DCP Farms v. Yeutter ( 1992 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 91-1384
DCP FARMS, ET AL.,
Plaintiffs-Appellees,
versus
CLAYTON YEUTTER, SECRETARY OF
AGRICULTURE, AND U.S. DEPARTMENT
OF AGRICULTURE, AGRICULTURAL
STABILIZATION & CONSERVATION SERVICE,
Defendants-Appellants.
Appeal from the United States District Court
for the Northern District of Mississippi
Before REAVLEY, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This appeal raises the question of whether the "mere
appearance of bias or pressure" standard adopted in Pillsbury Co.
v. FTC, 354 F.2d 952 (5th Cir. 1966) applies to claims of improper
congressional interference with an administrative determination of
eligibility for farm subsidies. We find that contact between a
congressman and the U.S. Department of Agriculture involving a
pending proceeding that was neither quasi-judicial nor judicial is
not governed by the Pillsbury standard. We hold that in such
proceedings congressional contact does not go beyond the pale
unless it causes the administrator to consider extraneous factors
in reaching his decision. We conclude then that remaining
administrative procedures were not tainted and the district court
abused its discretion by reviewing the agency decision when these
administrative remedies were not exhausted. Judicial intervention
in the agency's decision-making process before DCP Farms exhausted
its administrative remedies is unjustified without a clear showing
of futility. We reverse the district court's grant of injunctive
relief and remand the case with instructions
to dismiss.
I.
Farmers submit annual farm operating plans, which serve as
subsidy applications, to the county Agricultural Stabilization &
Conservation Service office. A county committee of local farmers
elected by their peers makes an initial determination of
eligibility and amount of subsidy. Appeal is to a state committee
of farmers appointed by the Secretary. Despite this delegation of
decision-making responsibility to the state and local committees,
the USDA expressly reserves the right to reverse or modify any
determination made by a county or state committee or by the Deputy
Administrator. 7 C.F.R. § 1497.2(d). Any producer or participant
dissatisfied with a decision at any level may request
reconsideration. Esch v. Yeutter, 876 F.2d 976, 987 (D.C. Cir.
1989). If the USDA decides to review a determination made at the
state or county level, a Deputy Administrator investigates the case
and makes an initial determination. If the Deputy Administrator's
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initial determination is adverse a farmer may appeal to a USDA
hearing officer.
DCP Farms are three joint venture farms with cotton, rice, and
other crops in Tunica and Coahoma counties, Mississippi. This case
arises from attempts by the Department of Agriculture to enforce
the statutory limit of $50,000 per "person" in federal crop
subsidies against DCP Farms. 7 U.S.C. § 1308. The three farms,
controlled by two families, had created 51 irrevocable trusts to
maximize the number of "persons" eligible to receive farm subsidy
payments. DCP Farms were slated to receive $1.4 million in
subsidies for the 1989 crop year.
After the county committee approved DCP Farms' requested
subsidy for the 1989 crop year, the USDA decided to review DCP
Farms' eligibility. In September 1989, the USDA's Office of
Inspector General released a report of abuses of the farm subsidy
program. The report highlighted DCP Farms as an example of
egregious violations of the $50,000 per person limit. This report
sparked considerable publicity and in late 1989, USDA officials met
with Congressional staff involved in agricultural affairs to
discuss the issues raised in the OIG report. John Campbell, Deputy
Undersecretary of Agriculture for Commodity Programs, and William
E. Penn, Assistant Deputy Administrator for State and County
Operations of ASCS, attended the meeting. Parks Shackelford, the
key staff aide on agricultural issues for Congressman Huckaby, the
chairman of the Subcommittee on Cotton, Rice, and Sugar was an
active participant. DCP Farms were specifically discussed.
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On December 6, 1989, Chairman Huckaby wrote to Agriculture
Secretary Yeutter expressing concern about "a number of recent
press items reporting abuses of the new farm program payment
eligibility regulations." The letter cites DCP Farms as described
in the OIG report as an example of continued abuse of the statutory
limit on payments. The most pointed part of the letter states
As the principal sponsor of the legislation which
established the new payment eligibility requirements, I
feel strongly that the [DCP Farms] operation violates
both the spirit and letter of the law. It was clearly
not the intent of Congress that such operations would
qualify for such vast sums; if this operation does
receive the reported $1.4 million, it will only happen
because USDA has failed to implement and enforce the law
as intended by Congress.
Congressman Huckaby urged the Secretary "to carefully review the
Tunica County, Mississippi case and any other similar operations."
He was particularly concerned about the treatment of 51 irrevocable
trusts as "persons" in light of previous assurances from the USDA
that it need not codify the treatment of irrevocable trusts and
estates, but could leave it to the Secretary to regulate.
Congressman Huckaby indicated that if the USDA allowed DCP Farms to
treat all 51 irrevocable trusts as "persons," he would introduce
legislation to revise the definition of "persons" to exclude trusts
entirely.
In response to Congressman Huckaby's letter, Penn drafted a
letter which was signed by Campbell on behalf of Under Secretary of
Agriculture Richard Crowder. The letter informed Congressman
Huckaby that the DCP Farms case was under administrative review and
assured him that "the Department of Agriculture will take a very
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aggressive position in dealing with this case." The letter did not
suggest that the USDA was committed to a specific outcome. In
fact, the Secretary's letter indicates a likelihood that DCP Farms'
organization would be allowed under an equitable reorganization
rule allowing farmers to reorganize their holdings to prevent a
reduction in payments.
In April 1990, the Deputy Administrator notified the
Mississippi ASCS office that the initial determination on DCP Farms
for 1990 would be made at the national level along with the
agency's initial determination of DCP Farms' eligibility under the
1989 plan. On June 1, 1990, the Deputy Administrator issued three
letter opinions concluding that DCP Farms had adopted schemes or
devices to evade the payment limitation provisions and therefore
was ineligible to receive any subsidy payments for the 1989, 1990,
or 1991 crop years.
DCP Farms appealed from the initial determination and
requested a hearing, which was set for December 12, 1990. Before
the hearing, however, DCP Farms obtained documents disclosing the
USDA meeting with congressional staffers and the letter from
Chairman Huckaby. DCP Farms petitioned the Deputy Administrator to
disqualify all employees and officials of the national office from
further involvement in the administrative proceedings. The
petition was denied.
On December 12, 1990, DCP Farms sued for declaratory and
injunctive relief alleging that improper congressional interference
denied them due process and that USDA's conduct was arbitrary,
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capricious and an abuse of discretion under the Administrative
Procedure Act. The district court granted DCP Farms' request for
permanent injunctive relief. The USDA appeals.
II.
DCP Farms' due process claim is based upon this court's
decision in Pillsbury Company v. Federal Trade Commission, 354 F.2d
952 (5th Cir. 1966). While Pillsbury's case was pending before the
FTC, the Subcommittee on Antitrust and Monopoly of the Senate
Judiciary committee held hearings at which several members of the
Commission and its staff appeared, including the author of the
Commission's final opinion. The committee members questioned the
FTC members at length about their reasoning and were critical of an
earlier FTC ruling in the case. Id. at 964. The Federal Trade
Commission eventually found that Pillsbury had violated § 7 of the
Clayton Act.
The Pillsbury court held:
when an investigation "focuses directly and
substantially upon the mental decisional processes of a
Commission in a case which is pending before it, Congress
is no longer intervening in the agency's legislative
function, but rather, in its judicial function. At this
latter point, we become concerned with the right of
private litigants to a fair trial and, equally important,
with their right to the appearance of impartiality, which
cannot be maintained unless those who exercise the
judicial function are free from powerful external
influences."
354 F.2d at 964 (emphasis in original). Pillsbury has been
interpreted to invalidate adjudicative agency decisions whenever
congressional contact with an agency creates the mere appearance of
bias or pressure. D.C. Federation of Civil Ass'ns v. Volpe, 459
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F.2d 1231 (D.C. Cir. 1971). The district court here relied on
Pillsbury to conclude that Congressman Huckaby's letter to the USDA
invalidated the agency's administrative determination by creating
an appearance of bias or pressure. The district court held that
Chairman Huckaby "exerted impermissible influence upon officials at
the national level of the Department of Agriculture in an effort to
dictate the outcome of those proceedings."
We must disagree with the district court's determination that
Pillsbury governs this case. Pillsbury holds that the appearance
of bias caused by congressional interference violates the due
process rights of parties involved in judicial or quasi-judicial
agency proceedings. 354 F.2d at 964. See D.C. Federation of Civic
Associations v. Volpe, 459 F.2d 1231, 1246 (D.C. Cir. 1972),
(declining to apply Pillsbury standard to congressional
interference where the Secretary's action was neither judicial nor
quasi-judicial). Pillsbury was a case pending before a quasi-
judicial body which would render the agency's final decision. In
contrast, the contact here occurred well before any proceeding
which could be considered judicial or quasi-judicial. This case
would not have reached the stage when it could fairly be called
adjudicative or quasi-judicial until the hearing which was
scheduled for December 1990. There was no hearing on the merits of
DCP Farms' application for farm subsidy payments because DCP Farms
abandoned the administrative process for this litigation.
In short, the congressional communication here was not aimed
at the decision-making process of any quasi-judicial body.
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Congressman Huckaby was concerned about the administration of a
congressionally created program. The dispute between the USDA and
DCP Farms was part of a larger policy debate. Applying Pillsbury's
stringent "mere appearance of bias" standard at this juncture of
administrative process would erect no small barrier to
Congressional oversight. It reflects an insular view of these
administrative processes for which we find no warrant. We are
unwilling to so dramatically restrict communications between
Congress and the executive agencies over policy issues. Appearance
of bias is not the standard.
III.
Actual bias is ordinarily required to invalidate decisions by
federal agencies. See Dirt, Inc. v. Mobile County Commission, 739
F.2d 1562 (11th Cir. 1984), ("Although such an appearance of bias
is clearly present in this case, the standards governing
administrative proceedings are far more relaxed than those
controlling judicial proceedings."). An administrative decision
will be overturned only when the hearing officers' mind is
irrevocably closed or there was an actual bias. United States v.
Batson, 782 F.2d 1307, 1315 (5th Cir. 1986). See also FTC v.
Cement Institute, 333 U.S. 683 (1948).
We agree with the D.C. Circuit's conclusion in Peter Kiewit
Sons' Co. v. U.S. Army Corps of Engineers, 714 F.2d 163 (D.C. Cir.
1983) that the proper standard for evaluating congressional
interference with non-judicial decisions of administrative agencies
is whether the communication actually influenced the agency's
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decision. More specifically, the test is "whether 'extraneous
factors intruded into the calculus of consideration' of the
individual decisionmaker." Id. at 170, quoting D.C. Federation,
459 F.2d at 1246.
This focus on the intrusion of improper extraneous factors
into the agency's decision-making process recognizes the political
reality that "members of Congress are requested to, and do in fact,
intrude in varying degrees, in administrative proceedings." S.E.C.
v. Wheeling-Pittsburgh Steel Corp., 648 F.2d 118, 126 (3d Cir.
1981) (en banc). It would be unrealistic to require that agencies
turn a deaf ear to comments from members of Congress. The agency's
duty, so long as it is not acting in its quasi-judicial capacity,
is simply to "give congressional comments only as much deference as
they deserve on the merits." Id.
We are cautious in reading extraneous factors too broadly,
lest they impair agency flexibility in dealing with Congress. In
particular, an agency's patient audience to a member of Congress
will not by itself constitute the injection of an extraneous
factor. Nor would a simple plea for more effective enforcement of
a law be the injection of an improper factor. A truly extraneous
factor must take into account "considerations that Congress could
not have intended to make relevant." D.C. Federation, 459 F.2d at
1247.
Congressional "interference" and "political pressure" are
loaded terms. We need not attempt a portrait of all their sinister
possibilities, even if we were able to do so. We can make plain
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that the force of logic and ideas is not our concern. They carry
their own force and exert their own pressure. In this practical
sense they are not extraneous. That a congressman expresses the
view that the law ought not sanction the use of fifty-one
irrevocable trusts to gain $1.4 million in subsidies is not
impermissible political "pressure." It certainly injects no
extraneous factor. We find no due process right in these
preliminary efforts to persuade the government to grant farm
subsidies sufficient to exclude the political tugs of the different
branches of government, and we see nothing more here. We reject
the holding of the district court that DCP Farms could ignore the
administrative procedure yet available to it and turn to the
consequence of this bypass of remedies.
IV.
The Administrative Procedure Act provides for judicial review
of agency action only where it is "made reviewable by statute" or
is "final agency action." 5 U.S.C. § 704. The deputy
administrator's initial determination of eligibility for farm
subsidy payments is not made reviewable by statute, nor is it the
USDA's final action on DCP Farms application. We review the
district court's ruling concerning exhaustion of administrative
remedies for abuse of discretion. Girard v. Klopfenstein, 930 F.2d
738, 741 (9th Cir. 1991).
The exhaustion requirement is not absolute, however, and this
court has recognized exceptions. The district court apparently
relied upon two of these exceptions to conclude that immediate
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judicial review of the agency's decision was appropriate. We
conclude that as a matter of law neither exception applies to the
facts of this case. The exceptions to the requirement that
administrative remedies be exhausted apply only in "extraordinary
circumstances." Central States S.E. and S.W. Areas Pension Fund v.
T.I.M.E.-D.C., Inc., 826 F.2d 320, 329 (5th Cir. 1987). The first
is when "the plaintiff contends that the administrative system
itself is unlawful or unconstitutional." Patsy v. Florida Int'l
University, 634 F.2d 900, 904 (5th Cir. 1981). This exception is
inapplicable because the challenge here is not to provisions of the
administrative process, but to its alleged subversion.
The second exception to the exhaustion requirement relied upon
by the district court is when the plaintiff demonstrates that "it
would be futile to comply with the administrative procedures
because it is clear that the claim will be rejected." Patsy, 634
F.2d at 904. We are convinced that DCP Farms has failed as a
matter of law to produce evidence sufficient to support a finding
of futility.
The district court relies upon two facts to support its
conclusion that the USDA process would be futile because the claim
would clearly be rejected. First, the district court cites the
fact that Don Lloyd, the ASCS officer appointed to conduct the
appellate hearing, had reviewed the letter USDA sent in response to
Congressman Huckaby's letter. Second, the district court relies
upon the USDA's summary rejection of DCP Farms' petition to recuse
the entire national level of the USDA from consideration of their
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case. A summary rejection was justified, however, by the
unreasonably broad nature of the requested relief. It does not
convince us that the USDA would have unreasonably refused a request
for a different hearing officer had DCP Farms made such a request.
In any event, evidence that a hearing officer read a letter
involving this case is weak evidence that pursuing administrative
appeals would have been futile. We recognize DCP Farms' concern
that its appeal would have been heard by an officer it considered
tainted by knowledge of Congressman Huckaby's letter. Nonetheless,
these two pieces of evidence, without more, do not support a
conclusion that pursuit of the USDA appeals process would be
futile.
The appropriate forum for resolving this dispute is an appeal
from a final USDA decision. The relief that DCP Farms sought here
is exceptional. The federal courts are asked to enjoin an
administrative agency from proceeding through its internal review
process to reach a final agency decision. We decline to intrude
into the USDA's administrative process where the plaintiff has not
demonstrated a valid reason to be excused from exhausting its
administrative remedies. To the extent that DCP Farms believes
that extraneous factors were considered in the USDA's initial
determination, it may make that argument in its appeal of the
Deputy Administrator's decision.
We conclude that the district court erred in granting DCP
Farms' request for injunctive relief. Accordingly, we REVERSE and
REMAND with instructions to dismiss.
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