IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 91-1384

DCP FARMS, ET AL.,

Plaintiffs-Appellees,

versus

CLAYTON YEUTTER, SECRETARY OF

AGRICULTURE, AND U.S. DEPARTMENT

OF AGRICULTURE, AGRICULTURAL

STABILIZATION & CONSERVATION SERVICE,

Defendants-Appellants.

Appeal from the United States District Court

for the Northern District of Mississippi

Before REAVLEY, HIGGINBOTHAM, and DeMOSS, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

This appeal raises the question of whether the "mere

appearance of bias or pressure" standard adopted in Pillsbury Co.

v. FTC

, 354 F.2d 952 (5th Cir. 1966) applies to claims of improper

congressional interference with an administrative determination of

eligibility for farm subsidies. We find that contact between a

congressman and the U.S. Department of Agri culture involving a

pending proceeding that was neither quasi-judicial nor judicial is

not governed by the Pillsbury standard. We hold that in such

proceedings congressional contact does not go beyond the pale

unless it causes the administrator to consider extraneous factors2

in reaching his decision. We conclude then that remaining

administrative procedures were not tainted and the district court

abused its discretion by reviewing the agency decision when these

administrative remedies were not exhausted. Judicial intervention

in the agency's decision-making process before DCP Farms exhausted

its administrative remedies is unjustified without a clear showing

of futility. We reverse the district court's grant of injunctive

relief and remand the case with instructions

to dismiss.

I.

Farmers s ubmit annual farm operating plans, which serve as

subsi dy applications, to the county Agricultural Stabilization &

Conservation Service office. A county committee of local farmers

elected by their peers makes an initial determination of

eligibility and amount of subsidy. Appeal is to a state committee

of farmers appointed by the Secretary. Despite this delegation of

decision-making responsibility to the state and local committees,

the USDA expressly reserves the right to reverse or modify any

determination made by a county or state committee or by the Deputy

Administrator. 7 C.F.R. § 1497.2(d). Any producer or participant

dissatisfied with a decision at any level may request

reconsideration. E sch v. Yeutter

, 876 F.2d 976, 987 (D.C. Cir.

1989). If the USDA decides to review a determination made at the

state or county level, a Deputy Administrator investigates the case

and makes an initial determination. If the Deputy Administrator's3

initial determination is adverse a farmer may appeal to a USDA

hearing officer.

DCP Farms are three joint venture farms with cotton, rice, and

other crops in Tunica and Coahoma counties, Mississippi. This case

arises fr om attempts by the Department of Agriculture to enforce

the statutory limit of $50,000 per "person" in federal crop

subsidies against DCP Farms. 7 U.S.C. § 1308. The three farms,

controlled by two families, had created 51 irrevocabl e trusts to

maximize the number of "persons" eligible to receive farm subsidy

payments. DCP Farms were slated to receive $1.4 million in

subsidies for the 1989 crop year.

After the county committee approved DCP Farms' reques t ed

subsidy for the 1989 crop year, the USDA decided to review DCP

Farms' eligib ility. In September 1989, the USDA's Office of

Inspector General released a report of abuses of the farm subsidy

program. The report highlighted DCP Farms as an example of

egregious violations of the $50,000 per person limit. This report

sparked considerable publicity and in late 1989, USDA officials met

with Congressional staff involved in agricultural affairs to

discuss the issues raised in the OIG report. John Campbell, Deputy

Undersecretary of Agriculture for Commodity Programs, and William

E. Penn, Assistant Deputy Adminis trator for State and County

Operations of ASCS, attended the meeting. Parks Shackelford, the

key staff aide on agricultural issues for Congressman Huckaby, the

chairman of the Subcommittee on Cotton, Rice, and Sugar was an

active participant. DCP Farms were specifically discussed.4

On December 6, 1989, Chairman Huckaby wrote to Agricu lture

Secretary Yeutter expressing concern about "a numbe r of recent

press items reporting abuses of the new farm program payment

eligibility regulations." The letter cites DCP Farms as described

in the OIG report as an example of continued abuse of the statutory

limit on payments. The most pointed part of the letter states

As the prin cipal sponsor of the legislation which

established the new payment eligibility requirements, I

feel strongly that the [DCP Farms] operation violates

both the spirit and l etter of the law. It was clearly

not the intent of Congress that such operation s would

qualify for such vast sums; if th is operation does

receive t he reported $1.4 million, it will only happen

because USDA has failed to implement and enforce the law

as intended by Congress.

Congr essman Huckaby urged the Secretary "to carefully review the

Tunica County, Mississippi case and any other similar operations."

He was particularly concerned about the treatment of 51 irrevocable

trusts as "persons" in light of previous assurances from the USDA

that it need not codify the treatment of irrevocable trusts and

estates, b ut could leave it to the Secretary to regulate.

Congressman Huckaby indicated that if the USDA allowed DCP Farms to

treat all 51 irrevocable trusts as "persons," he would introduce

legislation to revise the definition of "persons" to exclude trusts

entirely.

In response to Cong ressman Huckaby's letter, Penn drafted a

letter which was signed by Campbell on behalf of Under Secretary of

Agric u lture Richard Crowder. The letter informed Congressman

Huckaby that the DCP Farms case was under administrative review and

assured him that "the Department of Agriculture will take a very5

aggressive position in dealing with this case." The letter did not

suggest that the USDA was committed to a specific o utcome. In

fact, the Secretary's letter indicates a likelihood that DCP Farms'

organization would be allowed under an equitable re organization

rule allowing farmers to reorganize their holdings to prevent a

reduction in payments.

In April 1990, the Deputy Administrat or notified the

Mississippi ASCS office that the initial determination on DCP Farms

for 1990 would be made at the national level along with the

agency's initial determination of DCP Farms' eligibility under the

1989 plan. On June 1, 1990, the Deputy Administrator issued three

lette r opinions concluding that DCP Farms had adopted schemes or

devices to evade the payment limitation p rovisions and therefore

was ineligible to receive any subsidy payments for the 1989, 1990,

or 1991 crop years.

DCP Farms appealed from the initial determination and

requested a hearing, which was set for December 12, 1990. Before

the hearing, however, DCP Farms obtained documents disclosing the

USDA meeting with congressional s taffers and the letter from

Chairman Huckaby. DCP Farms petitioned the Deputy Administrator to

disqualify all employees and officials of the national office from

further involvement in the administrative proceedings. The

petition was denied.

On December 12, 1990, DCP Farms sued for declaratory and

injunctive relief alleging that improper congressional interference

denied them due process and that USDA's conduct was arbitrary,6

capricious an d an abuse of discretion under the Administrative

Procedure Act. The district court granted DCP Farms' request for

permanent injunctive relief. The USDA appeals.

II.

DCP Farms' due process claim is based upon this court's

decision in Pillsbury Company v. Federal Trade Commission

, 354 F.2d

952 (5th Cir. 1966). W hile Pillsbury's case was pending before the

FTC, the Subcommittee on Antitrust and Monopoly of t he Senate

Judiciary committee held hearings at which several members of the

Commission and its staff appeared, including the author of the

Commission's final opinion. The committee members questioned the

FTC members at length about their reasoning and were critical of an

earlie r FTC ruling in the case. I d

. at 964. The Federal Trade

Commission eventually found that Pillsbury had violated § 7 of the

Clayton Act.

The Pillsbury court held:

when an investigation "focuses directly and

substantially upon the mental decisional processes of a

Commission in a case which is pending before it

, Congress

is no longer intervening in the agenc y's legislative

function, but rather, in its judicial function. At this

latter point, we become concerned with the right of

private litigants to a fair trial and, equally important,

with their right to the appearance of impartiality, which

cannot be maintained unless those who exercise the

judicial function are free from powerful external

influences."

354 F.2d at 964 (emphasis in original). P illsbury has been

interpreted to invalidate adjudicative agency decisions whenever

congressional contact with an agency creates the mere appearance of

bias or pressure. D .C. Federation of Civil Ass'ns v. Volpe

, 4597

F.2d 1231 (D. C. Cir. 1971). The district court here relied on

Pillsbury to conclude that Congressman Huckaby's letter to the USDA

invalidated the agency's administrative determination by creating

an appearance of bias or pressure. The district court held that

Chairman Huckaby "exerted impermissible influence upon officials at

the national level of the Department of Agriculture in an effort to

dictate the outcome of those proceedings."

We must disagree with the district court's determination that

Pillsbury governs this case. Pillsbury holds that the appearance

of bias caused by congressional interference violates the due

process rights of parties involve d in j udicial or quasi-judicial

agency proceedings. 354 F.2d at 964. S ee D.C. Federation of Civic

Associations v. Volpe

, 459 F.2d 1 231, 1246 (D.C. Cir. 1972),

(declining to apply Pillsbury standard to congressional

interference where the Secretary's action was neither judicial nor

quasi-judicial). P illsbury was a case pending before a quasijudicial body which would render the agency's final decision. In

contrast, the contact here occurred wel l before any proceeding

w hich could be considered judicial or quasi-judicial. This case

would not hav e reached the stage when it could fairly be called

adjudicative or quasi-judicial until the hearing which was

scheduled for December 1990. There was no hearing on the merits of

DCP Farms' application for farm subsidy payments because DCP Farms

abandoned the administrative process for this litigation.

In short, the congressional communication here was not aimed

at the decision-making process of any quasi-judicial body.8

Con gressman Huckaby was concerned about the administration of a

congressionally created program. The dispute between the USDA and

DCP Farms was part of a larger policy debate. Applying P illsbury 's

stringent "mere appearance of bias" s tandard at this juncture of

adminis t rative process would erect no small barrier to

Congressional oversight. It reflects an insular view of these

administrative processes for which we find no warrant. We are

unwilling to so dramatically restrict communications between

Congress and the executive agencies over policy issues. Appearance

of bias is not the standard.

III.

Actual bias is ordinarily required to invalidate decisions by

federal agencies. S ee Dirt, Inc. v. Mobile County Commission

, 739

F.2d 1562 (11th Cir. 1984), ("Although such an appearance of bias

is clearly presen t in this case, the standards governing

administrative proceedings are far more relaxed than those

controlling judicial proceedings."). An administrative decision

will be overt urned only when the hearing officers' mind is

irrevocably closed or there was an actual bias. United States v.

Batson

, 782 F.2d 1307, 1315 (5th Cir. 1986). S ee also FTC v.

Cement Institute , 333 U.S. 683 (1948).

We agree with the D .C. Circuit's conclusion in P eter Kiewit

Sons' Co. v. U.S. Army Corps of Engineers

, 714 F.2d 163 (D.C. Cir.

1983) that the proper standard for evaluat ing congressional

interference with non-judicial decisions of administrative agencies

is whether the communi c ation actually influenced the agency's9

decision. More specifically, the test is "whether 'extraneous

factors intruded into the calculus of consideration' of the

i ndividual decisionmaker." I d

. at 170, quoting D.C. Federation

,

459 F.2d at 1246.

This focus on the intrusion of improper extrane ous factors

into the agency's decision-making process recognizes the political

reality that "members of Congress are requested to, and do in fact,

intrude in varying degrees, in administrative proceedings." S .E.C.

v. Wheeling-Pittsburgh Steel Corp.

, 648 F.2d 118, 126 (3d Cir.

1981) (en banc). It would be unrealistic to require that agencies

turn a deaf ear to comments from members of Congress. The agency's

duty, so long as it is not acting in its quasi-judicial capacity,

is simply to "give congressional comments only as much deference as

they deserve on the merits." Id

.

We are cautious in reading extraneous factors too broadly,

lest they impair agency flexibility in dealing with Congress. In

particular, an agency's patient audience to a member of C ongress

will not by itself constitute the injection of an ext raneous

factor. Nor would a simple plea for more effective enforcement of

a law be the injection of an improper factor. A truly extraneous

factor must take into account "considerations that Congress could

not have intended to make relevant." D .C. Federation

, 459 F.2d at

1247.

Congressional "interference" and "political pressure" are

loaded terms. We need not attempt a portrait of all their sinister

possibilities, even if we were able to do so. We can make plain10

that the force of logic and ideas is not our concern. They carry

their own force and exert the ir own pressure. In this practical

sense they are not extraneous. That a congressman expresses the

view that the law ought not sanction the use of fifty-one

irrevocable trusts to gain $1.4 million in subsidies is not

impermissible political "pressure." It certainly injects no

extraneous factor. We find no due process right in these

preliminary e fforts to persuade the government to grant farm

subsidies sufficient to exclude the political tugs of the different

branches of government, and we see nothing more here. We reject

the holding of the district court that DCP Farms could ignore the

administrative procedure yet available to it and turn to the

consequence of this bypass of remedies.

IV.

The Administrative Procedure Act provides for judicial review

of agency action only where it is "made reviewable by statute" or

is "final agency action." 5 U.S.C. § 704. The deputy

administrator's initial determination of eligibility for farm

subsidy payments is not made reviewable by statute, nor is it the

USDA's final action on DCP Farms application. We review the

district court's ruling concerning exhaustion of administrative

remedies for abuse of discretion. G irard v. Klopfenstein

, 930 F.2d

738, 741 (9th Cir. 1991).

The exhaustion requirement is not absolute, however, and this

court has recognized exceptions. The district court apparently

relied upon two of these exceptions to conclude that immediate11

judicial review of the agency's decision was appropriate. We

conclude that as a matter of law neither exception applies to the

facts of this case. The exceptions to the requirement that

administrative remedies be exhausted apply only in "extraordinary

circumstances." C entral States S.E. and S.W. Areas Pension Fund v.

T.I.M.E.-D.C., Inc.

, 826 F.2d 320, 329 (5th Cir. 1987). The first

is when "the plaintiff contends that the administrative system

itself is unlawful or unconstitutional." P atsy v. Fl orida Int'l

University , 634 F.2d 900, 904 (5th Cir. 1981). This exception is

inapplicable because the challenge here is not to provisions of the

administrative process, but to its alleged subversion.

The second exception to the exhaustion requirement relied upon

by the district court is when the plaintiff demonstrates that "it

would be futi le to comply with the administrative procedures

because it is clear that the claim will be rejected." Patsy , 634

F.2d at 904. We are convinced that DCP Farms has failed as a

matter of law to produce evidence sufficient to support a finding

of futility.

The district court relies upon two facts to support its

conclusion that the USDA process would be futile because the claim

would clearly be rejected. First, the district court cites the

fact that Don Lloyd, the ASCS officer appointed to conduct the

appellate hearing, had reviewed the letter USDA sent in response to

Congressman Huckaby's letter. Second, the district court relies

upon the USDA's summary rejection of DCP Farms' petition to recuse

the entire national level of the USDA from consideration of their12

case. A summary rejection was justified, however, by the

unreasonably broad nature of the requested relief. It does not

convince us that the USDA would have unreasonably refused a request

for a different hearing officer had DCP Farms made such a request.

In any event, evidence that a hearing officer read a letter

involving this case is weak evidence that pursuing administrative

appeals would have been futile. We recognize DCP Farms' concern

that its appeal would have been heard by an officer it considered

tainted by knowledge of Congressman Huckaby's letter. Nonetheless,

these two pieces of evidence, without more, do not support a

conclusion th at pursuit of the USDA appeals process would be

futile.

The appropriate forum for resolving this dispute is an appeal

from a final USDA decision. The relief that DCP Farms sought here

is exceptional. The federal courts are asked to enjoin an

administrative agency from proceeding through its internal review

process to reach a final agency decision. We decline to intrude

into the USDA's administrative process where the plaintiff has not

demonstrated a valid reason to be excused from exhaust ing its

administrativ e remedies. To the extent that DCP Farms believes

that extraneous factors were considered in the USDA's initial

determination, it may make that argument in its appeal of the

Deputy Administrator's decision.

We conclude that the district court erred in granting DCP

Farms' request for injunctive relief. Accordingly, we REVERSE and

REMAND with instructions to dismiss.