Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-01-05310/USCOURTS-caDC-01-05310-0/pdf.json

Nature of Suit Code: 210
Nature of Suit: Land Condemnation
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 01-5310 September Term, 2002

Filed On: November 20, 2002

Milk Train, Inc., et al.,

Appellants

v.

Ann M. Veneman, Secretary,

United States Department of Agriculture,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 00cv01121)

Before: Sentelle, Rogers and Garland, Circuit Judges.

O R D E R

It is ORDERED, sua sponte, that the opinion filed herein

on November 15, 2002 is amended as follows:

Page 2, the last sentence of the first paragraph: "Insofar

as Milk Train challenges the 26,000 cwt cap, we vacate the

district court opinion on that issue for lack of jurisdiction;

otherwise ..."

Page 5, first sentence in section A: "We first address the

district court's jurisdiction to review the Secretary's regulations. Steel Co. v. Citizens for a Better Env't, 523 U.S. 85, 95

(1998). According ..."

Page 6, first sentence in second full paragraph after the

comma: "... dairy farmers, we hold that the district court

lacked ..."

Page 7, last sentence of first paragraph: "Accordingly, we

vacate the district court's opinion on the issue of the 26,000

cwt cap for lack of subject-matter jurisdiction."

Page 8, first line at top of page: "hold that the district

court had jurisdiction ..."

Page 15, first sentence in full paragraph: "Accordingly, we

vacate that portion of the district court's opinion that discusses the Secretary's use of a 26,000 cwt cap for lack of jurisdiction, ..."

Per Curiam

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FOR THE COURT:

Mark J. Langer, Clerk

BY:

Deputy Clerk

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 10, 2002 Decided November 15, 2002

No. 01-5310

Milk Train, Inc., et al.,

Appellants

v.

Ann M. Veneman, Secretary,

United States Department of Agriculture,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 00cv01121)

Benjamin F. Yale argued the cause for appellants. With

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him on the briefs were Kristine H. Reed, Donald M. Barnes,

and Lowell H. Patterson III.

H. Thomas Byron III, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief

were Roscoe C. Howard, Jr., U.S. Attorney, and Mark B.

Stern, Attorney, U.S. Department of Justice.

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Before: Sentelle, Rogers and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Dissenting opinion filed by Circuit Judge Sentelle.

Rogers, Circuit Judge: The question in this appeal is

whether the Secretary of Agriculture's implementation of a

1999 subsidy program for milk producers was inconsistent

with the statutory requirement that payments be made "for

economic losses incurred during 1999." Agriculture, Rural

Development, Food and Drug Administration, and Related

Agencies Appropriations Act 2000, Pub. L. No. 106-78, s 805,

113 Stat. 1135, 1179 (1999) [hereinafter "2000 Appropriations

Act"]. The Secretary's regulations defined "eligible production" for purposes of determining how much money a producer could receive as "milk produced by cows in the United

States and marketed commercially in the United States anytime during the 1997 and or 1998 calendar year, subject to a

maximum of 26,000 [hundredweight ("cwt")] per dairy operation." 7 C.F.R. s 1430.502. Milk Train, Inc. and others

representing thirty-one large milk producers in several

states, appeal the grant of summary judgment upholding the

Secretary's regulations. Milk Train contends that the regulations are contrary to a clear statutory mandate and that the

Secretary arbitrarily denied assistance for losses attributable

to production in excess of 26,000 cwt. Insofar as Milk Train

challenges the 26,000 cwt cap, we vacate the district court

opinion on that issue for lack of jurisdiction; otherwise we

reverse and remand the case to the district court with instructions to remand the case to the Secretary.

I.

In the last three fiscal years (FY 1999--FY 2001), Congress has appropriated money to be distributed by the Secretary of Agriculture to compensate dairy producers for losses

they have sustained. We refer to the moneys appropriated as

a milk producers' subsidy in the 1999 Appropriations Act as

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the 1998 Program; we refer to the moneys appropriated in

the 2000 Appropriations Act as the 1999 program.

In the first year, Congress provided over $3 billion "for

assistance to owners and producers on a farm ... to partially

compensate [them] for the loss of markets for the 1998 crop

of a commodity." Omnibus Consolidated and Emergency

Supplemental Appropriations Act, 1999, Pub. L. No. 105-277,

Division A, s 101(a), Tit. XI, s 1111(a), 112 Stat. 2681, 2681-

44 (1998) [hereinafter "1999 Appropriations Act"]. In particular, Congress directed that $200 million of the moneys "shall

be available to provide assistance to dairy producers in a

manner determined by the Secretary." Id. s 1111(d). For

the 1998 program, the Secretary promulgated regulations

whereby the amount of each farm's payment would be based

on 1997 or 1998 milk production, with a cap on the maximum

eligible production level, approximately equivalent to a herd

of 150 cows (or 26,000 cwt, which represents 2,600,000 pounds

of milk). See 7 C.F.R. ss 1430.502, .504, .506. A cost benefit

analysis prepared by the Farm Service Agency ("FSA") on

December 21, 1999, indicated that 76,771 milk producers that

were in production at some time during the period October 2,

1998, through December 31, 1998, were sent checks in June

1999 based on a payment rate of 22.47897 cents per cwt, with

a maximum single payment of $5,845.

In the second year, at issue here, Congress appropriated

$325 million more to benefit livestock and dairy producers,

again directing that the funds be disbursed "in a manner

determined appropriate by the Secretary." 2000 Appropriations Act s 805. Congress directed that no less than $125

million (minus administrative expenses of $2.3 million) be in

the form of assistance to dairy producers "to compensate

producers for economic losses incurred during 1999." Id.

ss 825, 822. Waiving the notice and comment requirement

for implementing regulations, Congress directed that the

payments be made "as soon as practicable." Id. s 824(a).

For the 1999 program, the Secretary extended the regulations for the 1998 program; she specifically extended sign-up

for the subsidy program through February 28, 2002, with the

proviso that "[d]airy operations that applied for and received

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payments under the [1998 program] do not need to reapply.

Additional payments will be issued based upon the original

application." 1999 Crop and Market Loss Assistance, 65 Fed.

Reg. 7942, 7945 (Feb. 16, 2000). According to the FSA's costbenefit analysis, the sign-up was extended to permit the 1,100

eligible commercial operations that did not enroll in the 1998

program to enroll in the 1999 program. Payments under the

1999 program for producers who had signed up for the 1998

program (or were eligible for that program) were based on

the 1997 or 1998 production figures used for the 1998 program. 65 Fed. Reg. at 7945. Thus, producers who had

signed up or were otherwise eligible for the 1998 program

could receive 1999 funds, even if they did not produce in 1999.

The final payment per cwt under the 1999 program was

approximately $0.1405, with a maximum single payment of

about $3,653.

Milk Train filed suit challenging the regulations for the

1999 program as arbitrary and capricious under the Administrative Procedure Act ("APA"), 5 U.S.C. s 706(2)(A), and

violative of the Non-Delegation, Takings, and Equal Protection Clauses of the Constitution. The district court, addressing cross-motions for summary judgment, viewed "[t]he essence of this controversy [to be] whether the Secretary

exceeded her statutory authority by capping at 26,000 cwt the

amount of milk production that would be eligible for financial

assistance, the consequence of which was to bestow the bulk

of the funding on smaller dairy farmers." The court granted

judgment for the Secretary. As relevant here, the court

ruled that it had jurisdiction because the 2000 Appropriations

Act appropriating moneys for the 1999 program was not

within the lump-sum appropriations exception to APA jurisdiction under Lincoln v. Vigil, 508 U.S. 182 (1993), and

contained intelligible principles, including Congress' general

policy "to compensate dairy farmers suffering from declining

milk prices." The court rejected Milk Train's argument that

the Secretary's 26,000 cwt cap was arbitrary and capricious.

The court did not expressly address Milk Train's argument

that the Secretary's use of data from an earlier year to

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allocate payment of 1999 moneys was arbitrary and capricious.

II.

On appeal, Milk Train contends that the Secretary's regulations are invalid because they ignore the clear statutory

mandate to compensate dairy producers for "economic losses

incurred during 1999" and arbitrarily denied assistance for

losses attributable to production in excess of 26,000 cwt.

Pointing to the different statutory language that Congress

used in appropriating funds for the 1999 program (referring

to "producers" rather than "owners and producers" and to

"economic losses" rather than "market losses," and to a

different year), Milk Train contends that while Congress did

not reinstate the 1998 program the Secretary did, by extending the regulations for the 1998 program, with the result that

payments for 1999 economic losses were based on the same

production data and paid to the same producers who qualified

for the 1998 program rather than to those who operated in

1999. As to the 26,000 cwt cap, Milk Train contends that the

phrase "in the manner authorized by the Secretary" was "not

an expression in the alternative to compensation for the

producers' 1999 economic losses" and did not authorize the

Secretary "to deny compensation on substantial portions of

the economic losses incurred in 1999 by some producers in

order to increase the amounts received by others."

A.

We first address the district court's jurisdiction to review

the Secretary's regulations. Steel Co. v. Citizens for a Better

Env't, 523 U.S. 85, 95 (1998). According to the Secretary, her

determination of the manner of providing the moneys to dairy

producers is not qualified "in any way," Appellee's Br. at 15,

and reflects a congressional judgment that the Agriculture

Department, as the expert agency charged with implementing

the nation's farm policy, is best suited to determine how the

moneys should be used to provide assistance to the nation's

dairy farmers. Whether viewed as agency action committed

to agency discretion by law under the APA, 5 U.S.C.

s 701(a)(2), or as an express delegation to make all decisions

necessary to carry out Congress' broad purpose, the SecreUSCA Case #01-5310 Document #713922 Filed: 11/15/2002 Page 7 of 21
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tary contends that judicial review of the Secretary's implementation decision is "extremely circumscribed."

Section 701(a)(2) of the APA exempts agency action from

judicial review "to the extent that [it] is committed to agency

discretion by law." The Supreme Court in Heckler v. Chaney, 470 U.S. 821 (1985), held that an agency decision not to

institute enforcement proceedings was unreviewable. Id. at

831. Such a decision, the Court explained, involved a "complicated balancing of a number of factors which are peculiarly

within [an agency's] expertise." Id. Drawing on Heckler,

the Court held in Lincoln v. Vigil that an agency decision to

cease allocating funds from a lump-sum appropriation, which

contained no restrictions on use of the funds, for a program

not mentioned in a statute or the agency's regulations, was

committed to agency discretion and likewise unreviewable.

508 U.S. at 192-93. The Court defined the scope of review

precluded under s 701(a)(2) as turning on whether the statute "is drawn so that a court would have no meaningful

standard against which to judge the agency's exercise of

discretion." Id. at 191 (quoting Heckler, 470 U.S. at 830).

The Secretary maintains that the principle set forth in Lincoln v. Vigil is not limited to lump-sum appropriations and

would apply if the express conferral of discretion on the

Secretary, as well as other characteristics of the administrative decision at issue, bring the funding for the 1999 program

within s 701(a)(2).

Insofar as Congress has left to the Secretary's sole judgment the determination of the manner for providing assistance to dairy farmers, we hold that the district court lacked

jurisdiction to review Milk Train's challenge to the 26,000 cwt

cap on eligible production. Congress provided that the moneys for 1999 economic losses were to be used "to provide

assistance directly to ... dairy producers, in a manner determined appropriate by the Secretary." 2000 Appropriations

Act s 805. Milk Train relies on Whitman v. Amer. Trucking

Ass'n, 531 U.S. 457, 465-71 (2001), to support its contention

that the absence of express statutory authority for the Secretary to impose payment limitations makes the 26,000 cwt cap

unlawful. But unlike the Clean Air Act provisions analyzed

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in Whitman that expressly limited the discretion of the

Administrator by mandating the imposition of pollution regulations "requisite to protect the public health," 42 U.S.C.

s 7409(b)(1), the plain language in the 2000 Appropriations

Act indicates that Congress left to the Secretary the decision

about how the moneys for 1999 economic losses could best be

distributed consistent with its general policy to provide emergency assistance to dairy farmers "[a]s soon as practicable,"

id. s 824(a). The statute thus provides no relevant "statutory reference point" for the court other than the decisionmaker's own views of what is an "appropriate" manner of

distribution to compensate for 1999 losses. Drake v. FAA,

291 F.3d 59, 72 (D.C. Cir. 2002); cf. Wester v. Doe, 486 U.S.

592, 600-01 (1988). A decision memorandum prepared for

the Secretary in connection with the 1998 program described

five options for allocating the moneys, each containing a

listing of the pros and cons of each option. Choosing between

those options clearly requires "a complicated balancing of a

number of factors which are peculiarly within [the Secretary's] expertise." Lincoln, 508 U.S. at 193 (quoting Heckler,

470 U.S. at 831). Milk Train does not dispute that the

Secretary used the 1999 program funds to provide assistance

to compensate dairy producers for their losses; it challenges

the 26,000 cwt cap based on the distribution of those funds

among eligible producers. Accordingly, we vacate the district

court's opinion on the issue of the 26,000 cwt cap for lack of

subject-matter jurisdiction. Foodservice & Lodging Inst.,

Inc. v. Regan, 809 F.2d 842, 847 (D.C. Cir. 1987) (per curiam).

We reach a different conclusion with regard to Milk Train's

base-year challenge to the Secretary's regulations. By providing in the 2000 Appropriations Act that the moneys are for

"economic losses incurred during 1999," 2000 Appropriations

Act s 805, Congress limited the Secretary's authority to

disburse funds. This limitation affords a "statutory reference

point" by which the court is able to review the Secretary's

determination of which producers are eligible to receive funds

under the 1999 program. Drake, 291 F.3d at 72. Hence, we

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hold that the district court had jurisdiction of Milk Train's

base-year challenge.

B.

Milk Train's base-year challenge to the Secretary's regulations has two prongs, both of which are founded on the

premise that there is no statutory basis for the use of 1997

and 1998 production data for calculating 1999 losses and on

the dilution of 1999 moneys. The 2000 Appropriations Act

requires that the moneys are to be used to reimburse dairy

producers for "economic losses incurred during 1999." 2000

Appropriations Act s 805. Milk Train contends that "the

Secretary did not compensate producers for their 1999 economic losses but, instead, used the same time period and

formula used to compensate for 1998 market losses--losses

for which producers had already been paid once." Consequently, the moneys available to producers (such as appellants) who were eligible were diluted. There are two prongs

to Milk Train's base-year challenge, for the 1999 funds were

diluted, it maintains, either (1) because some producers who

received 1999 program moneys were not in business in 1999

(and thus suffered no losses) or (2) because some producers

were paid at a higher rate per cwt on 1997 or 1998 production

based on the earlier 1998 program.

Even though presented as a part of its challenge to the

26,000 cwt cap, Milk Train's base-year argument appears

throughout this case and is not the type of "asserted but

unanalyzed" contention that the court should not address; the

Secretary received fair notice of the argument and had an

opportunity to respond. See SEC v. Banner Fund Int'l, 211

F.3d 602, 613 (D.C. Cir. 2000) (quoting Carducci v. Regan,

714 F.2d 171, 177 (D.C. Cir. 1983)); cf. Singleton v. Wulff, 428

U.S. 106, 120-21 (1976). During the hearing on the crossmotions for summary judgment the district court sought the

Secretary's response to Milk Train's base-year argument, and

the Secretary responded that:

[w]hen the payments were made [for the 1998 program]

the most recent figures that were available for production were the '97 and '98 years. When payments were

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made under the [1999] program, the easiest and quickest

thing to do administratively was to use the same production figures for existing farmers and allow new farmers

to file new applications....

Again on appeal, the Secretary presents an administrative

efficiency response but also explains that "the use of 1997 or

1998 production quantity information as the basis for calculating payment amounts does not constitute a payment based on

losses incurred during those years. Rather, the Secretary

merely used those figures to allocate a limited pool of money...." Appellee's Br. at 21. Accordingly, we proceed to

address the merits of Milk Train's base-year challenge.

Our review of the grant of summary judgment is de novo.

Milk Indus. Found. v. Glickman, 132 F.3d 1467, 1473 (D.C.

Cir. 1998). In addressing Milk Train's challenge to the

Secretary's choice of a base year as contrary to law under the

APA, the court accords special deference to the Secretary's

interpretation of a statute that Congress has authorized the

Secretary to implement. See ABF Freight Sys., Inc. v.

NLRB, 510 U.S. 317, 324 (1994); Schweiker v. Gray Panthers, 453 U.S. 34, 44 (1981). So long as the regulations

reflect a permissible interpretation of the statute, the court

owes deference to the Secretary. See Transitional Hosps.

Corp. of La. v. Shalala, 222 F.3d 1019, 1025 (D.C. Cir. 2000)

(citing Chevron U.S.A., Inc. v. Natural Res. Def. Council,

Inc., 467 U.S. 837, 843-44 (1984)). The court likewise owes

deference to the Secretary's interpretation of her regulations.

Udall v. Tallman, 380 U.S. 1, 16 (1965) It remains incumbent

upon the Secretary to explain as part of the regulatory

proceedings how the chosen manner of distributing the moneys extends only to the losses covered by the statute or risk

vacation of the rule. See Int'l Union, United Mine Workers

v. Fed. Mine Safety & Health Admin., 920 F.2d 960, 966-67

(D.C. Cir. 1990); see also Checkosky v. SEC, 23 F.3d 452, 463

(D.C. Cir. 1994) (separate opinion of Silberman, J.).

We begin with the shared assumption of the parties, as

stated in Milk Train's brief, that "[t]he simple and logical

approach to compensating for economic losses incurred in

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1999 would be to pay producers a fixed amount per hundredweight on all of their 1999 production--the same production

impacted by lower BFP [basic formula price] prices." Appellant's Br. at 11; see Appellee's Br. at 13. Because the

economic losses to producers in 1999 were due primarily to

the collapse of milk prices in 1999, tying the level of payments

to a dairy operation's level of production seems a reasonable

conclusion by the Secretary, and Milk Train does not challenge it. Indeed FSA's cost-benefit analysis indicates that in

October 1999 manufacturing milk prices suffered the second

largest month-to-month drop, that the November 1999 basic

formula price was the lowest in 21 years, and that prices were

expected to remain low throughout FY 2000 at over 20% less

than the record high level of FY 1999. Anticipating that the

assistance provided by the 1999 program "will offset only a

modest portion of the expected decline in dairy producers[']

incomes as prices decline," the assessment added that the

number of commercial dairy operations declined about 4.2%

between July 1998 and July 1999.

The record indicates that the Secretary did consider requiring producers who had received payments under the 1998

program to reapply for compensation from the 1999 program.

A decision memorandum prepared for the Secretary agreed

that such a system would "target 1999 production," but

concluded that such a system would significantly delay payments to producers, place additional workload on agency field

offices, and require additional resources to develop new computer software to handle the new program. The decision

memorandum also discussed using only the lists of producers

who had participated in the 1998 program (including the data

for their 1997 or 1998 levels of production) to determine

eligibility and payment levels for the 1999 program. Such an

approach would greatly reduce administrative costs and the

time required to provide payments to producers, but, according to the decision memorandum, "the payments distributed

under the previous [1998] program will not reflect current

operations" and new operations in 1999 would be unable to

take advantage of the funding for 1999 losses. Instead, the

Secretary chose the approach whereby the eligibility and

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payment levels for the 1999 program for all producers who

had already participated in the 1998 program were to be

determined from the 1997 or 1998 data used in the 1998

program. 65 Fed. Reg. at 7945. For those who had failed to

participate in the 1998 program, they could apply, provided

they had production in the fourth quarter of 1998, with the

basis for establishing payment amounts being the higher of

1997 or 1998 production levels. For producers who had

begun production in 1999, new applications with 1999 data

could be submitted. This approach was preferable, the decision memorandum concluded, because it would allow new

producers to participate in the program, while minimizing the

administrative costs and time required for implementing the

program with respect to the vast majority of dairy producers.

In selecting this approach, the Secretary considered the

risk that the use of 1997-98 production data would inaccurately measure the level of 1999 production (and therefore, the

level of 1999 economic losses), and concluded that the benefit

of increased accuracy was not worth the additional delay in

distributing funds and the administrative costs. The FSA

cost-benefit assessment stated that it could be expected that

"about 1.5 percent of the recipients of the [1999 program

moneys] would not have been in operation in 1999" but

concluded that "[t]he chance of including operations in the

[1999] program which did not farm in 1999 was not great

enough to justify requiring 76,771 operations to re-enroll."

The parties agree that production levels are an appropriate

proxy for economic losses. Based on the parties' agreeemnt

and the above analysis, it would appear to follow that the

Secretary could reasonably conclude, in light of the dramatic

drop of milk prices in 1999, that all milk producers would

suffer economic losses in 1999 and consequently measuring

production was a reasonable way to measure economic losses.

As the Secretary explains in her brief, under the circumstances, use of the 1997 or 1998 production data was an

efficient way to allocate limited moneys promptly.

The analysis underlying the Secretary's approach using

1997 and 1998 production data is logically sound, for any

measurement by the Secretary of the amount of 1999 production would be subject to some level of uncertainty because of

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measurement errors and incomplete reporting. The trade-off

between the amount of uncertainty and error that is acceptable in view of the congressional purpose to get aid promptly

to milk producers, see 2000 Appropriations Act s 824(a), and

the considerable time and money that the Agriculture Department would have to expend to reduce that uncertainty and

error, is the type of issue for which courts show great

deference. An agency "typically has wide latitude in determining the extent of data-gathering necessary to solve a

problem." Allied Local & Reg'l Mfrs. Caucus v. U.S. Envtl.

Prot. Agency, 215 F.3d 61, 71 (D.C. Cir. 2000) (quotation

omitted), cert. denied 532 U.S. 1018 (2001); see also Nat'l

Ass'n of Mfrs. v. United States Dep't of Interior, 134 F.3d

1095, 1108 (D.C. Cir. 1998). The Secretary's explanation of

her approach using prior-year production data is sufficiently

clear in light of the FSA cost-benefit analysis and the decision

memorandum on options for payment that "the agency's path

may reasonably be discerned." Pub. Citizen, Inc. v. FAA,

988 F.2d 186, 197 (D.C. Cir. 1993) (quoting Bowman Transp.,

Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286

(1974)). Thus, the first prong of Milk Train's base-year

challenge--to use of prior-year production data--fails.

The second prong of Milk Train's base-year challenge is

more problematic for the Secretary. Here, Milk Train contends, some producers were paid at a higher rate per cwt on

1997 and 1998 production based on the 1998 program. Based

on Milk Train's contention and our review of the record, it

appears that even if the Secretary's approach to the use of

prior-year production data was otherwise reasonable, the

Secretary did not apply it consistently. As pointed out by

Milk Train, the Secretary, in interpreting the regulations, did

not simply use the 1997 and 1998 data to estimate 1999 levels

of production and thus 1999 economic losses. Instead, in

providing guidance for implementation of the 1999 program,

the Secretary apparently instructed field offices to use the

1997 and 1998 data to allow dairy producers to collect funds

from the 1999 program as compensation for losses in 1997

and 1998. Specifically, the Secretary instructed those offices

to accept applications from dairy producers who had not

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received funds under the 1998 program but had been in

operation in the last quarter of 1998 (whether or not they

were in production in 1999). The Secretary further instructed those offices that "[p]roducers who did not receive payments under the initial [i.e., 1998] program will receive a

payment calculated at the initial [i.e., 1998] payment rate."

The language in the 2000 Appropriations Act indicates that

Congress was not simply adding funds to a pool of money

that it had appropriated the prior year so any losses occurring from the start of the 1998 program through the end of

the 1999 program would be eligible for payment out of the

pool that included the 1999 moneys; rather, Congress limited

the moneys designated for dairy producers in the 2000 Appropriations Act to payment of "economic losses occurring during

1999." 2000 Appropriations Act s 805. Yet the Secretary's

interpretation of the regulations, as shown by the Secretary's

implementing guidance, appears to authorize the use of 1999

moneys to pay for non-1999 economic losses in addition to

1999 losses. It may well be that the Secretary's guidance

was intended merely to instruct that for those dairy producers who did not participate in the 1998 program a greater

proportion of their 1999 losses would be compensated under

the 1999 program. If this is what the Secretary intended, as

is suggested by the Secretary's argument in her brief that

reliance on prior-year data was merely an allocation tool that

did not result in payment of non-1999 losses out of 1999

funds, then the implementing guidance involves the manner

of distribution over which the court has no jurisdiction to

review. See supra Part IIA. But as the administrative

record now stands, the court is unable to determine whether

the Secretary's interpretation of the regulations was inconsistent with the plain language of the 2000 Appropriations Act,

and as such, contrary to law. Cf. FPC v. Texaco, Inc., 417

U.S. 380, 395-96 (1974).

C.

The decision whether to remand or vacate "depends on [1]

the seriousness of the order's deficiencies (and thus the

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extent of doubt whether the agency chose correctly) and [2]

the disruptive consequences of an interim change that may

itself be changed." Allied-Signal Inc. v. United States Nuclear Regulatory Comm'n, 988 F.2d 146, 150-51 (D.C. Cir.

1993) (quoting Int'l Union, United Mine Workers, 920 F.2d

960, 967); see County of Los Angeles v. Shalala, 192 F.3d

1005, 1023 (D.C. Cir. 1999); Radio-Television News Dirs.

Ass'n v. FCC, 184 F.3d 872, 887-89 (D.C. Cir. 1999); Checkosky, 23 F.3d at 462-66 (separate opinion of Silberman, J.)

While the deficiency in the regulations arising from the

Secretary's interpretation is not insignificant insofar as it may

have resulted in use of 1999 moneys to pay for economic

losses not incurred during 1999, this second prong of Milk

Train's base year challenge was not its most prominent

argument. In our view, there is at least "a serious possibility" that the Secretary on remand could explain her use of the

1999 funds in a manner that is consistent with the statute or

choose an allocation method to correct the problem, a factor

that favors remanding rather than vacating. See AlliedSignal, 988 F.2d at 151. Moreover, Milk Train's request for

a remand for a new rulemaking ignores the second prong of

the Allied-Signal test. As in Sugar Cane Growers Coop. v.

Veneman, 289 F.3d 89 (D.C. Cir. 2002), where the Secretary

had improperly disbursed large quantities of sugar to farmers

across the country, who in turn had already plowed under

their crops, the Secretary here has already disbursed the

1999 program moneys to numerous dairy producers throughout the country, and those moneys may not be recoverable

three years later. Here, as there, "[t]he egg has been

scrambled and there is no apparent way to restore the status

quo ante." Id. at 97.

Therefore, as in County of Los Angeles, where the court

similarly found the Secretary's explanation for using prioryear data in a rulemaking procedure inconsistent, we conclude that a remand is the appropriate course. 192 F.3d at

1023. The court, of course, expresses no opinion on what

might be a permissible manner of allocation based other than

on production data. Our remand does not bind the agency to

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its current reasoning, approach, or decision. Southeastern

Mich. Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir. 1998).

Accordingly, we vacate that portion of the district court's

opinion that discusses the Secretary's use of a 26,000 cwt cap

for lack of jurisdiction, and we reverse the grant of summary

judgment and remand the case to the district court with

instructions to remand to the Secretary, in light of the

inconsistent application of the Secretary's approach for using

1997 and 1998 production data to allocate 1999 moneys.

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Sentelle, Circuit Judge, dissenting: While I agree with

much of what the majority has to say, ultimately I would

reach a different result for somewhat different reasons. I

will not bother to rehash the facts well stated by the majority,

but instead, I must say that I find the Secretary's blatant use

of 1998 losses to disburse funds appropriated by Congress

"for economic losses incurred during 1999" unworthy of the

elaborate defense offered by the majority. As the majority

recognizes, the Secretary is empowered "to compensate producers for economic losses incurred during 1999." 2000

Appropriations Act s 805. The Secretary advanced a formula compensating dairy farmers for production during 1997 or

1998. I would not defer to that decision. Granted, Chevron

U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467

U.S. 837 (1984), requires us to defer in appropriate cases to

an agency's choice "based on a permissible construction of the

statute." Id. at 843. However, that deference is called down

only when "the statute is silent or ambiguous with respect to

the specific issue." Id. I find no ambiguity in the term

"1999" that would permit it to be construed as meaning

"1998." I therefore would get off at the first step of Chevron:

"If the intent of Congress is clear, that is the end of the

matter; for the court, as well as the agency, must give effect

to the unambiguously expressed intent of Congress." Id. at

842-43.

By way of examples of the operation of the Secretary's

complex departure from an unambiguous congressional instruction, if a milk producer operated a dairy in 1997 and

through the first week of October in 1998, and thereupon

ceased production, he would have incurred no loss in 1999.

Under the unambiguous instruction of Congress, he would be

entitled to no compensation from the fund at issue. Under

the Secretary's application, he would receive compensation

based on his production in 1997. Another producer, having

suffered difficulties in 1997 and 1998 resulting in reduced

milk production but having restored her herd to full producing potential in 1999, would likely have suffered compensable

losses in 1999, given the market situation data relied upon by

the Secretary. However, any compensation she received

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would be based not upon her 1999 losses, but upon a figure

derived from a presumptive loss incurred based on her 1997

and 1998 reduced milk production, and presumably a lower

figure than that to which she would be entitled for 1999. The

Secretary admits that this methodology will admit into the

pool of eligible applicants for a limited fund some number of

dairy producers who no longer produced milk in the calendar

year stated in the statute. Given that it is a fixed and limited

fund, this inevitably reduces the amount available for distribution to producers eligible under the statutory criterion.

The majority accepts as a reasonable explanation the elaborate interpretation that using 1997 or 1998 levels of production to determine payments was really an efficient method of

paying for losses in 1999. Assuming without conceding the

reasonableness of the explanation proffered, I would reject it

in any event. The analysis finds little basis in the administrative record, but is largely a product of the appellate brief

cited by the majority in support of the reasonableness of the

explanation. "We do not generally give credence to such post

hoc rationalizations, but rather 'consider only the regulatory

rationale actually offered by the agency during the development of the regulation.' " Gerber v. Norton, 294 F.3d 173,

184 (D.C. Cir. 2002) (quoting Grand Canyon Air Tour Coalition v. FAA, 154 F.3d 455, 469 (D.C. Cir. 1998)). I would

apply our normal rule and reject the post hoc explanation

advanced by the Secretary's appellate counsel and refined by

the majority today.

Having determined that I would reject the Secretary's

compensation scheme, I, like the majority, am left with the

question of what remedy is then appropriate. Once again I

part company with the majority. I would not simply remand,

but would vacate. In my view, "[o]nce a reviewing court

determines that the agency has not adequately explained its

decision, the Administrative Procedure Act requires the

court--in the absence of any contrary statute--to vacate the

agency's action." Checkosky v. SEC, 23 F.3d 452, 491 (D.C.

Cir. 1994) (Randolph, J., concurring). As Judge Randolph

noted in his opinion in Checkosky, the APA states as much "in

the clearest possible terms. [The Act] provides that a 'reviewUSCA Case #01-5310 Document #713922 Filed: 11/15/2002 Page 19 of 21
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ing court' faced with an arbitrary and capricious decision

'shall ... hold unlawful and set aside' the agency action." Id.

(quoting 5 U.S.C. s 706(2)(A)).

Granted, cases such as County of Los Angeles v. Shalala,

192 F.3d 1005 (D.C. Cir. 1999), provide precedent for the

authority of the court to remand without vacating, as the

majority holds today. Nonetheless, even if we are empowered to depart from the literal command of the language--a

proposition which in the absence of such precedent I would

find surprising--I think it often, if not ordinarily, unwise.

Heckler v. Chaney, 470 U.S. 821 (1985), among many other

cases, establishes the proposition that courts are not to

substitute their administrative judgments for those of the

agency. Any time that the agency has not adequately justified its decision, we do not know what the agency's decision

would have been had it subjected the questions before it to

the lawful administrative process. Therefore, when we hold

that the conclusion heretofore improperly reached should

remain in effect, we are substituting our decision of an

appropriate resolution for that of the agency to whom the

proposition was legislatively entrusted. I therefore cannot

concur.

For a similar reason, I would vacate not only the use of the

wrong annual losses for the determination of the amount of

relief offered, but the regulation in its entirety, including the

limitation of compensation to 26,000 cwt of production.

Granted, the Secretary and the majority make out a good

case for the unreviewability of that element of decision. Had

that question come to us unaccompanied by the primary issue

upon which I would vacate, I likely would have joined the

majority's decision that it is unreviewable. But, as the Supreme Court reminded us in Heckler v. Chaney, as relied

upon by the majority, the decisions of the agency involve a

" 'complicated balancing of a number of factors which are

peculiarly within [an agency's] expertise.' " Maj. Op. at 6

(quoting Heckler v. Chaney, 470 U.S. at 831). Since I would

vacate the unauthorized year, I am unable to ascertain whether the agency would have employed the same production cap

had it used the right production year, and therefore I would

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be left with no choice but to remand this case to the district

court for an order vacating the Secretary's decision and

remanding the matter to the Secretary for further proceedings applying the correct statutory allocation.

Although I greatly respect the majority's attempt to save a

well-intended relief program from possibly inefficient further

proceedings, I do not think we can lawfully do so. I therefore

most respectfully dissent.

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