Written by: Amie Alexander, JD/MPS Candidate, William H. Bowen School of Law

A recent District Court decision in the District of Colorado, Hixson v. USDA, reversed and remanded a National Appeals Division Director’s decision which denied Hixson’s request for equitable relief. Hixson applied for payment under the Supplemental Revenue Assistance Payments Program (SURE) – a federal crop insurance program operated by the USDA as directed by the Food, Conservation, and Energy Act of 2008. As a requirement to be eligible for disaster assistance payments under SURE, applicants must report “failed acreage” in a timely manner. Hixson’s claim was denied, eventually leading to this appeal.

Background on Hixson Farms

Hixson Farms is located in Prowers County, Colorado. It sustained a loss of wheat during a period of wind and drought in the time period of late 2008 to early 2009. Hixson submitted an insurance claim in March 2009 on 961.7 acres of insured wheat to Producers Agriculture Insurance Company. The wheat was inspected by an adjuster, who verified the loss, processed the claim, and verified the destruction of the wheat in April 2009. Hixson subsequently planted uninsured grain sorghum on 622.3 acres of the failed wheat.

Hixson filed a notice of loss form in support of a claim under the SURE program on May 19, 2009, declaring the affected acreage as the 622.3 replanted acres, and not the 961.7 acres previously destroyed that were covered by the insurance claim. The Prowers County Farm Service Agency (FSA) Committee called Hixson’s insurance agent to request documentation to verify the loss, but received no response. The FSA then requested the verification from Hixson. After no response, the claim was not approved. A letter mailed on September 18, 2009 by Prowers County FSA Committee informed Hixson that the notice was disapproved because “this crop was destroyed and replanted prior to any notification to the Farm Service Agency that it was planted and failed.” Hixson did not appeal, though the letter informed him of his right to appeal the decision within 30 days. Hixson claims this was because he never received the September 18 letter. Hixson inquired about the status of his claim on June 30, 2011, and was subsequently faxed a copy of the September 18 disapproval letter. He brought the FSA Committee documentation of the failed wheat acres on June 30, 2011, and sent a letter seeking to appeal the decision on July 26, 2011, seeking to appeal due to alleged factual errors.

Hixson filed an application for payment on July 28, 2011 – the day before the 2009 SURE program’s deadline. This application was approved, but calculated the allotted benefits as zero based on the September 15, 2009 determination of no failed acreage. Hixson appealed this decision, which was denied by Prowers County FSA Committee on October 4, 2011. Hixson later appealed to the Colorado State FSA Committee, but later withdrew this appeal and directly appealed to the USDA’s National Appeals Division (NAD). A May 2, 2012 hearing officer ruled against Hixson, who then appealed to the Director of the NAD. This decision was upheld on August 28, 2012. In this action, Hixson seeks judicial review of the USDA’s treatment of the SURE application.

Legal Analysis of Claims

In this action, the Court considered the following issues: “1) whether the FSA’s award of $0 was arbitrary and capricious; 2) whether the NAD Director’s decision to deny Hixson’s request for equitable relief was arbitrary and capricious; and 3) whether the USDA’s overall treatment of Hixson’s SURE application amounted to a denial of due process.”

In considering the first issue, Hixson alleges the following circumstances were arbitrary and capricious: misprocessing the notice of failed acreage, erroneously denying the 2009 SURE claim, and refusing to reconsider those decisions. Hixson claimed because these circumstances were continuous, its appeal was proper even though it did not appeal the September 2009 decision in the allotted time. The court determined this assertion was incorrect. The letter sent by FSA on September 18, 2009 was not returned and therefore was delivered, deeming this decision final. Hixson did not exhaust its administrative appeal procedures before filing this lawsuit. Hixson’s failure to seek an administrative appeal of the 2009 decision barred the judicial review of this issue, with the court determining that “neither the FSA nor the Director acted arbitrarily or capriciously in declining to grant Hixson’s tardy appeal and reconsideration requests.”

The court further found that the NAD Director’s decision not to provide equitable relief must be set aside because this decision was based on a misrepresentation of the law. Though Hixson did not meet the SURE program’s requirements for reporting, it did not fail to receive benefits “because of the calculation of eligible acreage” as the Director reported; therefore; the Director was not legally precluded from excusing this failure and the decision to deny benefits was vacated and remanded for further proceedings.

Finally, Hixson argued that its Fifth Amendments’ Due Process Rights were violated as it had a property interest in receiving payments from the SURE program. Though the court agreed that Hixson had a cognizable property interest, the denial of payment did not violate its Due Process Rights as the government provided notice that was reasonably calculated to notify interested parties of the pending action. Even though Hixson claimed that FSA failed to send notice of its decision, FSA had been sending letters to Hixson for years with no issues and it followed all policies in recording the letter had been sent. Thus, the Court concluded that the FSA’s methods of notifying farms of SURE application decisions were “reasonably calculated to reach the intended recipients.”

The Court’s Order

In its order, the Court reversed and remanded the National Appeals Division Director’s decision to deny Hixson’s request for equitable relief; on remand, the Director will consider the merits of Hixson’s request and must explain his decision on the record. Hixson was awarded reasonable costs. You can read the full case here.