The Honorable Nanette K. Laughrey, United States District 1

Judge for the Eastern and Western Districts of Missouri, sitting

by designation.

 

No. 96-3285ND

 

Darvin R. Lane; Dwight Lane, *

*

Appellants, *

*

v. * Appeal from the United States

* District Court for the

United States Department of * District of North Dakota

Agriculture; Daniel Glickman, *

Secretary of the U.S. Depart- *

ment of Agriculture; National *

Appeals Division of the *

USDA, also known as National *

Appeals Staff of the USDA; *

Norman G. Cooper, Director *

of the National Appeals *

Division of the U.S. Department *

of Agriculture; Office of *

General Counsel USDA; James *

Gilliand, General Counsel of *

the U.S. Department of Agricul- *

ture Consolidated Farm Service *

Agency; Grant Buntrock, acting *

Adminisrator of the Consoli- *

dated Farm Service Agency of *

the U.S. Department of *

Agriculture, *

 *

Appellees. *

 

Submitted: March 10, 1997

 Filed: July 14, 1997 

 

Before WOLLMAN and BEAM, Circuit Judges, and LAUGHREY, District Judge.

1

 
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LAUGHREY, District Judge.

This is an appeal from the District Court’s order that Plaintiffs,

Darvin and Dwight Lane (“Lanes”), are entitled to recover their attorney

fees from the United States Department of Agriculture (“Agency”) pursuant

to the Equal Access to Justice Act (“EAJA”), 5 U.S.C. § 504. We affirm in

part, reverse in part, and remand for further proceedings.

The Lanes are brothers who borrowed money through the Farmers Home

Administration (“FmHA”). The FmHA denied them delinquent farmer loan

servicing and the Lanes appealed to the National Appeals Division (“NAD”).

The Lanes won the appeal and then sought their attorney fees under the

EAJA, which provides that a United States agency which conducts an

adversary adjudication must pay the fees and other expenses incurred by the

prevailing party, unless the agency’s position is substantially justified

or there are special circumstances that make such an award unjust. 5

U.S.C. § 504(a)(1). An “adversary adjudication” is defined in relevant

part as an adjudication under § 554 of the Administrative Procedure Act

(“APA”), so long as the government is represented by counsel or otherwise.

5 U.S.C. § 504(b)(1)(C). The APA § 554 applies to all adjudications

“required by statute to be determined on the record after opportunity for

an agency hearing.” 5 U.S.C. § 554 (a).

The NAD hearing officer denied the Lanes’ EAJA applications, finding

that NAD proceedings are not under § 554 of the APA and, therefore, the

EAJA did not apply. The hearing officer did not consider the merits of the

application for fees because he found the EAJA inapplicable. The Lanes

sought judicial review of the agency ruling. The district court granted

the Lanes’ Motions for Summary Judgment, finding that NAD proceedings are

under § 554 of the APA, the EAJA did apply and the Lanes were entitled to

recover 
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their fees and other expenses because the NAD hearing officer did not make

a finding that the government’s position was substantially justified. The

district court’s order granting summary judgment is reviewed de novo.

Donaho v. FMC Corp., 74 F.3d 894, 897 (8th Cir. 1996)(citing LeBus v.

Northwestern Mut. Life Ins. Co., 55 F.3d 1374, 1376 (8th Cir. 1995)).

We find that the EAJA is under § 554 of the APA because all three

prerequisites for coverage have been satisfied. NAD proceedings are: 1)

adjudications; 2)there is an opportunity for a hearing; and 3) the hearing

must be on the record. We reject the agency’s argument that the NAD

statute is not under § 554 of the APA but rather is a separate,

comprehensive statutory scheme which supersedes § 554 of the APA. The APA

cannot be superseded by a subsequent statute “except to the extent that it

does so expressly.” 5 U.S.C. § 559. There is no express language in the

NAD statute modifying or superseding the APA. Finally, on remand, the NAD

hearing officer will be permitted to consider the merits of the Lanes’

application for EAJA fees. The agency’s failure to consider the merits of

the application was because of its finding that the EAJA did not apply to

NAD proceedings. The absence of a finding on the agency’s justification

for its position does not automatically entitle the Lanes to recover their

attorney’s fees.

A. APPLICABILITY OF THE EAJA TO NAD PROCEEDINGS

For the EAJA to be applicable to NAD proceedings, the Lanes must

establish that a NAD hearing is an adjudication under § 554 of the APA “in

which the position of the United States is represented by counsel or

otherwise.” 5 U.S.C. § 504(b)(1)(C)(I). An adjudication is under the APA

if it is governed by § 554 of the APA. Ardestani v. I.N.S., 502 U.S. 129,

135, 112 S. Ct. 515, 519, 116 L.Ed.2d 496 (1991). See also, St. Louis Fuel

& Supply Co., Inc. v. F.E.R.C., 890 F.2d 446, 450-51 (D.C. Cir. 1989). The

question, then, is whether NAD proceedings are governed by § 554 of the

APA.

The APA § 554 states that it applies to all adjudications “required

by statute to be determined on the record after opportunity for an agency
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hearing.” 5 U.S.C. § 554(a). An adjudication is defined as an “agency

process for the formulation of an order.” 5 U.S.C. § 551(7). The review

of agency determinations by NAD clearly meets the definition of an

adjudication. There is a procedure for hearing facts in dispute, after

which the hearing officer or Director must issue a determination. 7 U.S.C.

§ 6997. The NAD statute also meets the APA § 554 requirement that there

be an opportunity for a hearing. Such a hearing is mandatory once

requested by a participant. 7 U.S.C. § 6997(b). See, Smedberg Mach. &

Tool, Inc. v. Donovan, 730 F.2d 1089, 1092 (7th Cir. 1984).

The only remaining requirement is that NAD proceedings must be on the

record. The NAD statute does not expressly require the hearing to be on

the record; nonetheless, Congress’ intent is clear. “Although Section 554

specifies that the governing statute must satisfy the ‘on the record’

requirement, those three magic words need not appear for a court to

determine that formal hearings are required.” City of West Chicago, Ill.

v. U.S. Nuclear Regulatory Comm’n, 701 F.2d 632, 641 (7th Cir. 1983).

Congress need only “clearly indicate its intent to trigger the formal, onthe-record hearing provisions of the APA.” Id. See also, Moore v.

Madigan, 990 F.2d 375, 378 (8th Cir. 1993), cert. denied, 510 U.S. 823

(1993). 
-5-

The NAD statute provides that a participant who appeals an adverse

decision shall be given an evidentiary hearing. 7 U.S.C. § 6996(a). The

evidentiary hearing consists of a procedure in which the hearing officer

has the power to administer oaths and to subpoena witnesses and evidence.

7 U.S.C. § 6997(a)(2). The hearing officer and outside parties are

prohibited from ex parte communications. 7 U.S.C. § 6997(a)(2)(A)(B). The

hearing officer is not bound by prior factual findings. 7 U.S.C. §

6997(c)(2). The appellant carries the burden of proving that the agency’s

decision was erroneous, 7 U.S.C. § 6997(c)(4), and the hearing officer must

leave the record open for additional information in response to new facts

and evidence presented at the hearing. 7 U.S.C. § 6997(c)(3). The

appellant or the agency may request that the Director review the hearing

officer’s determination. 7 U.S.C. § 6998(a). The Director’s review is

based on the case record (all material related to the adverse decision),

7 U.S.C. § 6991(4)), the record from the evidentiary hearing under 7 U.S.C.

§ 6997 and any other arguments or evidence the Director chooses to accept.

7 U.S.C. § 6998(b). Judicial review is available upon issuance of a final

determination. 7 U.S.C. § 6999. 

The repeated references to the record in the NAD statute and its

provision for trial-type procedures make it clear that Congress intended

for NAD proceedings to be governed by § 554 of the APA. Furthermore, the

government admits that NAD proceedings are “on the record,” stating, “We

do not dispute that . . . 7 U.S.C. §§ 6996-6998 required the hearing

officer’s decisions to be on the record.” (Gov’t. Br. at 12). 

The agency argues that even if NAD proceedings appear to meet the

coverage requirements of the APA, it is not “under” the APA but rather

supersedes it. The agency claims that the NAD statutes are a separate,

comprehensive statutory scheme that contain express 
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procedures for conducting hearings. In essence, the agency is arguing that

the NAD statutes have amended by implication the provision that makes § 554

of the APA applicable to all adjudications required by statute to be

determined on the record after an opportunity for an agency hearing. 

The primary flaw in the agency’s argument is that the APA

specifically states that a “subsequent statute may not be held to supersede

or modify this subchapter . . . except to the extent that it does so

expressly.” 5 U.S.C. § 559. There is nothing in the NAD statutes which

expressly states that the APA is inapplicable. By adopting § 559, Congress

made it clear that the APA would apply unless there was some expression by

Congress that the APA was being superseded. This is a logical approach

given the variety of issues and forums covered by the APA and the

possibility that Congress would inadvertently adopt a provision that

conflicted with the APA or repeat a provision contained in the APA. 

We find unpersuasive the agency’s reliance on Marcello v. Bonds, 349

U.S. 302, 75 S. Ct. 757, 99 L.Ed. 1107 (1955), in which the Supreme Court

held that the APA did not apply to Immigration and Naturalization Service

deportation hearings. Congress, in the Immigration and Nationality Act

(“INA”), had elaborately adapted the APA to the deportation process,

creating a complete and distinct set of procedures. Marcello, 349 U.S. at

310. The NAD statutes contain some variations on the APA but those

variations deal primarily with subjects not contained in the APA. Nor are

there direct conflicts between the APA and the NAD statutes. Compare 5

U.S.C. §§ 554-557 with 7 U.S.C. §§ 6996-6998. There is one section of the

NAD statutes which refers to § 551 of the APA and incorporates by reference

the definition of “ex parte communication” contained in the APA. 7 U.S.C.

§ 6997(a)(2)(A). 
-7-

Appellant contends that this reference to the APA would not be necessary

if the NAD proceedings were under the APA. These minor variations,

however, do not approach the major adaptions contained in the INA. Rather,

they highlight the confusion that would occur, but for § 559 which forbids

amendment of the APA by implication. 

More importantly, the INA states that the procedures described in the

Act “shall be the sole and exclusive procedure for determining the

deportability of an alien under this section.” Marcello, 349 U.S. at 309.

The petitioner in Marcello argued that this was not a sufficient statement

to show that Congress intended the INA to supersede the APA, because

Congress simultaneously repealed an earlier statute which stated that the

APA did not apply to deportation hearings. Since there was no longer an

express provision that the APA did not apply, the deportee in Marcello

argued that the APA had to be followed. The Court acknowledged that an

exemption from the APA is not lightly presumed, but also found that: 1) the

same Congressmen who sponsored the APA had sponsored the INA; 2) there were

significant differences between the APA and the INA; and 3) Congress

probably thought it unnecessary to include a statement that the INA

superseded the APA because the INA stated that it was the “sole and

exclusive procedure for determining the deportability of an alien under

this section.” The Court refused to require Congress “to employ magical

passwords in order to effectuate an exemption from the Administrative

Procedure Act . . ..” Marcello, 349 U.S. at 310. The NAD statutes do not

have a similar legislative history. There has never been an expression by

Congress that the APA does not apply. There is no provision in the NAD

statutes that it is the sole and exclusive procedure for conducting

hearings. There is not an extensive adaptation of the APA, only minor

variations. The requirements of § 559 clearly have not been met. 
-8-

Ardestani v. I.N.S., 502 U.S. 129 (1991), is similarly

distinguishable. In that case, the Supreme Court held that the EAJA is not

applicable to INA deportation hearings because the INA is not under § 554

of the APA. This conclusion is based on the Court’s earlier finding in

Marcello that Congress had expressly provided that INA proceedings would

not be under § 554 of the APA. In contrast, we have found that proceedings

before the NAD are under § 554 of the APA. The only remaining question is

whether the district judge was correct in remanding the case to NAD for the

sole purpose of determining the amount of fees owed to the Lanes.

B. ISSUE ON REMAND

The EAJA states that “[a]n agency that conducts an adversary

adjudication shall award, to a prevailing party other than the United

States, fees and other expenses incurred by that party in connection with

that proceeding, unless the adjudicative officer of the agency finds that

the position of the agency was substantially justified or that special

circumstances make an award unjust.” 5 U.S.C. § 504(a)(1).

The district court interpreted this section to mean that the Lanes

were entitled to their fees because the NAD hearing officer did not make

an affirmative finding that the agency’s position was substantially

justified. The record is clear, however, that the Lanes’ applications for

fees were never submitted to the hearing officer for review. Instead, the

Lanes were notified by a representative of the agency that the EAJA did not

apply to NAD hearings and for that reason their fees could not be

recovered. 

Relying on 5 U.S.C. § 706(2)(A), the district court found that the

refusal of the agency to consider the Lanes’ applications was 
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not justified by law and, therefore, the court need not give deference to

the agency’s finding. The only finding made by the agency, however, was

that the EAJA did not apply. The agency’s adjudicative officer has never

reviewed the merits of the Lanes’ applications for fees. We find that the

agency’s adjudicative officer must have an opportunity to consider the

merits of the application prior to judicial review. 

To hold otherwise would put the NAD in an untenable position. Once

the NAD personnel concluded that the EAJA did not apply, the adjudicative

officer lacked ostensible authority to award EAJA fees. The law is clear

that an adjudicative officer cannot decide issues which are not properly

before the officer. See, Fidelity Constr. Co. v. United States, 700 F.2d

1379, 1386 (Fed. Cir. 1983), cert. denied, 464 U.S. 826, 104 S. Ct. 97, 78

L.Ed.2d 103 (the board of contract appeals had no authority to award

attorney fees under the EAJA where its proceedings were not subject to 5

U.S.C. § 554). If the adjudicative officer had rendered a decision on the

attorney fees, he would have violated this principle based on the

understanding of the agency at that time. Given that the question of

jurisdiction was novel, the agency did not have an obligation to make an

advisory decision on the propriety of the Lanes’ application.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEAL, EIGHTH CIRCUIT.