Tyson v. United States Department of Agriculture ( 2010 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1037
KATHERINE A. TYSON,
Plaintiff – Appellant,
v.
UNITED STATES DEPARTMENT OF AGRICULTURE,
Defendant – Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. Terrence W. Boyle,
District Judge. (5:07-cv-00140-BO)
Argued: December 1, 2009 Decided: January 13, 2010
Before KING and SHEDD, Circuit Judges, and John Preston BAILEY,
Chief United States District Judge for the Northern District of
West Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Steven K. McCallister, SHANAHAN LAW GROUP, Raleigh,
North Carolina, for Appellant. Neal Fowler, OFFICE OF THE
UNITED STATES ATTORNEY, Raleigh, North Carolina, for Appellee.
ON BRIEF: George E. B. Holding, United States Attorney, Anne M.
Hayes, Assistant 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Unpublished opinions are not binding precedent in this circuit.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:
Appellant Katherine A. Tyson instituted these proceedings
in the Eastern District of North Carolina in April of 2007,
seeking judicial review, pursuant to the Administrative
Procedure Act (the “APA”), of a Department of Agriculture ruling
that she was obligated to return an overpayment received for
tobacco crop losses. 1 Tyson had first unsuccessfully pursued her
contrary contention — namely, that she was entitled to keep the
$80,000 overpayment — through the administrative processes of
the Department’s National Appeals Division. In February 2007,
the Division ruled against Tyson, concluding that the
Department’s regulations required the overpayment to be
returned. See Tyson v. Farm Serv. Agency, No. 2006S000823
(Director Review Determination, Feb. 27, 2007) (the “Agency
Decision”). 2 Thereafter, on December 9, 2008, the district court
awarded summary judgment to the Department, upholding the Agency
Decision’s determination that Tyson had to return the
overpayment. See Tyson v. U.S. Dep’t of Agric., 589 F. Supp. 2d
1The APA authorizes judicial review of a final agency
decision, providing that any “person suffering legal wrong
because of agency action, or adversely affected or aggrieved by
agency action . . ., is entitled to judicial review thereof.” 5
U.S.C. § 702.
2
The Agency Decision is found at J.A. 21-28. (Citations
herein to “J.A. __” refer to the Joint Appendix filed by the
parties in this appeal.)
2
584 (E.D.N.C. 2008) (the “District Court Decision”). Tyson has
appealed the District Court Decision and, as explained below, we
affirm.
I.
A.
As the Agency Decision explains, Tyson is a tobacco farmer
in Nash County, North Carolina. She owns and operates a complex
farming business, where she utilizes multiple fields and farms
to produce tobacco. Tyson also serves as vice chairman of the
County Committee (the “COC”) of the Department of Agriculture’s
Farm Service Agency (the “FSA”) in Nash County. In 2003,
excessive rains damaged Tyson’s tobacco crop, prompting her to
apply to the Nash County FSA (the “County FSA”) in 2005 for
benefits under the Department’s Crop Disaster Program (the
“CDP”).
Pursuant to the CDP, farmers who suffered certain weather-
related losses to their 2003, 2004, or 2005 crops were eligible
to apply for CDP benefits for one of the affected years. The
CDP provided for a maximum payment of $80,000 to eligible
farmers for qualifying lost crops, with the farmer’s total
recovery — including insurance payments, harvested crops, and
CDP benefits — being limited to 95% of what would have been the
value of the farmer’s undamaged crop. In determining whether to
3
make such a CDP payment, the FSA was authorized to estimate the
value of an eligible tobacco farmer’s undamaged and harvested
tobacco crops, if any, using the county average of tobacco
prices during the relevant growing season. Under the then-
existing tobacco regulatory system, quota allotments made by the
Department of Agriculture dictated the quantity of tobacco a
farmer could market in a given year (the “effective quota”).
Thus, multiplication of an eligible farmer’s effective quota by
the average tobacco price for the relevant county would, for CDP
purposes, provide the expected value of the farmer’s undamaged
crop. 3
During the CDP application period in 2005, a “Fact Sheet”
detailing the CDP’s requirements was posted at the County FSA
Office. 4 The Fact Sheet explained that CDP benefits would be
calculated in the same manner as under the 2000 CDP. The Fact
Sheet further specified, inter alia, the following:
3
By way of example, if a tobacco farmer’s effective quota
were 1000 pounds and the average tobacco price for the relevant
county were $1.50 per pound, the value of the farmer’s undamaged
tobacco crop would be $1500. Accordingly, the aggregate value
of the farmer’s harvested tobacco crop, insurance payments, and
CDP benefits could not exceed $1425 — 95% of $1500.
4
In addition to its posting of the Fact Sheet, the County
FSA mailed notifications to potentially eligible farmers in its
jurisdiction, alerting them to the CDP and advising them to
contact the County FSA for further information regarding the
CDP.
4
Like the 2001/2002 crop disaster program, crop
disaster payments will be reduced, as required by
statute, if the sum of the: 1) disaster payment;
2) the net crop insurance indemnity; and 3) the value
of the crop harvested exceeds 95 percent of what the
value of the crop would have been in the absence of a
loss.
J.A. 305. The Fact Sheet’s explanation of the CDP benefits
comported with the “[l]imitations on payments and other
benefits” contained in the then-applicable regulations. More
specifically, those regulations provided that
[n]o producer shall receive disaster benefits under
[the CDP] in an amount that exceeds 95 percent of the
value of the expected production for the relevant
period as determined by [the Commodity Credit
Corporation]. The sum of the value of the crop not
lost, if any; the disaster payment received under [the
CDP]; and any crop insurance payment or payments
received . . . for losses to the same crop, cannot
exceed 95 percent of what the crop’s value would have
been if there had been no loss.
7 C.F.R. § 1479.105 (2006).
B.
Tyson applied for CDP benefits in April 2005 through her
husband, who had her power of attorney. In May 2005, the County
FSA determined that Tyson was entitled to $80,000 in CDP
benefits, the maximum payment an eligible farmer could receive.
On May 9, 2005, an $80,000 payment was deposited into Tyson’s
bank account, and the related disbursement statement, sent by
the County FSA to Tyson, explained that “[t]he payment
5
information reflected on this transaction statement is for the
CDP Program for 2003-2005 crop losses.” J.A. 295.
During spot checks of CDP applications in September 2005,
calculation errors were identified in CDP benefits paid to
thirty tobacco farmers in Nash County. Over the ensuing months,
the FSA State Committee (the “STC”), the County FSA, and the COC
conducted investigations and assessed whether the Department of
Agriculture’s ninety-day “Finality Rule” protected overpaid Nash
County tobacco farmers from returning their overpayments. 5 The
Finality Rule, as relevant here, provides that
[a] determination by a State or county FSA committee
. . . becomes final and binding 90 days from the date
the application for benefits has been filed . . .
unless . . . [t]he participant had reason to know that
the determination was erroneous.
7 C.F.R. § 718.306(a)(4). “Reason to know” is defined by the
FSA as “knowledge by way of a rule or provision that a person
could or should have known such as, but not limited to, the
following:” “statutes or public laws”; “published regulations”;
“program applications”; “notices the person receives”; “and
newsletters.” J.A. 289 (FSA Handbook); see also Agency Decision
2 (citing FSA Handbook).
5
The STC and COC administered the CDP, under the general
supervision of the Executive Vice President of the Commodity
Credit Corporation. See 7 C.F.R. § 1479.101 (2006).
6
Ultimately, the FSA determined that certain tobacco
farmers, who had received particularly excessive CDP
overpayments, had “reason to know” that such payments were made
in error, thus precluding application of the Finality Rule.
More specifically, the FSA determined that a tobacco farmer had
“reason to know” of such an overpayment if (1) the sum of the
farmer’s harvested crop and insurance payments equaled at least
92% of the market value of the farmer’s effective quota, and (2)
the sum of the harvested crop, insurance payments, and CDP
benefits equaled or exceeded 110% of the market value of the
farmer’s effective quota. Accordingly, the recipient Nash
County tobacco farmers who satisfied both criteria were not
shielded by the Finality Rule from returning their CDP
overpayments. Thus, in 2006, the FSA directed Tyson and eleven
other Nash County tobacco farmers to return overpaid CDP
benefits to the County FSA. 6
6
In 2003, Tyson’s effective quota was 327,858 pounds, and
the Nash County seasonal average price for tobacco was $1.85 per
pound. Hence, absent weather-related losses, Tyson could have
earned $606,537 for her 2003 tobacco crop. With her weather-
related crop losses in 2003, Tyson produced 201,222 pounds of
tobacco, valued at $372,261, and received $263,083 in insurance
payments, for an aggregate recovery of $635,344. Even prior to
the CDP overpayment, Tyson had received nearly $29,000 more than
she could have earned from selling her entire 2003 effective
quota. Nevertheless, the $80,000 CDP payment increased her
aggregate compensation to $715,344, giving her a windfall in
excess of $108,000.
7
C.
Thereafter, Tyson sought administrative review of the FSA’s
adverse determination through the Department of Agriculture’s
National Appeals Division. In December 2006, a Division Hearing
Officer overturned the FSA’s ruling, concluding instead that the
Finality Rule protected Tyson from having to return the $80,000
overpayment. As it was entitled to do, however, the FSA
promptly pursued further administrative review, and, by way of
the February 2007 Agency Decision, the Division Director
reversed the Hearing Officer.
In ruling against Tyson, the Agency Decision explained
that, under the Finality Rule, “constructive reason to know [is]
knowledge by way of a rule or provision that a person could or
should have known (including published regulations or press
releases/newsletters).” Agency Decision 2 (citing FSA
Handbook). The Agency Decision further emphasized that,
although Finality Rule protection adheres when incorrect yields
or calculations are used, it does not apply when payments simply
exceed the regulatory limits, because tobacco farmers should be
aware of such limitations. Id. Focusing on the magnitude of
the discrepancy here — and recognizing Tyson’s extensive
experience in FSA activities (including her position as vice
chairman of her COC) — the Agency Decision concluded that Tyson
had “reason to know” that she had received an erroneous
8
overpayment, thereby rendering the Finality Rule inapplicable.
Id. at 3, 7. More specifically, the Agency Decision determined
that the magnitude of Tyson’s overpayment placed her on notice
of its erroneous nature, observing that it is “unrefuted” that
“[Tyson] received total compensation that substantially exceeded
the market value of her entire tobacco quota,” even before
applying for CDP benefits. Id. at 7. The Agency Decision thus
concluded that
[Tyson] had all the facts and figures needed to
calculate that she had received as compensation for
her poor crop over $108,000 more than she would
otherwise receive if her crop was a success. Although
[Tyson] was not expected to identify [County FSA]
errors in the yields used to calculate benefits, she
was reasonably expected to question receipt of over
$108,000 in additional compensation she was not
otherwise eligible to receive.
Id.In April 2007, after the Division Director denied her
request for reconsideration, Tyson sought judicial review of the
Agency Decision in the district court. 7 In March 2008, the
parties filed cross-motions for summary judgment. By the
District Court Decision of December 9, 2008, summary judgment
was awarded to the Department of Agriculture, upholding the
7
Pursuant to 7 U.S.C. § 6999, “[a] final determination of
the [National Appeals] Division shall be reviewable and
enforceable by any United States district court of competent
jurisdiction in accordance with [the APA].”
9
Agency Decision’s ruling that the Finality Rule did not apply
and that Tyson was obligated to return the $80,000 overpayment.
More specifically, as the court explained:
Evidence in the administrative record demonstrates a
substantial evidentiary basis to find [Tyson] had
“reason to know” that the CDP payment for her tobacco
crop losses was erroneous. Based on the evidence,
[Tyson] could have calculated the total effective
income quota for the 2003 tobacco crop and compared
that figure to the total amount [Tyson] received from
the sale of the 2003 tobacco crop and the insurance
recovery in order to determine her eligibility for CDP
payments. [Tyson’s] farm records provide that
[Tyson’s] actual 2003 income exceeded her effective
income quota for the 2003 tobacco crop. Moreover, the
fact sheet explaining CDP eligibility clearly provided
the payment calculation required to be eligible for
the program. In addition, [Tyson’s] personal
extensive experience in FSA farm programs and on the
FSA county committee at the time of her application
further supports that [Tyson] should have known the
eligibility requirements for the program. In
reviewing the record, a substantial basis for the
conclusion the agency reached exists and no clear
error of judgment has occurred.
Tyson, 589 F. Supp. 2d at 587.
On January 5, 2009, Tyson filed a timely notice of appeal,
and we possess jurisdiction pursuant to 28 U.S.C. § 1291.
II.
We review de novo a district court’s award of summary
judgment. See Holly Hill Farm Corp. v. United States, 447 F.3d
258, 262 (4th Cir. 2006). Pursuant to the APA, however, our
review of the Agency Decision is — as was the district court’s
10
— limited to determining whether the agency’s findings and
conclusions were arbitrary, capricious, an abuse of discretion,
otherwise not in accordance with law, or unsupported by
substantial evidence. See 5 U.S.C. § 706. 8 Such a standard of
review is obviously quite narrow, and we are not entitled to
substitute our judgment for that of the agency. See Holly Hill,
447 F.3d at 263 (explaining that courts “perform only the
limited, albeit important, task of reviewing agency action to
determine whether the agency . . . has committed a clear error
of judgment” (internal quotation marks omitted)).
III.
A.
On appeal, Tyson primarily contends that the Agency
Decision is unsupported by substantial evidence. 9 In pursuing
8
In relevant part, the APA, as codified, provides that a
reviewing court shall set aside an agency action only when it is
found to be:
(A) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; [or]
* * *
(E) unsupported by substantial evidence . . . .
5 U.S.C. § 706(2).
9
Additionally, Tyson asserts that upholding the agency’s
determination would “nullify the Finality Rule” by, essentially,
(Continued)
11
this contention, Tyson emphasizes three points. First, she
asserts that “one’s [effective] quota — and by extension one’s
supposed knowledge of that quota — had nothing whatsoever to do
with any presumed knowledge of a CDP overpayment.” Br. of
Appellant 17. Second, she contends that the Fact Sheet was
ambiguous and that, in any event, there was no evidence that she
ever saw it. Third, she maintains that her experience with FSA
programs and her position as vice chairman of the COC simply had
no “nexus” to her knowledge of CDP eligibility requirements.
See id. at 25.
We need not tarry on Tyson’s first point, as she failed to
make her quota-based contention to the district court, thereby
precluding appellate review thereof. See Holland v. Big River
Minerals Corp., 181 F.3d 597, 605 (4th Cir. 1999) (“Generally,
issues that were not raised in the district court will not be
addressed on appeal.”). 10 Her second point is likewise
precluding application of the Rule any time there was an
overpayment. See Br. of Appellant 28-30. To recognize the flaw
in this contention, we need look no further than the fact that
eighteen of the thirty Nash County tobacco farmers who received
CDP overpayments were protected by the Finality Rule (even under
the FSA’s standard for “reason to know”).
10
Even had Tyson presented her quota-based contention to
the district court, it would have been rejected as meritless.
In 2003, tobacco was highly regulated and was controlled by
effective quotas, as Tyson’s farm records confirm. See J.A.
144-47; id. at 237-45; see also id. at 307-20 (affidavit of
(Continued)
12
unavailing, for the Fact Sheet clearly explains the statutory
cap on CDP benefits and was prominently displayed in the County
FSA office, where the CDP applications were submitted. See J.A.
297, 305. Moreover, and dispositive on Tyson’s third point, the
COC administered the CDP. See 7 C.F.R. § 1479.101 (2006); see
also J.A. 260-66. Accordingly, it would be extremely difficult,
in the first instance, for us to accept Tyson’s claim of
ignorance. And it would be inappropriate, under the applicable
standard of review, for this Court to overturn the Agency
Decision’s determination that Tyson “had constructive knowledge
of the [CDP’s] rules,” see Agency Decision 7. 11
Miles Davis, N.C. FSA Agricultural Farm Program Specialist).
Accordingly, Tyson cannot contend that such quotas are
irrelevant to the objective determination of whether a tobacco
farmer had “reason to know” of a CDP overpayment. Further, the
assertion that effective quotas are irrelevant to the “reason to
know” analysis — and that such an analysis should be focused on
tobacco yields — contradicts Tyson’s initial claim in the
administrative process that she compared the CDP benefits she
received to her insurance payment, see id. at 363, and not, as
she now attempts to assert, to her 2002 tobacco yield.
11
To the extent that Tyson contends that the FSA acted
arbitrarily and capriciously in determining which tobacco
farmers had “reason to know” of the overpayments, we also reject
this contention. In short, the Agency Decision did not err in
ruling that the FSA had applied a reasonable standard in
determining which tobacco farmers had “reason to know” that
their overpayments were erroneous.
13
B.
Having carefully assessed the record, we are, like the
district court, unable to say that the Agency Decision was
arbitrary, capricious, an abuse of discretion, not in accordance
with law, or unsupported by substantial evidence. Simply put,
we are unable to find fault with the Agency Decision’s
conclusion that Tyson, an experienced tobacco farmer and COC
officer, had constructive knowledge of the applicable regulatory
limitations and should have known that she had received a
substantial overpayment. We therefore uphold the district
court’s affirmance of the Agency Decision, and we are content to
do so on the basis of the court’s reasoning. See Tyson, 589 F.
Supp. 2d 584.
IV.
Pursuant to the foregoing, we affirm the district court’s
award of summary judgment to the Department of Agriculture.
AFFIRMED
14