Five Points Road v. Johanns, Mike

In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 07-3406

F IVE P OINTS R OAD JOINT V ENTURE , an

Illinois general partnership, JOHN

B AENZIGER, C INDY B AENZIGER, et al.,

Plaintiffs-Appellees,

v.

M ICHAEL O. JOHANNS, Secretary

of Agriculture, United States

Department of Agriculture, Office

of Secretary, and R OGER K LURFELD,

Director, National Appeals

Division, a Division of the United

States Department of Agriculture,

Defendants-Appellants.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Western Division.

No. 06 C 50145—Frederick J. Kapala, Judge.

____________

A RGUED A PRIL 7, 2008—D ECIDED S EPTEMBER 8, 2008

____________

2 No. 07-3406

Before R IPPLE, W ILLIAMS and SYKES, Circuit Judges.

R IPPLE, Circuit Judge. In April 2005, the Farm Service

Agency, an agency of the United States Department of

Agriculture (“USDA”), ordered the plaintiffs (collectively,

“Five Points”) to refund certain benefits that they had

received from it. Five Points appealed the decision to

the National Appeals Division (“NAD”), which reversed

the Farm Service Agency’s determination in its entirety.

Five Points then applied to the NAD for attorney’s fees

and costs under the Equal Access to Justice Act, 5 U.S.C.

§ 504 (“EAJA”), but the NAD denied the request on the

ground that the EAJA did not apply to NAD adjudica-

tions. Five Points petitioned for review of the agency’s

denial of its EAJA request to the district court.1 The

district court held that the EAJA did apply to NAD adjudi-

cations and remanded for consideration of whether the

requirements of the EAJA were met in this case. The Gov-

ernment now appeals the decision of the district court.2

For the reasons stated in this opinion, we affirm the

judgment of the district court.

1

The district court had jurisdiction under 7 U.S.C. § 6999

to review the National Appeals Division Director’s deter-

mination.

2

We have jurisdiction over this appeal under 28 U.S.C. § 1291.

See Aageson Grain & Cattle v. USDA, 500 F.3d 1038, 1040-41 (9th

Cir. 2007); see also Fortney v. Apfel, 524 U.S. 266 (1998); Sullivan

v. Finklestein, 496 U.S. 617 (1990); Horn Farms, Inc. v. Johanns,

397 F.3d 472 (7th Cir. 2005).

No. 07-3406 3

I

BACKGROUND

In April 2005, the Farm Service Agency, an agency of

the USDA, ordered Five Points to refund certain fed-

eral farm program benefits that it had received for the

years 2003 and 2004. Five Points appealed that decision

to an NAD hearing officer. The hearing officer reversed

the Farm Service Agency’s determination in its entirety.

The Director of the NAD then affirmed the hearing

officer’s decision in favor of Five Points.

Following its successful appeal of the merits of its

dispute, Five Points applied to the NAD Director for

attorney’s fees and costs under the EAJA, 5 U.S.C. § 504.

The NAD Director denied Five Points’ application be-

cause, in the Director’s view, the EAJA did not apply to

NAD adjudications. Five Points’ request for reconsidera-

tion also was denied by the Director. Five Points sought

review of that determination in the district court.

In the district court, Five Points and the Government

filed cross-motions for summary judgment. Following

the decision of the Eighth Circuit in Lane v. USDA, 120

F.3d 106 (8th Cir. 1997), the reasoning of which also

was applied by the Ninth Circuit in Aageson Grain &

Cattle v. USDA, 500 F.3d 1038 (9th Cir. 2007), it held that

proceedings before the NAD are subject to the EAJA. The

district court therefore granted Five Points’ motion for

summary judgment; it held that the NAD proceedings

were “under” section 554 of the Administrative Procedure

Act of 1946, 5 U.S.C. § 701 et seq. (“APA”), and that

the plaintiffs, as the prevailing party in the agency pro-

4 No. 07-3406

ceeding, were entitled to attorney’s fees and costs under

the EAJA. The Director had erred, therefore, in refusing

to consider the plaintiffs’ application. The case was re-

manded to the agency for appropriate consideration of

Five Points’ application under the EAJA. The Govern-

ment appealed.

II

DISCUSSION

We review de novo the district court’s grant of sum-

mary judgment. Foskett v. Great Wolf Resorts, Inc., 518

F.3d 518, 522 (7th Cir. 2008). On cross-motions for sum-

mary judgment, we construe all facts and inferences

therefrom in favor of the party against whom the motion

under consideration was made. Id. Summary judgment is

appropriate when “there is no genuine issue as to any

material fact and . . . the movant is entitled to judgment

as a matter of law.” Id.; Fed. R. Civ. P. 56(c).

This case presents a single issue: whether the EAJA

applies to administrative proceedings before the NAD.

This issue presents a question of statutory interpretation.3

3

In an introductory section of its brief, the Government urges

us to keep in mind principles of sovereign immunity in inter-

preting the statutes at issue. It contends that the EAJA should

not be interpreted as applying to proceedings conducted

under the NAD because “[t]he EAJA renders the United States

liable for attorney’s fees for which it would not otherwise be

(continued...)

No. 07-3406 5

The EAJA “provides that prevailing parties in certain

adversary administrative proceedings may recover attor-

ney’s fees and costs from the Government.” Ardestani v.

INS, 502 U.S. 129, 132 (1991). In pertinent part, the EAJA

states:

An agency that conducts an adversary adjudication

shall award, to a prevailing party other than the

United States, fees and other expenses incurred by that

party in connection with that proceeding, unless the

adjudicative officer of the agency finds that the posi-

tion of the agency was substantially justified or that

special circumstances make an award unjust.

5 U.S.C. § 504(a)(1); see also Ardestani, 502 U.S. at 132. The

EAJA defines an “adversary adjudication” as “an adjudica-

tion under section 554 of this title in which the position

of the United States is represented by counsel or other-

wise.” 5 U.S.C. § 504(b)(1)(C)(i). Here, the Government

3

(...continued)

liable, and thus amounts to a partial waiver of sovereign

immunity.” Ardestani v. INS, 502 U.S. 129, 137 (1991). The

Government contends, rightly, that “[a]ny such waiver must

be strictly construed in favor of the United States.” Id. Neverthe-

less, “once Congress has waived sovereign immunity over

certain subject matter, [a court] should be careful not to ‘assume

the authority to narrow the waiver that Congress intended.’ ” Id.

(quoting United States v. Kubrick, 444 U.S. 111, 118 (1979)). As

we point out in our statutory analysis, here, Congress ex-

pressly has waived sovereign immunity with respect to attor-

ney’s fees and costs to a prevailing party in an adversarial

adjudication under section 504.

6 No. 07-3406

concedes that it was represented by counsel in the appeal

before the NAD; the only question, then, is whether an

NAD proceeding is “an adjudication under section 554.” Id.

Section 554 of Title 5 delineates the scope of pro-

ceedings governed by the formal adjudication require-

ments of the APA. See Ardestani, 502 U.S. at 132-33. By

its terms, section 554 “applies . . . in every case of an

adjudication required by statute to be determined on the

record after opportunity for an agency hearing.” 4 5 U.S.C.

§ 554(a). An adjudication is defined as an “agency process

for the formulation of an order.” 5 U.S.C. § 551(7). Section

554 therefore will apply if the proceeding meets three re-

quirements: (1) there must be an adjudication, an agency

4

There are five exceptions to this definition, none of which are

at issue here; specifically, section 554 does not apply

to the extent there is involved—

(1) a matter subject to a subsequent trial of the law and the

facts de novo in a court;

(2) the selection or tenure of an employee, except a [sic]

administrative law judge appointed under section 3105 of

this title;

(3) proceedings in which decisions rest solely on inspec-

tions, tests, or elections;

(4) the conduct of military or foreign affairs functions;

(5) cases in which an agency is acting as an agent for a court;

or

(6) the certification of worker representatives.

5 U.S.C. § 554(a).

No. 07-3406 7

process for the formulation of an order, that is required

by statute; (2) it must be on the record; and (3) there

must be an opportunity for an agency hearing. Id. § 554;

Aageson, 500 F.3d at 1043.

The review of agency determinations by the NAD

clearly meets the definition of an adjudication, the first

criterion. The governing statute provides for a hearing to

determine disputed facts and requires that, after that

hearing, the hearing officer must issue a determination.

7 U.S.C. § 6997. The NAD statutes also meet the third

section 554 requirement: that there be an opportunity for

a hearing. Such a hearing is mandatory once requested

by a participant. 7 U.S.C. § 6997(b); cf. Smedberg Mach. &

Tool, Inc. v. Donovan, 730 F.2d 1089, 1092-93 (7th Cir. 1984)

(holding that section 554 is inapplicable to a proceeding

that “gives the administrative law judge the discretion

rather than the obligation to conduct a review hearing”).

The only remaining requirement for a proceeding to

be under section 554 is that it must be on the record. The

NAD statutes do not require expressly the hearing to be

on the record; nonetheless, Congress’ intent is clear.

“Although Section 554 specifies that the governing statute

must satisfy the ‘on the record’ requirement, those three

magic words need not appear for a court to determine

that formal hearings are required.” City of W. Chicago, Ill. v.

U.S. Nuclear Regulatory Comm’n, 701 F.2d 632, 641 (7th Cir.

1983). Congress need only “clearly indicate its intent to

trigger the formal, on-the-record hearing provisions of

the APA.” Id.

8 No. 07-3406

Here, Congress has indicated clearly its intent to

trigger the formal hearing provisions of the APA. See id.

The NAD statutes provide that a participant who appeals

an adverse decision shall be given an evidentiary hearing.

7 U.S.C. § 6996(a). The evidentiary hearing consists of a

procedure in which the hearing officer has the power to

administer oaths and to subpoena witnesses and evidence.

Id. § 6997(a)(2). The hearing officer and interested parties

are prohibited from ex parte communications. Id.

§ 6997(a)(2)(A)-(B). The hearing officer is not bound by

prior factual findings. Id. § 6997(c)(2). The appellant

carries the burden of proving that the agency’s decision

was erroneous, id. § 6997(c)(4), and the hearing officer

must leave the record open for additional information

in response to new facts and evidence presented at the

hearing, id. § 6997(c)(3). The appellant or the agency may

request that the Director review the hearing officer’s

determination. Id. § 6998(a). The Director’s review is

based on the case record (all material related to the ad-

verse decision), id. § 6991(4), the record from the eviden-

tiary hearing under 7 U.S.C. § 6997 and any other argu-

ments or evidence that the Director chooses to accept.

Id. § 6998(b). Judicial review is available upon issuance

of a final determination. Id. § 6999.

The language of the text, especially the repeated refer-

ences to the record and the provision for trial-type pro-

cedures, as well as the structure of the NAD statutes,

makes clear that Congress intended for NAD proceedings

to be governed by section 554 of the APA. Lane, 120 F.3d

at 109. Indeed, the Government concedes that NAD

proceedings are “on the record.” Appellants’ Br. at 15

No. 07-3406 9

(“7 U.S.C. §§ 6996-6998 required the hearing officer’s

decision to be on the record.”).

The Government nevertheless contends that, despite

meeting the statutory definition for proceedings to

which the EAJA applies, an administrative appeal pro-

ceeding before the NAD is not one to which the EAJA

applies because it is a “comprehensive, freestanding

scheme that supersedes 5 U.S.C. § 554.” Appellants’ Br. at

16 (comparing 7 U.S.C. § 6997(a)(2)(A) with 5 U.S.C.

§ 554(d)). In essence, the Government argues that the

NAD statutes have amended by implication section 554

of the APA, despite the language in section 554 that

makes it applicable to all adjudications required by

statute to be determined on the record after an oppor-

tunity for an agency hearing.

As our colleagues in the Eighth Circuit have pointed out,

“[t]he primary flaw in the agency’s argument is that the

APA specifically states that a ‘subsequent statute may

not be held to supersede or modify this subchapter . . .

except to the extent that it does so expressly.’ ” Lane, 120

F.3d at 109 (quoting 5 U.S.C. § 559). There is nothing

in the NAD statutes that expressly states that the APA is

inapplicable. See id. “By adopting [section] 559, Congress

made it clear that the APA would apply unless there

was some expression by Congress that the APA was

being superseded.” Id. (emphasis added). Section 559

therefore prevents a statute from amending the APA by

implication. Id. In enacting section 559, Congress adopted

a reasonable approach to ensure that, given the variety

of issues and forums covered by the APA, Congress

10 No. 07-3406

would not adopt inadvertently a provision that conflicted

with the APA or repeat a provision contained in the

APA. Id.; Aageson, 500 F.3d at 1045. Indeed, any variation

here between the NAD procedures and those in the APA

merely “highlight[s] the confusion that would occur[ ] but

for § 559[,] which forbids amendments of the APA by im-

plication.” Lane, 120 F.3d at 110.

As the Eighth Circuit made very clear, the situation

before us here is not controlled by the Supreme Court’s

decision in Marcello v. Bonds, 349 U.S. 302 (1955). There,

the Supreme Court held that the APA did not apply to

deportation hearings because, in crafting deportation

procedures, Congress had departed from the procedures

of the APA and had created different and unique proce-

dures to govern those proceedings. None of the varia-

tions from the APA in the NAD statutes are of the magni-

tude described in Marcello. These deviations simply

provide no basis for holding, in the face of the Supreme

Court’s warning in Marcello, that “[e]xemptions from

the terms of the [APA] are not lightly to be presumed.” Id.

at 310. Nor are they sufficient to justify holding, in the

face of section 559, that the NAD is a freestanding

scheme. See Lane, 120 F.3d at 110; cf. W. Chicago, 701 F.2d

at 641 (noting that if the proceeding was one “under

section 554,” then it must conform with section 554’s

requirements “despite [the Nuclear Regulatory Com-

mission’s] interpretation of the regulations”).

The Government also contends that the holdings in

Ardestani and Marcello foreclose the possibility that an

NAD proceeding is one “under section 554.” The Gov-

No. 07-3406 11

ernment submits that the statute creating the NAD must

state unambiguously that the NAD proceeding is subject

to section 554 or the EAJA for the proceeding to qualify

as one “under” section 554.

This understanding of Ardestani and Marcello was

rejected by the Eighth and Ninth Circuits in precisely the

circumstances before this court. Our sister circuits held

that section 554 applies to any proceeding that is “re-

quired by statute to be determined on the record after

opportunity for an agency hearing,” 5 U.S.C. § 554, unless

a subsequent statute expressly opts out of the EAJA, see

5 U.S.C. § 559. We agree. Marcello simply held that the

Immigration and Nationality Act (“INA”) did create

expressly a proceeding that was entirely separate from

section 554; the Supreme Court so held because the

INA states that it “shall be the sole and exclusive pro-

cedure for determining deportability of an alien.”

Ardestani, 502 U.S. at 519. Ardestani held that the

mere incorporation by the INA of some of the APA pro-

ceedings was insufficient, in the face of the express state-

ment in the INA that it was entirely an separate proceed-

ing, to make the INA proceeding one “under” section

554. Id. at 519-20. The decisions of our sister circuits,

which we follow today, are entirely consistent with the

Supreme Court’s holdings in these cases; the Court

simply concluded that section 554 did not apply to the

INA even if the INA otherwise met the conditions in

section 554 because Congress had exempted expressly

the INA from it. Here, by contrast, no such express state-

ment in the NAD exempts its proceedings from section

554 and the APA. Aageson, 500 F.3d at 1044.

12 No. 07-3406

Additionally, the Government’s understanding of

Ardestani conflicts with this court’s precedents regarding

the application of section 554 to a particular proceeding.

See W. Chicago, 701 F.2d at 641. In West Chicago, this court

considered whether section 554 applied to a hearing

provided by the Nuclear Regulatory Commission. The

statute provided that the “Commission shall grant a

hearing upon the request of any person whose interest

may be affected by the proceeding.” Id. Although the

outcome in West Chicago differed from that in Aageson

and Lane, this court engaged in the same analysis. We

held that a hearing was required by the statute, leaving

only the third element—whether the hearing was “on the

record”—in dispute. Id. The opinion concluded that

formal hearings, or hearings on the record, were not

required by the statute, and therefore that section 554

did not apply to the proceedings. Id. In essence, we en-

gaged in precisely the inquiry that was conducted by

the Ninth Circuit in Aageson and by the Eighth Circuit in

Lane; we did not, however, examine whether the statute

creating the hearing unambiguously stated that it was

subject to section 554 or the EAJA, as the Government

suggests is required by Ardestani.5

5

As a fall-back position, the Government submits that the result

reached in Lane and Aageson conflicts with two cases from the

District of Columbia Circuit, which held that a proceeding was

not “under section 554” even though the proceeding was not

excluded expressly from the APA. See Friends of the Earth v.

Reilly, 966 F.2d 690 (D.C. Cir. 1992); St. Louis Fuel & Supply Co. v.

(continued...)

No. 07-3406 13

The Government also points to the legislative history

of the NAD statutes, which, it contends, supports its

conclusion that the NAD is not “under” the APA. It

submits that one version of the NAD statutes would have

stated expressly that the NAD was under section 554, but

the final version omitted that language. Resort to the

legislative history, however, is only necessary if the

language of the statue is ambiguous; if the statutory

language is clear, then the legislative history is only

relevant if it shows a clear intent to the contrary. See

United States v. Shriver, 989 F.2d 898, 901 (7th Cir. 1992).

Here, there is no ambiguity that requires resort to the

legislative history. Moreover, the legislative history to

which the Government points does not create the clear

intent, contrary to the express language of the statute,

that is necessary to overcome a clear statute. See id. at 902-

03. In light of the statutory scheme as a whole, specifically

considering section 559, the legislative history does not

clearly contradict the express statutory language. See id.

at 903.

5

(...continued)

FERC, 890 F.2d 446 (D.C. Cir. 1989). In those cases, however, as

in West Chicago, the holdings were based on a determination that

the requirements of section 554 were not met at the outset: the

proceedings at issue did not require formal hearings “on the

record,” and therefore they did not meet the standard for a

proceeding “under section 554.” See Friends of the Earth, 966 F.2d

at 693; St. Louis, 890 F.2d at 448. The case before us, however,

meets the statutory requirements for proceedings “under section

554”; this case is therefore distinguishable from St. Louis Fuel

and Friends of the Earth.

14 No. 07-3406

The Government takes its legislative history analysis

a step further. It points to the national budget prepara-

tion process as evidence that Congress did not intend

section 554, and thus the EAJA, to apply to the NAD. It

submits that approximately 13,000 appeals are docketed

annually with the NAD, yet the Congressional Budget

Office’s cost estimates do not include potential EAJA

costs. The Government does not rely on any source of

authority for the proposition that budget estimates can

overcome statutory language or influence a court’s statu-

tory interpretation, however, and we see no reason in

this case to be persuaded by them.

Conclusion

A proceeding before the NAD is an “adjudication

required by statute to be determined on the record after

opportunity for an agency hearing.” See 5 U.S.C. § 554(a);

see also Aageson, 500 F.3d at 1045; Lane, 120 F.3d at 109. The

NAD does not establish a freestanding scheme of the

sort that prevents it from being governed by the APA.

See 5 U.S.C. § 559. Therefore, the EAJA applies to pro-

ceedings before the NAD. Id. § 504. For the foregoing

reasons, we affirm the judgment of the district court.

A FFIRMED

9-8-08