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Single Stick, Inc. v. Johanns

March 10, 2009

SINGLE STICK, INC., PLAINTIFF,
v.
MICHAEL JOHANNS, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Richard W. Roberts United States District Judge

MEMORANDUM OPINION

Plaintiff Single Stick, Inc. brought this action against the Secretary of Agriculture, and the United States Department of Agriculture (collectively "USDA") challenging the USDA's interpretation of The Fair and Equitable Tobacco Reform Act ("Tobacco Reform Act"), 7 U.S.C. §§ 518-519a, and alleging that the USDA violated the Information Quality Act ("IQA"), 44 U.S.C. § 3516 note. The USDA has moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss for failure to state a claim and Single Stick has moved under Rule 56 for summary judgment. Because the USDA's interpretation of the Tobacco Reform Act comports with congressional intent and is entitled to deference, and because the IQA does not create any individual right to the production or correction of information, the USDA's motion to dismiss, treated in part as a motion for summary judgment, will be granted and Single Stick's motion for summary judgment will be denied as moot.

BACKGROUND

Single Stick manufactures and sells "small" cigars --- those that weigh less than three pounds per thousand cigars. (See Compl. ¶ 5.) Under the Tobacco Reform Act, Single Stick, as a tobacco manufacturer, must pay assessments to the Tobacco Transition Payment Program ("Payment Program"). The funds obtained through the Payment Program are used to subsidize domestic tobacco farmers. (See id. ¶¶ 12-13.) The Tobacco Reform Act identifies six classes of tobacco products, including cigarettes, cigars, snuff, roll-your-own tobacco, chewing tobacco, and pipe tobacco. See 7 U.S.C. § 518d(c)(1). The Commodity Credit Corporation ("CCC"), an agency within the USDA, determines the annual assessments for which each class of tobacco product will be responsible. See 7 U.S.C. § 518d(c)(1).

The Tobacco Reform Act sets forth how assessments are to be calculated. "The assessment for each class of tobacco product . . . shall be allocated on a pro rata basis among manufacturers and importers based on each manufacturer's or importer's share of gross domestic volume."*fn1 7 U.S.C. § 518d(e)(1). "The amount of the assessment for each class of tobacco product . . . to be paid by each manufacturer or importer of that class of tobacco product shall be determined . . . by multiplying --- (1) the market share of the manufacturer or importer . . .; by (2) the total amount of the assessment . . . for the class of tobacco product." 7 U.S.C. § 518d(f). "The term 'market share' means the share of each manufacturer or importer of a class of tobacco product . . . of the total volume of domestic sales of the class of tobacco product[.]" 7 U.S.C. § 518d(a)(3). For cigars, a manufacturer's or importer's "volume[] of domestic sales shall be measured by . . . the number of . . . cigars" it places into the domestic market. 7 U.S.C. § 518d(g)(3). Implementing these rules, the CCC derives the total number of cigars placed in the domestic market from excise tax reports provided to the CCC by manufacturers and importers. (Defs.' Mem. in Opp'n to Summ. J. ("Defs.' Opp'n") at 3.) See 7 U.S.C. § 518d(h); 7 C.F.R. § 1463.7. The CCC then determines an individual manufacturer or importer's pro rata share "by dividing the number of cigars from [the] particular manufacturer or importer by the total number of cigars [placed] in the domestic market [("per-stick method")]." (Defs.' Opp'n at 3.)

Using the per-stick method, the CCC assessed Single Stick $339,719 for the period of October to December 2004 based on a market share of 4.81 percent, $455,373 for the period of January to March 2005 based on a market share of 6.45 percent, and $1,152,530 for the period of April to June 2005 based on a market share of 7.78 percent.*fn2 (See Compl. ¶ 20.) Single Stick timely appealed these assessments, alleging that the USDA "substantially overstated [its] 'stick count' market share and improperly inflated [its] Payment Program obligation" because the per-stick method resulted in an assessment "far in excess of Single Stick's pro rata share of the removed volume of cigar tobacco." (Id. ¶¶ 21, 23-24.) Single Stick also filed a Freedom of Information Act ("FOIA") request seeking the CCC's primary data sources underlying the CCC's calculations and an IQA petition seeking both data source disclosure and information correction. (Id. ¶¶ 26-27.) The USDA denied Single Stick's FOIA request*fn3 and did not respond to the IQA petition.*fn4 (Id.)

Single Stick filed this action challenging the calculation methods used by the USDA to determine Single Stick's Payment Program assessments. Specifically, Single Stick argues that the USDA violated the Tobacco Reform Act by assessing Single Stick in excess of its pro rata share of removed tobacco product, by assessing Single Stick without regard to its share of gross domestic volume, by calculating market share without regard to tobacco that was smuggled or unlawfully imported, and by calculating Single Stick's volume of domestic sales on a per-stick basis. (See id. ¶ 44(a).) As a result, Single Stick contends that the USDA over-estimated Single Stick's market share. (See id. ¶ 44(b).) Single Stick also alleges that the USDA violated the IQA by "refus[ing] to respond or otherwise acknowledge Single Stick's IQA Petition and Request for Reconsideration" and "by failing to correct influential information [publicly] disseminated . . . and/or to make available data and data sources Single Stick needed and requested to test and reproduce the [USDA's] estimate of market share." (Id. ¶¶ 44(c)-(d).) Finally, Single Stick contends that, because the USDA failed to disclose the data underlying its market share calculations, Single Stick's due process right to a full and fair administrative hearing was denied. (Id. ¶¶ 29, 44(e).)

The USDA has moved under Rule 12(b)(6) to dismiss Single Stick's claims, arguing that the USDA's method of calculating assessments was permitted under the Tobacco Reform Act, the IQA did not create a right to production or correction of data, and the APA does not provide a remedy because "IQA production and correction of data is 'committed to agency discretion.'"*fn5 (See Defs.' Mem. in Support of Its Mot. to Dismiss ("Defs.' Mem.") at 2-3 (citing 5 U.S.C. § 701(a)(2) and Heckler v. Chaney, 470 U.S. 821, 830 (1985)).) Single Stick has moved for summary judgment in its favor under Rule 56. In its opposition to Single Stick's summary judgment motion, the USDA suggests without opposition that its motion to dismiss be converted to a motion for summary judgment. (Defs.' Opp'n at 2 n.1.)

DISCUSSION

I. TOBACCO REFORM ACT

Summary judgment may be granted only where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The relevant inquiry "is the threshold inquiry of determining whether there is a need for a trial -- whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). In considering a motion for summary judgment, all evidence and inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

"When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions." Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1985). The first question is "whether Congress has directly spoken to the precise question at issue." Id. If it has, "the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43. However, "if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843. In these circumstances, a court "'must defer to the agency's interpretation of the ambiguous statutory term if it represents a reasonable accommodation of the conflicting policies that were committed to the agency's care by statute.'" Back Country Horsemen of Am. v. Johanns, 424 F. Supp. 2d 89, 95 (D.D.C. 2006) (quoting New York v. EPA, 413 F.3d 3, 23 (D.C. Cir. 2005) (internal quotation marks omitted)). The agency's construction of the statute is given deference when "there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation." Chevron, 467 U.S. at 843-44.

Congress expressly delegated authority under the Tobacco Reform Act to the Secretary of the USDA to "promulgate such regulations as are necessary to implement" the statute. 7 U.S.C. § 519a(a). Single Stick's claims that the USDA's implementation of the Tobacco Reform Act is impermissible amount to assertions that: (1) the USDA was not authorized to assess Single Stick on a per-stick basis, but rather was required by the statute to consider "the disparity in gross domestic volume between small and large cigars," and (2) the USDA should have accounted for smuggled or unlawfully imported tobacco in calculating market share. (See Compl. ¶ 44(a)(iii)-(iv).)

A. Per-stick method of calculating assessments The USDA contends that the Tobacco Reform Act "dictates that . . . assessments are based on the number of cigars, and not on the weight of tobacco in the cigars." (Defs.' Mem. at 13.) They ground their argument in support of a per-stick measurement of a manufacturer's volume of domestic sales in the plain language of the Tobacco Reform Act, which provides that "volumes of domestic sales shall be measured by -- in the case of cigarettes and cigars, the number of cigarettes and cigars[.]" 7 U.S.C. § 518d(g)(3)(A). Single Stick contends that such a reading of the Tobacco Reform Act fails to take into account the requirement that volume of domestic sales be measured by gross domestic volume, see 7 U.S.C. § 518d(g)(2), which considers the amount of tobacco products removed, see 7 U.S.C. § 518d(a)(2)(A), and that each manufacturer is to be assessed its pro rata share of gross domestic volume. See 7 U.S.C. § ...


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