Kroupa et al v. United States Farm Service Agency et al

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
GREGORY KROUPA and WENDY
KROUPA,
Plaintiffs,
vs.
UNITED STATES FARM SERVICE
AGENCY; FRANK M. WOOD, in his
official capacity as Director of Appeals –
United States Department of
Agriculture; and JAMIE WHITE, in her
official capacity as Acting State
Executive Director;
Defendants.
4:21-CV-04077-KES
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS FOR LACK OF
JURISDICTION, GRANTING
JUDGMENT ON THE PLEADINGS
ON COUNT TWO, AND GRANTING
SUMMARY JUDGMENT ON COUNT
ONE
This matter is before the court on defendants’ motion to dismiss for lack
of jurisdiction, motion for judgment as a matter of law, or in the alternative,
motion for summary judgment. Docket 19. Plaintiffs, Gregory Kroupa and
Wendy Kroupa, oppose the motion and submit a cross-motion for summary
judgment. Docket 22, 24. For the following reasons, the court grants in part
and denies in part defendants’ motion to dismiss for lack of jurisdiction, grants
defendants’ motion for judgment as a matter of law on Count 2 of the amended
complaint (Docket 9), and grants defendants’ motion for summary judgment.
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Background
I. 	Regulatory Framework
The Livestock Immunity Program (LIP) compensates livestock owners for
“eligible livestock deaths in excess of normal mortality” caused by an eligible
cause of loss, such as adverse weather. 7 C.F.R. § 1416.301(b) (2019)1; see also
§ 1416.302 (“Eligible adverse weather event means extreme and abnormal
damaging weather . . . includ[ing] winter storm . . . [or] blizzards.”). “The
eligible cause of loss is one . . . that directly results in the death of livestock . . .
despite the livestock owner’s performance of expected and normal preventative
or corrective measures and acceptable animal husbandry practices.”
§ 1416.301(b). Livestock that die or are injured for reasons not considered an
eligible loss condition do not qualify for compensation under the LIP.
§ 1416.304(f).
To receive compensation through LIP, a livestock producer must submit
notice of loss to the Farm Service Agency (FSA) with “documentation acceptable
to FSA substantiating that the claimed eligible loss condition occurred and was
responsible for eligible losses.” 7 C.F.R. § 1416.305(a). “For death losses . . .
the participant must provide adequate proof that the death . . . occurred as a
direct result of an eligible loss condition, as opposed to any other possible or
potential cause of loss.” § 1416.305(e). The LIP regulations outline three
1 Because the cause of action in this case arose in April 2019, the court uses
the regulations that were in effect at that time. In February 2020, 7 C.F.R.
§ 1416 was updated to the current version, which contains several changes to
the language of the regulations. Compare 7 C.F.R. § 1416.305 (2019) and 7
C.F.R. § 1416.305 (2022).
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alternative methods to provide adequate proof of eligible death. First, the death
loss can be established by verifiable records of loss, such as “[p]urchase
records; veterinarian records; bank or other loan papers; rendering-plant truck
receipts; Federal Emergency Management Agency records; National Guard
records; written contracts; production records; Internal Revenue Service
records; property tax records; private insurance documents; and other similar
verifiable documents as determined by FSA.” § 1416.305(e). Second, if
adequate verifiable records of loss are not available, then the applicant may
supply “reliable records, in conjunction with verifiable beginning and ending
inventory records . . . Reliable records may include contemporaneous producer
records, dairy herd improvement records, brand inspection records,
vaccination records, dated pictures, and other similar reliable documents as
determined by FSA.” § 1416.305(f). Third, if reliable proof of death records are
not available, the applicant may submit “[c]ertification of livestock deaths . . .
by third parties . . .” in conjunction with verifiable beginning and ending
inventory records, so long as “both of the following conditions are met:
(1) The livestock owner . . . certifies in writing: that there is no other
verifiable or reliable documentation of death available; the number
of livestock, by category identified in this subpart and by FSA were
in inventory at the time the eligible adverse weather event occurred;
[t]he physical location of the livestock, by category, in inventory
when the deaths occurred; and other details required for FSA to
determine the certification acceptable; and
(2) The third party is an independent source who is not affiliated
with the farming operations such as a hired hand and is not a ‘family
member,’ as defined as a person whom a member in the farming
operation 	or 	their 	spouse 	is 	related 	as 	lineal 	ancestor, 	lineal
descendant, sibling, spouse, and provides their telephone number,
address, and a written statement containing specific details about:
their knowledge of the livestock deaths; their affiliation with the
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livestock owner; the accuracy of the deaths claimed by the livestock
owner . . . including, but not limited to, the number and kind or type
of the participants livestock that died because of the eligible adverse
weather event; and other information required by FSA to determine
the certification acceptable.”
§ 1416.305(h) (cleaned up).
II. 	Factual Background
Plaintiffs, Gregory Kroupa and Wendy Kroupa, own a cow-calf operation
on 6,500 acres of land in Aurora and Brule Counties near White Lake, South
Dakota. Docket 21 ¶ 1; Docket 23 ¶ 1. From April 10, 2019 to April 12, 2019, a
blizzard occurred in the area, resulting in impassable roads and loss of
livestock. Docket 21 ¶ 2-3; Docket 23 ¶ 2-3. The roads remained impassable
after the blizzard, and the deceased livestock at issue remained frozen and
covered by snow. Docket 16-1 at 10. Kroupas contacted a rendering company
to count their cow/calf loss, but the rendering company was unable to fulfill
the request due to the unusually high demand for services caused by the
blizzard. Docket 21 ¶ 4; Docket 23 ¶ 4. Kroupas then contacted FSA for
guidance. Docket 21 ¶ 5; Docket 23 ¶ 5. An unnamed FSA representative
instructed Kroupas to have their veterinarian complete a third-party
certification of loss. Docket 21 ¶ 6; Docket 23 ¶ 6. Kroupas’ veterinarian came
to the farm and observed piles of deceased cows and calves. Docket 16-2 at 3.
The veterinarian did not count the deceased livestock himself and estimated
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that he personally observed 30-35 deceased cows and 30-35 deceased calves.
Id.
In December 2019, Kroupas submitted a notice of loss and supporting
documentation to the FSA. Docket 21 ¶ 7; Docket 23 ¶ 7. To support their
claim for 77 cow deaths, Kroupas provided purchase documents of the cow
beginning inventory and a handwritten count of the death loss. Docket 21 ¶ 8;
Docket 23 ¶ 8. To support their claim for 66 calf deaths, Kroupas provided
combined calving, pregnancy check, and ultrasound records of the calf
beginning inventory and a handwritten count of the death loss. Docket 21 ¶ 9;
Docket 23 ¶ 9 (agreeing to list of records provided, but contesting their
categorization as not verifiable). Kroupas also provided the veterinarian’s third-
party certification of a 77-cow and 66-calf death loss, photographs of dead
livestock, and a letter from their lender, which stated that the Kroupas’
completed balance sheets showed 70 more bred cows on December 18, 2018
than on January 15, 2020. Docket 21 ¶¶ 10-11; Docket 23 ¶¶ 10-11.
III. 	Procedural History
Kroupas' application for relief under the LIP was first considered by the
FSA County Committee. Docket 21 ¶ 13; Docket 23 ¶ 13. The County
Committee denied Kroupas’ claim in its entirety. Docket 21 ¶ 14; Docket 23
¶ 14. It cited the veterinarian’s failure to count the deceased livestock, the fact
that Kroupas’ claimed losses were not comparable to others suffered in the
area, and Kroupas’ livestock management practices as reasons for the denial.
Docket 21 ¶ 14; Docket 23 ¶ 14.
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Kroupas appealed the County Committee’s decision to the FSA State
Committee. Docket 21 ¶ 15; Docket 23 ¶ 15. In March 2020, the State
Committee met to discuss the Kroupas’ application. Docket 21 ¶ 16; Docket 23
¶ 16. The State Committee similarly found Kropuas’ documentation to be
inadequate to support their death loss claims. Docket 21 ¶ 19; Docket 23 ¶ 19.
The State Committee relied on the veterinarian’s failure to count each deceased
animal when it denied full relief but accepted his testimony as to a 35-cow and
35-calf loss. Docket 21 ¶¶ 20-21; Docket 23 ¶¶ 20-21. The State Committee
awarded partial relief on that basis and concluded that the losses were not
related to Kroupas’ management practices. Docket 21 ¶¶ 21-23; Docket 23
¶¶ 21-23.
Kroupas then appealed the State Committee’s decision to the National
Appeals Division. Docket 21 ¶ 24; Docket 23 ¶ 24. After an evidentiary hearing,
an Administrative Law Judge (ALJ) found that the two committee rulings on
Kroupas’ claim had been erroneous, and that Kroupas provided “very good”
reliable proof of death in the form of calving records, ultrasound records, and
pictures. Docket 21¶¶ 25-27; Docket 23 ¶¶ 25-27. The ALJ further found that
using a third-party certification to reduce Kroupas’ claimed cow death loss was
erroneous given that Kroupas submitted verifiable beginning and ending
inventory documentation, and a reliable death loss documentation. Docket 21
¶ 28; Docket 23 ¶ 28. Based on these findings, the ALJ awarded compensation
for the loss of 77 cows. Docket 21 ¶ 29; Docket 23 ¶ 29.
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The ALJ also found that the committees were correct in determining that
Kroupas’ proof, without third-party certification, did not support their claimed
66-calf death loss. Docket 21 ¶ 30; Docket 23 ¶ 30. But the ALJ held that the
committees abused their discretion when they arbitrarily rejected Kroupas’
third-party certification for the 66-calf death loss. Docket 21 ¶ 32; Docket 23
¶ 32. The ALJ awarded compensation for the 66 calves, granting Kroupas’
entire claim. Docket 21 ¶¶ 29, 33; Docket 23 ¶¶ 29, 33.
The FSA then filed a request for review of the determination of the ALJ to
the Appeals Division Director. Docket 21 ¶ 34; Docket 23 ¶ 34. The Director,
Frank Wood, upheld the award for the 77 cows, but found that the ALJ erred in
concluding that Kroupas established adequate proof of death for the 66-calf
death loss because Kropuas did not present verifiable beginning and ending
inventory data. Docket 21 ¶¶ 35-38; Docket 23 ¶¶ 35-38. Director Woods
reduced the award for loss of calves from 66 calves to 35 calves. Docket 21
¶ 42; Docket 23 ¶ 42.
Following the adverse ruling by the Appeals Division Director, Kroupas
filed a complaint in the District of South Dakota alleging two counts for relief.
Docket 9. Count One alleges that the Appeals Division Director erred in
denying them full relief on their LIP claim. Id. at 3. Count Two challenges the
constitutionality of 7 C.F.R. § 11 under the due process clause of the
Fourteenth Amendment of the United States Constitution. Id. at 4. Kroupas
request the following: an order “[a]ffirming the Decision of the Administrative
Law Judge which awarded [them] the full value permitted under the LIP
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regulations of 77 Cows and 66 Calves plus interest; $25,000 in actual damages
and $100,000 in punitive damages;” an order “[d]eclaring 7 C.F.R. § 11
Unconstitutional per the Due Process Clause of the 14th Amendmnet;
[r]easonable attorney’s fees, costs and disbursements (including sales tax
thereon); and [a]ny and all other awards this Court deem[s] necessary and
just.” Id. at 5.
Defendants then moved to dismiss the complaint for lack of subject
matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), moved for
judgment on the pleadings under Federal Rule of Civil Procedure 12(c) or, in
the alternative, moved for summary judgment under Federal Rule of Civil
Procedure 56. Docket 19. Kroupas oppose the motion and move for summary
judgment. Dockets 22, 24, 26.
Discussion
I. 	Jurisdiction
A. Legal Standard
“Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian
Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). 	As such, the existence of
jurisdiction is a “threshold inquiry” to be decided in every federal case. Crow
Creek Sioux Tribe v. Bureau of Indian Affs., 463 F. Supp. 2d 964, 967 (D.S.D.
2006) (citation omitted). “Jurisdictional issues are for the court to decide and
the court has broad power to decide its own right to hear a case.” Id. When a
party asserts federal question jurisdiction, as in this case, “[t]he presence or
absence of . . . jurisdiction is governed by the ‘well-pleaded complaint rule,’
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which provides that federal jurisdiction exists only when a federal question is
presented on the face of the plaintiff’s properly pleaded complaint.” Caterpillar
Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing Gully v. First Nat’l Bank, 299
U.S. 109 (1936)). Because the suit is one against an official of the United States
government acting in his official capacity, that jurisdiction must include a
waiver of sovereign immunity. See United States v. Mitchell, 445 U.S. 535
(1980). “The party seeking to invoke federal jurisdiction . . . carries the burden,
which may not be shifted to another party.” Jones v. United States, 727 F.3d
844, 846 (8th Cir. 2013) (citation omitted).
In challenging subject matter jurisdiction under Federal Rule of Civil
Procedure 12(b)(1), a party “must attack either the facial or factual basis for
jurisdiction.” Middlebrooks v. United States, 8 F. Supp. 3d 1169, 1173 (D.S.D.
2014) (citation omitted).
A facial challenge requires the court to examine the complaint and
determine if the plaintiff has sufficiently alleged a basis for subject
matter jurisdiction, and the nonmoving party receives the same
protections as it would if defending a motion to dismiss under Rule
12(b)(6). A factual attack challenges the factual basis for subject
matter jurisdiction, and the court considers matters outside the
pleadings without giving the nonmoving party the benefit of the Rule
12(b)(6) safeguards.
Id. (internal citation omitted). Because Defendants do not challenge the facts
underlying the jurisdictional claim, the court construes the challenge as facial
and thus construes all factual allegations in favor of plaintiffs.
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B. Discussion
Defendants argue that this court lacks jurisdiction over Kroupas’ claims
because this court cannot grant Kroupas’ requested relief because the United
States has not waived sovereign immunity as to money damages. Docket 20 at
11-12. Specifically, defendants contend that Kroupas’ claims arise under 5
U.S.C. §§ 702-706, commonly called the Administrative Procedure Act (APA),
that Kroupas are requesting money damages, and that money damages are
prohibited by the APA. Id. Defendants further contend that Kroupas’ request
for an order “Affirming the Decision of the Administrative Law Judge which
awarded Kroupa the full value permitted under the LIP regulations of 77 Cows
and 66 Calves plus interest” is similarly prohibited. Id. at 12.
Kroupas focus their response on establishing the elements of standing
and on their exhaustion of administrative remedies, neither of which is
contested by defendants. Docket 24 at 5-8; Docket 25 at 2. Kroupas also
reiterate their claim of a Fourteenth Amendment violation. Docket 24 at 9.
For this court to have jurisdiction over Kroupas’ claims, Kroupas must
allege a basis for jurisdiction in their “well-pleaded complaint.” Caterpillar Inc.,
482 U.S. at 392 (citation omitted). In cases against the United States or its
officials, jurisdiction must include both a waiver of sovereign immunity and an
underlying statutory or constitutional basis. Here, the court finds, and the
parties do not contest, that a statutory basis exists for Kroupas’ claims. Count
One, alleging that Director Woods’ administrative decision was arbitrary and
capricious, rests on 5 U.S.C. § 704. See Docket 9 ¶ 23 (basing relief on “5
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U.S.C. § 702 and related statutes”). Count Two, alleging a violation of due
process, rests on the Fourteenth Amendment of the United States constitution.
Docket 9 at 4. 28 U.S.C. § 1331 authorizes the federal district courts to hear
such causes of action, which arise under federal law. Thus, at issue is only
whether an adequate waiver of sovereign immunity exists to authorize the
Kroupas’ claims.
Kroupas’ amended complaint asserts that “5 U.S.C. § 702 and related
statutes” authorize the court to hear their claims. Docket 9 ¶ 23. Section 702
waives sovereign immunity for claims against the United States seeking relief
other than money damages. Though the section was passed as part of the APA,
the waiver of sovereign immunity is not restricted to claims under that Act. See
Red Lake Band of Chippewa Indians v. Barlow, 846 F.2d 474 (8th Cir. 1988).
Instead, “the waiver of sovereign immunity contained in section 702 . . . is
dependent on the suit against the government being one for non-monetary
relief.” Id. at 476.
To the extent that Kroupas are requesting money damages, the relief
must be dismissed under 5 U.S.C. § 702. As such, the court denies Kroupas’
request for “$25,000 in actual damages and $100,000 in punitive damages”
and for “reasonable attorneys fees, costs and disbursements.” Docket 9 at 5.
Kroupas’ requests for relief other than money damages, however, survive the
jurisdictional review. See McKoy v. Spencer, 271 F. Supp. 3d 25, 31 (D.D.C.
2017). The court must then decide whether the remaining requests, one for a
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declaration that 7 U.S.C. § 11 is unconstitutional and one for an affirmation
reinstating the ALJ’s award, are for money damages.
Though either request for relief, if granted, could result in Kroupas
receiving money, “[t]he fact that a judicial remedy may require one party to pay
money to another is not sufficient reason to characterize the relief as ‘money
damages.’ ” Bowen v. Massachusetts, 487 U.S. 879, 893 (1988). Instead, the
court must consider whether the request is one for specific relief or for a
monetary substitute of “that which ought to have been done.” Id. at 910. Here,
both requests ask the court for specific relief: Kroupas are not asking for a
substitution, but for the reinstatement of that to which they believe themselves
entitled. Therefore, Kroupas request a declaration that 7 U.S.C. § 11 is
unconstitutional and an affirmation reinstating the ALJ’s award.
Kroupas attempt to save their claims for damages by arguing that the
Tucker Act provides this court jurisdiction to award damages. Docket 26 at 6.
Kroupas do not cite the Tucker Act in their amended complaint, but instead
first raise the argument in their reply. Id.; Docket 9. As such, the court cannot
consider the Tucker Act in deciding whether subject matter jurisdiction was
alleged in a well-pleaded complaint. But even if the court could consider the
Tucker Act, it does not waive sovereign immunity for an award of money
damages by this court. As Kroupas themselves articulate, the Tucker Act
creates exclusive jurisdiction in the Court of Claims for certain monetary
claims against the government. Docket 26 at 5-6. Because this is a federal
district court and not the Court of Claims, the Tucker Act does not create
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subject matter jurisdiction for the award of money damages. See V S Ltd. P'ship
v. Dep't of Hous. & Urb. Dev., 235 F.3d 1109, 1112 (8th Cir. 2000) (holding that
the Court of Claims, and not a federal district court, has exclusive jurisdiction
over claims under the Tucker Act).
Thus, defendants’ motion to dismiss for lack of jurisdiction is granted to
the extent Kroupas request money damages and denied as to the requests for
specific relief.
II. 	Judgment on the Pleadings
A. Legal Standard
The court next considers defendants’ motion for judgment on the
pleadings. “After the pleadings are closed – but early enough not to delay trial –
a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c).
“Judgment on the pleadings is appropriate only when there is no dispute as to
any material facts and the moving party is entitled to judgment as a matter of
law.” Ashley Cnty. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009) (quoting
Wishnatsky v. Rovner, 433 F.3d 608, 610 (8th Cir. 2006)). When evaluating a
motion for judgment on the pleadings, the district court must “accept as true
all factual allegations set out in the complaint” and to “construe the complaint
in the light most favorable to the [non-moving parties], drawing all inferences in
[their] favor.” Id. (second alteration in original opinion) (citation omitted). “When
considering a motion for judgment on the pleadings . . . the court generally
must ignore materials outside the pleadings, but it may consider some
materials that are part of the public record or do not contradict the complaint,
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as well as materials that are necessarily embraced by the pleadings.” Porous
Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (internal
quotations omitted).
B. Discussion
Defendants contend that they are entitled to judgment on the pleadings
on Count Two of the complaint because Count Two arises under the
Fourteenth Amendment of the United States Constitution and the Fourteenth
Amendment does not apply to federal actors. Docket 20 at 12. Alternatively,
defendants argue that, even if the court were to construe the complaint as
arising under the Fifth Amendment, Kroupas’ claim fails as a matter of law
because they have not alleged a violation of due process. Id. at 12-13.
Kroupas allege that judgment on the pleadings is inappropriate because
there is a dispute of material fact. Docket 24 at 8. But Kroupas do not cite any
specific fact in dispute, instead relying on conclusory statements. Id. Kroupas
also state that “some governmental benefits . . . amount to ‘property’ with due
process protections” and that the fourth level of administrative review
authorized by 7 C.F.R. § 11 violates their procedural due process. Docket 26 at
6-7 (citing Goldberg v. Kelly, 397 U.S. 254 (1970)).
It is well established that the due process clause of the Fourteenth
Amendment applies only to the states, and not to the federal government. U.S.
Const. amend XIV; United States v. Morrison, 529 U.S. 598, 621 (2000) (“[T]he
Fourteenth Amendment, by its very terms, prohibits only state action.”). Thus,
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the court finds that any due process challenge to federal government action
under that amendment must fail.
Even if the court were to construe Kroupas’ complaint as arising under
the Fifth Amendment, Kroupas have not explained how the agency action
violated their due process rights. At its most fundamental level, procedural due
process requires notice and “the opportunity to be heard at a meaningful time
and in a meaningful manner.” Matthews v. Eldridge, 424 U.S. 319, 333 (1976)
(internal quotation omitted). Taking the facts in a light most favorable to
Kroupas, the allegations in the complaint clearly demonstrate that Kroupas
were on notice of multiple opportunities to be heard and that they did indeed
present their arguments on those occasions. Docket 9 ¶ 14-21 (describing
Kroupas’ involvement with the administrative review process). Thus, the court
finds that Kroupas failed to allege a violation of the Fourteenth Amendment’s
due process clause and grants judgment on the pleadings in favor of
defendants on Count Two. Count One of the amended complaint survives for
review under summary judgment.
III. 	Summary Judgment
A. Legal Standard
Generally, a motion for summary judgment may be granted when “the
movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a mater of law.” Fed. R. Civ. P. 56(a). The
factual “dispute must be outcome determinative under prevailing law” to be
material; any lesser dispute does not rise to the level of materiality and will not
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preclude summary judgment. Mosley v. City of Northwoods, 415 F.3d 908, 910-
11 (8th Cir. 2005) (internal quotation omitted).
Because this case concerns the court’s review of an administrative
decision, the general standard set forth in Federal Rule of Civil Procedure 56
does not apply. Instead, the court applies the standards articulated by the APA.
Voyageurs Nat’l Park Ass’n v. Norton, 381 F.3d 759, 763 (8th Cir. 2004); 5
U.S.C. § 706.
Specifically, 	a 	motion 	for 	summary 	judgment 	. . . makes 	no
procedural sense when a district court is asked to undertake judicial
review of administrative action. Such a motion is designed to isolate
factual issues on which there is no genuine dispute, so that the
court can determine what part of the case must be tried to the court
or a jury. Agency action, however, is reviewed, not tried. Factual
issues have been presented, disputed, and resolved; and the issue
is not whether the material facts are disputed, but whether the
agency properly dealt with the facts.
Bettor Racing, Inc. v. Nat’l Indian Gaming Com’n, 47 F. Supp. 3d 912, 918
(D.S.D. 2014) (alternation in original) (citing Lodge Tower Condo. Ass’n v. Lodge
Props., Inc., 880 F. Supp. 1370, 1374 (D. Colo. 1995)). The court’s review of the
agency record is “searching and careful.” Citizens to Pres. Overton Park, Inc. v.
Volpe, 401 U.S. 402 (1971), abrogated on other grounds by Califano v. Sanders,
430 U.S. 99 (1977). But the “review of an agency decision is limited. [The court
is] only permitted to set aside agency action that is ‘arbitrary, capricious, and
an abuse of discretion, or otherwise not in accordance with law.’ ” Voyageurs
Nat’l Park Ass’n, 381 F.3d at 763 (citing 5 U.S.C. § 706(2)(A)).
An agency decision is “arbitrary and capricious” if
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[T]he agency has relied on factors which Congress has not intended
it to consider, entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs counter to
the evidence before the agency, or is so implausible that it could not
be ascribed to a difference in view or the product of agency expertise.
Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43, 103 S. Ct. 2856, 77 L.Ed. 2d 443 (1983). Otherwise, “[i]f an agency’s
determination is supportable on any rational basis, we must uphold it. This is
especially true when an agency is acting within its own sphere of expertise.”
Voyageurs Nat’l Park Ass’n, 381 F.3d at 763 (citations omitted). The court also
accords “substantial deference to an agency’s interpretation of its own
regulation.” South Dakota v. U.S. Dep’t. of Interior, 423 F.3d 790 (8th Cir. 2005).
Even so, “[t]he agency must articulate a ‘rational connection between the
facts found and the choice made.’ ” Bowman Transp., Inc. v. Arkansas-Best
Freight Sys., Inc., 419 U.S. 281, 285 (1974) (quoting Burlington Truck Lines, Inc.
v. United States, 371 U.S. 156, 168 (1962)). A reviewing court cannot “supply a
reasoned basis for the agency's action that the agency itself has not given,” but
may “uphold a decision of less than ideal clarity if the agency's path may
reasonably be discerned.” Id. at 285–86 (internal citation omitted).
B. Discussion
Kroupas’ sole contention is that Director Woods acted arbitrarily and
capriciously by reducing their loss reimbursement by 31 calves. They argue
that they provided “verifiable inventory established by Lisa Reuland at FSA”
and that they are entitled to compensation for the entirety of their claimed loss.
Docket 22-1 at 4.
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Defendants argue that Director Woods’ decision was supported by
substantial evidence in the record and that it should be upheld. Docket 25 at
4-5. Specifically, defendants contend that the documents supplied by Kroupas
constitute “reliable,” but not “verifiable” records. Id. at 5. Thus, Kroupas did
not qualify for compensation for the entirety of the loss under the LIP.
As described above, the LIP provides three methods for demonstrating
loss. A claimant may file: (1) verifiable records of loss, (2) reliable records of
loss along with verifiable beginning and ending inventory, or (3) third-party
certification of loss along with verifiable beginning and ending inventory. 7
C.F.R. § 1416.305. To support their claim, Kroupas submitted combined
calving, pregnancy check, and ultrasound records to establish beginning
inventory and a handwritten death-loss account to establish ending inventory,
as contemplated by the third category of filings. Docket 16-1 at 11-12. Because
all parties agree to the validity of the third-party certification, at issue in this
case is only whether Director Woods was arbitrary or capricious in finding the
beginning inventory records submitted by Kroupas for their calf loss as reliable
instead of verifiable.
The LIP provides that “[r]eliable records may include contemporaneous
producer records, dairy herd improvement records, brand inspection records,
vaccination records, dated pictures, and other similar reliable documents as
determined by the FSA.” § 1416.305(f). Verifiable records, by contrast, include
“[p]urchase records; veterinarian records; bank or other load papers;
rendering-plant truck receipts; Federal Emergency Management Agency
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records; National Guard records; written contracts; production records;
Internal Revenue Service records; property tax records; private insurance
documents; and other similar verifiable documents as determined by the FSA.”
§ 1416.305(e).
Director Woods reviewed Kroupas’ records and found them to be reliable,
but not verifiable. Docket 16-1 at 14. Though not definitively explained in
Director Woods’ holding, defendants assert this is because the records are
“contemporaneous producer records,” and thus fall under § 1416.305(f)’s
definition of reliable records. Docket 20 at 15. Kroupas disagree with the
categorization of the documents as contemporaneous producer records and
argue that they are, indeed, verifiable. But they do not point to any provision in
§ 1416.305(e). Instead, Kroupas claim that the inventory was verified by Lisa
Reuland at FSA. Docket 22-1 at 4. Kroupas make no argument to support their
contention that Reuland has the authority to unilaterally verify the records.
Furthermore, the assertion appears unsupported by the record. After a careful
review, the court finds only two mentions of Reuland in the record. The first
notes her presence at the County Committee meeting, and the second appears
on a copy of handwritten notes from that meeting. Docket 16-3 at 17, 19.
Without any further legal or factual development, the bare assertion that
Reuland verified the document does not demonstrate that Director Woods’
decision was arbitrary or capricious.
Rather, Director Woods’ decision was supported by the natural language
of the regulation and by the record as a whole. Though Director Woods never
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explicitly stated the records were contemporaneous producer records, that
conclusion can be reasonably inferred both by the decision as a whole and by
the copies of the records, which appear to be handwritten by Kroupas. Docket
16-1, 16-2, 16-3. Though third-party certification was provided by the
veterinarian, this alone is not adequate to establish loss under the regulations.
See § 1416.305. As the veterinarian testified on multiple occasions, he did not
personally observe the full loss, nor did he count the deceased livestock that he
did observe. Docket 16-1, 16-3. Given the lack of factual or legal support for
Kroupas’ argument, the court finds that Director Woods was reasonable in his
interpretation of the regulations and in his decision to limit Kroupas’ recovery
to the thirty-five calves personally witnessed by the certifying veterinarian.
CONCLUSION
Because the Fourteenth Amendment does not apply to federal actors and
because Director Woods’ decision to limit Kroupas’ recovery is neither arbitrary
nor capricious, it is
ORDERED that Count Two of the amended complaint is dismissed with
prejudice and that defendants’ motion for summary on Count One is granted.
DATED September 28, 2022
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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