Org. for Competitive Markets v. U.S. Department of Agriculture , 912 F.3d 455 ( 2018 )

United States Court of Appeals
For the Eighth Circuit
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No. 17-3723
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Organization for Competitive Markets, et al.
lllllllllllllllllllllPetitioners
v.
U.S. Department of Agriculture, et al.
lllllllllllllllllllllRespondents
____________
Petition for Review of an Order of the
Department of Agriculture
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Submitted: September 26, 2018
Filed: December 21, 2018
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Before LOKEN, BENTON, and SHEPHERD, Circuit Judges.
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LOKEN, Circuit Judge.
The Organization for Competitive Markets and three of its members petition
for review of 2017 United States Department of Agriculture (“USDA”) orders
withdrawing an interim final rule and two proposed regulations promulgated under
the Packers and Stockyards Act (“PSA”), 7 U.S.C. §§ 181 et seq. We deny the
petition for review.
I. Background.
The PSA was enacted in 1921 to comprehensively regulate the “Big Five” meat
packers, stockyards they controlled, and commission men and dealers who profited
from their nationwide monopoly. See Stafford v. Wallace, 258 U.S. 495, 514-16
(1922) (rejecting a Commerce Clause challenge to the PSA). Modeled after the
Interstate Commerce Act of 1887 and the Federal Trade Commission Act of 1913,
two core PSA provisions make it unlawful for any packer, swine contractor, or live
poultry dealer to “use any unfair, unjustly discriminatory, or deceptive practice” or
“give any undue or unreasonable preference or advantage to any particular person or
locality in any respect.” PSA § 202(a) and (b), codified at 7 U.S.C. § 192(a) and (b).1
Because “[r]ead literally, [these terms] establish no standard at all,” at least six
circuits, including this court, have concluded that these provisions concern only those
business dealings that have an actual or potential adverse effect on competition, an
interpretation based on “their statutory and common-law antecedents, which were
known well by the Members of the Congress that passed the [PSA].” Wheeler v.
Pilgrim’s Pride Corp., 591 F.3d 355, 364-65 (5th Cir. 2009) (en banc) (Jones, J.,
concurring); accord Been v. O.K. Indus., Inc., 495 F.3d 1217, 1228-29 (10th Cir.
2007); London v. Fieldale Farms Corp., 410 F.3d 1295, 1303-04 (11th Cir. 2005);
IBP, Inc. v. Glickman, 187 F.3d 974, 977 (8th Cir. 1999); DeJong Packaging Co. v.
USDA, 618 F.2d 1329, 1336-37 (9th Cir. 1980); Pac. Trading Co. v. Wilson & Co.,
Inc., 547 F.2d 367, 369-70 (7th Cir. 1976). Notably, Congress has amended the PSA
at least seven times without making changes that would affect this judicial
interpretation. Wheeler, 591 F.3d at 361. Though the USDA has consistently
construed these provisions as not requiring proof of anti-competitive effect, courts
1
7 U.S.C. § 192 also includes five specific prohibitions, and broad prohibitions
that apply to stockyards and stockyard dealers are found in 7 U.S.C. § 213. But
subsections 192(a) and (b) are the focus of this appeal.
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have not given its position Chevron deference. See Wheeler, 591 F.3d at 362; Been,
495 F.3d at 1227; London, 410 F.3d at 1304.
On December 20, 2016 (the timing is significant), USDA published an interim
final rule -- known as the Farmer Fair Practices Rules -- declaring that a finding of
adverse effect on competition “is not necessary in all cases. Certain conduct or action
can be found to violate sections 202(a) and/or (b) of the Act without a finding of harm
or likely harm to competition.” 81 Fed. Reg. at 92,566, 92,594, to be codified as 9
C.F.R. § 201.3(a). USDA explained that its longstanding interpretation of the PSA
was correct but had been rejected by courts of appeals that misconstrued the statute.
“To the extent that these courts failed to defer to USDA’s interpretation of the statute
because that interpretation had not previously been enshrined in a regulation, this new
regulation may constitute a material change in circumstances that warrants judicial
reexamination of the issue.” Id. at 92,568 (footnotes omitted). USDA declared the
interim final rule would take effect on February 21, 2017, and invited written
comments before that date.
The same day, USDA published two proposed amendments to its PSA
regulations: proposed 9 C.F.R. § 201.210 set forth a long list of “per se” violations
of section 202(a), that is, conduct or action that is “unfair,” “unjustly discriminatory,”
or a “deceptive” practice “regardless of whether the conduct or action harms or is
likely to harm competition.” Proposed 9 C.F.R. § 201.211 listed six non-exclusive
criteria the Secretary will consider in determining whether section 202(b) has been
violated, one of which is whether the conduct or action “harms or is likely to harm
competition.” 81 Fed. Reg. 92,703, 92,722-23.
On February 7, 2017, citing a “Regulatory Freeze Pending Review” issued by
the President’s Chief of Staff to the heads of all executive departments, USDA
postponed the interim final rule’s effective date to April 22, 2017, and invited written
comments. 82 Fed. Reg. 9,489 (Feb. 7, 2017). On April 12, noting “the significant
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public interest in this rule,” USDA further postponed the rule’s effective date to
October 19, 2017, and issued a notice of proposed rulemaking seeking comments
regarding four alternative dispositions. 82 Fed. Reg. 17,531 and 17,594 (Apr. 12,
2017). On October 18, USDA withdrew the interim final rule and published notice
“that after review and careful consideration of the public comments received, [USDA]
will take no further action” on proposed 9 C.F.R. §§ 201.210 and 201.211. 82 Fed.
Reg. at 48,594 and 48,603 (Oct. 18, 2018). Petitioners argue that USDA’s
withdrawal of the interim final rule and failure to promulgate the proposed
regulations were arbitrary and capricious agency actions within the meaning of 5
U.S.C. § 706(2)(A) and a continuing failure to comply with a mandate in the Food,
Conservation, and Energy Act of 20082 that constitutes unlawful withholding of
agency action under 5 U.S.C. § 706(1).
II. Discussion.
Viewed from a political scientist’s perspective, this landscape is rather easy to
describe. In December 2016, the outgoing USDA administrators left their successors
a time bomb -- published proposed agency actions promulgating USDA’s
longstanding interpretation of the PSA that would increase its regulatory authority,
an interpretation that had been consistently rejected by numerous courts of appeals
for over 75 years, without congressional intervention. Not surprisingly, USDA’s
incoming Secretary, acting on a promise to reduce regulation, took action to postpone
and then cancel these proposals. In ruling on this petition for review, our task is
limited to applying established, neutral legal principles to determine whether that was
valid agency action. Whether prior court of appeals decisions have correctly
interpreted the PSA is a task for the Supreme Court, or for each of those courts acting
2
Pub. L. No. 110-246, § 11006(1), 122 Stat. 2120.
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en banc. Whether the PSA should be amended to reflect USDA’s view of what it
ought to provide is the task of Congress.3
A. The Arbitrary and Capricious Issue. The Administrative Procedure Act
provides for judicial review of most agency actions. 5 U.S.C. §§ 701-706. The
parties agree those provisions apply to the USDA actions at issue. Section 706(2)(A)
provides that a reviewing court shall “(2) 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.” This is a highly deferential standard:
“Under what we have called this ‘narrow’ standard of review, we insist that an agency
‘examine the relevant data and articulate a satisfactory explanation for its action.’”
FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009), quoting Motor
Vehicle Mfrs. Ass’n of U.S., Inc., v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983). “If an agency’s determination is supportable on any rational basis, we must
uphold it.” Voyageurs Nat’l Park Ass’n v. Norton, 381 F.3d 759, 763 (8th Cir. 2004).
This standard applies when an agency revokes an extant regulation.
In this case, USDA published a proposed interim final rule and two regulations
that reflected its prior enforcement policy but enshrined that policy in regulations, a
change of course that had not been subjected to full notice and comment rulemaking.
The proposals never took effect. Rather, in the actions at issue, USDA withdrew the
proposed regulatory change while leaving its prior enforcement policy unaffected.
Judicial review of this kind of action “present[s] questions that are delicate, subtle,
and complex.” Fox Television, 556 U.S. at 536 (Kennedy, J., concurring). “The
question in each case is whether the agency’s reasons for the change [or decision not
3
For relief, petitioners ask us to “order the Department to issue” the rules and
regulations it withdrew. This reflects a distressing disregard of the separation of
powers mandated by the Constitution. Article III grants us the “judicial Power” to
decide “Cases” and “Controversies,” not the legislative power to rewrite the PSA or
the executive power to promulgate interpretive regulations.
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to change], when viewed in light of the data available to it, and when informed by the
experience and expertise of the agency, suffice to demonstrate that the new policy
rests upon principles that are rational, neutral, and in accord with the agency’s proper
understanding of its authority.” Id. In general, “an agency’s discretion is surely at
its height when it chooses not to act.” Williams Nat. Gas Co. v. FERC, 872 F.2d 438,
450 (D.C. Cir. 1989) (emphasis in original). But “an agency changing its course by
rescinding a rule is obligated to supply a reasoned analysis for the change beyond that
which may be required when an agency does not act in the first instance.” Motor
Vehicle Mfrs., 463 U.S. at 42.
In its published comment withdrawing the interim final rule, USDA reviewed
in detail the public comments for and against the rule4 and offered two main
justifications for its decision to withdraw. First, surveying at length prior decisions
of seven courts of appeals regarding the need to show harm to competition, 82 Fed.
Reg. at 48,596-98, USDA concluded that the interim final rule would conflict with
decisions in at least four circuits, and that “a regulation conflicting with relevant
Circuit precedent will inevitably lead to more litigation in the livestock and poultry
industries [which] serves neither the interests of the livestock and poultry industries
nor [USDA].” Id. at 48,597. Second, USDA concluded there was no “good cause”
that warranted issuing the interim final rule without additional notice and public
comment, because of the six-year delay between the initial comment period and
publication of an interim final rule that was not contained in the 2010 proposal; the
substantial public interest in the proposal; and “no evidence that the public would
suffer harm following the normal notice and comment procedure.” Id. 48,598-99.
4
A large majority of the 1,951 comments submitted in response to the April 12,
2017 proposed rule favored withdrawal of the interim final rule. See 82 Fed. Reg. at
48,595-96.
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In the other action at issue, USDA explained that it was taking no further action
on proposed regulations 9 C.F.R. §§ 201.210 and 201.211 because:
In the past, [USDA] has approached the elimination of specific unfair
and deceptive practices on a case-by-case basis. Continuing this
approach will better foster market-driven innovation and evolution, and
is consistent with the obligation to promote regulatory predictability,
reduce regulatory uncertainty, and identify and use the most innovative
and least burdensome tools for achieving regulatory ends.
Id. at 48,604.
Petitioners argue that USDA’s assessment that circuit courts would refuse to
defer to the withdrawn proposed regulations “is flawed” because, in their view, the
court decisions in Wheeler and London misconstrued the PSA. But the merits of the
underlying debate are not the issue. An agency “need not demonstrate to a court’s
satisfaction that the reasons for the new policy are better than the reasons for the old
one; it suffices that the new policy is permissible under the statute, that there are good
reasons for it, and that the agency believes it to be better, which the conscious change
of course adequately indicates.” Fox Television, 556 U.S. at 515. Here, USDA’s
“new policy” was to return to the enforcement policy it had pursued for decades.
Thus, it is self-evident “that the new policy is permissible under the statute.” USDA’s
conclusion that the interim final rule and proposed regulations would result in
protracted litigation that “serves neither the interests of the livestock and poultry
industries” nor USDA is a rational reason not to adopt a proposed change of course.
Petitioners further argue that USDA “was legally correct” in December 2016
when it determined it could publish the interim final rule without invoking the APA’s
“good cause” exception to notice and comment rulemaking. See 5 U.S.C. § 553(b),
©. Again, this attack on the merits of the agency’s decision that more public notice
and comment was needed is not the issue. It is certainly not unprecedented for an
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agency to rescind an “interim final rule” because it determines that additional public
comment is needed. See Mortg. Inv’rs Corp. of Ohio v. Gober, 220 F.3d 1375, 1377
(Fed. Cir. 2000). This kind of procedural determination by an agency is entitled to
significant weight, particularly here where the initial proposals in 2010 drew strong
adverse public comment that caused the agency not to take action until the final days
of a departing administration. Petitioners assert that USDA’s justification “makes no
sense” because courts are “reluctant to vacate agency action on the basis of staleness
challenges.” That is no doubt true given judicial deference to agency procedural
decisions. But more to the point, petitioners cite no case holding that an agency’s
decision to seek updated public comment was arbitrary and capricious.
An agency’s decision to retain the status quo is more easily defensible than a
shift in policy would be. Here, USDA explained that it was withdrawing the interim
final rule and taking no further action on the proposed regulations because the
proposed regulatory change of course would generate protracted litigation, adopt
vague and ambiguous terms, and might prevent innovation and foster vertical
integration that would hinder new market entrants. 82 Fed. Reg. at 48,603-04. These
are legitimate regulatory and substantive concerns. We cannot say that the USDA
actions at issue were arbitrary and capricious. We deny the petition to review under
5 U.S.C. § 706(2)(A).
B. The 5 U.S.C. § 706(1) Issue. Petitioners contend that the actions at issue
reflect a continuing failure to comply with a directive in Title XI of the Food,
Conservation and Energy Act of 2008 that USDA promulgate, within two years,
regulations to establish criteria for enforcing the “undue or unreasonable preference
or advantage” provision in § 202(b) of the PSA. Therefore, petitioners argue, the
Administrative Procedure Act commands that we “shall” enter an order to “compel
agency action unlawfully withheld or unreasonably delayed.” 5 U.S.C. § 706(1).
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Review of this contention requires a closer look at historical events than
petitioners’ briefs provided. The 2008 Farm Bill mandate called for regulations
covering a number of subjects:
SEC. 11006. REGULATIONS
As soon as practicable, but not later than 2 years after the date of
the enactment of this Act, the Secretary of Agriculture shall promulgate
regulations with respect to the [PSA] to establish criteria that the
Secretary will consider in determining -
(1) whether an undue or unreasonable preference or advantage
has occurred in violation of such Act;
(2) whether a live poultry dealer has provided reasonable notice
to poultry growers of any suspension of the delivery of birds
under a poultry growing arrangement;
(3) when a requirement of additional capital investments over
the life of a poultry growing arrangement or swine production
contract constitutes a violation of such Act; and
(4) if a live poultry dealer or swine contractor has provided a
reasonable period of time for a poultry grower or a swine
production contract grower to remedy a breach of contract that
could lead to termination of the . . . arrangement or . . . contract.
On June 22, 2010, four days after the two-year period, USDA promulgated proposed
regulations addressing all four subjects. It also proposed regulations addressing
additional “discretionary” subjects, including two of the three proposals at issue on
this appeal -- proposed 9 C.F.R. § 201.3(c), stating that “Conduct can be found to
violate section 202(a) and/or (b) of the Act without a finding of harm or likely harm
to competition,” and proposed § 201.210, listing examples of unfair practices that
violate section 202(a) of the PSA. 75 Fed. Reg. 35,338, 35,351-54.
On December 9, 2011, USDA published a “final rule” adopting regulations on
three of the four subjects addressed in the 2008 Farm Bill -- delivery of birds,
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additional capital investments, and reasonable time to remedy a breach of contract.
76 Fed. Reg. 76,874. Those provisions can now be found at 9 C.F.R. §§ 201.215-
.217. However, noting it had received over 61,000 comments, USDA announced it
“opted not to finalize” some provisions, including proposed 9 C.F.R. §§ 201.3(c),
201.210, and 201.211, explaining that “[c]omments were sharply divided” with
respect to these provisions. Id. at 76,875, 76,889. Thereafter, congressional
appropriations acts for fiscal years 2012-2015 precluded USDA from finalizing these
three proposed regulations. However, the appropriations acts for 2016 and 2017 did
not include this limitation. See 81 Fed. Reg. 92,566, 92,567.
Courts that have considered the issue, including this court, have agreed that
there is at least limited authority for courts of appeals to review whether agency
action has been “unlawfully withheld or unreasonably delayed,” the operative words
in § 706(1) of the APA. In Forest Guardians v. Babbitt, the Tenth Circuit
categorically declared: “when an entity governed by the APA fails to comply with
a statutorily imposed absolute deadline, it has unlawfully withheld agency action and
courts, upon proper application, must compel the agency to act.” 164 F.3d 1261,
1272 (10th Cir. 1998). However, an agency’s mere failure to act is usually not a final
agency action triggering judicial review, and the Supreme Court has declared that the
APA does not “afford an implied grant of subject-matter jurisdiction.” Califano v.
Sanders, 430 U.S. 99, 105-06, 107 (1977). After surveying this jurisdictional
landscape, the D.C. Circuit adopted a less categorical approach, concluding that a
claim under § 706(1) should be reviewed as a petition for a writ of mandamus under
the powers granted courts of appeals by the All Writs Act, 28 U.S.C. § 1651(a), to
“issue all writs necessary or appropriate in aid of their respective jurisdictions.” See
Telecomms. Research & Action Ctr. v. FCC (“TRAC”), 750 F.2d 70 (D.C. Cir. 1984).
Most circuits have adopted the mandamus approach to agency delay issues; we
assumed it was jurisdictionally appropriate in Irshad v. Johnson, 754 F.3d 604, 607-
08 (8th Cir. 2014).
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Of controlling significance is the Supreme Court’s unanimous decision in
Norton v. Southern Utah Wilderness Alliance, 542 U.S. 55, 63 (2004). Without
explicitly discussing the APA jurisdictional issue, the Court agreed that a claim will
lie under § 706(1) to redress an agency’s failure to act, but observed that § 706(1)
authorizes courts to “carr[y] forward the traditional practice prior to its passage, when
judicial review was achieved through use of the so-called prerogative writs --
principally writs of mandamus under the All Writs Act.” Id. at 63. The Court
concluded that “a claim under § 706(1) can proceed only where a plaintiff asserts that
an agency failed to take a discrete agency action that it is required to take.” Id. at 64
(emphasis in original). Thus, whether petitioners’ claim is reviewed under § 706(1)
or as a petition for a writ of mandamus under the All Writs Act, their argument that
this court must compel agency action fails.5 “The issuance of a writ of mandamus is
an extraordinary remedy reserved for extraordinary situations.” In re MidAmerican
Energy Co., 286 F.3d 483, 486 (8th Cir. 2002); see Hvass v. Graven, 257 F.2d 1, 6
(8th Cir.), cert. denied, 358 U.S. 835 (1958). We conclude this is not an
extraordinary situation.
In the first place, we cannot conclude that USDA has “unlawfully withheld”
action by failing to comply with an absolute congressional deadline in Section 11006
of the 2008 Farm Bill. Congress directed USDA to “promulgate regulations.” That
5
We have serious doubt whether the Fourth Circuit correctly interpreted the
Supreme Court’s decision in Southern Utah when it held that § 706(1) “mandates the
award of injunctive relief when a plaintiff succeeds in challenging unlawfully
withheld agency action.” South Carolina v. United States, 907 F.3d 742, 757-58 (4th
Cir. 2018). We question whether Congress in § 706(1) intended to foreclose all
discretion that is inherent in the judiciary’s equity jurisdiction. See Weinberger v.
Romero-Barcelo, 456 U.S. 305, 313 (1982) (“The grant of jurisdiction to ensure
compliance with a statute hardly suggests an absolute duty to do so under any and all
circumstances.”). But we need not decide that question because, as explained below,
the issue in this case is whether USDA has “unreasonably delayed” agency action, not
whether action was “unlawfully withheld.”
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directive is subject to different interpretations. With regard to administrative
agencies, Black’s Law Dictionary defines “promulgate” as “to carry out the formal
process of rulemaking by publishing the proposed regulation, inviting public
comments, and approving or rejecting the proposal.” (9th ed. 2009)
In response, USDA proposed rules responsive to all four subjects Congress
identified. On subjects of this complexity, promulgating proposed regulations in the
two years specified is likely all Congress expected. It would be unreasonable to
assume that Congress expected final regulations within two years, regardless of the
public comments. USDA held public meetings and workshops and considered 61,000
public comments. 81 Fed. Reg. at 92,566-67. It then issued final regulations on three
of the four subjects in December 2011. It did not finalize action on proposed 9 C.F.R.
§ 201.211 because public comment confirmed it was controversial. Compare Oil,
Chem., & Atomic Workers Union v. OSHA, 145 F.3d 120, 124 (3d Cir. 1998)
(denying petition to compel agency action where agency had been “far from idle” in
addressing the action allegedly delayed). Arguably, this was full compliance with the
2008 Farm Bill. That Congress attached appropriations riders for the next four years
precluding USDA from finalizing its proposed regulation on the fourth subject is
powerful if not conclusive evidence that USDA’s failure to complete a controversial
part of the task was not “agency action unlawfully withheld or unreasonably
delayed.” See Irshad, 754 F.3d at 607-08 (denying a writ of mandamus to compel an
agency to make a hasty decision “based upon a high-level analysis of complex,
sensitive factors”).
This is not a case where an agency has failed to take action in the face of
multiple unambiguous commands. USDA postponed the interim final rule, solicited
additional public comment, and then took the alternative final action urged in a
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substantial majority of the comments, giving rational reasons for its decision to
withdraw a proposed regulatory change and to adhere to its longstanding practice.6
We are wary of becoming the ultimate monitor of Congressionally set
deadlines, as “courts are not charged with general guardianship against all potential
mischief in the complicated tasks of government.” FCC v. Pottsville Broad. Co., 309
U.S. 134, 146 (1940). Congress gave USDA an ambiguous directive in the 2008
Farm Bill. USDA made extensive efforts to comply, promulgating three final
regulations and a proposed regulation on the fourth controversial subject it declined
to finalize. Congress has demonstrated on-going interest in the issue, can determine
that its directive has been unreasonably delayed, and take appropriate action. “[I]t
must be remembered that legislatures are ultimate guardians of the liberties and
welfare of the people in quite as great a degree as the courts.” Missouri, Kansas, &
Texas Ry. Co. v. May, 194 U.S. 267, 270 (1904).
For these reasons, we deny the petition for review in its entirety.
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6
USDA has given assurance that it intends to issue regulations on the deferred
issues in the near future, a fact that counsels against determining that the delay
warrants a writ of mandamus at this time. Compare TRAC, 750 F.2d at 80, and
Wellesley, Concord, & Norwood, Mass. v. FERC, 829 F.2d 275, 277 (1st Cir. 1987),
with Pub. Citizen Health Research Grp. v. Chao, 314 F.3d 143, 151 (3d Cir. 2002),
and In re Bluewater Network, 234 F.3d 1305, 1316 (D.C. Cir. 2000).
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