UNITED STATES OF AMERICA v. Rouseco, Inc.
Filing
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ORDER denying 17 Motion to Compel. Counsel is reminded to read the order in its entirety for further information. Signed by US Magistrate Judge William A. Webb on 2/16/2012. (Edwards, S.)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
EASTERN DIVISION
NO. 4:11-CV-00035-F
UNITED STATES OF AMERICA
v.
ROUSECO, INC.,
Defendant.
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ORDER
This cause comes before the court upon Defendant Rouseco, Inc.’s motions to
compel and to amend the scheduling order, referred to the undersigned. (DE-17). The
United States has responded (DE-19) and the motions are accordingly ripe. For the
reasons set forth herein, the motions are DENIED.
I.
BACKGROUND
This case arises under the Fair and Equitable Tobacco Reform Act of 2004 (“FETRA”),
7 U.S.C. § 518 et seq. Congress passed FETRA in order to transition tobacco farming
from a quota-based system to a free market system. To facilitate this transition, FETRA
provides annual payments to tobacco farmers. See id. §§ 518a, 518b. The United States
Department of Agriculture (“USDA”), through the Commodity Credit Corporation
(“CCC”), funds the annual payments through quarterly assessments imposed on tobacco
importers and manufacturers.
See id. § 518d.
FETRA imposes various reporting
requirements on tobacco manufacturers, and the CCC uses these reports to calculate each
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manufacturer’s market share and consequential assessment. See id. § 518d(h). If a
company fails to provide these reports, the USDA may impose a civil penalty on the
company. Id. § 518d(h)(3). The USDA is authorized to use data from the Tobacco Tax
and Trade Bureau (“TTB”) to impose, and seek collection of, the quarterly assessments and
penalties. See 26 U.S.C. § 6103(o)(1).
Tobacco manufacturers may contest their FETRA assessments by filing an
administrative appeal with the USDA within thirty business days of receiving written
notice of the assessment. 7 U.S.C. § 518d(i); see also 7 C.F.R. § 1463.11. Following
exhaustion of the administrative appeal process, a company may obtain judicial review of
the USDA’s determination with respect to the challenged assessment. 7 U.S.C. § 518d(j).
Defendant Rouseco, Inc. (“Rouseco”) is a manufacturer of tobacco products located in
Kinston, North Carolina. On March 1, 2011, the United States filed a complaint asserting
Rouseco violated 7 U.S.C. §§ 518d and 518d(h) by failing to pay some or all of the
quarterly assessments imposed on it by the CCC, and by failing to submit its reports to the
CCC. (DE-1). Rouseco did not administratively appeal any of the USDA’s assessments
or penalties. The complaint alleges that Rouseco has failed to make any payments since
June 2007 and, as a result, owes $5,060,647.84 in unpaid assessments and penalties, which
the United States now seeks to recover. (DE-1, p.4).
Rouseco filed the instant motion to compel on January 23, 2012, contending the United
States has refused to respond to its interrogatories, requests for production, and a noticed
deposition. (DE-17). Rouseco also seeks to amend the scheduling order to extend the
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discovery deadlines. The United States responds that, because the Court’s review in this
case is limited to the administrative record, discovery beyond the administrative record is
inappropriate, and that any extension of the discovery deadlines is therefore unnecessary.
(DE-19).
II.
LEGAL BACKGROUND
Judicial review of action by an agency is generally confined to the administrative
record. See Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam) (“[T]he focal point for
judicial review should be the administrative record already in existence, not some new
record made initially in the reviewing court.”); Trinity Am. Corp. v. EPA, 150 F.3d 389,
401 n.4 (4th Cir. 1998) (“Review of agency action is limited to the administrative record
before the agency when it makes its decision.”). This principle holds true for enforcement
proceedings initiated by the government on behalf of the agency. See United States v.
Holcomb, 651 F.2d 231, 236 (4th Cir. 1981) (noting that review of an enforcement action
filed by the United States to collect a civil penalty is limited to the administrative
record); NLRB v. Southland Mfg. Co., 201 F.2d 244, 245-48 (4th Cir. 1952) (applying
administrative law principles, including restricted record review, to an enforcement action
brought by the NLRB); see also United States v. Menendez, 48 F.3d 1401, 1410 (5th Cir.
1995) (“The fact that this suit is one brought by the government for judicial enforcement
rather than one brought by a citizen to challenge agency action, does not mean that judicial
review of the agency’s action in this suit is not pursuant to the APA.”).
Moreover, where a statute is silent as to the appropriate standard of review, a court’s
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review is limited to the administrative record. See United States v. Carlo Bianchi & Co.,
373 U.S. 709, 715 (1963) (“[W]here Congress has simply provided for review, without
setting forth the standards to be used or the procedures to be followed, this Court has held
that consideration is to be confined to the administrative record and that no de novo
proceeding may be held.”); Holcomb, 651 F.2d at 236 (“Where the standard is not
specified . . . the Supreme Court has admonished that judicial review should ordinarily be
confined to the administrative record and should not be de novo.”). The introduction of
additional evidence, beyond the administrative record, would frustrate the standard of
review courts employ in reviewing administrative decisions. See Carlo Bianchi & Co.,
373 U.S. at 717 (noting that the “sound and clearly expressed purpose” of limiting review
to the administrative record “would be frustrated if either side were free to withhold
evidence at the administrative level and then to introduce it in a judicial proceeding”).
“Moreover, the consequence of [introducing new evidence] would in many instances be a
needless duplication of evidentiary hearings and a heavy additional burden in the time and
expense required to bring litigation to an end.” Id.
Because judicial review of agency action is generally confined to the administrative
record, discovery is similarly circumscribed. See, e.g., NVE Inc. v. HHS, 436 F.3d 182,
195 (3rd Cir. 2006) (“There is a strong presumption against discovery into administrative
proceedings born out of the objective of preserving the integrity and independence of the
administrative process.”); Browder v. United States Dep’t of Educ., No. 99-2290, 2000
U.S. App. LEXIS 29528 at *8 (4th Cir. Nov. 20, 2000) (per curiam) (unpublished) (noting
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the general principle that judicial review is confined to the administrative record and
concluding that “[i]n light of the extensive administrative record and appellants’ failure to
seek additional discovery before the arbitration panel, the district court did not abuse its
discretion in denying appellants’ motion for additional discovery”).
Notably, Rule
26(a)(1)(B)(i) of the Federal Rules of Civil Procedure expressly exempts an action for
review on an administrative record from the requirement of providing initial discovery
disclosures.
“However, although review is based on a limited record, ‘there may be
circumstances to justify expanding the record or permitting discovery.’” Fort Sumter
Tours v. Babbitt, 66 F.3d 1324, 1336 (4th Cir. 1995) (quoting Public Power Council v.
Johnson, 674 F.2d 791, 793 (9th Cir. 1982)), cert. denied, 517 U.S. 1220 (1996). For
example, when there is “such a failure to explain administrative action as to frustrate
effective judicial review,” the court may “obtain from the agency, either through affidavits
or testimony, such additional explanations of the reasons for the agency decision as may
prove necessary.”
Camp, 411 U.S. at 143.
Supplemental discovery may also be
permitted in cases alleging bias by an agency. See NVE, Inc., 436 F.3d at 195. “There
are also cases in which supplementation of the record through discovery is necessary to
permit explanation or clarification of technical terms or subject matter involved in the
agency action under review.” Public Power Council, 674 F.2d at 794. In addition, courts
have allowed discovery in situations where “it appears the agency has relied on documents
or materials not included in the record” such that “those challenging agency action have
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contended the record was incomplete.” Id.; see also Bar MK Ranches v. Yuetter, 994
F.2d 735, 740 (10th Cir. 1993) (“When a showing is made that the record may not be
complete, limited discovery is appropriate to resolve that question.”) (citing Tenneco Oil
Co. v. Dep’t of Energy, 475 F. Supp. 299, 317 (D.C. Del. 1979)).
The record is
incomplete if it fails to provide a court with all of the documents, memoranda, and other
evidence that was considered directly or indirectly by the agency. Public Power Council,
674 F.2d at 794.
Parties seeking discovery, however, must overcome the presumption that the
agency properly designated the administrative record with clear evidence to the
contrary. Bar MK Ranches, 994 F.2d at 740; see also Tafas v. Dudas, 530 F. Supp. 2d
786, 795 (E.D. Va. 2008) (“Courts must apply this presumption absent clear evidence that
those duties were improperly discharged”); Blue Ocean Inst. v. Gutierrez, 503 F. Supp. 2d
366, 369 (D.D.C. 2007) (“[T]he agency enjoys a presumption that it properly designated
the administrative record.”).
“Clear evidence may be demonstrated by a ‘strong,’
‘substantial,’ or ‘prima facie’ showing that the record is incomplete.” Tafas, 530 F. Supp.
2d at 795 (citations omitted).
With these legal precepts in mind, the undersigned
considers the instant motion to compel.
III.
ANALYSIS
The United States instituted this lawsuit as an enforcement action under FETRA
and pursuant to 15 U.S.C. § 714b(c), which authorizes the CCC to “sue and be sued.” As
neither FETRA nor the statutory cause of action expressly provides for de novo judicial
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review of USDA’s actions, the Court’s review of the enforcement action brought by the
government is generally limited to the administrative record.
142; Carlo Bianchi & Co., 373 U.S. at 715.
Camp, 411 U.S. at
Because review is limited to the
administrative record, the discovery of additional information beyond the administrative
record is unnecessary and will not lead to the discovery of relevant evidence. Rouseco did
not challenge the assessments through an administrative appeal. Although Rouseco
contends it needs additional information to defend the present action, the United States
submits that all of the information the CCC used to base its assessments may be found in
the administrative record. (DE-16). Rouseco has not overcome the presumption of
regularity with any “clear evidence” that the administrative record is incomplete. Bar MK
Ranches, 994 F.2d at 740. Indeed, Rouseco notes that it served its requests for discovery
before production of the administrative record. (DE-18, p.3). Nor does Rouseco allege
any agency bias or articulate any need to clarify technical terms. As Rouseco fails to offer
any clear evidence to justify discovery beyond the present record, the motion to compel is
denied. See Nat’l Res. Def. Council v. United States EPA, No. Civ. RDB 03-2444, 2005
U.S. Dist. LEXIS 45449, at *26-34 (D. Md. May 24, 2005) (denying motion to compel
discovery and limiting discovery to the administrative record).
IV.
CONCLUSION
Because Rouseco has failed to show that it is entitled to specific discovery beyond
the administrative record already produced, the motion to compel is DENIED. (DE-17).
As such, there is no need to amend the scheduling order to allow for additional discovery,
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and the motion to amend (DE-17) is accordingly DENIED as well.
DONE AND ORDERED in Chambers at Raleigh, North Carolina on Thursday,
February 16, 2012.
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WILLIAM A. WEBB
UNITED STATES MAGISTRATE JUDGE
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