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VANDERVELDE v. ESPY

December 12, 1995

ROY AND RENEE VANDERVELDE, Plaintiffs,
v.
MIKE ESPY, Secretary, The United States Department of Agriculture, Defendant.


Louis F. Oberdorfer, UNITED STATES DISTRICT JUDGE


The opinion of the court was delivered by: OBERDORFER

I.

 This matter is before the Court on cross-motions for summary judgment as to whether plaintiffs are entitled to payments totaling $ 1,734,906.40 and subject to a penalty of $ 26,000 on account of their participation in the Department of Agriculture's now-defunct Dairy Termination Program ("Program"). Congress authorized the Program in order to reduce the milk cow population, and hence the production of milk, in the United States. A Memorandum filed March 2, 1991 described the procedural history to that date of plaintiffs' unsuccessful administrative claims that they were entitled to payment pursuant to a contract which obligated them to export or sell for slaughter their entire herd of 1,224 milk cows. The Memorandum also reviewed defendant's decision not to make the payment because, among other things, plaintiffs allegedly failed to brand 11 cows and retained or otherwise failed to export or send to slaughter approximately 175 head from their herd pursuant to a scheme or device. See Vandervelde v. Yeutter, 774 F. Supp. 645 (D.D.C. 1991). A Memorandum and Order filed April 15, 1992 determined that the hearings preceding the earlier administrative decision were not conducted in the manner deemed most likely to obtain the facts as required by Department regulations. See Vandervelde v. Yeutter, 789 F. Supp. 24 (D.D.C. 1992). The Memorandum expressed concern that "an aura of community vendetta emanates from this record and from the possible disproportionality between the plaintiffs' alleged offense and the $ 1,700,000 sanction visited upon them." Id. at 26. Accordingly, the Memorandum remanded the matter to the defendant for further administrative proceedings.

 II.

 A.

 Resolution of the pending motions revolves around the provisions of acts of Congress providing for price support, and a corollary reduction in production, of milk. See 7 U.S.C. § 1446(d) and 7 C.F.R. § 1430 et. seq. promulgated by the Secretary of Agriculture pursuant to the statute. Congress limited the Program to an 18-month period beginning April 1, 1986. The statute authorized the Secretary of Agriculture to contract with a milk producer "for the purpose of terminating the production of milk by the producer" in return for a payment to be made by the Secretary. 7 U.S.C. § 1446(d)(3)(A)(ii). The statute contemplated that each contract would require the producer to sell for slaughter or for export "all the dairy cattle in which such producer owned an interest" and precluded a producer for a period of 3 to 5 years from acquiring "any interest in dairy cattle or in the production of milk." 7 U.S.C. § 1446(d)(3)(A)(iv)(I-II). Subsection (3)(A)(iv)(III) provided that "if the producer fails to comply with such contract, the producer shall repay to the Secretary the entire payment received under the contract." The statute authorized civil penalties of $ 1,000 to $ 5,000 per head of cattle for various Program violations. 7 U.S.C. § 1446(d)(5)(B). Subsection (5)(A) authorized the Secretary and/or the Attorney General to bring a civil action in a district court to enforce or prevent violation of any regulation issued pursuant to the statute.

 Section 1430.450 of the regulations reiterated the statutory "purpose of the program . . . to achieve reductions in the quantity of milk marketed for commercial use" and authorized the Secretary's delegate to "enter into contracts with producers . . . to sell their dairy cattle for slaughter or export and terminate milk production for a five-year period." To this end Section 1430.457(a) required a participating producer to sell for slaughter or export all dairy cattle "in which any such producer or related person had an interest." Section 1430.458 obligated the producer to brand all dairy cattle subject to a contract and precluded a producer from participating in more than one intermediate sale of any herd of cattle between the contract date and its expiration. In the enforcement of the participating producer's obligation to sell or export the dairy cows, the regulations required him to report to the Secretary's delegate the details of each slaughter or export. 7 C.F.R. § 1430.458(h). Critical here is the provision that the Secretary's delegate shall make payments on a contract "only if it has been determined that there has been compliance with all of the terms and conditions of the regulations and the contract. If any terms, conditions, or requirements . . . are not met . . . no further payments shall be made . . . ." 7 C.F.R. § 1430.459. Section 1430.468(g) placed the burden on "participating producers to establish compliance with the requirements of the contract." In addition, Section 1430.461, unlike the statute, addressed "misrepresentations, scheme and device, and fraud." This "fraud" provision rendered ineligible for payments "any participating producer [who] has misrepresented any fact or has adopted, participated in, or benefitted from, any scheme or device which has the effect of, or is designed to, defeat the purpose of this subpart and/or the contract."

 Of central interest is a provision authorizing discretionary relief for failure to comply with the terms of the contract. This provision is applicable "only to producers who are determined to have made a good faith effort to comply fully with the terms and conditions of the program and rendered substantial performance." 7 C.F.R. § 791.2.

 B.

 The authority of a court to review a decision by the Division under the Program is governed by the Administrative Procedures Act, 7 U.S.C. § 1385 and § 1429, and the Due Process Clause of the Constitution. Section 1385 provides in relevant part:

 
The facts constituting the basis for any . . . payment under . . . price support operation, or the amount thereof, when officially determined in conformity with the applicable regulations prescribed by the Secretary or by the Commodity Credit Corporation, shall be final and conclusive and shall not be reviewable by any other officer or agency of the Government . . . . [emphasis added]

 Section 1429 provides that "determinations made by the Secretary under this Act shall be final and conclusive . . . ." [emphasis added]

 Thus, Congress determined that with respect to the Program decisions by or on behalf of the Secretary, findings of fact, in and among themselves, are "final and conclusive" when officially determined "in conformity with the applicable regulations." Our Court of Appeals expressly recognizes that Section 1385 precludes judicial review of fact findings to which that section applies. Esch v. Yeutter, 278 U.S. App. D.C. 98, 876 F.2d 976, 990-91 & n.156 (D.C. Cir. 1989); accord United States v. Batson, 782 F.2d 1307, 1311 (5th Cir. 1986) ("Finality attaches in these cases only to those findings of fact that constitute the basis for program payments."). See also Wardlaw Farms, Inc. v. United States, 32 Fed. Cl. 475 (Ct. Cl. 1992). As plaintiffs have enjoyed ample opportunity to subpoena and cross-examine witnesses as contemplated by the April 15, 1992 decision, Vandervelde v. Yeutter, 789 F. Supp. 24 (D.D.C. 1992), Section 1385 applies and the Division's factual findings are unreviewable.

 The literal language of Section 1429 suggests there is also no judicial review of an agency's "determinations" concerning price support programs. However, the Administrative Procedures Act creates a presumption of reviewability of such determinations under the "arbitrary and capricious" standard. Thus, Batson emphasized that "only" the findings are unreviewable. 782 F.2d at 1311. See also Esch v. Lyng, 665 F. Supp. 6, 12-13 (D.D.C. 1987), aff'd, 876 F.2d 976, 278 U.S. App. D.C. 98 (D.C. Cir. 1989). Although the Division's "findings of fact" remain unreviewable, its "determinations" are reviewable and reversible if "arbitrary and capricious." See Peterson Farms I. California Partnership v. Espy, 976 F.2d 725, 1992 U.S. App. LEXIS 22395, aff'd, 304 U.S. App. D.C. 429, 15 F.3d 1160 (D.C. Cir. 1994) (per curiam) (unpublished). Accordingly, the ultimate question for decision here is whether the Division's determinations that plaintiffs violated the contract and were not ...


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