Court Opinion

ID: 30679
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:57:37+00
Date Added: 2024-06-11T12:37:36.837705
License: Public Domain

United States Court of Appeals
                                                               Fifth Circuit
                                                            F I L E D
                  UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT                March 26, 2003

                                                        Charles R. Fulbruge III
                                                                Clerk
                              02-30961
                          Summary Calendar

 SEVENTY ONE FARM JOINT VENTURE; WOOD LAKE INC; SLOW BAYOU INC;
   SANDY BAYOU, INC; SPRINGS INC; PORT BARRE INC; LAVEAU INC.

                                             Plaintiffs-Appellants,

                               VERSUS

             UNITED STATES DEPARTMENT OF AGRICULTURE,

                                                Defendant-Appellee.

           Appeal from the United States District Court
               for the Western District of Louisiana
                            (01-CV-1990)

Before DAVIS, DUHÉ, and DeMOSS, Circuit Judges.

DUHÉ, Circuit Judge:1

      Plaintiffs-Appellants Seventy-One Farm Joint Venture (“the

JV”) and its six joint venturer participants filed suit claiming

that, contrary to a final agency determination, each of the six

joint venturers was eligible to receive 1997 program payments

authorized by the Agricultural Market Transaction Act (AMTA), 7

U.S.C. § 7201, et seq.   Defendant Anne M. Veneman, Secretary of the

  1
     Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
United States Department of Agriculture (“USDA”), is ultimately

responsible        for    AMTA   payment       determinations.2            The    case   was

submitted on a stipulated transcript of agency proceedings and

cross-motions for summary judgment.                         The district court ruled

against Plaintiffs, concluding that substantial evidence supported

the Secretary’s decision that Plaintiffs were entitled to only one

AMTA payment in 1997, not six.                 After de novo review, we affirm.

                                               I.

          AMTA payments are limited to $40,000.00 per “person.”                            7

U.S.C. §§ 7215, 1308.            Under the payment limitation and payment

eligibility regulations, a joint venture is deemed to be a “joint

operation,”        which cannot be a “person” eligible for payments.

Each of its members or participants, however, can be a “person.”

See generally 7 C.F.R. §§ 1400.3(b) (definition of “person,”

¶ (1)(i)&(ii)), 1497.102.

          Within the regulatory definition of “person” are certain

“separate and distinct” requirements.                      A joint venture may satisfy

the       “separate      and   distinct”       requirements         for    each    of    its

participants or members.            See 7 C.F.R. § 1400.3 (definition of

“person,” ¶(3)) (“With respect to an . . . entity that is a member

of       a joint   operation,     such     .       .   .   entity   will   have    met   the

requirements of paragraph (2) [listed below] if the joint operation

     2
     The USDA is required to offer production flexibility contracts
to eligible farmers, to make annual payments in return for the
farmers’ agreeing to certain conservation and planting flexibility
provisions. See 7 U.S.C. § 7211 (1996).

                                               2
meets the requirements . . . .”).           To do so, a joint venture must

establish that it:

     (1)   Has a separate and distinct interest in the land or crop
           involved;

     (2)   Exercises separate responsibility for such interest; and

     (3)   Maintains funds or accounts separate from that of any
           other individual or entity for such interest.

7 C.F.R. § 1400.3 (definition of “person,” ¶(2)).

     Specifically       under    scrutiny   today     is   whether    the   JV’s

transactions   and   financial      relationship      with    another   entity,

Seventy-One Farms, LLC (“the LLC”), the owner of the land farmed by

the Plaintiffs, disqualified the JV from meeting the “separate and

distinct” requirements.

                                      II.

     The JV leases farm land in St. Landry Parish from the LLC for

cash rent.   Don Williams (“Williams”) manages the JV off premises

and Terrell Savage is the farm manager on site.                 The six joint

venturers, each a Louisiana corporation, are owned in varying

amounts by Williams, Savage, and Williams’s two adult daughters.

Williams also manages the LLC.        The LLC is owned by two trusts, one

for each of Williams’s two daughters.             Williams also resides in a

house owned by the same two trusts.

     The Agency determined that the members of the JV and the LLC

“were   combined   as    [one]    person    for    1997    payment   limitation

purposes,” because 1) the LLC secured one of its loans with the

JV’s crop, and 2) the JV and LLC jointly borrowed funds using

                                       3
property owned by the LLC’s two owners (the trusts) as security.3

      We review the district court’s summary judgment decision de

novo, Shell Offshore, Inc. v. Babbitt, 238 F.3d 622, 627 (5th Cir.

2001), and the final agency decision deferentially. Sierra Club v.

U. S. Fish & Wildlife Service, 245 F.3d 434, 444 (5th Cir. 2001).

The general standard under the Administrative Procedures Act, 5

U.S.C. §§ 701, et seq., is whether the agency’s final decision was

arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with the law.           5 U.S.C. § 706(2)(A); Sierra Club, 245

F.3d at 444.

      We   review    an   agency    finding   to   determine    whether   it    is

supported    by     substantial     evidence.      5   U.S.C.    §   706(2)(E);

Refrigerated Transport Co., Inc. v. I.C.C., 663 F.2d 528, 530 (5th

Cir. 1981).       An agency must articulate a rational relationship

between the facts found and the choice made.           Sierra Club, 245 F.3d

at 444; Refrigerated Transport, 663 F.2d at 531.

                                       III.

      The Agency decision was based in part on findings that the JV

commingled loans and collateral with the LLC and Williams.                     The

record contains substantial evidence to uphold an agency finding

  3
     Plaintiffs also argue that the combination of the JV and LLC
as one person was in contravention of the combination rules since
the LLC does not own any part of the JV. This argument misses the
mark. While the combination regulation, 7 C.F.R. § 1400.101, is
dependent on percentage ownership, the “person” requirements set
forth in § 1400.3, require the entity to maintain funds or accounts
separate from “any other individual or entity,” without regard to
percentages of ownership.

                                        4
that the assets and obligations of the JV were shared, by its

taking out joint loans with the LLC and by the joint use of its

property as collateral.4

      The agency concluded from these findings that the JV failed to

exercise “separate and distinct” responsibilities for the crops.

Whether   we   would   hold   that   the   transactions   at   issue   would

disqualify an entity from satisfying the “separate and distinct”

element in the regulations is not the standard we employ today.

Enron Oil & Gas Co. v. Lujan, 978 F.2d 212, 215 (5th Cir. 1992)

(agency’s interpretation need not be the sole interpretation or one

that a reviewing court would reach), cert. denied, 510 U.S. 813,

114 S. Ct. 59, 126 L.Ed.2d 29 (1993).         We decide only whether the

agency’s interpretation was plainly erroneous or inconsistent with

its own regulations; otherwise, the agency’s construction of its

own regulations is controlling. Silwany-Rodriguez v. INS, 975 F.2d

1157, 1160 (5th Cir. 1992); United Steel Workers v. Schuylkill

Metals Corp., 828 F.2d 314, 319 (5th Cir. 1987).               We review to

determine whether the agency considered the relevant factors or

  4
      The JV obtained financing for its 1997 crop from two loans
secured by the 1997 crops, with a collateral mortgage note made by
the LLC and collateral mortgage on land owned by the LLC and as
additional security for one of the two loans. The same collateral
was used to secure loans to the LLC during 1997.
   In addition, the JV and LLC took two loans jointly in 1997: one
secured by the JV’s crops, with proceeds payable to the LLC; the
other secured by the residence and lot owned by the two trusts, the
proceeds of which were payable to both the JV and the LLC. The
record also provides testimony that in the farming business the
land owner and tenant do not usually jointly borrow money and use
the crop of the tenant as collateral for such a loan.

                                      5
made a clear error in judgment in reaching its decision.                 State of

Louisiana v. Verity, 853 F.2d 322, 327 (5th Cir. 1988).

     Under this deferential standard we easily conclude that the

Agency   did   not    clearly   err   in    determining     that   the    JV,   by

participating in the transactions noted, did not retain a “separate

and distinct” interest in its crops.              Accordingly, we uphold the

Agency determination      that   the   JV    failed    to   meet   the   payment

eligibility requirements for each of its six members in 1997.

                                 CONCLUSION

     Because    the    Agency   decision     is   supported   by   substantial

evidence and does not represent a clear error of judgment, the

district court opinion upholding that determination is

     AFFIRMED.

                                       6