Seventy One Farm v. US Dept Agriculture

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT March 26, 2003
Charles R. Fulbruge III
Clerk
02-30961
Summary Calendar
SEVENTY ONE FARM JOINT VENTURE; WOOD LAKE INC; SLOW BAYOU INC;
SANDY BAYOU, INC; SPRINGS INC; PORT BARRE INC; LAVEAU INC.
Plaintiffs-Appellants,
VERSUS
UNITED STATES DEPARTMENT OF AGRICULTURE,
Defendant-Appellee.
Appeal from the United States District Court
for the Western District of Louisiana
(01-CV-1990)
Before DAVIS, DUHÉ, and DeMOSS, Circuit Judges.
DUHÉ, Circuit Judge:1
Plaintiffs-Appellants Seventy-One Farm Joint Venture (“the
JV”) and its six joint venturer participants filed suit claiming
that, contrary to a final agency determination, each of the six
joint venturers was eligible to receive 1997 program payments
authorized by the Agricultural Market Transaction Act (AMTA), 7
U.S.C. § 7201, et seq. Defendant Anne M. Veneman, Secretary of the
1
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
United States Department of Agriculture (“USDA”), is ultimately
responsible for AMTA payment determinations.2 The case was
submitted on a stipulated transcript of agency proceedings and
cross-motions for summary judgment. The district court ruled
against Plaintiffs, concluding that substantial evidence supported
the Secretary’s decision that Plaintiffs were entitled to only one
AMTA payment in 1997, not six. After de novo review, we affirm.
I.
AMTA payments are limited to $40,000.00 per “person.” 7
U.S.C. §§ 7215, 1308. Under the payment limitation and payment
eligibility regulations, a joint venture is deemed to be a “joint
operation,” which cannot be a “person” eligible for payments.
Each of its members or participants, however, can be a “person.”
See generally 7 C.F.R. §§ 1400.3(b) (definition of “person,”
¶ (1)(i)&(ii)), 1497.102.
Within the regulatory definition of “person” are certain
“separate and distinct” requirements. A joint venture may satisfy
the “separate and distinct” requirements for each of its
participants or members. See 7 C.F.R. § 1400.3 (definition of
“person,” ¶(3)) (“With respect to an . . . entity that is a member
of a joint operation, such . . . entity will have met the
requirements of paragraph (2) [listed below] if the joint operation
2
The USDA is required to offer production flexibility contracts
to eligible farmers, to make annual payments in return for the
farmers’ agreeing to certain conservation and planting flexibility
provisions. See 7 U.S.C. § 7211 (1996).
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meets the requirements . . . .”). To do so, a joint venture must
establish that it:
(1) Has a separate and distinct interest in the land or crop
involved;
(2) Exercises separate responsibility for such interest; and
(3) Maintains funds or accounts separate from that of any
other individual or entity for such interest.
7 C.F.R. § 1400.3 (definition of “person,” ¶(2)).
Specifically under scrutiny today is whether the JV’s
transactions and financial relationship with another entity,
Seventy-One Farms, LLC (“the LLC”), the owner of the land farmed by
the Plaintiffs, disqualified the JV from meeting the “separate and
distinct” requirements.
II.
The JV leases farm land in St. Landry Parish from the LLC for
cash rent. Don Williams (“Williams”) manages the JV off premises
and Terrell Savage is the farm manager on site. The six joint
venturers, each a Louisiana corporation, are owned in varying
amounts by Williams, Savage, and Williams’s two adult daughters.
Williams also manages the LLC. The LLC is owned by two trusts, one
for each of Williams’s two daughters. Williams also resides in a
house owned by the same two trusts.
The Agency determined that the members of the JV and the LLC
“were combined as [one] person for 1997 payment limitation
purposes,” because 1) the LLC secured one of its loans with the
JV’s crop, and 2) the JV and LLC jointly borrowed funds using
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property owned by the LLC’s two owners (the trusts) as security.3
We review the district court’s summary judgment decision de
novo, Shell Offshore, Inc. v. Babbitt, 238 F.3d 622, 627 (5th Cir.
2001), and the final agency decision deferentially. Sierra Club v.
U. S. Fish & Wildlife Service, 245 F.3d 434, 444 (5th Cir. 2001).
The general standard under the Administrative Procedures Act, 5
U.S.C. §§ 701, et seq., is whether the agency’s final decision was
arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law. 5 U.S.C. § 706(2)(A); Sierra Club, 245
F.3d at 444.
We review an agency finding to determine whether it is
supported by substantial evidence. 5 U.S.C. § 706(2)(E);
Refrigerated Transport Co., Inc. v. I.C.C., 663 F.2d 528, 530 (5th
Cir. 1981). An agency must articulate a rational relationship
between the facts found and the choice made. Sierra Club, 245 F.3d
at 444; Refrigerated Transport, 663 F.2d at 531.
III.
The Agency decision was based in part on findings that the JV
commingled loans and collateral with the LLC and Williams. The
record contains substantial evidence to uphold an agency finding
3
Plaintiffs also argue that the combination of the JV and LLC
as one person was in contravention of the combination rules since
the LLC does not own any part of the JV. This argument misses the
mark. While the combination regulation, 7 C.F.R. § 1400.101, is
dependent on percentage ownership, the “person” requirements set
forth in § 1400.3, require the entity to maintain funds or accounts
separate from “any other individual or entity,” without regard to
percentages of ownership.
4
that the assets and obligations of the JV were shared, by its
taking out joint loans with the LLC and by the joint use of its
property as collateral.4
The agency concluded from these findings that the JV failed to
exercise “separate and distinct” responsibilities for the crops.
Whether we would hold that the transactions at issue would
disqualify an entity from satisfying the “separate and distinct”
element in the regulations is not the standard we employ today.
Enron Oil & Gas Co. v. Lujan, 978 F.2d 212, 215 (5th Cir. 1992)
(agency’s interpretation need not be the sole interpretation or one
that a reviewing court would reach), cert. denied, 510 U.S. 813,
114 S. Ct. 59, 126 L.Ed.2d 29 (1993). We decide only whether the
agency’s interpretation was plainly erroneous or inconsistent with
its own regulations; otherwise, the agency’s construction of its
own regulations is controlling. Silwany-Rodriguez v. INS, 975 F.2d
1157, 1160 (5th Cir. 1992); United Steel Workers v. Schuylkill
Metals Corp., 828 F.2d 314, 319 (5th Cir. 1987). We review to
determine whether the agency considered the relevant factors or
4
The JV obtained financing for its 1997 crop from two loans
secured by the 1997 crops, with a collateral mortgage note made by
the LLC and collateral mortgage on land owned by the LLC and as
additional security for one of the two loans. The same collateral
was used to secure loans to the LLC during 1997.
In addition, the JV and LLC took two loans jointly in 1997: one
secured by the JV’s crops, with proceeds payable to the LLC; the
other secured by the residence and lot owned by the two trusts, the
proceeds of which were payable to both the JV and the LLC. The
record also provides testimony that in the farming business the
land owner and tenant do not usually jointly borrow money and use
the crop of the tenant as collateral for such a loan.
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made a clear error in judgment in reaching its decision. State of
Louisiana v. Verity, 853 F.2d 322, 327 (5th Cir. 1988).
Under this deferential standard we easily conclude that the
Agency did not clearly err in determining that the JV, by
participating in the transactions noted, did not retain a “separate
and distinct” interest in its crops. Accordingly, we uphold the
Agency determination that the JV failed to meet the payment
eligibility requirements for each of its six members in 1997.
CONCLUSION
Because the Agency decision is supported by substantial
evidence and does not represent a clear error of judgment, the
district court opinion upholding that determination is
AFFIRMED.
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