KANE, Senior District Judge.
This extensive review of an administrative agency case decided on appeal by a district court delineates the standards to which the district court must conform. When acting as a court of appeal, it is improper for a district court to use methods and procedures designed for trial. Moreover, the District Court here permitted the use of a so-called "motion to affirm" as well as a motion for summary judgment in contravention of the established law of this circuit.
Because our standard of review is de novo and because we have been required to scrutinize the 1600 page administrative record, we decide as well the merits of the appeal rather than remand. We reverse the District Court's affirmance of the agency's decision.
A certified class of Kansas farmers ("Farmers") appeal from the order of the United States District Court for the District of Kansas affirming temporary yield and deficiency payment reductions imposed by the Agriculture Stabilization and Conservation Service (ASCS) under a federal price support program for wheat. Program participants are entitled to deficiency payments when the actual market price for wheat falls below the target price set by the Secretary of Agriculture. Payments may be reduced to reflect a decrease in a farm's expected production, but only if that decrease is the result of causes other than a natural disaster or other condition beyond the producer's control.
Due to disastrous rains that destroyed fall plantings and flooded fields, Appellant-Farmers planted their 1987 program wheat after the fall 1986 planting season. The ASCS deemed the late planting a "changed practice" under program regulations, and reduced the yield per acre for which deficiency payments would be made.
The Farmers claim the ASCS's action was arbitrary and capricious in that it was the product of an inadequate administrative appeals process and not supported by substantial evidence in the administrative record. They argue the ASCS misapplied the rules and regulations governing wheat program payments by failing to consider fall rains and failing to determine whether late planting was the result of conditions beyond the
Despite our thorough review of the administrative record, we find it difficult to ascertain exactly what the agency did or did not do in this case.
The Farmers appealed this initial decision to the state ASCS committee and then the Deputy Administrator, State and County Operations (DASCO). They asserted the late planting was due to conditions beyond their control and done in reliance on information they received from ASCS officials indicating late planting would not result in reductions. Throughout the appeal process, the Farmers sought information regarding the basis for the reductions imposed and the way they were calculated.
Without making any findings of fact or articulating a reasoned basis for its decision, DASCO found "no justification" for relief. DASCO summarily concluded the Farmers were not misinformed and found a determination that late planting was not due to conditions beyond the Farmers' control implicit in the ASCS's action because "the county and state [ASCS] committees are familiar with ... weather conditions for [the Farmers'] area." Aplts.' App. at 49-50.
DASCO's extrapolation escaped the scrutiny of the District Court. Instead of reviewing the administrative record itself, the District Court relied on counsel's statements as to what was in the record and material appended to the government's "Motion to Affirm." The District Court selected isolated bits of this second hand "evidence" and concluded the agency's action was supported by the administrative record. Relying on this extrapolation, the District Court interpreted the wheat program regulations to authorize yield reductions notwithstanding the occurrence of a natural disaster, attributing this interpretation to the agency, and affirming the interpretation as the agency's own. See Olenhouse v. Commodity Credit Corp., 807 F.Supp. 688, 692-93 (D.Kan.1992).
While it found the Farmers' arguments regarding misinformation "persuasive" and opined they "may have a stronger basis for their contentions than defendants do," the District Court construed its review powers narrowly and concluded the agency's findings were "plausible" and therefore not "arbitrary and capricious." Id. at 690, 693. In doing so, the District Court employed neither the procedure nor the standard of review required when agency action is challenged on appeal to a district court in this circuit.
Where questions of due process and sufficiency of the evidence are raised on appeal from an agency's final decision, the district court must review the agency's decision-making process and conduct a plenary review of the facts underlying the challenged action. It must find and identify substantial evidence to support the agency's action and may affirm agency action, if at all, only on the grounds articulated by the agency itself. This cannot be done in the context of a motion to affirm, which allows the agency to
I. Background
A. Statutory and Regulatory Scheme
1. Overview
Neither the parties in their briefs, nor the District Court in its opinions below,
The Commodity Credit Corporation Charter Act, enacted in 1948 and codified at 15 U.S.C. § 714 (1988), authorizes the Commodity Credit Corporation (CCC) to support farm prices as determined by the Secretary of the United States Department of Agriculture (USDA). Specific price support programs were enumerated by Congress in the Agricultural Act of 1949, 7 U.S.C. § 1421 et seq., which authorizes the Secretary of the Department of Agriculture to deliver price supports under those programs through the CCC. See 7 U.S.C. § 1421(a) (1988).
The general administration and supervision of price support programs in the field has been delegated by the Secretary to the ASCS. 7 C.F.R. §§ 713.2, 1421.2 (1987)
The ASCS administers price support programs through a network of committees. These committees, and the conduct of the ASCS under all USDA programs, are governed not only by the Agricultural Act of 1949, the CCC Charter Act, and their respective regulatory schemes, but also by the Soil Conservation and Domestic Allotment Act of 1935. 16 U.S.C. § 590h(b) (1988 & Supp. 1994) (incorporated by reference and made part of the Agricultural Adjustment Act of 1938 and later amended by the Food Security Act of 1985, Pub.L. 99-198, §§ 1711, 1712 (1985)); see Garvey v. Freeman, 397 F.2d 600, 604 n. 2 (10th Cir.1968).
Three levels of authority exist under the ASCS committee structure. See generally, 16 U.S.C. § 590h(b) (fifth undesignated paragraph) (as amended) (function and election requirements); 7 C.F.R. §§ 7.1 (selection and functions, generally), 713.2 (grain programs, administration), 1421.2 (grain programs, CCC financing). At the local and state levels, USDA programs are administered by local, county and state ASCS committees. 16 U.S.C. § 590h(b). Local committee members are elected by and from farmers within an administrative area who participate or cooperate in price support programs administered in the area. Id. Members
The ASCS committee system established by the Soil Conservation Act contemplates that local and county ASCS committees serve as liaisons between the Secretary and individual producers. 16 U.S.C. § 590h(b). The Act specifically requires the Secretary to ensure information concerning changes in federal laws and agricultural programs is communicated in a timely manner to local committees in areas that contain agricultural producers who might be affected by such changes. Id.
2. The Wheat Program
Each member of the appellant class of Farmers participated in the 1987 Price Support and Adjustment Program for wheat (the "Wheat Program"). The Wheat Program is authorized by Section 107D(c) of the Agriculture Act of 1949, 7 U.S.C. § 1445b-3 (1988) (as amended by the Food Security Act of 1985, codified in applicable part at 7 U.S.C. § 1308 (1988) and the Farm Disaster Assistance Act of 1987, codified at 7 U.S.C. § 1445b-3(c)(2)(A)). The Wheat Program balances the goals of farm acreage reduction and price support for farmers.
In advance of the planting season, the Secretary announces a level of price support (a "target" price) for wheat. 7 U.S.C. § 1426(a); 7 C.F.R. § 713.108(a). Farmers plant their wheat, and apply for entry into the program. Once their application is approved and the contract with the CCC signed, participating farmers are guaranteed the target price for their crop; if the ultimate market price falls below that price, farmers are entitled to "deficiency payments" to make up the difference. See 7 U.S.C. § 1445b-3(c); 7 C.F.R. § 713.108(a), (c). Because a farm's established yield
Participants' entitlement to payment under the program is not without qualification, however. Participation is contingent upon signing a contract with the CCC. 7 C.F.R. §§ 1421.5 (contract precondition of eligibility under CCC price support programs for grain), 713.50 (contracting procedures under Wheat Program). The contract requires farmers to follow established farming practices and plant their crops in a workmanlike manner. Except as provided in parts 790 and 791 of the Code,
It is the manner in which the ASCS determined Appellant-Farmers had failed to comply with program regulations and its imposition of reduced benefits under 7 C.F.R. § 713.6 that forms the basis of this appeal.
3. The role of the county committee
Due to the number of farmers nationwide and the diversity of their operations, the Secretary places "enormous reliance" on the decisions of 3,000 local and county committees, which represent the agency at the "root line" of the nation's 2,000,000 farmers. See Esch v. Lyng, 665 F.Supp. 6, 21 (D.D.C.1987) (quoting testimony of DASCO chief Thomas VonGarlem), aff'd sub nom Esch v. Yeutter, 876 F.2d 976 (D.C.Cir.1989). With respect to the Wheat Program, it is the county committee that determines participants' "farm program acreage" and "program payment yields,"
This is no small task. The process is highly regulated and requires the county committee to apply a panoply of regulations and internal interpretive rules,
County committees are guided in their application of program regulations by an ASCS Handbook distributed by the Secretary to individual state committees, which then make the Handbook available to local county committees. ASCS Handbook 5-PA (Rev. 7) (the "Handbook"). The Handbook is an internal reference for use by the state and county committees; it is not distributed to program participants generally. See Jones v. Espy, 1993 WL 102641 (D.D.C.1993) (not reported in F.Supp.) (discussing ASCS Handbook 5-CM, price support program financing). Where instructions in the Handbook conflict with regulations, the regulations control. Id. (citing 7 C.F.R. § 713.2(b), (c)).
Based on our review of the Handbook sections provided us on appeal,
The effect these changes had on the agency's decision to impose the yield and deficiency payment reductions at issue is unclear. What is clear, however, is at the time the Farmers were faced with the decision of whether to plant or not plant 1987 program wheat, internal ASCS policy regarding the effect of fall flooding was unsettled.
B. Facts16
The Farmers reside in rural areas of Wilson County, Kansas. In September 1986, intending to participate in the 1987 Wheat Program, class representatives Don Olenhouse and Alan Sharp planted hard winter wheat on farms they operate. Admin.R. at 585-86 (Olenhouse testimony before state ASCS committee), 650 (Sharp testimony before state ASCS committee). In September and October 1986 Wilson County received over 20 inches of rain and was declared a disaster area. Aplts.' Br. at 5; see Admin.R. at 586. The wheat planted by Olenhouse and Sharp was destroyed. Admin.R. at 586, 650.
Olenhouse was able in late November to replant some of the fields washed away by the rains; he completed his replanting in all but a few "mudholes" by January 1, 1987. Id. at 586-98. Certain of Sharp's fields were dry enough to replant in December, 1986. Id. at 650. Most, however, were not. Id. By late December and early January, there was considerable confusion regarding the effect delayed planting might have on payments under the 1987 Wheat Program. The Farmers were aware winter wheat is generally planted in the fall, but the rains made this an impossibility.
Concerned local farmers might "go broke" if they were unable to plant their program wheat, members of the county committee called a special meeting with state officials in Topeka. See, e.g., Admin.R. at 621-22 (testimony of county committee member and Appellant-Farmer Bob Olson). Olson understood the result of that January 13, 1987 meeting to be approval for late planting, as long as program wheat was planted in a workmanlike manner. Id. at 622.
Relying on the county committee and information received at the Topeka meeting, the Farmers planted their wheat. See, e.g., Admin.R. at 735, 743, 777 (Farmer letters). They bought seed and fertilizer, kept 27.5% of their otherwise arable acreage fallow as required under the program, and complied with the rest of the program rules and regulations. Id.; see id. at 597-98 (Olenhouse testimony). In March and April, the Farmers' applications to participate in the Wheat Program were approved by the ASCS Executive Director for Wilson County. Admin.R. at 1474, 1483-90, 1500-40, 1544-59, 1565-66, 1569-78 (CCC Contracts for Participation in Price Support Program, Form 447).
Wheat is not considered a profitable crop without deficiency payments. See Admin.R. at 595 (Olenhouse testimony). Olenhouse testified he would never have incurred the expense of planting wheat and keeping acreage idle that otherwise could have been planted to more profitable crops such as soybeans, had he been told deficiency payments would be reduced. Id. at 595-97.
While county officials were approving the Farmers' applications to participate in the Wheat Program and authorizing full benefits under it, federal and state officials were reviewing and revising ASCS internal policy regarding the imposition of temporary yield reductions for late planting. On January 9, 1987, DASCO distributed Notice PA-1112, which purportedly notified state and county
On May 27, 1987, after the Farmers had planted their wheat, Congress enacted the Farm Disaster Assistance Act of 1987, Public Law 100-45, codified at 7 U.S.C. § 1445b-3(c)(2)(A)(i). This statute permitted Wheat Program participants who did not attempt to replant wheat destroyed in the fall to obtain 33 1/3 % of their full deficiency payments. The Farmers could not benefit from this Act. Instead, they continued to comply with program regulations and harvested what wheat they could. Of the wheat planted in Wilson County during the 1986-87 season, only that planted in January was harvested. Admin.R. at 591 (Olenhouse testimony).
At some time before December 1987, the Wilson County Committee was disbanded. The State Committee directed Lloyd Johnston to impose temporary reductions on the Farmers' 1987 wheat yields pursuant to a policy implemented by the State Committee "because the Wilson COC failed to establish a reasonable policy as required by 5-PA (Rev. 7), paragraph 414." Admin.R. at 39 (letter from State Executive Director Frank Mosier to Southwest Region Director transmitting the Farmers' case files); see id. at 491-92 (Mosier statements at state committee hearing). Johnston announced the reduction in form letters dated December 30, 1987, which he signed as Acting County Executive Director. Admin.R. at 783-945.
The form letters advised the Farmers reductions were being imposed because agency "records indicate (some or all) of the wheat planted on the farm was seeded in (January, February, or March)." See, e.g., Admin.R. at 888 (Olenhouse letter). Johnston stated the revised yields "represent[] the production which [sic] normally could be expected for wheat planted during this period if it was [sic] actually carried to harvest." Id. The reductions imposed were as follows: Winter wheat planted in January and February reduced 20% and 35% respectively; winter wheat planted in March reduced 100%; spring wheat planted in March reduced 30%; and spring wheat planted after March reduced
C. Appeals Process
The Farmers appealed the yield reductions to the state ASCS committee. After a series of informal hearings conducted in February 1988, the state committee generally denied the Farmers' requests for relief. Admin.R. at 1, 237-294 (letters denying Farmers' appeals).
The Farmers then sought review by DASCO. Certain of the Farmers, including Olenhouse and Sharp, participated in an informal telephone hearing before a hearing officer on May 18, 1988. See Admin.R. 5-37 (hearing transcript). DASCO rejected the Farmers' contentions and upheld the state committee's action in a two-page letter dated June 10, 1988. Aplts.' App. at 49-50. This letter constituted final agency action under program regulations.
After summarizing the Lloyd Johnston and state ASCS committee letters and the Farmers' contentions on appeal, DASCO concluded as follows:
Aplts.' App. at 50.
II. Appellate Jurisdiction— Notice of Appeal
We first address the sufficiency of the Notice of Appeal filed by the Farmers under Fed.R.App.P. 3(c). As interpreted by the United States Supreme Court, Rule 3(c) requires all parties taking an appeal be named individually in the notice so the appellee and the court can determine "with certitude" which parties would be bound by an adverse judgment or held liable for costs or sanctions. See Torres v. Oakland Scavenger Co., 487 U.S. 312, 318, 108 S.Ct. 2405, 2409, 101 L.Ed.2d 285 (1988). Formal identification is a "jurisdictional prerequisite," requiring dismissal of parties not specifically named in a notice of appeal. Id.
The issue arose in this case because the phrase "et al." was used to identify the plaintiff class of farmers in the caption of the original Notice of Appeal filed January 7, 1993, and singular "plaintiff's" was used in the body. In a show cause order dated January 29, 1993, the clerk's office advised counsel the Court was considering summary dismissal of the appeal for failure to comply with Rule 3(c), and requested briefing on the issue. Plaintiffs filed a first amended notice of appeal on February 2, 1993, naming Don Olenhouse, Alan Sharp, and John Rubow as plaintiffs "on behalf of themselves and all others similarly situated," (Aplts.' App. at 44-45), and filed a second amended notice of appeal on February 8, 1993, identifying the class as certified in the District Court below. Aplts.' App. at 46-47. We reserved judgment on the jurisdictional issue raised in the
The Farmers were certified as a class in the District Court with Don Olenhouse, Alan Sharp and John Rubow designated as class representatives. See Olenhouse v. Commodity Credit Corp., 136 F.R.D. 672 (D.Kan1991) (Aplts.' App. at 25-26). Where the phrase "et al." is used to identify members of a certified class, this Court has implicitly recognized an exception to the Torres rule. See Battle v. Anderson, 970 F.2d 716, 719 n. 4 (10th Cir.1992) (dicta) (citing Rendon v. AT & T Technologies, 883 F.2d 388 (5th Cir. 1989)).
In Rendon, plaintiffs' notice of appeal designated "Gilbert Rendon, et al." as appellants and defendant sought to dismiss the appeal. The Fifth Circuit rejected the defendant's Torres contention that the term "et al." provided insufficient notice of who was seeking the appeal because Rendon was a designated representative of a class that had been certified in the case from which the appeal was taken. 883 F.2d at 398 n. 8. Because Rendon's actions bound the entire class, the Fifth Circuit held the phrase "et al." sufficient to identify the entire class as appellants. Id.
While we discourage use of the phrase "et al." to identify any group of appellants,
III. Standard of Review
The Farmers seek review of final ASCS action under the Administrative Procedure Act, 5 U.S.C. § 706 (the "APA"). Specifically, they assert (1) the yield and deficiency payment reductions imposed are unsupported by the record; (2) the ASCS failed to comply with the laws, regulations and agency policy provisions governing the Wheat Program, including regulations governing the administrative appeals process; (3) the method for calculating the reductions imposed was arbitrary and capricious; and (4) by offsetting the Farmers' wheat deficiency payments before they had an opportunity to be heard, ASCS violated the Farmers' rights under the 5th Amendment of the United States Constitution.
A. Statutory Limitations on Review
Section 701 of the APA provides that agency action is subject to judicial review except where there is a statutory prohibition on review or where agency action is committed to agency discretion as a matter of law. 5 U.S.C. § 701(a)(1), (2), construed in Thomas Brooks Chartered v. Burnett, 920 F.2d 634, 641-42 (10th Cir.1990). The latter provision is not at issue here. There are, however, two statutory provisions applicable to the Wheat Program that purport to limit judicial review: 7 U.S.C. § 1385 and 7 U.S.C. § 1429.
Neither party addresses these statutes in their briefs, but we must consider them before reaching the merits of the Farmers' contentions on appeal.
Section 1385 provides:
Further, 7 U.S.C. § 1429 provides:
(Emphasis original).
The essence of the Farmers' claims is the ASCS action violated due process, substantively in the sense of being arbitrary or capricious, and procedurally in the sense of denying minimum safeguards. Neither statute precludes judicial consideration of such claims; rather, consistent with the judicial review provisions of the APA, each prevents the reviewing court from substituting its judgment on the facts for that of the agency. See Esch v. Lyng, 665 F.Supp. 6, 12 (D.D.C. 1987), aff'd sub nom. Esch v. Yeutter, 876 F.2d 976 (D.C.Cir.1989) (construing § 1385); Gonzalez v. Freeman, 334 F.2d 570, 575 (D.C.Cir.1964) (§ 1429). As we stated in Garvey:
397 F.2d at 605 (quoting Caulfield v. Dept. Agriculture, 293 F.2d 217, 228 (Wisdom, J. dissenting)); see Sabin v. Butz, 515 F.2d 1061, 1064-65 (10th Cir.1975).
We conclude neither 7 U.S.C. § 1385 nor § 1429 limits our review of the agency action at issue in the present appeal.
B. Overview of Judicial Review Under the APA
Having determined the ASCS's actions are subject to judicial review, we must determine the appropriate standard. The scope of judicial review of agency action under the APA is set forth in the United States Supreme Court's seminal opinion in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971).
Judicial review of both formal
We have held the essential function of judicial review is a determination of (1) whether the agency acted within the scope of its authority, (2) whether the agency complied with prescribed procedures, and (3) whether the action is otherwise arbitrary, capricious or an abuse of discretion. CF & I Steel Corp. v. Economic Dev. Admin., 624 F.2d 136, 139 (10th Cir.1980); American Petroleum Inst. v. EPA, 540 F.2d 1023, 1029 (10th Cir.1976) (citing Overton Park, 401 U.S. at 415-17, 91 S.Ct. at 823-24). Legal principles applicable in the first two determinations are straightforward. Determination of whether the agency acted within the scope of its authority requires a delineation of the scope of the agency's authority and discretion, and consideration of whether on the facts, the agency's action can reasonably be said to be within that range. Overton Park, 401 U.S. at 415-16, 91 S.Ct. at 823-24. Determination of whether the agency complied with prescribed procedures requires a plenary review of the record and consideration of applicable law. See id. at 416-17, 91 S.Ct. at 824. Difficulty arises in connection with judicial review under the "arbitrary or capricious" standard. See American Petroleum, 540 F.2d at 1028.
C. The "Arbitrary or Capricious" Standard
The duty of a court reviewing agency action under the "arbitrary or capricious" standard is to ascertain whether the agency examined the relevant data and articulated a rational connection
Motor Vehicle Mfrs., 463 U.S. at 43, 103 S.Ct. at 2867.
In a passage particularly relevant in the present case, the Supreme Court cautions,
Id. (emphasis added) (citing SEC v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1577, 91 L.Ed. 1995 (1947)).
Because the arbitrary and capricious standard focuses on the rationality of an agency's decisionmaking process rather than on the rationality of the actual decision, "[i]t is well-established that an agency's action must be upheld, if at all, on the basis articulated by the agency itself." Motor Vehicle Mfrs., 463 U.S. at 50, 103 S.Ct. at 2870. Thus, the grounds upon which the agency acted must be clearly disclosed in, and sustained by, the record. American Petroleum, 540 F.2d at 1029 (construing Motor Vehicle Mfrs.). The agency must make plain its course of inquiry, its analysis and its reasoning. Id. After-the-fact rationalization by counsel in briefs or argument will not cure noncompliance by the agency with these principles. Id. If the agency has failed to provide a reasoned explanation for its action, or if limitations in the administrative record make it impossible to conclude the action was the product of reasoned decisionmaking, the reviewing court may supplement the record or remand the case to the agency for further proceedings. Motor Vehicle Mfrs., 463 U.S. at 34, 50-57, 103 S.Ct. at 2862, 2870-74; Camp v. Pitts, 411 U.S. 138, 143, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973); see Thomas Brooks, 920 F.2d at 643-44. It may not simply affirm.
In addition to requiring a reasoned basis for agency action, the "arbitrary or capricious" standard requires an agency's action to be supported by the facts in the record. In reviewing the administrative record for factual support, we adopt the analysis articulated by then-Judge Scalia in Ass'n of Data Processing v. Bd. of Governors, 745 F.2d 677, 683 (D.C.Cir.1984), and rule informal agency action will be set aside as arbitrary if it is unsupported by "substantial evidence." This is not to substitute the "arbitrary or capricious" standard applicable to informal agency action under § 706(2)(A) with the arguably more stringent standard of review applicable to formal agency action under § 706(2)(E). It is simply an acknowledgment that
Id. at 684 (emphasis in original).
The government does not address the "arbitrary or capricious" standard of review. Instead, it asserts the yield and deficiency payment reductions at issue were the result of the ASCS's interpretation of its own regulations, which interpretation is entitled to "substantial deference." Aplees.' Br. at 5-6 (citing Renfro v. City of Emporia, 948 F.2d 1529, 1537 (10th Cir.1991), City of Gillette v. FERC, 737 F.2d 883, 885 (10th Cir. 1984), Grynberg v. Watt, 717 F.2d 1316 (10th Cir.1983), and City of Aurora v. Hunt, 749 F.2d 1457, 1462 (10th Cir.1984)). The government misses the point. An agency's interpretation of its own regulations may well be entitled to "substantial deference"; but it nevertheless will be set aside if it is the
IV. Analysis
A. The District Court's Review
As set forth above, the scope of review under the "arbitrary or capricious" standard is narrow, but it is not without dimension. Under this standard, the District Court was required to review the ASCS's decisionmaking process and determine whether the ASCS examined all relevant data and articulated a satisfactory explanation for its action, including a rational connection between the facts found and the choice made. Motor Vehicle Mfrs., 463 U.S. at 43, 103 S.Ct. at 2866. It was also required to conduct a plenary review of the record to ascertain whether the agency's action was supported by "substantial evidence." See Ass'n Data Processing, 745 F.2d at 683-84. We find the District Court failed on both counts.
With respect to the factual support for the agency's action, we have held the "substantial evidence" test to impose affirmative duties on a district court: the court must consider conflicts in the record and "define, specifically, those facts which it deems supportive of the agency decision if that is the court's resolution of the matter." Hill v. Morton, 525 F.2d 327, 328 (10th Cir.1975) (citing Nickol v. United States, 501 F.2d 1389, 1391 (10th Cir.1974) and Heber Valley Milk Co. v. Butz, 503 F.2d 96 (10th Cir. 1974)); see Overton Park, 401 U.S. at 415, 91 S.Ct. at 823. This requires a plenary review of the record as it existed before the agency. Nickol, 501 F.2d at 1391. The district court may not rely on counsel's statements as to what was in the record; the district court itself must examine the administrative record and itself must find and identify facts that support the agency's action. Heber Valley, 503 F.2d at 98.
Although the District Court's order in the present case provides a synopsis of the contested facts on appeal and purports to find support for facts found by the agency, little of the support came from the administrative record. Instead, it came from counsel's briefs and facts asserted for the first time on appeal. Gaps in the articulation of the agency's reasons for its actions were filled on appeal as well. Illustrative examples follow.
1. The Agency did not Determine Late Planting was Due to Reasons Within the Farmers' Control.
The District Court initially agreed with the Farmers that Wheat Program rules and regulations required the county committee to find "changed practices" and determine the change was due to reasons "within the producers' control" before imposing yield or deficiency payment reductions. Olenhouse, 807 F.Supp. at 692. The administrative record, however, was silent as to any such determination. The District Court tried three ways to supply it or otherwise remedy the defect.
First, it speculated the agency had, in fact, made the requisite determination:
Id. at 691.
Next, the District Court supplied the determination itself:
Finally, the Court interpreted the ASCS Handbook as having actually done away with the requirement:
Id. at 693.
It is the District Court which "arguably misreads ¶ 414,"
2. Factual Basis Upon Which District Court Affirmed Agency Action Product of Post-Hoc Rationalization and Not Supported by the Record.
a. Yield Reductions—The Kilgore Affidavit
In relying on counsel's statements as to what was in the record and isolated bits of evidence, the District Court failed to identify and define facts supportive of the agency's decision as required by the law of this circuit. See Hill v. Morton, 525 F.2d at 328. Affirmance of agency action cannot rest on such infirm grounds. See Heber Valley, 503 F.2d at 98; Pettyjohn v. Sullivan, 776 F.Supp. 1482, 1485 (D.Colo.1991), vacated and remanded on other grounds, 13 F.3d 406 (10th Cir.1993) (citations omitted). The Court's selective reliance on the affidavit of the Farmers' expert agronomist, Gary Kilgore, is illustrative.
As part of the administrative appeals process, the Farmers submitted the affidavit of Kansas agronomist Gary Kilgore. Aplts.' App. at 59-60. The affidavit sets forth the results of research undertaken by Kilgore in which he analyzed wheat yield data for southeast Kansas from 1983 to 1987. Id. at 59 (Kilgore Aff. at 1). Based on this data, Kilgore found "winter wheat planted in January and February can do as well as winter wheat planted in October, November and December, depending on the spring weather," and concluded there was "no scientific basis" for reductions in 1987 wheat yields of 15%-25% for wheat planted in January and 35%-50% for wheat planted in February. Id.
The Kilgore affidavit does not support the agency's conclusion that late planting was expected to result in lower yields, and neither the agency nor its counsel relied on it during the administrative process. Once review was sought in the District Court, however, the agency used a selective reading of the Kilgore affidavit to explain the agency's action and provide "support" for the reductions imposed. See Supp.R. II (Defs.' Mem. Supp.Mot. for J. at 4). The District Court adopted, verbatim, the government's post hoc rationalization, stating "defendants submitted evidence that showed wheat planted in November will produce between 74.8% and 83.3% of that planted in October." Olenhouse, 807 F.Supp. at 692 (citing Admin.R. at 62). It used this to conclude there was evidence to support the agency's determination that late planted wheat "would result in yield reductions." Id.
The government's reading of the Kilgore affidavit is not only an inadequate basis for review as a matter of law, it is insupportable as a matter of fact. The Kilgore affidavit
Isolated bits of evidence, taken out of context and overwhelmed by other evidence, will not support an affirmance of agency action. By relying on such "evidence," the District Court committed reversible error.
b. The Agency's Conclusion that the Farmers were not "Misinformed" Regarding Yield Reductions for Weather-Related Late Planting
During the course of their administrative appeals, the Farmers argued they were misled by county and state ASCS officials regarding the effect of late planting. Admin.R. at 24-25, 700-778. They claimed information received at the January meeting in Topeka, the spring approval of their Wheat Program Applications, and the receipt of unreduced advances and disaster credits all indicated they would receive full payment under the program. Id. They asserted that despite numerous requests for clarification, the agency waited until December 1987, nearly one year after the wheat was planted, to notify the Farmers their yields were being reduced. Id. The agency rejected the Farmers' contentions, and summarily concluded they were "not misinformed." Aplts.' App. at 50.
The agency made no findings of fact regarding "misinformation" and articulated no explanation for its summary conclusion. In a demonstration of ipse dixit, it simply stated "our review [of the record] indicates [farmers] were not misinformed by county office personnel regarding payment yields." Id. There can be no affirmance of agency action on this record because the record does not permit a reviewing court to assess whether the action was the product of reasoned decisionmaking. Motor Vehicle Mfrs., 463 U.S. at 43, 50, 52-57, 103 S.Ct. at 2866, 2870, 2871-74.
There is no basis in the administrative record to support the District Court's upholding of the agency's conclusion that the Farmers were not misinformed. In finding there was support the District Court first relied on defendants' contention that the Farmers received written notice their yields may be reduced in November and December of 1986:
Id. The administrative record does not support defense counsel's characterization of what it contained. Reading the record correctly, the District Court could not have concluded the November and December "notice" substantially supported the agency's conclusion.
The Notice of Yield and Acreage Bases (CCC Form 457) at issue is a standard form sent to all program participants at the beginning of the crop year. See Admin.R. at 819-959. Its purpose is to confirm the number of acres each farmer has in the program and set forth projected yields. Id. The "notice" to which defendants referred is boilerplate language notifying participants generally that program "yield[s] may later be reduced if practices actually carried out are different and would not normally produce the yields established." This language does not, as the government suggested in its briefs to the District Court for the first time on review, purport to notify the Farmers their 1987 yields would be reduced for late planting notwithstanding the fact of fall flooding. See id. Moreover, as these notices were sent months before the Topeka meeting and the Farmers' receipt of unreduced advances and
Second, in rationalizing the agency's action the District Court relied upon and mischaracterized a single page of testimony from the state ASCS committee hearing. Olenhouse, 807 F.Supp. at 692 (citing Admin.R. at 623, testimony of Bob Olson). The District Court characterized Olson's testimony as
Id. The testimony cited does not support the meaning ascribed it by the District Court. What Bob Olson said was he could not "remember" whether any member of the state committee at the Topeka meeting indicated farmers would receive reductions if they planted late. Admin.R. 623:15-21. This is not "evidence" of what the Farmers were told or not told by anyone, much less the county committee. Moreover, had the District Court reviewed the rest of the record regarding the Topeka meeting instead of relying on the agency's characterization of an isolated and irrelevant segment of Bob Olson's testimony, it would have discovered every member of the plaintiff class of farmers who attended the Topeka meeting and testified before the state committee swore under oath he was told to "go plant" his wheat and that as long as it was done in a "workmanlike manner," no yield reductions would be imposed. E.g., Admin.R. at 626 (Olson testimony), 634 (Porter testimony); see id. at 734 (Walker letter), 735 (Eisele letter), 743 (McVey letter), 777 (Olenhouse letter).
3. The Procedure Used by the District Court was Fundamentally Inconsistent with the Review Process Required under the APA.
The District Court's reliance on arguments, documents and other evidence outside the administrative record is due, at least in part, to the illicit procedure it employed to determine the issues for review. The District Court processed the Farmers' appeal as a separate and independent action, initiated by a complaint and subjected to discovery and a "pretrial" motions practice. See Supp.R. II at Tab 5 (District Court Docket Sheet). After the District Court denied a motion filed by defendants seeking to dismiss the Farmers' appeal on grounds the Federal Court of Claims had exclusive jurisdiction and granted Farmers' motion for class certification (see Olenhouse, 136 F.R.D. at 679), defendants sought summary review of the Farmers' appeal by filing a "Motion to Affirm" the agency's action.
This process, at its core, is inconsistent with the standards for judicial review of agency action under the APA. The use of motions for summary judgment or so-called motions to affirm permits the issues on appeal to be defined by the appellee and invites
A district court is not exclusively a trial court. In addition to its nisi prius functions, it must sometimes act as an appellate court. Reviews of agency action in the district courts must be processed as appeals. In such circumstances the district court should govern itself by referring to the Federal Rules of Appellate Procedure. Motions to affirm and motions for summary judgment are conceptually incompatible with the very nature and purpose of an appeal.
Based on these and other errors, the District Court misapplied the "arbitrary or capricious" standard applicable to informal agency action. It failed to engage in a substantive review of the record to determine if the agency considered relevant factors or articulated a reasoned basis for its conclusions. Instead, it relied on the post hoc rationalizations of counsel or attempted itself to supply a reasoned basis for agency action without regard to the contents of the administrative record. Any one of these errors would warrant reversal; their cumulative effect mandates it.
When a district court fails to conduct the requisite plenary review and make necessary factual findings to support the affirmance of agency action, we may either vacate its order and remand for further proceedings or we may conduct the necessary review ourselves based on the same administrative record considered by the district court. Nickol, 501 F.2d at 1392. Having already obtained and reviewed the administrative record in this case, we choose the latter course.
In reviewing the agency's action, we must render an independent decision using the same standard of review applicable to the District Court. Webb v. Hodel, 878 F.2d 1252, 1254 (10th Cir.1989). Once appealed, the District Court's decision is accorded no particular deference. Id.
B. The Farmers' Contentions on Appeal
As set forth above, we review informal agency action under the standards set forth in Overton Park and Motor Vehicle Mfrs. We review the record for "substantial evidence." See Data Processing, supra, n. 22 and accompanying text. Because we reverse the agency's action on other grounds, we decline to reach the Farmers' constitutional claim. See generally Rosenberg v. Fleuti, 374 U.S. 449, 451, 83 S.Ct. 1804, 1806, 10 L.Ed.2d 1000 (1963) (federal courts should decline to rule on constitutional issues unless necessary).
1. Appellants' Contention the Reductions Imposed were Arbitrary and Capricious.
a. Yield Reductions Were Unsupported by the Administrative Record
The Farmers contend the record does not support the yield and deficiency payment reductions imposed by the ASCS and affirmed by DASCO on administrative appeal. Aplts.' Br. at 19. The government disagrees, claiming the reductions were "based on the administrative record." Aplees.' Br. at 9. We find the agency's action unsupported by substantial evidence in the administrative record as it existed before the agency and thus "arbitrary or capricious" under APA § 706(2)(A).
Evidence is substantial in the APA sense if it is "enough to justify, if the trial were to a jury, a refusal to direct a verdict when the conclusion to be drawn is one of fact." Id. at 684 (quoting Illinois Central
The Farmers challenge the factual basis of DASCO's conclusion that they were not "misinformed" regarding the imposition of yield reductions for late planting. Aplts.' Br. at 23. They claim DASCO erroneously assumed the reductions at issue were imposed by the Wilson County Committee when, in fact, they were imposed by Lloyd Johnston. Id. at 22. The Farmers contend the committee explicitly determined not to reduce their yields, a determination upon which they relied. Although the administrative record is less than lucid as to what the original Wilson County Committee did, the evidence supports the Farmers', not the agency's, contentions regarding "misinformation" as to how and when yield reductions would be imposed.
At the Topeka meeting in early January 1987, the Wilson County ASCS Committee concluded yield reductions would not be imposed if farmers planted their wheat in a workmanlike manner. The Farmers planted, received advances and disaster credit (neither of which was reduced to reflect lower expected yields due to changed practices within the Farmers' control), and otherwise complied with Wheat Program regulations. In December 1987, the State Committee deemed Wilson County Committee's policy permitting late planting without reductions "unreasonable," and directed Lloyd Johnston to reduce participating farmers' yields. See Admin.R. at 39 and text, supra, at 1570-71. According to the Farmers, they had been led down the garden path.
We have already determined the District Court erred in affirming DASCO's conclusion that the Farmers had not been "misinformed" because DASCO failed to provide a reasoned explanation for the conclusion or identify the facts considered. See text, supra at 1578-79. We now find DASCO's conclusion is also unsupported by substantial evidence in the record and set it aside on those grounds as well. See id.
b. Agency Misapplied Program Rules and Regulations
The Farmers assert the ASCS failed to comply with the laws governing the Wheat Program in reducing the Farmers' yields and deficiency payments. Aplts.' Br. at 25. Specifically, they claim the agency failed to consider the weather or determine Farmers' late planting was the result of causes beyond their control as required by 7 C.F.R. § 713.6 and ASCS Handbook ¶ 414(A), and contend the Secretary failed to communicate information regarding the 1987 crop season and changes to ¶ 414 in a timely manner as required under the Soil Conservation Act, 16 U.S.C. § 590h(b). Id. at 25-29.
Although DASCO ostensibly considered the Farmers' contentions, it summarily concluded the state and county ASCS committees "followed the correct procedures" when they reduced the Farmers' yields and deficiency payments. By failing to discuss the Farmers' contentions or make any findings of fact, DASCO provided no basis for its conclusion. Under the standard set forth in Motor Vehicle Mfrs., 463 U.S. at 43, 50-57, 103 S.Ct. at 2866, 2870-74, we are unable to affirm because a determination that DASCO's action was the product of reasoned decisionmaking is impossible. Moreover, DASCO's action is not supported by substantial evidence in the record.
Failure to consider relevant factors— fall 1986 flooding
Before yield reductions may be imposed, 7 C.F.R. § 713.6 requires the ASCS county committee to determine whether any reduction in the current year's yields was "the result of causes other than a natural disaster or other condition beyond the producer's control." As far as can be determined from the
Throughout the spring and summer of 1987 (well before they were notified of any yield or deficiency payment reductions for the 1987 crop year), the Farmers applied for federal disaster credit on their 1987 crops. Admin.R. at 1313-1318, 1330-1332, 1402-1449, 1491-1499 (CCC Form 574 requests). Without exception, the reasons given for seeking disaster credit related to the fall rains. See, e.g., Admin.R. at 1412 (Lee Bradford Application, condition affecting crop identified as "late planted due to weather"), 1414 (Carlson Brothers, "wet weather prevented timely planting"), 1472 (Don Olenhouse, "excessive moisture"), 1498 (Dale Sharp, "excessive wetness and/or flooding of acres").
In order to receive disaster credit under Wheat Program regulations for prevented planting or failed acreage, there must be a determination by the county committee that the prevented planting or failed acreage was the result of "a natural disaster or other condition beyond the producer's control." 7 C.F.R. § 713.105(b) (prevented planting), (c) (failed acreage). This is the same standard that prevents the imposition of yield reductions under § 713.6(c)(1). Thus, it is axiomatic that any determination by the county committee that the Farmers were entitled to disaster credit under § 713.105 prohibits the county committee from imposing yield reductions under § 713.6.
The opposite occurred in this case. In March through June 1987, the Farmers received approval of their applications for disaster credit. See Admin.R. at 1318-1329, 1343-1384, 1457-1490. Yet in December 1987, their yields were reduced. This agency action cannot be reconciled. Rain-induced "late planting" cannot be the result of conditions "beyond the Farmers' control" for the purpose of disaster credit, but the result of conditions "within their control" for the purpose of yield reductions. We find the agency's contrary conclusion both arbitrary and capricious.
Failure to Communicate Changes in Wheat Program Regarding Yield Reductions Under 16 U.S.C. § 590h(b)
The Farmers assert the Secretary failed to comply with 16 U.S.C. § 590h(b) by failing to communicate changes in Wheat Program rules and policy in a timely manner. The essence of the Farmers' argument is not the Secretary's alleged failure to comply with the Soil Conservation Act, but the effect that failure had on the Farmers' decision to plant program wheat in the Spring of 1987. We have already concluded the agency's determination that the Farmers were not "misled" by the agency's silence must be set aside as unsupported by the administrative record, and no further elaboration is needed.
c. Failure to Observe Minimum Procedural Safeguards
The Farmers contend the administrative appeals process in this case was flawed and contrary to ASCS regulations. Aplts.' Br. at
Wheat Program regulations make no provision for a hearing on initial determinations by the county committee. They do, however, entitle a dissatisfied program participant to a multi-level appeal of that initial decision, and an informal hearing at each level. 7 C.F.R. §§ 780.7(a)-(c), 780.8; see Garvey v. Freeman, 397 F.2d at 604; Esch v. Yeutter, 876 F.2d at 992. Where deficiencies in the administrative appeals process call into question whether adjudicative officials considered all relevant factors, agency action will be set aside. Esch, 876 F.2d at 993. Agency action will also be set aside if the administrative process employed violated "basic concepts of fair play." Garvey, 397 F.2d at 612. From what we can determine from the record, the appeals process in this case failed on both counts.
Wheat Program regulations require the reviewing authority to conduct informal hearings "in the manner determined by CCC or ASCS to most likely obtain the facts relevant to the matter at issue";
The agency fell short of complying with these regulations in two important respects. As we have already concluded, neither the state committee nor DASCO set forth the basis for their determinations other than to state the Farmers planted their winter wheat in the spring. The agency did not address the fundamental issues raised by the Farmers, namely, that timely planting was impossible due to heavy rains and flooding during the fall planting season; they had been told to "go plant" without risk of reductions; and that Lloyd Johnston failed to make the requisite determination that the reduced yields were due to causes "other than a natural disaster or other condition beyond the producer's control." See 7 C.F.R. § 713.6.
Additionally, the agency failed to provide the Farmers with a "full opportunity" to present facts and information relevant to the reductions at the hearing before the state committee. The record indicates the Farmers' counsel asked at the hearing to question Lloyd Johnston, the individual who made the initial determination to reduce the Farmers' yields.
Notwithstanding any specific violation of the appeals regulations, the agency's refusal to permit the questioning of Johnston violated the minimum standards for a fair hearing. In Garvey v. Freeman, we stated the procedural hierarchy for hearings and appeals under 7 C.F.R. § 780 must conform with "basic concepts of fair play," including "a full, albeit informal, discussion of the pertinent issues with the rights of confrontation and cross-examination." Garvey, 397 F.2d at 612 (emphasis added). The Farmers were denied these rights. This denial raises serious questions as to whether the reviewing authorities considered all relevant factors in reaching their decision.
V. Conclusion
The decision of the District Court granting the "Motion to Affirm" is reversed and the case remanded. The District Court is instructed to enter judgment in favor of Plaintiffs-Appellants.
FootNotes
Although the government fares better in this regard, it also fails to support factual assertions with references to the record, and often overreaches when it does.
"In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error."
5 U.S.C. § 706 (1988).
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