United States District Court, District of Columbia
N. McFADDEN, U.S.D.J.
generations, an African American family has farmed cotton and
soybeans in the Mississippi River Delta near Mound Bayou,
Mississippi. In the 1980s and 90s, the Watsons pledged their
farmland as security for various loans from the U.S.
Department of Agriculture's Farm Service Agency,
including a Farm Ownership Loan. That Farm Ownership Loan is
delinquent, and the Agency has started foreclosure
proceedings against the Watsons' farmland. Wayne Watson
and his siblings seek a preliminary injunction to enjoin the
foreclosure. They claim that they have made payments toward
the Farm Ownership Loan but the Agency has misapplied those
payments to debts it should have forgiven after their
parents' successful discrimination claim under the
Pigford Consent Decree. The Agency argues that it
properly credited the Watsons' accounts with
Pigford debt relief, and in any event, the allegedly
misapplied payments are not enough to bring the Farm
Ownership Loan current. For the reasons below, the Court will
deny the Watsons' Motion for Preliminary Injunction.
1988 and 1995, Annie and James Watson, Jr. received
Operating, Emergency, and Farm Ownership Loans from the
Agency. See Miller Decl. ¶ 1, ECF No. 18-1. The
Operating Loan program, Emergency Loan program, and Farm
Ownership Loan program are separate, distinct loan programs.
See Monitor Update No. 10 at 2, ECF No.
12-6. These distinctions turn out to be critical
to the Watsons' entitlement to relief.
1995, the Watsons were behind on their loan payments. Miller
Decl. ¶ 1-2. So, in October of that year, they signed an
agreement with the Agency to restructure their debt.
Id. ¶ 2; see also Shared Appreciation
Agreement (“SAA”), ECF No. 18-4. The Agency
agreed to write down nearly $260, 000 of the Watsons'
debt. SAA at 2. The write-down extinguished all the
Watsons' outstanding Operating and Emergency Loans and
reduced their obligation on the Farm Ownership Loan by about
$16, 000. See Miller Decl. ¶ 1; see
also Loan Analysis at 18, ECF No. 18-3. After the
write-down, the Watsons were left with a balance on their
Farm Ownership Loan of just under $140, 000. Miller Decl.
¶¶ 1-2; see also SAA at 1; Loan Analysis
at 1-2, 18.
exchange for the write-down, the Watsons entered into a
Shared Appreciation Agreement (the “Agreement”).
See SAA at 1-2. A Shared Appreciation Agreement is
an agreement between the Agency and a borrower that requires
the borrower who has received debt write-down on a loan
secured by real estate to repay the Agency some or all the
write-down received. See Miller Decl. ¶ 3. How
much the borrower owes is based on a percentage of any
increase in the value of the real estate securing a Shared
Appreciation Agreement at a future date. See id.;
SAA at 2. The Watsons used their farmland as security. SAA at
1, 3. The Agreement had a ten-year term, and the Watsons
agreed to pay the Agency a “recapture amount”
equal to 50 percent of any positive appreciation in the
market value of their farmland, upon maturation. Id.
at 2; Miller Decl. ¶ 24. In sum, as of 1995, the Watsons
had an outstanding Farm Ownership Loan with the Agency and a
recapture liability that matured in 2005.
1999, James Watson, Jr., sought relief under the
Pigford Consent Decree. See Pigford Claim
Sheet, ECF No. 12-9. The Pigford Consent Decree
arose out of a class action by African American farmers
alleging the Agency had discriminatorily denied them loans,
“delay[ed] the processing of their applications or
approv[ed] the[ir] [applications] for insufficient amounts or
with restrictive conditions.” Pigford v.
Glickman, 185 F.R.D. 82, 87 (D.D.C. 1999). Relevant
here, the Consent Decree allowed farmers who believed that
the Agency had discriminated against them to submit claims to
a court-appointed adjudicator. See Consent Decree,
ECF No. 1-5 at 2, 13-17; see also, e.g., Decision of
Adjudicator, ECF No. 18-6. If the Adjudicator decided in a
claimant's favor, the claimant was entitled to the relief
of all his “outstanding debt to [the U.S. Department of
Agriculture] that was incurred under, or affected by, the
program(s) that was/were the subject of the . . . claim(s)
resolved in [his] favor.” Consent Decree at 15.
Watson alleged the Agency had discriminated against his
applications for Operating Loans starting in 1989.
Pigford Claim Sheet at 3. The Adjudicator originally
denied his claim. Decision of Adjudicator at 2-3. But Mr.
Watson appealed, and upon reexamination, the Adjudicator
determined that Mr. Watson had “established by
substantial evidence that he [was] entitled to recover under
the terms of the Consent Decree.” See Decision
on Reexamination at 3, ECF No. 12-11. The Adjudicator
directed that “as required by the Consent Decree, [Mr.
Watson] . . . shall be relieved of any USDA Operating Loan
debt incurred . . . between February 2, 1989 and December 31,
interim, the Agreement matured. The Agency calculated the
recapture amount due and determined that the Watsons owed
$60, 819. Recapture Calculation, ECF No. 18-9. The Agency
created an Equity Recapture Account (“ERA”) (No.
41-40) to track the balance of the recapture amount due.
Miller Decl. ¶ 8. The Watsons made two payments toward
the ERA: $8, 000 in 2008 and $14, 990.77 in 2011.
Id. ¶ 9.
debt relief covered the remaining balance of the ERA. See
Id. ¶¶ 11, 24; see also ERA Ledger,
ECF No. 18-23. Recall that the Adjudicator ordered the Agency
to grant debt relief to James Watson's Operating Loans
incurred between 1989 and 1996, but the Agency wrote off
those loans entirely under the Agreement-there was no debt
left to relieve. Miller Decl. ¶ 11. So the Agency
applied non-cash credits to the ERA in the amount equal to
the Pigford-qualifying Operating Loans that it had
written off. See id.; see also Debt Relief
Summary, ECF 18-12; ERA Ledger at 1. Between the Watsons'
payments and the non-cash credits, the ERA was satisfied.
Miller Decl. ¶ 24.
the Watsons fell behind on their Farm Ownership Loan (No.
41-32). Id. ¶ 4. According to the Agency, the
Farm Ownership Loan has been delinquent since 2000.
Id. James Watson died in 2006, and Annie Watson died
two years later. Id. ¶ 13. But their estates
remained liable for the outstanding loans. See Id.
¶ 14. Wayne, Troy, Fitzgerald, Rhonda, and Deborah
Watson (collectively, the “Heirs”) are heirs to
the Watsons' estates, and Wayne Watson is also the
executor of the estates. See Compl. at 1, ECF No. 1;
TRO Hearing Tr. at 8-9. Starting in 2006, the Heirs have made
payments toward the outstanding Farm Ownership Loan.
See Wayne Watson Aff. ¶ 4, ECF No. 2-2 at 6-10.
so, the Agency maintains that the loan is behind about $75,
000. See Miller Decl. ¶ 4; Farm Ownership Loan
Ledger, ECF No. 18-22; see also Summary of Payments,
ECF No. 18-5. Thus, the Agency sent the Heirs a “Notice
of Acceleration” on the delinquent loan. Notice of
Acceleration, ECF No. 18-21. The Agency offered the Heirs
three options: pay the loan balance in full, transfer the
farmland to someone who was willing and able to assume the
debt, or sell the farmland for market value and send the
proceeds to the Agency. Id. at 4-5. The Heirs did
not take any of those options. Miller Decl. ¶ 20.
Agency moved forward with foreclosure. Id. ¶
21. In June 2019, it published a notice starting foreclosure.
Id. It sent a “Notice of Sale” to all
known heirs of the Watson Estates and published the Notice of
Sale in the Bolivar County newspaper four times. Id.
It scheduled the sale for July 1, 2019. Id.
Heirs now seek to enjoin the sale, alleging that the Agency
improperly implemented Pigford debt relief which
caused the Farm Ownership Loan to become delinquent. See
generally Compl. Their argument proceeds in three steps.
First, the Agency wrongly implemented Pigford debt
relief and should have forgiven the entire ERA using the
non-cash credits awarded to the Watson. Id. at 6-14.
Second, the Agency's failure to do so caused it to
erroneously apply $22, 990.77 in payments meant for the Farm
Ownership Loan to the ERA. Prelim. Inj. Hearing Tr.
(“PI Tr.”) at 26-27, ECF No. 24; see
also Mem. in Supp. of Mot. for Prelim. Inj. at 5-8
(“Pls.' Mem.”), ECF No. 17-1. Finally, if the
Agency had applied the $22, 990.77 correctly, then it
“could have reduced the account balance of the [Farm
Ownership Loan] and possibly avoid[ed] foreclosure.”
Suppl. Mem. in Supp. of Mot. for Prelim. Inj.
(“Pls.' Suppl.”) at 2, ECF No. 25.
Court granted the Heirs' request for a temporary
restraining order after an initial hearing. Order, ECF No.
16. The Heirs then moved for a preliminary injunction.
Id.; Mot. for Prelim. Inj., ECF No. 17. The Court
held a hearing on the motion. 7/15/19 Minute Entry.
Heirs renewed their argument that “[s]erious questions
regarding the proper application of the credits and the
payments going to the merits are raised.” See
Pls.' Mem. at 5- 8. But, according to the Agency, it
granted the Watsons all the debt relief that they were
entitled to under Pigford and applied payments to
the Watsons' accounts properly. Defs.' Opp'n to
Mot for Prelim. Inj. (“Defs.' Opp'n”) at
8, ECF No. 18; Miller Decl. ¶ 22; see also PI
Tr. at 9, 11-14, 42-43. And, the Agency argues, even if the
Agency should have forgiven the entire ERA and applied all
payments to the Farm Ownership Loan, the loan would still be
delinquent. See Miller Decl. ¶ 24; see