Holly Hill Farm v. United States ( 2006 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
HOLLY HILL FARM CORPORATION, 
Plaintiff-Appellant,
v.  No. 05-1857
UNITED STATES OF AMERICA,
Defendant-Appellee.

Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Dennis W. Dohnal, Magistrate Judge.
(CA-04-856-3)
Argued: March 15, 2006
Decided: May 8, 2006
Before MOTZ and TRAXLER, Circuit Judges, and
James P. JONES, Chief United States District Judge for the
Western District of Virginia, sitting by designation.
Affirmed by published opinion. Chief District Judge Jones wrote the
opinion, in which Judge Motz and Judge Traxler joined.
COUNSEL
ARGUED: John Frederick Ames, Richmond, Virginia, for Appellant.
Tara Louise Casey, Assistant United States Attorney, OFFICE OF
THE UNITED STATES ATTORNEY, Richmond, Virginia, for
Appellee. ON BRIEF: Paul J. McNulty, United States Attorney,
Alexandria, Virginia, for Appellee.
2 HOLLY HILL FARM v. UNITED STATES
OPINION
JONES, Chief District Judge:
This case involves the judicial review of the final decision of
appellee United States of America, acting through the United States
Department of Agriculture ("USDA"), denying appellant Holly Hill
Farm Corporation’s application for farm benefits. Because we agree
with the district court that the agency’s decision was not arbitrary or
capricious nor the result of an abuse of discretion, we affirm.
I.
Holly Hill Farm Corporation ("Holly Hill") owns a 650-acre estate
in Caroline County, Virginia, and operates a farm, Farm Serial Num-
ber 1075 ("FSN 1075"), under the Direct County-Cyclical Program
("DCP"), administered by the USDA. The DCP provides income sup-
port to producers of eligible crops. At issue in the present case is Field
16 of FSN 1075, which is located between the Mattaponi River and
Route 207 in Caroline County. Field 16 consists of three and one-half
acres and includes approximately one acre that has been designated
as an illegally converted wetland. This designation rendered Holly
Hills ineligible for program benefits and is thus the subject of this
appeal.
The chain of events resulting in the designation at issue began on
May 16, 1989, when George R. Ways, District Conservationist for the
Soil Conservation Service ("SCS")1, confirmed the presence of hydric
soil on FSN 1075. Because such soil indicates the possible presence
of wetlands, Ways advised Holly Hill in a letter dated February 7,
1990, to seek a determination of the wetland status of FSN 1075
before beginning the clearing of any woodland. Ways explained that
the clearing of woodland that may also be wetland for use as a pasture
would not violate the 1985 Farm Bill, but attached an article suggest-
1
The Soil Conservation Service ("SCS") became the National
Resources Conservation Service ("NRCS") on October 20, 1994. The
SCS/NRCS is the division of the USDA responsible for making wetland
determinations.
HOLLY HILL FARM v. UNITED STATES 3
ing that destruction of wetland for any purposes may violate other
laws.
In a subsequent letter dated March 6, 1990, Ways noted that at that
time Field 16 was designated as woodland and that clearing was in
progress in that field and others without prior planning or approval by
SCS. Ways advised Holly Hill "that the clearing of wetland could
result in a violation of Federal Wetland Laws" and made arrange-
ments for SCS to map the soils on the entire property and make a wet-
lands determination. (J.A. 229.)
On June 11, 1990, SCS notified Holly Hill that Fields 6, 9, 10, and
an unnumbered area northeast of Field 11 were designated as wet-
lands. The soil map accompanying the report and the wetland deter-
mination itself specifically stated that "[w]etland determinations have
been made only for areas specifically delineated." (J.A. 230, 231.)
The disclaimer on the soil map additionally provided that "[a]reas not
marked as wetlands may contain areas of wet (hydric) soils. On-site
Investigation will be required to determine if these areas are wet-
lands." (J.A. 231.) Holly Hill appealed, and there were some revisions
to the dimensions of the land designated as wetland in Fields 6 and
9. A review of the record performed during this appeal process
revealed that "wetland determination disclaimer statements are inap-
propriate on [the] soil map." (J.A. 233E.) On August 23, 1991, SCS
completed and certified a revised wetland determination designating
Fields 6, 9, 10, and an unnumbered area northeast of Field 11 as wet-
lands. There was no reference to Field 16 in this official wetland
determination.
Also in 1991, the USDA received a whistle-blower complaint
regarding possible wetland conversions on Holly Hill’s property.
Holly Hill refused USDA officials access to the property in order to
investigate the complaint, and accordingly the USDA automatically
denied farm benefits according to Farm Services Agency ("FSA")
procedure. Holly Hill again denied USDA access to investigate the
whistle blower complaint in 1994. Additionally, in 1995, the Environ-
mental Protection Agency ("EPA") issued an "Order for Compliance"
instructing Holly Hill to cease unauthorized filling of wetlands in vio-
lation of the Clean Water Act and noted in the order that Holly Hill
4 HOLLY HILL FARM v. UNITED STATES
had previously denied the USDA, Army Corps of Engineers, and
NRCS access to the property in order to investigate the matter.
For crop year 2002, Holly Hill applied for program benefits for
FSN 1075. NRCS responded in November 2002 that Holly Hill would
be ineligible unless it allowed NRCS officials access to investigate
the outstanding wetland noncompliance complaint and establish a
conservation plan for the farm. Holly Hill initially resisted, but even-
tually granted access to the property in June 2003. On August 1,
2003, NRCS conducted an initial survey and determined that one acre
of land in Field 16 of FSN 1075 contained wetlands converted after
November 28, 1990. This determination was based on the presence of
hydrology and hydric soils, and on aerial photographs from 1993-
2002 demonstrating a conversion from bottomland hardwoods to pas-
tureland in or around 1994.
The determination became final, and on November 3, 2003, Holly
Hill appealed to the Hanover/Caroline FSA County Committee ("FSA
county committee"). The FSA county committee held a hearing on
December 19, 2003, decided that the case warranted a review by the
NRCS State Conservationist, and referred the matter to NRCS. On
January 20, 2004, the State Conservationist concluded that the con-
verted wetland determination was technically accurate and final. The
County Executive Director of the FSA county committee notified
Holly Hill of the State Conservationist’s conclusion and informed
Holly Hill that it was thus not eligible for program benefits.
Holly Hill appealed to the National Appeals Division ("NAD") of
the USDA on April 9, 2004. Holly Hill requested subpoenas for four
NRCS and three EPA employees to testify at the hearing. The Hear-
ing Officer faxed this subpoena request to the USDA, and the USDA
responded that it would send Dan Solomon, Farm Bill Program Man-
ager, and Jerry Quesenberry, the soil scientist responsible for wetland
determinations in the area of Virginia encompassing Holly Hill’s
property, neither of whom were among those witnesses requested by
Holly Hill. The NAD Hearing Officer denied all of Holly Hill’s sub-
poena requests on the grounds that the requested witnesses did not
possess specific relevant information not otherwise available.
The NAD hearing was held June 23, 2004. During the hearing,
Holly Hill objected when the NAD Hearing Officer questioned the
HOLLY HILL FARM v. UNITED STATES 5
USDA officials, arguing that the Hearing Officer was thereby leading
the government through the case. On July 22, 2004, the NAD Hearing
Officer issued a decision holding that the FSA’s denial of program
benefits based on the NRCS technical determination of wetland con-
version after November 28, 1990, was not erroneous. Holly Hill
requested that the NAD Director review the NAD Hearing Officer’s
determination, and the NAD Director upheld the NAD Hearing Offi-
cer’s determination on October 21, 2004, constituting final agency
action. Holly Hill appealed to the district court, asserting that the
USDA abused its discretion, took unreasonable action, and issued an
arbitrary and capricious decision.
In its memorandum opinion granting the government’s motion for
summary judgment, the district court found that (1) the NAD Hearing
Officer did not abuse his discretion when he confined the evidence
presented at the hearing to what he determined was relevant and non-
repetitious; (2) the NAD Hearing Officer did not abuse his discretion
when he denied Holly Hill’s requests for witness subpoenas; (3) the
NAD Hearing Officer’s ex parte communication did not relate to the
merits of the appeal, but rather only to procedural matters, and was
thus not prohibited; (4) the NAD Hearing Officer’s attempt to clarify
questions and answers, and to obtain all the applicable evidence, did
not evidence an improper bias or prejudice toward the defendant; and
(5) the USDA’s substantive decision to deny program benefits based
on its determination that Field 16 contained converted wetlands was
supported by substantial evidence and thus not arbitrary or capricious.
II.
On appeal, Holly Hill makes four substantive arguments in support
of its claim that the USDA’s denial of benefits was arbitrary and
capricious. First, Holly Hill argues that the USDA determined that
Field 16 was not a wetland in 1991, and that the USDA should be
bound by this determination as well as by Ways’ statement in his Feb-
ruary 7, 1990, letter to Holly Hill that clearing of Field 16 would not
violate the 1985 Farm Bill. Second, Holly Hill contends that the
USDA’s determination that Field 16 was converted after November
28, 1990, is arbitrary and capricious. Third, Holly Hill argues that
even if the wetlands on Field 16 were converted after November 28,
1990, all of the evidence regarding the alleged scope of the conver-
6 HOLLY HILL FARM v. UNITED STATES
sion supports the conclusion that Holly Hill is entitled to a minimal
effects exception under the Regulations. Lastly, Holly Hill challenges
the manner in which the NAD hearing was conducted, asserting that
the Hearing Officer’s denial of subpoena requests, ex parte contact
with the USDA, and questioning of government witnesses violated
due process.
This court reviews the district court’s grant of summary judgment
de novo. See Marshall v. Cuomo, 192 F.3d 473, 478 (4th Cir. 1999).
Our review of the underlying USDA denial of benefits, however, is
conducted pursuant to the Administrative Procedure Act ("APA"),
which provides, in relevant part, that a "reviewing court shall . . . hold
unlawful and set aside agency action, findings, and conclusions found
to be—(A) arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law." 5 U.S.C.A. § 706(2)(A) (West 1996); see
Marshall, 192 F.3d at 478. In determining whether agency action vio-
lates § 706(2)(A), "we perform ‘only the limited, albeit important,
task of reviewing agency action to determine whether the agency con-
formed with controlling statutes,’ and whether the agency has com-
mitted ‘a clear error of judgment.’" Maryland Dep’t of Human Res.
v. USDA, 976 F.2d 1462, 1475 (4th Cir. 1992) (quoting Baltimore
Gas & Elec. Co. v. Natural Res. Def. Council, Inc., 462 U.S. 87, 97
(1983)), and Citizens to Preserve Overton Park, Inc. v. Volpe, 401
U.S. 402, 416 (1971)). "[T]he ultimate standard of review is a narrow
one. The court is not empowered to substitute its judgment for that of
the agency." Citizens to Preserve Overton Park, 401 U.S. at 416.
Before turning to Holly Hill’s substantive arguments, it is useful to
set forth the statutory framework underlying this appeal. The
"Swampbuster" provision of the Food Security Act of 1985 prohibits
farmers who participate in USDA programs from converting wetlands
and then producing an agricultural commodity on those converted
wetlands. 16 U.S.C.A. § 3821(a)-(b) (West 2000). The Food, Agricul-
ture, Conservation and Trade Act ("FACTA"), passed in 1990,
extended the prohibition so that it is a violation when a wetland is
converted in a way that production of an agricultural commodity is
possible, even if an agricultural commodity has not actually been pro-
duced. 16 U.S.C.A. § 3821(c) (West 2000); 7 C.F.R. § 12.4(a)(3)
(2005). FACTA also added a stronger penalty for converting a wet-
land. While converting a wetland prior to November 28, 1990,
HOLLY HILL FARM v. UNITED STATES 7
resulted in only a proportional loss of benefits, conversion after that
date results in the loss of all USDA benefits on all land the farmer
controls until the wetland is restored or the loss mitigated. 16
U.S.C.A. §§ 3821(c), 3822(i) (West 2000). The USDA defines "con-
verted wetland" as follows:
Converted wetland is a wetland that has been drained,
dredged, filled, leveled, or otherwise manipulated (including
the removal of woody vegetation or any activity that results
in impairing or reducing the flow and circulation of water)
for the purpose of or to have the effect of making possible
the production of an agricultural commodity without further
application of the manipulations described herein if:
(i) Such production would not have been possi-
ble but for such action, and
(ii) Before such action such land was wetland,
farmed wetland, or farmed-wetland pasture and
was neither highly erodible land nor highly erod-
ible cropland;
7 C.F.R. § 12.2(a) (2005); see also 16 U.S.C. § 3801(a)(4)(West
2000).
Responsibility for administering the Swampbuster provisions is
divided between two USDA agencies—NRCS and FSA. NRCS
makes all technical determinations, evaluates any restoration and mit-
igation plans, and conducts monitoring activities. 16 U.S.C.A.
§ 3822(j) (West 2000); see also 7 C.F.R. § 12.6(c) (2005) (setting
forth specific determinations to be made by NRCS). The responsibili-
ties of the FSA include making determinations on (1) the ineligibility
of benefits; (2) whether the violations were made in good faith; and
(3) whether any other exemptions apply to the conversion of the wet-
land. 7 C.F.R. §§ 12.6(a), 12.6(b)(3)(viii) (2005).
With this statutory regime in mind, as well as the applicable stan-
dard of review set forth above, we now turn to address each of Holly
Hill’s four substantive arguments.
8 HOLLY HILL FARM v. UNITED STATES
A.
In its first argument, Holly Hill contends that any alleged conver-
sion on its part is justifiable because (1) Field 16 was reviewed and
designated as woodland as part of the final determination in 1991, and
(2) George Ways advised, in his February 7, 1990, letter, that any
conversion of woodland that contains a wetland would not violate the
1985 Farm Bill.
In support of its argument, Holly Hill relies on general due process
principles as well as two regulatory provisions setting forth exemp-
tions for situations in which applicants have placed reliance on NRCS
wetlands determinations. The first exemption states that a person shall
"not be ineligible for program benefits as a result of taking an action
in reliance on a previous certified wetland determination by NRCS."
7 C.F.R. § 12.5(b)(6)(i) (2005). The second exemption provides that
the USDA may make program benefits available if the appropriate
USDA agency finds that "the action of a person which would form
the basis of any ineligibility . . . was taken by such person in good-
faith reliance on erroneous advice, information or action of any other
authorized representative of USDA." 7 C.F.R. § 12.11 (2005).
Holly Hill’s argument regarding the February 7, 1990, letter from
Ways is clearly without merit. First, Holly Hill conceded during oral
argument that there is no evidence in the record to show that Holly
Hill actually relied on the letter from Ways. Indeed, Holly Hill asserts
that no clearing took place on Field 16 after November 28, 1990.
While Holly Hill is free to make alternative arguments in support of
its position, arguing that no conversion took place during the relevant
time period obviously undermines any contention that, had there been
a clearing after November 28, 1990, it was made in reliance on Ways’
letter.
Furthermore, the February 7, 1990, letter is an insufficient basis for
the reliance exemptions for two additional reasons. The February 7
letter stated that
As previously discussed the clearing of a woodland that may
also be wetland for use as pasture is not a violation of the
HOLLY HILL FARM v. UNITED STATES 9
1985 Farm Bill. However, the attached article sheds a differ-
ent light on the destruction of wetland for any purpose.
I suggest that before you proceed with any clearing of
woodland that you request the [NCRS] to make a determina-
tion as to wetland status of the area.
(J.A. 234.) First, Ways specifically cautioned Holly Hill to consult
with NRCS prior to any clearing of woodland. Furthermore, at the
time Ways sent the letter, the stricter law punishing a wetland conver-
sion that merely makes the production of an agricultural commodity
possible had not yet been enacted. Thus, Ways’ statement that clear-
ing for use as a pasture did not violate the 1985 Farm Bill was accu-
rate at the time it was made.
The law is clear that such statements would not excuse the clearing
of woodland after November 28, 1990, when FACTA was enacted
into law. Indeed "[p]rotection of the public fisc requires that those
who seek public funds act with scrupulous regard for the requirements
of law" and as such they are "held to the most demanding standards."
Heckler v. Cmty. Health Servs. of Crawford County, 467 U.S. 51, 63
(1984). "Those who deal with the Government are expected to know
the law and may not rely on the conduct of Government agents con-
trary to law." Id. (citing Fed. Crop Ins. Corp. v. Merrill, 332 U.S.
380, 384 (1947)). Statements regarding the propriety of clearing land
for use as a pasture on February 7, 1990, do not justify any ignorance
on the part of Holly Hill regarding the significant changes to the law
that occurred subsequently on November 28, 1990.
Holly Hill’s argument regarding the 1991 wetland determination is
a closer question, but ultimately fails as well. The 1991 wetland deter-
mination fails to address Field 16. It could be argued that by designat-
ing Fields 6, 9, 10, and an unnumbered area as wetlands, SCS
implicitly concluded that Field 16 was not a wetland. Ways’ March
6, 1990, letter tends to support this argument, because he noted that
"Fields 15 and 16 are designated as woodland" and explained that
SCS would map the soils on the entire property prior to making the
wetland determination. Nonetheless, both the designation itself and
the soil map accompanying that initial determination clearly contain
the same disclaimer: "Wetland determinations have been made only
10 HOLLY HILL FARM v. UNITED STATES
for areas specifically delineated." (J.A. 230, 231.) The soil map con-
tains an additional disclaimer providing that "areas not marked as
wetlands may contain areas of wet (hydric) soils. On-site investiga-
tion will be required to determine if these areas are wetlands." (J.A.
231.)
Admittedly, during the appeal of the initial 1991 determination,
SCS noted that "wetland determination disclaimer statements are
inappropriate on the soil map," and the soil map accompanying the
revised, final determination contained no disclaimers. (J.A. 233F,
240.) However, the same disclaimer that was present on the initial
determination and initial soil map is included in the final determina-
tion completed on August 23, 1991. (J.A. 239.) Also, before the FSA
county committee, Ways testified that the 1991 designation did not
cover Field 16. Therefore, while there is conflicting evidence on the
factual question of whether the status of Field 16 was designated non-
wetland in the 1991 determination, there is sufficient evidence sup-
porting the position that the 1991 determination did not address the
status of Field 16. Accordingly, we find that the agency’s decision
that Holly Hill could not reasonably rely on the 1991 determination
for matters involving Field 16 is not arbitrary, capricious, an abuse of
discretion, or contrary to law.
B.
Next, Holly Hill contends that the USDA’s decision that wetlands
were converted on Field 16 around 1994 is not supported by the evi-
dence and is thus both arbitrary and capricious. Holly Hill takes the
position that the wetland in Field 16 was never converted,2 and in the
alternative that if it was converted, the conversion took place prior to
November 28, 1990. Holly Hill claims that the only on-site factual
information regarding a conversion is Ways’ letter stating that
removal of trees occurred on Field 16 prior to Spring 1990. Holly Hill
also points to Ways’ testimony that during his August 2003 visit he
saw no evidence that trees or stumps had been removed from the area
in question, and argues that the aerial photographs relied on to support
2
At oral argument, Holly Hill conceded that Field 16 contained wet-
lands.
HOLLY HILL FARM v. UNITED STATES 11
a determination of conversion in 1994 were unreliable and do not
serve as a reasonable basis for the agency’s decision.
An examination of the record convinces us that there is sufficient
evidence on which the agency could base its decision that a wetland
conversion occurred and that the conversion occurred after November
28, 1990. While Ways did indeed state that when he went on site at
Field 16 on August 12, 2003, he saw no evidence of drainage, filling,
ditching, or leveling and did not see any tree stumps, he also stated
that "[t]here was evidence that vegetation ha[d] been cleared" based
on the fact that documented history revealed that the field was previ-
ously wooded and at the time of the visit it was consistent with pas-
tureland. (J.A. 113-23.) Other evidence that a clearing occurred on
Field 16 includes the presence of a push pile of rotting material and
dead stumps on Field 16 and a series of aerial photographs showing
that at one time Field 16 consisted of a wooded area but that later the
same land had been cleared.
With regard to the dates of those photographs, they are admittedly
not certified with specific dates, but testimony from both the NRCS
Soil Scientist and the Farm Bill Program Manager during the county
committee hearing indicates that the first pictures, showing a wooded
area, were taken in July of 1994, and that the later pictures, showing
the same land area with cleared pastureland, were taken in June of
2001. (J.A. 131-32, 173.) This sworn testimony from NRCS employ-
ees provides a sound basis for the agency’s decision. An agency
"must be permitted ‘to rely on the reasonable opinions of its own
qualified experts even if, as an original matter, a court might find con-
trary views more persuasive.’" Downer v. United States, 97 F.3d 999,
1002 (8th Cir. 1996) (quoting Marsh v. Or. Natural Res. Council, 490
U.S. 360, 378 (1989)). Thus, evidence in the record exists supporting
the determination that the land was converted after November 28,
1990, and such decision is thus not arbitrary, capricious, or an abuse
of discretion.
C.
Next, Holly Hill argues for the first time on appeal that even if the
wetlands on Field 16 were converted after November 28, 1990, the
FSA’s determination that it is ineligible for benefits is fundamentally
12 HOLLY HILL FARM v. UNITED STATES
flawed because the evidence regarding the alleged scope of the con-
version supports the conclusion that it had "minimal effects." The
minimal effects exemption provides that a producer may manipulate
a wetland if the changes will have only a "minimal effect on the func-
tional hydrological and biological value of the wetlands in the area."
16 U.S.C.A. § 3822(f)(West 2000). The regulations further provide
that
NRCS shall determine whether the effect of any action of a
person associated with the conversion of a wetland . . . has
a minimal effect on the functions and values of wetlands in
the area. Such determination shall be based upon a func-
tional assessment of functions and values of the wetland
under consideration and other related wetlands in the area,
and will be made through an on-site evaluation. A request
for such determination will be made prior to the beginning
of activities that would convert the wetland. If a person has
converted a wetland and then seeks a determination that the
effect of such conversion on wetland was minimal, the bur-
den will be upon the person to demonstrate to the satisfac-
tion of NRCS that the effect was minimal.
7 C.F.R. § 12.31(d) (2005). Holly Hill contends that because an
NRCS representative had testified that normal circumstances existed
at the site, the site was not significantly disturbed, and the site was
not a problem area, a finding of minimal effects has been made war-
ranting application of the exemption.
Holly Hill contends that this is not the first time it has raised the
minimal effects argument, but the record shows that during the
administrative proceedings and before the district court, Holly Hill’s
argument was that it did not convert the wetland at issue rather than
that any conversion had a minimal effect. Holly Hill contends that it
made the claim at the initial hearing when it challenged the determi-
nation as involving an insignificant amount of wetland with no dis-
cernable alteration. (J.A. 224.) Holly Hill further asserts that this
argument was made in the request for Director Review when it argued
that the site was not significantly disturbed per the agency and that
the area was not a problem area per the agency. (J.A. 248.) Lastly,
Holly Hill points to testimony of NRCS officials stating that Field 16
HOLLY HILL FARM v. UNITED STATES 13
did not demonstrate any draining, filling, relocation of soil, or damn
construction. (J.A. 415-16.) However, while these claims and evi-
dence might be relevant to a minimal effects determination, it is clear
that these assertions and citations to the record were made in support
of Holly Hill’s "no conversion" argument, which is separate and dis-
tinct from the minimal effects argument made before this court.
Because Holly Hill did not raise the minimal effects argument
below, it faces a high hurdle in this court. In this circuit, "[i]ssues
raised for the first time on appeal are generally not considered absent
exceptional circumstances." Williams v. Prof’l Transp. Inc., 294 F.3d
607, 614 (4th Cir. 2002). The underlying rationales for this rule are
"respect for the lower court, [an avoidance of] unfair surprise to the
other party, and the need for finality in litigation and conservation of
judicial resources." Wheatly v. Wicomico County, Md., 390 F.3d 328,
335 (4th Cir. 2004)(quoting Tele-Communications, Inc. v. Commis-
sioner, 12 F.3d 1005, 1007 (10th Cir. 1993)) (internal quotation omit-
ted). "Exceptions to this general rule are made only in very limited
circumstances, such as where refusal to consider the newly-raised
issue would be plain error or would result in a fundamental miscar-
riage of justice." Muth v. United States, 1 F.3d 246, 250 (4th Cir.
1993); see also Nat’l Wildlife Fed’n. v. Hanson, 859 F.2d 313, 318
(4th Cir. 1998).
Holly Hill argues that plain error would result if we refuse to con-
sider the minimal effects exemption, but we find this position unper-
suasive. First, while Holly Hill takes the position that it is entitled to
the minimal effects exemption as a matter of law and that no addi-
tional fact finding would be necessary, it seems clear that resolution
of this claim would require remand to the agency. Although there was
no evidence in the record that Holly Hill engaged in dredging, dam-
ming, or other disturbance of the soil, it seems entirely plausible that
USDA experts could nonetheless conclude that the removal of bot-
tomland hardwoods from Field 16 had more than minimal effects.
Moreover, both the statute and the regulation applicable to the mini-
mal effects exemption clearly provide that this determination is to be
made by the agency. 16 U.S.C.A. § 3822(f) (West 2000); 7 C.F.R.
§ 12.5(b)(1)(v) (2005). Because there is no indication in the record
that the USDA addressed minimal effects, if we were to reach Holly
Hill’s claim on this issue and find that the USDA erred in failing to
14 HOLLY HILL FARM v. UNITED STATES
make a minimal effects determination before denying benefits, we
would be required to remand the fact-specific question of whether
there were only minimal effects.
Secondly, apart from the issue of whether Holly Hill would ulti-
mately be entitled to a minimal effects exemption on remand, we can-
not say that the USDA’s initial failure to make the minimal effects
determination in the instant case rises to the level of clear error.
Admittedly, in B&D Land & Livestock Co. v. Veneman, 231 F. Supp.
2d 895 (N.D. Iowa 2002), the district court explained that "the Hear-
ing Officer could not properly consider whether removal of woody
vegetation, standing alone, is enough to result in the ‘conversion’ of
a wetland . . . unless the Hearing Officer had first determined that the
purported ‘conversion’ would have more than a ‘minimal effect’ on
the wetland functions and values." Id. at 908. Similarly, the district
court in Rosenau v. Farm Serv. Agency, 395 F. Supp. 2d 868 (D.N.D.
2005), stated that "[t]here is no question that the Defendants may
declare a person ineligible for USDA farm program benefits only after
a determination of their eligibility for a minimal effect exemption."
Id. at 874 (emphasis added)(citing 7 C.F.R. § 12.4(g); 7 C.F.R.
§ 12.5(b)(1)(v) (2005)). However, the regulations suggest that a per-
son seeking benefits must request consideration for this exemption.
The applicable regulation clearly states that a program benefits
applicant should make a request for a minimal effects determination
prior to any conversion activity and that if such prior request is not
made, the applicant will bear the burden of demonstrating that the
effect was minimal. See 7 C.F.R. § 12.31(d)(2005). While a SCS
decision maker instructed the team making the 1991 wetland determi-
nation that "[m]inimal effect must be conducted at each of the four
contested sites" and that a "worksheet should be completed for each
site even if the appellant does not ask for a minimal effect determina-
tion," this related only to the four sites deemed to contain wetlands
during the 1991 assessment, which did not include Field 16. (J.A.
233F.) Moreover, at oral argument, the government represented that
the USDA would not be bound by such an instruction from an SCS
employee.
Thus, the USDA’s failure to make a minimal effects determination
does not constitute plain error such that we should deviate from our
HOLLY HILL FARM v. UNITED STATES 15
general rule against considering issues raised for the first time on
appeal. Furthermore, we find that any possible error with regard to the
minimal effects exemption would not amount to a miscarriage of jus-
tice. Holly Hill had numerous opportunities to raise its minimal
effects argument, at both the administrative level and before the dis-
trict court, and we decline to entertain it at this late stage.
D.
In its final argument, Holly Hill contends that it was prevented
from sustaining its burden of proof in challenging the agency’s action
because of alleged abuses of discretion by the USDA in the manner
in which the administrative hearings were conducted. Specifically,
Holly Hill argues that the following actions by the NAD Hearing
Officer violated due process: (1) the denial of Holly Hill’s request to
subpoena witnesses; (2) the ex parte communications with the USDA
regarding the subpoena requests; and (3) the participation in witness
questioning during the NAD hearing. None of these claims have
merit.
While the NAD Hearing Officer did deny Holly Hill’s request for
subpoenas to compel seven individuals to attend the hearing, the
applicable regulation states that a subpoena shall be issued for a wit-
ness only if the Hearing Officer determines that
the appellant or the agency has established that either a rep-
resentative of the Department or a private individual pos-
sesses information that is pertinent and necessary for
disclosure of all relevant facts which could impact the final
determination, that the information cannot be obtained
except through testimony of the person, and that the testi-
mony cannot be obtained absent issuance of a subpoena.
7 C.F.R. § 11.8(2)(iii)(B) (2005). Furthermore, the regulations also
make clear that it is within a Hearing Officer’s discretion to "confine
the presentation of facts and evidence to pertinent matters and exclude
irrelevant, immaterial, or unduly repetitious evidence, information, or
questions." 7 C.F.R. § 11.8(c)(5)(ii) (2005).
16 HOLLY HILL FARM v. UNITED STATES
As the district court pointed out in its opinion, the NAD Hearing
Officer had at his disposal a written record of all the relevant informa-
tion supporting NRCS’s technical determination and the FSA’s resul-
tant denial of benefits, as well as a record of the FSA county
committee hearing at which many of the requested witnesses were
examined. The NAD Hearing Officer reasonably determined that this
information coupled with the testimony of the witnesses supplied by
the USDA would be sufficient. While those people Holly Hill wished
to subpoena may have possessed relevant information, this is not
enough to show that they had relevant knowledge not otherwise avail-
able. The technical determination was not based on the thought pro-
cesses or opinions of these persons, but rather on their notes and final
reports which were all included on the record. Indeed, "inquiry into
the mental processes of administrative decisionmakers is usually to be
avoided" and formal findings are the appropriate basis of review
when available. Citizens to Preserve Overton Park, Inc. v. Volpe, 401
U.S. 402, 420 (1971). For these reasons, it is clear that the NAD
Hearing Officer did not abuse his discretion by denying the subpoena
requests.
The ex parte communication with which Holly Hill takes issue is
that the NAD Hearing Officer faxed a note with a copy of Holly
Hill’s request for subpoenas to NCRS and FSA. The relevant regula-
tions provide that
At no time between the filing of an appeal and the issuance
of a final determination under this part shall any officer or
employee of the Division engage in ex parte communica-
tions regarding the merits of the appeal with any person hav-
ing any interest in the appeal pending before the Division,
including any person in an advocacy or investigative capac-
ity. This prohibition does not apply to . . . [d]iscussions of
procedural matters related to an appeal.
7 C.F.R. § 11.7(a)(1) (2005).
It seems clear that the exchange at issue here related to procedural
matters only, and was initiated merely to aid the Hearing Officer in
determining whether the requested witness had relevant information
not otherwise available. There was no discussion of the merits of the
HOLLY HILL FARM v. UNITED STATES 17
appeal. Thus, we agree with the district court’s conclusion that the ex
parte communication was not an abuse of discretion and did not indi-
cate bias on the part of the Hearing Officer.
Lastly, Holly Hill argues that the NAD Hearing Officer acted
improperly when he questioned witnesses and directed testimony at
the hearing on behalf of the government. According to Holly Hill, this
conduct coupled with the ex parte communication shows that the
Hearing Officer was clearly biased in favor of the government; there-
fore, impartiality protections were violated and a new hearing is
required. See Utica Packing Co. v. Block, 781 F.2d 71, 77-78 (6th Cir.
1986). For reasons discussed below, this argument is without merit.
The applicable regulation states that "[t]he hearing will be con-
ducted by the Hearing Officer in the manner determined by the Divi-
sion most likely to obtain the facts relevant to the matter or matters
at issue." 7 C.F.R. § 11.8(a)(5)(ii) (2005). The hearing transcript
makes clear, contrary to Holly Hill’s contention, that the Hearing
Officer did not act as counsel for the agency, but rather was simply
attempting to ensure the proceeding remained on track and that rele-
vant information was addressed. The Hearing Officer himself
explained that he was "not trying to lead them, but . . . trying to main-
tain . . . focus and stick to the relevant facts." (J.A. 330.) As the dis-
trict court found, the Hearing Officer’s "attempt to clarify questions
and answers, and to obtain all the applicable evidence, did not evi-
dence improper bias or prejudice toward [the USDA]." (J.A. 453.)
III.
In sum, there is no basis in the record before us to hold that the
USDA acted arbitrarily, capriciously, or in abuse of its discretion in
denying Holly Hill benefits. Accordingly, we affirm the district
court’s grant of the motion for summary judgment.
AFFIRMED