Opinion
Case No. 4:00-CV-94
June 22, 2001
OPINION
Plaintiffs, Daniel W. and Kathy L. Wright, are farmers. They seek judicial review of a final determination by the Director ("Director") of the United States Department of Agriculture's National Appeals Division ("NAD") regarding the amount owed by Plaintiffs pursuant to a Shared Appreciation Agreement (the "Agreement") that Plaintiffs entered into with the Farm Service Agency, an agency of the United States Department of Agriculture, on September 28, 1989. Defendant claims that Plaintiffs owe $59,500. Plaintiffs claim that they owe only $20,298.50. Pursuant to 7 U.S.C. § 6999, the Director's final determination is reviewable and enforceable by any United States District Court in accordance with the Administrative Procedure Act, 5 U.S.C. § 701-706.
Farm Service Agency cannot be sued separately from the United States Department of Agriculture. Owyhee Grazing Ass'n, Inc. v. Field, 637 F.2d 694, 697 (9th Cir. 1981). Therefore throughout this Opinion "Defendant" shall refer only to the Department of Agriculture.
The Complaint asserts five counts: Count I — Determination Contrary to 5 U.S.C. § 701, et seq.; Count II — Deprivation of Substantive Due Process; Count III — Deprivation of Procedural Due Process; Count IV — 42 U.S.C. § 1983 ; Count V — Breach of Contract. Plaintiffs seek discovery and, in essence, a trial de novo before this court. Defendant claims that the breach of contract count belongs in the Court of Claims. Plaintiffs claim that they are not seeking money damages — only a declaratory judgment that they owe less than Defendant claims.
Count 4 must be dismissed because this is not a case against a person acting under color of state law. American Mfg. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 49-50, 119 S.Ct. 977, 985 (1999).
The debt forgiveness program and the valuation at issue in this case are part of a complicated farm program governed by statute and Department of Agriculture regulations. It appears to this Court, as it did to the Court of Appeals for the District of Columbia, that § 6999 was intended to simplify appeals from the NAD regarding these programs by placing jurisdiction over them solely in the district court. Deaf Smith County Grain Processors, Inc. v. Glickman, 162 F.3d 1206, 1213 (D.C. Cir. 1998); see also Farmers Merchants Bank of Eatonton v. United States, 43 Fed. Cl. 38, 43-44 (Fed.Cl. 1999). Therefore, all claims brought by Plaintiffs are to be decided by this Court. Background Facts
In 1989, Plaintiffs were delinquent on their farm loans. The delinquent loans were restructured pursuant to 7 U.S.C. § 2001, which provides a procedure whereby farm loans owed to the government can be restructured and forgiven if a farmer enters into a "Shared Appreciation Agreement." 7 U.S.C. § 2001(e) provides that the government, pursuant to the Shared Appreciation Agreement, shall recapture a portion of the loan write down or write off based upon an appreciation of the real property securing the loan over a period of up to 10 years. On September 28, 1989, Plaintiffs entered into the Agreement with the USDA whereby approximately $335,000 of the loans were written off. As a condition of this write off, Plaintiffs and the USDA agreed to share 50/50 in the positive appreciation in the market value of the "real security property" securing the loan measured between the commencement and expiration of the Agreement. The Agreement expired on September 28, 1999.
The parties dispute the amount of appreciation that occurred to Plaintiffs' farm because each party values the farm in 1989 and 1999 differently. Defendant argues that the value of Plaintiffs' security was $109,000 in 1989, and $228,000 in 1999, for a total appreciation over 10 years of $119,000. Defendant claims that Plaintiffs owe it 50%, or $59,500, of this total appreciation. Plaintiffs claim that the value of their security was $153,603 in 1989, and $194,200 in 1999, for a total appreciation of $40,597. Plaintiffs claim that they owe 50%, $20,298.50, of this appreciation.
On June 23, 1999, Plaintiffs received a letter dated June 21, 1999, from the Farm Service Agency, advising them that the amount of $59,500.00 would become due on the Agreement on September 28, 1999. On July 16, 1999, Plaintiffs requested mediation. Mediation concluded without agreement on September 2, 1999. Plaintiffs were informed by David DeBlecourt, Farm Loan Manager, on behalf of the Farm Service Agency, that he would send a letter to Plaintiffs confirming unsuccessful mediation and giving Plaintiffs notice of their rights and times for appeal to NAD. Plaintiffs were told that they should wait to receive a copy of that letter and that the letter was necessary for appeal. (AR at 431.) DeBlecourt's instruction was consistent with the instructions in the initial letter Plaintiffs received from Defendant, which stated that "[a]fter mediation, you will be notified of the result and the time you have to appeal." (AR at 80.)
On September 14, 1999, Plaintiffs received a letter from Farm Services Agency confirming that mediation had concluded without an agreement and indicating that Plaintiffs had 30 days from the date of this letter to file an appeal. Plaintiffs filed an appeal postmarked October 1, 1999, and received by NAD on October 4, 1999. An appeal hearing was held before a NAD hearing officer, who issued a decision dated December 3, 1999, upholding the agency action.
Plaintiffs then requested a Director review of the determination of the hearing officer pursuant to 7 C.F.R. § 11.9. On February 11, 2000, the Director issued a determination in which he held that Plaintiffs had not filed their appeal within the 30 days required by 7 C.F.R. § 11.6 and 11.5(c). The Director noted that "[t]he 30-day requirement is jurisdictional in nature and NAD does not have authority to accept an appeal in this matter." (AR at 442.) The Director therefore vacated the decision of the hearing officer.
Standard of Review
This Court's review of the findings of the Director regarding the values of Plaintiffs' farm in 1989 and 1999 are subject to a very tough standard. The Court must find that the Director's decision was "`arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.'" Deaf Smith County Grain Processors, 162 F.3d at 1213 (quoting 5 U.S.C. § 706(2)(A)). The Court must determine whether the Director's decision was based upon a consideration of the relevant factors and whether there has been a clear error of judgment as well as whether the Department of Agriculture followed the necessary procedural requirements for reaching its decision. Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416-17, 91 S.Ct. 814, 824 (1971). This Court is prohibited from substituting its judgment for that of the agency, and the agency's decisions are "entitled" to a presumption of "regularity." Id. at 415-16, 91 S.Ct. at 823-24; see also Bowman Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285 , 95 S.Ct. 438, 442 (1975). Furthermore, the agency's action may not be attacked or supported in court by new evidence. 5 U.S.C. § 706; Tagg Bros. Moorhead v. United States, 280 U.S. 420, 444, 50 S.Ct. 220, 226 (1930).
Decision
1. Exhaustion of Administrative Remedies
As an initial matter, Defendant contends that Plaintiffs failed to exhaust their administrative remedies, as required for judicial review. 7 C.F.R. § 11.6(b) provides that an individual aggrieved by an action of Defendant must request a hearing with NAD within 30 days of receiving the notice of decision. 7 C.F.R. § 11.5(c) provides that if a participant requests mediation, the 30-day period is stopped and the participant will have the balance of days remaining in the 30-day period to file an appeal once mediation has been concluded. Plaintiffs received Defendant's letter on June 23, 1999. They requested mediation on July 16, 1999, 23 days later. Mediation concluded unsuccessfully on September 2, 1999, a fact of which Plaintiffs were aware. (AR at 431.) Plaintiffs did not file an appeal until October 1, 1999, 30 days later. Plaintiffs only had 7 days left in the original 30-day period to file an appeal once mediation concluded. It therefore appears that they may not have properly exhausted their administrative remedies. See, e.g. Glisson v. United States Forest Serv., 55 F.3d 1325, 1327-28 (7th Cir. 1995) (holding that by failing to file a timely appeal of an adverse decision to the Forest Service the plaintiff failed to exhaust his administrative remedies); Sharps v. United States Forest Serv., 28 F.3d 851, 854 (8th Cir. 1994) (same); Juda v. NTSB, No. 99-1096, 1999 WL 728531 (D.C. Cir. 1999) (same as to failure to file a timely appeal to the NTSB). As the court in Sharps put it, "[t]he exhaustion doctrine guarantees administrative autonomy and efficiency, and ensures that administrative agencies are afforded an opportunity to address their own errors without judicial intervention." Sharps, 28 F.3d at 854. See also Robinson v. Dow, 522 F.2d 855, 857 (6th Cir. 1975) (stating that the "exhaustion doctrine restricts untimely judicial intervention into agency proceedings until the administrative action has run its course").
The Director deemed the appeal filed on October 4, 1999. It is irrelevant to this Court's holding whether October 1 or October 4 was the effective date of filing, since both dates are well outside the 7 days remaining for filing after mediation.
Review under the APA (whose procedures are mandated by 7 U.S.C. § 6999) may be of any definitive agency action whether or not the party seeking review has exhausted administrative remedies, "unless either a statute or the agency's rules require exhaustion as a prerequisite to judicial review." Glisson, 55 F.3d at 1327-28. In this case, 7 C.F.R. § 11.13 provides that "[a]n appellant may not seek judicial review of any agency adverse decision appealable under this part without receiving a final determination from the Division pursuant to the procedures of this part." 7 U.S.C. § 11.13(b).
In this case, however, the reason for Plaintiffs' delay was that Mr. DeBlecourt of the Farm Service Agency informed Plaintiffs that they should wait to file an appeal until after they received a copy of a letter from him confirming unsuccessful mediation and informing them of their rights and time to appeal to NAD. In reliance upon this representation, Plaintiffs did not immediately file an appeal, but instead filed an appeal in line with the guidelines of Mr. DeBlecourt's letter.
Defendant does not discuss the possible application of equitable estoppel to its conduct. The Director also did not discuss this possibility. "The doctrine of equitable estoppel precludes a litigant from asserting a claim or defense which might otherwise be available to him against another party who has detrimentally altered her position in reliance on the former's misrepresentation or failure to disclose some material fact." Portmann v. United States, 674 F.2d 1155, 1158 (7th Cir. 1982). "[A]lthough the Supreme Court has been extremely reluctant to estop the federal government, it has not entirely foreclosed the possibility of applying estoppel in an appropriate case." Id. at 1164. InPortmann the court held the Postal Service estopped from claiming that it was not liable for the loss in shipping of the plaintiff's separation film negatives. Id. at 1158-69. See also SEC v. Blavin, 760 F.2d 706, 712 (6th Cir. 1985) (per curiam) (noting that "[e]stoppel may be available against the [Securities and Exchange] Commission in the present case", but also that "`the government may not be estopped on the same terms as any other litigant'") (quoting Heckler v. Community Health Servs., 467 U.S. 51, 60, 104 S.Ct. 2218 (1984)).
In Heckler, the Supreme Court stated that
the party claiming the estoppel must have relied upon its adversary's conduct "in such a manner as to change his position for the worse." and that reliance must have been reasonable in that the party claiming the estoppel did not know nor should it have known that its adversary's conduct was misleading.Heckler, 467 U.S. at 59, 104 S.Ct. at 2223 (quoting 3 J. Pomeroy, Equity Jurisprudence § 805, p. 192 (S. Symons ed. 1941)) (footnotes omitted). The Court elaborated in a footnote:
The truth concerning these material facts must be unknown to the other party claiming the benefit of the estoppel, not only at the time of the conduct which amounts to a representation or concealment, but also at the time when that conduct is acted upon by him. If, at the time when he acted, such party had knowledge of the truth, or had the means by which with reasonable diligence he could acquire the knowledge so that it would be negligence on his part to remain ignorant by not using those means, he cannot claim to have been misled by relying upon the representation or concealment.Id. at 59 n. 10, 104 S.Ct. at 2223 n. 10 (quotation marks omitted) (quoting 3 J. Pomeroy, Equity Jurisprudence § 810, at 219 (footnote omitted)). The Court further stated:
Justice Holmes wrote: "Men must turn square corners when they deal with the Government." This observation has its greatest force when a private party seeks to spend the Government's money. Protection of the public fisc requires that those who seek public funds act with scrupulous regard for the requirements of law; respondent could expect no less than to be held to the most demanding standards in its quest for public funds. This is consistent with the general rule that those who deal with the Government are expected to know the law and may not rely on the conduct of Government agents contrary to law.Id. at 63, 104 S.Ct. at 2225 (citation and footnote omitted). Finally, the Court noted that
"Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. The scope of this authority may be explicitly defined by Congress or be limited by delegated legislation properly exercised through the rule-making power. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority."Id. at 63 n. 17, 104 S.Ct. at 2225-26 n. 17 (quoting Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1 (1947)).
In light of these principles, Plaintiffs may not estop Defendant. 7 C.F.R. § 11.6 mandates that Plaintiffs only had a total of 30 days to respond to Defendant's initial letter. The Code of Federal Regulations also provides that the initial 30-day time period is merely tolled during mediation and resumes upon its conclusion. 7 C.F.R. § 11.5(c)(1). Plaintiffs would have known this had they looked at the regulations. "[T]hose who deal with the Government are expected to know the law and may not rely on the conduct of Government agents contrary to law."Heckler, 467 U.S. at 63, 104 S.Ct. at 2225. This rule protects the public fisc and insures that those who deal with the government follow proper procedures when doing so. That Defendant in this case may have misled Plaintiffs is unfortunate; but Plaintiffs may not consequently ignore mandatory requirements on the basis of these representations.
7 C.F.R. § 11.13 provides that "[a]n appellant may not seek judicial review of any agency adverse decision appealable under this part without receiving a final determination from the Division pursuant to the procedures of this part." 7 C.F.R. § 11.13(b). This provision prevents judicial review in cases where parties have not exhausted their administrative remedies. At first glance, it appears Plaintiffs may be entitled to judicial review under this provision, because they did receive a final determination from the Division. This determination, however, held that Plaintiffs did not use the proper procedures in filing their appeal since it was not timely filed. Thus, Plaintiffs are not entitled to judicial review under the APA and 7 C.F.R. § 11.13, because they did not receive a final determination from NAD "pursuant to the procedures of [7 C.F.R. § 11]", i.e., they did not follow the proper procedures requiring filing within 30 days. For the purpose of determining whether Plaintiffs have exhausted their administrative remedies, 7 C.F.R. § 11.13 should be interpreted to mean that a litigant has not exhausted administrative remedies prior to filing suit where (1) he has not filed any administrative appeal at all; or (2) he has filed such an appeal, but this appeal was properly dismissed as time-barred.
2. Substantive Matters
Other than the exhaustion issue, and the fact that different parcels of land are at issue, the operative facts in this case are in all relevant respects identical to those in a companion Opinion released today inCurtis v. Farm Service Agency, No. 4:00-CV-93. Plaintiffs and the Curtises both entered into Shared Appreciation Agreements with Defendant. These agreements differ only on specifics like the value of the land, relevant real estate security instruments, etc. In form, the agreements are the same. Moreover, as is the case with the Curtises, the final appraisal of Plaintiffs' property was performed by Charles Bender, but it was Dennis Liles who testified on behalf of this appraisal in support of Defendant at the hearing. Even if Plaintiffs had exhausted their administrative remedies, for the reasons expressed in the opinion in Curtis v. Farm Service Agency, 4:00-CV-93, released today, Plaintiffs would still have to pay Defendant the full amount requested by Defendant, namely, $59,500.
Conclusion
The decision of the NAD is affirmed. Defendant's motion for summary judgment will be granted. Plaintiffs owe the Farmers Home Administration the sum of $59,500.
Pursuant to the Stipulation and Order entered by this Court on July 26, 2000, the requirement that Plaintiffs request amortization within 30 days of their receipt of the August 23, 1999, letter has been stayed. Plaintiffs are eligible for amortization of the amount of this judgment, pursuant to the usual conditions imposed upon parties requesting amortization of amounts due Defendant in these circumstances.
A separate order will be issued.
ORDER
In accordance with the Opinion entered this day,
IT IS HEREBY ORDERED that Defendant's Motion for Summary Judgment (docket no. 12) is GRANTED. Plaintiffs, Daniel W. Wright and Kathy L. Wright, shall pay to the Farmer's Home Administration the sum of $59,500. Pursuant to the Stipulation and Order entered by this Court on July 26, 2000, the requirement that Plaintiffs request amortization within 30 days of their receipt of the August 23, 1999, letter has been stayed. Plaintiffs may be eligible for amortization of the amount of this judgment, pursuant to the usual conditions imposed upon parties requesting amortization of amounts due Defendant in these circumstances.
This matter is concluded.