Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-13-05200/USCOURTS-caDC-13-05200-0/pdf.json

Parties Involved:
Prime Time International Company
Appellant
United States Department of Agriculture
Appellee
Thomas J. Vilsack
Appellee

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 6, 2014 Decided June 10, 2014

No. 13-5200

PRIME TIME INTERNATIONAL COMPANY,

APPELLANT

v.

UNITED STATES DEPARTMENT OF AGRICULTURE AND THOMAS 

J. VILSACK, SECRETARY OF AGRICULTURE,

APPELLEES

Consolidated with 13-5204

Appeals from the United States District Court

for the District of Columbia

(No. 1:06-cv-01077)

(No. 1:12-cv-00910)

Jerry Stouck argued the cause and filed the briefs for 

appellant. Precious M. Gittens entered an appearance.

Sydney A. Foster, Attorney, U.S. Department of Justice, 

argued the cause for appellees. With her on the brief were 

Stuart F. Delery, Assistant Attorney General, Ronald C. 

Machen, Jr., U.S. Attorney, and Mark B. Stern, Attorney.

USCA Case #13-5200 Document #1496806 Filed: 06/10/2014 Page 1 of 8
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Before: HENDERSON, ROGERS, and TATEL, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge: The Fair and Equitable Tobacco 

Reform Act directs the U.S. Department of Agriculture to 

fund a subsidy program for tobacco growers by imposing 

monetary assessments on manufacturers of tobacco products. 

In this case, one such manufacturer argues that USDA’s 

method of calculating assessments for cigars violates the Act. 

The district court disagreed, concluding that the Department’s 

approach represented a reasonable interpretation of the Act.

We affirm. 

I.

Section 518d of the Fair and Equitable Tobacco Reform 

Act (FETRA) requires USDA to impose monetary 

assessments on tobacco product manufacturers and importers 

pursuant to a three-step process. See 7 U.S.C. § 518d. First, 

USDA must calculate the total monetary assessment needed 

to fund the subsidy program. See id. § 518d(b)(1)–(2). 

Second, the Department must apportion this amount among 

six classes of tobacco products—cigarettes, cigars, snuff, 

roll-your-own, chewing, and pipe—based, in part, on each 

class’s share of the gross domestic volume of tobacco 

products. See id. § 518d(c). Third, under subsection (e)—the 

focus of this case—USDA must divide each class’s 

assessment among the manufacturers and importers within 

each class “on a pro rata basis . . . based on each 

manufacturer’s and importer’s share of gross domestic 

volume.” Id. § 518d(e)(1). Under subsections (f) and (g), 

USDA “shall . . . determine[]” this amount based on the 

manufacturer’s or importer’s “market share” of “the class of 

tobacco product,” id. § 518d(f), which the Department “shall . 

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. . measure[] by[,] in the case of cigarettes and cigars, the 

number of cigarettes and cigars; and[] in the case of the other 

classes of tobacco products . . . in terms of number of 

pounds,” id. § 518d(g)(3). In accordance with this three-step 

process, USDA promulgated the so-called Per Stick Rule, 

under which it calculates each cigar manufacturer’s 

assessment based on the number of cigars—also known as 

“sticks”—that the manufacturer puts into commerce. See 7 

C.F.R. § 1463.7.

Appellant Prime Time, a manufacturer of small cigars, 

challenged the Per Stick Rule in district court, arguing that the 

Rule’s equal treatment of small and large cigars violated 

subsection (e)’s “pro rata basis” requirement. According to

Prime Time, subsection (e) requires the Department to 

account for large and small cigars’ different tobacco volume 

by subdividing the cigar assessment between large and small 

cigar manufacturers and then allocating the assessment within 

each subclass based on the number of cigars sold. The district 

court dismissed the case, but in Prime Time International Co. 

v. Vilsack, 599 F.3d 678 (D.C. Cir. 2010) (“Prime Time I”), 

this court held, contrary to USDA’s position at the time, that 

the Per Stick Rule was “not mandated by the plain text of 

FETRA.” Id. at 683. Observing that the Act “does not appear 

to be susceptible of only a single interpretation” and 

recognizing that “USDA [did] not maintain that its 

interpretation of FETRA [was] a permissible view of an 

ambiguous statute entitled to deference under Chevron step 

2,” we remanded to the district court with instructions to 

return the issue to the Department for further proceedings. Id.

USDA then solicited public comments on the question of 

whether it should revisit the Per Stick Rule. After considering 

the comments, it issued a “Determination” in which it 

concluded that its calculation “methodology [was] the optimal 

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reading of FETRA” and accordingly declined to revise the 

Rule. See Determination of the Administrator of the Farm 

Services Agency and Executive Vice President of the 

Commodity Credit Corporation Regarding the Current “Step 

A” and “Step B” Assessment Methods in the Tobacco 

Transition Payment Program at 20 (Nov. 16, 2011) 

(“Determination”). USDA explained that the Rule implements 

the statute’s language by interpreting subsection (e)(1) “to set 

the general rule” and subsections (f) and (g) to “inform [it] 

and direct [it] on how to implement the general rule of (e).”

Id. at 30. As to cigars in particular, the Department explained

that “the cigar class allocation is . . . properly allocated on a 

‘pro rata’ basis among manufacturers and importers based on 

each manufacturer’s or importer’s . . . proportion of the total 

[number of] cigar sticks” moved into commerce. Id.

Following several procedural developments not relevant 

to the question before us, the issue returned to the district 

court—now Judge Royce C. Lamberth—who upheld the Rule 

as a reasonable interpretation of an ambiguous statute. Prime 

Time again appeals.

II.

This court hears many complex and difficult cases. This 

is not one of them.

Prime Time’s first argument—that Prime Time I barred 

the Department from maintaining the Per Stick Rule on 

remand—completely misreads that decision. As Judge 

Lamberth explained, Prime Time I “remanded the case to 

USDA so it could properly exercise agency expertise, and 

took no position on whether the current per-stick rule could be 

permissible under Chevron step 2.” Prime Time International 

Co. v. Vilsack, 930 F. Supp. 2d 240, 251 (D.D.C. 2013); see 

also Prime Time I, 599 F.3d at 683 (“For the purpose of this 

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appeal, the court need only observe that USDA’s present 

interpretation is not mandated by the plain text of FETRA.”). 

On remand, USDA did exactly what we asked of it, and the 

only question now before us is whether the Per Stick Rule 

represents a reasonable interpretation of the Act. See Chevron, 

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

U.S. 837, 843 (1984).

Prime Time insists that USDA’s interpretation deserves 

no Chevron deference because the Department’s justification 

for maintaining the Per Stick Rule was “not developed in a 

rulemaking proceeding but only in the course of this 

litigation, to justify USDA’s litigation position.” Appellant’s 

Br. 51. This argument ignores not one but two lines of this 

court’s well-established case law: decisions affording

Chevron deference to agency actions that resolve “‘interstitial 

. . . legal question[s]’” related to an agency’s expertise 

regardless of whether the agency engaged in formal

rulemaking, e.g., Mylan Laboratories, Inc. v. Thompson, 389 

F.3d 1272, 1279–80 (D.C. Cir. 2004) (quoting Barnhart v. 

Walton, 535 U.S. 212, 222 (2002)), and cases deferring to 

reasoned agency decisions made in response to remands, e.g.,

PDK Laboratories, Inc. v. Drug Enforcement Agency, 438 

F.3d 1184, 1189 (D.C. Cir. 2006) (deferring to agency 

position developed following remand). The only authority

cited by Prime Time, Bowen v. Georgetown University 

Hospital, 488 U.S. 204, 212–13 (1988), bars deference to

statutory interpretations offered by appellate counsel for the 

first time on appeal—hardly the situation we face here. 

We turn, then, to the heart of this case. Prime Time 

contends that the Rule’s failure to “account for the differing 

tobacco volumes between large and small cigars” ignores 

subsection (e)’s “pro rata basis” requirement. Appellant’s Br. 

29 (emphasis omitted). This is so, Prime Time tells us, 

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because the word volume means “‘the amount of space 

occupied by a three-dimensional object or region of space, 

expressed in cubic units’” and because subsection (e) 

mandates a “pro rata” distribution based on each 

manufacturer’s or importer’s “share of gross domestic 

volume.” Id. (quoting THE AMERICAN HERITAGE DICTIONARY

1928 (4th ed. 2006)). This argument rests on a flawed 

premise: that volume as used in subsection (e) must mean the 

amount of tobacco in a tobacco product. As USDA points out, 

however, “volume” also means “quantity.” And crucially for 

our purposes, quantity can be measured in different units for 

different products. For an example, we need look only to 

subsection (g), which directs USDA to measure the “volume 

of domestic sales” in sticks for cigarettes and cigars and in 

pounds for the other tobacco product classes. See 7 U.S.C. § 

518d(g). USDA’s decision to read the word “volume” in 

subsection (e) as Congress used it in subsection (g) is entirely 

reasonable and fully implements subsection (e)’s “pro rata 

basis” requirement.

Nor is USDA’s interpretation of the statutory term “share 

of gross domestic volume” “internally inconsistent.” 

Appellant’s Br. 46. According to Prime Time, USDA 

interprets this phrase to have a “common metric”—i.e., not 

sticks and pounds—when it divides the total assessment 

among the six classes but maintains, contradictorily, that the 

phrase lacks a common metric when it calculates each 

manufacturer’s “share of gross domestic volume.” This 

argument also rests on a false premise. USDA does not use a 

common metric to calculate each class’s “share of gross 

domestic volume.” Instead, as it explained in the 

Determination, the Department first calculates each class’s 

share of gross domestic volume without using a common 

metric—“some [products] are measured by weight and others 

by stick count”—and then, to determine the class assessments, 

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it “converts” these “different measures . . . into a common 

metric.” Determination at 5 (emphasis added). In other words, 

at both allocation stages USDA treats “share of gross 

domestic volume” as lacking a common metric. 

Prime Time next claims that the Per Stick Rule violates 

the canon against surplusage because under USDA’s 

interpretation the Act would have the exact same meaning if 

Congress had omitted subsection (e) entirely. As the 

Department points out, however, subsection (e) does have a

function: it sets forth a general rule—assessments shall be pro 

rata—and subsections (f) and (g) then explain how this rule 

applies to each tobacco product class. Although subsection (e) 

may have little independent operative effect, USDA’s 

interpretation of subsection (e) as setting forth a general 

requirement is perfectly reasonable. See Lamie v. U.S. 

Trustee, 540 U.S. 526, 536 (2004) (noting that the “preference 

for avoiding surplusage constructions is not absolute”). 

“[S]ometimes Congress . . . drafts [statutory] provisions that 

appear duplicative of others . . . simply, in Macbeth’s words, 

to make assurance double sure.” Shook v. D.C. Financial 

Responsibility & Management Assistance Authority, 132 F.3d 

775, 782 (D.C. Cir. 1998).

Lastly, Prime Time insists that its interpretation gives 

more effect to subsection (e)’s pro rata basis limitation than 

does USDA’s. Rejecting this argument and invoking a 

fundamental principle of Chevron review, Judge Lamberth 

explained that “[a]s long as the agency’s interpretation of . . .

ambiguous language is reasonable, it does not matter whether 

Prime Time’s interpretation is ‘more’ reasonable.” Prime 

Time, 930 F. Supp. 2d at 259 (citing National Cable & 

Telecommunications Ass’n v. Brand X Internet Services, 545 

U.S. 967, 980 (2005)). We have nothing to add. 

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III. 

Having considered and rejected Prime Time’s remaining 

arguments, we affirm.

So ordered.

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