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Struss v. United States Department of Agriculture

United States District Court, D. Kansas

June 14, 2019

KEVIN STRUSS; STRUSS FARMS, L.L.C.; and STRUSS & COOK FARMS, Plaintiffs,
v.
UNITED STATES DEPARTMENT OF AGRICULTURE; RISK MANAGEMENT AGENCY; and FEDERAL CROP INSURANCE CORPORATION, Defendants.

          MEMORANDUM AND ORDER

          JOHN W. LUNGSTRUM, UNITED STATES DISTRICT JUDGE

         Plaintiffs seek judicial review of defendants' Final Agency Determination (FAD-277) under 5 U.S.C. § 706, a provision of the Administrative Procedures Act (APA), and the parties have submitted the matter for decision by the Court on written briefs (Doc. ## 21, 27, 30) based on the administrative record. For the reasons set forth below, the Court concludes that defendants' action in issuing FAD-277 was not arbitrary or capricious, and the Court therefore denies plaintiffs' request to set aside that action. Judgment will therefore be entered in favor of defendants in this matter.

         I. Background

         Defendant Federal Crop Insurance Corporation (FCIC) and defendant Risk Management Agency (RMA) are agencies of defendant United States Department of Agriculture (USDA). FCIC administers a program of crop insurance under the Federal Crop Insurance Act (FCIA), 7 U.S.C. §§ 1501 et seq. FCIC issues crop insurance policies and also provides reinsurance for policies issued by private insurance companies known as approved insurance providers (AIPs). RMA administers the program on behalf of FCIC. For purposes of this case, there is no distinction between FCIC and RMA.

         Defendants have issued regulations to carry out this program of crop insurance. One such regulation, 7 C.F.R. § 457.8, sets out certain terms, known as the Basic Provisions, that must be included in and govern any policy under the program. Other regulations provide that a program participant may request a final agency determination (FAD) by which FCIC interprets the FCIA or the authorized regulations. See 7 C.F.R. §§ 400.765-400.768.

         In 2016, plaintiffs suffered losses with respect to their corn crop, and they submitted claims to an AIP under seven crop insurance policies subject to the federal program. According to plaintiffs' complaint in this matter, the AIP denied the claims because plaintiffs failed to provide certain production records for corn that they were able to harvest and sell. Plaintiffs requested an FAD interpreting the applicable Basic Provisions from the regulations. On January 16, 2018, defendants issued FAD-277, in which they rejected plaintiffs' proposed interpretation. Plaintiffs exhausted administrative remedies and subsequently filed the instant action seeking judicial review of FAD-277.

         II. Governing Standards

         Plaintiffs seek review under 5 U.S.C. § 706(2)(A), which provides that the reviewing court shall hold unlawful and set aside any agency action found to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” See Id. The Court's review under that standard is “highly deferential.” See Citizens' Committee to Save Our Canyons v. Krueger, 513 F.3d 1169, 1176 (10th Cir. 2008). The reviewing court ascertains whether the agency considered the relevant factors and articulated a rational connection between any facts found and the decision made, and whether the agency made a clear error of judgment. See Id. “A presumption of validity attaches to the agency action and the burden of proof rests with the [parties] who challenge such action.” See Id. (quoting Colorado Health Care Ass'n v. Colorado Dept. of Soc. Servs., 842 F.2d 1158, 1164 (10th Cir. 1988)).

         In the present case, the agencies did not find facts but simply interpreted their own regulation. When an agency interprets its own regulation, the reviewing court defers to that agency interpretation “unless that interpretation is plainly erroneous or inconsistent with the regulation.” See Decker v. Northwest Environmental Defense Center, 568 U.S. 597, 613 (2013) (internal quotation and citations omitted). The reviewing court will also defer to the agency interpretation if there is no indication that the agency's current view “is a change from prior practice or a post hoc justification adopted in response to litigation.” See Id. at 614 (internal quotation and citation omitted). “It is well established that an agency's interpretation need not be the only possible reading of a regulation - or even the best one - to prevail.” See Id. at 613.

         III. Analysis

         The reviewed agency determination, FAD-277, addressed Section 14 of the Basic Provisions, 7 C.F.R. § 457.8 sec. 14, which sets forth certain duties of the insured and the AIP in the event of a loss. See Id. Section 14(e)(4) states that in order to receive any indemnity under a policy, the insured must “provide” “[a] complete harvesting, production, and marketing record of each insured crop by unit including separate records showing the same information for production from any acreage not insured;” certain other records; and any other information required to settle the claim. See Id. sec. 14(e)(4)(i). Section 14(e)(4) also imposes duties on the insured to cooperate with the AIP in the investigation or settlement of the claim, including by providing any records requested; to establish the total production or value received for the insured crop and to establish that the insured has complied with all provisions of the policy; and to submit to an examination under oath upon request. See Id. sec. 14(e)(4)(ii)-(iv). Section 14(e)(5) states as follows: “Failure to comply with any requirement contained in section 14(e)(4) will result in denial of the claim . . . .” See Id. sec. 14(e)(5).

         In requesting an FAD, plaintiffs presented the following question:

Is the denial of a claim under Sections 14(e)(4)(i) and 14(e)(5) proper when an insured producer inadvertently fails to supply some, but not all, of its harvesting or production records to the AIP and the AIP obtains the missing harvesting or production records from third parties such as grain elevators through the independent loss adjustment ...

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