Court Opinion

ID: 1031240
Source: CourtListenerOpinion
Date Created: 2013-07-05 08:28:07.548034+00
Date Added: 2024-06-11T15:27:37.875746
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 09-1037

KATHERINE A. TYSON,

                Plaintiff – Appellant,

           v.

UNITED STATES DEPARTMENT OF AGRICULTURE,

                Defendant – Appellee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh.   Terrence W. Boyle,
District Judge. (5:07-cv-00140-BO)

Argued:   December 1, 2009                 Decided:   January 13, 2010

Before KING and SHEDD, Circuit Judges, and John Preston BAILEY,
Chief United States District Judge for the Northern District of
West Virginia, sitting by designation.

Affirmed by unpublished per curiam opinion.

ARGUED: Steven K. McCallister, SHANAHAN LAW GROUP, Raleigh,
North Carolina, for Appellant.      Neal Fowler, OFFICE OF THE
UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee.
ON BRIEF: George E. B. Holding, United States Attorney, Anne M.
Hayes, Assistant United States Attorney, OFFICE OF THE UNITED
STATES ATTORNEY, Raleigh, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

      Appellant Katherine A. Tyson instituted these proceedings

in the Eastern District of North Carolina in April of 2007,

seeking      judicial      review,      pursuant          to     the        Administrative

Procedure Act (the “APA”), of a Department of Agriculture ruling

that she was obligated to return an overpayment received for

tobacco crop losses. 1          Tyson had first unsuccessfully pursued her

contrary contention — namely, that she was entitled to keep the

$80,000 overpayment — through the administrative processes of

the Department’s National Appeals Division.                          In February 2007,

the       Division     ruled     against         Tyson,        concluding       that     the

Department’s         regulations      required           the     overpayment        to    be

returned.       See     Tyson    v.   Farm       Serv.    Agency,      No.    2006S000823

(Director      Review    Determination,          Feb.     27,    2007)       (the   “Agency

Decision”). 2        Thereafter, on December 9, 2008, the district court

awarded summary judgment to the Department, upholding the Agency

Decision’s       determination        that        Tyson        had     to     return     the

overpayment.         See Tyson v. U.S. Dep’t of Agric., 589 F. Supp. 2d

      1
       The APA authorizes judicial review of a                               final agency
decision, providing that any “person suffering                                legal wrong
because of agency action, or adversely affected or                           aggrieved by
agency action . . ., is entitled to judicial review                           thereof.” 5
U.S.C. § 702.
      2
       The Agency Decision is found at J.A. 21-28. (Citations
herein to “J.A. __” refer to the Joint Appendix filed by the
parties in this appeal.)

                                             2
584 (E.D.N.C. 2008) (the “District Court Decision”).                      Tyson has

appealed the District Court Decision and, as explained below, we

affirm.

                                       I.

                                       A.

       As the Agency Decision explains, Tyson is a tobacco farmer

in Nash County, North Carolina.             She owns and operates a complex

farming business, where she utilizes multiple fields and farms

to produce tobacco.          Tyson also serves as vice chairman of the

County Committee (the “COC”) of the Department of Agriculture’s

Farm   Service    Agency     (the   “FSA”)    in   Nash    County.        In   2003,

excessive rains damaged Tyson’s tobacco crop, prompting her to

apply to the Nash County FSA (the “County FSA”) in 2005 for

benefits    under    the     Department’s     Crop    Disaster      Program     (the

“CDP”).

       Pursuant to the CDP, farmers who suffered certain weather-

related losses to their 2003, 2004, or 2005 crops were eligible

to apply for CDP benefits for one of the affected years.                         The

CDP    provided    for   a   maximum   payment       of   $80,000    to    eligible

farmers    for    qualifying    lost   crops,      with    the   farmer’s      total

recovery — including insurance payments, harvested crops, and

CDP benefits — being limited to 95% of what would have been the

value of the farmer’s undamaged crop.              In determining whether to

                                       3
make such a CDP payment, the FSA was authorized to estimate the

value of an eligible tobacco farmer’s undamaged and harvested

tobacco     crops,    if   any,   using   the   county    average    of    tobacco

prices    during     the   relevant   growing   season.      Under    the    then-

existing tobacco regulatory system, quota allotments made by the

Department of Agriculture dictated the quantity of tobacco a

farmer could market in a given year (the “effective quota”).

Thus, multiplication of an eligible farmer’s effective quota by

the average tobacco price for the relevant county would, for CDP

purposes, provide the expected value of the farmer’s undamaged

crop. 3

      During the CDP application period in 2005, a “Fact Sheet”

detailing the CDP’s requirements was posted at the County FSA

Office. 4    The Fact Sheet explained that CDP benefits would be

calculated in the same manner as under the 2000 CDP.                      The Fact

Sheet further specified, inter alia, the following:

      3
       By way of example, if a tobacco farmer’s effective quota
were 1000 pounds and the average tobacco price for the relevant
county were $1.50 per pound, the value of the farmer’s undamaged
tobacco crop would be $1500.    Accordingly, the aggregate value
of the farmer’s harvested tobacco crop, insurance payments, and
CDP benefits could not exceed $1425 — 95% of $1500.
      4
       In addition to its posting of the Fact Sheet, the County
FSA mailed notifications to potentially eligible farmers in its
jurisdiction, alerting them to the CDP and advising them to
contact the County FSA for further information regarding the
CDP.

                                          4
      Like   the  2001/2002  crop  disaster  program,  crop
      disaster payments will be reduced, as required by
      statute, if the sum of the: 1) disaster payment;
      2) the net crop insurance indemnity; and 3) the value
      of the crop harvested exceeds 95 percent of what the
      value of the crop would have been in the absence of a
      loss.

J.A. 305.       The Fact Sheet’s explanation of the CDP benefits

comported      with    the    “[l]imitations     on     payments    and        other

benefits” contained in the then-applicable regulations.                        More

specifically, those regulations provided that

      [n]o producer shall receive disaster benefits under
      [the CDP] in an amount that exceeds 95 percent of the
      value of the expected production for the relevant
      period   as   determined  by   [the  Commodity  Credit
      Corporation].   The sum of the value of the crop not
      lost, if any; the disaster payment received under [the
      CDP]; and any crop insurance payment or payments
      received . . . for losses to the same crop, cannot
      exceed 95 percent of what the crop’s value would have
      been if there had been no loss.

7 C.F.R. § 1479.105 (2006).

                                        B.

      Tyson applied for CDP benefits in April 2005 through her

husband, who had her power of attorney.             In May 2005, the County

FSA   determined       that   Tyson    was   entitled    to    $80,000    in    CDP

benefits, the maximum payment an eligible farmer could receive.

On May 9, 2005, an $80,000 payment was deposited into Tyson’s

bank account, and the related disbursement statement, sent by

the   County     FSA     to   Tyson,    explained       that   “[t]he     payment

                                         5
information reflected on this transaction statement is for the

CDP Program for 2003-2005 crop losses.”         J.A. 295.

     During spot checks of CDP applications in September 2005,

calculation   errors   were   identified   in    CDP     benefits   paid   to

thirty tobacco farmers in Nash County.          Over the ensuing months,

the FSA State Committee (the “STC”), the County FSA, and the COC

conducted investigations and assessed whether the Department of

Agriculture’s ninety-day “Finality Rule” protected overpaid Nash

County tobacco farmers from returning their overpayments. 5                The

Finality Rule, as relevant here, provides that

     [a] determination by a State or county FSA committee
     . . . becomes final and binding 90 days from the date
     the application for benefits has been filed . . .
     unless . . . [t]he participant had reason to know that
     the determination was erroneous.

7 C.F.R. § 718.306(a)(4).       “Reason to know” is defined by the

FSA as “knowledge by way of a rule or provision that a person

could or should have known such as, but not limited to, the

following:” “statutes or public laws”; “published regulations”;

“program   applications”;     “notices   the    person    receives”;   “and

newsletters.”   J.A. 289 (FSA Handbook); see also Agency Decision

2 (citing FSA Handbook).

     5
       The STC and COC administered the CDP, under the general
supervision of the Executive Vice President of the Commodity
Credit Corporation. See 7 C.F.R. § 1479.101 (2006).

                                    6
       Ultimately,            the   FSA    determined        that        certain    tobacco

farmers,          who     had       received       particularly            excessive       CDP

overpayments, had “reason to know” that such payments were made

in    error,      thus    precluding       application       of    the     Finality     Rule.

More specifically, the FSA determined that a tobacco farmer had

“reason to know” of such an overpayment if (1) the sum of the

farmer’s harvested crop and insurance payments equaled at least

92% of the market value of the farmer’s effective quota, and (2)

the    sum   of     the       harvested    crop,   insurance        payments,      and    CDP

benefits equaled or exceeded 110% of the market value of the

farmer’s       effective        quota.       Accordingly,          the     recipient      Nash

County     tobacco        farmers    who    satisfied    both       criteria       were    not

shielded       by       the     Finality    Rule     from     returning        their       CDP

overpayments.           Thus, in 2006, the FSA directed Tyson and eleven

other      Nash     County       tobacco    farmers     to        return     overpaid      CDP

benefits to the County FSA. 6

       6
       In 2003, Tyson’s effective quota was 327,858 pounds, and
the Nash County seasonal average price for tobacco was $1.85 per
pound.   Hence, absent weather-related losses, Tyson could have
earned $606,537 for her 2003 tobacco crop.    With her weather-
related crop losses in 2003, Tyson produced 201,222 pounds of
tobacco, valued at $372,261, and received $263,083 in insurance
payments, for an aggregate recovery of $635,344. Even prior to
the CDP overpayment, Tyson had received nearly $29,000 more than
she could have earned from selling her entire 2003 effective
quota.    Nevertheless, the $80,000 CDP payment increased her
aggregate compensation to $715,344, giving her a windfall in
excess of $108,000.

                                               7
                                                C.

      Thereafter, Tyson sought administrative review of the FSA’s

adverse    determination          through       the       Department    of   Agriculture’s

National Appeals Division.                In December 2006, a Division Hearing

Officer overturned the FSA’s ruling, concluding instead that the

Finality Rule protected Tyson from having to return the $80,000

overpayment.         As     it    was     entitled         to   do,    however,    the   FSA

promptly pursued further administrative review, and, by way of

the   February       2007        Agency     Decision,           the    Division    Director

reversed the Hearing Officer.

      In    ruling     against      Tyson,          the    Agency     Decision    explained

that, under the Finality Rule, “constructive reason to know [is]

knowledge by way of a rule or provision that a person could or

should     have   known     (including          published        regulations      or   press

releases/newsletters).”                   Agency          Decision      2    (citing     FSA

Handbook).        The       Agency        Decision         further      emphasized     that,

although Finality Rule protection adheres when incorrect yields

or calculations are used, it does not apply when payments simply

exceed the regulatory limits, because tobacco farmers should be

aware of such limitations.                 Id.        Focusing on the magnitude of

the   discrepancy         here     —      and        recognizing       Tyson’s    extensive

experience in FSA activities (including her position as vice

chairman of her COC) — the Agency Decision concluded that Tyson

had   “reason     to      know”     that        she       had   received     an   erroneous

                                                8
overpayment, thereby rendering the Finality Rule inapplicable.

Id. at 3, 7.       More specifically, the Agency Decision determined

that the magnitude of Tyson’s overpayment placed her on notice

of its erroneous nature, observing that it is “unrefuted” that

“[Tyson] received total compensation that substantially exceeded

the   market    value   of    her    entire    tobacco       quota,”    even   before

applying for CDP benefits.           Id. at 7.         The Agency Decision thus

concluded that

      [Tyson] had all the facts and figures needed to
      calculate that she had received as compensation for
      her poor crop over $108,000 more than she would
      otherwise receive if her crop was a success. Although
      [Tyson] was not expected to identify [County FSA]
      errors in the yields used to calculate benefits, she
      was reasonably expected to question receipt of over
      $108,000 in additional compensation she was not
      otherwise eligible to receive.

Id.

      In   April     2007,   after    the     Division       Director    denied     her

request for reconsideration, Tyson sought judicial review of the

Agency Decision in the district court. 7                     In March 2008, the

parties    filed     cross-motions      for        summary   judgment.         By   the

District Court Decision of December 9, 2008, summary judgment

was   awarded   to    the    Department       of    Agriculture,    upholding       the

      7
       Pursuant to 7 U.S.C. § 6999, “[a] final determination of
the [National Appeals] Division shall be reviewable and
enforceable by any United States district court of competent
jurisdiction in accordance with [the APA].”

                                          9
Agency Decision’s ruling that the Finality Rule did not apply

and that Tyson was obligated to return the $80,000 overpayment.

More specifically, as the court explained:

     Evidence in the administrative record demonstrates a
     substantial evidentiary basis to find [Tyson] had
     “reason to know” that the CDP payment for her tobacco
     crop losses was erroneous.       Based on the evidence,
     [Tyson] could have calculated the total effective
     income quota for the 2003 tobacco crop and compared
     that figure to the total amount [Tyson] received from
     the sale of the 2003 tobacco crop and the insurance
     recovery in order to determine her eligibility for CDP
     payments.      [Tyson’s]   farm   records   provide   that
     [Tyson’s] actual 2003 income exceeded her effective
     income quota for the 2003 tobacco crop. Moreover, the
     fact sheet explaining CDP eligibility clearly provided
     the payment calculation required to be eligible for
     the   program.      In   addition,   [Tyson’s]    personal
     extensive experience in FSA farm programs and on the
     FSA county committee at the time of her application
     further supports that [Tyson] should have known the
     eligibility    requirements   for   the   program.      In
     reviewing the record, a substantial basis for the
     conclusion the agency reached exists and no clear
     error of judgment has occurred.

Tyson, 589 F. Supp. 2d at 587.

     On January 5, 2009, Tyson filed a timely notice of appeal,

and we possess jurisdiction pursuant to 28 U.S.C. § 1291.

                                     II.

     We   review   de   novo   a   district   court’s   award   of   summary

judgment.   See Holly Hill Farm Corp. v. United States, 447 F.3d

258, 262 (4th Cir. 2006).          Pursuant to the APA, however, our

review of the Agency Decision is — as was the district court’s

                                     10
—     limited    to    determining        whether    the   agency’s     findings   and

conclusions were arbitrary, capricious, an abuse of discretion,

otherwise       not     in     accordance     with     law,     or   unsupported    by

substantial evidence.                See 5 U.S.C. § 706. 8      Such a standard of

review is obviously quite narrow, and we are not entitled to

substitute our judgment for that of the agency.                      See Holly Hill,

447    F.3d     at    263    (explaining      that    courts    “perform   only    the

limited, albeit important, task of reviewing agency action to

determine whether the agency . . . has committed a clear error

of judgment” (internal quotation marks omitted)).

                                            III.

                                             A.

       On     appeal,        Tyson     primarily     contends    that    the   Agency

Decision is unsupported by substantial evidence. 9                       In pursuing

       8
       In relevant part, the APA, as codified, provides that a
reviewing court shall set aside an agency action only when it is
found to be:

       (A) arbitrary, capricious, an abuse of discretion, or
       otherwise not in accordance with law; [or]

                                           * * *

       (E) unsupported by substantial evidence . . . .

5 U.S.C. § 706(2).
       9
       Additionally, Tyson asserts that upholding the agency’s
determination would “nullify the Finality Rule” by, essentially,
(Continued)
                                             11
this    contention,      Tyson   emphasizes     three    points.    First,     she

asserts that “one’s [effective] quota — and by extension one’s

supposed knowledge of that quota — had nothing whatsoever to do

with    any   presumed    knowledge   of    a   CDP   overpayment.”      Br.    of

Appellant 17.         Second, she contends that the Fact Sheet was

ambiguous and that, in any event, there was no evidence that she

ever saw it.       Third, she maintains that her experience with FSA

programs and her position as vice chairman of the COC simply had

no “nexus” to her knowledge of CDP eligibility requirements.

See id. at 25.

       We need not tarry on Tyson’s first point, as she failed to

make her quota-based contention to the district court, thereby

precluding appellate review thereof.              See Holland v. Big River

Minerals Corp., 181 F.3d 597, 605 (4th Cir. 1999) (“Generally,

issues that were not raised in the district court will not be

addressed     on   appeal.”). 10       Her      second    point    is   likewise

precluding application of the Rule any time there was an
overpayment. See Br. of Appellant 28-30. To recognize the flaw
in this contention, we need look no further than the fact that
eighteen of the thirty Nash County tobacco farmers who received
CDP overpayments were protected by the Finality Rule (even under
the FSA’s standard for “reason to know”).
       10
        Even had Tyson presented her quota-based contention to
the district court, it would have been rejected as meritless.
In 2003, tobacco was highly regulated and was controlled by
effective quotas, as Tyson’s farm records confirm.    See J.A.
144-47; id. at 237-45; see also id. at 307-20 (affidavit of
(Continued)
                                       12
unavailing, for the Fact Sheet clearly explains the statutory

cap on CDP benefits and was prominently displayed in the County

FSA office, where the CDP applications were submitted.               See J.A.

297, 305.    Moreover, and dispositive on Tyson’s third point, the

COC administered the CDP.          See 7 C.F.R. § 1479.101 (2006); see

also J.A. 260-66.      Accordingly, it would be extremely difficult,

in   the   first    instance,     for   us   to   accept   Tyson’s   claim   of

ignorance.       And it would be inappropriate, under the applicable

standard    of    review,   for   this   Court     to   overturn   the   Agency

Decision’s determination that Tyson “had constructive knowledge

of the [CDP’s] rules,” see Agency Decision 7. 11

Miles Davis, N.C. FSA Agricultural Farm Program Specialist).
Accordingly,   Tyson  cannot   contend  that   such  quotas  are
irrelevant to the objective determination of whether a tobacco
farmer had “reason to know” of a CDP overpayment. Further, the
assertion that effective quotas are irrelevant to the “reason to
know” analysis — and that such an analysis should be focused on
tobacco yields — contradicts Tyson’s initial claim in the
administrative process that she compared the CDP benefits she
received to her insurance payment, see id. at 363, and not, as
she now attempts to assert, to her 2002 tobacco yield.
      11
        To the extent that Tyson contends that the FSA acted
arbitrarily and capriciously in determining which tobacco
farmers had “reason to know” of the overpayments, we also reject
this contention.   In short, the Agency Decision did not err in
ruling that the FSA had applied a reasonable standard in
determining which tobacco farmers had “reason to know” that
their overpayments were erroneous.

                                        13
                                         B.

     Having   carefully    assessed         the      record,   we    are,     like   the

district   court,   unable     to   say       that    the   Agency        Decision   was

arbitrary, capricious, an abuse of discretion, not in accordance

with law, or unsupported by substantial evidence.                          Simply put,

we   are   unable   to    find      fault      with     the    Agency       Decision’s

conclusion that Tyson, an experienced tobacco farmer and COC

officer, had constructive knowledge of the applicable regulatory

limitations   and   should     have      known       that   she     had    received   a

substantial     overpayment.        We    therefore         uphold    the     district

court’s affirmance of the Agency Decision, and we are content to

do so on the basis of the court’s reasoning.                      See Tyson, 589 F.

Supp. 2d 584.

                                         IV.

     Pursuant to the foregoing, we affirm the district court’s

award of summary judgment to the Department of Agriculture.

                                                                              AFFIRMED

                                         14