Written by: Amie Alexander, JD/MPS Candidate, William H. Bowen School of Law
On April 7, 2018, The United States Court of Appeals for the Fifth Circuit affirmed a District Court’s ruling in favor of Texas winter wheat farmers who challenged the Federal Crop Insurance Corporation’s failure to permit them to exclude the 2015 growing year for determining expected yield for crop insurance purposes.
The issue in the case was whether farmers were permitted to exclude the historical data for the 2015 crop year, even though the FCIC had not completed its data compilation. The Court concluded they were, affirming the District Court’s decision.
Background
The Federal Crop Insurance Corporation (FCIC) oversees the crop insurance industry. The FCIC is designated as an agency within the Department of Agriculture, and supervised by the Department of Agriculture’s Office of Risk Management. In addition to rulemaking authority, the FCIC also can go out into the marketplace to insure or reinsure crops. The Federal Crop Insurance Act directs the FCIC to calculate a farmer’s expected yield in a particular manner. See 7 U.S.C. § 1508(g).
Yield coverage protects the crops farmers anticipate producing. The Federal Crop Insurance Act includes different methods for determining expected yield. Actual production history is one of these methods, and the subject of this case. The FCIC maintains a production database to track the farm’s production history, requiring at least four years of data to calculate the actual production history.
Under the 2014 Farm Bill, farmers have a right to elect to exclude certain low-production years from this calculation. See 7 U.S.C. § 1508(g)(4)(C). Farmers may exclude a year if the per-acre production of a crop in the farmer’s county that year was fifty percent below the county average per-acre production for the preceding ten years, or if a contiguous county to the farmer was eligible to exclude the year, even if the farmer’s own county did not meet the fifty-percent threshold.
The FCIC did not compile enough data in time to provide information for all 2015 crops, and therefore indicated it would not immediately implement the exclusion provision. The FCIC issued regulations in June 2014 to permit farmers to exclude a previous year if there was sufficient data provided in the actuarial documents. The FCIC had implemented the exclusion provision for eleven spring crops by October 2014, but others remained uncovered.
Background to this Action
Texas winter wheat farmers challenged the FCIC’s actions. These farmers notified their private insurance providers in September 2014 that they intended to exclude certain years from their actual production history calculation for the 2015 crop year, but without the actuarial data, private insurers turned to the FCIC for advice on how to handle the situation. After receiving a guidance letter from the FCIC, the insurance providers notified the winter wheat farmers that they would not be able to exclude crops for the 2015 crop year.
The farmers challenged the issuance of the letter as an adverse agency decision, and the Director of the National Appeals Division concluded that the 2014 Farm Bill was ambiguous about whether the exclusion provision was “self-executing and immediately available to crop insurance policy holders.” Analyzing the question under Chevron, the Director decided that the Risk Management Agency’s interpretation of the 2014 Farm Bill was reasonable and rejected the farmers’ challenge.
The farmers challenged this decision in federal district court under the Administrative Procedures Act. The magistrate judge recommended the court to reverse the final decision of the National Appeals Division, concluding that the exclusion provision was effective and available to farmers when the 2014 Farm Bill was enacted. The district court adopted the report and recommendation, and the agency appealed.
This Court’s Analysis
The court reviewed the Director’s determination using an arbitrary and capricious standard. The true question of the court reviewed is whether the exclusion provision applied to the winter wheat farmers’ request to exclude prior years in determining their 2015 crop year insurance policies.
Under Chevron, if the statute is clear, then the plain meaning of the statute applies. If the statute is silent or ambiguous, a court will affirm a reasonable interpretation by the agency. The farmers argued that the statute plainly applied at the time they attempted to use the exclusion provision. In response, the FCIC argued that the statute is ambiguous in two ways: (1) a statute’s effective data may be different than its implementation date, and the statute is silent as to its implementation date; and (2) the statute only required the agency to act when it had “sufficient actuarial data,” and if the agency had allowed the farmers to exclude years before it had compiled this data, it would have violated another statutory duty.
The court reasoned that the statute “could not be clearer,” and found the agency’s arguments “unconvincing.” The statute said nothing on the implementation data, and thus the general rule that absent a clear direction by Congress to the contrary, a law takes effect on the enactment date should apply. Additionally, the Conference Report specifically provides that its managers intended the exclusion provision to be “implemented in time for the 2015 crop year.” The court reasoned that this is not “a situation where two different provisions of a statute direct irreconcilable results,” and the situation did not give FCIC the authority to disregard the plain meaning of the statute.
Because the agency did not provide any textual or contextual clues that would cast doubt on the plain language of the statute, the farmers prevailed at the first step of Chevron.