FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

AMALGAMATED SUGAR CO. LLC, 

Plaintiff-Appellant,

v. No. 07-35971

THOMAS VILSACK;* DEPT. OF D.C. No.

AGRICULTURE,  CV-06-00167-EJL

Defendants-Appellees,

OPINION

AMERICAN CRYSTAL SUGAR

COMPANY,

Intervenor-Appellee. 

Appeal from the United States District Court

for the District of Idaho

Edward J. Lodge, District Judge, Presiding

Argued and Submitted

September 15, 2008—Moscow, Idaho

Filed February 11, 2009

Before: J. Clifford Wallace, Stephen S. Trott and

N. Randy Smith, Circuit Judges.

Opinion by Judge N. R. Smith

*Thomas Vilsack is substituted for his predecessor, Mike Johanns, as

United States Secretary of Agriculture, pursuant to Fed. R. App. P.

43(c)(2). 

1627
COUNSEL

Kevin J. Brosch, DTB Associates, LLP, Washington, District

of Columbia, for the plaintiff-appellant. 

Jeffrey Kahn, Office of the General Counsel, U.S. Dept. of

Agriculture, Washington, District of Columbia; Joanne P.

Rodriguez, Assistant United States Attorney, United States

Attorney’s Office, Boise, Idaho, for the defendant-appellee. 

David P. Bundle and Sarah C.S. McLaren, Fredrikson &

Byron, PA, Minneapolis, Minnesota, for the intervenorappellee. 

OPINION

N.R. SMITH, Circuit Judge: 

We are asked for the first time to review the construction

and application of certain provisions of the Agricultural

1630 AMALGAMATED SUGAR v. VILSACK
Adjustment Act (the “Act”), specifically

7 U.S.C. §§ 1359dd(b)(2)(E)-(F).1 We conclude that the disputed provisions of the Act to be unambiguous; therefore, the

district court erred in granting Chevron deference to the interpretation advanced by the U.S. Department of Agriculture

(the “USDA”). Within the Act, we hold that a “processor” is

an entity who processes sugar, as defined by the USDA’s own

regulations and entirely within the natural and ordinary meaning of the word. The Act requires the USDA to eliminate a

processor’s sugar marketing allocation (“allocation”) when

the processor has “permanently terminated operations (other

than in conjunction with a sale or other disposition of the processor or the assets of the processor).” § 1359dd(b)(2)(E). We

hold that Pacific Northwest Sugar Company (“Pacific”) permanently terminated operations prior to and not in conjunction with the purported sale of assets to Defendant-Intervenor

American Crystal Sugar Company (“American Crystal”).

Therefore, we conclude that the USDA erred in approving the

transfer of the allocation to American Crystal, and Pacific’s

sugar marketing allocation must be redistributed pro rata

among all processors. § 1359dd(b)(2)(E). We reverse the district court’s summary judgment in favor of the USDA and

American Crystal. 

I. Factual and Procedural History

Pacific processed sugar beets during the 1998, 1999, and

2000 crop years at its only factory in Moses Lake, Washington. Facing substantial financial problems, Pacific wrote to

one of its creditors in January 2001, describing its financial

problems, stating that Pacific could not continue to operate in

the coming years, and proposing liquidation of the company.

Pacific stopped processing sugar at Moses Lake in February

2001, had no sugar beet crops in 2002 or 2003, and never

resumed operations. In June 2001, Pacific sold the Moses

1All statutory references herein are to title 7, United States Code, unless

otherwise noted, and therefore omit “7 U.S.C.” from the citation. 

AMALGAMATED SUGAR v. VILSACK 1631
Lake facility to Central Leasing for $2.1 million and leased

the plant back with a twelve-month option to repurchase the

facility.2 Also in June 2001, Pacific unsuccessfully attempted

to secure capital to continue as a sugar beet processor. On

July 23, 2001, Pacific was administratively dissolved by the

Secretary of State of the State of Washington for failure to file

an annual license renewal application, as required by Washington State law. Also in 2001, Pacific terminated the majority of its employees, and by April 2002, Pacific employed no

one at its only factory. In March 2002, Pacific’s lease of the

Moses Lake facility from Central Leasing ended when Pacific

failed to pay the agreed rent, and the lease was not renewed.

On May 13, 2002, Congress amended the Act,3 creating the

Flexible Marketing Allotments for Sugar (“FMAS”) program.

The purpose of the program was to stabilize sugar prices by

requiring the Secretary of Agriculture (the “Secretary”) to

determine the total amount of domestically produced sugar

that can be marketed in the United States for the coming year

(the “allotment”) and then assign allocations for production of

sugar to processing companies in the United States. Section 1359cc.4

 By rule, the program is administered by the

CCC, an agency of the USDA. 7 C.F.R. § 1435.1. Under the

program, Congress directed the Secretary to make initial allocations based upon historical beet sugar production levels for

the 1998 through 2000 crop years. 

2Although Central Leasing acquired Pacific’s plant and equipment, it

never sought to acquire Pacific’s sugar allocation. 

3

See Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-

171, 116 Stat. 134, 187-204 (May 13, 2002). 

4The overall marketing allocation is divided between sugar derived

from sugar beets and sugar derived from sugarcane. § 1359cc(c). This case

involves sugar beet sugar allocations. Sugar beet processors who knowingly market sugar or sugar products in excess of their allocation are liable

to the Commodity Credit Corporation (the “CCC”) for a civil penalty

equal to three times the U.S. market value of the sugar involved in the violation. 7 C.F.R. § 1435.318(a). 

1632 AMALGAMATED SUGAR v. VILSACK
In June 2002, Central Leasing began disposing of the

equipment formerly owned by Pacific. By July 2002, Pacific

owned no sugar beet processing equipment, and its option to

repurchase the Moses Lake facility had expired. Also in July

2002, Pacific’s Board of Directors indicated that it would no

longer expend money for financial or legal consulting. The

Board also announced that Washington Sugar Company, LLC

(“Washington Sugar”) would succeed Pacific and assume any

debts or obligations relating to reviving processing operations

at Moses Lake. On September 24 and October 3, 2002, Scott

Lybbert, as President of Washington Sugar,5 wrote to the

CCC to request that Pacific’s allocation be transferred to

Washington Sugar. The CCC responded on October 11, 2002

that, as a “new entrant,” the allocation would be transferred

“upon receipt of a copy of the bill of sale showing that virtually all of the assets of Pacific Northwest, including the factory, have been acquired by the Washington Sugar Company.”

6

During this same period, appellant, Amalgamated Sugar

Company, LLC (“Amalgamated”), and others also inquired of

the CCC about acquiring Pacific’s allocation. 

On October 1, 2002, the CCC made the initial beet sugar

marketing allocations for crop year 2002. Pacific received an

allocation of 2.692 percent of the allotment, based on its production history for the 1998-2000 crop years.7

 However, the

USDA immediately reassigned virtually all the allocation,

because Pacific was not processing sugar and was unable to

market its share. 

5The USDA never transferred the allocation to Washington Sugar, we

assume because Washington Sugar could not provide a bill of sale showing that it had purchased virtually all of Pacific’s assets. 

6Lybbert was a former Vice-President of Pacific and a member of

Columbia River Sugar Company (“CRSC”), as well as the sole owner of

Washington Sugar. 

7The USDA apparently interpreted the Act to require them to make an

allocation to Pacific, despite the fact that Pacific was no longer processing

sugar. 

AMALGAMATED SUGAR v. VILSACK 1633
In a December 2002 USDA audit, the USDA Inspector

General reported that because of financial difficulties, Pacific

defaulted on a $20 million USDA guaranteed loan, which

resulted in a loss of $12.1 million to the USDA’s Rural

Development Agency. The USDA audit stated that in May

2001, “[t]he plant closed and the lender was forced to liquidate the company’s assets.” 

On December 3, 2002, the CRSC 8 adopted a resolution

purporting to transfer its allocation to Washington Sugar, in

support of Washington Sugar’s efforts to revive operations at

Moses Lake. The resolution stated, “CRSC has no desire,

interest or ability to move forward and operate [the Pacific]

processing facility.” 

After purporting to convey its interest in the allocation to

Washington Sugar and despite the fact that Pacific never used

any of its 2002 allocation, representatives of Pacific sought to

have the allocation increased for crop year 2003. After a hearing on June 16, 2003, the CCC denied Pacific’s request. During the hearing, several processors (including American

Crystal) testified that Pacific had been dissolved or seemingly

terminated operations and was unlikely to resume operations.9

In July 2003, American Crystal began negotiating with

Lybbert (on behalf of Washington Sugar) and Central Leasing

to purchase the assets previously owned by Pacific, in an

effort to secure the transfer of Pacific’s allocation by the

CCC. On July 3, 2003, American Crystal wrote to the CCC,

discussing the proposed acquisition: 

8CRSC is the sugar beet growers’ association that wholly owned

Pacific. 

9For example, the President and CEO of Defendant-Intervenor American Crystal, wrote: “Pacific Northwest has not processed sugarbeets of the

2001 and 2002 crops, and it is our understanding that no sugarbeets have

been planted for the 2003 crop. Therefore, it is a real question as to

whether it will be able to continue operation in 2003. . . .” 

1634 AMALGAMATED SUGAR v. VILSACK
American Crystal[ ] is currently contemplating a

transaction, which would effectively result in the

allocation, currently owned by [Pacific], being transferred to [American Crystal]. As currently contemplated, substantially all of the assets of [Pacific]

would be transferred to an intermediary company[,

Washington Sugar]. Since [Pacific] has already

transferred ownership of its former processing facility to another party (Central Leasing, LLC), substantially all of the assets of [Pacific] consists [sic]

mainly of the marketing allocation and some other

generally immaterial assets. The next step in the

transaction would be the immediate transfer of substantially all of the assets of [Washington Sugar] to

[American Crystal] . . . . The effect of the transaction

would be to move the sugar marketing allocation

from [Pacific], through [Washington Sugar], to

[American Crystal]. 

(emphasis added). 

On July 30, 2003, American Crystal informed the CCC of

American Crystal’s intent to “acquire ownership or control of

the assets (including the rights to the production history and

the marketing allocations), associated with the Moses Lake,

Washington sugarbeet processing factory.” In the same letter

to the CCC, American Crystal sought the CCC’s preliminary

approval and informed the CCC that American Crystal had no

intention of ever operating the Moses Lake facility. 

On August 28, 2003, the CCC replied: “We understand that

American Crystal is purchasing all of the assets of Pacific

Northwest, securing the rights to make sugar at the Pacific

Northwest/Central Leasing factory site, and purchasing some

of the sugar making equipment used by Pacific Northwest.”

The CCC also stated that it would condition approval of the

transfer on: (1) receiving documentation of the purchase of

Pacific’s assets by American Crystal; (2) certification from

AMALGAMATED SUGAR v. VILSACK 1635
Pacific that it had not marketed any sugar under the 2002 allocation; (3) waiver by American Crystal and Pacific of rights

to bring any action against the USDA in the event that the

USDA is required by a court to reverse the transfer of the

allocation; and (4) agreement by American Crystal to drop

Pacific’s appeal of the CCC’s June 16, 2003 adverse ruling

regarding Pacific’s request to increase its allocation for 2003.

On September 8, 2003, Pacific was reinstated as a legal

corporation when it filed the necessary documents with the

State of Washington. That same day, Washington Sugar also

executed a cancellation agreement with Pacific, revoking the

previous transfer of Pacific’s allocation to Washington Sugar.

These agreements were executed in conjunction with Pacific’s

purported conveyance of its allocation to American Crystal.

That same day, American Crystal advised the CCC that it had

acquired, through its wholly owned subsidiary Crab Creek

Sugar Company “ownership or control of all of the assets

(including the rights to the production history and the marketing allocations) associated with the production of sugar at the

Moses Lake, Washington sugarbeet processing factory.”

American Crystal paid $6.8 million to acquire the allocation,

including $2.125 million to Central Leasing, $300,000 to

Lybbert (in consideration of a non-compete agreement), and

$3.025 million to Pacific. On September 16, 2003, the CCC

wrote to Lybbert to inform him that Pacific’s allocation would

immediately be transferred to American Crystal. 

On December 4, 2003, Amalgamated filed a Petition for

Review, administratively challenging the CCC’s transfer decision. On February 7, 2005, the USDA’s Administrative Law

Judge (“ALJ”) issued a decision (“Initial Decision”) reversing

the CCC’s determination, finding that the transfer was not

proper because Pacific had permanently terminated operations. 

On February 28, 2005, the CCC appealed the decision to

the USDA Judicial Officer (“JO”). The JO reversed the Initial

1636 AMALGAMATED SUGAR v. VILSACK
Decision without a hearing and affirmed the CCC’s determination. The JO construed the Act to mean that as long as the

CCC had not eliminated and redistributed a processor’s allocation, that allocation may be sold along with the processor’s

assets. Amalgamated subsequently appealed to the district

court, seeking judicial review of the JO’s decision. On crossmotions for summary judgment, the district court deferred to

the USDA’s construction of the Act and entered summary

judgment in favor of the USDA and American Crystal.

Amalagamated now appeals. 

We are asked to decide whether the JO’s interpretation of

the Act was reasonable, supported by the administrative

record, in accordance with the law, not arbitrary or capricious,

and therefore entitled to deference under Chevron U.S.A. Inc.

v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). 

II. Standard of Review

We review de novo the district court’s decision on crossmotions for summary judgment. Arakaki v. Hawaii, 314 F.3d

1091, 1094 (9th Cir. 2002). We are governed by the same

standard used by the trial court and must determine whether

the district court correctly applied the relevant substantive

law. See McClung v. City of Sumner, 548 F.3d 1219, 1224

(9th Cir. 2008). The USDA’s “interpretation or application of

a statute is a question of law reviewed de novo.” Earth Island

Inst. v. Hogarth, 494 F.3d 757, 765 (9th Cir. 2007). 

The Administrative Procedure Act governs our review of

agency action, and consequently, we must determine whether

the USDA’s decision was arbitrary, capricious, an abuse of

discretion, or not in accordance with law. 5 U.S.C. § 706;

High Sierra Hikers Ass’n v. Blackwell, 390 F.3d 630, 638 (9th

Cir. 2004). Our review is “searching and careful, but the arbitrary and capricious standard is narrow, and we cannot substitute our own judgment for that of the [Agency].” Ocean

AMALGAMATED SUGAR v. VILSACK 1637
Advocates v. U.S. Army Corps of Eng’rs, 402 F.3d 846, 858

(9th Cir. 2005) (internal quotation marks omitted). 

III. The Act Guarantees an Equitable Opportunity to

Market Sugar to All Processors

We begin by noting that the Act works to maintain sugar

prices by limiting the total amount of sugar that can be produced and marketed, allocating the total sugar allotment for

a given crop year among all sugar processors in a fair and

equitable manner. See § 1359bb. The Act makes clear that its

purpose is to “afford all interested persons an equitable opportunity to market sugar under an allotment” and that “the Secretary shall allocate each such allotment among the processors

covered by the allotment.” § 1359dd(a). Because the Act

places significant restrictions on the freedom of processors to

produce and market sugar, the Act’s overarching directive is

to ensure predictable, fair, and transparent allocation of the

allotments to reflect industry events and changes in industry

conditions. See 148 Cong. Rec. S513, S514 (Feb. 8, 2002)

(statement of Sen. Conrad) (“The purpose of this amendment

is to provide a predictable, transparent, and equitable formula

for the Department of Agriculture to use in establishing beet

sugar marketing allotments in the future. . . . [T]he formula

allows for adjustments in the reallocation of beet sugar allotments to account for such industry events as the permanent

termination of operations by a processor, the sale of a processor’s assets to another processor, the entry of new processors,

and so on. Taken together, these provisions offer the predictability, fairness, and transparency we all agree is much

needed in the sugar beet industry.”). 

A. Permanent Termination of Operations Triggers the

Requirement that an Allocation be Redistributed or

Transferred.

In construing the provisions of the Act, we first look to the

language of the statute to determine whether it has a plain

1638 AMALGAMATED SUGAR v. VILSACK
meaning. McDonald v. Sun Oil Co., 548 F.3d 774, 780 (9th

Cir. 2008). “The preeminent canon of statutory interpretation

requires us to presume that the legislature says in a statute

what it means and means in a statute what it says there. Thus,

our inquiry begins with the statutory text, and ends there as

well if the text is unambiguous.” Id. (quoting BedRoc Ltd.,

LLC v. United States, 541 U.S. 176, 183 (2004) (internal quotations omitted)). Here, we conclude that the statutory text is

unambiguous. 

[1] To maintain an equitable allocation among processors

under the FMAS program, Congress directed the USDA to

eliminate the allocation of a processor that permanently terminates operations and redistribute it equitably among all processors. Section 1359dd(b)(2)(E) provides: 

If a processor of beet sugar has been dissolved, liquidated in a bankruptcy proceeding, or otherwise has

permanently terminated operations (other than in

conjunction with a sale or other disposition of the

processor or the assets of the processor), the Secretary shall —

(i) eliminate the allocation of the processor provided

under this section; and

(ii) distribute the allocation to other beet sugar processors on a pro rata basis. 

§ 1359dd(2)(E) (emphasis added).10

10The related USDA regulation in effect in 2003 provides: that the

“CCC will eliminate the allocation of the processor who has been dissolved or liquidated in a bankruptcy proceeding and the allocation will be

distributed to all other processors on a pro-rata basis.”

7 C.F.R. § 1435.308(b) (2003). The USDA subsequently amended this

regulation to conform the rule to the statute and to clarify the criteria by

which a processor is determined to be permanently terminated. The rule

AMALGAMATED SUGAR v. VILSACK 1639
A single processor may receive and exclusively benefit

from the allocation of another processor by acquiring the processor or all of the processor’s assets. Section

1359dd(b)(2)(F) provides: 

If a processor of beet sugar (or all of the assets of the

processor) is sold to another processor of beet sugar,

the Secretary shall transfer the allocation of the

seller to the buyer unless the allocation has been distributed to other sugar beet processors under subparagraph (E). 

§ 1359dd(2)(F) (emphasis added). 

[2] Thus, the Act requires the USDA to eliminate and redistribute the allocation of a processor that has permanently terminated operations, except when the processor terminated

operations because of a sale of the processor or all of its assets

to another processor. See § 1359dd(b)(2)(E).11 Even when the

USDA has not previously eliminated an allocation, the fact

that a processor has permanently terminated operations (other

than in conjunction with a sale of the processor or all assets

of the processor) cannot be ignored when the USDA is subsequently asked to transfer the allocation pursuant to a purported sale of the processor’s assets. 

[3] Reading the provisions together, before the USDA may

defines permanently terminated operations as “(i) Not processing sugarcane or sugar beets for 2 consecutive years, or (ii) Notifying CCC that the

processor has permanently terminated operations.” See Flexible Marketing

Allotments for Sugar, 69 Fed. Reg. 39,811, 39,813 (Jul. 1, 2004) (codified

at 7 C.F.R. § 1435.308(b)(3)) (subsequently amended by 69 Fed. Reg.

48,765 (Aug. 11, 2004) and 71 Fed. Reg. 16,198 (Mar. 31, 2006)). 

11The USDA may find that a processor has temporarily reduced or

stopped processing operations, in which case the statute gives the USDA

authority to temporarily reassign a processor’s allocation to other processors. See § 1359ee(b)(2). 

1640 AMALGAMATED SUGAR v. VILSACK
grant an allocation transfer request pursuant to a sale, the Act

requires: (1) that the buyer and seller are processors covered

by the Act; (2) that the seller has not been dissolved, liquidated in a bankruptcy proceeding, or otherwise has not permanently terminated operations, other than in conjunction with

the sale or other disposition of the processor or the assets of

the processor; and (3) that the sale involves a sale of the processor or all of the assets of the processor. See

§ 1359dd(b)(2)(E)-(F).12 If any of these conditions is not met,

the USDA cannot approve the transfer pursuant to a sale.

Amalgamated argues that the transfer was not proper because

Pacific was no longer a processor, since it had permanently

terminated operations before (and not in conjunction with) the

purported sale of assets to American Crystal. The USDA and

American Crystal both argue that subparagraph (F) required

the USDA to transfer Pacific’s allocation because the USDA

had not previously eliminated and redistributed Pacific’s allocation pursuant to subparagraph (E). The district court

deferred to this interpretation, concluding that it was reasonable, not arbitrary or capricious, and supported by the administrative record. We disagree with the district court and agree

with Amalgamated. 

B. The District Court Erred When it Deferred to the

USDA’s Interpretation of the Statutory Term 

“Processor”. 

[4] The district court deferred to the USDA’s interpretation

of the statutory term “processor” in its decision, granting

Chevron deference to the JO decision. We conclude that the

district court erred. First, the term “processor” is not ambigu12The related USDA regulation in effect in 2003 does not provide

criteria for when a processor permanently terminates operations, but does

provide: “Subject to paragraph (a) of this section [regarding requests from

growers to transfer an allocation from a closed facility], CCC will eliminate the allocation of the processor who has been dissolved or liquidated

in a bankruptcy proceeding and the allocation will be distributed to all

other processors on a pro-rata basis.” 7 C.F.R. § 1435.308 (2003). 

AMALGAMATED SUGAR v. VILSACK 1641
ous as used in the Act. Second, the interpretation advanced by

the USDA is not reasonable, because it is contrary to the

USDA implementing regulation. 

In reviewing the USDA’s interpretation of a statute that it

administers, the court must follow the two-step approach set

out in Chevron, 467 U.S. at 842-44. The first step is to determine whether Congress has unambiguously expressed its

intent on the issue before the court. Natural Res. Def. Council

v. U.S. E.P.A., 526 F.3d 591, 602 (9th Cir. 2008) (citing

Chevron, 467 U.S. at 843 n.9). If the intent of Congress is

clear, such as when the statute expressly defines the disputed

term, the court “must follow that definition, even if it varies

from that term’s ordinary meaning.” United States v. W.R.

Grace & Co., 429 F.3d 1224, 1238 (9th Cir. 2005) (quoting

Stenberg v. Carhart, 530 U.S. 914, 942 (2000)). 

If the statute is silent or ambiguous, the court must then

decide whether the agency’s interpretation “is based on a permissible construction of the statute.” Natural Res. Def. Council, 526 F.3d at 602 (citing Chevron, 467 U.S. at 843). Where

Congress explicitly or implicitly delegates legislative authority to the agency, the court must defer to an agency’s statutory

interpretation so long as it is reasonable and not arbitrary and

capricious. Id. The court must consider the agency’s position

over time, and if the agency’s interpretation of a relevant provision conflicts with the agency’s earlier interpretation, the

agency is “entitled to considerably less deference than a consistently held agency view.” Id. (citations omitted). This deference also does not extend to “ ‘agency litigating positions

that are wholly unsupported by regulations, rulings, or administrative practice.’ ” Ashoff v. City of Ukiah, 130 F.3d 409,

411 (9th Cir. 1997) (quoting Bowen v. Georgetown Univ.

Hosp., 488 U.S. 204, 212 (1988)). 

The agency’s own regulations are significant and cannot be

disregarded when interpreting a statute. See Vance v. Hegstrom, 793 F.2d 1018, 1025 (9th Cir. 1986). An agency’s inter1642 AMALGAMATED SUGAR v. VILSACK
pretation of its own regulation is not entitled to deference if

it is “plainly erroneous or inconsistent with the regulation.”

See Auer v. Robbins, 519 U.S. 452, 461-63 (1997) (citing

Robertson v. Methow Valley Citizens Council, 490 U.S. 332,

359 (1989)). “A regulation has the force of law; therefore, an

agency’s interpretation of a statute in a manner inconsistent

with a regulation will not be enforced.” Nat’l Med. Enters. v.

Bowen, 851 F.2d 291, 293 (9th Cir. 1988). 

In this case, the Act does not define the terms “processor”

or “processor of beet sugar.” However, where a term is not

ambiguous, its plain and ordinary meaning should be ascribed

unless there is clear evidence to the contrary that Congress

intended a different meaning. See Seldovia Native Ass’n, Inc.

v. Lujan, 904 F.2d 1335, 1341 (9th Cir. 1990). 

[5] We note that the term “processor” does not have any

independent legal significance. One dictionary defines the

word to mean “one that processes agricultural products, foods,

or similar products.” See Webster’s Third New International

Dictionary 1808 (1993). Two other common dictionaries likewise define “processor” as “one that processes.” See The

American Heritage College Dictionary 987 (2d ed. 1985);

Webster’s II New Riverside University Dictionary 938

(1984). 

[6] Within the relevant provisions of the Act, we read “processor” to mean an entity who processes sugar, entirely within

the natural and ordinary meaning of the word. For example,

the Act requires the Secretary to establish allotments of sugar

for “marketing by processors of sugar processed from . . .

sugar beets . . . .” See § 1359bb(b)(1). The sugar marketing

allotments “shall apply to the marketing by processors of

sugar . . .” § 1359bb(c)(1) (emphasis added). A “processor” is

not allowed to market more sugar than it has been allocated.

See id. at § 1359bb(d). The Act consistently uses “processor”

to exclusively refer to that class of entities who process sugar.

AMALGAMATED SUGAR v. VILSACK 1643
We find the term unambiguous and nothing in the Act contradicts or confuses the ordinary meaning. 

[7] Within the Act, it is not receipt of an allocation that

makes an entity a processor, but rather the processing of sugar

beets that entitles one to an equitable allocation. The Act

directs, and therefore presumes, that any entity that processes

sugar will have an equitable opportunity to market sugar and

therefore receive an allocation. § 1359dd(a).13 The initial allocations were made to processors who had actual, historical

production during the 1998-2000 crop years.

§ 1359dd(b)(2)(C). New processors, referred to as “new

entrants,” are equally entitled to an allocation under the Act

when they start processing sugar beets or acquire an ongoing

factory with a production history. § 1359dd(b)(2)(H)-(I).

Maintenance of the allocation is also conditioned on continuing operations and processing of sugar. Id. at

§ 1359dd(b)(2)(E)-(F). Thus, we conclude that actual processing and capacity to produce sugar are what make an entity a

processor, and it is this status as a processor that entitles it to

an allocation. 

The USDA argues that if the ordinary meaning of the term

is applied, then Pacific could not have received the original

allocation on October 1, 2002, because by that time Pacific

was no longer processing sugar. Likewise, the USDA contends that if Pacific were not a “processor,” the USDA could

not have temporarily reassigned Pacific’s allocation to other

processors for crop years 2002 and 2003.14 We are not asked

13The Act provides that “Whenever marketing allotments are established for a crop year under section [1359cc of this title], in order to afford

all interested persons an equitable opportunity to market sugar under an

allotment, the Secretary shall allocate each such allotment among the processors covered by the allotment.” § 1359dd(a). 

14If a processor with a share of the allotment will be unable to market

all of the allocation during a particular crop year, the Secretary may temporarily reassign to the “deficit” for that crop year. § 1359ee(b)(2). The

reassignment is redistributed to the other processors depending on their

capacity to fill a portion of the deficit. Id.

1644 AMALGAMATED SUGAR v. VILSACK
to review the propriety of the original allocations or the temporary reassignments made by the USDA under the Act.

Nonetheless, we find it unlikely that Congress intended that

the USDA give a defunct sugar company, incapable of processing or marketing sugar, a sugar marketing allocation. The

fact that the USDA gave the defunct Pacific an original allocation, which it temporarily reassigned to other processors,

has no impact on our interpretation of this unambiguous statutory term. 

The USDA also urges that “processor” must mean an entity

with an allocation, because the provisions regarding disposition of an allocation upon termination of operations or sale of

assets uses that term, and the provisions would not apply

unless a “processor” had an allocation. § 1359dd(b)(2)(E) &

(F). This argument is not persuasive. As we stated above, the

Act presumes that all processors will receive an equitable

allocation, and therefore it is true that a processor would have

or be entitled to an allocation. However, this does not mean

that a processor is only a processor because it has an allocation. 

[8] To the extent that the USDA’s argument exposes any

ambiguity in the statute, which we do not believe it does, the

USDA’s interpretation is not reasonable and not entitled to

deference, because it conflicts with the USDA’s own implementing regulations. See Pac. Rivers Council v. Thomas, 30

F.3d 1050, 1054 (9th Cir. 1994) (refusing to defer to the

USDA’s construction of a statutory term because it was

inconsistent with the plain language of the statute and contrary to the agency’s own regulation). The USDA implementing regulation provides, “[s]ugar beet processor means a

person who commercially produces sugar, directly or indirectly, from sugar beets (including sugar produced from sugar

beet molasses), has a viable processing facility, and a supply

of sugar beets for the applicable allotment year.”

7 C.F.R. § 1435.2 (2003).15 The district court acknowledged

15This definition has not changed since the rule was first effected. Compare 2002 Farm Security and Rural Investment Act of 2002 Sugar ProAMALGAMATED SUGAR v. VILSACK 1645
this regulatory definition, but concluded that the interpretation

advanced by the USDA was “reasonable given the use of the

word throughout the statute.” We disagree. The USDA’s proposed interpretation that a processor is an entity that has an

allotment, even if it is not processing anything, is not reasonable, precisely because it conflicts with its own regulation.

See Nat’l Med. Enters., 851 F.2d at 293-94. 

[9] Accordingly, we hold that the district court erred in

deferring to the definition of the term “processor” advanced

by the USDA. Within the Act, the term is unambiguous and

used in a manner consistent with its natural and ordinary

meaning. The USDA’s interpretation, advanced in the present

dispute, not only conflicts with the ordinary meaning of the

word but also conflicts with the USDA’s own regulatory definition of the term. 

C. Pacific Permanently Terminated Operations and

Ceased Being a Processor Prior to the Purported Sale

of Assets to American Crystal.

There is no dispute that Pacific was a sugar beet processor

during the 1998 through 2000 crop years. Whether Pacific

was a “processor” by the time it purported to sell its assets to

American Crystal in September 2003 depends on when and

under what circumstances Pacific permanently terminated

operations. We conclude that Pacific ceased being a processor

when it permanently terminated operations prior to the purported sale to American Crystal. 

[10] After five days of evidentiary hearings, the ALJ found

that Pacific had permanently terminated operations before the

purported sale of assets to American Crystal. The record

strongly supports this finding, given that Pacific had not programs and Farm Facility Storage Loan Program, 67 Fed. Reg. 54,926,

54,930 (Aug. 26, 2002) with 7 C.F.R. § 1435.2 (2008). 

1646 AMALGAMATED SUGAR v. VILSACK
cessed sugar beets since February 2001. Pacific sold its factory and assets in June 2001 and had no sugar beet crops in

2001, 2002 or 2003. The State of Washington administratively dissolved Pacific in July 2001, even though it was subsequently reinstated in September 2003 in connection with the

transaction with American Crystal. Pacific lost its lease and

option to repurchase its factory in July 2002. Pacific’s Board

of Directors also adopted a December 2002 resolution purporting to convey its allocation to Washington Sugar and stating that “CRSC has no desire, interest or ability to move

forward and operate [the Pacific] processing facility.” The JO

did not refute these findings. 

Instead, the JO reasoned that as long as the USDA had not

previously eliminated the allocation, it was available to be

transferred pursuant to a sale. There is no basis for this reasoning. The determinative factor on the availability of the

allocation is whether a processor has permanently terminated

operations, not whether the USDA has failed to act. If we

upheld the interpretation advanced by the USDA, the propriety of a transfer would not depend on events in the sugar beet

industry, as Congress intended, but on whether the USDA has

been diligent in fulfilling its statutory duties. Allowing such

an interpretation would result in an arbitrary and capricious

outcome that would be contrary to the intent of Congress. 

We also conclude that the USDA had a self-serving and,

possibly, a financial interest in interpreting the Act to allow

the transfer of Pacific’s allocation to American Crystal. First,

the USDA gained administrative advantage by conditioning

approval of the transfer on (1) waiver by American Crystal

and Pacific of rights to bring any action against the USDA in

the event that the USDA is required by a court to reverse the

transfer of the allocation; and (2) agreement by American

Crystal to drop Pacific’s appeal of the CCC’s June 16, 2003

adverse ruling regarding Pacific’s request to increase its allocation for 2003. The record also indicates that the USDA may

have had a financial interest in approving the transfer. Pacific

AMALGAMATED SUGAR v. VILSACK 1647
owed the USDA as much as $12.1 million after Pacific

defaulted on a $20 million loan guaranteed by the USDA.

Pacific received $3.025 million in payment from American

Crystal for the sale of the allocation. As a creditor of Pacific,

the USDA may have had a financial interest in approving the

transfer. Even if the USDA received no direct financial benefit, the existence of a possible pecuniary interest is of concern

in evaluating the manner in which the USDA administered the

Act and interpreted its provisions. We are troubled that the

USDA may have acted more out of concern for administrative

convenience and self-interest, rather than with an interest in

administering the Act according to statutory requirements and

Congressional intent. Where an agency interprets or administers a statute in a way that furthers its own administrative or

financial interests, the agency interpretation must be subject

to greater scrutiny. Chevron deference is also inappropriate

where an agency has a self-serving, pecuniary interest in

advancing a particular interpretation of a statute. Cf. Nat’l

Fuel Gas Supply v. Fed. Energy Reg. Comm’n, 811 F.2d

1563, 1571 (D.C. Cir. 1987) (noting that while an agency’s

interpretation of a statute incorporated into a contract may be

entitled to deference, such deference may be inappropriate

where the agency itself is a party to the contract). 

[11] The uncontradicted findings of the ALJ show that

Pacific permanently terminated operations prior to the purported sale of assets to American Crystal. Accordingly,

Pacific was no longer a processor at the time of the purported

sale. Because the permanent cessation of operations requires

redistribution, the USDA should have redistributed Pacific’s

allocation among all processors pro rata as required by law.

D. Termination of Operations Not in Conjunction with

a Sale of All Assets.

The USDA argues that, even if Pacific terminated operations, the USDA was not required to redistribute the allocation among all processors, because Pacific permanently

1648 AMALGAMATED SUGAR v. VILSACK
terminated operations in conjunction with a sale or other disposition of the processor or the assets of the processor. See

§ 1359dd(b)(2)(E). The JO agreed. The district court

expressed concern that there was no sale of “all the assets of

the processor,” but nonetheless affirmed, finding the JO’s

conclusions to be reasonable and not arbitrary or capricious.

We find this conclusion to be unreasonable and not supported

by the record. 

[12] American Crystal did not purchase Pacific itself. Thus,

in order to satisfy the prerequisites for transfer, American

Crystal must have purchased all of Pacific’s assets. See

§ 1359dd(b)(2)(F). Yet, Pacific’s assets were liquidated well

before the purported sale to American Crystal. The factory

and all Pacific’s processing equipment had been previously

liquidated and sold to Central Leasing. American Crystal

acknowledged that Pacific’s remaining assets largely included

“the marketing allocation and some other generally immaterial assets.” 

The USDA and American Crystal argue that to satisfy the

requirements of the Act, the asset sale need only be “a sale of

those assets that the processor has at the time, not those which

the processor may have owned in the past.” Therefore, the

USDA argues that it is not relevant that the assets sold were

immaterial so long as they include all the assets Pacific had

at the time of the sale. We agree that the sale of all of Pacific’s assets need not include all of the assets Pacific ever

owned. However, the fact that Pacific had no material assets

at the time of the sale is problematic. 

[13] First, at the time of the sale to American Crystal,

Pacific’s only purported asset of any value was its marketing

allocation. The JO concluded that “if a beet sugar processor

has a beet sugar marketing allocation, that allocation can be

sold in connection with a sale of the assets of the beet sugar

processor.” We conclude this to be an erroneous statement of

the law. A marketing allocation can be transferred only upon

AMALGAMATED SUGAR v. VILSACK 1649
a sale of all assets belonging to a processor.

§ 1359dd(b)(2)(F). Under the Act, however, while an allocation inevitably adds value to a processor, it is not an asset

itself that can be owned or conveyed by the processor. As

Amalgamated persuasively argues, an FMAS marketing allocation is “a right in the nature of a government license; it can

be conveyed only by an act of the Secretary of Agriculture.”

The USDA has near plenary control over the allocations, subject to the mandates of the Act. The USDA must modify the

allocations whenever a processor sells a factory or a new processor enters the industry, reopens a factory, or acquires an

operating factory with a production history. See § 1359dd.

The allocation is also subject to the requirement that it “be

shared among producers served by the processors in a fair and

equitable manner.” See § 1359ff. When a processor closes,

growers have the right to request that the USDA transfer the

allocation to an alternate processor where they will deliver

their crops. The USDA can also temporarily reassign an allocation when a processor is unable to fully use it in a given

crop year. See § 1359ee. Notably, the USDA is not required

to compensate a processor for reductions in the allocation or

seek the processor’s permission. We conclude, as the ALJ did,

that “[f]or there to be a ‘sale of all assets,’ more than the marketing allocation itself needs to be conveyed.”

16

[14] Second, assuming for the sake of argument that the

sale of purely immaterial assets were sufficient, the fact that

Pacific did not have any tangible assets of any value confirms

that it was no longer a processor and that its permanent termination of operations was not in conjunction with but prior to

16The fact that American Crystal ultimately purchased from Central

Leasing some of the assets formerly owned by Pacific does not affect our

analysis. Central Leasing was not a sugar processor and never acquired

Pacific’s allocation. Therefore, a purchase of assets from Central Leasing

does not entitle American Crystal to a transfer of Pacific’s allocation.

Under the Act, for the USDA to approve a transfer of an allocation in conjunction with the sale of assets, both the purchaser and seller must be processors. See § 1359dd(b)(2)(E). 

1650 AMALGAMATED SUGAR v. VILSACK
and independent of the sale to American Crystal. We

acknowledge that, if Pacific’s only remaining assets were

good will, production rights, production history, books, and

records, it would not be unreasonable to conclude that American Crystal purchased all of Pacific’s assets. However, this

does not mean that Pacific was a processor at the time of the

sale or that it terminated its operations in conjunction with the

sale. Rather, the absence of material assets is a strong confirmation that Pacific permanently terminated operations prior to

the sale. We believe the reasoning of the ALJ is persuasive in

determining that Pacific did not terminate operations in conjunction with the purported sale to American Crystal. If

Pacific had retained the assets it sold to American Crystal,

could it have continued operations? Pacific had no financing,

no equipment, no sugar beet crop, no factory, no right to operate a factory, and had not produced sugar for over two years.

As the ALJ noted, “The record in this case makes it abundantly clear that when the sale to American Crystal took

place, Pacific Northwest was no longer able to ever again process beets into sugar. It had neither the physical assets [n]or

the will.” 

IV. Conclusion

We are sympathetic to the principals and investors of

Pacific who sought to salvage what value they might from

their failed investment. We also recognize that it was good

business for American Crystal to seek to secure Pacific’s marketing allocation solely for itself. The transaction between

Pacific and American Crystal was a crafty effort to circumvent the Act’s clear directive and avoid an equitable redistribution of Pacific’s allocation, in favor of a single processor.

However, when a sugar processor permanently terminates

operations, Congress mandated that the USDA fairly and

equitably redistribute the failed processor’s allocation among

all processors. The USDA failed to fulfill its responsibilities

in this regard. It put administrative expediency ahead of the

intent of Congress and sanctioned a questionable transaction

AMALGAMATED SUGAR v. VILSACK 1651
that was attempting to resurrect a dead company for the sole

purpose of effecting the transfer of its sugar marketing allocation. 

We reverse the district court’s order granting summary

judgment in favor of the USDA and American Crystal. We

remand for further proceedings consistent with this opinion.

We award costs on appeal to Appellant, Amalgamated. 

REVERSED and REMANDED.

1652 AMALGAMATED SUGAR v. VILSACK