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### UNITED STATES COURT OF APPEALS

FOR THE SIXT H CIR CUIT

_________________
M ICHAEL F ULL ENKA MP , et al., Plaintiffs- Appellant s,

v.

ANN M. V ENEMAN , in her capacity as Secretary

of the United States Department of Agriculture, Defendant-Appellee. X

- - - -
> , - - - - - - N No. 03-3731

Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 02-07431—Ann Aldrich, District Judge.

Argued: June 17, 2004 Decided and Filed: September 2, 2004

Befor e: DAUGH TREY, GI

BBONS, and COOK , Circuit Judges.

_________________ COUNSEL

ARGUED: Benjamin F. Yale, BENJAMI N F. Y AL E & A SSOC. CO., Waynesfield, Ohio, for Appe llants. Jef fre y 2 Fullenkamp, et al., v. Veneman No. 03-3731

Cl ai r, UNITED STATES DEPARTMENT OF JUSTI CE, Washington, D.C., for Appellee. ON BRIE F: Benjamin F. Yale, Ryan K. Miltner, Kristine H. Ree d , BEN JAMIN F. YALE & ASSOC. CO ., Way nesfield , Ohio, for Appella nts. Jeffrey Clair, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

_________________ OPINION

_________________ MARTHA CRAIG DAUGHTREY , C ircuit Judge. The plaintiffs in this cas e are dai ry farmers who annu

ally produce
over 2.4 million pounds of milk. They challenge the regulations p romulgated by the defendant Secretary of Agricul t ure to impleme

nt the fe deral Mil

k Inc ome L oss Contract Progra m, 7 U.S.C. § 7982. When a producer signs
a contract to join the

progra m, it beg ins rece ivin g m onthly pay ments on th e eligi ble milk it produces and, under the statute’s transit

i on rule, a lump-sum pa

yme nt for eli gible mil

k it produced between December 1, 2001, and the month before the contract was signed. The statute inc l udes a limitation restrictingthe quant

it y of milk upon which payment can be made each fiscal y

ear to 2.4 million pounds. The Department of Agriculture regulations under a ttack here appl y the limitation t

o pay ments under the

transition ruleas well a s to the monthly pay

ments. The district court fou nd that the statute did not unambiguously forb id the Secretary ’s interpretation

of the statute and, moreover, tha t the Secretary ’s interpr etation was rea sonable. The court therefore denied the plaintiffs’ motion for injunctive relief and granted the Secr etary ’s motion to

dismiss.

For the r easons se t out below , we aff

irm.No. 03-3731 Fullenkamp, et al., v. Veneman 3

FACTUAL AND PROCEDURAL BACKGROUND

OnMay 13, 2002, President B ush signed into law the Farm Security and Rural Investment Act of 2002, Pub. L. No. 107- 171, 116 Stat. 134 (2002), which, in § 1502, created an income support program for dair y f armers that provides for direct federal pay

ments to milk producers whe n a specific statutorily-prescr

ibed price index falls belowa certa in level. See id. at § 1 502, codi fied at 7 U.S.C. § 798 2. In order to receive pay

ments thro

ugh the progra m, dairy farmers must enter into a contract with the Secretary of Agriculture. Once
a dairy fa rmer has entered into a con tra ct, the f

armer is eligible for two c ategor

ie s of pay ments: (1)

monthly pay ments on eligi

ble produ ction beg inning th e m onth the farmer enters into the co ntract and en ding S ept ember 30, 2005, see 7 U.S.C. § 7982(g); and (2) a retroactive, lump-sum payment for p roduc tion during the “transition” period between December

2001 and the month in whichthe farmer enters t he contra ct. See § 7982(h). The statute does not specify a month in which d

airy farmers must ente

r contra cts, just that the Secretary

must offer such contr acts from July 2002 until September 2005. See 7 U.S.C. § 7982(f).

Section 79 82 reads , in pertinent part : (b) Paym ents. The Secre ta ry shall off er to ent er into contracts with producers on a da iry farm located in a participatingState under w hic h the producers receive payments on elig ible production.

* * * * * (d) Payment quantity. (1) In gener

al. Subject to paragraph (2), the payment quantity for a porducer during the a ppli cable month

u nder this section shall be equal to the qua nt it y o f eligible production marketed by

the producer during the month. 4 Fullenkamp, et al., v. Veneman No. 03-3731

(2) Limi tat ion. The p ay ment quan

tity for all producers on a single dairy operation during the months of the applicable fiscal y

ear for which

t he producers
re ceive payments under subse ction (b) shall not ex cee d 2,400,000 pounds. . . .

* * * * * (f) Signup. The Secr

etary shall off er to ent er into contracts under this section during the period beginning
on the date that

is 60 days afte

r the date of enactment of this Act [May 13, 2002], and endin g on September 30, 2005.

* * * * * (h) Transition rule. In addition to any pay ment that i s otherwis e availab le under th is se ction, if the producers on
a d airy farm enter into a contract under this section, the Secretary shall make a pay

ment in accordance with the formula specified in subsection ( c) on the qua ntity of eligible production

of the producer marketed during the peri od beginning on December 1, 2001, a nd ending on the last day of the month pr ecedin g the month the produce rs on the d

airy farm en tered in to the con tract.

InOctober 2002, t

he S ecretary

of Agriculture issued regula tio ns implement

ing the d

airy assistanc e prog

ram. Under the regulations, the cap in § 7982(d)(2) limiting payment quantity to 2.4 million pounds of milk peryear was made applicable to transition period pay ments under § 7982(h), as well a s to the mon thly pay ments for

milk produced after a contrac t ha s been signed. See 7 C.F.R. §§ 1430.207(

b). I n respons e, the pla

intiffs f il ed thi s action, seekinga declaratory

judgement that dairy

producers who are entitled to payments during

the transition period are entitled to a lump-sum payment on all the milk produced and marke ted during the transition period, not just 2.4 million pounds a year. T hey requested an injunction compelling theNo. 03-3731 Fullenkamp, et al., v. Veneman 5

1 The defenda nt’s motion was styled a m otion to dismiss under Rule 12(b)( 1) of

the Federa l Rul es of

Civi l Proce dure or , i n th e al ter nati ve, for summary judgment under Rule 56. The d istri ct court said i t was granti ng the defe ndant ’s mot ion to dismis s, but also made cl ear th at i t was considering the case o n the mer its and not di smiss ing base d on subject matter jurisdic tion. It t herefor e appears t

hat it was e ither a dis miss al f or failur e to state a cl aim or a gra nt of sum mary judgment rather than a dismis sal for lack of sub ject m atter juri sdict ion. Evenif the di smiss al

were consi dered a dis miss al f or lack of

subject matter juri sdict ion, we can affir m a distri ct court’s judgment on any groun ds su

pporte d by the recor d. See Peterson Novelties, Inc. v. City of Berkl ey , 305 F.3d 38 6, 394 (6th Cir. 2002).

2 Chevron deferenc e is appropri ate “wh en it appear s t hat Cong ress delegat ed authori ty t o the agen cy gener ally to make rules ca rrying the force of law, and that

the age ncy i nterpre tati on clai ming def erence w a s promulgat ed i n the ex ercis e of th at aut horit y.” United Stat es v. Mead Corp. , 533 U.S. 218, 226-27 ( 20 01)

. In 7 U.S .C. § 79 91(c), C ongress authori zed the Se cretar y and C omm odity C redit Co rpo ration to Secretary to mo di fy the regula

tions at 7 C. F.R. § 143 0 to allow dairy produc ers uncapped transition pay ments.
The district court denied the plaintiffs’ motion for injunctive relief and granted the S ec retary ’s motion to dismiss the case. 1 With respect to the cap on transition payments, the court found tha

t § 7982 doe s not unamb iguousl y forbid the regul ations from maki

ng tran sition pay

ments subje ct to th e cap and that the Secretary ’s regulation was permissible and
reason able

. Applyin g Chevron defere nce, the court upheld the Secreta

ry ’s deter mination that the ca

p applies to transition pay ments as well

as prospe ctive pa

yme nts under the

contract. See Chevron, U.S.A., Inc. v. N atural Res

. Def. Council, Inc.
, 467 U.S. 837, 842-43 (1984). This appeal followed.

ANALYSIS

I. Standard of Review

The parties agree that Chevron , 467 U.S. 837, gover ns this
cas e. 2 Under Chevron , i n r ev ie wi ng an ag en cy’ s 6 Fullenkamp, et al., v. Veneman No. 03-3731

pro mulga te app rop riate reg ulations nece ssary to implement the chapter. It specif ied th at those regul ations we re t o b e ma de w ithout re gard to notice and comment rule-making procedures. The regula tions at issu e in this case, fi nal regu lat ions made wi thou t pri or notice and comment, were promulgat ed unde r the auth ority given to the S ecreta ry in § 7 991 (c). See 67 Fed. Reg. 64 454 (O ct. 18, 2002). int erp retation

of a statu

te it admin

isters, w e must fir st ask “whether Congress has directly

spoken to the precise question at issue.” Id . at 842. If, after “ employing tra ditional tools of statutory construction,” id . at 843 n.9, we dete rmine that Congress’s intent is clear, then “that is the end of the matter; for the court, as we ll as the agency , must give effect to the unambig uously expressed

intent of Congress.” Id . at 842-43. However, “if the st

atute is silentor ambig

uous with r

espect t o the specific issue , the que stion for the court is whether the agency ’s answer is based on a permissible construction of the statute.” Id . at 843; see also Barnh art v. Thomas , 124 S.Ct. 376, 3 80 (20 03) (ap plying Chevron ). II. The Application of the Cap to Transition Payments

Both the plaintiffs and the defendant in this case arg ue that Congress spoke directly

to the issue of whether the pay ment cap in § 7982(d)(2) applies to transition pay me nts. Ob vi ou sl y, however, they do not agree on what Cong res s said. The plain

tiffs ar gue tha t Congre ss clear

ly intended that the cap not

apply to transit

ion pay ments and

that t he Secretary ’s regulations therefore violate the statute. The Sec re ta ry, on the other hand, contends that Congress clear l y intended that all payments under § 7982 would be limitedby the cap and that the Department’s regulations are c onsistent with the statute. Both parties argue that the plain lang uage of the statute, legislative history, and the s tructure and purp ose of the sta tute support their p ositions.No. 03-3731 Fullenkamp, et al., v. Veneman 7

3 Subsec tion (c), entitled “amount,” p rovides as follow s: Paym ents to a pr oducer under thi s se cti on sha ll be calc ulat ed by mul ti ply ing (as dete rmin ed by t he Secr etar

y) – (1) the payment quantit y for the producer during th e applicable month established under subsecti on (d); (2) t he amoun t equ al t o – (A) $1 6.94 p er hundre dweight; less (B) the Class I mil k pri ce per hundr edwei ghtin Bost on under the appli cable Federa l mi lk ma rket ing order; by (3) 4 5 pe rcent. 1. Statutory Language

Instatutory construction ca ses, “[t]he fir st step ‘is to determine whether

the la ng uage at issue has a plain and unambiguous meaning

with regar d to the pa rticular dispute in the case.’” Barnhart v. Sigmon Coal Co., Inc. , 534 U.S. 438, 450 (2002) (citation omitted). The plaintiffs argue that the plain language of § 7982 u nambi guously re quires the Secretary to make tra nsition payments without limitation. They point out that subsection (h) requires pay ment on eligible producti on and not

e that Cong

ress did not limit

t he definition of

“eligible production” in either subsection (a) or (h). They

argue that if Con

gress had intend

ed the ca p to apply to tr a nsitional payments, it could have written the statute to say so in subsection (h) itself. As the Sec ret ary p oints out, however, subsection (h) provides that pay ment s shallbe made a

ccordin g to the f ormula in subsection (c), 3 whichincorporates the pay ment quantity in subsection (d), the subs ec tion that in

cludes th e pay

ment cap . Thus, according to this reading of the statute, the fact th at subsection(h) itsel f does not include a limitation on quantity is notdeterminative because the pay ment formula for

which it provides incorporates the pay ment cap in subsection

(d)(2). By its terms, however, the pay ment cap in subsection (d)(2) appl ies onl y to “pay

ments under subsection (b).” Thus, the central question in this case is whether t ra nsition pa

yme nts
are “payments under

subsection (b),” the section of the statute 8 Fullenkamp, et al., v. Veneman No. 03-3731

4 Subsec ti on (g), enti tled “ durati on of contr act, ” provides a s follows: (1) I n gene ral. Except as provided in paragraph (2) and subs ecti on (h), any contr act ente red i nto by produce rs on a dairy farm under

this section shall co ver eligib le product ion marketed by the producers on t he dairy f arm during the peri od st art ing with the fi rst day of [t he] month the producers on the dai ry f arm enter

int o the co ntra ct and that orders the Secretary

to offer to enter into contrac ts with dairy farmers under which the farmers wil l receive pay ment for eligible milk production. The plaintiffs a ssert that transi tion p ayments are

not payments under subsec tion (b). They maintain that § 7982 creates two similar but disti nct program s that cover farmers during diffe rent periods – one, described in subsec tion (e), that cove rs farme rs durin g the peri od a fter the

y si gn cont

racts a nd anothe

r, descr ibed in subsection(h), that covers farmers for the pe riod before they sign contra c ts – and that “payments unde r subsection (b)” refers to the payments under the first program, not the second. They argue that interpreting

“payments under

subsection (b)” to include both transition and monthly pay ments renders the phrase “subsecti on (b)” superfluous, since, under such an interpretation, the limitation could have been written to just read: “payments under

this section.” As the plaintiff s point
o ut, however, citing to Director, Office of Worke rs ’ Compensation Progr ams, United States Department of Labor

v. Goudy
, 777 F.2d1122, 1127 (6th Cir. 1985), statutes should be read t o giv e every

word and clause effect. Citing to other canons of statutory

interpre tation, the plaintiff s also assert that the statute is rem edial a nd should be construed liberally in favor of

the beneficiaries.

Inre sp on se , t he Se cr et ar y asse rts that tr ansition p ay

ments
are “payments under subsec tion (b).” She points out that dairy farmers receive

transitional pay

ments only if t hey sign contracts, as authorized in subsection (b ). She further notes th at in exceptin

g pay ments unde

r subsec tion (h) f

rom t h e pay ments that start

on the first day of

the month in which the contract is si gned, s ubsec tion (g) 4 contemplat es that pa yme ntsNo. 03-3731 Fullenkamp, et al., v. Veneman 9

end ing on Sep temb er 30 , 200 5 . . . . under subsection (h) are pay

ments covered by

the contract

. She contends that if Congress had intended to limit the cap to the monthly con

tr act payme

nts, it would have made more
senseto have the limit apply to “pay ments under

subsections (e)-(g),” the subse ctions de aling with the mont hly pay ments, rather than to “payments under

subsection (b),” the s ubsection discussing the contracts in general. Fur thermore, the Secretary questions whether the canon s of statutory interpretation

cited by the plaintiffs are

relevant here, arguing that the program is not remedial and tha t the cap is an eligibil ity limitation r

ather than an exce

ption. Finally
, she contends that nothing in the structure or purpose of the statut e sugge sts that Congress intended to create two separa t e progra ms o r to dist ingu ish between the retroactive transitional pay ments and

the prosp ective monthly

pay ments. Focusingon the statutory lang uage, we conclude

that it is unclear whether the phra se “pay

ments under subsection (b)” includes transition payments or not. As the de fendant points out, transition pay

ments are re ceived only

if the dairy fa

rmers enter into contracts and, therefore, such pay ments can be seen to be payments under subs ection (b). At the same time, as noted by th e plaintiffs, this interpretation does render the phrase “s ub section (b)” superfluous. Furthermore, whe n subsection(e) refers to “a pay ment under a contract under this section,” it is ref

erring to the monthly pay ments, thereby implying that transition payments ar e n ot considered pay ments under § 7982 contracts. In short, we conclude that altho ugh Congress may

have had an intent

regarding whether transition payments wer

e “under subsection (b) ,”that intent is not stated clearly in the lang uage of the statute.

2. Legislativ

e History, Structure, a

nd Purpose

Neither the legislative history of the statute nor the part ies’ explanations of how their inte rpreta tions furt her the p urpose 10 Fullenkamp, et al., v. Veneman No. 03-3731

of the statut e suffic iently

clarify the ambig

uity inthe statutory language. See Gen. Dynamics Land Sy s., Inc . v. Cline , 124 S.Ct. 1236, 1248 (2004) (looking to text, structure, purpose, and history of Act to f

ind it unamb iguous) ; United States v. Choice
, 201 F.3d 837, 841 (6th Cir. 2000) (explaining that the plain language of

the statute is the starting point for statutory interpretation, butthat the structure and language of the statute as a whole can aid in interpreting the plain mea ning and that legislative history c an be looked to if the statutory language is unclear)

. Both parties a re able to explain how their

position fi

ts into the overall structure of the statute and further s the s tatute’s purpose. The Secr

etary asserts t hat her i nterpre tati on of the statute gives the cap a meaningf ul role in the statute’s operation, wherea s the plain tiffs’ interpretation

would lar gely nullify the cap be caus e larg e produc ers would be able t

o circumvent

the ca p b y w aiti ng unt il Se ptemb er 200 5 to s ign
a contrac t and then receive “transitional pay ments” for the entire period between December 2001 and August 2005.

The p laint iffs object to this argument and to the district court’s acceptance of it, asserting tha t the district court and Secretary have usurped t

he role o f Congr

ess and injected their
own politic al vi ewpoints i nto a car efully -craf te d congressionalcompromise. Further m ore, they a

rgue, Congre ss intended for

large producersto be able to avoid the productioncaps. They

as sert t hat the overall purpose of the program was to assist dairy fa

rmers and that Congress wanted to cove r all elig

ible prod uction, bu

t that it ca

refully constructed

the program in a way

that would fo rce lar ge farmers to wait until the end of the covered period if they wanted to rece ive pay

ments on all the ir

eligible producti on in order to refrain from encourag ing large farmers to furthe r increa se production and in order to push costs of the program to later fiscal ye ars.
Si mi la rl y, both parties cite legislative history that supports their positions. The plain

ti ff s claim that the transitionNo. 03-3731 Fullenkamp, et al., v. Veneman 11

pay ments in § 7982 serve as a replacement for the N ortheas t Dairy Compact, which did not

have production caps. As the Secretary points out, however , the Nor theast Dairy Compact
was not a federal assistance progr am but anagreement

among North eastern

states to regulate prices. See Organic C ow , LLC v. Ctr. forNew England Dairy Compact Research , 335 F.3d 66, 67-68 (2d

Cir. 2003) (describing the Compact). As the Secret ary furthe r note s, pre viou s progr ams s upporting dairy farmers included pay

ment caps or gave discretion to the Se cr et ar y, who then c apped the amount of

milk eligible for assistance. See , e.g. , Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999, Pub. L No. 105-277, § 1111(d), 112 Stat. 2681 (1998) (providing $200 millionto provide assistance to dairy pr oduce rs “in a manner determined

by the Secre

tary”) ; Dairy

Market L oss Assistance Progra m, 64 Fed. Reg. 24933 ( Ma y 10, 1999) (capping payment to 2.6 million p ounds) . Similarly , both milk assistance progra

ms that we

re in the Farm Bill before it went to conferen ce i ncluded caps. See H.R. 2 646, 1 07th Cong. § 132 (2 002) (as amended and passed by Senate) (capping payment at lesser of average qua

ntity of milk in which farmer had interest during each

of a specified three-y

ear period or 8 million pounds). In addition, the conference report does not mention a difference be tween monthly and transition pay ments with reg ard to the

pay ment cap , simp ly no ting, in it s desc ription of the program, that: “Producers, on an operation-by- operation

basis, may rec eive payme nts on no
more than 2.4 mi llion pound s of milk ma r keted per year. Retroactive p ayment s will be made covering market losses due to low pric es since

Decemb er 1, 200 1.” H.R. Conf. Rep. No. 107-424 at 446 (2002), reprinted in 2002 U.S.C.C.A.N. 141, 171.

At the same

tim e, the plaintiff

s point out that some members of Congress, particularly Senators Leahy

and Jeffords, indicated

that they understood that

the cap in § 7982
was to be appl ied to the monthly pay ments and

not to transition pay

ments . Senator

Lea hy, for examp le, in discussin g the F arm Bill’ s confer

ence re port, note d that: 12 Fullenkamp, et al., v. Veneman No. 03-3731

[T]he prospective “m onthly” prog ram which provides monthly payments . . . has a 2.4 million pound cap as set forth in (d).

. . . This “limitations” language was inserted outof a concern that an uncapped prog ram would lea

d to significant

increases in pr o duction of milk. Also, there
was a concern that farmers would reor ganize in the future just to ge t higher pay ments unde

r the nat ional pro gram.
Theseconc erns do not apply to the benefits paid out under subsection (h) because farmers would ne ed time machin es to go back in the pa st and increase t heir production orto chang e their le gal s tructur e re tr os pe ct iv el y. Indeed, t he amount of production covered by (h) is the

amount of “eligible production” as defi ned i n sec tion [7 982( a)(2 )].

148 Cong. Rec. S4032 (May 8, 2002) (statement of Sen. Leahy ).

Insum, looking at the statutory langu age, legislative hi st or y, and overall structure and purp os e of the statute, we find the inten tion of Cong

ress with regar d to the application of the subsection (d)(2) cap to transition pay ments unclear.

3. Reasonable

ness
Under Chevron , if Cong

ress has not spoken

directly to the question at issue, the Secretary ’s interpretation of the statute will be upheld

so long a s it is rea sonable

. See Smiley v. Citibank (S.D), N.A. , 517 U.S. 735, 744-45 (1996) (“Since we have concluded that the Com ptro ller's regulation deserves deference, the question before us is not whether it repres ents the best interpretation

of the sta tute, but whether

it repre sents
a reasonable one.”); see also Barnhart v. Thomas , 124 S.Ct. at 382. In this instance, we conclude tha t the Sec re tary’s interpretation

of the sta

tute is i mmin ently reasona ble. As discussed above, transition

payments pursuant to subsection (h) could rationa lly be considered pay

ments under subsection (b), because they

are contin gent upon the recipients signingNo. 03-3731 Fullenkamp, et al., v. Veneman 13

contracts authorized under subsection (b) . Fu rthermore, cappingthe transition pa yme nts along with the monthly pay ments creates a consistency throughout the program and ensures that the cap has a meaningf ul role in the statute.

CONCLUSION

For the reasons set

out above, we find that

the Secretary ’s constructionof the statute was permissible, and we therefore AFFI RM the judgment of the district court in favor of the defenda nt.