SLIP OP. 07-93
UNITED STATES COURT OF INTERNATIONAL TRADE
------------------------------x
ROBERT L. ANDERSON, :
:
Plaintiff, :
: Before: Pogue, Judge
v. : Court No. 05-00329
:
:
UNITED STATES SEC’Y :
OF AGRICULTURE, :
:
Defendant. :
------------------------------x
[Defendant’s remand determination affirmed as to result.]
Dated: June 7, 2007.
Robert L. Anderson, Plaintiff pro se.
Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson,
Director, Patricia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice
(David S. Silverbrand), for Defendant United States Secretary of
Agriculture.
OPINION AND ORDER
Pogue, Judge: In Anderson v. United States Sec’y of Agric., 30 CIT
__, 462 F. Supp. 2d 1333 (2006) (“Anderson I")1, the court remanded
an initial determination from the United States Department of
Agriculture (“USDA”) denying Plaintiff’s application for Trade
Adjustment Assistance (“TAA”) on the basis of the agency’s summary
conclusion that Mr. Anderson’s net fishing income had not declined
during the 2000 to 2003 time period. The court found not in
1
Familiarity with the court’s decision is presumed.
Court No. 05-00329 Page 2
accordance with law the agency’s refusal to consider Mr. Anderson’s
claim that his net income, reported on an accrual basis, had
declined during the relevant time period.
The USDA filed its first remand determination with the court
on December 11, 2006. Reconsideration upon Remand of the
Application of Robert L. Anderson. (“First Remand Determination”).
In its first remand determination, the USDA did not, as directed by
the court in Anderson I, consider Mr. Anderson’s accrual-basis
claim, but rather once again found, relying solely on the net
fishing income line as presented on Mr. Anderson’s tax return as
submitted to the Internal Revenue Service (“IRS”), that Mr.
Anderson’s income did not decline from the marketing year to the
qualifying year. First Remand Determination. Upon review of the
first remand determination, the court again remanded the
determination to the USDA, ordering the USDA to comply with the
court’s initial remand order. Anderson v. United States Sec’y of
Agric., 30 CIT __, 469 F. Supp. 2d 1300 (2006) (“Anderson II”). On
February 9, 2007, the USDA issued its second remand determination,
finding that using the accrual method of accounting, Mr. Anderson’s
income did decline over the period from the marketing year to the
qualifying year, and as such found that Mr. Anderson would be
entitled to a TAA payment. Reconsideration upon the Second Remand
of the Application of Robert L. Anderson (“Second Remand
Determination”). The court affirms the results of USDA’s second
Court No. 05-00329 Page 3
remand determination.
DISCUSSION
As discussed in the court’s opinion in Anderson I, Mr.
Anderson was part of a group of salmon fishermen that had been
certified by the USDA as eligible for TAA. To continue the two-
part process for obtaining TAA benefits, Mr. Anderson was then
required to demonstrate that he was personally qualified for such
assistance, by providing evidence to the USDA that his net fishing
income had declined over the relevant two-year period. Anderson I,
30 CIT at __, 462 F. Supp. 2d at 1334.
The net fishing income line on Mr. Anderson’s IRS returns
indicated that his income had actually increased between 2002 and
2003. Id. at 1335. Mr. Anderson, however, provided other
supporting information in conjunction with his TAA application.
Id.2 Mr. Anderson claimed that this other information documented
that, considered on an accrual basis, Mr. Anderson’s net fishing
income had actually declined over the period in question. The
USDA never considered Mr. Anderson’s supporting information,
deeming it unnecessary to do so, because the net fishing income
line on his tax return had indicated an increase in income.
The court found that the USDA’s determination failed to
consider an important aspect of the problem presented and was
2
For example, Mr. Anderson cited evidence of delayed payment
for fish sold.
Court No. 05-00329 Page 4
therefore not in accordance with law. Id. at 1342. Specifically,
the court concluded that the USDA’s blind application of its
regulation 7 C.F.R. § 1580.102(2004), without any consideration of
the fact that applicants can report their income on either an
accrual or cash basis, leads to the possibility of the USDA
treating similarly situated people differently. Id. at 1339.
Additionally, the court explained that in adopting the definition
of “net farm income,” the USDA did not comment on how the
regulatory definition would have the effect of including or
excluding people based on their election of cash or accrual
accounting, and why such effects would be legally acceptable. Id.
at 1342. The court remanded the determination to the USDA in order
that the USDA:
consider the reasonableness of its regulation as applied
to Mr. Anderson, in view of the differences in cash
versus accrual accounting, the inequities the agency’s
application presents, and the fact that applicants elect
their accounting technique without knowing that it could
adversely impact their eligibility for benefits in the
future. On remand, the agency shall reconsider its
position and may reopen the record to permit an
acceptable alternative solution.
Id.
In the USDA’s first remand determination, the USDA refused to
comply with the court’s order. First Remand Determination;
Anderson II, 30 CIT __, 469 F. Supp. 2d 1300. In doing so, the
agency cited the decision of the U.S. Court of Appeals for the
Federal Circuit (“CAFC”) in Steen v. United States, 468 F. 3d 1357
Court No. 05-00329 Page 5
(Fed. Cir. 2006) as standing for the proposition that the USDA’s
“regulatory definition of the term ‘net farm income’ as applied to
fishing income was reasonable and cannot be condemned as arbitrary,
capricious, or manifestly contrary to the statute.” First Remand
Determination at 1 (quoting Steen, 468 F. 3d at 1363). Based on
the USDA’s reading of Steen, the USDA determined that it had no
obligation to evaluate the reasonableness of its application, to
Mr. Anderson’s accrual-basis claim, of its regulation defining “net
fishing income.” The agency stated that Steen “explicitly rejected
the [P]laintiff’s argument that the agency is barred from using the
standards applied under the Internal Revenue Code as a basis for
makings [sic] its determination of eligibility of cash benefits
under the TAA program.” First Remand Determination at 2.3
Finding that the agency failed to comply with the court’s
remand order by reading the holding of Steen too broadly, the court
once again remanded the matter to the USDA. Anderson II, 30 CIT
__, 469 F. Supp. 2d 1300. The court noted that, in Steen, the CAFC
explicitly qualified its holding regarding the net fishing income
regulation. Specifically, the CAFC stated: “Mr. Steen does not
contend that his tax returns distort the net amount of his income
3
Notwithstanding the USDA’s assertion that it had no need
to revisit the reasonableness of the regulation as applied to Mr.
Anderson, the USDA separately found that “based on the evidence
in the record, it [was] not possible to surmise how Mr.
Anderson’s Schedule C’s would have been calculated had he chosen
the accrual method of accounting, nor is it possible to ascertain
whether the IRS would have accepted them if they were submitted
in such a manner.” First Remand Determination at 2.
Court No. 05-00329 Page 6
derived from all fishing sources in the two relevant years . . . .”
Anderson II, 30 CIT at __, 469 F. Supp. 2d at 1300-01; Steen, 468
F. 3d at 1364. Because Mr. Anderson raised just such a claim-–that
his cash-basis tax returns distorted the net amount of his income
derived from all fishing sources in the two relevant years-–the
court remanded the matter to the USDA for reconsideration
consistent with the court’s remand orders. Anderson II, 30 CIT at
__, 469 F. Supp. 2d. at 1301.4
In the second remand determination the USDA reopened the
record, and requested additional documentation from Mr. Anderson,
advising him that:
Acceptable documentation includes supporting
documentation from a certified public accountant or
attorney, or relevant documentation and other supporting
documentation and other supporting financial data, such
as financial statements, balance sheets, and reports
prepared for or provided to the Internal Revenue Service
or another U.S. Government agency.
Second Remand Determination at 1.5 In response to the Department
4
As the court further explained in Anderson II, the agency's
action in the first remand was not only wrong on the law; it was
also improper procedurally. The agency is not free to disobey
remand instructions by invoking its interpretation of precedent.
Its choices are to ask for rehearing, to accede or to fully
comply under protest. Anderson II, 30 CIT __, 469 F. Supp. 2d.
at 1301.
5
The Department of Agriculture based this advice upon its
own regulation, 7 C.F.R. § 1580.301(e)(6). This regulation
explains the form of documentation that can be provided to
demonstrate to the agency that an individual producer’s net
fishing income was less than that during the producer’s pre-
adjustment year. The regulations state that an applicant shall
provide either:
(continued...)
Court No. 05-00329 Page 7
of Agriculture’s request, Mr. Anderson provided a letter from his
accountant, with accompanying Schedule C’s prepared using the
accrual form of accounting (as opposed to the cash form of
accounting originally used by Mr. Anderson in his tax returns).
Id. at 3. The accountant’s statement reconstructed Mr. Anderson’s
cash-basis tax filing, to present accrual-basis Schedule C’s. Id.
In the letter, Mr. Anderson’s accountant also includes the normal
tax-filing disclaimer, stating:
Our compilation was limited to presenting in the form
prescribed by the Internal Revenue Service information
that is the representation of the owner. We have not
audited or reviewed the financial statements referred to
above, and, accordingly, do not express an opinion or any
other form of assurance on them.
***
This report is intended solely for the information and
use of Robert L. Anderson and the United States
Department of Agriculture for determining qualification
under the Trade Adjustment Assistance for Farmers
program, and is not intended and should not be used by
anyone other than these specified parties.
Second Remand Determination at 2; Letter from Charles E. Morgan,
CPA, Jason, Morgan & Hent, PLLC, to Mr. Anderson (Apr. 6, 2007),
Attach. to Pl.’s Resp. to USDA Letter (“Reply Letter”).
5
(...continued)
(i) Supporting documentation from a certified public
accountant or attorney, or (ii) Relevant documentation
and other financial data, such as financial statements,
balance sheets, and reports prepared for or provided to
the Internal Revenue Service or another U.S. Government
agency.
7 C.F.R. § 1580.301(e)(6)(2004); see also Second Remand
Determination at 2.
Court No. 05-00329 Page 8
In commenting on the information provided by Mr. Anderson in
response to the agency’s request for additional information, the
USDA stated that
[t]he agency does not regard this documentation which
according to his certified public account [sic] only
relies upon Mr. Anderson’s representations, rather than
documentation or other supporting financial data reported
to the Internal Revenue Service or another U.S.
Government agency, without any audit or review of the
statements, in conjunction with the certified public
accountant’s unwillingness to express an opinion or any
assurance on them, as complying with the certification
that his net fishing income was less than that during the
pre-adjustment year. The very purpose of requiring such
documentation is to verify the producer’s certification
that his income actually declined in order to determine
eligibility for cash benefits. Merely presenting Mr.
Anderson’s representations on Schedule C’s does not
adequately support his certification that his net fishing
income was less than his income in the pre-adjustment
year. Furthermore, the certified public accountant’s
limiting the use of the report to Mr. Anderson and the
Department of Agriculture does not meet the requirement
in the regulation that the net fishing income be net
profit or loss reported to the Internal Revenue Service.
7 C.F.R. § 1580.102 (2004). In addition, it appears that
these revisions to his income are not being reported to
the Internal Revenue Service.
Second Remand Determination at 3.
Despite this analysis, the agency then determined, based on
Mr. Anderson’s submissions, that his “income on an accrual basis
declined from the pre-adjustment year, 2001, to the most recent
marketing year, 2002.” Id. at 3. Based on that finding, the USDA
further found that “[i]f this Court’s decision is the final
decision after all opportunities for appeal have been exhausted,
based upon an accrual method of accounting . . . Mr. Anderson would
Court No. 05-00329 Page 9
6
be entitled to a TAA payment.” Id. at 4.
Mr. Anderson, in his Reply Letter, stated that he provided
information in accordance with the plain language of the USDA’s
regulation and the agency’s request to Mr. Anderson for supporting
documentation. Mr. Anderson, a pro se plaintiff, stated, in his
response:
I did provide supporting documentation from a CPA. This
supporting documentation was provided to the USDA,(a US
government agency). The regulation asked me to provide
supporting documentation from a CPA, OR a report prepared
6
The USDA, in its second remand determination, provided no
further analysis of the reasonableness of its application of its
regulation to Mr Anderson, but rather continued to object to the
usage of the accrual method of accounting to determine whether or
not Mr. Anderson’s net fishing income declined, stating:
[t]he agency disagrees with the application of the
accrual method of accounting in determining whether Mr.
Anderson’s net fishing income declined, because Mr.
Anderson had reported his net fishing income on a cash
basis to the Internal Revenue Service, and is only doing
so under protest, in accordance with the Court’s Order.
Second Remand Determination at 2.
The court notes that in its initial opinion, it had directed
the USDA to reexamine the reasonableness of its regulation (and
the regulation’s interaction with farmers’ legal right to choose
to report their business income on either a cash or accrual
basis), as applied to Mr. Anderson, in light of the fact that the
regulation has the effect of treating similarly situated people
differently. Anderson I, 30 CIT at __, 462 F. Supp. 2d at 1339;
see Former Employees of Merrill Corporation v. United States, 31
CIT __, Slip Op. 07-46 at 27(Mar. 28, 2007). The USDA has yet to
make a reasonableness determination, as it first relied on Steen
to avoid evaluating the reasonableness of the application of the
regulation, and then sidestepped the issue altogether in the
second remand determination by stating that it was applying the
accrual method “only ... under protest, in accordance with the
Court’s order.” Second Remand Determination at 2. Accordingly,
the court considers the issue waived.
Court No. 05-00329 Page 10
for, or provided to a US government agency. I provided
both.
Reply Letter at 2 (emphasis in original).
The plain language of the regulation, with which Mr. Anderson
sought to comply,7 supports Mr. Anderson’s interpretation. 7 C.F.R.
§ 1580.301(e)(6)(2004); see Christensen v. Harris County, 529 U.S.
576, 588 (2000)(An agency’s interpretation of its own regulation is
not entitled to deference when it is contrary to the plain language
of the regulation). The USDA, as indicated by its comments quoted
above, seems to believe that its regulations require more than is
stated by their terms. This, however, in addition to ignoring the
plain language of the regulation, ignores the court’s two previous
rulings which require the USDA to evaluate the reasonableness of
its application of 7 C.F.R. § 1580.102,8 upon which the USDA relies
for its definition and determination of net income, to Mr.
7
Mr. Anderson claims, and Defendant does not dispute, that
his attempts at compliance with the USDA’s rules included a
conversation with a contact person at the USDA in order to
“clarify exactly what the USDA wanted,” as the “USDA’s letter
requesting supporting documentation was not clear to [Mr.
Anderson].” Reply Letter at 2 (emphasis in original). According
to Mr. Anderson, he was told “that they wanted me to have a CPA
recalculate my 2001 and 2002 fishing income on an accrual basis,
using an IRS style format.” Id.
8
Under 7 C.F.R. § 1580.102, the USDA defines net farm income
as “net farm profit or loss, excluding payments under this part,
reported to the Internal Revenue Service Schedules C or C-EZ for
individuals or taxable income . . . during the tax year that most
closely corresponds with the marketing year under consideration.”
7 C.F.R. § 1580.102(2004).
Court No. 05-00329 Page 11
Anderson. Remand Determination at 2; Def.’s Resp. to Pl.’s
Comments Upon Remand at 5. The agency cannot have it both ways.
If it wished to invoke 7 C.F.R. § 1580.102 as a basis for rejecting
Mr. Anderson’s filing, it was required to explain why its reasons
for doing so were reasonable and in accordance with law.
Despite the USDA’s refusal to evaluate the effects of its
regulation on individual producers, in light of the fact that
farmers are in the unique position of being permitted to choose
accrual or cash accounting as a means of reporting their income,
and despite the agency’s seeming rejection of Mr. Anderson’s
supporting information, the USDA did approve the granting of TAA
benefits to Mr. Anderson pending the exhaustion of the agency’s
opportunities for appeal. Therefore, this court affirms the remand
determination only as to the results. See Hontex Enters., Inc. v.
United States, 30 CIT__, 425 F. Supp. 2d 1315 (affirming the
conclusion of a remand determination, but finding the summary and
discussion sections not to be in accordance with the remand
instructions).
SO ORDERED.
Dated: June 7, 2007
New York, N.Y. /s/
Donald C. Pogue, Judge
SLIP OP. 07-93
UNITED STATES COURT OF INTERNATIONAL TRADE
------------------------------x
ROBERT L. ANDERSON, :
:
Plaintiff, :
: Before: Pogue, Judge
v. : Court No. 05-00329
:
:
UNITED STATES SEC’Y :
OF AGRICULTURE, :
:
Defendant. :
------------------------------x
Judgment
This action has been duly submitted for decision, and this
Court, after due deliberation, has rendered a decision herein; now,
in conformity with that decision, it is hereby
ORDERED that the United States Department of Agriculture remand
determination with respect to the application of Robert L. Anderson
is affirmed as to the results.
/s/
Donald C. Pogue
Judge
Dated: June 7, 2007
New York, New York