to $8,270 in 2004. (Id.) Consequently, Plaintiff had "fewer expenses to deduct from its tax return in 2004", thereby creating the appearance that its net farm income increased — or at least that losses fell — between 2003 and 2004. (Id.) As a result of the distorting effect of the deductions and in light of Whitney Brothers's "drastic decline of gross income and operating expenses (deductions) in 2004, [the USDA] should have conducted a more comprehensive review" of Whitney Brothers's Schedules F to "understand fully the circumstances that led to the net figures." (Id.)
This Court has jurisdiction over this action pursuant to section 142 of the Trade Act of 2002, as amended, 19 U.S.C. § 2395 (Supp.2004).5 This Court may affirm, set aside, or remand the actions of the USDA "in whole or in part." 19 U.S.C. § 2395(c).
The court employs a split standard of review, which varies for questions of fact and for questions of law. For factual determinations made by the USDA, the court must accept the findings-of-fact as conclusive if they are supported by "substantial evidence."6 19 U.S.C. § 2395(b); Cabana v. United States Sec'y of Agric., 30 CIT ___, ___, 427 F.Supp.2d 1232, 1233 (2006). Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938) (citations omitted); accord Huaiyin Foreign Trade Corp. (30) v. United States, 322 F.3d 1369, 1374 (Fed Cir.2003); ...
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