995 F.3d 528
6th Cir.2021Background
- Watts & Associates submitted a 508(h) proposal (2011) to create revenue-protection insurance for dry beans in MN/ND using AMS Bean Market News data to set projected and harvest prices; the Board approved the submission for the pilot.
- The endorsement text actually used in MN/ND policies (sold to farmers) defaulted the harvest price to the projected price when AMS data were insufficient, whereas the 2011 FCIC-approved 508(h) materials included language saying the FCIC/RMA would determine the harvest price in that event.
- In 2013 Watts submitted a maintenance/expansion package to extend the pilot to Michigan; the Michigan endorsement used the same ‘‘default-to-projected-price’’ mechanism that appeared in the MN/ND sold policies, creating a material pricing-method difference from the FCIC‑approved Minnesota 508(h) submission.
- The FCIC treated the Michigan expansion as a "non-significant" change and approved it without new expert review; in 2015 AMS/Bean Market News published insufficient data, so the Michigan endorsements defaulted harvest prices to projected prices and many Michigan farmers received no revenue-protection payout.
- The farmers sued the USDA/FCIC; the district court granted summary judgment for the government after the government mistakenly represented that the Minnesota-approved 508(h) and the Michigan submission used the same pricing mechanism. On appeal the Sixth Circuit reversed in part, holding the FCIC’s approval was procedurally defective and arbitrary and capricious with respect to Count II, and affirmed dismissal on Count I.
Issues
| Issue | Farmer's Argument | Gov't/FCIC Argument | Held |
|---|---|---|---|
| Whether the Michigan 508(h) expansion was a "significant change" from the approved Minnesota 508(h) (triggering expert review) | The Michigan submission changed pricing methodology (default-to-projected vs. agency-determined) — that is a significant change under 7 C.F.R. § 400.701 | The change was non-significant; any challenge is forfeited/waived and, in any event, the record supports non-significance | Reversed on this point: the change was "significant"; FCIC violated procedure by not treating it as a new 508(h) and by not obtaining expert review |
| Whether FCIC acted arbitrarily and capriciously by failing to analyze the effects of the Michigan default-pricing mechanism on producers' interests | FCIC failed to consider an important aspect (the effect of defaulting to projected prices), so approval was arbitrary and capricious under the APA | FCIC sufficiently considered data-sparsity risk; agency discretion and deference apply | Held for Farmers on Count II: agency action arbitrary and capricious for failing to analyze the Michigan pricing mechanism |
| Whether Farmers forfeited/waived the right to challenge the procedural error because they did not raise it earlier | Farmers preserved the issue; the court should consider the merits despite government misstatements | Gov't argued plaintiffs forfeited the argument by failing to timely identify the difference | Court exercised discretion to reach the merits and rejected gov't forfeiture argument |
| Whether the Michigan endorsement should be reinterpreted to give FCIC discretion (Farmers’ Count I) | Farmers argued endorsement text should be read to afford FCIC discretion to set the harvest price | Gov't argued the text unambiguously defaulted to projected price; district court agreed | Affirmed for Gov't on Count I: Farmers’ textual reinterpretation claim was without merit |
Key Cases Cited
- Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (2016) (agency approval may be arbitrary and capricious if it fails to consider important aspects of the issue)
- Marsh v. Oregon Natural Resources Council, 490 U.S. 360 (1989) (courts should defer to agency expertise on matters like whether a change is "significant")
- F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502 (2009) (court may uphold agency decisions of less-than-ideal clarity if the agency’s path can reasonably be discerned)
- Nat'l Ass'n of Home Builders v. Defs. of Wildlife, 551 U.S. 644 (2007) (agency action arbitrary and capricious when it entirely fails to consider an important aspect)
- Ky. Waterways All. v. Johnson, 540 F.3d 466 (6th Cir. 2008) (standard of review for district-court grants of summary judgment reviewing agency action)