Steve Bass v. Tom Vilsack , 595 F. App'x 216 ( 2014 )


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  •                               UNPUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    No. 14-1017
    STEVE BASS; TERRY H. BASS,
    Plaintiffs – Appellants,
    v.
    TOM   VILSACK,    Secretary   United     States     Department   of
    Agriculture,
    Defendant - Appellee.
    Appeal from the United States District Court for the Eastern
    District of North Carolina, at Wilmington. Malcolm J. Howard,
    Senior District Judge. (7:11-cv-00239-H)
    Argued:   October 30, 2014               Decided:    December 31, 2014
    Before SHEDD, AGEE, and WYNN, Circuit Judges.
    Affirmed by unpublished per curiam opinion.
    ARGUED: Thomas A. Lawler, LAWLER & SWANSON, Parkersburg, Iowa,
    for Appellants.    Matthew Fesak, OFFICE OF THE UNITED STATES
    ATTORNEY, Raleigh, North Carolina, for Appellee.        ON BRIEF:
    Thomas G. Walker, United States Attorney, OFFICE OF THE UNITED
    STATES ATTORNEY, Raleigh, North Carolina, for Appellee.
    Unpublished opinions are not binding precedent in this circuit.
    PER CURIAM:
    The “Swampbuster” provision of the Food Security Act, 
    16 U.S.C. § 3821
    , prohibits persons who participate in programs
    administered    by   the   United     States     Department      of    Agriculture
    (“USDA”   or     “the      agency”)      from       converting        wetlands    to
    agricultural use without authorization.                   Appellants Steve and
    Terry Bass (collectively “the Basses”) seek judicial review of a
    final decision of the USDA finding them in violation of this
    provision.     Because we agree with the district court that the
    agency conformed with controlling statutes and did not commit a
    clear error of judgment in its decision, we affirm.
    I.
    This case centers around a piece of farmland in Sampson
    County, North Carolina, referred to as Farm 3188, Tract 8355,
    Field UN2 (“Field UN2”).         Joe Bass, the original owner of this
    tract, filed an application in 1994 with the USDA seeking a
    wetland determination in anticipation of clearing Field UN2 for
    agricultural     crop      production.              The    National      Resources
    Conservation    Service       (“NRCS”),       the    division     of     the     USDA
    responsible    for   making    wetland       determinations,     concluded       that
    2
    Field UN2 contained approximately 38 acres of wetlands. 1                                  Joe
    Bass was properly notified of this determination and informed
    that       clearing,    draining,       or     altering      these      areas      to     make
    possible      the   planting      of    a    commodity    crop       would       render    him
    ineligible      for    most     USDA    farm      programs.       Joe    Bass      took     no
    further administrative action regarding the NRCS determination,
    which thus became final.
    In 2004, Joe Bass again filed an application seeking to
    convert Field UN2 to farmland, falsely representing that he had
    not “previously received a wetland determination or delineation
    on this tract from [NRCS.]”                 (J.A. 103.)        Apparently unaware of
    the    1994    wetland     determination,           an   NRCS     wetland        specialist
    completed an on-site inspection of Field UN2, which resulted in
    another      NRCS     wetland    determination,          issued      March       23,    2005,
    concluding      that     the    tract       contained     at    least       28    acres     of
    wetlands.
    NRCS informed Joe Bass that this determination would become
    final unless he requested further review or mediation within
    thirty      days.      However,    the       NRCS   letter     did    not    include,       as
    required by USDA regulations, a notice that he could also appeal
    to the USDA’s National Appeals Division (“NAD”).                             This defect
    1
    NRCS was then known as the Soil Conservation Service.                               For
    ease of reference, we refer to this division and                                           its
    predecessors as NRCS.
    3
    rendered        the   2005      determination      procedurally     deficient.
    Nonetheless, Joe Bass did not pursue an appeal and he later
    died.    His interest in Field UN2 passed to the Basses.
    NRCS was required and did notify the U.S. Army Corps of
    Engineers (“USACE”) of its 2005 wetlands determination, which
    prompted the USACE to issue a letter to the Basses advising that
    it might also have jurisdiction over Field UN2 under the Clean
    Water Act.        The USACE letter recommended having the property
    inspected.       The Basses then hired a private consultant, the Land
    Management Group, Inc. (“LMG”), to provide wetland mapping for
    the tract.       LMG prepared a report finding no wetlands on Field
    UN2, but its evaluation did not meet any of NRCS’s requirements
    for determining the presence of wetlands under the Food Security
    Act.
    In response to the LMG report, the USACE conducted a site
    visit and found waters of the United States over which it had
    jurisdiction      along   the   southern    boundary   of   Field   UN2.     The
    USACE    then    notified    the   Basses   that   this   determination     only
    “applies to Section 404 of the Clean Water Act,” and that it
    “may or may not be valid for identifying wetlands or waters
    subject to the rules of the Food Security Act.”               (J.A. 434.)
    Without contacting or seeking any information from NRCS,
    the Basses drastically altered Field UN2 by removing the natural
    forest    and    woody    vegetation   through     logging,    stump   removal,
    4
    drainage, and disking to prepare the tract for agricultural use.
    The   Basses    sought       a    cropland     acreage        determination        from    the
    USDA, which triggered an investigation by NRCS to determine if
    the Food Security Act was violated by the alteration of the
    tract.
    NRCS conducted an on-site inspection and determined that
    Field UN2 contained wetland hydrology prior to its alteration.
    As part of its investigation, NRCS also examined whether the
    Basses could qualify for a minimal effects exemption under 
    16 U.S.C. § 3822
    (f), which permits alteration of a wetland if the
    changes      have     only       a     “minimal       effect     on       the     functional
    hydrological        and    biological         value      of    the    wetlands      in     the
    area[.]”       
    Id.
             The       exemption     did    not    apply      because        NRCS
    determined     that       the    effects      of   the    wetland         conversion       were
    greater than minimal.
    NRCS     then       worked       with    the     Basses        to    determine       the
    feasibility of mitigating the converted wetlands on Field UN2,
    but   those    efforts          proved   unsuccessful.               Consequently,         NRCS
    issued a final technical determination in June 2010 finding that
    Field UN2 contained at least 13.5 acres of converted wetlands.
    The   Basses    were       then       declared       ineligible       for       programs    or
    benefits administered by the USDA.
    The Basses timely filed an administrative appeal with the
    NAD, which held a lengthy evidentiary hearing.                              In a written
    5
    decision, the NAD affirmed NRCS’s final determination that Field
    UN2 contained converted wetlands in violation of 
    16 U.S.C. § 3821
    .       The hearing officer found that NRCS had met its burden of
    proving that wetlands were present on Field UN2 prior to its
    alteration,      and        it     now    contained     at     least        13.5    acres   of
    converted      wetlands.            In    addition,    the    hearing        officer    found
    NRCS’s       evidence       and     testimony       more      credible,         specifically
    observing that the Basses’ private consultant did not complete
    its wetland survey in compliance with the applicable guidelines.
    Pertinent      here,        the    Basses    attempted          to   argue    that   no
    wetlands       existed       on     Field     UN2     prior       to    their      conversion
    activities.      The hearing officer found this issue barred under 
    7 C.F.R. § 12.30
    (c)(4), which provides that once a final wetland
    determination has been made any appeal regarding a potential
    conversion is “limited to the determination that the wetland was
    converted[.]”         
    Id.
            Noting the absence of any evidence that NRCS
    had    rescinded      its        1994    determination       or    that     the    property’s
    prior owner had appealed that determination, the hearing officer
    precluded the Basses from presenting evidence that the property
    did not contain wetlands.
    The Basses then filed this lawsuit seeking judicial review
    of    the    USDA’s   final        action.      Their      complaint        raised    several
    claims, but only two are now at issue on appeal: (1) did the NAD
    hearing officer err by limiting their appeal in the manner noted
    6
    above; and (2) did NRCS incorrectly perform a minimal effects
    determination in compliance with 
    16 U.S.C. § 3822
    (f)?
    The district court granted the USDA’s motion for summary
    judgment, finding no error in the hearing officer’s decision to
    preclude the Basses from re-litigating the question of whether
    wetlands ever existed on Field UN2.             Specifically, the court
    held:
    [T]here   was  at  least   one  valid  prior
    certified wetland determination in existence
    at the time of the plaintiffs’ conversion of
    Field UN2.      In such circumstances, the
    review of the agency’s 2010 determination
    that conversion occurred is properly limited
    to that question of conversion on appeal
    before the agency, and thus to this court as
    well. . . .
    . . . .
    . . . The agency reasonably interpreted its
    own regulations by limiting the scope of
    review to whether a conversion took place,
    thus the court must defer to the agency.
    (J.A.   62-64.)      The   district   court   also   held   that   it   lacked
    jurisdiction over the minimal effects claim because the Basses
    never pursued this argument during the administrative process
    and thus “failed to exhaust their administrative remedies[.]”
    (J.A. 64.)
    The Basses timely appealed, and this Court has jurisdiction
    pursuant to 
    28 U.S.C. § 1291
    .
    7
    II.
    We review the district court’s ruling on summary judgment
    de novo.        See Holly Hill Farm Corp. v. United States, 
    447 F.3d 258
    ,     262     (4th     Cir.     2006).        However,       this       Court,       like    the
    district court, reviews the underlying decision from the USDA
    pursuant       to   the     Administrative            Procedures      Act    (“APA”),        under
    which the agency’s decision must be upheld unless “arbitrary,
    capricious,         an     abuse     of     discretion,         or        otherwise      not    in
    accordance with law[.]”                  
    5 U.S.C. § 706
    (2)(A); see also Holly
    Hill     Farm    Corp.,      
    447 F.3d at 262-63
        (applying         APA   judicial
    review to a final determination of the NAD).                                  Following this
    narrow     standard,        we     are    “not       empowered       to    substitute        [our]
    judgment for that of the agency.”                        Md. Dep’t of Human Res. v.
    U.S.     Dep’t      of    Agric.,     
    976 F.2d 1462
    ,    1475      (4th     Cir.     1992)
    (citation and internal quotation marks omitted).                                   Rather, our
    task      is    “to       determine       whether       the     agency       conformed         with
    controlling statutes,” and “whether the agency has committed a
    clear error of judgment.”                 
    Id.
     (citations and internal quotation
    marks omitted).
    A.
    The NAD hearing officer limited the Basses’ appeal pursuant
    to   
    7 C.F.R. § 12.30
    (c)(4),       which       provides         that    if    a   prior
    wetlands         determination            exists        for     purportedly             converted
    8
    property, any administrative appeal is limited to the issue of
    whether wetlands were converted.           After remarking that the 2005
    wetland determination was deficient, the hearing officer found
    that the 1994 determination was a final, certified decision for
    purposes of this regulation.
    The Basses argue that the NAD hearing officer contravened
    
    16 U.S.C. § 3822
    (a)(4) in reaching that conclusion, citing the
    statutory     language       that   provides       “[a]     final      [wetland]
    certification . . . shall remain valid and in effect . . . until
    such time as the person affected by the certification requests
    review of the certification by the Secretary.”                    
    16 U.S.C. § 3822
    (a)(4).    Relying on this provision, the Basses contend that
    the   1994   wetland   determination       was   made    void   when   Joe   Bass
    requested a new wetland determination in 2004.                   They conclude
    that, because the 1994 determination was invalid at the time of
    their appeal, “
    7 C.F.R. § 12.30
    (c)(4)’s limitation [could] not
    apply [and] [t]he hearing officer’s ruling to the contrary is an
    error of law.”    (Opening Br. 21.)
    We find this argument to lack merit.              By its plain terms, §
    3822(a)(4)     ends    the      validity     of     an     existing     wetland
    determination only when an aggrieved landowner “requests review”
    of that decision.      We agree with the USDA’s position (regardless
    of the deference applied) that Joe Bass’s actions in 2004 were
    9
    not a request for review, making this provision inapplicable. 2
    Accordingly, the NAD hearing officer did not act contrary to law
    in concluding that the 1994 determination was a valid wetland
    decision that limited the Basses’ appeal.
    Furthermore, even assuming the hearing officer erred in the
    manner    alleged,   the    result   in   this   case   would   be   unaffected
    because the evidence was overwhelming that Field UN2 contained
    wetlands prior to its conversion.           Any error on the part of the
    USDA was therefore harmless, and the Basses’ argument fails.
    See Ngarurih v. Ashcroft, 
    371 F.3d 182
    , 190 n.8 (4th Cir. 2004)
    (noting    that   the      harmless-error    doctrine     is    available   in
    judicial review of administrative actions).
    2
    Citing to SEC v. Chenery, 
    332 U.S. 194
     (1947), the Basses
    contend that this argument is unavailable because it was not
    relied upon by the NAD hearing officer in the administrative
    decision below.    While generally a reviewing court may only
    judge the propriety of an agency decision on the grounds invoked
    by the agency, see 
    id. at 196-97
    , the court is not so bound
    when, as here, the issue in dispute is the interpretation of a
    federal statute.    See N.C. Comm’n of Indian Affairs v. U.S.
    Dep’t of Labor, 
    725 F.2d 238
    , 240 (4th Cir. 1984) (“We do not .
    . . perceive there to be a Chenery problem in the instant case
    because the question of interpretation of a federal statute is
    not ‘a determination or judgment which an administrative agency
    alone is authorized to make.’” (citation omitted)).
    10
    B.
    The Basses next claim that NRCS did not correctly perform a
    minimal effects determination under 
    16 U.S.C. § 3822
    (f).                                The
    district court determined it lacked jurisdiction to adjudicate
    this   claim     because    the    Basses       never   raised      it    during   their
    administrative         appeal.     While    we     agree     that    the    Basses      are
    foreclosed from pursuing this claim on appeal, we reach that
    result on a different basis than the district court.
    The Supreme Court has long held that it is inappropriate
    for    courts     to    consider    arguments       not      developed      before      an
    administrative         agency    because    doing       so   usurps      the     agency’s
    function.        See    Woodford   v.   Ngo,      
    548 U.S. 81
    ,       88-91    (2006);
    United States v. L.A. Tucker Truck Lines, Inc., 
    344 U.S. 33
    , 36–
    37 (1952); see also Pleasant Valley Hosp., Inc. v. Shalala, 
    32 F.3d 67
    ,   70    (4th    Cir.    1994)    (“As    a    general      matter,      it   is
    inappropriate for courts reviewing appeals of agency decisions
    to    consider    arguments       not   raised      before     the       administrative
    agency involved.”).         As explained by the Supreme Court,
    orderly procedure and good administration
    require that objections to the proceedings
    of an administrative agency be made while it
    has opportunity for correction in order to
    raise issues reviewable by the courts. . . .
    [C]ourts     should     not    topple   over
    administrative     decisions    unless   the
    administrative body not only has erred but
    has erred against objection made at the time
    appropriate under its practice.
    11
    L.A. Tucker Truck Lines, Inc., 
    344 U.S. at 37
    .
    In Sims v. Apfel, 
    530 U.S. 103
     (2000), the Supreme Court
    further explained that the need for issue exhaustion is, first
    and   foremost,       a    question     of   statutory        construction     and     that
    agencies generally have the power to adopt regulations requiring
    issue exhaustion.            
    Id.
     at 107–08.         Where the relevant statutes
    and regulations do not clearly require exhaustion, however, a
    court-imposed issue exhaustion requirement may be appropriate.
    
    Id. at 108
    .        “[T]he     desirability        of    a    court    imposing      a
    requirement of issue exhaustion depends on the degree to which
    the   analogy        to    normal     adversarial    litigation         applies       in   a
    particular administrative proceeding.”                    
    Id. at 109
    .         Where the
    parties are expected to fully develop the dispute during the
    course of an adversarial proceeding, the rationale for requiring
    issue exhaustion is at its strongest.                    
    Id. at 110
    .         Conversely,
    where    an    administrative          proceeding    is       not    adversarial,       the
    reasons for requiring issue exhaustion are much weaker.                         
    Id.
    There     is    no     statute    or    regulation       that    mandates       issue
    exhaustion in this case.              See Mahon v. U.S. Dep’t of Agric., 
    485 F.3d 1247
    , 1256 (11th Cir. 2007) (“[T]here is no express issue
    exhaustion requirement in the NAD regulations[.]”).                             However,
    the regulations that describe the review process before the USDA
    reflect       that    this        process    is   adversarial         and    that     issue
    exhaustion      should       be    required.       
    Id.
        (“The      NAD’s    procedures
    12
    provide an adversarial system in which parties are given a full
    and     fair    opportunity            to     make     their     arguments       and     present
    evidence,      and,     as   a     corollary,           to    attempt      to   challenge     the
    arguments      and    evidence         presented         by    the    agency.”);       see    also
    Downer v. U.S. Dep’t of Agric., 
    97 F.3d 999
    , 1005 (8th Cir.
    1996)     (noting       that       a        general      exhaustion        of    remedies      is
    insufficient in the context of a wetlands determination, and
    specific issue exhaustion is required).                          Indeed, every court to
    address this question has found that issue exhaustion applies to
    similar proceedings before the USDA.                            See, e.g., Ballanger v.
    Johanns,       
    495 F.3d 866
    ,       868-71      (8th     Cir.      2007);      Care   Net
    Pregnancy Ctr. of Windham Cnty. v. U.S. Dep’t of Agric., 
    896 F. Supp. 2d 98
    , 110 (D.D.C. 2012).                        Finding these cases persuasive,
    we agree that an issue exhaustion requirement applies.
    The      Basses    had      ample        opportunity       to     raise    the     minimal
    effects claim at each phase of the administrative proceeding and
    before the NAD, yet they failed to do so.                              Instead, the Basses
    focused their administrative appeal on arguing that Field UN2
    did not contain wetlands prior to its conversion.                                 This course
    of    action     denied      the       USDA       an    opportunity        to   exercise      its
    discretion      and     expertise            in   considering        any    minimal      effects
    claim.      On these facts, preclusion is appropriate.                              See Mahon,
    
    485 F.3d at 1256-57
     (precluding claims raised for the first time
    13
    in   federal     court      and    never     presented        to   the    NAD   during       the
    plaintiffs’ administrative appeal).
    Although        the     district          court     incorrectly           viewed      the
    foregoing as a jurisdictional bar, see Pleasant Valley Hosp.,
    Inc.,     
    32 F.3d at 70
         (“[T]his      general      rule    is    not    a    strict
    jurisdictional        bar,        it    is   a       prudential      one[.]”),         it    was
    ultimately      correct      in    its    decision       to   forego      review       of   this
    claim.         Accordingly,        we    find    the     district        court’s   decision
    without reversible error. 3
    III.
    For the foregoing reasons, the judgment of the district
    court is
    AFFIRMED.
    3
    Apparently forecasting this hurdle, the Basses argue that
    plain error would result if we decline to consider this claim.
    Under this doctrine, as applied in our civil jurisprudence, we
    will correct an error not raised previously if it is “‘plain’
    and our refusal to consider it would result in a miscarriage of
    justice.”   Nat’l Wildlife Fed’n v. Hanson, 
    859 F.2d 313
    , 318
    (4th Cir. 1988) (citation omitted).    Plain error analysis, in
    the noncriminal context, is very rarely available, and then only
    to correct particularly egregious errors. See In re Under Seal,
    
    749 F.3d 276
    , 285-86 (4th Cir. 2014). It is not at all evident
    that NASD erred in its minimal effects determination in the
    manner alleged.      Moreover, this type of error does not
    constitute a “miscarriage of justice” as defined in our case
    law. See Holly Hill Farm Corp., 
    447 F.3d at 268
    ; see also In re
    Celotex Corp., 
    124 F.3d 619
    , 631 (4th Cir. 1997). We therefore
    find this doctrine inapplicable.
    14