Court Opinion

ID: 185804
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:36:04+00
Date Added: 2024-06-11T09:43:00.794867
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United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

                            
           No. 01-5310           September Term, 2002 

                   Filed On:  November 20, 2002

                                 

                    Milk Train, Inc., et al., 
                            Appellants

                                v.

                   Ann M. Veneman, Secretary, 
            United States Department of Agriculture, 
                             Appellee

          Appeal from the United States District Court 
                  for the District of Columbia 
                         (No. 00cv01121)

                            
     Before:  Sentelle, Rogers and Garland, Circuit Judges.

                            O R D E R

     It is ORDERED, sua sponte, that the opinion filed herein 
on November 15, 2002 is amended as follows:

     Page 2, the last sentence of the first paragraph:  "Insofar 
as Milk Train challenges the 26,000 cwt cap, we vacate the 
district court opinion on that issue for lack of jurisdiction;  
otherwise ..."

     Page 5, first sentence in section A:  "We first address the 
district court's jurisdiction to review the Secretary's regula-
tions.  Steel Co. v. Citizens for a Better Env't, 523 U.S. 85, 95 
(1998).  According ..."

     Page 6, first sentence in second full paragraph after the 
comma:  "... dairy farmers, we hold that the district court 
lacked ..."

     Page 7, last sentence of first paragraph:  "Accordingly, we 
vacate the district court's opinion on the issue of the 26,000 
cwt cap for lack of subject-matter jurisdiction."

     Page 8, first line at top of page:  "hold that the district 
court had jurisdiction ..."

     Page 15, first sentence in full paragraph:  "Accordingly, we 
vacate that portion of the district court's opinion that discuss-
es the Secretary's use of a 26,000 cwt cap for lack of jurisdic-
tion, ..."

                                    Per Curiam

                                   FOR THE COURT:

                                   Mark J. Langer, Clerk

                              BY:

                                   Deputy Clerk

                                 

                    United States Court of Appeals

               FOR THE DISTRICT OF COLUMBIA CIRCUIT

       Argued October 10, 2002   Decided November 15, 2002 

                           No. 01-5310

                    Milk Train, Inc., et al., 
                            Appellants

                                v.

                   Ann M. Veneman, Secretary, 
            United States Department of Agriculture, 
                             Appellee

          Appeal from the United States District Court 
                  for the District of Columbia 
                         (No. 00cv01121)

     Benjamin F. Yale argued the cause for appellants.  With 
him on the briefs were Kristine H. Reed, Donald M. Barnes, 
and Lowell H. Patterson III.

     H. Thomas Byron III, Attorney, U.S. Department of Jus-
tice, argued the cause for appellee.  With him on the brief 
were Roscoe C. Howard, Jr., U.S. Attorney, and Mark B. 
Stern, Attorney, U.S. Department of Justice.

     Before:  Sentelle, Rogers and Garland, Circuit Judges.

     Opinion for the Court filed by Circuit Judge Rogers.

     Dissenting opinion filed by Circuit Judge Sentelle.

     Rogers, Circuit Judge:  The question in this appeal is 
whether the Secretary of Agriculture's implementation of a 
1999 subsidy program for milk producers was inconsistent 
with the statutory requirement that payments be made "for 
economic losses incurred during 1999."  Agriculture, Rural 
Development, Food and Drug Administration, and Related 
Agencies Appropriations Act 2000, Pub. L. No. 106-78, s 805, 
113 Stat. 1135, 1179 (1999) [hereinafter "2000 Appropriations 
Act"].  The Secretary's regulations defined "eligible produc-
tion" for purposes of determining how much money a produc-
er could receive as "milk produced by cows in the United 
States and marketed commercially in the United States any-
time during the 1997 and or 1998 calendar year, subject to a 
maximum of 26,000 [hundredweight ("cwt")] per dairy opera-
tion."  7 C.F.R. s 1430.502.  Milk Train, Inc. and others 
representing thirty-one large milk producers in several 
states, appeal the grant of summary judgment upholding the 
Secretary's regulations.  Milk Train contends that the regula-
tions are contrary to a clear statutory mandate and that the 
Secretary arbitrarily denied assistance for losses attributable 
to production in excess of 26,000 cwt.  Insofar as Milk Train 
challenges the 26,000 cwt cap, we vacate the district court 
opinion on that issue for lack of jurisdiction;  otherwise we 
reverse and remand the case to the district court with in-
structions to remand the case to the Secretary.

                                I.

     In the last three fiscal years (FY 1999--FY 2001), Con-
gress has appropriated money to be distributed by the Secre-
tary of Agriculture to compensate dairy producers for losses 
they have sustained.  We refer to the moneys appropriated as 
a milk producers' subsidy in the 1999 Appropriations Act as 

the 1998 Program;  we refer to the moneys appropriated in 
the 2000 Appropriations Act as the 1999 program.

     In the first year, Congress provided over $3 billion "for 
assistance to owners and producers on a farm ... to partially 
compensate [them] for the loss of markets for the 1998 crop 
of a commodity."  Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999, Pub. L. No. 105-277, 
Division A, s 101(a), Tit. XI, s 1111(a), 112 Stat. 2681, 2681-
44 (1998) [hereinafter "1999 Appropriations Act"].  In partic-
ular, Congress directed that $200 million of the moneys "shall 
be available to provide assistance to dairy producers in a 
manner determined by the Secretary."  Id. s 1111(d).  For 
the 1998 program, the Secretary promulgated regulations 
whereby the amount of each farm's payment would be based 
on 1997 or 1998 milk production, with a cap on the maximum 
eligible production level, approximately equivalent to a herd 
of 150 cows (or 26,000 cwt, which represents 2,600,000 pounds 
of milk).  See 7 C.F.R. ss 1430.502, .504, .506.  A cost benefit 
analysis prepared by the Farm Service Agency ("FSA") on 
December 21, 1999, indicated that 76,771 milk producers that 
were in production at some time during the period October 2, 
1998, through December 31, 1998, were sent checks in June 
1999 based on a payment rate of 22.47897 cents per cwt, with 
a maximum single payment of $5,845.

     In the second year, at issue here, Congress appropriated 
$325 million more to benefit livestock and dairy producers, 
again directing that the funds be disbursed "in a manner 
determined appropriate by the Secretary."  2000 Appropria-
tions Act s 805.  Congress directed that no less than $125 
million (minus administrative expenses of $2.3 million) be in 
the form of assistance to dairy producers "to compensate 
producers for economic losses incurred during 1999."  Id. 
ss 825, 822.  Waiving the notice and comment requirement 
for implementing regulations, Congress directed that the 
payments be made "as soon as practicable."  Id. s 824(a).  
For the 1999 program, the Secretary extended the regula-
tions for the 1998 program;  she specifically extended sign-up 
for the subsidy program through February 28, 2002, with the 
proviso that "[d]airy operations that applied for and received 

payments under the [1998 program] do not need to reapply.  
Additional payments will be issued based upon the original 
application."  1999 Crop and Market Loss Assistance, 65 Fed. 
Reg. 7942, 7945 (Feb. 16, 2000).  According to the FSA's cost-
benefit analysis, the sign-up was extended to permit the 1,100 
eligible commercial operations that did not enroll in the 1998 
program to enroll in the 1999 program.  Payments under the 
1999 program for producers who had signed up for the 1998 
program (or were eligible for that program) were based on 
the 1997 or 1998 production figures used for the 1998 pro-
gram.  65 Fed. Reg. at 7945.  Thus, producers who had 
signed up or were otherwise eligible for the 1998 program 
could receive 1999 funds, even if they did not produce in 1999.  
The final payment per cwt under the 1999 program was 
approximately $0.1405, with a maximum single payment of 
about $3,653.

     Milk Train filed suit challenging the regulations for the 
1999 program as arbitrary and capricious under the Adminis-
trative Procedure Act ("APA"), 5 U.S.C. s 706(2)(A), and 
violative of the Non-Delegation, Takings, and Equal Protec-
tion Clauses of the Constitution.  The district court, address-
ing cross-motions for summary judgment, viewed "[t]he es-
sence of this controversy [to be] whether the Secretary 
exceeded her statutory authority by capping at 26,000 cwt the 
amount of milk production that would be eligible for financial 
assistance, the consequence of which was to bestow the bulk 
of the funding on smaller dairy farmers."  The court granted 
judgment for the Secretary.  As relevant here, the court 
ruled that it had jurisdiction because the 2000 Appropriations 
Act appropriating moneys for the 1999 program was not 
within the lump-sum appropriations exception to APA juris-
diction under Lincoln v. Vigil, 508 U.S. 182 (1993), and 
contained intelligible principles, including Congress' general 
policy "to compensate dairy farmers suffering from declining 
milk prices."  The court rejected Milk Train's argument that 
the Secretary's 26,000 cwt cap was arbitrary and capricious.  
The court did not expressly address Milk Train's argument 
that the Secretary's use of data from an earlier year to 

allocate payment of 1999 moneys was arbitrary and capri-
cious.

                               II.

     On appeal, Milk Train contends that the Secretary's regula-
tions are invalid because they ignore the clear statutory 
mandate to compensate dairy producers for "economic losses 
incurred during 1999" and arbitrarily denied assistance for 
losses attributable to production in excess of 26,000 cwt.  
Pointing to the different statutory language that Congress 
used in appropriating funds for the 1999 program (referring 
to "producers" rather than "owners and producers" and to 
"economic losses" rather than "market losses," and to a 
different year), Milk Train contends that while Congress did 
not reinstate the 1998 program the Secretary did, by extend-
ing the regulations for the 1998 program, with the result that 
payments for 1999 economic losses were based on the same 
production data and paid to the same producers who qualified 
for the 1998 program rather than to those who operated in 
1999.  As to the 26,000 cwt cap, Milk Train contends that the 
phrase "in the manner authorized by the Secretary" was "not 
an expression in the alternative to compensation for the 
producers' 1999 economic losses" and did not authorize the 
Secretary "to deny compensation on substantial portions of 
the economic losses incurred in 1999 by some producers in 
order to increase the amounts received by others."

                                A.

     We first address the district court's jurisdiction to review 
the Secretary's regulations.  Steel Co. v. Citizens for a Better 
Env't, 523 U.S. 85, 95 (1998).  According to the Secretary, her 
determination of the manner of providing the moneys to dairy 
producers is not qualified "in any way," Appellee's Br. at 15, 
and reflects a congressional judgment that the Agriculture 
Department, as the expert agency charged with implementing 
the nation's farm policy, is best suited to determine how the 
moneys should be used to provide assistance to the nation's 
dairy farmers.  Whether viewed as agency action committed 
to agency discretion by law under the APA, 5 U.S.C. 
s 701(a)(2), or as an express delegation to make all decisions 
necessary to carry out Congress' broad purpose, the Secre-

tary contends that judicial review of the Secretary's imple-
mentation decision is "extremely circumscribed."

     Section 701(a)(2) of the APA exempts agency action from 
judicial review "to the extent that [it] is committed to agency 
discretion by law."  The Supreme Court in Heckler v. Cha-
ney, 470 U.S. 821 (1985), held that an agency decision not to 
institute enforcement proceedings was unreviewable.  Id. at 
831.  Such a decision, the Court explained, involved a "com-
plicated balancing of a number of factors which are peculiarly 
within [an agency's] expertise."  Id.  Drawing on Heckler, 
the Court held in Lincoln v. Vigil that an agency decision to 
cease allocating funds from a lump-sum appropriation, which 
contained no restrictions on use of the funds, for a program 
not mentioned in a statute or the agency's regulations, was 
committed to agency discretion and likewise unreviewable.  
508 U.S. at 192-93.  The Court defined the scope of review 
precluded under s 701(a)(2) as turning on whether the stat-
ute "is drawn so that a court would have no meaningful 
standard against which to judge the agency's exercise of 
discretion."  Id. at 191 (quoting Heckler, 470 U.S. at 830).  
The Secretary maintains that the principle set forth in Lin-
coln v. Vigil is not limited to lump-sum appropriations and 
would apply if the express conferral of discretion on the 
Secretary, as well as other characteristics of the administra-
tive decision at issue, bring the funding for the 1999 program 
within s 701(a)(2).

     Insofar as Congress has left to the Secretary's sole judg-
ment the determination of the manner for providing assis-
tance to dairy farmers, we hold that the district court lacked 
jurisdiction to review Milk Train's challenge to the 26,000 cwt 
cap on eligible production.  Congress provided that the mon-
eys for 1999 economic losses were to be used "to provide 
assistance directly to ... dairy producers, in a manner deter-
mined appropriate by the Secretary."  2000 Appropriations 
Act s 805.  Milk Train relies on Whitman v. Amer. Trucking 
Ass'n, 531 U.S. 457, 465-71 (2001), to support its contention 
that the absence of express statutory authority for the Secre-
tary to impose payment limitations makes the 26,000 cwt cap 
unlawful.  But unlike the Clean Air Act provisions analyzed 

in Whitman that expressly limited the discretion of the 
Administrator by mandating the imposition of pollution regu-
lations "requisite to protect the public health," 42 U.S.C. 
s 7409(b)(1), the plain language in the 2000 Appropriations 
Act indicates that Congress left to the Secretary the decision 
about how the moneys for 1999 economic losses could best be 
distributed consistent with its general policy to provide emer-
gency assistance to dairy farmers "[a]s soon as practicable," 
id. s 824(a).  The statute thus provides no relevant "statuto-
ry reference point" for the court other than the decision-
maker's own views of what is an "appropriate" manner of 
distribution to compensate for 1999 losses.  Drake v. FAA, 
291 F.3d 59, 72 (D.C. Cir. 2002);  cf. Wester v. Doe, 486 U.S. 
592, 600-01 (1988).  A decision memorandum prepared for 
the Secretary in connection with the 1998 program described 
five options for allocating the moneys, each containing a 
listing of the pros and cons of each option.  Choosing between 
those options clearly requires "a complicated balancing of a 
number of factors which are peculiarly within [the Secre-
tary's] expertise."  Lincoln, 508 U.S. at 193 (quoting Heckler, 
470 U.S. at 831).  Milk Train does not dispute that the 
Secretary used the 1999 program funds to provide assistance 
to compensate dairy producers for their losses;  it challenges 
the 26,000 cwt cap based on the distribution of those funds 
among eligible producers.  Accordingly, we vacate the district 
court's opinion on the issue of the 26,000 cwt cap for lack of 
subject-matter jurisdiction.  Foodservice & Lodging Inst., 
Inc. v. Regan, 809 F.2d 842, 847 (D.C. Cir. 1987) (per curiam).

     We reach a different conclusion with regard to Milk Train's 
base-year challenge to the Secretary's regulations.  By pro-
viding in the 2000 Appropriations Act that the moneys are for 
"economic losses incurred during 1999," 2000 Appropriations 
Act s 805, Congress limited the Secretary's authority to 
disburse funds.  This limitation affords a "statutory reference 
point" by which the court is able to review the Secretary's 
determination of which producers are eligible to receive funds 
under the 1999 program.  Drake, 291 F.3d at 72.  Hence, we 

hold that the district court had jurisdiction of Milk Train's 
base-year challenge.

                                B.

     Milk Train's base-year challenge to the Secretary's regula-
tions has two prongs, both of which are founded on the 
premise that there is no statutory basis for the use of 1997 
and 1998 production data for calculating 1999 losses and on 
the dilution of 1999 moneys.  The 2000 Appropriations Act 
requires that the moneys are to be used to reimburse dairy 
producers for "economic losses incurred during 1999."  2000 
Appropriations Act s 805.  Milk Train contends that "the 
Secretary did not compensate producers for their 1999 eco-
nomic losses but, instead, used the same time period and 
formula used to compensate for 1998 market losses--losses 
for which producers had already been paid once."  Conse-
quently, the moneys available to producers (such as appel-
lants) who were eligible were diluted.  There are two prongs 
to Milk Train's base-year challenge, for the 1999 funds were 
diluted, it maintains, either (1) because some producers who 
received 1999 program moneys were not in business in 1999 
(and thus suffered no losses) or (2) because some producers 
were paid at a higher rate per cwt on 1997 or 1998 production 
based on the earlier 1998 program.

     Even though presented as a part of its challenge to the 
26,000 cwt cap, Milk Train's base-year argument appears 
throughout this case and is not the type of "asserted but 
unanalyzed" contention that the court should not address;  the 
Secretary received fair notice of the argument and had an 
opportunity to respond.  See SEC v. Banner Fund Int'l, 211 
F.3d 602, 613 (D.C. Cir. 2000) (quoting Carducci v. Regan, 
714 F.2d 171, 177 (D.C. Cir. 1983));  cf. Singleton v. Wulff, 428 
U.S. 106, 120-21 (1976).  During the hearing on the cross-
motions for summary judgment the district court sought the 
Secretary's response to Milk Train's base-year argument, and 
the Secretary responded that:

     [w]hen the payments were made [for the 1998 program] 
     the most recent figures that were available for produc-
     tion were the '97 and '98 years.  When payments were 
     
     made under the [1999] program, the easiest and quickest 
     thing to do administratively was to use the same produc-
     tion figures for existing farmers and allow new farmers 
     to file new applications....
     
Again on appeal, the Secretary presents an administrative 
efficiency response but also explains that "the use of 1997 or 
1998 production quantity information as the basis for calculat-
ing payment amounts does not constitute a payment based on 
losses incurred during those years.  Rather, the Secretary 
merely used those figures to allocate a limited pool of mon-
ey...."  Appellee's Br. at 21.  Accordingly, we proceed to 
address the merits of Milk Train's base-year challenge.

     Our review of the grant of summary judgment is de novo.  
Milk Indus. Found. v. Glickman, 132 F.3d 1467, 1473 (D.C. 
Cir. 1998).  In addressing Milk Train's challenge to the 
Secretary's choice of a base year as contrary to law under the 
APA, the court accords special deference to the Secretary's 
interpretation of a statute that Congress has authorized the 
Secretary to implement.  See ABF Freight Sys., Inc. v. 
NLRB, 510 U.S. 317, 324 (1994);  Schweiker v. Gray Pan-
thers, 453 U.S. 34, 44 (1981).  So long as the regulations 
reflect a permissible interpretation of the statute, the court 
owes deference to the Secretary.  See Transitional Hosps. 
Corp. of La. v. Shalala, 222 F.3d 1019, 1025 (D.C. Cir. 2000) 
(citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, 
Inc., 467 U.S. 837, 843-44 (1984)).  The court likewise owes 
deference to the Secretary's interpretation of her regulations.  
Udall v. Tallman, 380 U.S. 1, 16 (1965) It remains incumbent 
upon the Secretary to explain as part of the regulatory 
proceedings how the chosen manner of distributing the mon-
eys extends only to the losses covered by the statute or risk 
vacation of the rule.  See Int'l Union, United Mine Workers 
v. Fed. Mine Safety & Health Admin., 920 F.2d 960, 966-67 
(D.C. Cir. 1990);  see also Checkosky v. SEC, 23 F.3d 452, 463 
(D.C. Cir. 1994) (separate opinion of Silberman, J.).

     We begin with the shared assumption of the parties, as 
stated in Milk Train's brief, that "[t]he simple and logical 
approach to compensating for economic losses incurred in 

1999 would be to pay producers a fixed amount per hundred-
weight on all of their 1999 production--the same production 
impacted by lower BFP [basic formula price] prices."  Appel-
lant's Br. at 11;  see Appellee's Br. at 13.  Because the 
economic losses to producers in 1999 were due primarily to 
the collapse of milk prices in 1999, tying the level of payments 
to a dairy operation's level of production seems a reasonable 
conclusion by the Secretary, and Milk Train does not chal-
lenge it.  Indeed FSA's cost-benefit analysis indicates that in 
October 1999 manufacturing milk prices suffered the second 
largest month-to-month drop, that the November 1999 basic 
formula price was the lowest in 21 years, and that prices were 
expected to remain low throughout FY 2000 at over 20% less 
than the record high level of FY 1999.  Anticipating that the 
assistance provided by the 1999 program "will offset only a 
modest portion of the expected decline in dairy producers['] 
incomes as prices decline," the assessment added that the 
number of commercial dairy operations declined about 4.2% 
between July 1998 and July 1999.

     The record indicates that the Secretary did consider requir-
ing producers who had received payments under the 1998 
program to reapply for compensation from the 1999 program.  
A decision memorandum prepared for the Secretary agreed 
that such a system would "target 1999 production," but 
concluded that such a system would significantly delay pay-
ments to producers, place additional workload on agency field 
offices, and require additional resources to develop new com-
puter software to handle the new program.  The decision 
memorandum also discussed using only the lists of producers 
who had participated in the 1998 program (including the data 
for their 1997 or 1998 levels of production) to determine 
eligibility and payment levels for the 1999 program.  Such an 
approach would greatly reduce administrative costs and the 
time required to provide payments to producers, but, accord-
ing to the decision memorandum, "the payments distributed 
under the previous [1998] program will not reflect current 
operations" and new operations in 1999 would be unable to 
take advantage of the funding for 1999 losses.  Instead, the 
Secretary chose the approach whereby the eligibility and 

payment levels for the 1999 program for all producers who 
had already participated in the 1998 program were to be 
determined from the 1997 or 1998 data used in the 1998 
program.  65 Fed. Reg. at 7945.  For those who had failed to 
participate in the 1998 program, they could apply, provided 
they had production in the fourth quarter of 1998, with the 
basis for establishing payment amounts being the higher of 
1997 or 1998 production levels.  For producers who had 
begun production in 1999, new applications with 1999 data 
could be submitted.  This approach was preferable, the deci-
sion memorandum concluded, because it would allow new 
producers to participate in the program, while minimizing the 
administrative costs and time required for implementing the 
program with respect to the vast majority of dairy producers.

     In selecting this approach, the Secretary considered the 
risk that the use of 1997-98 production data would inaccurate-
ly measure the level of 1999 production (and therefore, the 
level of 1999 economic losses), and concluded that the benefit 
of increased accuracy was not worth the additional delay in 
distributing funds and the administrative costs.  The FSA 
cost-benefit assessment stated that it could be expected that 
"about 1.5 percent of the recipients of the [1999 program 
moneys] would not have been in operation in 1999" but 
concluded that "[t]he chance of including operations in the 
[1999] program which did not farm in 1999 was not great 
enough to justify requiring 76,771 operations to re-enroll."  
The parties agree that production levels are an appropriate 
proxy for economic losses.  Based on the parties' agreeemnt 
and the above analysis, it would appear to follow that the 
Secretary could reasonably conclude, in light of the dramatic 
drop of milk prices in 1999, that all milk producers would 
suffer economic losses in 1999 and consequently measuring 
production was a reasonable way to measure economic losses.  
As the Secretary explains in her brief, under the circum-
stances, use of the 1997 or 1998 production data was an 
efficient way to allocate limited moneys promptly.

     The analysis underlying the Secretary's approach using 
1997 and 1998 production data is logically sound, for any 
measurement by the Secretary of the amount of 1999 produc-
tion would be subject to some level of uncertainty because of 

measurement errors and incomplete reporting.  The trade-off 
between the amount of uncertainty and error that is accept-
able in view of the congressional purpose to get aid promptly 
to milk producers, see 2000 Appropriations Act s 824(a), and 
the considerable time and money that the Agriculture Depart-
ment would have to expend to reduce that uncertainty and 
error, is the type of issue for which courts show great 
deference.  An agency "typically has wide latitude in deter-
mining the extent of data-gathering necessary to solve a 
problem."  Allied Local & Reg'l Mfrs. Caucus v. U.S. Envtl. 
Prot. Agency, 215 F.3d 61, 71 (D.C. Cir. 2000) (quotation 
omitted), cert. denied 532 U.S. 1018 (2001);  see also Nat'l 
Ass'n of Mfrs. v. United States Dep't of Interior, 134 F.3d 
1095, 1108 (D.C. Cir. 1998).  The Secretary's explanation of 
her approach using prior-year production data is sufficiently 
clear in light of the FSA cost-benefit analysis and the decision 
memorandum on options for payment that "the agency's path 
may reasonably be discerned."  Pub. Citizen, Inc. v. FAA, 
988 F.2d 186, 197 (D.C. Cir. 1993) (quoting Bowman Transp., 
Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 
(1974)).  Thus, the first prong of Milk Train's base-year 
challenge--to use of prior-year production data--fails.

     The second prong of Milk Train's base-year challenge is 
more problematic for the Secretary.  Here, Milk Train con-
tends, some producers were paid at a higher rate per cwt on 
1997 and 1998 production based on the 1998 program.  Based 
on Milk Train's contention and our review of the record, it 
appears that even if the Secretary's approach to the use of 
prior-year production data was otherwise reasonable, the 
Secretary did not apply it consistently.  As pointed out by 
Milk Train, the Secretary, in interpreting the regulations, did 
not simply use the 1997 and 1998 data to estimate 1999 levels 
of production and thus 1999 economic losses.  Instead, in 
providing guidance for implementation of the 1999 program, 
the Secretary apparently instructed field offices to use the 
1997 and 1998 data to allow dairy producers to collect funds 
from the 1999 program as compensation for losses in 1997 
and 1998.  Specifically, the Secretary instructed those offices 
to accept applications from dairy producers who had not 

received funds under the 1998 program but had been in 
operation in the last quarter of 1998 (whether or not they 
were in production in 1999).  The Secretary further instruct-
ed those offices that "[p]roducers who did not receive pay-
ments under the initial [i.e., 1998] program will receive a 
payment calculated at the initial [i.e., 1998] payment rate."

     The language in the 2000 Appropriations Act indicates that 
Congress was not simply adding funds to a pool of money 
that it had appropriated the prior year so any losses occur-
ring from the start of the 1998 program through the end of 
the 1999 program would be eligible for payment out of the 
pool that included the 1999 moneys;  rather, Congress limited 
the moneys designated for dairy producers in the 2000 Appro-
priations Act to payment of "economic losses occurring during 
1999."  2000 Appropriations Act s 805.  Yet the Secretary's 
interpretation of the regulations, as shown by the Secretary's 
implementing guidance, appears to authorize the use of 1999 
moneys to pay for non-1999 economic losses in addition to 
1999 losses.  It may well be that the Secretary's guidance 
was intended merely to instruct that for those dairy produc-
ers who did not participate in the 1998 program a greater 
proportion of their 1999 losses would be compensated under 
the 1999 program.  If this is what the Secretary intended, as 
is suggested by the Secretary's argument in her brief that 
reliance on prior-year data was merely an allocation tool that 
did not result in payment of non-1999 losses out of 1999 
funds, then the implementing guidance involves the manner 
of distribution over which the court has no jurisdiction to 
review.  See supra Part IIA.  But as the administrative 
record now stands, the court is unable to determine whether 
the Secretary's interpretation of the regulations was inconsis-
tent with the plain language of the 2000 Appropriations Act, 
and as such, contrary to law.  Cf. FPC v. Texaco, Inc., 417 
U.S. 380, 395-96 (1974).

                                C.

     The decision whether to remand or vacate "depends on [1] 
the seriousness of the order's deficiencies (and thus the 

extent of doubt whether the agency chose correctly) and [2] 
the disruptive consequences of an interim change that may 
itself be changed."  Allied-Signal Inc. v. United States Nu-
clear Regulatory Comm'n, 988 F.2d 146, 150-51 (D.C. Cir. 
1993) (quoting Int'l Union, United Mine Workers, 920 F.2d 
960, 967);  see County of Los Angeles v. Shalala, 192 F.3d 
1005, 1023 (D.C. Cir. 1999);  Radio-Television News Dirs. 
Ass'n v. FCC, 184 F.3d 872, 887-89 (D.C. Cir. 1999);  Checko-
sky, 23 F.3d at 462-66 (separate opinion of Silberman, J.)  
While the deficiency in the regulations arising from the 
Secretary's interpretation is not insignificant insofar as it may 
have resulted in use of 1999 moneys to pay for economic 
losses not incurred during 1999, this second prong of Milk 
Train's base year challenge was not its most prominent 
argument.  In our view, there is at least "a serious possibili-
ty" that the Secretary on remand could explain her use of the 
1999 funds in a manner that is consistent with the statute or 
choose an allocation method to correct the problem, a factor 
that favors remanding rather than vacating.  See Allied-
Signal, 988 F.2d at 151.  Moreover, Milk Train's request for 
a remand for a new rulemaking ignores the second prong of 
the Allied-Signal test.  As in Sugar Cane Growers Coop. v. 
Veneman, 289 F.3d 89 (D.C. Cir. 2002), where the Secretary 
had improperly disbursed large quantities of sugar to farmers 
across the country, who in turn had already plowed under 
their crops, the Secretary here has already disbursed the 
1999 program moneys to numerous dairy producers through-
out the country, and those moneys may not be recoverable 
three years later.  Here, as there, "[t]he egg has been 
scrambled and there is no apparent way to restore the status 
quo ante."  Id. at 97.

     Therefore, as in County of Los Angeles, where the court 
similarly found the Secretary's explanation for using prior-
year data in a rulemaking procedure inconsistent, we con-
clude that a remand is the appropriate course.  192 F.3d at 
1023.  The court, of course, expresses no opinion on what 
might be a permissible manner of allocation based other than 
on production data.  Our remand does not bind the agency to 

its current reasoning, approach, or decision.  Southeastern 
Mich. Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir. 1998).

     Accordingly, we vacate that portion of the district court's 
opinion that discusses the Secretary's use of a 26,000 cwt cap 
for lack of jurisdiction, and we reverse the grant of summary 
judgment and remand the case to the district court with 
instructions to remand to the Secretary, in light of the 
inconsistent application of the Secretary's approach for using 
1997 and 1998 production data to allocate 1999 moneys.

     Sentelle, Circuit Judge, dissenting:  While I agree with 
much of what the majority has to say, ultimately I would 
reach a different result for somewhat different reasons.  I 
will not bother to rehash the facts well stated by the majority, 
but instead, I must say that I find the Secretary's blatant use 
of 1998 losses to disburse funds appropriated by Congress 
"for economic losses incurred during 1999" unworthy of the 
elaborate defense offered by the majority.  As the majority 
recognizes, the Secretary is empowered "to compensate pro-
ducers for economic losses incurred during 1999."  2000 
Appropriations Act s 805.  The Secretary advanced a formu-
la compensating dairy farmers for production during 1997 or 
1998.  I would not defer to that decision.  Granted, Chevron 
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 
U.S. 837 (1984), requires us to defer in appropriate cases to 
an agency's choice "based on a permissible construction of the 
statute."  Id. at 843.  However, that deference is called down 
only when "the statute is silent or ambiguous with respect to 
the specific issue."  Id.  I find no ambiguity in the term 
"1999" that would permit it to be construed as meaning 
"1998."  I therefore would get off at the first step of Chevron:  
"If the intent of Congress is clear, 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.

     By way of examples of the operation of the Secretary's 
complex departure from an unambiguous congressional in-
struction, if a milk producer operated a dairy in 1997 and 
through the first week of October in 1998, and thereupon 
ceased production, he would have incurred no loss in 1999.  
Under the unambiguous instruction of Congress, he would be 
entitled to no compensation from the fund at issue.  Under 
the Secretary's application, he would receive compensation 
based on his production in 1997.  Another producer, having 
suffered difficulties in 1997 and 1998 resulting in reduced 
milk production but having restored her herd to full produc-
ing potential in 1999, would likely have suffered compensable 
losses in 1999, given the market situation data relied upon by 
the Secretary.  However, any compensation she received 

would be based not upon her 1999 losses, but upon a figure 
derived from a presumptive loss incurred based on her 1997 
and 1998 reduced milk production, and presumably a lower 
figure than that to which she would be entitled for 1999.  The 
Secretary admits that this methodology will admit into the 
pool of eligible applicants for a limited fund some number of 
dairy producers who no longer produced milk in the calendar 
year stated in the statute.  Given that it is a fixed and limited 
fund, this inevitably reduces the amount available for distri-
bution to producers eligible under the statutory criterion.

     The majority accepts as a reasonable explanation the elabo-
rate interpretation that using 1997 or 1998 levels of produc-
tion to determine payments was really an efficient method of 
paying for losses in 1999.  Assuming without conceding the 
reasonableness of the explanation proffered, I would reject it 
in any event.  The analysis finds little basis in the administra-
tive record, but is largely a product of the appellate brief 
cited by the majority in support of the reasonableness of the 
explanation.  "We do not generally give credence to such post 
hoc rationalizations, but rather 'consider only the regulatory 
rationale actually offered by the agency during the develop-
ment of the regulation.' "  Gerber v. Norton, 294 F.3d 173, 
184 (D.C. Cir. 2002) (quoting Grand Canyon Air Tour Coali-
tion v. FAA, 154 F.3d 455, 469 (D.C. Cir. 1998)).  I would 
apply our normal rule and reject the post hoc explanation 
advanced by the Secretary's appellate counsel and refined by 
the majority today.

     Having determined that I would reject the Secretary's 
compensation scheme, I, like the majority, am left with the 
question of what remedy is then appropriate.  Once again I 
part company with the majority.  I would not simply remand, 
but would vacate.  In my view, "[o]nce a reviewing court 
determines that the agency has not adequately explained its 
decision, the Administrative Procedure Act requires the 
court--in the absence of any contrary statute--to vacate the 
agency's action."  Checkosky v. SEC, 23 F.3d 452, 491 (D.C. 
Cir. 1994) (Randolph, J., concurring).  As Judge Randolph 
noted in his opinion in Checkosky, the APA states as much "in 
the clearest possible terms. [The Act] provides that a 'review-

ing court' faced with an arbitrary and capricious decision 
'shall ... hold unlawful and set aside' the agency action."  Id. 
(quoting 5 U.S.C. s 706(2)(A)).

     Granted, cases such as County of Los Angeles v. Shalala, 
192 F.3d 1005 (D.C. Cir. 1999), provide precedent for the 
authority of the court to remand without vacating, as the 
majority holds today.  Nonetheless, even if we are empow-
ered to depart from the literal command of the language--a 
proposition which in the absence of such precedent I would 
find surprising--I think it often, if not ordinarily, unwise.  
Heckler v. Chaney, 470 U.S. 821 (1985), among many other 
cases, establishes the proposition that courts are not to 
substitute their administrative judgments for those of the 
agency.  Any time that the agency has not adequately justi-
fied its decision, we do not know what the agency's decision 
would have been had it subjected the questions before it to 
the lawful administrative process.  Therefore, when we hold 
that the conclusion heretofore improperly reached should 
remain in effect, we are substituting our decision of an 
appropriate resolution for that of the agency to whom the 
proposition was legislatively entrusted.  I therefore cannot 
concur.

     For a similar reason, I would vacate not only the use of the 
wrong annual losses for the determination of the amount of 
relief offered, but the regulation in its entirety, including the 
limitation of compensation to 26,000 cwt of production.  
Granted, the Secretary and the majority make out a good 
case for the unreviewability of that element of decision.  Had 
that question come to us unaccompanied by the primary issue 
upon which I would vacate, I likely would have joined the 
majority's decision that it is unreviewable.  But, as the Su-
preme Court reminded us in Heckler v. Chaney, as relied 
upon by the majority, the decisions of the agency involve a 
" 'complicated balancing of a number of factors which are 
peculiarly within [an agency's] expertise.' "  Maj. Op. at 6 
(quoting Heckler v. Chaney, 470 U.S. at 831).  Since I would 
vacate the unauthorized year, I am unable to ascertain wheth-
er the agency would have employed the same production cap 
had it used the right production year, and therefore I would 

be left with no choice but to remand this case to the district 
court for an order vacating the Secretary's decision and 
remanding the matter to the Secretary for further proceed-
ings applying the correct statutory allocation.

     Although I greatly respect the majority's attempt to save a 
well-intended relief program from possibly inefficient further 
proceedings, I do not think we can lawfully do so.  I therefore 
most respectfully dissent.