Opinion
Civil No. A3-99-32.
April 7, 1999.
ORDER
I. INTRODUCTION
Before the court is plaintiffs' motion for preliminary injunction (doc. #12). Defendants oppose the motion (doc. #13).
II. BACKGROUND
Briefly stated, this action arises out of a dispute over a purported amendment to the terms of the 1999 Durum Crop Revenue Coverage (CRC) insurance policy issued pursuant to the Federal Crop Insurance Act (FCIA), Title 7, United States Code Section 1508(h), and reinsured by the Federal Crop Insurance Corporation (FCIC), a wholly-owned government corporation within the United States Department of Agriculture (USDA). Plaintiffs are farmers who have applied, or purportedly intended to apply, for this policy.
On February 10, 1999, defendant Ken Ackerman, in his capacity as Administrator of the Risk Management Agency, issued Bulletin MGR-99-004, amending the CRC policy by lowering the minimum price guarantee therein by $0.77 per bushel. See Ex. C accompanying Pls.' Compl. On March 10, 1999, plaintiffs filed this suit, alleging that the amendment violates a provision of the policy which requires any changes to be announced by December 31, 1998, as well as a publication requirement contained in Section 1508(h)(5) of Title 7, United States Code. Plaintiffs also allege that the amendment deprives both policy holders and would-be policy holders of a protected property right without due process of law.
CRC policies in Arizona and California were exempted from the amendment.
That section provides that any policy, provision of a policy, or rate approved under subsection (h) of Section 1508 shall be published as a notice in the Federal Register and made available to all persons contracting with or reinsured by FCIC under the terms and conditions of the contract between FCIC and the person originally submitting the policy or other material. 7 U.S.C. § 1508(h)(5).
On March 18, 1999, plaintiffs filed a motion for preliminary injunction (doc. #12) pursuant to Rule 65(a) of the Federal Rules of Civil Procedure, requesting that this court enjoin enforcement of Bulletin MGR-99-004 and require defendants to honor the original terms of the CRC policy as published in the July 14, 1998 Federal Register, 63 Fed. Reg. 37,829 (1998). See Ex. A accompanying Pls.' Compl. Defendants responded with several objections (doc. #13), directed both to the merits of plaintiffs' motion, as well as this court's power to entertain and/or satisfy plaintiffs' requests. The motion came on for hearing on March 26, 1999, and was taken under advisement thereafter.
III. ANALYSIS
A. EXHAUSTION OF ADMINISTRATIVE REMEDIES
Defendants argue first that this court must deny plaintiffs' request for a preliminary injunction and dismiss this case due to plaintiffs' failure to exhaust administrative remedies pursuant to Title 7, United States Code Section 6912(e). That section requires a party to exhaust all administrative appeal procedures before suing the Secretary of Agriculture, USDA, or an agency, office, or employee of USDA in a court of competent jurisdiction. The applicable procedures in this case would require exhaustion via the National Appeals Division (NAD), an independent agency of USDA. See 7 C.F.R. § 11.1, et seq. Plaintiffs respond that NAD has no jurisdiction over questions of law or the appropriateness of agency regulations. Consequently, the validity of Bulletin MGR-99-004 is not an issue appealable to that body.
In support of their argument for exhaustion, defendants citeBastek v. Federal Crop Ins. Corp., 145 F.3d 90, 94-95 (2nd Cir. 1998) cert. denied, 119 S. Ct. 539 (1998), in which the Second Circuit Court of Appeals held that the exhaustion requirement contained in Section 6912(e) is jurisdictional, and not subject to judicially created exceptions. The court also stated that parties may not circumvent this exhaustion requirement by couching their individualized benefit disputes as broad challenges to the validity of agency policies. Id. at 95 (citing 7 U.S.C. § 6992(d)).
Defendants correctly point out that Bastek affords this court no discretion to create an exception to Section 6912(e). Id. at 94-95. See United States v. Dico, Inc., 136 F.3d 572, 575-76 (8th Cir. 1998). However, Bastek involved several individualized disputes over the calculation of indemnities following a single growing season. See Bastek, 145 F.3d at 91-93. The Bastek court did not consider the issue before this court — whether Section 6912(e) requires exhaustion of a colorable constitutional challenge to a generally applicable agency action. This court provided the parties with two federal district court cases which appear to interpret Section 6912(e) not to require exhaustion of such claims. See Calhoun v. USDA Farm Serv. Agency, 920 F. Supp. 696, 700 (N.D. Miss. 1996) (citations omitted); Gleichman v. United States Dep't of Agric., 896 F. Supp. 42, 46 (D. Me. 1995). While these decisions are by no means binding, this court similarly finds that Section 6912(e) does not require exhaustion of a colorable constitutional challenge to generally applicable agency action. Defendants' arguments notwithstanding, this court further finds that plaintiffs have raised a colorable due process claim in this case. Since this claim features purely legal questions which require no agency fact-finding, none of the purposes of the exhaustion requirement would be served by requiring plaintiffs to submit the claim to NAD. Accordingly, this court finds that plaintiffs' failure to exhaust administrative remedies pursuant to Section 6912(e) does not require denial of their motion for preliminary injunction; nor does it require dismissal of this case.
For the same reasons, this court finds that neither exhaustion or arbitration is required by the applicable regulations or the policy itself.
B. ANTI-INJUNCTION PROVISION
Defendants next argue that Title 7, United States Code Section 1506(d) prohibits this court from issuing an injunction. Section 1506(d) provides that while FCIC may sue and be sued in its own name, "no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against [FCIC] or its property." 7 U.S.C. § 1506(d). Defendants claim that FCIC is the real party in interest in this action, and plaintiffs should not be allowed to enjoin it indirectly by seeking an injunction against defendants.
However, it is doubtful that section 1506(d) prohibits this court from enjoining any FCIC action which might exceed its authority.See generally Ulstein Maritime Ltd. v. United States, 833 F.2d 1052, 1057 (1st Cir. 1987). More importantly, plaintiffs have not requested that this court direct FCIC to perform or refrain from performing an act. Rather, plaintiffs urge this court to forbid defendants from "attempting to override" the original terms of the CRC policy via Bulletin MGR-99-004. See Pls.' Reply Br. in Supp. of Mot. for Prelim. Inj. (doc. #14). Thus, the mere presence of FCIC as reinsurer does not "clothe" defendants with any of the immunity to which FCIC may or may not be entitled. See Mitchell v. Block, 551 F. Supp. 1011, 1015-1016 (W.D. Va. 1982). Accordingly, this court finds that section 1506(d) does not prevent this court from issuing the relief requested by plaintiffs.
C. MOTION FOR PRELIMINARY INJUNCTION
The remainder of defendants' objections relate to the merits of plaintiffs' motion. Along these lines, Eighth Circuit courts consider four factors when determining whether a party is entitled to a preliminary injunction: (1) the threat of irreparable harm to the moving party; (2) the balance between that harm and any harm that granting the injunction might do to the other parties to the litigation; (3) the likelihood that the movant will succeed on the merits; and (4) the public interest. National Credit Union Admin. Bd. v. Johnson, 133 F.3d 1097, 1101 (8th Cir. 1998) (citingDataphase Sys., Inc. v. C.L. Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981)).
While no single factor is in itself dispositive, Eighth Circuit courts often find the "likelihood of success" prong most significant. See United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1179 (8th Cir. 1998); Minnesota Ass'n of Nurse Anesthetists v. Unity Hosp., 59 F.3d 80, 83 (8th Cir. 1995). Given "[t]he speculative nature of this [factor]," however, Eighth Circuit courts do not measure a movant's likelihood of success against "wooden or mathematical" standards. Clorox Co., 140 F.3d at 1179. Rather, Eighth Circuit courts "flexibly weigh the case's particular circumstances to determine whether the balance of equities so favors the movant that justice requires [intervention] to preserve the status quo until the merits are determined." Id.
Under these standards and upon a review of the record, this court concludes that plaintiffs have a strong likelihood of success on the merits. According to the original terms of the CRC policy, any change which would restrict coverage was to be provided to crop insurance agents no later than December 31, 1998. See 63 Fed. Reg. 37,829 (1998). Bulletin MGR-99-004, dated February 10, 1999, appears to be in direct violation of this term, and defendants cite no authority to indicate otherwise. Nor have defendants sufficiently responded to the merits of plaintiffs' due process and publication claims.
Rather, defendants argue that since none of the plaintiffs has suffered a loss for which the policy may provide coverage, there is no actual case or controversy currently before this court. However, this court is in receipt of several affidavits from various plaintiffs indicating that they will suffer immediate harm if Bulletin MGR-99-004 takes effect. Defendants also argue that plaintiffs have failed to join necessary parties, namely the private insurance companies that issued the CRC policy. However, while FCIC relies upon private companies to provide the CRC policy to farmers, the policy is clearly issued pursuant to FCIA and FCIC regulations, and approved for reinsurance by the Board of Directors of FCIC. See 63 Fed. Reg. 37,829 (1998); 7 U.S.C. § 1508. Consequently, failure to join private insurance companies at this stage does not prevent this court from granting plaintiffs the relief they seek. Any unresolved questions regarding the parties currently named, as well as those not named but perhaps necessary for complete adjudication of this suit, can be left for a later determination. Additionally, the identification of classes and class certification, if any, can also be left for a later time.
In short, plaintiffs have raised serious and difficult issues of law which clearly call for more deliberate investigation. Clorox Co., 140 F.3d at 1179. Once such a showing is made, a preliminary injunction should issue where the balance of the three other factors tips toward the movant. Id. Along these lines, plaintiffs have indicated that immediate harm will result if Bulletin MGR-99-004 were to take effect. Notwithstanding defendants' arguments to the contrary, this harm clearly appears to outweigh the harm that may befall them if they are forced to honor the original terms of the CRC policy. This court finds that granting plaintiffs the relief they seek would also vindicate the overriding public interest in the economic stability of agriculture. See 7 U.S.C. § 1502(a). For the foregoing reasons, plaintiffs' motion for preliminary injunction (doc. #12) is hereby GRANTED.
Finally, given the aforementioned balance of hardships, this court finds that no security is required under Rule 65(c) pending a final resolution of this case. See Elliott v. Kiesewetter, 98 F.3d 47, 60 (3rd Cir. 1996) (stating that bond may be waived where the balance of hardships weighs overwhelmingly in favor of the movant).
IV. PRELIMINARY INJUNCTION
Plaintiffs' motion for preliminary injunction (doc. #12) is hereby GRANTED. IT IS HEREBY ORDERED that Bulletin MGR-99-004 is void and of no effect. IT IS FURTHER ORDERED that the original terms of the CRC policy, as published in the July 14, 1998 Federal Register, 63 Fed. Reg. 37,829 (1998), control. IT IS FURTHER ORDERED that no security is required under Rule 65(c) of the Federal Rules of Civil Procedure pending a final resolution of this case.
IT IS SO ORDERED.
RODNEY S. WEBB, CHIEF JUDGE UNITED STATES DISTRICT COURT