# Petition for Writ of Certiorari — Horn Farms, Inc. v. Johanns (No. 04-1502)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2004

## Text

FILED

041502 MAY 2 - 2005

3n The
Supreme Court of the Anited States

,
_

HORN FARMS, INC.,

Petitioner,
v.
MIKE JOHANNS,
SECRETARY OF AGRICULTURE, et ai.,
Respondents.

,
v

On Petition For Writ Of Certiorari
To The United States Court Of Appeals
For The Seventh Circuit

2
¥

PETITION FOR WRIT OF CERTIORARI

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vw

KAREN BUDD-FALEN

Counsel of Record
BRANDON L. JENSEN
BuUDD-FALEN Law OFFICES, LLC
300 East 18th Street
Post Office Box 346
Cheyenne, Wyoming 82001
(307) 632-5105

Counsel for Petitioner

= lleeeleele
COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831

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QUESTIONS PRESENTED FOR REVIEW

The wetland conservation provisions of the Food
Security Act of 1985, as amended by the Food, Agriculture,
Conservation, and Trade Act of 1990 and the Federal
Agriculture Improvement and Reform Act of 1996, make it
unlawful to convert a wetland “by draining, dredging,
filling, leveling, or any other means for the purpose, or to
have the effect, of making the production of an agricul-
tural commodity possible on such converted wetland,”
unless one or more of the statute’s exemptions apply. 16
U.S.C. §§ 3821(c), 3822(b) (Supp. IV 1998). Any person
who in any crop year violates the wetland conservation
provisions shall be permanently ineligible for certain
payments, loans, or programs administered by the United
States Department of Agriculture. 16 U.S.C. §§ 3821(a)(2),
(b), and (c) (Supp. IV 1998).

Accordingly, the Petitioner’s questions presented for
review include the following:

1. Whether the United States Court of Appeals for the
Seventh Circuit erred in holding that an exemption to
program ineligibility, as set forth in 16 U.S.C.
§ 3822(b\(2D) (Supp. IV 1998), for wetlands previ-
ously converted for the production of an agricultural
commodity, was inapplicable if wetland characteris-
tics returned prior to the enactment of the Food Secu-
rity Act of 1985?

2. Whether the statute permanently terminating a
farmer’s eligibility, in its entirety, is a violation of the
Spending Power of the United States Constitution,
because it amounts to impermissible coercion?

|

ii

PARTIES TO THE PROCEEDING
AND CORORATE DISCLOSURE STATEMENT

The Petitioner in this Court is Horn Farms, Inc. There
are no parent corporations, publicly held companies, or
investment funds that hold any ownership interest in the

‘corporation. The corporation is privately-owned in its
entirety by Gene and Ellen Horn of Kewanna, Indiana.

The Respondents in this Court are Mike Johanns, in
his official capacity as Secretary of the United States
Department of Agriculture; the United States Department
of Agriculture; Steven Rodenberg, in his official capacity as
Fulton County Executive Director of the United States
Farm Service Agency, an agency of the United States
Department of Agriculture; and Daniel M. Rosswurm, in
his official capacity as District Conservationist of the
United States Natural Resources Conservation Service, an
agency of the United States Department of Agriculture.

en

10 ~

TABLE OF CONTENTS
Page
QUESTIONS PRESENTED FOR REVIEW .............. i
PARTIES TO THE PROCEEDING AND CORPO-
RATE DISCLOSURE STATEMENT ...................... ii
ee CI Fy EE i ccicccveccenccsckcrcecncdsescctssncccce v
I ciniiabbatad 1
I a i ee 1
CONSTITUTIONAL AND STATUTORY PROVI-
I i cn ceetnaiatl 1
STATEMENT OF THE CASE ..........cc.cccccccccccsscccsccses 2
B, Beatebery BRGITOUIAG 220.ccrcccccccecccccscoscscoccsceses 3
Bs. SE CUEIOUIINES ccceidciccnscesccdsacscatsecsescunidees 5
C. Initiation of Judicial Review and the District
ee apa NE IP RR ape A 7
D. The Seventh Circuit’s Decision ........................ 9
REASONS FOR GRANTING THE PETITION.......... 10
I. THE CIRCUITS ARE SPLIT OVER THE
USDA'S AUTHORITY TO TERMINATE ELI-
GIBILITY BASED ON THE CONVERSION OF
A WETLAND PRIOR TO THE ENACTMENT
OF SWAMPBUSTER IN 1985. ...................00000
Il. THE COURT OF APPEALS ERRED IN HOLD-
ING THAT THE LEGISLATIVE HISTORY OF
THE SWAMPBUSTER WAS IRRELEVANT IN
UPHOLDING THE SECRETARY'S INTER-
PRETATION OF THE STATUTE UNDER
IIIT scinenelinicchcbsctheckbéendecdeibaciteabineseainade 15

iv

TABLE OF CONTENTS -— Continued

Page
III. REVIEW BY THIS COURT IS WARRANTED
TO CLARIFY LIMITATIONS ON CONGRESS’
SPENDING POWER TO CONDITION THE
RECEIPT OF FEDERAL FUNDS BASED
UPON COMPELLED COMPLIANCE WITH A

AT TO acc cccccccccccnccccnsensccnccsences 20
CE ibicchadinccuibictnbtt seein chad icndecodtbtineenniieiiibeininans 30
APPENDIX A (Seventh Circuit Decision)

ge Foe ys, 1s % eae ce eee la
APPENDIX B (District Court Decision)
319 F.Supp.2d 902 (N.D. Ind. 2004) ..............eceseseeees 12a
APPENDIX C (Administrative Decisions)
NRCS Preliminary Technical Determination ............. 53a
NRCS Non-Agricultural Determination ........2............ 64a
NRCS Final Technical Determination ........................ 67a
Farm Service Agency Decision .............cccccsssssseeeeeseeees 8la
FSA Fulton County Committee Decision. .................... 84a
Hearing Officer’s Preliminary Decision ..................+++- 86a
Hearing Officer’s Final Decision .................ccceseeeseeeees 90a
Denial of a Director Review Request ..............2::::see+++ 94a
Second Denial of a Director Review Request.............. 96a
APPENDIX D (NRCS Field Notes)...............sscssccssseeeesees 99a
APPENDIX E (United States Code) .................ceseeeseeees 10la

APPENDIX F (Code of Federal Regulations)............... 113a

TABLE OF AUTHORITIES
Page
CASES:
A.W. v. The Jersey City Public Schools, 341 F.3d 234
RI I Ris csnciniicttiiciticnainnhiadtnnlouncdcsde col. oe 29
B&D Land and Livestock, Co. v. Veneman, 231
F.Supp.2d 895 (N.D. Iowa 2002) ........cecccccccsssececoceseceees 22
Barthel v. United States Department of Agriculture,
181 F.3d 934 (8th Cir. 1999) oo. cecccccescseseee 13, 14, 16
Bradley v. Arkansas Department of Education, 189
F.S6 745 (Gtth Cir, 1990) u....n:ccccccsesscsoccscsesseseen ecscsessecece, 26
Chevron U.S.A. Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1994).....cccccecceccoeeeees 9, 11, 15
College Savings Bank v. Florida Prepaid Post
Secondary Education Expense Board, 527 U.S.
PE iidhintchinituinleateendiabucaste Soe 20, 21, 21
Commonwealth of Virginia, Department of Education
v. Riley, 106 F.3d 559 (4th Cir. 1997) (en banc).................. 27
Doe v. State of Nebraska, 345 F.3d 593 (8th Cir.
2003) ....... niin dalpipiinnadahnnadiipictiinpabiusniaaibipaimiiipiniesstaanietiaie 27
Frost v. Railroad Commission of the State of Cali-
fornia, 271 U.S. 588 (1926)...............e.ececeseceseoeesessee. 24, 25
General Dynamics Land Systems, Inc. v. Cline, 540
WA GE GNPIAD hscciinsciicesaineiantctcescgcedn nc ee 15
Greene v. McElroy, 360 U.S. 474 (1959).....ccccccccccscseseesecee. 30
Gunn v. United States Department of Agriculture,
118 F.3d 1233 (8th Cir. 1997) o.oo. ccccccscccoscoseceeces 12,13

Horn Farms, Inc. v. Veneman, 319 F.Supp.2d 902
a NE og | NED LALO TES BAPE RE Hike. 22

vi

TABLE OF AUTHORITIES — Continued

Page
Immigration and Naturalization Service v. Car-
doza-Fonseca, 480 U.S. 421 (1987) ..0.........cccccccceesceeeeseee 15
dim C. v. United States, 235 F.3d 1079 (8th Cir.
I Oe i icnccccreensnintciceitintaniinsnninierntipiimemiiaiiaiiinias 27
Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494
CEL GRE CED cncceesensvatnatniiintacscehaceeniatentiatilinkgiaanbiaiinies 18

Kansas v. United States, 24 F.Supp.2d 1192 (D.
Kan. 1998), aff'd, 214 F.3d 1196 (10th Cir. 2000) .. 21, 27

Koslow v. Commonwealth of Pennsylvania, 302 F.3d

BR Cae Gi Bir irctcncstsicecnasiilenscccecenceniessninnnisueinaitaaianiicis 29
Massachusetts v. Mellon, 262 U.S. 447 (1923).................. 20
Mich. Dep't of State v. United States, 166 F.Supp.2d

SD Cees Se, CD cccsnictacsncencctbinccntenaniillitetndiiianis 21

National Wildlife Federation v. Agricultural Stabi-
lization and Conservation Service, 955 F.2d 1199

GRUB Clee, Be acscsnnensecssncsusscttcherenscesssesusuiealdenaannne 18, 22
New York v. United States, 505 U.S. 144 (1992)......... 20, 24
Oklahoma v. Schweiker, 655 F.2d 401 (D.C. Cir. 198})......... 21
Perry v. Sindermann, 408 U.S. 593 (1972) .................00000 29

Solid Waste Agency of Northern Cook County v.
United States Army Corps of Engineers, 531 US.

South Dakota v. Dole, 483 U.S. 203 (1987).....9, 20, 25, 26, 28
State of California v. United States, 104 F.3d 1086

Vii

TABLE OF AUTHORITIES - Continued

Page

United States v. Butler, 297 U.S. 1 (1936)................ 24, 25
United States v. Dierckman, 201 F.3d 915 (7th Cir.

OUTED caieristiphcntpistntgantetiinatatligsnhidtaigena ac A 22
United States v. James Daniel Good Real Property,

Oy Ie SG aaah 30
United States v. Sabri, 183 F.'Supp.2d 1145 (D.

EEA COR TSI AN es ee AED 27
United States v. Sabri, 326 F.3d 937 (8th Cir. 2003) .. 27, 28
United States v. Shimer, 367 U.S. 374 (1961).................. 15
West Virginia v. United States Department of

Health and Human Services, 289 F.3d 281 (4th

(SIU ED anpnsiihsnniintensesttemnieanadonibatensidainkinind kml 27, 28
STATUTES AND REGULATIONS:
Farmland Protection Policy Act, 7 U.S.C. § 4201 et seq.:

7 U.S.C. § CaO PI nsicisesteniarcncissthniiiediibasisacacescen 2
Food Security Act of 1985, Pub. L. No. 99-198, 99

Stat. 1354 (December 23, 1985) oo.0.......-occccccccccsocoseocoes-. 3

16 U.S.C. § 3821 (Supp. TTT 1985)... cccccccscececeeeeee-... 3
Food, Agriculture, Conservation, and Trade Act,

Pub. L. No. 101-624, 104 Stat. 3359 (November

SE, BED icwcessecetnts piadnnsigenesdiidetmdsnisitintnnstbaannieniniaanaindisaniaian 3

16 U.S.C. § 3821(a) (Supp. IT 1990)... ccccccccesocseeess-s... 4

16 U.S.C. § 3821(b) (Supp. IT 1990)... ecco. 3,4

16 U.S.C. § 3821(bX1XA) (Supp. IT 1990)........................ 4

Federal Agriculture Improvement and Reform Act
of 1996, Pub. L. No. 104-127, 110 Stat. 888 (April
© TD ectincsintintsitsinigictintiginedde ha ek a, 19

viii

TABLE OF AUTHORITIES — Continued

Page
Food Security Act, as amended:
16 U.S.C. § 3821(a) (Supp. IV 1998)... eee 1,3
16 U.S.C. § 3821(b) (Supp. IV 1998)... eee ceeeeeeeeees 3
16 U.S.C. § 3821(c) (Supp. TV 1998) 0.0... eeseseeee 1,3
16 U.S.C. § 3822(b) (Supp. IV 1998)... eens 1,3
16 U.S.C. § 3822(bX1)(A) (Supp. IV 1998)................. 3,17
16 U.S.C. § 3822(b)\(1G) (Supp. IV 1998)............. passim
16 U.S.C. § 3822(b)\(2)(D) (Supp. IV 1998)............. passim
16 U.S.C. § 3822(i) (Supp. IV 1998)............cceceeeeeeeeee 3,5
7 C.FR.:
Ris FT Ct ceestcniencniccesninntnsecscsninnpsastesnncantinidensal 2
eet: BI i iarstiticiinesenaicennicasinsecssinnceaensein 2, 8, 11, 16
ee BE itt etestesieniicichcesebiinnbidienhainihebigalisnaciaadiiiianig 2
Rats FE ad ivccrnsnisniiiininincicndbinsentansininentiniacialbhig alae
i Re hikitiincnckcncscicnenichnnnicsapnesincsahenmnanbaonia 2
Section 12.5(bX1ii) (1999) .............cccecccccsecccssssceceeees 7,16
ite Fe ee SE tiscnctsecnedcnninnctinnnitnnpansistninnisinten 5
ea, Fe sirsicenincnhidairninnniucsacitinidniacincnpieibhiaaamab 13
is Tee CD ereninctcinicteniincentiatiincisitiniaiaminiainiens 4
Section 614.102 (1999)............s:cscsssssssessesseeeseeeeees mca 5
MISCELLANEOUS:
H.R. Rep. No. 99-271, pt. 1, 99th Cong. (1st Sess.
1985), reprinted in 1985 U.S.C.C.A.N. 1103..... 17, 18, 22
136 Cong. Rec. H11029, 11345 (daily ed. Oct. 22,
1990) (statement of Rep. De La Garza)................::00000+ 23
Baker, Lynn A., Conditional Federal Spending After
Lopez, 95 COLUM. L. REV. 1911 (1995) ..........:ccsscseeereees 29
Chemerinsky, Erwin, Protecting the Spending
Power, 4 CHAP. L. REV. 89 (2001)..............sssescscsssssssseees 21

—

—_

ix

TABLE OF AUTHORITIES - Continued
Page

Douglas, Patrick R., Conservation or Coercion:
Federal Regulation of Intrastate Wetlands Under
the Swampbuster Provisions of the Food Security
Act, 8 Mo. ENVTL. L & Pot’y REV. 59 (2001)................. 22

McBeth, Daryn, Wetlands Conservation and Fed-
eral Reguiation: Analysis of the Food Security
Act’s “Swampbuster” Provisions as Amended by
the Federal Agriculture Improvement and Reform
Act v," 1996, 21 Harv. ENVTL. L. REV. 201 (1997)............ 4

Zietlow, Rebecca E., Federalism’s Paradox: The
Spending Power and Waiver of Sovereign Immu-
nity, 37 WAKE ForEsT L. REV. 141 (2002)..................... 29

4 ere

1

PETITION FOR WRIT OF CERTIORARI

Petitioner Horn Farms, Inc. respectfully petitions for
a writ of certiorari to review the judgment of the United
States Court of Appeals for the Seventh Circuit.

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OPINIONS BELOW

The opinion of the United States Court of Appeals for
the Seventh Circuit (App. A, infra, la-1lla) is reported at
397 F.3d 472. The opinion of the United States District
Court for the Northern District of Indiana, South Bend
Division, the Honorable Judge Allen Sharp presiding (App.
B, infra, 12a-52a), is reported at 319 F.Supp.2d 902. The
opinions and orders of the various administrative agencies
are reproduced herein at App. C, infra, 53a-98a.

,
Ld

JURISDICTION

The judgment of the Court of Appeals was entered on
February 2, 2005. The jurisdiction of this Court is invoked
pursuant to 28 U.S.C. § 1254(1) (2000).

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vv

CONSTITUTIONAL AND
STATUTORY PROVISIONS INVOLVED

This case raises issues involving the Spending Clause
of the United States Constitution, which authorizes
Congress to “lay and collect Taxes, Duties, Imposts, and
Excises, to pay the Debts and provide for the common
Defence and general Welfare of the United States.” U.S.
Const. art. I, § 8, cl. 1. The relevant provisions of the Food
Security Act, 16 U.S.C. §§ 3821 and 3822(b) (Supp. IV
1998), are reproduced herein at App. E, infra, 106a-112a.

2

The pertinent regulations, 7 C.F.R. §§ 12.1 through 12.5
(1999), are reproduced herein at App. F, infra, 113a-134a.

2
4

STATEMENT OF THE CASE

Fundamentally, this matter concerns the balance
between protecting the Nation’s long-term capability to
produce food and fiber, and preserving the functions and
values of the Nation’s wetlands. The issue in this case is
whether, pursuant to the Food Security Act of 1985, the
United States Department of Agriculture (“USDA”) prop-
erly has jurisdiction over previously converted wetlands,
which at one time were lawfully converted for the produc-
tion of one or more agricultural commodities, even though
wetland characteristics returned prior to the enactment of
the Food Security Act on December 23, 1985.

Despite Congress’ admonition that farmland is not to
be irreversibly converted to nonagricultural uses and its
assurance that other national interests will not override
the importance of the protection of farmland nor otherwise
outweigh the benefits of maintaining farmland resources,
7 U.S.C. § 4201(aX7) (1994), the Seventh Circuit Court of
Appeals held that if the wetland characteristics of a prior
lawfully converted wetland return at any time prior to
December 23, 1985, then the Petitioner and others remain
subject to the prohibitions of the Food Security Act of
1985. Failure to adhere to the provisions of the Act shall
result in the termination of eligibility to receive various
farm subsidies from the USDA; a coercive or punitive
measure, which remains attached to both the Petitioner
and his private property in perpetuity.

3

A. Statutory Background.

Congress enacted the wetland conservation provisions
of the Food Security Act on December 23, 1985. Pub. L. No.
99-198, §§ 1221-1222, 99 Stat. 1507 (1985) (codified at 16
U.S.C. §§ 3821-3822). The Act’s wetland conservation
provisions are commonly referred to as “Swampbuster,”
because the Act seeks to provide an economic encourage-
ment to farmers to voluntarily conserve wetlands located
on their privately-owned property, and conversely, seeks to
remove any economic incentives for farmers to produce
agricultural commodities on converted wetlands. Specifi-
cally, any person who produces an agricultural commodity
on a converted wetland after December 23, 1985, shall be
ineligible for certain benefits provided by the USDA. 16
U.S.C. § 3821 (Supp. III 1985); App. E, infra, 101a-102a.

However, in 1990, Congress strengthened the provi-
sions of Swampbuster through the enactment of the Food,
Agriculture, Conservation, and Trade Act. Pub. L. No. 101-
624, § 1421(b), 104 Stat. 3572 (November 28, 1990). While
retaining the original 1985 prohibitions, the 1990 amend-
ments additionally provided that “any person who in any
crop year subsequent to November 28, 1990, converts a
wetland by draining, dredging, filling, leveling, or any
other means for the purpose, or to have the effect, of
making the production of an agricultural commodity
possible on such converted wetland sha!! be ineligible” for
certain benefits provided by the USDA. 16 USC.
§ 3821(b) (Supp. II 1990); App. E, infra, 103a-105a.

Consequently, subsequent to the 1990 amendments,
any person could become ineligible for certain USDA
benefits by either (1) converting a wetland and producing
agricultural commodities after December 23, 1985, or (2)
merely converting a wetland after November 28, 1990, so
that agricultural commodities could be produced. 16

4

U.S.C. §§ 3821(a), (b) (Supp. II 1990); App. E, infra, 103a-
105a. Nevertheless, under the Act and the 1990 amend-
ments, no person shall become ineligible as the result of
the production of an agricultural commodity on a con-
verted wetland if the conversion of such wetland occurred
before December 23, 1985. 16 U.S.C. § 3822(b)1)(A) (Supp.
II 1990); App. E, infra, 105a-106a.

Finally, and perhaps most importantly, the 1996 re-
authorization of the Food Security Act, via the Federal
Agriculture Improvement and Reform Act of 1996, Pub. L.
No. 104-127, §322(b), 110 Stat. 888, 988-89 (April 4,
1996), provides for the lawful conversion of a wetland, “if
the original conversion of the wetland occurred prior to
December 23, 1985, and the wetland characteristics
returned after that date as a result of the lack of mainte-
nance of drainage, the lack of management of the lands
containing the wetlands, or circumstances beyond the
control of the person.” 16 U.S.C. §§ 3822(b)\(1)(G), (bX 2D)
(Supp. IV 1998) (emphasis added). This language effec-
tively repealed the Natural Resources and Conservation
Service’s regulations pertaining to abandonment.

Previously, if a farmer abandoned a prior converted
wetland, which was exempt from the provisions of
Swampbuster, for five years during which time the wet-
land characteristics returned, the prior converted wetland
was considered “abandoned” and was “re-labeled” as a
wetland, subject to the provisions of Swampbuster. 7
C.F.R. § 12.33(b) (1996). However, the 1996 amendments
“perfect” a prior converted wetland status for a landowner:
once a prior converted wetland, always a prior converted
wetland. McBeth, Daryn, Wetlands Conservation and
Federal Regulation: Analysis of the Food Security Act’s
“Swampbuster” Provisions as Amended by the Federal
Agriculture Improvement and Reform Act of 1996, 21
HARV. ENVTL. L. REV. 201, 256 (1997).

B. Factual Background.

Petitioner Horn Farms is owned and operated by Mr.
Gene Horn. Between February 8, 1995 and February 28,
1996, Petitioner Gene Horn purchased 150 acres of farm-
land in Fulton County, Indiana. Mr. Horn principally
produces agricultural commodities such as corn and
soybeans for sale at market. Prior to 1999, the Petitioner
was eligible to participate in, and receive loans and subsi-
dies from, various agriculture programs administered by
the USDA. App. B, infra, 13a.

In the late 1970's, the drainage tile system on the
Petitioner’s private property began to fall into disrepair
and needed to be replaced. Jd. at 14a-15a, 32a, 4la-43a;
App. A, infra, 2a; and App. D, infra, 99a-100a. The Peti-
tioner determined that his property had previously been
farmed, but portions had reverted to wetlands through
lack of maintenance of the drain tile system. Jd. at 14a.
Unfortunately, much needed repairs never occurred prior
to the Petitioner’s ownership. After the Petitioner pur-
chased the property, he endeavored to replace the entire
drainage tiling system to improve and more efficiently
maintain water drainage. Therefore, in 1998, he converted
several wetlands and restored the drain tile system
throughout the property. Jd. at 14a-15a, 41a-43a.

On May 5, 1999, the Petitioner was preliminarily
notified by the NRCS that he allegedly converted 6.2 acres
of wetlands in violation of the provisions of Swampbuster.
Id. at 15a-16a; App. C, infra, 53a-64a. The notification
provided the Petitioner an opportunity to mediate his
alleged misconduct with the NRCS, as required by 7 C.F.R.
§ 614.102 (1999). During mediation, the NRCS provided
the Petitioner with the option of restoring or mitigating
the loss of the wetlands in accordance with 16 U.S.C.
§ 3822(i) (Supp. IV 1998) and 7 C.F.R. § 12.5(b4) (1999).

6

According to the NRCS, even though the Petitioner alleg-
edly converted only 6.2 acres of wetlands, he was required
to acquire, develop, or restore approximately 32 acres of
wetlands in order to mitigate their loss. Jd. at 16a-17a;
App., infra, 65a-66a. Due to the substantial discrepancy
between the amount of acreage allegedly converted, and
the amount of acreage potentially required for restora-
tion/mitigation, the Petitioner declined to accept the
restoration/mitigation criteria. Jd. at 17a.

Therefore, on July 30, 2001, the NRCS declared the
Petitioner ineligible for all USDA programs administered
by the Farm Service Agency. App. C, infra, 67a-8la. The
final decision by the NRCS requires the Petitioner to
either restore the converted areas to wetland conditions or
mitigate their loss. Jd. at 75a, 77a. According to the Farm
Service Agency, and in accordance with 16 U.S.C. § 3821(c)
(Supp. [V 1998), all of the Petitioner’s USDA-related bene-
fits were to be withheld beginning in 1999, and will
continue through all subsequent years until the wetlands
are restored or mitigated before January Ist of the subse-
quent crop year. App. B, infra, 16a; App. C, infra, 81a-84a.
Subsequently, each of the Petitioner's administrative
appeals failed. Jd. at 17a-19a; App. C, infra, 84a-98a. The
production of an agricultural commodity in a converted
wetland, without the attendant loss of agricultural subsi-
dies, is strictly prohibited by any successor-in-interest,
even those wholly innocent of the actual unlawful conver-
sion. Such a determination has a significant adverse
impact on the fair market value of the Petitioner’s prop-
erty.

7

©. Initiation of Judicial Review and the District
Court’s Decision.

On November 18, 2002, the Petitioner brought this
action challenging the authority of the NRCS to terminate
his eligibility based on the re-conversion of a previously
lawful conversion of the wetlands on his privately-owned
property. The Petitioner sought to have the district court
hold unlawful and set aside the USDA's termination of his
eligibility. Additionaily, the Petitioner sought to compel the
USDA to reimburse him for those USDA payments which
have been unlawfully withheld since 1999. App. B, infra,
27a.

Swampbuster provides for the lawful re-conversion of
a wetland, if the original conversion of the wetland oc-
curred prior to December 23, 1985, and the wetland
characteristics returned after that date as a result of the
lack of maintenance of drainage, the lack of management of
the lands containing the wetlands, or circumstances beyond
the control of the person. 16 U.S.C. §§ 3822(bX1XG), (bX2D)
(Supp. IV 1998) (emphasis added); and 7 C.F.R. § 12.(bX1Xii)
(1999). Both parties agree that the meaning of the phrase
“after that date,” determines whether the exemption is
applicable to the Petitioner’s wetlands and his alleged
unlawful activity. Id. at 42a; App. A, infra, 2a-4a.'

The parties cross-moved for summary judgment, and
on May 20, 2004, the district court concluded that the
phrase “after that date,” as set forth in the exemption, is

* If the Petitioner's interpretation is correct (ie., the phrase refers
to the date of the original conversion of the wetlands), then the
Petitioner is exempt from program ineligibility. However, if the USDA's
interpretation is correct, (ie., the phrase refers to the date of the
enactment of the Act, or December 23, 1985), then the Petitioner's
eligibility may be subject to termination.

8

ambiguous as to whether it refers to the date of the en-
actment of the Act, December 23, 1985, or the date of the
original conversion of the wetlands. Jd. at 44a. Despite the
district court’s conclusion that the USDA's interpretation
of the exemption was reasonable given the ambiguous
language within the statute, and after reviewing the
legislative history and purpose of the exemption, the
district court ultimately held that the Petitioner’s inter-
pretation of the phrase is correct, and that the Petitioner’s
wetlands, must therefore, be classified as “prior converted
wetlands,” and are exempt from the prohibitions under
Swampbuster, pursuant to 16 U.S.C. § 3822(bX2XD) (Supp.
IV 1998). Id. at 40a-47a. The district court also held that
the USDA's regulatory definition of the exemption, 7
C.F.R. § 12.2 (wetland determination (8)) (1999), which
required the land to be in production as of December 23,
1985 in order to qualify for the exemption, exceeded the
agency’s statutory authority. Jd. at 46a-47a. Accordingly,
the district court granted partial summary judgment in
favor of the Petitioner and remanded this matter to the
USDA for action not inconsistent with its opinion. Jd. at
51la-52a.”

In addition, however, the Petitioner further alleged
that the statute terminating his eligibility is a violation of
the Spending Power of the United States Constitution,
because it amounts to impermissible coercion. Id. at 36a.
Congress has conditioned the receipt of USDA-related
funding in such a manner as to leave the recipient, such as
the Petitioner herein, with no practical alternative, other
than complying with the Federal mandate. The district

* As of October 1, 2003, the USDA had withheld from the Peti-
tioner approximately $150,000 in payments or benefits for which he
was previously entitled to receive. App. B, infra, 35a.

9 -

court agreed that “the Swampbuster provisions are coer-
cive, in fact, they give the USDA a big club with which to
protect wetlands.” Jd. at 37a. Nevertheless, the district
court ultimately concluded that no constitutional provi-
sions provide an independent bar to the conditional grant
of federal funds by the USDA to the American farmer.
Ibid. Accordingly, the district court granted partial sum-
mary judgment in favor of the USDA and upheld the
provisions of Swampbuster as Constitutional. Jd. at 38a-
39a.

D. The Seventh Circuit’s Decision.

The Seventh Circuit reversed the district court’s
judgment. First, similar to the district court, the court of
appeals concluded that the language of the exemption, 16
U.S.C. $§ 3822(bX 1G), (bX2XD) (Supp. IY 1998), is ambigu-
ous. App. A, infra, 4a. Yet, the court of appeals held that the
USDA's interpretation was reasonable and entitled to
substantial deference under Chevron U.S.A. Inc. v. Natu-
ral Resources Defense Council, Inc., 467 U.S. 837 (1994).
Id. at 4a-7a. Contrary to the district court, the court of
appeals determined that the legislative history of the
Swampbuster to be irrelevant under Chevron, and more-
over, lend no support to the Petitioner’s arguments. Jbid.
Second, the court of appeals affirmed the district court and
upheld the constitutionality of the wetland conservation
provisions under South Dakota v. Dole, 483 U.S. 203
(1987). Id. at 7a-8a. For these reasons, the court of appeals
reversed the judgment of the district court. Consequently,
Horn Farms, Inc. timely files this petition for certiorari.

2
vv

10

REASONS FOR GRANTING THE PETITION

The Seventh Circuit reached a decision in this case
which is erroneous as a matter of statutory interpretation
and constitutional law, and seriously infringes on a
farmer's privilege of unrestricted use and enjoyment of his
privately-owned property; not to mention his interest to be
free from governmental interference. Moreover, it is
apparent from the legislative history of Swampbuster, that
Congress must not have intended the purportedly broad
curtailment of private property rights that the Secretary's
interpretation has permitted. This Court should grant
review, because the circuits are seemingly split as to the
applicability of the provisions of Swampbuster to wetlands
lawfully converted prior to December 23, 1985. In addi-
tion, review is warrante? in order to clarify the limitations
of Congress’ spending power under the Constitution to
condition the receipt of federal funds upon compliance
with a federal regulatory scheme under which Congress
may, through the guise of its spending power, indirectly
regulate the use of private property that it is unable to
regulate under its constitutionally enumerated powers.

I. THE CIRCUITS ARE SPLIT OVER THE USDA’S
AUTHORITY TO TERMINATE ELIGIBILITY
BASED ON THE CONVERSION OF A WETLAND
PRIOR TO THE ENACTMENT OF SWAMP-
BUSTER IN 1985

Farmers, landowners, and other agricultural produc-
ers are entitled to consistent treatment under the provi-
sions of Swampbuster throughout the country; the fate of
their activities on the wetlands located on their property
should not turn on the fortuity of which circuit court their
land lies within. Accordingly, the need for national uni-
formity is great.

11

The NRCS, in this case, confirmed the Petitioner's
claims and agreed that sometime prior to 1985, the Peti-
tioner’s wetlands had been converted and supported the
production of one or more agricultural commodities. App.
B, infra, 41a; App. D, infra, 99a-100a. Even though the
USDA recognized that the Petitioner's wetlands were
previously converted prior to 1985, the NRCS nonetheless
determined that in 1998, the Petitioner unlawfully con-
verted approximately 6.2 acres of wetlands, in violation of
Swampbuster. The district court concluded, however, that
the wetlands at issue are exempt as “prior-converted
wetlands” under 16 U.S.C. § 3822(b2XD) (Supp. IV 1998),
and that the USDA's regulatory definition of the exemp-
tion, 7 C.F.R. § 12.2 (wetland determination (8)) (1999),
which required the land to be in production as of Decem-
ber 23, 1985 in order to qualify for the exemption, ex-
ceeded the agency's statutory authority. App. B, infra, 46a-
47a.

The Seventh Circuit reversed, reasoning that since
the language of the statute is in fact ambiguous, the
Secretary's interpretation was “the most sensible under-
standing of the legislation,” and entitled to “all of the
deference contemplated by Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837 (1984).” App.
A, infra, 4a-5a. Moreover, the court of appeals was per-
suaded that when “after that date” is understood to be
December 23, 1985, supra, see discussion at pp. 7-8, “the
subsection is a non-degradation clause: the legislation
protects wetlands as they actually existed on the date of
its enactment, penalizing withdrawals without attempting
to restore lands then under agricultural production.
Reading ‘that date’ to be the time of original conversion
would allow net reductions in wetlands after the legisla-
tion’s enactment/|.}” Jd. at 5a.

12

The circuit court’s decision stands in marked contrast
to various judgments issued by the Court of Appeals for
the Eighth Circuit and various district courts within that
circuit. The Eighth Circuit has remarked that “[a]mong
the exemptions to the provisions of Swampbuster is one
for wetlands that had been converted to agricultural
production before December 23, 1985. ... The farming of
such previously converted wetlands does not make the
farmer ineligible for benefits.” Gunn v. United States De-
partment of Agriculture, 118 F.3d 1233, 1235 (8th Cir. 1997).
While the Eighth Circuit in Gunn v. United States Depart-
ment of Agriculture did not discuss the exception at issue
herein, i.e., 16 U.S.C. § 3822(bX2XD),” the court noted that
even if a wetland was converted prior to 1985, the peti-
- tioner was authorized to maintain that drainage system
without losing benefits, so long as the previously accom-
plished drainage or manipulation is not significantly
improved upon. /d. at 1237-38.

At issue in Gunn was 160 acres of land in Iowa which
had been farmed since 1906. Jd. at 1235. Prior to 1906, the
land was wetlands and not arable. bid. In 1906, however,
the local drainage district installed tiles under the land to
drain the excess water from the land. Jbid. By 1947,
additions to the drainage system had increased the drain-
age area so that the amount of water in some years ex-
ceeded the capacity of the system, leaving parts of Gunn’s
land wet and unsuitable for farming. /bid. Finally, in 1992,
realizing that a drainage problem existed, the drainage
district installed new drainage tiles and dug an open ditch

* It bears noting that the exception at issue herein, ie, 16 U.S.C.
§ 3822(bX2KD), was not enacted by Congress until July 3, 1996;
accordingly, the Eighth Circuit could not have considered the scope of
that particular exception in Gunn, because the actions at issue occurred
in 1992.

13

on Gunn’s land that remedied the system’s shortcomings.
Ibid. The 1992 improvements were designed to further
degrade the wetland characteristics of the farm. Jd. at
1238.

According to the Eighth Circuit, “it is the initial
man‘pulation, not some subsequent ‘applications’ of it,
that is to be considered.” Jd. at 1236 n.3. In fact, the court
mentioned that the “initial improvement took place in
1906, and the [NRCS] told Gunn he could maintain that
drainage system without losing benefits.” Jd. at 1237.
Ultimately, the court concluded that part of the farm
encompassed “converted wetland,” but that it did not
become converted wetland until 1992. Jd. at 1238.

Moreover, in Barthel v. United States Department of
Agriculture, 181 F.3d 934 (8th Cir. 1999), the Eighth
Circuit reiterated its holding in Gunn by providing that
farmers “‘may continue to farm such wetlands ... as they
did prior to December 23, 1985. However, no action can be
taken to increase effects on the water regime beyond that
which existed on such lands’ on or before that date.”
Barthel v. United States Department of Agriculture, 181
F.3d 934, 936 (8th Cir. 1999) (emphasis in original), citing
7 C.F.R. § 12.33(a) (1992). Consequently, “[ljand meeting
{the prior converted wetland) exemption can be main-
tained as it was prior to the effective date of the Act
without loss of federal benefits.” Jbid. Again, as in Gurn,
the Eighth Circuit neld that under Swampbuster, the
farming of a wetland should be maintained at the level
that was achieved prior to the Act. Jd. at 937.

At issue in Barthel was the permissible dredging of a
drainage ditch across Barthel’s 450-acre hay meadow in
Nebraska. Jd. at 935-36. Prior to 1985, Barthel was able to
produce hay, and pasture his milk cows on the land. Jd. at
936. In 1987, the USDA denied him permission to clean

14

the drainage ditch which left his land completely and
permanently under water. Jd. at 936-37. Barthel con-
tended that “maintenance of the manipulation should
allow them to use the land as they did prior to the passage
of the Act.” Id. at 937. The Eighth Circuit agreed, stating
that the “agency's interpretation misses the clear focus on
the Swampbuster provisions and the implementing regu-
lations.” Ibid.

According to the Eighth Circuit, the proclaimed
purpose of Swampbuster is to preserve wetlands, or, if the
wetlands were altered, to preserve the conditions as altered.
Ibid. “The unambiguous focus of the statute and imple-
menting regulations is to maintain the status quo of the
manipulated wetlands — not the drainage ditch.” Jd. at 938
(emphasis added). Therefore, a technical determination
which produces a result contrary to the previous status
quo of the wetlands cannot stand. Ibid. “The statute and
regulations mandate that the Barthels should be able to
have the water and farming regime they had before De-
cember 23, 1985.” Ibid (emphasis added).*

The Eighth Circuit’s opinions stand in marked con-
trast to the Seventh Circuit’s decision below, because the
Eighth Circuit may have ultimately permitted the Peti-
tioner’s activities on his farmland. The Petitioner was
attempting to maintain and repair the original drainage
system on his property, and had no intention of significantly
improving upon the previously accomplished drainage.
Therefore, under the Eighth Circuit’s interpretation of the

* Importantly, the Eighth Circuit noted that at “oral argument,
counsel for the government did concede that the Barthels are entitled to
the best drainage of their land, on or before December 23, 1985, that
they can prove with reliable evidence.” Barthel v. United States
Department of Agriculture, 181 F.3d at 938 n.8 (emphasis added).

15

provisions of Swampbuster, the Petitioner would have
remained eligible for benefits.

For these reasons, this Court should resolve the
conflict in the lower courts by granting the petition and
addressing the important question whether the USDA
may terminate an individual’s eligibility, based on the re-
conversion of a prior lawfully converted wetland, if wet-
land characteristics have returned prior to the enactment
of Swampbuster on December 23, 1985.

II. THE COURT OF APPEALS ERRED IN HOLD-
ING THAT THE LEGISLATIVE HISTORY OF
THE SWAMPBUSTER WAS IRRELEVANT IN
UPHOLDING THE SECRETARY’S INTERPRE-
TATION OF THE STATUTE UNDER CHEVRON

In Chevron, U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837 (1984), this Court held that
considerable weight should be accorded to the agency’s
construction of a statutory scheme it was entrusted to
administer, “‘unless it appears from the statute or its
legislative history that the accommodation is not one that
Congress would have sanctioned.’” Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837, 845
(1984) (emphasis added), quoting United States v. Shimer,
367 U.S. 374, 382 (1961). Even for an agency to claim all
the deference possible under Chevron, “deference to its
statutory interpretation is called for only when the devices
of judicial construction have been tried and found to yield
no clear sense of congressional intent.” General Dynamics
Land Systems, Inc. v. Cline, 540 U.S. 581, 600 (2004),
citing Immigration and Naturalization Service v. Cardoza-
Fonseca, 480 U.S. 421, 446-48 (1987).

As set forth in greater detail above, Swampbuster
provides for the lawful re-conversion of a wetland, if the

16

original conversion of the wetland occurred prior to De-
cember 23, 1985, and the wetland characteristics returned
after that date as a result of the lack of maintenance of
drainage, the lack of management of the lands containing
the wetlands, or circumstances beyond the control of the
person. 16 U.S.C. §§ 3822(b\1G), (bX 2D) (Supp. IV 1998)
(emphasis added). The USDA has interpreted this exemp-
tion as applying only in those circumstances when wetland
characteristics have returned after the enactment of the
Act, or December 23, 1985. 7 C.F.R. § 12.5(b)(1)(ii) (1999);
and 7 C.F.R. § 12.2 (wetland determination (8)) (1999). In
other words, the USDA requires the land to be in produc-
tion as of December 23, 1985, in order to qualify for the
exemption. Jbid. Both the district court and the court of
appeals determined that the statutory language pertain-
ing to the implementation of this exemption is in fact
ambiguous. App. A, infra, 4a; App. B, infra, 44a.

While the district court concluded that the legislative
history of the exemption supported the Petitioner’s conten-
tion that the exemption is applicable even if wetland
characteristics returned prior to 1985, the court of appeals
reversed, reasoning that the Secretary’s interpretation is
reasonable, and therefore, the legislative history is irrele-
vant. Jd. at 5a-6a; App. B, infra, 43a-47a. Nevertheless,
the court of appeals uitimately concluded that the legisla-
tive history did not lend any support to the Petitioner’s
interpretation of the statute. Jd. at 6a-7a. Consequently,
the court of appeals erroneously disregarded the express
language and purpose of the Act, and by upholding the
Secretarys interpretation of the exemption, frustrated
Congress’ intent. As best stated by the Eighth Circuit,
“[clertainly, there is no worse statute than one misunder-
stood by those who interpret it.” Barthel v. United States
Department of Agriculture, 181 F.3d 934, 937 (8th Cir.
1999).

17

1. The court of appeals mischaracterized the general
purpose of the Food Security Act of 1985 as only preserv-
ing those wetlands characteristics still in existence in 1985
from agricultural production. App. A, infra, 5a. The court
of appeals cited no authority for its limited characteriza-
tion of the purpose of the statute. Indeed, the statute
expressly exempts those wetlands which were converted
before the enactment of the statute, demonstrating a clear

purpose to “grandfather” prior converted wetlands used for .

agricultural production prior to 1985. 16 U.S.C.
§§ 3822(b)(1)(A), (b)(1G), and (b\(2XD) (Supp. IV 1998);
H.R. Rep. No. 99-271, pt. 1, at 416, 419, 99th Cong. (1st
Sess. 1985), reprinted in 1985 U.S.C.C.A.N. 1103, 1520-23
(statements by Rep. Daschle that if agricultural produc-
tion occurred at any time in the past, the land would be
grandfathered as of the date of the bill’s enactment into
law). Congress expressly recognized that certain exemp-
tions were required for a reasonable and fair implementa-
tion of the provisions of Swampbuster. H.R. Rep. No. 99-
271, pt. 1, at 88, 99th Cong. (1st Sess. 1985), reprinted in
1985 U.S.C.C.A.N. 1103, 1189.

Moreover, the Food Security Act of 1985 was derived
from a desire to bolster a failing agricultural economy:

The purpose of this bill is simple. It is to provide,
as far as it can be done in legislation of this kind,

* The court of appeals misunderstood the importance of Rep.
Daschle’s statements which were contemporaneous with the enactment
of the Food Security Act of 1985. App. A, infra, 5a-6a. Even though Rep.
Daschle’s statements were made long before the enactment of the
exemption at issue herein, his statements indicate Congress’ intent to
exempt all prior converted wetlands from the provisions of Swamp-
buster. The 1996 amendments, while not contemporaneous with Rep.
Daschle’s statements, provide further evidence of Congress’ original
intent in 1985.

Borge: am

Dr GReig ets e. eas t

/
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|

18

the basis for an economic climate in which effi-
cient American family farmers can survive the
grim squeeze that has already driven too many of
them to or close to the brink of ruin.
H.R. Rep. No. 99-271, pt. 1, at 8, 99th Cong. (Ist Sess.
1985), reprinted in 1985 U.S.C.C.A.N. 1103, 1111. It is
clear that Congress enacted the Food Security Act in an
effort to protect our Nation’s largest and most basic
industry. Jd. at 1111-12. Congress was concerned about the
implications to the national economy if segments of the
agricultural economy were permitted to collapse. Id. at
1111. The Food Security Act of 1985 addressed not only the
conservation of our Nation’s highly erodible lands and
wetlands, but established and continued significant price
support programs for producers who grow sugar, dairy,
wool, wheat, cotton, rice, peanuts, and soybeans. Id. at
1113-79.

The legislative history demonstrates that the primary
purpose of the Food Security Act of 1985 was, as the name
implies, to secure a market oriented climate for the pro-
duction of our Nation’s food and fiber by providing eco-
nomic security to our Nation’s farmers. Congress chose to
balance this effort with a conservation ethic that protects
wetlands, but not at the expense of prior farming prac-
tices. Congress made a policy decision to “grandfather”
prior converted wetlands — a policy decision which has
been subverted by a new definition promulgated by the
agency, and upheld by the court of appeals, which under-
mines the statute’s general purpose. Where the intent of
Congress is clear, as it is here, it governs. National Wild-
life Federation v. Agricultural Stabilization and Conserva-
tion Service, 955 F.2d 1199, 1204 (8th Wir. 1992), citing
Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S.
827, 837 (1990).

19

2. Moreover, the 1990 and 1996 amendments to the
Food Security Act did not alter the Act’s general purpose,
or provide an increased emphasis on the preservation of
wetlands. For instance, the Food, Agriculture, Conserva-
tion, and Trade Act of 1990 was enacted in order to extend
and revise agricultural support programs, to provide for
agricultural export programs, to ensure consumers an
abundance of food and fiber at reasonable prices, and to
provide for resource conservation. Pub. L. No. 101-624, 104
Stat. 3359 (November 28, 1990). The Federal Agriculture
Improvement and Reform Act of 1996 was intended to
modify the operation of certain agricultural programs.
Pub. L. No. 104-127, 110 Stat. 888 (April 4, 1996). Neither
amendment sought to undermine Congress’ initial decision
to exempt prior converted wetlands from the provisions of
Swampbuster.

3. In fact, in 1996, the prohibitions under Swamp-
buster were relaxed in order to provide greater flexibility
to farmers who lawfully converted their wetlands prior to the
enactment of the Food Security Act in 1985. The Federal
Agriculture Improvement and Reform Act of 1996 expanded
the list of statutory exemptions to agricultural program
ineligibility. Pub. L. No. 104-127, § 322(b), 110 Stat. 888, 988-
89 (April 4, 1996) (codified at 16 U.S.C. §§ 3822(bX1XG),
(bX2XD) (Supp. IV 1998)); supra, see discussion at p. 4. The
particular exemption at issue authorized the re-conversion of
a prior lawfully converted wetland, where wetland charac-
teristics returned to the site due to a lack of drainage
maintenance or circumstances beyond the control of the
property owner. 16 U.S.C. §§ 3822(bX1G), (bX2XD) (Supp.
IV 1998). This amendment, enacted in 1996, provides
additional evidence of Congress’ statutory scheme —
Congress intended all drained, dredged, filled, leveled, or
otherwise manipulated wetlands to be exempt from
agricultural production ineligibility, so long as the original

20

manipulation of the wetlands occurred prior to December
23, 1985.

The court of appeals upheld the USDA's contention
that the wetlands at issue herein were not “prior con-
verted wetlands” as of December 23, 1985, because wet-
land characteristics had returned to the site. The court of
appeals’ determination was erroneous for two reasons.
First and foremost, the 1996 amendments provide that
any previously converted sites, which are or have returned
to wetland characteristics, will remain exempted from
ineligibility. Second, the determination of the USDA is not
one Congress would have sanctioned, and thus, frustrates
Congress’ intent. 16 U.S.C. §§ 3822(bX1\G), (b\2XD)
(Supp. IV 1998). The USDA's determination, upheld by the
court of appeals, effectively negates the prior converted
wetland exemption that Congress clearly and unequivo-
cally granted farmers like Mr. Horn, whose land was
manipulated, converted, and farmed prior to 1985.

Ill. REVIEW BY THIS COURT IS WARRANTED
TO CLARIFY LIMITATIONS ON CONGRESS’
SPENDING POWER TO CONDITION THE RE-
CEIPT OF FEDERAL FUNDS BASED UPON
COMPELLED COMPLIANCE WITH A STATU-
TORY SCHEME

Despite the recognition that federal funds are consid-
ered a “gift” from Congress that it was under no obligation
to give, College Savings Bank v. Florida Prepaid Post
Secondary Education Expense Board, 527 U.S. 666, 686-87
(1999) and Massachusetts v. Mellon, 262 U.S. 447, 480
(1923), Congress’ spending power is not without limita-
tions. South Dakota v. Dole, 483 U.S. 203, 207 (1987); and
New York v. United States, 505 U.S. 144, 167 (1992). This
Court notably established that “in some circumstances the

21

financial inducement offered by Congress might be so
coercive as to pass the point at which ‘pressure turns into
compulsion.’” Jd. at 211; Steward Machine Co. v. Davis,
301 U.S. 548, 590 (1937) (noting that “the location of the
point at which pressure turns into compulsion, and ceases
to be inducement, would be a question of degree, at times,
perhaps, of fact.”). Consequently, Congress may not condi-
tion the receipt of federal funds in such a manner as to
leave the recipient with no practical alternative, other
than complying with the Federal directives. College
Savings Bank v. Florida Prepaid Post Secondary Educa-
tion Expenses Board, 527 U.S. at 687.

Review by this Court is especially warranted, because
the circuit courts, including the Seventh Circuit below,
have either declined the opportunity to develop a workable
standard for detecting unconstitutional coercion, or re-
fused to acknowledge the viability and application of the
coercion theory altogether, often characterizing it as an
“uphill battle.” App. B, infra, 37a; App. A, infra, 7a-8a;
State of Nevada v. Skinner, 884 F.2d 445, 448 (9th Cir.
1989); Oklahoma v. Schweiker, 655 F.2d 401, 414 (D.C. Cir.
1981); Mich. Dep't of State v. United States, 166 F.Supp.2d
1228, 1233-34 (W.D. Mich. 2001); Kansas v. United States,
24 FSupp.2d 1192, 1196 (D. Kan. 1998), aff’d, 214 F.3d
1196 (10th Cir. 2000); and Chemerinsky, Erwin, Protecting
the Spending Power, 4 CHAP. L. REv. 89, 103 (2001).
Clarification of Congress’ spending authority to compel
compliance with a statutory scheme is much needed, for no
other reason than the fact that the district court below
concluded that “the Swampbuster provisions are coercive,
in fact, they give the USDA a big club with which to
protect wetlands.” App. B, infra, 37a. Yet, the district court
refused to hold the provisions of Swampbuster unconstitu-
tional. Ibid.

22

1. Congress has conditioned the receipt of certain
farm subsidies in such a manner (i.e., the potential loss of
100% of USDA benefits) as to leave the recipient, such as
the Petitioner and others, with no practical alternative
other than complying with the regulation of their private
property in order to prevent the further loss of wetlanus
for the production of agricultural commodities. The Food
Security Act encompasses “a coercive federal regulatory
scheme under which Congress may, through the guise of
its spending power, indirectly regulate the use of private
property that it is unable to regulate under its constitu-
tionally enumerated powers.” Douglas, Patrick R., Conser-
vation or Coercion: Federal Regulation of Intrastate
Wetlands Under the Swampbuster Provisions of the Food
Security Act, 8 Mo. ENVTL. L & POL’y REV. 59, 59 (2001).

Similar to the Court’s concerns in College Savings
Bank v. Florida Prepaid Postsecondary Education Expense
Board, what Congress threatens if the farmer refuses to
agree to its conditions is not the denial of a gift or gratuity,
“but a sanction: exclusion of the [individual] from other-
wise permissible activity.” College Savings Bank v. Florida
Prepaid Postsecondary Education Expense Board, 527 U.S.
at 687; United States v. Dierckman, 201 F.3d 915, 927 (7th
Cir. 2000) (characterizing the termination of eligibility
pursuant to the Food Security Act as a “penalty” and “sanc-
tion” for improperly converting wetlands); National Wildlife
Federation v. Agricultural Stabilization and Conservation
Service, 955 F.2d 1199, 1204 (8th Cir. 1992) (sanction);
Horn Farms, Inc. v. Veneman, 319 F.Supp.2d 902, 909
(N.D. Ind. 2004) (penalty); B&D Land and Livestock, Co. v.
Veneman, 231 F.Supp.2d 895, 906 (N.D. Iowa 2002) (pen-
alty); H.R. Rep. No. 99-271, pt. 1, at 88, 99th Cong. (1st
Sess. 1985), reprinted in 1985 U.S.C.C.A.N. 1103, 1189
(sanction). Accordingly, the point of coercion is automati-
cally passed when what is attached to the refusal to abide

—

23

by the conditions of receipt of the funding is a penalty,
sanction, or the exclusion from otherwise lawful activity.
Ibid. The loss of 100% of eligibility in USDA-related
programs can be characterized not as the denial of a gift or
gratuity, but only as a coercive or punitive measure, which
remains attached to both the Petitioner and his private
property in perpetuity.

Its bears noting that while the farmer is forever
excluded from receiving agricultural subsidies from the
USDA for violating the provisions of Swampbuster, id. at
64a-65a, his private property is similarly subject to the
broad curtailment of certain rights and uses by the
farmer’s successors-in-interest. The production of an
agricultural commodity in a converted wetland, without
the attendant loss of agricultural subsidies, is strictly
prohibited by any successor-in-interest, even those wholly
innocent of the actual unlawful conversion. Such a deter-
mination has a significant adverse impact on the fair
market value of farmland in rural communities. Maintain-
ing sufficient productive cropland and/or forage areas on
farmland is unavoidable for the property to remain mar-
ketable for agricultural production purposes. 136 Cong.
Rec. H11029, 11345 (daily ed. Oct. 22, 1990) (statement of
Rep. De La Garza). Under such circumstances, the provi-
sions of Swampbuster obviously were not intended to be a
condition on the receipt of a gratuitous benefit, but rather,
were intended to penalize individuals for the unlawful
conversion of wetlands.

Recipients of USDA-related funding are forced to
choose between two equally coercive alternatives: the
recipient must either submit to Federal regulation of their
private property by opting not to use wetlands on their
property for agricultural use, even those that were prior
converted, or lose 100% of their USDA benefits. Under
Swampbuster, the range of alternatives is unacceptably

24

narrow. New York v. United States, 505 U.S. 144, 176-77
(1992).

2. In United States v. Butler, 297 U.S. 1 (1936),
certain provisions of the Agricultural Adjustment Act of
1933 were determined to exceed Congress’s enumerated
authority under the Constitution. United States v. Butler,
297 U.S. 1, 62-78 (1936). Even though the Court held the
challenged legislation invalid as a violation of the Tenth
Amendment, rather than the Spending Clause, the Court
also determined that the challenged legislation constituted
impermissible coercion under the Spending Clause. Jd. at 70-
74. Importantly, the Court stated that “[t]here is an obvious
difference between a statute stating the conditions upon
which moneys shall be expended and one effective only upon
assumption of a contractual obligation to submit to a regula-
tion which otherwise could not be enforced.” Jd. at 73.°
Swampbuster clearly involves the latter and not the former.

The Court in Butler colorfully defined “impermissible
coercion” as “an option to forego a privilege which may be
vital to his livelihood or submit to a requirement which
may constitute an intolerable burden.” United States v.
Butler, 297 U.S. at 72, quoting Frost v. Railroad Commis-
sion of the State of California, 271 U.S. 583, 593 (1926).’

* In Solid Waste Agency of Northern Cook County v. United States
Army Corps of Engineers, 531 U.S. 159, 171-74 (2001), this Court held
that federal authority over wholly intrastate wetlands raises “signifi-
cant constitutional questions.”

” In Frost, Justice Sutherland explained that:

It would be a palpable incongruity to strike down an act of
state legislation which, by words of express divestment,
seeks to strip the citizen of rights guaranteed by the federal
Constitution, but to uphold an act by which the same result
is accomplished under the guise of a surrender of a right in
exchange for a valuable privilege which the state threatens
otherwise to withhold.

(Continued on following page)

25

“While Butler’s authority is questionable insofar as it
assumes that Congress has no regulatory power over farm
production, its discussion of the spending power and its
description of both the power’s breadth and its limitations
remain sound.” South Dakota v. Dole, 483 U.S. 203, 216-17
(1987) (O’Connor, J., dissenting). In fact, Justice O’Connor
has interpreted the Spending Clause to afford Congress no
authority “to impose requirements on a grant that go
beyond specifying how the money should be spent,” unless
the condition “falls within one of Congress’ delegated
regulatory powers.” Jd. at 216 (citation omitted).

With regard to the termination of agricultural benefits
in Butler, the Court determined that the processing tax
coerced farmers in complying with an acreage reduction
scheme. United States v. Butler, 297 U.S. at 69-73. In
support of this conclusion, the Court stated that:

The regulation is not in fact voluntary. The

farmer, of course, may refuse to comply, but the

price of such refusal is the loss of benefits. The
amount offered is intended to be sufficient to ex-

ert pressure on him to agree to the proposed

regulation. The power to confer or withhold

unlimited benefits is the power to coerce or de-
stroy. If the cotton grower elects not to accept the
benefits, he will receive less for his crops; those
who receive payments will be able to undersell
him. The result may well to financial ruin....

This is coercion by economic pressure. The as-

serted power of choice is illusory.

United States v. Butler, 297 U.S. at 70-71 (emphasis
added). Similar to the Court’s opinion in Butler. pertaining to
the Agricultural Adjustment Act of 1933, and Justice

Frost v. Railroad Commission of the State of California, 271 U.S. 583,
593 (1926).

26

O’Connor’s dissenting opinion in South Dakota v. Dole,
pertaining to the National Minimum Drinking Age Amend-
ment, the provisions of Swampbuster clearly encompass an
exercise of regulatory, not spending, authority. Swampbuster
does not create a spending program; it merely imposes a
penalty — the loss of federal funding.

The wetland conservation provisions are impermissi-
bly coercive, because the potential loss of an individual’s
entire eligibility is intended to be sufficient to exert
pressure on him to agree to the proposed regulation of his
private property.’ The Federal Government has, in an act
more akin to forbidden regulation than to permissible
condition, supplanted with its own policy preferences the
considered judgments of the States, such as to how best to
preserve the functions and values of wetlands located
entirely within their respective borders.

3. It is not surprising that in the aftermath of South
Dakota v. Dole, lower courts have been called upon to limit
the spending authority of Congress based upon the coer-
cion theory. The courts of appeals have disagreed whether
the coercion theory remains a viable means of limiting
Congress’ spending power. The United States Court of
Appeals for the Eighth Circuit, in Bradley v. Arkansas
Department of Education, 189 F.3d 745 (8th Cir. 1999), held
that the section of the Federal Rehabilitation Act requiring
Arkansas to waive its Eleventh Amendment immunity to all
claims arising under the Rehabilitation Act, if it receives
Federal funding, amounted to impermissible coercion.
Bradley v. Arkansas Department of Education, 189 F.3d

* To be sure, the wetland conservation provisions constitute far
more than a “temptation” or “mild encouragement.” The wetland
conservation provisions are impermissibly coercive, because they
authorize 100% ineligibility in certain USDA-related programs.

27

745, 757-58 (8th Cir. 1999). The Eighth Circuit concluded
that the “condition § 504 imposes on recipients of federal
funds exceeds the ordinary quid pro quo involved in a
proper exercise of Congress’s spending power.” Ibid.
(citation omitted). However, the Eighth Circuit panel’s
decision was reversed on rehearing en banc. Jim C. v.
United States, 235 F.3d 1079 (8th Cir. 2000) (en banc). The
court in Jim C. v. United States, was unpersuaded that the
loss of twelve percent in education-related funding com-
pelled Arkansas’ choice. Jd. at 1082.

Similarly, other courts have held that the loss of Federal
funding at issue, on the grounds that the recipients refused
to fulfill their Federal obligations in some insubstantial
respect, did not deprive the recipients of any meaningful
choice or amount to impermissible coercion. Doe v. State of
Nebraska, 345 F.3d 593, 598-600 (8th Cir. 2003); Kansas v.
United States, 214 F.3d at 1201-02; State of California v.
United States, 104 F.3d 1086, 1092 (9th Cir. 1997); and State

of Nevada v. Skinner, 884 F.2d at 449-50.

Importantly, however, “while most courts faced with
the question have effectively abandoned any real effort to
apply the coercion theory,” some courts do not view the
coercion theory with such suspicion. West Virginia v.
United States Department of Health and Human Services,
289 F.3d 281, 287-91 (4th Cir. 2002); Commonwealth of
Virginia, Department of Education v. Riley, 106 F.3d 559,
561 (4th Cir. 1997) (en banc) (stating that the Federal
Government’s withholding from the Commonwealth of
100% of an annual special education grant, because of the
Commonwealth’s failure to abide by certain conditions,
“resembles impermissible coercion.”); and United States v.
Sabri, 183 F.Supp.2d 1145, 1156 (D. Minn. 2002) (conclud-
ing that two local governments’ decisions to either abide by
certain funding conditions, or forego approximately
99.97% and 99.96% of their federal funds, respectively,

28

surely is “so coercive as to pass the point at which pres-
sure turns into compulsion.”).” At the very least, the
coercion theory remains viable in the Fourth Circuit. Jd. at
291. According to the Fourth Circuit, “federal statutes that
threaten the loss of an entire block of federal funds upon a
relatively minor failing by a [recipient] are constitutionally
suspect.” Id.”

Had the Petitioner’s wetlands been located within the
Fourth Circuit, the result in this case may certainly have
been different. The Fourth Circuit may have brought more
credibility to the Petitioner’s argument that the wetland
conservation provisions are impermissibly coercive,
because the Food Security Act, as amended, confers the
power to withhold unlimited benefits from agricultural
producers unwilling or unable to comply with the wetland
conservation provisions. This Court should not tolerate a
circuit split on an issue as important as the scope and
limitation of Congress’ spending authority.

4. Furthermore, each of the above cases involve
conditional Federal spending which arguably interferes

* The court’s decision in United States v. Sabri was reversed on
appeal, because the Eighth Circuit determined that the statute at issue
did not actually condition the receipt of federal funds. United States v.
Sabri, 326 F.3d 937, 945-48 (8th Cir. 2003). The Eighth Circuit con-
cluded, therefore, that since the statute did not qualify as a conditional-
grant statute, the spending limitations set forth in South Dakota v.
Dole did not apply. Id. at 948.

” The Fourth Circuit, in West Virginia v. United States Department
of Health and Human Services, ultimately held that the Federal
requirements that states adopt an estate recovery program, or lose all
or part of their Federal Medicaid reimbursements, were not impermis-
sibly coercive, because the government threatened to withhold “all or
part” of West Virginia’s Federal financial participation in the State’s
Medicaid Program. West Virginia v. United States Department of Health
and Human Services, 289 F.3d at 291-92.

29

with a state’s autonomy. In this case, the Petitioner does
not represent a sovereign community, but rather is an
individual. A state possesses political powers, particularly
the power to tax, that “help ensure the federal government
does not ‘coerce’ the state through economic ‘encourage-
ment.’” A.W. v. The Jersey City Public Schools, 341 F.3d
234, 243-44 (3rd Cir. 2003), quoting Koslow v. Common-
wealth of Pennsylvania, 302 F.3d 161, 174 (8rd Cir. 2002).
“An individual citizen, in contrast, lacks these formidable
institutional resources.” Koslow v. Commonwealth of
Pennsylvania, 302 F.3d at 174. An individual’s refusal of
conditional money is an unsatisfactory choice “in light of
growing depen@ence of recipients on federal money.”
Zietlow, Rebecca E., Federalism’s Paradox: The Spending
Power and Waiver of Sovereign Immunity, 37 WAKE
ForEsT L. REv. 141, 172 n.206 (2002).

Consequently, “the states are sufficiently strong to
resist the blandishments of federal money, while private
individuals and institutions tend not to be.” Baker, Lynn A.,
Conditional Federal Spending After Lopez, 95 COLUM. L.
Rev. 1911, 1957 n.16 (1995) (citation omitted). “[Plolitical
self-help by [individuals] is less feasible when majorities seek
to curtail civil liberties than when Congress goes beyond its
enumerated powers or interferes with the autonomy of state
or local government.” Jbid. Moreover, the Government “may
not deny a benefit to a person on a basis that infringes his
constitutionally protected interests.” Perry v. Sindermann,
408 U.S. 593, 597 (1972).”

“ In addition to their private property rights, individuals have a
constitutionally protected property interest in statutory entitlements,
such as agricultural subsidies, for persons qualified to receive them.
Atkins v. Parker, 472 U.S. 115, 128 (1985); Cleveland Board of Educa-
tion v. Loudermill, 470 U.S. 532, 538 (1985); Mathews v. Eldridge, 424
U.S. 319, 332 (1976); Board of Regents of State Colleges v. Roth, 408

(Continued on following page)

30

5. Finally, it is appropriate to resolve the issue at
this time, because the Seventh Circuit’s refusal to studi-
ously consider these arguments renders meaningless this
Court’s acknowledgment that a person has the right to be
free from unauthorized actions of government officials
which substantially impair his or her property rights.
Greene v. McElroy, 360 U.S. 474, 492-93 (1959). If the
right to unrestricted use and enjoyment of one’s property,
and the right to be free from governmental interference, are
in fact private interests of historic and continuing impor-
tance, United States v. James Daniel Good Real Property,
510 U.S. 43, 53-54 (1993), then the Petitioner is entitled to a
more exacting scrutiny of Congress’ encroachment into the
Petitioner’s “privilege of use,” than that provided by either
the district court or the court of appeals.

,
v

CONCLUSION

The petition for a writ of certiorari should be granted.
Respectfully submitted,

KAREN BUDD-FALEN

Counsel of Record

BRANDON L. JENSEN
BUDD-FALEN LAW OFFICES, LLC
300 East 18th Street

Post Office Box 346

Cheyenne, Wyoming 82001
(307) 632-5105

Counsel for Petitioner

April 2005

U.S. 564, 577-78 (1972); and Goldberg v. Kelly, 397 U.S. 254, 262 n.8
(1970).

SUPREME COURT APPENDIX
Page
Appendix A (7th Circuit Decision)........... saadadiiivnendiltidlevaunes la

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

Appendix B (District Court Decision).....................:c00008 12a

319 F.Supp.2d 902 (N.D. Ind. 2004)

Appendix C (Administrative Decisions)

NRCS Preliminary Technical Determination............. 53a
Wetland Conservation Determination; Tract
i sisnsnasasuanseoies 5646
Assistance Notes; Tract No. 13599..................c.sseees 59a
Wetland Conservation Determination; Tract
a asc nheensnnvonccscnces 60a
Assistance Notes; Tract No. 980 .............ccccccceseseeeee 63a

NRCS Non-Agricultural Determination. ..................... 64a

NRCS Final Technical Determination........................ 67a
Map of all involved Tracts ................cc:ccccsscecsseeesseees 70a
Wetland Conservation Determination; Tract
IIR i saad nenabnnntinediadnaundesiccanectes 7la
Wetland Determination Designation Map;
ESET a ne w.. 128
Wetland Conservation Determination; Tract
eh Se a aici nctscccdniasdebcdssiadeoss 73a
Wetland Determination Designation Map;
icici soa iidieehi aden suadnchdétossasseasadcoosese 74a
Wetland Conservation Determination; Tract
REISE TSK ne na Soo 75a

Wetland Determination Designation Map;
oa as canlcenacnsbiabepensebens

ii

SUPREME COURT APPENDIX - Continued

Wetland Conservation Determination; Tract

i SI siete cxcsnsenitcicibaibchsictacatdepihusiasapnptiasuacaesnseaanialiaiia 77a
Wetland Determination Designation Map;
Trt Ti GD cc snrvastich hccestdectninteitaccilininaseiwanachinenivies 78a
Definitions of Wetland Label Codes....................00+ 79a
Farm Service Agency Decision.................:ssscccseeesereees 8la
FSA Fulton County Committee Decision..................... 84a
Hearing Officer’s Preliminary Decision....................+++ 86a
Hearing Officer’s Final Decision. .................:::ssscceeeees 90a
Denial of a Director Review Request ...............ccccceeees 94a
Second Denial of a Director Review Request.............. 96a
Appendix D (NRCS Field Notes)...........::ccccccssscessseeseeenes 99a
Appendix E (United States Code)
16 U.S.C. § 3821 (Supp. TIT. 1985) ............. ee eseeees 101la
16 U.S.C. § 3822(a) (Supp. TT 1985).......... eee 102a
16 U.S.C. § 3821 (Supp. IT 1990).................ccssssseees 103a
16 U.S.C. § 3822(b) (Supp. IT 1990).......................00 105a
16 U.S.C. § 3821 (Supp. IV 1998)...................csseesees 106a
16 U.S.C. § 3822(b) (Supp. IV 1998) .......... eee 108a
Appendix F (Code of Federal Regulations)
F CLES a8 Cee iieidcincasicpianincsnnbianiaiasemnisansvainiea 113a
7 CPD. © Ue i iiteiitianiiiciniionatin 1l4a
FCPS TS ee tiitittcincictinidinaeseainn 122a
7 C.F.R. §§ 12.4(a), (c), (g), (lh) (1999)... ceeeeeeeeeees 123a
Fite. SR Ce eaten vintincarcansnttiinhnanatctladasarectionts 126a

F CFs FFB Ce hiicstissricnscinsnisatsecsceaannsrannasanins 135a

la

APPENDIX A
In the
United States Court of Appeals

for the Seventh Circuit

Nos. 04-2948, 04-2909.
HORN FARMS, INC.,

Plaintiff-Appellee,
Cross-Appellant,

v.
MIKE JOHANNS, Secretary of Agriculture, et al.,

Defendants-Appellants,
Cross-Appellees.

Appeals from the United States District Court for the
Northern District of Indiana, South Bend Division.
No. 3:02 CV-0831 AS — Allen Sharp, Judge.

ARGUED JANUARY 3, 2005 — DECIDED FEBRUARY 2, 2005

Before BAUER, EASTERBROOK, and WOoD, Circuit
Judges.

EASTERBROOK, Circuit Judge. Farmers who convert
wetlands to agricultural use lose eligibility for federal
agricultural subsidies. The initial version of this statute,
16 U.S.C. §§ 3821-24, enacted in 1985 and dubbed
“Swampbuster,” made the loss proportional to the amount
of wetland converted. An amendment in 1990 provided

2a

that converting any wetland would cause the farmer to
lose all agricultural payments. A further amendment in
1996 added an exception for wetlands that had been
drained and farmed, had reverted to wetland status, and
then were restored to agricultural use. We must interpret
and apply the 1996 exception.

In 1998 Horn Farms drained about 6.2 acres of wet-
lands. A system of tiles under that ground showed that
this was not its first conversion to farm use, but well
before 1998 the system had broken down and the parcel
had reverted to wetland. The district conservationist
concluded, from the age of trees and other vegetation, that
the ground probably had become saturated again during
the 1970s, and certainly no later than 1981. This led local
agricultural officials to deem Horn Farms ineligible for the
exception, which covers: “A wetland previously identified
as a converted wetland (if the original conversion of the
wetland was commenced before December 23, 1985), but
that the Secretary determines returned to wetland status
after that date as a result of — (i) the lack of maintenance
of drainage, dikes, levees, or similar structures; (ii) a lack
of management of the lands containing the wetland; or (iii)
circumstances beyond the control of the person.” 16 U.S.C.
§ 3822(b)(2)(D). The date on which the ground “returned to
wetland status” could not be determined with certainty,
but it preceded December 23, 1985 — so much Horn Farms
concedes. Because the Department of Agriculture reads
the phrase “after that date” to refer to December 23, 1985,
its immediate antecedent, Horn Farms was ineligible for
the exception and lost all federal agricultural subsidies.
(The statute restores the subsidies if the farmer restores
the wetlands, but Horn Farms has declined to do this, and

3a

the parties could not agree on the adequacy of its offer to
mitigate the loss in other ways. See 16 U.S.C. § 3822(i).)

Horn Farms contends that “that date” is the date of
the original conversion, so that any wetland converted to
farm use before December 23, 1985, always may be farmed
again without any loss of federal subsidy, no matter how
long it had been a wetland before the second conversion
and no matter what its status on December 23, 1985. A
federal district court agreed with this position and di-
rected the Department to resume Horn Farms’ subsidy
payments. 319 F. Supp. 2d 902 (N.D. Ind. 2004). The judge
rejected Horn Farms’ request that he declare the legisla-
tion unconstitutional as a misuse of Congress’ spending
power, so Horn Farms remains at risk of losing federal
support again if it converts any wetland that had not been
drained and farmed some time before December 23, 1985.
Both sides have appealed; the Department of Agriculture
also asks us to review two other parts of the district court’s
opinion that we describe later.

Because the district court remanded to the Secretary,
we must consider whether the judgment is appeaiable as a
“final decision” under 28 U.S.C. § 1291. It is not clear what
the Secretary is supposed to do on remand; the judgment
omits all details. The remand appears to be the result of
careless drafting. The district court did not want the
Department of Agriculture to take more evidence and
make a fresh decision; instead the court contemplated that
the Department would restore Horn Farms’ subsidy. Yet if
by ordering a remand rather than a concrete remedy the
judge has made his decision non-final, an appeal is im-
permissible — though an application under Fed. R. Civ. P
60(a) might be in order to conform the disposition to the
opinion’s rationale. Given the rationale of Sullivan v.

PRO A SPOOVONS ADIT

4a

Finkelstein, 496 U.S. 617 (1990), and Forney v. Apfel, 524
U.S. 266 (1998), however, the order is a “final decision” as
it stands. Nothing that the Secretary could do in the
future would lead to a fresh administrative order that the
federal government could take back to district court (and
this independent of the fact that the Department cannot
petition for judicial review of its own orders). It is thus
now or never for an appeal. Although Finkelstein and
Forney concerned a provision in the Social Security act
rather than § 1291, we applied them to § 1291 in Perlman
v. Swiss Bank Corp., 195 F.3d 975, 979 (7th Cir. 1999): “If
the district court finds that the decision was erroneous
and enters a judgment wrapping up the litigation, that
decision is appealable even if extra-judicial proceedings lie
ahead; but if the court postpones adjudication until after
additional evidence has been analyzed, then it has not
made a final decision.” The district court concluded that
the Secretary’s decision was erroneous and awarded Horn
Farms all financial relief that it sought, so the order is
appealable now.

Section 3822(b)(2)(D) is ambiguous. The referent of
“that date” could be December 23, 1985, as the Secretary
contends, but it also could be the date on which the wet-
land was “previously identified” or the date on which the
“original conversion ... was commenced”. Several contex-
tual elements support the Secretary’ reading. First,
December 23, 1985, is the last antecedent of “that date”.
See Barnhart v. Thomas, 540 U.S. 20, 26 (2003). Second,
the date on which a wetland was “previously identified” is
meaningless for land converted before December 1985, as
the statute’s approach to “identifying” wetlands did not
come into existence until then. Third, the date of original
conversion is an implausible candidate for the antecedent,

5a

because then the phrase “before that date” and much of
the remaining language would serve no function. It would
be as if the statute exempted: “A wetland converted before
December 23, 1985, that the Secretary determines re-
turned to wetland status after that date as a result of
...”. Any reading that makes so much of a statute surplu-
sage has little to recommend it. Fourth, when “that date”
is understood to be December 23, 1985, the subsection is a
non-degradation clause: the legislation protects wetlands
as they actually existed on the date of its enactment,
penalizing withdrawals without attempting to restore
lands then under agricultural production. Reading “that
date” to be the time of original conversion would allow net
reductions in wetlands after the legislation’s enactment —
and would allow them in ways that are difficult to police,
because there would be few records to show the date of
original conversion, so farmers who drained wetlands after
1985 could make hard-to-refute claims that they were just
going back to some long-forgotten state of affairs.

So the Secretary’s interpretation not only is reason-
able but also is the most sensible understanding of the
legislation. Moreover, because the interpretation is ex-
pressed in regulations adopted after notice and opportu-
nity for comment, see 7 C.F.R. §§ 12.2(7), 12.2(8), and
concerns the Secretarys administration of a federal
program, it receives all of the deference contemplated by
Chevron U.S.A. Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984). Yet the district court concluded
that a solitary statement by one of the legislation’s spon-
sors overrode all of this. The judge relied on an exchange
that took place in the House Agriculture Committee and
was summarized (though not reported verbatim) in the
committee report:

i

I LA einem catty Mt

6a

Mr. Daschle was recognized to offer a clarifying
amendment to the previously adopted Swamp-
buster provisions. Mr. Daschle briefly explained
the provisions of the amendment. Mr. Lewis of-
fered an amendment to the amendment to clarify
that the definition of wetlands would not include
simply wet soils. Mr. Daschle said he would ac-
cept the amendment. The Committee agreed to
the Lewis amendment by voice vote. Mr. Daschle
and Mr. Lewis discussed the question of cropland
that has been flooded and later reclaimed. Mr.
Daschle stressed that the amendment would not
affect the use of this land because if production
was underway at any time in the past, the land
would be grandfathered.

H.R. Kep. 99-271 (Pt. 1) at 419, 99th Cong. Ist Sess.
(1985). This implies that Rep. Daschle thought that the
version of the statute under consideration in 1985 allowed
previously converted wetlands to be re-converted later
without penalty. What that has to do with the interpreta-
tion of an amendment 11 years later is a mystery. The
1985 legislation lacked any counterpart to § 3822(b\(2)(D);
Rep. Daschle could not have been trying to pin down the
antecedent of “that date” in a bill whose drafting lay far in
the future. The district judge also did not explain why one
representative’s view would trump that of the Cabinet
official to whom administration has been delegated. If
agencies and legislators read ambiguous language differ-
ently, the agency wins under Chevron. When Congress
delegates to the Executive Branch a power of interpreta-
tion, it surrenders any opportunity to rule the outcome via
statements in committee. See, e.g., American Hospital
Ass’n v. NLRB, 499 U.S. 606 (1991). Cf. United States v.
Mead Corp., 533 U.S. 218 (2001). Thus the Secretary’s
reading would prevail even had the statement been

7a

contemporaneous with the statute’s enactment. Cf. Conti-
nental Can Co. v. Chicago Truck Drivers Pension Fund,
916 F.2d 1154 (7th Cir. 1990).

This conclusion brings to the fore Horn Farms’ conten-
tion that Congress lacks authority to make subsidies
contingent on preserving wetlands. Such a tie between the
agricultural subsidy and leaving wetlands alone is imper-
missibly coercive, Horn Farms insists, and oversteps
Congress’ authority under Article I § 8 cl. 1 of the Consti-
tution. He relies principally on Justice O’Connor’s conclu-
sion in South Dakota v. Dole, 483 U.S. 203, 212-18 (1987)
(dissenting opinion), that the spending power may not be
used in a way that coerces states to surrender fundamen-
tal attributes of their sovereignty. Beyond the fact that
Justice O’Connor wrote for herself alone is the fact that
Horn Farms is not a governmental body and lacks any
sovereignty that can be trampled upon. Anyway, if it is
unduly “coercive” to link agricultural subsidies to how the
farmer uses (or misuses) agricultural land, it must be
unduly “coercive” to link the subsidy to the agricultural
product. A farmer can’t get federal payments for growing
(or not growing) soybeans, without actually growing the
soybeans or allowing the land to lie fallow. The sort of
argument Horn Farms presses would demolish, not the
Swampbuster legislation, but the whole system of agricul-
tural subsidies, and indeed all federal legislation (includ-
ing tax credits and deductions) linking financial rewards
to the satisfaction of conditions. Horn Farms could not
gain from such a decision.

The majority in South Dakota identified three poten-
tial limitations on the spending power: conditions set on
expenditures must (i) promote the general welfare, (ii) be
unambiguous (at least when they affect states), and (iii)

POL SR ee

8a

relate to a legitimate federal interest. 483 U.S. at 207-08.
The first and third of these come to the same thing and
don’t help Horn Farms, which does not deny that preser-
vation of wetlands (which support migratory birds and
other wildlife) promotes a legitimate federal interest and
thus a plausible conception of the general welfare -— a
subject on which the legislature’s assessment is all but
conclusive. See McCulloch v. Maryland, 17 U.S. (4 Wheat.)
316 (1819). As for the second: the statute is as clear as can
be. Even the scholars most skeptical of Congress’ use of
conditional spending to achieve substantive goals would
not think this legislation problematic. See Laurence Claus,
“Uniform Throughout the United States”: Limits on Taxing
as Limits on Spending, 18 Const. Commentary 517 (2001);
Lynn A. Baker, Conditional Federal Spending After Lopez,
95 Colum. L. Rev. 1911 (1995). No surprise, then, that we
thought this legislation to be within national power the
last time it was challenged. See United States v. Dierck-
man, 201 F.3d 915, 922-23 (7th Cir. 2000). Horn Farms
developed the conditional-spending point more fully than
did the parties in Dierckman (our treatment there was
correspondingly succinct), but a more elaborate argument
does not affect our resolution. This makes it unnecessary
to determine whether the legislation could be supported at
any event by the national commerce power. See Wickard v.
Filburn, 317 U.S. 111 (1942).

What we have said so far fully resolves the parties’
disputes. But the district court went further; actually the
district court began with a constitutional decision that did
not affect its judgment. The district court stated that the
Swampbuster legislation offends the due process clause of
the fifth amendment because it does not afford farmers
adequate opportunities for administrative review of the

SS ——

9a

district conservationist’s conclusion that particular wet-
lands had been converted to farm use on particular dates.
319 F. Supp. 2d at 912-16. The judge did not explain why
he considered a constitutional issue first, when challenges
to statutes’ validity should be entertained only as a last
resort. See Jean v. Nelson, 472 U.S. 846, 854 (1985); ISI
International, Inc. v. Borden Ladner Gervais LLP, 256
F.3d 548, 552 (7th Cir. 2001). As the judge later deter-
mined that the dates of conversion, reversion, and recon-
version do not matter (provided that the original
conversion occurred before December 23, 1985), it was
unnecessary, on his understanding of § 3822(b)(2)(D), to
consider the adequacy of the procedures used to determine
those dates. Constitutional adjudication is unnecessary on
our view of that statute as well: the timing question is
whether the converted ground was a wetland on December
23, 1985. This, too, is uncontested. So the agency did not
need to offer Horn Farms any procedures to find facts, for
there were no material disputes. A hearing was no more
essential before the agency than it was in the district court
— which granted summary judgment without offering an
evidentiary hearing. So we let the due process issue pass
without further analysis. The Secretary contends that the
district judge misunderstood how state and federal agen-
cies determine contested factual issues under the Swamp-
buster legislation, but this topic we need not explore. It is
enough to say that the district court’s constitutional
analysis in this litigation lacks any precedential force.

At the close of its opinion, the district judge stated
that the Secretary’s removal of Horn Farms’ subsidy vio-
lated 5 U.S.C. § 558, a part of the Administrative Procedure
Act, because it deprived Horn Farms of a “license” without
the procedures required by that subsection. 319 F. Supp. 2d

10a

at 921-23. On the district court’s view this was irrelevant,
because Horn Farms is entitled to prevail independent of
any procedural shortcomings. Moreover, the district court’s
understanding of §558 made its constitutional ruling
doubly gratuitous, because the court purported to invali-
date a set of procedures that, given its conclusion about
§ 558, did not apply to Horn Farms in the first place.
Because we have sided with the Secretary on substance,
however, § 558 might offer an alternative ground for relief
— if not an award of the subsidy that Horn Farms wants,
at least for a remand at which it would be given an “oppor-
tunity to demonstrate or achieve compliance with all
lawful requirements.” 5 U.S.C. § 558(c)(2).

It is not clear to us that Horn Farms wants that
opportunity, which would mean a chance to turn the 6.2
acres back into wetlands. Since the Swampbuster legisla-
tion itself offers that opportunity, see 16 U.S.C. § 3822(i),
which Horn Farms spurned, it is hard to see what role
§ 558 could serve. But, just in case, we adi that the
district judge’s understanding of § 558 is mistaken. It
deals with procedures to be followed in connection with
any “application ... for a license required by law”. Horn
Farms did not “apply” for a “license.” It wants a check
drawn on the Treasury, not a license — for it does not need
any federal official’s permission under Swampbuster
either to engage in farming or to drain wetlands. It is free
to do as much of either as it wants (subject to other legal
constraints). Procedures to be used for resolving disputes
about whether land was wetlands, and when conversions
occurred, are provided in the Swampbuster legislation and
the implementing regulations, independent of the APA.

That a farmer’s acts have financial consequences no
more makes a subsidy a “license” than it would make sense

lla

to say that, because a taxpayer cannot claim the child-care
credit without actually having a child, the United States has
established a “licensing” requirement to bear or raise chil-
dren. Similarly the fact that a mortgage-interest deduction
becomes unavailable if the IRS concludes that the taxpayer
no longer has a mortgage does not mean that one needs a
license to borrow money on the security of real estate.
Doubtless § 558 should be read so that it encompasses all
situations in which federal approval is required to undertake
some act — even if the document is called a “permit” or
“certificate of public interest, convenience, and necessity”
rather than a “license.” See 5 U.S.C. § 551(8) (defining a
“license” as “the whole or a part of an agency permit, certifi-
cate, approval, registration, charter, membership, statutory
exemption or other form of permission”); see also, e.g.,
Bullwinkel v. Department of Transportation, 787 F.2d 254,
256 (7th Cir. 1986) (pilots’ medical certificates); Gallagher &
Ascher Co. v. Simon, 687 F.2d 1067, 1072 n.5 (7th Cir. 1982)
(“term special permits” required to import certain merchan-
dise); Anchestegui v. Department of Agriculture, 257 F.3d
1124, 1129 (9th Cir. 2001) (cattle grazing permit). But when
no agency stands as a gatekeeper to a proposed private
activity, there is no “license” either.

The judgment is reversed, and the case is remanded
with instructions to enter judgment against Horn Farms.

A true Copy:

Teste:
/s/
Clerk of the United States
Court of Appeals for the
Seventh Circuit

12a

APPENDIX B

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA

SOUTH BEND DIVISION
HORN FARMS, INC., )
eas ) Cause No.
siaeatint ) 3:02 CV-0831 AS
v. )
ANN M. VENEMAN, Secretary, ?
U.S. Department of Agriculture, )
)
et. al
Defendants. )

MEMORANDUM AND ORDER

This cause is before the Court on cross motions for
summary judgment. The Plaintiffs brought suit under the
Administrative Procedures Act, asking this Court to
review the decision of the United States Department of
Agriculture to terminate Horn Farms from a variety of
farm subsidy programs. The parties have briefed the
issues, and on March 3, 2004, this Court heard oral
argument on the motions After considering the submis-
sions of the parties and the oral arguments, the Court now
rules as follows.

I. JURISDICTION

Jurisdiction is premised upon the Administrative
Procedures Act (the “APA”), 5 U.S.C. §§ 706(1) & (2), which
gives federal courts jurisdiction to review agency decisions,
and federal question jurisdiction under 28 U.S.C. § 1331.

13a

II, RELEVANT FACTS

The facts are not in dispute in this case. The Plaintiff,
Horn Farms, Inc., (“Horn Farms”) is owned and operated
by Gene Horn, who currently owns and farms approxi-
mately 1400 acres in Fulton and Cass Counties in Indiana.
Pl.’s Mem. in Supp. at 4. Some of this land was purchased
in 1995, including the parcels at issue in this case. Id. at 5,
n.4,6. The purchased land included several small tracts
that the Natural Resources Conservation Service (the
“NRCS”) later determined to be wetlands. After noticing
pieces of broken drain tiles in the area, and speaking with
neighbors, Mr. Horn determined that these tracts had
previously been farmed, but had reverted to wetlands
through lack of maintenance of the drain: tile system.
Admin. R. at p. 6. Therefore, in 1998, he cleared several
tracts and restored the drain tile system. Jd.

Up to that time, Gene Horn and Horn Farms were
eligible to participate in various farm subsidy programs
administered by the United States Department of Agricul-
ture (the “USDA”) which allowed them to receive various
loans and payments. Jd. As part of the eligibility require-
ments for participation in these programs, a representa-
tive for Horn Farms executed Form AD-1026, agreeing not
to grow crops on wetlands converted after 1985, and not to
convert wetlands for the purpose of growing crops. Def.’s
Mem. in Supp. at 1-2.

On January 28, 1999, Robert Baker, the operator of
one of Plaintiff’s farms, requested a wetland determina-
tion on certain property owned by Horn Farms. Pl.’s Mem.
in Supp. at 2. On February 8, 1999, the Fulton County

l4a

Farm Service Agency’ office (the “FSA”) requested that the
NRCS’ conduct a wetland spot check on two tracts owned
by Horn Farms: tract 3713; and tract 13599. Def.s’ Mem.
in Supp. at 2. On March 22, 1999, NRCS representative
Albert Tinsley conducted a site-assessment with Mr. Horn
present in order to evaluate the wetland areas in question.
Id.; Pl.’s Mem. in Supp. at 5.

The results of Tinsley’s field visit formed the basis for
the NRCS’s determination, and will therefore be included
in some detail. His field notes state that according to
slides reviewed, six of the areas he looked at had been in
trees from prior to 1981, and that one site had growing
cat-tails and rushes due to continuing inundation and
saturation. Admin. R. at p. 75. He said that five sites bore
evidence of being converted wetlands, with actual satura-
tion in spite of the new tile system and risers installed. Id.
They also had the remnants of wetland plants in the form
of twigs, sticks and root wads, and in some places, surviv-
ing plants. Jd.

Tinsley’s notes state that he did observe evidence of
past drainage, in the form of tile chips and broken pieces,
but “since these areas were all in mature trees prior to

* The Farm Service Agency (FSA) was created in 1994 to replace
the Agricultural Stabilization and Conservation Agency (the ASCS).
United States v. Dierckman, 210 F.3d 915, 917, n.4 (7th Cir. 2000); see
also, Public L. No. 103-354, § 226 (1994) (codified at 7 U.S.C. § 6932)
and 60 Fed. Reg. 56,392 (Nov. 8, 1995) (changing the name of the newly
created Consolidated Farm Service Agency to the Farm Service
Agency).

> The NRCS was also created in 1994, and took over the services
formerly provided by the Soil Conversation Service (the “SCS”). See,
Dierckman, 201 F.3d at 917, n.3; and Pub. L. No. 103-354, § 246 (1994)
(codified at 7 U.S.C. § 6962).

15a

1981, there is no evidence that the drainage systems were
actually working during or prior to 1981.” Id. He says,
“The chronology of this field appears to be that it was
drained many decades ago, the system stopped function-
ing, trees had returned sometime no later than in the
1970’s and were not suitable for a determination of PC
[prior-converted wetland] during the pertinent 1981-1985
time frame for purposes of the Farm Bill provisions or the
1993-1998 time frame for purposes of the Clean Water
Act.” Id.

The NRCS reviewed the results from the onsite
assessment and remote images and determined that some
of the tracts in question were wetlands converted after
November 28, 1990. Pl.’s Mem. in Supp. at 2; Def.s’ Mem.
in Supp. at 7. This is significant in terms of wetlands
conversion because a new, more stringent version of the
Swampbuster provisions went into effect on that date. The
NRCS determined that four wetlands were converted on
Tract No. 13599, consisting of 0.4, 0.5, 1.8, and 2.1 acres.
Id. The NRCS noted that these wetlands had been cleared
of trees and vegetation, and drainage tiles installed in
order to facilitate the production of agricultural products,
but that no farming activities had yet occurred in these
areas. Id. In addition, the NRCS stated that one wetland
had been converted on Tract No. 980, consisting of 1.4
acres, fer a total of 6.2 acres of converted wetlands. Id.

Plaintiff Gene Horn was notified by letter on May 5,
1999, that the NRCS had made “a preliminary technical
determination” that he had converted 6.2 acres of wet-
lands in violation of the Food Security Act of 1985, as
amended by the Food, Agriculture, Conservation, and
Trade Act of 1990, and the Federal Agricultural Improve-
ment and Reform Act of 1996. Admin. R. at p. 72. The

16a

letter informed Mr. Horn that the preliminary determina-
tion would become final within 30 days unless he appealed
or asked for mediation. Admin. R. at pp. 72-3. On June 10,
1999, the FSA notified Mr. Horn that unless he took action
to mitigate the loss of the converted wetlands, he would be
ineligible for benefits under certain programs adminis-
tered by the USDA. Def.’s Stmt. of Mat. Facts at 4.° Based
on the preliminary technical determination, Mr. Horn’s
benefits were terminated beginning with the 1999 crop
year, and he remains ineligible until he either restores the
wetlands or mitigates their loss before January 1 of the
subsequent crop year. Id.

Mr. Horn asked for mediation, but there was a sub-
stantial delay in getting the session scheduled because of
difficulties in the office of the Indiana Commissioner of
Agriculture. Def.s’ Reply at 4. During this time, on Janu-
ary 31, 2000, Tinsley sent a letter to Mr. Horn explaining
his options, that he could choose not to participate in the
USDA farm support programs, or he could restore the
converted wetlands in place. Admin. R. at p. 55.

When the mediation was finally held on March 28,
2001, the discussion was primarily about the options the
agency could offer Horn Farms to get back into compliance
so that it could regain eligibility for program benefits.
Banks Aff. at p. 1. The mediation failed to produce an
agreement. On May 16, 2001, Tinsley sent another letter
to Mr. Horn explaining the steps he would need to take if

* The Defendant’s factual statement says that this letter was sent,
but there is no citation to the record. Although it is not required to do
so, the Court has searched the record and is unable to find this letter. It
is relevant on the issue of whether the Defendants offered the Plaintiff
an opportunity to come into compliance before terminating his benefits.

17a

he chose to mitigate the loss of the converted wetlands.
Admin. R. at p. 502. Mr. Horn’s understanding of the
mitigation plan was that it required him to set apart
possibly as much as 32 acres of farmland and turn it into a
wetland to offset the loss of the 6.2 acres that he cleared.
Pl.’s Mem. in Supp. at p. 6; Admin. R. at 128.‘ Mr. Horn
found this mitigation plan unacceptable, primarily due to
the discrepancy between the amount of wetlands con-
verted and the amount of acreage potentially required for
restoration and mitigation. Id.

On May 25, 2001, Mr. Horn proposed an alternative
wetlands conservation plan. Admin. R. at p. 512-13. He
offered to set aside and permanently protect 40 acres of
wetlands on his remaining farmland properties, in addi-
tion to a reduction in support payments proportional to the
amount of wetlands he converted to farm use. id. As long
as Mr. Horn remains out of the USDA's farm subsidy
programs, he is nct under the Swampbuster restrictions
that prevent the conversion of wetlands to farm use. Jd.
The Record does not indicate that the agency considered
Mr. Horn’s proposal.

After the failure of tie mediation process, Mr. Horn
filed an appeal with the Farm Service Agency County
Committee in Fulton County, Indiana, pursuant to C.F.R.
Part 780. Pl.’s Mem. in Supp. at p. 7. He presented evi-
dence to support the following claims: (1) that the six acres

* Tinsley’s letter dated May 11, 2001, states that the Wetland
Mitigation Ratio Key included in the record is only a sample, used as an
example. Admin. R. at p. 126. Again, although it is not required to, the
Court has searched the record and is unable to find anything that
documents the amount of acreage Plaintiff would be required to put
into a wetland in order to mitigate the loss of the 6.2 acres.

18a

in question fell within an exception to the Act for “prior-
converted wetlands”; (2) that NRCS did not make a deter-
mination on the “good faith” issue; (3) that the termination
of all benefits was inappropriate; and (4) that ignoring his
settlement proposal was contrary to the public interest.
Def.’s Mem. in Supp. at p. 4; Admin. R. at pp. 217-224.

The County Committee held an informal hearing on
October 17, 2001, regarding Mr. Horn’s administrative
appeal, and the next day, the Committee issued its deci-
sion. Pl.’s Mem. in Supp. at p. 7-8. The County Committee
“determined that merit could not be found in regards to
making a recommendation the NRCS technical determina-
tion be reviewed by the Indiana NRCS State Conserva-
tionist.” Jd. at 8; Def.s’ Mem in Supp. at 5. In addition, the
County Committee determined that they did not have
authority to reverse a technical determination by the
NRCS, and denied his appeal in its entirety. Id. The
Committee advised Horn Farms of its appeal rights, and
advised it that it would forward Horn Farm’s Good Faith
Determination Forms to NRCS for processing. Def.s’ Mem.
in Supp. at 5. The Committee advised that it lacked the
authority to act on a settlement proposal, but that it could
make a recommendation on the relief of penalties when
the Good Faith Determination was returned by NRCS. Id.

Horn Farms appealed the Committee’s decision and
the underlying technical determination to the National
Appeals Division, asking for a “record review”. Pl.’s Mem.
in Supp. at p. 8. The hearing officer, Michael E. Jacobs,
issued a written decision stating that the National Appeals
Division did not have subject-matter jurisdiction to con-
duct a record review because there exists “no authority to
hold a hearing or review of the record on the denial of the
Fulton County FSA Committee (COC) to seek a technical

19a

review by the Indiana NRCS State Conservationist”. Id.;
Admin. R. at p. 272. He further stated that the NAD had
no jurisdiction in this matter because “an: appeal of the
Fulton County Committee to not seek the NRCS State
Conservationist to review the technical determination is of
general applicability and policy.” Jd.

Horn Farms asked for reconsideration of this deter-
mination, which was denied, then sought review by the
Director of the National Appeals Division. Pl.’s Mem. in
Supp. at p. 8. Review was denied because Mr. Horn’s
appeal was signed by counsel, and the agency’s rules
required Mr. Horn to personally sign the request. Jd. at 8-
9. When he resubmitted his appeal, it was late. His re-
quest for reconsideration was also denied. Jd. After ex-
hausting his administrative appeals, Mr. Horn filed this
suit on November 18, 2002.

HI, THE STATUTORY AND REGULATORY SCHEME

The loss of wetlands is a matter of growing national
concern. According to studies prepared by the United
States Fish and Wildlife Service, Indiana experienced an
87% loss of wetlands between the 1780’s and mid 1980's.’
For the United States as a whole, the forty-eight conter-
minous states lost 53% of wetlands, with 2.5% of that loss

* Dahl. T.E.1990, Wetlands, Losses in the United States 1780’s to
1980's, U.S. Fish and Wildlife Service, Washington, D.C., available at

46a

revert back to a wetland, we should not make
him plow it up every five years just so he can
keep his designation. Even if he wishes to then
turn it into a corn field fifteen years later, society
received those benefits of the wetland for that
time, and it doesn’t seem right to penalize the
producer by saying he just converted a wetland.
That is not the intent of Swampbuster or aban-
donment.”

Based on the Agency’s interpretation of the statute, if
the Plaintiff’s land was farmed in 1985, then allowed to
return to a wetland, he could clear it and farm it without
violating the statute. But, because farming ceased on
these areas a few years earlier, in the late 1970's, and
trees were growing on some of the tracts in 1985, the
Plaintiff violated the Swampbuster provisions. Based on
the Agency’s interpretation of the statute, the 6.2 acres
cleared were “not suitable for a PC determination” because
they were not farmed in 1985 or the five years prior to
1985.

In light of Mr. Daschle’s statements in the Congres-
sional record, and the statutory change doing away with
the concept of abandonment, the Court finds that the
Agency’s requirement that land be farmed in 1985 to
qualify as prior-converted cropland is not a reasonable
interpretation of the statute. In this case, society has had
the benefit of wetlands on Plaintiff’s 6.2 acres for more
than twenty years, and, in the words of Warren Lee, “it

* McBeth, Daryn, Wetlands Conservation and Federal Regulation:
Analysis of the Food Security Act’s “Swampbuster” Provisions as
Amended by the Federal Agriculture Improvement and Reform Act of
1996, 21 Harv. Envtl. L. Rev. 201, 256 (1997).

47a

doesn’t seem right to penalize [Horn Farms] by saying [it]
just converted a wetland.”

This Court has here attempted to wade through a
highly complicated and often convoluted series of federal
regulations and procedures that often stretched and in
this case, exceeded Congressional authority under the
statute. The Court has literally plowing through this
complex and complicated record, and finds that the issue
comes down to the intent of Congress, another highly
complicated concept, with complications upon complica-
tions. After minute consideration of the record and the
regulations at issue in this case, the Court has come down
on the side of effectuating the intent of Congress as
expressed by a key sponsor of the legislation in that
regard. Once that decision is made, the result here is
easier to determine. After Congress changed the statute in
1996, overruling the Agency’s regulations on abandon-
ment, it is a small step for this Court to find that the
Agency’s definition of “prior-converted cropland”, requiring
that the land be in production in 1985 to qualify, exceeds
the Agency’s statutory authority and must also be over-
ruled.

D. Applicability of 5 U.S.C. § 558

The Plaintiff’s Complaint also asserts a claim under 5
U.S.C. § 558(c), for failure to give notice and an opportu-
nity to demonstrate or achieve compliance before termina-
tion of its “license” to participate in the farm programs.
The Defendants argue that this provision does not apply,
claiming that it only applies to a license that is “required
by law”, and that participation in USDA farm programs is
not required by law in order for the Plaintiff to farm. The

48a

Plaintiff counters that the “required by law” provision only
applies to applications for licenses, it is not repeated in the
second sentence addressing termination of licenses.

5 U.S.C. § 558(c) states:

(c) When application is made for a license re-
quired by law, the agency ... shall set and com-
plete proceedings required to be conducted in
accordance with sections 556 or 557 of this title or
other proceeding required by law and shall make
its decision. Except in cases of willfulness or those
in which public health, interest, or safety requires
otherwise, the withdrawal, suspension, revoca-
tion, or annulment of a license is lawful only if,
before the institution of agency proceedings
therefor, the licensee has been given —

(1) notice by the agency in writing of
the facts or conduct which may warrant
the action; and

(2) opportunity to demonstrate or
achieve compliance with all lawful re-
quirements.

5 U.S.C. § 558(c) (Emphasis added).

For this provision to apply, a license must be involved.
A license is defined as “the whole or a part of an agency
permit, certificate, approval, registration, charter, mem-
bership, statutory exemption or other form of permission.”
5 U.S.C. § 551(8). This definition is “extremely broad”, as
noted by the Ninth Circuit Court of Appeals in Air North
America v. Dept. of Transportation, 937 F.2d 1427, 1437
(9th Cir. 1991). At issue in Air North America was a
certificate issued by the Department required for an
airline to fly. The Court determined that the certificate,

a

49a

although not in itself sufficient to allow the airline to fly,
nevertheless fit within the broad statutory language.

In other cases, courts have determined that the
language was broad enough to cover a permit to graze on
national forest land, Anchestegui v. Dept. of Agriculture,
257 F.3d 1124 (9th Cir. 2001); to “specifically approved
stockyard” status under the Cattle Contagious Diseases
Act, Moore v. Madigan, 789 F. Supp. 1479 (W.D. Mo. 1992),
affirmed, 990 F.2d 375, rehearing denied, cert. denied, 114
S.Ct. 83; to veterinarian accreditation, Charlene Hagus,
D.V.M. v. Michael Espy, Secretary, USDA, 53 Agric. Dec.
443, 1994 WL 733120 (U.S.D.A.); to designation by the
Immigration and Naturalization Service of a facility as an
approved laboratory for conducting medical examination,
New York Pathological & X-Ray Laboratories, Inc. v.
[Immigration and Naturalization Service, 523 F.2d 79 (2d
Cir. 1975); and to approval granted to an institution of
higher learning authorizing entry of nonimmigrant alien
students for study, Blackwell College of Business v. Attor-
ney General, 454 F.2d 928 (D.C. Cir. 1971); among others.

In this case, the USDA's approval or permission is
required for farmers to participate in various farm pro-
grams under the Food Security Act of 1985 and subse-
quent Farm Bills. Therefore, based on the broad definition
of license to include agency “approval” or “other form of
permission” the Court concludes that Plaintiff’s eligibility
to participate constitutes a “license” for purposes of section
558(c).

However, as already noted, the Defendants have a
second argument, that even if the Plaintiff can establish
that it has a “license” to participate in farm programs, that
license is not “required by law.” Def.’s Mem. in Supp. at

50a

p. 17. The Defendant asserts that the determinative issue
is not “whether farmers who apply for certain USDA
subsidy programs had to comply with the requirements of
the Swampbuster provisions in order to receive those
subsidies, but rather whether farmers are required by law
to participate in USDA farm programs in order to farm.”
Id. The Court is not convinced.

The license at issue is the USDA's approval or permis-
sion to participate in various farm subsidy programs. In
other words, the “license” is “required by law” in order to
participate in the programs, just as a grazing permit is
1v., ““ed to graze cattle in a national forest, or approval is
requirea for an institute of higher learning to accept
nonimmigrant alien students. See, Anchestegui 257 F.3d
1124; and Blackwell College of Business, 454 F.2d 928. The
Government is correct that in some cases, the license
requirement is broad, and failure to obtain a license
forecloses all opportunity to work in a certain field, as with
the requirement that veterinarians be accredited, Char-
lene Hagus, D.V.M., 53 Agric. Dec. 443, 1994 WL 733120,
or the requirement that airlines have the certificate in
order to fly, Air North America, 937 F.2d at 1437, but that
is not always the case.

The Court concludes that the “license” at issue in this
case is required by law for farmers to participate in vari-
ous programs under the Farm Bill, triggering the provi-
sions in section 558(c) of .ae APA. This provision does not
create a right to a full adjudicatory hearing, but at a
minimum requires that before termination of Plaintiff’s
“license”, Defendants had to provide notice and an oppor-
tunity to demonstrate or achieve compliance w:th lawful
requirements. Gallagher & Ascher Co. v. Simon, 687 F.2d
1067 (7th Cir. 1982) (noting that the sole purpose of

5la

section 558(c) is to provide licenser threatened with
termination of license an opportunity to correct its trans-
gressions before actual suspension or revocation). The
Plaintiff was given notice, but no opportunity to achieve
compliance before termination of its eligibility. Therefore,
summary judgment for the Plaintiff is appropriate on this
issue.

The Court notes that this provision of the APA pro-
vides protection that is similar to, but greater than, the
“good faith exemption” in the statute. Under the “good
faith exemption”, the Secretary has discretion to waive
ineligibility and allow the person to implement measures
to restore the wetland. 16 U.S.C.A. § 3822(h)(1)&(2).
Under section 558(c), the agency must allow a reasonable
opportunity for the licensee to demonstrate or achieve
compliance before terminating the license. The record in
this case does not indicate that the Defendants ever made
a “good faith” determination. The Defendants could easily
satisfy this provision of the APA by making the “good
faith” determination early enough in the process to allow
the Plaintiff to restore the wetland or mitigate the loss
before terminating all benefits under the Act.

VI. CONCLUSION

For the foregoing reasons, the Defendants’ Motion for
Summary Judgment is granted in part and denied in part.
Defendants’ Motion is GRANTED on Claim II, based on
the Spending Clause, and GRANTED on the claim that
the USDA was arbitrary and capricious for not reducing
its payments in proportion to the severity of the violation.
The Plaintiff’s Motion is also granted in part and denied
in part. The Motion is GRANTED on the issue that the

52a

USDA's decision denying the land at issue “prior converted
cropland” status was arbitrary and capricious, GRANTED
on the Due Process claim that the Agency failed to provide
meaningful review of the NRCS technical decision, and
GRANTED on the issue of compliance with the require-
ments of 5 U.S.C. § 558(c). This case is now remanded to
the Agency for further action not inconsistent with this
opinion.

IT IS SO ORDERED.
DATED: May 20, 2004

s/ Allen Sharp
ALLEN SHARP, JUDGE
NORTHERN DISTRICT OF
INDIANA

53a
APPENDIX C

[LOGO]
1252 E1008
United States Department of Agriculture Syite D
Natural Resources Conservation Service Rochester, IN.

Pape 46975
[Address Omitted in Printing]

May 5, 1999

SUBJECT: wetland and highly erodible land determina-
tion T 980, 13599

TO: Horn Farms Inc
Gene Horn

5079 S 500 W
Kewanna, IN 46939

Dear Mr. Horn:

This is to notify you that as of the date of this letter, I am
making a preliminary technical determination that fields
shown in Section II of the attached NRCS-CPA-026E
“HIGHLY ERODIBLE LAND AND WETLAND CON-
SERVATION DETERMINATION?” form contains wetland
determinations with the labels/certifications as indicated.
These areas meet the wetland criteria of hydric soil, soil or
surface wetland and wetland plants.

This wetland certification does not include “other waters of
the United States” as defined by the Corps of Engineers,
which include but are not limited to lakes, rivers, streams
which are regulated under the Clean Water Act. Contact the
Corps of Engineers regarding needs for permits. In order to
maintain your USDA program eligibility and comply with
the Clean Water Act, contact us prior to performing the
following activities: land clearing, drainage and drainage
maintenance, filling, leveling, dredging, land use changes.

Fn nen ee

54a

This technical determination may affect USDA benefits
such as commodity loans and Agricultural Market Transi-
tion Act contracts.

As a result of the statutory and regulatory changes, the
United States Department of Agriculture appeal process
has changed. Under the new appeals and mediation
process, this preliminary technical determination will
become final within 30 days unless you request any of the
following options:

1) A field visit be made by our office to review with you
the basis for our preliminary technical determination,
answer any questions you have concerning the determina-
tion, and to gather additional information from you con-
cerning the preliminary determination.

2) Right to review the records in our office.

3) Appeal rights to Farm Service Agency County Com-
mittee when decision is final.

4) Mediation be used in an attempt to settle your con-
cerns with the preliminary determination.

Mediation is a process in which a trained, impartial person
(a neutral mediator) helps look at the mutual problems,
identify and consider options, and determine if we can agree
on a solution. Unlike an appeal, mediation is private, confi-
dential and informal. The mediator will help us work to-
gether to evaluate the information in your case and help us
identify alternatives that will assist us resolving the dispute.
The mediator has no decision making authority. A mediator
cannot decide what is “right” or “make” anyone do anything.
If the mediation is successful, the mediator will help us reach
an agreement and document that solution in writing. Each

55a

party will sign the agreement and you man continue to
pursue the appeal.

If you choose mediation, you must contact the mediator
directly and make arrangements for the process. Contact
Ms. Julia Wickard at:

Indiana Agricultural Mediation Program

Office of the Commissioner of Agriculture

ISTA Center, Suite 414

150 W. Market Street

Indianapolis, IN 46204

Telephone: (317) 232-8775 FAX: (317) 232-1362

If you choose to use the mediation, NRCS will pay up to
one-half of the costs that are appropriate with securing the
services of the trained mediator, when the services are
provided on other than voluntary basis. The NRCS will
have final discretion over what is considered appropriate
and reasonable.

A final determination will be issued within 30 days after the
field visit, if one is requested, and/or within 30 days following
the completion of the mediation. If neither is requested, this
preliminary determination becomes final on 10 June 99.

The final determination, whether it is the result of the
expiration of the 30 days period following receipt of this
preliminary determination or receipt of a final determina-
tion may be appealed to the Farm Service Agency Fulton
County Committee at the address below. If you take no
action during the preliminary 30 day period, your appeal
rights begin 10 June 99 and end 10 July 99.

Fulton County Committee

1252 E 100 S, Suite E
Rochester, IN 46975

56a

If you are the owner of this tract and have a tenant, I urge
you to discuss this letter and accompanying NRCS-CPA-
026E with your tenant. Likewise, if you are the tenant of
this land, I urge you discuss this letter with your landlord.

/s/ Daniel M. Rosswurm [jk]
DANIEL M ROSSWURM
RESOURCE CONSERVATIONIST
219-223-3220

U.S. DEPARTMENT OF AGRICULTURE NRCS-CPA-026E
NATURAL RESOURCES CONSERVATION 8-95
SERVICE

HIGHLY ERODIBLE LAND AND WETLAND
CONSERVATION DETERMINATION

Name: Horn, Gene Tract: 13599 Farm: 3472

County: Fulton Request Date: FSA Farm No.: 3472

Fields in this section have undergone a determination of
whether they were highly erodible land (HEL) or not;
fields for which an HEL Determination has not been
completed are not listed. In order to be eligible for USDA
benefits, a person must be using an approved conservation
system on all HEL.

HEL Sodbusted Determination
Field (Y/N) (Y/N) Acres Date
1 N N 39.6 05/22/98
5 N N 4.5 05/22/98

unl N N 8.0 05/22/98

Section T-— Wetlands

Fields in this section have had wetland determinations
completed. See the Wetlands Explanation section for
additional information regarding allowable activities
under the wetland conservation provisions of the Farm
Bill and Section 404 of the Clean Water Act.

Wetland Determination Certification
Field Label Acres Date Date
1 PC/NW 39.6 05/22/98 05/22/98
5 PC/NW 4.5 05/22/98 05/22/98
unl NW 8.0 05/22/98 05/22/98
un2 CW+1998 0.5 04/28/99 04/28/99
un3 CW+1998 1.8 04/28/99 04/28/99
un4 CW+1998 2.1 04/28/99 04/28/99
uni CW+1998 0.4 04/28/99 04/28/99
un6 NI 12.0 04/28/99 04/28/99
Wetlands Explanation

Label Explanatory Comments

CWyr Converted wetland after 11/28/90;
Description: An area where wetlands were
converted after 11/28/90; Authorized Cropping:
Conversion caused ineligibility; Authorized
Maintenance: None allowed by person; If you
plan to clear, drain, fill, level or manipulate
these areas contact COE**.

NI

PC/NW

58a

Not Inventoried;

Description: An area where no wetland determi-
nation has been completed; Authorized Crop-
ping: May be farmed as long as no woody
vegetation is removed and no hydrologic ma-
nipulation is undertaken; Authorized Mainte-
nance: Request determination from NRCS* prior
to initiating any manipulation; If you plan to
clear, drain, fill, level or manipulate these areas
contact NRCS* and COE**.

Non-wetland;

Description: An area that does not meet wetland
criteria under natural conditions er wetlands
that were converted prior to 12/23/85, not
cropped prior to 12/23/85, does not meet wetland
criteria, and has not been abandoned; author-
ized cropping: No Restrictions; Authorized
Maintenance: No restrictions unless the ma-
nipulation would convert adjacent wetland
labels.

Prior Converted Cropland/Non-Weitland;
Description: An area that contains both prior
converted cropland and non-wetland; Authorized
Cropping: No restrictions; Authorized Mainte-
nance: No restrictions unless the manipulation
would convert adjacent wetland labels.

* Natural Resources Conservation Service
** Corps of Engineers

Remarks

Remaining woods should not be cleared or drained with-
out first having a non-

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0871%3A1. Public record. Not legal advice.