SHOW, Incorporated v. U.S. Dept of AgricultSHOW, Incorporated v. U.S. Dept of Agricult
Contender Farms, L.L.P. and Mike McGartland appeal the district court‘s order granting summary judgment in favor of the United States Department of Agriculture (“USDA“). McGartland owns Contender Farms, and each actively participates in the Tennessee walking horse industry by buying, selling, and exhibiting horses. They challenge a USDA regulation (the “Regulation“) promulgated under the Horse Protection Act (“HPA“),
According to Contender Farms and McGartland, this new Regulation exceeds the USDA‘s rulemaking authority under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), violates the Administrative Procedure Act,
At summary judgment, the district court held that Contender Farms and McGartland presented a justiciable controversy, but it entered a final judgment in favor of the USDA on the merits of the challenge, concluding that the Regulation is valid. The parties renew these arguments on appeal. For the reasons that follow, we AFFIRM the district court‘s holding as to justiciability, REVERSE and VACATE its ruling on the merits, and REMAND the case for entry of judgment in favor of Contender Farms and McGartland.
I.
To resolve this appeal, we must interpret both the HPA and the USDA regulations promulgated under the HPA. Ultimately, we must decide whether
The HPA requires the USDA to “prescribe by regulation requirements for the appointment by the management of any horse show, horse exhibition, or horse sale or auction of persons qualified to detect and diagnose a horse which is sore or to otherwise inspect horses for the purposes of enforcing this chapter.”
Pursuant to the provisions of
Under this program, an event‘s management that wishes to have DQPs perform inspections contracts with an HIO, which then provides the DQPs who perform the inspections. To participate in the event, a competitor must agree to be bound by that HIO‘s procedures. Traditionally, HIOs imposed penalties for soring violations and provided procedures for appealing those penalties. HIOs were free, however, to vary their penalties and appeals procedures, and competitors had a choice to select events, which could be based in part on a particular HIO‘s penalties and procedures. Both parties admit that HIO penalties varied, with some imposing mandatory suspensions for certain soring violations and others declining to impose the more stringent penalties.
For years the USDA has sought to reduce such disparities among HIOs. Initially, the USDA entered into voluntary “Operating Plans” with HIOs whereby cooperating HIOs agreed to impose certain penalties for partiсular violations and honor suspension lists from other HIOs. In 2010, the HIOs could not agree with the USDA on an operating plan. That same year the USDA Office of Inspector General released a report (the “OIG Report“), which concluded that the private system of HPA enforcement through HIOs yielded inconsistent enforcement of the HPA and failed to address adequately the problem of soring.
As a result of the OIG Report, the USDA proposed the Regulation. It solicited public comments on the Regulation and adopted it as a Final Rule in June 2012. The Regulation requires that HIOs adopt mandatory minimum penalties for a number of soring violations as a condition of certification for participation in the DQP program.
II.
We first consider whether Contender Farms and McGartland present a justiciable controversy. The USDA has raised an issue of standing and an issue of ripeness. We review both issues de novo, and we examine each in turn. Roark & Hardee LP v. City of Austin, 522 F.3d 533, 542 (5th Cir. 2008).
A.
We begin with the basic proposition that the Constitution limits our jurisdiction to “Cases” and “Controversies.”
Contender Farms and McGartland can satisfy the constitutional elements of standing by “present[ing] (1) an actual or imminent injury that is concrete and particularized, (2) fairly traceable to the defendant‘s conduct, and (3) redressable by a judgment in [their] favor.” Duarte ex rel. Duarte v. City of Lewisville, Tex., 759 F.3d 514, 517 (5th Cir. 2014). They must also support
1.
We initiate our discussion by addressing a basic question that underlies all three elements of standing—“whether the plaintiff is himself an object” of the challenged regulation. Id. at 561. If a plaintiff is an object of a regulation “there is ordinarily little question that the action or inaction has caused him injury, and that a judgment preventing or requiring the action will redress it.” Id. at 561–62. By contrast, “when the plaintiff is not himself the object of the government action or inaction he challenges, standing is not precluded, but it is ordinarily substantially more difficult to establish.” Id. at 562 (internal quotation marks omitted). As this distinction is often a helpful guidepost in the standing inquiry, we examine this matter first and conclude that Contender Farms and McGartland are objects of the Regulation. See Duarte, 759 F.3d at 518.
Whether someone is in fact an object of a regulation is a flexible inquiry rooted in common sense. For example, in Duarte, we addressed a city ordinance prohibiting registered sex offenders from establishing residence near areas where children gather. Id. at 515. A registered sex offender, along
The Third Circuit applied a similar analysis when a number of sports leagues challenged a New Jersey statute permitting betting on many types of sporting events. Nat‘l Collegiate Athletic Ass‘n v. Governor of New Jersey, 730 F.3d 208 (3d Cir. 2013) (”NCAA“). In NCAA, the court noted that New Jersey‘s law “does not directly regulate the Leagues, but instead regulates the activities that may occur at the State‘s casinos and racetracks.” Id. at 219. Although the court expressed reluctance in concluding that the sports leagues could satisfy the standing requirements merely by pointing to the statute, it noted that the law is “in a sense, as much directed at the Leagues’ events as it is aimed at the casinos.” Id. Thus, “[t]his is not a generalized grievance like those asserted by environmental groups over regulation of wildlifе in cases where the Supreme Court has found no standing.” Id.
Applying this commonsense approach to the facts in this case, it is clear that Contender Farms and McGartland are objects of the Regulation. By its terms, the Regulation requires an HIO to enforce USDA-approved minimum suspension penalties for many types of soring violations.
The Regulation requires that an HIO “provide a process in its rulebook for alleged violators to appeal penalties.”
We find unpersuasive the USDA‘s argument that the Regulation targets only those horse owners who sore horses, not owners like Contender Farms and McGartland who purportedly do not. All participants in a competition that uses HIOs agree at the outset to be bound by the terms of the HIO‘s rulebook, which includes the now-mandatory suspension and appeal procedures. The participants also agree to be bound by the inspection procedures. As the record indicates, inspections are far more art than science. In many cases, inspectors, veterinarians, and other professionals will disagree as to whether a horse is actually a sore. The record also suggests that those who actually sorе their horses will go to great lengths to hide the results in order to avoid detection, which further muddies the waters with regard to inspections.
Finally, we also reject the USDA‘s argument that Contender Farms and McGartland lack standing because they are not “forced” to use HIO-affiliated shows. The record establishes that the preeminent events in the Tennessee walking horse industry affiliate with HIOs; Contender Farms and McGartland suggest that they could neither earn a living nor compete recreationally without participating in these events. Contender Farms and McGartland are objects of the Regulation because they participate in the type of events that the Regulation seeks to regulate, i.e., the major Tennessee walking horse events. To be clear, this Regulation actually depends on thе participation of parties like Contender Farms and McGartland. Thus, we conclude that they are objects of the Regulation.
2.
Next, we find no reason to depart from the ordinary rule that Contender Farms and McGartland, as objects of the Regulation, may challenge it. Contender Farms and McGartland demonstrate a concrete injury resulting from the Regulation that would be redressable by a favorable decision of this Court.
An increased regulatory burden typically satisfies the injury in fact requirement. See Ass‘n of Am. R.R.s v. Dep‘t of Transp., 38 F.3d 582 (D.C. Cir. 1994) (”American Railroads“). In American Railroads, challengers to a regulation argued that a new rule required them to comply with two sets of regulations enforced by two agencies instead of one. Id. at 585. The court concluded that the assertion that railroads “are materially harmed by the additional regulatory burden imposed upon thеm as the result of a federal agency‘s unlawful adoption of a rule” established standing. Id. at 586.
The Regulation amounts to an increased regulatory burden. Under the Regulation, competitors like Contender Farms and McGartland now face harsher, mandatory penalties from HIOs. Additionally, they may also face
Causation and redressability then flow naturally from the injury. The record indicates that HIOs offered a range of penalties and appeals procedures before the USDA adopted the Regulation. Although the USDA correctly notes that HIOs could impose penalties before the promulgation of the Regulation, the record indicates that a number of the HIOs previously opposed mandatory minimum suspensions.3 If we find that the Regulation is invalid, Contender Farms and McGartland can again participate in competitions with a range of available sanctions and appellate processes.
In sum, Contender Farms and McGartland have standing to challenge the Regulation because they are objects of the Regulation, and they have independently satisfied the three prongs of constitutional standing.
B.
Alternatively, the USDA contends that Contender Farms and McGartland have not presented a ripe controversy even if they can meet the elements of standing. According to the USDA, the dispute is unripe because there is only a remote possibility that Contender Farms and McGartland will actually be subject to the mandatory minimum suspensions under the
The ripeness and standing analyses are closely related, as ripeness inquires as to “‘whether the harm asserted has matured sufficiently to warrant judicial intervention.‘” Miss. State Democratic Party v. Barbour, 529 F.3d 538, 544–45 (5th Cir. 2008) (quoting Warth v. Seldin, 422 U.S. 490, 499 n.10 (1975)). The USDA argues that this is a pre-enforcement challenge to the Regulation, and in such cases “[a]n allegation of future injury may suffice if the threatenеd injury is certainly impending, or there is a substantial risk that the harm will occur.” Susan B. Anthony List v. Driehaus, 134 S. Ct. 2334, 2341 (2014) (internal quotation marks omitted). When the parties challenge a regulation, the ripeness inquiry seeks
to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties.
Abbott Laboratories v. Gardner, 387 U.S. 136, 148–49 (1967) (abrogated on other grounds by Califano v. Sanders, 430 U.S. 99, 105 (1977)).
First, we observe that Contender Farms and McGartland raise a purely legal challenge to the Regulation. If we adopt their view, the Regulation exceeds the USDA‘s authority as granted by Congress and violates various constitutional principles. Thus, “[i]t is unnecessary to wait for the [Regulation] to be applied in order to determine its legality.” Nat‘l Envtl. Dev. Ass‘n‘s Clean Air Project v. Envtl. Prot. Agency, 752 F.3d 999, 1008 (D.C. Cir. 2014). Moreover, the USDA has promulgated a final rule, and it appears from this litigation that it has every intention of requiring HIOs to adopt these
As the Supreme Court noted in Driehaus, “[n]othing in this Court‘s decisions requires a plaintiff who wishes to challenge the constitutionality of a law to confess that he will in fact violate that law.” 134 S. Ct. at 2345. The challenge here is similar to that in Driehaus, where a public interest group challenged an Ohio law prohibiting false advertising about a political candidate. The group had accused a congressional candidate of supporting a measure that included “taxpayer-funded abortion,” and the cаndidate filed a challenge based on the false advertising law. Id. at 2339. A panel found probable cause that the group violated the law, but the candidate lost and dropped his challenge before it could be finally resolved. Id. at 2339–40. To support justiciability, the group claimed that it intended to engage in similar future activity, and it sought to proceed with its challenge to the law. Id. at 2343. The Supreme Court concluded that the alleged future conduct was “arguably” proscribed by the law, particularly given its broad reach. Id. at 2344. This Regulation targets soring, which is a practice that yields a large number of “false positives.” Inspectors face significant difficulties distinguishing violators from non-violators. As in Driehaus, Contender Farms and McGartland will encounter these risks because they intend to participate in these events in thе future.
Accordingly, we hold that the dispute is ripe for review. We therefore AFFIRM the district court‘s ruling as to justiciability, and we proceed to analyze the merits of the challenge to the Regulation.
III.
Because the USDA is statutorily authorized to administer the HPA, we review the merits of the regulation under the well-established principles of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Dhuka v. Holder, 716 F.3d 149, 154 (5th Cir. 2013). Under Chevron, we must first decide whether “Congress has directly spoken to the precise question at issue,” and if it has, we apply Congress‘s answer to the question. 467 U.S. at 842–43. Alternatively, “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency‘s answer is based on a permissible construction of the statute.” Id. at 843. Our goal at all times is to effectuate congressional intent, as we presume “that Congress, when it left ambiguity in a statute administered by an agency, understood that the ambiguity would be resolved, first and foremost, by the agency, and desired the agency (rather than the courts) to possess whatever degree of discretion the ambiguity allows.” City of Arlington, Tex. v. Fed. Commc‘ns Comm‘n, 133 S. Ct. 1863, 1868 (2013) (internal quotation marks omitted).
The district court concluded that the HPA did not address the precise question at issue and, proceeding to the second prong of Chevron, it found that the USDA‘s construction of the statute was reasonable. On appeal, the USDA and its amici urge us to adopt the district court‘s interpretation of the HPA. Contender Farms and McGartland argue that the HPA addresses this issue and the statute clearly prohibits the Regulation. For the reasons that follow, we agree with Contender Farms and McGartland, and thus we REVERSE and VACATE the district court‘s ruling on this ground without reaching either the second рrong of Chevron or the various other issues that Contender Farms and McGartland raise. See Texas v. United States, 497 F.3d 491, 499 (5th Cir. 2007) (avoiding various constitutional issues by finding that the regulation at issue failed under Chevron). We outline the relevant law, parse the Regulation, and then apply the law to the HPA to decide this case.
A.
To determine whether a statute is ambiguous, we evaluate it using the “traditional tools of statutory construction.” Chevron, 467 U.S. at 843 n.9. Unlike the deference given to agency interpretations of ambiguous statutes, “[t]he judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent.” Id. Indeed, “[w]here Congress has established a clear line, the agency cannot go beyond it.” City of Arlington, 133 S. Ct. at 1874.
We determine whether a statute is ambiguous based in part on “the text itself, its history, and its purpose.” Bellum v. PCE Constructors, Inc., 407 F.3d 734, 739 (5th Cir. 2005). Canons of statutory interpretation further assist us in assessing the meaning of a statute. See Miss. Poultry Ass‘n, Inc. v. Madigan, 31 F.3d 293, 307 (5th Cir. 1994). Several basic considerations guide our inquiry under these canons: (1) we begin with the statute‘s language; (2) we give undefined words “their ordinary, contemporary, common meaning;” (3) we read the statute‘s words in proper context and consider them based on the statute as a whole; and (4) we consider a statute‘s terms in the light of the statute‘s purposes. Wilderness Soc‘y v. U.S. Fish & Wildlife Serv., 353 F.3d 1051, 1060 (9th Cir. 2003) (internal quotation marks omitted); see also Bell Atl. Tel. Cos. v. Fed. Commc‘ns Comm‘n, 131 F.3d 1044, 1047 (D.C. Cir. 1997) (explaining that “text, legislative history, and structure” are traditional tools of statutory interpretation).
Our review is ultimately “‘bound, not only by the ultimate purposes Congress has selected but by the means it has deemed appropriate, and prescribed, for the pursuit of those purposes.‘” Texas, 497 F.3d at 502 (quoting MCI Telecomm. Corp. v. AT&T Co., 512 U.S. 218, 231 n.4 (1994)) (emphasis removed). We do not merely presume that a power is delegated if Congress does not expressly withhold it, as then “‘agencies would enjoy virtually
With these principles in mind, we turn first to the challenged Regulation and then to the USDA‘s regulatory authority under the HPA.
B.
Speaking somewhat broadly, we can say that the Regulation alters but does not eliminate the longstanding practices surrounding the DQP program: HIOs train and certify DQPs according to USDA requirements, which persons then inspect horses at those shows at which the management has contracted with an HIO to provide DQPs. We will now proceed to the relevant aspects of the Regulаtion.
First, the Regulation imposes mandatory minimum penalties that must be assessed by HIOs for soring violations. Previously, HIOs developed and enforced their own penalties according to their rulebooks. Although HIOs were required to provide copies of these rulebooks to the USDA, the USDA was not formally involved in writing or imposing penalty assessments. See
Second, the Regulation requires that HIOs establish particular appeals procedures to address disagreements over DQP findings of violations. Specifically, the Regulation provides:
The HIO must provide a process in its rulebook for alleged violators to appeal penalties. The process must be approved by the Department. For all appeals, the appeal must be granted and the case heard and decided by the HIO or the violator must begin serving the penalty within 60 days of the date of the violation. The HIO must submit to the Department all decisions on penalty appeals within 30 days of the completion of the appeal. When a penalty is overturned on appeal, the HIO must аlso submit evidence composing the record of the HIO‘s decision on the appeal.
The Department retains the authority to initiate enforcement proceedings with respect to any violation of the Act, including violations for which penalties are assessed in accordance with this section, and to impose the penalties authorized by the Act if the Department determines that such actions are necessary to fulfill the purpose of the Act and this part. In addition, the Department reserves the right to inform the Attorney General of any violation of the Act or of this part, including violations for which penalties are assessed in accordance with this section.
In sum, the Regulation is an indisputably significant effort by the USDA to become involved in HIO enforcement procedures. Although participants in horse shows have always been subject to regulations from both HIOs and the USDA, the USDA has now taken intrusive steps into the private scheme to strengthen the penalties that HIOs must levy against those found to sore horses. Additionally, the USDA significantly increased its oversight of HIO review procedures. In the past the HIOs could develop their own appeal procedures, but these procedures must now be approved by the USDA and reconfigured in accordance with the USDA‘s specific requirements. So, we now move on to decide whether the HPA contemplates such USDA involvement in
C.
The USDA purports to draw its authority to adopt the Regulation from several provisions of the HPA. Upon examining these provisions, we conclude that none of these provisions authorizes the Regulation but conversely, that these provisions plainly prohibit the Regulation.
1.
First, to justify the extension of its authority asserted in the Regulation, the USDA invokes its statutory duty to regulate horse inspectors under § 1823(c). The HPA provides as follows:
The Secretary shall prescribe by regulation requirements for the appointment by the management of any horse show, horse exhibition, or horse sale or auction of persons qualified to detect and diagnose a horse which is sore or to otherwise inspect horses for the purposеs of enforcing this chapter.
As always, we begin our initial inquiry by looking to the plain language of § 1823(c). Here, when reduced to its essence, the provision permits the USDA to promulgate “requirements for the appointment by the management . . . of persons qualified to detect and diagnose a horse . . . or to otherwise inspect
The USDA relies heavily on the broad definition of “requirements,” arguing that the Regulation merely adopts new “requirements for HIOs” that participate in the DQP program. This may well be true, but the argument is off target. The statutory authorization to promulgate “requirements” refers, not to requirements for HIOs, but requirements for “persons” to perform inspections of horses. Section 1823(c) does not authorize the USDA to adopt, carte blanche, any сondition that it wishes for participation in the DQP program. Instead, a “requirement” promulgated pursuant to § 1823(c) must relate to whether “persons” are “qualified” to inspect horses for evidence of soring. Thus, an event‘s management must appoint inspectors deemed “qualified” by the USDA pursuant to its regulations.
The Regulation here extends the authority of the USDA beyond that statutorily defined mission. Although federal agencies often possess broad authorities to regulate behavior, an agency may not “create from whole cloth new liability provisions.” Nat‘l Pork Producers Council v. U.S. Envtl. Prot. Agency, 635 F.3d 738, 753 (5th Cir. 2011) (”Pork Producers“). For example, in Pork Producers the EPA attempted to impose liability on certain animal
The USDA urges that its new enforcement regime is a proper assertion of its statutory authority because the HPA anticipates the DQP program, and consequently, this parallel enforcement scheme is within its statutory authorization. But nothing in § 1823(c) contemplates USDA involvement in the enforcement procedures of HIOs. Although nothing in the HPA prohibits HIOs from voluntarily adopting such procedures, such statutory silence is far from a grant of authority that permits the USDA to promulgate regulations imposing uniform penalties. Section 1823(c) plainly allows the USDA only to impose those requirements that relate to the certification and insрection process for individual inspectors.
By contrast, and contrary to the statute, the Regulation establishes a parallel enforcement scheme.6 It is purportedly a private scheme, but the USDA interjects itself into each layer of enforcement. At the bottom end, it imposes mandatory suspensions on competitors, enforced through the HIOs. Then, the Regulation requires that the HIOs adopt appeal procedures that
2.
Having decided that § 1823(c) does not support the Regulation, we turn to the rest of the HPA to decide whether any other provision supports the Regulation. The USDA points us to its general rulemaking authority under the HPA, which provides thаt “[t]he Secretary is authorized to issue such rules and regulations as he deems necessary to carry out the provisions of this chapter.”
We focus on the terms “provisions of this chapter.” By its terms, § 1828 authorizes the USDA to regulate when necessary to effectuate the other provisions in the HPA. As counsel for the USDA conceded at oral argument, § 1828 does not purport to allow the USDA to amend the HPA. Thus, this provision is not a stand-alone source of authority to validate any rule the USDA wishes; the provision authorizes the USDA only to regulate in order to carry out the other provisions in the HPA. As we explained above, § 1823(c) does not extend to enforcement-related regulation, and the enforcement provisions in § 1825 apply оnly to the USDA and do not contemplate delegation to third parties.
We find the District of Columbia Circuit‘s decision in American Bar Association v. Federal Trade Commission, 530 F.3d 457 (D.C. Cir. 2005), persuasive. In American Bar, the court addressed a challenge to an act requiring that financial institutions establish certain privacy protections. Id. at 459. The law also gave the Federal Trade Commission and other agencies broad authority to “‘prescribe . . . such regulations as may be necessary to carry out the purposes of this subchapter with respect to the financial institutions subject to their jurisdiction.‘” Id. at 459 (quoting
Thus, a broad grant of general rulemaking authority does not allow an agency to make amendments to statutory provisions. As in American Bar, the Regulation addresses an area that is plainly outside the USDA‘s statutory authority. The HPA authorizes the USDA to develop a private inspection system carried out by DQPs who are certified by HIOs, but it does not imply that the USDA may then establish a mandatory private enforcement system administered by those HIOs. The USDA‘s reading of its rulemaking authority under § 1828 of the HPA stretches beyond the statute‘s plain language. We also reject the USDA‘s argument that it can maintain this scheme merely because Congress did not expressly disallow such regulation. See id. at 468. Thus, we hold that § 1828 does not authorize the Regulation.8
IV.
After review, we AFFIRM the district court‘s holding as to justiciability. Contender Farms and McGartland, regular participants in the Tennessee walking horse industry, have standing to challenge the Regulation and present a ripe challenge to it. On the merits, we hold that the district court erred in concluding that the Regulation is a valid application of USDA regulatory authority under the HPA, and accordingly, we REVERSE and VACATE its judgment. Finally, we REMAND the case for entry of judgment in favor of Contender Farms and McGartland.
AFFIRMED in part; REVERSED and VACATED in part; and REMANDED for entry of judgment for the Plaintiffs.