USDA Loses Again – Court Says Farmers Can Recover Attorney Fees and Costs in USDA Administrative Appeals

The Equal Access to Justice Act (EAJA) provides that a party who prevails administratively against government action can recover fees and expenses if the administrative officer determines that the government’s position was not substantially justified.  However, the USDA’s long-held position is that the EAJA does not apply to administrative hearings before the National Appeals Division (NAD) because NAD proceedings are not adversarial adjudications that are held “under” the Administrative Procedure Act (APA).  The Eighth Circuit Court of Appeals rejected the USDA’s position in 1997 and, in 2007, the Ninth Circuit agreed.  Now the Seventh Circuit has also ruled that the EAJA applies to USDA administrative hearings.    
        
The USDA’s position has been that successful appeals from adverse agency decisions are not subject to EAJA, because NAD appeals do not fall under the realm of the APA.  According to the USDA, NAD administrative appeals involve an exclusive administrative appeal process that is not subject to the APA.  But, that position was rejected by the U.S. Court of Appeals for the Eighth Circuit in a 1997 case, where the court determined that nothing in the NAD authorizing statutes stated that the NAD was to be the exclusive means of adjudicating issues with the USDA.  The court further held that NAD proceedings involved an adversarial administrative adjudication thereby subjecting them to the EAJA by virtue of the APA.    

The USDA has abided by the court’s decision in the Eighth Circuit, but has continued to maintain its position that the Eighth Circuit case was wrongly decided and that the EAJA does not apply to NAD administrative appeals outside the Eighth Circuit.  But, recently two more Federal Circuit Courts have ruled against the USDA on the issue. 

The first case, from the Ninth Circuit, involved several Montana farmers who filed claims with the USDA’s Farm Service Agency (FSA) under the Noninsured Crop Disaster Assistance Program (NAP) for losses to perennial grasses.  FSA denied the claim on the basis that it was the state FSA’s policy that all perennial grasses were not covered during their first year.  The farmers appealed to the NAD, and the NAD held a hearing which resulted in the NAD hearing officer reversing the FSA’s decision on the basis that it was “over-restrictive and avoided the requirement for NAP coverage.  The FSA did not request NAD Director review, which had the effect of making the hearing officer’s decision final.  The farmers applied for an award of attorney’s fees and expenses under the EAJA in the amount of $17,943.84, and the NAD refused to consider the application based on the USDA’s longstanding position that the EAJA did not apply to NAD proceedings outside the Eighth Circuit.  The farmers filed a petition for judicial review and the Montana district court ruled in the farmers’ favor, determining that the Eighth Circuit case was correctly decided and directly applicable to the case.  The court remanded the case to the NAD, but the USDA appealed.

On appeal, the USDA continued to maintain that the Eighth Circuit case was incorrectly decided because NAD administrative proceedings are, in the USDA’s view, the sole and exclusive procedure for determining eligibility for farm program benefits and, as such, are not subject to the EAJA.  The Ninth Circuit rejected the USDA’s argument, agreeing with the Eighth Circuit that the statutory language governing NAD proceedings did not create an exclusive means of adjudicating issues with the USDA.  Thus, the pertinent question became whether NAD proceedings were subject to the EAJA by virtue of the APA.   On that issue, the court noted that the USDA’s position at the NAD hearing was represented by two program specialists.  Thus, USDA had taken a position which had the effect of making the proceeding adversarial – a threshold requirement for potential EAJA application.   Second, on the question of whether NAD proceedings are “under” Section 554 of the APA, the court noted that the governing statute required a NAD adjudication that was on the record and also required an opportunity for a hearing.  As such, the court reasoned that NAD proceedings occur “under” Section 554 of the APA and are subject to the EAJA.  In addition, the court noted that the statute governing NAD proceedings provide for judicial review pursuant to the provisions of the APA.

The Seventh Circuit case involved FSA’s order that the plaintiff refund certain farm program benefits.  The plaintiff appealed to the NAD, which reversed FSA’s determination.  The plaintiff then applied to the NAD for attorney fees, but the NAD stuck to the historic USDA position that the EAJA did not apply to NAD adjudications.  The court, citing the 8th and 9th Circuit opinions, disagreed.  The court noted that review of determinations by the NAD met the definition of an adjudication, provide an opportunity for a hearing, and that the proceedings occur “under” Section 554 of the APA and are, therefore, subject to the EAJA

While the Eighth Circuit’s 1997 decision did not result in a change of USDA policy on the issue of whether the EAJA applied to NAD proceedings, the Ninth Circuit’s 2007 opinion and the Seventh Circuit’s 2008 opinion could cause the agency to rethink its position. Five Points Road Joint Venture, et al. v. Johanns, No. 07-3406, 2008 U.S. App. LEXIS 19148 (7th Cir. Sept. 8, 2008).

Note: The Eighth Circuit case is Lane v. United States Department of Agriculture, 120 F.3d 106 (8th Cir. 1997), and the Ninth Circuit case is Aageson Grain and Cattle, et al. v. United States Department of
Agriculture, 500 F.3d 1038 (9th Cir. 2007).