Summary of a Recent
Judicial
Development in
Farm Commodity Programs
Scheme to Evade Payment Limitations
Prompts Joint and Several Liability
Amy K. MillerNational AgLaw Center Graduate Assistant
In Mitchell v. Johanns, 400 F. Supp. 2d 1133, 1135 (D. Iowa 2005), the United States District Court for the Southern District of Iowa upheld a USDA determination that Maurice D. Mitchell, Sr., Marvin Mitchell, and Marlene Mitchell ("the Mitchells") were jointly and severally liable for farm program benefits received as part of a scheme devised to evade payment limitations.
The Farm Service Agency ("FSA") found that the Mitchells, along with Steve Agan and George Paul had applied as five separate persons for FSA payments purposes, when in fact only two persons were eligible for payments. Id. Accordingly, the agency required the Mitchells to repay the FSA farm payments received in 1997 and 1998 as a result of the scheme. Id. When Marvin and Marlene Mitchell filed for bankruptcy in 2002, the FSA State Committee for Iowa determined that the Mitchells were jointly and severally liable for the farm payments that Agan and Paul received in 1997 and 1998. Id. at 1135-36.
As part of the scheme, the Mitchells bought and sold chemicals among Agan and Paul to create the appearance that loan balances complied with loan limits set by FarmPro, their lender. Id. at 1138. The business relationship among each of the five borrowers was so close that FarmPro required personal guarantees for all of the loans from each of the five borrowers. Id. The court concluded that because "the Mitchells acted as 'one person' when they rearranged the FarmPro loan funds, joint and several liability [was] appropriate, and therefore, the USDA's interpretation was not plainly erroneous or inconsistent with the regulation. Id. at 1139. The court also deferred to the NAD Director's determination and stated it was not appealable because the decision to impose joint and several liability was "a matter of general applicability." Id. Although the court sympathized with of the Mitchell's frustration over not being informed of the joint and several liability sooner, it concluded that the delay was not prejudicial. Id. at 1140.
The case was decided on November 15, 2005; this summary was posted Mar. 21, 2007.