Court Opinion

ID: 4767
Source: CourtListenerOpinion
Date Created: 2010-04-25 04:59:01+00
Date Added: 2024-06-11T09:37:54.431199
License: Public Domain

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 Agriculture 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 factors
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 submit annual farm operating plans, which serve as

subsidy 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.        Esch 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's

                                        2
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 from 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 irrevocable 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' requested

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

Farms' eligibility.        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 Administrator 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.

                                       3
     On December 6, 1989, Chairman Huckaby wrote to Agriculture

Secretary Yeutter expressing concern about "a number 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 principal sponsor of the legislation which
     established the new payment eligibility requirements, I
     feel strongly that the [DCP Farms] operation violates
     both the spirit and letter of the law. It was clearly
     not the intent of Congress that such operations would
     qualify for such vast sums; if this operation does
     receive the reported $1.4 million, it will only happen
     because USDA has failed to implement and enforce the law
     as intended by Congress.

Congressman 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,    but   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 Congressman Huckaby's letter, Penn drafted a

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

Agriculture 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 very

                                         4
aggressive position in dealing with this case." The letter did not

suggest that the USDA was committed to a specific outcome.                        In

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

organization would be allowed under an equitable reorganization

rule allowing farmers to reorganize their holdings to prevent a

reduction in payments.

     In    April     1990,    the       Deputy       Administrator   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

letter opinions concluding that DCP Farms had adopted schemes or

devices to evade the payment limitation provisions 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 staffers 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,

                                           5
capricious and 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). While Pillsbury's case was pending before the

FTC, the Subcommittee on Antitrust and Monopoly of the 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

earlier FTC ruling in the case.        Id. 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 agency'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).              Pillsbury 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, 459

                                  6
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 involved in judicial or quasi-judicial

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

Associations v. Volpe, 459 F.2d 1231, 1246 (D.C. Cir. 1972),

(declining     to    apply   Pillsbury      standard         to   congressional

interference where the Secretary's action was neither judicial nor

quasi-judicial).      Pillsbury was a case pending before a quasi-

judicial body which would render the agency's final decision.                   In

contrast, the contact here occurred well before any proceeding

which could be considered judicial or quasi-judicial.                 This case

would not have 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.

                                      7
Congressman 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 Pillsbury's

stringent "mere appearance of bias" standard at this juncture of

administrative          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.           See Dirt, Inc. v. Mobile County Commission, 739
F.2d 1562 (11th Cir. 1984), ("Although such an appearance of bias

is     clearly       present    in     this     case,       the    standards    governing

administrative         proceedings       are       far     more    relaxed     than    those

controlling judicial proceedings.").                       An administrative decision

will    be   overturned        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).                           See also FTC v.

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

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

Sons' Co. v. U.S. Army Corps of Engineers, 714 F.2d 163 (D.C. Cir.

1983)    that    the       proper     standard       for    evaluating      congressional

interference with non-judicial decisions of administrative agencies

is whether the communication actually influenced the agency's

                                               8
decision.   More specifically, the test is "whether 'extraneous

factors   intruded   into   the   calculus    of   consideration'   of   the

individual decisionmaker."        Id. at 170, quoting D.C. Federation,
459 F.2d at 1246.

     This focus on the intrusion of improper extraneous 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 Congress

will not by itself constitute the injection of an extraneous

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 plain

                                     9
that the force of logic and ideas is not our concern.                              They carry

their own force and exert their 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 efforts 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. Girard 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 immediate

                                              10
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." Central 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."   Patsy v. Florida 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 futile 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 their

                                11
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 that 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 exhausting its

administrative 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.

                                        12