The opinion of the court was delivered by: Lamberth, District Judge.
Now before the Court are cross motions for summary judgment.
Although the motions present a variety of issues, the Court need
only consider two: (1) whether the defendant's interpretation of
"eligibility" under 7 C.F.R. § 1951.909 is acceptable, and (2)
whether the defendant's delay, if any, in processing the
plaintiff's loan servicing application violated applicable law.
The Court finds for the defendant on both issues. Accordingly,
the Court GRANTS the defendant's motion for summary judgment on
those issues and DENIES the plaintiff's motion for summary
judgment on those issues. The remaining issues, being rendered
moot by the eligibility decision, are thus DISMISSED WITHOUT
I. The Statutory and Regulatory Scheme
In 1994, Congress created the FSA. One of the FSA's duties is
the administration of the Farm Loan Programs, formerly handled by
the Farmer's Home Administration. Under this program, the FSA
makes loans to farmers for operating expenses and land purchases.
These loans are normally secured by the farmer's real and
To assist farmers who fall behind in their loan payments,
Congress also created the Primary Loan Servicing Program. See
7 U.S.C. § 2001 et seq. (1994). This program allows delinquent
loans to be "serviced" by consolidation and rescheduling,
reamortization, deferral, debt set-aside, and write-down. To
qualify for primary loan servicing, four factors must be
satisfied: (1) the borrower's delinquency must be "due to
circumstances beyond the control of the borrower," (2) "the
borrower must have acted in good faith with the Secretary [of
Agriculture] in connection with the loan," (3) "the borrower must
present a preliminary plan containing reasonable assumptions"
that demonstrates an ability to meet all expenses under the
restructured loan, and (4) the loan, if restructured, would yield
a net recovery to the government equal to or exceeding what
foreclosure would yield. 7 U.S.C. § 2001(b).
One of the loan servicing options, a loan write-down, can be
accomplished through what is called a "conservation contract" — a
contract between the Secretary of Agriculture and the farmer.
Under the contract, the farmer grants an interest in his land to
the government in exchange for a write-down of his debt.*fn1 A
conservation contract is available if the farmer qualifies for
primary loan servicing and four additional factors are met: (1)
the contract property must be "wetland, upland, or highly
erodible land", (2) the property must be "suitable" for the
purposes involved, (3) the property must be loan security, and
(4) the contract "better enables a qualified borrower to repay
the loan." 7 U.S.C. § 349(c).
To assist in the administration of the loan servicing program,
the Secretary of Agriculture has promulgated an extensive body of
regulations. See 7 C.F.R. § 1951, subpart S. Of particular
importance in this case are the Secretary's eligibility
requirements that supplement the statutory requirements of
7 U.S.C. § 2001(b) listed above. Specifically, section
7 C.F.R. § 1951.909(c)(4). Neither the statutory nor the
regulatory provisions specify a particular point in the loan
servicing process when a final decision on eligibility must be
II. Factual and Procedural History
Joseph Cerniglia, the plaintiff, grows apples and grapes on his
farm in Vermont. His farm is partially financed by loans from the
FSA. In early 1995, being unable to make his loan payments, Mr.
Cerniglia applied for primary loan servicing with the FSA. The
FSA found him eligible for loan servicing in general, and a
conservation contract in particular. Electing to service his
loans with a conservation contract, the multi-stepped process of
contract finalization was begun. Over a year later, the FSA,
while still in the process of finalizing the contract, discovered
through a local newspaper that Mr. Cerniglia had sold a portion
of his winery to Stroh Brewery Company. The sale increased his
nonessential assets to $2,084,284. At the time, only $167,615 was
needed to bring his FSA loan current.
With this revelation, the FSA sought updated financial records
from Mr. Cerniglia. After obtaining the necessary records, the
FSA made a final decision on the conservation contract on January
27, 1998. The FSA decided that Mr. Cerniglia was not eligible for
the conservation contract because he had sufficient nonessential
assets to bring his accounts current.
Mr. Cerniglia appealed this decision to the National Appeals
Division ("NAD") in the spring of 1998. He argued that he was
found eligible for the contract in 1995 and that the regulations
do not require continuous eligibility throughout the approval
process. Further, he argued that, even if there were such a
requirement, the FSA unlawfully delayed the processing of his
application, thereby causing the final consideration of his
contract to fall after his sale to Stroh's Brewery.
After a series of proceedings, the NAD hearing officer ruled on
November 4, 1998 that (1) the FSA had the authority to ask for
current financial information after the applicant had submitted a
complete application, (2) Mr. Cerniglia's financial situation and
assets were a relevant factor in considering a request for a
conservation contract, (3) although eligibility for a
conservation contract is initially determined at the beginning of
the review process, the borrower must remain eligible for such
servicing until the final closing, and (4) no credible evidence
existed to support Mr. Cerniglia's allegations of unlawful
This decision resulted in another appeal, this time to the NAD
Director. On March 18, 1999 the NAD Director ruled that (1) Mr.
Cerniglia's request for a conservation contract was separate from
his earlier successful request for primary loan servicing, (2)
when a conservation contract is considered without other primary
loan servicing, there is no regulatory deadline within which the
FSA must make a decision, (3) the FSA properly considered Mr.
Cerniglia's post-1997 financial information to determine
eligibility, and (4) the FSA properly found Mr. Cerniglia
ineligible for a conservation contract because he had
nonessential assets well in excess of his past due debt.
The NAD Director's decision gave rise to the instant civil
action. As mentioned at the outset, the Court need only address
two of the plaintiff's claims: (1) the claim that the FSA
violated 5 U.S.C. § 706(2) in conducting a second review of his
eligibility, and (2) the claim that the FSA violated