Bottoms Farm Partnership et al v. United States Department of Agriculture, Risk Management Agency et al
Filing
59
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Plaintiffs' Motion for Summary Judgment 35 is DENIED. IT IS FURTHER ORDERED that Defendants' Motion for Summary Judgment 38 is GRANTED. A separate judgment will accompany this Memorandum and Order. Signed by Magistrate Judge Shirley Padmore Mensah on 3/24/17. (CAR)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
BOTTOMS FARM PARTNERSHIP,
BELL FAMILY PARTNERSHIP,
BELL PLANTING CO., and
NEZ FARMS, INC.,
Plaintiffs,
v.
UNITED STATES DEPARTMENT
OF AGRICULTURE,
RISK MANAGEMENT AGENCY, and
FEDERAL CROP INSURANCE
CORPORATION,
Defendants.
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No. 4:15-CV-1073-SPM
MEMORANDUM AND ORDER
This is an action for judicial review of a final agency action under the Administrative
Procedure Act, 5 U.S.C. § 701, et seq. This case is before the Court on the cross-motions for
summary judgment filed by Plaintiffs (Doc. 35) and Defendants (Doc. 38). Both motions have
been fully briefed, and the Court has heard oral argument on them. The parties have consented to
the jurisdiction of the undersigned United States Magistrate Judge pursuant to 28 U.S.C.
§ 636(c)(1). (Doc. 28). For the following reasons, Defendants’ motion will be granted, and
Plaintiffs’ motion will be denied.
I.
FACTUAL BACKGROUND
Plaintiffs in this case are four entities that conduct farming operations in Missouri: Bottoms
Farm Partnership, Bell Family Partnership, Bell Planting Co., and Nez Farms, Inc. (collectively,
“Plaintiffs”). Defendants in this case are the United States Department of Agriculture (“USDA”),
the Risk Management Agency (“RMA”), and the Federal Crop Insurance Corporation (“FCIC”)
(collectively, “Defendants”). In their Complaint, Plaintiffs seek a declaratory judgment and
injunctive relief arising from administrative determinations issued by FCIC and RMA.
The Federal Crop Insurance Act (“FCIA”) was enacted “to promote the national welfare
by improving the economic stability of agriculture through a sound system of crop insurance and
providing the means for the research and experience helpful in devising and establishing such
insurance.” 7 U.S.C. § 1502(a). Defendant FCIC is a federal government-owned corporation
within the USDA that was created to “carry out the purposes” of the FCIA. 7 U.S.C. § 1503; 31
U.S.C. § 9101(3). Defendant RMA is an agency of the USDA and is charged with supervision of
FCIC and with regulation and oversight of the FCIA. 7 U.S.C. § 6933.
Pursuant to the FCIA, FCIC is authorized to act as a reinsurer to Approved Insurance
Providers (“AIPs”). 7 U.S.C. § 1508. An AIP is “a private insurance provider that has been
approved by [FCIC] to provide insurance coverage to producers participating in the Federal crop
insurance program established under this subchapter.” 7 U.S.C. § 1502(b)(2). “In order to qualify
for reinsurance through the FCIC, the policies written by [AIPs] must comply with the FCIA and
its accompanying regulations.” Davis v. Producers Agric. Ins. Co., 762 F.3d 1276, 1284 (11th Cir.
2014). “Consequently, the FCIA generally establishes the terms and conditions of insurance, . . .
even though the crop insurance policy is between the farmer and an [AIP].” Id. (internal quotation
marks omitted).
During the time periods relevant to this litigation, Plaintiffs conducted farming operations,
including rice production, in Stoddard County, Missouri. In 2012, each of the Plaintiffs purchased
federally reinsured policies of Multi-Peril Crop Insurance that provided revenue protection
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coverage for their 2012 rice crop from Rural Community Insurance Services (“RCIS”), an AIP.
As an AIP, RCIS entered into a Standard Reinsurance Agreement with FCIC.
The policies issued to each Plaintiff, like other policies issued under the Federal crop
insurance program, include three sets of provisions: (1) the Common Crop Insurance Policy Basic
Provisions (the “Basic Provisions”), which are common to all crops and are codified in the Code
of Federal Regulations at 7 C.F.R. § 457.8 (2012); (2) the Rice Crop Provisions, which are specific
to the particular crop that is being insured and that are codified in at 7 C.F.R. § 457.141 (2012);
and (3) the “Special Provisions of Insurance 2012 and Succeeding Crop Years for Stoddard
County, Missouri—Rice (“Special Provisions”),” which govern rice grown in Stoddard County,
Missouri and are not codified in the Code of Federal Regulations.
At issue in this case is the following provision, contained in the Special Provisions:
Insurance Availability
...
In addition to the definition of Planted Acreage specified in section 1 of the Crop
Provisions, the following must have occurred immediately following seeding. If
these activities have not occurred, the acreage will be considered “acreage seeded
in any other manner” and will not be insurable:
1. levees are surveyed and constructed;
2. levee gates are installed and butted; and
3. the irrigation pump is operable, ready to be started in the event sufficient
rainfall has not been received, and turned on to provide sufficient water for
the purposes of germination or elimination of soil crusting.
(Administrative Record 59).
As a result of substantial damage to their rice crop in 2012, each of the Plaintiffs filed
claims with RCIS for the 2012 crop year. RCIS denied the Plaintiffs’ claims on the ground that the
acreage was not insurable due to the alleged failure to comply with the Special Provisions—
specifically, the failure to survey and construct levees immediately after seeding and the failure to
immediately fully install levee gates following seeding.
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Plaintiffs disagreed with RCIS’s interpretation of the Special Provisions, and the parties
entered into policy-mandated arbitration pursuant to RMA Manager’s Bulletin No. MGR-12-003.1
and Section 20(a) of the Basic Provisions. The arbitration proceedings have been consolidated and
are being held in abeyance pending the resolution of the issue presented in this action.
Section 20 of the Basic Provisions provides for mandatory arbitration of disputes involving
determinations made by an AIP. Specifically, Section 20(a) provides:
[I]f you and we fail to agree on any determination made by us . . . , the disagreement
may be resolved through mediation in accordance with Section 20(g). If resolution
cannot be reached through mediation, or if you and we do not agree to mediation,
the disagreement must be resolved through arbitration in accordance with the rules
of the American Arbitration Association (AAA) . . .
(1) All disputes involving determinations made by us . . . are subject to
mediation or arbitration. However, if the dispute in any way involves a
policy or procedure interpretation, regarding whether a specific
provision or procedure is applicable to the situation, how it is
applicable, or the meaning of any policy provision or procedure, either
you or we must obtain an interpretation from FCIC in accordance with
7 CFR part 400, subpart X or such other procedures as established by
FCIC.
(i)
Any interpretation by FCIC will be binding in any mediation
or arbitration.
(ii)
Failure to obtain any required interpretation from FCIC will
result in nullification of any agreement or award.
(iii) Any interpretation by FCIC of a policy provision is
considered a determination that is a matter of general
applicability.
(iv)
Any interpretation by FCIC of a procedure may be appealed
to the National Appeals Division in accordance with 7 CFR
part 11.
(AR 107-08).
In accordance with this provision, RCIS and Plaintiffs jointly sought an interpretation of
the Special Provisions from FCIC. (AR 3-7). The joint request stated that the parties sought an
interpretation “in accordance with Bulletin MGR-05-018.” (AR 3). Manager’s Bulletin MGR-05018 provides rules and procedures by which parties can obtain an interpretation from FCIC, as
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required by Section 20(a), of “procedure”; it does not expressly discuss how to obtain an
interpretation of a “policy provision.” (AR 118-24).
In the request for interpretation, RCIS asserted that the provision of the Special Provisions
at issue should be interpreted to require that “a producer must, no later than immediately following
seeding of the fields, construct the entire levee system for all of the fields including preparation
and installation of levee gates throughout all fields.” (AR 6). Plaintiffs asserted that the provision
should be interpreted to “only require that such levees, levee gates, and irrigation pumps as are
required to enable the producer to put sufficient water on the field in the event it is needed for the
purposes of germination or the elimination of soil crusting be in place immediately following
seeding.” (AR 6).
On December 17, 2014, RMA issued FCIC’s interpretation of the Special Provisions, in
which it adopted RCIS’s interpretation (the “FCIC Interpretation”). (AR 9-13). It stated:
FCIC agrees with [RCIS’s] interpretation. FCIC does not agree with [Plaintiffs’]
interpretation. Any time a term is not defined in the policy, its common meaning is
used and that is found in any standard dictionary. The Merriam-Webster dictionary
defines “immediately” as “without any delay.” This means the listed activities must
occur right after planting has ended, weather permitting, without any delay. If
weather prevents these activities, they must commence as soon as the weather
permits.
Therefore, FCIC does not agree with [Plaintiffs’] interpretation that the Special
Provisions only require that such levees, levee gates, and irrigation pumps as are
required to enable the producer to put sufficient water on the field in the event it is
needed for purposes of germination or the elimination of soil crusting, be in place
immediately following seeding. FCIC also does not agree that interior levees do not
have to be installed immediately following planting in order for the acreage to be
insurable.
The Special Provisions statement specifies what activities must occur immediately
following seeding, including:
1. levees are surveyed and constructed;
2. levee gates are installed and butted; and
3. the irrigation pump is operable, ready to be started in the event sufficient
rainfall has not been received, and turned on to provide sufficient water
-5-
for the purpose of germination or elimination of soil crusting.
These are specific activities that must occur on the insurable acreage each year.
These are not requirements that only need to occur if the situation arises that
requires the irrigation. The requirement is to conduct these activities immediately
after planting and are [sic] not governed by the requirement that the producer follow
good farming practice. This is a condition of insurability, not an issue of whether
the producer followed good farming practices.
In accordance with section 20(a) of the Common Crop Insurance Basic Provisions,
this FCIC interpretation is binding in any mediation or arbitration. Any appeal of
this interpretation must be in accordance with 7 C.F.R. part 11.
(AR 12-13).
Following receipt of the FCIC Interpretation, Plaintiffs sought an administrative review of
the FCIC Interpretation pursuant to 7 C.F.R. § 400.93, asserting that FCIC lacked the authority to
issue an interpretation of a provision of the Special Provisions. (AR 15). They noted that the
interpretation was purportedly issued under the authority provided in MGR-05-018, which by its
terms applies to “an interpretation of procedure (i.e., procedural handbooks or manuals, or
memoranda or bulletins that contain procedures).” (AR 15-16, 120). Plaintiffs argued that nothing
in Bulletin No. MGR-05-018 authorizes FCIC to issue what purports to be a binding interpretation
of a policy provision. (AR 15). RMA issued a decision (the “RMA Determination”) affirming the
FCIC Interpretation. (AR 24-25). RMA found that under Section 20(a)(1)(i) of the Basic
Provisions, FCIC is required to give an interpretation of a policy provision, and that although
nothing in MGR-05-018 expressly states that it applies to policy provisions, “there is nothing to
legally preclude RMA from using the process contained therein to provide an interpretation . . .
required by the policy.” (AR 25). RMA emphasized that legally, it was required to provide an
interpretation, and the form of that interpretation does not override the substance of the
requirement to issue the interpretation. (Id.). It noted that the interpretation could be in any form
and that a reference to MGR-05-018 was immaterial. (Id.) It also stated that it has previously
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interpreted pilot policy provisions using MGR-05-018 because no procedures exist for
interpretation of such provisions. (Id.).
On February 5, 2015, Plaintiffs appealed the FCIC Interpretation and the RMA
Determination to the National Appeals Division (“NAD”) of USDA. (AR 28-38). By letter dated
March 12, 2015, NAD issued its determination, finding that the RMA Determination was a matter
of general applicability and, therefore, was not appealable. (AR 54-56). Plaintiffs have exhausted
their administrative remedies.
On July 10, 2015, Plaintiffs filed their Complaint for Review of Agency Action,
Declaratory Judgment, and Other Relief under the Administrative Procedure Act, 5 U.S.C. § 701,
et seq. (the “APA”). (Doc. 1). Plaintiffs brought two claims for declaratory judgment, both under
the APA. The first claim asserted that under principles of contract law, the FCIC Interpretation of
the Special Provisions was arbitrary, capricious, and contrary to law. The second claim asserted
that the FCIC Interpretation and the RMA Determination were arbitrary, capricious, contrary to
law, and in excess of statutory authority, because FCIC lacked the statutory authority to issue a
binding interpretation of the Special Provisions. In their Prayer for Relief, Plaintiffs seek the
following:
(a) [a declaration] that [the FCIC Interpretation stating] that the entire levee system must
be in place immediately following seeding was arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law; was in excess of statutory
jurisdiction, authority, or limitations, or short of statutory right; was without
observance of procedure required by law; and was unwarranted by the facts, in
violation of 5 U.S.C. § 706;
(b) [a declaration that] Plaintiffs’ rice acreage satisfied the requirements for insurability
under the Special Provisions if such levees, levee gates, and irrigation pumps as are
required to enable the producer to put sufficient water on the field in the event it is
needed for the purposes of germination or the elimination of soil crusting be in place
immediately following seeding;
(c) [a declaration that FCIC and RMA] lacked the statutory authority to issue a binding
interpretation of the Special Provisions under Federal law and that the FCIC
[Interpretation] and [RMA Determination] be set aside as [they] were in excess of the
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statutory authority given to Defendants;
(d) [a declaration] that the FCIC Interpretation is not binding on the arbitrator in the
pending arbitration as the Agency Defendants lacked the authority to issue a binding
interpretation of the Special Provisions; []
(e) [t]hat the Court remand this case to Defendants with instructions that Defendants take
such further action as is consistent with the ruling and judgment of this Court; [and]
(f) [attorney’s fees and costs].
(Compl. at 10-11).
On June 20, 2016, Plaintiffs and Defendants filed cross-motions for summary judgment on
Plaintiffs’ claims. On January 17, 2017, the Court held a hearing on the motions.
II.
LEGAL STANDARD FOR SUMMARY JUDGMENT
The Court shall grant a motion for summary judgment “if the movant shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). The parties agree that in an administrative record review case such as
this, no disputed facts exist for the Court to resolve; instead, “[t]he Court reviews only the
administrative record.” Von Eye v. United States, 887 F. Supp. 1287, 1290-91 (D. S.D. 1995)
III.
DISCUSSION
There are two principal issues presented by the parties’ cross-motions for summary
judgment: (A) whether the FCIC Interpretation should be set aside because the FCIC Interpretation
is erroneous; and (B) whether the FCIC Interpretation and the RMA Determination should be set
aside because FCIC lacked the authority to issue a binding interpretation of the Special Provisions.
The Court will address each in turn.
A. Whether the FCIC Interpretation Should Be Set Aside Because It Is Erroneous
With respect to this issue, the parties’ first dispute is over the appropriate scope of this
Court’s review of the FCIC Interpretation of the Special Provisions. Once the scope of review is
determined, the Court will address whether the FCIC Interpretation should be set aside.
-8-
1. The Scope of Review
The parties agree that the Court’s scope of review is defined generally by 5 U.S.C. § 706,
which states in relevant part that “the reviewing court shall decide all relevant questions of law,
interpret constitutional and statutory provisions, and determine the meaning or applicability of the
terms of an agency action,” and shall “hold unlawful and set aside agency action, findings, and
conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law” or “in excess of statutory jurisdiction, authority, or limitations, or short of
statutory right.” The parties disagree about how to apply this statute in the present case.
Plaintiffs argue that the interpretation of the Special Provisions is a question of law that the
Court should review de novo. They point out that Section 706 explicitly directs courts to “decide
all relevant questions of law” and to set aside agency action that is “not in accordance with law.”
They also emphasize that the Eighth Circuit has held that an administrative officer’s conclusions
of law are reviewed de novo. See Syverson v. USDA, 601 F.3d 793, 799 (8th Cir. 2010). They
further note that the Eighth Circuit has previously held (outside the context of the APA, in a case
involving a coverage dispute) that the proper construction of an FCIC crop insurance policy is a
question of law. See Kroeplin Farms Gen. P’ship v. Heartland Crop Ins., Inc., 430 F.3d 906, 909
(8th Cir. 2005) (“The proper construction of an insurance contract is an issue of law . . .”).
Defendants do not disagree that the interpretation of the Special Provisions involves a
question of law. However, they argue that rather than applying de novo review, this Court should
afford the same “substantial deference” to the FCIC Interpretation that is generally afforded to
agency interpretations of statutes and regulations. In Chevron, U.S.A. Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984), the Supreme Court held that where a court reviews
“an agency’s construction of the statute which it administers” in a situation in which Congress has
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not directly addressed the precise question at issue, the “court may not substitute its own
construction of a statutory provision for a reasonable interpretation made by the administrator of
an agency.” Id. at 842, 844. Instead, the court conducts a deferential review, wherein “the question
for the court is whether the agency’s answer is based on a permissible construction of the statute.”
Id. at 843. The Supreme Court noted in its opinion that “policy arguments are more properly
addressed to legislators or administrators, not to judges.” Id. at 864. The Supreme Court
subsequently extended the Chevron rule of substantial deference to cases involving a court’s
review of an agency’s interpretation of its own regulations. See Thomas Jefferson Univ. v. Shalala,
512 U.S. 504, 512 (1994). (“We must give substantial deference to an agency’s interpretation of
its own regulations.”). In such cases, “the agency’s interpretation must be given controlling weight
unless it is plainly erroneous or inconsistent with the regulation.” Id. (internal quotation marks
omitted). The Court noted that “[t]his broad deference is all the more warranted when . . . the
regulation concerns a complex and highly technical regulatory program, in which the identification
and classification of relevant criteria necessarily require significant expertise and entail the
exercise of judgment grounded in policy concerns.” Id. (citation and internal quotation marks
omitted).
Significantly, the FCIC Interpretation at issue here did not involve either an agency’s
interpretation of a statute or an agency’s interpretation of its own regulations. Although the Basic
Provisions and the Rice Crop provisions are codified in regulations, the Special Provisions are not.
Defendants argue that the FCIC Interpretation of the Special Provisions is nonetheless entitled to
Chevron-style substantial deference, because the Special Provisions are akin to regulations with
the force of law. They note that codified regulations make the Special Provisions a required
component of the Federal crop insurance policy; that regulations provide that the Special
- 10 -
Provisions may not be waived or varied in any way; and that regulations provide that in the event
of a conflict, the Special Provisions must control over other policy provisions that are codified in
the Code of Federal Regulations. Defendants also emphasize that the Special Provisions are part
of the complex, highly technical program of Federal crop insurance and that the FCIC
Interpretation involved a matter within the agency’s specific expertise.
The Eighth Circuit has previously extended substantial deference to contexts other than
agency interpretations of statutes and regulations. In Rain & Hail Insurance Service, Inc. v.
Federal Crop Insurance Corp., the USDA’s Board of Contract Appeals (“AGBCA”) issued an
interpretation of a Manager’s Bulletin issued by FCIC, and an insurer challenged that
interpretation. 426 F.3d 976, 978-79 (8th Cir. 2005). The court began by noting that it needed to
decide what deference was owed to the agency’s construction of the Manager’s Bulletin. Id. at
979. The court acknowledged that the Manager’s Bulletin was not a regulation and did not
otherwise carry the force of law, noting that it was not the product of a formal adjudication or
notice-and-comment rulemaking, and that the FCIA gives no indication that Congress meant to
delegate authority to the FCIC to issue Bulletins with the force of law. Id. Nevertheless, it found
that deference was appropriate, stating:
[W]e think that the reasons for deferring to an agency’s interpretation of its
regulations apply equally to the AGBCA’s interpretation of the Manager’s Bulletin:
Because the AGBCA possesses a “unique expertise” in the “complex . . .
circumstances” of reinsuring MPCI policies, “we presume that the power
authoritatively to interpret” such FCIC pronouncements as the Manager’s Bulletin
“is a component of the [AGBCA’s] delegated lawmaking powers.” See Martin v.
Occupational Safety & Health Rev. Comm’n, 499 U.S. 144, 151, 111 S. Ct. 1171,
113 L. Ed.2 2d 117 (1991).
Id. at 979. The court then stated that it would “defer to the AGBCA’s interpretation unless plainly
erroneous.” Id.
The Eighth Circuit reached a similar conclusion in Clason v. Johanns, 438 F.3d 868 (8th
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Cir. 2006). In Clason, the National Appeals Division of the USDA issued a decision that involved
an interpretation of a term in the “CCC-681-1 form,” a form created by a corporation within the
agency that addressed the terms under which agricultural loans could be discharged. Id. at 870-71.
In an action brought under the APA challenging the decision, the court held that it should afford
the agency interpretation “the same level of deference afforded to an agency’s interpretation of its
own regulations.” Id. at 871 (citing Rain & Hail, 426 F.3d at 979). It reasoned in part that
regulations authorized the CCC (a federal corporation within the USDA) to set the terms and
conditions of the CCC-681-1 form, and that “[t]he terms of CCC-681-1 involve complex matters
within the Department of Agriculture’s area of expertise, namely, the repayment terms of
subsidized agricultural commodity loans.” Id.
Similarly, numerous courts have found that an agency’s interpretation of a contract is
entitled to deference when the interpretation implicates the agency’s expertise. See Muratore v.
U.S. Office of Pers. Mgmt., 222 F.3d 918, 921-23 (11th Cir. 2000) (stating, “Most courts have
deferred to an agency’s interpretation [of a contract] by applying the arbitrary and capricious
standard of review”; finding that the Office of Personnel Management’s interpretation of a health
benefits contract was entitled to deference because OPM negotiates the contracts at issue; because,
pursuant to the FEHBA, OPM routinely interprets plans to determine an insurance carrier’s
liability; because Congress has given OPM broad authority to regulate the field in which OPM
negotiates the insurance contracts; and because OPM has the ability to take a broad, national view
when it interprets plans which serves the function of ensuring consistent, nationwide application);
United States v. Gonzales & Gonzales Bonds & Ins. Agency, Inc., 103 F. Supp. 3d 1121, 1129
(N.D. Cal. 2015) (collecting cases and stating, “several courts have held that, where an agency’s
action is being challenged pursuant to the APA, and where the agency has interpreted a contract,
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that interpretation is entitled to deference and the arbitrary-and-capricious standard applies—at
least where the agency’s expertise or statutory domain is implicated”; noting that cases applying
de novo review “appear to be much fewer in number”). Cf. Sternberg v. Sec’y, Dep’t of Health &
Human Servs., 299 F.3d 1201, 1205 (10th Cir. 2002) (stating, “[t]his circuit has adopted the view
that under the principles of [Chevron], an agency’s interpretation of a contract is reviewed under
the arbitrary and capricious standard when the subject matter of the contract involves the agency’s
specialized expertise”; declining to afford deference to the Department of Health and Human
Service’s interpretation of a sentencing agreement, because the agreement did not involve HHSspecialized expertise, did not deal with arcane subject matter, did not contain specialized
terminology, and was not the sort of agreement normally reviewed by the agency).
Plaintiffs acknowledge that in some cases, agency interpretations of non-codified language
have been accorded substantial deference. However, Plaintiffs urge the Court to follow the
approach articulated by the Eastern District of North Carolina in Harrell & Owens Farm v. Federal
Crop Insurance Corp., in which the court found that substantial deference is appropriate when an
agency’s interpretation “turns on reference to rules and regulatory provisions, is made pursuant to
a comprehensive statutory scheme, and is based on policymaking prerogatives and subject-specific
expertise,” but that “where the agency’s determination was made simply by reference to general
common law principles governing contracts, no such deference is given.” No. 4:09-CV-217-FL,
2010 WL 9462574, at *7 (E.D.N.C. Oct. 6, 2010). Plaintiffs argue that here, the text of the FCIC
Interpretation shows that the interpretation was made simply by reference to general common-law
principles governing contracts. They argue that therefore the FCIC Interpretation is not entitled to
deference and should be reviewed de novo.
After careful consideration of the above cases and the circumstances here, the Court finds
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that the FCIC Interpretation is entitled to substantial deference. Like the interpretations in Rain &
Hail and Clason, the interpretation at issue here did not involve the product of a formal
adjudication or notice-and-comment rulemaking. However, as in both of those cases, the
interpretation at issue fell squarely within the agency’s specific area of expertise—here, the
circumstances under which particular acreage is insurable under the Federal crop insurance
program. In addition, although the Special Provisions are not codified, the regulations indicate that
the Special Provisions have the same (or more) force as those provisions that are codified. By
regulation, the Special Provisions (like the codified provisions) “may not be waived or varied in
any way . . . .” See 7 C.F.R. § 457.8. Moreover, the regulations provide that in the event of a
conflict, the Special Provisions are controlling over the provisions that are codified (the Basic
Provisions and Crop Provisions). See 7 C.F.R. § 457.8, at “AGREEMENT TO INSURE” (“If a
conflict exists among the policy provisions, the order of priority is: (1) The Catastrophic Risk
Protection Endorsement, as applicable; (2) the Special Provisions; (3) the Commodity Exchange
Price Provisions, as applicable; (4) the Crop Provisions; and (5) these Basic Provisions, with (1)
controlling (2), etc.”) (AR 77). It appears to be undisputed that an agency interpretation of the
Basic Provisions or Crop Provisions would be subject to substantial deference. It would be illogical
to accord deference to the agency’s interpretation of those policy provisions, yet not afford the
same deference to other provisions in the policy that, legally, are controlling over the codified
provisions. The Court also finds it significant that the FCIC Interpretation under review here is
specifically authorized and mandated by regulation. See 20 C.F.R. § 457.8, 20(a)(1) (providing
that in the event of a dispute about the meaning of any policy provision (which includes the Special
Provisions), the parties “must obtain an interpretation from FCIC” and that the FCIC’s
interpretation “will be binding in any mediation or arbitration”). (AR 108).
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The Court acknowledges that the FCIC Interpretation does not contain a detailed
explanation of the agency’s reasoning and appears to rely at least in part on the common-law
principle of assigning words their plain-language dictionary definitions. However, the FCIC
Interpretation also appears to be drawing from the agency’s area of expertise when it distinguishes
between requirements of “good farming practices” and requirements of “insurability.” The Court
declines to take a narrow approach to the scope of review question that focuses solely on the
reasons expressly articulated in the agency decision while ignoring other factors that favor
deferential review. Such an approach is not consistent with the Eighth Circuit’s decisions in Rain
& Hail and Clason, in which the Eighth Circuit considered other factors to be most relevant. After
consideration of all of the relevant factors, the Court finds that substantial deference is appropriate
here.
In sum, in light of the fact that the subject matter of the FCIC Interpretation falls squarely
within the agency’s area of expertise, the role that the Special Provisions play as controlling over
codified provisions in the policy, and the fact that FCIC is specifically authorized by regulation to
issue an interpretation of the Special Provisions, the Court finds that FCIC’s interpretation of the
Special Provisions is entitled to the same level of deference as an agency interpretation of its own
regulations. Thus, the Court will give controlling weight to the FCIC Interpretation unless it is
plainly erroneous or is inconsistent with the regulations or the language of the Special Provisions.
2. The FCIC Interpretation
The Court next turns to the question of whether the FCIC Interpretation is plainly erroneous
or inconsistent with regulations or with the language of the Special Provisions. The provision that
is the subject of the FCIC Interpretation reads as follows:
Insurance Availability
...
- 15 -
In addition to the definition of Planted Acreage specified in section 1 of the Crop
Provisions, the following must have occurred immediately following seeding. If
these activities have not occurred, the acreage will be considered “acreage seeded
in any other manner” and will not be insurable:
1. levees are surveyed and constructed;
2. levee gates are installed and butted; and
3. the irrigation pump is operable, ready to be started in the event sufficient
rainfall has not been received, and turned on to provide sufficient water for
the purposes of germination or elimination of soil crusting.
(AR 59).
As discussed above, FCIC agreed with RCIS’s position and interpreted the above provision
to mean that “a producer must, no later than immediately following seeding of the fields, construct
the entire levee system for all of the fields including preparation and installation of levee gates
throughout all fields.” (AR 6). FCIC rejected Plaintiffs’ assertion that this provision should be
interpreted to “only require that such levees, levee gates, and irrigation pumps as are required to
enable the producer to put sufficient water on the field in the event it is needed for the purposes of
germination or the elimination of soil crusting be in place immediately following seeding.” (Id.)
FCIC stated, in relevant part:
FCIC agrees with [RCIS’s] interpretation. FCIC does not agree with [Plaintiffs’]
interpretation. Any time a term is not defined in the policy, its common meaning is
used and that is found in any standard dictionary. The Merriam-Webster dictionary
defines “immediately” as “without any delay.” This means the listed activities must
occur right after planting has ended, weather permitting, without any delay. If
weather prevents these activities, they must commence as soon as the weather
permits.
Therefore, FCIC does not agree with [Plaintiffs’] interpretation that the Special
Provisions only require that such levees, levee gates, and irrigation pumps as are
required to enable the producer to put sufficient water on the field in the event it is
needed for purposes of germination or the elimination of soil crusting, be in place
immediately following seeding. FCIC also does not agree that interior levees do not
have to be installed immediately following planting in order for the acreage to be
insurable.
The Special Provisions statement specifies what activities must occur immediately
following seeding, including:
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1. levees are surveyed and constructed;
2. levee gates are installed and butted; and
3. the irrigation pump is operable, ready to be started in the event sufficient
rainfall has not been received, and turned on to provide sufficient water
for the purpose of germination or elimination of soil crusting.
These are specific activities that must occur on the insurable acreage each year.
These are not requirements that only need to occur if the situation arises that
requires the irrigation. The requirement is to conduct these activities immediately
after planting and are [sic] not governed by the requirement that the producer follow
good farming practice. This is a condition of insurability, not an issue of whether
the producer followed good farming practices.
(AR 12).
Plaintiffs argue that this Court should evaluate the FCIC Interpretation based on principles
of Missouri contract law. Defendants contend that contract law is inapplicable, but do not specify
what specific framework that the Court should apply to determine whether the agency’s decision
concerning interpretation of the Special Provisions was plainly erroneous. The Court will assume,
without deciding, that Missouri contract law applies to this dispute, as Plaintiffs contend. Under
Missouri law, if the language of an insurance policy is “reasonably open to different
constructions,” then the language is ambiguous. Burns v. Smith, 303 S.W.3d 505, 509 (Mo. 2010)
(internal quotation marks omitted). When an ambiguity exists in an insurance policy, the court
must interpret the policy in favor of the insured. Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d
156, 160 (Mo. 2007). If, however, the policy is unambiguous, the court must enforce the contract’s
terms as written. Id.
The Court finds that the FCIC Interpretation is not plainly erroneous and is not inconsistent
with the regulations or with the language of the Special Provisions. The policy language states,
without qualification, that several activities must have occurred immediately following seeding,
including that “levees are surveyed and constructed” and that “levee gates are installed and butted.”
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(AR 59). In the absence of any qualifying language in those clauses of the policy, the logical
reading of this provision is that “levees” unambiguously means “all levees,” rather than some
unspecified subset of levees. It was not plainly erroneous for FCIC to determine that RCIS’s
interpretation reflected the plain and unambiguous meaning of this language. It was entirely
reasonable for FCIC to reject Plaintiffs’ suggested interpretation, which would have required FCIC
to insert several very specific qualifications into the Special Provision that simply are not present
in the policy language. For example, to accept Plaintiffs’ interpretation, FCIC would have had to
find that by “levees,” the Special Provisions meant “such levees as are required to enable the
producer to put sufficient water on the field in the event it is needed for the purposes of germination
or the elimination of soil crusting be in place immediately following seeding.” Given the absence
of such qualifying language to describe the “levees” and “levee gates” that were required, it was
not plainly erroneous for FCIC to find that the Special Provisions, as written, were not open to the
interpretation offered by Plaintiffs.
Plaintiffs offer several arguments in favor of their preferred interpretation: that evidence in
the record suggests that the Special Provisions were put in place to address a situation wherein
some producers had planted rice without installing a field levee that would give them the option
to water the crop for germination (AR 593, 597); that under the FCIC Interpretation, a farmer who
decided later in the season to add additional levees or gates to a field to prevent losses would be
unable to do so without rendering the field uninsurable; and that the FCIC Interpretation places
farmers in a Catch-22 situation, because under some circumstances delaying levee or gate
installation constitutes a good farming practice, and another policy provision states that losses
caused by a failure to follow good farming practices are not covered. These arguments might be
relevant if the Special Provisions were ambiguous and the Court were deciding between two
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reasonable constructions.1 However, none of these arguments persuade the Court that FCIC plainly
erred by finding that the plain language of the Special Provisions unambiguously required all
levees and levee gates to be constructed immediately following seeding.
Plaintiffs also argue that a 2013 email in the Administrative Record from Rebecca Davis
at RMA discussing post-2012 changes to the Special Provisions supports their interpretation. The
email states, in relevant part:
The changes are that the term “immediately following seeding” was removed. Even
though the rice production handbooks all have this provision, under certain
circumstances, it can be considered a good farming practice to delay the
construction of levees. The statement was intended to ensure that losses were not
paid if producers did not have the means to “flush” the acres in order to obtain an
adequate stand. The modified provision clarifies this point. . . .
The current special provision statement in Missouri has been in place since 1998
and is a reiteration of the information published in the rice production handbooks
defining good farming practices. It was initially put in place to address program
integrity concerns with poor insurance experience caused by failure to get an
adequate stand of rice. Since the statement was implemented in 1998, insurance
experience has greatly improved. . . .
The changes provide more flexibility to producers by acknowledging that a “flush”
may not always be needed after planting to establish an adequate stand and there
are production practice differences between zero grade fields and contour fields.
Under certain conditions, this allows the producer more time to implement the
necessary requirements to Flood Irrigate their rice crop. The modified provision
meets the needs of RMA by preserving the integrity concerns of previous years,
while also acknowledging current rice production practices, so these provisions do
not prohibit producers from caring for their crop. . . .
(AR 597). Plaintiffs argue that Ms. Davis’s statement that the modified provision “clarifies” the
requirements of the policy constitutes an admission by RMA that Plaintiffs’ interpretation is
correct. The Court disagrees. First, Plaintiffs cite no authority to suggest that the specific wording
1
The Court also notes that because these arguments concern what constitutes good rice farming
practices and the history and purpose of the Special Provisions, the agency is in a much better
position to evaluate these arguments than is this Court.
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of an email written by a single RMA employee, outside the context of any administrative decisionmaking process, should be entitled to any weight in evaluating a formal agency determination.
Moreover, read as a whole, Ms. Davis’s email indicates that the post-2012 removal of the
“immediately following seeding” language caused a substantive change to the meaning of the
policy. Ms. Davis states that “the changes provide more flexibility to producers,” suggesting that
producers covered after the change have more flexibility than those covered prior to the change. If
anything, this supports Defendants’ position that the Special Provisions at issue here did not
provide this flexibility to producers because they required construction of the entire levee system
immediately following seeding.
In sum, the Court finds that the FCIC Interpretation was not plainly erroneous or contrary
to regulation or the language of the Special Provisions. Therefore, Defendants’ motion for
summary judgment will be granted, and Plaintiffs’ motion will be denied.
B.
Whether the RMA Determination Should Be Set Aside on the Ground That
FCIC Lacked the Authority to Issue a Binding Interpretation of the Special
Provisions
Plaintiffs’ second contention is that the RMA Determination (RMA’s finding that FCIC
had the authority to issue a binding interpretation of the Special Provisions) should be set aside
because Defendants lacked the authority to issue a binding interpretation of the Special Provisions.
The Court will review the RMA Determination using the substantial deference standard.2
The RMA Determination appears to have been primarily an interpretation of Section 20(a)(1) of
the Basic Provisions, which is codified in regulations, and an agency’s interpretation of its own
regulation must be given controlling weight unless it is plainly erroneous or inconsistent with the
regulation. See Thomas Jefferson Univ., 512 U.S. at 512. Moreover, to the extent that the RMA
2
Plaintiffs do not appear to dispute the appropriateness of this standard.
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Determination involved an interpretation of a Manager’s Bulletin, the Eighth Circuit has held that
an agency’s interpretation of a Manager’s Bulletin is also entitled to substantial deference and will
be set aside only if plainly erroneous. See Rain & Hail, 426 F.3d at 980.
Plaintiffs assert that RMA’s finding that Section 20(a)(1) of the Basic Provisions requires
FCIC to give an interpretation of a policy provision and permits it to do so through the process
established in MGR-05-018 is contrary to the plain language of both Section 20(a)(1) and
Manager’s Bulletin, MGR-05-018. Section 20(a)(1) provides, in relevant part:
All disputes involving determinations made by us . . . are subject to mediation or
arbitration. However, if the dispute in any way involves a policy or procedure
interpretation, regarding whether a specific provision or procedure is applicable to
the situation, how it is applicable, or the meaning of any policy provision or
procedure, either you or we must obtain an interpretation from FCIC in accordance
with 7 CFR part 400, subpart X or such other procedures as established by FCIC.
(AR 107). Plaintiffs argue that this plain language only requires an interpretation from FCIC when
such an interpretation is either in accordance with “7 C.F.R. Part 400, subpart X”3 or with “such
other procedures as established by FCIC.” Plaintiffs further argue that FCIC has not established
any procedures for interpretations of the Special Provisions, and therefore Section 20(a)(1) does
not require an interpretation from FCIC. Plaintiffs point out that although Defendants purported to
issue the FCIC Interpretation pursuant to a Manager’s Bulletin (MGR-05-018), that Bulletin, by
its express terms, establishes a procedure for obtaining an “interpretation of procedures used to
settle disputes” (AR 118), not a procedure for obtaining interpretations of policy provisions.
Plaintiffs’ argument is without merit. Section 20(a)(1) plainly requires that “if the dispute
in any way involves . . . the meaning of any policy provision or procedure, either you or we must
obtain an interpretation from FCIC . . . .” 7 C.F.R. § 457.8, at 20(a)(1) (emphasis added). (AR
3
The parties appear to agree that 7 C.F.R. Part 400, subpart X is not applicable to the present case.
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108). It also states, “[a]ny interpretation by FCIC will be binding in any mediation or arbitration.”
(Id.) The Special Provisions are plainly “policy provision[s]” to which the obligation to obtain a
binding arbitration from FCIC applies. The regulation contains no qualifying language to suggest
that the obligation to obtain an interpretation from FCIC, or the binding nature of that
interpretation, is limited to situations in which FCIC has issued any particular type of procedures
for issuing the interpretation. Moreover, Defendants point to nothing in Section 20(a)(1) or
elsewhere that requires FCIC to establish a procedure for issuing such interpretations with any
particular level of formality or specificity. Apparently, FCIC’s current “procedure” for making
interpretations of Special Provisions is the procedure outlined in Manager’s Bulletin MGR-05018.
Plaintiffs appear to believe that because the Manager’s Bulletin itself does not authorize
the issuance of an interpretation of a policy provision, FCIC lacked the authority to issue such an
interpretation. However, the authority and requirement for FCIC to issue a binding interpretation
of a policy provision does not come from the Manager’s Bulletin, but from Section 20(a)(1), which
is codified as a regulation. The Manager’s Bulletin simply provides one possible procedure FCIC
may use to carry out that obligation.
In sum, RMA reasonably determined that the regulations provide that FCIC has the
obligation and authority to issue a binding interpretation of the Special Provisions. That
determination was not plainly erroneous or contrary to any regulation. Thus, the Court finds that
neither the FCIC Interpretation nor the RMA Determination should be vacated on this ground.
Defendants’ motion for summary judgment on Plaintiffs’ request to vacate the FCIC Interpretation
and RMA Determination will be granted, and Plaintiffs’ motion will be denied.
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IV.
CONCLUSION
For all of the above reasons,
IT IS HEREBY ORDERED that Plaintiffs’ Motion for Summary Judgment (Doc. 35) is
DENIED.
IT IS FURTHER ORDERED that Defendants’ Motion for Summary Judgment (Doc. 38)
is GRANTED.
A separate judgment will accompany this Memorandum and Order.
SHIRLEY PADMORE MENSAH
UNITED STATES MAGISTRATE JUDGE
Dated this 24th day of March, 2017.
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