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KJELDAHL v. BLOCK

August 29, 1983

Willie Ole Knute KJELDAHL, et al., Plaintiffs
v.
John BLOCK, Secretary of Agriculture, Defendant



The opinion of the court was delivered by: FLANNERY

 FLANNERY, District Judge.

 This matter is before the court on cross-motions for summary judgment. Plaintiffs contend that defendant Secretary of Agriculture ("Secretary") in fiscal year ("FY") 1982 unlawfully refused to implement the program of guaranteed and insured loans created by the Emergency Agricultural Credit Adjustment Act of 1978, as amended, 7 U.S.C. prec. 1961 note (the "Act"). The Secretary argues that the Act gave him the discretion to determine whether or not economic emergency conditions existed which warranted issuance of loan guarantees under the Act, and that he exercised his discretion reasonably in refusing to authorize any such guarantees in FY 1982.

 On September 28, 1982 Judge Joyce Hens Green granted plaintiffs' motion for a temporary restraining order and enjoined the Secretary from making any disbursements from the Agricultural Credit Insurance Fund (the "Fund"), created pursuant to 7 U.S.C. ┬ž 1929, which would deplete the Fund below $600 million -- the total of loans which the act authorized the Secretary to guarantee or insure in FY 1982. On October 26, 1982 this court denied plaintiffs' motion for a preliminary injunction, finding that plaintiffs had failed to demonstrate irreparable injury in the absence of injunctive relief, for two reasons. Although the Secretary's authority under the Act to insure or guarantee loans expired on September 30, 1982, if the court finds that he unlawfully failed to act while he still enjoyed that authority, he may exercise it pursuant to court order. Jacksonville Port Authority v. Adams, 181 U.S. App. D.C. 175, 556 F.2d 52, 56-57 (D.C.Cir.1977). And the "revolving" nature of the Fund is such that there is no danger of it being depleted. Consequently, even without preliminary injunctive relief, plaintiffs will be able to receive any relief to which they are entitled.

 The parties argued their cross-motions for summary judgment on November 17, 1982. On November 29, 1982, the court ordered the Secretary to submit supplemental affidavits and memoranda detailing the data considered by the Secretary and the frequency and manner of his consideration, in order to permit the court to properly review the reasonableness of the Secretary's decision. The Secretary submitted his supplemental memoranda on December 15, 1982. Plaintiffs responded to the supplemental submission on January 14, 1983.

 For the reasons set forth below, upon careful consideration of the entire record in this case, the court shall grant plaintiffs' motion for summary judgment and deny that of defendant.

 In 1978 Congress enacted the Emergency Agricultural Credit Adjustment Act, Pub.L. No. 95-334, 92 Stat. 429 (1978), 7 U.S.C. prec. 1961 note, creating an economic loan guarantee program. Congress sought to address "the most stressed economic conditions which have prevailed for decades" in American agriculture. H.R.Rep. No. 986, 95th Cong., 2d Sess. 12 (1978), U.S.Code Cong. & Admin.News, pp. 1106, 1117. Noting that farmers suffered from declining income, sagging commodity prices, increased production costs, and low crop yields, Congress found a need for economic emergency loans analogous to those loans which were available to farmers who were victims of natural disasters. Id. at 14-15. Existing programs were inadequate, Congress found, because farm ownership and operating loans could be made only to family farmers, and historically, insufficient funds existed to meet the demands for ownership loans. Id. at 15.

 Under Section 202 of the Act, Congress authorized the Secretary of Agriculture to guarantee or insure loans made to bona fide farmers -- including farm cooperatives, corporations, or partnerships -- who had adequate experience or training, needed credit, and were unable to obtain sufficient credit from private sources due to economic stresses. Section 205 of the Act required that the private lender and the farmer certify that credit could not be obtained in the absence of the federal guarantee. The Act limited the total amount of loans which could be insured or guaranteed through the end of 1979 to $4 billion.

 In 1980 Congress voted to extend the program through September 30, 1981 and to increase the ceiling to $6 billion. Pub.L.No. 96-220, 94 Stat. 129 (1980). The program had been created, Congress noted, at a time of severe financial stress for farmers and, Congress concluded, "today there remains a critical need for the type of credit provided by the Act." H.R.Rep. No. 782, 96th Cong., 2d Sess. 4 (1980). Net farm income was down, reducing farmers' ability to repay existing debt and increasing their need for refinancing, at a time when production costs were rising rapidly and banks suffered from a scarcity of funds with which to make loans. Id. Congress sought to tighten administration of the program, however, and so added a requirement that each applicant submit one written refusal of credit from a private lender. Congress further directed the Secretary to prepare a comprehensive report on the program's effectiveness.

 The Secretary submitted his report in January 1981, concluding that the program had fulfilled its basic objectives, but that it was no longer necessary for two reasons. First, credit conditions had improved; second, any need for credit which might exist could be met by increasing the funding in existing operating and farm ownership loan programs. U.S. Department of Agriculture, Farmers Home Administration, Economic Emergency Farm Loan Program Evaluation Study Report 25-27 (1981). *fn1"

 Later in 1981, as the program approached expiration, Congress was divided as to its extension. The Senate passed an omnibus farm bill which did not include an extension of the economic loan program. S.Rep. No. 97-126, 97th Cong., 1st Sess. (1981), U.S.Code Cong. & Admin.News, p. 1965. The House of Representatives, on the other hand, included in its version of the 1981 farm bill an amendment to the Act which simply extended the program for one year, until September 30, 1982. No mutually agreeable version of the farm bill was passed, however, before the end of the fiscal year, and consequently the Secretary's authority to make economic emergency loans expired on September 31, 1981.

 A conference committee met to reconcile the conflicting farm bills and compromised on the extension of the economic emergency loan program by extending it until September 30, 1982, but limiting the amount of loans which could be guaranteed or insured in any one fiscal year to $600 million and including in the Conference Report the following limiting language:

 H.R.Rep. No. 377, 97th Cong., 1st Sess. 270 (1981), U.S.Code Cong. & Admin.News, p. 2367. As agreed to by the conferees, the extension of the Act was passed by Congress on December 22, 1981. Pub.L. No. 97-98, 95 Stat. 1213 (1981). Despite the extension, however, the Secretary made no economic emergency loans under the Act in FY 1982. It is this refusal which plaintiffs challenge in this action.

 Discussion

 A. Motion for class certification

 Plaintiffs have moved for certification of a class which would include essentially all farmers and ranchers who meet the eligibility criteria enumerated in the Act: being primarily and directly engaged in agriculture, having the requisite training or experience, needing credit and unable to obtain it in the absence of the federal guarantee or insurance. Defendants oppose the motion for class certification, arguing that the only plaintiffs with standing would be those farmers who applied for loans under the program and were rejected, or inquired about the program and were told it had been terminated, or those who by the Secretary's actions were discouraged from applying or inquiring. To determine the contours of the class would require an inquiry into the state of mind of each potential class member, argues defendant, rendering this controversy inappropriate for class resolution.

 The court finds that the proposed class is properly certifiable under Fed.Rule Civ.Pro. 23(b)(1) or 23(b)(2). In the three years the program did operate more than 67,000 farmers participated, and there is no reason to believe that a proportionately large number would not have participated had the program been implemented by the Secretary during the approximately nine months of its extension. Consequently, the class is so numerous as to make joinder impracticable. The common questions of law and fact all turn on the legality of the Secretary's admitted refusal to implement the program. Defendant does not contest the named plaintiffs' ability to prosecute this action to protect the interests of the class fairly and adequately. Prosecution of separate actions could result in inconsistent adjudications, and the Secretary has refused to act -- has refused to implement the program -- on grounds applicable to the class generally.

 Defendant's contention that the motion should be denied because of the difficulty of identifying precisely all the members of the class is without merit. Plaintiffs seek a reopening of the program for a period of time equal to that for which it was extended by Congress in 1981. Procedures governing the program require farmers seeking its benefits to file written applications certifying that they are indeed bona fide farmers or ranchers as defined by the Act, have proper training or experience, need credit and cannot otherwise obtain it. Through the application and certification process, therefore, the Secretary will be able to identify class members. Defendant's suggestion that the parties and the court will have to engage in ephemeral inquiries into the state of mind of class members between December 22, 1981 and September 30, 1982 is without foundation. If the Secretary unlawfully refused to implement the economic loan program, in fashioning an equitable remedy the court will not be bound by the strictures urged by the defendant. Instead, the court has the power to order the Secretary to reopen the program and process ...


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