1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2004 FED App. 0294P (6th Cir.)

File Name: 04a0294p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

MICHAEL FULLENKAMP, et al.,

Plaintiffs-Appellants,

v.

ANN M. VENEMAN, in her

capacity as Secretary of the

United States Department of

Agriculture,

Defendant-Appellee.

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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 

Before: DAUGHTREY, GIBBONS, and COOK, Circuit

Judges.

_________________

COUNSEL

ARGUED: Benjamin F. Yale, BENJAMIN F. YALE &

ASSOC. CO., Waynesfield, Ohio, for Appellants. Jeffrey

2 Fullenkamp, et al., v. Veneman No. 03-3731

Clair, UNITED STATES DEPARTMENT OF JUSTICE,

Washington, D.C., for Appellee. ON BRIEF: Benjamin F.

Yale, Ryan K. Miltner, Kristine H. Reed, BENJAMIN F.

YALE & ASSOC. CO., Waynesfield, Ohio, for Appellants.

Jeffrey Clair, UNITED STATES DEPARTMENT OF

JUSTICE, Washington, D.C., for Appellee. 

_________________

OPINION

_________________

MARTHA CRAIG DAUGHTREY, Circuit Judge. The

plaintiffs in this case are dairy farmers who annually produce

over 2.4 million pounds of milk. They challenge the

regulations promulgated by the defendant Secretary of

Agriculture to implement the federal Milk Income Loss

Contract Program, 7 U.S.C. § 7982. When a producer signs

a contract to join the program, it begins receiving monthly

payments on the eligible milk it produces and, under the

statute’s transition rule, a lump-sum payment for eligible milk

it produced between December 1, 2001, and the month before

the contract was signed. The statute includes a limitation

restricting the quantity of milk upon which payment can be

made each fiscal year to 2.4 million pounds. The Department

of Agriculture regulations under attack here apply the

limitation to payments under the transition rule as well as to

the monthly payments. The district court found that the

statute did not unambiguously forbid the Secretary’s

interpretation of the statute and, moreover, that the

Secretary’s interpretationwasreasonable. The court therefore

denied the plaintiffs’ motion for injunctive relief and granted

the Secretary’s motion to dismiss.

For the reasons set out below, we affirm.
No. 03-3731 Fullenkamp, et al., v. Veneman 3

FACTUAL AND PROCEDURAL BACKGROUND

On May 13, 2002, President Bush 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 dairy farmers that provides for

direct federal payments to milk producers when a specific

statutorily-prescribed price index falls below a certain level.

See id. at § 1502, codified at 7 U.S.C. § 7982. In order to

receive payments through the program, dairy farmers must

enter into a contract with the Secretary of Agriculture. Once

a dairy farmer has entered into a contract, the farmer is

eligible for two categories of payments: (1) monthly

payments on eligible production beginning the month the

farmer enters into the contract and ending September 30,

2005,see 7 U.S.C. § 7982(g); and (2) a retroactive, lump-sum

payment for production during the “transition” period

between December 2001 and the month in which the farmer

enters the contract. See § 7982(h). The statute does not

specify a month in which dairy farmers must enter contracts,

just that the Secretary must offer such contracts from July

2002 until September 2005. See 7 U.S.C. § 7982(f). 

Section 7982 reads, in pertinent part:

(b) Payments. The Secretary shall offer to enter into

contracts with producers on a dairy farm located in a

participating State under which the producers receive

payments on eligible production.

* * * * *

(d) Payment quantity.

(1) In general. Subject to paragraph (2), the payment

quantity for a porducer during the applicable month

under this section shall be equal to the quantity of

eligible production marketed by the producer during the

month.

4 Fullenkamp, et al., v. Veneman No. 03-3731

(2) Limitation. The payment quantity for all

producers on a single dairy operation during the months

of the applicable fiscal year for which the producers

receive payments under subsection (b) shall not exceed

2,400,000 pounds. . . .

* * * * *

(f) Signup. The Secretary shall offer to enter into

contracts under this section during the period beginning

on the date that is 60 days after the date of enactment of

this Act [May 13, 2002], and ending on September 30,

2005. 

* * * * *

(h) Transition rule. In addition to any payment that is

otherwise available under thissection, if the producers on

a dairy farm enter into a contract under this section, the

Secretary shall make a payment in accordance with the

formula specified in subsection ( c) on the quantity of

eligible production of the producer marketed during the

period beginning on December 1, 2001, and ending on

the last day of the month preceding the month the

producers on the dairy farm entered into the contract.

In October 2002, the Secretary of Agriculture issued

regulations implementing the dairy assistance program.

Under the regulations, the cap in § 7982(d)(2) limiting

payment quantity to 2.4 million pounds of milk per year was

made applicable to transition period payments under

§ 7982(h), as well as to the monthly payments for milk

produced after a contract has been signed. See 7 C.F.R.

§§ 1430.207(b). In response, the plaintiffs filed this action,

seeking a 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

marketed during the transition period, not just 2.4 million

pounds a year. They requested an injunction compelling the
No. 03-3731 Fullenkamp, et al., v. Veneman 5

1

The defendant’s motion was styled a motion to dismiss under Rule

12(b)(1) of the Federal Rules of Civil Procedure or, in the alternative, for

summary judgment under Rule 56. The district court said it was granting

the defendant’s motion to dismiss, but also made clear that it was

considering the case on the merits and not dismissing based on subject

matter jurisdiction. It therefore appears that it was either a dismissal for

failure to state a claim or a grant of summary judgment rather than a

dismissal for lack of subject matter jurisdiction. Even if the dismissal

were considered a dismissal for lack of subject matter jurisdiction, we can

affirm a district court’s judgment on any grounds supported by the record.

See Peterson Novelties, Inc. v. City of Berkley, 305 F.3d 386, 394 (6th Cir.

2002).

2

Chevron deference is appropriate “when it appears that Congress

delegated authority to the agency generally to make rules carrying the

force of law, and that the agency interpretation claiming deference was

promulgated in the exercise of that authority.” United States v. Mead

Corp., 533 U.S. 218, 226-27 (2001). In 7 U.S.C. § 7991(c), Congress

authorized the Secretary and Commodity Credit Corporation to

Secretary to modify the regulations at 7 C.F.R. § 1430 to

allow dairy producers uncapped transition payments. 

The district court denied the plaintiffs’ motion for

injunctive relief and granted the Secretary’s motion to dismiss

the case.

1

 With respect to the cap on transition payments, the

court found that § 7982 does not unambiguously forbid the

regulations from making transition payments subject to the

cap and that the Secretary’s regulation was permissible and

reasonable. Applying Chevron deference, the court upheld

the Secretary’s determination that the cap applies to transition

payments as well as prospective payments under the contract.

See Chevron, U.S.A., Inc. v. Natural 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, governs this

case.

2

 Under Chevron, in reviewing an agency’s

6 Fullenkamp, et al., v. Veneman No. 03-3731

promulgate appropriate regulations necessary to implement the chapter.

It specified that those regulations were to be made without regard to

notice and comment rule-making procedures. The regulations at issue in

this case, final regulations made without prior notice and comment, were

promulgated under the authority given to the Secretary in § 7991(c). See

67 Fed. Reg. 64454 (Oct. 18, 2002).

interpretation of a statute it administers, we must first ask

“whether Congress has directly spoken to the precise question

at issue.” Id. at 842. If, after “employing traditional tools of

statutory construction,” id. at 843 n.9, we determine that

Congress’s intent is clear, then “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.

However, “if the statute is silent or ambiguous with respect to

the specific issue, the question for the court is whether the

agency’s answer is based on a permissible construction of the

statute.” Id. at 843; see also Barnhart v. Thomas, 124 S.Ct.

376, 380 (2003) (applying Chevron). 

II. The Application of the Cap to Transition Payments

Both the plaintiffs and the defendant in this case argue that

Congress spoke directly to the issue of whether the payment

cap in § 7982(d)(2) applies to transition payments.

Obviously, however, they do not agree on what Congress

said. The plaintiffs argue that Congress clearly intended that

the cap not apply to transition payments and that the

Secretary’s regulations therefore violate the statute. The

Secretary, on the other hand, contends that Congress clearly

intended that all payments under § 7982 would be limited by

the cap and that the Department’s regulations are consistent

with the statute. Both parties argue that the plain language of

the statute, legislative history, and the structure and purpose

of the statute support their positions.
No. 03-3731 Fullenkamp, et al., v. Veneman 7

3

Subsection (c), entitled “amount,” provides as follows:

Payments to a producer under this section shall be

calculated by multiplying (as determined by the Secretary) – 

(1) the payment quantity for the producer during the

applicable month established under subsection (d);

(2) the amount equal to – 

(A) $16.94 per hundredweight; less

(B) the Class I milk price per hundredweight in Boston

under the applicable Federal milk marketing order; by

(3) 45 percent. 

1. Statutory Language

In statutory construction cases, “[t]he first step ‘is to

determine whether the language at issue has a plain and

unambiguous meaning with regard to the particular 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 unambiguously requires the

Secretary to make transition payments without limitation.

They point out that subsection (h) requires payment on

eligible production and note that Congress did not limit the

definition of “eligible production” in either subsection (a) or

(h). They argue that if Congress had intended the cap to

apply to transitional payments, it could have written the

statute to say so in subsection (h) itself. As the Secretary

points out, however, subsection (h) provides that payments

shall be made according to the formula in subsection (c),3

which incorporates the payment quantity in subsection (d),

the subsection that includes the payment cap. Thus,

according to this reading of the statute, the fact that

subsection (h) itself does not include a limitation on quantity

is not determinative because the payment formula for which

it provides incorporates the payment cap in subsection (d)(2).

By its terms, however, the payment cap in subsection (d)(2)

applies only to “payments under subsection (b).” Thus, the

central question in this case is whether transition payments

are “payments under subsection (b),” the section of the statute

8 Fullenkamp, et al., v. Veneman No. 03-3731

4

Subsection (g), entitled “duration of contract,” provides as follows:

(1) In general. Except as provided in paragraph (2) and

subsection (h), any contract entered into by producers on a

dairy farm under this section shall cover eligible production

marketed by the producers on the dairy farm during the

period starting with the first day of [the] month the

producers on the dairy farm enter into the contract and

that orders the Secretary to offer to enter into contracts with

dairy farmers under which the farmers will receive payment

for eligible milk production. The plaintiffs assert that

transition payments are not payments under subsection (b).

They maintain that § 7982 creates two similar but distinct

programs that cover farmers during different periods – one,

described in subsection (e), that covers farmers during the

period after they sign contracts and another, described in

subsection (h), that covers farmers for the period before they

sign contracts – and that “payments under 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 payments renders the

phrase “subsection (b)” superfluous, since, under such an

interpretation, the limitation could have been written to just

read: “payments under this section.” As the plaintiffs point

out, however, citing to Director, Office of Workers’

Compensation Programs, United States Department of Labor

v. Goudy, 777 F.2d 1122, 1127 (6th Cir. 1985), statutes

should be read to give every word and clause effect. Citing

to other canons of statutory interpretation, the plaintiffs also

assert that the statute is remedial and should be construed

liberally in favor of the beneficiaries. 

In response, the Secretary asserts that transition payments

are “payments under subsection (b).” She points out that

dairy farmers receive transitional payments only if they sign

contracts, as authorized in subsection (b). She further notes

that in excepting payments under subsection (h) from the

payments that start on the first day of the month in which the

contract is signed, subsection (g)4contemplates that payments
No. 03-3731 Fullenkamp, et al., v. Veneman 9

ending on September 30, 2005 . . . .

under subsection (h) are payments covered by the contract.

She contends that if Congress had intended to limit the cap to

the monthly contract payments, it would have made more

sense to have the limit apply to “payments under subsections

(e)-(g),” the subsections dealing with the monthly payments,

rather than to “payments under subsection (b),” the subsection

discussing the contracts in general. Furthermore, the

Secretary questions whether the canons of statutory

interpretation cited by the plaintiffs are relevant here, arguing

that the program is not remedial and that the cap is an

eligibility limitation rather than an exception. Finally, she

contends that nothing in the structure or purpose of the statute

suggests that Congress intended to create two separate

programs orto distinguish between the retroactive transitional

payments and the prospective monthly payments.

Focusing on the statutory language, we conclude that it is

unclear whether the phrase “payments under subsection (b)”

includes transition payments or not. As the defendant points

out, transition payments are received only if the dairy farmers

enter into contracts and, therefore, such payments can be seen

to be payments under subsection (b). At the same time, as

noted by the plaintiffs, this interpretation does render the

phrase “subsection (b)” superfluous. Furthermore, when

subsection (e) refers to “a payment under a contract under this

section,” it is referring to the monthly payments, thereby

implying that transition payments are not considered

payments under § 7982 contracts. In short, we conclude that

although Congress may have had an intent regarding whether

transition payments were “under subsection (b) ,” that intent

is not stated clearly in the language of the statute.

2. Legislative History, Structure, and Purpose

Neither the legislative history of the statute nor the parties’

explanations of how their interpretations further the purpose

10 Fullenkamp, et al., v. Veneman No. 03-3731

of the statute sufficiently clarify the ambiguity in the statutory

language. See Gen. Dynamics Land Sys., Inc. v. Cline, 124

S.Ct. 1236, 1248 (2004) (looking to text, structure, purpose,

and history of Act to find it unambiguous); 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, but that the structure and language of the

statute as a whole can aid in interpreting the plain meaning

and that legislative history can be looked to if the statutory

language is unclear). 

Both parties are able to explain how their position fits into

the overall structure of the statute and furthers the statute’s

purpose. The Secretary asserts that her interpretation of the

statute gives the cap a meaningful role in the statute’s

operation, whereas the plaintiffs’ interpretation would largely

nullify the cap because large producers would be able to

circumvent the cap by waiting until September 2005 to sign

a contract and then receive “transitional payments” for the

entire period between December 2001 and August 2005. 

The plaintiffs object to this argument and to the district

court’s acceptance of it, asserting that the district court and

Secretary have usurped the role of Congress and injected their

own political viewpoints into a carefully-crafted

congressional compromise. Furthermore, they argue,

Congress intended for large producers to be able to avoid the

production caps. They assert that the overall purpose of the

program was to assist dairy farmers and that Congress wanted

to cover all eligible production, but that it carefully

constructed the program in a way that would force large

farmers to wait until the end of the covered period if they

wanted to receive payments on all their eligible production in

order to refrain from encouraging large farmers to further

increase production and in order to push costs of the program

to later fiscal years. 

Similarly, both parties cite legislative history that supports

their positions. The plaintiffs claim that the transition
No. 03-3731 Fullenkamp, et al., v. Veneman 11

payments in § 7982 serve as a replacement for the Northeast

Dairy Compact, which did not have production caps. As the

Secretary points out, however, the Northeast Dairy Compact

was not a federal assistance program but an agreement among

Northeastern states to regulate prices. See Organic Cow,

LLC v. Ctr. for New England Dairy Compact Research, 335

F.3d 66, 67-68 (2d Cir. 2003) (describing the Compact). As

the Secretary further notes, previous programs supporting

dairy farmers included payment caps or gave discretion to the

Secretary, who then capped 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 million to

provide assistance to dairy producers “in a manner

determined by the Secretary”); Dairy Market Loss Assistance

Program, 64 Fed. Reg. 24933 (May 10, 1999) (capping

payment to 2.6 million pounds). Similarly, both milk

assistance programs that were in the Farm Bill before it went

to conference included caps. See H.R. 2646, 107th Cong.

§ 132 (2002) (as amended and passed by Senate) (capping

payment at lesser of average quantity of milk in which farmer

had interest during each of a specified three-year period or 8

million pounds). In addition, the conference report does not

mention a difference between monthly and transition

payments with regard to the payment cap, simply noting, in

its description of the program, that: “Producers, on an

operation-by-operation basis, may receive payments on no

more than 2.4 million pounds of milk marketed per year.

Retroactive payments will be made covering market losses

due to low prices since December 1, 2001.” H.R. Conf. Rep.

No. 107-424 at 446 (2002), reprinted in 2002 U.S.C.C.A.N.

141, 171. 

At the same time, the plaintiffs point out that some

members of Congress, particularly Senators Leahy and

Jeffords, indicated that they understood that the cap in § 7982

was to be applied to the monthly payments and not to

transition payments. Senator Leahy, for example, in

discussing the Farm Bill’s conference report, noted that:

12 Fullenkamp, et al., v. Veneman No. 03-3731

[T]he prospective “monthly” program which provides

monthly payments . . . has a 2.4 million pound cap as set

forth in (d). . . . This “limitations” language was inserted

out of a concern that an uncapped program would lead to

significant increases in production of milk. Also, there

was a concern that farmers would reorganize in the future

just to get higher payments under the national program.

These concerns do not apply to the benefits paid out

under subsection (h) because farmers would need time

machines to go back in the past and increase their

production or to change their legal structure

retrospectively. Indeed, the amount of production

covered by (h) is the amount of “eligible production” as

defined in section [7982(a)(2)].

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

Leahy).

In sum, looking at the statutory language, legislative

history, and overall structure and purpose of the statute, we

find the intention of Congress with regard to the application

of the subsection (d)(2) cap to transition payments unclear.

3. Reasonableness

Under Chevron, if Congress has not spoken directly to the

question at issue, the Secretary’s interpretation of the statute

will be upheld so long as it is reasonable. See Smiley v.

Citibank (S.D), N.A., 517 U.S. 735, 744-45 (1996) (“Since we

have concluded that the Comptroller's regulation deserves

deference, the question before us is not whether it represents

the best interpretation of the statute, but whether it represents

a reasonable one.”); see also Barnhart v. Thomas, 124 S.Ct.

at 382. In this instance, we conclude that the Secretary’s

interpretation of the statute is imminently reasonable. As

discussed above, transition payments pursuant to subsection

(h) could rationally be considered payments under subsection

(b), because they are contingent upon the recipients signing
No. 03-3731 Fullenkamp, et al., v. Veneman 13

contracts authorized under subsection (b). Furthermore,

capping the transition payments along with the monthly

payments creates a consistency throughout the program and

ensures that the cap has a meaningful role in the statute. 

CONCLUSION

For the reasons set out above, we find that the Secretary’s

construction of the statute was permissible, and we therefore

AFFIRM the judgment of the district court in favor of the

defendant.