Den Hoed v. United States Secretary of Agriculture

Slip Op. 08-7
UNITED STATES COURT OF INTERNATIONAL TRADE
BEFORE: SENIOR JUDGE NICHOLAS TSOUCALAS
________________________________________
:
RUTH DEN HOED, :
:
Plaintiff, :
:
v. : Court No.: 06-00446
:
UNITED STATES SECRETARY OF AGRICULTURE, :
:
Defendant. :
________________________________________:
[Plaintiff’s motion to supplement the record is denied.
Defendant’s motion to dismiss is granted. The case is dismissed.]
Skadden, Arps, Slate, Meagher & Flom LLP (Jeffrey D. Gerrish; Neena
G. Shenai) for Ruth Den Hoed, plaintiff.
Jeffrey S. Bucholtz, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice (Devin A. Wolak); of counsel: Jeffrey Kahn,
Office of the General Counsel, United States Department of
Agriculture, for the United States Secretary of Agriculture,
defendant.
January 16, 2008
OPINION
TSOUCALAS, Senior Judge: Defendant United States Secretary of
Agriculture (“Defendant” or “Secretary” ) moves pursuant to USCIT
R. 12(b)(5) to dismiss this action for failure to state a claim
upon which relief may be granted. Plaintiff Ruth Den Hoed
(“Plaintiff”) opposes the motion and moves pursuant to USCIT R. 7
to supplement the administrative record. Plaintiff contends that
Court No. 06-00446 Page 2
the record is inadequate and argues that Defendant’s denial of
trade adjustment assistance (“TAA”) benefits to Plaintiff is not
supported by substantial evidence. Plaintiff also seeks a
protective order with respect to the information with which she
seeks to supplement the administrative record. The Secretary
opposes Plaintiff’s motion to supplement the administrative record
on the ground that the administrative record is complete and
sufficient.
JURISDICTION
The Court has jurisdiction over this matter pursuant to 19
U.S.C. § 2395.
STANDARD OF REVIEW
A court should not dismiss a complaint for failure to state a
claim upon which relief may be granted “unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of
his claim which would entitle him to relief.” Conley v. Gibson,
355 U.S. 41, 45-46 (1957); see also Halperin Shipping Co., Inc. v.
United States, 13 CIT 465, 466 (1989). Moreover, the Court must
accept all well-pleaded facts as true and view them in the light
most favorable to the non-moving party. See United States v.
Islip, 22 CIT 852, 854, 18 F. Supp. 2d 1047, 1051 (1998) (citing
Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir.
1991)). A pleading that sets forth a claim for relief must contain
Court No. 06-00446 Page 3
“a short and plain statement” of the grounds upon which
jurisdiction depends and “of the claim showing that the pleader is
entitled to relief.” USCIT R. 8(a). “To determine the sufficiency
of a claim, consideration is limited to the facts stated on the
face of the complaint, documents appended to the complaint, and
documents incorporated in the complaint by reference.” Fabrene,
Inc. v. United States, 17 CIT 911, 913 (1993). Accordingly, the
Court must decide whether plaintiff is entitled to offer evidence
in support of its claim, and not whether plaintiff will prevail in
its claim. See Halperin, 13 CIT at 466.
BACKGROUND
On June 9, 2006, Plaintiff filed her application for TAA
benefits for crop year 2004. See Confidential Administrative
Record (“Admin. R.”) at 1. Plaintiff’s application reflected that
her husband reported a net farm loss of $291.00 in 2003, see id. at
2, and a net farm loss of $140.00 in 2004, see id. at 3.
In November 2006, the Secretary denied Plaintiff’s application
on the ground that Plaintiff “did not provide acceptable
documentation of net farm or fishing income . . . to show that
[her] net income declined from that reported during the petition’s
pre-adjustment tax year.” Id. at 38-40. Thereafter, Plaintiff
timely sought review of Secretary’s decision by filing a letter
complaint.
Court No. 06-00446 Page 4
On March 2, 2007, Defendant filed its motion to dismiss the
action for failure to state a claim for which a relief may be
granted. On October 26, 2007, Plaintiff filed (1) an opposition to
Defendant’s motion to dismiss, (2) a motion to supplement the
administrative record, and (3) a motion for a protective order with
respect to documents designated as confidential or business
confidential. On November 16, 2007, Defendant filed its responses
to Plaintiff’s motion to supplement the administrative record and
to Plaintiff’s motion for a protective order. On November 20,
2007, Defendant filed a reply brief in support of its motion to
dismiss.
DISCUSSION
I. Plaintiff Failed To State A Claim For Which A Relief May Be
Granted
To receive TAA benefits, 19 U.S.C. § 2401e(a)(1)(C) requires
that “[t]he producer’s net farm income (as determined by the
Secretary) for the most recent year is less than the producer’s net
farm income for the latest year in which no adjustment assistance
was received by the producer under this part.” Pursuant to 7
C.F.R. § 1580.301(e)(6), the producer must
“provide either – (i) [s]upporting documentation from a
certified public accountant or attorney, or (ii)
[r]elevant documentation and other supporting financial
data, such as financial statements, balance sheets, and
reports prepared for or provided to the Internal Revenue
Service or another U.S. Government agency.”
In its motion to dismiss, the Secretary argues that Plaintiff
Court No. 06-00446 Page 5
failed to plead an essential element of her claim because the
complaint fails to state that her farm income decreased between
2003 and 2004. See Def.’s Mem. Supp. Mot. Dismiss (“Def.’s Mem.”)
at 5-7. Citing Wooten v. United States (“Wooten II”), 30 CIT __,
441 F. Supp. 2d 1253 (2006), the Secretary contends that an
applicant who is unable to demonstrate a decrease in her income
based on the administrative record has failed to state a claim for
which a relief may be granted. See Def.’s Mem. at 7. The
Secretary notes that Plaintiff’s income actually increased between
2003 and 2004 based on the IRS Schedule F forms, and therefore
argues that the complaint must be dismissed. See id. at 6.
Plaintiff does not claim that she successfully plead the
required elements to establish her entitlement to TAA benefits, but
instead argues that Defendant’s motion should be denied because the
Secretary acted improperly in denying Plaintiff’s TAA benefits.
See Mem. Opp’n Def.’s Mot. Dimiss (“Pl.’s Opp’n”) at 5-6.
Plaintiff states that the Secretary failed to conduct an
investigation of her application that met the threshold of
reasonableness, and as a result, failed to find that Plaintiff’s
net income declined from 2003 to 2004. See id. at 6-11. In
addition, Plaintiff complains that the Secretary may not rely
solely on tax returns to determine net income. See id. at 8.
The Court agrees with Defendant and finds Wooten II
controlling. In Wooten II, the court found that an applicant who
Court No. 06-00446 Page 6
reported a net loss of $86,470 in 2002 and a net loss of $125,671
in 2001 had an actual increase in income of $39,201 during the two
years although he reported losses in both years. See 30 CIT at
__, 441 F. Supp. 2d at 1256. Finding that the applicant had failed
to demonstrate a decrease in his income based on the administrative
record, the court in Wooten II dismissed the case for failure to
state a claim upon which relief may be granted. See 30 CIT at __,
441 F. Supp. 2d at 1259.
Accepting all well-pleaded facts as true and viewed in the
light most favorable to the plaintiff, the Court finds that
Plaintiff has failed to state a claim for which a relief may be
granted. See Conley v. Gibson, 355 U.S. at 45-46. Nowhere in the
letter complaint does the Plaintiff allege that her net income
decreased between 2003 and 2004, an essential element of her claim.
Indeed, like the plaintiff in Wooten II, the letter complaint
states that Plaintiff should receive TAA benefits if she reported
losses in both 2003 and 2004. See letter complaint dated December
7, 2006. Moreover, the administrative record contains only one
form of documentation demonstrating Plaintiff’s net income, and
that document indicates that Plaintiff reported an actual increase
in income during the relevant period. Thus, the Court finds that
Plaintiff has failed to allege facts sufficient to demonstrate that
she is entitled to receive TAA benefits. Because Plaintiff has not
stated a claim upon which relief may be granted, this case must be
Court No. 06-00446 Page 7
dismissed, unless Plaintiff establishes that she is entitled to
supplement the administrative record.
II. Plaintiff Is Not Entitled To Supplement The Administrative
Record
The Court must sustain the Secretary’s decision as long as it
is “reasonable and supported by the record as a whole.” Lady Kim
T. Inc. v. United States Sec'y of Agric. (“Lady Kim I”), 30 CIT __,
__, 469 F. Supp. 2d 1262, 1266 (2006) (quoting Universal Camera
Corp. v. National Labor Relations Board, 340 U.S. 474, 488 (1951)).
The Secretary, in examining the documents submitted in connection
with individual applications for TAA benefits, must meet “a
threshold requirement of reasonable inquiry.” See, e.g., Van Trinh
v. United States Sec'y of Agric., 29 CIT __, __, 395 F. Supp. 2d
1259, 1268 (2005) (“While the Department has considerable
discretion in conducting its investigation of TAA claims, there
exists a threshold requirement of reasonable inquiry.”)(citation,
internal quotation marks and alterations omitted); see also
Anderson v. United States Sec'y of Agric., 30 CIT __, __, 429 F.
Supp. 2d 1352, 1355 (2006) (“The Department of Agriculture's
discretion in conducting its investigations of TAA claims is
prefaced by the existence of a threshold requirement of reasonable
inquiry.”)(citation and internal quotation marks omitted). The
Court “cannot uphold a determination based upon manifest inaccuracy
or incompleteness of record when relevant to a determination of
Court No. 06-00446 Page 8
fact.” Anderson, 30 CIT at __, 429 F. Supp. 2d at 1355 (quoting
Former Employees of Pittsburgh Logistics Sys. Inc. v. United States
Sec'y of Labor, 27 CIT 339 (2003)); see also Wooten v. United
States Sec'y of Agric. (“Wooten I”), 30 CIT __, 414 F. Supp. 2d
1313 (2006). “If the court determines that Defendant did not meet
the threshold requirement of a reasonable inquiry, it may, for good
cause shown, remand the case to Agriculture to take further
action.” Anderson, 30 CIT at __, 429 F. Supp. 2d at 1355 (citing
19 U.S.C. § 2395(b)). Good cause exists if the Secretary’s finding
is arbitrary or not based on substantial evidence. See id. (citing
Former Employees of Galey & Lord Indus. v. Chao, 26 CIT 806, 809,
219 F. Supp. 2d 1283, 1286 (2002)).
Plaintiff argues that the Secretary failed to conduct a
reasonable inquiry of her application for TAA benefits as required
by law. See Pl.’s Mot. Supplement R. (“Pl.’s Mot.”) at 1-3; Pl.’s
Opp’n at 6-11. As a result, Plaintiff contends that Defendant’s
denial of her application for TAA benefits was based on an
inadequate record, and thus, unsupported by substantial evidence.
See Pl.’s Mot. at 1-2; Pl.’s Opp’n at 11. In addition, Plaintiff
claims that it was improper for the Secretary to rely upon her tax
returns as the sole basis for determining net income. See Pl.’s
Mot. at 2; Pl.’s Opp’n at 10. Plaintiff therefore seeks to
supplement the records with “evidence that should have been and
would have been record evidence had the Secretary conducted a
Court No. 06-00446 Page 9
‘reasonable inquiry’ of Plaintiff’s TAA claim.” Pl.’s Mot. at 3.
The Secretary responds that the administrative record was
complete and sufficient to make an informed decision upon
Plaintiff’s application. See Def.’s Resp. Pl.’s Mot. Supplement R.
(“Def.’s Resp.”) at 1. According to the Secretary, Plaintiff
completed and submitted all the necessary forms and supporting
documents required under the statute and regulations including
documents evidencing her net farm income. See id. at 5-6. In
addition, the Secretary notes that Plaintiff did not submit any
documents concerning her net farm income (other than her husband’s
tax returns) or make any attempt to supplement her application with
additional documents. See id. at 7. Since the documents with
which Plaintiff attempts to supplement the record were not timely
submitted and Plaintiff offers no excuse for such failure, the
Secretary contends that Plaintiff improperly seeks to introduce
extra-record evidence. See id. at 10-11.
The Court finds that Defendant here did not fail to meet the
threshold of reasonable inquiry in examining Plaintiff’s
application. The Secretary did not ask for additional information
from Plaintiff because nothing in the application as reviewed by
the Secretary indicated any deficiency. Plaintiff does not dispute
that her application, which included all necessary forms and
supporting documents, appeared to be complete. Since the Secretary
could not have known that Plaintiff possessed other documents
Court No. 06-00446 Page 10
relevant to determination of her net income, the Secretary could
not be expected to request them or to notify Plaintiff of any
deficiency. Indeed, the Secretary is entitled to “rely only on the
information submitted to it by the producer.” See Lady Kim T. Inc.
v. United States Sec'y of Agric. (“Lady Kim II”), 31 CIT __, 491 F.
Supp. 2d 1366, 1371 n. 6 (2007).
The cases relied upon by Plaintiff are factually
distinguishable because they each involve a situation where the
agency knew or should have known that the application at hand was
deficient in some fashion. In such instances, the Court has found
that the Secretary failed to meet the threshold requirement of
reasonable inquiry by failing to notify the applicant of the
deficiencies. See, e.g., Wooten I, 30 CIT at __, 414 F. Supp. 2d
at 1316 (holding that the Secretary should have made a reasonable
inquiry about the obviously missing tax returns); Van Trinh, 29 CIT
at __, 395 F. Supp. 2d at 1269 (finding that significant
discrepancies and conflicting information in the applicant’s file
should have at least suggested to the Secretary that documentation
was missing or lost from the record).
Here, Plaintiff proffers no evidence whatsoever that the
Secretary knew or should have been aware of the fact that Plaintiff
possessed additional information regarding her net farm income.
Nothing was obviously missing from Plaintiff’s application.
Plaintiff does not allege that her application contained
Court No. 06-00446 Page 11
discrepancies or conflicting information that should have indicated
to the Secretary a need to notify the applicant of any missing
information regarding her net farm income.
In addition, the Court finds no merit to Plaintiff’s argument
that the Secretary acted improperly by relying only on tax return
information in determining net income when the applicant chose to
evidence it by submitting nothing more than her husband’s tax
returns. Plaintiff chose to do so even though applicants are
permitted to submit various forms of documents to demonstrate their
net income. See 7 C.F.R. § 1580.301(e)(6). Although Steen v.
United States, 468 F.3d 1357 (Fed. Cir. 2006), requires the
Secretary to consider all materials submitted by applicants
evidencing net income, in addition to any tax forms, it cannot be
read to bar the Secretary from relying solely on tax forms if no
other information is available.
Accordingly, the Court finds that Defendant met the threshold
requirement of reasonable inquiry, and the Secretary’s denial of
Plaintiff’s application was not arbitrary and was supported by
substantial evidence. Plaintiff is therefore not entitled to
supplement the administrative record. Plaintiff’s motion is
denied.1
1
Plaintiff’s motion for a protective order is denied as
moot in light of the Court’s ruling on Plaintiff’s motion to
supplement the administrative record.
Court No. 06-00446 Page 12
CONCLUSION
For the reasons stated above, Plaintiff’s motion to supplement
the record is denied, Plaintiff’s motion for a protective order is
denied as moot, and Defendant’s motion to dismiss is granted. Case
is dismissed.
/s/ Nicholas Tsoucalas
NICHOLAS TSOUCALAS
SENIOR JUDGE
Dated: January 16, 2008
New York, New York