whether ASCS "considered all relevant factors" and had a rational basis for its decision. King v. Bergland, 517 F. Supp. 1363 (D. Colo. 1981). Much of the evidence and testimony proffered at the hearing was directly relevant to this inquiry. Plaintiffs offered evidence demonstrating that they had no intention of deceiving or misleading the Baca County ASCS or FmHA in 1984; that their federal tax returns were consistent with their representations to ASCS concerning the number of persons in the partnership for the years in question; that they did not intend to deceive or mislead the county committee when they filed as a nine-person farm in 1985 and 1986, and that the committee was not deceived, see Plaintiff's Exhibit 15; that plaintiffs considered all nine brothers and sisters, not just Dennis and Patrick, liable on the FmHA loan, and the local FmHA shared that understanding of the obligation, see Plaintiffs' Exhibit 16; and that Dennis and Patrick Esch filed the 1984 FmHA loan application as two persons rather than four at the suggestion of FmHA.
In its various appellate decisions and its filing with this court, defendant accuses plaintiffs of a "lack of good faith," see May 6, 1987 Decision at 1; of filing their 1986 561 Form "as a device designed to evade the payment limitation payment rules," id.; and of "conceal[ing] information" and "misrepresent[ing]" facts. Defendant's Motion at 24, 27. Yet in reaching these conclusions, ASCS apparently never interviewed the members of the local FmHA office or the county committee, nor did they investigate all of plaintiffs' relevant federal tax returns.
In fact, so far as the record reveals, the principal basis for defendant's charges of false filings, misrepresentation, and deceit was the OIG audit, yet that audit included no interviews with plaintiffs or with the local FmHA or county committee personnel.
In short, whatever the merits of defendant's person determination insofar as it concerns the application of 7 C.F.R. § 795.7 to the facts of the 1984 reorganization of plaintiffs' farm, plaintiffs have made a substantial showing that defendant's "bad faith" determinations were not based on consideration of all relevant factors, but were instead premised solely on a review of Baca County ASCS files. The administrative record and the brief defendant filed in this case both strongly suggest that the principal basis for defendant's findings were the inconsistent two-person, four-person filings plaintiffs made in 1984 to FmHA and the county committee respectively. Indeed, it was plaintiffs' provision of this "conflicting information" which led defendant to reduce plaintiffs from a four-person to a one-person entity.
Yet, as the facts developed in this case so far reveal, findings of bad faith, deceit, and intentional misrepresentation cannot rest on so slender a reed. A person's state of mind may sometimes be discerned simply from a pair of documents, but under the circumstances of this case, it appears that such a determination could not be made without an investigation of the intent of the alleged defrauders or the effect their alleged misrepresentations had on the relevant audience -- investigations which defendant apparently never undertook here. Cf. United States v. Batson, 706 F.2d 657, 666-71 (5th Cir. 1983) (setting out ASCS' detailed investigation of scheme to defraud government price support program).
Perhaps equally troubling is the fact that nowhere in its various decisions nor at the hearing before this court has defendant identified the standard against which plaintiffs' filings were measured, or how the filings fell short of those standards. Defendant has characterized plaintiffs' 1986 Form 561 and their 1984 applications as "incorrect," "inaccurate," "untimely," "false," "misleading," and, in essence, fraudulent. Both plaintiffs and this court are at a loss to know whether defendant views these terms as interchangeable, whether an untimely submission above is sufficient to warrant payment suspension, or whether any incorrect filing is deemed misleading.
This court cannot declare agency action rational when the agency fails to indicate what standards guided the action.
In short, plaintiffs have demonstrated not only that they are entitled to offer evidence in order to demonstrate the inadequacies of the agency's decisionmaking process, but that they have a substantial likelihood of success on their claim that defendant acted arbitrarily and capriciously in suspending their payments and reducing the number of persons in their farm. Substantial likelihood of success on the merits, of course, is one of the four elements plaintiffs must establish in order to demonstrate the propriety of preliminary injunctive relief. The other three are: (1) that they will suffer irreparable harm if the injunction does not issue; (2) that defendant and others will not be irreparably harmed by the injunction; and (3) that the public interest favors entry of the injunction. Virginia Petroleum Jobbers Ass'n v. Federal Power Comm'n, 104 U.S. App. D.C. 106, 259 F.2d 921, 925 (D.C. Cir. 1958); accord Wisconsin Gas Co. v. Federal Energy Regulatory Comm'n, 244 U.S. App. D.C. 349, 758 F.2d 669, 673-74 (D.C. Cir. 1985). There is virtually no dispute that without injunctive relief plaintiffs will be irreparably harmed. The Douglas County Bank and Trust suspended their operating line of credit in January and called due the approximately $ 250,000 outstanding on that loan; the John Deere Financing Corporation repossessed four combines and related equipment from plaintiffs one month ago; the Federal Land Bank, holder of the first deed of trust on the farm itself, has instituted foreclosure proceedings which, unless forestalled by action of this court, will be completed no later than June 25. Without relief from this court, plaintiffs will lose their farm and be forced into bankruptcy in less than three weeks.
Defendant, on the other hand, will suffer no cognizable injury at all if this court grants plaintiffs the relief they seek. Plaintiffs have not asked for an injunction directing defendant to disburse funds to them, nor could they, given the Tucker Act limitations discussed above. An injunction enjoining defendant from suspending plaintiffs from participation in the 1987 price support and CRP programs could serve as a predicate for money damages against the government in the Claims Court. Payments under those programs, however, do not come due until October, and this court has scheduled a final hearing in this matter for mid-July, and has given its assurance that a final decision will issue before October. Under these circumstances, defendant will not be harmed by the relief sought.
Finally, the parties offer conflicting arguments as to where the public interest lies in this matter. Thus, for example, defendant suggests that the integrity of the farm subsidy programs may be endangered if those who file incorrect or false applications escape unpunished. Plaintiffs respond by pointing to the frustrated expectations of third parties, primarily lenders, who extend credit on the understanding that a given farm is entitled to certain payments over the 10-year life of a CRP contract and then find those benefits jeopardized years later because of ASCS' person re-determination.
The court finds that on the whole, the equities cited by both parties tend to balance out. Because plaintiffs have shown that the balance of harms weighs heavily in their favor, however, and because they have further demonstrated that they have a substantial likelihood of success on their claim that the agency acted arbitrarily and capriciously, the court will grant them the relief they request.
Accordingly, it is hereby
ORDERED that defendant, its agents, employees, officers, and representatives, and those acting in concert or participation with any of the foregoing, preliminarily are enjoined from suspending plaintiffs' participation in defendant's farm programs (production adjustment program and conservation reserve program) for 1987 and hereafter for the duration of the preliminary injunction as a nine-person farm operation; and it is
FURTHER ORDERED, that this Preliminary Injunction shall remain in effect until the final hearing on the merits of plaintiffs' complaint (scheduled to commence on July 16, 1987, at 10:00 a.m., and to last for two days, which may, as appropriate, include brief testimony), and a decision rendered thereon, or until further order of this court; and it is
FURTHER ORDERED that plaintiffs' brief, if any, supplemental to that already on record, must be filed no later than June 11, 1987; opposition shall be filed by June 19, 1987; and reply, if any, by June 24, 1987. There shall be no extensions. It is
FURTHER ORDERED that plaintiffs shall post a bond in the amount of $ 1,000, cash or surety, on or before 1:00 p.m., June 9, 1987, failing which this injunction shall stand immediately dissolved.
IT IS SO ORDERED.
ORDER (July 21, 1987)
In accordance with the Memorandum Opinion to be issued forthwith, and in consideration of the Opinion and Order of June 5, 1987 granting plaintiffs' request for a preliminary injunction, the submissions and arguments of the parties for the July 16, 1987 hearing on the permanent injunction, the administrative record herein, and the imminence of foreclosure of plaintiffs' farm, it is accordingly hereby
ADJUDGED that defendant's suspension of plaintiffs' participation as a nine-person farm operation in defendant's farm programs (production adjustment program and Conservation Reserve Program) for 1987 was arbitrary and capricious; and it is
ORDERED that defendant, his agents, employees, officers, and representatives, and those acting in concert or participation with any of the foregoing, are permanently enjoined from suspending plaintiffs' participation as a nine-person farm in defendant's farm programs for 1987; and it is
FURTHER ORDERED that this case be remanded to the defendant for his redeterminations as to the "person" eligibility of plaintiffs for participation in defendant's farm programs after 1987, in accordance with due process and consistent with the Memorandum Opinion to accompany this Order.
IT IS SO ORDERED.