United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 11, 2002 Decided May 10, 2002
No. 01-5335
Sugar Cane Growers Cooperative of Florida, et al.,
Appellants
v.
Ann M. Veneman, in her official capacity as
Secretary of the United States Department of
Agriculture, et al.,
Appellees
Appeal from the United States District Court
for the District of Columbia
(01cv01904)
Raymond B. Ludwiszewski argued the cause for appel-
lants. With him on the briefs were Peter E. Seley and
Hassan A. Zavareei.
David J. Ball, Jr., Assistant United States Attorney, ar-
gued the cause for appellees. With him on the brief were
Roscoe C. Howard, Jr., United States Attorney, and R. Craig
Lawrence, Assistant United States Attorney.
William Bradford Reynolds and John F. Bruce were on
the brief for amicus curiae United States Beet Sugar Associ-
ation in support of appellees.
Before: Tatel and Garland, Circuit Judges, and
Silberman, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
Silberman.
Silberman, Senior Circuit Judge: Sugar Cane Growers
Cooperative of Florida, Florida Crystals Corporation, and
Refined Sugars, Inc., appeal from the district court's grant of
summary judgment holding that appellants lacked standing.
The court dismissed their claims that the United States
Department of Agriculture failed to comply with the Adminis-
trative Procedure Act1 and the Food Security Act of 19852 in
implementing a payment-in-kind program for the 2001 sugar
crop by press release. We think appellants have demonstrat-
ed standing and because the Department did not comply with
the APA or the Food Security Act, we reverse the district
court's grant of summary judgment and remand to that court
to in turn remand to the Department.
I.
In the United States, sugar production, which the govern-
ment supports through a variety of programs, is about evenly
divided between sugar cane and sugar beet production. This
suit involves the Department's choice of a particular method
of support. Appellants are self-described small-, medium-
and large-sized sugar cane growers, processors, refiners and
marketers, who together make up a "significant" portion of
the total domestic sugar cane production, which mostly occurs
in the Gulf Belt and Hawaii. Sugar beets grow primarily in
the North and West, and sugar beet farmers tend to harvest
__________
1 5 U.S.C. ss 551-559, 701-706.
2 7 U.S.C. s 1308a.
significantly fewer acres per producer than sugar cane farm-
ers. The Department supports sugar production through a
program of non-recourse loans; if the market price of sugar
drops below the forfeiture price, producers may forfeit their
crops to the Department in satisfaction of these loans rather
than try to repay in cash, which effectively guarantees a
minimum price for harvested and processed sugar. With the
low sugar prices over the past several years, the Department
has accumulated more than 700,000 tons of sugar, for which it
pays approximately $1.35 million per month in storage fees.
The presence of that potential supply (or "overhang") may
depress somewhat sugar prices and it exacerbates the prob-
lem of limited sugar storage, which is particularly trouble-
some for sugar beet farmers.
The Food Security Act gives the Department authority to
implement a payment-in-kind (PIK) program for sugar, which
it did for sugar beet farmers in August 2000. For the 2000
PIK program, sugar beet farmers submitted bids to the
Department offering to destroy (or "divert") a certain amount
of their crops in return for sugar from USDA storage. A
farmer's bid is his asking price for that amount of destruc-
tion; the price is expressed in terms of a percentage of the
three-year average value of the crop yield for the acreage
diverted. Thus, a farmer bidding 80 percent would receive
eight dollars for every acre destroyed if an average acre of
their farm produced ten dollars worth of sugar. In fact, the
average bid was approximately 84 percent and resulted in the
distribution of about 277,000 tons of government sugar and
the diversion of approximately 102,000 acres. Participants
were prohibited from participating in future PIK programs if
they increased their acreage planted with sugar beets over
2000 levels. The Agency did not proceed by notice and
comment, but no party challenged that decision or the pro-
gram itself.
Appellants claim the 2000 PIK program unfairly provided
participants with below-harvest-cost government sugar which
gave them a competitive advantage over appellants. And
they claim that the program depressed sugar prices. Actual-
ly, the price of sugar rose, but it is not clear what caused the
increase. According to appellants, although initial forecasts
predicted that the diverted acreage would lead to lower sugar
crop volume in 2000, subsequent forecasts increased substan-
tially in the months following implementation of the PIK
program--to 23.6 tons per acre in December 2000 from 22.8
tons per acre before August 2000. Appellants contend that
the yield increase (or "yield slippage") resulted in part from
farmers taking their lowest-yielding crops out of production
for the PIK program. With the yield slippage, additional
beet sugar supplies ended up on the market, and PIK farm-
ers received more sugar through the program than they
would have if they had produced sugar on the diverted acres.
And the greater supplies of sugar, it is argued, necessarily
depressed sugar prices below that which would otherwise
have obtained. The government insists that the program had
a positive effect on the price of sugar, at least in part because
it reduced the government's sugar supply and storage fees,
ameliorating the overhang effect and storage scarcity prob-
lem.
In January 2001, the Department met with interested
persons (including representatives of appellants) and indicat-
ed that while it was considering a PIK program for the 2001
sugar crop, it would not do so without notice and comment.
The Agency also asked those present about the effectiveness
of the 2000 PIK program and their thoughts on the desirabili-
ty and structure of a potential 2001 program. Appellants
claim that they were unable to comment satisfactorily because
the data on the 2000 program was not yet available. Before
August 2001, Department employees had approximately a
dozen contacts with sugar industry representatives regarding
the possibility of a 2001 program.
The Department announced by an August 31, 2001 press
release, however, that it was implementing a PIK program
for the 2001 sugar crop without using APA rulemaking. The
Agency followed that announcement a week later with a
"Notice of Program Implementation" in the September 7,
2001 Federal Register. For the 2001 PIK program, the
Department set a 200,000 ton limit in order to encourage
more competitive bidding and made both beet and cane sugar
producers eligible. But a statutory restriction limiting pay-
ments to $20,000 per producer effectively eliminated appel-
lants' opportunity to participate because of their size. Partic-
ularly troubling appellants, the government waived its 2000
PIK program restriction on future eligibility by participants
who had increased their crop acreage; it merely included a
similar restriction on 2001 participants. In contrast to the
2000 PIK program, in which the government disbursed all of
the allotted sugar at the same time, in 2001 the Department
indicated that it would stagger disbursement. After announc-
ing the program, the Department received more than 6,000
bids and accepted 4,655 bids, some as high as 87.9931 percent.
The final data on bids is not a part of the summary judgment
record, nor is the disbursement schedule.
Appellants filed suit shortly after the press release ap-
peared, seeking injunctive and declaratory relief. They ar-
gued that the Department did not comply with the APA
because it promulgated a rule without notice-and-comment
rulemaking; that it violated the Food Security Act of 1985 by
not making required findings; and that the Department
violated the Regulatory Flexibility Act3 because it did not
consider the impact of the program on small businesses. It
was argued that the 2001 PIK program caused appellants two
injuries: first, it gave participants a competitive advantage by
providing them with below-harvest-cost sugar; second, it had
a depressive effect on prices.
The district court, with the agreement of the parties,
converted appellants' motion for preliminary injunctive relief
into a summary judgment motion. The court concluded that
appellants failed to establish standing on two grounds: first,
they had not shown an injury-in-fact; second, they had not
established causation because they had not demonstrated that
the Department would have decided against implementing the
program following notice and comment. The court neverthe-
__________
3 5 U.S.C. s 601 et seq. On appeal, appellants failed to raise
their Regulatory Flexibility Act claim--a footnote at the end of
their opening brief does not suffice. We therefore do not reach the
government's argument that appellants, primarily large producers,
lack prudential standing to raise such a claim.
less decided the merits, holding that the 2001 PIK program
was a rule subject to notice-and-comment procedures, but the
Department's failure to comply with those procedures was
harmless. Appellants' Food Security Act and Regulatory
Flexibility Act claims were not addressed.
II.
We, of course, begin with standing. Appellants claim that
the Department gave sugar beet farmer participants a com-
petitive advantage by giving them below-harvest-cost sugar.
Participants will use that competitive advantage to capture
market share and customer good will, or so the argument
goes. The government responds by pointing out (and appel-
lants do not dispute) that refined sugar is a commodity
market. In light of that, appellants have not explained how
any cost advantage participants could gain would translate
into a meaningful competitive advantage.4
On the other hand, appellants are on much sounder eco-
nomic ground in claiming that the PIK program had a
depressive effect on sugar prices--which would have clearly
injured appellants. They produced an affidavit from Brian
O'Malley and studies by two independent industry analysts,
each of which indicated that the PIK programs have harmed
appellants. O'Malley, who has spent over 20 years in the
refined sugar industry, testified that Refined Sugars suffered
at least part of its $22 million loss last year as a result of the
government "flooding" the market with 277,000 tons of PIK
sugar. The Sparks Companies, Inc. concluded that the 2000
PIK program resulted in "a substantial amount of yield
slippage," which meant more sugar on the market and there-
by depressed prices. Similarly, Gregory Harnish, a research
analyst for Sparks Companies, concluded in a different report
that the 2000 PIK program "increased free supplies of sugar
__________
4 We dismiss appellants' unsubstantiated argument that sugar
beet farmers will use the PIK program to access stores of refined
sugar cane--an argument predicated on the unproven (and dubious)
proposition that there is a difference between refined sugar cane
and refined sugar beet.
due to a substantial amount of slippage and the timing of
USDA's release of PIK sugar." And the government, in an
internal options memorandum, acknowledged that "some ana-
lysts believe that the 2000 PIK was, at least partially, respon-
sible for the yield increase."
The government's response to this injury claim was to
demonstrate that after the PIK program sugar prices went
up, not down, so appellants could not have been injured. This
led the district court to conclude that appellants' injury was
speculative. But the government's contention is a snare
because the relevant question is not whether sugar prices
actually went up or down but whether the PIK program had a
depressive effect. A number of other factors led to reduced
supply and thereby presumably an increased price. For
instance, the Federal Circuit limited the import of "foreign
stuffed molasses," a product that was allegedly used by
Canadian producers to export sugar into this country. Simi-
larly, the Department adjusted the Mexican sugar quota and
eliminated 200,000 tons of imported sugar. The government
does not really dispute appellants' claim that because of the
"yield slippage" (that appellants contend the PIK program
induced) more sugar was produced than would otherwise be
in the market. Indeed, the government had no response to
appellants' particular argument that the Department's waiver
of disqualifications for those producers who, contrary to the
2000 restrictions had increased their acreage, would inevita-
bly lead to more sugar production. Prior violators would
presumably continue their practice.
In sum, appellants have made a prima facie showing that
the PIK program caused them injury by increasing the
supply of U.S. sugar. To be sure, the government suggests
that even an increase in the direct supply of sugar would not
have had a depressive effect on prices because the PIK
program at least depleted sugar stores, thereby reducing
what could be thought an ancillary supply (the overhang). It
seems rather doubtful to us that the amount of government
sugar in storage would have anywhere near the effect on
prices as would sugar available for sale. In any event, the
government never sought a hearing on that issue nor on its
dispute of appellants' affidavits and studies, the credibility of
which it attacked; instead, like appellants, it moved for
summary judgment. Since appellants presented a prima
facie claim of injury based on basic economic logic (as set
forth and supported in the contested affidavits and studies), it
was the government's burden, if it wanted a trial on the
question of sugar price movements, to seek a factual hearing.
Because it did not, we think appellants established injury.
The district court's alternative ground that appellants lack
standing because "it is not at all clear that the Department
would have decided against the PIK program had it received
[appellants'] additional comments" simply misstates the law.
A plaintiff who alleges a deprivation of a procedural protec-
tion to which he is entitled never has to prove that if he had
received the procedure the substantive result would have
been altered. All that is necessary is to show that the
procedural step was connected to the substantive result. In
Defenders of Wildlife v. Lujan, 504 U.S. 555, 573 n.7 (1992),
the Supreme Court explained that an individual living next to
a federally licensed dam "has standing to challenge the
licensing agency's failure to prepare an environmental impact
statement, even though he cannot establish with any certainty
that the statement will cause the license to be withheld or
altered." See also Florida Audubon Society v. Bentsen, 94
F.3d 658, 669 (D.C. Cir. 1996) (en banc). If a party claiming
the deprivation of a right to notice-and-comment rulemaking
under the APA had to show that its comment would have
altered the agency's rule, section 553 would be a dead letter.
III.
Turning to the merits, we take up first appellants' APA
claim. The APA sets forth several steps an agency must take
when engaged in rulemaking: it must publish a general notice
of proposed rulemaking in the Federal Register; give an
opportunity for interested persons to participate in the rule-
making through submission of written data, views, or argu-
ments; and issue publication of a concise general statement
of the rule's basis and purpose. 5 U.S.C. s 553(b), (c). The
government defends the Department's failure to engage in
notice-and-comment rulemaking by asserting the PIK an-
nouncement was not really a rule and, even if it were, the
failure to engage in rulemaking was a harmless error.5
The APA defines a rule very broadly as
the whole or a part of an agency statement of general or
particular applicability and future effect designed to im-
plement, interpret, or prescribe law or policy or describ-
ing the organization, procedure, or practice requirements
of an agency and includes the approval or prescription
for the future of rates, wages, corporate or financial
structures or reorganizations thereof, prices, facilities,
appliances, services or allowances therefor or of valua-
tions, costs, or accounting, or practices bearing on any of
the foregoing.
5 U.S.C. s 551(4). We have recognized that notwithstanding
the breadth of the APA's definition an agency pronouncement
that lacks the firmness of a proscribed standard--particularly
certain policy statements--is not a rule. See Syncor Int'l
Corp. v. Shalala, 127 F.3d 90, 94 (D.C. Cir. 1997). Compare
also Appalachian Power Co. v. EPA, 208 F.3d 1015, 1021-22
(D.C. Cir. 2000), with Tozzi v. HHS, 271 F.3d 301, 312-13
(D.C. Cir. 2001) (Silberman, J. concurring). (Of course, gen-
eral statements of policy are exempt from notice-and-
comment procedures anyway. 5 U.S.C. s 553(b)(A)). But
the government does not claim that its package of announce-
ments is a policy statement. Instead, the government argues
__________
5 Although the government also implies that it had good cause
not to follow notice-and-comment rulemaking, it does not rely on
that position, presumably because the Department did not assert it.
Nor do we address amicus' argument that the 2001 PIK program
was exempt from APA rulemaking requirements under 5 U.S.C.
s 553(a)(2) because it constitutes agency action relating to "public
property, loans, grants, benefits, or contracts." As the Department
acknowledged, it has essentially waived that APA exemption. See
36 Fed. Reg. 13,804 (July 24, 1971); Rodway v. United States Dep't
of Agric., 514 F.2d 809, 814 (D.C. Cir. 1975).
that because the announcement of the 2001 PIK program was
an "isolated agency act" that did not propose to affect subse-
quent Department acts and had "no future effect on any other
party before the agency" it was not a rule. (Quoting Daing-
erfield Island Protective Soc'y v. Babbitt, 823 F. Supp. 950,
957 (D.D.C.), aff'd in relevant part, 15 F.3d 1159 (D.C. Cir.
1993)). The government would have us see its announcement
of the PIK program as analogous to an agency's award of a
contract pursuant to an invitation of bids or an agency's
decision to approve an application or a proposal--in adminis-
trative law terms an informal adjudication (which is the
technical term for an executive action). See, e.g., United
States v. Mead Corp., 533 U.S. 218, 239 n.1 (Scalia, J.,
dissenting).
We have little difficulty--as did the district court--in re-
jecting this argument. The August 31 press release, the
September Questions and Answers and most notably the
September 7 Notice of Program Implementation set forth the
bid submission procedures which all applicants must follow,
the payment limitations of the program, and the sanctions
that will be imposed on participants if they plant more in
future years than in 2001. It is simply absurd to call this
anything but a rule "by any other name."6
As a variation on the government's second standing argu-
ment--that appellants have not demonstrated injury because
they cannot show that if the Department had acted pursuant
to section 553 the result would have been altered--the gov-
ernment alternatively claims harmless error. We are told
that appellants cannot identify any additional arguments they
would have made in a notice-and-comment procedure that
they did not make to the Department in the several informal
sessions. And we are reminded that the Department did
make certain changes to the 2001 PIK program in response
__________
6 The government's suggestion that because participation in the
program is "voluntary" the announcement and accompanying docu-
ments should not be considered a rule is not worth a response.
Similarly, the notion that the government "essentially complied with
section 553 of the APA" borders on the frivolous.
to appellants' concerns. It is true that we have recognized
certain technical APA errors as harmless. For example, in
Sheppard v. Sullivan, 906 F.2d 756, 761-62 (D.C. Cir. 1990), a
challenge to an agency adjudication in a benefits case, we
held that a failure to undertake formal notice and comment
with respect to a program manual was harmless. But, in so
doing, we applied the standard set out in McClouth Steel
Prods. Corp. v. Thomas, 838 F.2d 1317, 1324 (D.C. Cir. 1988),
under which an utter failure to comply with notice and
comment cannot be considered harmless if there is any
uncertainty at all as to the effect of that failure. And in
Sheppard, we initially observed that the agency did not even
rely on that program manual in its challenged order; further-
more, we expressly concluded that the agency's substantive
approach was "the only reasonable one." Sheppard, 906 F.2d
at 762. See also First Am. Discount Corp. v. CFTC, 222 F.3d
1008, 1015 (D.C. Cir. 2000) (holding that agency's failure to
give adequate notice was harmless because the final rule was
a logical outgrowth of the proposed rule).
Here the government would have us virtually repeal section
553's requirements: if the government could skip those proce-
dures, engage in informal consultation, and then be protected
from judicial review unless a petitioner could show a new
argument--not presented informally--section 553 obviously
would be eviscerated. The government could avoid the ne-
cessity of publishing a notice of a proposed rule and perhaps,
most important, would not be obliged to set forth a statement
of the basis and purpose of the rule, which needs to take
account of the major comments--and often is a major focus of
judicial review.
In any event, although they need not have, appellants have
indicated additional considerations they would have raised in
a comment procedure. For example, they would have argued
that the Agency should have bound itself to a gradual dis-
bursement of the sugar, rather than merely allowing itself
that option. And, they would have challenged the Depart-
ment's decision to waive the 2000 PIK program restriction on
participants who had increased their acreage.
In their final claim, appellants argue that the Department
violated the Food Security Act because the Secretary did not
make four required findings before implementing a PIK
program. See 7 U.S.C. s 1308a. Section 1308a(a) requires
the Secretary to consider whether an action "will reduce the
total of the direct and indirect costs to the Federal Govern-
ment of a commodity program administered by the Secre-
tary" but "without adversely affecting income to small- and
medium-sized producers participating in such program."
Section 1308a(e) requires the Secretary to find that "changes
in domestic or world supply or demand conditions have
substantially changed after announcement of the program for
that crop," and "without action to further adjust production,
the Federal Government and producers will be faced with a
burdensome and costly surplus."7
In response, the Department directs our attention to the
Federal Register Notice of Implementation, in which it "ex-
pressly refers" to each of the required findings, and argues
that this reference is sufficient. That too is absurd. Refer-
encing a requirement is not the same as complying with that
requirement. The Department then turns to the post hoc
affidavit of Thomas Hunt Shipman, the Deputy Under Secre-
tary for Farm and Foreign Agricultural Services. But the
declaration merely states that Shipman "participated" in the
decision, not that he was the final decisionmaker. Shipman is
not the Secretary of Agriculture, and there is no evidence on
either the administrative or summary judgment record that
the Secretary delegated decisionmaking authority to Ship-
man. The internal options memoranda the government also
relies on suffer the same fatal defect. The record is devoid of
any evidence that the Secretary, or a Department employee
with final decisionmaking authority, ever complied with sec-
tion 1308a.
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7 Appellants also claim that the Department could not have
made three of the four findings. We need not decide that now.
In sum, this government argument has no more substance
than the second standing argument.
* * * *
There remains the question of remedy. Normally when an
agency so clearly violates the APA we would vacate its
action--in this case its "non-rule rule"--and simply remand
for the agency to start again. Unfortunately, because we
denied preliminary relief in this case, the 2001 program was
launched and crops were plowed under. The egg has been
scrambled and there is no apparent way to restore the status
quo ante. Appellants suggested that if we were to vacate, the
Federal Court of Claims would have the responsibility of
allocating damages. But that seems an invitation to chaos.
Moreover, although the government did not--and could not
have for the first time on appeal--assert a good cause for
omitting notice and comment, it is at least possible that the
Department could establish good cause because of timing
exigencies.
Appellants insist that we have no discretion in the matter;
if the Department violated the APA--which it did--its actions
must be vacated. But that is simply not the law. Instead,
"[t]he decision whether to vacate depends on 'the seriousness
of the order's deficiencies (and thus the extent of doubt
whether the agency chose correctly) and the disruptive conse-
quences of an interim change that may itself be changed.' "
Allied-Signal, Inc. v. United States Nuclear Regulatory Com-
mission, 988 F.2d 146, 150-51 (quoting International Union
UMW v. FMSHA, 920 F.2d 960, 966-67 (D.C. Cir. 1990)).
We have previously remanded without vacating when the
agency failed to follow notice-and-comment procedures. See,
e.g., Fertilizer Institute v. EPA, 935 F.2d 1303, 1312 (D.C.
Cir. 1991); see also American Medical Ass'n v. Reno, 57 F.3d
1129 (D.C. Cir. 1995); County of Los Angeles v. Shalala, 192
F.3d 1005, 1023 (D.C. Cir. 1999) (remanding without vacating
because the panel did not perceive any "rare circumstances"
that would warrant a break from that "established adminis-
trative practice").
Accordingly, we reverse the district court's grant of sum-
mary judgment and remand to that court to in turn remand
to the Department.
So ordered.