Court Opinion

ID: 817539
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:54:09.961857+00
Date Added: 2024-06-11T09:00:59.449393
License: Public Domain

Slip Op. 08-7

               UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
                                        :
RUTH DEN HOED,                          :
                                        :
     Plaintiff,                         :
                                        :
     v.                                 :         Court No.:      06-00446
                                        :
UNITED STATES SECRETARY OF AGRICULTURE, :
                                        :
     Defendant.                         :
________________________________________:

[Plaintiff’s motion to supplement the record is denied.
Defendant’s motion to dismiss is granted. The case is dismissed.]

Skadden, Arps, Slate, Meagher & Flom LLP (Jeffrey D. Gerrish; Neena
G. Shenai) for Ruth Den Hoed, plaintiff.

Jeffrey S. Bucholtz, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (Devin A. Wolak); of counsel: Jeffrey Kahn,
Office of the General Counsel, United States Department of
Agriculture, for the United States Secretary of Agriculture,
defendant.

                                                    January 16, 2008

                                    OPINION

TSOUCALAS, Senior Judge:           Defendant United States Secretary of

Agriculture (“Defendant” or “Secretary” ) moves pursuant to USCIT

R. 12(b)(5) to dismiss this action for failure to state a claim

upon   which   relief   may   be   granted.    Plaintiff   Ruth    Den   Hoed

(“Plaintiff”) opposes the motion and moves pursuant to USCIT R. 7

to supplement the administrative record.         Plaintiff contends that
Court No. 06-00446                                                Page 2

the record is inadequate and argues that Defendant’s denial of

trade adjustment assistance (“TAA”) benefits to Plaintiff is not

supported   by   substantial    evidence.     Plaintiff   also   seeks   a

protective order with respect to the information with which she

seeks to supplement the administrative record.            The Secretary

opposes Plaintiff’s motion to supplement the administrative record

on the ground that the administrative record is complete and

sufficient.

                               JURISDICTION

     The Court has jurisdiction over this matter pursuant to 19

U.S.C. § 2395.

                         STANDARD OF REVIEW

     A court should not dismiss a complaint for failure to state a

claim upon which relief may be granted “unless it appears beyond

doubt that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief.”        Conley v. Gibson,

355 U.S. 41, 45-46 (1957); see also Halperin Shipping Co., Inc. v.

United States, 13 CIT 465, 466 (1989).        Moreover, the Court must

accept all well-pleaded facts as true and view them in the light

most favorable to the non-moving party.          See United States v.

Islip, 22 CIT 852, 854, 18 F. Supp. 2d 1047, 1051 (1998) (citing

Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir.

1991)). A pleading that sets forth a claim for relief must contain
Court No. 06-00446                                                          Page 3

“a   short    and     plain   statement”    of    the    grounds     upon   which

jurisdiction depends and “of the claim showing that the pleader is

entitled to relief.” USCIT R. 8(a). “To determine the sufficiency

of a claim, consideration is limited to the facts stated on the

face of the complaint, documents appended to the complaint, and

documents incorporated in the complaint by reference.”                  Fabrene,

Inc. v. United States, 17 CIT 911, 913 (1993).                Accordingly, the

Court must decide whether plaintiff is entitled to offer evidence

in support of its claim, and not whether plaintiff will prevail in

its claim.     See Halperin, 13 CIT at 466.

                                  BACKGROUND

     On June 9, 2006, Plaintiff filed her application for TAA

benefits for crop year 2004.              See Confidential Administrative

Record (“Admin. R.”) at 1.       Plaintiff’s application reflected that

her husband reported a net farm loss of $291.00 in 2003, see id. at

2, and a net farm loss of $140.00 in 2004, see id. at 3.

     In November 2006, the Secretary denied Plaintiff’s application

on   the     ground    that   Plaintiff    “did    not     provide    acceptable

documentation of net farm or fishing income . . . to show that

[her] net income declined from that reported during the petition’s

pre-adjustment tax year.”         Id. at 38-40.          Thereafter, Plaintiff

timely sought review of Secretary’s decision by filing a letter

complaint.
Court No. 06-00446                                                  Page 4

     On March 2, 2007, Defendant filed its motion to dismiss the

action for failure to state a claim for which a relief may be

granted. On October 26, 2007, Plaintiff filed (1) an opposition to

Defendant’s motion to dismiss, (2) a motion to supplement the

administrative record, and (3) a motion for a protective order with

respect    to   documents   designated   as   confidential   or   business

confidential.     On November 16, 2007, Defendant filed its responses

to Plaintiff’s motion to supplement the administrative record and

to Plaintiff’s motion for a protective order.           On November 20,

2007, Defendant filed a reply brief in support of its motion to

dismiss.
                               DISCUSSION

I.   Plaintiff Failed To State A Claim For Which A Relief May Be
     Granted

     To receive TAA benefits, 19 U.S.C. § 2401e(a)(1)(C) requires

that “[t]he producer’s net farm income (as determined by the

Secretary) for the most recent year is 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.”           Pursuant to 7

C.F.R. § 1580.301(e)(6), the producer must

     “provide either – (i) [s]upporting documentation from a
     certified public accountant or attorney, or (ii)
     [r]elevant documentation and other supporting financial
     data, such as financial statements, balance sheets, and
     reports prepared for or provided to the Internal Revenue
     Service or another U.S. Government agency.”

     In its motion to dismiss, the Secretary argues that Plaintiff
Court No. 06-00446                                                          Page 5

failed to plead an essential element of her claim because the

complaint fails to state that her farm income decreased between

2003 and 2004.        See Def.’s Mem. Supp. Mot. Dismiss (“Def.’s Mem.”)

at 5-7.      Citing Wooten v. United States (“Wooten II”), 30 CIT __,

441 F. Supp. 2d 1253 (2006), the Secretary contends that an

applicant who is unable to demonstrate a decrease in her income

based on the administrative record has failed to state a claim for

which a relief may be granted.                 See Def.’s Mem. at 7.              The

Secretary notes that Plaintiff’s income actually increased between

2003 and 2004 based on the IRS Schedule F forms, and therefore

argues that the complaint must be dismissed.                 See id. at 6.

      Plaintiff does not claim that she successfully plead the

required elements to establish her entitlement to TAA benefits, but

instead argues that Defendant’s motion should be denied because the

Secretary acted improperly in denying Plaintiff’s TAA benefits.

See   Mem.    Opp’n     Def.’s    Mot.   Dimiss   (“Pl.’s      Opp’n”)    at     5-6.

Plaintiff      states    that     the    Secretary    failed    to     conduct    an

investigation     of     her     application   that   met     the    threshold    of

reasonableness, and as a result, failed to find that Plaintiff’s

net income declined from 2003 to 2004.                 See id. at 6-11.            In

addition, Plaintiff complains that the Secretary may not rely

solely on tax returns to determine net income.                 See id. at 8.

      The     Court     agrees    with    Defendant    and     finds    Wooten    II

controlling.     In Wooten II, the court found that an applicant who
Court No. 06-00446                                            Page 6

reported a net loss of $86,470 in 2002 and a net loss of $125,671

in 2001 had an actual increase in income of $39,201 during the two

years although he reported losses in both years.       See 30 CIT at

__, 441 F. Supp. 2d at 1256.    Finding that the applicant had failed

to demonstrate a decrease in his income based on the administrative

record, the court in Wooten II dismissed the case for failure to

state a claim upon which relief may be granted.    See 30 CIT at __,

441 F. Supp. 2d at 1259.

     Accepting all well-pleaded facts as true and viewed in the

light most favorable to the plaintiff, the Court finds that

Plaintiff has failed to state a claim for which a relief may be

granted.   See Conley v. Gibson, 355 U.S. at 45-46.   Nowhere in the

letter complaint does the Plaintiff allege that her net income

decreased between 2003 and 2004, an essential element of her claim.

Indeed, like the plaintiff in Wooten II, the letter complaint

states that Plaintiff should receive TAA benefits if she reported

losses in both 2003 and 2004.    See letter complaint dated December

7, 2006.   Moreover, the administrative record contains only one

form of documentation demonstrating Plaintiff’s net income, and

that document indicates that Plaintiff reported an actual increase

in income during the relevant period.     Thus, the Court finds that

Plaintiff has failed to allege facts sufficient to demonstrate that

she is entitled to receive TAA benefits. Because Plaintiff has not

stated a claim upon which relief may be granted, this case must be
Court No. 06-00446                                                       Page 7

dismissed, unless Plaintiff establishes that she is entitled to

supplement the administrative record.

II.    Plaintiff Is Not Entitled To Supplement The Administrative
       Record

       The Court must sustain the Secretary’s decision as long as it

is “reasonable and supported by the record as a whole.”                Lady Kim

T. Inc. v. United States Sec'y of Agric. (“Lady Kim I”), 30 CIT __,

__, 469 F. Supp. 2d 1262, 1266 (2006) (quoting Universal Camera

Corp. v. National Labor Relations Board, 340 U.S. 474, 488 (1951)).

The Secretary, in examining the documents submitted in connection

with    individual   applications      for   TAA   benefits,    must    meet   “a

threshold requirement of reasonable inquiry.” See, e.g., Van Trinh

v. United States Sec'y of Agric., 29 CIT __, __, 395 F. Supp. 2d

1259,    1268   (2005)   (“While    the      Department   has    considerable

discretion in conducting its investigation of TAA claims, there

exists a threshold requirement of reasonable inquiry.”)(citation,

internal    quotation    marks   and    alterations    omitted);       see   also

Anderson v. United States Sec'y of Agric., 30 CIT __, __, 429 F.

Supp. 2d 1352, 1355 (2006) (“The Department of Agriculture's

discretion in conducting its investigations of TAA claims is

prefaced by the existence of a threshold requirement of reasonable

inquiry.”)(citation and internal quotation marks omitted).                     The

Court “cannot uphold a determination based upon manifest inaccuracy

or incompleteness of record when relevant to a determination of
Court No. 06-00446                                                       Page 8

fact.”     Anderson, 30 CIT at __, 429 F. Supp. 2d at 1355 (quoting

Former Employees of Pittsburgh Logistics Sys. Inc. v. United States

Sec'y of Labor, 27 CIT 339 (2003)); see also Wooten v. United

States Sec'y of Agric. (“Wooten I”), 30 CIT __, 414 F. Supp. 2d

1313 (2006).      “If the court determines that Defendant did not meet

the threshold requirement of a reasonable inquiry, it may, for good

cause shown, remand the case to Agriculture to take further

action.”       Anderson, 30 CIT at __, 429 F. Supp. 2d at 1355 (citing

19 U.S.C. § 2395(b)). Good cause exists if the Secretary’s finding

is arbitrary or not based on substantial evidence. See id. (citing

Former Employees of Galey & Lord Indus. v. Chao, 26 CIT 806, 809,

219 F. Supp. 2d 1283, 1286 (2002)).

     Plaintiff argues that the Secretary failed to conduct a

reasonable inquiry of her application for TAA benefits as required

by law.    See Pl.’s Mot. Supplement R. (“Pl.’s Mot.”) at 1-3; Pl.’s

Opp’n at 6-11.        As a result, Plaintiff contends that Defendant’s

denial    of    her   application   for   TAA   benefits   was   based   on   an

inadequate record, and thus, unsupported by substantial evidence.

See Pl.’s Mot. at 1-2; Pl.’s Opp’n at 11.           In addition, Plaintiff

claims that it was improper for the Secretary to rely upon her tax

returns as the sole basis for determining net income.               See Pl.’s

Mot. at 2; Pl.’s Opp’n at 10.              Plaintiff therefore seeks to

supplement the records with “evidence that should have been and

would have been record evidence had the Secretary conducted a
Court No. 06-00446                                                       Page 9

‘reasonable inquiry’ of Plaintiff’s TAA claim.”            Pl.’s Mot. at 3.

     The Secretary responds that the administrative record was

complete    and    sufficient    to   make   an    informed   decision    upon

Plaintiff’s application. See Def.’s Resp. Pl.’s Mot. Supplement R.

(“Def.’s Resp.”) at 1.           According to the Secretary, Plaintiff

completed and submitted all the necessary forms and supporting

documents required under the statute and regulations including

documents evidencing her net farm income.              See id. at 5-6.       In

addition, the Secretary notes that Plaintiff did not submit any

documents concerning her net farm income (other than her husband’s

tax returns) or make any attempt to supplement her application with

additional documents.       See id. at 7.          Since the documents with

which Plaintiff attempts to supplement the record were not timely

submitted and Plaintiff offers no excuse for such failure, the

Secretary contends that Plaintiff improperly seeks to introduce

extra-record evidence.      See id. at 10-11.

     The Court finds that Defendant here did not fail to meet the

threshold    of     reasonable     inquiry    in     examining   Plaintiff’s

application.      The Secretary did not ask for additional information

from Plaintiff because nothing in the application as reviewed by

the Secretary indicated any deficiency. Plaintiff does not dispute

that her application, which included all necessary forms and

supporting documents, appeared to be complete. Since the Secretary

could not have known that Plaintiff possessed other documents
Court No. 06-00446                                                           Page 10

relevant to determination of her net income, the Secretary could

not be expected to request them or to notify Plaintiff of any

deficiency. Indeed, the Secretary is entitled to “rely only on the

information submitted to it by the producer.” See Lady Kim T. Inc.

v. United States Sec'y of Agric. (“Lady Kim II”), 31 CIT __, 491 F.

Supp. 2d 1366, 1371 n. 6 (2007).

      The    cases     relied        upon     by     Plaintiff     are    factually

distinguishable because they each involve a situation where the

agency knew or should have known that the application at hand was

deficient in some fashion.           In such instances, the Court has found

that the Secretary failed to meet the threshold requirement of

reasonable inquiry by failing to notify the applicant of the

deficiencies.      See, e.g., Wooten I, 30 CIT at __, 414 F. Supp. 2d

at   1316 (holding that the Secretary should have made a reasonable

inquiry about the obviously missing tax returns); Van Trinh, 29 CIT

at   __,    395   F.   Supp.    2d    at     1269    (finding    that    significant

discrepancies and conflicting information in the applicant’s file

should have at least suggested to the Secretary that documentation

was missing or lost from the record).

      Here, Plaintiff proffers no evidence whatsoever that the

Secretary knew or should have been aware of the fact that Plaintiff

possessed additional information regarding her net farm income.

Nothing     was   obviously      missing      from    Plaintiff’s       application.

Plaintiff     does     not     allege       that    her   application     contained
Court No. 06-00446                                                 Page 11

discrepancies or conflicting information that should have indicated

to the Secretary a need to notify the applicant of any missing

information regarding her net farm income.

     In addition, the Court finds no merit to Plaintiff’s argument

that the Secretary acted improperly by relying only on tax return

information in determining net income when the applicant chose to

evidence it by submitting nothing more than her husband’s tax

returns.     Plaintiff chose to do so even though applicants are

permitted to submit various forms of documents to demonstrate their

net income.       See 7 C.F.R. § 1580.301(e)(6).      Although Steen v.

United States, 468 F.3d 1357 (Fed. Cir. 2006), requires the

Secretary    to   consider   all   materials   submitted   by   applicants

evidencing net income, in addition to any tax forms, it cannot be

read to bar the Secretary from relying solely on tax forms if no

other information is available.

     Accordingly, the Court finds that Defendant met the threshold

requirement of reasonable inquiry, and the Secretary’s denial of

Plaintiff’s application was not arbitrary and was supported by

substantial evidence.        Plaintiff is therefore not entitled to

supplement    the   administrative   record.     Plaintiff’s    motion   is

denied.1

     1
          Plaintiff’s motion for a protective order is denied as
moot in light of the Court’s ruling on Plaintiff’s motion to
supplement the administrative record.
Court No. 06-00446                                         Page 12

                            CONCLUSION

     For the reasons stated above, Plaintiff’s motion to supplement

the record is denied, Plaintiff’s motion for a protective order is

denied as moot, and Defendant’s motion to dismiss is granted. Case

is dismissed.

                                         /s/ Nicholas Tsoucalas
                                         NICHOLAS TSOUCALAS
                                             SENIOR JUDGE

Dated:    January 16, 2008
          New York, New York