Mt. Valley Farms and Lumber Products, L.L.C. et al v. Federal Crop Insurance Corporation

Filing 31

MEMORANDUM (eo, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
MT. VALLEY FARMS AND
LUMBER PRODUCTS, L.L.C.
MT. VALLEY TIMBER
RESOURCES, L.L.C.

:
:
:
:
:
Plaintiffs,
:
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v.
:
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FEDERAL CROP INSURANCE,
:
U.S. DEPT. OF AGRICULTURE, :
:
Defendant.
:

1:10-cv-2327

Hon. John E. Jones III
Hon. Mildred E. Methvin

MEMORANDUM
February 7, 2012
THE BACKGROUND OF THIS MEMORANDUM IS AS FOLLOWS:
This matter is before the Court on the Report and Recommendation
(“R&R”) of Magistrate Judge Mildred E. Methvin (Doc. 25), filed on October 31,
2011, which recommends that this court reverse an administrative decision of the
Risk Management Agency (“RMA) of the United States Department of Agriculture
(“USDA”), and enter judgment in favor of Plaintiffs, finding that they followed
good farming practices (“GFP”) in 2009, thus permitting their crop insurance
claims be paid. Defendant Federal Crop Insurance Corp. (“Defendant” or “FCIC”)

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filed objections to the R&R on November 11, 2011, to which the Plaintiffs
responded. (Docs. 28 and 30). Accordingly, this matter is ripe for disposition.
For the reasons set forth below, the Court will adopt the Magistrate Judge’s R&R
in its entirety.
I.

BACKGROUND1
Plaintiffs Mt. Valley Farms and Lumber Products, L.L.C. and Mt. Valley

Timber Resources, L.L.C. (“Lumber” and “Timber” respectively or “Plaintiffs”
collectively) own and operate apple and peach orchards on separate tracts of land
in Adams County, Pennsylvania. Plaintiffs each purchased a crop insurance policy
from Agriserve covering their 2009 apple crops.2 The policies covered losses
caused by “drought, flood, or other natural disaster,” but not losses caused by “the
failure of the producer to follow good farming practices.” The term good farming
practices (“GFP”) is defined in the Common Crop Insurance Policy Basic
Provisions under the Act as:
Plaintiffs, two separately incorporated components of a family-owned
orchard business, filed the instant civil action on November 10, 2010. (Doc. 1).
Plaintiffs named the FCIC as the sole Defendant to the action. In the interest of
judicial economy, the well-worded history of this case offered in Magistrate Judge
Methvin’s R&R will not be reproduced here. In its place is a summary.
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2

Agriserve is an Approved Insurance Provider, defined as a private
insurance company approved and reinsured by FCIC for providing coverage to
producers participating in programs authorized by the Federal Crop Insurance Act
(“the Act”). 7 C.F.R. § 400.701; 7 U.S.C. § 1501 et seq.
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The production methods utilized to produce the insured crop and
allow it to make normal progress toward maturity and produce at least
the yield used to determine the production guarantee or amount of
insurance, including any adjustments for late planted acreage, which are:
(1) for conventional or sustainable farming practices, those generally
recognized by agricultural experts for the area ... [The insurer] may, or
[the producer] may request [the insurer] to, contact FCIC to determine
whether or not production methods will be considered to be “good
farming practices.”
(Doc. 7-1, at 37). Bulletin MGR-05-010 states that it is the provider’s
responsibility to decide:
[W]hether (1) production methods that were used by the producer, or
will be used by the producer, are considered GFP in accordance with the
terms of the policy, and (2) that the producer followed GFP for the
insured unit in question. This will typically occur during the loss
adjustment process.
(Doc. 7-1, at 26).
In March of 2009, Agriserve sent its inspector and adjuster, Ronald
Sollenberger (“Sollenberger”), to Plaintiffs orchards to determine the ability of the
Plaintiffs to receive insurance coverage. Sollenberger reported on the Plaintiffs’
fertilization program, feral bee pollination process, management of the orchard
operations, and of the orchards’ condition. Sollenberger’s report indicated that 95100% of the Plaintiffs’ acreage was insurable, and that the trees had “sufficient
vigor to produce the average yield computer for this unit.” (Doc. 7-1, at 67).

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On April 13, 2009, Lumber filed a loss claim with Agriserve, and Timber
filed similar loss claims on April 13 and July 28, 2009 for the loss of Plaintiffs’
2009 apple crop. In aid of evaluating of the claims, Agriserve sent Sollenberger to
inspect plaintiffs’ orchards on four separate occasions, three of which were during
the growing season. Agriserve also hired Win Cowgill (“Cowgill”), Professor and
Head of Rutgers Cooperative Extension in New Jersey, to evaluate Plaintiffs’
operations and issue an export report. Agriserve also considered, in connection
with the claims evaluation, a report of the USDA Farm Service Agency (“FSA”).
Sollenberger’s reports attributed the damage done to Plaintiffs’ orchards to
poor weather and other factors outside of the farmers’ control. Cowgill’s report,
however, conflicted with Sollenberger’s four reports. Although Cowgill
recognized that he had not observed the orchards during the bloom season, Cowgill
nonetheless offered his speculation that “with trees in such a weakened state[,] it
would be hard to envision that they had adequate bloom to set crop.” (Doc. 7-1, at
78). He declared that Lumber and Timber were “not a well-managed orchard
operation.” (Id.). The FSA report similarly offered a poor review of the farming
practices utilized by Plaintiffs.
On November 16, 2009, Agriserve denied both Plaintiffs’ insurance claims,
substantially relying upon Cowgill’s report and that of the FSA, and largely

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ignoring the reports of its own adjuster, Sollenberger. Agriserve based its denial of
Plaintiffs’ claim on its determination that Plaintiffs did not follow recognized GFP
for the 2009 crop year. In response, Plaintiffs requested administrative review of
Agriserve’s decision. The Raleigh Regional Office (“RRO”) of the USDA’s RMA
determined that the Plaintiffs had failed to follow GFP in five respects. On
reconsideration, the RMA affirmed the RRO’s GFP finding on three of the five
grounds. Plaintiffs thereafter sought judicial review of the RMA’s decision in this
Court. The matter was subsequently referred to Magistrate Judge Methvin for her
review. In her resulting R&R, the Magistrate Judge recommends that this Court
reverse the findings of the RMA and enter judgment in favor of Plaintiffs, so that
their crop insurance claims are paid by Agriserve.
II.

STANDARDS OF REVIEW
A.

Review of Magistrate Judge’s R&R

When objections are filed to the report of a magistrate judge, the district court
makes a de novo determination of those portions of the report or specified proposed
findings or recommendations to which objections are made. 28 U.S.C. § 636(b)(1);
United States v. Raddatz, 447 U.S. 667, 674-75 (1980). The court may accept,
reject, or modify, in whole or in part, the magistrate judge’s findings or
recommendations. Id. Although the standard of review is de novo, 28 U.S.C. §

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636(b)(1) permits whatever reliance the district court, in the exercise of sound
discretion, chooses to place on a magistrate judge’s proposed findings and
recommendations. Raddatz, 447 U.S. at 674-75; see also Mathews v. Weber, 423
U.S. 261, 275 (1976); Goney v. Clark, 749 F.2d 5, 7 (3d Cir. 1984).
B.

7 U.S.C. §1508(a)(3)(B)(iii)(II) Review of Administrative Decision

Under 7 U.S.C. §1508(a)(3)(B)(iii)(II), the reviewing court’s discretion is
“narrow” and the court may not “substitute its judgment for that of the agency.”
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983). The agency is only required to “examine the relevant data and articulate a
satisfactory explanation for its action including a ‘rational connection between the
facts found and the choice made.’” Id. (quoting Burlington Truck Lines v. United
States, 371 U.S. 156, 168 (1962). The reviewing court must determine whether the
agency’s decision “was based on a consideration of the relevant factors and whether
there has been a clear error of judgment.” Id. (quoting Bowman Transp., Inc. V.
Ark-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974), and Citizens to Preserve
Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), abrogated on other grounds
by Califano v. Sanders, 430 U.S. 99 (1997)). An agency’s decision may be found
arbitrary or capricious if:
the agency has relied on factors which Congress has not intended it to
consider, entirely failed to consider an important aspect of the problem,
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offered an explanation for its decision that runs counter to the evidence
before the agency, or is so implausible that it could not be ascribed to a
difference in view or the product of agency expertise.
Id. A court cannot “supply a reasoned basis for the agency’s action that the agency
itself has not given,” but will “uphold a decision of less than ideal clarity if the
agency’s path may reasonably be discerned.” Id. (quoting SEC v. Chenery Corp.,
332 U.S. 194, 196 (1947), and Bowman Transp., Inc., 419 U.S. at 286).
III.

DEFENDANT’S OBJECTIONS
The Defendant’s objections to the R&R voice the FCIC’s opinion that

Magistrate Judge Methvin’s recommendation oversteps the scope of review
afforded to the district court when reviewing a federal agency’s administrative
determination. Defendant argues that the determination of whether the Plaintiffs
followed GFP, at least as it relates to apple orchards, is “extremely technical and
specialized,” and, as such, the RMA should be afforded “great deference” in its
handling of Plaintiffs’ insurance claims. The FCIC specifically argues that
Magistrate Judge Methvin erred in the following ways: A) by misconstruing the
agency’s scope of review during the reconsideration process; B) by drawing factual
conclusions not supported within the record when discussing pollination; C) by
finding that RMA failed to consider important aspects surrounding Plaintiffs’
disease control methods; D) by finding that RMA failed to consider all relevant

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factors in rendering its decision that Lumber failed to adequately fertilize its
orchard; and E) by misconstruing the burden of showing causation in a GFP
determination. We shall discuss the merits of each objection in turn.
IV.

DISCUSSION
A.

RMA’s Scope of Review

As Magistrate Judge Methvin correctly notes, the RRO and the RMA were
limited under the applicable law to a determination of whether Plaintiffs followed
GFP in the 2009 growing season. Matters of insurability or causes of crop loss
unrelated to farming practices are beyond the scope of RMA’s review and to the
judicial review of RMA’s reconsideration. Title 7 C.F.R. § 400.91(a)(2), (b)(2).
However, this section does not alleviate an administrative agency of its burden to
“articulate a satisfactory explanation for its action including a ‘rational connection
between the facts found and the choice made.” Motor Vehicle Mfrs. Ass’n v. State
Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983). Here, Magistrate Judge Methvin
reasoned, and we agree, that the RMA did not articulate any reason as to why the
reports of the FSA and Cowgill were favored over those of Sollenberger,
Agriserve’s own inspector and adjuster. This absence of support does, in our view,
justify Judge Methvin’s determination that RMA’s evaluation was arbitrary and
capricious.

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B.

Pollination Analysis

Defendant argues that Magistrate Judge Methvin improperly used the
successful pollination of Plaintiffs’ peach trees, which were adjacent to the
damaged apple orchard, as evidence that Plaintiffs’ pollination methods must
exemplify GFP. It appears that Defendant is correct when noting that peach trees
are self-pollinating while apple trees are not, thus Plaintiffs’ decision not to rent bee
hives to further pollinate the trees would not affect the peach trees as it would the
apple trees. However, Magistrate Judge Methvin’s comparison of peach trees to
apples trees, which may have been an inartful one, was but a single point in a
lengthy discussion about the use of commercial bee hives during the pollination
process. Magistrate Judge Methvin also cites a letter from Michael Trimmer, a
sales representative from Helena Chemical Company, who wrote a letter in support
of Plaintiffs’ position, in which he stated:
The overwhelming majority of growers today do not rent hives, and the
few that do rent hives use only a fraction of suggested amounts. Growers
that I know who have not rented bees for over ten years have not seen a
difference in their apple crops compared to their neighbors who do rent
hives.
(Doc. 7-3, at 30). Most importantly, Magistrate Judge Methvin also relied upon
Sollenberger’s report made prior to the growing season wherein he concluded that
the Plaintiffs’ practice of relying on wild bees for pollination was GFP. Although

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Defendant argues that Magistrate Judge Methvin misconstrued Sollenberger’s
statement by giving it more weight than a preliminary report deserves, this
argument is unavailing because it was Agriserve’s responsibility to ensure that the
farmers it insures use GFP. Agriserve knew that Plaintiffs were not renting bees
prior to and at the time it issued its policy. Thus, Magistrate Judge Methvin
properly determined that the RMA could not now allow Agriserve to claim that the
practice of using wild bees to pollinate the apple orchard is not GFP. Second, since
Sollenberger’s statement establishes that Agriserve determined Plaintiffs’ reliance
on wild bees for pollination was GFP, all Plaintiffs must show to prove that they
followed GFP with respect to pollination is that they in fact relied upon wild bees
for pollination. There is no dispute as to whether Plaintiffs relied upon wild bees,
so their pollination practices must be considered GFP under the policy.
C.

Rainfall Analysis and Plaintiffs’ Disease Control Methods

While Defendant is correct in its assessment that Mr. Trimmer’s statements,
as they pertain to rainfall, cannot be relied upon because Mr. Trimmer has a
business relationship with Plaintiffs and did not cite a published report to support
his statements, Defendant’s attempts to degrade the weight of Dr. Ngugi’s analysis
of rainfall and its affects on Plaintiffs’ orchards are suspect. Defendant cites a chart
from the National Weather Service in an effort to show that Plaintiffs and Dr. Ngugi

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overemphasized the affect of the rain on Plaintiffs’ orchards. (See Doc. 29-1).3
However, the National Weather Service chart was not included in the record and
made its first appearance in Defendant’s objection to Magistrate Judge Methvin’s
R&R. As such, this Court has no obligation to consider the chart; however, even if
we were to consider it, the chart would not hold significant weight when compared
to Dr. Ngugi’s report because the chart shows rainfall in Harrisburg, Pennsylvania
and not rainfall at the orchard in question, located in Adams County, Pennsylvania.
As a general report on rainfall in Harrisburg, the chart would seem to shed little
light on the issue of rainfall at Lumber’s and Timber’s orchards that are situated
well south of the City.4
Further, Magistrate Judge Methvin properly determined that Defendant’s
assertion that Plaintiffs failed to follow GFP when they discontinued use of the
disinfectant spray upon detecting mature ascospores a few miles away from
Plaintiffs’ orchards was unavailing. By discontinuing their spraying regimen upon
the detection of apple scab, Plaintiffs followed the guidelines set out in the very

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The chart shows daily rainfall in Harrisburg during the months of April, May, and June

of 2009.
4

Similarly, Defendant’s reliance on the general reporting of the Fruit Times is misplaced.
Defendant encourages the court to read Fruit Times as a clear assessment that rainfall could not
have played a major roll in the damaging of Plaintiffs’ orchards. However, Defendant’s citation
to a statement in the Fruit Times which reads that a rain and infection period occurred from April
13th through the 16th does not prove Defendant’s point that no other rain periods occurred.

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same Fruit Times article that Defendant repeatedly cites in support of its position
The article clearly states that a farmer should “discontinue any sterol inhibitor ... or
strobilurin ... applications for apple scab” once apple scab is detected. (Doc. 7-4, at
21.). As such, we agree with Magistrate Judge Methvin that the Plaintiffs utilized
GFP when making their decision to discontinue the disinfectant spray.
D.

Fertilization Analysis

Despite Defendant’s objection, we also agree with Magistrate Judge
Methvin’s analysis as to RMA’s treatment, or lack thereof, of Plaintiffs’
fertilization procedures. Specifically, Magistrate Judge Methvin determined that
the RMA’s decision was not based on a consideration of all relevant factors and was
a clear error of judgment because the RMA based its decision regarding fertilization
only on a visual inspection, when other, objective tests were available. Based on our
review of the record, we agree with Magistrate Judge Methvin that the RMA’s
determination regarding Plaintiffs’ fertilization procedures based on a visual
inspection only was arbitrary and capricious.

E.

Burden of Causation in a GFP Determination

Finally, we agree with Magistrate Judge Methvin that, even if there was a
hypothetical lapse in the Plaitniffs’ GFP, the record lacks substantial evidence to

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support a finding that the GFP was the cause of the crop loss. Notably, the one
report that directly addressed causation, Dr. Ngugi’s report, concluded that poor
weather conditions, not poor GFP, led to the infection and ultimate loss of
Plaintiffs’ apple crop.
V.

CONCLUSION
Accordingly, for the reasons set forth above, the Defendant’s objections are

overruled and the R&R shall be adopted in its entirety. An appropriate Order shall
issue.

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