Court Opinion

ID: 3064419
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:24:38.066097+00
Date Added: 2024-06-11T09:33:04.074020
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

AMALGAMATED SUGAR CO. LLC,                
               Plaintiff-Appellant,
                v.                              No. 07-35971
THOMAS VILSACK;* DEPT. OF
AGRICULTURE,                                     D.C. No.
                                               CV-06-00167-EJL
             Defendants-Appellees,
                                                  OPINION
AMERICAN CRYSTAL SUGAR
COMPANY,
              Intervenor-Appellee.
                                          
         Appeal from the United States District Court
                   for the District of Idaho
          Edward J. Lodge, District Judge, Presiding

                   Argued and Submitted
             September 15, 2008—Moscow, Idaho

                     Filed February 11, 2009

       Before: J. Clifford Wallace, Stephen S. Trott and
               N. Randy Smith, Circuit Judges.

                 Opinion by Judge N. R. Smith

  *Thomas Vilsack is substituted for his predecessor, Mike Johanns, as
United States Secretary of Agriculture, pursuant to Fed. R. App. P.
43(c)(2).

                                1627
1630           AMALGAMATED SUGAR v. VILSACK

                        COUNSEL

Kevin J. Brosch, DTB Associates, LLP, Washington, District
of Columbia, for the plaintiff-appellant.

Jeffrey Kahn, Office of the General Counsel, U.S. Dept. of
Agriculture, Washington, District of Columbia; Joanne P.
Rodriguez, Assistant United States Attorney, United States
Attorney’s Office, Boise, Idaho, for the defendant-appellee.

David P. Bundle and Sarah C.S. McLaren, Fredrikson &
Byron, PA, Minneapolis, Minnesota, for the intervenor-
appellee.

                        OPINION

N.R. SMITH, Circuit Judge:

  We are asked for the first time to review the construction
and application of certain provisions of the Agricultural
                   AMALGAMATED SUGAR v. VILSACK                        1631
Adjustment         Act        (the     “Act”),      specifically
7 U.S.C. §§ 1359dd(b)(2)(E)-(F).1 We conclude that the dis-
puted provisions of the Act to be unambiguous; therefore, the
district court erred in granting Chevron deference to the inter-
pretation advanced by the U.S. Department of Agriculture
(the “USDA”). Within the Act, we hold that a “processor” is
an entity who processes sugar, as defined by the USDA’s own
regulations and entirely within the natural and ordinary mean-
ing of the word. The Act requires the USDA to eliminate a
processor’s sugar marketing allocation (“allocation”) when
the processor has “permanently terminated operations (other
than in conjunction with a sale or other disposition of the pro-
cessor or the assets of the processor).” § 1359dd(b)(2)(E). We
hold that Pacific Northwest Sugar Company (“Pacific”) per-
manently terminated operations prior to and not in conjunc-
tion with the purported sale of assets to Defendant-Intervenor
American Crystal Sugar Company (“American Crystal”).
Therefore, we conclude that the USDA erred in approving the
transfer of the allocation to American Crystal, and Pacific’s
sugar marketing allocation must be redistributed pro rata
among all processors. § 1359dd(b)(2)(E). We reverse the dis-
trict court’s summary judgment in favor of the USDA and
American Crystal.

I.       Factual and Procedural History

   Pacific processed sugar beets during the 1998, 1999, and
2000 crop years at its only factory in Moses Lake, Washing-
ton. Facing substantial financial problems, Pacific wrote to
one of its creditors in January 2001, describing its financial
problems, stating that Pacific could not continue to operate in
the coming years, and proposing liquidation of the company.
Pacific stopped processing sugar at Moses Lake in February
2001, had no sugar beet crops in 2002 or 2003, and never
resumed operations. In June 2001, Pacific sold the Moses
     1
   All statutory references herein are to title 7, United States Code, unless
otherwise noted, and therefore omit “7 U.S.C.” from the citation.
1632               AMALGAMATED SUGAR v. VILSACK
Lake facility to Central Leasing for $2.1 million and leased
the plant back with a twelve-month option to repurchase the
facility.2 Also in June 2001, Pacific unsuccessfully attempted
to secure capital to continue as a sugar beet processor. On
July 23, 2001, Pacific was administratively dissolved by the
Secretary of State of the State of Washington for failure to file
an annual license renewal application, as required by Wash-
ington State law. Also in 2001, Pacific terminated the major-
ity of its employees, and by April 2002, Pacific employed no
one at its only factory. In March 2002, Pacific’s lease of the
Moses Lake facility from Central Leasing ended when Pacific
failed to pay the agreed rent, and the lease was not renewed.

   On May 13, 2002, Congress amended the Act,3 creating the
Flexible Marketing Allotments for Sugar (“FMAS”) program.
The purpose of the program was to stabilize sugar prices by
requiring the Secretary of Agriculture (the “Secretary”) to
determine the total amount of domestically produced sugar
that can be marketed in the United States for the coming year
(the “allotment”) and then assign allocations for production of
sugar to processing companies in the United States. Sec-
tion 1359cc.4 By rule, the program is administered by the
CCC, an agency of the USDA. 7 C.F.R. § 1435.1. Under the
program, Congress directed the Secretary to make initial allo-
cations based upon historical beet sugar production levels for
the 1998 through 2000 crop years.
  2
     Although Central Leasing acquired Pacific’s plant and equipment, it
never sought to acquire Pacific’s sugar allocation.
   3
     See Farm Security and Rural Investment Act of 2002, Pub. L. No. 107-
171, 116 Stat. 134, 187-204 (May 13, 2002).
   4
     The overall marketing allocation is divided between sugar derived
from sugar beets and sugar derived from sugarcane. § 1359cc(c). This case
involves sugar beet sugar allocations. Sugar beet processors who know-
ingly market sugar or sugar products in excess of their allocation are liable
to the Commodity Credit Corporation (the “CCC”) for a civil penalty
equal to three times the U.S. market value of the sugar involved in the vio-
lation. 7 C.F.R. § 1435.318(a).
                   AMALGAMATED SUGAR v. VILSACK                        1633
   In June 2002, Central Leasing began disposing of the
equipment formerly owned by Pacific. By July 2002, Pacific
owned no sugar beet processing equipment, and its option to
repurchase the Moses Lake facility had expired. Also in July
2002, Pacific’s Board of Directors indicated that it would no
longer expend money for financial or legal consulting. The
Board also announced that Washington Sugar Company, LLC
(“Washington Sugar”) would succeed Pacific and assume any
debts or obligations relating to reviving processing operations
at Moses Lake. On September 24 and October 3, 2002, Scott
Lybbert, as President of Washington Sugar,5 wrote to the
CCC to request that Pacific’s allocation be transferred to
Washington Sugar. The CCC responded on October 11, 2002
that, as a “new entrant,” the allocation would be transferred
“upon receipt of a copy of the bill of sale showing that virtu-
ally all of the assets of Pacific Northwest, including the fac-
tory, have been acquired by the Washington Sugar Company.”6
During this same period, appellant, Amalgamated Sugar
Company, LLC (“Amalgamated”), and others also inquired of
the CCC about acquiring Pacific’s allocation.

   On October 1, 2002, the CCC made the initial beet sugar
marketing allocations for crop year 2002. Pacific received an
allocation of 2.692 percent of the allotment, based on its pro-
duction history for the 1998-2000 crop years.7 However, the
USDA immediately reassigned virtually all the allocation,
because Pacific was not processing sugar and was unable to
market its share.
   5
     The USDA never transferred the allocation to Washington Sugar, we
assume because Washington Sugar could not provide a bill of sale show-
ing that it had purchased virtually all of Pacific’s assets.
   6
     Lybbert was a former Vice-President of Pacific and a member of
Columbia River Sugar Company (“CRSC”), as well as the sole owner of
Washington Sugar.
   7
     The USDA apparently interpreted the Act to require them to make an
allocation to Pacific, despite the fact that Pacific was no longer processing
sugar.
1634              AMALGAMATED SUGAR v. VILSACK
   In a December 2002 USDA audit, the USDA Inspector
General reported that because of financial difficulties, Pacific
defaulted on a $20 million USDA guaranteed loan, which
resulted in a loss of $12.1 million to the USDA’s Rural
Development Agency. The USDA audit stated that in May
2001, “[t]he plant closed and the lender was forced to liqui-
date the company’s assets.”

   On December 3, 2002, the CRSC 8 adopted a resolution
purporting to transfer its allocation to Washington Sugar, in
support of Washington Sugar’s efforts to revive operations at
Moses Lake. The resolution stated, “CRSC has no desire,
interest or ability to move forward and operate [the Pacific]
processing facility.”

   After purporting to convey its interest in the allocation to
Washington Sugar and despite the fact that Pacific never used
any of its 2002 allocation, representatives of Pacific sought to
have the allocation increased for crop year 2003. After a hear-
ing on June 16, 2003, the CCC denied Pacific’s request. Dur-
ing the hearing, several processors (including American
Crystal) testified that Pacific had been dissolved or seemingly
terminated operations and was unlikely to resume operations.9

   In July 2003, American Crystal began negotiating with
Lybbert (on behalf of Washington Sugar) and Central Leasing
to purchase the assets previously owned by Pacific, in an
effort to secure the transfer of Pacific’s allocation by the
CCC. On July 3, 2003, American Crystal wrote to the CCC,
discussing the proposed acquisition:
  8
    CRSC is the sugar beet growers’ association that wholly owned
Pacific.
  9
    For example, the President and CEO of Defendant-Intervenor Ameri-
can Crystal, wrote: “Pacific Northwest has not processed sugarbeets of the
2001 and 2002 crops, and it is our understanding that no sugarbeets have
been planted for the 2003 crop. Therefore, it is a real question as to
whether it will be able to continue operation in 2003. . . .”
               AMALGAMATED SUGAR v. VILSACK                    1635
    American Crystal[ ] is currently contemplating a
    transaction, which would effectively result in the
    allocation, currently owned by [Pacific], being trans-
    ferred to [American Crystal]. As currently contem-
    plated, substantially all of the assets of [Pacific]
    would be transferred to an intermediary company[,
    Washington Sugar]. Since [Pacific] has already
    transferred ownership of its former processing facil-
    ity to another party (Central Leasing, LLC), substan-
    tially all of the assets of [Pacific] consists [sic]
    mainly of the marketing allocation and some other
    generally immaterial assets. The next step in the
    transaction would be the immediate transfer of sub-
    stantially all of the assets of [Washington Sugar] to
    [American Crystal] . . . . The effect of the transaction
    would be to move the sugar marketing allocation
    from [Pacific], through [Washington Sugar], to
    [American Crystal].

(emphasis added).

   On July 30, 2003, American Crystal informed the CCC of
American Crystal’s intent to “acquire ownership or control of
the assets (including the rights to the production history and
the marketing allocations), associated with the Moses Lake,
Washington sugarbeet processing factory.” In the same letter
to the CCC, American Crystal sought the CCC’s preliminary
approval and informed the CCC that American Crystal had no
intention of ever operating the Moses Lake facility.

   On August 28, 2003, the CCC replied: “We understand that
American Crystal is purchasing all of the assets of Pacific
Northwest, securing the rights to make sugar at the Pacific
Northwest/Central Leasing factory site, and purchasing some
of the sugar making equipment used by Pacific Northwest.”
The CCC also stated that it would condition approval of the
transfer on: (1) receiving documentation of the purchase of
Pacific’s assets by American Crystal; (2) certification from
1636            AMALGAMATED SUGAR v. VILSACK
Pacific that it had not marketed any sugar under the 2002 allo-
cation; (3) waiver by American Crystal and Pacific of rights
to bring any action against the USDA in the event that the
USDA is required by a court to reverse the transfer of the
allocation; and (4) agreement by American Crystal to drop
Pacific’s appeal of the CCC’s June 16, 2003 adverse ruling
regarding Pacific’s request to increase its allocation for 2003.

   On September 8, 2003, Pacific was reinstated as a legal
corporation when it filed the necessary documents with the
State of Washington. That same day, Washington Sugar also
executed a cancellation agreement with Pacific, revoking the
previous transfer of Pacific’s allocation to Washington Sugar.
These agreements were executed in conjunction with Pacific’s
purported conveyance of its allocation to American Crystal.
That same day, American Crystal advised the CCC that it had
acquired, through its wholly owned subsidiary Crab Creek
Sugar Company “ownership or control of all of the assets
(including the rights to the production history and the market-
ing allocations) associated with the production of sugar at the
Moses Lake, Washington sugarbeet processing factory.”
American Crystal paid $6.8 million to acquire the allocation,
including $2.125 million to Central Leasing, $300,000 to
Lybbert (in consideration of a non-compete agreement), and
$3.025 million to Pacific. On September 16, 2003, the CCC
wrote to Lybbert to inform him that Pacific’s allocation would
immediately be transferred to American Crystal.

   On December 4, 2003, Amalgamated filed a Petition for
Review, administratively challenging the CCC’s transfer deci-
sion. On February 7, 2005, the USDA’s Administrative Law
Judge (“ALJ”) issued a decision (“Initial Decision”) reversing
the CCC’s determination, finding that the transfer was not
proper because Pacific had permanently terminated opera-
tions.

   On February 28, 2005, the CCC appealed the decision to
the USDA Judicial Officer (“JO”). The JO reversed the Initial
                AMALGAMATED SUGAR v. VILSACK               1637
Decision without a hearing and affirmed the CCC’s determi-
nation. The JO construed the Act to mean that as long as the
CCC had not eliminated and redistributed a processor’s allo-
cation, that allocation may be sold along with the processor’s
assets. Amalgamated subsequently appealed to the district
court, seeking judicial review of the JO’s decision. On cross-
motions for summary judgment, the district court deferred to
the USDA’s construction of the Act and entered summary
judgment in favor of the USDA and American Crystal.
Amalagamated now appeals.

   We are asked to decide whether the JO’s interpretation of
the Act was reasonable, supported by the administrative
record, in accordance with the law, not arbitrary or capricious,
and therefore entitled to deference under Chevron U.S.A. Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).

II.   Standard of Review

   We review de novo the district court’s decision on cross-
motions for summary judgment. Arakaki v. Hawaii, 314 F.3d
1091, 1094 (9th Cir. 2002). We are governed by the same
standard used by the trial court and must determine whether
the district court correctly applied the relevant substantive
law. See McClung v. City of Sumner, 548 F.3d 1219, 1224
(9th Cir. 2008). The USDA’s “interpretation or application of
a statute is a question of law reviewed de novo.” Earth Island
Inst. v. Hogarth, 494 F.3d 757, 765 (9th Cir. 2007).

   The Administrative Procedure Act governs our review of
agency action, and consequently, we must determine whether
the USDA’s decision was arbitrary, capricious, an abuse of
discretion, or not in accordance with law. 5 U.S.C. § 706;
High Sierra Hikers Ass’n v. Blackwell, 390 F.3d 630, 638 (9th
Cir. 2004). Our review is “searching and careful, but the arbi-
trary and capricious standard is narrow, and we cannot substi-
tute our own judgment for that of the [Agency].” Ocean
1638            AMALGAMATED SUGAR v. VILSACK
Advocates v. U.S. Army Corps of Eng’rs, 402 F.3d 846, 858
(9th Cir. 2005) (internal quotation marks omitted).

III.   The Act Guarantees an Equitable Opportunity to
       Market Sugar to All Processors

   We begin by noting that the Act works to maintain sugar
prices by limiting the total amount of sugar that can be pro-
duced and marketed, allocating the total sugar allotment for
a given crop year among all sugar processors in a fair and
equitable manner. See § 1359bb. The Act makes clear that its
purpose is to “afford all interested persons an equitable oppor-
tunity to market sugar under an allotment” and that “the Sec-
retary shall allocate each such allotment among the processors
covered by the allotment.” § 1359dd(a). Because the Act
places significant restrictions on the freedom of processors to
produce and market sugar, the Act’s overarching directive is
to ensure predictable, fair, and transparent allocation of the
allotments to reflect industry events and changes in industry
conditions. See 148 Cong. Rec. S513, S514 (Feb. 8, 2002)
(statement of Sen. Conrad) (“The purpose of this amendment
is to provide a predictable, transparent, and equitable formula
for the Department of Agriculture to use in establishing beet
sugar marketing allotments in the future. . . . [T]he formula
allows for adjustments in the reallocation of beet sugar allot-
ments to account for such industry events as the permanent
termination of operations by a processor, the sale of a proces-
sor’s assets to another processor, the entry of new processors,
and so on. Taken together, these provisions offer the predict-
ability, fairness, and transparency we all agree is much
needed in the sugar beet industry.”).

A.     Permanent Termination of Operations Triggers the
       Requirement that an Allocation be Redistributed or
       Transferred.

   In construing the provisions of the Act, we first look to the
language of the statute to determine whether it has a plain
                   AMALGAMATED SUGAR v. VILSACK                       1639
meaning. McDonald v. Sun Oil Co., 548 F.3d 774, 780 (9th
Cir. 2008). “The preeminent canon of statutory interpretation
requires us to presume that the legislature says in a statute
what it means and means in a statute what it says there. Thus,
our inquiry begins with the statutory text, and ends there as
well if the text is unambiguous.” Id. (quoting BedRoc Ltd.,
LLC v. United States, 541 U.S. 176, 183 (2004) (internal quo-
tations omitted)). Here, we conclude that the statutory text is
unambiguous.

   [1] To maintain an equitable allocation among processors
under the FMAS program, Congress directed the USDA to
eliminate the allocation of a processor that permanently termi-
nates operations and redistribute it equitably among all pro-
cessors. Section 1359dd(b)(2)(E) provides:

       If a processor of beet sugar has been dissolved, liqui-
       dated in a bankruptcy proceeding, or otherwise has
       permanently terminated operations (other than in
       conjunction with a sale or other disposition of the
       processor or the assets of the processor), the Secre-
       tary shall —

       (i) eliminate the allocation of the processor provided
       under this section; and

       (ii) distribute the allocation to other beet sugar pro-
       cessors on a pro rata basis.

§ 1359dd(2)(E) (emphasis added).10
  10
     The related USDA regulation in effect in 2003 provides: that the
“CCC will eliminate the allocation of the processor who has been dis-
solved or liquidated in a bankruptcy proceeding and the allocation will be
distributed to all other processors on a pro-rata basis.”
7 C.F.R. § 1435.308(b) (2003). The USDA subsequently amended this
regulation to conform the rule to the statute and to clarify the criteria by
which a processor is determined to be permanently terminated. The rule
1640              AMALGAMATED SUGAR v. VILSACK
   A single processor may receive and exclusively benefit
from the allocation of another processor by acquiring the pro-
cessor or all of the processor’s assets. Section
1359dd(b)(2)(F) provides:

     If a processor of beet sugar (or all of the assets of the
     processor) is sold to another processor of beet sugar,
     the Secretary shall transfer the allocation of the
     seller to the buyer unless the allocation has been dis-
     tributed to other sugar beet processors under sub-
     paragraph (E).

§ 1359dd(2)(F) (emphasis added).

   [2] Thus, the Act requires the USDA to eliminate and redis-
tribute the allocation of a processor that has permanently ter-
minated operations, except when the processor terminated
operations because of a sale of the processor or all of its assets
to another processor. See § 1359dd(b)(2)(E).11 Even when the
USDA has not previously eliminated an allocation, the fact
that a processor has permanently terminated operations (other
than in conjunction with a sale of the processor or all assets
of the processor) cannot be ignored when the USDA is subse-
quently asked to transfer the allocation pursuant to a pur-
ported sale of the processor’s assets.

   [3] Reading the provisions together, before the USDA may

defines permanently terminated operations as “(i) Not processing sugar-
cane or sugar beets for 2 consecutive years, or (ii) Notifying CCC that the
processor has permanently terminated operations.” See Flexible Marketing
Allotments for Sugar, 69 Fed. Reg. 39,811, 39,813 (Jul. 1, 2004) (codified
at 7 C.F.R. § 1435.308(b)(3)) (subsequently amended by 69 Fed. Reg.
48,765 (Aug. 11, 2004) and 71 Fed. Reg. 16,198 (Mar. 31, 2006)).
   11
      The USDA may find that a processor has temporarily reduced or
stopped processing operations, in which case the statute gives the USDA
authority to temporarily reassign a processor’s allocation to other proces-
sors. See § 1359ee(b)(2).
                  AMALGAMATED SUGAR v. VILSACK                       1641
grant an allocation transfer request pursuant to a sale, the Act
requires: (1) that the buyer and seller are processors covered
by the Act; (2) that the seller has not been dissolved, liqui-
dated in a bankruptcy proceeding, or otherwise has not perma-
nently terminated operations, other than in conjunction with
the sale or other disposition of the processor or the assets of
the processor; and (3) that the sale involves a sale of the pro-
cessor or all of the assets of the processor. See
§ 1359dd(b)(2)(E)-(F).12 If any of these conditions is not met,
the USDA cannot approve the transfer pursuant to a sale.
Amalgamated argues that the transfer was not proper because
Pacific was no longer a processor, since it had permanently
terminated operations before (and not in conjunction with) the
purported sale of assets to American Crystal. The USDA and
American Crystal both argue that subparagraph (F) required
the USDA to transfer Pacific’s allocation because the USDA
had not previously eliminated and redistributed Pacific’s allo-
cation pursuant to subparagraph (E). The district court
deferred to this interpretation, concluding that it was reason-
able, not arbitrary or capricious, and supported by the admin-
istrative record. We disagree with the district court and agree
with Amalgamated.

B.     The District Court Erred When it Deferred to the
       USDA’s Interpretation of the Statutory Term
       “Processor”.

   [4] The district court deferred to the USDA’s interpretation
of the statutory term “processor” in its decision, granting
Chevron deference to the JO decision. We conclude that the
district court erred. First, the term “processor” is not ambigu-
  12
     The related USDA regulation in effect in 2003 does not provide
criteria for when a processor permanently terminates operations, but does
provide: “Subject to paragraph (a) of this section [regarding requests from
growers to transfer an allocation from a closed facility], CCC will elimi-
nate the allocation of the processor who has been dissolved or liquidated
in a bankruptcy proceeding and the allocation will be distributed to all
other processors on a pro-rata basis.” 7 C.F.R. § 1435.308 (2003).
1642            AMALGAMATED SUGAR v. VILSACK
ous as used in the Act. Second, the interpretation advanced by
the USDA is not reasonable, because it is contrary to the
USDA implementing regulation.

   In reviewing the USDA’s interpretation of a statute that it
administers, the court must follow the two-step approach set
out in Chevron, 467 U.S. at 842-44. The first step is to deter-
mine whether Congress has unambiguously expressed its
intent on the issue before the court. Natural Res. Def. Council
v. U.S. E.P.A., 526 F.3d 591, 602 (9th Cir. 2008) (citing
Chevron, 467 U.S. at 843 n.9). If the intent of Congress is
clear, such as when the statute expressly defines the disputed
term, the court “must follow that definition, even if it varies
from that term’s ordinary meaning.” United States v. W.R.
Grace & Co., 429 F.3d 1224, 1238 (9th Cir. 2005) (quoting
Stenberg v. Carhart, 530 U.S. 914, 942 (2000)).

   If the statute is silent or ambiguous, the court must then
decide whether the agency’s interpretation “is based on a per-
missible construction of the statute.” Natural Res. Def. Coun-
cil, 526 F.3d at 602 (citing Chevron, 467 U.S. at 843). Where
Congress explicitly or implicitly delegates legislative author-
ity to the agency, the court must defer to an agency’s statutory
interpretation so long as it is reasonable and not arbitrary and
capricious. Id. The court must consider the agency’s position
over time, and if the agency’s interpretation of a relevant pro-
vision conflicts with the agency’s earlier interpretation, the
agency is “entitled to considerably less deference than a con-
sistently held agency view.” Id. (citations omitted). This def-
erence also does not extend to “ ‘agency litigating positions
that are wholly unsupported by regulations, rulings, or admin-
istrative practice.’ ” Ashoff v. City of Ukiah, 130 F.3d 409,
411 (9th Cir. 1997) (quoting Bowen v. Georgetown Univ.
Hosp., 488 U.S. 204, 212 (1988)).

   The agency’s own regulations are significant and cannot be
disregarded when interpreting a statute. See Vance v. Hegs-
trom, 793 F.2d 1018, 1025 (9th Cir. 1986). An agency’s inter-
                AMALGAMATED SUGAR v. VILSACK                1643
pretation of its own regulation is not entitled to deference if
it is “plainly erroneous or inconsistent with the regulation.”
See Auer v. Robbins, 519 U.S. 452, 461-63 (1997) (citing
Robertson v. Methow Valley Citizens Council, 490 U.S. 332,
359 (1989)). “A regulation has the force of law; therefore, an
agency’s interpretation of a statute in a manner inconsistent
with a regulation will not be enforced.” Nat’l Med. Enters. v.
Bowen, 851 F.2d 291, 293 (9th Cir. 1988).

   In this case, the Act does not define the terms “processor”
or “processor of beet sugar.” However, where a term is not
ambiguous, its plain and ordinary meaning should be ascribed
unless there is clear evidence to the contrary that Congress
intended a different meaning. See Seldovia Native Ass’n, Inc.
v. Lujan, 904 F.2d 1335, 1341 (9th Cir. 1990).

  [5] We note that the term “processor” does not have any
independent legal significance. One dictionary defines the
word to mean “one that processes agricultural products, foods,
or similar products.” See Webster’s Third New International
Dictionary 1808 (1993). Two other common dictionaries like-
wise define “processor” as “one that processes.” See The
American Heritage College Dictionary 987 (2d ed. 1985);
Webster’s II New Riverside University Dictionary 938
(1984).

   [6] Within the relevant provisions of the Act, we read “pro-
cessor” to mean an entity who processes sugar, entirely within
the natural and ordinary meaning of the word. For example,
the Act requires the Secretary to establish allotments of sugar
for “marketing by processors of sugar processed from . . .
sugar beets . . . .” See § 1359bb(b)(1). The sugar marketing
allotments “shall apply to the marketing by processors of
sugar . . .” § 1359bb(c)(1) (emphasis added). A “processor” is
not allowed to market more sugar than it has been allocated.
See id. at § 1359bb(d). The Act consistently uses “processor”
to exclusively refer to that class of entities who process sugar.
1644               AMALGAMATED SUGAR v. VILSACK
We find the term unambiguous and nothing in the Act contra-
dicts or confuses the ordinary meaning.

   [7] Within the Act, it is not receipt of an allocation that
makes an entity a processor, but rather the processing of sugar
beets that entitles one to an equitable allocation. The Act
directs, and therefore presumes, that any entity that processes
sugar will have an equitable opportunity to market sugar and
therefore receive an allocation. § 1359dd(a).13 The initial allo-
cations were made to processors who had actual, historical
production      during      the    1998-2000      crop      years.
§ 1359dd(b)(2)(C). New processors, referred to as “new
entrants,” are equally entitled to an allocation under the Act
when they start processing sugar beets or acquire an ongoing
factory with a production history. § 1359dd(b)(2)(H)-(I).
Maintenance of the allocation is also conditioned on continu-
ing operations and processing of sugar. Id. at
§ 1359dd(b)(2)(E)-(F). Thus, we conclude that actual process-
ing and capacity to produce sugar are what make an entity a
processor, and it is this status as a processor that entitles it to
an allocation.

   The USDA argues that if the ordinary meaning of the term
is applied, then Pacific could not have received the original
allocation on October 1, 2002, because by that time Pacific
was no longer processing sugar. Likewise, the USDA con-
tends that if Pacific were not a “processor,” the USDA could
not have temporarily reassigned Pacific’s allocation to other
processors for crop years 2002 and 2003.14 We are not asked
  13
      The Act provides that “Whenever marketing allotments are estab-
lished for a crop year under section [1359cc of this title], in order to afford
all interested persons an equitable opportunity to market sugar under an
allotment, the Secretary shall allocate each such allotment among the pro-
cessors covered by the allotment.” § 1359dd(a).
   14
      If a processor with a share of the allotment will be unable to market
all of the allocation during a particular crop year, the Secretary may tem-
porarily reassign to the “deficit” for that crop year. § 1359ee(b)(2). The
reassignment is redistributed to the other processors depending on their
capacity to fill a portion of the deficit. Id.
                  AMALGAMATED SUGAR v. VILSACK                       1645
to review the propriety of the original allocations or the tem-
porary reassignments made by the USDA under the Act.
Nonetheless, we find it unlikely that Congress intended that
the USDA give a defunct sugar company, incapable of pro-
cessing or marketing sugar, a sugar marketing allocation. The
fact that the USDA gave the defunct Pacific an original allo-
cation, which it temporarily reassigned to other processors,
has no impact on our interpretation of this unambiguous statu-
tory term.

   The USDA also urges that “processor” must mean an entity
with an allocation, because the provisions regarding disposi-
tion of an allocation upon termination of operations or sale of
assets uses that term, and the provisions would not apply
unless a “processor” had an allocation. § 1359dd(b)(2)(E) &
(F). This argument is not persuasive. As we stated above, the
Act presumes that all processors will receive an equitable
allocation, and therefore it is true that a processor would have
or be entitled to an allocation. However, this does not mean
that a processor is only a processor because it has an alloca-
tion.

   [8] To the extent that the USDA’s argument exposes any
ambiguity in the statute, which we do not believe it does, the
USDA’s interpretation is not reasonable and not entitled to
deference, because it conflicts with the USDA’s own imple-
menting regulations. See Pac. Rivers Council v. Thomas, 30
F.3d 1050, 1054 (9th Cir. 1994) (refusing to defer to the
USDA’s construction of a statutory term because it was
inconsistent with the plain language of the statute and con-
trary to the agency’s own regulation). The USDA implement-
ing regulation provides, “[s]ugar beet processor means a
person who commercially produces sugar, directly or indi-
rectly, from sugar beets (including sugar produced from sugar
beet molasses), has a viable processing facility, and a supply
of sugar beets for the applicable allotment year.”
7 C.F.R. § 1435.2 (2003).15 The district court acknowledged
  15
    This definition has not changed since the rule was first effected. Com-
pare 2002 Farm Security and Rural Investment Act of 2002 Sugar Pro-
1646            AMALGAMATED SUGAR v. VILSACK
this regulatory definition, but concluded that the interpretation
advanced by the USDA was “reasonable given the use of the
word throughout the statute.” We disagree. The USDA’s pro-
posed interpretation that a processor is an entity that has an
allotment, even if it is not processing anything, is not reason-
able, precisely because it conflicts with its own regulation.
See Nat’l Med. Enters., 851 F.2d at 293-94.

   [9] Accordingly, we hold that the district court erred in
deferring to the definition of the term “processor” advanced
by the USDA. Within the Act, the term is unambiguous and
used in a manner consistent with its natural and ordinary
meaning. The USDA’s interpretation, advanced in the present
dispute, not only conflicts with the ordinary meaning of the
word but also conflicts with the USDA’s own regulatory defi-
nition of the term.

C.     Pacific Permanently Terminated Operations and
       Ceased Being a Processor Prior to the Purported Sale
       of Assets to American Crystal.

  There is no dispute that Pacific was a sugar beet processor
during the 1998 through 2000 crop years. Whether Pacific
was a “processor” by the time it purported to sell its assets to
American Crystal in September 2003 depends on when and
under what circumstances Pacific permanently terminated
operations. We conclude that Pacific ceased being a processor
when it permanently terminated operations prior to the pur-
ported sale to American Crystal.

   [10] After five days of evidentiary hearings, the ALJ found
that Pacific had permanently terminated operations before the
purported sale of assets to American Crystal. The record
strongly supports this finding, given that Pacific had not pro-

grams and Farm Facility Storage Loan Program, 67 Fed. Reg. 54,926,
54,930 (Aug. 26, 2002) with 7 C.F.R. § 1435.2 (2008).
                AMALGAMATED SUGAR v. VILSACK               1647
cessed sugar beets since February 2001. Pacific sold its fac-
tory and assets in June 2001 and had no sugar beet crops in
2001, 2002 or 2003. The State of Washington administra-
tively dissolved Pacific in July 2001, even though it was sub-
sequently reinstated in September 2003 in connection with the
transaction with American Crystal. Pacific lost its lease and
option to repurchase its factory in July 2002. Pacific’s Board
of Directors also adopted a December 2002 resolution pur-
porting to convey its allocation to Washington Sugar and stat-
ing that “CRSC has no desire, interest or ability to move
forward and operate [the Pacific] processing facility.” The JO
did not refute these findings.

   Instead, the JO reasoned that as long as the USDA had not
previously eliminated the allocation, it was available to be
transferred pursuant to a sale. There is no basis for this rea-
soning. The determinative factor on the availability of the
allocation is whether a processor has permanently terminated
operations, not whether the USDA has failed to act. If we
upheld the interpretation advanced by the USDA, the propri-
ety of a transfer would not depend on events in the sugar beet
industry, as Congress intended, but on whether the USDA has
been diligent in fulfilling its statutory duties. Allowing such
an interpretation would result in an arbitrary and capricious
outcome that would be contrary to the intent of Congress.

   We also conclude that the USDA had a self-serving and,
possibly, a financial interest in interpreting the Act to allow
the transfer of Pacific’s allocation to American Crystal. First,
the USDA gained administrative advantage by conditioning
approval of the transfer on (1) waiver by American Crystal
and Pacific of rights to bring any action against the USDA in
the event that the USDA is required by a court to reverse the
transfer of the allocation; and (2) agreement by American
Crystal to drop Pacific’s appeal of the CCC’s June 16, 2003
adverse ruling regarding Pacific’s request to increase its allo-
cation for 2003. The record also indicates that the USDA may
have had a financial interest in approving the transfer. Pacific
1648            AMALGAMATED SUGAR v. VILSACK
owed the USDA as much as $12.1 million after Pacific
defaulted on a $20 million loan guaranteed by the USDA.
Pacific received $3.025 million in payment from American
Crystal for the sale of the allocation. As a creditor of Pacific,
the USDA may have had a financial interest in approving the
transfer. Even if the USDA received no direct financial bene-
fit, the existence of a possible pecuniary interest is of concern
in evaluating the manner in which the USDA administered the
Act and interpreted its provisions. We are troubled that the
USDA may have acted more out of concern for administrative
convenience and self-interest, rather than with an interest in
administering the Act according to statutory requirements and
Congressional intent. Where an agency interprets or adminis-
ters a statute in a way that furthers its own administrative or
financial interests, the agency interpretation must be subject
to greater scrutiny. Chevron deference is also inappropriate
where an agency has a self-serving, pecuniary interest in
advancing a particular interpretation of a statute. Cf. Nat’l
Fuel Gas Supply v. Fed. Energy Reg. Comm’n, 811 F.2d
1563, 1571 (D.C. Cir. 1987) (noting that while an agency’s
interpretation of a statute incorporated into a contract may be
entitled to deference, such deference may be inappropriate
where the agency itself is a party to the contract).

   [11] The uncontradicted findings of the ALJ show that
Pacific permanently terminated operations prior to the pur-
ported sale of assets to American Crystal. Accordingly,
Pacific was no longer a processor at the time of the purported
sale. Because the permanent cessation of operations requires
redistribution, the USDA should have redistributed Pacific’s
allocation among all processors pro rata as required by law.

D.     Termination of Operations Not in Conjunction with
       a Sale of All Assets.

   The USDA argues that, even if Pacific terminated opera-
tions, the USDA was not required to redistribute the alloca-
tion among all processors, because Pacific permanently
                AMALGAMATED SUGAR v. VILSACK               1649
terminated operations in conjunction with a sale or other dis-
position of the processor or the assets of the processor. See
§ 1359dd(b)(2)(E). The JO agreed. The district court
expressed concern that there was no sale of “all the assets of
the processor,” but nonetheless affirmed, finding the JO’s
conclusions to be reasonable and not arbitrary or capricious.
We find this conclusion to be unreasonable and not supported
by the record.

   [12] American Crystal did not purchase Pacific itself. Thus,
in order to satisfy the prerequisites for transfer, American
Crystal must have purchased all of Pacific’s assets. See
§ 1359dd(b)(2)(F). Yet, Pacific’s assets were liquidated well
before the purported sale to American Crystal. The factory
and all Pacific’s processing equipment had been previously
liquidated and sold to Central Leasing. American Crystal
acknowledged that Pacific’s remaining assets largely included
“the marketing allocation and some other generally immate-
rial assets.”

   The USDA and American Crystal argue that to satisfy the
requirements of the Act, the asset sale need only be “a sale of
those assets that the processor has at the time, not those which
the processor may have owned in the past.” Therefore, the
USDA argues that it is not relevant that the assets sold were
immaterial so long as they include all the assets Pacific had
at the time of the sale. We agree that the sale of all of Pacif-
ic’s assets need not include all of the assets Pacific ever
owned. However, the fact that Pacific had no material assets
at the time of the sale is problematic.

   [13] First, at the time of the sale to American Crystal,
Pacific’s only purported asset of any value was its marketing
allocation. The JO concluded that “if a beet sugar processor
has a beet sugar marketing allocation, that allocation can be
sold in connection with a sale of the assets of the beet sugar
processor.” We conclude this to be an erroneous statement of
the law. A marketing allocation can be transferred only upon
1650               AMALGAMATED SUGAR v. VILSACK
a sale of all assets belonging to a processor.
§ 1359dd(b)(2)(F). Under the Act, however, while an alloca-
tion inevitably adds value to a processor, it is not an asset
itself that can be owned or conveyed by the processor. As
Amalgamated persuasively argues, an FMAS marketing allo-
cation is “a right in the nature of a government license; it can
be conveyed only by an act of the Secretary of Agriculture.”
The USDA has near plenary control over the allocations, sub-
ject to the mandates of the Act. The USDA must modify the
allocations whenever a processor sells a factory or a new pro-
cessor enters the industry, reopens a factory, or acquires an
operating factory with a production history. See § 1359dd.
The allocation is also subject to the requirement that it “be
shared among producers served by the processors in a fair and
equitable manner.” See § 1359ff. When a processor closes,
growers have the right to request that the USDA transfer the
allocation to an alternate processor where they will deliver
their crops. The USDA can also temporarily reassign an allo-
cation when a processor is unable to fully use it in a given
crop year. See § 1359ee. Notably, the USDA is not required
to compensate a processor for reductions in the allocation or
seek the processor’s permission. We conclude, as the ALJ did,
that “[f]or there to be a ‘sale of all assets,’ more than the mar-
keting allocation itself needs to be conveyed.”16

   [14] Second, assuming for the sake of argument that the
sale of purely immaterial assets were sufficient, the fact that
Pacific did not have any tangible assets of any value confirms
that it was no longer a processor and that its permanent termi-
nation of operations was not in conjunction with but prior to
  16
    The fact that American Crystal ultimately purchased from Central
Leasing some of the assets formerly owned by Pacific does not affect our
analysis. Central Leasing was not a sugar processor and never acquired
Pacific’s allocation. Therefore, a purchase of assets from Central Leasing
does not entitle American Crystal to a transfer of Pacific’s allocation.
Under the Act, for the USDA to approve a transfer of an allocation in con-
junction with the sale of assets, both the purchaser and seller must be pro-
cessors. See § 1359dd(b)(2)(E).
                AMALGAMATED SUGAR v. VILSACK                1651
and independent of the sale to American Crystal. We
acknowledge that, if Pacific’s only remaining assets were
good will, production rights, production history, books, and
records, it would not be unreasonable to conclude that Ameri-
can Crystal purchased all of Pacific’s assets. However, this
does not mean that Pacific was a processor at the time of the
sale or that it terminated its operations in conjunction with the
sale. Rather, the absence of material assets is a strong confir-
mation that Pacific permanently terminated operations prior to
the sale. We believe the reasoning of the ALJ is persuasive in
determining that Pacific did not terminate operations in con-
junction with the purported sale to American Crystal. If
Pacific had retained the assets it sold to American Crystal,
could it have continued operations? Pacific had no financing,
no equipment, no sugar beet crop, no factory, no right to oper-
ate a factory, and had not produced sugar for over two years.
As the ALJ noted, “The record in this case makes it abun-
dantly clear that when the sale to American Crystal took
place, Pacific Northwest was no longer able to ever again pro-
cess beets into sugar. It had neither the physical assets [n]or
the will.”

IV.   Conclusion

   We are sympathetic to the principals and investors of
Pacific who sought to salvage what value they might from
their failed investment. We also recognize that it was good
business for American Crystal to seek to secure Pacific’s mar-
keting allocation solely for itself. The transaction between
Pacific and American Crystal was a crafty effort to circum-
vent the Act’s clear directive and avoid an equitable redistri-
bution of Pacific’s allocation, in favor of a single processor.
However, when a sugar processor permanently terminates
operations, Congress mandated that the USDA fairly and
equitably redistribute the failed processor’s allocation among
all processors. The USDA failed to fulfill its responsibilities
in this regard. It put administrative expediency ahead of the
intent of Congress and sanctioned a questionable transaction
1652            AMALGAMATED SUGAR v. VILSACK
that was attempting to resurrect a dead company for the sole
purpose of effecting the transfer of its sugar marketing alloca-
tion.

  We reverse the district court’s order granting summary
judgment in favor of the USDA and American Crystal. We
remand for further proceedings consistent with this opinion.
We award costs on appeal to Appellant, Amalgamated.

  REVERSED and REMANDED.