Court Opinion

ID: 817637
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:56:21.915256+00
Date Added: 2024-06-11T12:19:52.749240
License: Public Domain

Slip Op. 09 - 62

              UNITED STATES COURT OF INTERNATIONAL TRADE

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LARRY J. HACKER and NANCY A. HACKER,               :

                                Plaintiffs,        :

                         v.                        :   Court No. 07-00008

UNITED STATES SECRETARY OF AGRICULTURE, :

                                Defendant.         :

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                                  Memorandum

[Plaintiffs’ motion for judgment on the
 agency record denied; action dismissed.]

                                                       Decided:   June 19, 2009

     Miller    &    Chevalier   Chartered       (Daniel   P.   Wendt)   for    the
plaintiffs.

     Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Franklin F. White, Jr., Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice
(Brian T. Edmunds); and Office of General Counsel, U.S.
Department of Agriculture (Jeffrey Kahn), of counsel, for the
defendant.

             AQUILINO,   Senior   Judge:        Upon   commencement     of    this

action pursuant to 19 U.S.C. §2395 and 28 U.S.C. §1581(d) to

contest the denial of a cash benefit under the Trade Adjustment

Assistance    for    Farmers    program    by    the   Foreign    Agricultural
Court No. 07-00008                                       Page 2

Service (“FAS”), U.S. Department of Agriculture, the defendant

interposed a motion to remand to FAS so that

     it may issue a new and more detailed decision
     explaining the reasons for its denial of plaintiffs’
     request   for   certification for  trade  adjustment
     assistance (“TAA”).

                                I

          That motion was granted, and the order of remand has

brought forth a reconsidered decision by FAS that, nevertheless,

on

     the basis of the net farm income reported on the 2003
     and 2004 Schedule F’s that Mr. Hacker submitted, there
     was not a decline in his net farm income from 2003 to
     2004, and therefore Mr. Hacker does not meet the
     requirements of 19 U.S.C. § 2401e(a)(1)(C) and 7
     C.F.R. § 1580.301(e)(4) and is not eligible for a cash
     payment under TAA.1

     1
       The “Schedule F’s” referred to were part of plaintiffs’
submissions to the Internal Revenue Service on Forms 1040 for
those calendar years. See Administrative Record (“AR”), pp. 5,
6.

     Footnote 1 to this decision states that, according to the
agency record,

     Larry J. Hacker was the sole applicant for TAA
     benefits.   Although Nancy A. Hacker also signed the
     application, her name is not listed as an applicant,
     and all determinations were made solely with respect
     to Larry J. Hacker.    . . .    However, this does not
     affect the determination in this case.

AR citations omitted. Plaintiffs’ counsel concur.   See Hackers’
Rule 56.1 Brief, p. 1 n. 1.
Court No. 07-00008                                               Page 3

Whereupon, with the able assistance of counsel pro bono publico,

the plaintiffs filed an amended complaint, which has been duly

answered by the defendant, and then a motion for judgment on the

agency record pursuant to USCIT Rule 56.1.

          That   motion   indicates   that   plaintiffs   are   American

farmers who have grown and harvested Concord and Niagara grapes

in the state of Michigan.    It proceeds to describe in haec verba

their circumstances in this matter as follows:

          A drought in 2001 ruined much of the Hackers’
     grape crop, but the Secretary was there to help,
     providing a disaster relief payment of $80,000.    The
     Hackers received the payment in early 2004.    By that
     time, however, the Hackers were struggling to cope
     with an influx of low-priced imports from Argentina.
     Soon, the Secretary recognized that grape prices had
     significantly fallen due to the low-priced imports and
     made TAA payments available to eligible farmers.    To
     be eligible, a farmer must show that his or her net
     farm income has decreased at the same time as low-
     priced imports penetrated the market.         For the
     Hackers, this meant that they were required to show
     that their 2004 net farm income was lower than their
     2003 net farm income.

          But the Hackers’ net farm income - as reported in
     their tax filings - did not decline from 2003 to 2004
     because the Hackers’ 2004 net farm income included the
     $80,000 disaster relief payment.         However, the
     Hackers’ true net farm income - i.e., the net farm
     income excluding the disaster relief payment - did
     decline from 2003 [to] 2004.    Indeed, although they
     farmed approximately the same acreage in 2003 and
Court No. 07-00008                                                 Page 4

     2004, the Hackers produced fewer grapes in 2004 in a
     market with declining prices.

          The Secretary relied solely on the Hackers’ net
     farm income as reported in their tax returns and
     denied the Hackers’ request for TAA payments. . . .

Hackers’ Rule 56.1 Brief, pp. 1-2 (emphasis in original).

            The motion takes the position that defendant’s denial

of assistance was not based on substantial evidence because the

Secretary   relied   solely   on   the   Hackers’   net   farm   income   as

reported in their tax returns.

          Also, the Secretary’s determination was not
     otherwise in accordance with law because the . . .
     regulation defining net farm income, as applied to Mr.
     Hacker’s application, unjustifiably and arbitrarily
     distinguishes between farmers based on the irrelevant
     facts of (1) if and when a farmer receives a disaster
     relief payment unrelated to the relevant period; and
     (2) whether the farmer reports net farm income for tax
     purposes on an accrual or cash basis.

Id. at 2.     It argues that the defendant could have and should

have provided the plaintiffs with relief, first by excluding the

disaster payment “per se” from its determination of their net

farm income or, second, by accepting plaintiffs’ “invitation” to

calculate that income on an accrual, rather than a cash, basis.

See id. at 2-3.
Court No. 07-00008                                                             Page 5

                                            A

             Congress      has     enacted       qualifying       requirements      for

relief of the kind prayed for herein, including that a

       producer’s net farm income (as determined by the
       Secretary) for the most recent year [be] less than the
       producer’s net farm income for the latest year in
       which no adjustment assistance was received by the
       producer under this part.

19 U.S.C. §2401e(a)(1)(C).             In furtherance of this statutory

condition, the Secretary of Agriculture has determined to define

“net farm income” to mean

       net farm profit or loss, excluding payments under this
       part, reported to the Internal Revenue Service for the
       tax year that most closely corresponds with the
       marketing year under consideration.2

And   the   courts     have      determined      that     this   is    a   “reasonable

definition of the statutory term, to which [they] are obligated

to    defer.”      Steen      v.   United       States,    468    F.3d     1357,   1360

(Fed.Cir. 2006), aff’g, 29 CIT 1241, 395 F.Supp.2d 1345 (2005).

             In   this     matter,     the       defendant       has   proceeded     in

accordance      with   this    law,   thereby      leaving       the   plaintiffs   to

       2
       7 C.F.R. §1580.102.     The court notes that plaintiffs’
$80,000 disaster relief payment was not the kind of “payment[]
under this part” contemplated by this regulation.
Court No. 07-00008                                                          Page 6

attempt to find relief in certain cases decided subsequent to

Steen,     including     Robert      L.    Anderson       v.     U.S.    Sec’y     of

Agriculture,    30    CIT    1993,   469   F.Supp.2d      1300    (2006);    Dus    &

Derrick, Inc. v. U.S. Sec’y of Agriculture, 31 CIT ___, 469

F.Supp.2d    1326    (2007);     Mark     T.   Anderson    v.     U.S.   Sec’y     of

Agriculture, 31 CIT           , Slip Op. 07-77 (May 16, 2007).

             In the case of Robert L. Anderson, the court remanded

his claim because it found the agency failed to consider the

reasonableness of its regulation as applied to Mr. Anderson in

its determination.          See 30 CIT 1742, 1753, 462 F.Supp.2d 1333,

1342 (2006).        Citing Steen, which was decided by the court of

appeals one month after that order, the agency declined to carry

out its mandate.        Whereupon the CIT ordered the Secretary, yet

again, to comply on the grounds of improper procedure and that

“a   plain    reading       of   Steen     would    have       demonstrated      its

inapplicability”3 because that matter lacked any contention that

the tax returns distorted the net amount of income derived from

all fishing sources in the two relevant years.                    There was such

an assertion in Robert L. Anderson.                See 31 CIT ___, ___, 493

F.Supp.2d 1288, 1291 (2007).

     3
         30 CIT at 1994, 469 F.Supp.2d at 1301.
Court No. 07-00008                                                 Page 7

             Such a reading does not lead to the same conclusion in

this action.       Indeed, what seemingly has come to discomfort the

plaintiffs is the timing of their application at the end of one

tax   year   for    the   disaster   relief   payment,   which   was   then

received soon after the start of the ensuing such year.

           It is well-established that the cash method
      usually leads to distorted income statements for any
      one taxable year. See, e.g., Frysinger v. Comm’r, 645
      F.2d 523, 527 (5th Cir. 1981).            However, the
      “sacrifice in accounting accuracy under the cash
      method represents an historical concession by the
      Secretary and the Commissioner to provide a unitary
      and expedient bookkeeping system for farmers and
      ranchers   in   need   of   a   simplified   accounting
      procedure.” United States v. Catto, 384 U.S. 102, 116
      (1966); see also Frysinger, 645 F.2d at 527 (finding
      the Commissioner has specifically granted farmers the
      special privilege of using the cash method despite the
      high probability for substantial distortions of income
      in any one taxable year).        For income reporting
      purposes, the distortions are not considered material
      because “over a period of years the distortions will
      tend to cancel out each other.” Van Raden v. Comm’r,
      71 T.C. 1083, 1104 (1979); see also Spitalny v. United
      States, 430 F.2d 195, 197 (9th Cir. 1970).

Robert L. Anderson v. U.S. Sec’y of Agriculture, 30 CIT at 1750,

462 F.Supp.2d at 1340.        Presumably the delayed receipt of the

disaster relief payment was the result of appropriate business

planning, yet having the effect countenanced by the foregoing

cited cases.
Court No. 07-00008                                                  Page 8

             Moreover, the evidence of those farm-relief funds on

the agency record differentiates this action from all the others

cited by the plaintiffs herein.         Compare, e.g., Dus & Derrick,

Inc. v. U.S. Sec’y of Agriculture, supra, with id., 32 CIT                ,

Slip Op. 08-19 (Feb. 6, 2008), and Mark T. Anderson v. U.S.

Sec’y of Agriculture, 30 CIT 1104, 441 F.Supp.2d 1379 (2006),

with id., supra.     In sum, this court is unable to conclude that

defendant’s determination after remand is not in accordance with

law and not supported by substantial evidence on the record.

                                    B

             With regard to appropriate relief, the plaintiffs take

the position that the Secretary of Agriculture’s definition of

“net farm income”, supra, is not in accordance with law.                To

contend that the disaster relief payment received be excluded

from farm income for TAA-calculation purposes does not coincide

with plaintiffs’ own understanding of the payment, which they

included as net farm income on that line of their Schedule F

income-tax filing.      Nor does it concur with the Secretary’s

recognized     use   under    its   Generally      Accepted    Accounting

Principles    all-inclusive   concept   of   net   income   that   includes

even extraordinary items.      See, e.g., Selivanoff v. U.S. Sec’y
Court No. 07-00008                                          Page 9

of Agriculture, 30 CIT 1051 (2006); Dorsey v. U.S. Sec’y of

Agriculture, 32 CIT ___, Slip Op. 08-76 (July 11, 2008).

                                II

           In view of the foregoing, plaintiffs’ Rule 56.1 motion

for judgment on the agency record must be denied.          Judgment

dismissing this action will enter accordingly.

Decided:   New York, New York
           June 19, 2009

                                     /s/ Thomas J. Aquilino, Jr.
                                            Senior Judge