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USCA1 Opinion
UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
_________________________
No. 96-1435
NANCY STRICKLAND, ET AL.,
Plaintiffs, Appellants,
v.
COMMISSIONER, MAINE DEPARTMENT OF HUMAN SERVICES,
Defendant, Appellee,
v.
SECRETARY, U.S. DEPARTMENT OF AGRICULTURE,
Third-Party Defendant, Appellee.
_________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge] ___________________
_________________________
Before
Selya, Circuit Judge, _____________
Aldrich and Bownes, Senior Circuit Judges. _____________________
_________________________
Rufus E. Brown, with whom Jack Comart, Patrick Ende, and _______________ ___________ ____________
Pine Tree Legal Assistance, Inc. were on brief, for appellants. ________________________________
Jennifer H. Zacks, Attorney, Civil Division, Dept. of ___________________
Justice, with whom Frank W. Hunger, Assistant Attorney General, _______________
Mark B. Stern, Attorney, Civil Division, Dept. of Justice, and ______________
Jay McCloskey, United States Attorney, were on brief, for ______________
Secretary of Agriculture.
_________________________
September 24, 1996
_________________________
SELYA, Circuit Judge. Nearly four centuries ago, an SELYA, Circuit Judge. ______________
English playwright wrote of a young monarch exhorting his battle-
weary comrades to stride "once more unto the breach, dear
friends, once more." William Shakespeare, King Henry the Fifth, ____________________
Act III, Sc. 1, l.1 (1600). Nancy and Lyle Strickland, the
appellants here, issue a similar call, again requesting that this
court invalidate a regulation which the Secretary of Agriculture
(the Secretary) promulgated under authority granted by the Food
Stamp Act, 7 U.S.C. 2011-2025 (1988) (the Act). In Strickland __________
v. Commissioner, Me. Dept. of Human Servs., 48 F.3d 12 (1st __________________________________________
Cir.), cert. denied, 116 S. Ct. 145 (1995) (Strickland I), we _____ ______ ____________
applied the teachings of Chevron, U.S.A. Inc. v. Natural ______________________ _______
Resources Defense Council, Inc., 467 U.S. 837 (1984), and upheld ________________________________
a portion of the regulation that gave meaning to an ambiguous
phrase contained within the Act. See Strickland I, 48 F.3d at 21 ___ ____________
(upholding 7 C.F.R. 273.11(a)(4)(ii)(D) (1994) as a reasonable
rendition of 7 U.S.C. 2014(d)(9)). This second time around the
appellants seek to strike down a different (but closely related)
section of the same regulation. Because Chevron is still the law _______
of the land, we affirm the lower court's entry of summary
judgment in the appellees' favor.
I. THE STATUTORY SCHEME I. THE STATUTORY SCHEME
First enacted in 1964, the Act is designed "to
safeguard the health and well-being of the Nation's population by
raising levels of nutrition among low-income households." 7
U.S.C. 2011; see generally Strickland I, 48 F.3d at 14-15. The ___ _________ ____________
2
states administer most aspects of the Food Stamp Program (the
Program) while the federal government underwrites the cost (which
now amounts to some $29 billion per year). Recipients, whose
eligibility is determined by income and family size, receive
assistance in the form of coupons that may be used to purchase
groceries at local stores. In order to implement the Program,
Congress has authorized the Secretary to promulgate "such
regulations . . . as [he] deems necessary or appropriate for the
effective and efficient administration" of the Program's federal
aspects. See 7 U.S.C. 2013(a), (c). Responsibility for other ___
elements of the Program devolves upon state agencies. In Maine,
that obligation reposes with the Department of Human Services
(DHS).
In 1971, Congress instructed the Secretary to set
national eligibility standards for the Program. The Secretary
did so. Of particular interest for present purposes, the
Secretary barred any consideration of principal payments made on
the purchase price of capital assets in computing the costs which
could be offset against the income of a self-employed individual
to determine whether that person met the national eligibility
standard. See 36 Fed. Reg. 14102, 14107 (July 29, 1971). Six ___
years later, Congress overhauled the Act. It directed, inter _____
alia, that for purposes of determining eligibility for ____
participation in the Program, a person's income should not
include the "cost of producing self-employment income." 7 U.S.C.
2014(d)(9). Though Congress did not define the term "cost,"
3
the House Committee on Agriculture noted, seemingly with
approbation, that existing Program regulations did not treat
principal payments as a "cost" that could be set off against
income. See H. Rep. No. 464, 95th Cong., 1st Sess. 25, reprinted ___ _________
in 1977 U.S.C.C.A.N. 1978, 2001-02. __
Throughout, the Secretary has consistently hewed to the
position that principal payments on capital assets are not a cost
of producing self-employment income. The current regulation
epitomizes this longstanding viewpoint; it states that "cost,"
when figured for that purpose, shall not include "[p]ayments on
the principal of the purchase price of income-producing real
estate and capital assets, equipment, machinery, and other
durable goods." 7 C.F.R. 273.11(a)(4)(ii)(A).
II. THE COURSE OF LITIGATION II. THE COURSE OF LITIGATION
Mr. and Mrs. Strickland operate a construction business
in Belgrade, Maine (where they reside). When their business
faltered, they applied for admission to the Program and began
receiving benefits. In 1993 the DHS determined that the
Stricklands' average monthly income was more than double the
Program's eligibility limit. Had they been permitted to deduct
depreciation on business equipment as a "cost of producing self-
employment income," they would have remained eligible for food
stamp assistance. Consequently, they challenged the regulation
that excluded depreciation, 7 C.F.R. 273.11(a)(4)(ii)(D),
arguing that it had been promulgated in derogation of 7 U.S.C.
2014(d)(9). See Strickland I, 48 F.3d at 15-16. In due season ___ ____________
4
the appellants asserted claims against both the DHS and the
Secretary, and the district court certified the Stricklands as
representatives of a class of "all Maine food stamp applicants or
recipients adversely affected by the [] regulation on or after
July 1, 1992." Id. at 16. ___
The appellants enjoyed some initial success. After the
parties submitted the case on a stipulated record, the trial
court invalidated the Secretary's "no depreciation" regulation.
See Strickland v. Commissioner, Me. DHS, 849 F. Supp. 818 (D. Me. ___ __________ _____________________
1994). We reversed, finding ambiguity in the term "cost" as used
in the statutory phrase "cost of producing self-employment
income." See Strickland I, 48 F.3d at 19. Stressing that ___ ____________
ambiguity made deference appropriate, we upheld the Secretary's
right to exclude depreciation from "cost" as a permissible
rendition of the statute. See id. at 21. In what may now be ___ ___
viewed as an overabundance of caution, we noted that the parties'
arguments in Strickland I did "not require us to decide whether ____________
self-employed food stamp recipients must be given some
alternative deduction, such as a deduction for replacement costs,
in recognition of either the cost of acquiring capital goods or
their consumption in the course of producing income." Id. at 21 ___
n.6.1
Apparently convinced that a judicial footnote is a
____________________
1That issue was neither briefed nor argued in this court
during the pendency of Strickland I. In any event, the _____________
appellants had told the district court that they did not dispute
the Secretary's authority to disallow principal payments on
equipment loans as a cost of producing self-employment income.
5
terrible thing to waste, the Stricklands promptly reformulated
their suit to challenge that portion of 7 C.F.R.
273.11(a)(4)(ii) in which the Secretary purposed to exclude
payments on the principal of the purchase price of capital
assets, averring that a favorable finding would entitle them to
continued eligibility for food stamp assistance.
This about-face proved unproductive. The district
court granted summary judgment in favor of the state and federal
defendants, holding that the Secretary permissibly excluded
principal payments in determining the cost of producing self-
employment income. See Strickland v. Commissioner, Me. DHS, 921 ___ __________ _____________________
F. Supp. 21, 24 (D. Me. 1996) (Strickland II) (concluding that ______________
"if the Secretary is not required to recognize even depreciation,
he certainly cannot be required to recognize cash principal ________
payments"). This appeal followed.
III. STANDARD OF REVIEW III. STANDARD OF REVIEW
Because the interpretation of a statute or regulation
presents a purely legal question, courts subject that
interpretation to de novo review. See United States v. Gifford, ___ _____________ _______
17 F.3d 462, 472 (1st Cir. 1994); Liberty Mut. Ins. Co. v. _______________________
Commercial Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992). __________________________
This standard of review is between appellate tribunals and lower
courts. It does not diminish the deference that courts must
accord to authoritative interpretations of opaque statutory
provisions undertaken by those whom Congress has empowered to
administer or enforce particular laws. As we have regularly
6
held, such deference is due the Secretary's interpretation of a
less-than-pellucid food stamp statute. See, e.g., Strickland I, ___ ____ ____________
48 F.3d at 16; Massachusetts v. Secretary of Agric., 984 F.2d _____________ ____________________
514, 520-21 (1st Cir.), cert. denied, 114 S. Ct. 81 (1993); see _____ ______ ___
also 7 U.S.C. 2013(a), (c) (empowering the Secretary to ____
administer the Act).
IV. ANALYSIS IV. ANALYSIS
When courts review an agency's interpretation of a
statute that it administers, Chevron directs them to engage in a _______
bifurcated inquiry. See Passamaquoddy Tribe v. State of Me., 75 ___ ___________________ ____________
F.3d 784, 794 (1st Cir. 1996); Strickland I, 48 F.3d at 16. In ____________
an oft-quoted passage, the Chevron Court delineated the nature of _______
the inquiry:
First, always, is the question whether
Congress has directly spoken to the precise
question at issue. If the intent of Congress
is clear, that is the end of the matter; for
the court, as well as the agency, must give
effect to the unambiguously expressed intent
of Congress. If, however, the court
determines Congress has not directly
addressed the precise question at issue, the
court does not simply impose its own
construction on the statute, as would be
necessary in the absence of an administrative
interpretation. Rather, 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.
Chevron, 467 U.S. at 842-43 (footnotes omitted). These are the _______
same questions that this court posed in Strickland I, 48 F.3d at ____________
16, and we retrace our steps to the extent appropriate.
A A
7
We first look to see if Congress has spoken to the
precise question at issue by mandating either the inclusion or
the exclusion of principal payments on capital assets from the
computation of the "cost of producing self-employment income"
under 7 U.S.C. 2014(d)(9).2 Since this branch of the inquiry
deals exclusively with statutory construction and congressional
intent, no deference is due the Secretary's views.
In Strickland I we determined that the statute, 7 _____________
U.S.C. 2014(d)(9), did not require depreciation to be included
as a "cost of producing self-employment income." In reaching
this conclusion, we focused on the ambiguity inherent in the word
"cost" a word that Congress chose not to define. We concluded
that "the word ``cost' is a chameleon, capable of taking on
different meanings, and shades of meaning, depending on the
subject matter and the circumstances of each particular usage."
____________________
2In their complaint, the appellants asked the district court
to strike down the Secretary's policy, embodied in 7 C.F.R.
273.11(a)(4)(ii)(A), of disallowing principal payments made to
purchase capital assets (which they term "capital costs"). The
district court confined its ruling accordingly. See Strickland ___ __________
II, 921 F. Supp. at 24-25. At oral argument before us, however, __
the appellants' counsel suggested that the pivotal issue should
be cast in broader terms; he posed the ultimate question of
whether the Secretary's general regulatory scheme, in not
allowing any offset for wear and tear on capital assets by means
of depreciation, principal payments, or otherwise, is
permissible. For purposes of Chevron's first step, it makes no _______
difference whether we accept or reject this formulation of the
issue. Because the statute (and, particularly, the word "cost")
is ambiguous, see text infra, either formulation of the issue ___ _____
leads ineluctably to the second step of the Chevron inquiry. _______
8
Strickland I, 48 F.3d at 19.3 We therefore found that Congress ____________
had not spoken directly to the matter at issue. See id. at 19- ___ ___
20.
Although Strickland I did not address exactly the same ____________
question that confronts us today, we agree with the district
court that its analysis controls. The appellants would have us
believe that by some thaumaturgical sleight-of-hand the word
"cost" has acquired a plain meaning in the brief interval since
we decided Strickland I. They seek to persuade us that, though ____________
"cost" was not clear enough to force the inclusion of
depreciation, the word nonetheless possesses sufficient clarity
to force the inclusion of either principal payments on capital
assets, or, at least, some offset for the expense of acquiring
and using up such assets.4 We are unconvinced. Statutory
ambiguity does not flash on and off like a bank of strobe lights
____________________
3Though noting the open question as to whether legislative
history could be considered at the first stage of a Chevron _______
inquiry, see Strickland I, 48 F.3d at 16-18, we examined the slim ___ ____________
legislative history underpinning 7 U.S.C. 2014(d)(9) and deemed
it insufficient to "suck the elasticity from the word ``cost' and
convey an ``unambiguously expressed intent of Congress,'" id. at ___
19-20 (quoting Chevron, 467 U.S. at 842-43). That conclusion _______
remains unscathed.
4In this connection, we are puzzled by the appellants'
reliance on Estey v. Commissioner, Me. DHS, 21 F.3d 1198 (1st _____ ______________________
Cir. 1994). We ruled there that the term "energy assistance" had
a generally understood meaning and then proceeded to apply that
meaning to a particular set of facts. See id. at 1201, 1207. ___ ___
The appellants' suggestion that the term "cost" has an equally
familiar meaning a meaning that includes principal payments on
capital assets as a component of "cost" flies in the teeth of
our unequivocal holding that "cost," as that term is used in the
Act, does not have any readily apparent meaning. See Strickland ___ ___ __________
I, 48 F.3d at 19. _
9
at a discotheque, shining brightly at the time of one lawsuit and
then vanishing mysteriously in the interlude before the next suit
appears.
We need not dawdle. There is nothing in the record
before us to indicate that Congress ever had an unambiguously
expressed intent to include principal payments on capital assets
as a cost of producing self-employment income. The text of the
statute does not encourage such a construction and there is no
legislative history (beyond that already considered and deemed
insufficient in Strickland I, 48 F.3d at 19-20) that supports _____________
including principal payments or any proxy therefor as a "cost."
To the precise contrary, all the extrinsic evidence suggests that
Congress concurred in the Secretary's longstanding decision to
disregard such payments. The most persuasive datum comes from
the archives of the Program. The Secretary had been excluding
principal payments from the cost of producing self-employment
income for several years by the time Congress enacted 7 U.S.C.
2014(d)(9). That being so, the presumption is that Congress
intended the word "cost" to be given the same meaning that
already had been established in the regulatory context. See ___
Commissioner v. Keystone Consol. Indus., Inc., 508 U.S. 152, 159 ____________ _____________________________
(1993); Strickland I, 48 F.3d at 20. ____________
Here, moreover, it cannot plausibly be argued that
Congress merely overlooked the Secretary's contemporaneous
treatment of principal payments, for the House Committee on
Agriculture explicitly recognized the prevailing practice. See ___
10
H. Rep. No. 464, supra, 1977 U.S.C.C.A.N. at 2001-02. This _____
combination congressional awareness of an existing
administrative praxis coupled with a concomitant unwillingness to
revise that praxis strongly implies legislative approval.
"[W]hen Congress revisits a statute giving rise to a longstanding
administrative interpretation without pertinent change, the
``congressional failure to revise or repeal the agency's
interpretation is persuasive evidence that the interpretation is
the one intended by Congress.'" CFTC v. Schor, 478 U.S. 833, 846 ____ _____
(1986) (quoting NLRB v. Bell Aerospace Co., 416 U.S. 267, 274-75 ____ __________________
(1974) (footnotes omitted)).5
In sum, because Congress has not plainly resolved the
interpretive question that is now before us, we must move to the
second step of the Chevron pavane. _______
B B
During the second stage of a Chevron analysis, an _______
inquiring court accords substantial respect to authoritative
agency interpretations. See Strickland I, 48 F.3d at 17-18. ___ _____________
____________________
5We dismiss out of hand the appellants' contention that
Strickland I etched in stone a particular conception of "cost," ____________
equating the word with cash outlays. This contention reflects a
misunderstanding of the thrust of our opinion. The first step of
a Chevron inquiry requires a court to determine whether the _______
language of a statute is susceptible to more than one natural
meaning. Finding "cost" to be inherently ambiguous in the
context of the Act, we held that plain meaning did not foreclose
the Secretary's decision to exclude depreciation from the cost of
producing self-employment income. See Strickland I, 48 F.3d at ___ ____________
19. Our intention was to explain why the courts must defer to
any permissible interpretation of "cost" adopted by the ___
Secretary, not to endorse a particular conception of "cost"
(whether it be that of an economist, a layman, or a food stamp
recipient).
11
Thus, an interpretive regulation must be honored unless it is
"arbitrary, capricious, or manifestly contrary to the statute."
Chevron, 467 U.S. at 844. In deciding this issue, a court must _______
avoid inserting its own policy considerations into the mix. "The
agency need not write a rule that serves the statute in the best
or most logical manner; it need only write a rule that flows
rationally from a permissible construction of the statute."
Strickland I, 48 F.3d at 17; accord Cohen v. Brown Univ., 991 ____________ ______ _____ ____________
F.2d 888, 899 (1st Cir. 1993). Though the level of respect
varies with the circumstances, deference to an agency's
interpretation is "particularly appropriate in complex and highly
specialized areas where the regulatory net has been intricately
woven." Massachusetts Dept. of Educ. v. United States Dept. of _____________________________ _______________________
Educ., 837 F.2d 536, 541 (1st Cir. 1988) (quoting Citizens Sav. _____ _____________
Bank v. Bell, 605 F. Supp. 1033, 1041 (D.R.I. 1985)). Moreover, ____ ____
longstanding agency interpretations generally receive greater
deference than newly contrived ones. See Visiting Nurse Ass'n of ___ _______________________
No. Shore, Inc. v. Bullen, ___ F.3d ___, ___ (1st Cir. 1996) [No. _______________ ______
95-1849, slip op. at 24].
Applying these standards, we readily conclude that 7
C.F.R. 273.11(a)(4)(ii) is within the pale. The regulation,
which reflects the agency's consistent interpretation for the
past quarter-century, emanates from the Secretary's reasonable
determination that the purpose of the Act is to help low-income
families purchase food, not to underwrite the acquisition of
12
capital assets.6 To be sure, rental payments on capital assets
are, as the appellants point out, deductible as a "cost," but
such payments easily can be distinguished from principal
payments. When one leases a capital asset (say, a tractor) no
ownership interest is acquired, and the lease payments go
entirely toward producing self-employment income. By contrast,
when one buys a capital asset and pays for it in installments,
the payments not only permit the payer to use the asset as a
means of producing self-employment income but also permit him to
build equity. This additional feature changes the nature of the
transaction. The Secretary's regulation reasonably seeks to
avoid subsidizing such "dual purpose" payments.
Of course, the appellants now put a different spin on
the situation. See supra note 2. They suggest that, instead of ___ _____
appraising the validity of 7 C.F.R. 273.11(a)(4)(ii)(A), we
should view the matter in broader terms and determine whether the
Secretary must allow some offset for expenses associated with the ____
acquisition and depletion of capital assets used in a trade or
business.
Passing potential procedural problems and addressing
this argument on the merits, it does not benefit the appellants.
____________________
6Our determination that the Secretary reasonably excluded
principal payments on capital assets from the cost of producing
self-employment income is bolstered by the evidence, already
chronicled, that this interpretation of "cost" is very likely the
one that Congress intended. See supra pp. 10-11. When an ___ _____
agency's interpretation jibes with discernible congressional
intent, a court is hard-pressed to declare that interpretation
impermissible under Chevron's second step. _______
13
Their premise is that, by putting capital assets to one side, the
Secretary has defined "cost of producing self-employment income"
so grudgingly as to frustrate Congress' intent. But this premise
is faulty. The Secretary has not ignored the costs of doing
business; rather, he has recognized numerous items as allowable
costs, e.g., labor, stock, inventory, business-related interest
(including interest associated with installment payments on
capital assets), and taxes paid on income-producing property.
See 7 C.F.R. 273.11(a)(4)(i). He simply has refused to ___
recognize the kind of costs for which the appellants seek credit,
saying in effect that when a self-employed person is building
equity (a phenomenon that almost invariably accompanies the
purchase of capital assets), the Secretary will define "cost"
very restrictively (probably because no good way exists to give a
credit for expenses related to the purchase of capital assets
without also subsidizing some intangible ownership interest). As
a result, food stamp recipients who buy capital assets are able
to claim relatively few offsets for the expense connected with
acquiring and using those assets.
We frankly acknowledge that the Secretary's
interpretation is a harsh one, especially as it relates to
persons in the appellants' position. The regulatory edifice that
now exists may not be the one which we, if building on an empty
site, would choose to construct. But that is largely beside the
point. The term "cost" is ambiguous, and a harsh interpretation,
as here, which arises out of the Secretary's reasonable refusal
14
to subsidize ownership, is not per se arbitrary or capricious. ___ __
V. CONCLUSION V. CONCLUSION
We need go no further. The "cost of producing self-
employment income," 7 U.S.C. 2014(d)(9), is imprecise and
Congress has neither specified that payments designed to amortize
the purchase price of capital assets must be deemed part of the
cost nor decreed that some equivalent write-off must be
recognized in calculating the cost. Thus, the regulation here at
issue represents a permissible construction of the statute.
After all, within the wide limits that Chevron sets, courts must _______
respect the Secretary's policy choices.
Affirmed. Affirmed. ________
15
Document Info
Docket Number： 96-1435
Filed Date： 9/24/1996
Precedential Status： Precedential
Modified Date： 9/21/2015