of dairy farmers, giving each farmer an equal payment regardless
of its size or milk production capacity. See Gov't Statement
of Material Facts as to Which There is No Genuine Dispute
("Gov't SOF") ¶ 15. Second, the Secretary could have linked the
DMLA payments to production by paying each farmer a flat rate
for each cwt of milk produced. See id. Third, the Secretary
could have linked the payments to production, but placed a limit
on the amount of milk eligible for DMLA payments. See id. The
first option would have favored small farmers, and the second
option — advocated by plaintiffs here — would have favored
larger farmers. The Secretary chose the "middle-ground" option.
The administrative record analyzes each of the options. See
id. ¶¶ 16-21. The first "per capita" option would have
provided $1,714 per farm with 29% of the funds being paid to the
33,240 farms with fewer than 30 cows and only 6% of the funds
being paid to the 7,250 dairy operations with more than 200
cows.*fn8 The second "production-linked" option — which
plaintiffs support — would have provided 45% of the DMLA funds
to 6.2% of the largest farming operations in the country. The
third hybrid or "production eligibility limit" option included
three sub-options: (1) a 17,000 cwt limit; (2) a 26,000 cwt
limit; and (3) a 34,000 cwt limit. Each of these sub-options
fell between the first two options, providing a higher payment
rate per cwt — 21.7 cents per cwt, 19.1 cents per cwt, and 18
cents per cwt, respectively — while avoiding the singularly
large payments to larger dairy producers at the expense of
smaller dairy farmers that would have occurred under plaintiffs'
Pursuant to the first prong of the Chevron test, nothing in
the governing statutes explicitly controls the Secretary's
selection of a payment method. Indeed, there is no support
whatsoever for plaintiffs' claim that the Secretary was required
by the statute to choose their preferred distribution method.
Because the Secretary's method of distribution is not contrary
to the "unambiguously expressed intent of Congress," the second
prong of the Chevron test requires the Court to determine
whether the Secretary's choice is reasonable.
The Supreme Court has stated that "an agency to which Congress
has delegated policymaking responsibility may, within the limits
of that delegation, properly rely upon the incumbent
administration's views of wise policy to inform its judgments."
Chevron, 467 U.S. at 865, 104 S.Ct. 2778. The government
argues that the Secretary's method of disbursing DMLA funds is
reasonable in light of Congress's request in the Conference
Report of the 1999 Omnibus Act to consider the needs of small
farmers when developing farming policy. The Conference Report
states: "[t]he conferees urge the Secretary to coordinate
activities and to encourage policy considerations within
existing programs of the Department that promote the needs of
small farm operators and that may help reverse the unwarranted
decline of small farm operations." H.R.Rep. No. 105-825, at 991.
Therefore, considering the department's general policy of
focusing scarce federal resources on struggling small farm
operations, the Court concludes that the Secretary's selection
of the hybrid "production eligibility limit" method of
distributing DMLA funds was not arbitrary or capricious.
Plaintiffs also argue that the Secretary's selection of 26,000
cwt as the production eligibility limit was arbitrary and
capricious. The government contends not only that the Secretary
fully justified her policy choice in the record, but that the
Secretary's decision to set the limit at 26,000 cwt was not
arbitrary or capricious, but eminently rational.
As explained above, the Secretary considered a total of five
different payment methods: the "per capita" option, the
"production-linked" option, and three variations of the
"production eligibility limit" option. The Secretary rejected
the first two "extreme" options and focused on the three
variations of the third option. The 17,000 cwt limit represented
the average annual milk production of a 100-cow farm. A 100-cow
farm generates approximately $250,000 in sales, which is the
maximum amount of sales for a "small" farm as defined by the
USDA Commission on Small Farms. The 26,000 cwt limit represented
the average annual milk production of a 150-cow farm. The 34,000
cwt limit represented the average annual milk production of a
200-cow farming operation. As the government explains:
The decision to choose 26,000 cwt, the average
production of a 150-cow farm, for the purposes of
distributing the funds appropriated under the 1999
Act, and to apply that choice when allocating the
funds made available under the 2000 Act, is
essentially a compromise position that favors smaller
farms and maximizes benefits to larger farms. It is
critical to note that, under the 26,000 cwt limit, no
eligible producer was excluded from receiving some
share of the DMLA funds, and, on average, every
eligible producer who milked up to 150 cows received
assistance commensurate with their full milk
production in an eligible year. Because the average
herd size in the United States is 79 cows, SOF ¶ 2,
generally only those dairy operations with herds more
than twice the size of the national average were
subject to the 26,000 cwt production limit for the
purposes of calculating benefits payments.
Gov't Mot. at 27.
When the Secretary selected the "middle-ground" production
limit option for distributing DMLA funds, she then was obliged
to chose a specific cwt limit. She considered three options, and
once again, selected the middle-of-the-road choice. As the D.C.
Circuit has stated, "[t]here may be no strong reason for
choosing [a numerical standard] rather than a somewhat higher or
lower number. If so, we will uphold the agency's choice of a
numerical standard if it is within a zone of reasonableness."
Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506,
525 (D.C.Cir. 1983) (citations omitted). Here, the Secretary's
choice of the 26,000 cwt limit and her justifications thereof
fall within "a zone of reasonableness." Therefore, the Court
concludes that the Secretary's decision was not arbitrary or
capricious and, therefore, is upheld under the APA.
Plaintiffs challenge to the regulations based on the Takings
Clause of the Fifth Amendment does not merit extensive
consideration. Plaintiffs' claim that the Secretary's funding
formula constitutes a "taking" cannot stand under Supreme Court
precedent. Although plaintiffs contend that they would have
received an additional $4 million in federal funds under their
preferred funding formula, they fail to offer a credible legal
basis for any expectation for a larger share of DMLA funds. In
Bowen v. Gilliard, 483 U.S. 587, 604, 107 S.Ct. 3008, 97
L.Ed.2d 485 (1987), the Supreme Court rejected a Fifth
Amendment challenge to benefit reductions in an existing welfare
entitlement program, concluding that "Congress is not, by virtue
of having instituted a . . . program, bound to continue it at
all, much less at the same level." Of course, plaintiffs here
have an even weaker case than the plaintiffs in Bowen, because
these plaintiffs are challenging the allocation of funds in a
new program, not cuts to an existing entitlement program. And as
the Supreme Court stated in Bowen, "[i]t is hard to believe
that [the Court] would seriously entertain an argument that a
new benefit program constituted a taking." Id.
The Court also need not spend much time on plaintiffs'
challenge to the DMLA programs on Equal Protection grounds
because it clearly is not a viable claim. In essence, plaintiffs
insist that the Secretary's funding formula "discriminates"
against dairy producers based on the size of their operations.
However, because large farmers are not a suspect class and a
fundamental right is not at issue, the appropriate level of
scrutiny for the regulations is rational basis review. The
Secretary's decision easily survives this type of deferential
review: Because it is reasonable to conclude that smaller farms
are more severely impacted by declining milk prices than larger
farms and smaller farmers are more likely to benefit from the
government's relatively small benefit payments, the Secretary's
decision to target a larger percentage of emergency funds to
small farms is reasonable and justifies the classification.
For the foregoing reasons, it is, therefore, this 2nd day of
ORDERED, that the defendant's motion for summary judgment is
granted, and plaintiffs' motion for summary judgment is denied;
and it is
FURTHER ORDERED, that the Clerk of Court shall forthwith enter
final judgment for defendant dismissing the complaint with