[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
May 10, 2007
No. 06-12793
THOMAS K. KAHN
CLERK
D. C. Docket No. 04-00049 CV-OC-10-GRJ
JOHN MAHON, et al,
Plaintiffs-Appellants,
versus
UNITED STATES DEPARTMENT
OF AGRICULTURE,
Defendant-Appellee.
Appeal from the United States District Court
for the Middle District of Florida
(May 10, 2007)
Before DUBINA and COX, Circuit Judges, and SCHLESINGER,* District Judge.
SCHLESINGER, District Judge:
______________________
*Honorable Harvey E. Schlesinger, United States District Judge for the Middle District of
Florida, sitting by designation.
The appellants, John, Shelby, and Paul Mahon, filed a complaint against the
United States Department of Agriculture (“USDA”) in the United States District
Court for the Middle District of Florida. The complaint sought judicial review of
final agency determinations in which the USDA had denied the appellants’
applications for federal disaster assistance under 7 C.F.R. § 1480.20 (2002) for
damage to container-grown crops (citrus trees) at the Mahons’ nurseries located in
Lake County, Florida. The damage was caused by freezing temperatures that
occurred in November and December 2000.
As to John and Shelby Mahon, the complaint asserted that the USDA had
(1) “failed to follow its own procedures” by not reviewing the Hearing Officer’s
determination within ten days, as required, (2) “misapplied” the applicable
regulations, (3) “unlawful[ly] discriminat[ed]” against John and Shelby Mahon,
and (4) deprived John and Shelby of their “due process rights.”
With respect to Paul Mahon, the complaint asked the district court to
reverse the final agency determination, in which the USDA had denied his request
for an administrative appeal on grounds that the request was untimely, and to
remand the matter to the USDA for an evidentiary hearing. The complaint
asserted that the USDA had (1) erred in refusing to accept Paul Mahon’s appeal
for the reasons stated in the Agency’s denial letter, (2) “misconstrued” the
2
applicable regulations, and (3) “deprived Paul Mahon of due process.”
The parties stipulated that the district court would resolve the case based on
the Mahons’ motion for summary judgment, the USDA’s response to that motion,
and the district court’s de novo review of the administrative records. The district
court denied the Mahons’ motion for summary judgment and entered summary
judgment in favor of the USDA. In its order, the court concluded that as to John
and Shelby Mahon’s claims, the USDA’s determination denying them benefits was
not unreasonable nor contrary to law. With respect to Paul Mahon, the court
concluded that it lacked jurisdiction because he had failed to exhaust his
administrative remedies by failing to timely file an administrative appeal. This
appeal followed.
For the reasons stated below, we vacate the district court’s decision with
respect to John and Shelby Mahons’ claims and remand this case for further
proceedings. With respect to Paul Mahon’s claims, we affirm the decision of the
district court.
I. BACKGROUND
John and Shelby Mahon are owners of a citrus nursery located in Lake
County, Florida. The nursery primarily produces citrus trees, however, it also
produces other plants, including philodendron selloms and azaleas. The trees and
3
plants are grown in small containers and then sold. Their nursery is situated on
approximately 126-acres, and a typical crop can consist of approximately 175,000
trees and plants. Paul Mahon is also the owner of a citrus nursery located in Lake
County, Florida.1 Like John and Shelby Mahon’s nursery, his nursery primarily
produces citrus trees. His nursery is situated on five acres of land, and his crops
can consist of as many as 100,000 trees and plants. On several days between
November 22 and December 31, the Mahons’ citrus crops were destroyed as a
result of freezing temperatures.
In January 2001, John, Shelby, and Paul Mahon filed applications for
disaster assistance pursuant to the 2000 Crop Disaster Program, 7 C.F.R. Part 1480
(2002), a program established by the USDA. The Mahons requested
approximately $1.45 million in benefits.
On May 25, 2001, the Lake County Committee of the Farm Service Agency
(“FSA”) denied Paul Mahon’s application on the ground that he “d[id] not meet
the eligibility criteria for a commercial nursery operation” because he had not
renewed his certificate of registration to sell or distribute, or to offer for sale or
distribution nursery stock under Florida law, § 581.131, Fla. Stat. (2000), and
1
It is unclear from the record what the familial relationship is between John and Shelby
Mahon and Paul Mahon.
4
because the State of Florida’s records showed that he was “no longer in business.”
Paul Mahon filed a request for reconsideration, which was denied on November 9,
2001. The denial letter noted that in his request for reconsideration, Paul Mahon
had submitted receipts that “reflect[] movement of inventory off of the property
[when] he was not certified with the State of Florida.”
On November 9, 2001, the Lake County Committee denied John and Shelby
Mahon’s applications on the ground that they “di[d] not meet the eligibility criteria
for a commercial nursery operation” because, like Paul Mahon, their certificate of
registration as commercial growers under Florida law had expired and because the
State of Florida’s records showed that they were “out of business.” The denial
letter noted that John and Shelby Mahon had submitted receipts which “reflect[ed]
that the operation was moving inventory off of the location [when] they were not
certified with the State of Florida.” In addition, the County Committee concluded
that the Plaintiffs did not follow “best management practices.” John and Shelby
Mahon also sought reconsideration, and their request was likewise denied.
A. PAUL MAHON’S ADMINISTRATIVE APPEAL.
On December 5, 2001, following the denial of his benefits application, Paul
Mahon elected to proceed to mediation. After mediation reached an impasse, Paul
Mahon’s attorney sent a letter purporting to be a notice of appeal on May 29,
5
2002,2 and again on June 7, 2002.3
On June 13, 2002, Paul Mahon signed a written statement in which he
authorized his attorney to appeal to the National Appeals Division (“NAD”) and
“confirmed” his attorney’s June 7, 2002 request for appeal. Paul Mahon also
signed a letter that forwarded the signed authorization to the NAD and asked the
NAD to “consider [the signed authorization] to be [his] formal notice of appeal
and request for oral argument.” On June 14, Paul Mahon (or someone acting on
his behalf) mailed the written appeal authorization and transmittal letter.
The NAD sent a letter to Paul Mahon’s counsel denying the June 7, 2002,
request for an appeal on the ground that, even after application of 7 C.F.R. §
11.5(c)(1) (2002) (stating that a request for mediation tolls the thirty-day period to
appeal to the NAD), based on an impasse date of April 25, 2002, Paul Mahon
“[had] not filed[d] a personally signed request for an appeal within the [thirty]day]
time limit established by [7 C.F.R. § 11.6(b)(1)–(2) (2002).].”
On June 20, 2002, Paul Mahon objected to the denial of his appeal claiming
that the NAD did not notify him that the mediation had reached an impasse until
2
The letter was sent to the Lake County Committee. In the letter, Paul Mahon’s attorney
asked the Committee to consider the letter to be a notice of administrative appeal.
3
This letter was sent to the National Appeals Division (“NAD”), and was substantively
similar to the letter sent to the Lake County Committee.
6
May 25, 2002, and that there was never an agreement amongst the parties to have
an impasse declared on April 25, 2002. Paul Mahon demanded “a rehearing and
an evidentiary hearing as to when the impasse [had] occurred and to the lack of
notice.” To support his position, Paul Mahon pointed out that the Florida
Agricultural Mediation Service, which conducted the mediation, did not consider
the mediation to have reached an impasse until May 28, 2002.
The NAD nevertheless denied Paul Mahon’s request for reconsideration on
the ground that his personally signed notice of appeal, which was signed on June
13, 2002 and postmarked June 14, 2002, was untimely based on either impasse
date. The NAD subsequently denied Paul Mahon’s numerous motions for
reconsideration.
B. JOHN AND SHELBY MAHON’S ADMINISTRATIVE APPEAL.
On June 13, 2002, John and Shelby Mahon timely signed and filed notices
of administrative appeal with the NAD. A Hearing Officer conducted a hearing on
November 16, 2002. During the hearing, the Officer received evidence that other
nurseries in Lake County and elsewhere in Florida had received benefits even
though they had not paid the commercial growers registration fees as required by
Florida law and that the FSA had not asked those nurseries whether they were
registered under Florida law. Although the FSA acknowledged that it erroneously
7
had issued some payments to ineligible applicants, the FSA argued that the
applicable federal regulation, 7 C.F.R. § 718.9 (2002), prohibited the FSA from
seeking a refund. The FSA also presented sworn testimony that the FSA had not
been aware of the “status” of the unregistered recipients when it had approved
their applications and that “once the problem was identified, [the] FSA began
inquiring into licensure status of all applicants before paying benefits.”
On December 4, 2002, the Hearing Officer issued an Appeal Determination
in which he found that the Lake County Committee had erred in denying John
Mahon’s and Shelby Mahon’s applications for disaster relief. The Hearing Officer
concluded that the Agency’s decision to deny disaster relief to John and Shelby
Mahon because their state certificate of registration to sell nursery stock had
expired, while granting relief to others whose certificates had likewise expired,
was arbitrary and contrary to law. According to the Hearing Officer, the Agency
“must provide assistance to all producers equally.” In addition, the Hearing
Officer found that “the [A]gency’s use of Florida Statutes as one of the basis [sic]
for denying [John and Shelby Mahon’s Crop Disaster Program] benefits is not in
accordance with the standards established by federal published regulations.” In the
alternative, the Hearing Officer noted that even if Florida’s certification law was
applicable, a USDA Official had already concluded in another case that under
8
Florida law a certification was not required until such time as the crop was ready
to be sold.4 Since the Agency failed to provide any evidence that the Mahon’s
crops were eligible for sale, they were not required to be registered as commercial
producers pursuant to Florida law. Lastly, the Hearing Officer concluded that the
Agency’s determination that John and Shelby Mahon’s management of the nursery
did not meet the definition of “best management practices” was erroneous. On
December 27, 2002, the FSA Acting Administrator filed a request for review of
the Hearing Officer’s December 4, 2002 Appeal Determination by the Director of
the NAD.
On January 22, 2003, the Director issued a Director Review Determination,
in which he reversed the Hearing Officer’s ruling. The Director found that John
and Shelby Mahon’s request for disaster relief was appropriately denied because
they had not employed “best management practices” as required by federal
regulations. The Director declined to address “the issue of whether [John and
Shelby Mahon’s] missing state [certificate of registration] also supported [the]
FSA’s adverse decision.”
4
This conclusion of law was made by Marcinda Wolthuis, County Executive Director for
the Lake-Orange Co. FSA, in a letter dated December 19, 2001, addressed to growers Aaron and
Jamie Fender. The letter was sent in reference to a motion for reconsideration filed by the
Fenders and in granting the motion Ms. Wolthuis stated: “No inventory had been sold in the
2001 year therefore certification with the State of Florida would not have been required until the
crop was eligible for sale. Deeming that the certification was not required at the time of loss.”
9
On February 7, 2003, John and Shelby Mahon requested reconsideration of
the “Director’s Review Determination.” Thereafter, on August 15, 2003, the
Deputy Director, who had been delegated authority to make determinations on
requests for reconsideration, issued a Revised Director’s Review Determination.
The Deputy Director vacated the January 22, 2003, Director Review
Determination based on a finding that it had been “based on a material fact that
was in error.” Specifically, the Deputy Director found the Director’s conclusion
that the Mahons had failed to employ “best management practices” was erroneous.
The Deputy Director then conducted a de novo review of the matter, but
nevertheless determined that the Lake County Committee’s denial of benefits was
“supported by the law and the evidence” and that the Hearing Officer’s December
4, 2002, Appeal Determination, “must be reversed.”
The Deputy Director found that the Agency properly denied disaster relief
to John and Shelby Mahon because they were not operating as a commercial
nursery at the time of their loss. The Deputy Director reasoned that “[d]isaster
benefits are expressly limited by regulations to ornamental nursery crops that were
grown in a container or controlled environment for commercial sale on property
owned or leased by the producer,” and since John and Shelby Mahon’s nursery
was not registered as a commercial nursery under Florida law, and since their
10
crops could not be legally sold under Florida law without being registered on the
dates of their loss, disaster benefits were properly denied.
On September 9, 2003, John and Shelby Mahon filed their “Request for
Reconsideration of the Director’s Revised Review.” Their request was denied on
October 17, 2003.
II. DISCUSSION
A.
This court reviews a district court’s grant of summary judgment de novo,
applying the same standard as the district court. McDowell v. Brown, 392 F.3d
1283, 1288 (11th Cir. 2004); O’Ferrell v. United States, 253 F.3d 1257, 1265
(11th Cir. 2001). This court may affirm a district court’s grant of summary
judgment “on any ground fairly supported by the record.” Alliance Metals, Inc. v.
Hinely Industries, Inc., 222 F.3d 895, 900 (11th Cir. 2000).
Summary Judgment is particularly appropriate in cases in which a district
court is asked to review a decision rendered by a federal administrative agency.
Florida Fruit & Vegetable Ass’n v. Brock, 771 F.2d 1455, 1459 (11th Cir. 1985);
10B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
and Procedure § 2733 (3d ed. 1998). However, “even in the context of summary
judgment, an agency action is entitled to great deference.” Alabama-Tombigbee
11
Rivers Coalition v. Kempthorne, 477 F.3d 1250, 1254 (11th Cir. 2007) (citations
omitted). Under the Administrative Procedure Act, this court must set aside any
agency action, finding or conclusion that is found to be arbitrary, capricious, an
abuse of discretion, unconstitutional, in excess of statutory authority, without
observance of procedure as required by law, or unsupported by substantial
evidence. 5 U.S.C. § 706(2); see Citizens to Preserve Overton Park, Inc. v. Volpe,
401 U.S. 402, 416, 91 S. Ct. 814, 824, 28 L. Ed. 2d 136 (1971). However, we
cannot substitute our judgment for that of the agency. Kempthorne, 477 F.3d at
1254. Instead, we must look to see “whether an agency’s decision was based on
consideration of the relevant factors and whether there has been a clear error of
judgment.” Id. (quoting Sierra Club v. Johnson, 436 F.3d 1269, 1273–74 (11th
Cir. 2006)).
B.
In the Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriation Act of 2001, Pub. L. No. 106-387, § 815, 114
Stat. 1549, 1549A-55 (2000), Congress directed the Secretary of Agriculture to
use Commodity Credit Corporation (“CCC”) funds “to make emergency financial
assistance . . . available to producers on a farm that have incurred [specified]
qualifying losses.” “Qualifying losses” include “losses due to damaging weather .
12
. . associated with crops that are, as determined by the Secretary[,] (1) quantity
losses for the 2000 crop; (2) quality losses for the 2000 crop; or (3) severe
economic losses for the 2000 crop.” § 815, 114 Stat. at 1549A-55–1549A-56.
The program applies to “losses for all crops, as determined by the Secretary, due to
disasters[,] including . . . nursery losses in the State of Florida that occur[red],
because of disaster, during the period beginning on October 1, 2000, and ending
on December 31, 2000.” § 815, 114 Stat. at 1549A-56.
Following Congress’s directive, the USDA, through the CCC, promulgated
7 C.F.R. Part 1480 (2002), to implement the 2000 Crop Disaster Program. See 7
C.F.R. § 1480.1 (2002). The regulations provide that “[t]he program will be
administered under the general supervision of the Executive Vice President,
Commodity Credit Corporation (CCC), and shall be carried out in the field by
Farm Service Agency (FSA) State and county committees.” 7 C.F.R. § 1480.2(a)
(2002). The regulations further provide that “[p]roducers in the United States will
be eligible to receive disaster benefits . . . only if they have suffered [ ] crop losses
of eligible crops” due to specified disasters. 7 C.F.R. § 1480.4(a) (2002). Also,
the terms “eligible crop” and “value loss crop” were assigned the meanings
assigned to those terms by 7 C.F.R. Part 1437 (Noninsured Crop Disaster
Assistance Program Regulations for the 1998 and Succeeding Crop Years). 7
13
C.F.R. § 1480.3 (2002); see 7 C.F.R. § 1437.3 (2002) (defining “eligible crop” and
“value loss crop” to include, “ornamental nursery crop” as a “decorative plant
grown in a container or controlled environment for commercial sale”).
Furthermore, the regulations provide that eligible disasters include “freeze[s],” 7
C.F.R. § 1480.10(a)(1), and, moreover, the regulations state that disaster benefits
for “ornamental nursery crops . . . are limited to ornamental nursery crops that
were grown in a container or controlled environment for commercial sale on
property owned or leased by the producer, and cared for and managed using good
nursery growing practices.” 7 C.F.R. § 1480.18(d) (2002). “[D]isaster benefits
under [Part 1480] are calculated based on the loss of value at the time of disaster,
as determined by CCC.” 7 C.F.R. § 1480.18(b).
The National Appeals Division (“NAD”) is responsible for adjudicating
specified administrative appeals from adverse decisions by certain agencies within
the USDA. See 7 U.S.C. §§ 6991–7002 (2000). The NAD’s responsibilities
include the adjudication of appeals from adverse decisions by the CCC, the FSA,
and the FSA State, county, and area committees, see 7 C.F.R. § 11.1 (2002)
(defining the term “agency” as including local committees), including appeals
from the “[d]enial of participation in, or receipt of benefits under, any program of
an agency[.]” 7 C.F.R. § 11.3 (2002).
14
C.
With respect to John and Shelby Mahon, the issue before this court is
whether the district court erred in finding that the USDA’s interpretation of its
regulations implementing the 2000 Crop Disaster Program was reasonable. First,
John and Shelby Mahon argue that the district court erred in finding that they
operated an “ornamental nursery” as defined under 7 C.F.R. § 1480.18(d). John
and Shelby Mahon claim that their citrus operations do not fall within the agency’s
own definition of “eligible nursery crops” of an “ornamental nursery.” In fact,
they argue, that their crops are explicitly excluded by the definition set forth in the
FSA’s handbook.
The 2000 Crop Disaster Program Handbook, 3-DAP Amend. 1, ¶ 93
(2000), states as follows:
Eligible ornamental nursery includes decorative plants grown in a
container or controlled environment for commercial sale.
Eligible nursery crops include, but are not limited to:
• deciduous shrubs, broadleaf evergreens,
coniferous evergreens, shade and flowering trees,
etc.
• seed stock for use as propagation in a commercial
ornamental nursery operation.
Note: This includes fruit and nut seedlings
15
grown for sale as seed stock for
commercial orchard operations
growing the fruit or nut.
Eligible nursery crops do not include:
• edible varieties
• plants produced for reforestation purposes or for
the purposes of producing a crop for which NAT
or crop insurance does not provide protection.
Id. (emphasis added). Accordingly, since John and Shelby Mahon’s citrus trees
produced “edible fruit,” they argue, their crops could not fall under the definition
of “ornamental nursery,” and their citrus trees were not required to have been
grown for “commercial sale” in order to be eligible for disaster benefits.
The USDA contends that John and Shelby Mahon waived this argument by
failing to raise it during the administrative proceedings. This court agrees with the
USDA and finds that the argument was waived.
“Under ordinary principles of administrative law, a reviewing court will not
consider arguments that a party failed to raise in timely fashion before an
administrative agency.” Sims v. Apfel, 530 U.S. 103, 114, 120 S. Ct. 2080, 2087,
147 L. Ed. 2d 80 (2000) (Breyer, J., dissenting); accord Woodford v. Ngo, ___
U.S. ___, 126 S. Ct. 2378, 2385–86 (2006); United States v. L.A. Tucker Truck
Lines, Inc., 344 U.S. 33, 36–37, 73 S. Ct. 67, 68–69, 97 L. Ed. 54 (1952);
16
Unemployment Compensation Comm’n of Alaska v. Aragon, 329 U.S. 143, 155,
67 S. Ct. 245, 249–51, 91 L. Ed. 136 (1946). As the Supreme Court explained
long ago:
[O]rderly procedure and good administration require that objections
to the proceedings of an administrative agency be made while it has
opportunity for correction in order to raise issues reviewable by the
courts. . . . [C]ourts should not topple over administrative decisions
unless the administrative body not only has erred but has erred
against objection made at the time appropriate under its practice.
L.A. Tucker Truck Lines, Inc., 344 U.S. at 37, 73 S. Ct. at 69 (emphasis added).
Although true that requirements of administrative issue exhaustion are
principally “creatures of statute,” Sims v. Apfel, 530 U.S. at 107, 120 S. Ct. at
2084, the requirements apply with equal force in many cases not involving a
statute or regulation. Id. at 108, 120 S. Ct. 2084. The basis for imposing a
judicially created issue-exhaustion requirement is an analogy to the general rule
that appellate courts will not consider arguments not raised before trial courts. Id.;
see Hormel v. Helvering, 312 U.S. 552, 556, 61 S. Ct. 719, 721, 85 L. Ed. 1037
(1941) (explaining rationale of issue-exhaustion requirement). This court has also
noted seven policy reasons for applying an issue exhaustion requirement:
(1) to avoid premature interruption of the administrative process; (2)
to let the agency develop the necessary factual background upon
which decisions should be based; (3) to permit the agency to exercise
its discretion or apply its expertise; (4) to improve the efficiency of
17
the administrative process; (5) to conserve scarce judicial resources,
since the complaining party may be successful in vindicating rights in
the administrative process and the courts may never have to
intervene; (6) to give the agency a chance to discover and correct its
own errors; and (7) to avoid the possibility that frequent and
deliberate flouting of the administrative processes could weaken the
effectiveness of an agency by encouraging people to ignore its
procedures.
Johnson v. Meadows, 418 F.3d 1152, 1156 (11th Cir. 2005) (Dubina, J.) (citing
Alexander v. Hawk, 159 F.3d 1321, 1327 (11th Cir. 1998)).
The Supreme Court has further opined that “the desirability of a court
imposing a requirement of issue exhaustion depends on the degree to which the
analogy to normal adversarial litigation applies in a particular administrative
proceeding.” Sims v. Apfel, 530 U.S. at 109, 120 S. Ct. at 2085. Accordingly,
where the parties are expected to fully develop the issues during the course of an
adversarial administrative proceeding, the rationale for requiring issue exhaustion
is at its strongest. Id. at 110, 120 S. Ct. at 2085. By contrast, where an
administrative proceeding is not adversarial, the reasons for requiring issue
exhaustion are much weaker. Id.; see Shepard v. NLRB, 459 U.S. 344, 351, 103 S.
Ct. 665, 670, 74 L.Ed.2d 523 (1983) (noting the wide differences between
administrative agencies and courts).
In the instant case, the NAD administrative appeal procedures do not
impose an issue-exhaustion requirement. The NAD’s regulations do require
18
claimants to exhaust the NAD’s administrative appeal procedures prior to seeking
judicial review, 7 C.F.R. §§ 11.2(b), 11.13(b) (2002), and the regulations require
claimants to state the reasons why the adverse decision was incorrect at several
stages of the litigation, 7 C.F.R. §§ 11.6(b)(2), 11.8(c)(2), 11.9(a), 11.11 (2002),
however, there is no express requirement in the regulations that a party must list
the specific issues that the reviewing court will consider. See Ballanger v.
Johanns, 451 F. Supp. 2d 1061, 1068 (S.D. Iowa 2006) (“[T]he Court is not aware
of any statute or regulation that requires issue exhaustion for an appeal from the
NAD”).5 Compare with 20 C.F.R. § 802.211 (2002) (requiring that in a petition
filed before the Benefits Review Board of the Department of Labor, the petition
must “[s]pecifically state[] the issues to be considered by the Board).
Although there is no express issue exhaustion requirement in the NAD
regulations, a review of the NAD’s Rules of Procedure reveals that NAD
proceedings are “adversarial” in nature. The director and hearing officer are
charged with “the authority to administer oaths and affirmations” and they may
issue subpoenas for the attendance of witnesses and the production of evidence at
5
Although this Court is not bound by the district court’s decision in Ballanger v. Johanns,
451 F. Supp. 2d at 1061, this Court notes that it is the only other published case dealing with the
issue of whether the NAD procedures constitute adversarial proceedings. Moreover, this Court
finds that Ballanger is a well reasoned decision, and is accordingly very persuasive.
19
the request of either party. 7 C.F.R. § 11.8(a)(2) (2002). Upon a timely request,
the appellant is entitled to a hearing, the hearing officer receives written
statements of each sides’ position, and takes evidence into the hearing record. 7
C.F.R. § 11.8(c). Also, during the course of the hearing “[a]ny party shall have the
opportunity to present oral and documentary evidence, oral testimony of
witnesses, and arguments in support of the party’s position; controvert evidence
relied on by any other party; and question all witnesses.” 7 C.F.R. § 11.8(c)(5)(ii).
The regulations also provide all parties with an opportunity to present evidence
and raise issues that may not have been proffered or raised earlier in the
administrative review process, either on account of omission or because they were
not apparent at the time. The regulations provide that the hearing officer “will
allow the presentation of evidence at the hearing by any party without regard to
whether the evidence was known to the officer, employee, or committee of the
agency making the adverse decision at the time the adverse decision was made.”
Id. In addition, at the Director Review phase, the director issues a final
determination upholding, reversing, or modifying the determination of the hearing
officer. 7 C.F.R. § 11.9(d)(1). The director also retains the discretion to remand
all or a portion of the determination to the hearing officer, or hold a new hearing if
new evidence is presented. Id.
20
The NAD’s procedures provide an adversarial system in which parties are
given a full and fair opportunity to make their arguments and present evidence,
and, as a corollary, to attempt to challenge the arguments and evidence presented
by the agency. As such, the adversarial nature of the administrative proceedings
counsel against allowing John and Shelby Mahon to raise new arguments that
were not raised during the course of their administrative appeal or during the
Director Review phase. Sims v. Apfel, 530 U.S. at 109–10, 120 S. Ct. at 2084–85.
The Agency was not on notice of John and Shelby Mahon’s argument prior to this
appeal and at this stage neither party can present evidence. See Hormel v.
Helvering, 312 U.S. at 556, 61 S. Ct. at 722. Furthermore, John and Shelby
Mahon were given every opportunity to raise their arguments at each phase of the
administrative proceeding, see 7 C.F.R. §§ 11.8(c)(5)(ii), 11.9(d)(1), and the
Agency was denied the opportunity to exercise its discretion and expertise in
considering the issue. See Sims v. Apfel, 530 U.S. at 114, 120 S. Ct. at 2087–88
(Breyer, J., dissenting); Johnson v. Meadows, 418 F.3d at 1156; Ballanger v.
Johanns, 451 F. Supp. 2d at 1069.
In their reply brief, John and Shelby Mahon argue that the district court’s
conclusion that they were operating an “ornamental nursery” under 7 C.F.R.
1480.18(d) constitutes plain error and that plain error trumps any alleged waiver.
21
In support of their argument, they cite Johnson v. United States, 520 U.S. 461, 117
S. Ct. 1544, 137 L. Ed. 2d 718 (1997), for the proposition that this court may
correct an error that was not raised before the district court on a showing of plain
error. See id. at 466–67, 117 S. Ct. 1548–49. Although John and Shelby Mahon
fail to further explain their theory, they appear to imply that the inference to be
drawn from Johnson is that even if an issue was waived during the administrative
process, and the issue was never raised before the district court, the issue may be
reviewed by the appellate court if the district court commits plain error, thus, this
court can review the error. Said differently, if the district court commits plain
error with respect to an issue that was never raised during the administrative
process, and never raised before it, the issue may nevertheless be reviewed by this
court. This argument is unsupported by the law and is accordingly rejected.
In Johnson v. United States, the Supreme Court was considering a direct
appeal of a criminal conviction, and not an administrative adjudication. Id. at 463,
117 S. Ct. at 1547. Specifically, the Johnson Court was examining whether
Federal Rule of Criminal Procedure 52(b), which provides that “[p]lain errors or
defects affecting substantial rights may be noticed although they were not brought
to the attention of the [district] court,” required that the court examine several
issues that the defendant failed to raise at trial. Id. at 464–68, 117 S. Ct. at
22
1547–49. The Johnson Court found that Rule 52(b) did not mandate review
because the “forfeited error” did not “seriously affect the fairness, integrity or
public reputation of judicial proceedings.” Id. at 469, 117 S. Ct. at 1550 (internal
alterations and citations omitted). In the instant case, the Federal Rules of
Criminal Procedure are inapplicable, and, furthermore, there is no indication that
the alleged error “seriously affect[s] the fairness, integrity or public reputation of
judicial proceedings.” As such, Johnson does not provide an exception to the
general rule that in administrative cases “a reviewing court will not consider
arguments that a party failed to raise in timely fashion before an administrative
agency.” Sims v. Apfel, 530 U.S. at 114, 120 S. Ct. at 2087 (Breyer, J., dissenting).
D.
John and Shelby Mahon also argue that even assuming that their citrus trees
were “ornamental nursery crops,” as defined under 7 C.F.R. § 1480.18(d) (2002),
the district court erred by affirming the NAD’s determination that they were
required to register as commercial producers under Florida law, as set out by
section 581.131, Fla. Stat. (2000), in order to satisfy section 1480.18(d)’s
requirement that “ornamental nursery crops” must be held for “commercial sale” at
the time of the disaster in order to qualify for federal disaster assistance. They
also argue that the Agency acted arbitrarily and capriciously by (1) only applying
23
that portion of section 581.131 which was adverse to the Mahons and by ignoring
the statute’s added written notice requirement which required the state to provide
the Mahons with sixty days notice prior to their certification expiration date, (2)
denying the Mahons benefits while others who were also not certified as
commercial producers under Florida law were granted benefits, and (3) ignoring
evidence that the Mahons were engaged in the commercial sale of citrus trees.
The USDA responds by arguing that its interpretation of the term “commercial
sale” is reasonable, therefore, this court should defer to the USDA’s interpretation
and affirm its decision to deny benefits to John and Shelby Mahon. This court
finds that the USDA’s decision that John and Shelby Mahon were not engaged in
the “commercial sale” of their citrus trees was arbitrary and capricious and
contrary to the law and the evidence.
As this court has explained, an agency’s decision should “be set aside only
if found to be arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with the law.” Sierra Club v. Johnson, 436 F.3d at 1273. When
reviewing “an agency’s interpretation of a statute that the agency is responsible for
administering, we apply a two-part test.” Id. (citing Chevron, U.S.A., Inc. v.
Natural Res. Def. Council, 467 U.S. 837, 842–43, 104 S. Ct. 2778, 2781–82, 81 L.
Ed. 2d 694 (1984)); see also Cadet v. Bulger, 377 F.3d 1173, 1185 (11th Cir.
24
2004); Lewis Barnhart, 285 F.3d 1329, 1333 (11th Cir. 2002); Legal Envtl.
Assistance Found. v. EPA, 118 F.3d 1467, 1473 (11th Cir. 1997). First, if
congressional intent is clear, then this court and the agency must give effect to the
unambiguously expressed intent of Congress. Sierra Club v. Johnson, 436 F.3d at
1273; Cadet v. Bulger, 377 F.3d at 1185 (11th Cir. 2004). On the other hand, if
the statute is silent or ambiguous with respect to the particular issue, we are
obligated to defer to the agency’s interpretation of the statute so long as that
interpretation is reasonable. See Cadet v. Bulger, 377 F.3d at 1185; Mazariegos v.
Office of the U.S. Att’y Gen., 241 F.3d 1320, 1327 n.4 (11th Cir. 2001). The
agency’s interpretation shall be considered reasonable and controlling so long as it
is not “arbitrary, capricious, or manifestly contrary to the statute.” Dawson v.
Scott, 50 F.3d 884, 887 (11th Cir. 1995) (quoting Chevron, 467 U.S. at 844, 104 S.
Ct. at 2782).
“An agency’s interpretation of its own regulations is ‘controlling unless
plainly erroneous or inconsistent with the regulation.’” Sierra Club v. Johnson,
436 F.3d at 1274 (quoting Auer v. Robbins, 519 U.S. 452, 461, 117 S. Ct. 905,
911, 137 L. Ed. 2d 79 (1997)); see also Brennan v. S. Contractors Serv., 492 F.2d
25
498, 501 (5th Cir. 1974)6 (holding that Secretary of Labor’s interpretation of a
regulation promulgated under Occupational Safety and Health Act was entitled to
“great weight”). This deferential standard is applicable so long as the agency does
not formulate a regulation that merely parrots the statute it is designed to
implement. Gonzales v. Oregon, ___ U.S. ___, 126 S. Ct. 904, 916, 163 L. Ed. 2d
748 (2006) (“An agency does not acquire special authority to interpret its own
words when, instead of using its expertise and experience to formulate a
regulation, it has elected merely to paraphrase the statutory language.”).
After reviewing the statute and its legislative history, it is apparent that
Congress failed to provide any guidance with respect to the meaning of the term
“commercial sale,” therefore, Congress has implicitly left a gap in the statutory
scheme that must be filled by the USDA. See Chevron, 467 U.S. at 843, 104 S. Ct.
at 2782 (“The power of an administrative agency to administer a congressionally
created program necessarily requires the formulation of policy and the making of
rules to fill any gap left, implicitly or explicitly, by Congress.”) (internal citations
and alterations omitted). As such, this court must defer to the agency’s
interpretation of the term “commercial sale” so long as it is reasonable.
6
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this court
adopted as binding precedent all decisions of the Fifth Circuit handed down prior to the close of
business on September 30, 1981.
26
The terms and conditions for the 2001 and 2002 Crop Disaster Program are
set forth under 7 C.F.R. Part 1480 (2002). See 7 C.F.R. § 1480.1. The purpose of
the program is to provide disaster assistance to producers who incurred losses due
to disasters occurring in 2001 and 2002. Id. Specifically, 7 C.F.R. § 1480.4(a)
provides that “[p]roducers in the United States will be eligible to receive disaster
benefits under this part only if they have suffered losses of eligible crops in 2001
or 2002 as a result of a disaster or related condition . . . .” For ornamental nursery
crops, “disaster benefits . . . are limited to ornamental nursery crops that were
grown in a container or controlled environment for commercial sale on property
owned or leased by the producer, and cared for and managed using good nursery
growing practices.” 7 C.F.R. § 1480.18 (emphasis added).
The Agency denied John and Shelby Mahon disaster relief because the
Agency concluded that their nursery crops were not for “commercial sale.” In
order to provide the term “commercial sale” with meaning, the Agency looked to
Florida law, which provides that before any person can sell or distribute nursery
stock in the state, they must be registered with the state. § 581.131, Fla. Stat.
Since John and Shelby Mahon were not registered with the state at the time of the
disaster, and were therefore prohibited from distributing nursery stock under
27
Florida law, the Agency concluded that their crops were not for commercial sale.7
The Mahons argue that the Agency violated 7 C.F.R. § 1480.2(b) (2002),
which provides that “FSA State and county committees and representatives do not
have the authority to modify or waive any of the provisions of [Part 1480],” by
deferring to Florida law and by incorporating and relying upon compliance with
Florida’s registration requirements to determine eligibility for federal disaster
assistance. As an alternative argument, though obliquely stated, John and Shelby
Mahon assert that even if it is reasonable that the Agency relied upon Florida law,
it was nevertheless arbitrary and capricious for the Agency to apply the statute
when the state failed to send them a renewal notice as required by section 581.131,
Fla. Stat. See § 581.131(8), Fla. Stat. (providing that “[t]he department shall
provide to each person subject to this section written notice and renewal forms 60
days prior to the annual renewal date informing the person of the certificate of
registration renewal date and the applicable fee.”). Put simply, John and Shelby
Mahon argue that the Agency’s selective application of the Florida statute was
arbitrary and capricious.
7
Florida law provides “[i]t is unlawful for any nurseryman, stock dealer, agent, or plant
broker to sell, give away, transfer, move or cause to be moved, carry, ship, or deliver for carriage
or shipment any nursery stock except in compliance with the provisions of this chapter and the
rules made pursuant to law.” § 581.121, Fla. Stat.
28
This Court finds that while it is reasonable for the Agency to rely upon state
law to provide meaning to an undefined statutory term, see Chevron, 467 U.S. at
843, 104 S. Ct. at 2782, the USDA acted arbitrarily in selectively applying only
part of the Florida statute. Under section 581.131, Fla. Stat., in order to sell their
citrus crops in Florida, the Mahons must register with the state. However, the
state is required to provide them with sixty days notice prior to the annual renewal
date. During the administrative proceedings, the Mahons testified that they never
received the statutorily required notice, and the agency failed to present evidence
rebutting this testimony. This court cannot condone an agency’s practice of
picking and choosing mere portions of a state statute, instead, in cases where an
agency chooses to incorporate a state statute it should, if practicable, incorporate
the whole statute, and not just isolated portions that support a certain result. This
practice serves to insure consistency and predictability in the administrative
process.
Aside from the issue of selectively incorporating only those provisions that
were adverse to the Mahons, another issue remains, and that is whether the Florida
statute should apply to the instant case at all. Although not addressed by the
parties in their briefs, this Court notes that a USDA official in another benefits
case similar to this one rendered an opinion that section 581.131, Fla. Stat. would
29
only apply if a claimant’s crops were eligible for sale at the time of the disaster.
Thus, under this standard, the fact that the Mahons were not registered as
commercial producers would only be relevant if their crops were ripe and ready
for sale at the time they were destroyed.8 The district court failed to consider
whether section 581.131 should be interpreted this way, or whether the statute
applies regardless of whether the Mahons’ crops were ready for sale. Furthermore,
this court finds it troubling that the USDA would interpret and apply section
581.131 so differently with respect to two similarly situated claimants.
John and Shelby Mahon further claim that the Agency acted arbitrarily by
denying them benefits while the evidence demonstrated that over one million
dollars was awarded to other non-registered producers in the State of Florida.
Such disparate treatment of similarly situated producers, they argue, demonstrates
the Agency’s arbitrary and capricious treatment of their claims. In addition, John
and Shelby Mahon argue, in effect, that the Agency acted arbitrarily and
capriciously in ignoring evidence that they were engaged in the “commercial sale”
of citrus trees. After considering these contentions, this court is convinced that the
Agency acted arbitrarily and capriciously by treating similarly situated producers
8
This court finds nothing in the record indicating whether the Mahon’s crops were ready
for sale at the time of the disaster. Accordingly, the district court may need to determine whether
the Mahon’s crops were eligible for sale.
30
differently, and by ignoring evidence which supported the Mahon’s claims.
First, the record demonstrates that the Agency made payments to other
uncertified nurseries, who had suffered the same type of loss, and that even
$325,958.00 was paid to uncertified nurseries by the very same County Committee
that originally rejected John and Shelby Mahon’s claims. Also, the Agency
arbitrarily chose to ignore evidence establishing that John and Shelby Mahon were
in the business of selling citrus trees. The record demonstrates that they had been
growing and selling citrus trees for over twenty years, and that they were
continuing to grow over 175,000 trees, which were grown in individual containers
on their 126-acre nursery at the time of the disaster. Why were they growing so
many trees on their farm in individual containers? For personal use?9
Furthermore, during the administrative process the Mahons introduced several
receipts into evidence which demonstrate that they were continuing to sell their
nursery stock. Logically, these facts suggest that they were indeed in the business
of growing and selling citrus trees.
While true that agencies are granted tremendous deference in interpreting
Congressional directives and in formulating implementing regulations, that
9
It seems that this was indeed the Agency’s conclusion. However, common sense seems
to dictate that if a person were going to plant 175,000 citrus trees for personal use, i.e., to pick
and eat the fruit, they would plant the trees in the ground and not in pots.
31
deference must end when an agency acts as arbitrarily and obtusely with regard to
the law and facts as the USDA did here. See Citizens to Preserve Overton Park,
Inc. v. Volpe, 401 U.S. at 416, 91 S. Ct. at 824; Sierra Club v. Johnson, 436 F.3d
at 1273–74. Accordingly, the law requires that the decision of the district court be
vacated.
E.
Turning to Paul Mahon’s appeal, we first note that under 7 U.S.C. §
6912(e), before a party may bring an action in federal court they must “exhaust all
administrative appeal procedures established by the Secretary.” In implementing
this explicit Congressional directive, the agency promulgated 7 C.F.R. § 11.2(b)
(2002), which provides that a person “shall seek review of an adverse decision
before a Hearing Officer,” and “may seek further review by the Director,” before
seeking judicial review. See also 7 C.F.R § 11.13(b) (2002). Thus, we must
determine whether Paul Mahon did indeed exhaust his administrative remedies.
Paul Mahon’s contention is that this court should reverse the NAD’s
rejection of his administrative appeal on the ground that he had not filed a
personally signed request for appeal within the thirty-day time limit established by
7 C.F.R. § 11.6(b)(1) and (2) (2002). However, he fails to argue that he complied
with the applicable regulations, that the applicable regulations did not require his
32
personal signature, or that the NAD’s interpretation of the applicable regulations
was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law. Instead, he baldly claims that the NAD should have accepted his late
appeal and that the district court erred by concluding that he had not exhausted his
administrative remedies. Without citing any federal authority, he claims that the
district court had the inherent power to find that he substantially complied with the
NAD procedures based on his attorney’s prior requests to appeal, and because his
failure to comply with the “technical details” of the regulations had been
“inadvertent.” We find that these arguments are without merit.
Pursuant to 7 C.F.R. § 11.6(b)(1), once Paul Mahon received notice that his
claim for disaster relief had been denied, he had thirty days to appeal the adverse
decision. Since he requested mediation prior to filing an appeal, however, the
thirty-day period was tolled and he had the balance of the days remaining in that
period to file an appeal after mediation concluded. See 7 C.F.R. § 11.5(c)(1).
Paul Mahon received notice that his application was denied on November
13, 2001. On December 5, 2001, or twenty-two calendar days later,10 he gave
notice to the agency that he intended to exercise his right to mediation. As such,
the thirty-day period was tolled and he had a total of eight days to file an appeal
10
According to 7 C.F.R. § 11.1, “[d]ays mean calendar days unless otherwise specified.”
33
after mediation concluded. Taking the later mediation impasse date of May 28,
2002,11 as the relevant date, Paul Mahon had eight days, or until June 5, 2002, to
submit an appeal. Before the time to appeal had expired, Paul Mahon’s attorney
requested an appeal on May 29, 2002, but the request was not personally signed by
Paul Mahon. In fact, Paul Mahon did not file a personally signed request for an
appeal with the agency until June 14, 2002, nine days after the appeal period had
expired.
7 C.F.R. § 11.6(b) provides the applicable procedures that must be followed
when requesting an appeal from an adverse agency decision. That section
provides as follows:
(1) To obtain a hearing under § 11.8, a participant personally must
request such hearing not later than 30 days after the date on which the
participant first received notice of the adverse decision or after the
date on which the participant receives notice of the Director’s
determination that a decision is appealable. . . .
(2) A request for a hearing shall be in writing and personally signed
by the participant, and shall include a copy of the adverse decision to
be reviewed, if available, along with a brief statement of the
participant’s reasons for believing that the decision, or the agency’s
failure to act, was wrong. The participant also shall send a copy of
the request for a hearing to the agency, and may send a copy of the
adverse decision to be reviewed to the agency, but failure to do either
will not constitute grounds for dismissal of the appeal. Instead of a
11
In a letter sent to Paul Mahon, denying his request to appeal, the NAD contended that
mediation reached an impasse on April 25, 2002.
34
hearing, the participant may request a record review.
Id. (emphasis added). Accordingly, the plain text of the regulation requires that a
person seeking appellate review must request such review within thirty days and
must personally sign the request.12 Since it is undisputed that Paul Mahon failed
to sign the request within the applicable thirty-day period, we find that he failed to
exhaust his administrative remedies, and is barred from seeking judicial review.13
12
As the district court noted, although section 11.6(b) uses the term “hearing,” the section
is applicable even if a participant does not request an actual hearing. The regulations, when read
as a whole, contemplate § 11.6 as the sole procedural mechanism for a party seeking to appeal an
agency’s adverse decision. See e.g., 7 C.F.R. § 11.5(c)(1) (providing that “participant stops the
running of the 30-day period during which a participant may appeal to [the National Appeals
Division] under 11.6(b)(1) . . .”).
13
Paul Mahon’s arguments indirectly raise an issue of first impression for this Court.
Specifically, whether the exhaustion requirement found in section 6912(e) is jurisdictional or
non-jurisdictional in nature. The Supreme Court has explained that under a jurisdictional statute
an exhaustion of administrative remedies requirement cannot be excused or waived, and a party’s
failure to exhaust serves as a jurisdictional bar. See Weinberg v. Salfi, 422 U.S. 749, 765–66, 95
S. Ct. 2457, 2466–67, 45 L. Ed. 2d 522 (1975). By contrast, a non-jurisdictional statute codifies
the common law exhaustion principle under which, for reasons of judicial economy and
administrative expertise, exhaustion of administrative remedies is favored, but may be excused
by a limited number of exceptions to the general rule. See Honig v. Doe, 484 U.S. 305, 326–27
108 S. Ct. 592, 606, 98 L. Ed. 2d 686 (1988); see also Ace Prop. and Cas. Ins. Co. v. Federal
Crop Ins. Corp., 440 F.3d 992, 996–97 (8th Cir. 2006) (explaining the distinctions between non-
jurisdictional and jurisdictional exhaustion requirements and finding that the administrative
exhaustion requirement set out in 7 U.S.C. § 6912 is jurisdictional). However, this Court need
not resolve that issue in the instant case because Paul Mahon’s proffered reasons for excusing his
failure to exhaust administrative remedies—substantial compliance with the statute and
regulations, and his inadvertent failure to comply with the technical details of the statute and the
regulations—do not fall within the recognized exceptions to non-jurisdictional exhaustion
requirements. See, e.g., Cochran v. United States Health Care Fin. Admin., 291 F.3d 775, 780
(11th Cir. 2002) (finding that non-jurisdictional administrative exhaustion requirements may be
bypassed if resort to them would be futile, or if the remedy is inadequate). As such, Paul
Mahon’s claim fails regardless of whether we find that section 6912 is jurisdictional or not.
35
III. Conclusion
For the above stated reasons, with respect to John and Shelby Mahon’s
appeal we find that the USDA acted arbitrarily and capriciously in denying their
claims for relief under the 2000 Crop Disaster Program. As to Paul Mahon, we
conclude that he failed to exhaust available administrative remedies and is
therefore barred from seeking judicial review. Thus, we VACATE the district
court’s order denying John and Shelby Mahon’s motion for summary judgment
and granting summary judgment in favor of the USDA, and REMAND to the
district court for further proceedings consistent with this opinion. With respect to
Paul Mahon, the judgment of the district court is AFFIRMED.
36
COX, Circuit Judge, specially concurring:
I concur in the judgments, and I join that part of the majority opinion
addressing Paul Mahon’s appeal. I do not join that part of the opinion addressing
John and Shelby Mahon’s appeal because my analysis differs from that of the
majority.
The regulation applied in this case provides disaster benefits for nursery
crops that are “grown in a container or controlled environment for commercial sale
on property owned or leased by the producer . . . .” 7 C.F.R. § 1480.18(d) (2000).
The district court, concluding that Chevron deference was due, granted summary
judgment to the agency, affirming the denial of the Mahons’ application for
disaster benefits based upon the Deputy Director’s finding that the plants were not
grown for commercial sale.
I disagree with the district court and the majority’s view that Chevron
deference is due the agency action here. The Deputy Director was not interpreting
any federal statute. Neither was he, as the district court believed, interpreting any
federal agency regulation. Indeed, the only “interpretation” he offered was that
“[t]he program is intended to reimburse persons in the business of selling
ornamental nursery crops, not persons growing the plants for their own use.” The
parties do not dispute that interpretation.
37
The Deputy Director decided only one question: whether the Mahons’
plants were grown for commercial sale. This is a question of fact.1 And, questions
of fact resolved by an agency through an adjudicatory hearing process are properly
reviewed by a court under the substantial evidence test. Citizens to Preserve
Overton Park, Inc. v. Volpe, 401 U.S. 402, 413-15, 91 S. Ct. 814, 822-23 (1971)
(citing 5 U.S.C.§§ 556, 557); see also 5 U.S.C. § 706(2)(E).
Here, the Deputy Director’s decision that the Mahons’ plants were not
grown for commercial sale is not supported by substantial record evidence. In
reaching his conclusion, the Deputy Director relied on one fact only – that the
Mahons were delinquent in paying the $552 registration fee that Florida law
requires for the sale of nursery stock. But, the record contains other undisputed
evidence relevant to the question of whether the plants were grown for commercial
sale. In addition to the large scale of the Mahons’ citrus growing operation, the
officer who conducted the evidentiary hearing found: that the Mahons had been in
the nursery business for about 20 years; that all of the plants for which the Mahons
sought payment had been grown in individual containers and intended for sale;
and that the Mahons were engaged in the nursery business during the period that
1
The Deputy Director’s decision acknowledges that it rests on a determination of fact. “I
have concluded that the determination was based on a material fact that was in error. I therefore
vacate the determination.”
38
they were not registered pursuant to the Florida statute. The agency’s failure to
consider all of this undisputed evidence renders its finding of fact unsupported by
substantial evidence.
39