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MILK TRAIN, INC. v. VENEMAN

July 2, 2001

MILK TRAIN, INC., ET AL., PLAINTIFFS,
V.
ANN VENEMAN, SECRETARY, U.S. DEPARTMENT OF AGRICULTURE DEFENDANT.



The opinion of the court was delivered by: Jackson, District Judge.

    MEMORANDUM AND ORDER

Thirty-one large dairy producers bring this action challenging regulations issued by the U.S. Department of Agriculture ("USDA") governing the disbursement of funds from the Dairy Market Loss Assistance Program. Plaintiffs contend that the Secretary exceeded the scope of her rulemaking authority by issuing regulations that limit the amount of market loss assistance a dairy producer could receive. Plaintiffs are challenging the regulations on the grounds that they violate the Non-Delegation Clause, the Takings Clause, the Equal Protection Clause, and the Administrative Procedures Act. The case is currently before the Court on the parties' cross-motions for summary judgment.*fn1

I.

In 1998, responding to a sharp decline in milk prices that was causing a severe hardship in the dairy industry, Congress appropriated $200 million in the Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriation Act for Fiscal Year 1999 ("FY'99 appropriations bill") for the USDA "to provide assistance to dairy producers in a manner determined by the Secretary." Pub.L. No. 105-277, § 1111(d), 112 Stat. 2681 (Oct. 21, 1999). In May 1999, USDA issued a final rule establishing the Dairy Market Loss Assistance Program ("DMLA"), which would be responsible for distributing the financial assistance to dairy producers. See Final Rule, 64 Fed. Reg. 24,933-24,936, codified at 7 C.F.R. § 1430.501 et seq. Endeavoring to distribute a finite sum of money to best effect, the Secretary issued regulations that favored smaller dairy producers by limiting the amount of assistance a producer could receive based on its production volume. Specifically, the regulations provided that all dairy producers who marketed milk in the last quarter of 1998 would be eligible for DMLA assistance, but their payments would be limited to the first 26,000 hundredweight ("cwt")*fn2 of milk produced in either 1997 or 1998.*fn3 Plaintiffs claim that, as a result of the Secretary's allocation formula, approximately 90% of their milk production is ineligible for DMLA assistance.

In 1999, Congress again appropriated funds to assist dairy producers to cope with declining milk prices. The Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriation Act for Fiscal Year 2000 ("FY'00 appropriations bill") provided $125 million to USDA to be distributed to "dairy producers, in the manner determined appropriate by the Secretary, to compensate for economic losses incurred during 1999." Pub.L. No. 106-78, § 805, 113 Stat. 1135 (Oct. 22, 1999). In February 2000, the USDA issued new rules applying the allocation formula adopted in the original DMLA Program to the newly appropriated funds. See Final Rule, 65 Fed. Reg., 7944-7945, 7956, codified at 7 C.F.R. § 1430, et seq., as amended. The new rules also provided that any producer who had applied for funds in 1998 did not have to reapply to receive payments in 1999. These producers would automatically receive payments based upon their original 1998 applications.

The essence of this controversy is whether the Secretary exceeded her statutory authority by capping at 26,000 cwt the amount of milk production that would be eligible for financial assistance, the consequence of which was to bestow the bulk of the funding on smaller dairy farmers. This question obviously turns on the interpretation of the statutory language of the DMLA programs. The FY'99 appropriations bill directed the Secretary "to provide assistance to dairy producers in a manner determined by the Secretary," and the FY'00 appropriations bill directed the Secretary to allocate the funds to "dairy producers, in the manner determined appropriate by the Secretary, to compensate for economic losses incurred during 1999." Plaintiffs argue that this statutory language does not provide the Secretary with any authority to cap payments to large producers, whereas the government contends that the language accords the Secretary broad discretion in determining how to distribute the funds.

Plaintiffs challenge the DMLA regulations on a number of grounds. First, plaintiffs argue that to infer authority in the Secretary to impose an eligibility limitation on DMLA payments would violate the Non-Delegation Clause of the Constitution because the statutory language did not authorize any limitations and the Secretary cannot identify an "intelligible principle" in the statutory language to assist her in determining how it might be permissible to impose them. Second, they argue that the regulations violate the Administrative Procedures Act ("APA") because the eligibility limitation is arbitrary and capricious. Third, plaintiffs contend that the limitation constitutes a "taking" under the Takings Clause of the Constitution because plaintiffs did not receive as much assistance under DMLA as they would have received if the Secretary had, for example, adopted a pro rata distribution scheme. Fourth, plaintiffs claim that the regulations violate the Fifth Amendment's Equal Protection Clause because the regulations treat larger dairy operations differently — and less favorably — than smaller dairy operations.

II.

"The fundamental precept of the delegation doctrine is that the lawmaking function belongs to Congress, U.S. Const., Art. I, § 1, and may not be conveyed to another branch or entity." Loving v. United States, 517 U.S. 748, 758, 116 S.Ct. 1737, 135 L.Ed.2d 36 (1996). "The [Supreme] Court has also recognized, however, that the `separation of powers principle and the non-delegation doctrine in particular, do not prevent Congress from obtaining the assistance of the coordinate branches.'" National Federation of Federal Employees v. United States, 905 F.2d 400, 404 (D.C.Cir. 1990) (quoting Mistretta v. United States, 488 U.S. 361, 372, 109 S.Ct. 647, 102 L.Ed.2d 714 (1989)). The Supreme Court's application of the nondelegation doctrine has been "driven by a practical understanding that in our increasingly complex society, replete with ever changing and more technical problems, Congress simply cannot do its job absent an ability to delegate power under broad general directives." Mistretta, 488 U.S. at 372, 109 S.Ct. 647. Therefore, Congress does not violate the Constitution "merely because it legislates in broad terms, leaving a certain degree of discretion to executive or judicial actors." Touby v. United States, 500 U.S. 160, 165, 111 S.Ct. 1752, 114 L.Ed.2d 219 (1991).

The test the Supreme Court has applied to determine whether Congress has violated the non-delegation doctrine is well-settled. "So long as Congress `shall lay down an intelligible principle to which the person or body authorized to' [exercise the delegated authority] is directed to conform, such legislative action is not a forbidden delegation of legislative power." Mistretta, 488 U.S. at 372, 109 S.Ct. 647 (quoting J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 406, 48 S.Ct. 348, 72 L.Ed. 624 (1928)). Under the "intelligible principle" test, it is "constitutionally sufficient if Congress clearly delineates the general policy, the public agency which is to apply it, and the boundaries of this delegated authority." Id. at 372-73, 109 S.Ct. 647 (quoting American Power & Light Co. v. SEC, 329 U.S. 90, 105, 67 S.Ct. 133, 91 L.Ed. 103 (1946)). This test is not difficult to satisfy. See National Federation, 905 F.2d at 404. Indeed, the Supreme Court has not struck down legislation for violating the non-delegation doctrine since it invalidated two statutes over 65 years ago in A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570 (1935), and Panama Refining Corp. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 79 L.Ed. 446 (1935). See id. (citing Mistretta, 488 U.S. at 373, 109 S.Ct. 647).

Acknowledging that the DMLA statutes themselves may not violate the non-delegation doctrine, plaintiffs nevertheless insist that the Secretary's DMLA regulations are unconstitutional because "there is no intelligible principle anywhere in the DMLA that assists the Secretary in determining whether to impose limits [on how much assistance each dairy producer may receive], let alone what those limits should be." Pls.' Opp'n at 26. Plaintiffs argue that the Secretary's decision to distribute the funds in a "non-uniform manner" amounts to the creation of new policy without the required congressional authorization. In essence, plaintiffs' non-delegation doctrine argument can be summarized as follows: either the statute contemplates providing the Secretary wide discretion in allocating the funding in any manner she wishes — in which case the statute lacks an "intelligible principle" to guide the agency in promulgating regulations and violates the non-delegation doctrine — or the statute does not contemplate providing the Secretary such wide discretion — in which case the Secretary's regulations constitute new policy and impermissibly intrude on Congress's legislative authority. Either way, plaintiffs argue, the Secretary's regulations are unconstitutional.

In advancing this argument, plaintiffs rely almost exclusively on a D.C. Circuit opinion that has since been overturned by the Supreme Court. See American Trucking Ass'ns, Inc. v. EPA, 175 F.3d 1027 (D.C.Cir. 1999), rev'd, Whitman v. American Trucking Ass'ns, Inc., 531 U.S. 457, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001). In ATA, the D.C. Circuit struck down the EPA's National Ambient Air Quality Standards ("NAAQS") on non-delegation doctrine grounds, because the EPA had failed to articulate an "intelligible principle" in the Clean Air Act that guided the agency in its selection of factors used "in determining the degree of public health concern associated with different levels of ozone and [particulate matter]." Id at 1034. The Supreme Court, however, explicitly rejected the D.C. Circuit's requirement that "statutes provide a `determinate criterion' for saying `how much [of a regulated harm] is too much.'" Id at 913. The Supreme Court explained:

In Touby, for example, we did not require the statute to decree how "imminent" was too imminent, or how "necessary" was necessary enough, or even-most relevant here-how "hazardous" was too hazardous. Similarly, the statute at issue in Lichter authorized agencies to recoup "excess profits" paid under wartime Government contracts, yet we did not insist that Congress specify how much profit was too much. It is therefore not conclusive for delegation purposes that, as respondents argue, ozone and particulate matter are "nonthreshold" pollutants that inflict a continuum of adverse health effects at any airborne concentration greater than zero, and hence require the EPA to make judgments of degree. "[A] certain degree of discretion, and thus of lawmaking, inheres in most executive or judicial action."

Id. at 913-14 (citations omitted). Based on this reasoning, Congress did not have to specify, as plaintiffs argue, how the Secretary should distribute the DMLA funds among dairy farmers or even how "small" was too small when it encouraged the Secretary to adopt policies favoring small farms. Because plaintiffs' non-delegation doctrine argument was based primarily on the D.C. Circuit's decision in ATA, the ...


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